This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk04: Good day and welcome to the Peloton Interactive Third Quarter 2022 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, press star then two. Please note this event is being recorded and those in the question queue, please limit yourself to one question and one follow-up. I would now like to turn the conference over to Peter Stabler, Senior Vice President, Investor Relations. Please go ahead.
spk13: Good morning and welcome to Peloton's third quarter fiscal 2022 conference call. Joining today's call are CEO and President Barry McCarthy 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. 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 website. During this call, we will discuss both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP financial measures is provided in today's shareholder letter. With that, I'll turn the call over to Barry.
spk03: Morning, everyone, and thank you for joining today's call. Earlier this morning, we released the letter to shareholders, which discusses our strategy for growing Peloton's business and the Q3 performance. I'm not going to repeat what was said in the letter except to thank our employees for their hard work and our 7 million members for giving our work meaning and purpose. Before we begin today's Q&A, I'd like to acknowledge the contributions of William Lynch to the growth of Peloton. As part of the leadership transition at Peloton, Williams decided to resign from our board to pursue other interests, and we wish him continued success in his next endeavor. Operator, let's turn to our first question.
spk04: We will now begin the question and answer session. To ask a question, press star then 1 on your touch-tone phone. To withdraw your question, press star then 2. And if you're using a speakerphone, it may be necessary to pick up your handset before pressing the keys. And as said before, please limit yourself to one question and one follow-up, please. The first question comes from Doug Anmuth with JPMorgan. Please go ahead.
spk14: Thanks for taking the questions. Trying to understand the recent hardware price reductions just in the context of your bigger plans. Are they just an effort to move inventory and perhaps drive a little bit more revenue near term? And do you really envision SaaS becoming the primary or only business model over time besides the digital app? And what are you seeing in those early tests? And what could that service look like? Thanks.
spk03: Hey, Doug. So the price increase was geared towards moving hardware and alleviating some of the stress we're seeing in inventory. We've also learned quite a bit about price elasticity and have seen a significant increase in total revenue as a result of the price decrease. So I'm feeling pretty good about that, and I'm looking to sustain it. The framework for thinking about unit economics begins and ends with LTV. and then the CAC expense associated with the LCD. And today we're operating, we operate in the range of, I would say broadly two to one to three to one, depending on seasonality, which I feel really good about. What was the third part of the question? Oh, just what the fast will be a compliment to to our business. So they're absolutely members who want to own the bike outright. And we're delighted to sell it to them. And then there's others for whom that the cost of entry poses a barrier. And roughly 53 percent of our customers year to date, by the way, have household incomes of less than one hundred thousand dollars. So FAST is an opportunity for us to continue to introduce consumers' mass market to our value proposition. I'm not sure what the mix will be over time. We need to test our way into an understanding of that as well as an economic model that enables us to earn an attractive profit. return on investment. What we can say with certainty at the moment is that we're seeing faster growth than I had hoped we would see. So I'm enormously encouraged by the early test results, but it's early. The total number of units that we placed is so relatively small. It's on the order of 1,000. We're looking to aggressively expand the test on our e-commerce platform. I think we'll be fully live with an A-B test by the end of June. We've got some engineering work to do to enable that. Maybe it'll be a couple weeks sooner. We'll have to see. So that's complementary to the core business. Not yet sure what the mix over time will be or what the ultimate pricing will be, but we need to test our way into figuring that out. Thank you. Appreciate it.
spk04: The next question comes from Justin Post with Bank of America.
spk02: Please go ahead. Great. A couple questions. Thanks. Can you help us understand the churn contemplated in your sub-growth outlook for Q4? It looks like you have subs of 1% quarter over quarter. Just the dynamics of the quarter with the testing you're doing and then the churn. And then OPEX was up 19% year over year. Any update on your cost-cutting efforts and whether you're, you know, trending ahead or below your plan? Thank you.
spk03: I'll take the churn part, and Jill will take the cost-cutting part. So we're hedging our bets a little bit in guidance related to churn. We saw a very small increase in cancellations when we announced the price increase on all-access service from $39 to $44.00. but the price change doesn't actually hit until June 1, and so we're still a little bit uncertain about what, when the dust settles, the turn impact will be. To date, I would say it's been quite small.
