Good morning, ladies and gentlemen, and welcome to the Peloton Interactive 1Q '20 Earnings Conference Call. As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Ms. Alison Brightly. You may begin.

Good morning, and welcome to Peloton's First Quarter Earnings Conference Call for FY 2020. Joining us on today's call to answer your questions are John Foley, our Cofounder and CEO; William Lynch, our President; and Jill Woodworth, our CFO. A copy of today's shareholder letter is available on the Investor Relations section of our website at www.onepeloton.com and has been furnished to the SEC on Form 8-K. Before we begin, I would like to remind you that our comments and responses to your questions this morning reflect management's views as of today only and will include statements related to our business that are forward-looking statements under federal securities laws. 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 a discussion of the material risks and other important factors that could impact actual results, please refer to our SEC filings and today's shareholder letter, both of which can be found on our 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 John, who will begin with a few opening remarks.

Hi, everyone. Thank you for joining our first earnings call. I want to start by expressing how proud I am of the Peloton team for what we've achieved over the last few months and the results we delivered in the first quarter. Specifically, let me share a few highlights from the quarter. We completed our IPO in September, raising over $1.2 billion in capital. As we've mentioned before, our members are our priority, and we are excited about how these funds will help us expand globally, develop a strong product pipeline, and continue to innovate our software, content, and platforms. On October 12, we launched Home Trial, which allows customers to try the Peloton Bike at home for 30 days after delivery, risk-free. This approach aligns with our commitment to putting our members first, and we are encouraged by the initial sales impact. In October, we completed the acquisition of Tonic Fitness, one of our long-term Taiwanese bike manufacturing partners, with whom I have worked since 2012. This acquisition will enhance our control over scaling our supply chain to meet the high demand for our products. We will also continue partnering with other excellent manufacturers in Taiwan and beyond, as we believe in having multiple sources for our core products. Lastly, here are some financial highlights for our strong operating and financial metrics for Q1. We ended with over 562,000 connected fitness subscribers, a 103% year-on-year growth rate, allowing us to serve more than 1.6 million members. We continue to experience low churn, with the average net monthly connected fitness churn at 0.90%. As engagement is a key indicator of retention, our connected fitness subscribers averaged 11.7 workouts per month in Q1, reflecting significant year-on-year growth of 31%. To illustrate further, in Q1 of last year, we had 7.1 million workouts on our platform, and this Q1, that number rose to 19 million workouts from our members, marking a 171% year-on-year growth in the number of workouts on the Peloton platform. Revenue reached $228 million, representing a 103% year-on-year growth, while gross margin remained steady at 46.1%. Adjusted EBITDA loss was negative $21 million, with an adjusted EBITDA margin of negative 9.2%, showing an improvement of 283 basis points over Q1 of last year. I will now pass it over to Jill Woodworth, our CFO, to review our guidance.

Great. Thanks, John. We remain focused on driving strong connected fitness subscriber growth and engaging and retaining our growing scaled member base. Our subscriber guidance is based on the early success of Home Trial, which was launched on September 12; our expectations for a robust holiday and New Year's resolution season; and continued low average net monthly churn of our connected fitness subscribers. For Q2, we expect ending connected fitness subs of 680,000 to 685,000, which represents 88% growth at the midpoint. For the full year 2020, which ends in June, we expect ending connected fitness subs of 885,000 to 895,000, representing 74% growth at the midpoint. Churn is expected to rise slightly but stay below 1.05% in Q2 and average below 1.05% for the full year fiscal 2020. It is slightly increasing from our 0.90% churn in Q1 primarily due to Home Trial and the continued rolling off of prepaid connected fitness subscriptions. For revenue, we expect Q2 to come in at $410 million to $420 million, representing 58% growth at the midpoint. And for the full year fiscal 2020, we expect $1.45 billion to $1.50 billion of revenue, representing 61% growth at the midpoint. A couple of additional notes on gross margin. For Q2, we expect our overall gross margin in the range of 39% to 40%. When you look at it on a segment basis, we will expect for Q2 a connected fitness gross profit margin in the range of 37% to 38% and a subscription contribution margin of 58% to 59%. For fiscal year '20, we expect overall gross margin of 41% to 42%, essentially flat year-over-year. Our connected fitness gross margin for the full year we expect to be in the range of 38% to 39%, and our subscription contribution margin in the range of 60% to 61%. Our connected fitness gross profit margin decline year-over-year is attributed to the continued mix shift of sales to Tread and continued investments that we are making to scale our supply chain and logistics platform to meet the high demand for our products. Our subscription contribution improvement over the last year is attributed to the significant reduction in expected content costs for past use and, to a lesser extent, the continued leveraging of fixed costs of producing our content. We will continue to invest in building our brand, supporting our growth, scaling operations internationally, improving our end-to-end member experience, and recruiting and retaining the best teams across all business functions at Peloton. With all of that said, for adjusted EBITDA for Q2, we're expecting a range of negative $70 million to negative $65 million of adjusted EBITDA loss, which represents a negative 16.3% adjusted EBITDA margin at the midpoint. And for the full year 2020, we expect an adjusted EBITDA of negative $170 million to $150 million, which represents an adjusted EBITDA margin of negative 10.8% at the midpoint of that range. With that, we will now move to questions. So I will turn it over to the operator.

