Photo courtesy of Peloton
Just a day after Peloton recalled its treadmills, the company reported beating its third-quarter revenue expectations by $140 million.
Yesterday, Peloton announced that it is pulling its Tread and Tread+ after more than 70 injuries and one child death were reported in relation to the product.
The company said it is working with the Consumer Product Safety Commission, which has been pushing for the recall for more than a month, to build additional safety features into the treadmills and will be delaying the launch of the Tread in the United States, which was originally set to roll out May 27.
"We expect to offer the Tread for sale as soon as the CPSC's full review of the product is completed," John Foley, CEO of Peloton, said during the earnings call. "While this process typically takes six to eight weeks, it could take longer, so we can't offer an on sale or revised launch date at this time. In the meantime, we will continue to produce the Tread, we will continue to produce Tread content in anticipation of our Tread launch, as well as to support our nearly 900,000 digital subscribers."
Foley also touched on new initiatives from last quarter. The company purchased Precor, a major manufacturer of commercial fitness equipment, for $420 million. Recently, Peloton also rolled out a slew of new features, including one that lets users tap into scenic virtual rides.
Peloton reported a total of $1.262 billion in revenue during Q3. This represents a 141% year-over-year growth. It also announced a 135% year-over-year increase in fitness memberships.
The gross margin was on par with the guidance at 35.2%, and the connected fitness product gross margin was 28.4%. Total operating expense accounted for 36.3% of revenue, down from 59% in 2020's Q3.
The fitness giant revised its Q4 revenue guidance to $915 million, citing the loss of revenue from the Tread and Tread+ as factors. The recall is expected to cost the company around $165 million, according to Jill Woodworth, chief financial officer at Peloton. Overall sales are expected to dip after the COVID-19 surge, she added.
"As anticipated, Global Bike and Bike Plus sales have been tapering from COVID highs, and we're expecting a gradual return to historical seasonal sales trends. However, our unit sales remain significantly higher than pre-COVID levels. We expect Global Bike and Bike Plus unit sales in Q4 fiscal '21 to be over 3x higher than they were in Q4 of fiscal '19, two years prior."
In the future, Peloton is looking to roll out new features and hardware.
"We're particularly excited about our fiscal year '22 roadmap when we plan to introduce new hardware, software features, languages and content [with] the goal of providing the most comprehensive connected fitness and digital membership experiences in the world and driving ever-increasing engagement among our members," Foley said.
Peloton went public in 2019, offering its stock at just under $30 a share at opening. Currently, the stock is trading at roughly $85 per share. However, that is a drop from its January high of roughly $167.
Over the last year, the company has been looking to expand its product lines. In September, it launched the second generation of its bike, as well as a less-expensive version of its treadmill, which has since been recalled.