Peloton Interactive, Inc.

Good day and welcome to Peloton's third 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 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, press star 1-1 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, Head of Investor Relations. Please go ahead.

Thank you, operator. Good morning, and welcome to Peloton's third quarter fiscal year 2026 conference call. Joining today's call are Peloton Chief Executive Officer and President Peter Stern, Interim Chief Financial Officer Saka Beg, and Vice President of Financial Planning and Analysis, Scott Birch. 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, today's press release, and our earnings presentation, all of which can be found on our investor relations website for a discussion of our 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 and definitions for our user metrics are also provided in today's press release. I'll turn it over to Peter.

Thanks, James, and good morning, everyone. Our Q3 results are proof that the strategy of evolving Peloton from a connected fitness company to a connected wellness company, is delivering results. This strategy is in direct response to consumers not only wanting to add years to their life, but also life to their years. Peloton's content, equipment, and beloved brand position us to capture more market share within the growing $7 trillion global wellness economy and to achieve ever greater human impact. As I've shared in prior calls, there are four pillars to delivering on our strategy. One, improve member outcomes. Two, meet members everywhere. Three, make members for life. And four, business excellence. Let's start with our progress on improving member outcomes, which is how we empower them to live fit, strong, long, and happy. During the quarter, over 400,000 people took our High Lit classes with Rebecca Kennedy. This contributed to 48% growth in our Pilates modality, which is becoming a central plank of our strength program and an area where we are investing both in R&D and instructors as exemplified by the three we onboarded last quarter. Speaking of R&D, Our work on producing new equipment in one of our existing modalities is progressing well, and I look forward to introducing some exciting new hardware and features to you this fall. In the space of mental well-being, last week we launched 140 Peloton instructor-led meditation and sleep classes in the Breathwork app, as well as daily meditations and Breathwork programming that will begin to develop that app into a preeminent platform to help people relieve stress, sleep, and achieve better focus. To further our progress in improving member outcomes, I'm delighted to celebrate the arrival of Sarah Robb O'Hagan, our Chief Content and Member Development Officer. Sarah brings a wealth of experience serving in executive and board of director roles for various well-known brands in the fitness space, including Exos, Strava, Equinox, Gatorade, and Nike. Sarah is focused on accelerating innovation across our content ecosystem, driving engagement, and in so doing, deepening loyalty across our community by evolving the member experience. Second, let's talk about our strategy for meeting members everywhere. This part of our strategy is how we grow our Peloton community. Last week, we announced big news in this area, our content licensing partnership with Spotify. This partnership brings more than 1400 Peloton classes across strength, Pilates, bar, yoga, meditation, outdoor, and cardio to hundreds of millions of Spotify Premium subscribers globally, exponentially growing our reach. Our work with Spotify provides a powerful entry point into the magic of Peloton, allowing us to efficiently grow our brand through a platform that people everywhere already know and love, while also providing a high margin, diversified revenue stream. We expect to bring hundreds more classes to Spotify Premium subscribers each month. Our commercial business unit is another way we can meet members everywhere, by reaching people in tens of thousands of gyms across more than 60 countries. In Q3, we delivered another quarter of standout growth in this unit, as revenue increased 14% year over year. To build on this momentum, we recently announced the Peloton Commercial Series, which includes a new bike and treadmill specifically designed for heavy traffic gym environments. This equipment, which brings together PreCore's industrial-grade durability with Peloton's unsurpassed connected experience, will become available to gym operators in Q2 of fiscal 27 and will help us continue to grow Peloton's international footprint and gym presence. We see tremendous upside in this category as we estimate that we have only a 3% share of the more than $10 billion and growing global commercial fitness equipment market segment. And I'd be remiss if I didn't mention our recent ad campaign featuring Hudson Williams. This campaign went viral because it's a glorious demonstration of the joy of movement that drives everything we do at Peloton. I want to congratulate Peloton's marketing team, led by Megan Imbres, which have delivered more than 60 million organic social views and significant global earned media buzz, helping us put Peloton back in the center of the zeitgeist where we belong. Third, let's talk about our strategy of members for life. This is where we work to keep the members we have. Initiatives such as Club Peloton, personalized plans from Peloton IQ, and some reactivation offers we implemented in Q3 helped us deliver net churn that was seven basis points lower year over year in Q3, despite the price change we implemented in Q2. These results demonstrate the substantial value we provide to our members. Last, but certainly not least, is our strategy of business excellence. I believe the numbers here speak for themselves, as we achieved an important milestone of positive year-over-year revenue growth in Q3, along with growth in gross margin, adjusted EBITDA, and free cash flow. Free cash flow increased $56 million, or 59% year-over-year. While our Q4 expectations reflect that our path to sustained year-over-year revenue growth will not be linear, the underlying vectors of growth have never been clearer. As our business model evolves, we expect investors will see our growth materialize in total revenue first, driven in part by revenue streams like the commercial business unit and content licensing. I'm also pleased to share that we expect Peloton to achieve positive net income on a full year basis in fiscal 26, in addition to our previously stated goal of positive operating income. This would be the first time in the company's history that we have achieved either of these metrics for a full year, let alone both. We have right-sized our cost structure, in particular G&A, and are now delivering in excess of $1 million of annualized revenue per employee. And we are well positioned to continue delivering innovations in cardio, strength, commercial, mental well-being, content licensing, and beyond within a disciplined envelope for R&D spend. Strong financials and consistent cash flow have resulted in a vastly improved balance sheet. We ended Q3 with a 70% reduction year over year in our net debt. Add all this up, and from a financial standpoint, we are no longer operating defensively. Instead, we are operating from a position of profound strategic optionality. This enables us to move to a new stage of financial maturity, characterized by strategic capital allocations. In anticipation of the expiration of the prepayment penalty on our term loan at the end of this month, we're evaluating every avenue to maximize shareholder value, including debt optimization, capital returns, and accretive strategic investments. With meaningful excess cash on the balance sheet, we have the luxury of patience. We are actively finalizing our holistic capital allocation strategy, evaluating alternatives including share repurchases, debt optimization, and potentially highly targeted investments. Finalizing and executing on this plan will be a key agenda item for our permanent CFO once they are seated. And speaking of a permanent CFO, our search is progressing well. We have met numerous qualified candidates, and we are gratified by the strong interest they have shown in Peloton. As I wrap up these remarks, I want to reiterate my confidence in Peloton's future. We continue to make great progress on deepening our relationships with our members, growing our opportunities to reach new members globally, diversifying our revenue streams, and planting new seeds for future growth, all while continuing to strengthen our financial foundation. With that, I will now pass it over to Saqib who I'm very grateful to for serving so ably as Interim Chief Financial Officer and who will share more details on our financial results.