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What changed in PELOTON INTERACTIVE, INC.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of PELOTON INTERACTIVE, INC.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+529 added−608 removedSource: 10-K (2024-08-22) vs 10-K (2023-08-23)

Top changes in PELOTON INTERACTIVE, INC.'s 2024 10-K

529 paragraphs added · 608 removed · 421 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

57 edited+10 added−15 removed18 unchanged
Biggest changeWe compete with producers of fitness products, services and apps and work to ensure that our platform maintains the most innovative technology and user-friendly features. • Talent. We compete for talent in every vertical across our company including technology, media, fitness, design, supply chain, logistics, content, marketing, finance, strategy, legal, and retail.
Biggest changeThe areas in which we compete include: • Consumers and Engagement: We compete for consumers to join our platform through Connected Fitness Subscriptions or Peloton App Subscriptions, and we seek to engage and retain them through an integrated experience that combines content, hardware, software, service, and community. • Product and App Offering: We compete with producers of fitness products, services, and apps and work to ensure that our platform maintains the most innovative technology and user-friendly features. • Business-to-Business (B2B) Clients and Employers: We compete with commercial fitness equipment manufacturers and wellness benefits providers to offer fitness products and services to B2B clients and employers. 7 • Talent: We compete for talent in every vertical across our company including technology, media, fitness, design, supply chain, logistics, content, marketing, finance, strategy, legal, and retail.
We’re also committed to maintaining pay equity for our team and continue to conduct an annual global pay equity study; • Learning and Development - We offer content that supports internal mobility, individual growth, and ongoing skills development, and training around diversity, equity, and inclusion (DEI) topics; • Community Investments - We partner with leading action-oriented organizations addressing systemic racism through partnerships that drive real, sustainable transformation; 8 • Democratizing fitness - We continuously evaluate progress and apply learnings to do our part to democratize access to fitness and cultivate a diverse and inclusive Member community; • Long-Term DEI Strategy - We invest in various programs to support long-term DEI, as further described below.
We’re also committed to maintaining pay equity for our team and continue to conduct an annual global pay equity study. • Learning and Development: We offer content that supports internal mobility, individual growth, and ongoing skills development, and training around diversity, equity, and inclusion (DEI) topics. • Community Investments: We partner with leading action-oriented organizations addressing systemic racism through partnerships that drive real, sustainable transformation; • Democratizing Fitness: We continuously evaluate progress and apply learnings to do our part to democratize access to fitness and cultivate a diverse and inclusive Member community; • Long-Term DEI Strategy: We invest in various programs to support long-term DEI strategy, as further described below.
The principal competitive factors that companies in our industry need to consider include, but are not limited to: total cost, supply chain efficiency across sourcing and procurement, manufacturing and logistics, enhanced products and services, original content, product 7 quality and safety, competitive pricing policies, vision for the market and product innovation, strength of sales and marketing strategies, technological advances, and brand awareness and reputation.
The principal competitive factors that companies in our industry need to consider include, but are not limited to: total cost, supply chain efficiency across sourcing and procurement, manufacturing and logistics, enhanced products and services, original content, product quality and safety, competitive pricing policies, vision for the market and product innovation, strength of sales and marketing strategies, technological advances, and brand awareness and reputation.
Solely for convenience, our trademarks and tradenames referred to in this Annual Report on Form 10-K appear without the 9 ® and ™ symbols, but those references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights, or the right of the applicable licensor, to these trademarks and tradenames.
Solely for convenience, our trademarks and tradenames referred to in this Annual Report on Form 10-K appear without the ® and ™ symbols, but those references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights, or the right of the applicable licensor, to these trademarks and tradenames.
We are pushing ourselves from the inside out and partnering with community-based organizations to deliver meaningful and measurable impact. Through the Peloton Pledge we are investing across five pillars: • Pay Equity - We continue to offer competitive rates for our hourly workforce and equally competitive rates for equivalent roles in all markets.
We are pushing ourselves from the inside out and partnering with community-based organizations to deliver meaningful and measurable impact. Through the Peloton Pledge we are investing across five pillars: 8 • Pay Equity: We continue to offer competitive rates for our hourly workforce and equally competitive rates for equivalent roles in all markets.
Competitive Compensation and Work/Life Harmony Our compensation program is structured around our overarching philosophy of rewarding demonstrable performance and aligning team members with our goals and strategy. Consistent with this approach, we provide market competitive compensation and benefits that will attract, motivate, reward, and retain a highly talented team.
Competitive Compensation and Work-Life Harmony Our compensation program is structured around our overarching philosophy of rewarding demonstrable performance and aligning team members with our goals and strategy. Consistent with this approach, we provide market competitive compensation and benefits that will attract, motivate, reward, and retain a highly talented team and foster work-life harmony.
Our pay equity study is in addition to any market-specific obligations we have to undertake pay gap analyses, such as our Gender Pay Gap Study in the United Kingdom. Team Member Safety We prioritize the health and welfare of our team members, our Members, and the impact our operations have on the environment.
Our pay equity study is in addition to any market-specific obligations we have to undertake pay gap analyses, such as our Gender Pay Gap Study in the United Kingdom. Team Member Safety We prioritize the health and safety of our team members, our Members, and the impact our operations have on the environment.
We are committed to cultivating an equitable and inclusive culture that enables people to thrive in the best career experiences of their lives by engaging with, and listening to, our team members.
We are committed to cultivating an equitable and inclusive culture that enables people to thrive in the best career experiences of their lives by consistently engaging with, and listening to, our team members.
We define a completed workout as either completing at least 50% of an instructor-led class, scenic ride or run, or ten or more minutes of “Just Ride”, “Just Run”, or “Just Row” mode.
We define a completed workout as either completing at least 50% of an Instructor-led class, Scenic ride, run, or row, or ten or more minutes of “Just Ride”, “Just Run”, or “Just Row” mode.
We maintain ongoing connection with our team members through our company intranet, “Pelonet,” regular all-hands meetings and business performance reviews, team town halls, and company-wide engagement surveys during the year. Our Patent Incentive Program provides rewards and recognition to qualifying team members whose inventions are included in a patent application submitted by Peloton.
We maintain ongoing connection with our team members through our company intranet, “Pelonet,” regular all-hands meetings and business performance reviews, team town halls, and company-wide engagement surveys throughout the year. Our Patent Incentive Program provides rewards and recognition to qualifying team members whose inventions are included in a patent application submitted by Peloton.
The Peloton Pledge has sharpened our focus on delivering value-add, business-wide DEI programming. In our ongoing push for shared learning, we continue to create psychologically safe spaces for our team members to learn and grow together. For example, we have introduced specific learning programs for managers, such as Activating Allyship, to support our ambition to be an anti-racist organization.
The Peloton Pledge has sharpened our focus on delivering value-add, business-wide DEI programming. In our ongoing push for shared learning, we continue to create psychologically safe spaces for our team members to learn and grow together. For example, we have introduced specific learning programs for managers to support our ambition to be an anti-racist organization.
Accordingly, investors should monitor our Investor Relations website, Twitter feed and Press Newsroom in addition to following our press releases, SEC filings, and public conference calls and webcasts. 10
Accordingly, investors should monitor our Investor Relations website and Press Newsroom in addition to following our press releases, SEC filings, and public conference calls and webcasts. 10
The core elements of our team member health and safety program include site risk analysis, incident management, documented processes and standards, environmental programs, training, and occupational health programs, and we are continually striving to improve these processes.
The core elements of our team member health and safety program include workplace injury reporting, site risk analysis, incident management, documented processes and standards, environmental programs, training, and occupational health programs, and we are continually striving to improve these processes.
We define a “Member” as any individual who has a Peloton account through a paid Connected Fitness Subscription or a paid Peloton App Membership, and completes one or more workouts in the trailing 12 month period.
We define a “Member” as any individual who has a Peloton account through a paid Connected Fitness Subscription or a paid Peloton App Subscription, and completes 1 or more workouts in the trailing 12 month period.
Sales and Marketing We sell our products directly to customers through a multi-channel sales platform and via third parties. We also sell Peloton Bikes to business-to-business (“B2B”) customers and provide the opportunity for employers, insurers and other enterprise partners to offer their employees and members subsidized access to Peloton App subscriptions.
Sales and Marketing We sell our products directly to customers through a multi-channel sales platform and via third parties. We also sell Peloton Connected Fitness Products to business-to-business (“B2B”) customers and provide the opportunity for employers, insurers, and other enterprise partners to offer their employees and members subsidized access to Peloton App subscriptions and All-Access Memberships.
While we believe we are changing the consumption patterns for fitness and growing the market, our main sources of competition include in-studio fitness classes, fitness clubs, at-home fitness equipment and content, and health and wellness apps. The areas in which we compete include: • Consumers and Engagement.
While we believe we are changing the consumption patterns for fitness and over time growing the market, our main sources of competition include at-home fitness equipment and content, health and wellness apps, fitness clubs, and in-studio fitness classes.
Designed to keep riders motivated and effortlessly moving from cardio to strength, yoga, and more, the Peloton Bike+ unlocks an even more seamless and integrated total workout experience. • Peloton Tread - The Peloton Tread combines a cutting-edge treadmill design with Peloton’s compelling running and strength training content.
Designed to keep riders motivated and effortlessly moving from cardio to strength, yoga, and more, the Peloton Bike+ unlocks an even more seamless and integrated total workout experience. • Peloton Tread: The Peloton Tread combines a cutting-edge treadmill design with Peloton’s compelling Instructor-led running and Tread Bootcamp content, as well as Entertainment, Scenic and Lanebreak.
We define a “Connected Fitness Subscription” as a person, household, or commercial property, such as a hotel or residential building, who has either paid for a subscription to a Connected Fitness Product (a Connected Fitness Subscription with a successful credit card billing or with prepaid subscription credits or waivers) or requested a “pause” to their subscription for up to three months.
We define a “Paid Connected Fitness Subscription” as a person, household, or commercial property, such as a hotel or residential building, who has paid for a subscription to a Connected Fitness Product (a Connected Fitness Subscription with a successful credit card billing or with prepaid subscription credits or waivers).
We use a combination of leased and operated as well as contracted third-party logistics providers (“3PLs”) in our logistics and service network which includes middle mile and last mile operations centers in the United States, Canada, Germany, the United Kingdom, and Australia. Intellectual Property The protection of our technology and intellectual property is an important aspect of our business.
We use a combination of leased and operated as well as contracted third-party logistics providers (“3PLs”) in our logistics and service network which primarily includes middle mile and last mile operations centers in the United States, Canada, Germany, the United Kingdom, Australia, and Austria.
For example, in fiscal year 2023, our second and third quarters combined represented 62% of Connected Fitness Products revenue and 55% of our Total revenue.
For example, in fiscal year 2024, our second and third quarters combined represented 60% of Connected Fitness Products revenue and 54% of our Total revenue.
With tens-of-thousands of classes available across 16 fitness modalities, Members can access Peloton content via our hardware or via the Peloton App, on their phone, tablet, or TV, allowing them to workout when, where, and how they want.
At home, outdoors, traveling, or at the gym, we offer an immersive and personalized experience. With tens-of-thousands of classes available across many fitness modalities, Members can access Peloton content via our hardware or via the Peloton App, on their phone, tablet, or TV, allowing them to workout when, where, and how they want.
Additionally, Peloton continues to invest in AI/ML and Computer Vision technology to power proprietary personalization and discovery models across all of our software platforms and unique fitness features like Guide Rep Counting. Content We create engaging, original fitness and wellness content in an authentic, live environment that is immersive and motivating while also creating a sense of community.
Lastly, we use AI/ML to power proprietary personalization and discovery models across all of our software platforms and unique fitness features. Content We create engaging, original fitness and wellness content in an authentic studio environment that is immersive and motivating, while also creating a sense of community.
Concerns about the health and safety of our team members, or the health and safety of individuals working on behalf of Peloton suppliers or business partners, are reportable through our Ethics Hotline or online Ethics Portal, which is maintained through an independent third-party platform and monitored by our Safety, Ethics, and Compliance Team.
Concerns about the health and safety of our team members can be reported through our PeloSafe portal, and concerns about Peloton suppliers or business partners are reportable through our Integrity Helpline or online Integrity Portal, which is maintained through an external third-party platform and monitored by our Safety, Ethics, and Compliance Team.
Manufacturing and Logistics In July 2022, we announced a shift from in-house manufacturing to utilizing third-party manufacturing partners for 100% of our products. The components used in our products are procured on our behalf using our designs by our contract manufacturers, according to our required design specifications and high standards, from a variety of suppliers.
The components used in our products are procured on our behalf using our designs by our contract manufacturers, according to our required design specifications and high standards, from a variety of suppliers.
Our U.S. issued patents expire between September 15, 2023 and October 14, 2040 As of June 30, 2023, we held 52 registered trademarks in the United States, including the Peloton mark and our “P” logo and also held 844 registered trademarks in foreign jurisdictions. We continually review our development efforts to assess the existence and patentability of new intellectual property.
As of June 30, 2024, we held 58 registered trademarks in the United States, including the Peloton mark and our “P” logo and also held 950 registered trademarks in foreign jurisdictions. We continually review our development efforts to assess the existence and patentability of new intellectual property.
Our Integrated Fitness Platform Technology Our content delivery and interactive software platform are critical to our Member experience. We invest substantial resources in research and development to enhance our platform, develop new products and features, and improve the speed, scalability, and security of our platform infrastructure. Our research and development organization consists of engineering, product, and design teams.
We thoughtfully invest in research and development to enhance our platform, develop new products and features, and improve the speed, scalability, and security of our platform infrastructure. Our research and development organization consists of engineering, product, and design teams.
Diversity, Equity, and Inclusion We cultivate a culture of inclusion by creating physiologically, emotionally, physically, and psychologically safe spaces so all team members feel valued, heard, and secure.
We are not signatories to any agreements with any labor organization, or a party to any collective bargaining agreements. Diversity, Equity, and Inclusion We cultivate a culture of inclusion by creating physiologically, emotionally, physically, and psychologically safe spaces so all team members feel valued, heard, and secure.
Peloton Guide features personalized strength training routines, rep tracking, time tracking, and progress tracking. It features exclusive strength programs and workouts only available on Peloton Guide. • Peloton Row - Peloton Row combines the innovative software, premium hardware design, and exclusive Peloton content to deliver a unique low-impact, full-body cardio, and strength workout.
It features exclusive strength programs and workouts only available on Peloton Guide. • Peloton Row: Peloton Row combines the innovative software, premium hardware design, and exclusive Peloton content to deliver a unique low-impact, full-body cardio, and strength workout. Peloton Row employs proprietary form assistance and form guidance technology for rowers and also features personalized pace target technology.
Peloton content is accessed via a Membership, and we have created a number of ways – including a free option – for consumers to engage with Peloton’s fitness experience.
Peloton content is accessed via a Membership, and we have created a number of ways for consumers to engage with Peloton’s fitness experience. Monthly membership options include: 5 • All-Access Membership: The Peloton All-Access Membership is the most value-packed Peloton Membership.
Employees As of June 30, 2023, we employed 2,765 individuals in the United States across our New York City headquarters, retail stores, and field operations warehouses, with 2,678 being full-time employees. Internationally, we employed 819 individuals primarily across corporate, retail stores, and warehouse functions. We also hire additional seasonal employees, primarily in our showrooms, during the holiday season.
Employees As of June 30, 2024, we employed 2,322 individuals in the United States across our offices, retail showrooms, field operations warehouses, and remote roles, of which 2,257 were full-time employees. Internationally, we employed 596 individuals primarily across corporate, retail showrooms, and warehouse functions. We may also hire additional seasonal employees, primarily in our showrooms, during the holiday season.
Its world-renowned instructors coach and motivate Members to be the best version of themselves anytime, anywhere. Founded in 2012 and headquartered in New York City, Peloton continues to scale across the five markets in which it operates.
A category innovator at the nexus of fitness, technology, and media, Peloton's first-of-its-kind subscription platform seamlessly combines innovative hardware, distinctive software, and exclusive content. Its world-renowned Instructors coach and motivate Members to be the best version of themselves anytime, anywhere. Founded in 2012 and headquartered in New York City, Peloton continues to scale across the markets in which it operates.
We use our Investor Relations website (https://investor.onepeloton.com/investor-relations) as well as our Twitter feed (@onepeloton) and Press Newsroom (https://www.onepeloton.com/press) as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD.
The SEC maintains a website at http://www.sec.gov that contains reports, proxy and information statements, and other information regarding us and other companies that file materials with the SEC electronically. We use our Investor Relations website (https://investor.onepeloton.com/investor-relations) and Press Newsroom (https://www.onepeloton.com/press) as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD.
We frequently host Peloton community events in our stores, which help deepen brand engagement and customer loyalty. • Third Party Retailers: Our products are also available to purchase from a number of third party retailers, including Amazon, Dick’s Sporting Goods, and John Lewis. • Peloton for Business: Peloton For Business is a unified portfolio of B2B well-being solutions for enterprise clients, offered across seven key verticals: Hospitality, Corporate Wellness, Multi-Family Residential, Education, Healthcare, Gyms and Community Wellness.
We frequently host Peloton community events in our showrooms, which help deepen brand engagement and customer loyalty. • Third Party Retailers: Our products are also available to purchase from a number of third party retailers, at times including Amazon, Dick’s Sporting Goods, John Lewis, and Fitshop.
Competition We believe that our first-mover advantage, leading market position, brand recognition, and integrated platform set us apart in the market for connected, technology-enabled fitness.