spk08: And on the restructuring side, if you look at the OPEX and COG savings in the second half of fiscal 22, so what's already achieved, We expect about $165 million of OpEx savings in the second half, and we're certainly on track for $450 million in OpEx savings for fiscal 23. In terms of COGS, we expect about $30 to $35 million in savings in the second half already baked in, and we're on track for about $100 million of COGS savings in fiscal 23. As we outlined last quarter, this is something we're incredibly committed to, and we've already made a lot of progress, and I think culturally the organization understands what we have to do.
spk04: Great. Thank you. The next question comes from Yousef Swali with Truist Securities. Please go ahead.
spk05: Great. Thank you very much. Barry, just in terms of supply chain issues, can you maybe just clarify a bit how Andy and Angel are improving the process? I think you had a nice mention of them in the letter. And just broadly speaking, your predecessor had followed the strategy of maybe owning a bunch of productive assets, including pre-core assets. Is that still strategic to the direction of the company and how that fits in your overall solution? Thanks.
spk03: Well, about the supply chain, let me say that I don't think we had the visibility that maybe we would have wanted, and we had a number of systems issues related to supply chain that we needed to address. And we've taken steps to do both. I think we also hadn't made quite as much progress in right-sizing the production as we needed to. We've been working as closely with our partners in the supply chain as we needed to related to the ordering of long lead time parts. And so... Andy and his team have taken important steps in addressing all of those issues. And in the process, we have much greater visibility into how the supply chain issues affect the business overall. So I'm excited. It was an area where we had work to do. We're making a lot of progress. We'll make more, but I'm feeling pretty good about that piece of the business, which characterized it as an urgent need when I stepped in, and I'm proud of the progress we're making. With respect to pre-core, there were a couple of things we were trying to accomplish with that acquisition. Bolsters, our go-to-market strategy in commercial, which along with corporate wellness is an important area of growth for us in our core business. On that, I haven't spent a lot of time yet thinking about or looking at the pre-core business. For the moment, I just want to put a pin in it. I'm not signaling that it's not core, but I'm not signaling that it is core either. There have been so many other issues to address. I just haven't gotten there yet.
spk05: Great, thank you.
spk03: But the overarching strategy is, look, it's all about connected fitness. It's about the magic that happens in the tablet, right? We need to be good at hardware, but being good at hardware is not nearly sufficient. The thing that makes us special, that accounts for the low churn rate that drives the outrageously high net promoter scores is all the magic that Jen Cotter and her team do. and our instructors infuse into the service, and we need to be absolutely great at that. And that calls for, I think, a shift in the investment priorities of the business. We've just compared where we've spent money historically in order to double down on the things that have made us great.
spk05: Great. Thanks for the clarification, Barry.
spk04: The next question comes from Ron Josie with Citi. Please go ahead.
spk01: Hey, thanks for taking the question. Maybe I want to talk a little bit more or help to understand, better understand gross margin assumptions and third-party delivery. I think in the note, in the letter, we talked about lower gross margins for product in the range of $300 million. So maybe, Jill, help us understand where these savings are coming from. Is it greater efficiencies in manufacturing, third-party delivery? And, Barry, you mentioned some issues in Last Mile. maybe help us understand how those have been fixed or what's going on there. And then lastly, just still, I think in the letter we talked about free cash flow timing changes and how that impacted free cash flow this quarter versus going forward. Any insights there would be helpful. Thank you.
spk08: Sure. So I think what I'll talk about first is connected fitness gross margin, right? So what you have happening currently and what we saw in Q3 is or a few sort of one-time items, right? You have an increase to trad plus returns reserve. We also took additional inventory reserves around accessories, primarily driven by a strategy shift in the way we went to market with the Peloton guide. And we also had higher scrap reserves for bike, which essentially is not resaleable inventory that has been returned to us and cannot be refurbished. And what we've also seen which we will experience in Q3 and Q4, is higher detention and demurrage and storage costs, given the fact that our inventory position is higher than we expected, given the decline in our demand forecast. So a lot of these issues are one time in nature or short term in Q3 and Q4. In terms of just the overall restructuring efforts in COGS, though, There's a lot behind that, right? Some of that was related to the shift to 3PL, right, which we did realize some savings certainly going from a much larger than we needed fleet of our in-house delivery. And so moving to 3PL helped us variabilize that expense and reduce some of that fixed cost overhead. That was a challenge to leverage with lower demand volumes. But there's a lot more optimization we can do here. There's more we can do in better warehouse management, better optimization of our labor structure. So that's part of what I think we can see on the horizon for fiscal 23. And what I would add to that is next year we've negotiated better freight rates, which we've talked about. I do think there is future opportunity in the longer term to look at better procurement better sourcing and better product margins as a result of reworking the way that we're designing and building our products and taking some costs out. And then lastly, I think on warranty management, if we deliver products better, if we service products better, I think there's a way for us to, with improved quality, to also bring down our cost of warranty. So I think there's a lot for us to do within that segment over the next year or two.
