Peloton(PTON) - 2024 Q4 - Annual Results

Revenue Performance - Q4 total revenue was $644 million, up 0.2% Y/Y, with subscription revenue at $431 million, up 2.3% Y/Y[2] - Total revenue for Q2 2024 was $643.6 million, a slight increase from $642.1 million in Q2 2023, while annual revenue for FY 2024 was $2,700.5 million, down from $2,800.2 million in FY 2023[43] - Subscription revenue grew to $431.4 million in Q2 2024, up from $421.7 million in Q2 2023, and annual subscription revenue increased to $1,708.7 million in FY 2024 from $1,670.1 million in FY 2023[43] - Connected Fitness Products revenue declined to $212.1 million in Q2 2024 from $220.4 million in Q2 2023, and annual revenue for this segment dropped to $991.7 million in FY 2024 from $1,130.2 million in FY 2023[43] - Total Revenue for Q1 FY25 is projected to be between $560.0 million and $580.0 million, a 4% Y/Y decline[26] - FY25 Total Revenue is expected to be between $2,400.0 million and $2,500.0 million, a 9% Y/Y decline[31] Profitability and Margins - GAAP Net Loss improved to $30 million, a $211 million Y/Y improvement, and Net Cash Provided By Operating Activities was $33 million, up $88 million Y/Y[2] - Adjusted EBITDA reached $70 million, up $105 million Y/Y, and Free Cash Flow was $26 million, tripling Q/Q[3] - Total Gross Profit was $312.0 million, yielding a gross margin of 48.5%, slightly ahead of guidance[20] - Gross profit improved significantly to $312.0 million in Q2 2024 from $201.1 million in Q2 2023, and annual gross profit rose to $1,206.5 million in FY 2024 from $923.5 million in FY 2023[43] - Net loss narrowed to $30.5 million in Q2 2024 from $241.8 million in Q2 2023, and annual net loss decreased to $551.9 million in FY 2024 from $1,261.7 million in FY 2023[43] - Adjusted EBITDA for Q2 2024 was $70.3 million, compared to a net loss of $30.5 million, with significant adjustments including $105.4 million in stock-based compensation and $25.8 million in depreciation and amortization[56] - Subscription Gross Profit for Q2 2024 was $294.4 million, with a Subscription Gross Margin of 68.2%, reflecting strong performance in the Connected Fitness Subscription segment[61] - FY25 Adjusted EBITDA is projected to improve significantly, ranging between $200.0 million and $250.0 million, a 6,266% Y/Y increase[31] Cash Flow and Liquidity - Net cash provided by operating activities was $32.7 million and Free Cash Flow was $26.0 million, with $697.6 million in unrestricted cash and cash equivalents at the end of the quarter[23] - Net cash used in operating activities improved to $66.1 million in FY 2024 from $387.6 million in FY 2023[45] - Capital expenditures and capitalized internal-use software development costs decreased to $19.7 million in FY 2024 from $82.4 million in FY 2023[45] - Cash, cash equivalents, and restricted cash decreased to $750.9 million at the end of FY 2024 from $885.5 million at the beginning of the period[47] - Free Cash Flow for Q2 2024 was $26.0 million, derived from $32.7 million in net cash provided by operating activities and $6.7 million in capital expenditures[64] - The company expects to deliver meaningful Free Cash Flow of at least $75 million for FY25[29] Subscription Metrics - Ending Paid Connected Fitness Subscriptions were 2.98 million, with Average Net Monthly Paid Connected Fitness Subscription churn at 1.9%[17] - Q1 Paid Connected Fitness Subscription guidance expects a Y/Y decline in hardware sales due to seasonality and macroeconomic uncertainty, with a similar Average Net Monthly Paid Connected Fitness Churn rate to Q4 FY24[24] - Q1 Paid App Subscription guidance anticipates a sequential decline in gross additions due to seasonality, with a sequential improvement in Average Monthly Paid App Subscription Churn[25] - Ending Paid Connected Fitness Subscriptions for Q1 FY25 are expected to range between 2.88 million and 2.89 million, reflecting a 3% Y/Y decline[26] - Full-year FY25 guidance expects a Y/Y decline in hardware sales and a modest increase in Average Net Monthly Paid Connected Fitness Churn[27] - FY25 Ending Paid Connected Fitness Subscriptions are projected to range between 2.68 million and 2.75 million, a 9% Y/Y decline[31] - Subscription Revenue for Q2 2024 was $431.4 million, with a Subscription Contribution of $312.3 million and a Subscription Contribution Margin of 72.4%[61] Operational Efficiency and Cost Management - Sales & Marketing expense decreased by $26 million, or 19% Y/Y, with further reductions expected in FY25[4] - Operating expenses decreased to $375.3 million in Q2 2024 from $426.8 million in Q2 2023, and annual operating expenses dropped to $1,735.5 million in FY 2024 from $2,120.6 million in FY 2023[43] - The company's restructuring expenses for Q2 2024 were $2.8 million, primarily related to severance and exit costs[56] - The company's capital expenditures and capitalized internal-use software development costs for Q2 2024 were $6.7 million, contributing to a Free Cash Flow of $26.0 million[64] Debt and Financial Structure - Debt decreased by $200 million, with average maturity extended to 2029[5] - The company reported a net gain on debt refinancing of $53.6 million in Q2 2024 and FY 2024[43] Product Performance and Market Trends - Bike+ rental program in the UK outperformed expectations, with net monthly paid subscription churn for rental down 110 bps Y/Y[6] - Connected Fitness revenue from treadmills grew 42% Y/Y, with Tread+ achieving a 76 NPS, the highest across all Connected Fitness products[9] - Precor revenue grew over 20% Y/Y, with gross margin improving more than 22 percentage points Y/Y[11] Impairments and Adjustments - The company incurred $10.6 million in impairment expenses during Q2 2024, primarily related to fixed assets and goodwill[56] - Product recall related matters resulted in a $5.8 million adjustment to Adjusted EBITDA for Q2 2024, reflecting costs associated with returns and logistics[56] - Litigation and settlement expenses for Q2 2024 were $0.6 million, reflecting ongoing legal proceedings outside the ordinary course of business[56]