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Peloton (PTON) fiscal Q3 2021 losses mount


Peloton stationary bikes for sale in Dedham Massachusetts on Wednesday, February 3, 2021

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PelotonOn Tuesday, the company reported a larger-than-expected quarter loss as well as a sharp decline in sales. This was due to inventory piling up in warehouses that ate at cash. 

A connected fitness equipment company also indicated a poor outlook for fiscal fourth quarter sales, due to softer demand. It anticipates that the business will achieve a positive outlook for fiscal fourth quarter sales. planned subscription price hikesSome users may decide to end their monthly subscriptions. 

Peloton’s excessive inventory forced it to reconsider its capital structure. Chief Executive Officer Barry McCarthy stated this in a letter to shareholders. Peloton was “thinly capitalized” at $879million in cash and equivalents unrestricted, he stated. 

This week, the company signed an agreement letter that was binding. JPMorgan Goldman SachsThe CEO stated that $750 million of five-year debt could be borrowed. These two banks were the main contributors to Peloton’s IPO which took place in 2019.

McCarthy stated that he is confident that the company will return to zero cash flow by 2023 with the capital injection from the term loan. On a conference call following earnings, McCarthy stated: “We have plenty of capital to achieve that.” No matter what the economy does, it will be there. “Full stop”

McCarthy stated in the letter that he was focused on stabilizing Peloton’s cash flow and getting the right people into the right positions to grow the company again. McCarthy says that he has learned from past experiences how to increase subscription revenue. Spotify Netflix. Peloton, which has never taken this step before, said that they will soon start selling their products through third party retailers. 

Based on an analysis of Wall Street analysts, here’s what Peloton did over the three months ending March 31, versus expectations. 

  • Loss Per Head: $2.27 vs. 83 cents expected 
  • Revenue: $964.3 million vs. $972.9 million expected 

Peloton’s fiscal third quarter losses increased to $757.7 million or $2.27 per shares, up from an earlier net loss of $8.6million or 3 cents per share one year. This was more than analysts expected, which is 83 cents per share. 

From $1.26billion a year ago, revenue fell to $964.3million. The company saw a decrease in revenue of $964.3 million, which was below its expectations at $972.9million. This marked the company’s first year-overyear drop in sales since going public in 2019.

Peloton claimed that the fall was caused mainly by a drastic reduction in consumer demands following the collapse of the Covid-19 pandemic‘s peak. It said that treadmill sales were partially compensating this. 

But Peloton also noted that it faced higher-than-anticipated returns of its Tread+ machine, which was recalled last MayThis amount was approximately $18million and affected the company’s quarterly results. 

Peloton’s connected fitness products generated sales of $594million and subscriptions made $370 million during the last period. 

This quarter saw the company add 195,000 connected fitness subscribers to its 2.96million members. The company has connected fitness subscribers who pay a monthly fee for access to live or on-demand classes. These include yoga, meditation and cycling.

Peloton’s average monthly net connected fitness churn (which is used to determine its retention of connected subscribers) improved to 0.75 percent during this period, as opposed to 0.79% for the second quarter.

Peloton’s churn rate being lower is good news, because it indicates that more people will stay and continue to pay for their memberships. Peloton’s risk is, though, that its subscription prices will rise and the churnrate will increase.

McCarthy wrote that “our users are engaged and our subscriber rate is below 1% which is the best I have seen.” This success is a challenge, and there’s a way to continue and expand it.

“Turnarounds can be hard work”

Peloton’s dim outlook on its current quarter was the most disappointing for investors. This period ends on June 30, and is also the end of Peloton’s fiscal Year.

McCarthy stated in a letter addressed to shareholders, “turnarounds require hard work.” McCarthy shared with analysts that Peloton’s supply chain was weaker when he arrived in the country, after a conference call following earnings.

McCarthy wrote that the company is working fast to rectify any mistakes, which included right-sizing production. Peloton’s fourth-quarter free cash flow was “meaningfully higher” than the previous quarter.

The company’s shares fell by more than 15% during early trading on Tuesday, after hitting a new all-time low. Its market cap was now below $4 billion.

Peloton expects fourth quarter revenue between $675 million to $700 million. According to estimates by Refinitiv, analysts had expected $821.7million. 

According to the company, connected fitness subscribers will reach 2.98 million. This is just 1% more than in the third quarter. 

Peloton stated that it had seen less demand than February, but this has been partly offset by increased sales after it cut its prices for Bike+, Tread and Bike+ machines.

It said that the soft subscriber forecast does not take into consideration a “modest adverse impact” of subscription price increases, which will be in effect from next month.

Peloton acknowledged that it had seen “a small increase” in subscription cancellations in the period since mid-April when it made the price hikes public. However, it anticipates that the effect will diminish in fiscal 2023. 

McCarthy stated that Peloton would work to increase awareness about its digital app. This allows users to access the workout content and pay without having to own a Tread or Bike.

“We are still known for being a stationary bike business. He stated in the letter that the app had never been at center of any marketing campaign or growth strategy. The digital app must be the tip of the spear.

Peloton will also expand, said he. a recent test where customers can pay a combined flat rateFor one of its stationary bikes, and to access the fitness club. You can return your Bike if you cancel.

Peloton’s CEO stressed that the company must grow into international markets to reach its 100 million member goal.

Peloton shares fell more than 60% in the past year. Tuesday’s losses are not included. Stock closed Monday trading at $14.13 per Share, well below the $29.0 IPO price.