Financial Data and Key Metrics Changes - Total revenue for Q1 was $551 million, comprising $152 million from connected fitness products and $398 million from subscription revenue, outperforming guidance by $6 million [19] - Paid connected fitness subscriptions decreased by 6% year-over-year to 2.732 million, with average net monthly churn improving to 1.6%, a 20 basis point improvement year-over-year [18][19] - Total gross profit was $284 million, a decrease of 7% year-over-year, with total gross margin at 51.5%, down 30 basis points year-over-year [20][21] - Adjusted EBITDA was $118 million, a 2% improvement year-over-year, and free cash flow increased to $67 million, significantly outperforming prior expectations [24][25] Business Line Data and Key Metrics Changes - Connected fitness products revenue decreased by $7 million, or 5% year-over-year, while subscription revenue decreased by $28 million, or 7% year-over-year [19] - Connected fitness products gross margin was 6.9%, negatively impacted by a $13.5 million inventory accrual, but would have been 15.8% excluding this charge [21][57] - Subscription gross margin increased to 68.6%, an 80 basis point improvement year-over-year [21] Market Data and Key Metrics Changes - The connected fitness market in the U.S. is still declining year-over-year, but the rate of decline has decelerated to low single digits [50] - The overall wellness economy in the U.S. is estimated to exceed $2 trillion, indicating a significant market opportunity beyond connected fitness [52] Company Strategy and Development Direction - The company is focusing on product innovation, wellness expansion, and new distribution channels, including a new retail partnership with Johnson Fitness and Wellness [12][13] - The launch of the Peloton Cross Training Series and Peloton IQ aims to enhance member engagement and outcomes, with a shift towards premium products [9][10] - The company is committed to operational discipline and business excellence, targeting at least $100 million in run rate cost savings by the end of fiscal 2026 [16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving positive operating income on a full-year basis in fiscal 2026, despite external challenges [32] - The anticipated financial impact of the recent recall is reflected in the guidance, with expectations for a small drag on subscriptions but overall revenue impact expected to be immaterial [4][40] - The company remains focused on execution and believes it offers an unmatched ecosystem of products and experiences to help members invest in their health and well-being [16] Other Important Information - The company has expanded its retail presence significantly, now having 10 micro stores in the U.S. and a retail presence in 46 states [12] - The acquisition of Breathwork aims to enhance mental fitness offerings, which are now included in all-access subscriptions [10][11] Q&A Session Summary Question: What is the market opportunity for the new commercial business unit? - Management highlighted a large market opportunity with low share and emphasized the strategic combination of Precor's commercial-grade equipment and Peloton's software and community [32][33] Question: Are there any plans in the next five years to provide for dividends? - Management indicated it is early to discuss dividends but emphasized the importance of deleveraging and maximizing capital allocation options in the future [35][36] Question: Can you compare the recent recall to the previous one? - Management explained that the recent recall was based on different models and incidents, with a small anticipated headwind to paid connected fitness net churn due to elevated subscription pauses [38][40] Question: How do you see churn normalizing post-price increase? - Management noted that while there was an initial spike in cancellations, churn has moderated back to normal levels, with expectations for flat churn over the year despite a temporary increase in Q2 [41][44] Question: What is the overall demand environment? - Management acknowledged continued softness in connected fitness equipment demand but remains optimistic about long-term growth potential in the wellness economy [50][52]

Core Insights - Peloton is launching a national expansion of its bike and treadmill resale marketplace, named Repowered Marketplace, after a successful pilot program [2][4] - The marketplace allows users to list pre-owned Peloton equipment, with sellers receiving 70% of the sale proceeds [2][5] - The beta test in select cities resulted in approximately 400 equipment listings, indicating strong interest in second-hand sales [3][5] Company Strategy - Peloton's CEO emphasized that the resale market is a significant avenue for acquiring new members, particularly as many Peloton bikes are underutilized [5] - The company is focusing on new initiatives like the resale marketplace to address a 13% drop in sales reported in May, marking the third consecutive year of revenue decline [5] - The shift in strategy includes a greater emphasis on subscriptions and transitioning from traditional retail stores to smaller boutique locations [5] Market Trends - Research indicates that consumers are increasingly interested in secondhand shopping, especially during economic downturns, as it allows for an average savings of 30% [6] - The current economic climate, including new tariffs, is driving consumers to seek cost-saving options, making resale marketplaces more appealing [6]