Yahoo Finance Peloton reports $1.2 billion loss, forecasts further revenue declines
Peloton Interactive (PTON) reported an operating loss of $1.2 billion in its fiscal fourth quarter as revenue came in below Wall Street expectations.
Shares plunged more than 16% in pre-market trading following the results, one day after the exercise-bike maker saw its stock close up more than 20%.
The company said in a release Thursday before the opening bell its fourth quarter revenue totaled $678.7 million, down 28% from last year. The figure also came in below the $685.9 million analysts had expected, according to estimates compiled by Bloomberg.
Peloton's loss per share in the fourth quarter, which included $415 million in restructuring charges, totaled $3.68 per share. The company's adjusted EBITDA loss in the quarter came in at $288.7 million.
"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 issues," CEO Barry McCarthy said in a letter to shareholders.
In its first quarter, the company expects revenue to come in between $625-$650 million, indicating an expected decline of 6% over the fourth quarter and 21% from the same period last year. Adjusted EBITDA in Peloton's first quarter is expected to reflect an adjusted loss of $90-$115 million, compared to the $93.2 million expected by analysts.
"Our Q1 outlook reflects near-term demand weakness associated with our recent hardware price increases as well as typical seasonal demand softness," McCarthy said in the letter.
Peloton saw 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, an increase of 36% from Q4 2021.
The company said it expected subscriptions to stay flat in the first quarter.
While growth in its subscriber revenue was a bright spot during the quarter, the company saw the number of total members fall by 2% on a quarterly basis — or a count of 143,000 — to 6.9 million.
And the average net monthly churn rate for the quarter rose to 1.41% from 0.73% in the same quarter last year, higher than the company expected internally.
The company indicated it will revise its approach to reporting operating metrics and forward guidance in its 2023 fiscal year, attributing the move 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 to the current quarter for at least the duration of the next fiscal. year. The fitness-equipment maker will also stop reporting quarterly engagement metrics but will continue to report subscription churn.
In his letter to shareholders, McCarthy emphasized what he called a "positive story behind the headline loss" for Peloton, pointing to cost-cutting measures the company has undergone as it looks to revive cash flow. These initiatives included outsourcing all manufacturing for its connected fitness hardware, hundreds of layoffs, closing some of its showrooms, and launching a self-assembled option for the original Peloton Bike.
"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 issues," McCarthy said.
The company also reported results one day after unveiling a deal to sell its fitness equipment and apparel on Amazon as Peloton continues efforts to turn its business around and regain investor confidence.
McCarthy said in Thursday's letter, "We remain engaged in productive conversations with other prospective retail partners and are hopeful we’ll be able to announce additional partnerships soon."
"When you look at our financial performance in Q4, I suspect what you see will be a function of where you sit," McCarthy began his 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.
"They will say these threaten the viability of the business," he added. "But what I see is significant progress driving our comeback and Peloton’s long-term resilience."
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Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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