Peloton Financial Statement Analysis

Peleton Financial Statement Analysis
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Profitability
To evaluate Peloton’s profitability for the last three financial years- 2020, 2021, and 2022, revenue growth, operating expenses growth, net income growth, gross margin, and operating margins will be considered (Peloton, 2022). The listed elements will provide an indication of the company’s profitability for the last five years.
Revenue Analysis
Peloton’s revenues and gross profit have been considerably volatile. In 2020, the company experienced significant revenue growth of 120.26% compared to the previous year, which can be attributed to the COVID-19 pandemic and increased demand for at-home fitness equipment. However, in 2021, Peloton's revenue growth slowed down significantly, with revenue decreasing by 10.93%. The decline can be attributed to a significant decline in revenues generated by the company in Connected Fitness Products, with the revenues from the segment decreasing from $3.1 billion to $2.2 billion. Comparatively, the company’s subscription business continued expanding within the same period, although at a lower rate. 2020-2021 saw the subscription revenue grow by 140 percent, compared to the 70 percent recorded by the company in FY 2022.
Notably, the decrease in revenue can be attributed to the product recall of Tread+ and Tread products. Peloton estimates that it recorded a US$ 139.9 million revenue reduction due to the recall because the recall was accompanied by the decision to stop the sale of Tread+ and Tread products until the products were upgraded.
Expenses Analysis
The company has also experienced significant growth in operating expenses over the last three years. In 2022, the company's total operating expenses were $3.43 billion, which is an increase of 109.1% compared to the financial year 2021. The increase can be attributed to higher sales and marketing expenses, as the company invests in advertising and promotional campaigns to attract new customers. Due to the increased operating expenses, the company's net loss has increased significantly in the last three years. In 2022, Peloton reported a net loss of $2.83 billion, which is a significant increase compared to the previous year's net loss of $189 million. This increase can be attributed to higher operating expenses and significant investments in growth initiatives, such as expanding its product offerings and expanding its global footprint.
To minimize the risk of uncontrolled operating expenses, Peloton has introduced a restructuring plan that is intended at enabling the company to achieve an operational focus that will support the company’s growth. The restructuring plan saw the company incur a charge of US$ 611.3 million in FY 2022. The charges consisted of US$ 109.1 million in severance pay, 15.4 million in consultation charges, US$ 373.8 million in non-inventory asset write-downs, US$ 56.5 million in stock-based compensation, and US$ 56.4 million in inventory markdown. The implementation of the restructuring plan is one of the factors that led to a significant increase in the company’s expenses.
Another significant contributor to the company’s ...