spk03: As it relates to last mile, let me say we have parts of the world like Australia where partnerships with 3PL work seamlessly for us and users have a good experience. When we transitioned to 3PL after the restructuring, hadn't put in place any systems integration that enabled us to work in a seamless way with those partners. And as a consequence, our members who were being serviced by some of those partners had extremely frustrating experiences. So to begin with, when we transitioned to 3PL, there were about 10,000 orders in our system that got transferred to 3PL. That means right out of the box, 10,000 people got rescheduled. And we did nothing to communicate with those people initially about that transition. And then many of them had deliveries that were rescheduled and rescheduled and rescheduled. And we had no ability in our customer service organization to see into the delivery schedules of our 3PL partners to help deal with delivery issues that our members were experiencing. These are just some of the examples of some of the implementation-related issues that we've experienced that have created some membership-related issues that have been attacks on our net promoter score that we're looking to address on a go-forward basis.
spk08: I'm sorry. I just realized I missed part of your three-part question on free cash flow. Certainly, as outlined in the letter, we're focused on getting to free cash flow positive in fiscal 23. And there's really four drivers, and one of those is obviously growing the business, which we outlined in the shareholder letter, the various strategies that we're going to employ over the next several months to grow our subscriber base. We have multiple levers in connected fitness margin improvements, Again, we've outlined a lot of these, so I won't rehash them. But, again, a lot to optimize to get back to a positive connected fitness gross margin structure. Restructuring savings we've touched on are on track. Next year we expect significantly lower CapEx spend. We expect to sell the land in the facility that we purchased for our Ohio manufacturing facility. And then, of course, most importantly, inventory we expect to turn from a source of cash or use of cash to a source of cash in fiscal 23.
spk03: Let me just jump in here and say with respect to free cash flow, the objective here is to get the business to positive free cash flow in FY23, just full stop. And with the money that we raised in the term loan, I'm very confident we've got plenty of capital to do that. regardless of what happens in the economy, will stop. So to the extent that there are any concerns amongst investors about our ability to do that, I don't share them, and I want to be clear about that.
spk13: Next question, Tom.
spk04: The next question comes from Shweta Kajaria with Evercore. Please go ahead.
spk10: Thank you very much. Let me try two, please. You mentioned several growth drivers. One of them was third-party retailer partnerships. Possible to please provide a little bit more color in how the economics of those partnerships would work? Understood it may be very early, but how you're thinking about it perhaps. And then the second question is another growth driver you called was adding value prop of digital app subscriptions. So as that subscription base grows, where do you think churn rates could shake out over the next, call it a couple years, with growing digital app subscribers as well as connected fitness subscribers? Thank you.
spk03: I don't know the answer to the second question, honestly. And until we know what the the monthly revenue is, the gross margin, and the acquisition cost, won't really have context for thinking about the churn. I know from experience, why is that? Because I know from experience that the way you build a successful subscription business model is by managing the interplay of SAC churn and gross margin, and no one of them independently of the other two. So I realize that may not yet be satisfying, but it is what it is. We need to figure out how to widen the marketing funnel and to use the digital app as a vehicle to do that. Could be some premium kind of model, could be a straight subscription model, not yet sure. The consumer mix is about 80% female, 20% male. I think we need to drive it more towards, you know, an Internet norm of kind of 50-50. The net promoter, sorry, the unaided brand awareness is like 4%, so it's the greatest app nobody's ever heard of. And we absolutely need to fix that. And, of course, because it's relatively lightweight, it has the potential to grow rapidly across geographies. And expanding the business internationally is one of the priorities. So the first part of the question related to third-party retailers. I'm not actually going to talk about that today other than I wanted, I thought it was important given the strategy that preceded me to signal a shift, a potential shift. We're in discussion with several potential retail partners now. I would say it's still early, early enough for us to have a sense for what some of the cost-benefit tradeoffs might be, but too early for us to talk publicly about it. No reason particularly to think that any deal that we were able to negotiate would be different than anybody else who distributes hardware through third-party retailers.
spk10: Okay. Thank you, Barry.
spk04: The next question comes from Artin Kacharian with UBS. Please go ahead.
