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Peloton S-1
- whalesalad 7y agoCan't help but start to think that everyone is cashing out before the impending recession.
- michaelvoz 7y agoIPO takes months and months of effort and planning. It is not as short term as you seem to imply.
- blawson 7y agoAlso looks like they are already profitable, and growing like crazy. EDIT: my bad interpreting the loss format, they are not profitable.
- sca4 7y agoThey're operating at a -25% EBITDA, so no they are not.
- fbonetti 7y ago> 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 > We have incurred operating losses each year since our inception in 2012, including net losses of $(71.1) million, $(47.9) million, and $(195.6) million for fiscal 2017, 2018, and 2019, respectively, and expect to continue to incur net losses for the foreseeable future. They've never been profitable.
- SanchoPanda 7y agoLook at their contribution margins though. Especially on subs. Unit economics are, I guess unsurprisingly, fantastic on selling 2k bikes with a ~40$ monthly sub.
- blawson 7y agoMy mistake, I interpreted the $(...) values as being negative losses.
- davidw 7y agoWhich is why they're hurrying to get them done now, before things get bad? It does seem like there are a number of them, but maybe that's just my impression. Anyone got numbers?
- whalesalad 7y agoSo does a major recession.
- ryacko 7y agohttps://fred.stlouisfed.org/series/NEWORDER https://fred.stlouisfed.org/series/NEWORDER (capital purchases by manufacturing) It isn’t even clear that there is a risk of a recession according to some economic indicators.
- somebodythere 7y agoIn 2008, this indicator didn't turn down until the recession was well underway.
- rtkwe 7y agoWhat about earlier ones? 2008 was a recession because the bottom fell out of the credit market after the subprime bubble popped not because of larger trends so it makes sense that capital investments didn't decline until they just couldn't get credit.
- yowlingcat 7y agoThis comment has nothing to do with the financials of this particular IPO and everything to do with a perceived correlation between this event and some arbitrary macroeconomic event. Is there any reasoning you can give for why your hunch disproves the null hypothesis, which is that there is no connection between IPOs and what you perceive to be the impending recession?
- TallGuyShort 7y agoGrouping the filings from https://sec.report/Form/S-1 https://sec.report/Form/S-1 by day: 2019-07-18 5 2019-07-19 7 2019-07-22 10 2019-07-23 4 2019-07-24 12 2019-07-25 12 2019-07-26 7 2019-07-29 7 2019-07-30 7 2019-07-31 4 2019-08-01 5 2019-08-02 14 2019-08-05 3 2019-08-06 7 2019-08-07 6 2019-08-08 6 2019-08-09 5 2019-08-12 10 2019-08-13 5 2019-08-14 2 2019-08-15 6 2019-08-16 5 2019-08-19 4 2019-08-20 5 2019-08-21 8 2019-08-22 4 2019-08-23 9 2019-08-26 4 2019-08-27 2 Grouping this by complete weeks (excluding weeks where we don't have a complete Monday -> Friday list) we get totals of 45, 37, 27, 28, 30, in that order. Don't know what typical trends are by time of year, etc. HN has had a flurry of posts about S1s, but this trend doesn't seem to be the sudden uptick it has seemed to be on HN.
- davidw 7y agoI think you'd want a chart going back a few years, grouped by month. Glad to see some actual data though!
- uptown 7y agoThe Peloton "How I Built This" episode is well worth a listen for anyone interested in the company. https://www.npr.org/2019/04/05/710439824/live-episode-peloton-john-foley https://www.npr.org/2019/04/05/710439824/live-episode-peloto...
- dave_aiello 7y agoGood call. At 33:30, John Foley and Guy Raz start talking about the Kickstarter and how it didn't achieve its goals. At 35:00, they talk about the the initial pricing for the bike being breakeven ($1,200) and how that didn't work. The feedback was "at $1,200 [the bike] 'seems cheap', 'it sounds cheap.' And so, we said, well, let's increase the price...." You can listen to more of the podcast, unpack this, and analyze what the reveals about that the demographics of the customers with whom they've connected so far. Without any intent to be critical, the HN readers who think the bike is too expensive have the opposite reaction to the people who became customers. I suspect the average Peloton customer has more money than time.