Competition We believe that our first-mover advantage, leading market position, brand recognition, best-in-class content, and integrated platform set us apart in the market for connected, technology-enabled fitness. We provide a superior value proposition with our Connected Fitness Subscription and App offerings, giving us a competitive advantage versus traditional fitness and wellness products and services, and future potential entrants.
We’re proud that one of our core aspirations is to become an anti-racist organization, and in 2020, we created and committed to the Peloton Pledge, our multi-pronged, multi-faceted action plan to combat systemic racial inequities and amplify change both in our company and our community.
We’re proud of our concrete action plan to combat systemic inequities, the Peloton Pledge. Created in 2020, the Peloton Pledge is a multi-pronged, multi-faceted action plan to address Peloton’s internal culture and principles as well as a strategy to amplify change both in our company and our community.
Item 1. Business Overview Peloton is a leading global fitness company with a highly engaged community of over 6.5 million Members across the United States, United Kingdom, Canada, Germany and Australia. As a category innovator at the nexus of fitness, technology, and media, Peloton's first-of-its-kind subscription platform seamlessly combines innovative hardware, distinctive software, and exclusive content.
Item 1. Business Overview Peloton is a leading global fitness company with a highly engaged community of over 6.4 million Members as of June 30, 2024 across the United States, United Kingdom, Canada, Germany, Australia, and Austria.
We provide interactive product demonstrations and many of our stores have private areas where customers can take a “test class” on our Bike, Bike+, Tread, and Row 6 products.
The full-service offering includes a range of equipment and content-based solutions. • Retail Showrooms: Our showrooms allow customers to experience and try our products. We provide interactive product demonstrations and select showrooms have private areas where customers can take a “test class” on our Bike, Bike+, Tread, Tread+, and Row products.
The Tread includes fundamental elements unique to Peloton, like dial control knobs and jump buttons. • Peloton Tread+ - The Peloton Tread+ features slat belt technology that offers the optimal comfort experience when running.
The Tread includes fundamental design elements unique to Peloton, like dial control knobs, jump buttons, and an auto-incline feature. It has a 23.8” HD touchscreen. • Peloton Tread+: The Peloton Tread+ includes all Tread features and unlocks an elevated comfort experience with slat belt technology.
Regular studio member classes and events are held in these spaces combining a high-energy live production environment with fitness classes in seven active production studios. We currently produce our content in three languages: English, German, and Spanish.
These are produced and developed using features that are exclusively available on Peloton. Our Peloton Studios in New York City and London provide an in-person Peloton content experience. Regular studio member classes and events are held in these spaces combining a high-energy live production environment with fitness classes in seven active production studios.
Our Products Peloton provides Members with expert instruction and world class content to create impactful and entertaining workout experiences for anyone, anywhere, and at any stage in their fitness journey. At home, outdoors, traveling, or at the gym, Peloton offers an immersive and personalized experience.
“Paid App Subscriptions” include all App One and App+ subscriptions for which we are currently receiving payment. Our Products We provide Members with expert instruction and world class content to create impactful and entertaining workout experiences for anyone, anywhere, and at any stage in their fitness journey.
We rely upon a combination of patents, trademarks, trade secrets, copyrights, confidentiality procedures, contractual commitments, and other legal rights to establish and protect our intellectual property. We generally enter into confidentiality agreements and invention or work product assignment agreements with our employees and consultants to control access to, and clarify ownership of, our proprietary information.
Intellectual Property The protection of our technology and intellectual property is an important aspect of our business. We rely upon a combination of patents, trademarks, trade secrets, copyrights, confidentiality procedures, contractual commitments, and other legal rights to establish and protect our intellectual property.
We have developed a proprietary music platform that allows our instructors to integrate curated playlists into our programming in a way that we believe aligns with our Members’ musical tastes.
Our technology allows our Instructors to integrate curated music and class plans into our programming in a way that we believe aligns with our Members’ musical tastes. We feature and celebrate some of the biggest artists and genres in the world through collaboration with music providers.
To help us reach our goal of maintaining healthy work/life harmony, we have instituted a number of supportive practices. Corporate Information Our website address is www.onepeloton.com. The information contained on, or that can be accessed through, our website is not incorporated by reference into, and is not a part of, this Annual Report on Form 10-K.
The information contained on, or that can be accessed through, our website is not incorporated by reference into, and is not a part of, this Annual Report on Form 10-K. Investors should not rely on any such information in deciding whether to purchase our Class A common stock.
Training, Development, and Engagement At Peloton, we have a dedicated global Talent Development Team that develops and delivers company-wide learning experiences across all functions. These include, but are not limited to, programs focusing on Peloton’s approach to leadership, coaching and team member connectivity, functional and role specific training, and internal hiring and mobility to support professional growth.
These include, but are not limited to, programs focusing on Peloton’s approach to onboarding new team members, people and business leadership, dedicated coaching, function and role specific training offerings, and internal hiring and mobility to support personal and professional growth.
Peloton has become noteworthy as a brand providing the opportunity for our Members to engage in a new way with the fitness modalities they love. We believe we have also taken a leading position in the fitness and wellness category by developing musical content partnership campaigns that feature some of the most recognizable global talent in the industry.
We currently produce our content in three languages: English, German, and Spanish. We also have classes featuring subtitles and a selection of classes that are dubbed in German. We have become noteworthy as a brand providing the opportunity for our Members to engage in a new way with the fitness modalities they love.
Peloton Row employs proprietary form assistance and form guidance technology for rowers and also features personalized pace target technology. Financing options are available for most Peloton products. In the United States and Canada, we also provide the opportunity via the Peloton Rental program to rent Peloton Bikes and access fitness content for one monthly fee.
It has a 23.8” HD rotating touchscreen. Our Connected Fitness Products also include certain Precor products. Financing options are available for most Peloton products. In select markets, we also provide the opportunity via the Peloton Rental program to rent certain Peloton products and access fitness content for one monthly fee.
The full-service offering includes a range of equipment and content-based solutions, delivering on Peloton's commitment to empower anyone, anywhere, anytime. To market our products, we use a combination of brand and product specific performance marketing to build brand awareness, generate sales of our Connected Fitness Products and drive App subscriptions.
To market our products, we use a combination of brand and product specific performance marketing, which includes seasonal promotions to build brand awareness, generate sales of our Connected Fitness Products, and drive Paid Connected Fitness subscriptions and Paid App subscriptions. Manufacturing and Logistics We utilize third-party manufacturing partners for many of our new products.
We take a comprehensive view of the tools and programs we use to attract, reward, and retain top talent. Our workforce is diverse – so our benefits must be, too. At Peloton, we encourage our team members to foster kindness, support, empathy, respect, compassion, and a sense of community in all interactions every day.
We take a comprehensive view of the tools and programs we use to attract, reward, and retain top talent, including comprehensive health benefits, family and lifestyle services and 9 support, financial, legal and retirement benefits, product discounts, free App access, and studio rides. Our workforce is diverse – so our benefits must be too.
As of June 30, 2023, we held 170 U.S. issued patents and had 83 U.S. patent applications pending. We also held 393 issued patents in foreign jurisdictions and 146 patent applications pending in foreign jurisdictions.
We also held 429 issued patents in foreign jurisdictions and 119 patent applications pending in foreign jurisdictions. Our U.S. issued patents expire between February 9, 2025 and August 5, 2046.
Exclusively produced at our production studios in New York City and London, featuring our 57 instructors, across 16 fitness and wellness modalities including Strength, Yoga, Meditation, Cardio, Stretching, Cycling, Outdoor, Running, Walking, Tread Bootcamp, Bike Bootcamp, Boxing, Pilates, Barre, Rowing, and Row Bootcamp, our content breadth and depth is vast.
Our content breadth and depth is vast, reaching a wide range of consumers. Fitness modalities include: Strength, Yoga, Meditation, Cardio, Stretching, Cycling, Outdoor, Running, Walking, Tread Bootcamp, Bike Bootcamp, Boxing, Pilates, Barre, Rowing, and Row Bootcamp. We have Scenic Content that includes Instructor-guided classes, as well as non-guided time and distance-based options, all shot in beautiful destinations.
Our Inside Sales team engages with customers by phone, email, and online chat on our websites, and offers one-on-one sales consultations seven days a week. • Retail Stores: Our stores allow customers to experience and try our products.
Our Inside Sales team engages with customers by phone, email, and online chat on our websites, and offers one-on-one sales consultations seven days a week. 6 • Peloton for Business: Peloton For Business is a unified portfolio of B2B well-being solutions for enterprise clients, offered across seven key verticals: Hospitality, Corporate Wellness, Multi-Family Residential, Education, Healthcare, Gyms and Community Wellness.
Monthly membership options include: • All-Access Membership: Includes App+ Membership and content exclusively for Peloton equipment. • Peloton App Membership: Access to the Peloton App is available with an All Access or Guide Membership for Members who have Connected Fitness Products or through a standalone App Membership with multiple Membership tiers: ◦ Peloton App+: Designed for the user who wants unlimited access to Peloton’s entire library other than Lanebreak and Scenic classes.
The All-Access Membership also offers advanced metrics and progress tracking features to help members reach their goals, and the ability to diversify their workout experience through Scenic content, game-inspired experiences including Lanebreak, and the ability to stream favorite TV shows, movies, and sports. • Peloton App Membership: Access to the Peloton App is available with an All-Access or Guide Membership for Members who have Connected Fitness Products or through a standalone App Membership (App+ or App One).
This tier also offers exclusive access to classes, featuring specialty content. ◦ Peloton App One: Designed for the Member who wants unlimited access to thousands of classes across 9 of Peloton’s 16 modalities, including Strength, Meditation, Outdoor Walking, Yoga, and more, as well as all the classes included in the free tier.
Peloton App+ provides unlimited access to Peloton’s entire library of content, excluding Lanebreak and Scenic classes. Peloton App One is designed for Members who want unlimited access to thousands of classes across Strength, Yoga, Outdoor Running, HIIT, and more.
We have Scenic Content that includes instructor-guided classes, as well as non-guided time and distance-based options, all shot in beautiful destinations. We also have a game-inspired workout experience with our Lanebreak feature, allowing Members to experience an animated workout as an alternative to instructor-led programming. Our Peloton Studios in New York City and London provide an in-person Peloton content experience.
We also have game-inspired workout experiences like our Lanebreak feature, which allows Members to experience an animated workout as an alternative to Instructor-led programming. Lastly, we have a number of training programs, as well as collections of classes that are catered to our Members’ interests and fitness goals.
Our Connected Fitness Products include: • Peloton Bike - The original Peloton Bike combines fitness, technology, and media to connect riders to live and on-demand workouts led by Peloton instructors. • Peloton Bike+ - The Peloton Bike+ unlocks an even more dynamic workout experience with indoor cycling riders having the option of on-and-off-bike content as well as automatic resistance control with the Bike+ electronic braking system.
Our Connected Fitness Products include: • Peloton Bike: The original Peloton Bike combines fitness, technology, and media to connect riders to live and on-demand workouts led by Peloton Instructors. The Peloton Bike also offers alternative workout experiences like Entertainment (video streaming), Scenic (guided, time, and distance based rides filmed in locations around the world), and Lanebreak (game inspired workout experience).
App One Members can also take up to three, equipment-based cardio classes per month (Cycling/Tread/Row).
App One Members can also take a limited number of equipment-based cardio classes per month (Bike/Tread/Row). • Guide Membership: Includes App+ Membership and content exclusively for Guide. Our Integrated Fitness Platform Technology Our content delivery and interactive software platform is critical to our Member experience.
We constantly improve our Connected Fitness Products, as well as the Peloton App, through frequent software updates, iteration of feature enhancements, and innovations such as Peloton Lanebreak, our first game-inspired fitness experience.
We seek to continuously improve our Connected Fitness Products, as well as the Peloton App (including the Peloton mobile app, watch apps, and TV apps), through frequent software updates, iterations of feature enhancements, and innovations. For example, last year we launched Peloton Entertainment, where Members can watch sports, shows, and movies via certain entertainment platform partners while working out.
Removed
The Tread+ offers a combination of cardio and strength content, all streamed via a 32” touchscreen and a powerful sound bar, for a total body workout at home. On May 5, 2021, we issued a voluntary product recall on Tread+, which we conducted in collaboration with the U.S.
Added
It has a 21.5” HD touchscreen. • Peloton Bike+: The Peloton Bike+ includes all Bike features and unlocks an even more dynamic workout experience with a rotating screen improving the off-bike workout experience, as well as automatic resistance control with the Bike+ electronic braking system, and a 23.8” HD touchscreen.
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Consumer Product Safety Commission ("CPSC"); currently, we are seeking to resume sales of the Tread+ in the United States in 2024. See Part I, Item 1A " Risk Factors — Risks Related to Our Connected Fitness Products and Members. ” • Peloton Guide - Peloton’s first connected strength product, Peloton Guide, is an AI-powered personal trainer that connects to televisions.
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It has an upgraded 32” touchscreen and powerful sound bar designed for the highest quality home workout experience. • Peloton Guide: Peloton’s first connected strength product, Peloton Guide, is an AI-powered personal trainer that connects to televisions and offers personalized strength training routines, as well as rep and progress tracking.
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This tier includes all of App One’s offerings and unlocks access to thousands of equipment-based 5 cardio classes to take on any indoor bike, treadmill, or rower.
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With this membership, the entire household can create a unique profile to access the full library of classes and receive tailored content recommendations across many fitness and wellness modalities on the Peloton Bike, Bike+, Tread, Tread+, Row, Guide, and the Peloton App.
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New, on-demand, and live classes are offered almost daily, as well as access to Peloton’s Challenges, Programs, and Collections. ◦ Peloton App Free: Designed to supplement a user’s current workout routine and to serve as a gateway to all Peloton has to offer a new user.
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We’ve also launched a number of performance based features, including personalized pace targets on the Peloton Tread and Row, and continue to invest in the Peloton App to create a more social experience.
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The free tier provides more than 50 classes curated across 12 of Peloton’s modalities, enabling the user to pair workouts to meet their individual interests, even as their goals change over time. This tier includes a rotating set of featured classes that are refreshed on an ongoing basis. • Guide Membership: Includes App+ Membership and content exclusively for Guide.
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In addition, we recently added a new marathon training collection on Tread and Tread+, including featuring a series of Scenic classes filmed on a well known marathon course. In a first-of-its-kind experience, these classes provide Members the ability to train on a marathon course with auto-incline functionality that matches the course's gradient fluctuations.
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We have developed a diverse content library with tens-of-thousands of classes.
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We are constantly building and evolving our content library and offering, which includes Instructor-led classes, Scenic content, Entertainment, Just Work Out, and game-inspired workout options. Tens-of-thousands of classes and content types are produced at our production studios in New York City and London, featuring our proprietary Instructors, across many fitness and wellness modalities.
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As we expand into other non-English-speaking countries, we intend to produce classes in local languages from our existing studios and use subtitling for English-speaking users, continually expanding our content library while also being culturally relevant in the markets where we are serving Members.
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We generally enter into confidentiality agreements and invention or work product assignment agreements with our employees and consultants to control access to, and clarify ownership of, our proprietary information. As of June 30, 2024, we held 180 U.S. issued patents and had 82 U.S. patent applications pending.
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We work with music providers to ensure that our curated music is as diverse and dynamic as the Members we serve, delivering an exceptional workout experience created by instructors and music supervisors on our production team.
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We will continue to evolve our learning content to support our team members and managers while remaining relevant and engaged to the best practices in this space.
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This includes working with music providers on the development of our signature Artist Series which celebrate the legacy and catalog of some of the most prominent names in the music business. We also collaborate closely with artist teams to premiere new music exclusives available only on Peloton, and to arrange for guest appearances in our classes.
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Training, Development, and Engagement We have a dedicated Global Talent Development Team that develops and delivers company-wide learning experiences across all functions.
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In addition, in May 2023, we relaunched the Peloton Brand, for anyone, anywhere, with a new brand identity and campaign and new content features. Following the brand relaunch, we continue to diversify and maximize our marketing channel mix.
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At Peloton, we encourage our team members to foster kindness, support, empathy, respect, compassion, and a sense of community in all interactions every day. We believe our approach to maintaining healthy work-life harmony has contributed to making Peloton a great place to work for our team members. Corporate Information Our website address is www.onepeloton.com.
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We provide a superior value proposition and benefit from the clear endorsement of our Connected Fitness Subscription and mobile app solutions, giving us a competitive advantage versus traditional fitness and wellness products and services, and future potential entrants.
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We compete for consumers to join our platform through Connected Fitness Subscriptions or Peloton App subscriptions, and we seek to engage and retain them through an integrated experience that combines content, hardware, software, service, and community. • Product and App Offering.
