Peloton earnings miss on adjusted operating profits, CEO says company is 'thinly capitalized'
Peloton's turnaround will take a while, new CEO Barry McCarthy warned shareholders on the company's earnings Tuesday.
“Turnarounds are hard work,” McCarthy said at the top of the shareholder letter on his first Peloton earnings day. “It’s intellectually challenging, emotionally draining, physically exhausting, and all consuming. It’s a full contact sport.”
The company's performance in its most recent quarter underscores challenges including working through excess bike inventory to trying to get customers to pay more for their monthly subscription to getting the expense structure correct after years of profligate spending by prior management.
Peloton said today that fiscal third quarter sales clocked in at $964.3 million, below analyst estimates for $971 million. The company lost $194 million on an adjusted EBITDA basis, worse than analyst forecasts for a loss of $132 million.
Moreover, the company said its free cash flow — arguably the most important metric right now on upstart tech companies — was an outflow of $746.7 million.
McCarthy pointed to a new $750 million five-year debt agreement as a step at shoring up Peloton's balance sheet. But despite ending the quarter with $879 million in cash, McCarthy hinted he may have to look for more financing to stabilize the company's finances.
“We finished the quarter with $879 million in unrestricted cash and cash equivalents, which leaves us thinly capitalized for a business of our scale,” McCarthy said.
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