PTON - Earnings call transcript Q3 2020 | Peloton Interactive, Inc.

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Peloton's Third Quarter Earnings Conference Call. [Operator Instructions]

I would now like to hand the call over to your speaker today, SVP of Investor Relations, Peter Stabler. Sir, please go ahead.

Peter Stabler

Good afternoon, and welcome to Peloton's third quarter earnings conference call for our fiscal year ending June 30, 2020.

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

statements that business Before we responses to today your reflect questions like and under to those results in and forward-looking statements our are as only differ or may that to of with due these Actual our you forward-looking business. begin, remind I laws. related securities will include management’s federal by would and our materially to risks contained views from associated comments statements uncertainties implied

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

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

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

John Foley

Good third quarter discuss afternoon. joining our you Thank to results. for us

COVID-XX we've a of As based New City battle epidemic. of we to tirelessly this on firsthand working heartfelt those and company, York magnitude the the thank a you all crisis offer seen to the frontlines

and members has to the and be been priority continues communities we the and employees, Our in operate. of top our safety, health which well-being

our obviously to routines employees that this we number businesses to benefits a recognize overall time. continue this of operational their order challenges and significant letter difficult throughout significant As remain safely time. and members mental detailed number in and this committed Fitness service. extraordinary changes tremendous of to facing at our afternoon, are serving well-being We physical we've a released made shareholder our in yield

broad of hearts all by the this go across impacted of to negatively crisis sections Our out economy. those

and home towards shelter-in-place a Peloton experiences. have however, work shift created from for home imagine a meaningful might that the tailwind fitness consumer you As and ongoing realities broader

undeniably we feedback While helped our members the financially, business received and is our and Peloton about mental difficult the increased from in physical more these this of tailwind member how positive our them maintain proud our growth, engagement platforms, of we've members times. our for on are their well-being has

over Specifically, of XXX,XXX inclusive account representing with Connected year-over-year Subscribers, subscribers. Digital we XXX,XXX XX% the ended growth. now Fitness quarter over X.X Peloton is Member million

verticals seen launched stay saw past orders, gains so and the many in With member expected. than we've steady members experiences. year, new now member gain even expanded larger this Over we've engagement under an quarter content as home at

year-over-year up Our Fitness the workouts Connected XXX% XX.X logged million the last in growth. in year from period representing million with us Subscribers XX.X quarter same workouts

of subscriber is led workouts has period year. a On Subscriber engagement products in Fitness with growth Connected Fitness Connected platform workouts been incredible basis our With level compared per monthly four XX.X to the our our churn XX.X the same last average proposition that to This of lowest value stronger. never this in years.

churn monthly quarter, the was Connected our average Fitness net For X.XX%.

our In have fitness with for our content to and now to digital attributed improvements available have features we XXX,XXX addition, subscribers we growth made on saw app. over digital

Our Amazon like and price TV. new December Fire changed to platforms $XX.XX to extension the in

to time. extremely to Peloton digital weeks. subscription of downloads people resulting free Early over We XX content X.X in period days fitness many to during the in the so COVID crisis, proud XX days trial free incredible in we this were from past extended access offer the Digital six million our

quarter achieved growing performance X.X%. and financial we public margin revenue EBITDA our $XXX.X leverage against fixed company proud EBITDA flow this also an QX adjusted XX% positive of quarter to revenue our with am through strong costs, in a with year-over-year million. as first I our adjusted of With

Over the most we $XXX scale billion platform of accelerating in the connected are increasing fitness several global the and share fitness world. as gains market our our weeks, believe largest lead we the past industry and

is social believe people of as the driving distancing Peloton We and the engaging, environment for working current consumer from platform fitness influencing permanently motivating and immersive, most and entertaining, home discover to behavior more well-being. home

and to platform personal of presents also asset tens interact people a to thousands as on but continue a scale members Our in way. the the of each other rapidly, at we platform on with develop challenges more for a and our is time with community huge millions some of leaderboard growing a ways

end, we express that the are our social last it to network connected together. connections power of strengthens simple on without feel Tags out that to making flexible feature to themselves, software week groups even leveraging new To launched Peloton. members easy work a highly others and with existing way Tag others, for yet by connect

shared represent community just geography favorite sports employer, through that our their that team, more in browse college, charity, can XX,XXX or more and week launch. than since its been the Tags their by Members created interests, one tags create have

