Peloton Interactive Inc has posted losses of more than $1.2 billion in its fiscal fourth quarter as revenue plunged, and the maker of bikes and treadmills warned that it will spend more cash than it brings in for several more months.
The company lost $2.8 billion in the year ended June 30, 2022, compared with a $189 million loss in the prior year.
It saw its revenue for the fourth quarter drop to $679 million, down nearly 30% from a year earlier as declining exercise-equipment sales more than offset higher revenue from subscriptions.
For the first time in the most recent quarter, however, Peloton’s subscription revenues were greater than equipment sales. Peleton chief executive Barry McCarthy, who took over in February 2022 and previously worked at Spotify Technology and Netflix Inc, aims to make the firm primarily a subscription-based company. Subscriber revenue for the fourth quarter was $383 million, while equipment sales were $296 million.
READ: Peloton stock soars as company announces agreement to sell exercise bikes and fitness accessories through Amazon
Peloton’s restructuring and operations burned through another $412 million in cash in the quarter to June 30, 2022, after going through $650 million in each of the prior two periods. The company ended June with $1.25 billion in cash reserves and a $500 million credit line.
McCarthy said the company is taking steps to shore up its finances, with sweeping layoffs to outsourcing the manufacturing of its fitness equipment.
“The naysayers 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 these threaten the viability of the business,” McCarthy said in a letter to shareholders. “But what I see is significant progress driving our comeback and Peloton’s long-term resilience.”
Demand for Peloton’s bikes and treadmills has dropped, and the company’s subscriber count, which grew fourfold during the height of the COVID-19 pandemic, rose by just 4,000 in the quarter ended June 30, 2022. Peloton predicts that the number will remain flat in the current quarter.
On Wednesday, Peleton revealed that it would start selling its equipment and apparel on Amazon.com Inc’s website, a move that will expand distribution of its equipment. Earlier this month, the company said it would cut around 800 jobs in an effort to reduce costs.
One of the pandemic’s biggest winners, Peloton has struggled to adapt as Americans revert to pre-pandemic habits and tighten spending amid inflation near its highest level in decades.
In early New York trading on Thursday, Peloton shares dropped 18.3% to $11.02. Its share price to Wednesday's close was down 88% from a year ago even after a 20% boost from the Amazon.com news on Wednesday.
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Contact the author at jon.hopkins@proactiveinvestors.com