Peloton Interactive (PTON) 6 Nov 192019 Q3 Earnings call transcript

Company Profile

Participants

Alison Brightly	Assistant Controller
John Foley	Co-Founder and CEO
Jill Woodworth	CFO
William Lynch	President
Heath Terry	Goldman Sachs
Douglas Anmuth	JPMorgan
Justin Patterson	Raymond James
Eric Sheridan	UBS
Edward Yruma	KeyBanc Capital Markets
Michael Graham	Canaccord Genuity
Deepak Mathivanan	Barclays & Co.
Justin Post	Bank of America Merrill Lynch
John Blackledge	Cowen & Co.
Lee Horowitz	Evercore ISI
Jason Helfstein	Oppenheimer & Co.

Call transcript

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Operator

Good morning, ladies and gentlemen, and welcome to the Peloton Interactive 1Q '20 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference call is being recorded.

I would now like to turn the conference over to your host, Ms. Brightly. Alison

begin. may You

Alison Brightly

welcome year first XXXX. and call earnings for fiscal to morning quarter Peloton's conference Good

William X-K. and Joining and at your copy the Foley, the CEO; Investor questions to on of has are our us today's is on of SEC John been our call today's shareholder Relations Co-Founder furnished available CFO. section Woodworth, www.onepeloton.com our Jill to letter answer Lynch, Form A President; on and website our

remind to management's you our we today begin, are like Before under Securities questions related reflect would responses forward-looking and morning only statements Federal your that laws. views that to our include I comments of business to statements and this will as

by with statements uncertainties Actual risks and business. these our to results differ or forward-looking from may due associated materially those contained implied in

For and material a important our our could impact and refer shareholder actual can factors found today's SEC which letter, that other to discussion results, of be please the our filings website. risks of on both

this non-GAAP of financial both financial letter. measures. GAAP today's call and measures shareholder reconciliation to non-GAAP GAAP discuss A we During provided is in will

opening that, who will few to I'll over remarks. John, turn a with With begin the call

John Foley

Go earnings Thank the results of that we delivered call. Hi, our team. last the by and months Peloton team quarter. the few the want joining you has off everyone. Peloton I'm to kick for what I proud first saying very accomplished first over in

quarter. let Specifically, our into - for me jump highlights first few the

billion capital. our We in $X.X IPO obviously of September, over raising completed

will a and content pipeline excited raised and our to we're times, our have do our heard first put platforms. software, on in allow about continue robust and build to to these you our footprint. say expand what products several funds global our us of innovating we As us the IPO members

that to our October Obviously, to obsession. XX members for the true we delivery, this by are Bike we days impact encouraged risk-free. after are Home customers Trial, allows the And try seeing. we on which at stays Second, launched sales XX, Peloton home first initial

In October, as who with award with I closed long our and back time creating far us as who partners of worked acquisition of on for the collaborated winning Peloton we Taiwanese-based years to Tonic XXXX, manufacturing bike going Fitness, personally one Bike. our

are acquiring scaling control the for gives stay out in supply front to that We excited of Tonic us over more order our our high in chain demand products.

will our sourced manufacturing is believe We as to core Taiwan of we partners it continue and on great that all products. dual other be to work beyond with in smart

want XXX,XXX for QX. and Lastly, representing members. some give to highlights serve ended I to financial our subs, at subs for Fitness X.X rate, growth over allowing us year-on-year operating financial more than XXX% strong million Connected metrics

monthly average with churn X.XX%. We net Connected at low the continue see churn to Fitness

engagement can leading number XX.X we the QX you averaged Interestingly, rate growth growth of the XXX% XX the QX, and on the workouts million year saw this point our same of in last of to in per XX% want guess, X.X workouts year-on-year growth, combining Connected growth As retention number platform a platform. year-on-year jumped from that workouts and that representing members, out on workouts our million to last I year. showing engagement period versus subscribers indicator and Fitness is QX, the significant the month, subscriber our Peloton

negative an X.X%, of up while gross XX.X%. was showing million, at held year-on-year margin $XX basis last points was adjusted million XXX% steady was EBITDA loss which growth, over represented improvement and EBITDA $XXX margin Revenue year. XXX to QX Adjusted negative of

our give a Woodworth, Jill review quick now turn guidance. will our I to to of things over CFO,

