PELOTON INTERACTIVE INC

Previous wording

Peloton is a leading global fitness company with a highly engaged community of 6.4 million Members as of December 31, 2023. A category innovator at the nexus of fitness, technology, and media, Peloton's first-of-its-kind subscription platform seamlessly combines innovative hardware, distinctive software, and exclusive content. Its world-renowned instructors coach and motivate Members to be the best version of themselves anytime, anywhere. We define a “Member” as any individual who has a Peloton account through a paid Connected Fitness Subscription or a paid Peloton App Membership, and completes 1 or more workouts in the trailing 12 month period. We define a completed workout as either completing at least 50% of an instructor-led class, scenic ride or run, or ten or more minutes of “Just Ride”, “Just Run”, or “Just Row” mode.

Current wording

Peloton is a leading global fitness company with a highly engaged community of 6.6 million Members as of March 31, 2024. A category innovator at the nexus of fitness, technology, and media, Peloton's first-of-its-kind subscription platform seamlessly combines innovative hardware, distinctive software, and exclusive content. Its world-renowned instructors coach and motivate Members to be the best version of themselves anytime, anywhere. We define a “Member” as any individual who has a Peloton account through a paid Connected Fitness Subscription or a paid Peloton App Membership, and completes 1 or more workouts in the trailing 12 month period. We define a completed workout as either completing at least 50% of an instructor-led class, scenic ride or run, or ten or more minutes of “Just Ride”, “Just Run”, or “Just Row” mode.

Previous wording

Our Connected Fitness Products portfolio includes the Peloton Bike, Bike+, Tread, Tread+, Guide, and Row. Access to the Peloton App is available with an All Access or Guide Membership for Members who have Connected Fitness Products or through a standalone App Membership with multiple Membership tiers. Our revenue is generated primarily from recurring Subscription revenue and the sale of our Connected Fitness Products. We are additionally focused on growing our Paid App subscribers, including through efforts such as our recent branding and App relaunch in May 2023. We define a “Connected Fitness Subscription” as a person, household, or commercial property, such as a hotel or residential building, who has paid for a subscription to a Connected Fitness Product (a Connected Fitness Subscription with a successful credit card billing or with prepaid subscription credits or waivers).

Current wording

Our Connected Fitness Products portfolio includes the Peloton Bike, Bike+, Tread, Tread+, Guide, and Row. Access to the Peloton App is available with an All Access or Guide Membership for Members who have Connected Fitness Products or through a standalone App Membership with multiple Membership tiers. Our revenue is generated primarily from recurring Subscription revenue and the sale of our Connected Fitness Products. We are additionally focused on growing our Paid App subscribers, including through efforts such as our branding and App relaunch in May 2023. We define a “Connected Fitness Subscription” as a person, household, or commercial property, such as a hotel or residential building, who has paid for a subscription to a Connected Fitness Product (a Connected Fitness Subscription with a successful credit card billing or with prepaid subscription credits or waivers).

Previous wording

Second Quarter Fiscal 2024 Update and Recent Developments

Current wording

Third Quarter Fiscal 2024 Update and Recent Developments

Previous wording

In February 2022, we announced and began implementing the Restructuring Plan to realign our operational focus to support our multi-year growth, scale the business, and improve costs. The Restructuring Plan originally included: (i) reducing our headcount; (ii) closing several assembly and manufacturing plants, including the completion and subsequent sale of the shell facility for our previously planned Peloton Output Park; (iii) closing and consolidating several distribution facilities; and (iv) shifting to third-party logistics providers in certain locations. We expect the Restructuring Plan to be substantially implemented by the end of fiscal year 2024.

Current wording

In February 2022, we announced and began implementing a restructuring plan to realign our operational focus to support our multi-year growth, scale the business, and improve costs (the “2022 Restructuring Plan”). The 2022 Restructuring Plan originally included: (i) reducing our headcount; (ii) closing several assembly and manufacturing plants, including the completion and subsequent sale of the shell facility for our previously planned Peloton Output Park; (iii) closing and consolidating several distribution facilities; and (iv) shifting to third-party logistics providers in certain locations.

