Peloton Interactive reported worse-than-feared fourth-quarter results as costs of its restructuring efforts surged while issuing a downbeat outlook for the first quarter.
Net loss attributable to Class A and Class B common stockholders widened to $1.24 billion, or $3.68 per share, in the quarter, from $313.2 million, or $1.05 per share, a year earlier. Wall Street’s consensus estimate had called for a loss on a GAAP basis of 76 cents a share.
Revenue fell 28 percent to $678.7 million from $936.9 million a year earlier and below Wall Street’s consensus estimat of $718.2 million. Connected Fitness Products revenues were down 55 percent to $295.6 million. Subscription revenue rose 36 percent to $383.1 million.
Gross margins eroded to negative 4.4 percent from 27.2 percent a year ago. Connected fitness gross margin was a negative 98.1 percent compared with positive 11.7 percent a year earlier. Peloton said it experienced higher logistics expenses per delivery, increased port and storage costs, plus charges related to the recall of its Tread+ treadmill machine.
Total operating expenses grew 111 percent to $1,172.1 from $556.3 million a year ago. Adjusted EBITA amounted to negative $288.7 million against negative $45.1 million a year ago.
It marks Peloton’s sixth consecutive quarter of reported losses. The company said it aims to reach breakeven cash flow on a quarterly basis in the second half of its fiscal year 2023.
Peloton ended its latest quarter with 2.97 million connected fitness subscriptions, about flat with prior-quarter levels and up 27 percent from a year ago. Connected fitness subscribers are people who own a Peloton product, such as its original Bike, and also pay a monthly fee for access to live and on-demand workout classes.
Its total member count, though, declined by about 143,000 people from the prior quarter to 6.9 million. Peloton’s average net monthly churn levels for connected fitness users ticked up to 1.41 percent from 0.73 percent a year ago.
Peloton CEO Barry McCarthy said he expects the market for connected fitness will remain challenging for the foreseeable future, as consumer demand for at-home workout machines wanes from pandemic highs.
“The naysayers will look at our [fourth quarter] financial performance and see a melting pot of declining revenue, negative gross margin, and deeper operating losses,” McCarthy wrote in a letter to Peloton shareholders. “But what I see is significant progress driving our comeback and Peloton’s long-term resilience,” he said. “We still have work to do.”
Peloton did not offer an outlook for its upcoming fiscal year 2023. For the first quarter, it said it sees subscribers staying flat, and revenue ranging between $625 million and $650 million. Peloton said this takes into account near-term demand weakness and seasonal fluctuations to the business.
Photo courtesy Peloton
