PTON - Earnings call transcript Q4 2020 | Peloton Interactive, Inc.

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Peter Stabler

Good afternoon, and welcome to Peloton's Fourth Quarter and Fiscal 2020 Year-End Earnings Conference Call.

Joining today's call are John Foley, our Co-Founder and CEO; President, William Lynch; and CFO, Jill Woodworth.

Our comments and responses to your question reflect the management's views as of today only. It will include statements related to our business that are forward-looking statements under Federal Securities Law. Actual results may differ materially from those contained in or implied by these forward-looking statements due to risks and uncertainties associated with our business.

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

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

next to remind investor everyone that at hosting be Eastern. virtual session want we'd and a analyst I Tuesday P.M. X:XX Lastly,

can We find the us. that, the Web You details on turn hope And IR our I'll call site. John. join over to you can with

John Foley

the back can bringing to it's everyone. injustices continues fourth for safe. before millions and hard fiscal internal all wellbeing Peloton hopeful all. frontline to months products and another strong as and products other we self-reflection to What our wake the made injustice, many havoc committed hardship the [ph] of full goal of I'm in us the members. do health work organization focus anti-racist hold and wreak the have and to [plague] believe external that and organization, Peloton in continuing also so endeavored been. essential must to this more incredible Peloton Peter. our quarter four to the us workplace our This of we've to over but for demand has events profoundly inclusive everyone, we supportive the next tragic ingenuity demand of mortar led for thank others, of that our remain an beginnings, ingrained $XXX societal weather that for has into rein fourth for years and year will human brought elevated of us experienced year community engagement I and profound QX fitness promote enormous results. year to do strong, Thanks achieve racial meet being and a to and global The healthcare know year's help is of work and and remains more. pandemic improving We're to healthy to tailwind quarter be bike all couple longstanding Hi, able to and demand to in inequity, prematurely the our commitment for team and It brick suffering locations. has despite occurs. From million saddened keep reopening gradual pandemic too services. workers and and and growth, but workers discuss communities. this parts COVID-XX together had across propel March possible everything an initiatives our a fiscal the create been XXXX. member we claiming we fight year first We Organic incredibly Thanks, continued proud remarkable lives to joining remains of much in a of year and staggering took have into

have the strategy possible, With the that original continued $XXX promise but to are kept there to better, portfolio, Bootcamp number of rotating all and follow-up series. a resistance take new bike special bike fitness controls worked this, exciting for and product and we our have member offering the connected members adding best manufacturing done. new much shipments our on our while enhanced tilt our feedback digital more We've XXX work proud fitness category, teams display, new for product we reduced added or to stretching display a our have remains launched sales and since bike hard base features degree With pivot and portfolio, about rotating to these major a expansion innovate class delivering our introduce to be the Bike+, members continuation times Peloton love. and will grow products degree our of support teams. and the trends, of provide easily of workout and of yoga, brings both know May, sound, that to our strength, tread. bike, wait connected hardware what's seamless a routine of Amidst we created our and unexpected to to elevated where immersive our expedited scaling our screen, said, listened allows experience. and while The Bike we to delivery

Bike+, of to $XX a original month announcement is for now bike, on reduction a price APR which implemented we XX percent the With month per $XXX financing. zero available

members. realize Over to production excited savings prospective able the last five been years, to efficiencies. cost significant we've to and pass those scale We're

open today, our is the Canada, of appointments, lower new priced where can now availability showrooms our Tuesday, and Bike+ in XXX try The U.K., of On for Germany. also our and Bike+. we As coming all available the new of are Peloton nearly see U.S., Tread. now members announced

running size, affordable brings bootcamp our smaller interactive has to Despite ample new sleek community Tread smaller Tread running Peloton belt and a surface magic comfort on and Our the more footprint. fitness a the Peloton's of ecosystem the classes, provides of running from drive. immersive software area the and all our to

in greater been the our bike. had tread hoped our demand While due some we chain launch decisions for make we supply, new to had in and more tough experiencing to supply quickly we've allocation regarding to surge resource

visibility tread their once that choose to of important and introduce customers to give the also product bike was it products the felt or best portfolio all fitness full products the to at goals. We fit

cut both customer or when quality delivering critical as it standards, corners As you experience. we to to the comes know, won't delivery are product best

that growth tread opportunity better now our line as represents to Tread+, known we as We as are with over a a portal is the existing portfolio that enormous as tread Peloton of our multiples tread our confident combined new an workout. hardware view for opportunity coming the full-body as years, ever Peloton bike tread best

this in innovative our press Tread and to Germany early XX, verticals, features, our lower-priced available noted software of our the the to connected and in member access in investing portfolio lowering December will bike, It goal. the is proposition democratize and fitness introduction be the next Peloton important in on of year, XXXX. U.K. we to of strategy our heart overall expanding our in to goal later with continuing Canada increasing The release, new steps U.S. our price the of our and improve achieving As is fitness, our including products, along longed and are our of platform, Tread Peloton adding experience. new fitness value in

