Peloton Announces Comprehensive Program to Reduce Costs and Drive Growth, Profitability and Free Cash Flow
Posted: February 9, 2022 in Suppliers
Peloton
NEW YORK, N.Y. – Peloton Interactive, Inc. (NASDAQ: PTON) has announced a series of steps it is taking to position the business for long-term growth while establishing a clear path to consistent profitability and sustainable free cash flow. Once these actions are fully implemented, the company expects to achieve at least $800 million of annual run-rate cost savings through operating expense efficiencies and significant margin improvement in its Connected Fitness category.
The company will also reduce its planned capital expenditures in 2022 by approximately $150 million. The restructuring program is expected to result in approximately $130 million in cash charges related to severance as well as other exit and restructuring activities and $80 million in non-cash charges. The majority of the charges will be recorded in fiscal year 2022.
“Peloton is at an important juncture, and we are taking decisive steps. Our focus is on building on the already amazing Peloton Member experience, while optimizing our organization to deliver profitable growth,” said John Foley, Co-Founder of Peloton and newly appointed Executive Chair. “With today’s announcements, we are taking action to ensure Peloton capitalizes on the large, long-term Connected Fitness opportunity. This restructuring program is the result of diligent planning to address key areas of the business and realign our operations so that we can execute against our growth opportunity with efficiency and discipline.”
As a result of the initiatives announced, the company expects to:
- Improve the economics of its hardware business. The company is winding down the development of its Peloton Output Park (POP) manufacturing plan. This will result in $60 million in restructuring capital expenditures, which is included in the company’s revised full year guidance. In addition, Peloton will optimize its logistics network by reducing its owned and operated warehousing and delivery footprint, while scaling third party relationships.
- Right-size the organization by enacting a workforce reduction. The workforce reduction will occur across nearly all business operations to streamline reporting structures and create clearer lines of accountability. This will result in the reduction of approximately 2,800 global positions. Corporate positions will be reduced by approximately 20%. With regard to operations in the field, the company is reducing its owned and operated warehouses and delivery teams and expanding its commercial agreements with third party logistics providers.
Peloton’s roster of instructors and breadth and depth of its content will not be impacted by the initiatives announced.
Foley added, “These decisions, particularly those related to our impacted Peloton team members, were not taken lightly. We greatly value the contributions of our talented colleagues and are committed to supporting impacted team members in their transitions. We thank our global team members for their focus and dedication through this process.”
