After surging in popularity during the early days of the pandemic, Peloton Interactive continues to struggle in a non-quarantined world. 

The company announced that it will lay off 15% of its staff Thursday, roughly 400 employees, because it “simply had no other way to bring its spending in line with its revenue.” CEO Barry McCarthy is also stepping down from his role at the company.

The layoffs represent the fifth round of staff reductions at the connected fitness company since 2021. Last year, McCarthy indicated that the company was done with layoffs and the “ship was turning.”

McCarthy said that the latest job cuts were necessary for the company to generate sustainable positive free cash flow (FCF). “Achieving positive FCF makes Peloton a more attractive borrower, which is important as the company turns its attention to the necessary task of successfully refinancing its debt,” McCarthy says.

McCarthy plans to stick with Peloton through the end of the year as a strategic adviser, and the company’s chairperson and director, Karen Boone and Chris Bruzzo, will serve as co-CEOs on an interim basis. It’s not the company’s first CEO exit. McCarthy replaced Peloton cofounder John Foley, who stepped down in 2022.

Restructuring in the works

Beyond the staffing changes, the company plans to continue to close some of its retail showrooms and “reimagine the company’s international go-to-market approach” in order to make that approach more targeted and efficient, allowing the company to consolidate resources.

“This restructuring will position Peloton for sustained, positive free cash flow while enabling the company to continue to invest in software, hardware, and content innovation, improvements to its member support experience, and optimizations to marketing efforts to scale the business,” Peloton said in a press release announcing the change. “Upon full implementation, the company expects the plan to result in reduced annual run-rate expenses by more than $200 million by the end of its 2025 fiscal year.”

Peloton fell short of Wall Street’s expectations with its fiscal third-quarter results, which were also announced Thursday. The company reported a loss of 45 cents per share, versus a loss of 37 cents that was expected by analysts. The company’s revenue was at $718 million, less than the $723 million that analysts expected.

Overall sales for the company dropped to $718 million, which is down 4% from the $748.9 million in sales it reported at the same time last year.

Peloton has been struggling for a while. The company hasn’t been able to turn a net profit since December 2020, when the world was at the height of the pandemic and most people were confined to their homes. Revenue has fallen for the ninth quarter in a row. CNBC notes that Peloton hasn’t seen growth in sales since December of 2021, when most of the world had not returned to gyms and the company’s bikes were still in high demand.

“Investing in hardware, software, and content innovation is the lifeblood of the business and the key to reversing the decline in revenues and restoring the company’s growth,” McCarthy said in his note announcing his departure from the company. “I’ve never been more optimistic that Peloton is on the right path to achieve this objective.”

Shares of Peloton Interactive were down more than 13% Thursday in early trading.