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Peloton (PTON) fiscal Q3 2021 losses mount


A Peloton stationary bike for sale at the company’s showroom in Dedham, Massachusetts, U.S., on Wednesday, Feb. 3, 2021.

Adam Glanzman | Bloomberg | Getty Images

Peloton on Tuesday reported a wider-than-expected quarterly loss and a steep decline in sales, as inventory piled up in warehouses and ate away at the company’s cash. 

The connected fitness equipment maker also offered up a weak sales outlook for the fiscal fourth quarter, citing softer demand. The company anticipates planned subscription price hikes may lead some users to cancel their monthly memberships. 

Peloton’s shares closed down nearly 9% at $12.90 Tuesday, a new low for the stock. Its market valuation is more than $4 billion after hitting $50 billion early last year.

Peloton’s excess inventory forced the company to rethink its capital structure, Chief Executive Officer Barry McCarthy said in a letter to shareholders. Peloton finished the quarter “thinly capitalized” with $879 million in unrestricted cash and cash equivalents, he said. 

To address this, the company earlier this week signed a binding commitment letter with JPMorgan and Goldman Sachs to borrow $750 million in five-year term debt, according to the CEO. The two banks led Peloton’s IPO in 2019.

With the fresh capital infusion from the term loan, McCarthy said he’s confident the company can return to free cash flow positive by fiscal 2023. “We’ve got plenty of capital to do that,” he said on a post-earnings conference call. “Regardless of what happens in the economy. Full stop.”

McCarthy said in the letter he is focused on stabilizing Peloton’s cash flow, getting the right people in the right roles and growing the business again. Expanding subscription revenue is a centerpiece of McCarthy’s strategy, something he takes from his prior experiences at Spotify and Netflix. He also said Peloton will soon be selling its products through third-party retailers, a step the company has not taken before. 

Here’s how Peloton did in the three-month period ended March 31 compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv: 

  • Loss per share: $2.27 vs. 83 cents expected 
  • Revenue: $964.3 million vs. $972.9 million expected 

Peloton’s losses widened in the fiscal third quarter to $757.1 million, or $2.27 per share, from a net loss of $8.6 million, or 3 cents a share, a year earlier. That came in larger than the per-share loss of 83 cents that analysts had been looking for. 

Revenue dropped to $964.3 million from $1.26 billion a year earlier. That was short of expectations for $972.9 million and marked the company’s first year-over-year decline in sales since it went public in 2019.

Peloton said the drop was primarily driven by a steep reduction in consumer demand coming off of the Covid-19 pandemic‘s peak. That was partially offset by higher treadmill sales, it said. 

But Peloton also noted that it faced higher-than-anticipated returns of its Tread+ machine, which was recalled last May, that totaled…



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