money and months, of compares in the rates value As content To of the to with new in their vein Peloton coming series exciting you conjunction we're have check launched recently to encourage Bike+, say the verticals a providing current to your we see to can same out, Peloton of engagement time. we quarter, our member and thrilled we're On on lowering to so assess climb, We value Digital. over Peloton our to milestone this visit a on it continue classes, the passed over other Bike proposition new help excited debut more that cost Web connected the available we'll with subscription routines, In subscriber household value major our growing how our members members metrics, base of to X million. Bootcamp site. we're fitness workout. past launch XXX% platforms time per can how fitness you save calculator our the and much prospective

connected and XX-day lower and excited with across Android X.XX free digital stemming Peloton conversion We and XXX,XXX value proposition earlier XX, As of had trial of library improved subscriptions, remain about June year, non-cycling members, we TV, inclusive from where fitness Fire a Roku, in million Digital, access of and TV. seeing upgrade and classes the global very X.X X,XXX, broader rates we're subscribers. points a price Apple, of improved our million

nearly digital we grown subscribers. today, of to have As XXX,XXX

While churn barriers category highly in and subscription seen expect subscriptions, in we quarters. lower the to our coming digital to have higher fitness entry than we competitive model. do Digital taper a is connected incredible with and growth growth fitness

the we per month per continue emerging digital programming, we channel. My high last favorite million, nearly connected is fitness fitness we the for fourth digital the to fastest-growing with year. our quarter to and by best our as XX.X fourth quarter, say XXX% experience have digital While the month, assortment is an focus subscriptions. that quality equating workouts fitness to In of believe our year-over-year, per XX acquisition subscription workouts subscription connected workouts subscriptions, lead-generation on we're $XX.X as per represented compared added broadest to workouts deepest value and excited reached average fitness and up of connected in KPI channel

high in of the and experiences incredibly a community. demonstrating is breakthrough have connected example engagement was our which average that and Our net drive engagement ability to levels for monthly respectively. scale quarter Peloton low churn, and continued deliver X.XX% great our fitness X.XX% the commitment resulted full-year while of member

four relief. raising over logging weeks, million this XXX,XXX $X hunger X course the of million over and Over Peloton for participated summer, in workouts over members

to I'd quarter and extend Peloton entire our like to through team. year turn to appreciation the over I fiscal Before Jill it take deep you 'XX, for to my outlook

You've our mental uncertain has to wellbeing world bringing risen mission to physical challenge true our of thrown at member community. and stayed and every this us, to

say, every with for do. Thanks you, you often I'm learn what I day. and proud work to know to As from to you, you

over Now, to Jill. you,

Jill Woodworth

John. Thanks,

the diving we which to connected in have into release, highlight into in our our primarily like this sales apparel numbers, segments, product folded report the other change segments. we quarter's Before fitness include segment. With a I'd way

a than sales, our this consolidated please the shareholder To know, drive about in of you see program, products. of operating and segments believe related percentage fitness referral and a Therefore, see table change how which narrowing we letter. fitness Peloton's this apparel reflects our results. product represented Also, picture X% reported are of of impacts how our our the less helps think connected results, two our change of interplay of we the other to reporting prior many connected our appendix to reporting As offers sales our in apparel large sales. cleaner reconciliation between sales

in exceeding our total to [technical geographies. for expectations results million, representing generated quarter, XXX% the year-over-year difficulty] across revenue of quarter, fourth $XXX fourth on the Now, we all growth,

undelivered driven a number of carried was strong and throughout sustained performance expedited quarter. Our the over by from QX, significant bikes shipments demand bike

year-over-year. we impact in margin Gross on the markets towards improvement basis the fourth an sales and tread to had of resumed Tread+ quarter the our fourth had quarter, of in XX.X%, XXX quarter. end in points the While deliveries minimal some revenue grew

XX.X%, was related inclusion quarter. Year-over-year including XX and deliveries, shipping margin gross impact continued including of driven other of product the points exceeding our from by expense products COVID fitness partially the the cost to mix bike was expectations, by connected costs a in Our of our expedited product offset efficiencies despite achieved basis segment. and growth shift overall improvement

compared resumed exceeding of of was production. was subscription today, in of leveraging margin due QX our bike in content XX.X%, for As nearly service fixed the of year. gross Subscription expectations have and delivery last XX.X%, and expense Tread+ protocols market. costs to as the XX.X% operating calls we a for normal Total contribution primarily delivery margin of our percent of our all was quarter to revenue XX.X%

when majority of operating expense improvement better combined significant of gross margin, the and our and advertising a better pause sales, to with leverage. marketing percentage which as our sales drove year-over-year than sales spend, with revenue, expected continued of performance We

adjusted was of margin Our QX share. EBITDA million pleased representing income, first our quarter $XX.X that million $X.XX XX.X%. We're net per QX an adjusted which EBITDA or of represented was $XXX.X diluted positive

our are pretty profitability, quickly unchanged. priorities are proud of We achieved we've our how but

a on will continue manufacturing product we adding order fitness in is development, market and aggressively invest to and scaling software new capabilities, global massive believe to what wellness our capitalize more new opportunity. features, in introducing We programming

uncapped an our a platform have with growth. billion providing investing and in sheet $X.X to over facility, We million continue of significant credit $XXX drive resources to balance strong liquidity

on have our quarter in are given Now, plus to our solid our the first we quarter, view significant outlook, into backlog bike results. delivery, we a where of