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Certain of our instructors are covered by collective bargaining agreements with the Screen Actors Guild-American Federation of Television and Radio Artists, or SAG-AFTRA. However, we are not signatories to any agreements with SAG-AFTRA. With the exception of SAG-AFTRA, none of our domestic employees are currently represented by a labor organization or a party to any collective bargaining agreements.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeRisks we may face in connection with our acquisition of Precor include: • We may not realize the benefits we expect to receive from the transaction, such as anticipated synergies; • We may have difficulties managing Precor’s technologies and lines of business or retaining key personnel from Precor; • The acquisition may not further our business strategy as we expected, there could be unanticipated adverse impacts on Precor’s business, or we may otherwise not realize the expected return on our investments, which could adversely affect our business or operating results; • The acquisition may cause, and additional factors relating to the shift in our strategic focus and to our restructuring initiatives have caused and may continue to cause, impairments to assets that we record as a part of an acquisition, including intangible assets and goodwill; • Our operating results or financial condition may be adversely impacted by (i) claims or liabilities related to Precor’s business, including, among others, claims from government agencies, terminated employees, current or former customers, consumers or business partners, or other third parties; (ii) pre-existing contractual relationships or lines of business of Precor that we would not have otherwise entered into, the termination or modification of which may be costly or disruptive to our business; (iii) unfavorable accounting treatment as a result of Precor’s practices; and (iv) intellectual property claims or disputes; • Precor operates in segments of the commercial market that we have less experience with, including traditional gyms, multifamily residences, hotels and college and corporate campuses, and expansion of our operations in these segments could present various challenges and result in increased costs and other unforeseen challenges; • Precor serves customers in more than 100 countries worldwide, and, as a result of the acquisition, our operations have expanded into new jurisdictions, which could present significant challenges and result in significant increased risks and costs inherent in doing business in international markets (see “— Expansion into international markets will expose us to significant risks ”); and • We may have failed to identify or assess the magnitude of certain liabilities, shortcomings or other risks in Precor’s business, which could result in unexpected litigation or regulatory exposure, unfavorable accounting treatment, a diversion of management’s attention and resources, and other adverse effects on our business, financial condition, and operating results.
Biggest changeRisks we may face in connection with our integration of Precor include: • We may not realize the benefits we expect to receive from the transaction, such as anticipated synergies; • We may have difficulties managing Precor’s technologies and lines of business or retaining key personnel from Precor; • The acquisition may cause impairments to assets that we record as a part of an acquisition; • We may have failed to identify or assess the magnitude of (i) claims or liabilities related to Precor’s business, including, among others, claims from government agencies, terminated employees, current or former customers, consumers or business partners, users, or other third parties, unexpected litigation or regulatory exposure, or intellectual property disputes; (ii) pre-existing contractual relationships or lines of business of Precor that we would not have otherwise entered into, the termination or modification of which may be costly or disruptive to our business; (iii) unfavorable accounting treatment as a result of Precor’s practices; and (iv) other shortcomings or risks in Precor’s business; • Precor operates in segments of the commercial market that we have less experience with, including traditional gyms, multifamily residences, hotels and college and corporate campuses, and expansion of our operations in these segments could present various challenges and result in increased costs and other unforeseen challenges; • We may be unable to successfully integrate Precor and its operations into our control environment; and • Precor serves customers in more than 50 countries worldwide, and, as a result of the acquisition, our operations have expanded into new jurisdictions, which could present significant challenges and result in significant increased risks and costs inherent in doing business in international markets (see “— Expansion into international markets will expose us to significant risks ”).
Moreover, our new offerings may not receive consumer acceptance as preferences could shift rapidly to different types of fitness and wellness offerings or away from these types of offerings altogether, and our future success depends in part on our ability to anticipate and respond to these changes.
Moreover, our new offerings may not receive consumer acceptance as preferences could shift rapidly to different types of fitness and wellness offerings, or away from these types of offerings altogether. Our future success depends in part on our ability to anticipate and respond to these changes.
If we cannot successfully defend any large claim, maintain our general liability insurance on acceptable terms, or maintain adequate coverage against potential claims, our financial results could be adversely impacted.
If we cannot successfully defend any large claim or potential liability, maintain our general liability insurance on acceptable terms, or maintain adequate coverage against potential claims, our financial results could be adversely impacted.
Examples of data tracked on our platform include heart rate, calories burned, distance traveled and Strive Score as well as cadence, resistance, and output in the case of Bike; pace, speed, and elevation in the case of Tread; Movement Tracker in the case of Guide; and stroke rate, pace, and output in the case of Row.
Examples of data tracked on our platform include heart rate, calories burned, distance traveled and Strive Score as well as cadence, resistance, and output in the case of Bike; pace, speed, elevation, and output in the case of Tread; Movement Tracker in the case of Guide; and stroke rate, pace, and output in the case of Row.
Among other things, our restated certificate of incorporation and amended and restated bylaws include provisions that: • provide that our Board of Directors is classified into three classes of directors with staggered three-year terms; • permit the Board of Directors to establish the number of directors and fill any vacancies and newly created directorships; • require super-majority voting to amend some provisions in our restated certificate of incorporation and restated bylaws; • authorize the issuance of “blank check” preferred stock that our Board of Directors could use to implement a stockholder rights plan; • provide that only the chairman of our Board of Directors, our chief executive officer, or a majority of our Board of Directors will be authorized to call a special meeting of stockholders; • eliminate the ability of our stockholders to call special meetings of stockholders; • prohibit cumulative voting; • provide that directors may only be removed “for cause” and only with the approval of two-thirds of our stockholders; • provide for a dual class common stock structure in which holders of our Class B common stock may have the ability to control the outcome of matters requiring stockholder approval, even if they own significantly less than a majority of the outstanding shares of our common stock, including the election of directors and significant corporate transactions, such as a merger or other sale of our company or its assets; • prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders; • provide that the Board of Directors is expressly authorized to make, alter, or repeal our bylaws; and • establish advance notice requirements for nominations for election to our Board of Directors or for proposing matters that can be acted upon by stockholders at annual stockholder meetings.
Among other things, our restated certificate of incorporation and second amended and restated bylaws include provisions that: • provide that our Board of Directors is classified into three classes of directors with staggered three-year terms; • permit the Board of Directors to establish the number of directors and fill any vacancies and newly created directorships; • require super-majority voting to amend some provisions in our restated certificate of incorporation and restated bylaws; • authorize the issuance of “blank check” preferred stock that our Board of Directors could use to implement a stockholder rights plan; • provide that only the chairman of our Board of Directors, our chief executive officer, or a majority of our Board of Directors will be authorized to call a special meeting of stockholders; • eliminate the ability of our stockholders to call special meetings of stockholders; • prohibit cumulative voting; • provide that directors may only be removed “for cause” and only with the approval of two-thirds of our stockholders; • provide for a dual class common stock structure in which holders of our Class B common stock may have the ability to control the outcome of matters requiring stockholder approval, even if they own significantly less than a majority of the outstanding shares of our common stock, including the election of directors and significant corporate transactions, such as a merger or other sale of our company or its assets; • prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders; • provide that the Board of Directors is expressly authorized to make, alter, or repeal our bylaws; and • establish advance notice requirements for nominations for election to our Board of Directors or for proposing matters that can be acted upon by stockholders at annual stockholder meetings.
See “— Our operating results have been, and could in the future be, adversely affected if we are unable to accurately forecast consumer demand for our products and services and adequately manage our inventory .” Moreover, volatile economic conditions have made it and may continue to make it more likely that our suppliers and logistics providers may be unable to timely deliver supplies, or at all, and there is no guarantee that we will be able to timely locate alternative suppliers of comparable quality at an acceptable price.
See “— Our operating 16 results have been, and could in the future be, adversely affected if we are unable to accurately forecast consumer demand for our products and services and adequately manage our inventory .” Moreover, volatile economic conditions have made it and may continue to make it more likely that our suppliers and logistics providers may be unable to timely deliver supplies, or at all, and there is no guarantee that we will be able to timely locate alternative suppliers of comparable quality at an acceptable price.
See “— We have identified material weaknesses in our internal control over financial reporting, and if our remediation of such material weaknesses is not effective, or if we fail to develop and maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable laws and regulations could be impaired. ” Pursuant to Sections 302 and 404 of the Sarbanes-Oxley Act, our independent registered public accounting firm has provided an attestation report regarding our internal control over financial reporting.
See “— We have identified material weaknesses in our internal control over financial reporting, and if our remediation of such material weaknesses is not effective, or if we fail to 23 develop and maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable laws and regulations could be impaired .” Pursuant to Sections 302 and 404 of the Sarbanes-Oxley Act, our independent registered public accounting firm has provided an attestation report regarding our internal control over financial reporting.
Although we expend significant resources to seek to comply with applicable contractual, statutory, regulatory, and judicial frameworks, we cannot guarantee that we currently hold, or will always hold, every necessary right to use all of the music that is used on our service now or that 16 may be used in our products and services in the future, and we cannot assure you that we are not infringing or violating any third-party intellectual property rights, or that we will not do so in the future.
Although we expend significant resources to seek to comply with applicable contractual, statutory, regulatory, and judicial frameworks, we cannot guarantee that we currently hold, or will always hold, every necessary right to use all of the music that is used on our service now or that may be used in our products and services in the future, and we cannot assure you that we are not infringing or violating any third-party intellectual property rights, or that we will not do so in the future.
Our restated certificate of incorporation provides that the Court of Chancery of the State of Delaware, to the fullest extent permitted by law, will be the exclusive forum for any derivative action or proceeding brought on our behalf, any action asserting a breach of fiduciary duty, any action asserting a claim against us arising pursuant to the DGCL, our restated certificate of incorporation, or our amended and restated bylaws, or any action asserting a claim against us that is governed by the internal affairs doctrine.
Our restated certificate of incorporation provides that the Court of Chancery of the State of Delaware, to the fullest extent permitted by law, will be the exclusive forum for any derivative action or proceeding brought on our behalf, any action asserting a breach of fiduciary duty, any action asserting a claim against us arising pursuant to the DGCL, our restated certificate of incorporation, or our second amended and restated bylaws, or any action asserting a claim against us that is governed by the internal affairs doctrine.
If our products and services fail to provide accurate metrics and data to our Members, or if there are reports or claims of inaccurate metrics and data or claims of inaccuracy regarding the overall health benefits of our products and services in the future, our 27 Members’ experience may be negatively impacted, we may become the subject of negative publicity, litigation, regulatory proceedings, and warranty claims, and our brand, operating results, and business could be harmed.
If our products and services fail to provide accurate metrics and data to our Members, or if there are reports or claims of inaccurate metrics and data or claims of inaccuracy regarding the overall health benefits of our products and services in the future, our Members’ experience may be negatively impacted, we may become the subject of negative publicity, litigation, regulatory proceedings, and warranty claims, and our brand, operating results, and business could be harmed.
See “— Our operating results have been, and could in the future be, adversely affected if we are unable to accurately forecast consumer demand for our products and services and adequately manage our inventory .” Stockholder activism could disrupt our business, cause us to incur significant expenses, hinder execution of our business strategy, and impact our stock price.
See “— Our operating results have been, and could in the future be, adversely affected if we are unable to accurately forecast consumer demand for our products and services and adequately manage our inventory .” 24 Stockholder activism could disrupt our business, cause us to incur significant expenses, hinder execution of our business strategy, and impact our stock price.
Alternatively, if a court were to find the choice of forum provision contained in our restated certificate of incorporation and/or amended and restated bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, financial condition, and operating results.
Alternatively, if a court were to find the choice of forum provision contained in our restated certificate of incorporation and/or second amended and restated bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, financial condition, and operating results.
We are dependent on the interoperability of the Peloton App with popular mobile and television streaming operating systems that we do not control, such as Android and iOS, and any changes in such systems that degrade the functionality of our App offering or give preferential treatment to competitors could adversely affect our platform’s usage on mobile devices and televisions.
We are dependent on the interoperability of the Peloton App with popular mobile and television streaming operating 20 systems that we do not control, such as Android and iOS, and any changes in such systems that degrade the functionality of our App offering or give preferential treatment to competitors could adversely affect our platform’s usage on mobile devices and televisions.
Additionally, prior renewal rates may not accurately predict future Subscriber renewal rates for a variety of reasons, such as Subscribers’ 22 dissatisfaction with our offerings and the cost of our subscriptions, macroeconomic conditions, or new offering introductions by us or our competitors. If our Subscribers do not renew their subscriptions, our revenue may decline, and our business will suffer.
Additionally, prior renewal rates may not accurately predict future Subscriber renewal rates for a variety of reasons, such as Subscribers’ dissatisfaction with our offerings and the cost of our subscriptions, macroeconomic conditions, or new offering introductions by us or our competitors. If our Subscribers do not renew their subscriptions, our revenue may decline, and our business will suffer.
Comprehensive and accurate ownership information for the musical compositions embodied in sound recordings is sometimes unavailable because songwriters' catalogs are frequently bought and sold between rights holders, meaning ownership and share information can change at 32 any time without notification and it may take a while for the appropriate parties to be notified.
Comprehensive and accurate ownership information for the musical compositions embodied in sound recordings is sometimes unavailable because songwriters' catalogs are frequently bought and sold between rights holders, meaning ownership and share information can change at any time without notification and it may take a while for the appropriate parties to be notified.
Our providers may also take actions beyond our control that could seriously harm our business, including discontinuing or limiting our access to one or more services, increasing pricing terms, terminating or seeking to terminate our contractual relationship altogether, or altering how we are able to process data in a way that is unfavorable or costly to us.
Our providers may also take actions beyond our control that could seriously harm our business, including discontinuing or limiting our access to one or more services, increasing pricing terms, terminating or seeking to terminate our contractual relationship altogether, or altering how we are able to process data in a way that is 32 unfavorable or costly to us.
Adverse outcomes with respect to any of these legal or regulatory proceedings may result in significant settlement costs or judgments, penalties and fines, or require us to modify our products or services, make content unavailable, or require us to stop offering certain products, components, or features, all of which could negatively affect our membership and revenue growth.
Adverse outcomes with respect to any of these legal, government, or regulatory proceedings may result in significant settlement costs or judgments, penalties and fines, or require us to modify our products or services, make content unavailable, or to stop offering certain products, components, or features, all of which could negatively affect our membership and revenue growth.
In addition, while we experienced a significant increase in our Subscriber base at the onset of the COVID-19 pandemic, the rate of the increase has since slowed down and, over the longer term, it remains uncertain how the post-COVID-19 pandemic environment will impact consumer 25 demand for our products and services and consumer preferences generally.
In addition, while we experienced a significant increase in our Subscriber base at the onset of the COVID-19 pandemic, the rate of the increase has since slowed down and, over the longer term, it remains uncertain how the post-COVID-19 pandemic environment will impact consumer demand for our products and services and consumer preferences generally.
There is also a risk that, due to regulatory changes, such as further limitations or suspensions on the use of NOLs, or other unforeseen reasons, our existing NOLs could expire or otherwise be unavailable to offset future income tax liabilities. Our NOLs 31 may also be limited under state laws.
There is also a risk that, due to regulatory changes, such as further limitations or suspensions on the use of NOLs, or other unforeseen reasons, our existing NOLs could expire or otherwise be unavailable to offset future income tax liabilities. Our NOLs may also be limited under state laws.
Our employees’ inability to sell their shares in the public market at times and/or at prices desired may lead to a larger than normal turnover rate. If the actual or perceived value of our Class A common stock declines, it may adversely affect our ability to hire or 34 retain employees.
Our employees’ inability to sell their shares in the public market at times and/or at prices desired may lead to a larger than normal turnover rate. If the actual or perceived value of our Class A common stock declines, it may adversely affect our ability to hire or retain employees.
We rely on the Internet, as well as digital infrastructure, computing networks and systems, hardware and software to support our internal and Member-facing operations (collectively, "information technology systems” or “systems”). Certain of our information technology systems are designed and maintained by us while others are designed, maintained and/or operated by third parties.
We rely on the Internet, as well as digital infrastructure, computing networks and systems, hardware and software to support our internal and Member-facing operations (collectively, “information technology systems” or “systems”). Certain of our information technology systems are designed and maintained by us while others are designed, maintained and/or operated by third parties.
Our failure to repurchase Notes or to pay the cash amounts due upon conversion when required will constitute a default under the indenture. 38 A default under the indenture or the fundamental change itself could also lead to a default under agreements governing our other indebtedness, which may result in that other indebtedness becoming immediately payable in full.
Our failure to repurchase Notes or to pay the cash amounts due upon conversion when required will constitute a default under the indenture. A default under the indenture governing the notes or the fundamental change itself could also lead to a default under agreements governing our other indebtedness, which may result in that other indebtedness becoming immediately payable in full.
We have limited control over our suppliers, contract manufacturers, and logistics partners, which subjects us to the following risks: • inability to satisfy demand for our Connected Fitness Products; • reduced control over delivery timing and related customer experience and product reliability; • reduced ability to monitor the manufacturing process and components used in our Connected Fitness Products; • limited ability to develop comprehensive manufacturing specifications that take into account any materials shortages or substitutions; • variance in the manufacturing capability of our third-party manufacturers; • price increases; • failure of a significant supplier, manufacturer, or logistics partner to perform its obligations to us for technical, market, or other reasons; • variance in the quality of services provided by our third-party last mile partners; • reliance on our partners to adhere to our supplier code of conduct; • difficulties in establishing additional supplier, manufacturer, or logistics partner relationships if we experience difficulties with our existing suppliers, manufacturers, or logistics partners; • shortages of materials or components; • misappropriation of our intellectual property; • exposure to natural catastrophes, including climate-related risks and extreme weather events, epidemics such as the COVID-19 pandemic, political unrest, including escalating tensions, hostilities, or trade disputes between Taiwan and China, terrorism, labor disputes, and economic instability resulting in the disruption of trade from foreign countries, in which our Connected Fitness Products are manufactured or the components thereof are sourced; • changes in local economic conditions in the jurisdictions where our suppliers, manufacturers, and logistics partners are located; • the imposition of new laws and regulations, including those relating to labor conditions, quality and safety standards, imports, duties, tariffs, taxes, and other charges on imports, as well as trade restrictions and restrictions on currency exchange or the transfer of funds; and • insufficient warranties and indemnities on components supplied to our manufacturers or performance by our partners.