Previous wording

In fiscal year 2023, we continued to take actions to implement the Restructuring Plan. In July 2022, we announced we were exiting all owned-manufacturing operations and expanding our current relationship with Taiwanese manufacturer, Rexon Industrial Corporation. Additionally, in August 2022, we announced our decision to (i) fully transition our North American Field Operations to third-party providers, including the significant reduction of our delivery workforce teams; (ii) eliminate a significant number of roles on the North America Member Support team and exit our real-estate footprints in our Plano and Tempe locations; and (iii) reduce our retail showroom presence. In January 2024, we completed the sale of the Peloton Output Park building and a portion of the corresponding land and received net proceeds of approximately $31.9 million. The Company continues to market the remaining land parcel.

Current wording

In fiscal year 2023, we continued to take actions to implement the 2022 Restructuring Plan. In July 2022, we announced we were exiting all owned-manufacturing operations and expanding our current relationship with a Taiwanese manufacturer, Rexon Industrial Corporation. Additionally, in August 2022, we announced our decision to (i) fully transition our North American Field Operations to third-party providers, including the significant reduction of our delivery workforce teams; (ii) eliminate a significant number of roles on the North America Member Support team and exit our real-estate footprints in our Plano and Tempe locations; and (iii) reduce our retail showroom presence. In January 2024, we completed the sale of the Peloton Output Park building and a portion of the corresponding land and received net proceeds of approximately $31.9 million. The Company continues to market the remaining land parcel.

Previous wording

Total charges related to the Restructuring Plan were $15.2 million and $56.4 million for the three and six months ended December 31, 2023, respectively, and $62.4 million and $232.2 million for the three and six months ended December 31, 2022, respectively. Total charges for the three and six months ended December 31, 2023 consisted of cash charges of $9.3 million and $13.8 million for exit and disposal costs and professional fees and $0.3 million and $6.4 million for severance and other personnel costs, respectively, and non-cash charges of $3.8 million and $3.8 million for the loss on sale of a manufacturing subsidiary in Taiwan, $1.3 million and $24.1 million related to non-inventory asset write-downs and write-offs, $0.5 million and $1.0 million for write-offs of inventory related to restructuring activities, and zero and $7.2 million for stock-based compensation expense, respectively. Total charges for the three and six months ended December 31, 2022 consisted of cash charges of $34.1 million and $61.1 million for severance and other personnel costs and $8.9 million and $12.0 million for exit and disposal costs and professional fees, respectively, and non-cash charges of $9.7 million and $72.6 million related to non-inventory asset write-downs and write-offs, $6.0 million and $82.8 million for stock-based compensation expense, and $3.7 million and $3.7 million for write-offs of inventory related to restructuring activities, respectively.

Current wording

Total charges incurred related to the 2022 Restructuring Plan were $10.4 million and $66.8 million for the three and nine months ended March 31, 2024, respectively, and $48.0 million and $280.2 million for the three and nine months ended March 31, 2023, respectively. Total charges for the three and nine months ended March 31, 2024 consisted of cash charges of $2.3 million and $16.1 million for exit and disposal costs and professional fees and $1.1 million and $7.5 million for severance and other personnel costs, respectively, and non-cash charges of $7.0 million and $31.1 million related to non-inventory asset write-downs and write-offs, zero and $7.2 million for stock-based compensation expense, zero and $3.8 million for the loss on sale of a manufacturing subsidiary in Taiwan, and zero and $1.0 million for write-offs of inventory related to restructuring activities, respectively. Total charges for the three and nine months ended March 31, 2023 consisted of cash charges of $6.9 million and $68.0 million for severance and other personnel costs and $4.4 million and $16.4 million for exit and disposal costs and professional fees, respectively, and non-cash charges of $36.0 million and $108.6 million related to non-inventory asset write-downs and write-offs, $0.7 million and $83.5 million for stock-based compensation expense, and zero and $3.7 million for write-offs of inventory related to restructuring activities, respectively.