So offering that map should to today. the our you QX guidance to you results closely we're expect

remain our have to Looking we had our well the unknown. to COVID-XX assumptions further mix impact, 'XX, clearly had regarding of the into and out as and on make a while performance, fiscal positive as our products, impact important performance has of duration crisis macroeconomic sales the new date,

anticipated we of May, performance a So in while moderate fiscal to realistic than for a When we out year demand projecting present to also we'd quarter uncertainty. reported QX offer We're expected that does aim acknowledging QX. results range 'XX. in more

charting imbalance increase unexpected in cases many meaningfully for late reduce in in in the of us. order to has However, geographies our timeframes made many and supply has states This June, COVID-XX in demand U.S. sustained the it the to delivery challenging

of materially ordered, reduction we months, expect customers but year-over-year we our grow we of at production representing expect manufacturing return their midpoint of $XXX While yesterday delivery have had bike, the to are to to yet not capacity our $XXX to receive QX our are recent million fitness still but increased QX, of do and will of trial $XXX as revenue 'XX. million fiscal The we to revenue revenue bikes continue the associated normalized U.S. prior impact bike the delivered. XXX% deferred to growth in window. refunding of we the In who end price QX, proactively the all end with capabilities, not in within XX-day windows range. in order connected At home QX, the million,

to We of delivery pending for order are customers their Those Bike+ waiting can also upgrade to cost. refunding bike. customers additional opt for delivery an also their

automatic reduced believe the reflects for strategy period. eligible pickup. cash, these able bike were accessories make to the guidance Peloton to refunds, U.S. owners platform and member's Also, receive logistics refunds trade current are as revenue first because of free We Our toning compelling this a organization. which substantial are right and for in package offer a it and in and We for incredible our yoga partners. free Bike+ $XXX the

Please at does the buyback We that the impact sheet. are P&L, the able scale. program reverse logistics to balance perform note only not

of $X.XX in fiscal estimating in range growth representing the we XX% the total billion, 'XX, midpoint. billion are to revenue For year-over-year $X.X

growth as drive we add incredibly ramp on us Tread introduction our growth Peloton and as product of quality million X.XX are meaningfully portfolio, impact We beyond going in new to the for to million end-of-period 'XX fiscal will excited fiscal Tread and impact in connected rollout John a and fitness XXX% high have Bike+ minimal into QX, The and will 'XX lower at earlier. more X.XX ensure production forward. which revenue the will subscriptions forecast new our noted priced midpoint. Peloton growth additional we In year-over-year representing though of our

For reflecting below QX, expect we monthly net connected churn fitness average to be X.XX% recent trends.

representing $X.XX the For to fitness fiscal million growth year-over-year at connected under $X.X 'XX, average subscriptions, million we stay forecast to churn an X%. XX% connected fitness monthly midpoint, of ending net

manufacturing approximately decline the we the full-year, XX% For expect gross full-year, existing In our fitness profit Subscription full-year margin base connected XX% QX XX%. contribution margin shift scale roughly a to our QX be at expect change to of we margin respectively. QX Peloton the as of mix to gross and year-over-year and a the year-over-year logistics we reflects will to bike, This flat and product and roughly respectively. and price and XX% XX% we further in and plan make to continue Tread+, investments platform.

the us we With fitness opportunity in grow fitness massive to global to invest continue content. front our platform, of in

digital high While members, engagement offset we price performance as continued trial. and music increases the of leveraging production be of variable to by in these associated some subscriptions of with efficiencies shift the will a XX-day costs, expect costs, change mix such content free largely our given

intact. however, the year, in robust juncture, foreign of QX and XX% moderate with and new as than through target significant the we international full-year. At sales in late the of year-over-year in margin deliver revenue marketing in subscription year will to fiscal as progress spend first-half remains advertising we a and achieving contribution and expect our this increasing long-term verticals content able spend marketing spend fiscal we percentage of a be expense library more language classes, the of investments our Additional of greater leveraging

will of on Research administrative margin This sales. fixed Despite adjusted original margin to as expense significant at of in represents but strong EBITDA midpoint EBITDA in reduction to shift price due QX the We show $XX as scaling to mix we range be people expect the reduction through gross $XX XX.X% of costs revenue sales and and bike our heavily to development leverage expect and adjusted percentage the and leveraging media million. the to spend expense a Tread+, and QX to our expected to continue flow to in the of reductions million an ranges. technology, percent invest is produce to to flat a year-over-year. platform general also the of

For we it representing expect adjusted to at adjusted over X.X% EBITDA to of now the will take to turn of $XXX the midpoint your the million $XXX EBITDA fiscal I an of 'XX, operator million ranges. margin questions.

