Peloton's new CEO Barry McCarthy is known in tech circles and on Wall Street as Mr. No Bullshit.
Direct. No nonsense. A deep strategic thinker who wants to get stuff done yesterday. A man who likes golf, but enjoys explaining the intricacies of tech subscription models and the ins and outs of a balance sheet perhaps way more.
And overall McCarthy, 69, lived up to all of that external branding in an exclusive 30-minute Zoom chat with Yahoo Finance.
"I could have stayed in retirement," McCarthy said, decked out in his trademark vest and glasses and looking not too far removed from fit Peloton instructor status. "It's pretty clear to me there are only one or two outcomes for me here — either I'm coming home in defeat or I'm coming out victorious."
McCarthy's resume suggests victory is not out of reach.
It includes being the innovative architect of Spotify's 2018 direct listing. At Spotify, he was CFO for several years before retiring in 2019, working closely with founder Daniel Ek. Before then, he worked alongside Netflix's founder Reed Hastings to build the streaming giant into a powerhouse.
Peloton hired McCarthy as its no-nonsense sheriff several weeks ago — to work alongside founder and now executive chairman John Foley — after several challenging quarters, operationally and reputation wise.
To be sure, McCarthy has a lot on his plate from the jump — something you pick up on within the first five minutes of our chat.
Peloton recently slashed 2,800 jobs as it seeks to better align costs with slowing demand for its connected bikes (spending got out of whack with the revenue growth rate, McCarthy explained). In turn, that has led to a hit to employee morale (McCarthy says Peloton has great talent).
The company is working through thousands of delayed bike orders due to global supply-chain challenges. A treadmill recall in 2021 as a result of safety issues has not gone lost on subscribers and would-be subscribers.
An activist investor is still clamoring for changes to the board and wants the company to be sold to Amazon, Disney or Apple. Peloton's stock price is down 77% in the past year as growth has slowed.
The company has lost a shade over $500 million on an adjusted EBITDA [earnings before interest, taxes, depreciation and amortization] basis through its first two fiscal quarters. The average number of monthly workouts has continued to trek lower from a peak midway through 2021 as people returned to gyms and left their homes.
Again, a lot for McCarthy to tackle which is not overlooked in our chat as he thoughtfully pauses while explaining his vision for Peloton.
Some takeaways:
Peloton will soon be testing new pricing to attract new members. The $39 price for existing members is not going away, McCarthy said.
No, Peloton isn't going to be sold tomorrow. "I came here for the comeback story," McCarthy said, noting he is moving his family to New York City (the home of Peloton HQ) from California. "I am coming here and it's not to sell the business."
A year from now, McCarthy hopes Peloton has a lot of success with fitness-as-a-service driven by a lot of price elasticity.
McCarthy hasn't halted the development of new products (Peloton has long been rumored to be working on a rowing machine, for instance).
No additional fundraising is needed to support McCarthy's vision for the company, which sounds more software driven as opposed to a steady drumbeat of manufacturing its own hardware and producing original workout content.
He is open to adding outside partners to the Peloton platform to boost the user experience.
McCarthy is hesitant to put a timeframe on when Peloton will be fully turned around. But, he believes it can — and will — be done.
"With all the cash on the balance sheet and the love for the brand, if we can't figure out how to make that into a successful business I should have stayed in retirement," McCarthy said.
Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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