Jill Woodworth

member base. remain growth engaging growing and subscriber driving and scale Fitness Thanks, retaining focused our on Great. Connected of We John. strong

Trial, on which Home Our subscriber September success XX. guidance is was based early launched of on the

a net average Connected and monthly subscribers. expectations churn of Our resolution for our low Fitness New Year's continued and holiday season robust

ending QX, XXX,XXX that Connected of For expect midpoint. Fitness to growth subs we XXX,XXX at represents the XX%

June, primarily ends for at QX growth the of X.XX% stay prepaid and in from Home year and off representing XXX,XXX of Connected in subs expect full X.XX% continued ending the is average our we below is Trial Connected but fiscal subscriptions. the X.XX% to XXXX. to churn the XXX,XXX, It in XXXX, full Fitness For below midpoint. slightly year rolling increasing to expected slightly, QX, Fitness which XX% Churn rise due

the year represents QX For to that And revenue, in XXXX, expect we billion at full growth $X.XX for expect to at midpoint. the growth midpoint. million billion of we $XXX representing XX% fiscal revenue, to the come million XX% at $XXX $X.XX

notes additional the basis, and of gross a range to range XX%. we XX% expect profit will QX, you subscription in of of expect the margin gross to our For segment XX%. XX%, it overall couple we When QX A at on XX% of to margin, on look contribution a XX% gross margin Connected in margin Fitness a for

we For to XX%, 'XX flat fiscal year year-over-year. essentially XX% gross margin of expect overall

Fitness year, of and contribution margin subscription XX%, for of we to to our XX%. the XX% in expect full to be gross Connected XX% Our margin range range in the

investments the continued logistics continued chain gross scale to tread of shift we to year-over-year the Connected margin for and products. high making attributed Our meet Fitness mix profit is to decline that are demand supply our sales platform our and to

improvements reduction past continued Our leveraging content last our dues, are significant a to over fixed extent, the in of lesser the costs costs producing the subscription contribution for expected year to of and content. attributed

operations experience supporting recruiting teams across member the retaining Peloton. best our building end-to-end and in and at all We business functions internationally, continue will invest growth, scaling brand, to our improving our

range. adjusted year that we're negative at negative With expecting EBITDA the an XX.X% to the that $XXX of midpoint. an adjusted represents represents XX.X% full all to of of million EBITDA which we margin for a which a EBITDA XXXX, QX, And $XX for at loss, million said, margin for EBITDA of $XX EBITDA adjusted expect adjusted negative range adjusted of million negative of negative midpoint $XXX million,

With that, we now questions. to will move

the So, I it operator. will turn over to

Operator

the we your Goldman question first Heath line proceed. Presenters, from coming from you. [Operator Terry have Instructions] Sachs. Please Thank of

Heath Terry

you're reliance beginning seeing your can a into beginning for Just, On of those what direct - an you QX we Booking they are the go in in have to give you're relationships, impact and as as or you hotel how us what with the are more the relationships those to looking on progress? sense Expedia? relationships go more quarter, of on to hotels,

William Lynch

Heath. Hey. William It's Lynch.

that the at if terms the consumer In business, our tracking same year-on-year, is. rate our business hospitality rate look you it's growth to of about

channel. we with ago, about and we've partnership and partnership Peloton So penetrate our that announced - to then, as was the hospitality since Westin continuing two been years

weekly, base go as We gym hotels get for grows want to gyms, they our hotels monthly put asking treads into inbound that Peloton. and their experience, Peloton both member bikes daily, to from differentiate their to a and those

consumer So channel growth. that's, us. we've a got a I for And team it's good as focused said, over-triple as on business, hospitality. but ourselves top-line We that's a define digits

the the So consumer the demand seeing we're definitely hospitality. is filling from in

Heath Terry

then, quarter, the for side, profitability sense implied can as at the rest on clearly, you're at you go Jill, through terms about we particularly Bill. instance as what's the you And of incredible look gross this that Thanks, of but you're the you us margin expecting? year, year, of way guidance a give look the the through terms way of the Great. about as level in of thinking the just the investments, you're investment rest in that of thinking

expect well say this ramp as as what Canada, German launch, as through giving with to leeway year? the able I go And or of know you level how much yourself with you outperformance be and UK seeing continue already would are investment? we degree you guess down of to further the to up you're I the should

Jill Woodworth

Yeah.