We have limited control over our suppliers, contract manufacturers, and logistics partners, which subjects us to the following risks: • inability to satisfy demand for our Connected Fitness Products; • reduced control over delivery timing and related customer experience and product reliability; • reduced ability to monitor the manufacturing process and components used in our Connected Fitness Products; • limited ability to develop comprehensive manufacturing specifications that take into account any materials shortages or substitutions; • variance in the manufacturing capability of our third-party manufacturers; • price increases; • failure of a significant supplier, manufacturer, or logistics partner to perform its obligations to us for technical, market, or other reasons; • variance in the quality of services provided by our third-party last mile partners; • reliance on our partners to adhere to our supplier code of conduct; • difficulties in establishing additional supplier, manufacturer, or logistics partner relationships if we experience difficulties with our existing suppliers, manufacturers, or logistics partners; • shortages of materials or components; • misappropriation of our intellectual property; • exposure to natural catastrophes, including climate-related risks and extreme weather events, epidemics, political unrest, including escalating tensions, hostilities, or trade disputes between Taiwan and China, terrorism, labor disputes, and economic instability resulting in the disruption of trade from foreign countries, in which our Connected Fitness Products are manufactured or the components thereof are sourced; • changes in local economic conditions in the jurisdictions where our suppliers, manufacturers, and logistics partners are located; • the imposition of new laws and regulations, including those relating to labor conditions, quality and safety standards, imports, duties, tariffs, taxes, and other charges on imports, as well as trade restrictions and restrictions on currency exchange or the transfer of funds; and • insufficient warranties and indemnities on components supplied to our manufacturers or performance by our partners.
See “ — Our success depends on our ability to maintain the value and reputation of the Peloton brand. ” The restructuring plan has required, and may continue to require, a significant amount of management’s and other employees’ time and focus, which may divert attention from effectively operating and growing our business.
See “— Our success depends on our ability to maintain the value and reputation of the Peloton brand .” The 2024 Restructuring Plan has required, and may continue to require, a significant amount of management’s and other employees’ time and focus, which may divert attention from effectively operating and growing our business.
Similarly, in times of decreased demand, we may deem it necessary or advisable to renegotiate agreements with our supply partners in order to appropriately scale our inventory, which could impair our relationship with these counterparties if we are unable to arrive at mutually acceptable terms.
Similarly, in times of decreased demand, we may deem it necessary or advisable to renegotiate agreements with our supply partners in order to appropriately scale our inventory, which could impair our relationship with these counterparties if we are unable to arrive at 14 mutually acceptable terms.
In addition, a party who circumvents our security measures or exploits inadequacies in our security measures, could, among other effects, misappropriate Member data or other proprietary information, cause interruptions in our operations, or expose Members to computer viruses or 29 other disruptions. Actual or perceived vulnerabilities may lead to claims against us.
In addition, a party who circumvents our security measures or exploits inadequacies in our security measures, could, among other effects, misappropriate Member data or other proprietary information, cause interruptions in our operations, or expose Members to computer viruses or other disruptions. Actual or perceived vulnerabilities may lead to claims against us.
In periods when we experience a decrease in demand for our products and an increase in inventory, we may 11 be unable to renegotiate our agreements with existing suppliers or partners on mutually acceptable terms and may be prevented from fully utilizing firm purchase commitments.
In periods when we experience a decrease in demand for our products and an increase in inventory, we may be unable to renegotiate our agreements with existing suppliers or partners on mutually acceptable terms and may be prevented from fully utilizing firm purchase commitments.
As such, the actions we are taking under the restructuring plan and that we may decide to take in the future may not be successful in yielding our intended results and may not appropriately address either or both of the short-term and long-term strategy for our business.
As such, the actions we are taking under the 2024 Restructuring Plan and that we may decide to take in the future may not be successful in yielding our intended results and may not appropriately address either or both of the short-term and long-term strategy for our business.
Our success in maintaining and increasing our Subscriber base depends on our ability to identify and originate trends as well as to anticipate and react to changing consumer demands in a timely manner. Our products and services are subject to changing consumer preferences that cannot be predicted with certainty.
Our success in maintaining and/or increasing our Subscriber base depends on our ability to identify and originate trends as well as to anticipate and react to changing consumer demands in a timely manner. Our products and services are subject to changing consumer preferences that cannot be predicted with certainty.
The conversion of Class B common stock to Class A common stock will have the effect, over time, of increasing the relative voting power of those holders of Class B common stock who retain their shares in the long term. 36 The dual class structure of our common stock may adversely affect the trading market for our Class A common stock.
The conversion of Class B common stock to Class A common stock will have the effect, over time, of increasing the relative voting power of those holders of Class B common stock who retain their shares in the long term. The dual class structure of our common stock may adversely affect the trading market for our Class A common stock.
Disputes with our supply partners regarding our agreements have, in certain instances, resulted, and may in the future result in, litigation, which could result in adverse judgments, settlements or other litigation-related costs as well as disruption to our supply chain and require management’s attention.
Disputes with our supply partners regarding our agreements have, in certain instances, resulted, and may in the future result in, litigation, which could result in adverse judgments, settlements or other litigation-related costs as well as disruption to our supply chain and has and may in the future require management’s attention.
Although in certain instances our agreements allow us the option to cancel, reschedule, and adjust our requirements based on our business needs, our loss contingencies may include liabilities for contracts that we cannot cancel, reschedule or adjust with suppliers or partners.
Although in certain instances our agreements allow us the option to cancel, reschedule, and adjust our requirements based on our business needs, our loss contingencies may include liabilities for contracts that we cannot cancel, reschedule or adjust with 11 suppliers or partners.
Additionally, we experienced a significant increase in our Subscriber base at the onset of the COVID-19 pandemic, which slowed down as consumers were able to resume activity outside the home, and, it remains uncertain how the impacts of the post-COVID-19 pandemic 13 environment and other market constraints, including macro- and micro-economic factors such as inflation, rising interest rates, foreign currency exchange rate fluctuations, and increased debt and equity market volatility, will impact consumer demand for our products and services over the long term.
Additionally, we experienced a significant increase in our Subscriber base at the onset of the COVID-19 pandemic, which slowed down as consumers were able to resume activity outside the home, and, over the long term it remains uncertain how the impacts of the post-COVID-19 pandemic environment and other market constraints, including macro- and micro-economic factors such as inflation, interest rates, foreign currency exchange rate fluctuations, and increased debt and equity market volatility, will impact consumer demand for our products and services over the long term.
If we fail, or are perceived to be failing, to meet the standards included in any sustainability disclosure or the expectations of our various stakeholders, it could negatively impact our reputation, customer attraction and retention, access to capital and employee retention.
Additionally, if we fail, or are perceived to be failing, to meet the standards included in any sustainability disclosure or the expectations of our various stakeholders, it could negatively impact our reputation, customer attraction and retention, access to capital and employee retention.
Our products may be subject to U.S. export controls and compliance with applicable regulatory requirements regarding the export of our products and services may create delays in the introduction of our products and services in international markets, prevent our international Members from accessing our products and services, and, in some cases, prevent the export of our products and services to some countries altogether.
Our products may be subject to U.S. export controls and compliance with applicable regulatory requirements regarding the export of our products, technology and services may create delays in the introduction of our products and services in international markets, prevent our international Members from accessing our products and services, and, in some cases, prevent the export of our products, technology and services to some countries altogether.
Effective protection of intellectual property, including but not limited to patents, trademarks, and domain names, is expensive and difficult to maintain, both in terms of application and registration costs as well as the costs of defending and enforcing those rights.
Effective protection of intellectual property, including but not limited to patents, trademarks, copyrights and domain names, is expensive and difficult to maintain, both in terms of application and registration costs as well as the costs of defending and enforcing those rights.
In addition, significant judgment is required in evaluating our tax positions and determining our provision for income taxes. During the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain.
In addition, significant judgment is required in evaluating our tax positions and determining our provision for income taxes. 29 During the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain.
Many of the risks associated with the use of open source software, such as the lack of 33 warranties or assurances of title or performance, cannot be eliminated, and could, if not properly addressed, negatively affect our business.
Many of the risks associated with the use of open source software, such as the lack of warranties or assurances of title or performance, cannot be eliminated, and could, if not properly addressed, negatively affect our business.
Implementation of the restructuring plan and any other cost-saving initiatives may be costly and disruptive to our business, the expected costs and charges may be greater than we have forecasted, and the estimated cost savings may be lower than we have forecasted.
Implementation of the 2024 Restructuring Plan and any other cost-saving initiatives may be costly and disruptive to our business, the expected costs and charges may be greater than we have forecasted, and the estimated cost savings may be lower than we have forecasted.
Our quarterly operating results and other operating metrics may fluctuate from quarter to quarter, which makes these metrics difficult to predict. Our quarterly operating results and other operating metrics have fluctuated in the past and may continue to fluctuate from quarter to quarter. Additionally, our limited operating history makes it difficult to forecast our future results.
Our operating results and other operating metrics may fluctuate from quarter to quarter, which makes these metrics difficult to predict. Our operating results and other operating metrics have fluctuated in the past and may continue to fluctuate from quarter to quarter. Additionally, our limited operating history makes it difficult to forecast our future results.
Design and manufacturing defects, real or perceived, and claims related thereto, may subject us to judgments or settlements that result in damages materially in excess of the limits of our insurance coverage.
Design and manufacturing defects, real or perceived, and claims or investigations related thereto, may subject us to judgments or settlements that result in damages materially in excess of the limits of our insurance coverage.
See “ — Our products and services may be affected from time to time by design and manufacturing defects or product safety issues, real or perceived, that could adversely affect our business and result in harm to our reputation.” In addition to warranties supplied by us, we also offer the option for customers to purchase third-party extended warranty and services contracts in some markets, which creates an ongoing performance obligation over the warranty period.
See “ — Our products and services may be affected from time to time by design and manufacturing defects or product safety issues, real or perceived, that could adversely affect our business and result in harm to our reputation .” In addition to warranties supplied by us, we also offer the option for customers to purchase extended warranty and services contracts in some markets, which creates an ongoing performance obligation over the warranty period.
Because of the twenty-to-one voting ratio between our Class B and Class A common stock, the holders of our Class B common stock collectively control a majority of the combined voting power of our common stock and therefore are able to control a number of matters submitted to our stockholders for approval until the earlier of (i) the date specified by a vote of the holders of 66 2/3% of the then outstanding shares of Class B common stock, (ii) ten years from the closing of the IPO, and (iii) the date the shares of Class B common stock cease to represent at least 1% of all outstanding shares of our common stock.
Because of the twenty-to-one voting ratio between our Class B and Class A common stock, the holders of our Class B common stock collectively control a majority of the combined voting power of our common stock and therefore are able to control most matters submitted to our stockholders for approval until the earlier of (i) the date specified by a vote of the holders of 66 2/3% of the then outstanding shares of Class B common stock, (ii) ten years from the closing of the IPO, and (iii) the date the shares of Class B common stock cease to represent at least 1% of all outstanding shares of our common stock.
Provisions in our restated certificate of incorporation and amended and restated bylaws may have the effect of delaying or preventing a merger, acquisition or other change of control of our company that the stockholders may consider favorable.
Provisions in our restated certificate of incorporation and second amended and restated bylaws may have the effect of delaying or preventing a merger, acquisition or other change of control of our company that the stockholders may consider favorable.
A decline in sales of our Bike and Bike+ would negatively affect our future revenue and operating results. Our Connected Fitness Products are sold in highly competitive markets with limited barriers to entry.
A decline in sales of our Connected Fitness Products would negatively affect our future revenue and operating results. Our Connected Fitness Products are sold in highly competitive markets with limited barriers to entry.
As a result of quarterly fluctuations caused by these and other factors, comparisons of our operating results across different fiscal quarters 17 may not be accurate indicators of our future performance.
As a result of quarterly fluctuations caused by these and other factors, comparisons of our operating results across different fiscal quarters may not be accurate indicators of our future performance.
In addition, U.S. public companies are required to maintain books and records that accurately and fairly represent their transactions 30 and have an adequate system of internal accounting controls.
In addition, U.S. public companies are required to maintain books and records that accurately and fairly represent their transactions and have an adequate system of internal accounting controls.
Unfavorable publicity about us or any of our strategic initiatives, including our restructuring plan, could result in reputation harm and could diminish confidence in, and the use of, our products and services.
Unfavorable publicity about us or any of our strategic initiatives, including the 2024 Restructuring Plan, could result in reputation harm and could diminish confidence in, and the use of, our products and services.
These efforts and additional expenses may be more costly than we expect, and we cannot guarantee that we will be able to increase our revenue to offset our operating expenses.
These potential efforts and additional expenses may be more costly than we expect, and we cannot guarantee that we will be able to increase our revenue to offset our operating expenses.
See “— We have engaged and in the future may engage in acquisition and disposition activities, which could require significant management attention, disrupt our business, fail to achieve the intended benefit, dilute stockholder value, and adversely affect our operating results .” In April 2021, we completed our acquisition of Precor, which serves customers in more than 100 countries worldwide.
See “— We have engaged and in the future may engage in acquisition and disposition activities, which could require significant management attention, disrupt our business, fail to achieve the intended benefit, dilute stockholder value, and adversely affect our operating results .” In April 2021, we completed our acquisition of Precor, which serves customers in more than 50 countries worldwide.
Any debt financing secured by us in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. 40 Item 1B. Unresolved Staff Comments Not applicable.
Any debt financing secured by us in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. 37 Item 1B. Unresolved Staff Comments Not applicable.
Additionally, certain aspects of the restructuring plan, such as severance costs in connection with reducing our headcount, could negatively impact our cash flows.
Additionally, certain aspects of the 2024 Restructuring Plan, such as severance costs in connection with reducing our headcount, could negatively impact our cash flows.
As discussed further in “ Risks Related to Our Connected Fitness Products and Members” and “ Risks Related to Laws, Regulation, and Legal Proceedings ,” the legal proceedings in which we have been named, the regulators’ investigations, and any other claims or proceedings involving us or our products, actions we take to address these matters, and any further publicity regarding any of the foregoing could harm our brand.
As discussed further in “Risks Related to Our Connected Fitness Products and Members” and “Risks Related to Laws, Regulation, and Legal Proceedings,” the legal proceedings in which we have been named, the regulators’ investigations, and any other claims or proceedings involving us or our products, actions we take to address these matters, and any further publicity regarding any of the foregoing could harm our brand.
Our systems and data, as well as those of critical third parties, are vulnerable to cyber-attacks involving, for example, viruses and worms, social engineering/phishing, ransomware or other extortion-based attacks, denial-of-service attacks, physical or electronic break-ins, third-party or current/former employee theft or misuse, and similar disruptions from unauthorized tampering with our servers and computer systems or those of third parties that we use in our operations, as well as cyber-risks attributable to software or hardware (e.g., tablets) vulnerabilities, coding errors and misconfigurations (e.g., involving APIs).
Our systems and data, as well as those of critical third parties, are vulnerable to cyber-attacks involving, for example, malware, social engineering/phishing, ransomware or other extortion-based attacks, denial-of-service attacks, physical or electronic break-ins, third-party or current/former employee theft or misuse, and similar disruptions from unauthorized tampering with our servers and computer systems or those of third parties that we use in our operations, as well as cyber-risks attributable to software or hardware (e.g., tablets) vulnerabilities, coding errors and misconfigurations (e.g., involving APIs).
We expect that our operating expenses may increase in the future as we optimize and grow our business, including via our sales and marketing efforts, continuing to invest in research and development, adding content and software features to our platform, expanding into new geographies, expanding the reach and use of the Peloton App, and developing new products and features.
We expect that our operating expenses may increase in the future as we optimize and grow our business, including, for example, via our sales and marketing efforts, continuing to invest in research and development, adding content and software features to our platform, expanding into new geographies, expanding the reach and use of the Peloton App, and developing new products and features.
See Note 12 - Debt in the Notes to our Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K and the section titled “ Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Second Amended and Restated Credit Agreement ” in Part II, Item 7 of this Annual Report on Form 10-K.
See Note 12 - Debt in the Notes to our Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K and the section titled “ Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Third Amended and Restated Credit Agreement ” in Part II, Item 7 of this Annual Report on Form 10-K.
Upon the occurrence of an event of default, our lenders could elect to declare all amounts outstanding under its debt agreements to be immediately due and payable. In addition, our 23 lenders would have the right to proceed against the assets we provided as collateral pursuant to the credit agreement and the security agreement.
Upon the occurrence of an event of 22 default, our lenders could elect to declare all amounts outstanding under its debt agreements to be immediately due and payable. In addition, our lenders would have the right to proceed against the assets we provided as collateral pursuant to the credit agreement and the security agreement.
If we use content in ways that are found to exceed the scope of such agreements, we could be subject to monetary penalties or claims of infringement, and our rights under such agreements could be terminated. We face risk of unforeseen costs and potential liability in connection with content we produce, license, and distribute through our platform.
If we use content in ways that are found to exceed the scope of such agreements, we could be subject to monetary penalties or claims of infringement, and our rights under such agreements could be terminated. We face risk of unforeseen costs and potential liability in connection with content we produce, license, and distribute.
See Part 1, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations —Fourth Quarter Fiscal 2023 Update and Recent Developments— Restructuring Plan .” The Company has evolved rapidly in recent years and continues to establish its operating experience at the appropriate scale.
See Part 1, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations —Fourth Quarter Fiscal 2024 Update and Recent Developments— Restructuring Plan .” The Company has evolved rapidly in recent years and continues to establish its operating experience at the appropriate scale.
