Business

Peloton has returned to sales growth for the first time in nine quarters.
The connected fitness company posted quarterly results that came in well ahead of expectations and delivered a mixed outlook for the year ahead.
The Bike and Tread maker has been working to improve its balance sheet and looks to be more focused on profitability than growth.

Peloton said Thursday it is digging itself out of the red and eked out a slight sales increase for the first time in nine quarters as it slashed its overall losses. 
The company’s shares spiked 35% on Thursday.

The beleaguered connected fitness company, which two board members have run since former CEO Barry McCarthy resigned earlier this year, saw sales grow by 0.2% during its fiscal fourth quarter. While only a modest uptick, it’s the first time Peloton posted year-over-year revenue growth since its 2021 holiday quarter. 
The company also indicated it’s ready to focus on profitability over growth with significant cuts to its marketing and sales spending and meaningful increases to free cash flow and adjusted EBITDA. Those cuts helped Peloton narrow its quarterly losses to $30.5 million from $241.1 million in the year-ago period.
Here’s how the Bike and Tread maker performed compared with what Wall Street was anticipating, based on a survey of analysts by LSEG:

Loss per share: 8 cents vs. 17 cents expected
Revenue: $644 million vs. $631 million expected

For the three-month period that ended June 30, Peloton significantly narrowed its losses. The company posted a loss of $30.5 million, or 8 cents per share, compared with a loss of $241.8 million, or 68 cents per share, a year earlier. 
Sales rose to $643.6 million, up about 0.2% from $642.1 million a year earlier. That’s only a $1.5 million increase, but Peloton did it at a time when sales are typically a bit slower for the company, because the quarter bleeds into the summer when people are more focused on going out and traveling than working out. The last time Peloton delivered year-over-year sales growth was during its holiday season in 2021, which is typically the company’s strongest quarter.

Secondary market gains

During the quarter, sales for Peloton’s pricy connected fitness hardware fell about 4%, continuing a trend for the company. But subscription revenue rose by 2.3%, and the segment’s gross margin increased by 1 percentage point.
Though hardware sales were down, Peloton is growing its subscription revenue through the secondary market where people can buy used stationary bikes for a fraction of the cost of a new one. During the quarter, subscription revenue from hardware purchased on the secondary market grew 16% year over year.
“We believe a meaningful share of these subscribers are incremental, and they exhibit lower net churn rates than rental subscribers,” the company said in a letter to shareholders.
While hardware sales have hurt Peloton’s overall performance, sales for its Tread are growing after it overcame a costly recall. During the quarter, sales from Peloton’s treadmill portfolio grew 42% year over year.
The company is also seeing some positive signs in its Bike rental program, which allowed it to clear through a glut of inventory. During the quarter, average net monthly paid subscription churn for rentals was down 1.1 percentage points. Demand has been so steady, it no longer has the refurbished inventory levels necessary to supply that side of the program. The company ceased offering its original Bike rental program on Aug. 1 and since then, has seen demand grow for its Bike+ rental, refurbished original Bike sales and financed new Bike sales.
“These alternative programs have stronger unit economics than original Bike rental, with more cash paid upfront and a stronger retention profile,” the company said in its shareholder letter.
Ever since Peloton’s pandemic heyday came to an end, the company has struggled to generate free cash flow and ensure it has enough assets on its balance sheet to cover its many liabilities. Earlier this year, it announced a sprawling restructuring plan that included cutting 15% of the company’s global workforce to achieve $200 million in annualized cost savings by the end of fiscal 2025.
Those efforts are starting to bear fruit.
During the quarter, Peloton delivered adjusted EBITDA and free cash flow for the second consecutive quarter – a feat it had not pulled off since the height of the Covid-19 pandemic. It posted $70 million of adjusted EBITDA, far more than the $53 million that analysts had expected, according to StreetAccount. 
That metric was up $105 million compared with the year-ago period and $64 million quarter over quarter.
Peloton also generated $26 million in free cash flow, compared with negative $74 million in the year-ago period and $8 million in the prior quarter.
Improvements to Peloton’s balance sheet come after the company completed massive refinancing of its debt that staved off a looming liquidity crunch and pushed out its debt maturities by several years.
As far as who will be Peloton’s next leader, interim co-CEO Karen Boone said the search is “well underway” and they’ve seen “no shortage of interest.”
“We are far along in the process. We’ve done a lot of vetting, a lot of conversations, and we’ve narrowed it down to some very highly qualified candidates,” Boone said. “We have some very specific folks in mind at this point.”
In her opening remarks, Boone said the company can’t speculate on when its next CEO will start. But just before ending the call, she said the new hire will be in place by the time the company next reports earnings, which is expected to be sometime in the fall.
“I should probably under-promise here, but I am excited to say that I do believe you will be speaking to and hearing from the new CEO of Peloton on this call next quarter,” said Boone.