So, thanks. Heath.

philosophy for first off, I you. our I describe would think, guidance

of market of guidance bike you and will but our you is current estimate our as believe stages early does guidance growth give we we But as over business, in well And the still control our as our our Our in both vertical integration take what very US opportunity. we performance. us our execution, good achieve. internationally, know, as can are best

in some of our in to our perspective. to efficiencies both international, bike less well continue and tremendous with launch see Canada, spend of and terms Germany, marketing, our excited I grow is about and bulk say And as again our efficient And sales in we're businesses the I slightly think Germany sales we offset I a in new to are of in UK shows to the allowing tread. spend we from and expenses launch guidance as would obviously in of as that's prepare product marketing nascent the very mean US terms us what to what that business

helping So internationally. efficiencies think that very us efficient the with spend less good feel I certainly of all those that we are

Operator

Go am you, Thank your sorry. ahead. I question next comes -

Jill Woodworth

Sorry, I next was ask to for question. going just the

Operator

Thank you.

next the of Please comes JPMorgan. proceed. Your from question Doug from Anmuth line

Douglas Anmuth

so questions. Great. much. Thanks Two

John for just or First, William.

you percentage that capability? so give you the to Tonic on you the for color strategically represent it and of bit what thought manufacturing does talk or If important why could is manufacturing overall little there more it the any can a us Tonic-acquisition, bikes about was you today? And own if

Peloton's your about Jill, peak year in can confidence year? second, bike then, thinking and US how you're 'XX just this core on comment profitability And being Thanks. you loss fiscal around

John Foley

you, Thank Doug.

respect with order to make and to globally. of be treads need the to bikes and sell able would Tonic, bikes treads to coming yeah, in So, globally of we years, I millions in millions

about a acquire supply it we why So the Company chain world-class so and it understand in into the a obviously little Apple us doesn't order chain manufacturing a We the atypical supply supply to reason is why it need capability. scaling did we do But important scale for chain we're bit and reason manufacturer. is, and to to thing invest a create excited is very for own that like us. Foxconn,

it which partners. love contract bike strong we is both. one have control and manufacturers over were little our investing, big on Tonic, of largely them with based but and more wanted our bit a do relationship it, to Our manufacturing We two

We Tonic is team have with relationship incredibly the strong. and the longest

founder our force The is become with respect leadership. space in Wu equipment in son equipment a has Andy manufacturing a visionary of fitness kind manufacturing. His to

excited are we so And it. about

dual continue will We to sourced. be

make destiny, that to our but properly. So we're in invest us contract excited strategically could about we sure general, manufacturing control for

fun world of new and relationship. manufacturing equipment from facility is in very fitness new facility best, one I A not be the that to brand with for we're that be, we're is launching a you a to that of the if in dirt going will believe, we a excited going manufacturing thing and the kind Tonic on months facility the best, or working coming brand greenfield fitness tell about

Douglas Anmuth

Thank you.

John Foley

take to everyone's it. and profitability me I'm asking think mind, because talk one I'll as do the it's well, apologize. sorry. on Doug, I Jill is I about

For us, profitability is a managed outcome.

have this said before. We

know economics business bike profitable our guys continue gorgeous profitable. because is be and that unit well, to will it Our of you

So the are just making based think within investments new managed international saw, we're a investments. on of are is and and growth, top-line you profitability. just striking digital and QX more I in content single performance that, our retail triple-digit what guys digit they locations EBITDA which we But It's are outcome. products distance of and loss,

balance we Board that I on growth. so We be profitable Peloton opportunity we believe what that is think investing big that right we believes at the right do. could the we growth, are back is leadership the think and pull for tomorrow, we future on if globally of not but should

Jill Woodworth

Great.

