Peloton Interactive Inc Q2 2025 Earnings Call Transcript

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

Question: Simeon Siegel - BMO - Analyst : Thanks. Hey, everyone. Good morning, Peter. Honored, I can welcome you to the fund, that is analyst Q&A. So welcome. I was curious how you're thinking about the path to growth versus the ongoing improvement in profits? I know it's still early days for you, but just curious if you have any thoughts on any time line you'd want to share in terms of your views as you dig in. And then just as a follow-up, I'm not sure if this is for you or for Liz, but you guys have been doing such a nice job in improving profitability in recent quarters. Could you share any thoughts on continuing that profitability improvement if and when you do decide to start investing for growth? Thanks. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 06, 2025 / 1:30PM, PTON.OQ - Q2 2025 Peloton Interactive Inc Earnings Call

Question: Shweta Khajuria - Wolfe Research - Analyst : I have two, please. Well, so you can make progress on deleveraging. Can you please highlight some of the milestones on your plan, deleveraging plan from here and maybe some of the tangible and intangible benefits of deleveraging? And then the follow-up question is on the tariffs. Do you expect to see any meaningful impact from tariffs if levied on your P&L? Thank you.

Question: Shweta Khajuria - Wolfe Research - Analyst : Very helpful. Thanks, Peter. Thanks, Liz.

Question: Curtis Nagle - Bank of America - Analyst : Good morning. Thanks very much. I wanted to focus on the free cash flow just -- what drove the outperformance in 2Q? And then on the big rates for the, full year, assuming that's mostly just the incremental flow through on the higher higher EBITDA, maybe some working capital efficiencies? Could we -- I guess that will be our first question if you go through that. And then I have a follow-up.

Question: Curtis Nagle - Bank of America - Analyst : Awesome. Good to hear. Peter, maybe a question for you, just churn numbers were certainly encouraging. I guess, just in terms of maybe a little bit more what's driving it, I mean it sounds like it's results of some of these engagement efforts. Maybe you're seeing a leveling off across the subbase more generally. Just digging into that and then just what's assumed in the guidance, maybe a little more specifically, I think churn is lower. But yes, I'd love to hear your thoughts on that.

Question: Curtis Nagle - Bank of America - Analyst : Helpful. Thank you.

Question: Arpine Kocharyan - UBS - Analyst : Hi, thanks for taking my question. Peter, welcome to Peloton. Great to hear you on the call. You talked a lot about improving churn. I was wondering, is it fair to assume that this better-than-expected churn, which is probably not as much of a surprise to you as to us, given the efforts you've taken to get there. My question is, how should we think about potential price increases in light of improving churn? It seems like you feel better about churn today than you did three months ago? First, is that a fair assumption? Second, how should we think about sort of price increases in the subscription business in light of improving churn? Thank you. Then I have a quick follow-up.

Question: Arpine Kocharyan - UBS - Analyst : Wonderful. Great. Peter, I was wondering if you could share your initial impression of where you see low-hanging fruit in terms of further cost optimization? Do you feel that, that's first in hardware COGS versus more in sort of OpEx and the obvious sort of G&A that you've talked about before in terms of being higher than it's supposed to be? Where do you see that low-hanging fruit as you sort of look at the business with fresh eyes?

Question: Eric Sheridon - Goldman Sachs - Analyst : Hi. This is Eric Sheridan from Goldman Sachs. I had a quick question on brand versus direct marketing investments and generating end demand. How do you think about the mix of those marketing investments over the medium to long term and where there could potentially be a higher return on marketing spend as you think about deploying that -- those growth investments against your platform goals. Thank you.

Question: Eric Sheridon - Goldman Sachs - Analyst : Great.

Question: Lee Horowitz - Deutsche Bank - Analyst : And thanks for sneaking me in. Maybe, Peter -- we appreciate the growth plans for '26 and beyond are selling the works. Can you maybe talk at a high level as to what you see as the most obvious levers you can pull in order to stabilize sort of the gross addition declines that you've seen worsened to start off the calendar year? And one follow-up to Liz, if I could.

Question: Lee Horowitz - Deutsche Bank - Analyst : Really helpful. And maybe one just follow-up on Connected Fitness gross profit, gross margin. Reaching that double-digit sort of milestone for the first time is a great hurdle to clear, but we think that you still are always away from where you think this can go over time. Any context as to sort of where you see the upper band on Connected Fitness product gross margin and the levers you have there to sort of pull those higher going forward? Thanks so much.