If our market does not develop, develops more slowly than expected, or becomes saturated with competitors, or if our products and services do not achieve or sustain market acceptance, our business, financial condition, and operating results could be adversely affected. Our past financial results may not be indicative of our future performance.
If our market does not develop, develops more slowly than expected, or becomes saturated with competitors, or if our products and services do not achieve or sustain market acceptance, our business, financial condition, and operating results would be adversely affected. Our past financial results may not be indicative of our future performance.
In addition to expanding our operations into international markets through the sale of our Connected Fitness Products and the production of our platform content, we have expanded, and may in the future expand, our international operations through acquisitions of, or investments in, foreign entities, which may result in additional operational costs and risks.
In addition to expanding our operations into international markets through the sale of our Connected Fitness Products and the production of our platform content, we have expanded, and may in the future expand, our international operations through partnerships with, acquisitions of, or investments in, foreign entities, which may result in additional operational costs and risks.
Our success depends in large part on our proprietary technology and our patents, trade secrets, trademarks, and other intellectual property rights.
Our success depends in large part on our proprietary technology and our patents, trade secrets, trademarks, copyrights and other intellectual property rights.
Many of our retail stores are leased pursuant to multi-year leases, and our ability to sublease to a suitable subtenant, or negotiate favorable terms to exit a lease early or for a lease renewal option, may depend on factors that are not within our control.
Many of our retail showrooms are leased pursuant to multi-year leases, and our ability to sublease to a suitable subtenant, or negotiate favorable terms to exit a lease early or for a lease renewal option, may depend on factors that are not within our control.
An adverse change to, loss of, or claim that we do not hold necessary licenses may have an adverse effect on our business, operating results, and financial condition. Music is an important element of the overall content that we make available to our Members.
An adverse change to, loss of, or claim that we do not hold necessary licenses may have an adverse effect on our business, operating results, and financial condition. 15 Music is an element of the overall content that we make available to our Members.
Our revenue growth may slow down, or our revenue may decline for a number of other reasons, including reduced demand for our products and services, increased competition, a decrease in the growth or reduction in size of our overall market, or if we cannot capitalize on strategic opportunities.
Our revenue may decline for a number of other reasons, including reduced demand for our products and services, increased competition, a decrease in the growth or reduction in size of our overall market, or if we cannot capitalize on strategic opportunities.
Injuries sustained by Members or their friends and family members, or others who use or purchase our Connected Fitness Products, have subjected us to, and could in the future subject us to, regulatory proceedings, government inquiries, investigations, and actions, and private litigation that regardless of their merits, could harm our 28 reputation, divert management’s attention from our operations and result in substantial legal fees and other costs.
Injuries sustained or damages claimed by Members or their friends and family members, or others who use or purchase our Connected Fitness Products, have subjected us to, and could in the future subject us to, regulatory proceedings, government inquiries, investigations and actions, or private litigation that, regardless of their merits, could harm our reputation, divert management’s attention from our operations, and result in substantial legal fees and other costs.
See “— We may not successfully execute or achieve the expected benefits of our restructuring initiatives and other cost-saving measures we may take in the future, and our efforts may result in further actions and/or additional asset impairment charges and adversely affect our business.” We may not successfully execute or achieve the expected benefits of our restructuring initiatives and other cost-saving measures we may take in the future, and our efforts may result in further actions and/or additional asset impairment charges and adversely affect our business.
We may not successfully execute or achieve the expected benefits of our restructuring initiatives and other cost-saving measures we may take in the future, and our efforts may result in further actions and/or additional asset impairment charges and adversely affect our business.
See “ Risks Related to Laws, Regulation, and Legal Proceedings. ” Sales of a substantial amount of our Class A common stock in the public markets, or the perception that such sales might occur, could cause the price of our Class A common stock to decline.
See “Risks Related to Laws, Regulation, and Legal Proceedings .” Sales of a substantial amount of our Class A common stock in the public markets, or the perception that such sales might occur, could cause the price of our Class A common stock to decline.
Bribery Act”), by us, our employees, and our business partners; • complexity and other risks associated with current and future legal requirements in other countries, including legal requirements related to sustainability disclosure, consumer protection, consumer product safety, and data privacy frameworks, such as the General Data Protection Regulation 2016/679; • varying levels of internet technology adoption and infrastructure, and increased or varying network and hosting service provider costs; • tariffs and other non-tariff barriers, such as quotas and local content rules, customs detentions, as well as tax consequences; • fluctuations in currency exchange rates and the requirements of currency control regulations, which might restrict or prohibit conversion of other currencies into U.S. dollars; and 19 • political or social unrest or economic instability in a specific country or region in which we operate, including, for example, escalating tensions, hostilities, or trade disputes between China and Taiwan or the effects of “Brexit,” each of which could have an adverse impact on our operations in such locations.
Bribery Act”), by us, our employees, and our business partners; • complexity and other risks associated with current and future legal requirements in other countries, including legal requirements related to sustainability disclosure, artificial intelligence, consumer protection, consumer product safety, and data privacy frameworks, such as the General Data Protection Regulation 2016/679; • varying levels of internet technology adoption and infrastructure, and increased or varying network and hosting service provider costs; • tariffs and other non-tariff barriers, such as quotas and local content rules, customs detentions, as well as tax consequences; • fluctuations in currency exchange rates and the requirements of currency control regulations, which might restrict or prohibit conversion of other currencies into U.S. dollars; and • political or social unrest or economic instability in a specific country or region in which we operate, including, for example, escalating tensions, hostilities, or trade disputes between China and Taiwan which could have an adverse impact on our operations in such locations.
We use a broad mix of marketing and other brand-building measures to attract Members. We use traditional television and online advertising, as well as third-party social media platforms such as Facebook, Twitter, and Instagram, as marketing tools.
We use a broad mix of marketing and other brand-building measures to attract Members. We use traditional television and online advertising, as well as third-party social media platforms such as Facebook, X (Twitter), Instagram, and TikTok as marketing tools.
The time required to evaluate such indications of interest could require significant attention from management, disrupt the ordinary functioning of our business, and could have an adverse effect on our business, financial condition, and operating results.
The time required to evaluate such indications of interest could require significant attention from management and our board of directors, disrupt the ordinary functioning of our business, and could have an adverse effect on our business, financial condition, and operating results.
Our term loan and revolving credit facility contain various restrictive covenants, including, among other things, minimum liquidity and revenue requirements applicable solely to the revolving credit facility, restrictions on our ability to dispose of assets, make acquisitions or investments, incur debt or liens, make distributions to our stockholders, or enter into certain types of related party transactions.
Our term loan and revolving credit facility contain various restrictive covenants, including, among other things, minimum liquidity and subscription revenue requirements applicable solely to drawings under the revolving credit facility, restrictions on our ability to dispose of assets, make acquisitions or investments, incur debt or liens, make distributions to our stockholders, or enter into certain types of related party transactions.
Our business has historically been influenced by seasonal trends common to traditional retail selling periods, where we generated a disproportionate amount of sales activity related to our Connected Fitness Products during the period from November through February due in large part to seasonal holiday demand, New Year’s resolutions, and cold weather.
Our business has historically been influenced by seasonal trends common to traditional retail selling periods, where we generated a disproportionate amount of sales activity related to our Connected Fitness Products from November through February due in large part to seasonal holiday demand, New Year’s resolutions, and cold weather.
Unfavorable publicity about us, our strategic initiatives, such as our restructuring plan or our products, services, technology, customer service, content, personnel, and suppliers could diminish confidence in, and the use of, our products and services.
Unfavorable publicity about us, our strategic initiatives, such as our 2024 Restructuring Plan, or our products, services, technology, customer service, content, personnel, and suppliers could diminish confidence in, and the use of, our products and 13 services.
Risks Related to the Ownership of Our Class A Common Stock The stock price of our Class A common stock has been, and will likely continue to be, volatile and you could lose all or part of your investment. The market price of our Class A common stock has been, and will likely continue to be, volatile.
Risks Related to the Ownership of Our Class A Common Stock 33 The stock price of our Class A common stock has been, and will likely continue to be, volatile and you could lose all or part of your investment.
There are a number of factors that could lead to a decline in Subscriber levels or that could prevent us from increasing our Subscriber levels, including: • our failure to introduce new features, products, or services that Members find engaging or our introduction of new products or services, or changes to existing products and services that are not favorably received; • harm to our brand and reputation; • pricing and perceived value of our offerings; • our inability to deliver quality products and functionality, content, and services; • actual or perceived safety concerns regarding our products; • unsatisfactory experiences with the delivery, installation, or servicing of our Connected Fitness Products, including due to delivery costs or prolonged delivery timelines and limitations on in-home installation, return, and warranty servicing processes; • our Members engaging with competitive products and services; • technical or other problems preventing Members from accessing our content and services in a rapid and reliable manner or otherwise affecting the Member experience; • a decline in the public’s interest in indoor cycling or running, or other fitness disciplines that we invest most heavily in; • deteriorating general economic conditions or a change in consumer spending preferences or buying trends; • changes in consumer preferences regarding home fitness, whether as a result of the COVID-19 pandemic or otherwise; and • interruptions in our ability to sell or deliver our Connected Fitness Products or to create content and services for our Members.
There are a number of factors that could lead to a decline in Subscriber levels or that could prevent us from increasing our Subscriber levels, including: • our failure to introduce new features, products, or services that Members find engaging or our introduction of new products or services, or changes to existing products and services that are not favorably received; • harm to our brand and reputation; • pricing and perceived value of our offerings; • our inability to deliver quality products and functionality, content, and services; • actual or perceived safety concerns regarding our products; • unsatisfactory experiences with the delivery, installation, or servicing of our Connected Fitness Products, including due to delivery costs or prolonged delivery timelines and limitations on in-home installation, return, and warranty servicing processes; • our Members engaging with competitive products and services; • technical or other problems that affect the Member experience; • a decline in the public’s interest in indoor cycling or running, or other fitness disciplines that we invest most heavily in; • deteriorating general economic conditions or a change in consumer spending preferences or buying trends; • changes in consumer preferences regarding home fitness, whether as a result of the COVID-19 pandemic or otherwise; and • interruptions in our ability to sell or deliver our Connected Fitness Products or to provide or to create content and services for our Members.
Forced labor concerns have rapidly become a global area of interest, and is a topic that will likely be subject to new regulations in the markets we operate within.
Forced labor concerns have rapidly become a global area of interest, and is a topic that will likely be subject to new regulations in the markets in which we operate.
If we are unable to introduce new or enhanced offerings in a timely manner or via the appropriate channels, or our new or enhanced offerings are not accepted by our Subscribers, our competitors may introduce similar or more desirable offerings and at speeds that are faster than us, which could negatively affect our growth.
If we are unable to introduce new or enhanced offerings in a timely manner or via the appropriate channels, then our new or enhanced offerings may not be accepted by our Subscribers. Our competitors may also introduce similar or more desirable offerings and at speeds that are faster than us, which could negatively affect our growth.
Some acquisitions may require us to spend considerable time, effort, and resources to integrate employees from the acquired business into our teams, and acquisitions of companies in lines of business in which we lack expertise may require considerable management time, oversight, and research before we see the desired benefit of such acquisitions.
Some acquisitions have required us, and may in the future require us, to spend considerable time, effort, and resources to integrate employees from the acquired business into our teams, and acquisitions of companies in lines of business in which we lack expertise may require considerable management time, oversight, and research before we see the desired benefit of such acquisitions.
In addition, upon conversion, we will satisfy part or all of our conversion obligation in cash unless we elect to settle conversions solely in shares of our Class A common stock.
In addition, upon conversion, we may satisfy part or all of our conversion obligation in cash unless we elect to settle conversions solely in shares of our Class A common stock.

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Item 2. Properties

Properties — owned and leased real estate

4 edited+1 added−1 removed3 unchanged
Biggest changeIn addition, we lease and sublease field operations and distribution facilities primarily in North America and Europe, which are used to support our Connected Fitness segment.
Biggest changeWe lease our production studio facilities, which are located in New York City and London, and are used to support our Subscription segment. In addition, we lease and sublease field operations and distribution facilities primarily in North America and Europe, which are used to support our Connected Fitness segment.
In February 2022, as part of the Restructuring Plan, we announced the closing of several assembly and manufacturing plants, including our plans to sell the facility that was intended to be Peloton Output Park .
In February 2022, as part of the 2022 Restructuring Plan, we announced the closing of several assembly and manufacturing plants, including our plans to sell the facility that was intended to be Peloton Output Park .
Item 2. Properties As of June 30, 2023, our principal properties included our corporate headquarter offices, field operations and distribution facilities, retail locations and production studio facilities. We are headquartered in New York City, where we occupy facilities totaling approximately 336,000 square feet under a lease that expires in 2035.
Item 2. Properties As of June 30, 2024, our principal properties included our corporate headquarter offices, field operations and distribution facilities, retail locations and production studio facilities. We are headquartered in New York City, where we occupy facilities totaling approximately 336,000 square feet under a lease that expires in 2035.
Refer to Note 19 in the “Notes to Consolidated Financial Statements” included in Part II, Item 8 of this Annual Report on Form 10-K for further details regarding our segments. We lease our production studio facilities, which are located in New York City and London, and are used to support our Subscription segment.
Refer to Note 19 in the “Notes to Consolidated Financial Statements” included in Part II, Item 8 of this Annual Report on Form 10-K for further details regarding our segments. In April 2024, as part of the 2024 Restructuring Plan, we announced the continued closures of certain of our retail locations.
Removed
Refer to Part I, Item 1A, “ Risk Factors — Risks Related to Our Business — We have experienced, and may continue to experience, delays in the sale of the Ohio industrial facility that was intended to be Peloton Output Park, which could adversely impact our business and financial condition ” for more information. 41
Added
In January 2024, the Company completed the sale of the Peloton Output Park building and a portion of the corresponding land and received net proceeds of approximately $31.9 million. 39

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed1 unchanged
Biggest changeFor a discussion of legal and other proceedings in which we are involved, see Note 13 - Commitments and Contingencies in the Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K. Item 4. Mine Safety Disclosures Not applicable. 42
Biggest changeFor a discussion of legal and other proceedings in which we are involved, see Note 13 - Commitments and Contingencies in the Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K. Item 4. Mine Safety Disclosures Not applicable. 40

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

2 edited+0 added−0 removed9 unchanged
Biggest changeOur Class B common stock is not listed or traded on any stock exchange. Holders of Record As of July 31, 2023, there were 35 registered holders of our Class A common stock and 74 registered holders of our Class B common stock.
Biggest changeOur Class B common stock is not listed or traded on any stock exchange. Holders of Record As of July 31, 2024, there were 33 registered holders of our Class A common stock and 73 registered holders of our Class B common stock.
The comparisons in the graph below are based upon historical data and are not indicative of, nor intended to forecast, future performance of our common stock. 43 Item 6. [Reserved] 44
The comparisons in the graph below are based upon historical data and are not indicative of, nor intended to forecast, future performance of our common stock. 41 Item 6. [Reserved] 42

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeSome of these limitations are, or may in the future be, as follows: • Although depreciation and amortization expense are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements; • Adjusted EBITDA excludes stock-based compensation expense, which has recently been, and will continue to be for the foreseeable future, a significant recurring expense for our business and an important part of our compensation strategy; • Adjusted EBITDA does not reflect: (1) changes in, or cash requirements for, our working capital needs; (2) interest expense, or the cash requirements necessary to service interest or principal payments on our debt, which reduces cash available to us; or (3) tax payments that may represent a reduction in cash available to us; • Adjusted EBITDA does not reflect certain litigation expenses, consisting of legal settlements and related fees for specific proceedings that we have determined arise outside of the ordinary course of business based on the following considerations which we assess regularly: (1) the frequency of similar cases that have been brought to date, or are expected to be brought within two years; (2) the complexity of the case; (3) the nature of the remedy(ies) sought, including the size of any monetary damages sought; (4) offensive versus defensive posture of us; (5) the counterparty involved; and (6) our overall litigation strategy; • Adjusted EBITDA does not reflect transaction and integration costs related to acquisitions; • Adjusted EBITDA does not reflect impairment charges for goodwill and fixed assets, and gains (losses) on disposals for fixed assets; • Adjusted EBITDA does not reflect the impact of purchase accounting adjustments to inventory related to the Precor acquisition; 56 • Adjusted EBITDA does not reflect costs associated with product recall related matters including adjustments to the return reserves, inventory write-downs, logistics costs associated with Member requests, the cost to move the recalled product for those that elect the option, subscription waiver costs of service, and recall-related hardware development and repair costs; • Adjusted EBITDA does not reflect reorganization, severance, exit, disposal and other costs associated with restructuring plans; • Adjusted EBITDA does not reflect non-recurring supplier settlements; and • The expenses and other items that we exclude in our calculation of Adjusted EBITDA may differ from the expenses and other items, if any, that other companies may exclude from Adjusted EBITDA when they report their operating results and we may, in the future, exclude other significant, unusual expenses or other items from this financial measure.