Profit over growth

For the year ahead, Peloton is planning to invest in its hardware and software to deliver a better user experience, among other initiatives. However, its guidance assumes that investments in these new initiatives “will not deliver subscriber growth within the fiscal year,” indicating Peloton may finally be shifting its focus away from growth in favor of profitability and free cash flow generation.
“Chris, and I, in partnership with Peloton’s strong leadership team, are continuing to make progress on several key strategic priorities, which include aligning our cost structure to the current size of our business to improve profitability, and deliver meaningful free cash flow without requiring growth to get there,” Boone said on a call with analysts.
“We’re enthusiastic about our innovative roadmap, but we’ll be judicious about deploying marketing dollars until we demonstrate product market fit, and continue to be cautious about marketing spend given the uncertain consumer backdrop, and ongoing macro environment,” she said.
That shift shows in its reductions to sales and marketing spending — an expense that has long dragged down Peloton’s balance sheet and has been criticized as being too high for the company’s size.
During the quarter, Peloton cut sales and marketing spending by $25.5 million, or 19% year over year. It said it expects to continue to make reductions to its marketing budget throughout fiscal 2025.
For the current quarter, Peloton is projecting sales to be worse than Wall Street expected but is guiding to higher-than-forecast adjusted EBITDA. The company said it anticipates sales to be between $560 million and $580 million, compared with estimates of $609 million, according to LSEG. It’s expecting to post adjusted EBITDA of $50 million to $60 million, compared with estimates of $45 million, according to StreetAccount.
StreetAccount analysts had expected the number of connected fitness subscribers to be 2.96 million during the current quarter, but Peloton projects a range of 2.88 million to 2.89 million instead.
For the full year, Peloton expects sales to be between $2.4 billion and $2.5 billion, compared with estimates of $2.7 billion, according to LSEG.

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The National Women’s Soccer League and the NWSL Players Association have agreed to eliminate the draft and give free agency to all players.
“Unlike a lot of other sports, we compete in a global labor market for talent,” NWSL Commissioner Jessica Berman said in an interview with CNBC.
The new CBA, announced Thursday, also raises the minimum salary from $48,500 in 2025 to $82,500 by 2030.

Maitane Lopez Millan #77 of Gotham FC defending battling Jordyn Huitema #9 of OL Reign for the ball during NWSL Cup Final game between NJ/NY Gotham City FC and OL Reign at Snapdragon Stadium on November 11, 2023 in San Diego, CA. 
Michael Janosz | ISI Photos | Getty Images

The National Women’s Soccer League and the NWSL Players Association have agreed to eliminate the draft and give free agency to all players – an unprecedented move in major professional U.S. sports. 
As part of a new collective bargaining agreement, which extends the current contract to 2030, the two sides sought to grant players more control over where they play – which could help with recruitment of athletes who can join top clubs around the world.

“Unlike a lot of other sports, we compete in a global labor market for talent,” NWSL Commissioner Jessica Berman said in an interview with CNBC. “So, if we want to attract, retain and develop the best players in the world, we believe that we will be most strongly positioned if we remove that artificial barrier and put ourselves on an even playing field with the rest of the world.” 
The new CBA, announced Thursday, also raises the league minimum salary from $48,500 in 2025 to $82,500 by 2030. The base salary cap – or the pool of money designated for each team – goes from $3.3 million in 2025 to $5.1 million in 2030. Individual players will have no limit on pay, and the teams will have discretion over how to allocate salaries. 
The CBA also allows for the salary cap to increase in future seasons as part of the league’s revenue-sharing model in which the players could benefit from additional sponsorship and media deals. 
“We want them to have skin in the game,” Berman said. “We want them to know that they, too, will benefit from that growth.” 
NWSL’s growth is underscored by the recent surge in attendance, viewership — and team valuations.

Last month, Disney CEO Bob Iger and journalist Willow Bay took a controlling stake in Angel City FC in a deal that valued the team at $250 million, making it the world’s most valuable women’s sports team.
In November, the league inked a media deal worth $240 million over four years – 40 times higher than the prior agreement.
Berman said in light of the recent boom in women’s soccer, the NWSL opted to renegotiate its CBA with the NWSL Players Association two years early in order to give future investors and other partners more visibility into the future of the business model. 
“We actually thought it was really important to proactively engage the union and really extend the life of our labor agreement so that when we’re building the business from an ownership-investment perspective, from a sponsor-investment perspective, from media-investment perspective, there isn’t fear of labor disruption or distraction in the foreseeable future,” said Berman. “We believe this next phase of growth is going to unlock an incredible amount of investment and resources.”  More

At the end of the month there were 1.33 million homes on the market, an increase of 0.8% from June and 19.8% higher than July 2023.

Closed sales of previously owned homes rose 1.3% in July compared with June to a seasonally adjusted, annualized rate of 3.95 million units, according to the National Association of Realtors. That was the first gain in five months.
Sales were 2.5% lower compared with the same time last year.

