Peloton’s earnings miss bigger than expected, lower outlook for first quarter

Peloton Interactive ( PTON ) reported an operating loss of $1.2 billion in its fiscal fourth quarter as revenue fell short of Wall Street expectations.

Shares fell more than 16% in premarket trading after the results, a day after the exercise bike maker saw its stock close down more than 20%.

The company said in a statement Thursday before the open that its fourth-quarter revenue was $678.7 million, down 28 percent from a year ago. The figure was also below the $685.9 million analysts had expected, according to estimates compiled by Bloomberg.

Peloton’s loss per share in the fourth quarter, which included restructuring charges of $415 million, totaled $3.68 per share. The company’s adjusted EBITDA loss in the quarter was $288.7 million.

“The loss reflects the significant progress we made this past quarter restructuring the business to reduce current and future inventory overhang, convert fixed to variable costs and address several supply chain issues,” CEO Barry McCarthy said in a letter to the shareholders.

In the first quarter, the company expects revenue to range between $625 million and $650 million, indicating an expected decline of 6% in the fourth quarter and 21% from the same period last year. Peloton’s first-quarter adjusted EBITDA is expected to reflect an adjusted loss of $90-115 million, compared to the $93.2 million expected by analysts.

“Our 1Q outlook reflects near-term weakness in demand related to our recent material price increases as well as typical seasonally soft demand,” McCarthy said in the letter.

People walk past a Peloton store on January 20, 2022 in Coral Gables, Florida. (Photo by Joe Raedle/Getty Images)

Peloton saw nearly 2.97 million connected fitness memberships in its fiscal fourth quarter, unchanged from the prior quarter and up 27% from the same period last year. Subscription revenue was $383.1 million, up 36% from Q4 2021.

The company said it expects subscriptions to remain flat in the first quarter.

While its subscriber revenue growth was a bright spot during the quarter, the company saw its total membership decline 2% quarter-over-quarter — or 143,000 — to 6.9 million.

And the average net monthly deviation rate for the quarter rose to 1.41% from 0.73% in the same quarter last year, higher than the company expected internally.

The company said it will review its approach to reporting operating metrics and forward guidance in fiscal 2023, attributing the move to “broader macroeconomic uncertainties” and the “pace and number of changes” Peloton is making to operations her.

Peloton will limit its official revenue, gross margin, adjusted EBITDA and net subscriber addition guidance to the current quarter for at least the next fiscal year. year. The fitness equipment maker will also stop reporting quarterly engagement metrics, but will continue to report on membership decline.

In his letter to shareholders, McCarthy highlighted what he called a “positive story behind the stock loss” for Peloton, pointing to cost-cutting measures the company has taken as it tries to revive cash flow. Those initiatives included outsourcing all manufacturing for its connected fitness hardware, hundreds of layoffs, closing some of its showrooms, and launching a self-assembling option for its original Peloton bike.

“The loss reflects the significant progress we made this past quarter in restructuring the business to reduce current and future inventory overhang, convert fixed to variable costs and address several supply chain issues,” McCarthy said.

The company also reported results a day after disclosing a deal to sell its fitness equipment and apparel to Amazon, as Peloton continues efforts to turn around its business and regain investor confidence.

McCarthy said in Thursday’s letter: “We remain in productive conversations with other prospective retail partners and hope to be able to announce additional partnerships soon.”

“When you look at our financial performance in the fourth quarter, I suspect that what you see will be a function of where you sit,” McCarthy’s letter to shareholders began. “The naysayers will look at our financial performance in the fourth quarter and see a melting pot of declining revenue, negative gross margin and larger operating losses.

“They will say that these threaten the viability of the business,” he added. “But what I see is significant progress driving our comeback and the long-term resilience of the Peloton.”

Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc

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