Edward Yruma: Hey. Good morning. Thanks for taking the question. So I guess just a bigger picture question and maybe in light of what happened with seat post, I guess, I know you haven’t reported like workouts per user in a long time, but very curious how you think about overall engagement within your Connected Fitness subscriber base? How has it been trending? Did the seat post have an issue with that? And then just real quickly on inventory. I know there were a lot of extraordinary costs that were kind of capitalized on some of the older layers of inventory. I guess going forward, how should we think about kind of directionally kind of cost of goods and how the Bike price compares to maybe some of the legacy inventory you had on the balance sheet? Thank you.
Barry McCarthy: Maybe Liz could take the inventory piece, and I’ll take the engagement piece first. And Liz, there’s anything you want to add to Engagement, please do. Macro engagement has remained strong. Liz mentioned that there were a number of folks who [indiscernible] so who paused their account related to seat post, but amongst the members who didn’t, and I would say the fact that in our notification we have them to stop using their bike, they just kept using their bike. And as if there was no notification. So — and I think that probably explains why we didn’t see in aggregate a dip in engagement like perhaps you might have expected given the proposal around seat post. Liz, do you want to comment on inventory or correct anything I just said.
Liz Coddington: Nothing to correct, but I will — let me talk a little bit about inventory. So from an inventory perspective, inventory will continue to be a source of cash for us in fiscal ’24. But we are in a much more normalized inventory position than we were last year. And we are already, we’re purchasing more hardware. We purchase. In fact, we’re purchasing more Bike inventory and Tread inventory this quarter. So I think your question was talking about the cost of goods sold and have our cost of goods sold come down. For products like Tread, we have seen our cost of goods sold come down substantially. That’s part of one of the reasons why we were able to reduce the price for Tread. So the freight inbound is down from what it was for the old inventory because it’s no longer those really expensive rates that we had to pay for freight.
We also aren’t storing as much inventory as we had in the past, our storage costs have come down. And also, our logistics costs have come down, and we have — and we’re continuing to make progress even in our middle mile as well, and that will come in throughout the year. So all of those things have reduced our overall cost of goods. And in the case of Tread and Rower, some of those reductions we decided to give back to our customers in the form of a price reduction. We haven’t seen as big of an impact to our Bike from that perspective. But more to Tread specifically. I did want to correct one thing about Barry’s comment about the 80,000 subscribers related to the seat post that was really more around 15, 000 to 20,000 incrementals.
Barry McCarthy: I think the 80,000 is the aggregate.
Liz Coddington: Yes. 80,000 is the aggregate, 15,000 to 20,000 incremental.
Edward Yruma: Thanks.
Operator: Thank you. One moment for our next question. Our next question comes from John Blackledge with T.D Cowen. Your line is open.
John Blackledge: Great. Thanks. Two questions. On the college initiative, can you talk about the pipeline for that opportunity? And then second, on the rental program launched in Germany on August 9. I know it’s a couple of weeks in, but just curious how you see that opportunity in Germany? Thank you.
Barry McCarthy: In reverse order in Germany, John, as you may know, they’re more culturally accustomed to rental models and which is why the team thought that fitness as a service program would land well. It’s really too early to know, although there’s enthusiasm about it initially. So we’re incredibly optimistic, let’s say. And with respect to the college pipeline, I understand where you’re coming from the question. I really don’t want to answer it. But you could imagine that program like the one that we were fortunate enough to have announced with Michigan could scale across other Division 1 programs in the fall and some time. And I certainly hope that is true. I think the opportunity to do co-branded bikes on college campuses and elsewhere are enormous.
And if we’re — I wonder, if we’re going to be the dog that caught the car because if the thing really takes off, then the supply chain guys are going to all be pulling their hair out, of course, because it’s going to create enormous pressure on them to fulfill demand amongst the rapid fan base. I hope we’re lucky enough to have that problem.
John Blackledge: Thank you.
Operator: One moment for our next question. Our next question comes from Aneesha Sherman with Bernstein. Your line is open.
Aneesha Sherman: Thank you. So historically, Q1 has been your weakest quarter and Q2 to Q3 (ph) have driven more than 60% of the year’s sales. So as you talk about seasonality impact in Q1, do you then expect to see a similar cadence through the year into Q2 to Q3? And then I have a kind of follow on with a bit more medium term. As you effectively kind of lowered the dollar commitment for new members over your new pricing schemes do you then expect the seasonality in the business to get sharper? And do you believe your cost base is now aligned for just generally more seasonal business? Thank you.
Liz Coddington: Let me start with — I can take the question about the revenue seasonality. So we’re not going to offer full year guidance for our revenue. But in the past, we’ve shared sort of what the revenue phasing we expect for the year and I’m going to show that again with you. So we expect our fiscal ’24 revenue seasonality to be most closely resemble our fiscal ’23, but we do expect it to be more heavily weighted to the back half of the year this year, as Barry mentioned. Not quite as heavy as fiscal ’21, but heavier than it was weighted in fiscal ’23. Now the second half of — the second part of the question was will our seasonality change with pricing changes? I think that is a tougher question to answer because we’ll know as we go along.