Presenters, we have your first question coming from Heath Terry from Goldman Sachs.

On the quarter, can you give us a sense of what you are looking for in Q4 as you go into more direct relationships with the hotels, sort of what you're seeing in those relationships or how those hotel relationships are beginning to progress? Just are they beginning to have more of an impact on your reliance on booking in Expedia?

It's William Lynch. In terms of the hospitality business, if you look at our growth rate year-on-year, it's tracking to about the same rate that our consumer business is. So as we announced our partnership with Westin about two years ago, we’ve been continuing to penetrate the hospitality channel. We get inbound daily, weekly, monthly from hotels that want to put Peloton into their gyms, both Bikes and Treads, to differentiate their gym experience as our member base grows and they go to those hotels asking for Peloton. So we've got a team focused on hospitality. We define ourselves as a consumer business, but that's a good channel for us. And as I said, it's over triple-digits top-line growth. So the demand we're seeing from the consumer definitely is spilling into hospitality.

Great. And then Jill, as you look at the way that you are thinking about guidance through the rest of the year, clearly, incredible performance in terms of profitability this quarter, particularly on the gross margin side. But as you look at the way you're thinking about the investments as we go through the rest of the year, can you just give us a sense of what's implied in terms of the level of investment that you're expecting? I know with the German launch as well as sort of what you've seen already with the U.K. and Canada, should we continue to expect this level of outperformance as you go further through the year? And how much leeway, I guess, would you say are you giving yourself to be able to ramp up or down the degree of investment?

Thank you, Heath. First, I want to share our approach to guidance. Our guidance represents our best current estimate of our performance. Our vertical integration allows us good control over our operations in both our U.S. Bike business and internationally, but we are still in the early stages of growth and market opportunities. You can view our guidance as what we aim to achieve. Regarding international growth spending, as we prepare to launch in Germany, a significant portion of our expenses will go to sales and marketing. We are excited to see that our guidance reflects substantial efficiencies in our U.S. Bike business from a sales and marketing standpoint, which helps us balance some of the less efficient spending for the Germany launch along with our emerging businesses in the U.K. and Canada, as well as our new product, Tread. Overall, we feel confident that these efficiencies are assisting us with the less efficient spending internationally.

Your next question comes from the line of Doug Anmuth from JPMorgan.

Two questions. Just for John and William, if you could talk a little bit more about the Tonic acquisition, what it does for you strategically? And why you thought it was so important to own the manufacturing capability? And if there's any color you can give us on the percentage of bikes or overall manufacturing that Tonic represents today? And then second, Jill, can you just comment on how you're thinking about core U.S. Bike profitability in fiscal '20 and your confidence around this year being Peloton's peak loss year?