- xenospn 7y agoThank you for the link! this is awesome.
- jakarta 7y agoNice unit economics: Our Connected Fitness Subscriber Lifetime Value for fiscal 2017, fiscal 2018, and fiscal 2019, was $267.1 million, $604.4 million, and $1,053.8 million, respectively, or $3,433, $4,015, and $3,593 per Connected Fitness Subscriber, respectively. As we expand our content offering, develop new interactive software features, and grow our community of Members, we believe we can maintain a low Average Net Monthly Connected Fitness Churn, resulting in a high Connected Fitness Subscriber Lifetime Value. In addition, with the growth of our Connected Fitness Subscriber base over time, we expect to improve our Subscription Contribution Margin as we scale our fixed content production costs. Net Customer Acquisition Cost (profit) can be calculated as Adjusted Sales and Marketing Expense (which excludes depreciation and amortization expense and stock-based compensation expense) less Adjusted Connected Fitness Product Gross Profit (which excludes depreciation and amortization expense and stock-based compensation expense). Our Net Customer Acquisition Costs (profit) for fiscal 2017, fiscal 2018, and fiscal 2019, was $14.2 million, $(4.9) million, and $1.6 million, respectively, or $183, $(33), and $5 per Connected Fitness Subscriber added, respectively. We believe we will continue to drive rapid payback and efficiencies in Net Customer Acquisition Costs (profit) by further leveraging sales and marketing investments as a result of heightened brand awareness and growing word-of-mouth referrals. Changes in Connected Fitness Product margins or sales and marketing expenses may result in an inability to fully offset our customer acquisition costs.
- SanchoPanda 7y agoAgreed. And nothing surreal at first glance in it's calculation either. EBITDA as well.
- michaelwilson 7y agoWhat's amazing is that they get people to pay _more_ than they would - or would even think of paying - for a streaming service like Netflix or Hulu, but their content creation costs are obviously a fraction of what it take to produce even one show on those platforms.
- gamblor956 7y agoWhat's really crazy is that the cost of 1 month of a Peloton subscription is less than the cost of 2 spinning classes in a real-world spin studio. If you spin enough, you actually do save money with a Peloton. $40/month + $2000/bike vs $30/class (in LA/NY/SF) results in a breakeven point of roughly 4 months if you spin every weekday, which many spin aficionados do.
- sharps_xp 7y agoGiven how expensive a bike is, I imagine their market being even smaller than the apple iPhone market and a subscription-based health system can arguably be as important to someone as an iPhone, but it doesn't really have that "i want that" shine that iPhone does. I imagine they'll see a lot of growth short term and taper off really soon maybe after 6 years.
- askafriend 7y agoHave you seen how expensive a gym membership is?
- dsfyu404ed 7y agoA gym membership starts at under $30/mo. I'm not sure at what point money spent becomes rapidly divorced from what you get but I'd wager that point is closer to $30/mo than to $100/mo.
- mdorazio 7y agoUnder $30 a month for a 24 hour fitness membership via Costco with zero initial cost ;) "Nice" gyms like Equinox are of course significantly more. It's important to segment the gym market into different tiers and niches, and figure out what the market size is for each. Same as for direct equipment sales like this. To your point, though, I suspect the people who would pony up for a Peloton are the same people who would splurge for a $100/month gym membership instead of a 24 hour, Planet Fitness, or local hole in the wall gym.
- gamblor956 7y agoSpin classes cost $30/month at spin studios. The people going to those classes are Peloton's target market, not the people content to spin at the local 24 hour fitness.
- mdorazio 7y agoWhat city are you in? Here in Portland, spin classes are more than double that. I think Peloton's market overlap is a combination of people who would sign up for Spin classes at a dedicated studio, people who would sign up for Spin classes at a nice gym that gives them as part of a membership, and people who think cycling is a good workout and have high disposable income, but no desire to join a real class or gym of any kind. It's obviously not for people like me who would happily buy a set of used free weights for a few hundred bucks if I had a garage or basement.