Next question please.

Operator

Thank you.

Patterson comes Raymond question the next James. Please Justin proceed. line from of Your from

Justin Patterson

Great. asking any resist online questions. Thanks much and so I'll travel

do comfortable I you I'm Are against could it's performing know the early, the about customers around Home with that how are demographics forecasting talk seeing engagement So you and but get Trial shipped then among previously? campaigns season? how And any new versus in where differences holiday expectations? Thanks. to marketing the you curious, and you

William Lynch

both Hey, On Lynch. Justin. take it's Trial, those. William days. Home I'll It's of early still

two XX, it last weeks the John and we Jill launched it's September quarter. really so As of said,

Blodgett Tisch So Home purchase marketing the Carolyn our barriers great to led brand treads. for of is our and a biggest team research lot does the around impetus Trial by bikes

And what price we barriers were and were then, biggest affordability, will found I it. that two use

test. We test a And in everything of did so major programs. We almost guess. terms don't we

home, what year is, free, markets Trial tested it we So test we've Home and been it launching the this try earlier showed by encouraged And we since XX in. in results. it lift did a the it, substantial bring days around really

bike. first again, for our a the So - Home then, the time both holiday and as well is this big on Trial, as marketing, promoting secondly, ever, $XX both push

XX-month we're our zero all APR, the bike to with for consumers financing, a underwriting ability and get So costs. a $XX have month the

incredible an it's deal. So

the fitness. which We right think a membership month. $XX Interestingly, deal average against on that the it's pay, gym goes average that best people is most in

the the we So then, the feel Trial, TUV affordability heavy And again, two feel attacking we between early perception results and barriers weights on $XX, like biggest holiday. with great to attacking purchase. we're promoting Home with about

Jill Woodworth

everyone, If that, fiscal just to back I strong remind want very look to if we 'XX, might to add year I on had just you holiday period. a

so our And lapping the at guidance period. of a midpoint Fitness holiday Connected we're our pretty XX% QX big for subscribers,

a significant lot commonly stopped to by we some program pretty the program, which with our driven debundling, in created financing had we financing made a of equipment, where we that conversion. that And uplift was subscription to which changes our refer as

remind for to from get next we everyone that the Could wanted just last I holiday. of this year time question? So

Operator

you. Thank

of from line UBS. proceed. next comes Eric Your Please Sheridan from question the

Eric Sheridan

Thanks so gross might see sustain of I of halo One, much. coming IPO, we out fiscal are IPO aware QX of can. either additions the channels the did in two the or effect just the around so into of marketing anything marketplace? Maybe if a out or QX better better fiscal dynamic that coming effective you

And international developing the year with UK can much. in opportunity how unit around give one curves you what might the the so Thanks us Canada, might and opportunity any secondly, the sense in growth that happened economics or into contrast or US? be

William Lynch

what sales, definitely in saw or about but are traffic US and traffic then what we and and on it And happens, got saw the three tracking said On able by was is, period. are the it We channel marketing of fleeting. conversion and bump terms days, for where we which it project typically IPO, to same is, four the and international, to a at steady of ahead Canada state in UK sales. was we've the

We the that, there, investments leading and retail we've UK, see was measure up faster. developing you sales the on the actually markets And been opened awareness. aided about the in advertising is is and our One we've of and indicators internationally, Canada running benefit what the of awareness. spend unaided awareness with Jill marketing talking are

so of are ahead expectations. And they our

we'll Jill That's They're market. to was. ahead But launches, It actually That's XX/XX. of in gave answer. first the where confidence our which said, the us as language invest - US Germany, see. foreign that's

the that of time. terms economics, ahead. US on really the again, not US. put they're it's of wouldn't business the spend terms And investment lot to unit different so and than they're In a substantially I curve, about that we It's of upfront tracking had in about - into model,

Jill Woodworth

Great.

Next question please.

