Peloton (PTON) Morgan Stanley Technology, Media & Telecom Conference summary

Financial performance and restructuring

• Achieved four consecutive quarters of positive Adjusted EBITDA and free cash flow, with expectations of at least $200 million in free cash flow and $300–$350 million in Adjusted EBITDA for fiscal 2025.

• Reduced net debt by over $280 million year-over-year, lowering the net leverage ratio from 7x to 2.7x and First Lien Net Leverage Ratio below 5x, resulting in $5 million annual interest savings.

• Completed a $1.35 billion refinancing in May 2024, extending debt maturities and achieving more flexible loan terms.

• Cost restructuring plan announced in May 2024 targets $200 million in annualized run rate savings by end of fiscal 2025, with half from payroll and half from non-payroll expenses.

• Continued focus on optimizing G&A, reducing tech debt, legal spending, and corporate real estate expenses.

Strategic priorities and growth outlook

• Emphasis on right-sizing operating expenses, improving hardware gross margins, and increasing marketing effectiveness through LTV to CAC improvements.

• New CEO Peter Stern, with extensive subscription business experience, is leading a rigorous strategic planning process for long-term growth.

• Despite a declining Connected Fitness market, maintains a strong long-term growth trajectory with a 30% six-year CAGR on paid subscriptions since 2019.

• Investments focus on product innovation, expanding distribution, and deepening member engagement.

• Ongoing development of a longer-term growth strategy to be shared later in the year.

Product, experience, and community innovation

• Product innovation centers on integrating premium hardware, software, and expert human coaching.

• Recent software launches include Personalized Plans, Strength+, Pace Targets, and Teams to enhance engagement.

• Expanded third-party retail partnerships, notably with Costco and Dick’s Sporting Goods, and piloted a microstore concept for asset-light physical retail.

• Community features like Find Friends and Invite Only Teams have driven increased engagement, with nearly 70,000 teams created and further expansion to community-based teams.

• App strategy positions the app as a gateway and companion to the ecosystem, with 80% of weekly app usage from connected fitness subscribers.