- kgwgk 7y agoThere are some funny things in the Risk Factors section: “We have identified material weaknesses in our internal control over financial reporting and if our remediation of such material weaknesses is not effective, or if we fail to develop and maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable laws and regulations could be impaired.” There are also three long subsections about music licensing (edit: and music-related legal proceedings mentioned in multiple places).
- michaelvoz 7y agoSeems like standard boilerplate.
- uptown 7y ago"There are also three long subsections about music licensing." I'm a customer. I've noticed that some of their old classes are no longer available, presumably due to music licensing issues.
- timdorr 7y agoYup: https://www.cbsnews.com/news/peloton-lawsuit-fitness-company-sued-for-stealing-music/ https://www.cbsnews.com/news/peloton-lawsuit-fitness-company...
- stilist 7y agoThere’s also > In addition, customers of certain of our providers have been subject to litigation by third parties claiming that the service and basic HTTP functions infringe their patents. If we become subject to such claims, although we expect our provider to indemnify us with respect to at least a portion of such claims, the litigation may be time consuming, divert management’s attention, and, if our provider failed to indemnify us, adversely impact our operating results.
- uptown 7y agoUnder the risks section: "We derive a significant majority of our revenue from sales of our Bike and a decline in sales of our Bike would negatively affect our future revenue and operating results;" What many people don't know is that you can access all their classes using your own exercise bike and their apps, paying a little over 1/4 of the normal monthly subscription fee. The limitations of this approach is that you don't get to participate in the leader-board gamification of your workout, and your bike won't have the integrated sensors to tie your output back into their app, but for a fraction of the price of both the bike and the service, it's a good way to either test out their service to determine whether it's something you're into, or to permanantly utilize most of their product at a fraction of the cost.
- nlawalker 7y agoI had no idea! I had to go find it for myself: https://www.onepeloton.com/membership https://www.onepeloton.com/membership $19.49/mo gets you all the content. It's double that ($39) to make use of the bike's live metrics/dashboard/leaderboard, plus the bike itself is $2245. This is really interesting to me, as I've heard quite a few people say that the content is what they really like.
- uptown 7y agoThere’s a couple writeups on the web. Here’s one I used: https://www.sippingandshopping.org/my-peloton-bike-alternative/ https://www.sippingandshopping.org/my-peloton-bike-alternati... Presumably that post has affiliate links. It’s not my page. I guess they’ve raised the subscription price. I think I’m grandfathered in at $13/mo paid via iTunes which I preload with discounted iTunes cards to knock another 15-20% off the price paid. I do wish I had the metrics and integrated solution. Maybe I’ll upgrade someday.
- kjbfojbejib 7y ago> I do wish I had the metrics and integrated solution. The only metric that matters is how many workouts did you do today, or this week. Unless perhaps you're planning on entering some sort of competitive spinning event all those numbers don't add up to anything.
- cbhl 7y agoIs it normal for the "20-votes-per-share" class B stock to "convert automatically upon ... (ii) ten years from the closing of this offering"?
- SanchoPanda 7y agoEarlier of three events with a hard cap at 10 years, not really. Thats a bit of peace offering to investors re: dual(+) share classes and control.
- SanchoPanda 7y agoThey seem to have been careful to take some lessons from the soul cycle S-1 and roadshow, https://www.sec.gov/Archives/edgar/data/1644874/000119312515270469/d844646ds1.htm https://www.sec.gov/Archives/edgar/data/1644874/000119312515.... That one was eventually pulled. The subscription part is interesting, they did 4x the sales in bikes -connected fitness products- as 2 years ago (719/183), and cogs is ~4x (410/113). But subscription revs are up 5x (181/35) and cogs on that are only up 3x (100/3).
- tempsy 7y agoIt really makes we wonder how we could be on the verge of a recession when companies like this become successful? Maybe I'm just too cheap to ever buy something like this but it feels like a mass marketed luxury good that requires a decent level of consumer confidence to have succeeded.
