Peloton Interactive Inc at Morgan Stanley Technology, Media & Telecom Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Nathaniel Feather - Morgan Stanley - Analyst : Great. Well, before we get, a few quick housekeeping items for important disclosures, please see the Morgan Stanley Research Disclosure website at If you have any questions, please reach out to your Morgan Stanley sales representative. And with that, let's kick it off. It's been an eventful year for the company, to say the least. For those who may be new or returning to the story, how has Peloton evolved over the past year and what are the key priorities over the next?

Question: Nathaniel Feather - Morgan Stanley - Analyst : Okay. Great. Well, a lot to unpack from that. Let's start maybe on the revenue side. And for '25 -- fiscal '25, you're guiding to revenue growth of down 9% at the midpoint. How would you break apart that decline between macro headwinds, the weakness within discretionary spend more broadly, impact of cost reduction actions, kind of any other key factors to call out there?

Question: Nathaniel Feather - Morgan Stanley - Analyst : Great. that's really helpful. And I want to dig a little bit more into that. In the 2Q letter, you outlined a few pillars around the forward growth strategy. And the first one was innovating on products and experience to deliver better outcomes. Given that, what are the one or two areas you see the most opportunity to elevate the member experience?

Question: Nathaniel Feather - Morgan Stanley - Analyst : Okay. Well, the next pillar is meeting members in more places. And you mentioned a little bit within that, the combination of all these things, and a key part of that is getting into the hands of new members. And so within that is increased distribution, such as the Costco partnership that ran

Question: Nathaniel Feather - Morgan Stanley - Analyst : Okay. Very exciting. Now you've also talked about deepening connections and fostering community with the recent highlight of the team's launch. What areas of the Peloton experience can you infusional community aspects? And what impact of engagement and churn have you seen from social features you've launched in the past?

Question: Nathaniel Feather - Morgan Stanley - Analyst : That's great. I also want to spend a minute on the app business. Can you talk to the updated strategy for that segment across both the stand-alone app and some of the partnerships you've launched.

Question: Nathaniel Feather - Morgan Stanley - Analyst : You mentioned in that answer briefly, the Strength+ app which launched recently. Interested to hear more about the early learnings there. Has that been better for user retention or acquisition? And given the early learnings, how do think about the opportunity to build out additional unique digital experiences? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 04, 2025 / 7:30PM, PTON.OQ - Peloton Interactive Inc at Morgan Stanley Technology, Media & Telecom Conference

Question: Nathaniel Feather - Morgan Stanley - Analyst : Great. Well, switching to the cost side, and you've made remarkable progress in the expense base over the past few months with now set to grow $300 million or more year-on-year. Can you help us break down the primary buckets of savings you found into the cost reduction program?

Question: Nathaniel Feather - Morgan Stanley - Analyst : Great. Well, following up on that, what opportunity do you see to further take cost of the business, both through the remainder of fiscal '25 and beyond areas that same to you?

Question: Nathaniel Feather - Morgan Stanley - Analyst : I want to hone in on some of the specific expense lines, starting with Connected Fitness gross margin, just returned to double digits really encouraging. Can you break down the primary levers that enabled that improvement? And going forward, do you feel that has additional room to expand or are we kind of the right place?

Question: Nathaniel Feather - Morgan Stanley - Analyst : Great. So that's Connected Fitness gross margin. I just want to talk about ability to drive further efficiencies across your marketing spend. And despite the magnitude of cost reduction, LTV-to-CAC is still running a little bit below your 2 times to 3 times longer-term target. What's the road map to get back within that range? And is that at all dependent on improving macro backdrop?

Question: Nathaniel Feather - Morgan Stanley - Analyst : Clearly, you've made a step function improvement in profitability. As you pivot increasingly to focus on revenue growth, how do you balance investing for growth while maintaining the strong DOT discipline and margin base you built over the course of fiscal '25?

Question: Nathaniel Feather - Morgan Stanley - Analyst : Okay. Great. Now relative to many companies at the conference, generative AI hasn't been as core to the Peloton story. Interested to hear what might be some potential use cases for Peloton? And where does GenAI fit within the priority list? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 04, 2025 / 7:30PM, PTON.OQ - Peloton Interactive Inc at Morgan Stanley Technology, Media & Telecom Conference

Question: Nathaniel Feather - Morgan Stanley - Analyst : The next question I'm excited to be able to ask. You're guiding to at least $200 million of free cash flow this year, successfully restructured the debt stack. And so interested to hear how you're thinking about capital allocation specifically, with around $1.5 billion or so of debt on the balance sheet, how do you plan to plan to manage the debt load going forward?

Question: Nathaniel Feather - Morgan Stanley - Analyst : Okay. Now two more before we wrap up. First, it's been nearly 4 years since you purchased Precor. Interested to hear how that business has been performing recently? And where does it sit within the overall strategy going forward. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 04, 2025 / 7:30PM, PTON.OQ - Peloton Interactive Inc at Morgan Stanley Technology, Media & Telecom Conference

Question: Nathaniel Feather - Morgan Stanley - Analyst : Okay. I have a few minutes left here. Interested to hear is, what are the one or two things you think investors most underappreciate or misunderstand about the Peloton story?

Question: Nathaniel Feather - Morgan Stanley - Analyst : Thanks so much, Liz. I really appreciate you being here.