Thank you, Doug. With regard to Tonic, we aim to sell millions of Bikes and Treads globally in the upcoming years, which means we need the ability to produce millions of them as well. Supply chain management and scaling are crucial for us. We realize that Apple does not own Foxconn, making it somewhat unconventional for us to acquire a manufacturer. However, our motivation behind this acquisition is to invest in the supply chain that allows us to scale and develop top-tier manufacturing capabilities. While our contract manufacturers have been investing, we sought to have more control over the process. Our strong relationship with Tonic, one of our two major bike manufacturing partners, enhances this opportunity. We maintain the longest partnership with Tonic, and the team is exceptionally talented. The founder, Andy Wu, is a visionary in fitness equipment manufacturing, and his son has emerged as a significant leader in this area. We are enthusiastic about the partnership and plan to continue dual-sourcing. While we appreciate contract manufacturing, we believe it's important strategically to shape our own path and ensure that we can invest effectively. In the coming months, we are excited to launch a new fitness facility with Tonic, which will be a brand-new manufacturing plant that we expect to be one of the finest manufacturing facilities for fitness equipment globally. We are very optimistic about this collaboration. Regarding profitability, we recognize it's a topic on everyone’s mind, so I will address it. For us, profitability is a managed outcome. Our Bike business is profitable due to our solid unit economics, and it will remain profitable. The investments we are making in international expansion, new products, digital content, and additional retail locations are all strategic investments. Based on our Q1 performance, which showed significant top-line growth alongside a modest EBITDA loss, we are close to achieving profitability. It is a managed outcome, and if we decided to slow down growth, we could be profitable immediately. However, that is not the direction the Board and leadership at Peloton endorse. We believe the global opportunity is substantial, and we are confident in our approach of balancing investment for future growth.

Your next question comes from the line of Justin Patterson from Raymond James.

And I'll resist asking any online travel questions. So I'm curious. I know it's early, but could you talk about how the Home Trial and marketing campaigns are performing against expectations? Are you seeing any differences in the demographics and engagement among new customers versus who you shipped to previously? And then how do you get comfortable with forecasting that around the holiday season?

It's William Lynch. I'll address both points. Regarding Home Trial, it's still in the early stages. We launched it on September 12, which was really just the last two weeks of the quarter. The idea behind Home Trial comes from our brand marketing team, led by Carolyn Tisch Blodgett, who conducted extensive research to identify the main obstacles to purchasing our Bikes and Treads. We discovered that the primary concerns were price and whether customers would actually use the products. We don't rely on assumptions; we conduct tests on nearly all our major initiatives. Earlier this year, we tested Home Trial, and the results showed a significant increase in the markets we evaluated. Since we started offering 30 days free to try at home, we have been very encouraged by our findings. Additionally, this holiday season, we are making a substantial marketing effort not only for Home Trial but also for the first time ever, promoting a bike priced at $58. With our 39-month financing plan at 0% APR, customers can acquire a bike for just $58 per month, and we are covering all associated costs. It's an exceptional offer, likely the best in the fitness industry. Interestingly, this price point directly competes with the average gym membership, which typically costs around $58 monthly. Therefore, by addressing affordability through the promotion of the $58 bike with significant television advertising, alongside the promising early results from Home Trial, we are feeling quite optimistic about the holiday season. We believe we are directly tackling the two main barriers to purchase.

If I might just add on to that, I just want to remind everyone, if you look back to fiscal year '19, we had a very strong holiday period. Our Q2 guidance of 88% at the midpoint for our connected fitness subscribers shows we’re lapping a pretty big holiday period. A lot of that was driven by some program changes that we made to our financing program, which we commonly refer to as de-bundling where we stopped financing the subscription with our equipment, which created a pretty significant uplift in conversion. So I just wanted to remind everyone of that from this time last year for holiday.

Your next question comes from the line of Eric Sheridan from UBS.

Maybe two, if I can. One, coming out of the IPO, did you see anything around a halo effect of either better effective marketing channels or better gross additions coming out of the IPO that might sustain into fiscal Q2 or fiscal Q3? Just so we’re aware of sort of the dynamic in the marketplace. And secondly, one year into the opportunity in the U.K. and Canada, any sense you can give us around growth curves or unit economics or how the international opportunity might be developing that might contrast with what happened in the U.S.?

On the IPO, we definitely noticed a temporary increase in traffic and sales that lasted about three to four days. This is typically expected, and we can project this by marketing channel, which eventually stabilized in terms of traffic, conversion, and sales. Regarding international markets, both the U.K. and Canada are performing better than the U.S. did during the same period. One of our key indicators for sales is awareness, which we assess through unaided and aided awareness metrics. With the marketing investments and strategies Jill mentioned for Canada and the U.K., we've been advertising there and opening retail locations, leading to quicker market development. They are exceeding our expectations and outpacing the performance of the U.S., which gives us confidence to invest in Germany, launching on November 20. This will be our first foreign language market. As for unit economics, they are quite similar to those in the U.S., so I wouldn't focus too much on that. Ultimately, in terms of our business model, it revolves around the upfront investments we had to make in the U.S., and again, the international markets are tracking ahead of that curve.

Your next question comes from the line of Edward Yruma from KeyBanc Capital Markets.

