Public Markets

Peloton (Finally) Drops Its S-1, Revealing Sharply Rising Revenue And Net Losses

Today, Peloton, the maker of pricey in-home bicycles and treadmills paired with on-demand fitness classes, filed its S-1, detailing plans for its long-awaited public offering.

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In June, we covered how the company had confidentially filed to go public. So, as we reported at that time, this news is not shocking. In February, Alex detailed the New York-based company’s funding history in advance of the big day. Since it was founded in 2012, Peloton has raised nearly $1 billion. Its most recent raise was a $550 million Series F that was announced last August at a $4.15 billion valuation. Backers include many heavyweight investors such as TCV, Kleiner Perkins, and Tiger Global Management, among many others.

Since its first outside financing, raised through a Kickstarter campaign which nabbed $307,332 in startup capital (less Kickstarter’s marketplace fee) back in July 2013, Peloton raised nearly $995 million in private-market financing.


In terms of growth, the company cited over 1.4 million members to date, inspiring more than 58 million Peloton workouts in fiscal year 2019. Its current product portfolio is made up of its bikes, Treadmill, and fitness and wellness subscription services, which can hover around $39 a month. Digital subscribers pay $19.49 a month just to access Peloton content on their smartphones.

Interestingly, the company noted that it grew its “Connected Fitness Subscribers” from 35,135 as of June 30, 2016, to 511,202 as of June 30, 2019, representing annualized growth of approximately 144.1 percent.

Metrics disclosed in the company’s S-1 indicate that Peloton users are becoming more engaged with the connected subscription service as well. In the fiscal year ending June 30, 2019, Peloton subscribers logged an average of 11.5 workouts per month, compared to an average of 7.5 workouts per month in the year ending June 30, 2017. This could indicate that Peloton’s investments in cultivating a network of fitness instructors, and the content they create, has paid off.

The company’s fastest growing demographic is “consumers under 35 years old and those with household incomes under $75,000,” it says in its S-1.

Peloton, which is looking to be listed on the Nasdaq under the ticker symbol “PTON,” has seen explosive growth over the years–and it counts that as a risk factor. The company noted in its filing that it grew from 443 employees in June 2017 to 1,950 employees in June 2019.

Inside The Gears Of Peloton’s Business

In its filing, the company revealed some impressive revenue figures. For fiscal 2019, Peloton reported revenue of $915 million, up 110 percent compared to $435 million in fiscal 2018. That’s more than four times the $218.6 million in revenue it saw in fiscal 2017. (Peloton’s fiscal year ends June 30 of each calendar year.)

However, its net losses also increased over the same timeframe. According to the filing,

Peloton posted a net loss of $195.6 million in fiscal 2019, way up from a net loss of $47.9 million in fiscal 2018 and one of $71.1 million in fiscal 2017.

While it is common for companies growing quickly to run deficits, a four-fold increase in net losses is not attractive. The company’s sales and marketing costs appear to blame, growing from $151.4 million in its fiscal 2018 to $324 million in its fiscal 2019. That’s more than double; Peloton’s sales and marketing costs also roughly doubled from its fiscal 2017 to its fiscal 2018.

Peloton’s growth has not come cheaply.

Indeed, the company has gone from generating cash from its operations to sharply negative operating cash flow. In its fiscal 2018, Peloton’s operating activities generated $49.7 million in cash. In its fiscal 2019, that number swung to negative $108.6 million.

Coupled to the company’s increasingly negative investing cash flow (negative $10.2 million, negative $56.7 million, and negative $297.5 million in its fiscal 2017, 2018, and 2019), Peloton is probably going public to further pad its accounts. The firm did report $162.1 million in cash and equivalents along with $216 million in marketable securities at the end of its fiscal 2019. That will last for a good while, but not forever at the company’s current pace of cash consumption.


A key question going into the company’s S-1 filing dealt with the company’s margins. Namely, what was its blended margin result of its aggregate revenue, and what sort of margin could it derive from its hardware revenues and software incomes, respectively.

Looking at its fiscal 2019, Peloton’s blended gross margin was about 42 percent. That’s not bad at all, given the company’s quick revenue growth. Hardware (“Connected Fitness Products”) had gross margins of 43 percent in the fiscal year, better than we anticipated.

However, the company’s recurring digital classes revenue (“Subscription”) had margins of roughly 43 percent as well. That is lower than we anticipated. Happily for Peloton, selling bikes is a better business than expected, more than making up for its more-expensive-than-expected subscription incomes.

Who Owns What

Finally, let’s get into the facts and figures relating to ownership. In other words, which venture capital fund is celebrating its bet.

On page 132 of Peloton’s S-1, the breakdown of investors can be found.

The CEO of Peloton, John Foley, received 15,169,568 Class B shares, or 6.2% of total shares. William Lynch, the president of the company, received half of that — 7,502,716 Class B shares, or 3.1% of shares.

There were three executive women listed in this portion of Peloton’s S-1: Jill Woodworth, Karen Boone, and Pamela Thomas-Graham. Woodworth, the company’s CFO, received 3,500,000 shares, while Boone and Thomas-Graham got 600,000 each.

True VenturesJon Callaghan got 28,369,274 shares, and Tiger Global Management got 46,721,427 shares, more than any other investor or executive listed on the S-1.

Peloton brought on Goldman Sachs, J.P. Morgan, Bank of America Merrill Lynch and others as underwriters for the IPO.

Illustration: Li-Anne Dias


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