Peloton is cutting another 500 jobs, or 12 percent of its workforce, as it attempts to turn around its struggling connected fitness business, CEO Barry McCarthy announced in a memo to staff on Thursday. The Wall Street Journal reports that McCarthy says Peloton has six months to get back on its feet or else it may not be viable as a standalone company.

“We are eliminating these positions and reducing other operating expenses, in order to reach break even cash flow by year-end FY23,” McCarthy wrote in his staff memo. “Please know this is a necessary step if we are going to save Peloton, and we are. With today’s announcement, the bulk of our restructuring work is complete.”

This is Peloton’s fourth round of layoffs this year after it let go of around 2,800 employees in February, 500 in July, and almost 800 in August. Combined, the cuts mean that the company’s workforce will now sit at around 3,800 employees globally. That’s a big drop from Peloton’s peak of 8,600 employees last year but not far off from the 3,700 people the WSJ notes it employed around the start of the pandemic. Today’s cuts are expected to mainly affect employees working in marketing.

“There comes a point in time when we’ve either been successful or we have not,” McCarthy, who took over as CEO in February, told the WSJ in an interview. As well as cutting staff, the company has also been making other moves to reduce its operating costs. It now sells equipment and apparel through Amazon and Dick’s Sporting Goods as it shifts toward third-party distributors. It’s also announced plans to outsource the production of its bikes and treadmills and to shutter its retail showrooms starting next year.

“A key aspect of Peloton’s transformation journey is optimizing efficiencies and implementing cost savings to simplify our business and achieve break-even cash flow by the end of our fiscal year,” company spokesperson Ben Boyd said in a statement. “As we pivot to growth, today marks the completion of the vast majority of our restructuring plan we began in February 2022.”

But these cuts haven’t yet been enough to put the company back in the black. In its August earnings release, Peloton reported a $1.2 billion operating loss, a decline in membership, and a 28 percent drop in revenue. McCarthy characterized today’s cuts as being its last major move to reduce operating costs, with increasing revenue being the focus going forward.

While numerous tech companies have either announced job cuts (Snap) or hiring freezes (Meta, Google, Amazon) this year, Peloton has been particularly badly hit as pandemic-related lockdowns come to an end. In recent months, many have been able to return the public gyms and other communal forms of exercise that were inaccessible during the pandemic. But its costly exercise equipment is also proving a harder sell in a time of high inflation and general economic uncertainty.

McCarthy’s full staff memo is published below:

A Difficult, But Critical Pivot to Growth

Team,

This will be a difficult day for approximately 500 global team members whose positions are being eliminated. I want to start by acknowledging them and thanking them for their many contributions to our company.

We are eliminating these positions and reducing other operating expenses, in order to reach break even cash flow by year-end FY23. Our goal is to control our own destiny and assure the future viability of the business.

I am acutely aware many of those impacted by these changes aren’t just colleagues but are also close friends. I know many of you will feel angry, frustrated, and emotionally drained by today’s news, but please know this is a necessary step if we are going to save Peloton, and we are.

With today’s announcement, the bulk of our restructuring work is complete.

The final building block, which I have previously outlined, is the right-sizing of our retail footprint. We lost more than $100M on retail last year which is why we must restructure this segment of the business. Our commitment is to provide updates on which retail operations will be impacted by this decision in the coming months as our analysis and negotiations with landlords progress.

While today’s news is difficult to hear, let’s remind ourselves of the significant and purposeful changes we have made since the beginning of the year.

Together, we have:

● implemented a restructuring plan to variablize our cost structure and generate significant annual cost savings,

● secured $750 million in financing as well as maintained a liquid cash balance of more than one billion dollars,

● simplified our operations by exiting owned-manufacturing in Taiwan,

● shifted our last mile delivery by expanding relationships with our third party partners,

● affirmed our pricing and premium brand positioning,

● entered into new partnerships with iconic retailers Amazon and Dick’s Sporting Goods, and

● introduced the Peloton Row, forever changing the rowing category.

Together, we have dramatically restructured Peloton’s business. You should be incredibly proud of what we have accomplished. This has not been easy. And, I want to reiterate how grateful I am to each of you for your hard work, contributions, and commitment to this company, our mission, and our Members.

In closing, I want to offer my deepest gratitude to those who are directly impacted by today’s actions. Twice in my career I’ve found myself in a similar situation. The first time was brutally hard. The second time I’d learned from the first. Resilience is a conscious choice. Sooner or later, we all get knocked down in life. But we all deal with setbacks in our own way. However you deal with it, don’t ever lose faith in yourself, and don’t ever stop getting up off the ground when you get knocked down.

I know we can make Peloton a great comeback story if we continue to fight for it. As I have said, this is not easy, but I’ve never been more confident in Peloton and where we are going.

Me to you. You to me. You to each other. And all of us to our Members.

-Barry

Update October 6th, 11:43AM ET: Updated with Barry McCarthy’s staff memo and company statement.