When Barry McCarthy stepped up as Peloton’s new CEO last quarter amid news the company had laid off 2,800 employees, it was clear he had his work cut out for him. Since then, McCarthy has been vocal about shifting the company’s focus from hardware to software. That new direction can be explained by looking at today’s Q3 earnings release, which paints a tough financial picture for Peloton. The company continued to post larger than expected losses, and stock prices subsequently plunged more than 20 percent.

Peloton said today that its Q3 losses were $757.1 million, compared to an $8.6 million in losses at this time last year. Meanwhile, revenue slid to $964.3 million from $1.26 billion a year ago. As with last quarter, Peloton attributed the decline to lower demand as pandemic restrictions eased and increased costs due to higher than ideal inventory. In its shareholder letter, Peloton said that number was partially offset by Tread sales. However, the company also said Tread Plus returns were higher than anticipated following last year’s recall, costing the company $18 million. McCarthy also noted that the company finished the quarter with $879 million in cash, leaving the company “thinly capitalized” for its needs. To “strengthen [its] balance sheet”, McCarthy pointed to an additional $750 million in funding it received from JPMorgan and Goldman Sachs earlier this week.

Photography by Amelia Holowaty-Krales / The Verge

Those numbers don’t paint a rosy picture for the connected fitness company’s current finances, which is why the company is in the middle of a dramatic shift in strategy — though it may not be all doom and gloom. In April, the company announced it was slashing prices for all of its hardware and raising the cost of its All-Access membership to $44 starting June 1st. The company also began piloting a new subscription model called One Peloton Club that allows users to rent the Bike and take classes for a monthly fee. So far, McCarthy said in today’s investor call that the company has seen promising results from these efforts. Reducing the price of its equipment led to daily unit sales increasing by 69 percent. Meanwhile, McCarthy cited the “mass market appeal” of the One Peloton Club pilot, with 53 percent of signups coming from people with household incomes of under $100,000.

Peloton’s quarterly subscriber churn rate also improved to 0.75 percent, from 0.79 percent last quarter. Peloton’s always had impressively low churn, and the Q3 figure also includes a “modest increase” in cancellations following the news that the company would be hiking up its monthly membership fee starting June 1st. That said, McCarthy said on the investor call that Peloton was “hedging its bets” on what churn might look like going forward once the price hike hits.

“It remains to be seen what the net impact is when the price increase hits in June,” McCarthy said on the call, adding that the company won’t “know until it knows.”

Photo by Victoria Song / The Verge

Otherwise, McCarthy said he was optimistic for the company’s future “notwithstanding the stock price,” saying that “turnarounds are hard work.” (Of course, you’d expect McCarthy to be bullish on his own company.) He doubled down on the company shifting gears to be less reliant on hardware — which is interesting when considering its recent launch of the Peloton Guide and rumors that it’ll eventually release a connected rower.

“The overarching strategy is connected fitness,” McCarthy said on the call. “We need to be good at hardware but being good at hardware is not nearly sufficient.”

McCarthy went on to elaborate on what he meant by “connected fitness.” Namely, the company aims to grow its membership to 100 million members by expanding into global markets and promoting the Peloton App. That’s a significant jump from its current membership, which increased 29 percent year over year to 7 million. Meanwhile, unaided awareness of the Peloton app in the US is a meager 4 percent — likely because Peloton is primarily known as “that Bike company.” He also noted that the app hasn’t been at the center of the company’s marketing efforts thus far, even though it’s the easiest way to expand outside the US. McCarthy also kicked around the idea of potentially changing hardware designs in the future so that Peloton products arrive at consumers’ homes in one piece. Currently, Peloton’s treadmills and bikes require white-glove delivery and installation.

The company is also exploring partnerships with third-party retailers, though McCarthy declined to give further insight into that strategy just yet. And while Peloton says the One Peloton Club pilot has delivered some “promising results”, the company says it’s still too early to say whether the pilot will become a permanent option.

Likewise, it’s still too early to say whether McCarthy’s strategy is paying off, as he’s been at the helm for a mere 13 weeks. We’ll likely see more hints of what McCarthy’s got planned at Peloton’s annual Homecoming event later this week. The event is generally aimed at Peloton’s loyal fans and is when the company traditionally teases new products and features. But given that it’s happening so close to earnings, it’s another good opportunity for Peloton to drop hints for antsy investors about its product roadmap and how it plans to get back on track.