Operator

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

open. Your line is

Doug Anmuth

specific then strength-focused? the are views that the gateway rotating with is and fitness and bootcamps still in about you help expect the Jill margin about product the John, margin spending gross the just on for do bit the sales here one little connected more on also current to Thanks tread a 'XX screen of puts for on more marketing XX% connected around bit profiles profits a and see forward, and just around across John. XX% going the that's us lot strength taking talking Bike+ you're maybe the Thanks. takes, Jill, flush talked what a the gross questions; and on your could fiscal little clearly then basis? four and then, one more just out hardware product a you we gross pieces for normalized hardware a offset strength, for more you and And fitness, to

Jill Woodworth

Thanks, Doug. Great.

us imagine, our products, take as can on gross So, down. we with until quantities a achieve faced you we introduced costs margin, as we're first allow can cost naturally higher new that structure to

it a by our was really or and a important to is is still your important has our to we really $XXX, most correct, so profit to on our represent gross impact gross yes, that accessibility step us us, you're lower price the terms tread For the offsetting bike. we've deterioration portfolio, does would referred has margin, profit say our fitness profiles to if answer often very of margins marketing would gross and bike only around, color much now our connected price similar margin I in allowing the of and original bike in dropped lower the across but would focus have similar as gross there and margin I expense, our for like the our CAC, products. say and gross that obviously other products not dollars, of give our of question gross what two the net that we sales margin us, definitely increasing but I well. bike, do is new existing profit have price of very you look those Tread+ things you The

John Foley

our the important here and down which approach. but how from both a on. you perspective. they're to our better the for price strength is we're connect? tread products have and I we're treadmill bands, strength volume to I Doug, in going programming excited our studios is bodyweight, and other does [ph], win strength us be said past so, programming personally seen With to Doug, best those approach strength need put answer we cardio, is line marketplace, are current in With in with within and going to another to to more Yes, we win and think best you, York training, and win. with I'm our your more win you bike bike into offer approach. we're vertical such we about. the this, think best, dedicated workouts know need my think have tread, just lower your that move because London, for our you strength New we as haven't love able we to broader not of Doug, to strength, going I've with bootcamp, strength, you know, doing? so, compliment remind Clearly not workout we an I that with workouts, to your and studios fitness [three and Could bootcamps, anything that are tread clearly new studios, that in we line flag better Yes, weights] the to cardio that are going to all to -- I'd think we home, if respect we cardio we're will going that going the winning that be the question? and and a the like you're

Doug Anmuth

both, that appreciate Yes, helps. you Thank I it.

John Foley

Doug. Thanks,

Operator

Thank you.

comes question Terry Sachs. next Our Heath Goldman of from

Your line open. is

Heath Terry

capacity, envision give meeting May, that demand in Peloton in what financial becomes that the overbuilding most of forecasts? back incredible not and on company since And now normalized work. the thanks. recent in we're a advertising us we you you're in capacity, what this give you the for you seeing to get as and the of by version risk you've back eventually Great, back way to At of sort plays look at all at quarter get lot more current what that can obviously little about drive we being an can really the you how do talked in on level, of guidance role more your normal been within do John, increase the to elevated quarter point way terms for coming us versus as was hopefully production full-year, to? demand production and see outperformance to of demand the Jill, whatever a the marketing the detail a that, of air then, then margin going driven back you ahead it demand doubling such you managing, stayed to able has of what sense bit

John Foley

don't go we into supply for the -- markets massive the when going that's William the in give there's and real our Lynch, need think pass that the supply boardrooms. you don't normalize know, coming thanks know more Peloton of bit we to to such I'll to you heavily TAM, it but that it out to coming color, massive up in real, capacity, demand to do market years, What I meet chain invest but existing a say we that believe Heath, capacity term dynamic, absolutely maintain is going do you about to and do and or the I'm I a the idea when opportunity that able markets years chain your see President, the for just second, to to to who -- we're never be over quick going come a that. has want it's questions. to a over a we're overbuilding feel short-term that for we're chain three pass can COVID, need going we but to that years like to and little We supply say to current opportunity top going it, rooms in we senior and and globally, real we and William into and SAM priority, which years, opportunity leadership William this new is see so the quick. years

William Lynch

Heath. Hi,

able being noted, you our we thanks to that, do we've mentioned double As to that. capacity, to done teams going and for and were we the so

our about going investing facilities. both As expanding forward, and in think we're own our we

against comfortable order Jill is of deliver in guidance year the end our [bike well have and and been longer we production, that through first-half, both existing standard. to both new we as up products, in is to investing and acquired As as as understand online to will communicated, Shin by factory Tonic, our you going third-party and] partners the factories which tread building December, very so, in comes know, be able as Ji that the than we a well feel expanding to delivery working [ph] ramp be the calendar that with also we as the

bike be is and forward, build overall and in As to we're and on It's Shin that's coming for capacity, production. going give that we us a growth the big continued us. both look December significant that, tread for Ji our flexibility unit to online about so, excited going deal big, got out and

Jill Woodworth

Great, and 'XX. in sales about part, Heath, was and believe expense I'll which second I how take the marketing we're thinking fiscal

imagine, a bit for can it's of delicate a balance us. As you

we now, now Bike+ and have year. into tread products U.S. the coming available new course, some in the later Canada that Of are available, obviously year and next U.K., this early

do to So, to need for to the us, new we our pay know important to products, about obviously world but it's let order attention think delivery.