- losteric 7y agoDo economic models distinguish consumer confidence from ignorance?
- cellis 7y agoI bought one. I like it because it's pretty high quality, I didn't have to pay cash ( using Affirm it's 62/mo /39 months), and I was able to test ride 2 of them for free ( apartment complex has a gym with one, but very hard to get a time to ride ). My girlfriend likes it because it saves tons of time compared to driving to e.g. SoulCycle or a spin class and they have nice social features like a competition ladder. But I don't do the classes, I just use it for the free ride.I try to set new PRs in terms of wattage, peak HR etc. Edit: I also like that you can sync your heart rate/ distance to Apple Health and it counts towards your rings in Apple Activity/Apple Watch.
- 8ytecoder 7y agoI use the one at our gym and I do like it. I have a decent carbon bike and an indoor trainer that I use Zwift with. However I do like the peloton for the classes/instructors. The machine itself is nice and the ride is smooth. The screen is amazing. It pairs with ANT HRMs and Bluetooth earphones. It’s nice to visually see the metrics and have target numbers. Missing ERG is a problem but not a huge one. I don’t think it’s a fair comparison with juicero. Although I’d admit I won’t pay for it - I’m not the target market. I’m primarily an outdoor cyclist.
- jgys 7y ago> compared to driving to e.g. SoulCycle or a spin class Radical idea: rather than choosing between a $2,000 stationary bike for your living room or burning a bunch of fossil fuels to move yourself and your 2,000+ pounds of motor vehicle to a gym to ride somebody else's stationary bike, you could just buy an ordinary bike and ride around outside. You could probably even buy a indoor trainer for your ordinary bike as well, for less than the cost of a Peloton. I mean, you do you, I guess... I just can't comprehend the appeal of paying $2,000 for a bike that doesn't even take you anywhere. ¯\_(ツ)_/¯
- discreteevent 7y agoThis thread on the pretentiousness of the peleton ads (which clearly work for them) is a bit of fun: https://mobile.twitter.com/clueheywood/status/1089699762331217920?lang=en https://mobile.twitter.com/clueheywood/status/10896997623312...
- pastor_elm 7y agoanother company i could have gotten in on on the ground floor for some stock options but was too pragmatic to think they'd be successful
- floatingatoll 7y agoPragmatic in what way?
- tguedes 7y agoWow I was heavily skeptical of Peloton until these numbers. I would have thought who would pay a few thousand dollars for a machine and then an additional $39 a month. But 92% of all customers who have purchased the equipment are still subscribers at the end of June 2019, that is extremely impressive.
- matwood 7y agoDo you spin, and have you ridden a Peloton? Nearly every person I know who likes spin enough to go to spin studios buys a Peloton after test riding one. They did that good of job nailing and improving the spin studio experience. Their risk is that spin studios are a luxury item over and above gym memberships and will be the first things cut in a recession.
- rossdavidh 7y agoTLDR; "We have incurred operating losses each year since our inception in 2012, including net losses of $(71.1) million, $(47.9) million, and $(195.6) million for fiscal 2017, 2018, and 2019, respectively, and expect to continue to incur net losses for the foreseeable future..."
- pushcx 7y agoA figure in the "Opportunity" section has two large inverted cones showing total addressable market. The lie factor[0] of the "Peloton's Current Markets" chart is 4.2. The lie factor of the "U.S. Only" chart is 5.8. [0]: https://infovis-wiki.net/wiki/Lie_Factor https://infovis-wiki.net/wiki/Lie_Factor
- mrnobody_67 7y agoChurn rate is better than I would have guessed. Losses going up 4x year over year to $200m on $1b in revenue is pretty insane though.
- jdalgetty 7y agoWhen you spend that much on the bike you'd better get your money's worth.
- mrnobody_67 7y agoI bought nearly new equipment for my home gym for 1/5th of the retail value on Craigslist... tons of sellers out there.
- TMWNN 7y agoIs it true that the best deals are in February, after people realize they won't use the equipment they bought in January for New Year's resolutions?
