00:00Big hardware line, a big AI platform, Peloton IQ coming out today, long anticipated, but the market appears underwhelmed.
00:08And I know that you don't follow the stock move on a day-to-day, minute-by-minute basis, but what might investors not fully appreciate about this announcement?
00:15First of all, Scarlett, thanks for having me here.
00:17And I leave the day-to-day gyrations of the stock to the experts, the traders, the analysts, folks like yourselves.
00:24That being said, if you take the long view, let's look back a year.
00:31Our stock has almost doubled.
00:33Look back a month, way up.
00:35So I wouldn't focus on day-to-day, but I would focus on the news that we announced today because it's pretty amazing what we just announced.
00:41Completely new lineup of equipment, Peloton IQ, our AI-powered personal trainer, big moves into total wellness.
00:49So it'll play out over time as people see the value and they start to embrace these things.
00:56Who sees the value, not just from an investor, but your stakeholder is me, who owns Peloton Bike, thinking about is it me who's going to upgrade?
01:04Is it a whole new cohort that comes in and buys these more pricey products, but with more built-in cameras, more effective nature of wellness, I'm sure?
01:12So, Caroline, first of all, thanks so much for being a member.
01:14It's great to have a fellow member here, and we are focused both on existing members as well as non-members.
01:23For existing members, they're getting so much today.
01:26We are introducing for everyone, regardless of when you bought your equipment, the benefits of Peloton IQ, and that's just included in your membership.
01:34We are now including a new acquisition that we did, a company called Breathwork, because we know the power of breathing and how it can help people with stress and anxiety and depression and improve heart rate variability and improve blood pressure.
01:47So everyone's getting that.
01:49Major partnerships, for example, one with the Hospital for Special Surgery to focus on injury prevention and rehabilitation.
01:55All of these things happen for existing members.
01:57But if you're not an existing member, there has never been a better time to become one with the launch of this all-new equipment lineup, the cross-training series.
02:07Now we're delivering the benefits of both cardio and strength, because we know that adults should be doing a couple of hours, at least a week of cardio, and two days of strength training every week.
02:19You can do that now all with one piece of equipment that makes it super easy.
02:23It's almost, in many ways, like cross-training is the way in which you're sort of identifying it.
02:29But if I look at the analyst notes, and maybe the reaction from the stock is, because a lot of this has been baked in, you've already given us full-year forecasts that in many ways talk about what churn you're expecting, but what subscriber growth.
02:39What do you think this will spur in terms of subscriber growth?
02:41So we knew, of course, as we went into this year, what we were going to be launching.
02:46And we were able, as you point out, Caroline, to bake all of that into our guidance for the year.
02:50But we also included in our guidance that as the year progresses, we will be inflecting back toward growth.
02:57And that's a big, big step for us as a company.
03:01You know, we had a couple of years where we've been down as we have regrouped after the pandemic.
03:07And we are now in such a good place where you see us having reignited our innovation engine.
03:14Of course, our customer love has never left us.
03:17Customers really just appreciate what Peloton does for them and, in particular, have that deep connection with our instructors.
03:24So we're building on that foundation and now feel even more confident about our future than ever before.
03:29I like what you said earlier about how existing members will have the benefits of the new software.
03:33But will you continue to support the existing hardware and software if customers don't upgrade to the new equipment?
03:39Because down the road, at some point, you want to get everyone to the new model of Peloton equipment, don't you?
03:45Scarlett, we build our products to last.
03:49The bikes that we have today are still beautiful.
03:54Even the original bikes, they are absolutely beautiful and they are fully functional.
03:59Our treads are designed to last.
04:00The row is designed to last.
04:01So it's not like the iPhone wear.
04:02We're continuing to support them.
04:04We are not in the obsolescence business.
04:06Whatever it takes for you to get and stay fit, we want to support you on that journey.
04:11You said about the growth trajectory, the inflection.
04:15Is that profitable growth?
04:16When are we going to get to it?
04:17Absolutely.
04:17So I'm so pleased that we have now been able to deliver five consecutive quarters of significant free cash flow.
04:28And so this is now a company that we're running in a very disciplined way and we're delivering real profitability.
04:37And I think you can see that in the year-over-year changes in the stock price where we're up considerably because people now feel so confident about the future.
04:43And you're confident in the price point.
04:45What's so interesting is at what point do you see that elasticity?
04:48How high can you push me when I've got loyalty to a Tunde, to a Cody Risby?
04:53How much do you think that I will continue to add on price points when it comes to the bike, to the tread, to the subscription?
04:58So we know that every dollar is precious and people are considering how to spend their money these days.
05:03And so we're very careful about what we do here.
05:06But we're also looking at the value that we deliver.
05:09And we know that if people are going to invest in something, they should be investing in their health, in their well-being, in their longevity, and how they feel both physically and about themselves.
05:21And Peloton allows them to get a great return on that investment.
05:25So we did do a price increase.
05:26It was the first change in our all-access membership in over three years.
05:30We were very thoughtful about what that was.
05:32And we hope that our members appreciate all of the additional benefits that we've provided them over the last year.
05:38For example, adding about 12,000 more classes, 40 more programs, more modalities, things like weighted vest workouts, as well as what we just announced today,
05:47which is the introduction of Peloton IQ, which provides basically the benefits of a personal trainer in your home.
05:53I want to get your sense of the competitive landscape.
05:55When you look at music streaming services, people usually have only one.
05:58They pick Spotify or they pick Apple Music.
06:01For actual streaming of television shows, maybe they have a couple of them.
06:05When it comes to fitness and wellness, what's your sense of how many people are willing to hold on to and pay for?
06:10Yeah. So, first of all, we are happy for you to work out in whatever ways you choose to and in as many ways as you do.
06:19But our focus is on making sure that Peloton can be the answer for you, regardless of what aspect of total health you're focused on.
06:27So cardio, of course, is where we started.
06:29And we're known for that between our row, our tread, and, of course, the bike.
06:35But now strength is a huge area of focus for us.
06:39We know people are recognizing the importance of strength training, in particular, as we grow older,
06:47in terms of building and maintaining muscle mass and what it does, for example, for our metabolic function.
06:52So we're a great solution for that.
06:54With the cameras that we launched today in our plus line, we're able to count your reps.
07:00We're able to give you feedback.
07:01We're able to suggest when you should be upping your weights.
07:04Then we get to things like mental well-being.
07:05We talk about breath work, our meditations, the work that we do with yoga.
07:09All these things help.
07:11So, I mean, and I can see that.
07:12The strength, Halle Berry, perimenopausal.
07:15You're thinking about a wellness trajectory.
07:17Very briefly, Peter, five years from now, how do you see yourself in the fitness landscape?
07:21Yeah, so we intend to be your essential partner in the journey to feeling better about yourself and living your best life.
07:30And that means not just focusing on the quantity of years that you have on this planet, but the quality of those years.
07:36And we know that there are choices that we can make, behavioral choices that we can make, that make a difference in the quality of those years.
07:45Those are, am I doing cardio?
07:47Am I doing strength?
07:48Am I taking care of my mental well-being?
07:50Am I eating right?
07:52If I need supplements, am I taking the right supplements?
07:55Am I sleeping right?
07:56We can make a difference in every one of those areas, and we intend to.
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