Biggest changeSome of these limitations are, or may in the future be, as follows: • Although depreciation and amortization expense are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements; • Adjusted EBITDA excludes stock-based compensation expense, which has recently been, and will continue to be for the foreseeable future, a significant recurring expense for our business and an important part of our compensation strategy; • Adjusted EBITDA does not reflect: (1) changes in, or cash requirements for, our working capital needs; (2) interest expense, or the cash requirements necessary to service interest or principal payments on our debt, which reduces cash available to us; or (3) tax payments that may represent a reduction in cash available to us; • Adjusted EBITDA does not reflect gains (losses) associated with refinancing efforts that we have determined are outside of the ordinary course of business and are nonrecurring, infrequent or unusual based on factors such as the nature and strategy of the refinancing, as well as our frequency and past practice of performing refinancing activities. • Adjusted EBITDA does not reflect certain litigation expenses, consisting of legal settlements and related fees for specific proceedings that we have determined arise outside of the ordinary course of business and are nonrecurring, infrequent or unusual based on the following considerations which we assess regularly: (1) the frequency of similar cases that have been brought to date, or are expected to be brought within two years; (2) the complexity of the case; (3) the nature of the remedy(ies) sought, including the size of any 54 monetary damages sought; (4) offensive versus defensive posture of us; (5) the counterparty involved; and (6) our overall litigation strategy.
We define a completed workout as either completing at least 50% of an instructor-led class, scenic ride or run, or ten or more minutes of “Just Ride”, “Just Run”, or “Just Row” mode. Our Connected Fitness Products portfolio includes the Peloton Bike, Bike+, Tread, Tread+, Guide, and Row.
We define a completed workout as either completing at least 50% of an Instructor-led class, Scenic ride, run, or row, or ten or more minutes of “Just Ride”, “Just Run”, or “Just Row” mode. Our Connected Fitness Products portfolio includes the Peloton Bike, Bike+, Tread, Tread+, Guide, and Row.
Some of these limitations are as follows: 57 • Although depreciation and amortization expense are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Subscription Contribution and Subscription Contribution Margin do not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements; and • Subscription Contribution and Subscription Contribution Margin exclude stock-based compensation expense, which has recently been, and will continue to be for the foreseeable future, a significant recurring expense for our business and an important part of our compensation strategy.
Some of these limitations are as follows: • Although depreciation and amortization expense are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Subscription Contribution and Subscription Contribution Margin do not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements; and • Subscription Contribution and Subscription Contribution Margin exclude stock-based compensation expense, which has recently been, and will continue to be for the foreseeable future, a significant recurring expense for our business and an important part of our compensation strategy.
See “ Risk Factors - Risks Related to Our Connected Fitness Products and Members — Our products and services may be affected from time to time by design and manufacturing defects or product safety issues, real or perceived, that could adversely affect our business and result in harm to our reputation.” Key Operational and Business Metrics In addition to the measures presented in our consolidated financial statements, we use the following key operational and business metrics to evaluate our business, measure our performance, develop financial forecasts, and make strategic decisions.
See “ Risk Factors - Risks Related to Our Connected Fitness Products and Members — Our products and services may be affected from time to time by design and manufacturing defects or product safety issues, real or perceived, that could adversely affect our business and result in harm to our reputation.” 45 Key Operational and Business Metrics In addition to the measures presented in our consolidated financial statements, we use the following key operational and business metrics to evaluate our business, measure our performance, develop financial forecasts, and make strategic decisions.
The Restructuring Plan originally included: (i) reducing our headcount; (ii) closing several assembly and manufacturing plants, including the completion and subsequent sale of the shell facility for our previously planned Peloton Output Park; (iii) closing and consolidating several distribution facilities; and (iv) shifting to third-party logistics providers in certain locations.
The 2022 Restructuring Plan originally included: (i) reducing our headcount; (ii) closing several assembly and manufacturing plants, including the completion and subsequent sale of the shell facility for our previously planned Peloton Output Park; (iii) closing and consolidating several distribution facilities; and (iv) shifting to third-party logistics providers in certain locations.
The Restructuring Plan originally included: (i) reducing our headcount; (ii) closing several assembly and manufacturing plants, including the completion and subsequent sale of the shell facility for our previously planned Peloton Output Park; (iii) closing and consolidating several distribution facilities; and (iv) shifting to third-party logistics providers in certain locations.
The 2022 Restructuring Plan originally included: (i) reducing our headcount; (ii) closing several assembly and manufacturing plants, including the completion and subsequent sale of the shell facility for our previously planned Peloton Output Park; (iii) closing and consolidating several distribution facilities; and (iv) shifting to third-party logistics providers in certain locations.
Inventory Valuation We review our inventory to ensure that its carrying value does not exceed its net realizable value (“NRV”), with NRV based on the estimated selling price of inventory in the ordinary course of business, less estimated costs of completion, disposal and transportation.
Inventory Valuation and Reserves We review our inventory to ensure that its carrying value does not exceed its net realizable value (“NRV”), with NRV based on the estimated selling price of inventory in the ordinary course of business, less estimated costs of completion, disposal and transportation.
Free cash flow reflects an additional way of viewing our liquidity that, we believe, when viewed with our GAAP results, provides management, investors and other users of our financial information with a more complete understanding of factors and trends affecting our cash flows.
Free cash flow reflects an additional way of viewing our liquidity that, we believe, when viewed with our GAAP results, provides 56 management, investors, and other users of our financial information with a more complete understanding of factors and trends affecting our cash flows.
To the extent that current and anticipated future sources of liquidity are insufficient to fund our future business activities and requirements, we may be required to seek additional equity or debt financing. The sale of additional equity would result in additional dilution to our stockholders.
To the extent that current and anticipated future sources of liquidity are insufficient to fund our future business activities and requirements, we may be required to seek additional equity or debt financing. The sale of additional equity would result in further dilution to our stockholders.
Our future capital requirements may vary materially from those currently planned and will depend on many factors, including our rate of revenue growth, timing to adjust our supply chain and cost structures in response to material fluctuations in product demand, timing and amount of spending related to acquisitions, the timing and amount of spending on research and development, the timing and financial impact of product recalls, sales and marketing activities, the timing of new product introductions, market acceptance of our Connected Fitness Products, timing and investments needed for international expansion, and overall economic conditions.
Our future capital requirements may vary materially from those currently planned and will depend on many factors, including our rate of revenue growth, timing to adjust our supply chain and cost structures in response to material fluctuations in product demand, timing and amount of spending related to acquisitions, the timing and amount of spending on research and development and manufacturing initiatives, the timing and financial impact of product recalls, sales and marketing activities, the timing of new product introductions, market acceptance of our Connected Fitness Products, timing and investments needed for international expansion, and overall economic conditions.
Revenue Recognition The Company’s primary sources of revenue are our recurring content Subscription revenue, and revenue from the sales of our Connected Fitness Products and related accessories, as well as Precor branded fitness products, delivery and installation services.
Revenue Recognition Our primary sources of revenue are our recurring content Subscription revenue, and revenue from the sales of our Connected Fitness Products and related accessories, as well as Precor branded fitness products, delivery and installation services.
See “Risk Factors—Risks Related to Our Business—Our operating results have been, and could in the future be, adversely affected if we are unable to accurately forecast consumer demand for our products and services and adequately manage our inventory .” Off-Balance Sheet Arrangements We did not have any undisclosed off-balance sheet arrangements as of June 30, 2023.
See “Risk Factors—Risks Related to Our Business—Our operating results have been, and could in the future be, adversely affected if we are unable to accurately forecast consumer demand for our products and services and adequately manage our inventory .” Off-Balance Sheet Arrangements We did not have any undisclosed off-balance sheet arrangements as of June 30, 2024.
Extended warranty revenue is recognized ratably over the extended warranty coverage period and is included in Connected Fitness Products revenue in the Consolidated Statements of Operations and Comprehensive Loss. 63 Goodwill and Intangible Assets Goodwill represents the excess of the aggregate of the consideration transferred and the amount recognized for non-controlling interest, if any, over the fair value of identifiable assets acquired and liabilities assumed in a business combination.
Extended warranty revenue is recognized ratably over the extended warranty coverage period and is included in Connected Fitness Products revenue in the Consolidated Statements of Operations and Comprehensive Loss. 62 Goodwill and Intangible Assets Goodwill represents the excess of the aggregate of the consideration transferred and the amount recognized for non-controlling interest, if any, over the fair value of identifiable assets acquired and liabilities assumed in a business combination.
Our financial profile has been characterized by strong retention, recurring revenue, and efficient customer acquisition. O ur low Average Net Monthly Connected Fitness Churn, together with our high Subscription Contribution Margin, yields an attractive lifetime value (“LTV”) for our Connected Fitness Subscriptions well in excess of our customer acquisition costs (“CAC”).
Our financial profile has been characterized by strong retention, recurring revenue, and efficient customer acquisition. O ur low Average Net Monthly Connected Fitness Churn, together with our high Subscription Gross Profit and Subscription Contribution Margin, yields an attractive lifetime value (“LTV”) for our Connected Fitness Subscriptions well in excess of our customer acquisition costs (“CAC”).
We maintain a valuation allowance on the majority of our deferred tax assets as we have concluded that it is more likely than not that the deferred assets will not be utilized. 50 Results of Operations The following tables set forth our consolidated results of operations in dollars and as a percentage of total revenue for the periods presented.
We maintain a valuation allowance on the majority of our deferred tax assets as we have concluded that it is more likely than not that the deferred assets will not be utilized. 48 Results of Operations The following tables set forth our consolidated results of operations in dollars and as a percentage of total revenue for the periods presented.
The fair values of intangible assets are determined utilizing information available near the acquisition date based on expectations and assumptions that are deemed reasonable by management. Given the considerable judgment involved in determining fair 64 values, we typically obtain assistance from third-party valuation specialists for significant items.
The fair values of intangible assets are determined utilizing information available near the acquisition date based on expectations and assumptions that are deemed reasonable by management. Given the considerable judgment involved in determining fair 63 values, we typically obtain assistance from third-party valuation specialists for significant items.
If actual return costs differ from previous estimates, the amount of the liability and corresponding revenue are adjusted in the period in which such costs occur. 62 There is not significant judgement required in the determination of performance obligations, allocation of our transaction price, or the recognition of revenue.
If 61 actual return costs differ from previous estimates, the amount of the liability and corresponding revenue are adjusted in the period in which such costs occur. There is not significant judgement required in the determination of performance obligations, allocation of our transaction price, or the recognition of revenue.
Average Monthly Paid App Subscription Churn When a Subscriber to App One or App+ cancels their membership (a churn event) and resubscribes in a subsequent period, the resubscription will be considered a new subscription (rather than a reactivation that is counted as a reduction in our churn count).
Average Monthly Paid App Subscription Churn When a Subscriber to App One or App+ cancels their membership (a churn event) and resubscribes in a subsequent period, the resubscription is considered a new subscription (rather than a reactivation that is counted as a reduction in our churn count).
Based on information that is currently available, management believes that the accruals are adequate. It is possible that substantial additional charges may be required in future periods based on new information, changes in facts and circumstances, and actions the Company may commit to or be required to undertake.
Based on information that is currently available, management believes that the accruals are adequate. It is possible that substantial additional charges may be required in future periods based on new information, changes in facts and circumstances, and actions we may commit to or be required to undertake.
Because we do not receive payment for paused Connected Fitness Subscriptions, a paused Connected Fitness Subscription will now be treated as a churn event at the time the pause goes into effect, which is the start of the next billing cycle.
Because we do not receive payment for paused Connected Fitness Subscriptions, a paused Connected Fitness Subscription is now treated as a churn event at the time the pause goes into effect, which is the start of the next billing cycle.
We cancel a Member's Connected Fitness Subscription when it remains unpaid for two days after their billing cycle date. 48 Furthermore, we have reported our Average Net Monthly Connected Fitness Churn metric net of reactivations.
We cancel a Member's Connected Fitness Subscription when it remains unpaid for two days after their billing cycle date. 46 Furthermore, we have reported our Average Net Monthly Connected Fitness Churn metric net of reactivations.
We define a “Member” as any individual who has a Peloton account through a paid Connected Fitness Subscription or a paid Peloton App Membership, and completes 1 or more completed workouts in the trailing 12 month period.
We define a “Member” as any individual who has a Peloton account through a paid Connected Fitness Subscription or a paid Peloton App Subscription, and completes 1 or more workouts in the trailing 12 month period.
The original lease terms are between one and 21 years, and the majority of the lease agreements are renewable at the end of the lease period. The Company has finance lease obligations of $0.7 million, also included above. (2) We are subject to minimum royalty payments associated with our license agreements for the use of licensed content.
The original lease terms are between one and 21 years, and the majority of the lease agreements are renewable at the end of the lease period. The Company has finance lease obligations of $0.1 million, also included above. 60 (2) We are subject to minimum royalty payments associated with our license agreements for the use of licensed content.
We believe our existing cash and cash equivalent balances and cash flow from operations will be sufficient to meet our working capital and capital expenditure needs for at least the next 12 months and beyond.
We believe our existing cash and cash equivalent balances and cash flow from operations will be sufficient to meet our working capital and capital expenditure needs for the next 12 months and beyond.
(3) Please see the section titled “Non-GAAP Financial Measures—Free Cash Flow” for a reconciliation of net cash used in operating activities to Free Cash Flow and an explanation of why we consider Free Cash Flow to be a helpful measures for investors.
(6) Please see the section titled “Non-GAAP Financial Measures—Free Cash Flow” for a reconciliation of net cash used in operating activities to Free Cash Flow and an explanation of why we consider Free Cash Flow to be a helpful measure for investors.
Connected Fitness Products revenue is recognized at the time of delivery, except for extended warranty revenue that is recognized over the warranty period and service revenue that is recognized over the term, and is recorded net of returns and discounts and third-party financing program fees, when applicable.
Connected Fitness Products revenue is recognized at the time of delivery, except for extended warranty revenue that is recognized over the warranty period and service revenue that is recognized over the term, and is recorded net of sales returns and concessions, discounts and allowances, and third-party financing program fees, when applicable.
Free Cash Flow We define Free Cash Flow as Net cash provided by (used in) operating activities less capital expenditures and capitalized internal-use software development costs.
Free Cash Flow We define Free Cash Flow as Net cash used in operating activities less capital expenditures and capitalized internal-use software development costs.
These costs consist of both fixed costs, including studio rent and occupancy, other studio overhead, instructor and production personnel-related expenses, 49 depreciation of property and equipment as well as variable costs, including music royalty fees, content costs for past use, third-party platform streaming costs, and payment processing fees for our monthly subscription billings.
These costs consist of both fixed costs, including studio rent and occupancy, other studio overhead, Instructor and production personnel-related expenses, depreciation of property and equipment as well as variable costs, including music royalty fees, third-party platform streaming costs, and payment processing fees for our monthly subscription billings.
(2) Please see the section titled “Non-GAAP Financial Measures—Adjusted EBITDA” for a reconciliation of Net loss to Adjusted EBITDA and an explanation of why we consider Adjusted EBITDA to be a helpful measures for investors.
(5) Please see the section titled “Non-GAAP Financial Measures—Adjusted EBITDA” for a reconciliation of Net loss to Adjusted EBITDA and an explanation of why we consider Adjusted EBITDA to be a helpful measure for investors.
The Company has no intangible assets with indefinite useful lives. Intangible assets other than goodwill are comprised of acquired developed technology and other finite-lived intangible assets. At initial recognition, intangible assets acquired in a business combination or asset acquisition are recognized at their fair value as of the date of acquisition.
We have no intangible assets with indefinite useful lives. Intangible assets other than goodwill are comprised of acquired developed technology and other finite-lived intangible assets. At initial recognition, intangible assets acquired in a business combination or asset acquisition are recognized at their fair value as of the date of acquisition.
Non-operating income and expenses Other (expense) income, net Other (expense) income, net consists of interest (expense) income, unrealized and realized gains (losses) on investments, and foreign exchange gains (losses). Income tax provision The provision for income taxes consists primarily of income taxes related to state and international taxes for jurisdictions in which we conduct business.
Non-operating income and expenses Other expense, net Other expense, net consists of interest (expense) income, unrealized and realized gains (losses) on investments, net gains relating to our refinancing activities, and foreign exchange gains (losses). Income tax provision The provision for income taxes consists primarily of income taxes related to state and international taxes for jurisdictions in which we conduct business.
Product Recall Related Matters The Company accrues cost of product recalls and potential corrective actions based on management estimate of when it is probable that a liability has been incurred and the amount can be reasonably estimated, which occurs when management commits to a corrective action plan or when required by regulatory requirements.
Product Recall Related Matters We accrue cost of product recalls and potential corrective actions based on management’s estimate of when it is probable that a liability has been incurred and the amount can be reasonably estimated, which occurs when management commits to a corrective action plan or when required by regulatory requirements.
The Second Amended and Restated Credit Agreement also contains certain customary events of default. Certain baskets and covenant levels have been decreased and will apply equally to both the Term Loan and Revolving Facility for so long as the Term Loan is outstanding.
The Third Amended and Restated Credit Agreement also contains certain customary events of default. Certain baskets and covenant levels have been adjusted and will apply equally to both the Term Loan and Revolving Facility for so long as the Term Loan is outstanding.
Restructuring Plan In February 2022, we announced and began implementing a restructuring plan to realign our operational focus to support our multi-year growth, scale the business, and improve costs (the “Restructuring Plan”).
Restructuring In February 2022, we announced and began implementing the 2022 Restructuring Plan to realign our operational focus to support our multi-year growth, scale the business, and improve costs.
Average Paid App Subscription Churn will be calculated as follows: Paid App Subscription cancellations in the quarter, divided by the average number of beginning Paid App Subscriptions each month, divided by three months.
Average Paid App Subscription Churn is calculated as follows: Paid App Subscription cancellations in the quarter, divided by the average number of beginning Paid App Subscriptions each month, divided by three months.
