Peloton Interactive, Inc.

Good day and welcome to Peloton's second quarter fiscal year 2026 conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Mr. James Marsh, Senior Vice President of Investor Relations. Please go ahead.

Thank you, operator. Good morning and welcome to Peloton's second quarter fiscal year 2026 conference call. Joining today's call are Peloton Chief Executive Officer and President Peter Stern and Chief Financial Officer Liz Coddington. Our comments and responses to your questions reflect management's views as of today only and will include forward-looking statements related to our business 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. Please refer to our SEC filings and today's press release, both of which can be found on the Investor Relations website, for discussion of the material risks and other important factors that could impact our results. During this call, we will discuss both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP financial measures is also provided in today's press release. I'll now turn it over to Peter.

Thanks, James. This quarter, we made significant progress on our multi-year strategy of evolving Peloton from a connected fitness company to a connected wellness company. An ambition anchored in the societal shift from a focus on lifespan to healthspan. Peloton's platform, equipment, and beloved brand position us to capture more market share within the growing $7 trillion global wellness economy and to deliver ever greater human impact. As I shared in my annual shareholder letter last month, our path forward is focused on expanding our leadership in cardio plus strength, growing our global commercial footprints, and using AI-driven personalization to help our members across a wider array of fitness and wellness domains. As we begin the new calendar year, we are more prepared for this evolution than ever, as we have built a strong financial foundation. Our cost discipline has enabled us to reduce our net debt by 52% year over year. The hard work we've done to improve our balance sheet enables us to both invest in our long-term growth and, as the year progresses, put in place an anticipated lower cost and more flexible capital structure. In the second quarter, we unveiled a number of exciting updates to our magic formula of industry-leading equipment, intuitive software powered by AI, and unmatched human instruction. This included the Peloton cross-training series, our first-ever hardware portfolio refresh, Peloton IQ, our AI-powered personalized software, and new instructors focused on innovative strengths, yoga, and Pilates offerings. We launched all of this going into our peak holiday sales period, which delivered 39% adjusted EBITDA growth year over year in Q2. We continue to drive higher margins and reduced operating expenses thanks to our cost restructuring efforts. This quarter also highlighted the resilience of our subscription business, as we enjoyed strong member retention. Churn was lower than expected during a quarter with a price increase, underscoring the high value members placed on our integrated experience. Revenue for Q2 came in below guidance, primarily due to fewer than expected equipment sales of the cross-training series to existing members. However, we were encouraged by the mix of existing members who purchased a new category of equipment as more than 70% of cross-training series equipment sales to existing bike owners were tread and row products. Our installed base of equipment is quite durable and member satisfaction is extremely high as evidenced by our consistently high net promoter scores and low churn. We believe these factors likely contribute to a longer upgrade cycle than we had anticipated. In contrast, with sales to new members coming roughly in line with our expectations for the quarter, we remain confident that our product lineup featuring the new Cross Training Series will continue to attract new members. We are also encouraged to see sales of the Cross Training Series lean more towards the plus line for our bikes, indicating that its premium features and camera vision-based personal coaching are important purchase drivers for consumers. Our current marketing focus is on product education, helping both existing and prospective members discover the full power of what we've built. Swivel screens on all hardware products, more comfortable saddles on our bikes, as well as plus-line feature upgrades. including the movement tracking camera that provides form feedback, rep tracking, and weight suggestions. Reviewers from trusted publications have praised the reinvention of our product lineup, including the Wall Street Journal, Women's Health, Men's Health, PCMag, and more. We also scaled our retail footprint to 10 microstores by the end of October, offering capital-efficient, Peloton-managed environments that showcase our hardware and educate consumers on the cross-training series. In Q2, MicroStores drove more sales on average than our legacy showrooms, and more than eight times the legacy showroom on a sales per square foot basis. In contrast, our third-party retail sales lagged expectations, so we are working with our distribution partners to share best practices in Q3 and beyond. We're committed to growing our commercial offerings and our brand touchpoints outside the home. Our commercial business unit is well positioned to capture more market share by leveraging the strength of both the Precor and Peloton brands. Commercial showed strong performance, achieving 10% revenue growth year over year and exceeding expectations across U.S. and international markets. In Q2, we continued to make meaningful progress in improving member outcomes. We saw a 7% year-over-year increase in workout time per connected fitness subscription, a clear indication that our content and programming continue to resonate with our members and contributed to our member retention. We also see rapid adoption of Peloton IQ, which makes personal training more accessible and impactful by providing dynamic coaching that's responsive to each member's goals. 