Peloton subscriber will be its next CEO – Carswellfamilyfoundation

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Brief description of the dive:

Peloton Interactive has joined Ford CEO Peter Stern will become chief executive officer effective January 1. According to a press release, the company plans to appoint him to its board of directors.
Stern also previously held executive positions at Apple—he co-founded Apple Fitness+—and Time Warner Cable. He has been a Peloton member since 2016.
The news comes after Peloton reported some progress in improving the situation. Total 1st quarter revenue fell by 1.6% year-on-year to $586 million, beating expectations, and net loss narrowed significantly from $159.3 million a year ago to $900,000.

Dive Information:

In addition to his personal knowledge of Peloton itself, Stern’s experience includes “significant experience working at the intersection of hardware, software, content and services at Ford, Apple and Time Warner Cable… and he has grown more than a dozen subscription companies,” the company said in a letter to shareholders.

Its challenge will be to balance growth and profits, according to BMO analysts led by Simeon Siegel, who thinks Peloton “would be better off embracing its brand loyalists and acknowledging that growth is likely to be left behind.”

The fitness company beat revenue expectations in the first quarter, but the improvement in EBITDA was particularly encouraging, Siegel said. Adjusted EBITDA for the period reached $116 million and free cash flow reached $11 million, the company said in its letter.

As Peloton has struggled with profitability over the past few months, it has become smarter with its marketing strategy. In its announcement, the company said the first quarter is typically a period of slower hardware sales, and that overall sales and marketing expenses were down $64 million, or 44%, from a year earlier, and media expenses are at historic lows, down almost 60%. year after year.

“As the holiday season approaches, we expect to increase our media spend while maintaining discipline to ensure the subscribers we acquire are profitable,” the company said.

Because women make up about two-thirds of the company’s members, Peloton is shifting its marketing focus to men, including through advertising during football games, Chris Bruzzo, interim co-CEO and co-president, said on a call with analysts Thursday. Men are buying more Peloton gear, which Bruzzo called “an indicator of how we’re thinking about the market now, which is targeting those individual pockets and then being efficient and effective in how we reach them.”

And in some areas, Peloton has also changed its pricing and sales models. In the first quarter, Peloton raised retail prices for its Bike and Bike+ products in international markets and moved to a third-party retail and distribution model in Germany. In North America, the company has raised the retail price of its rowing machine. Add in shifts toward more profitable revenue streams and supply chain efficiencies, first-quarter gross margin in the connected fitness segment increased 600 basis points year over year to 9.2%.

Subscriber churn was 1.9% in the first quarter, with engagement “relatively stable (year-over-year) and well above pre-Covid levels,” the company said. Peloton has released new content, including an in-studio performance from Keith Urban. The period ended with paid connected fitness subscriptions down 2% year-over-year to 2.9 million, and paid app subscriptions down 24% to 0.6 million.

Peloton is also testing new products and features aimed at increasing engagement, which the company says is key to retaining subscribers. Its approach is to accelerate the release of new software initiatives to get feedback and “iterate accordingly,” the company said.