spk07: Hi. Thank you for taking my question. I was wondering if you could walk through the hardware versus software margin outlook for Q4 and what makes up the 31% guidance because it implies meaningful improvement versus Q3. So I'm just trying to understand sort of how you get there.
spk08: Yeah, so I think what you can see on the subscription margin is probably versus Q3 a slight continued leveraging of fixed costs, and we'll have a small benefit from the pricing increase from one month of that. But remember, most of our costs within subscription are variable. On the connected fitness side, you know, we expect a negative margin. There's a few factors at play. We just reduced our prices pretty meaningfully across the portfolio back in April to drive scale and drive growth. But we also have some items that are consistent with Q3 around managing our excess inventory. We're still going to see elevated detention and demurrage and storage costs, but we think those will largely abate as we move through fiscal 23. So, those are not permanent. And I guess the third factor in connected fitness margin is going to be around logistics. Again, with a lower demand forecast, we're not getting the fixed cost leverage that we would have expected within logistics. But our new supply chain leadership team has only been here for about six weeks, and this is certainly an area of focus to get that better optimized. And as I said previously, with labor force optimization and better utilization of our warehouse space, I think there's a lot we can do in the short term to make some good improvements.
spk07: Thank you. That's helpful. And then just a quick follow-up. Is there anything you could share on price elasticity of demand that you saw as a result of price cuts? Anything you could sort of quantify, understand, commentary could be limited given some of the competitive nature of pricing in general. but anything else you could share in terms of demand change that you saw as a result of your pricing initiative? Thank you.
spk03: Well, we talked about the unit increase in the letter, right? So that was on the range of 70%. And the revenue increase was less, of course, but it was also pretty dramatic. Memory, I think, is on the order of 50%. as compared with sort of the baseline growth we were seeing before we made the price change. So, it's abundantly clear that the business would better serve as a result of the reduction. Now, still remains to be seen what the net impact is once the price increase kicks in in June, but early indicators are at that. that the turn related to that will be low, but we won't know until we know.
spk07: Thank you very much.
spk04: Next question, Tom. The next question comes from John Blackledge with Cowen. Please go ahead.
spk11: Hi, good morning. This is James on for John. In the letter, you mentioned rolling out additional international markets. What geography should we be thinking about next? Are you still focused on Latin America and European adjacent markets? Any color on timing would also be helpful. And then as a follow-up, you mentioned the goal to reach 100 million members. Jill, could you provide an update on how you're thinking about it across the regions you're currently in? I think it's been a while since the last update, which I think was around 20 million global, Sam, back in 2020. Thank you.
spk03: Well, with respect to international, I'm not sure yet. And in part because we're still in the middle of developing our final FY23 plan. One, two, there are a finite number of resources to spread across the business. The threshold question for us is how many of those resources to allocate to growth in international. It's something we need to be able to figure out how to do. The reason I say that is if we were to look, by way of example, at subscription revenue growth in the current quarter, in North America it was 53%, but in international it was 92%. So international has potential to drive a lot of growth. But the more growth it drives early in its development, the more money we lose. And since the overarching goal is to get to positive, sustained positive cash flow for the business in FY23. Positive cash flow trumps growth. So, you know, TBD, now there are things we are looking at internationally, which will make it more economical for us to launch new markets. I'm thinking particularly about last mile delivery. An example would be just illustrative. I don't mean to do any signaling, but today our bike, our tread has to be installed. But a much simpler solution would be if we designed it and shipped it in a way that it could be delivered to FedEx. you wouldn't have to be home to receive it and have it be installed, and it would cost significantly less, and it would be much easier logistically for us to launch new international markets. Some of the ways we're thinking about flexing the model in order to make accessible to us markets that might not otherwise be, but the First, we have to make the asset allocation decision. And in order to do that, we need to weigh the trade-offs and the growth opportunities that we see in the business. So new geos is one growth factor. New products is another. I spoke earlier about consumer wellness, corporate, another growth opportunity, all of which we would like to lean into over the next 12 months.
spk11: And then for Jill, just to follow up on if you could get any color on the SAM, which I think was $20 million when last provided.
spk08: Sure. And obviously that analysis hasn't been updated for the most recent price change, which I suspect will significantly extend TAM since that's the primary barrier. But the $100 million goal, I don't know, Barry, if you want to jump in, but obviously it's a long way from where we sit today. We have often looked at the number of people that have belonged to a gym globally as an interesting data point to understand the number of folks who are interested in fitness, and that number is 180 million. We believe that tech-enabled fitness has a massive opportunity to expand the market, and we think that software will drive a transformative experience, but we've got to evolve the strategy fairly significantly to get to that 100 million, and that could include SaaS, that could include further expansion and scaling of the app, much more international growth. And so there's a lot of different pillars to get to that, but that's a long way away.