Importantly, leaderboard our motivating. by making personal, global members and intimate, can instantly it now a massive leaderboard and Tag filter taking more the in-class

to under member disciplines the public, centralized Peloton has first all broadcasting fitness four for few additional York it Equipped began New us will Before come compound media XX, QX. in in our March want technology, New it the to to XX,XXX York. opens Studios foot our a flagship film mention over state-of-the-art together. Jill, milestones location turning one to studios a I from facility to new new Studios for be square On allowing with one When Peloton our time. community we roof destination a

industry important litigation our Publishing. already our songs that milestone library. highlight love adding welcomed and leading legal teams has platform third resolving also in Music an Peloton new that achieved I'd music publishers then to Since members thousands to Downtown like music great the of the quarter our our to with new

our with settled flywheel We patent our to infringement protect property. ability also our litigation intellectual strengthening further

which patent strong vigorously to portfolio a we continue defend. have We

I and instructors, the all through proud our York all Lastly, supporting mental who played important our retail, COVID members work at field the at member XX entire Taiwan, lines, crisis employees my on and to and this and gratitude operations, definitely across hope in physical have London, and appreciation headquarters New beyond. to City, content am Plano our of our an Peloton in folks I too. well-being want production, role express and to support, our Peloton you are team manufacturing I

Now over Jill. you, to

Jill Woodworth

Thanks John.

our we exceeding face said launched year. of a Bike. that by Tread our comp a geographies in all we earnings We revenue $XXX.X generated QX expectations last million strong QX last challenging total call the across same would quarter representing for driven our growth On XX% year-over-year in in given demand

are pleased growth especially So we with in quarter. achieved the we the

KPIs. increase has of financial the demand continued for saw in that March I areas into starting also clarity With that of significant But more our variability. better due spans gained first pacing high on all guidance we our noted or and at COVID-XX. more as forward sales we of week for our closely The markets all would a to Tread in key and metrics guidance and end the we were to map result said, Bike May. of spike moving of in

pickups passed when members for resume delivery, XX.X% it margin expectations. these in-home fitness and On quarter March the XX.X% employees, our It grew entering to the and our our activities we XX Gross servicing. margin gross require home safe is that was activities will including for return connected communities. tread product exceeding

expected warehouse our improvements shift a delivery. gross to margin contribution delivery sales employees. and Bike for leverage. margin mix was partially due were Tonic in efficiencies cost expectations fixed logistics of cost acquisition XX.X%, due by outperformance our continued greater and shift to to hazard was to XX.X% than and threshold due Subscription product pay was the These the delivery leverage helped by This costs exceeding offset fixed primarily and to and our subscription

excluding high to mouth of operating million see all from percentage year-over-year was in total a litigation revenue. majority expenses many In word of in and customer years satisfaction, brand benefit Total $XX.X as and of the we marketing awareness referrals. our expense flat markets, driving mid-March, the advertising of assessments paused allowing us non-recurring settlement of

expected was leverage inclusive quarter, representing X.X%. operating of our than million, EBITDA expense margin better lower for spend $XX.X the QX margins, adjusted With marketing and gross of an sales adjusted EBITDA

our sheet strong over going of employees to an to care billion during a resources and drive us and have additional credit with our take to platform continue balance significant cash equivalents make the of $X.X to in members this forward. while allowing and We facility, million providing growth cash uncapped in investments of form liquidity time, $XXX

Moving on to guidance.

the previous our Fitness Connected X.XX a are XXX,XXX, growth million, XXX% our to fiscal For guidance the versus X.XX ending XXXX, we million midpoint. raising of year-over-year year at Subscriber representing to range XXX,XXX expected

recent QX, expectation net we reflecting by Fitness monthly Connected will average trends the X.XX%, levels For expect of quarter. and more the below to normalized to an that revert end churn we be

at In representing QX, to midpoint. of growth expect we the million year-over-year revenue $XXX XXX% $XXX million,

$X.XX are $X.XX guidance at billion fiscal billion. billion, year-over-year revenue $X.XX For fiscal to guidance growth representing of XXXX to we XXXX, billion previous to year raising revenue XX% the $X.XX versus midpoint

delivery backlog has unfortunately The order of to continue and our a expectations demand of created in sharp sales customers. surpass imbalance with QX entered for increase an windows deliveries elongated May. We sales in geographies Bike and to into unexpected supply all causing

accelerate the supply of delivery order and costs improve to to we to QX. incurring order to While in materially do bikes we working expedite in expect not are higher shipments, windows

we XX% to XX.X% of on margin margin, gross QX, Moving connected a for to XX.X% expect product XX%. fitness margin of to gross and

is reflects the expedite shipments hazard As partially fitness margin continuation previously employees. delivery. for gross product and pay product The connected offset shift decline Bike to in mentioned, decline by warehouse delivery of this costs mix and a to

Connected adjusted and continue assembly that QX Subscriber and resume modest revenue delivery put the to we to thread expectation pressure EBITDA in the If of guidance unchanged. fitness provide upside home margin assumes count quarter. will Our we end on product connected Fitness leave our through gross pause sooner

subscription by and gross subscription to leveraging fixed continued year of of For driven in QX contribution contribution we improvement XX% margin year cost production. XX% of content primarily expected are subscription margin over margin