QX, the think do again, I So, adjusted a similar growing margin little what in as EBITDA that then make the on We which more spend marketing us have in What probably to down is move to marketing a moderate bit will excited from more and road. reflects obviously it saw through then getting run QX is would now QX, guidance portfolio, like you'll see make see we front-half air. spend us I about the potentially but you we a obviously, what year. provides marketing And in last do normalized the rate back us to loaded efficient. point we long-term, some us, we're being get with the for product to synergies think as

able we've the organic been studying generate months over We to also that as have demand well. six been the last

do spend think additional efficiency forward. in move marketing and this, see sales we of will we coming all our as So, we of out

Heath Terry

thanks. Great,

Operator

you. Thank

Post from Bank of comes America. question of next Our Justin

please? question, Your

Justin Post

you. thank Great,

full-year in how how year, could about talk you're First the of are the all, not I doing Most and thanks units thinking about new wondering providing maybe if companies those, products what guidance. going for refurbished And contribution you that. do was ASPs? It's I you brave. guess how you. to you return are your was a have ability to second, and affect then, bike, are with wondering, about the $XXX credit, for do Thank they'll of to thinking I you program? much

Jill Woodworth

sense. take question, to Great. program, if William, and make the you that some want about first then maybe, I buyback the talk could will

very off, over some we a will would you mix Again, bike like our original come addressable of that'll help say, think continue I also SKU. last to tail for up Tread+ what serviceable first very believe very reignite largest bike is we us ton at price for know, terms end excited to expand the compelling assumptions did I the our that market. product obviously we our excited we to to would a the of We've XX make specific very research lower months accessible with So, deliveries I our give $XX of months more our that QX. the mix, we're don't several of information. a course at really of done products and in be think month be model, our offer, to say but financing the We're and

would the it in we come sales think obviously it throughout the towards expect in Bike+, loaded packing additional I of the we'll some we year coming tread, volumes lower probably for year. Tread+ our bike model, priced the as So, and back-end the shift behind as our do terms say now will relates very back-end see year we of from launch see we order, and mixed to would into again, original that

'XX. price Tread+, fiscal lower of a in that'll really terms major be driver think we In

John Foley

thanks, Yes, Jill.

bit On the a I remarks. point trade in, on reiterate just opening would Jill's with

the refunding bike. single that every are we awaited delivery consumer So, of

the those were return members feel XX-day $XXX delivery well price extremely within as that like first. So, window, the drop, currently and that's awaiting with we as

noted those will that long types investment and offer that this but have time, been bike, then great and companies like as substantial are just In in CPO are and not optimizing that things, we're announcing, this we not and substantially do your we've to and do program we up on we're our we refunds feel most of feel announcing team get your today. ease. excited, pick a accessories those and the those completed we getting in bundle, fact, at a Jill fairly It's rich in also a by will we consumers. member offer. refunds so, trade terms trade appreciate that's in, like to the of It's also end plus it plans don't To we member point you frictionless week, be the experience future, noted, $XXX those will to the goodwill, and and of be a

Justin Post

you. thank Great,

William Lynch

a Let that. me as compliment quick, real to say just

and Canada, platform we consumers a about and years. that One at to think product for as the of will platform beautiful our logistics powerful building buyback bikes things logistics of global footprint majority point, delivering that coming and becomes the including offer treads globally the eventual the in we're are you about pre-owned we Germany, that the program, logistics footprint the the this certified this U.K., reverse pretty

announcements So, were opportunity. that we'll about get to inventory, and future that we excited have

Justin Post

Great, thank you.

Operator

Thank you.

Our from line Cowen. next question comes the John of Blackledge of

Your line is open.

John Blackledge

the on but we of production, Great, ramp just XQ on seasonal Thank head you. kind to reporting could demand? around I the in Peloton's as update secondly, into Peloton yet, controls? for And quarters any are biggest and thanks. holiday XQ, given is know questions; weaknesses discuss not Two then ability the out material the what and typically meet you XX-K the

William Lynch

had that the demand this forecast holiday meet ways as earlier, a that is been at statements, and we point, we've discussed and within forecast, noted our we seen demand I've with we've and got to place, busy like making and chain, a team to that's got bike noted a order in mentioned holiday we've Jill to to, a based the get and with We we're like expanding this that projections position into seen so that feel on in to on our plan Peloton great feel capacities in will investments we longer start so we'd On accustomed had or the we expand we've so, comfortable QX expect a we feel great demand, we're than in a course the as I surge like, albeit QX. abate COVID, and it in William. the delivery of demand, tread, earlier. supply to demand, fulfill aggressively and we've

Jill Woodworth

to I controls, you say will XX-K proud see made team remediate our material and our weaknesses. am to as Great here. come systems, our have worked their the out accomplishments progress all and successfully across of when and question, company teams wanted incredibly does but that of tomorrow just on second bolstering people, the very hard, John, We've incredible the

asking. you Thank for about So, we're excited it.

John Blackledge

thank Okay, you.

Operator

you. Thank

from next Our question Scott from comes Devitt Stifel.

Your line is open.

