PTON Q1 Earnings Call: Management Cites Cost Cuts and Strategy Shift in Response to Declining Sales

Exercise equipment company Peloton (NASDAQ:PTON) met Wall Street’s revenue expectations in Q1 CY2025. Its non-GAAP loss of $0.04 per share was in line with analysts’ consensus estimates.

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StockStory’s Take

Peloton's leadership emphasized operational discipline and product evolution as key drivers of the first quarter's results, with CEO Peter Stern highlighting improved unit economics and a renewed focus on expanding beyond the company's traditional home fitness base. Stern pointed to the rollout of new strength content and the adoption of personalized workout plans, noting, "Members who set up Personalized Plans work out more often and with more disciplines." The company also made changes to its leadership team, including the appointment of a new COO, aiming to enhance supply chain agility and innovation. Cost reduction efforts, such as a 23% year-over-year decrease in operating expenses, were credited with supporting profitability despite continued pressure on hardware sales and subscriber counts.

Looking ahead, management is prioritizing a return to growth by deepening member engagement, expanding retail and commercial partnerships, and leveraging technology to personalize the fitness experience. Stern stated, “We need to meet new and existing members at retail stores, gyms, hotels, online and in real life events, both in the U.S. and the other countries in which we operate.” The company is also exploring international expansion, with a focus on increasing efficiency in customer acquisition and translating content for broader audiences. CFO Liz Coddington acknowledged potential macroeconomic risks but noted the resilience of the subscription business, describing it as “highly resilient with quite strong retention.” While the company is not offering explicit guidance on subscription price increases, management indicated ongoing evaluation of pricing strategies and further cost optimization to support future profitability.

Key Insights from Management’s Remarks

Management attributed the quarter’s results to a mix of cost discipline, product updates, and early progress in new retail and commercial initiatives, while also outlining leadership changes intended to drive future growth.

• Cost reduction focus: The company achieved a 23% year-over-year decrease in total operating expenses, with substantial cuts in advertising, marketing, and personnel costs. This was described by CFO Liz Coddington as a critical step in improving profitability and reducing net debt.

• Product and content innovation: New strength and wellness programming, including the launch of kettlebell workouts and personalized training plans, drove higher engagement. Stern highlighted that nearly 500,000 members started a personalized plan, which correlated with increased workout frequency and variety.

• Retail and commercial channel tests: Early results from a micro-store pilot in Nashville and a Peloton-branded studio at the University of Texas showed promising engagement and sales per square foot, suggesting a potential path to more cost-effective retail expansion.

• International and translation initiatives: Management launched AI-powered subtitles in multiple languages and increased the daily translation rate of classes, aiming to boost penetration in non-U.S. markets and support future expansion into adjacent countries.

• Leadership team changes: The appointment of Charles Kirol as COO and the search for new C-level executives reflect a strategic push for improved supply chain management, faster innovation cycles, and a broader commercial footprint. Stern described these changes as necessary to "get Peloton back to top-line growth."

Drivers of Future Performance

Peloton’s near-term outlook is shaped by efforts to deepen member engagement, cost improvements, and expansion into new channels and markets.

• Member engagement and retention: Management sees increased engagement through new content types, personalized plans, and community features as critical to sustaining subscription revenue. Stern noted that higher satisfaction scores and the success of team-based features are expected to reduce churn and increase customer lifetime value.

• Retail and commercial expansion: The company plans to scale its micro-store retail model and expand partnerships with commercial gyms and hospitality providers. This multi-channel approach is intended to reach new customer segments while managing acquisition costs, with Stern citing promising initial results as a basis for broader rollout.

• Pricing and cost management: While no immediate subscription price increases are planned, management continues to evaluate pricing and cost structure, including responses to tariffs and supply chain efficiencies. Coddington emphasized that ongoing cost controls and “meaningful positive free cash flow” are priorities, though hardware sales remain sensitive to broader economic trends.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will watch for (1) measurable gains in member engagement and reduced churn from new content and community initiatives, (2) evidence that micro-store and commercial partnerships can drive sustainable subscriber growth, and (3) further improvement in operating margins and free cash flow from ongoing cost management. Progress on international expansion and leadership hires will also be key milestones.

Peloton currently trades at a forward EV-to-EBITDA ratio of 8.6×. In the wake of earnings, is it a buy or sell? See for yourself in our full research report (it’s free).

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