QX adjusted EBITDA XX.X% expect the $XX We margin to adjusted of million EBITDA million at midpoint. representing of $XX an

of X% year for adjusted $XX This expect adjusted to at to the EBITDA and million fiscal margin that million we $XX midpoint. of means EBITDA earn XXXX

able profile an to continued due profitability offset media expected shipping EBITDA for partially growth reduction spend trial to across of while for beyond and is lastly margin a limited expense sales global of the the related days of notable with XX by the We significant to you modeling we all financial leverage with profit expense associated current cost looking marketing time base for costs provide and markets the at high and robust of basis fiscal significant are additional not extension Our are our many fixed XX period our bikes digital understand demand in year. our on to with QX guidance COVID this albeit free XXXX. fiscal our result help adjusted

have in ongoing we previously forecast. than to over We XXXX we taking achieved expected our past achieve extraordinary opportunity Fitness. goal have far the Connected fiscal events expanded place sooner said measurably the accelerated two shift a to profitability The market months and originally

Our leverage demonstrates of are the model and profitability achieved. fiscal year XXXX when financial outlook our strength scale

strategy However, Connected invest programming fitness and prioritize products, unchanged. growth continue behind our aggressively to growth. to Subscriber new plan is international underlying and software, We Fitness

not industry COVID-XX location. long earlier XX with impact have to million today, fitness gym With growth soon the members noted or million continue in for boutiques only over returning will John four years. the at in or runway and we likely quarters our to this As we a global market, believe many all people current and the long-term U.K., gyms and Canada Germany, memberships a X.X across see coming U.S., on

fall to when guidance QX. expect provide fiscal We the in report XXXX we

turn now your to operator take question. over it will to the I

Operator

[Operator comes Anmuth from Our question JPMorgan. Instructions] line first from of Doug the

please. question Your

Doug Anmuth

in change hoping on just to you pull you what lift about or think Can a bottlenecks demand the Fitness? elongated delivery forward I Connected if how perhaps And you where be logistics by you mentioned Thanks. then of wait you provide versus some manufacturing the spikes. or times of and the First, of comes more second, demand was could that driven the for much more might see both? sales talk kind in was just durable thoughts on

Jill Woodworth

second Jill. question it’s first and William chain question Hi, and Doug, your to to then hand over it supply take address I’ll the around logistics.

So great question.

quarters. is next imagine, can several as you across this very to topic we team for the important a resource as for the a organization As us management plan understand

to end tracking our outperformance of week well high until with QX Fitness I think we remarks, when the for we prepared the top first in the financial I in Connected in our on as demand saw of products, which said sales the spike were end the COVID-related. is means of guidance above guidance Subscribers March

though, market as are price significant current a we short intent that our addressable our consumers our have our believe expansion serviceable products In purchased at serviceable market. point. for We addressable seeing we in current define who

SAM intent brand following measured our brand awareness products. our we've growing largely expansion at COVID, in across progress year already XX believe we geographies growth Connected With A significant we Fitness and purchase our made prior ago, the awareness. of our to we had SAM, given million our

our hard the dialogue members working to too of understand constant COVID-XX. in like very are with impact We are and companies many

we SAM, purchase definitive did our And as purchase of a people large of increase have intent prior COVID Peloton expansion are on market a a some opportunity. of a conclusions, our a which who indicate percentage percentage to some while research of as in Bike So not there sales of large draw to it's as significant our expansion an we recent buyers. we intent deal of previously done attribute post-COVID little our early

going we Further, elongated even all to exciting believe continue any than persistent the newest to than buyers delivery us has at are some our I routines continue see and sales today, intact to cohort product older and engaging with engaging more across cohorts, to continuing, of even our most are our home are even COVID to Bike buyer we with stay and when and of windows more done sustained say would that is has order our regions passed. new new

no themselves think profile lot moving So long growth of we're like and try get and that forward held other converted. Peloton very they we experiences for the excited our is that once people about view this our just a validating it

about excited very of market. our we're So expansion the

William Lynch

the a So chain possible. to as Typically, way Bike aim first it's supply on in all seven play case. days. days, with in inventory, this forecasts of terms - members of to of of in x perform the we on an we quickly inventory levels products to our the that sales constraints nine order And We of on well based extremely number we're we regard get as delivery. any number

historically. QX period is a us low seasonally for

so created with that of is initial acceleration wanted we days the to within of we’re we producing versus Jill team, so good so if as we’re double able and the the the chain producing facilities in at referenced one look the planned existing we’ve output. expand than that in best early imbalance out number statement, and today in more And sales just March, worked we've quickly our industry supply we the carry the hit been and what to and news to the what got incredible you

new an Fitness, online move the the And point structural that future, Tonic to going as to new and in and Tainan the growth holiday a factory Connected we Sinshih forward and are in investing to look a area on help will our big we've called and as changes is of will then, factory. we in sort come in part December fulfill acquisition, the of demand. This mentioned,

It will production holiday actually then help beyond. and for

confident very And we provided in going the so, well-positioned, it we're supply that to supply, have doing we mid, we're forward, term ensure against we have we for QX, short, Bike worth terms supply but that and that and is feel it's like of have really capacity guidance we long everything inventory. we that we can noting guidance absolutely feel comfortable