I guess first, you guys have added a lot of functionality to the app, and you’ve added a lot more activities and such over the past six months. How would you score customer acceptance and usage of some of these non-spin activities? And then second, and maybe a broader question, the competitive environment continues to intensify. You guys clearly have a big lead, but you had a competitor that rolled out a bike that used your likeness. How should we consider the overall competitive environment?

We are very enthusiastic about our digital business, even though it isn't a significant contributor to our overall growth right now. Our new Head of Digital, Karina Kogan, is incredibly talented and you'll be hearing more about her in the future. We value digital because it enhances engagement and provides more content and utility for our connected fitness members. Additionally, it plays a key role in acquiring customers, helping the 34 million treadmill owners in the U.S. connect to our boot camp classes and use our app at the gym. We have introduced numerous features and will continue to invest in our software and content, viewing the digital business as a potential powerhouse similar to our connected fitness division. Regarding competition, we have a strong advantage with a seven-year head start and pioneered this category. To our knowledge, there isn't currently any similarly positioned competitor, but that could change in the future. Competing in this space is challenging, and we've invested $2.2 billion very strategically. We are focused on hardware, software, media, retail, logistics, music, community, and apparel, all of which work together in a vertically integrated direct-to-consumer model. We're learning and improving in our markets, including the U.K. and Canada, and we'll be ready to excel in Germany soon. We're developing a global technology platform that we believe will be hard to compete against.

Your next question comes from the line of Michael Graham from Canaccord.

On the connected fitness product gross margin, it was a lot stronger than we were modeling for this quarter, and you’re guiding it to come down a little bit sequentially. Just what were some of the things that helped it be strong this quarter? And conversely, what might happen to bring it back down to your normal outlook level? And I just wanted to ask also on the German local language content, how long do you think it's going to take until that catalog gets to a density of local language classes so that’s the majority of the experience for those subscribers?

Great. So it's a great question on connected fitness gross profit margin. Just to remind everyone, for Q1, the connected fitness gross profit margin was 43%, that was versus 46% last year. The year-over-year differences were primarily attributed to two things: One is the mix shift to Tread, which currently carries a lower gross profit margin, and secondly, some incremental investments that we've made year-over-year in our supply chain and logistics platform. If you're referring to kind of the expectation of consensus versus what we achieved in Q1, I’ll say that we really had a lot of factors that are moving in our favor. Again, just to remind you, we achieved 43%, but for the balance of the year, we expect our connected fitness gross profit margin for the full year to be 38% to 39%. For the first quarter though, what I would say is again, better than expected supply chain and logistics, but again, through the balance of the year, we’ll continue to make investments there. They will be a little bit more back-end loaded perhaps than what is reflected within consensus. Secondly, we did have a one-time favorable inventory reserve benefit. We're piloting a resale program for a small amount of returned inventory, which resulted in a one-time benefit to our inventory reserve in Q1. We’re also seeing product cost efficiencies in both Bike and Tread that were better than expected. Lastly, our warranty utilization on both Bike and Tread were lower than expected. So it was just a lot of positive news in our favor. For the full year, the 43% will continue to decline throughout the balance of the year given the mix shift in Tread and the supply chain investments we plan to make.

I can take the German catalog question just very quickly. Interestingly, if you look at the U.K., some of the most popular instructors are actually out of the U.S. Our two U.K. instructors are doing really well. It talks to the fixed cost nature of our content and the instructors, which is exciting as we think about expanding globally. We have hired two German instructors. We're not going to announce them on this call. They will be announced shortly. Jen Cotter, our Chief Content Officer, and Kevin Cornils, our Managing Director of International, have done a phenomenal job of priming the pump. We’re going to have substantial German content at launch, including subtitling, because in our testing in the spring, German consumers that we tested with actually wanted to take U.S. language classes subtitled. We think that's going to be a competitive advantage given our catalog in the U.S., but also bolster the catalog as Germans are curious to take U.S. language cycling classes. We’ll be well-covered from a German catalog perspective.

Your next question comes from the line of Deepak Mathivanan from Barclays.

Jill, I wanted to ask you to elaborate on the connected devices gross margin comment. Specifically for Q2, I think you noted 37% for Q2. Is there an incremental step-up from current levels in terms of logistics investments sequentially? And how should we think about the promotional strategy during the holiday season? And then the second question is can you also provide an update on the timing of some of the big investments you are looking to make in the next few quarters? Like the headquarters and studio launches in New York City and London, is the timing and then the cost flow-through into the P&L also happening at the expected cadence?