spk03: Yeah, look, we can't get there without making the digital app a big success. That's pretty clear. And we can't get there without having a broad-scale international business. It's clear that, you know, people outside the United States also care about fitness, and there's an opportunity for us to capitalize on that. We'll know how big the TAM is when we get done at vetting it. But I know of digital apps that already have more than 100 million people that are focused on fitness, and I can't for the life of me think why, given our success early in the category, that we couldn't be one of those digital apps. So stay tuned.
spk04: The next question comes from Eric Sheridan with Goldman Sachs. Please go ahead.
spk12: Thanks so much for taking the questions. Barry, great to reconnect. Barry, I'd love to take a step back for a minute and just get your perspective, having been inside the business now over the last couple of months. What did you find that surprised you to the upside from some of your outside perspective? Where are you finding that you need to spend money? more of your time or you think there's a bit of more effort that has to be applied to sort of get the business to where it goes over the medium term? Just sort of broader question on your perceptions and how that's resulted in how you spend your time and are realigning assets. Thanks.
spk03: Let me make sure that I got the question. What have I found internally that makes me optimistic about the success of the business?
spk08: Surprise.
spk03: What surprised me?
spk08: Opportunity.
spk03: Well, you know, the nature of turnarounds is they're full of surprises. I would say, you know, the biggest surprise in the quarter was the cash flow. And related to that, the biggest surprise was our ability to quickly address it. without diluting existing shareholders and adequately capitalizing the business. So, I was really, really pleased with the way the team executed to address that particular issue. I found more talent in the building, honestly, than I expected to find. And which is, you know, incredibly important if you're going to be able to execute. We were weaker on the everything supply chain than I expected, but we were fortunate to get Andy. Andy's moved quickly to build out his team, and so I'm pretty optimistic about our ability to address that. And then I would say lastly, I was surprised to discover that when I first introduced the concept of fitness as a service, the business had already been thought about it two years ago. and then got sucked into the vortex of COVID. And so never really leaned into the opportunity, but had already done thinking about it. And so we were able to move on it faster than we would have if they hadn't already thought about it. And then lastly, I would say I'm really encouraged by the growth and my I was hoping we'd get to 70 percent uplift. I thought that'd be pretty spectacular, and we're pushing north of 90 at the moment. It remains to be seen whether the, you know, the value proposition that we're pushing will drive, you know, the kind of ROI that we would like to see to justify the investment. But I think that's a really big idea, and it would change dramatically The P&L, if we roll it, you know, there is no hardware gross margin in that business. We own it. There's no transfer. We own the hardware. There's no transfer of title. We amortize the hardware over the expected useful life of the bike. The frame has a different, has a longer shelf life than the console. I expect the gross margins in that business to push high 70s, low 80s. And I think we would have super attractive customer acquisition costs. So I'm just in love with the whole thing, and nothing I've seen yet gives me pause related to it. I know it won't be a straight line from here to there, and we may have to do some engineering, but that's been the biggest surprise on the upside since I walked in the door, I would say.
spk04: Next question, Tom. The next question comes from Amisha Sherman with Bernstein. Please go ahead.
spk09: Thank you for taking my questions. So your point around digital being the tip of the spear and the leading force towards getting towards 100 million, How does that fit with your point of international? Would you be considering digital only or digital first expansion internationally to get around some of the drag on margins you talked about earlier in the call? And then related to that, last quarter you talked about going dark on marketing to understand the baseline. Has that plan changed now that you're thinking about top of the funnel and improving brand awareness? Thank you.
spk03: Yeah, going dark on marketing is not my plan. And so mostly I've been focused on what I think makes sense for driving business growth. And the frame of reference I have brought to that decision-making is LTV to CAC. As it relates to international growth and the digital app, the answer to your question is yes. but remains to be seen what actually we're going to, what the value proposition for consumers will be. You know, what's going to be in the app and how do we position it relative to all access? But historically, the approach has been all access first, digital later, kind of maybe if we get to it. And I think we need to change the order.
spk04: The next question comes from Rohit Kulkarni with MKM Partners. This will be our last question. Please go ahead.
