Peloton Interactive, Inc.

Greetings and welcome to the Peloton Interactive Third Quarter 2021 Earnings Call. During presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question and answer session. At that time, if you have a question, please press the 1 followed by the 4 on your telephone. If at any time during the conference you need to reach an operator, please press star 0. This conference will be recorded Thursday, May 6, 2021. And now I'd like to turn the conference over to Peter Stabler, Head of Investor Relations. Please go ahead.

Thanks, Scott. Good afternoon and welcome to Peloton's fiscal third quarter conference call. Joining today's call are John Foley, our co-founder and CEO, President William Lynch, and CFO Jill Woodworth. Our comments and responses to your questions reflect management's views as of today only and will include statements related to our business that are forward-looking statements under federal securities law. Actual results may differ materially from those contained in or implied by these forward-looking statements due to risks and uncertainties associated with our business. As a reminder, our question and answer session during today's call is for our covering analysts only. For discussion of the material risks and other important factors that could impact our actual results, please refer to our SEC filings and today's shareholder letter, both of which can be found on our investor relations websites. During this call, we will discuss both GAAP and non-GAAP financial measures. The reconciliation of GAAP to non-GAAP financial measures is provided in today's shareholder letter. With that, I'll turn the call over to John.

Thank you, Peter. Good afternoon, everyone. Thank you for joining us today. I want to start by giving you an update on recent events regarding our treadmill products. As a company, we believe strongly in the future of at-home connected fitness, and we know we have a responsibility to be an industry leader in product safety. We are a members-first organization, and that means for all of us at Peloton, the safety of our member community comes first. I want to be clear, though. Peloton made a mistake in our initial response to Consumer Product Safety Commission's request that we recall our TRED Plus product. We should have been more open to a productive dialogue with them from the outset. As a members-first organization, promptly stopping the sales of our products while we cooperated more closely with the CPSC was something we should have considered sooner. For that, I apologize. Given our goal of being the largest and safest home fitness brand in the world, yesterday we took an important step, initiating voluntary recalls and stop-use directives for our TreadPlus and Tread products in collaboration with the CPSC the Consumer Product Safety Commission. That was the right decision at this time. We are working to build and introduce even more safety measures and to help set new industry safety standards for all treadmills. We want to provide a safe, world-class fitness experience for our members, people who want the convenience and value of being able to work out from home. Specifically, our voluntary recall involves immediately stopping sales of both products in all markets where they were available. We will also postpone the launch of TREAD in the U.S., which was previously scheduled for May 27. With regard to the TREAD+, our work with the CPSC involves building an extra layer of safety features for that product. This will include a digital passcode that will further protect against unauthorized use, a feature that we expect to deploy via an over-the-air software update in the coming days. We will be working hard in the coming weeks and months to develop additional physical hardware to further enhance the safety of TREAD+. We will, of course, share details as we develop a plan and a timeline for these additional safety features, but bear in mind that hardware features take time to develop, test, and manufacture, and in this case, the CPSC will need to approve our proposed enhancements. With regard to the tread, which is our new lower-priced treadmill product that features a low-profile traditional belt design, we are also temporarily stopping sales. As a reminder, this product was only available in Canada and the UK. And as we have stated previously, we have been pleased with the reception and reviews. In addition, a small number of tread units were made available to select US members over the past few months in a controlled rollout to gain additional insights and feedback on the product ahead of launch. While the new tread has been well received, there have been some minor quality issues related to how the tablet console is attached to the tread. The console, or touchscreen, attaches to the tread with screws. In a handful of cases, we have had reports of the screws loosening, causing the console to detach from the unit. We notified the CPSC and the safety regulators in the UK and Canada last week about this issue and we'll be working with them to review our proposed solution. We expect to offer the tread for sale as soon as the CPSC's full review of the product is completed. While this process typically takes six to eight weeks, it could take longer, so we can't offer an on-sale or revised launch date at this time. In the meantime, we will continue to produce the tread, sorry, we will continue to produce tread content in anticipation of our tread launch as well as to support our nearly 900,000 digital subscribers. The passcode we are developing for the Tread Plus will also be released on the Tread by the end of the fourth quarter of fiscal 2021. As the largest home-connected fitness brand in the world, we want to be leaders in safety. Our goal is to have the best safety features for treadmill products on the market, the most engaging content from our roster of world-class fitness instructors, and the most innovative software that unites our community. While there will be a short-term financial impact due to the steps we're taking, we are putting and will continue to put our members first. In a moment, Jill will review how these actions are expected to impact our financial outlook for Q4. Now turning to some other recent announcements. On April 1st, we officially closed our purchase of PreCore. The PreCore team adds greatly to our already talented supply chain, manufacturing, and R&D teams. In addition, we expect that PreCore will help us significantly grow our commercial opportunity in hospitality, colleges and universities, corporate campuses, and multi-unit residential buildings. To our PreCore teammates, a hearty welcome. We're thrilled to have you join us. The integration process with Precor is advancing according to plan, and we look forward to offering you updates in the future as we refine our go-to-market strategy. And to be sure, we continue to expect to produce Peloton products, both bikes and treads, here in the US by the end of this calendar year. We are also excited to share some great new features announced at our virtual Homecoming celebration last weekend. As many of you know, Homecoming is our annual member community event, with this year's event bringing together over 200,000 Peloton members for a three-day weekend featuring special live classes and community discussions. Newly announced features include a major expansion of Peloton programs, which are guided fitness programs designed to help members stay on track to achieve specific fitness goals with weekly progress reports. We also launched Strive Score, which is a personal, non-competitive, metric-based based on your heart rate. Using a compatible heart rate monitor, Strive Score gives you credit for all the work you do with Peloton, even when you're off the bike or off the tread, engaged in floor-based exercises. With many members taking scenic rides and runs, we're also very excited to announce a major upgrade to our scenic experiences. And finally, we will be introducing a pause button for our on-demand classes. one of the most member requested features for years. We know sometimes life's other duties intrude on your workouts, and while maintaining the integrity of the leaderboard, members will soon be able to pause the workout and seamlessly pick up where they left off. Member reception of these announcements has been great, and we're hard at work building more features to motivate and delight our member community. In fact, From a hardware, software, and content standpoint, we've never been more excited about our future roadmap. Fiscal year 2020 is going to be a year of major innovation for us. Now, I'll hand it over to Jill to review our financial results and updated outlook.