Peloton\u00a0announced Thursday that CEO Barry McCarthy will be stepping down and the company will lay off 15% of its staff because it \u201csimply had no other way to bring its spending in line with its revenue.\u201d<\/p>\n
McCarthy, a former\u00a0Spotify\u00a0and\u00a0Netflix\u00a0executive, will become a strategic advisor to Peloton through the end of the year while Karen Boone, the company\u2019s chairperson, and director Chris Bruzzo will serve as interim co-CEOs.\u00a0Jay Hoag, another Peloton director, has been named the new chairperson of the board. Peloton is seeking a permanent CEO.<\/p>\n
The company also announced a broad restructuring plan that will see its global headcount cut by 15%, or about 400 employees. It plans to continue to close retail showrooms and make changes to its international sales plan.<\/p>\n
The moves are designed to realign Peloton\u2019s cost structure with the current size of its business, it said in a news release. It\u2019s expected to reduce annual run-rate expenses by more than\u00a0$200 million\u00a0by the end of fiscal 2025.<\/p>\n
\u201cThis restructuring will position Peloton for sustained, positive free cash flow, while enabling the company to continue to invest in software, hardware and content innovation, improvements to its member support experience, and optimizations to marketing efforts to scale the business,\u201d the company said.<\/p>\n
Shares were up about 9% in premarket trading.<\/p>\n
McCarthy\u00a0took the helm\u00a0of Peloton in February 2022 from founder John Foley and has spent the last two years restructuring the business and working to get it back to growth.<\/p>\n
As soon as he took over, he began implementing mass layoffs to right size Peloton\u2019s cost structure, closing the company\u2019s splashy showrooms and enacting new strategies designed to grow membership. Contrary to Peloton\u2019s founder, McCarthy redirected Peloton\u2019s attention to its app as a means to capture members who may not be able to afford the company\u2019s pricey bikes or treadmills but could be interested in taking its digital classes.<\/p>\n
In a letter to staff, McCarthy said the company needed to implement layoffs because it wouldn\u2019t be able to generate sustainable free cash flow with its current cost structure. Peloton hasn\u2019t turned a profit since December 2020 and it can only burn cash for so long when it has more than $1 billion in debt on its balance sheet.<\/p>\n
\u201cAchieving positive [free cash flow] makes Peloton a more attractive borrower, which is important as the company turns its attention to the necessary task of successfully refinancing its debt,\u201d McCarthy said in the memo.<\/p>\n
In a letter to shareholders, the company said it is \u201cmindful\u201d of the timing of its debt maturities, which include convertible notes and a term loan. It said it is working closely with its lenders at JPMorgan and Goldman Sachs on a \u201crefinancing strategy.\u201d<\/p>\n
\u201cOverall, our refinancing goals are to deleverage and extend maturities at a reasonable blended cost of capital,\u201d the company said. \u201cWe are encouraged by the support and inbound interest from our existing lenders and investors and we look forward to sharing more about this topic.\u201d<\/p>\n
In a news release, Boone thanked McCarthy for his contributions.<\/p>\n
\u201cBarry joined Peloton during an incredibly challenging time for the business. During his tenure, he laid the foundation for scalable growth by steadily rearchitecting the cost structure of the business to create stability and to reach the important milestone of achieving positive free cash flow,\u201d Boone said.<\/p>\n
\u201cWith a strong leadership team in place and the Company now on solid footing, the Board has decided that now is an appropriate time to search for the next CEO of Peloton.\u201d<\/p>\n
In a joint statement, Boone and Bruzzo said they are looking forward to \u201cworking in lockstep\u201d with the company\u2019s leadership to ensure it \u201cdoesn\u2019t miss a beat while the CEO search is underway.\u201d<\/p>\n
Also on Thursday, Peloton announced its fiscal third-quarter results and fell short of Wall Street\u2019s expectations on the top and bottom line. Here\u2019s how the connected fitness company did compared with what Wall Street was anticipating, based on a survey of analysts by LSEG:<\/p>\n
Loss per share: 45 cents vs. a loss of 37 cents expected<\/p>\n
Revenue: $718 million vs. $723 million expected<\/p>\n
The company\u2019s reported net loss for the three-month period that ended March 31 was $167.3 million, or 45 cents per share, compared with a loss of $275.9 million, or 79 cents per share, a year earlier.\u00a0<\/p>\n
Sales dropped to $718 million, down about 4% from $748.9 million a year earlier.\u00a0<\/p>\n
Peloton has tried a little bit of everything to get the company back to sales growth. It\u00a0removed the free membership option\u00a0from its fitness app, expanded its corporate wellness offerings and\u00a0partnered with mega-brands\u00a0like\u00a0Lululemon\u00a0to grow membership, but none of the initiatives have been enough to grow sales.<\/p>\n
For the ninth quarter in a row, Peloton\u2019s revenue fell during its fiscal third quarter, when compared to the year-ago period. It hasn\u2019t seen sales grow compared to the year ago quarter since December 2021, when the company\u2019s stationary bikes were still in high demand and many hadn\u2019t yet returned to gyms amid the Covid-19 pandemic.<\/p>\n
The business is continuing to bleed money and\u00a0hasn\u2019t turned a net profit\u00a0since December 2020.\u00a0<\/p>\n
Last February, McCarthy set a goal of returning the company to revenue growth within a year. When it failed to reach that milestone, McCarthy\u00a0pushed it back\u00a0and said he now expects the company to be back to growth in June, at the end of the current fiscal year.\u00a0<\/p>\n
McCarthy had also expected Peloton to reach positive free cash flow by June \u2014 a goal the company said it reached early during its third quarter. It\u2019s the first time Peloton has hit that mark in 13 quarters. In a letter to shareholders, Peloton said it generated $8.6 million in free cash flow but it\u2019s unclear how sustainable that number is.<\/p>\n
Last month, CNBC reported that Peloton hadn\u2019t been\u00a0paying its vendors on time, which could temporarily pad its balance sheet. Data from business intelligence firm Creditsafe showed that Peloton\u2019s late payments to vendors spiked in December and again in February after improving in January.<\/p>\n
Part of the reason why Peloton had failed to reach positive free cash flow is because it\u2019s simply not selling enough of its hardware, which is costly to make and has become less popular since the Covid-19 pandemic ended and people returned to gyms.<\/p>\n
Shortly after McCarthy replaced Foley, he implemented numerous rounds of layoffs that impacted thousands of employees. The last round of cuts, affecting 500 employees, were announced in October 2022. He later said the company\u2019s restructuring was \u201ccomplete\u201d and it was instead pivoting to \u201cgrowth.\u201d\u00a0<\/p>\n
\u201cWe are done now,\u201d McCarthy had said in November 2022 of the layoffs. \u201cThere are no more heads to be taken out of the business.\u201d<\/p>\n<\/p>\n
Peloton\u00a0announced Thursday that CEO Barry McCarthy will be stepping down and the company will lay off 15% of its staff because it \u201csimply had no other way to bring its spending in line with its revenue.\u201d McCarthy, a former\u00a0Spotify\u00a0and\u00a0Netflix\u00a0executive, will become a strategic advisor to Peloton through the end of the year while Karen Boone, […]<\/p>\n","protected":false},"author":0,"featured_media":3894,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[],"class_list":["post-3893","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business"],"_links":{"self":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts\/3893","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/comments?post=3893"}],"version-history":[{"count":0,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts\/3893\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/media\/3894"}],"wp:attachment":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/media?parent=3893"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/categories?post=3893"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/tags?post=3893"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}