In this photo illustration the Peloton Interactive logo is seen displayed on a smartphone screen.
Raphael Henrique | light rocket | fake images
platoon sweetened incentives for his workers with one-time cash bonuses and changes to his stock compensation plan as he struggles to keep employees and fix his struggling business, according to internal memos seen by CNBC.
The changes come just over five months after Barry McCarthy, a former Spotify and Netflix executive, works to boost morale at Peloton as part of a turnaround drive. McCarty was appointed CEO in early Februaryreplacing founder John Foley, as the company’s spending spiraled out of control and demand for its bikes dwindled from a pandemic peak.
At the time of the C-suite reorganization, Peloton announced that it was cutting approximately $800 million in annual costs. That included cutting 2,800 jobs, or about 20% of corporate positions. Now, investors are waiting to see if McCarthy can boost sales and win over customers, as rising inflation squeezes budgets and a competitive job market makes it hard for companies to keep employees.
Peloton shares hit a record low of $8.73 on Tuesday, down more than 70% year-to-date, amid a sell-off in the market. The stock had traded as high as $129.70 almost exactly a year ago.
Shari Eaton, chief personnel officer for Peloton, said in an interview Wednesday that the company is taking steps so employees can benefit as the company works on its recovery efforts.
“The extraordinary circumstances that we find ourselves in now really give us an opportunity to pause and see what we can do to ensure future success,” Eaton said.
Equity Unlock
In one of the internal memos, Peloton told employees that eligible team members will have their post-IPO options revalued to Peloton’s July 1 closing price of $9.13.
As an example, Pelton said that the options granted on March 1 had an exercise price of $27.62, meaning they were “underwater” and employees would not benefit financially until the stock passed that threshold. After the price revision, Peloton employees will be able to exercise their options after the price exceeds $9.13.
Peloton said it has no plans for future price review events.
The company is also accelerating the one-year vesting requirement for eligible unallocated restricted stock units that have more than eight vesting dates remaining on their vesting schedule. That allows employees to access the value of stock units sooner, Eaton said.
The change does not apply to hourly employees or C-suite executives, the company said.
cash bonuses
Not all Peloton employees own or want company stock. In lieu of an equity grant, Peloton hourly workers in September will be eligible for a one-time cash bonus to be paid before the end of February, according to one of Peloton’s internal memos.
Many of the company’s hourly employees have said they would prefer to receive cash compensation rather than longer-term capital grants, Eaton said in a phone interview.
Peloton said people who are employed hourly as of July 1 will be eligible for the one-time bonus as long as they stay with the company through January 1. 23. The amount of the bonus will vary for people in the company, Eaton said. Any capital award granted in the past will not be affected.
Peloton also told employees Wednesday that it recently completed its first pay equity study with Aon, an outside consulting firm.
The company said it identified that less than 4% of its workforce, or 206 people, had a base salary disparity relative to their peers that could not be explained by factors such as job level, geography or seniority. Peloton said it took immediate steps to eliminate the disparities.