Yes. I might ask you to repeat the second question in a minute while I address your first question on the sequential decline from Q1 to Q2. Yes, we historically see a decrease in our connected fitness gross profit margin between Q1 and Q2, and one of the drivers there is the holiday season and any promotional activity we do tends to fall in that time period. I might also note, and you saw this in our advertising over the last couple of months, we’ve also been highlighting in our marketing, the $58 bike. We have, over the last few weeks, begun to see an uptick in our financing penetration rates, which, as you know, impact our gross margin on our connected fitness unit. We’ve launched a 39-month, 0% APR financing for Tread just in time for the holidays. So that is another driver of that sequential decline, along with continued investments in mix shift to Tread and new investments made in supply chain and logistics.

CapEx.

Sorry. And then if you could just repeat the second question one more time?

Yes. I was just asking about the cadence of some of the big OpEx and CapEx-related investments that you are planning to make, specifically along headquarters and the studio launches and those. Is the cadence still expected to be as you previously anticipated in terms of just the flow-through into the P&L over the next few quarters?

Yes. In Q1, you can expect some variations from the consensus. There has been a slight timing shift regarding the capital expenditures related to our new builds for Peloton Studios in New York, London, and our new headquarters near Hudson Yards. All three projects are fully aligned with the budget. While there are some timing differences in the impact of that capital expenditure, the overall budgets remain on schedule. Additionally, we continue to expand our showroom footprint, which constitutes the incremental aspect, but everything is within budget.

Your next question comes from the line of Justin Post from Merrill Lynch.

A couple of follow-ups. You mentioned the Tread mix shift a lot. Can you give us any update on how Tread sales are performing, either just in absolute or versus your expectations? And then secondly, in your guidance for the second quarter and for the year, can you talk about your marketing cost of acquisition? Do you expect your gross profit on your hardware to cover your marketing cost of acquisitions as you look out over the next three quarters?

Yes, Justin. Thank you. Tread is doing very well. To your question, it is exceeding our expectations. We’re very proud of it, and the sales are out in front of what we anticipated. Probably more important than that is that our Net Promoter Score for that experience is approaching 80, which you might have heard us talk about. Net Promoter Score is kind of our true north of delighting our members and creating one of the most special consumer brands of our day. To the extent we're getting close to 80 with our Tread experience, it speaks to how great that platform is in providing boot camp experiences and circuit training at home, which was the goal. The content continues to get better. William brought up Jen Cotter, who is our new Chief Content Officer; and her lieutenant, Kevin Chorlins, not to be confused with Kevin Cornils, who is our MD of International. But Kevin and Jen are really investing in the content and doing a lot of innovation for the Tread content and the boot camp content. So that platform continues to get better just as the software continues to get better. So when you buy one of these connected fitness platforms, either Peloton Bike or Peloton Tread, every month, the experience gets better. So no different with the Tread.

I’d just briefly mention, I think you're referring to a measurement that we look at where, in our unit economic model, our connected fitness gross profit margin offsets the majority of our sales and marketing expenses. If you look at what's implied based on our guidance for the full year, our net customer acquisition costs, again, taking our adjusted sales and marketing expense less our connected fitness gross profit margin, is about $86 based on the midpoint of the guidance range for the full year. So very much, our unit economics are very much intact. What that means is that we're essentially acquiring a new subscriber for $86, and then thereafter enjoying a very long lifetime subscriber, so very much intact. Overall, we continue to be very encouraged with the efficiencies we’re seeing in our U.S. Bike business in terms of sales and marketing and word of mouth.

Your next question comes from the line of John Blackledge from Cowen.

Two questions. The sub contribution margin was better than what we had. Just curious about the key drivers and any thoughts on the sub contribution margin trajectory longer term. And then secondly, any color on paused subscribers? I'm not sure if you can quantify it as a percentage of total subs.

On the sub contribution margin, again, our guidance for Q2 is 58 to 59 versus what we achieved in Q1 of 63. The beat was primarily due to a significant improvement in content costs for past use. Given our strong top-line growth in subscriber adds, the balance was just fixed cost leverage of our content production as we scaled our subscriber base. In terms of going beyond 2020, we're not really guiding beyond that at this point, but I think what Q1 demonstrates is that, over time, as we scale our subscriber base, we will most certainly be able to leverage a lot of the fixed costs of producing our content. In terms of your second question, would you mind repeating it? Pause? It's on pause?

