Peloton earnings show bigger-than-expected losses, lower Q1 outlook

Peloton earnings show bigger-than-expected losses, lower Q1 outlook

Peloton Interactive (PTON) posted an operating loss of $1.2 billion in its fiscal fourth quarter as revenue fell short of Wall Street expectations.

Shares are down more than 16% in premarket trading after the results, a day after the exercise bike maker saw its shares close more than 20%.

The company said in a statement Thursday before the opening bell that its fourth-quarter revenue totaled $678.7 million, down 28% from last year. The figure was also below the $685.9 million that analysts had expected, according to estimates compiled by Bloomberg.

Peloton’s fourth-quarter loss per share, which included $415 million in restructuring charges, totaled $3.68 per share. The company’s adjusted EBITDA loss for the quarter was $288.7 million.

“The loss reflects the substantial progress we’ve made this past quarter re-architecting the business to reduce current and future excess inventory, converting fixed to variable costs, and addressing various supply chain issues,” CEO Barry McCarthy said in letter to shareholders.

For its first quarter, the company expects revenue to be between $625 million and $650 million, indicating an expected decline of 6% from the fourth quarter and 21% from the same period last year. Peloton’s first-quarter adjusted EBITDA is expected to reflect an adjusted loss of $90 million to $115 million, compared to the $93.2 million analysts expected.

“Our first-quarter outlook reflects the short-term demand weakness associated with our recent hardware price increases, as well as the typical softness of seasonal demand,” McCarthy said in the letter.

CORAL GABLES, FLORIDA - JANUARY 20: People walk past a Peloton store on January 20, 2022 in Coral Gables, Florida.  Reports indicate that Peloton Interactive Inc is temporarily halting production of its bikes and treadmills following a drop in demand for the products.  (Photo by Joe Raedle/Getty Images)

People walk past a Peloton store on January 20, 2022 in Coral Gables, Florida. (Photo by Joe Raedle/Getty Images)

Peloton recorded nearly 2.97 million connected fitness subscriptions in its fiscal fourth quarter, unchanged from the previous quarter and up 27% from the same period last year. Subscription revenue totaled $383.1 million, up 36% from the fourth quarter of 2021.

The company said it expects subscriptions to remain stable in the first quarter.

While growth in its subscriber revenue was a bright spot during the quarter, the company saw total membership drop 2% on a quarterly basis – or a count of 143,000 – to 6.9 million.

And average monthly net churn for the quarter rose to 1.41% from 0.73% in the same quarter last year, above what the company had internally expected.

The company indicated it will review its approach to reporting operational metrics and forward guidance in its fiscal 2023, attributing the change to “broader macroeconomic uncertainties” and the “pace and number of changes” Peloton is making to its business.

Peloton will restrict its formal revenue, gross margin, adjusted EBITDA and net subscriber addition guidance for the current quarter for at least the next fiscal year. year. The fitness equipment maker will also stop reporting quarterly engagement metrics, but will continue to report lost subscriptions.

In his letter to shareholders, McCarthy emphasized what he called a “positive story behind the loss” for Peloton, pointing to the cost-cutting measures the company has taken as it tries to revive cash flow. These initiatives have included outsourcing all of their connected fitness hardware manufacturing, hundreds of layoffs, closing some of their showrooms, and launching a self-assembly option for the original Peloton Bike.

“The loss reflects the substantial progress we’ve made this past quarter re-architecting the business to reduce current and future excess inventory, converting fixed costs to variables, and addressing various supply chain issues,” McCarthy said.

The company also released earnings a day after revealing a deal to sell its fitness equipment and apparel on Amazon, as Peloton continues efforts to turn around its business and regain investor confidence.

McCarthy said in Thursday’s letter, “We remain engaged in productive conversations with other potential retail partners and look forward to announcing additional partnerships soon.”

“When you look at our fourth quarter financial performance, I suspect what you see will be a function of where you are,” McCarthy began his letter to shareholders. “Pessimists will look at our fourth-quarter financial performance and see a melting pot of declining revenue, negative gross margin and deeper operating losses.

“They will say it threatens the viability of the business,” he added. “But what I see is significant progress boosting our return and Peloton’s long-term resilience.”

Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc

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