Peloton posted their quarterly filings in the beginning of February 2024 and their share price immediately dropped. Looking at the filing and it is easy to see why. Year over year, there as a $49.1 million decrease in total revenue, but the where the decrease came from is the interesting aspect. The connected fitness (hardware sales and subsequent memberships) decreased by 62.3 million, while the subscription revenue increased by 13.2 million. The cost of revenue is much higher for connected fitness, at almost 100% of the revenue it produces, whereas the cost of subscription is 33% of the revenue it generates. Since subscription revenue has capacity for scale (production costs are fixed) it would appear that this is the future of Peloton's business. Sales and marketing continue to be a large percentage of revenue, despite not having much to show in terms of new acquisitions.
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