Peloton has posted a heavy quarterly loss for the first quarter, indicating that it has a lot of work to do in order to correct course. The company made a net loss of $757.1 million in the first three months of the year (Q3 of Peloton’s 2022 fiscal year). Not only was that a worse result than expected, it’s a massive decrease from the $8.6 million loss it posted for the same period in 2021.

Revenue dropped from $1.262 billion a year ago to $964 million. Operating expenses, meanwhile, grew by 101 percent year-over year to $920 million. Peloton says those represented 95.4 percent of total revenue for the quarter, compared with 36.3 percent a year earlier.

One of the company’s biggest challenges has been handling its stockpile of connected fitness equipment in the wake of a sales decline as more people return to office life. “We have too much [inventory] for the current run rate of the business, and that inventory has consumed an enormous amount of cash, more than we expected, which has caused us to rethink our capital structure,” CEO Barry McCarthy, who took on the job in February, wrote in a letter to shareholders. “We believe the inventory will sell eventually, so this is primarily a cash flow timing issue, not a structural issue.”

Around the time McCarthy was appointed, Peloton announced it would cut 2,800 jobs, or around 20 percent of the corporate workforce. Rumors swirled in February that the company was an acquisition target for several suitors, with the likes of Amazon and Nike said to be interested.

Although it won’t be easy for the company to get back on track, Peloton at least has a plan to turn things around. It aims to return to positive free cash flow in its 2023 fiscal year.

Last month, it announced an upcoming increase to subscriptions along with price cuts for many of its connected fitness machines. There are several reasons why Peloton is banking more heavily on subscriptions. For one, subscription revenues rose by 55 percent year-over-year to $369.9 million. The company now has 7 million members, and McCarthy has a long-term goal of reaching 100 million. “Our users are highly engaged, and our subscriber churn rate is less than 1 percent, which is the best I’ve seen,” McCarthy, a former Netflix and Spotify executive, said.

McCarthy said the pricing changes could help the company deliver “roughly $40 million of incremental revenue monthly.” The increased cost of the All-Access plan doesn’t kick in until June 1st, but McCarthy says there’s only been a small increase in user attrition and the move will generate an extra $14 million in revenue each month if that level of churn holds.

Cutting prices on some hardware models has led to a 69 percent increase in daily unit sales too. So far, that move has increased revenue by $25 million per month. The company also plans to keep testing a program that will combine an All-Access subscription plan with rentals of its equipment.

McCarthy noted that Peloton is revamping its workforce as it shifts from a hardware- to a software-focused company. The recent job cuts factor into the company’s plan to increase annual run-rate savings to at least $800 million by its 2024 fiscal year. It also signed a binding commitment letter to borrow $750 million in five-year term debt from JP Morgan and Goldman Sachs.

Meanwhile, Peloton says more than half a million users have tried Lanebreak, its first gamified workout, on Bike and Bike+. The company expects to lean “more into gaming content in response to the success of Lanebreak.”