Yes.

This is not something we plan to regularly disclose, but at any given time, our paused subscribers are around 0.5%. That is well below 4,000 based on current levels. Just to remind everyone, a paused subscriber can pause for up to three months and is still included in our connected fitness subscriber base. Typically, a member pauses due to pregnancy, injury, or moving house. Even if someone pauses, our data shows that they are no more likely to churn off of our subscription. Thank you for the question.

Your next question comes from the line of Lee Horowitz from Evercore ISI.

Given that you disaggregated the financing from the subscription last year, how, if at all, is your full year outlook for churn being impacted by those cohorts rolling off of their finance agreements, potentially seeing an impact to churn as their financing agreements lapse? And another one, I guess, bigger picture on the macro environment. Obviously, you're in the U.K., moving into Germany. How has macro impacted the business in any way? How are you maybe thinking about your marketing investments into perhaps softer macro environments in those growth markets?

Great. I'll take the first part of the question and then hand over to William. In Q1, our churn did remain low at 0.9% average net monthly churn. The main impact, I think this is what you're getting at, although we used to offer two things. We obviously used to bundle our financing and we used to also offer prepaid subscriptions. The main impact to churn in Q1 was really the roll-off of prepaid subscriptions onto month-to-month. That said, we did see higher-than-anticipated retention rates for those subscribers that came out of their prepaid period. Now over 90% of our subscribers are paying month-to-month and we expect that number to slowly climb throughout the year. As you look at our guidance for Q2 and the full year at keeping our churn below 1.05%, one other thing to note is that Home Trial will start to impact churn in Q2. If a customer returns a bike within that 30-day period, they will be accounted for as a churned customer, and we recognize that churn immediately. To the extent we see an increase in our return rates over time, that could create a little bit of upward pressure in churn.

It's William. I'll answer the sales and marketing investment against the macro environment. On a day-to-day and week-to-week basis, the macro environment doesn't impact our sales and marketing investment at all. Our acquisition team led by Tim Shannehan, Johnny Jiang, and Alan Smith look at what we can acquire a customer for and what is the lifetime value of that customer. It’s sort of the net CAC calculation that Jill talked about. We’re really disciplined in our performance marketing. As it relates to internationally, how we think about those upfront investments, the decision to go internationally and the markets we select is very deliberate. We make those decisions 18 months in advance of actually going into the market. We assess the rate of expansion against market risk then. As I said, U.K. and Canada gave us a lot of confidence to decide to go into Germany. Once we decide to go into those markets, we are going to invest to win, meaning really sales and marketing upfront to get primarily awareness of this product. We know it delivers a great experience. We know there's unit economics in it. Our experience has shown us that as we've done that in the U.K. and Germany, sales follows. So that's how we think about sales and marketing.

Your next question comes from the line of Jason Helfstein from Oppenheimer.

I'll do two today. John, you made a comment about using IPO proceeds to fund the pipeline of products. Any color you want to share on that? And then OpEx was meaningfully lower than expected, I think, in the quarter. How much of that was timing versus other budget decisions that you're making?

Yes. I would say about $10 million of our Q1 beat was timing-related, which we will flow into subsequent quarters.

Yes. Regarding our new product pipeline, I want to emphasize that we are fundamentally a technology and software innovation company. The Peloton Bike was a significant innovation, and the treadmill is at least as strong a product or platform, possibly even better for full body fitness. In the years ahead, we expect to introduce new platforms, products, and innovations from Peloton that will surprise and delight our customers. We are enjoying the process of innovating, and our R&D lab is quite active. Additionally, we are enhancing software features for our core platforms with new and exciting updates each month that benefit our current Bike and Tread owners. We are also rolling out new digital features that we mentioned earlier. There is ongoing innovation within our existing platforms and potential new offerings that we aren't disclosing today, but I believe you will be impressed by what we are developing in the R&D lab over the coming years. I want to express my gratitude to the Peloton team; we believe we have one of the strongest teams in consumer tech, and we take pride in that. Thank you all for your dedication. I also want to acknowledge any members listening, as well as analysts and investors, some of whom are Peloton customers. We appreciate your support and will continue to work hard on your behalf. I hope you all have a wonderful holiday, and I look forward to our next conversation. Thank you, everyone.

Ladies and gentlemen, this concludes today's conference. Thank you for your participation, and have a wonderful day. You may all disconnect.