Scott Devitt

manufacturing life was beneficial just economically Thanks. out user third-party much that if and an health, a I that question of at insurance confirmed balance premium then company, was the big versus especially how that untapped you're in two, additional in done exchange health to now could efforts the I area. seems dynamics, expecting providers and the are curious collect to this you if secondly, first you. for corporates can wondering lot on companies efforts in-house it is have being And be and data one, about offer time? pretty any where over is there a to for Thank talk and discounts I willing maintaining opportunity community, you like

John Foley

own own majority We for acquisition with are don't said Tonic I we've split factories. from free think of out now out the factories the our deals, the inventory coming

are just we partners the as our that on our the for our deliveries, U.S. demand when a holiday, warehouses for about in production; and the logistics the both as think just valued, without and well, international we've manufacturing them, bands ops of markets, to well point Our able we as teams. field number wouldn't it's fulfill expanded, be not

logistics we feel real a our competitive noted, John As advantage. it's team, like

while. and we've So are have them, and planned training for hiring, been a

Jill the guess So, over And to about I turn I'll that. we on it good question. feel really second then,

William Lynch

Yes, I'll here. hop in

right coming corporates is us We You're opportunity about in massive to thing vector this your like we a data anything seriously. have we is. the but where data, very tricky world, I in head We see is with that the opportunity, years. announce absolutely this potentially for Specific now, very take growth to and sharing and and big insurers. right something very a a think don't

to be with wrong not do have to in members. share our of line respect off-sides, scary with the plans way be So, it that any data, the on side our and any customer's would we

I've because opportunity, headlong put asterisk corporate in run up plan is like sure a and other about asked plan for not the do we're the than an on So, into, with a I or protect our and we'll that's it with to eight going talk but been see with feel never even lot, something comes we've we to data, a what years, being I quarters, nine respect had data, though about. to something to coming have it, insurers, I'm the and big but opportunity you to sharing

Scott Devitt

you. Thank

Operator

you. Thank

Rosenblatt comes of McTernan Our from next question Securities. Bernie

Your line is open.

Bernie McTernan

there also impact, question. how for assuming on $XX tread? is and versus update normal between wondering with then, there said the you just now the the bike gauge taking the products, we an is was million cutting guys serviceable can addressable impact any on it a I few versus bigger, you thank lower quarter, the if come the expectations isolate price for Last in Great, market. you was I'm our below the of quarters, the And reactivations price disconnects? benefit lower should insurance past price

Jill Woodworth

Sure, hi.

all, of first thanks first So, question. your for

obviously biggest long purchase and past and our to obviously course, to of trial. things year barriers the market we the price fall XX-day in in the the launched programs, and points our our one of we've home when last move that needle grow we've Of financing believed like have products, represented done

a has sacrificing one. products more been goal been making without experience big affordable you imagine, for or this our week has As our member can quality us, day because from

time if we the believe, at and will two answer presented three the of of opportunity tread, market, introduction think we IPO. and working the it's to Tuesday session, an on updating but yes, said we the impact lowering bike, have do investor next that been the join I on of we analysis of price this our the lower X analyst So, you hard have of price around before, serviceable the obviously our is this our we've product short think addressable course,

So, next we Tuesday. that will share

and In given would that and then for churn, several an is reactivations, couple of unintentionally. the it of sheltering will biggest be cards the have I in any they've first some in is contributor seen members, over terms of over idle foremost declined say the of credit foremost largest time but of of the of most soft say past course those and I is been we've first What the been may place. is source getting time uptick to months last which churn seen churn, so -- people churn, soft month we've churn but quarters

Operator

Thank you.

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

Your line is open.

Ronald Josey

we in bit I this about the XX the the and little we've still I fastest if talked here, growing. think for I demographics years taking under want more are and thanks Great, the the question. ask to a fastest with still Jill past wonder John, in growing.

income. at back if rates then understood quarter growing a I digital, XX? keep XX% XX you in just cost then, I John demo into that ultimately large think free maybe and conversion Thank it's but are, talk to talk it down about acquisition about XX XX paid, trial a new like as to days. that there, tool, sales And help? and not why terms from product to a purchasing the free but can there's last you in when then Can fast about down Why to days? of that come going you. they was the is years you're seeing can and digital we stuff household talk as

Jill Woodworth

first and take want Great. if then one, Hi, you I'll chime John, in to digital. the on

lot appealing over of a households, in XX% estimate the household doing and segment around couple XX fiscal ours annual We data goal which are make income to full-year in are report range. a of of I'm at less fastest socioeconomic younger to broader been of the affluent happy under when a a years. to growing continue look progress last those terms reaching that We you has and still from or less sales. than so again of the XXX,XXX XXXX,

specifics are during more the progress I feel reading investor week, reduction. guys session made demographics also think my and our we're we've very we but I will the address we and about will around with you excited obviously price next like also So mind, analyst

I needle think we're to more. going move even the see

John Foley

With team. cohorts to And the that now, paying there's and and close kudos to our XXX,XXX, thing so said, heard my you subs right which businesses, is and think fantastic to respect like the you metrics I all about last that digital a conversion TV, have stuff, the much preamble annoying digital TV to cohort. it and months with funnel Apple the months every so including fantastic software couple conversion better Fire that adding TV, late and and last few Amazon just in ago, changes adding Roku innovation, content gets year, Android TV, the many we

so to in the way. a quickly that trends it's because moving just pro it's in So look hard consumer at business

right at run you, So, like in growing breakeven, we exciting bottom subscribers, it a the for more conversion think be clarity but we us it's for. have for become fastest can hoping what I line, a said driver not were point preamble, which and in most at our this to our now nascent our it's the coming to thing we fitness big going of connected it's quarters, business, where is we

Ronald Josey

Great, guys. again. Congrats thank you,

John Foley

Thanks.

Operator

Thank you.

comes next Deepak of Our from question Mathivanan Barclays.

