Peloton(PTON)2025-02-06 17:48Financial Data and Key Metrics Changes - Total revenue for Q2 was 14 million, with product revenue at 421 million [32][34] - Average net monthly paid connected fitness subscription churn was 1.4%, reflecting a 50 basis point improvement quarter-over-quarter [28][29] - Adjusted EBITDA was 28 million above the high end of guidance, and free cash flow was 95 million quarter-over-quarter [42][48] Business Line Data and Key Metrics Changes - Over 2 million unique members completed strength training workouts, which accounted for 75% of total cycling workouts [12] - Connected Fitness products gross margin reached 12.9%, the first time in over three years to achieve double digits [22][39] - The company ended the quarter with 2.88 million paid connected fitness subscriptions, reflecting a net decrease of 21,000 [27] Market Data and Key Metrics Changes - International hardware sales showed positive performance alongside growth in paid connected fitness subscriptions from international markets [17] - Third-party retail sales were lower than expected, partly due to reduced promotional discounts on the original Bike [35] Company Strategy and Development Direction - The company aims to focus on innovation, improving unit economics, and expanding presence in more locations to enhance member engagement [11][50] - The strategy includes deepening connections among members and enhancing member outcomes through new products and experiences [11][50] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, emphasizing the importance of operational excellence and financial discipline [51][52] - The company is on track to exceed 200 million in run rate cost savings by the end of fiscal '25, reflecting progress in rightsizing costs [23][63] Other Important Information - The company raised its full-year fiscal 2025 guidance for paid connected fitness subscriptions by 55,000 at the midpoint [45] - The company expects to maintain connected fitness product gross margins primarily due to a shift towards higher-margin products [123] Q&A Session Summary Question: Path to growth versus ongoing improvement in profits - Management is focused on rightsizing expenses and improving gross margins before discussing specifics on growth timelines [56][57] Question: Deleveraging plan milestones and benefits - The company has reduced net debt by 281 million or 30% year-over-year, improving leverage ratios and enabling interest expense savings [70][71] Question: Impact of tariffs on P&L - No Peloton branded hardware products are subject to tariffs, and the expected impact from potential tariffs is minimal [74] Question: Free cash flow performance - Free cash flow of $106 million in Q2 was driven by favorable revenue and faster-than-expected operating expense reductions [78][79] Question: Churn improvement drivers - The low churn rate of 1.4% is attributed to long-standing loyal members and increased engagement levels [84][85] Question: Pricing strategy in light of improving churn - Pricing is a powerful lever, and the company is evaluating pricing strategies carefully, especially for subscriptions [97][98] Question: Cost optimization opportunities - The company is aggressively pursuing cost savings, particularly in IT and corporate real estate expenses [102][103] Question: Marketing investment mix - The company is balancing brand and performance marketing, focusing on measurable returns while improving marketing efficiency [110][111] Question: Stabilizing gross addition declines - The focus is on enhancing member satisfaction and engagement to retain existing customers and attract new ones [115][116]