Operator

line comes America. Post Our of Bank from Justin from Instructions] question of [Operator the next

please. question Your

Justin Post

as thinking got know you. about there how trends? demand was new help product is from as what side, normal, development for And I when on well to products wondering the been Obviously, to on impact, Thank talk studio tell content is How you to could can. that's you looks pipeline right start to new time, now? going back you like about And already secondly, recent I then just get on impact this and the product any hard handling unusual with next if the has year. development Peloton? you're opened it's things but

John Foley

will Yes, want Thanks then new I William, for I'll take, calling. take Justin, product this to is take and the content. Foley. you John one the

last with So quarters things tease new the of we going innovation to did to respect in some had newest year. bring some market couple products, this we that that we're and to

forced William now. the and company working product current crisis of every out rethink like are other COVID portfolio. what can rolling our with has the through right closed world to that anything retail chain realities alluded You obviously imagine the new, supply our to us we're stores in

we to are timing like In innovation exciting significant good rethink it It's new you real. an So we do to the as can unfortunate forward point we feels and are of at looking imagine. a did to launches. bringing way, and this but market of have that R&D way product a have backlog

has been continues So reality. taking in a two, shelter-in-place that take lot a the year stuff even place over or of last place to

backlog we And to do not innovations and announce the we can. today, very bring we a timing we going and are so I it's be excited believe. to will those market We're and have going it impressive about products when but those obviously

William Lynch

the that in mentioned. John expand to verticals terms important the In but Peloton like launched the and to CDS membership which to would And development expressed growth some content offer then getting few COVID engagement of SSF the is Jill which Jill on content utility of add and we we started your types Family seeing beginning that incredible Justin exactly more members part in actually increasingly most classes large Xth and more investors, workout. it point engagement we're to before we've fitness what XXX,XXX to in in was is just our months the side and and do which and last why new engagement mentioned, both

to So is the things in together, something XXX,XXX whole super this to and that us which so and a month sheltering our content had so everyone's Cardio in just time expand ago place, topical during out discipline these studios launched Fitness put we like together a to family will can more important. which classes team new work more Dance continue that close where becoming and the allow has

We've seen exploded the that We training strength things pillars massively like which us. adoption strategic believe is non-cycling and strength fitness to classes is cardio fitness. so of two are

we feel so. Line just so a And And the that us Line. Those allow our then superfast something online part coming growing to that to invest great will cardio portfolio and and in our Bike of about expanding, part of the with we continue is will content. that keep studios strength Tread is expanding

Operator

Capital Our the next from Yruma Markets. of KeyBanc comes question from Edward line

please. question Your

Edward Yruma

take any to standards your notwithstanding? Thanks the a first kind and quick live Two achieve for from in partner? of mouth the how finance to And of of leverage kind of me. fantastic. I long you the any given Thank you. a kind taking changes ones it question seeing will Robin power objectives period on was current term you ride longer and the her are from marketing perspective underwriting here, word two, from rethink term that longer marketing home from of guess

Jill Woodworth

no, have answer we actually I but changed questions Yes. second the answer take not is I'll standards. the both any first. the first question take I'll and will

before. months over couple as Our can not financing and rates partners to talked of good. about financing penetration had our default very our you of healthy low last in fairly those imagine We consistent extremely very to underwriting participate profile and We changed have of We think a feel standards that a programs. lot any we've had the knowledge. I this credit date

that help we again feel that on the seen we've So and very that. penetration. good We think consistency about financing support

William then sales maybe question off well kick on missed. spend turn second to I’ll it as marketing that to The it add and I've anything and

the experience, we've to the interesting media really our put to a been organic spend the into the interesting we for we're has spend that been product investments of journey markets we've best of this see is customer and and time where made demand that awareness media of what's member continuing building XXX% years to in we've our experience had building investments and that that that because and can. and brand most we create pause reduce us But

can growing really So word of larger. see we're seeing getting is larger that I think the say membership gets mouth as base interesting We to rival do what's we're engagement great lead deployed. going our the some having increased of to payoff more we're of it believe especially seeing dollars word zero sales important. becoming increasingly the of And mouth in media us given terms does marketing despite the with effect again today

top in expect early of beyond see than to still stay said we're consumers. forecast. We just with smartly growth to we so that say we going mind the fiscal I’ll marketing more innings and continue think to much should do efficiency grow we're very XXXX that in spend, with originally and platform sales we and of marketing a as

John Foley

word decision of mouth buyers as Obviously, of COVID still influencing that word faster period another it. our side mouth virus of we've on of of what that. task is their post was ever Peloton than and they seen during mouth heard in the first do purchase seen new the decision purchase we new a this about we've grow word say cited We and influencing as grow. of percent point point survey where it’s That’s the

our who that's we're viral clearly that delivery the like marketing hoped those we pay towards experience So and we believe would this and treat off experience we member the in terms service, would put post-purchase way effect. investments and unmatched seeing of members, they things we'd