Operator

Please line Markets. Yruma of question next the comes proceed. Edward KeyBanc Your from Capital from

Edward Yruma

activity? maybe a And six intensify. over a question, have Good lot these non-spin morning. months. the how competitive such to the past functionality of guess, usage guys acceptance app second, my customer then, broader and taking you of a guess, of Thanks I for some to first, continues score environment questions. you I the you've and and added would more and added activities lot

You lead, Thank guys that rolled we there guess, likeness. competitor are bike big Obviously, environment? other out a had competitive you connected clearly fitness overall starting used that a should you. products but have to a the consider how I emerge. your

John Foley

Yeah.

So we business. love digital the

you're our of of line we top Digital leaders. but as - hear of about She is about new in who excited She a our big may young a more Kogan, growth strongest coming to see you Ed, in monster. digital. her or very one It's a going Karina is driver are years. Gead not We bottom the is have

Connected to represents our giving and content for to its more in and and and of and for app our million engagements more a our to their But the a us. treadmill ride own great take from basement Fitness for membership. engage XX Fitness boot today have a and It's subscribers is digital it Connected our like for to the our to for gym camp driver our utility more content. with acquisition know classes bike a a then, community in like it we that get which and what America instructors And we way customer the or gym people business,

Connected features, own to akin We're our have business, mighty investing to point, is of your launched going know. the to digital lot software, continue as we Fitness gorgeous into investing in a Ed. that to that continue We that an develop which its we're and content is business going that you in could oak acorn think

would capitalized company have, head point, like-minded exist years. very in I you're out may seven-year With competitive this which not what that very right, very, knowledge at a we category. a a have the technology I point competition, competition, respect will yet, we from We say, But company. well is to but To coming call, some be created hard. would start. doesn't we our the at what point I it perspective, do do

as We - billion. have $X.X know, raised, you we've invested

We are bought investing hardware, very the back smartly, it very manufacturing. aggressively, the We manufacturer. to

in it's music, have, better perfecting but to the to we they perfected, teeth media, we're to We on concert community, apparel, and integrated, And US. at see retail, that cut won't I our we're a believe consumer, all it. software, marketing multi-channel are working vertically the direct approach getting in logistics, hardware, say - Peloton business. Williams And in works investing it that obviously lot we we've point,

to in to formidable. Canada, as pretty we we and global the smarter to pretty be market going that platform so go building smarter we're we're I be to months compete even going will we in rollout guess and technology a We're we're next question. believe in UK, coming the the with smarter Germany is that hard in

Operator

line from proceed. comes of Please Michael question Canaccord. next from the Graham Your

Michael Graham

you. Thank

Connected was the gross for Fitness lot product stronger guiding we come than a down bit little margin, and modeling quarter it were you're sequentially. On a this it to

things some might outlook it were the helped quarter? level? back to strong And of that your conversely, down bring it this side, what normal Just happen what to on the be other to

gets then that long that just majority I How going take the density of also And those of classes, want it's the language ask language to a on think so content. catalog the do until you to that's subscribers? local local German for experience to

Jill Woodworth

Great.

QX, was just for primarily Obviously, to profit tread margin. XX%. on question differences is two And currently year. carries margin XX% last versus the mix which Connected That the margin. great year-over-year to So was everyone, shift profit gross Fitness Connected one remind Fitness things, gross attributed gross profit lower were a the

in And secondly, year-over-year made supply incremental we've chain some platform. investments and logistics our that

think expectation achieved gross that I to favor. QX, moving year, remind for a if year referring XX%-XX%. really what the in be profit full we again, you, the are to of for balance achieved versus of XX%, lot margin Connected just to you're that, consensus had say we expect the we factors our in but we of And I'll our Fitness

first again, perhaps the little will within loaded for quarter, expected perhaps say I the through They is, supply continue we'll to than what be chain would is but again, the reflected a and than bit make consensus. logistics, back-end more investments though So there. better year, what balance of

inventory in to in QX. a a did resulted of a inventory which reserve benefit. piloting We're inventory, our resale program one-time for benefit one-time returned a favorable reserve small we Secondly, amount have

that better seeing lastly, And warranty expected. were also on lower tread We bike product than both than in are I and were both then, say and our tread would utilization expected. cost bike efficiencies

news given full for positive the will in supply the the throughout and balance decline again, our a the we mix the So to the it of of just shift year favor, throughout year. XX% chain to was again, tread, year, investments the but make plan continue in lot

