Peloton announces a net loss of $757 million in the first quarter and goes into debt

Turning around on an exercise bike is tough. Running an exercise bike and a fitness business is even harder. Peloton shares fell 20% after reporting a dismal net loss of $757 million on Tuesday.

Barry McCarthy, CEO of the troubled company, said in a letter to shareholders that it was “thinly capitalized”. The company had just $879 million in cash at the end of the first quarter. This forced Peloton to borrow $750 million over five years from JPMorgan and Goldman Sachs. The company’s sales fell 15% in the quarter, down to $964.3 million from $1.26 billion last year. The peloton losses come as pandemic restrictions ease and more people return to the gym rather than continuing to train at home.

“Turnarounds are hard work,” McCarthy said. “It’s intellectually challenging, emotionally draining, physically exhausting and all-consuming. It’s a full-contact sport.”

The company has made several changes in recent months to both products and personnel as it attempts to return to its former glory. McCarthy took the helm as CEO in February, moving former CEO John Foley to executive chairman. Peloton also brought in Andrew Rendich in March as director of supply chain to fix its long mismanaged equipment supply.

After temporarily halting production of its bikes in January and laying off 41% of its sales and marketing staff in February, the company has cut prices for its equipment in an attempt to attract more sales. It also plans to increase the cost of its membership from June 1 and is launching a subscription service called One Peloton Club, which will allow customers to pay for bikes and lessons with a monthly subscription.

McCarthy said Peloton is seeing good feedback from these changes. Lower hardware prices have increased daily unit sales by 69%, while the incoming increase in subscription prices has “so far only resulted in a modest increase in churn.”

“The strategy wasn’t flawed, but our execution was,” McCarthy said of the company. “Better systems. Better decision-making. Better execution. We’re working on it.”

Still, the company has around 7 million subscribers, a far cry from McCarthy’s lofty long-term goal of gaining 100 million subscribers. With debt financing, however, the company’s ascent increased a bit.

Correction: An earlier version of this story misstated the month in which the layoffs occurred. This story was updated on May 10, 2022.

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