Operator

comes from the next question of JMP Ron Josey Securities. line from Our

please. question Your

Ron Josey

the numbers. and amazing Thanks for taking question

thinking given distancing strategy commentary give a So we're Connected demand? the just update still are digital seeing question and seeing social maybe And I from natural potentially any your what around significant doors how there's hubs? demand the bigger you're I about on obviously you. you're and over wanted to us into on some ask you're just still retail John also converting closed a think subscribers seeing Thank Fitness insight and of showrooms

Jill Woodworth

want take you question. do on can the take the and to then William, Actually question retail, John, Great. next

John Foley

I the answering question was on mute.

going you glad are I’m So to…

Jill Woodworth

it. got Oh,

I might have have might you Sorry. thought lost you, we - John.

John Foley

people let on on have me, do, of Ron, them months. good provide color those close their forward with the we know, hub of look couple probably our they more definitely try countries as as can thing necessarily them No, stores answers. the respect few out, William, X sales stores kind love the need we William and across have love quick our retail to being about to We what XXX stores, we to retail products. a retail different don't and able launching real you last local love products. the them. without for we They're you weeks, for but and been a to strong community, point We

that is see able when the But don't going have to and the them Unlike are reopening little call say think at inside leases sales. on better experience on committed their of from now, retail we be home, to business could better a retail be matter, studios retailers to this environment, are entire XX locations. bleeding edge with about we having love excited the some months getting depends back retail open, and that adding because our you about, actually us even what bit we more and helping we cautious actually with opening other trailing for be we're to it edge. you struggling who out are member value up But back retail, folks from in

XX around are would obviously the important trailers to market X.X say on too And of to to they will marketing digital an go digital then to the going because up come day we consumers. our gate, early thing the become efficiency have how they and multi-channel convert to second and strategy of be subscriber. so, conversion, And our we retail to continue haven't decide and where a it's been our has with part how million engage the and to

people seeing London better But online. that the and get you with is up can imagine content comes to as next to going comes Studios engagement as as of Peloton quality Peloton we’re the that brought those online year Justin and Studios from continue New York the

more content. content, more to with verticals, So ways more engage that

connected golden that business. expect a but million we a the eventually those. fitness - don't point, both purchaser, goose become this conversion. we which welcome those on a lot is But of We would any for obviously our subscriber And X.X at either data the digital or become will of have

Operator

Our from Jason the Oppenheimer. line from comes Helfstein of next question

Your please. question

Unidentified Analyst

for on Anthony Jason. It’s

six to fitness you see do be users what Given if an business the attractive around after the past in digital-only new subscription, remain jobs the believe weeks promotional digital-only you period that convert LTV can or don't connected expires?

John Foley

can Yes. Jill I'll take weigh guys you - that and and William, you in. can

business lead increase to with a and meaningful that that years. type going a $X,XXX. That next ratio us to to our cap believe the in seen seen great Peloton of would in LTV explosive in said, the bottom of line economics price lower we've to driver the unit that it's increase haven't in going LTV be couple of We for a

engagement points new of Android like Some the touch TV.

love business. And so, we the

because this we've just to and and buy. trial as we introducing continue get and do of unit possible run We kind let said we to platform content - as on to they them at are letting many our before like try people it - it do economic them the is a breakeven people

those in subscribers more our price legion about points connected of have different digital you platforms engaging we're our we buying products. as mostly bring for digital and potentially fitness those we we more execute our now, of it right as But lines, - our see better, could on as thinking lower best, trailers and and strategy

saying wheel going or it still at standalone business flywheel answer but it's to that aren't Does this massive that yet. a a house question. your is So point be virtual beautiful we

Operator

Our line next the Securities. Wedbush question comes from Hardiman of from James

Your question please.

James Hardiman

your those XX sounds begin say But What's gyms. that safe pallet for XQ numbers keep they upside the substantiate? there's keep marketing people as down reopened. actually potentially once in and people options access It about turned do of How versus increasing helps Connected to is people Fitness gyms it's looking have for you obviously if fold, to resuming piece didn't that, that equipment. sort that like to largely to just and the it sales their bought are and when your strategy to the we XQ a should gyms reopen think of the

Jill Woodworth

the we've been that the of they in a countless lot doubt had purchase not and Yes. COVID-XX we've are our chime routines product intent incredibly heard Maybe again obviously COVID-XX the large a to did most I’ll John, do, they're collected but that them think but what's I encouraging right. with from can engaged is newest for Bike no who no our of Peloton percentage some have data of buyers members start of of post and Fitness prior our complete longer that who stories converts, aspect

a we such strongly again, I be are And to people for think permanently value and features proposition our many environment changing own so and think that we of in behavior and of think get do to new the people that I software members. it'll products community slow in so of believe we are gyms the just and research, climb entertainment the many experience on comfortable based these boutiques. immersiveness able and our as we now think

aim when be to engagement. members we William well, pointed confident think these we're I engaged do we think able it to this engagement company, sole drive our think going and so earlier, out our everything is about drive to of to keep very we at is members I And that and feel

features, the better can, continue to creating, that months. content and our we're we're we fitness to next several So the the more software verticals tags, the the can more over going better like do make we

we're be able continue think members, to back convert to think newest I going anytime to be our soon. a the gym we who lot hesitant of go to to attract and might

