Peloton(US:PTON)2023-03-07 19:33Summary of Peloton Interactive, Inc. Conference Call Company Overview - Company: Peloton Interactive, Inc. (NASDAQ:PTON) - Event: Morgan Stanley Technology, Media & Telecom Conference - Date: March 7, 2023 - Participants: Liz Coddington (CFO), Lauren Schenk (Morgan Stanley Analyst) Key Points Industry Insights - The Connected Fitness category is part of the overall fitness industry, which has historically been a net GDP grower and resilient [7][8] - Peloton experienced a growth rate of approximately 100% year-over-year prior to the pandemic, which was significantly accelerated during COVID-19 [8] - There has been a shift in consumer spending back to in-person fitness experiences as gyms and studios reopened [8] Company Performance and Challenges - Liz Coddington highlighted the positive brand impact of Peloton, noting strong community engagement and customer loyalty [3][4] - The company faced financial reporting challenges, including a late 10-K filing, which was unexpected for the new CFO [5] - Cost-cutting measures were implemented quickly after Coddington joined, but financial reporting issues were a surprise [5] Product and Channel Strategy - Peloton's third-party retail partnerships with Amazon and Dick's Sporting Goods have outperformed expectations, although they are still in the early stages [11] - Gross margin concessions exist for third-party retail partners, but lower marketing costs help offset these impacts [11][12] - The company has closed 52 showrooms globally to reduce high fixed costs, while still maintaining a physical retail presence [15] Subscription Models and Growth - The Fitness as a Service (FaaS) model has seen significant growth, with membership doubling to 28,000 subscribers [16][19] - FaaS is attracting new subscribers, with over 60% of members being incremental to Peloton's existing base [19] - The average churn rate for FaaS is approximately 4.5%, compared to 1.5% for all-access members, but is expected to decline as the program matures [21] Financial Metrics and Future Outlook - Peloton's long-term target for LTV to CAC (Lifetime Value to Customer Acquisition Cost) is in the 2x to 3x range, currently hovering around 1.4x [32] - The company aims for free cash flow breakeven by the end of fiscal 2023 while continuing to invest in growth initiatives [38] - Long-term EBITDA margins are targeted to be positive, with a focus on innovation and content quality to drive member growth [39][40] App Development and Market Expansion - The Peloton app has shown potential for growth, with membership stable around 800,000 to 900,000 and high customer satisfaction [25][26] - Plans to launch different app tiers are in development, aiming to expand the addressable market [27] - The FaaS model is currently only available in the U.S., with potential international rollout being considered [25] Conclusion - Peloton is navigating a turnaround phase, focusing on improving financial health, expanding its product offerings, and enhancing customer engagement through innovative strategies and partnerships [34][38]