By Geoffrey Smith
Investing.com -- Peloton (NASDAQ:PTON) stock slumped in premarket trading after the connected fitness group reported a sharply wider net loss in the three months through March and revised its fiscal 2022 guidance lower.
The company also said it had secured a $750 million credit from JPMorgan (NYSE:JPM) and Goldman Sachs (NYSE:GS) to help staunch the outflow of cash as it heavily restructures its exercise bike and treadmill business. It had ended the quarter with only $879 in unrestricted cash, leaving it "thinly capitalized for a business of our scale," according to new CEO Barry McCarthy.
The company said it lost $194 million on an adjusted EBITDA level in the third quarter of its fiscal year, well above its previous guidance. Revenue fell 24% on the year to $964 million, as customers reverted to their pre-pandemic exercise routines. The delivery and setup charges it had introduced earlier in the year to save cash, along with a big reduction in sales and marketing expenses, also contributed to the drop in sales.
The company said it now expects revenue of less than $700 million in the current quarter, and an adjusted EBITDA loss of between $115 and $120 million.
On the bottom line, the company lost $757 million in the last quarter, suffering an almost equal outflow in net cash, as unsold inventory ballooned.
"We have too much for the current run rate of the business, and that inventory has consumed an enormous amount of cash, more than we expected, which has caused us to rethink our capital structure," McCarthy said. He argued that because the inventory should hold its value, "this is primarily a cash flow timing issue, not a structural issue."
Cost cuts implemented so far will generate $165 million in savings in the second half of the current year and around $450 million in savings for fiscal 2023, McCarthy said. He had earlier announced a target of $800 million in annual savings by fiscal 2024.
By 8:12 AM ET (1212 GMT), Peloton stock was indicated down 24% at what would be a new record low at Tuesday's opening. It has already lost over 90% from its pandemic-era peak and is down by over half from its IPO price of $29 in 2019.
(CORRECTION: An earlier version of this story misstated the company's EBITDA guidance)