John Foley

the take just can German I question, catalog very quickly.

out look if So actually you US. most of of the UK, at some interestingly, the instructors popular the are

content the expanding globally. doing fixed-cost UK instructors, talks about But instructors two nature well. we which think of Our and our are it is as to exciting really

and announced We two They Chief call. Managing Director Jen of We're have to Cotter, Chorlins, have who our phenomenal pump. shortly. a not our job hired on Kevin announce will International, instructors. going is of be German priming them done Officer Content the this

try - take going the classes our at to going substantial actually German to we wanted to subtitle. - content - with we're also in that But tested spring language including subtitle, testing we again, launch, to we're because test German US in have everything consumers

bolster to to So curious we Germans US, that's given competitive US the in really catalog our again language going be as think a cycling the advantage but classes. take catalog also are

from German perspective. So we'll catalog a well be covered

Jill Woodworth

question, please. Next

Operator

question line Mathivanan Deepak from Barclays. next Your of Please the from comes proceed.

Deepak Mathivanan

I for Jill, guys. on ask to margin to XQ. Thanks gross device's Great. wanted specifically comment, elaborate you connected the

investment and I strategy up an think XQ. you XX% sequentially holiday promotional there Is the about we the should in from for during of noted levels incremental think season? how step current terms logistics

then on of is, quarters, then of some few timing headquarters and in timing expected that the London? And in you provide the make City also question at very you're and Is the the Thank the New update studio next like second York also and can P&L the the an you to flow through looking into happening cost big much. investments the cadence? the launches

Jill Woodworth

QX I QX. the sequential a a I your second QX we in to profit on holiday in in you from the first address that and gross that margin between repeat decrease Yeah. activity ask is, Yes. question the to is any decline QX, to fall historically minute time one do the season see there might question of while tends Fitness our We and drivers that period. Connected and promotional

our in other the I this perhaps which couple and thing also bike. happened you marketing is, I last we've months saw advertising, our been one in might of The over the $XX think note highlighting

have Fitness on And impact you as uptick which our Connected see over our financing the an penetration few began our in weeks margin gross last know, we units. to rates, so

in we time The recently thing is, for for XX-month, say tread, the I zero would other launched just APR holidays. financing

continued to decline, is in logistics. again, of investments made shift chain and just So if continued mix tread will. you And and and another supply sequential investments that that driver

repeat second just then, if could And you Sorry. more question one time? the

Deepak Mathivanan

Yeah. of big flow and through to cadence the just asking the investments be into P&L the I still Overlap] those, the is and was specifically headquarters the anticipated previously the OpEx expected just that of the you along next to make, over launches in [Speech as you're cadence some quarters? planning related few of about terms in CapEx

Jill Woodworth

Yes.

So, consensus, in have QX, you what been Peloton shift for Studio, little there has near know bit with was the Hudson London the on for perhaps headquarters a again obviously, in CapEx York of respect to there versus some our of a timing New we studios, going new and new Peloton's builds Yards.

So are be is will by timing when XXX% spend, the CapEx all as some budget. differences track three time. on on we budgets that to respect completely overall to but are with impacted There

our aspect is as growth know, is the the balance. of that's CapEx, showroom footprint, incremental other of on The you so continued But everything budget.

question. Next

Operator

next from Please Lynch. proceed. from comes Post the line Your Merrill Justin of question

Justin Post

follow-ups. of couple A you. Thank Great.

you. sales lot. performing, talk you for guidance You gross tread shift next mentioned just profit acquisition? you quarter a of Thank Can And quarters? or second your cost to you your on the in the us marketing expect any your look versus for over the tread on then, expectations? your out in secondly, mix marketing hardware give the either update cost are cover how year, can and three acquisitions as your your Do of you about absolute

John Foley

Yes.

