Peloton replaces CEO after 90% stock slide during his tenure, plans more layoffs

By Emily Bary

Shares see their big Thursday premarket gains evaporate as they turn lower

Peloton Interactive Inc. is replacing its chief executive after a continued slide in its stock.

Barry McCarthy is stepping down as Peloton's (PTON) CEO, the connected-fitness company announced on Thursday morning. Karen Boone, the board chair, and Chris Bruzzo, a director, will serve as interim co-CEOs while the company looks for a permanent replacement.

Peloton shares were down 91% since McCarthy assumed the CEO spot in February 2022. The S&P 500 SPX is up 11% over that same span.

Shares opened 12% higher Thursday morning, but fell after the opening bell. They were down 5% after the first 30 minutes of trading.

Peloton also announced a new restructuring program meant to shave annual costs by upwards of $200 million. In the process, Peloton expects to cut roughly 15% of staff, amounting to about 400 employees. The company went through numerous rounds of job cuts in 2022.

"The objective of the cost reductions is to align our cost structure with the current size of our business and position Peloton to generate sustained and meaningful positive free cash flow, which is a top priority for us," the company said in a shareholder letter.

It added that it's "mindful" of its debt maturities, which are of interest to investors. "We believe that achieving sustained positive free cash flow makes Peloton a more attractive investment for debt holders," the company said. "Overall, our refinancing goals are to deleverage and extend maturities at a reasonable blended cost of capital."

Peloton intends to continue scaling back its retail-showroom footprint while taking a more "efficient" approach to its international business. "While we have no plans to exit any of our existing international markets, we will leverage global strategies and capabilities where we can, allowing us to optimize and consolidate resources with localized execution," it said in the letter.

Peloton's commentary accompanied its fiscal third-quarter results, which showed revenue of $717.7 million, down from $748.9 million a year before. Analysts tracked by FactSet were modeling $721 million.

The company's net loss narrowed to $167.3 million, or 45 cents a share, from $275.9 million, or 79 cents a share, in the year-earlier period. Analysts were modeling a 36-cent per-share loss.

Peloton logged adjusted earnings before interest, taxes, depreciation and amortization (Ebitda) of $5.8 million, whereas it racked up a loss of $18.7 million on the metric a year before. The FactSet consensus was for a $24 million loss.

Free cash flow came in positive at $8.6 million, whereas it was negative in the December quarter and the prior year's March quarter. Expectations were for a free cash flow of negative-$18 million in the latest quarter.

The company expects $2.675 billion to $2.700 billion in revenue for the full fiscal year, which ends in June. Analysts were modeling $2.706 billion. Peloton's outlook also calls for a $5 million to $20 million adjusted Ebitda loss for the period, which compares with the $64 million loss that analysts were modeling.

-Emily Bary

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

05-02-24 1005ET

Copyright (c) 2024 Dow Jones & Company, Inc.