Peloton on Thursday reported a wider-than-expected loss in the fiscal third quarter, but pointed to signs of progress with its turnaround plan.
Shares of the company dropped more than 2% in pre-market trading.
The connected fitness company reported connected fitness subscription growth and a reduction of free cash flow losses.
Here’s how the connected fitness equipment company did in the three months that end March 31 compared with what Wall Street was anticipating, based on a survey of analysts by Refinitiv:
- Loss per share: 79 cents vs. 46 cents expected
- Revenue: $749 million vs. $708 million expected
Peloton’s net loss for the period was $275.9 million, or 79 cents per share, compared with a loss of $757.1 million, or $2.27 per share, a year earlier. It marked the ninth quarter in a row of the company reporting losses.
Revenue declined 22% from a year ago, dropping from $964.3 million.
The company ended the quarter with about 3.1 million connected fitness subscriptions, up 5% from the year-ago period. Connected fitness subscribers are people who own a Peloton product, such as its Bike or Tread, and pay a monthly fee for access to live and on-demand workout classes.
Average net monthly connected fitness churn ticked up slightly from a year ago, too. It came in at 1.1% for the quarter, consistent with the prior quarter, but above the year-ago churn level of 0.8%.
Peloton’s overall membership, however, did not grow. It ended the quarter with 6.7 million total members, the same as the end of the prior quarter and down from 7 million in the year-ago period.
In a letter to shareholders, CEO Barry McCarthy said Peloton is looking toward the future. The company later this month will relaunch the brand and introduce a new version of the Peloton app with a tiered membership structure, he said.
McCarthy added the relaunch aims to shake up how people view Peloton, so they think of its wide variety of fitness offerings — not just its well-recognized bikes.
Yet he warned of challenges ahead. He said the company typically experiences a seasonal decline in subscriber growth in the fourth quarter, which stretches across summer months. He said he expects one this year, too.
“Notwithstanding the relaunch, Q4 will be among our most challenging from a growth perspective,” he said.
The fitness company has sought to stabilize its business and find a path to profitability again, after seeing a sharp reversal of fortunes. Sales of its bikes and treadmills slowed dramatically after a pandemic-related surge.
That forced the company to cut costs by laying off thousands of employees, shuttering many of its stores and outsourcing its last-mile delivery and manufacturing. Its co-founder and former CEO John Foley also stepped down last year and later resigned as executive chairman.
As fitness equipment sales continue to lag, Peloton has focused on other ways to drive growth and attract new customers. Under McCarthy, a former Spotify and Netflix executive, the company has emphasized increasing subscriptions.
The company has tried to nudge sales of equipment by tinkering with prices, offering a rental option and adding rowing machines to its lineup. It got into wholesale by allowing Amazon and Dick’s Sporting Goods to carry its equipment. Peloton also struck a deal with Hilton to put bikes in all of its U.S. hotels.
Separately, Peloton announced Thursday that it had reached an agreement with Dish Technologies over a patent dispute. The company said it will pay Dish $75 million to settle an International Trade Commission complaint.
The company had previously said it aimed to reach break-even cash flow on a quarterly basis in the second half of its fiscal year 2023. McCarthy said in the letter Thursday that the settlement will significantly pressure free cash flow in the current fiscal quarter.
He added that the temporary hit is worthwhile because it “eliminates a cloud of uncertainty and an enormous distraction to the day-to-day operation of our business.”
Peloton’s stock has risen about 11% so far this year. Yet its shares are still less than half of its 52-week high of $18.86 — and just a tiny fraction of their over $100 highs during the early years of the pandemic.
Peloton’s market cap is $3.06 billion, after reaching as high as almost $50 billion in early 2021.
This story is developing. Please check back for updates.