Earnings Results: Peloton loses more than $1 billion in latest quarter and stock dives

Daily Trade

Fresh off an announcement that it would begin selling its bikes on Amazon.com Inc., Peloton Interactive Inc. posted a sharp loss for its most recent quarter along with nearly flat sequential growth in connected fitness subscribers.

The maker of connected fitness equipment logged a fiscal fourth-quarter net loss of $1.24 billion, or $3.68 a share, whereas it lost $313 million, or $1.05 a share, in the year-earlier period. Analysts tracked by FactSet were anticipating a 76-cent per-share loss on a GAAP basis.

Chief Executive Barry McCarthy noted in the company’s shareholder letter that $415 million of the company’s $1.20 billion fiscal fourth-quarter operating loss came from restructuring charges.

“The loss reflects the substantial progress we made this last quarter re-architecting the business to reduce the current and future inventory overhang, converting fixed to variable costs, and addressing numerous supply chain issue,” he continued.

Peloton’s
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+20.36%

revenue declined to $679 million from $937 million a year before and came in below the FactSet consensus, which was for $682 million. The company generated $296 million in revenue from products and $383 million from subscriptions.

Shares were down 15% in premarket trading Thursday.

“When you look at our financial performance in Q4, I suspect what you see will be a function of where you sit,” McCarthy said in the letter to shareholders. “The naysayers will look at our Q4 financial performance and see a melting pot of declining revenue, negative gross margin, and deeper operating losses.”

McCarthy, however, sees “significant progress driving our comeback and Peloton’s long-term resilience,” though milestones like “new executive leadership, renegotiated supply contracts, and significantly reduced cash outflow.”

The company ended the fiscal fourth quarter with 2.97 million connected fitness subscriptions, whereas analysts were modeling 2.98 million. The company had 2.96 million connected fitness subscribers in the fiscal third quarter.

“We anticipated a sequential increase in churn this quarter due to seasonal trends as well as the announcement of our All-Access Membership subscription price increase,” the company said in its letter to shareholders. “Exiting the quarter, churn has been tracking lower than Q4 levels.”

For the fiscal first quarter, Peloton expects $625 million to $650 million in revenue, along with 2.97 million connected fitness subscribers. Analysts tracked by FactSet were expecting $757 million in revenue as well as 3.03 million connected fitness subscribers.

The earnings come amid a tumultuous period for Peloton, a former pandemic darling that now must contend with evolving consumer preferences. The company has been trying to cut costs and reduce inventory amid slowing demand.

Earlier this week it announced a plan to start selling certain products on Amazon
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a move that helped send shares more than 20% higher in Wednesday’s session.

Peloton previously was limited to direct-to-consumer sales, and JMP Securities company Andrew Boone thought that the new arrangement, and potential other retail partnerships down the line, could help Peloton operate under more of a variable-cost model as the company could reduce its reliance on fixed-cost showrooms.

“[W]e believe Peloton is increasingly becoming a cost savings story,” he wrote Wednesday after the Amazon announcement.

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