Dive Brief:
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Peloton would be “within striking distance” of achieving free cash flow goals for its fiscal fourth quarter if not for a $75 million patent settlement with Dish Network and related expenses, the fitness company’s CFO said Thursday.
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Peloton announced Thursday that it will pay Dish $75 million to settle a U.S. International Trade Commission complaint that it brought against the fitness brand in April 2021. The cost of the settlement, plus other related expenses, will “significantly pressure” Peloton’s free cash flow for the fourth quarter, according to a company shareholder letter.
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“If you exclude those items, we actually are pretty close, but within striking distance of achieving free cash flow break-even,” Peloton CFO Liz Coddington said during a quarterly earnings call.
Dive Insight:
The $75 million settlement follows a determination from the ITC that Peloton infringed on several Dish patents.
“We were expecting a different outcome and could have appealed the ITC decision,” CEO Barry McCarthy said in the company’s shareholder letter. “We believe our growth agenda is better served by the settlement because it eliminates a cloud of uncertainty and an enormous distraction to the day-to-day operation of our business, despite its adverse impact on Q4 cash flow. With this matter in the rearview mirror, we can focus again on growing our business.”
Peloton reported a 22% revenue decline for its fiscal third quarter. Revenue fell to $748.9 million for the quarter, down from $964.3 million year over year.
Last year, the company announced the resignations of its co-founders following operational and financial problems.
Even with the Dish matter resolved, the company still faces uncertainties in the coming quarter, including macroeconomic headwinds, executives said during the earnings call.
“There's certainly no exuberance in the marketplace, but it's not frozen either,” McCarthy said. “So it's kind of a mixed bag, and we're definitely uncertain about what's next in terms of the economic environment.”