sales goal. members was is our is net getting our we than the close us it score which Tread just promoter of out of might approaching that our have XX more brands our important platform to very and exceeding tread special talk are very well. the with promoter one XX, is experiences our you John. Probably providing anticipated. boot the in It's proud and score We're of of creating how which front is expectations. To it home, that camp consumer to most is doing speaks we're question, of our about, experience, is in for delighting that experience heard to that thank at what your Justin, it circuit extent And the and training great net north true you. day.

get Officer boot doing MD the up International. who continues is investing really is and Kevin But confused be the in to and and Content for a her the content Jen to of content who The Cotter, Cornils, with lot tread Lieutenant new Kevin content. William brought of camp Chief and better. our content Chorlins, our Jen Kevin innovation are not

continues better just the So to get that as software platform to get better. continues

when these either So you or Bike Connected every buy better. of Tread, Peloton platforms, Peloton the gets one experience month, Fitness

the $XX the that partner two month, adults or living becomes platform. no with out, which deal a launched just XX-months in to So your person, believe your the we of which financing home, by Jill the two, spouse you X% for then live-in that And your a quality for the as or whoever, the per which if gets pointed different divide which tread. tread on $XXX we is month, screaming a

tread. feel don't the very about who we So wants I good to take...

Jill Woodworth

Yeah.

sales that where briefly our I'll we referring look marketing our and gross expenses. our think, profit I model unit offsets majority mention, So to you're in that a at, margin just of measurement Fitness Connected the economic

for marketing that's guidance again, range of our midpoint you is taking on And year, on for adjusted Connected implied $XX the at our full acquisition costs, full the guidance expense, profit about based so customer what's Fitness margin, the year. look based our gross if less sales net and our

thereafter, a for very sub very are then, subscriber. long $XX our unit are time that essentially a we that, and economics enjoying means acquiring So very life much intact. new much is What

very sales and of we're and seeing our would So overall. terms intact, encouraged Again, say, I of the mouth. marketing in US much we efficiencies bike just continue that business to with be very in word

Next question?

Operator

Your John Cowen. from Blackledge proceed. question of comes line next from Please the

John Blackledge

Great. than The margin sub contribution Thanks. what had. was Two we better questions.

secondly, sub if you. margin the about percentage then, And and longer of not sure contribution curious any drivers color on trajectory quantify subs? thoughts paused subscribers, Just a Thank key on the total any can term? you as

Jill Woodworth

And The in XX%. versus XX% sub QX to for on a contribution improvement achieved again, top our past of significant our our we obviously, guide beat to cost leverage was balance So was in cost for then, was what subscriber our QX adds, of content primarily we due growth XX% is given produced strong margin, production in fixed subscriber scale that content as line the use. just base.

going we're QX beyond content. fixed point, we certainly of time, subscriber least a of the that demonstrates base, that our XXXX, leverage be terms scale but over at able In production at our is guiding I lot we not what really think will of as the that, most to costs beyond of

we is that confident very something remain So about.

your of you it, pause. would want on all I question, - that sure repeating? It's of make second would you mind answer mind terms I just to In

Okay.

Sorry, year on mute.

think - This can That so, based paused given that any time what great is disclose, but I plan we to subscribers is on current say X.X%. not are our levels. at around is and in X,XXX we So question. regularly well something below

just of see three can that base. that is someone to I house. Connected they a pauses pauses, - what for in to to to months, due they paused And And of remind member subscription. are subscriber likely are months. thing our still that typically, and that, up shows And last we Fitness they And everyone up can off to injury, no add is subscriber then, our data pause more even churn might if pause for moving a three the person pregnancy, included our

question. for the thanks So

Operator

Evercore Lee line ISI. Next proceed. Please question of from comes Horowitz from the

Lee Horowitz

Great, for Thanks question. the

to last financing by seeing you your how, the if financing disaggregated subscription all, of outlook agreements, at full-year as an their for that those churn lapse? year, potentially impact has finance and impacted the being churn their cohorts agreements off rolling Given from

bigger maybe the macro business the maybe may those way be has markets? environments another in moving your guess, environment. one, are in about in you Obviously, the marketing on softer UK, into macro then macro how how perhaps Germany, and impacted I picture into any you're thinking growth investments And

Jill Woodworth

Great.

