Peloton Interactive, Inc. (NASDAQ:PTON) Q1 2024 Earnings Call Transcript

Peloton Interactive, Inc. (NASDAQ:PTON) Q1 2024 Earnings Call Transcript November 2, 2023

Peloton Interactive, Inc. misses on earnings expectations. Reported EPS is $-0.44 EPS, expectations were $-0.36.

Operator: Good day, and thank you for standing by. Welcome to the Peloton Interactive 1Q 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] Please be advised today’s conference being recorded. I would now like to hand the conference over to your speaker today, Peter Stabler, Head of Investor Relations.

Peter Stabler: Thank you, Ken. Good morning and welcome to Peloton’s first quarter and fiscal 2024 conference call. Joining today’s call are CEO, Barry McCarthy; and CFO, Liz Coddington and Chief Marketing Officer, Leslie Berland. Our comments and responses to your questions reflect management’s views as of today only and 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. For a discussion of the material risks and other important factors that could impact our actual results, please refer to our SEC filings and today’s shareholder letter, both of which can be found on our Investor Relations website.

During this call, we will discuss both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP financial measures is provided in today’s shareholder letter. I’ll now turn the call over to Barry McCarthy.

Barry McCarthy: Morning, everyone. Thanks for joining us. In a break with tradition, I invited Leslie Berland to join us, knowing that growth is on everyone’s mind. And this begins a process whereby in future calls from time-to-time, you can expect me to invite into the room other operating executives so that you have an opportunity to gain exposure to them and they have an opportunity to gain exposure to you. And you can hear firsthand from them about different aspects of how the business is being operated. And with that, we’ll open the phones to questions, Josh.

See also 30 Most Owned Dog Breeds in America and 25 Countries that Produce the most Carbon Dioxide Emissions.

Q&A Session

Operator: Thank you. [Operator Instructions] Our first question comes from Doug Anmuth with JPMorgan. You may proceed.

Doug Anmuth: Thanks for taking questions. I have two. First, the number of different growth initiatives going just as you think about your forecast for revenue growth and positive EBITDA and substantial free cash flow in the back half of the fiscal year. Can you just help us rank the two to three biggest drivers across these various initiatives? And then secondly, how do you think about timing for the Lululemon partnership to benefit the business just given access to their large membership base? Thanks.

Barry McCarthy: Well, let’s see. From my perspective, with respect to the drivers, a couple things. One is we’re going to reintroduce the Tread+ this quarter and begin taking pre-orders. And that will be, if we’re successful, that will be a big driver of incremental cash flow and revenue for us. Remember, we have all of that inventory in warehouse already and fully paid for and have sent before I walked in the door. So that would be thing one. Thing two is continue success growing app-related subscribers. And I’m sure we’ll have more questions about how we’re thinking about that opportunity on a go forward basis. And then we need to continue to have success with the core all access membership. I think our growth projections are reasonably conservative in that regard.

So that’s how I’m thinking about the growth initiatives. In terms of Lululemon, that’s live. And we are benefiting from it as we speak. So, actually nothing more to say about the economics of that on a go forward basis.

Liz Coddington: Yes, the one thing I can add on Lululemon is that we just started having our content available for the Lululemon studio members who have a mirror that actually went live yesterday on November 1st. And so, as far as receiving the revenue sharing benefit from that agreement that we have with Lululemon, that started effective in November. And we expect roughly give you a sense of the size for the quarter, roughly about $10 million of revenue for Q2 coming from that subscription revenue for us.

Barry McCarthy: Yes. There is an apparel component to it. It started phenomenally strongly. And it’s kind of inarticulate. Then an initial launch in Chicago, we drove a tremendous amount of store traffic for them, a huge increase in apparel sales for us. And we’ll be working on a more complete integration of that opportunity. And that will be a little slower to develop over time.

Doug Anmuth: Thank you.

Operator: Thank you. One moment for questions. Our next question comes from Shweta Khajuria with Evercore ISI. You may proceed.

Shweta Khajuria: Okay. Thank you for taking my questions. Could you please talk about the promotion environment this year versus last year and any change in your strategy in terms of running promotions this year? Length of time, the depth of promotions, any comments on that, please? And then the second is, how should we think about your guidance for the quarter and for the full year? Puts and takes that are baked into or the assumptions that are baked into your guidance and any potential, what impact from these new partnerships are you accounting for in your guidance for the full year? Thank you.

Barry McCarthy: Let me say just a brief intro. I’ll turn it over to Leslie to talk about her thoughts about the promo environment for the current quarter. And Liz will take the last part of the question. So I think I’m right on a Q-over-Q basis for the quarter completed. We had a higher AST and we’re less on promotion than we were a year ago. We were higher by 3% something like that. And so that reflected in the improvement in gross margin on a year-to-year basis and the 31% increase in gross profit that helps deliver in the quarter. You want to talk about the holiday?