Peloton CEO sees $1.2 billion loss as sign of ‘substantial progress’

Peloton numbers don’t look good.among them Fourth Quarter 2022 Earnings Announcement This morning, the company reported a $1.2 billion operating loss, a 28% drop in revenue, a decline in membership and a monthly subscriber churn rate of over 1% for the first time in a long time. (Maybe ever?) This is just the tip of the iceberg. In short, the loss was greater than both Peloton and its investors had anticipated.

Still, Peloton CEO Barry McCarthy would have you believe the numbers actually depict “substantial progress” and the true beginning of Peloton’s comeback story.

“Naysayers will look at our financial performance in the fourth quarter and see a crucible of declining revenues, negative gross margins and even severe operating losses. I would say,” McCarthy said in a letter to shareholders. McCarthy says investors are happy that a good chunk of that $1.2 billion figure (his $415 million, to be exact) is the cost of getting back on track. must.

Still, it’s hard to spin such a big loss as a win if that’s your thing. sixth Perhaps that’s why McCarthy evoked dramatic metaphors involving speeding cargo ships and daring rescues in the Mediterranean.

To conclude his letter to shareholders, McCarthy wrote:

When I was in high school, I worked on a cargo ship for three months in the summer. Shortly after midnight on my second voyage, I was asleep when I was awakened by an alarm in the general compartment. My reporting station was on the bridge. Fear is a great motivator. I changed while running. The 720-foot ship she sailed at 27 knots and had a stiff rudder. The ship recovered sharply to her starboard, her steel hull quivering. The captain tried to turn her ship around, but a ship that big and fast would take miles to turn her around. We saved the lives of her two men that night. They had been missing in the Mediterranean waters for several days. happy, happy ending.

A platoon is like that cargo ship. We sounded the alarm in the general district. Everyone is at their station. We will continue to add new information to evolve our market strategy to restore growth. The question is when the ship will respond. Our target is FY23.

Somewhere in that complex metaphor lies a kernel of truth. Peloton recently made some significant changes to “get back on track.” 3rd layoff, subscription fee increaseexperimenting with product pricing, planning retail store closures, shrinking distribution and manufacturing networks, and redesigning bicycles. so that it can self-assemble for easier shipping. All these efforts have led to financial progress. Instead of spending $650 million in cash each quarter, that number improved to $412 million in the fourth quarter. Had it been, the $1.2 billion loss could have been much worse.

Overall churn increased, but the churn rate One Peloton Club Pilot Program It was lower than expected, less than 3%. The program allows members to pay a flat monthly fee of $89 for a combined bike and membership fee. In September, the company plans to expand marketing of the program nationwide. He also pointed to the fact that the program is attracting younger, more value-oriented shoppers.

That said, McCarthy was hesitant to “get serious” about bike rentals as a panacea for the company’s financial woes. That’s because the company hasn’t yet figured out whether the program is “a nuclear bomb or a road to the promised land.”

McCarthy has been vocal about pivoting to software.
Photo by Amelia Holowaty Krales/The Verge

Subscriptions were also less dire. It’s roughly flat since last quarter, but up 27% from this time last year. Subscription revenue also increased 36% from last year to $383.1 million, surpassing hardware revenue across all configurations. McCarthy has been bullish on the Peloton subscription as the key to success since day one, and it looks like his hard work is starting to pay off.

McCarthy also highlighted members’ enthusiasm for the reopened Peloton Studios in New York and London as a sign of continued engagement. Specifically, he named Lizzo as a superfan in a letter to shareholders, saying that a sudden studio drop-in from the singer would result in 426,000 workouts and “in any cycle class within seven days of the air date.” It led to the largest number of participants in the

It involves sheer optimism, barrel scraping, However, it’s a bombastic rhetoric to persuade investors.Platoon Stock down 13% It didn’t jump 20% in the news 24 hours ago. Selling bikes in partnership with AmazonThat said, McCarthy acknowledged that much work remains and it is likely that we won’t see the fruits of that effort until 2023.

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