the the take William. it then I'll over and first of to So question part hand

prepaid offer getting We net the churn also you're to low was financing and think, bundle did QX, obviously although, roll main - remain prepaid two offer monthly subscriptions main churn. used to our really churn QX so in So in what onto impact is subscriptions this our I of things. off used X.X% The the impact at and to we we month-to-month. to used average at

we their period. came of higher those said, see that than That retention anticipated subs out for prepaid did rates

subscribers over year. expect that are slowly number climb the to month-to-month and we XX% throughout of our Now, paying

accounted As immediately. you a as bike full to look that and at churned and churn a start our QX. we that recognize churn guidance will be the customer a in to other at for thing that X.XX%, below note Trial will within QX one period, Home If customer is keeping for year XX-day churn impact returns they our

of So pressure increase extent if to the that we in upward bit little a see our over time, churn. rates in create an could return

William Lynch

day-to-day answer I'll William. a It's and impact environment. and macro basis, week-to-week sales our the On and Hi. the at all. macro the sales investment doesn't against marketing marketing environment investment

the is customer led team for and acquisition Johnny sort the Tim Smith, what Jill that and can talked that calculation Our as net Jiang about. customer we and at acquire of what Shannehan CAC by LTV of Alan a look

really marketing. so in disciplined our And we're performance

how we decision we about deliberate. the investments, and upfront think select markets relates to internationally those the As go very to is it internationally

And going so of actually months market. those decisions advance XX make into in we the

confidence market And Germany. lot so of as go of rate gave I UK us Canada decide into to assess and the to expansion Then, risk. said, we a against

that go know of there's economics this and invest we And once to going it upfront in are experience. into to sales product. awareness primarily to unit those it. We a really marketing markets, decide We means win. great know get to delivers we And

the some places low the awareness about really done up. we've get as What that Germany in to start, it's very awareness is we've in sales cold UK from seen our market is, Germany, and that are - So educating follows. and

So think that's sales how and we marketing. about

Jill Woodworth

Great.

one I think we more question. time have for

Operator

next from Jason from Your Please of line the Oppenheimer. Helfstein question comes proceed.

Jason Helfstein

share do comment of versus decisions Any How on of will proceeds was you're want lower making? to the then And John, expected, Thanks. products. Thanks. much timing I fund made OpEx was you Thanks. to using a meaningfully IPO that? that than quarter. that two. in think, color I the about other you pipeline budget

William Lynch

say into will very related, John first $XX short flow second the we million would about I'll let do our answer - which was timing is quarters. QX and I your just Maybe I'll Yeah. subsequent one question. the of take of then part quick the beat a

John Foley

In years, surprise obviously. new said fitness, Yeah. new at potentially and we've Peloton delight innovative. a answer. very comes technology we're having is and innovation coming treadmill will are And and I created fun product product people one R&D say that least a for that innovation out pipeline, good with we of lab or platform, will new software better of respect to pretty was be can busy. We there people our products, before, innovating I full-body our core. this the company and The Bike, new platforms, is at the That's believe as it Peloton

against The features other answer Right. software we're platforms. also is, our innovating core against

platforms. about and bike cool owners launching features not our today, of potentially working in that our you existing R&D owners, we the new lab. platforms things. all existing kinds in years, new stuff with new the new coming that We're to think and will we're our be products innovation new month, I of earlier. announce some certainly So digital with today on but tread the delight that talked Every features within existing obviously guys going There is impressed

everybody. it that's guess I out close last. I'll

tread know the to we've consumer Bike Peloton teams So We're owners of work. hard to tech. or all owners also I Thank again do of analyst, your the believe you Thank team, buy listening. any team. proud side Peloton sell are in or one subscribers. digital I all it. strongest We some for want of thank very side, the got you and the members

your for say you we the the you on believed business. for will who us. thank in So have investors thank call, And

to hard everybody. will continue we call. Anyway, that and next forward work will We on in the a we talking to look you to I'm Thanks your great holiday. honor. have confident

Alison Brightly

Everyone else the call. has left

Operator

have concludes your and wonderful participation gentlemen, and for a you today's this day. conference. Thank Ladies

disconnect. all may You

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