09:30 AM EDT, 05/02/2024 (MT Newswires) -- Peloton Interactive ( PTON ) said it plans to slash 15% of its workforce in a restructuring and that Chief Executive Barry McCarthy is leaving the job as fiscal third-quarter results missed analysts' expectations.

Revenue retreated to $717.7 million from $748.9 million a year earlier, missing the consensus on Capital IQ for $718.6 million. Peloton's net loss narrowed to $0.45 a share from $0.79, but that was worse than the Street's view for a $0.36 GAAP loss.

Peloton's restructuring will include 400 job cuts and the reduction of annual expenses by "more than" $200 million by the end of fiscal 2025, the maker of exercise bikes and treadmills said in a statement Thursday. The company's stock has plunged 58% over the past year, but was up 9% pre-market.

"The headcount cuts announced today were made to ensure that Peloton is able to continue to produce (free cash flow) while continuing to invest in software, hardware and content innovations, even if revenues continue to shrink (year-over-year)," McCarthy said in a letter.

Peloton "produced positive free cash flow" for the first time in three years during the just-ended quarter, he said. The measure was $8.6 million, compared with a negative cash balance of $55.3 million a year ago, according to the company. Peloton isn't giving specific guidance for the current quarter, but the firm said they "expect to deliver modest positive free cash flow" in the period.

Ending paid app subscriptions dropped 21% annually in the third quarter to 674,000, while members were off 1% to 6.6 million. Connected fitness products revenue was 14% lower at $279.9 million, although subscription revenue was up 3% in the three-month period to $437.8 million.

McCarthy, who will be replaced by board members Karen Boone and Chris Bruzzo as co-chief executives, will stay as an advisor through the end of the year. "Barry joined Peloton during an incredibly challenging time for the business," Boone said in a separate statement. "With a strong leadership team in place and the company now on solid footing, the board has decided that now is an appropriate time to search for the next CEO of Peloton."

Peloton saw its popularity surge during the COVID-19 pandemic that drove demand for at-home workout equipment, before facing a series of issues including a 2021 treadmill recall after the death of a child and mounting debt as product sales diminished. In the most-recent quarter, Peloton said it began delivering its Tread+ products after three years off the market. The company also said Thursday it's "mindful of the timing" of its debt maturities and is working with banks and its financial advisor on a refinancing strategy.

The company lowered its outlook for full-year ending paid connected fitness subscriptions by 30,000 to 2.97 million. The view for ending paid app subscriptions was cut by 150,000 at the midpoint to 605,000. Full-year revenue guidance now sits at a midpoint of $2.687 billion, down by $25 million from the previous projection.

"While our updated full year guidance reflects headwinds to subscriber growth in (the fourth quarter), we remain optimistic about the investments we are making across the business," Peloton said.

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