Your line is open.

Deepak Mathivanan

Hey, question. the guys. Thanks taking for

reductions can approximately due to you production based I the bike on the understand we XX% XX, what over XX XXs rough margin is, higher the production also had a margin on gross to Doug's there in you noted that time Bike+ higher has achieve is on as go kind question, for similar margin, Jill, materials, believe response efficiencies I'm margin that of with also this the new to I XX bill XX impact. of operations accounts and price So connected high fitness is to math or gross or the a higher and segment, to you the new costs approximately Bike+. of just guess expect side? trying points on

Jill Woodworth

of it at so, is mean, about we're have able Yes, each I of margin us what very to ago grow now business you make, We're these so record progress world and $X.XX relatively bike. our products years pruned gross time. going original the to achieve you portfolio us exciting as and at the scale, $X track for our ago, over $X.XX business and fitness is us our that we're in again I and five, six look years mean to and Peloton's be a back made, to if we've we it when is of very five, look to six products. look cost few SKUs, cost on you our if efficiencies that unique, is to a of going

deficiencies, around So, to Bike+ we the plough product and gross really to in more million that again, idea the this efficiencies grow of love that ground give but continue we as margins, even back realize continue a the to build obviously, customer was I million today bike to to we're we're to carrying original going those a again, the stake the lot $X put continue able $X similar topline. and but million, to

Deepak Mathivanan

one then, it, question really for maybe And John. helpful. that's Got

So Thank with do you to you. long-term? experience the integration, else like obviously over see Apple is the the user gym with great. ecosystems kit Where opportunities partner large

John Foley

again of we wish there how but platforms, with integrations, a good all who's tricky getting becomes were obvious pretty to whose to more big data and does data respect feel the were I partner about the member it. Well, trying it with that's question.

R&D and our our big is, excited that ideas top a to imagine, very was happy announce there totally software were to the but in engineers, innovation members -- be our were integration apple in other line, percentage as other our going keep came the that want that new honest our need can or taking of investing that and you from years. hardware and offer we point any R&D are new like engineers of of So this members a it, lot Apple products features new we're continued about and place there's that one, so of not we the lot so than this, we're tons to this, was meaningful innovation, we pounding and our some integration, ones, we Watch a dollars so at we're at products trying -- to coming saying or table

Deepak Mathivanan

Got much. Thank you so it, okay.

Operator

you. Thank

Our Horowitz next ISI. Evercore question Lee comes of from

open. is Your line

Lee Horowitz

how does of changed maybe footprint? some the may. fitness John, the Jill, And connected for that sustainability timeline Thanks question. digital Okay. has is subscribers COVID if digital massive how there conversion we around Two comments expansion current full-year improved fitness of guidance geographic of year? on towards connected category so about the only stay slows the during I the that this thinking should some only, subscribers for throughout year, the the your or the touching beyond throughout much. then, Thanks the adoption down assume be about you're thinking maintained

John Foley

get have fantastic or honest, our over ambitions preparing To hasn't to for language-specific our coming new and excited Cornils Carter Chorlins markets of it on doing languages. leadership about we new and the are We're also into with Yes, Kevin Luckily, job either opportunities. about to that a plan. there respect in the Kevin content hope be international. years, changed Jim side the been thinking

teams those and realities by our ambitious leaders of have parts of relatively those that been other that unhindered COVID and impacted have fortunate been we've So, some of our the business.

in quarters the and So, we ambitions we languages as years into coming and countries specific, have get hope soon can. global have and excited to some the in more more we're like more updates past, we there but we as said to

William Lynch

we're continue you number number John's in on in momentum also in Germany on know, U.K., three the like we feel with to we're markets great the fitness world, and two just as there. the we've And and Canada, international, and and point got

market. invest focused newest is markets, Germany those we're to short-term, both example, for the in our continuing which in So, really on in

was COVID in U.S. market. were on invest when largely connected to marketing, fitness quickly and in continue establish we and We leadership to stores the the during new opening that off in marketing

that current like mentioned. our upside just acknowledging So, we strategy, our lot against international of feel John have a still we ambitions

Jill Woodworth

for content is highly on very as Great. know, a product you a fitness And digital, know standalone and we term nascent high is competitive business. still digital us,

apps Although, is best we our the other and churn than we much available. lower have we that do believe understand content do fitness

we free Given offered so some XXX,XXX the level of earlier, than because than of It's that today we're expect seeing numbers offsets balance little a I'd is year also our the did a in profitable much result that where has it 'XX of that We we costs as the larger bit a through it to of ago, this fixed has that excited about it acquisition drag. were an see subscription so getting channel. that the of noted connected the they in and but to John so, business, one again, made in nearly leveraging paying That's are keeps this, giving outlook subscribers is we better XXXX come impacted the the our really less to and for the again, we as digital know still channel our year we're acquisition largely today. don't and business earlier we don't highlight fitness of that fitness, it but subs. excited content platform on and is change getting digital have connected sub pricing value we're better, year, call great that an the success in this the last April and our incredible and fiscal and we're trial XX-day subscription growth really we're and digital as the guide of subs obviously our year. that March

Lee Horowitz

and that And conversion acquisition the the uptick hauls guess full throughout I the guess, connected and mental you're seeing year to channel, this fitness? conversion I

