Barry McCarthy, chief financial officer at Spotify, attend annual Allen & Company Sun Valley Conference, July 11, 2018 in Sun Valley, Idaho.Drew Angerer | Getty ImagesWhen Barry McCarthy showed up to run Peloton about three months ago, he was surprised to learn just how discombobulated the supply chain was and how quickly the company’s cash coffers were shrinking.”The nature of turnarounds is they are full of surprises,” McCarthy told analysts on Tuesday, during his first post-earnings conference call with Peloton.After digging into the business, the CEO said he learned that Peloton was “weaker on everything supply chain” than he had expected. He said the biggest surprise during the previous quarter was cash flow, and how bleak it was.Yet the former Netflix and Spotify executive also said he was also surprised by Peloton’s ability to “quickly address” its cash flow situation without diluting existing shareholders and while continuing to adequately capitalize the business. Another bright spot noted by McCarthy was that he found more talent within Peloton’s headquarters than he thought he would discover.McCarthy’s comments to Wall Street on Tuesday were incredibly high-stakes, given Peloton’s diminishing share price and waning confidence among investors that the business can be successful in a post-pandemic world.The CEO’s letter to shareholders Tuesday came with disappointing results for the three-month period ended March 31 and a grim outlook for the current quarter, which ends on June 30 and marks the end to Peloton’s fiscal year. McCarthy was quick to call out areas where former Peloton management had not been so successful, while laying the ground work for his turnaround scheme.At least for now, investors are more focused on the current sour state of things. Peloton shares sunk to an all-time low Tuesday morning, dragging the company’s market valuation down to about $4 billion. It had been as high as $50 billion near the start of last year.Still, McCarthy ended the conference call by telling Wall Street that he’s “pretty optimistic” about the company’s path forward, “notwithstanding the stock price.””I don’t mean to sound pollyannaish, but I’m hopeful that someday soon we’re going to look back on this call as one of the important turning points in the business,” he said.A shift in prioritiesOn McCarthy’s check list are:Breaking into third-party retailers by selling Peloton products through other businessesGrowing awareness of the company’s digital app, which can be an option for people who don’t want to commit to a Bike or Tread machineExpanding internationallyRolling out more widely a pilot test where customers pay a flat rate to rent one of Peloton’s stationary bikes and access its live and on-demand workout classes”We need to be good at hardware, but being good at hardware is not nearly sufficient,” he said on the call. “And that calls for a shift in the investment priorities of the business.”He also, importantly, aims to turn the business back to free cash flow positive in its upcoming fiscal year.A recent cash infusion from JPMorgan and Goldman Sachs should allow it do to this, McCarthy said, in spite of any economic headwinds. According to McCarthy’s letter, Peloton ended its latest quarter “thinly capitalized” with $879 million in unrestricted cash and cash equivalents.Many investors will likely have pause, though, until they’re able to witness greater signs of progress. Some also worry that Peloton could lose a fraction of its existing subscriber base — which has proven loyal during the pandemic — if they change too much and too soon.UBS analyst Arpine Kocharyan said he expects Peloton investors are going to be more concerned in the short-term on the company’s ability to preserve its cash flows and liquidity. Peloton’s strategy under McCarthy is to put greater focus on the net present value of the subscriber, versus a prior focus on hardware profits, Kocharyan said in a note to clients.Other analysts are questioning whether McCarthy’s strategy is really that different from that of former CEO and Peloton co-founder John Foley. Peloton enjoyed success under Foley, who led the connected fitness equipment maker through the height of the pandemic. But it also experienced challenges as consumer demand started to fade but costs still mounted and Peloton had made investments in things, such as additional manufacturing hubs, that it no longer needed. “The company continues to suggest with their words that they know they need to turn around,” said BMO Capital Markets analyst Simeon Siegel. “And yet they’re holding onto this notion that their growth story is their North star.” “If the company would simply work on selling their existing inventory and focusing on bear hugging their existing loyalists, there should be a reasonable path to profitability,” he added. “The issue is that story gets clouded with the belief that they’re entitled to grow as far and as fast as they want.” McCarthy reiterated Tuesday that Peloton’s goal is to one day count 100 million members, a goal that Foley laid out in 2020. “I know of digital apps that already have more than 100 million people that are focused on fitness. And I can’t for the life of me think why, given our success early in the category, that we couldn’t be one of those digital apps,” he said. Peloton had 7 million subscribers as of March 31.