Why Peloton Interactive (PTON) Shares Are Diving Today - Peloton Interactive (NASDAQ:PTON)

Peloton Interactive Inc PTON shares are down following its mixed bag of Q3 results. The company expects an adverse impact on its Q4 cash flow from its settlement and patent license agreement with DISH Technologies.
PTON reported a third-quarter FY23 sales decline of 22% year-on-year to $748.90 million, beating the consensus of $708.05 million.
The total number of members in the quarter fell 5% Y/Y to 6.7 million.
Ending connected fitness subscriptions rose 5% Y/Y to 3.1 million, and Ending App subscriptions fell 13% to 0.85 million.
Average net monthly connected fitness churn was 1.1% versus 0.8% a year ago.
Gross profit for the quarter increased 47% to $270.2 million, and the margin expanded 1700 basis points to 36.1%. The operating expenses plunged 42% to $536.2 million.
Adjusted EBITDA loss for the quarter was $(18.7) million versus $(194) million last year.
The company held $873.6 million in cash and equivalents as of March 31, 2023.
EPS loss was $(0.79), missing the consensus of $(0.46).
Settlement: Earlier this morning, PTON announced a settlement and patent license agreement with DISH Technologies. The cost of the settlement ($75 million), plus other related expenses, will significantly pressure FCF for Q4.
The settlement follows a recent International Trade Commission (ITC) determination that Peloton’s method of adaptive bit rate streaming infringes several DISH patents.
Outlook: Peloton sees Q4 FY23 revenue of $630 million - $650 million, representing a decline of 6% Y/Y and 15% Q/Q at the midpoint.
The company expects Q4 ending connected fitness subscriptions of 3.08 million - 3.09 million.
Price Action: PTON shares are trading lower by 12.23% at $7.75 in premarket on the last check Thursday.

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Why Peloton Interactive Shares Are Diving Today