The following table presents a reconciliation of Free Cash Flow to Net cash used in operating activities, the most directly comparable financial measure prepared in accordance with GAAP, for each of the periods indicated: Fiscal Year Ended June 30, 2023 2022 2021 (in millions) Net cash used in operating activities $ (387.6) $ (2,020.0) $ (239.7) Capital expenditures and capitalized internal-use software development costs (82.4) (337.3) (252.2) Free Cash Flow $ (470.0) $ (2,357.4) $ (491.9) Liquidity and Capital Resources Our operations have been funded primarily through net proceeds from the sales of our equity and convertible debt securities, and term loan, as well as cash flows from operating activities.
The following table presents a reconciliation of Free Cash Flow to Net cash used in operating activities, the most directly comparable financial measure prepared in accordance with GAAP, for each of the periods indicated: Fiscal Year Ended June 30, 2024 2023 2022 (in millions) Net cash used in operating activities $ (66.1) $ (387.6) $ (2,020.0) Capital expenditures and capitalized internal-use software development costs (19.7) (82.4) (337.3) Free Cash Flow $ (85.8) $ (470.0) $ (2,357.4) Liquidity and Capital Resources Our operations have been funded primarily through net proceeds from the sales of our equity and convertible debt securities, and term loan, as well as cash flows from operating activities.
See “Risk Factors—Risks Related to Our Business—We may not successfully execute or achieve the expected benefits of our restructuring initiatives and other cost-saving measures we may take in the future, and our efforts may result in further actions and/or additional asset impairment charges and adversely affect our business .” Tread+ and Tread Product Recall Return Reserves and Cost Estimates On May 5, 2021, we announced separate, voluntary recalls of each of our Tread+ and Tread products in collaboration with the CPSC and halted sales of these products to work on product enhancements.
See “Risk Factors—Risks Related to Our Business—We may not successfully execute or achieve the expected benefits of our restructuring initiatives and other cost-saving measures we may take in the future, and our efforts may result in further actions and/or additional asset impairment charges and adversely affect our business .” Tread+ Product Recall Return Reserves and Cost Estimates In May 2021, we announced a voluntary recall of our Tread+ product in collaboration with the CPSC and halted sales of this product to work on product enhancements.
Consistent with our previous practice, our churn count will be shown net of reactivations and our new quarterly Average Net Monthly Paid Connected Fitness Subscription Churn metric will average the monthly Connected Fitness churn percentage across the three months of the reported quarter.
Consistent with our previous practice, our churn count is shown net of reactivations and our new quarterly Average Net Monthly Paid Connected Fitness Subscription Churn metric averages the monthly Connected Fitness churn percentage across the three months of the reported quarter.
Cost of revenue Connected Fitness Products Connected Fitness Products cost of revenue consists of our portfolio of Connected Fitness Products and branded apparel product costs, including duties and other applicable importing costs, shipping and handling costs, packaging, warranty replacement and service costs, fulfillment costs, warehousing costs, depreciation of property and equipment, and certain costs related to management, facilities, and personnel-related expenses associated with supply chain logistics.
Cost of revenue Connected Fitness Products Connected Fitness Products cost of revenue consists of our portfolio of Connected Fitness Products, related accessories, and branded apparel product costs, including third party manufacturing costs, duties and other applicable importing costs, shipping and handling costs, packaging, warranty replacement and service costs, fulfillment costs, warehousing costs, costs related to our commercial business, depreciation of property and equipment, and certain costs related to management, facilities, and personnel-related expenses associated with supply chain logistics.
A discussion of our results of operations for our fiscal year ended June 30, 2022 compared to the year ended June 30, 2021 is included our Annual Report on Form 10-K for the fiscal year ended June 30, 2022, filed with the SEC on September 7, 2022 (File No. 001-39058) under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Overview Peloton is a leading global fitness company with a highly engaged community of over 6.5 million Members as of June 30, 2023.
A discussion of our results of operations for our fiscal year ended June 30, 2023 compared to the year ended June 30, 2022 is included our Annual Report on Form 10-K for the fiscal year ended June 30, 2023, filed with the SEC on August 23, 2023 (File No. 001-39058) under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Overview Peloton is a leading global fitness company with a highly engaged community of over 6.4 million Members as of June 30, 2024.
As a result of this recall, we recognized $48.4 million for the cost to replace the bike seat posts based on an amount that was deemed probable and reasonably estimable, reflected in Connected Fitness Products cost of revenue in our Consolidated Statements of Operations and Comprehensive Loss for the fiscal year ended June 30, 2023.
As a result of this recall, the Company recognized $(5.5) million and $48.4 million for the (benefits) costs to replace the bike seat posts based on an amount that was deemed probable and reasonably estimable, reflected in Connected Fitness Products cost of revenue in the Consolidated Statements of Operations and Comprehensive Loss for the fiscal year ended June 30, 2024 and 2023.
See “ Risk Factors—Risks Related to Our Connected Fitness Products and Members—We may be subject to warranty claims that could result in significant direct or indirect costs, or we could experience greater product returns than expected, either of which could have an adverse effect on our business, financial condition, and operating results .” Bike Seat Post Recall In May 2023, in collaboration with the CPSC, we announced a voluntary recall of the original Peloton model Bikes (not Bike+) seat posts sold in the U.S. from January 2018 to May 2023.
See “ Risk Factors—Risks Related to Our Connected Fitness Products and Members—We may be subject to warranty claims that could result in significant direct or indirect costs, or we could experience greater product returns than expected, either of which could have an adverse effect on our business, financial condition, and operating results .” Bike Seat Post Recall In May 2023, in collaboration with the CPSC, we announced a voluntary recall of the original Peloton Bike (not Bike+) sold in the U.S. from January 2018 to May 2023 related to its seat post, and we are offering Members a free replacement seat post as the approved repair.
To date, we have reported Average Net Monthly Connected Fitness Churn, which is defined as Connected Fitness Subscription cancellations, net of reactivations, in the quarter, divided by the average number of beginning Connected Fitness Subscriptions in each month, divided by three months. This metric does not treat a pause of a Connected Fitness Subscription as a churn event.
Prior to fiscal year 2024, we reported Average Net Monthly Connected Fitness Churn, which is defined as Connected Fitness Subscription cancellations, net of reactivations, in the quarter, divided by the average number of beginning Connected Fitness Subscriptions in each month, divided by three months. This metric does not treat a pause of a Connected Fitness Subscription as a churn event.
The amount of a refund customers are eligible to receive may differ based on the status of an approved remediation of the issue driving the recall, and the age of the Connected Fitness product being returned. We estimate return reserves primarily based on historical and expected product returns, product warranty, and service call trends.
The amount of a refund customers were eligible to receive differed based on the status of an approved remediation of the issue driving the recall, and the age of the Connected Fitness product being returned. We estimated return reserves primarily based on historical and expected product returns, product warranty, and service call trends.
The Term Loan bears interest at a rate equal to, at our option, either at the Alternate Base Rate (as defined in the Second Amended and Restated Credit Agreement) plus 5.50% per annum or the Adjusted Term SOFR Rate (as defined in the Second Amended and Restated Credit Agreement) plus 6.50% per annum.
The Term Loan initially bears interest at a rate equal to, at our option, either the Alternate Base Rate (as defined in the Third Amended and Restated Credit Agreement) plus 5.00% per annum or the Term SOFR Rate (as defined in the Third Amended and Restated Credit Agreement) plus 6.00% per annum.
Average Net Monthly Paid Connected Fitness Subscription Churn To align with the new definition of Ending Paid Connected Fitness Subscriptions above, our new quarterly Average Net Monthly Paid Connected Fitness Subscription Churn will be calculated as follows: Paid Connected Fitness Subscriber "churn count" in the quarter, divided by the average number of beginning Paid Connected Fitness Subscribers each month, divided by three months.
Average Net Monthly Paid Connected Fitness Subscription Churn To align with the definition of Ending Paid Connected Fitness Subscriptions above, our quarterly Average Net Monthly Paid Connected Fitness Subscription Churn is calculated as follows: Paid Connected Fitness Subscriber “churn count” in the quarter, divided by the average number of beginning Paid Connected Fitness Subscribers each month, divided by three months.
As of June 30, 2023, our commitments to contract with third-party manufacturers for their inventory on-hand and component purchase commitments related to the manufacture of our products were estimated to be approximately $174.6 million.
As of June 30, 2024, our commitments to contract with third-party manufacturers for their inventory on-hand and component purchase commitments related to the manufacture of our products were estimated to be approximately $80.1 million.
As a result of these recalls , we have recorded return provisions as a reduction to Connected Fitness Products revenue of $ 14.6 million , $ 48.9 million , and $ 81.1 million for the fiscal years ended June 30, 2023, 2022 and 2021, respectively .
As a result of these recalls, we have recorded return provisions as a (benefit)/reduction to Connected Fitness Products revenue of $(4.5) million, $14.6 million, and $48.9 million for the fiscal years ended June 30, 2024, 2023 and 2022, respectively.
These include recorded costs in Connected Fitness Products cost of revenue associated with recall related matters of $61.6 million, zero, and zero, adjustments to Connected Fitness Products revenue for actual and estimated future returns of $14.6 million, $48.9 million and $81.1 million, recorded costs in Connected Fitness Products cost of revenue associated with inventory write-downs and logistics costs of $2.5 million, $8.1 million and $15.7 million, and operating expenses of $2.3 million, $5.4 million and $3.2 million associated with recall-related hardware development costs, in each case for the fiscal years ended June 30, 2023, 2022 and 2021, respectively.
These include recorded (benefits) costs in Connected Fitness Products cost of revenue associated with recall related matters of $(9.5) million, $64.1 million, and $8.1 million, adjustments to Connected Fitness Products revenue for actual and estimated future returns of $(4.5) million, $14.6 million and $48.9 million, and operating expenses of zero, $2.3 million and $5.4 million associated with recall-related hardware development costs, in each case for the fiscal years ended June 30, 2024, 2023 and 2022, respectively.
"Churn count" is defined as quarterly CF Subscription churn events minus CF Subscription unpause events minus CF Subscription reactivations. We refer to any cancellation or pausing of a subscription for our All Access Membership as a churn event.
“Churn count” is defined as quarterly Connected Fitness Subscription churn events minus Connected Fitness Subscription unpause events minus Connected Fitness Subscription reactivations. We refer to any cancellation or pausing of a subscription for our All-Access Membership as a churn event.
We also offer the option for customers in some markets to purchase a third-party extended warranty and service contract that extends or enhances the technical support, parts, and labor coverage offered as part of the base warranty included with the Connected Fitness Products for an additional period of 12 to 36 months.
We also offer the option for customers in some markets to purchase an extended warranty and service contract that extends or enhances the technical support, parts, and labor coverage offered as part of the base warranty included with the Connected Fitness Products for additional periods beyond the standard product warranty period.
See “Risk Factors—Risks Related to Our Business—We may not successfully execute or achieve the expected benefits of our restructuring initiatives and other cost-saving measures we may take in the future, and our efforts may result in further actions and/or additional asset impairment charges and adversely affect our business .” Convertible Notes In February 2021, we issued $1.0 billion aggregate principal amount of 0% Convertible Senior Notes due 2026 (the “Notes”) in a private offering, including the exercise in full of the over-allotment option granted to the initial purchasers of $125.0 million.
See “Risk Factors—Risks Related to Our Business—We may not successfully execute or achieve the expected benefits of our restructuring initiatives and other cost-saving measures we may take in the future, and our efforts may result in further actions and/or additional asset impairment charges and adversely affect our business .” 2029 and 2026 Convertible Notes In May 2024, we issued $350.0 million aggregate principal amount of 5.50% Convertible Senior Notes due 2029 (the “2029 Notes”) in a private offering, including the exercise in full of the option granted to the initial purchasers to purchase $50.0 million of the 2029 Notes.
We expect substantial further improvements in fiscal year 2024 in the above as well as a number of other measures by which we measure the success of our Restructuring Plan.
Throughout fiscal year 2025, we expect further improvements in the above as well as a number of other measures by which we measure the success of our restructuring initiatives.
Any borrowing at the Alternate Base Rate is subject to a 1.00% floor and a term loan borrowed at the Adjusted Term SOFR Rate is subject to a 0.50% floor and any revolving loan borrowed at the Adjusted Term SOFR Rate is subject to a 0.00% floor.
Any borrowing at the Alternate Base Rate is subject to a 1.00% floor and the Term SOFR Rate is subject to a 0.00% floor.
We define a “Connected Fitness Subscription” as a person, household, or commercial property, such as a hotel or residential building, who has either paid for a subscription to a Connected Fitness Product (a Connected Fitness Subscription with a successful credit card billing or with prepaid subscription credits or waivers) or requested a “pause” to their subscription for up to three months.
We define a “Paid Connected Fitness Subscription” as a person, household, or commercial property, such as a hotel or residential building, who has paid for a subscription to a Connected Fitness Product (a Connected Fitness Subscription with a successful credit card billing or with prepaid subscription credits or waivers).
Ending Paid Connected Fitness Subscriptions Ending Paid Connected Fitness Subscriptions will include all Connected Fitness Subscriptions for which we are currently receiving payment (a successful credit card billing or prepaid subscription credit or waiver). Historically, we have included a Connected Fitness Subscription that is paused for up to three months as a Connected Fitness Subscription.
Ending Paid Connected Fitness Subscriptions Ending Paid Connected Fitness Subscriptions includes all Connected Fitness Subscriptions for which we are currently receiving payment (a successful credit card billing or prepaid subscription credit or waiver). Prior to fiscal year 2024, we included a Connected Fitness Subscription that is paused for up to three months as a Connected Fitness Subscription.
The following table presents a reconciliation of Subscription Contribution to Subscription Gross Profit, the most directly comparable financial measure prepared in accordance with GAAP, for each of the periods indicated: Fiscal Year Ended June 30, 2023 2022 2021 (dollars in millions) Subscription Revenue $ 1,670.1 $ 1,394.7 $ 872.2 Less: Cost of Subscription 547.9 450.0 330.5 Subscription Gross Profit $ 1,122.1 $ 944.7 $ 541.7 Subscription Gross Margin 67.2 % 67.7 % 62.1 % Add back: Depreciation and amortization expense $ 36.9 $ 26.8 $ 19.0 Stock-based compensation expense 42.8 22.7 25.9 Subscription Contribution $ 1,201.8 $ 994.2 $ 586.5 Subscription Contribution Margin 72.0 % 71.3 % 67.2 % The continued growth of our Connected Fitness Subscription base will allow us to improve our Subscription Contribution Margin.
The following table presents a reconciliation of Subscription Contribution and Subscription Contribution Margin to Subscription Gross Profit and Subscription Gross Margin, respectively, which are the most directly comparable financial measures prepared in accordance with GAAP, for each of the periods indicated: Fiscal Year Ended June 30, 2024 2023 2022 (dollars in millions) Subscription Revenue $ 1,708.7 $ 1,670.1 $ 1,394.7 Less: Cost of Subscription 551.0 547.9 450.0 Subscription Gross Profit $ 1,157.7 $ 1,122.1 $ 944.7 Subscription Gross Margin 67.8 % 67.2 % 67.7 % Add back: Depreciation and amortization expense $ 34.6 $ 36.9 $ 26.8 Stock-based compensation expense 39.3 42.8 22.7 Subscription Contribution $ 1,231.6 $ 1,201.8 $ 994.2 Subscription Contribution Margin 72.1 % 72.0 % 71.3 % We believe continued growth of our Connected Fitness Subscription base will allow us to improve our Subscription Contribution Margin.
Additionally, on August 12, 2022, we announced our decision to perform the following additional restructuring activities: (i) fully transitioning our North American Field Operations to third-party providers, including the significant reduction of our delivery workforce teams; (ii) eliminating a significant number of roles on the North America Member Support team and exiting our real-estate footprints in our Plano and Tempe locations; and (iii) reducing our retail showroom presence.
Additionally, in August 2022, we announced our decision to (i) fully transition our North American Field Operations to third-party providers, including the significant reduction of our delivery workforce teams; (ii) eliminate a significant number of roles on the North America Member Support team and exit our real-estate footprints in our Plano and Tempe locations; and (iii) reduce our retail showroom presence.
Additionally, on August 12, 2022, we announced the decision to perform the following additional restructuring activities: (i) fully transitioning our North American Field Operations to third-party providers, including the significant reduction of our delivery workforce teams; (ii) eliminating a significant number of roles on the North America Member Support team and exiting our real-estate footprints in our Plano and Tempe locations; and (iii) reducing our retail showroom presence.
Additionally, in August 2022, we announced our decision to (i) fully transition our North American Field Operations to third-party providers, including the significant reduction of our delivery workforce teams; (ii) eliminate a significant number of roles on the North America Member Support team and exit our real-estate footprints in our Plano and Tempe locations; and (iii) reduce our retail showroom presence.
As of June 30, 2023 and June 30, 2022, our returns reserve related to the impacts of the recalls was $24.4 million and $39.9 million, respectively.
As of June 30, 2024 and June 30, 2023, our returns reserve related to the impacts of the recalls was $6.7 million and $24.4 million, respectively.
