Release Date: February 06, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q: How are you balancing the path to growth with ongoing profitability improvements, and what are your thoughts on investing for growth? A: Peter Stern, CEO, stated that while it's early days, Peloton is setting the stage for growth by rightsizing expenses, improving equipment gross margins, and increasing the LTV to CAC ratio. The focus is on innovation, meeting members in more places, and deepening connections with existing members to drive growth. Elizabeth Coddington, CFO, added that they raised their full-year adjusted EBITDA target, reflecting continued profitability improvements through gross margin expansion and operating cost savings.
Q: Can you highlight milestones in your deleveraging plan and the impact of tariffs on your P&L? A: Elizabeth Coddington, CFO, explained that Peloton's improved free cash flow has enabled significant deleveraging, reducing net debt by 30% year-over-year. This has resulted in interest expense savings and positions the company for future growth. Regarding tariffs, Peter Stern, CEO, noted that no Peloton-branded hardware is currently subject to tariffs, and any impact would be minimal.
Q: What drove the free cash flow outperformance in Q2, and what are the expectations for the full year? A: Elizabeth Coddington, CFO, attributed the Q2 free cash flow outperformance to timing benefits from invoice payments and permanent benefits from adjusted EBITDA outperformance. The full-year target of at least $200 million reflects inventory production improvements and faster-than-expected operating expense savings.
Q: With improving churn rates, how are you considering potential price increases in the subscription business? A: Peter Stern, CEO, acknowledged that pricing is a powerful lever and that Peloton is evaluating it carefully. While they have made some hardware pricing adjustments, any changes to subscription pricing will be considered thoughtfully, given its importance to members and business performance.
Q: What are the most obvious levers to stabilize gross addition declines and improve Connected Fitness gross margins? A: Peter Stern, CEO, emphasized the importance of super-serving existing members and launching new capabilities to add value. Elizabeth Coddington, CFO, noted that improvements in gross margins are due to a mix of premium products, optimized discounts, and pricing changes, with expectations for continued expansion.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
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