Is Peloton’s Turnaround Plan Finally Working?

It’s a marathon comeback that only hours and hours of sweaty stationary bike training could’ve prepared you for.

In its earnings call Thursday, Peloton reported sales growth of 0.2% in the latest quarter. It may not sound like much, but it’s the first three-month period of year-over-year revenue growth the workout-from-home company has seen since… late 2021. The win was enough to send its share price soaring 35%.

Let’s Grow, Peloton!

Just mere months ago, Peloton was huffing and puffing through dire straits. After over a dozen consecutive quarters of losses and one massive product recall, CEO Barry McCarthy stepped down in May. (The company remains CEO-less, with board members Karen Boone and Chris Bruzzo holding co-interim positions amid a job search.) Just days later, reports surfaced that at least one private equity firm was eyeing a takeover. 

As the vultures circled, Peloton worked to prioritize profits over growth, slashing costs in the process. And now the turnaround plan, like its virtual exercise regimes, is starting to show tangible results:

• In May, the company laid off 15% of its employees. It said Thursday that it cut sales and marketing spending by 19% year-over-year in the previous quarter. That allowed it to narrow losses to $30.5 million, well down from $241 million a year ago, and increase free cash flow from negative $74 million a year ago to positive $26 million this quarter.
• Meanwhile, revenue hit $643.6 million, up 0.2% year-over-year, easily besting Wall Street’s expectations as well as the typical summer slowdown for exercise companies. 

Uphill Climb: It’s not all good news, however. The company also announced that it is anticipating sales between $560 million and $580 million in the current quarter, short of most analyst estimates of $609 million. It also warned of a coming 3% dip in subscribers using its hardware, and as much as a 26% dip in paid app users — likely casualties of macroeconomic headwinds and slashed marketing. In other words: Peloton’s comeback is still just building momentum. Adjust your pedal resistance settings accordingly.