Sales saw the biggest gains in the Northeast and were flat in the Midwest. Prices also rose the most in the Northeast.
“Despite the modest gain, home sales are still sluggish,” said Lawrence Yun, the NAR’s chief economist, in a release. “But consumers are definitely seeing more choices, and affordability is improving due to lower interest rates.”
These sales are based on contracts that were likely signed in May and June, when mortgage rates were well over 7% on the popular 30-year fixed loan. Rates began dropping in July and are now hovering around 6.5%.
All-cash offers made up 27% of July sales, up from 26% the year before and far higher than the historical norm.
The supply of homes for sale continued to move higher in July. At the end of the month, there were 1.33 million houses on the market, an increase of 0.8% from June and 19.8% higher than in July 2023. At the current sales pace, that represents a four-month supply, slightly lower than it was in June.

Read more CNBC news on real estate

The increase in supply did not, however, help to cool home prices. The median price of an existing home sold in July was $442,600, an increase of 4.2% year over year.
First-time buyers made up 29% of sales in July, unchanged from June but down from 30% in July 2023. Historically, these buyers make up closer to 40% of home sales, but affordability has been hit hard in the last two years due to fast-rising home prices and higher mortgage rates.
With rates now slightly lower, demand is starting to pick up. A separate report from Redfin, a real estate brokerage, found requests for tours and other buying services from Redfin agents rose 4% over the last week to their highest level in two months.
Correction: A previous version of this story misstated a time frame for the decline in home sales.

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Connected fitness company Peloton said it will start charging a one-time $95 activation fee for new subscribers that bought used hardware on the secondary market.
The Bike and Tread maker said the secondary market is an “important source” of new members.
Trade My Stuff, a startup that sells used Peloton equipment, offers same or next day delivery in 14 cities across the country.

Source: Peloton

Peloton on Thursday said it will start charging new subscribers a one-time $95 activation fee if they bought their hardware on the secondary market as more consumers snag lightly used equipment for a fraction of the typical retail price.
The used equipment activation fee for subscribers in the U.S. and Canada comes as Peloton starts to see a meaningful increase in new members who bought used Bikes or Treads from peer-to-peer markets such as Facebook Marketplace. 

During its fiscal fourth quarter, which ended June 30, Peloton said it saw a “steady stream of paid connected fitness subscribers” who bought hardware on the secondary market. The company said the segment grew 16% year over year.
“We believe a meaningful share of these subscribers are incremental, and they exhibit lower net churn rates than rental subscribers,” the company said in a letter to shareholders. 
“It’s also worth highlighting that this activation fee will be a source of incremental revenue and gross profit for us, helping to support our investments in improving the fitness experience for our members,” interim co-CEO Christopher Bruzzo later added on a call with analysts. 
While plenty of Peloton subscribers are avid users of the home workout machines, some have likened them to glorified clothes racks because so many people stop using the equipment. Those people paid Peloton for that hardware originally, but importantly, many of them have canceled their monthly subscription, which is how Peloton makes the bulk of its money. 
The ability to attract new, budget-conscious members from the secondary market who are willing to pay for a monthly subscription is a unique opportunity for Peloton to grow revenue without any upfront cost, on top of the revenue from the original sale. 

Ari Kimmelfeld — whose startup Trade My Stuff, formerly known as Trade My Spin, sells used Peloton equipment — estimates there are around a million Bikes collecting dust in homes around the world that could be a source of new revenue for the company. 
He told CNBC he previously met with Peloton executives to discuss ways to collaborate, because every time he sells a used piece of equipment, it could lead to more than $500 in new revenue per year for Peloton. With the new used equipment activation fee, that number could grow to more than $600 for the first year. 
“We save the customer a lot more than $95,” Kimmelfeld told CNBC on Thursday after the new activation fee was announced. “I don’t think it’ll stop or slow down people from buying secondary equipment … because you can get a bike delivered faster and cheaper on the secondary market, even with the $95, let’s call it a tax, from Peloton.” 
Trade My Stuff sells first-generation Bikes for $499, compared with $1,445 new. It offers the Bike+ for $1,199, compared with $2,495 new. It also sells used Treads for $1,999, compared with $2,995 new. 
Since launching his business, Kimmelfeld has worked with people looking to sell their used Peloton equipment and has since sold a “few thousand” Bikes. In 14 cities around the country, including Los Angeles, Denver and New York City, the company offers same- or next-day delivery. Outside of those locales, it provides delivery within three to five days. That compares with a new Peloton purchase, which can take significantly longer to deliver. 
The used equipment activation fee is designed to ensure that new members “receive the same high-quality onboarding experience Peloton is known for,” the company said. Bruzzo said that those who buy a used Bike or Bike+ have access to a virtual custom fitting ahead of their first ride, as well as a history summary that shows how many rides those bikes had before they were resold. 
“We’re also offering these new members discounts on accessories such as bike shoes, bike mats and spare parts,” said Bruzzo. “We’ll continue to lean into this important channel and find additional ways to improve the new member experience, for example, providing early education about the broad range of fitness modalities that we offer and the many series and programs our instructors provide to new members.”

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