46% of active members engaged with their performance insights and recommendations during the first quarter since its rollout. And all-access member engagement with personalized plans was up more than 10% from Q1. Based on our post-purchase research, Peloton IQ was ranked the most compelling feature by those who purchased the cross-training series Bike Plus TREAD, and TREAD+. We expect member engagement to increase further as we refine and evolve Peloton IQ to encompass more fitness and wellness domains. As strength continues to grow in popularity, in part due to the broader adoption of GLP-1s, we will continue to evolve our programming to support both cardio and strength. We welcome three new strength instructors all of whom premiered in December, teaching yoga sculpt and Pilates. In addition to our content, we have a robust R&D agenda in the strength category as well. This Thanksgiving, we celebrated one of Peloton's most beloved traditions, the 12th annual Turkey Burn. We produced a full slate of live classes throughout Thanksgiving morning and saw a 6% increase in completed live workouts year over year. The Feast, our strength class featuring six instructors, had a 24% increase in live workouts year over year and was our biggest live strength class of all time. Our commitment to health outcomes is further evident in the strategic partnerships we initiated. In October, we announced a partnership with TwinHealth to deliver personalized guidance with recommended Peloton content to improve metabolic health and reverse type 2 diabetes. Several thousand twin health members are engaging with our cardio, strength, yoga, and meditation programming. Focusing on women's health, we collaborated with Respin Health on a 60-day study with more than 200 Peloton members experiencing menopause symptoms. Results from the program. which included cardio and strength workouts by Peloton, and online community and coaching sessions, showed that 84% of women experienced overall symptom improvement, including relief from brain fog, lack of energy, weight gain, and poor memory. This further validates the impact Peloton can have on health outcomes. A pillar of our strategy remains meeting members everywhere. Peloton was the official fitness partner of F1's Grand Prix in Las Vegas and filmed a first-of-its-kind class series on-site, bringing the high-energy race vibe to members through on-demand content and immersive experiences. These classes performed well above individual class benchmarks, and according to a search list study, the activation led to a 10% increase in brand sentiments, and an 11% rise in purchase intent as online conversation pivoted toward our world-class content, instructors, and excitement for the partnership. Turning to our strategy of creating members for life, we're strengthening member ties through our new loyalty program, Club Peloton, which is designed to reward our members for their engagement and consistency. Since launching on October 1st, 24% of active members engaged with Club Peloton, exceeding our 20% internal target. Benefits thus far have included Peloton apparel discounts and access to exclusive live rides, depending on the member's tier. Members using their exclusive Club Peloton apparel discounts drove nearly 50% of apparel purchases in Q2. We also launched four new official teams, Menopause Health, High Rocks, Move for Life, and Cross Training, with 25,000 members joining one or more of them in the quarter. Business excellence remains a top priority, and it shows in our balance sheet and P&L. We remain on track to achieve our $100 million run rate savings goals by the end of fiscal year 2026. As we shared in August, we're achieving this by evolving our global operating model, thereby enabling us to invest in areas that give us a competitive advantage and most directly support our long-term growth. We recently entered into a relationship with a leading global business services provider to support and deliver some of our operational work, while also expanding Peloton's presence in lower cost locations. The progress we've made in optimizing our cost structure shows in our meaningful free cash flow generation and continued deleveraging. Optimizing capital allocation is one of our top priorities, as we believe it is critical to achieving our growth goals. While our updated full-year revenue guidance does not turn positive for the year, Our trajectory reflects a meaningful improvement compared to the declines Peloton sustained last year. More important, we are making this progress while improving unit economics and profitability, demonstrating our discipline in pursuing sustainable and profitable growth. By prioritizing business excellence, we are doing what is right in the long term for our shareholders and our community of loyal members. I will now pass it over to Liz, who will share more details about our Q2 financial results and guidance for the remainder of fiscal 2026.