James Hardiman

is would normal the people's to you obviously, particularly takes remarks the bottleneck any back get prepared to a you're Can follow longer as homes, actually helps sort up, holding of forget in the made that go growth. when And is comment Great. treadmills you into how economy. the talk suggest not actually think a the of throughput? homes And How a who delivery not Subscriber through then about Connected it back able being just to about think we us into reopening bring process? to to going way. we which deliver if seem function sort that delivery to about people's in I

Jill Woodworth

the efficiencies it difficulty] weight we've is capacity. over last you tread I for couple not delivery William, as [technical the gained limiting and is through really maybe some But supply months of the that think QX walk can but of chain, delivery factor well.

William Lynch

tracking important Yes. we out forecasts. Sure. ahead that was our It’s positive note had of before was deliveries. ahead Trend to a tread

So still category traction we tread an to ability felt of cardio, gain for what’s a great we about And our mentioned just relatively in treads like saw beachhead us. as I new and for feel Peleton. earlier important terms

Bike field and explosion take incredible shift to have able our what folks tracking would to definitely with We our the were Bike tread take from over deliveries we been ahead. deliveries. them field to were and demand, ops able we ops, of some So were

across business. one And have seen model actually so benefits our we and the the many vertical it's this of of

We helped lot those side to really all it's retail member stores Parker folks as vertical team. and to things great sales orders, Peloton, the by the macro demand at our answer also - we in It’s is retail calls and able on closed model management point inbound here flexibility team shifting, experience gives do folks our and into Jen us led our some amazing a the her inside so and phone the whether ourselves retail and retail be of take of over phones.

efficiencies specific growth have were that To able able tread and what question put into that's to to and the do saw spike we your take were able we the were would we and field demand. we loss this and capacity that's incredible factor we to the Bike

Jill Woodworth

delivery if that able we that. and to tread thing deliveries guidance QX. before the mentioned are earlier capacity of quarter, The the add trend the of before I current resume assumes obviously, would have only I are the is But we not the will we end XXX% end resuming for this

Operator

line Heath from Goldman comes question Sachs. the from of Terry next Our

please. question Your

Heath Terry

implied of December probably you the If is had ability see going at number look roll wanted for Q chain a so? Is sort to dig the ability the I season have six lot would that backlog bikes QX of indication months won't sort ahead or of pre-build these there for sell give where June sheet sits XXX,XXX, could of deliver a now I the sort more that December getting given you order terms have sits supply quarter. can XXX,XXX particularly could to over I are next supply compare way supply September, of in more efforts of that us the just that the XX,XXX be discussion. I've the XX,XXX you is thanks. Great, are you on that the in the in what expand or the bikes. that and holiday it supply March the that over at where the the you guidance the capacity of to capacity the chain in little a to month a and than out guys necessarily to the normally - for bit supply capacity chain XX,XXX already all of in the the sense imagine balance deeper deliver chain you just of - of would capacity sort April into on now or chain in the reported an supply to yourselves chain had quarter, where XXX,XXX of of have And the in typical got to appear point. you guidance roughly to about you that to the that

Jill Woodworth

I take. chain can want a a couple think do from dive I'll just just we're to doing of William you for deeper what on perspective. then supply make clarification and a point I

at said delivery of inventory different picture an sale that look get it's accurate think hard order and very for significantly to available imagine we can you as the and across the have times, markets. in our to past I I've how many right bikes

spikes the and country you and warehouses seeing and It depends dozen across of as two-and-a-half now U.K. know demand we're we certain in on the warehouses in where kind and Germany Canada. have

trade there's So looking inventory - there. and

So inventory. I necessarily wouldn't look at

Heath Terry

inventory. looking I wasn’t deferred was I line. at looking you Yes, revenue at

Jill Woodworth

Yes.

so backlog pretty year - backlog deferred also and QX on XXXX. going with remember for revenue, occurring QX sales to decent And fiscal a any yes, then are and we that XXX% are be in a entered

some from you I want the that it can very estimates feel the will subscriber but address what say around very given I we those with that we with know is and the feel we're William of is about for good on we supply don't chain perspective. very QX that - to in sales we were specifics So deliver supply feel chain doing confident definitely what a