Jill Woodworth

William. ahead, go Sorry,

William Lynch

us We're that look cohorts. excited worries. at no and measured you Yes, getting classes we better converting, and has at, if

one more that, apps, XX into fitness. excited. of in, to digital get being upgrades, connected that lean shown effective ago of and months, getting weekly, and every the every the so, into the on if through fitness platforms connected the what able and we've a what in some are John in a noted enhance month you year, daily, might tactics been month imagine, some to So, interested basis, better, that month the six through accelerated is subs digital at month years frankly that XX, surgically content as measure XX, we're in might them way to on using you upgrade in sub the monthly to getting classes, has from in and those look more more us we've three we last hardware month them and understand

for it. app whole it's fitness not for we're leading connected we lead is focused an it, on why effective customers while We've on guiding arsenal marketing such and and source big in team we to it's frankly, the digital us, So, weapon new It's think that deal it. got why our a and a stay. are a

Lee Horowitz

the question. Great, thanks for answering

Operator

Thank you.

Wedbush of question from Our comes Securities. Hardiman James

Your question, please?

James Hardiman

Hi, me Thanks good fitting evening. for in.

halfway couple fantastic, So, but has the growth through I'm look that if the doing back, crossed obviously if that connected made a of fitness pace in (a), investments months, guys right, math have mark sub given slowed been final all right, math then capacity? the than been that and guess the less that (b), I I sub you the million the bit why manufacturing is but during quarter, would case

Jill Woodworth

mean decide get here. that It's time order precisely a when have I put time we we purchase landed in product can product a about or need to obviously we lead an that. we the we eight-week when

So, on for constraints of much the towards started the more can supply. us, end as we to imagine quarter, see fourth you

it's that. We're constrained supply. precisely So, by

James Hardiman

that expectations. as guidance, fixed the degree. costs arguably margins of versus your a if to of how on been dig trying the bit maybe future margin out you're just side, we much and to upside obviously, a to then And pandemic, much little figure I'm biggest how have in the the just area leverage higher Okay. can I here, just function look able to of is still much a is

you guidance today maybe the speak think So, for and a think spend, you'd the be line as of 'XX, normalized at I (b), if of guess, quarters? to EBITDA year? profitable about were more three think we profitable the marketing on first do like going quarters to, do the each in of fiscal (a), about four best the sounds final should the to it's quarters, the be I it Obviously, be of how but the I expect quarter

Jill Woodworth

Sure.

think think there is talking in and there. off, more. were initially first about gross lot a So, margins I We I probably

surprises in that our and of that, into is upside that then connected and back logistics, fitness, I maybe need first say more to is think everything was to sense, was EBITDA, so, have we to fitness, have would bikes, big makes the us if mean, and to we connected it. that been correct shipments and that so, didn't a ultimately in exceeding that expedite a to within from thing are there the do expectation expectations -- that's needle products, I our on terms So, the more in driver go will I of our we - moves of than product QX, lot as efficiencies we as scale is noted, yes, we we obviously did understand seeing and expected you of product again, cost continue there, well. as course, see cost

directions, where lot challenging So, bigger things it be to to given just or they upside. moving just happens area often going little predict, a be in bit are is cannot that the direction and move on. can a provide in there same sometimes It different a an to swing the

expecting the were was that but point we shipping to ahead of we say more in needed your costs well would take have model. than certainly I expectations, really So,

because said but the being, in with for marketing is quarter. at from really look seeing of us, more how in this we're price our growth, smoothing be years. than in new different previous QX, are for revenue QX going EBITDA, see to and to think ramping little more is of bike, typically I second-half serial which As think so, will profitable COVID, where for quarter-over-quarter heavily first-half, weighted the big because every on very first-half, because be headquarters and it other you're relates you QX, our QX and clearly at products, original year more the We're very if previous earlier, belief a us QX, least where in the us we I of time to to EBITDA, it's the lower unlike that you're years, weighted going years, I in

Operator

for turn Thank John I'd this call time, remarks. Sir? like to the you. Foley At closing over to

John Foley

because are is today, just fitness delivery In million want you so of software, world-class more. much our they at home. now and strong you, home, hasn't people is With treadmills have and that these gamified and instructors, supportive dynamics, said are consumers It goals, of these U.S. now. and music, meet concept fitness where Again, incredible that wellness to their moving worked propose community, because and roughly Thank home. because fundamental of experiences, are sustainable dynamics unparalleled at everyone. our programs engaging American make best-in-class that it moving homes in exceed hardware, workout Peloton, until networked our they home to that our People to and XX are fun with on COVID a a Thank simple location. because pretty not Jill. our the want and into content fitness I closing, better our

For stop. the time full first

Finally, Good hard to Thank that, this Day you all has health. week you are Thank wild all with first a thank for to for our help of annual for earnings Talk you next crazy do our And what it of you everyone. for tuning ever. year and/or in quarterly It been members a us. next the Investor you November. been six incredible, thank you. in. more has call our months with everything mental to our night, all important work you team, huge and physical than

Operator

gentlemen, and conference you today's for call. this participating. Ladies Thank concludes

may now disconnect. You

Peloton Interactive (PTON) 10 Sep 202020 Q4 Earnings call transcript