Making its play to be ‘the Netflix of exercise’, indoor training platform Peloton has filed for an initial public offering (IPO). In its filing with the US Securities and Exchange Commission (SEC), the New York based company reported that it generated revenue of US$915 million in the 12 months to June 2019, up 110% year on year.
While it has had strong revenue growth, Peloton has witnessed increasing losses. These are up from US$47.9 million in its previous financial year to reach US$195.6 million in its latest fiscal year to June 2019.
These losses are due to general operating costs and an expensive customer acquisition process, whereby Peloton has invested significantly in above-the-line TV and online ads. The fitness platform’s advertising expenditure has been extensive – with high profile television ads a prominent feature of its marketing strategy.
In its IPO prospectus, filed with the US SEC, Peloton cites 1.4m+ total members (across all aspects of its business), 55m total workouts and a 95% 12-month retention rate. The company adds that ‘this is just the beginning’.
In the year to June 2019, Peloton notes that it has 511,000 connected fitness subscribers (via its bike and treadmills). This is up from 246,000 in fiscal year 2018, and 108,000 in 2017.
As noted by the Financial Times, Peloton is positioned as a media company, ‘a Netflix of exercise’. The company explains that it doesn’t just sell bikes and subscriptions, and that content is a key aspect to its business model.
The majority of Peloton’s revenue comes via sales of its connected bike and treadmill products. These are linked to a US$39 a month fitness subscription. The Peloton bike is priced at US$2,245; while the treadmill comes in at US$4,295.
Physical products (bikes and treadmills) accounted for US$719 million of revenue in the year to June 2019.
Peloton cites its market opportunity in terms of a Total Addressable Market (TAM). This can be reached… ‘over the long-term in our current and announced markets, and a Serviceable Addressable Market, or SAM, which we address with our current product verticals and price points.’
Peloton identifies a TAM of 67 million households, of which 45 million are in the United States. This is via targeting of the ‘Peloton demographic’ – households at 18-70 with US$50K+ in total income.
A cautionary note features in the Peloton SEC filing. When outling the risks associated with its business, the company states… ‘We have incurred operating losses in the past, expect to incur operating losses in the future, and may not achieve or maintain profitability in the future’.