John Foley

Yes. Sure. done I’ll supply Heath. lot this growth yes, a we to chain add, this de-risk and support just We’ve where manufacturing. our a and including the is put

and Magtonic third Taiwan. part Peloton We then terrific also you as Tonic, acquired, in in we Rexon know, of is it party manufacturers have now is now, a fall who manufacturer and is two last

on that’s side. So and supply a derisked and our lot Bike on most we're components, chain dual factory major of the sourced the

delivery able delivery XPL well got got and there. - Hunt flex As ops great the addition, and field so XPO own volume side, to we've team, J.B. to providers, able we're in we’ve got we've our on we're

not COVID - significant factory, are saw unit to of that manufacture that in we a We but Connected this substantial of in terms growth that think a I'm is but but you it and mid long and term coming. out Fitness in As both, online, we've addition growth mentioned can are our the growth Equipment, to factory about try made to it I coming we so coming the new going that capacity, factory, we saw long this CapEx online and not we our ability got it's coming that we've in term, period, holiday, factory. new company within to talk we

service to like the been where able QX, we've scaling going our we're So and Brad and to to that's way been members member we're terrific in we a be growth true has feel in the out comfortable. in so business experience, areas across support also team [indiscernible] like that able up of

Heath Terry

When capacity a like that comfortable, where William, you there by say - be the, not going mean to able that that to feel point growth? a is suggestion you is is the holiday you're is don't to limitation supply is like a I you this season like of feel get

John Foley

at guidance, have we We're extracted if harder variability, our in period we obviously have tight, wherein I We enhancement this, been. do. we're key it’s this the think look and you don’t realize. giving not fully forecast Yes. could lot and as pretty anyone

to of the about think coming we is the As - Factor X what baseline out like is this. looks

in articulated not accelerated that so the got get and about We're moved this Fitness. place the Jill guidance is to business we're feel Connected obviously And we than view so we've and going like plans is to believe I great feel we long-term which think thing to our whole our and growth. support

Operator

Jonathan the of Baird. Our comes question line Komp from from next

please. question Your

Jonathan Komp

on lead you're willing how the you're then of even planning may it’s how be of First about delivery time, tactically Jill, thoughts if last on, more current thinking the any low the shortened quarter? marketing. wanted know you're the quarter about marketing levels kind thoughts share just to I And some tactics when should are ask don't to additional on back planning? expect and you've we only you there

Jill Woodworth

Yes.

we majority structure of in cost a call the predominantly building. I right said in nascent think still brand the like marketing. which are our half we're our Germany and where is been us the the turned markets majority spend very is turning for of So our assumption QX, in UK, stages for the it US and very past roughly most our they're spend, media off But of sales has we've the of in media off obviously, markets early now is of in still

other And slight for one required point that is we so do to that out the free have cost offset XX of a the in it - - would thing in trial. terms was which required the day is QX I

to offset sales a streaming slight million cost is music and So marketing. that and number those X.X

So mention that, media mass the and sales to about next spend. think you that William introduction media we I turning on difficulty] when marketing might think [technical yes months. in if all But, and several over want

our yes assumed sure of so But end in order for for it’s delivery. the to elongated model the QX just QX with

William Lynch

Yes.

in off. our leadership for we these feel benefits us. connected and this fitness creating is in we're asset we're to time now awareness investments and noted, in where like a of all reaping product awareness Peloton think the we Jill building an the As And

Jill substantial about but not we marketing envision future to new envision the Again, of going You could products, announce talked anything, good about feel that. that we're can going behind in innovation quarters. pipeline you

you in Germany As we and we're know on just We're TV marketing like to activities as other still we're where channels still Jill Germany. digital feel we create noted, marketing launched on and awareness.

how that's we it. think So about

on with come marketing. back will We

to invest, find find the will new we'll off be XXXX as We we're as lead Jill we continue think connected into fitness. products forever new get to noted going to GEOs and efficiency We beyond. don't and and

Jonathan Komp

free. the what for customers of customers their well were who demographics Okay, million great. downloaded who potentially? the fitness routines or just any characteristics of details X.X the previously considering app maybe fitness mentioned the more connected insight purchase if customers study bases on as either And then new two on those one were that Anymore on those you as of previously new the, follow-up Jill

Jill Woodworth

question. Yes, up. it brought I'm a no that's glad really you great

the notable In of And past buyer that said under in specifically the grown. know most has the age of we've post COVID that one I XX our before - cohort in the is very of terms over acceleration those that that changes demographics significantly those group we've household even and previously the fastest XX,XXX quarters. make consistent XX,XXX. call it seen are that are of seen age We've of data income growing and couple under a lower last demographics huge under that

is in with working place new cohort that also age we're that engagement of us most a our our our shelter is pretty some more best obviously other which significantly. down that going seen out core but is indicator by is I is And recent any encouraged average customer So that. back are that the we've engagement, of always than we're leading stats buyers encouraged there think very probably driving that really the to by say again we would

