Peloton Interactive Inc.’s latest earnings showed that the company is making progress on its goal of trimming losses, though the company’s CEO acknowledged that these strides were coming at the expense of growth.
Shares of the former pandemic darling were off as much as 16.1% in Thursday morning trading but pared back those losses and were recently down just 2.6%. The stock-price decline comes after Peloton
PTON,
reduced its cash burn for the September quarter relative to the June one but delivered a holiday-quarter sales forecast that missed expectations by a wide margin.
Still, Chief Executive Barry McCarthy said that the company was making strides in its turnaround.
“‘Turnaround’ means a stable underlying business with the green shoots of growth beginning to emerge,” he said in the company’s shareholder letter. “It means a financially sustainable business, which means breakeven or better free-cash flow.”
The company’s “results show we’re making significant progress,” he added.
Peloton logged a net loss of $409 million, or $1.20 a share, for the fiscal first quarter. That compares with a loss of $1.26 billion in the June quarter and $376 million in the year-earlier September quarter.
The company posted a negative free-cash flow of $246 million in the September quarter, compared with $412 million in the June quarter.
Top-line trends disappointed as revenue fell to $617 million from $805 million and came up short of the $637 million that analysts surveyed by FactSet had been expecting.
McCarthy acknowledged the growth trends on the company’s earnings call.
“Our job one is to ensure the viability of the business, which a year ago was in doubt,” he said. “And I believe that is no longer the case” because of Peloton’s newfound focus on rightsizing its cost structure and targeting breakeven free-cash flow.
“Clearly, that has come at the expense of growth, and there will come a time when we begin to focus again on growth,” he added.
Looking to the fiscal second quarter, executives anticipate $700 million to $725 million in revenue, whereas the FactSet consensus was for $866 million. Executives are also forecasting a loss on the basis of adjusted earnings before interest, taxes, depreciation, and amortization (Ebitda) of $110 million to $115 million. Analysts were modeling a $108 million loss on the non-GAAP metric.
“While macroeconomic uncertainty and concerns about a potential recession impacting consumer spending levels are real, we take comfort in knowing fitness spending has proven to be resilient during previous recessionary periods,” McCarthy said in his shareholder letter.
Peloton’s stock has shed more than three quarters of its value on the year as the S&P 500
SPX,
has declined 21%.