Previous wording

In connection with the Restructuring Plan, we estimate that we will incur additional cash charges of approximately $20.0 million, primarily composed of lease termination and other exit costs, which are expected to be substantially incurred by the end of fiscal year 2024. Additionally, the Company expects to recognize additional non-cash charges of approximately $10.0 million, primarily composed of non-inventory asset impairment charges in connection with the Restructuring Plan, which are expected to be substantially incurred by the end of fiscal year 2024.

Current wording

In connection with the 2024 Restructuring Plan, which includes any remaining restructuring activity under the original 2022 Restructuring Plan, we estimate that we will incur additional cash charges of approximately $45.0 million, primarily composed of lease termination and other exit costs, which are expected to be substantially incurred by the end of fiscal year 2025. Additionally, we expect to recognize additional non-cash charges of approximately $20.0 million, primarily composed of non-inventory asset impairment charges in connection with the 2024 Restructuring Plan, which are expected to be substantially incurred by the end of fiscal year 2025.

Previous wording

We may not be able to realize the cost savings and benefits initially anticipated as a result of the Restructuring Plan, and costs may be greater than expected. See“Risk Factors—Risks Related to Our Business—We may not successfully execute or achieve the expected benefits of our restructuring initiatives and other cost-saving measures we may take in the future, and our efforts may result in further actions and/or additional asset impairment charges and adversely affect our business” in our Form 10-K.

Current wording

We do not believe these cost-saving measures will impair our ability to conduct any of our key business functions. We may not be able to realize the cost savings and benefits initially anticipated as a result of the 2022 Restructuring Plan and the 2024 Restructuring Plan, and costs may be greater than expected. See“Risk Factors—Risks Related to Our Business—We may not successfully execute or achieve the expected benefits of our restructuring initiatives and other cost-saving measures we may take in the future, and our efforts may result in further actions and/or additional asset impairment charges and adversely affect our business” in our Form 10-K.

Previous wording

On May 5, 2021, we announced a voluntary recall of our Tread+ product in collaboration with the Consumer Product Safety Commission (the “CPSC”) and halted sales of this product to work on product enhancements. Members were notified that they could return their Tread+ for a full refund, or wait until a solution is available. In collaboration with the CPSC, on May 18, 2023, we jointly announced approval of a rear guard repair for the recalled Tread+, for which we are in the process of manufacturing. We have made this rear guard available to our Members who continue to own a Tread+ and resumed pre-sales of the Tread+ from our existing inventory with the rear guard installed.

Current wording

On May 5, 2021, we announced a voluntary recall of our Tread+ product in collaboration with the U.S. Consumer Product Safety Commission (the “CPSC”) and halted sales of this product to work on product enhancements. Members were notified that they could return their Tread+ for a full refund, or wait until a solution was available. In collaboration with the CPSC, on May 18, 2023, we jointly announced approval of a rear guard repair for the recalled Tread+. We have made this rear guard available to our Members who continue to own a Tread+ and during thethree months ended March 31, 2023, we resumed deliveries of the Tread+ from our existing inventory with the rear guard installed.

Previous wording

Return reserves related to the impacts of the Tread+ recall of $8.5 million and $24.4 million were included within Accounts payable and accrued expenses in the Condensed Consolidated Balance Sheets as of December 31, 2023 and June 30, 2023, respectively. Accruals for costs associated with the Tread+ repair of$10.0 million and$10.0 million were included within Accounts payable and accrued expenses in the Condensed Consolidated Balance Sheet as of December 31, 2023 and June 30, 2023, respectively. We may continue to incur additional costs beyond what we have currently estimated to be probable and reasonably estimable which could include costs for which we have not accrued or established adequate reserves, including increases to the return reserves, inventory write-downs, logistics costs associated with Member requests to return or move their hardware, subscription waiver variable costs of service, anticipated recall-related hardware development and repair costs, and related legal and advisory fees. Recall charges are based upon estimates associated with our expected and historical consumer response rates.