Operator

from And our line Youssef Squali today comes question of for SunTrust. the final from

please. question Your

Youssef Squali

considering product. just ultimately Two a is John, one trend you're the clarification have layer cash quick first the quick so happening that very - future you the some but profitability? about heavy one price the guys selling rollout of right of higher as And new of now. with the issues - obviously you've - comfortable had on accelerate what's the talked lower COVID potential the kind with the the on Does congrats with profitability just balance ones milestone, a on one and sheet earlier

Thanks. than at great? Can you color anticipated. expansion just M&A capital maybe be faster Any would speak your to little your or has maybe any international there thinking a of around allocation, doing COVID changed initially

John Foley

it’s Yes question. good

lower absolutely that are lot. more committed We price. having experience I love previous were quarter, committed that circuit We've a last treadmill today. a best We about quarter XXX% Peloton for we're and workout priority Personally that strength is off owner at say talked committed the Tread cross-training team. in Peloton and the Tread a price massive the our entire love point training tread, bringing a bootcamp to the a a more bootcamp on program offers affordable the current tread, that the and that is at

year Peloton. to committed is the That but high priority us your priority we're it forced has guys it's high XXX% and about or investors. know that a remain Tread relook you at we and whenever, or for world this category COVID to how globally. when a products next this I owning or very for we excited and category launch Again for

bikes We stationary and are pullback to not I weeks. for few a right like had know because that we've now company. deliver it bike past looks just the

the or product of about tread for Peloton. the don’t a category remains as super and take excited category. priced please in that very But around high that priority It lower focus anything that we’re our importance

our growth and investing. strategy. can't our say about we going and around and much was Youssef, change about profitability, I we're question think balance sheet point how to Second At this

been We've pretty with aggressive growth.

sixth sheet. triple on we we think With and would of become the into awesome unfortunately, subscriber going growth year our trajectory see what change M&A that that We very and we're growth are of to digit we're proud strategic. really a anything the of respect doing. don't balance could proud We’re of it

So we're are - our organic first, second and growth. priority third

for couple to it The doing, it's a you're part, that have or from smaller great but a few power to our we balance quarters right going let's doesn't or things part the our the to sleep M&A look big of most investors of one of like M&A make, a maybe see well. and start two we're next like and my things years. sheet might But We our model. at profitability, team even do looking be allows accelerate we're perspective

one So more is about trade-off. than Obviously, anything, We've the about that. Peloton saw just of versus we've you few is that. power talking companies, been of been talking a the how where growth profitability not

you'll continue see think I to that.

our operations is aren't we from do everyone stores the so, shutting the side. creative our and including content on COVID of changing And stuff home, changing down and working to having anything. teams

we've So strategically, make, on there changes is but to we're had operational still track.

international and to new enter point point coming new markets will markets your in to your We years. the

that will against but we've couple We past strategy bring has to for been years. same the of executing been market, all of new products the

Operator

the session question-and-answer program. today's back hand conclude further does John for to of remarks. Thank to the like you. any Foley This program I'd

John Foley

Yes.

to macro on everyone coming with to QX for hoping COVID-XX, want to a speedy are So respect closing of we normal. Like in the and back here off QX. loopback do I recovery

fun for We're lot to willing. with how am. a busy New can't the New I’m We're society. science. pulling the too by where note, City us I never a literally are for On I rooting God go good future distant City not packed way, to of restaurant society. realized live. personal for York pulling for in We wait social We're a pulling York friends

our hopefully and want that to fitness not Peloton get count when you I of future more back our to normal. like is looking you independent about want talk subscriber point growing XXX%. we So said that our just year we a But the of I get Peloton own to stock. future years story. is believe not that must like normal out to outlook PTON back would COVID want we We of of growth Six than believe to everybody. to or with that lead whether said, I are at consecutive by triple-digit sixth

going experiences, we locations, dramatically to offer is we workout Instead better Peloton better on fitness - basis that. with about you're believe better future better and because at hear a at on the better of hardware, per instructors more a value

of we releasing weeks those calculator see the offer, next couple the value on value value a as of updated don't what and you calculator website. of part in we're For our

on the to with value I boutique are about and better we affordable play But XX just I'm engagement, time. higher-end see or you’re engagement or you close working gyms vis-à-vis and QX. engagement with talked a what with times to We increasing you’re going over months, encourage to it value saw products today think options in remind basis. yourself a even in value gyms I getting when of type everyone pro-workout out other QX fitness more increasing marketplace, in to you increasing

a always be that the is and team believe that the at XXX% Peloton Better value focused. We in that is is will best entire better where a COVID-proof, Peloton experiences value the is fitness. recession-proof

Thank one So, delighting members of and for in. speaking you quarter Good of last night, thank another tuning fantastic outperforming our Peloton team, the you team our, for expectations. entire everybody. to

Operator

This Thank program. today's you, conclude conference. in ladies and gentlemen the for your participation does

may day. You now disconnect. Good

Peloton Interactive (PTON) 6 May 202020 Q3 Earnings call transcript