Peloton’s quarterly loss exceeds $1.2 billion

Peloton Interactive Inc.And the

PTON -19.25%

Racing to save herself, she will dismiss some basic aspects of her decade-old business model.

The internet-connected fitness equipment maker posted a loss of more than $1.2 billion last quarter as revenue fell and the company warned that it will spend more money than it earns for several more months. Peloton lost $2.8 billion in the year ended June 30, compared to a loss of $189 million the year before.

Losses come Demand for Peloton bikes and treadmills has decreased The number of people subscribing to the company’s fitness classes stagnated after having grown fourfold since early 2020. The company had about 3 million subscribers to its related fitness offerings at the end of the June quarter.

Barry McCarthy, Peloton CEO, aims to make Peloton essentially a subscription-based company.


picture:

Kevin Deitch/Getty Images

Peloton shares fell nearly 20% in morning trading, as the company posted bigger losses and weaker revenue than analysts had expected. As of Wednesday’s close, its stock price is down 88% from a year ago.

The naysayers will look at us [fourth-quarter] Financial performance We see a melting pot of diminishing revenue, negative gross margin and deeper operating losses. “They will say it threatens the viability of the company,” CEO Barry McCarthy said in a letter to shareholders. “But what I see is significant progress driving our comeback and Peloton’s long-term resilience.”

Peloton has long sought out a wealthy customer base with stationary bikes that cost up to $2,500, and worked to ensure that only its owners were able to connect to popular exercise classes.

Mr. McCarthy, Who took office in FebruaryThe company will attract more frugal customers and make its exercise classes, which are often accessed through screens on Peloton equipment, compatible with competitors’ exercise products, he said.

He said the company is also trying to attract more people through it Selling equipment and apparel through Amazon.com Inc.’s e-commerce platform. To allow people to rent bikes through a subscription. Peloton has historically offered two subscription options, one in which courses connect to bikes and treadmills, and cheaper options in classes that are disconnected.

“You never know which initiative will get us where we want to go, but I’m confident of the cumulative effect,” McCarthy said in a call with analysts.

The efforts come as Peloton’s financial conditions deteriorate.

Revenue for the June quarter fell to $679 million, down nearly 30% from a year ago as lower sales of exercise equipment offset higher revenue from subscriptions.

The company’s restructuring efforts contributed to a $412 million cash burn last quarter, after $650 million passed in each of the previous two periods. It ended in June with a cash reserve of $1.25 billion and a credit line of $500 million.

Peloton is taking steps to support its financial resources, from sweeping hairstyles for workers to me Manufacturing Outsourcing of its own fitness equipment. The company said earlier this month that it would cut about 800 jobs in an effort to cut costs, after it announced in February that it would lay off about 2,800 workers. Executives said the cost-cutting aims to ensure the company retains at least $1 billion in cash on hand.

Peloton, one of the biggest winners of the epidemic Struggle to adapt With Americans returning to pre-pandemic habits and spending tightening amid inflation near its highest level in decades. Americans spend less on fitness at home, from selling equipment to connected workouts, as they return in droves to gyms and become more cautious about spending available money amid economic uncertainty.

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McCarthy’s predecessor, Peloton co-founder John Foley, spent hundreds of millions of dollars to expand the company’s manufacturing and supply, betting that demand would continue as the pandemic subsided. Besides replacing Mr. Foley, the company earlier this year made changes to its board of directors and said it would Plans to build a $400 million factory canceled in Ohio.

For the first time, in the last quarter, subscription revenue for Peloton was greater than equipment sales. Mr. McCarthy, who worked previously in

Spotify Technology SA

And the

Netflix.

, aims to make Peloton primarily a subscription-based company. Subscriber revenue for the quarter was $383 million. Equipment sales amounted to $296 million.

Peloton’s subscriber count increased by just 4,000 in the quarter ended June 30 and the company expects the total number of subscribers to remain flat in the current quarter.

It’s a big change since the start of 2021, when Peloton’s quarterly revenue peaked at $1.2 billion, and exercise equipment accounted for more than 80% of sales.

The company said it expects total revenue of between $625 million and $650 million for the current quarter, which ends September 30.

McCarthy, in his letter to the investor, likened the Peloton to a dangerously capsized cargo ship he was on as a high school student when the crew made a dramatic recovery.

“Peloton is like that cargo ship,” he said. “We have sounded the alarm to the public. Everyone is at their station.”

Write to Sharon Terlep at [email protected]

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