- mrnobody_67 7y ago85million cumulative workouts as of June 2019... really low actual usage relative to revenue.
- justinator 7y agoDo they follow the same model as a big chain gym? Hope people get the subscription, but never use it?
- michaelmior 7y agoI don't think their marginal costs increase the same way as a gym. People using their bikes more just means somewhat higher load on their servers for users using the workouts (and I suppose more demand for new content). There is a cost, but I'm guessing it's much lower than the cost of the added wear on gym equipment and the need for extra staff and other costs associated with a gym.
- tbrock 7y agoI’m a mega bear on this. It’s Juicero 2.0 The bike’s only have a lifetime of a couple years and the experience isn’t that great. The promise of software upgrades only take it so far until planned obsolescence kicks in. This is just creating a fleet of useless metal that will have software vulnerabilities up the wazoo in a decades time.
- EForEndeavour 7y agoI'm genuinely curious: > The bike’s only have a lifetime of a couple years What's your source for this figure? > and the experience isn’t that great. According to whom? You? Or the legions of apparently very satisfied subscribers?
- pazimzadeh 7y agoI have been waiting for essentially this, but with racing games onscreen. Does anyone know if they allow, or plan on allowing third party apps and games? I can see a game like Mario Kart being very popular.
- veritas3241 7y agoThat would be amazing... I've never tried a spin class but if I knew that I could play Mario Kart or Burnout or something like that on the bike... what an idea!
- stilist 7y agoAm I doing correct math that they spent about $1200 per new subscription? $324m sales & marketing / (511k - 246k) new members in 2019 = ~$1222. $915000000 revenue / 1800 full-time employees = ~$500k revenue per employee, though.
- asmithmd1 7y agoI was surprised to see how low the gross margin is on their subscription business, it has only recently broken above 50%. The cost of revenue for their subscription business includes licensing the music in their workouts, and the costs to operate their NYC and London studio. I was also surprised to see the margins on the bike itself are about the same as on the subscription business. They have room to lower the price of the bikes to get more customers hooked on that sweet, sweet recurring subscription revenue.
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- eddyg 7y agoI use a Keiser M3i with the Peloton app on an iPad. It’s great. The Peloton app records heart rate and cadence via Bluetooth. I run the Keiser app on my phone to record additional metrics, such as power. Much better solution than being tied to a proprietary Peloton bike while still enjoying the benefits of the always-fresh Peloton classes. Mike biggest complaint is the music change. Way too many knock-off versions of songs by “studio musicians” instead of the original artists... https://www.engadget.com/2019/04/25/peloton-users-music-complaints-licensing-lawsuit/ https://www.engadget.com/2019/04/25/peloton-users-music-comp...
- buttcoinslol 7y agoI wish you didn't have to wait a week to buy options for newly listed stocks, I want to write calls and buy puts on this ticker Once consumer credit dries up, this company goes poof
- trimbo 7y agoI will invest in this company because I love the product and so does everyone I know who uses it. But the general and administrative costs in 2019 seem ridiculously high. The tender offer last year only makes up 1/3 of that increase. What's up with that?
- anotherareaman 7y agoif you need all the S-1 tables in one excel file (free but collects an email; FD: I work there) https://get.sentieo.com/peloton-ipo/ https://get.sentieo.com/peloton-ipo/
- rickyc091 7y agoDoes anyone know if fitness benefit reimbursement would apply to these?
- woeirua 7y agoThese guys are following the Uber business model. Burn as much cash as possible up front to generate buzz and big numbers for the IPO, worry about profitability later. The problem is that, as Uber has shown, profitability never comes. Peloton will limp around for a few years after the executives have all taken their sweet IPO money home and become a shell of what it once was. Too bad.
- mthurmond 7y agoI just wrote this post to summarize my views on the S-1. Focused more on the skeptical side, since I know there will be plenty of euphoria to counter-balance it: https://medium.com/@mattthurmond/a-skeptical-look-at-pelotons-s-1-3f0a5d67ddb3 https://medium.com/@mattthurmond/a-skeptical-look-at-peloton...