Peloton's return to positive cash flow hit by bike recall, shares slide
Reuters
Published Aug 23, 2023 07:22AM ET
Updated Aug 23, 2023 11:52AM ET
(Reuters) -Peloton Interactive said it expects to burn cash in the next two quarters due to costs related to bike recall and other expenses, delaying return to a positive cash flow and sending its shares to a record low.
It also posted results on Wednesday that failed to lift the gloom around the company, which has been struggling with waning demand for its fitness equipment as consumers return to gyms and spend more on travel and experiences.
Peloton (NASDAQ:PTON) cut costs last year to deal with a slump in demand and had hoped to achieve positive free cash flow by fiscal 2023, which ended on June 30.
But it later tempered that goal to a breakeven cash flow due to a recall of 2.2 million exercise bikes following a seat issue and a $75 million settlement agreement with DISH Technologies.
"The cost of this recall substantially exceeded our initial expectations, leading to an additional accrual of $40 million (in Q4) for actual costs incurred as well as anticipated future recall-related expenses," Peloton CEO Barry McCarthy said.
The company forecast first-quarter revenue between $580 million and $600 million, below Refinitiv estimates of $655.9 million.
McCarthy also added the company would ramp up marketing spending ahead of the key holiday season later this year, which will further pressure cash flows. Peloton now expects to achieve positive cash flow in the second half of fiscal 2024.
It had last reported a positive cash flow in the second quarter of fiscal 2021, as per Refinitiv data.
Peloton's fourth-quarter revenue fell 5% to $642.1 million from a year earlier, marginally above Refinitiv expectations of $639.9 million.
It reported loss per share was 68 cents, compared with expectations of 38 cents. Its cash burn was $74 million, lower than $411.9 million.
Shares of Peloton fell 27.8% to $5.05 in early trading.
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Written By: Reuters
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