Peloton is known for their at-home fitness equipment and fitness streaming services. The company showed a larger volume of sales but widening loss margins just before they went public, through documents filed with regulators on Tuesday. In the fiscal year which has just passed, sales reportedly grew 110% to amount to $915 million, from the existing $435 million in 2018. On the other hand, the 2019 losses have gone up to $245,7 million, which was estimated to be $47.9 million in 2018.
The company expects that $500 million may be raised in its public offering. In the registration documents, the plans show expansion to international waters which will come with brand new costs. Estimates in the past have shown a valuation of $8 billion. The company has promised that it will be selling Class B stocks which grand 20 votes for every share held.
Founded in 2012, Peloton had filed its paperwork confidentially. They have been accredited with the first company to make cycles and treadmills which have screen attachments for users to be able to join in their sessions live, or view their recorded classes from home or at hotels and offices. The goal here is to make the at-home fitness experience a physically rewarding and addictive process to compare with live classes.
The fitness subscriber base which consists of users who have paid subscriptions, or someone who has been paused for three months, has risen from245, 667 in 2018, to 511,202 in 2019. The company now has 1.4 million members. They have consistently viewed their workouts increase over the last few years along with engagement from their users. On an average, the connected subscribers have completed 7.5 workouts per month in 2017, 11.5 in 2018, and 11.5 in 2019. Its retention rate for these connected subscribers has been 95% since the financial year of 2016.
Peloton had made their first sale of cycles in 2014. Since then, they have expanded way beyond their $2,000 bicycles and $4,995 treadmills. Each subscription costs $39 for a month. For those who do not want to invest in the expensive equipment, the company now sells digital memberships as well which are more reasonably priced at $19.49 for a month. Roughly speaking, 102,000 digital subscribers stream yoga, meditation, boot camp, running, and walking classes.
They had already warned that they are a part of a music license agreement which is complex and burden the company with lots of obligations which act as a hurdle to the company. The music publishers who had sued Peloton have accused them of using more than 1000 songs from famous artists like Lady Gaga, Drake, Justin Timberlake, and Gwen Stefani, etc. without their explicit permission. A litigation also exists with their main competition in the market ‘Flywheel’ which had launched its own version of the cycle which Peloton alleges is an infringement on its patent.
In a statement, the company has mentioned that their use of third party content like music and software may be subject to infringement claims, but their technologies, content, etc. cannot be guaranteed to not be using the intellectual property of others. Their material weakness in internal control over financial reports has not been addressed completely since the last day of June. Qualified personnel are being hired for the same. Peloton will be added as PTON and will trade on Nasdaq. It is a client of high priority firms such as Goldman Sachs & Co, and J.P. Morgan.