CNBC is reporting that Tonal will be laying off around 35% of their employees. Like many others in the connected fitness industry (Peloton was forced to lay off over 2,800 employees in February), Tonal has seen growth slow this year, based on the explosive growth seen in both 2020 and 2021.
According to an interview with CNBC from Tonal CEO Aly Orady, part of the reason for the layoffs is in an attempt to become profitable.
Orady also emphasized the need to be profitable, particularly as the company eyes an initial public offering. Tonal hasn’t been profitable in the past, he said. But the job cuts will put the company on track to make money in a matter of months, he added.
He went on to expand how this was also being done in advance of a possible future IPO
“The public markets are no longer rewarding hypergrowth when it comes at the expense of profitability. And as such, private market investors are no longer investing as many dollars or as aggressively to support businesses through hypergrowth,” Orady said. “Those dollars just aren’t out there the way they were a year ago.”
Orady shared that Tonal had already begun reducing their marketing spend over the last 90 days in an attempt to save money. He stated that if there had been any slowing in sales, it was due to that reduction in marking spend, not a sign of overall demand.
CNBC was able to review a memo sent to employees about the layoffs, and it covered what benefits those employees being let go will receive
All of Tonal’s employees who are impacted by the job cuts will receive a minimum of eight weeks of continued pay, the company said, as well as health-care benefits through the end of September.
Tonal also said in its memo to workers that it is offering extended equity vesting for all employees to become shareholders, including accelerated stock option vesting and an extension on the window of time that option holders have to exercise their stock options for up to four years.
Want to be sure to never miss any news? Sign up for our newsletter and get all the latest news sent directly to your inbox.