Peloton CEO John Foley writes open letter to Peloton Team + releases initial Q2 2022 earnings results

This evening, Peloton CEO John Foley published an open letter to the Peloton team, which was posted on Peloton’s website.

This comes following a week of reports detailing internal Peloton operations. It started with the report that McKinsey was being brought in to consult, and possible job cuts. Later in the week it was reported that Peloton was pausing production of Bike & Tread, as well as delaying opening of the new US factory.

In John’s letter, he addresses some of the recent articles that have been appearing in the press – and states that “information the media has obtained is incomplete, out of context, and not reflective of Peloton’s strategy. It has saddened me to know you read these things without the clarity and context that you deserve.” He goes on to say Peloton has “identified a leaker”, and plans to take legal action.

He then shares that Peloton released preliminary Q2 2022 earnings results, in order to offer a “more accurate” picture of how Peloton is doing. You can find the initial Q2 2022 earning data for Peloton here. The data shows that Peloton had a total revenue of $1.14 billion, which was within the guidance of $1.1 to $1.2 billion. The total number of subscribers was 2.77 million, which was slightly under guidance of 2.8 to 2.85 million. Peloton’s adjusted EBITDA is expected to see their losses between $270 & $260 million, better than the guidance of $350 to $325 million.

After mentioning the earnings are available, John goes on to talk about a few higher level topics. The first topic John discussed was regarding layoffs at Peloton. He says:

In the past, we’ve said layoffs would be the absolute last lever we would ever hope to pull. However, we now need to evaluate our organization structure and size of our team, with the utmost care and compassion. And we are still in the process of considering all options as part of our efforts to make our business more flexible.

He then asks his team for patience:

I am SO proud of everything we have accomplished together, and it pains me we are faced with these tough decisions. I know this is difficult, and I want to thank you for your patience as we work through these times together.

John also flatly denies the recent reports about Peloton stopping all production, plainly stating “Rumors that we are halting all production of bikes and Treads are false”

Instead, he states that the are “rightsizing” their production, and “resetting production levels”

We worked quickly and diligently to meet the demand head-on at a time when the world really needed us, in large part thanks to how hard you worked every day. We feel good about right-sizing our production, and, as we evolve to more seasonal demand curves, we are resetting our production levels for sustainable growth.

Finally, he goes on to talk about the industry in general. He points out how Peloton has their low 0.79% churn level, and members are still loving the platform. He also states that Peloton recently hit a new record for the number of workouts in one day – more than 2.9 million workouts.

You can read the full letter below, or on Peloton’s website here:

We have always done our best to share news with you all first, before sharing with the public. This week, we’ve experienced leaks containing confidential information that have led to a flurry of speculative articles in the press. The information the media has obtained is incomplete, out of context, and not reflective of Peloton’s strategy. It has saddened me to know you read these things without the clarity and context that you deserve. Before I go on, I want all of you to know that we have identified a leaker, and we are moving forward with the appropriate legal action. But moving forward, I want to take a moment to talk about some of the changes with you directly.


As a public company that is in a pre-earnings “Quiet Period”, we are limited in what information we can share. However, we issued a pre-earnings press release earlier this evening about our preliminary Q2 results, in order to offer an initial and more accurate picture of our business performance.


As you have heard me and other leaders say over the past few months, we are continuing to invest in our growth, but we also need to review our cost structure to ensure we set ourselves up for continued success, while never losing sight of the important role we play in helping our 6.2+ million Members lead healthier, happier lives.

What this means for our team right now

In the past, we’ve said layoffs would be the absolute last lever we would ever hope to pull. However, we now need to evaluate our organization structure and size of our team, with the utmost care and compassion. And we are still in the process of considering all options as part of our efforts to make our business more flexible.


This team is made up of some of the smartest, most passionate, hard-working and KIND people I have ever met. You have each painted your masterpiece at Peloton in your own way, and your contributions matter. They always have, and they always will.


I am SO proud of everything we have accomplished together, and it pains me we are faced with these tough decisions. I know this is difficult, and I want to thank you for your patience as we work through these times together.

Rumors that we are halting all production of bikes and Treads are false



Notably, we’ve found ourselves in the middle of a once-in-a-hundred year event with the COVID-19 pandemic, and what we anticipated would happen over the course of three years happened in months during 2020, and into 2021.


We worked quickly and diligently to meet the demand head-on at a time when the world really needed us, in large part thanks to how hard you worked every day. We feel good about right-sizing our production, and, as we evolve to more seasonal demand curves, we are resetting our production levels for sustainable growth.

Connected Fitness is here to stay

This past quarter, our churn rate was 0.79%. This means that our Members are sticking with us, again thanks to your brilliance and continued innovation. Connected fitness provides the convenience people need to stay active and centered and will continue to be a key part of the future of fitness. In fact, just a few days ago, we recorded our highest ever number of daily workouts — over 2.9M workouts.


I want to acknowledge that this does not answer all of the questions I am sure many of you have right now. But, I did want to share what we could at this time.


I know there is a lot of noise and anxiety in our environment right now, which is why I wanted to take this moment to provide some additional context for you all as we navigate the next few weeks together.


John


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Chris L
Chris is the founder of Pelo Buddy. He purchased his Peloton in 2018, and has been riding and running ever since. You can find him on the leaderboard at #PeloBuddy.

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