spk00: Great. Thanks for squeezing me in. A couple of questions for you, Barry. Can you talk about the obvious holes in talent that you're trying to fill here at Peloton? You talk about tech debt. Also, any examples as to if you're able to resolve the tech debt, what improvements in processes, execution, timeline? that he could have. And then maybe one kind of question on the 800 million annual run rate savings by fiscal year 24. Why does it take so long to achieve these savings and not just by next fiscal year itself as you are trying to get to cash flow break even? Is there a scenario that you could get these run rate savings a lot sooner?
spk08: You want me to take that restructuring question first? Sure. So I can speak on the COG side. I mean, really, when you think about having, you know, having improved cost per unit, right, through better design procurement, you have to sell through your existing inventory. I think we've well broadcast our inventory position at this juncture, but, you know, it will take us through fiscal 23 to sell down. And so... that is one of the main reasons for the longer timeframe on getting to a better cost per unit and being able to realize a lot of the COG savings, which I think we said 300 million by fiscal 25, 24, end of 24, sorry. And then on OPEX, we are going as absolutely fast as we can. There are certain things that take a little bit more time as we move out of certain real estate that we occupy from a corporate perspective. But we are moving as quickly as possible. And as I said, of the 500 million, we're expecting 450 within fiscal 23. And our goal was to get to that $500 million run rate by the end of fiscal 23. But COGS will take more time.
spk03: And I'm going to say some of that, those savings are run rate related. So taking $200 million out of marketing. Well, partly that's a function of taking a different structural approach to how we market the product and the savings get realized over time. Same thing with respect to some of the savings that we have projected that we will achieve in J&A. The first part of the question was related to imbalance of what? Talent. Well, None that I want to highlight on the call. People here at Peloton are getting tired of me saying talent density is job one, talent density is job one. So, if there are additional additions that are going to happen as a team, you'll hear about it after the fact, not before the fact. You're going in expectation. Your understanding should be that there's maybe more talent in the building than you might have expected. Tech debt. Well, so let me tell the story this way. The business was crowdsourced. There was a bunch of software that was hacked. um that you know the business started to have success like all tech companies i've ever been associated with all of the resources of the business were focused on engineering and product in order to accelerate growth and then covet hits and so the business explodes from 700 000 subs to 3 million subs and all those systems related issues are still present in the in the business today so the order management system is still you know the original code that was hacked when the business was, you know, first organized. And pretty much all of that needs to be rewritten. And then there are a bunch of downstream issues that happen because of the way that the order management system was architected and speaks to all the accounting-related systems, the ERP system. You know, if you work in customer service, or I think I've heard there are 13 or 16 different screens you look at in order, you know, to be able to see the entire, you know, customer history. And Andy's just hired a new head of customer service, and, you know, we're going to be addressing some of those issues. So when you actually call up, you know, our customer service reps are actually able to be helpful because we've organized all that information, you know, on one screen. So those are, you know, kinds of, those are examples of some of the, the kinds of issues we face. Others relate to our ability to push code in our engineering team and the productivity of engineers. This is an issue, for instance, in the last couple of years that Spotify very effectively wrestled to the ground. But even after it was public, it was an issue that they had to address and we have to address it here as well. And so as a consequence, it slows down the speed with which we're able to A-B test. and the speed with which we're able to, you know, update our e-commerce platform. You see that in our ability to quickly get to market, to A-B test, fitness as a service, for instance. I mean, really, we have to wait until the end of June to be able to A-B test on the website. That's something that would take a day and a half at Netflix, you know, even early on. But it is what it is. And, you know, we'll get through it. We understand what the issues are now. And we'll get, you know, the kind of expertise we need in-house to get it fixed. These are not unsolvable problems. They're not problems that companies like us haven't seen. We just have to get our arms around it and, you know, fix it, and then 12 months we'll be in a much better place than we are today. So they don't threaten the business. It just slows down, and we move a little slower than we'd like to as a consequence.
spk04: This concludes our question and answer session, and I'll turn the conference back over to management for any closing remarks.
spk03: Okay. Well, I'm sorry that we sort of ended on that downer note, because actually, notwithstanding the stock price, feeling pretty optimistic about the path ahead and the number of levers that we have to turn to improve the operating performance of the business. I don't mean to sound Pollyannish, but I'm hopeful that someday soon we're going to look back on this call as one of the important turning points in the business and look forward to checking in with you next quarter on our progress.
spk04: The conference is now concluded. Thank you for attending today's presentation and you may now disconnect.
Disclaimer