The modification resulted in incremental stock-based compensation expense of $21.9 million in the aggregate. ____________________ (2) Includes depreciation and amortization expense as follows: Fiscal Year Ended June 30, 2023 2022 2021 (in millions) Cost of revenue Connected Fitness Products $ 18.7 $ 20.0 $ 7.7 Subscription 36.9 26.8 19.0 Total cost of revenue 55.5 46.8 26.7 Sales and marketing 31.1 29.6 14.3 General and administrative 26.3 45.7 13.0 Research and development 11.4 20.7 9.9 Total depreciation and amortization expense $ 124.3 $ 142.8 $ 63.8 Comparison of the fiscal years ended June 30, 2023 and 2022 Revenue Fiscal Year Ended June 30, 2023 2022 % Change (dollars in millions) Revenue: Connected Fitness Products $ 1,130.2 $ 2,187.5 (48.3)% Subscription 1,670.1 1,394.7 19.7 Total revenue $ 2,800.2 $ 3,582.1 (21.8)% Percentage of revenue Connected Fitness Products 40.4 % 61.1 % Subscription 59.6 38.9 Total 100.0 % 100.0 % 52 Fiscal Years Ended June 30, 2023 and 2022 Connected Fitness Products revenue decreased $1,057.3 million for the fiscal year ended June 30, 2023 compared to the fiscal year ended June 30, 2022.
The modification resulted in incremental stock-based compensation expense of $21.9 million in the aggregate. ____________________ (2) Includes depreciation and amortization expense as follows: Fiscal Year Ended June 30, 2024 2023 2022 (in millions) Cost of revenue Connected Fitness Products $ 16.5 $ 18.7 $ 20.0 Subscription 34.6 36.9 26.8 Total cost of revenue 51.0 55.5 46.8 Sales and marketing 23.4 31.1 29.6 General and administrative 23.7 26.3 45.7 Research and development 10.7 11.4 20.7 Total depreciation and amortization expense $ 108.8 $ 124.3 $ 142.8 50 Comparison of the fiscal years ended June 30, 2024 and 2023 Revenue Fiscal Year Ended June 30, 2024 2023 % Change (dollars in millions) Revenue: Connected Fitness Products $ 991.7 $ 1,130.2 (12.2)% Subscription 1,708.7 1,670.1 2.3 Total revenue $ 2,700.5 $ 2,800.2 (3.6)% Percentage of revenue Connected Fitness Products 36.7 % 40.4 % Subscription 63.3 59.6 Total 100.0 % 100.0 % Fiscal Years Ended June 30, 2024 and 2023 Connected Fitness Products revenue decreased $138.4 million for the fiscal year ended June 30, 2024 compared to the fiscal year ended June 30, 2023.
Operating expenses Sales and marketing Sales and marketing expense consists of performance marketing media spend, asset creation, and other brand creative, all showroom expenses and related lease payments, payment processing fees incurred in connection with the sale of our Connected Fitness Products, sales and marketing personnel-related expenses, expenses related to the Peloton App, and depreciation of property and equipment.
Operating expenses Sales and marketing Sales and marketing expense consists of performance marketing media spend, asset creation, and other brand creative, costs to operate our retail showrooms including rent and occupancy charges, payment processing fees incurred in connection with the sale of our Connected Fitness Products, sales and marketing personnel-related expenses, expenses related to the Peloton App, and depreciation of property and equipment.
This decrease was primarily driven by fewer deliveries for the fiscal year ended June 30, 2023 compared to the fiscal year ended June 30, 2022.
This decrease was primarily driven by fewer deliveries stemming from lower demand for the fiscal year ended June 30, 2024 compared to the fiscal year ended June 30, 2023.
Cash Flows Fiscal Year Ended June 30, 2023 2022 2021 (in millions) Net cash used in operating activities $ (387.6) $ (2,020.0) $ (239.7) Net cash (used in) provided by investing activities (69.9) 153.3 (585.1) Net cash provided by financing activities 76.8 2,015.1 916.8 Operating Activities Net cash used in operating activities of $387.6 million for the fiscal year ended June 30, 2023 was primarily due to a net loss of $1,261.7 million, partially offset by an increase in non-cash adjustments of $760.2 million and a net decrease in operating assets and liabilities of $113.8 million.
Cash Flows Fiscal Year Ended June 30, 2024 2023 2022 (in millions) Net cash used in operating activities $ (66.1) $ (387.6) $ (2,020.0) Net cash provided by (used in) investing activities 26.8 (69.9) 153.3 Net cash (used in) provided by financing activities (94.4) 76.8 2,015.1 Operating Activities Net cash used in operating activities of $66.1 million for the fiscal year ended June 30, 2024 was primarily due to a net loss of $551.9 million and a net increase in operating assets and liabilities of $13.9 million, partially offset by non-cash adjustments of $499.7 million.
An adverse change to, loss of, or claim that we do not hold necessary licenses may have an adverse effect on our business, operating results, and financial condition.” 61 (3) Pursuant to the Second Amended and Restated Credit Agreement, we are required to pay a commitment fee of 0.325% and 0.375% on a quarterly basis based on the unused portion of the Revolving Facility for the revolving loans maturing on December 10, 2026 and June 20, 2024, respectively.
An adverse change to, loss of, or claim that we do not hold necessary licenses may have an adverse effect on our business, operating results, and financial condition.” (3) Pursuant to the Third Amended and Restated Credit Agreement, we are required to pay a commitment fee of 0.500% on a quarterly basis based on the unused portion of the Revolving Facility.
The Second Amended and Restated Credit Agreement contains customary affirmative covenants as well as customary covenants that restrict our ability to, among other things, incur additional indebtedness, sell certain assets, guarantee obligations of third parties, declare dividends or make certain distributions, and undergo a merger or consolidation or certain other transactions.
The Third Amended and Restated Credit Agreement contains customary affirmative covenants as well as customary negative covenants that restrict our ability to, among other things, incur additional indebtedness, incur liens or grant negative pledges, make loans and investments, conduct certain transactions with affiliates, sell certain assets, enter into certain swap agreements, guarantee obligations of third parties, declare dividends or make certain distributions, and undergo a merger or consolidation or certain other transactions.
Components of our Results of Operations Revenue Connected Fitness Products Connected Fitness Products revenue consists of sales of our portfolio of Connected Fitness Products and related accessories, delivery and installation services, branded apparel, extended warranty agreements, and the sale, service, installation, and delivery contracts of our commercial business.
Components of our Results of Operations Revenue Connected Fitness Products Connected Fitness Products revenue consists of sales of our portfolio of Connected Fitness Products and related accessories, as well as Precor branded fitness products, delivery and installation services, rental lease arrangements, extended warranty agreements, branded apparel, and commercial service contracts.
After the repayment in full of the Term Loan, such baskets and levels will revert to those previously disclosed in connection with the Amended and Restated Credit Agreement. 60 The obligations under the Second Amended and Restated Credit Agreement with respect to the Term Loan and the Revolving Facility are secured by substantially all of our assets, with certain exceptions set forth in the Second Amended and Restated Credit Agreement, and are required to be guaranteed by certain material subsidiaries of the Company if, at the end of future financial quarters, certain conditions are not met.
The obligations under the Third Amended and Restated Credit Agreement with respect to the Term Loan and the Revolving Facility are secured by substantially all of our assets, with certain exceptions set forth in the Third Amended and Restated Credit Agreement, and are required to be guaranteed by certain material subsidiaries of the Company if, at the end of future financial quarters, certain conditions are not met.
Operating Expenses Sales and Marketing Fiscal Year Ended June 30, 2023 2022 % Change (dollars in millions) Sales and marketing $ 648.2 $ 1,018.9 (36.4)% As a percentage of total revenue 23.1 % 28.4 % Fiscal Years Ended June 30, 2023 and 2022 Sales and marketing expense decreased $370.7 million in the fiscal year ended June 30, 2023 compared to the fiscal year ended June 30, 2022.
Operating Expenses Sales and Marketing Fiscal Year Ended June 30, 2024 2023 % Change (dollars in millions) Sales and marketing $ 658.9 $ 648.2 1.7% As a percentage of total revenue 24.4 % 23.1 % Fiscal Years Ended June 30, 2024 and 2023 Sales and marketing expense increased $10.8 million in the fiscal year ended June 30, 2024 compared to the fiscal year ended June 30, 2023.
The following table presents a reconciliation of Adjusted EBITDA to Net loss, the most directly comparable financial measure prepared in accordance with GAAP, for each of the periods indicated: Adjusted EBITDA Fiscal Year Ended June 30, 2023 2022 2021 (dollars in millions) Net loss $ (1,261.7) $ (2,827.7) $ (189.0) Adjusted to exclude the following: Total other expense, net 60.9 74.1 10.4 Income tax expense (benefit) 3.7 19.6 (9.2) Depreciation and amortization expense 124.3 142.8 63.8 Stock-based compensation expense 319.9 271.8 194.0 Goodwill impairment — 181.9 — Impairment expense 144.5 390.5 4.5 Restructuring expense 193.0 237.5 — Supplier settlements 22.0 337.6 — Product recall related matters (1) 80.9 62.3 100.0 Litigation and settlement expenses (2) 102.8 118.6 35.8 Other adjustment items 1.0 8.4 43.4 Adjusted EBITDA $ (208.5) $ (982.7) $ 253.7 ______________________ (1) Represents adjustments and charges associated with product recall related matters, as well as accrual adjustments.
The following table presents a reconciliation of Adjusted EBITDA to Net loss, the most directly comparable financial measure prepared in accordance with GAAP, for each of the periods indicated: Adjusted EBITDA Fiscal Year Ended June 30, 2024 2023 2022 (dollars in millions) Net loss $ (551.9) $ (1,261.7) $ (2,827.7) Adjusted to exclude the following: Total other (income) expense, net (1) 76.8 60.9 74.1 Net gain on debt refinancing (2) (53.6) — — Income tax (benefit) expense (0.2) 3.7 19.6 Depreciation and amortization expense 108.8 124.3 142.8 Stock-based compensation expense 305.2 319.9 271.8 Goodwill impairment — — 181.9 Impairment expense 57.3 144.5 390.5 Restructuring expense (3) 67.1 193.0 237.5 Supplier settlements (4) (2.6) 22.0 337.6 Product recall related matters (5) (14.0) 80.9 62.3 Litigation and settlement expenses (6) 10.8 102.8 118.6 Other adjustment items — 1.0 8.4 Adjusted EBITDA $ 3.5 $ (208.5) $ (982.7) ______________________ (1) Primarily consists of Interest expense of $112.5 million, $97.1 million, (43.0), and Interest income of $35.1 million, $26.4 million, $2.3 million, for the for the fiscal years ended June 30, 2024, 2023 and 2022, respectively.
During fiscal 2022 and fiscal 2023, management identified various qualitative factors that collectively indicated that the Company had impairment triggering events, including (i) realignment of cost structure in connection with the Restructuring Plan, (ii) softening demand and (iii) a sustained decrease in stock price.
During fiscal 2022, 2023 and 2024, management identified various qualitative factors that collectively indicated that the Company had impairment triggering events, including (i) realignment of cost structure in connection with the restructuring initiatives, (ii) softening demand and (iii) significant decrease in the market price of certain long-lived asset groups.
Under this metric, a Connected Fitness Subscriber that cancels their membership (a churn event) and resubscribes in a subsequent period is considered a reactivation and is counted as a reduction in our churn count in the period during which the Subscriber resubscribes.
Under this metric, a Connected Fitness Subscriber that cancels their membership (a churn event) and resubscribes in a subsequent period is considered a reactivation and is counted as a reduction in our churn count in the period during which the Subscriber resubscribes. These metrics do not include data related to our App One Subscribers and App+ Subscribers.
Total other expense, net, was comprised of the following for the fiscal year ended June 30, 2022: • Interest expense primarily related to the Notes, the Term Loan, and deferred financing costs of $43.0 million; • Interest income from cash, cash equivalents, and short-term investments of $2.3 million; • Foreign exchange losses of $31.8 million; and • Other expense, net of $1.5 million.
Total other expense, net, was comprised of the following for the fiscal year ended June 30, 2023: • Interest expense primarily related to term loan, convertible notes, and deferred financing costs of $97.1 million; • Interest income from cash, cash equivalents, and short-term investments of $26.4 million; • Foreign exchange gains of $7.0 million; and • Other income, net of $2.9 million.
We expect the Restructuring Plan to be substantially implemented by the end of fiscal 2024. In fiscal year 2023 we continued to take actions to implement the Restructuring Plan. On July 12, 2022, we announced we are exiting all owned-manufacturing operations and expanding our current relationship with Taiwanese manufacturer Rexon Industrial Corporation.
In fiscal year 2023 we continued to take actions to implement the 2022 Restructuring Plan. In July 2022, we announced we were exiting all owned-manufacturing operations and expanding our current relationship with a Taiwanese manufacturer, Rexon Industrial Corporation.
On May 25, 2022, the Company entered into an Amendment and Restatement Agreement to the Second Amended and Restated Credit Agreement (as amended, restated or otherwise modified from time to time, the “Second Amended and Restated Credit Agreement”) with JPMorgan Chase Bank, N.A., as administrative agent, and certain banks and financial institutions party thereto as lenders and issuing banks.
Third Amended and Restated Credit Agreement On May 30, 2024, we entered into a Third Amended and Restated Credit Agreement (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Third Amended and Restated Credit Agreement”), with JPMorgan Chase Bank, N.A., as administrative agent, and certain banks and financial institutions party thereto as lenders and issuing banks.
Loss Contingencies We are involved in legal proceedings, claims, and regulatory, tax, and government inquiries and investigations that arise in the ordinary course of business. Certain of these matters include claims for substantial or indeterminate amounts of damages.
Loss Contingencies We are, or may become, a party to legal proceedings, claims, and regulatory, tax, and government inquiries and investigations that arise in the ordinary course of business. Certain of these matters include claims for substantial uncertainty or the amount of potential damages are unascertainable.
Research and Development Fiscal Year Ended June 30, 2023 2022 % Change (dollars in millions) Research and development $ 318.4 $ 359.5 (11.4)% As a percentage of total revenue 11.4 % 10.0 % Fiscal Years Ended June 30, 2023 and 2022 Research and development expense decreased $41.1 million, or 11.4% in the fiscal year ended June 30, 2023 compared to the fiscal year ended June 30, 2022.
Research and Development Fiscal Year Ended June 30, 2024 2023 % Change (dollars in millions) Research and development $ 304.8 $ 318.4 (4.3)% As a percentage of total revenue 11.3 % 11.4 % Fiscal Years Ended June 30, 2024 and 2023 Research and development expense decreased $13.7 million, or 4.3% in the fiscal year ended June 30, 2024 compared to the fiscal year ended June 30, 2023.
Because there is no payment on a paused subscription, we will no longer include paused Connected Fitness Subscriptions in our Ending Paid Connected Fitness Subscription count.
Because there is no payment on a paused subscription, effective as of the beginning of fiscal year 2024, we no longer include paused Connected Fitness Subscriptions in our Ending Paid Connected Fitness Subscription count.
In connection with the Restructuring Plan, we estimate that we will incur additional cash charges of approximately $40.0 million, primarily composed of lease termination and other exit costs, by the end of fiscal year 2024.
In connection with the 2024 Restructuring Plan, which includes any remaining restructuring activity under the original 2022 Restructuring Plan, we estimate that we will incur additional cash charges of approximately $40.0 million, primarily composed of lease termination and other exit costs, the majority of which are expected to be incurred by the end of fiscal year 2025.
For example, we have reduced our negative Free Cash Flow from $(2.4) billion in the fiscal year ended June 30, 2022 to $(470.0) million in the fiscal year ended June 30, 2023 (and we have reduced our negative Net cash used in operating activities from $(2.0) billion in the fiscal year ended June 30, 2022 to $(387.6) million in the fiscal year ended June 30, 2023).
For example, we have reduced our negative Net cash used in operating activities from $(387.6) million in the fiscal year ended June 30, 2023 to $(66.1) million in the fiscal year ended June 30, 2024.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeInflation Risk Given the recent rise in inflation, there have been and may continue to be additional pressures on the ongoing increases in supply chain and logistics costs, materials costs, and labor costs.
Biggest changeInflation Risk As a result of inflationary conditions, there have been and may continue to be additional pressures on the ongoing increases in supply chain and logistics costs, materials costs, and labor costs.
We are primarily exposed to changes in short-term interest rates with respect to our cost of borrowing under our Second Amended and Restated Credit Agreement. We monitor our cost of borrowing under our facilities, taking into account our funding requirements, and our expectations for short-term rates in the future.
We are primarily exposed to changes in short-term interest rates with respect to our cost of borrowing under our Third Amended and Restated Credit Agreement. We monitor our cost of borrowing under our facilities, taking into account our funding requirements, and our expectations for short-term rates in the future.
A hypothetical 10% change in the interest rate on our Second Amended and Restated Credit Agreement for all periods presented would not have a material impact on our consolidated financial statements.
A hypothetical 10% change in the interest rate on our Third Amended and Restated Credit Agreement for all periods presented would not have a material impact on our consolidated financial statements.
Additionally, because we purchase component parts from our suppliers, we may be adversely impacted by their inability to adequately mitigate inflationary, industry, or economic pressures. 66
Additionally, because we purchase component parts from our suppliers, we may be adversely impacted by their inability to adequately mitigate inflationary, industry, or economic pressures. 65
Our business could be more affected by inflation in the future which could have an adverse effect on our ability to maintain current levels of gross margin and operating expenses as a percentage of net revenue if we are unable to fully offset such higher costs through price increases.
Our business may continue to be impacted by inflation in the future which could have an adverse effect on our ability to maintain current levels of gross margin and operating expenses as a percentage of net revenue if we are unable to fully offset such higher costs through price increases.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Interest Rate Risk We had Cash and cash equivalents of $813.9 million as of June 30, 2023. The primary objective of our investment activities is the preservation of capital, and we do not enter into investments for trading or speculative purposes.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Interest Rate Risk We had Cash and cash equivalents of $697.6 million as of June 30, 2024. The primary objective of our investment activities is the preservation of capital, and we do not enter into investments for trading or speculative purposes.

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