Peloton Secures $750M Loan as Losses Mount

Peloton’s uphill climb gets steeper following its Q3 earnings report.

The latest: Revealing mounting losses while trimming revenue projections, Peloton’s third-quarter financials further complicate the company’s turnaround effort.

• Net losses totaled $757M, compared to $8.6M a year earlier.
• Revenue fell 24% to $964.3M from $1.26B, the company’s first YoY decline since its 2019 IPO.
• Forecasting Q4 sales, Peloton expects up to $700M, about $120M below Wall Street expectations.

Between the lines. The first earnings call under new CEO Barry McCarthy, Peloton said weak demand and the cost of holding unsold bikes and treadmills weighed heavy on the balance sheet.

While McCarthy attempts to reshuffle the core business by prioritizing subscriptions—including a rent-a-bike option that bundles equipment and content for $60—the company is taking steps to shore up its coffers.

Following reports that Peloton is seeking a minority investment, the equipment maker secured a $750M loan from JPMorgan and Goldman Sachs.

Pros & cons. From pandemic highs to an all-time low, Peloton has seen its market cap crater from $50B to about $4B, well below its 2019 IPO price.

Despite the backslide, the company’s churn rate among connected fitness users remains under 1%, and it added nearly 200K connected fitness subscribers in the latest quarter.

Tapping third-party sellers, expanding internationally, and promoting its digital app, McCarthy said he still believes Peloton can achieve its goal of 100M members. For now, the combined digital/connected fitness customer base totals 7M.

Punchline: Peloton has done the hard work of getting people hooked on exercise. Still, from inventory to pricing and business model, capitalizing on this feat remains a work in progress.