Financial Data and Key Metrics Changes - The company reduced its debt from $1.6 billion to $465 million, resulting in a significant decrease in interest expenses and freeing up approximately $50 million annually [5][27] - Monthly subscription revenues per average subscriber (ARPU) increased by 12% year over year in Q2, marking the third consecutive quarter of ARPU expansion [29] - Total revenues for Q2 were $189 million, a decline of 6% year over year, primarily due to challenges in the behavioral business [31] - Adjusted EBITDA margin improved to 34% in the predecessor period, up more than 900 basis points year over year, reflecting disciplined cost management [32] Business Line Data and Key Metrics Changes - Total ended period subscribers declined by 17% year over year, ending at 3.2 million, with clinical subscribers growing by 56% year over year but experiencing a sequential decline due to the transition from compounded semaglutide to FDA-approved medications [29][30] - Behavioral revenue declined by 13% year over year, while clinical revenue grew by 55%, largely due to compounded semaglutide subscriptions [31] Market Data and Key Metrics Changes - The company is facing near-term headwinds from the transition of clinical members to alternative medications, which are generally at higher price points [9] - The competitive landscape remains challenging, with other telehealth players continuing to offer compounded GLP-1s, impacting consumer sentiment and acquisition [9][45] Company Strategy and Development Direction - The company aims to return to profitable growth by focusing on four core pillars: building a unified member experience, growing emerging revenue streams, revitalizing the brand, and driving operational excellence [10][11] - The strategic reorganization is seen as a pivotal moment, allowing for renewed investment and innovation for long-term growth [5][8] - The company plans to expand into women's health, particularly targeting the menopause segment, which aligns with its weight health initiatives [61][62] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the challenges posed by the bankruptcy process and the transition to FDA-approved medications, but remains confident in the long-term growth strategy [9][36] - The company expects total combined revenues for fiscal 2025 to be between $685 million and $700 million, with adjusted EBITDA of $140 million to $150 million [37] Other Important Information - The company has completed $100 million in run-rate cost savings and continues to optimize its cost base [25] - The integration of clinical and behavioral operations is underway to enhance resource efficiency and support [25] Q&A Session Summary Question: Impact of the shutoff of compounding on clinic subscribers - Management emphasized the complexity of the clinical landscape and the ongoing transition of members from compounded semaglutide to alternative medications, which is expected to continue through August [45][48] Question: Quantification of compounding members rolling off - Management indicated that the majority of subscriber growth was linked to compounded semaglutide, and a decline in subscribers is anticipated as the transition progresses [52] Question: B2B opportunity and scaling enterprise sales teams - Management expressed confidence in the B2B channel as a significant growth area, particularly with increasing pressure on employers to offer obesity solutions [57] Question: Expansion into women's health - Management confirmed plans to launch a women's health program that incorporates behavioral support and clinical care, targeting the perimenopausal and menopausal stages [61][62]

Financial Data and Key Metrics Changes - The company generated $324 million of free cash flow in fiscal year 2025, an increase of $49 million year over year [20] - Net debt was reduced by $343 million or 43% year over year, indicating significant deleveraging [20] - Total revenue for Q4 was $607 million, outperforming guidance by $21 million, primarily driven by higher hardware sales [22] Business Line Data and Key Metrics Changes - Paid Connected Fitness subscriptions decreased by 80,000 quarter over quarter, ending at 2.8 million, a 6% decrease year over year [21] - Connected Fitness products revenue decreased by $13 million or 6% year over year, while subscription revenue decreased by $23 million or 5% year over year [22][23] - Total gross profit for Q4 was $328 million, a 5% increase year over year, with total gross margin at 54.1%, up 560 basis points year over year [23] Market Data and Key Metrics Changes - The company plans to expand its global presence through hotel partnerships and retail expansion, with a successful MicroStore pilot in Nashville and a second store opened in Utah [13] - The commercial business unit, which includes Precor, operates in over 9,000 hotels, indicating a strong market presence [16] Company Strategy and Development Direction - The company aims to evolve from a cardio fitness partner to a comprehensive wellness partner, focusing on strength, mental well-being, sleep, recovery, and nutrition [11][12] - Plans include employing advanced technologies like AI for personalized coaching and insights [13] - The company is targeting $100 million in run rate cost savings by the end of fiscal year 2026 through optimizing indirect spend and restructuring [18] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, citing a significant market opportunity in the U.S. for fitness and wellness, particularly among households with incomes over $75,000 [58] - The company anticipates a pivot towards revenue growth starting in Q2 of fiscal year 2026, driven by product innovations and seasonal trends [80] Other Important Information - The company has launched Peloton Repowered, a platform for buying and selling used equipment, enhancing accessibility [14] - The company is committed to generating meaningful free cash flow, targeting at least $200 million in fiscal year 2026, despite anticipated tariff exposure [32] Q&A Session Summary Question: How does Peloton see the opportunity for growth as Americans focus more on health and fitness? - Management noted that younger demographics are expanding their definition of wellness, leading to a strategy that incorporates a holistic approach to fitness, including strength and mental health [37] Question: What are management's thoughts on current levels of stock-based compensation? - Management acknowledged that while stock-based compensation aligns employee interests with shareholders, it has historically been too high, but they expect a reduction in fiscal year 2026 [41][42] Question: Can you go over the cadence of the $100 million cost savings? - Management indicated that half of the run rate savings have been actioned, with the remainder expected to be realized throughout the year, focusing on indirect spend optimization and workforce relocations [52] Question: What are the expectations for gross margin for 2026? - Management expects gross margin improvement across both subscription and hardware segments, driven by lower service costs and optimizations in content production [64]