Current wording

Return reserves related to the impacts of the Tread+ recall of $7.5 million and $24.4 million were included within Accounts payable and accrued expenses in the Condensed Consolidated Balance Sheets as of March 31, 2024 and June 30, 2023, respectively. Accruals for costs associated with the Tread+ repair of$8.9 million and$10.0 million were included within Accounts payable and accrued expenses in the Condensed Consolidated Balance Sheet as of March 31, 2024 and June 30, 2023, respectively. We may continue to incur additional costs beyond what we have currently estimated to be probable and reasonably estimable which could include costs for which we have not accrued or established adequate reserves, including increases to the return reserves, inventory write-downs, logistics costs associated with Member requests to return or move their hardware, subscription waiver variable costs of service, anticipated recall-related hardware development and repair costs, and related legal and advisory fees. Recall charges are based upon estimates associated with our expected and historical consumer response rates.

Previous wording

On May 11, 2023, in collaboration with the CPSC, the Company announced a voluntary recall of the original Peloton Bike (not Bike+) sold in the U.S. from January 2018 to May 2023 related to its seat post, and the Company is offering Members a free replacement seat post as the approved repair. As of December 31, 2023 and June 30, 2023, accruals of$2.5 million and $42.2 million, respectively, were included within Accounts payable and accrued expenses in the Condensed Consolidated Balance Sheet related to the recall. The estimated cost to replace the bike seat posts is primarily based on the estimated number of requests for seat posts and the estimated costs of the production and shipment of the replacement parts.

Current wording

On May 11, 2023, in collaboration with the CPSC, the Company announced a voluntary recall of the original Peloton Bike (not Bike+) sold in the U.S. from January 2018 to May 2023 related to its seat post, and the Company is offering Members a free replacement seat post as the approved repair. As of March 31, 2024 and June 30, 2023, accruals of$2.4 million and $42.2 million, respectively, were included within Accounts payable and accrued expenses in the Condensed Consolidated Balance Sheet related to the recall. The estimated cost to replace the bike seat posts is primarily based on the estimated number of requests for seat posts and the estimated costs of the production and shipment of the replacement parts.

Previous wording

(6) Please see the section titled “Non-GAAP Financial Measures—Free Cash Flow” for a reconciliation of net cash used in operating activities to Free Cash Flow and an explanation of why we consider Free Cash Flow to be a helpful measure for investors.

Current wording

(6) Please see the section titled “Non-GAAP Financial Measures—Free Cash Flow” for a reconciliation of net cash provided by (used in) operating activities to Free Cash Flow and an explanation of why we consider Free Cash Flow to be a helpful measure for investors.

Previous wording

Subscription revenue consists of revenue generated from our monthly Connected Fitness Subscription and Peloton App subscription.

Current wording

Subscription revenue consists of revenue generated from our monthly Connected Fitness Subscription and Paid App Subscription.

Previous wording

As of December 31, 2023, 99% and 88% of our Connected Fitness Subscription and Peloton App subscription bases, respectively, were paying month-to-month.

Current wording

As of March 31, 2024, 99% and 84% of our Connected Fitness Subscription and Paid App Subscription bases, respectively, were paying month-to-month.

Previous wording

If a Connected Fitness Subscription owns a combination of a Bike, Tread, Guide or Row product in the same household, the price of the Subscription remains $44 monthly. As of December 31, 2023, approximately 9% of our Connected Fitness Subscriptions owned multiple Connected Fitness Products.

Current wording

If a Connected Fitness Subscription owns a combination of a Bike, Tread, Guide or Row product in the same household, the price of the subscription remains $44 monthly. As of March 31, 2024, approximately 10% of our Connected Fitness Subscriptions owned multiple Connected Fitness Products.

Previous wording

On July 1, 2022, the Compensation Committee approved a one-time repricing of certain stock option awards that had been granted to date under the 2019 Plan. The repricing impacted stock options held by all employees who remained employed through July 25, 2022. The repricing did not apply to our U.S.-based hourly employees (or employees with equivalent roles in non-U.S. locations) or our C-level executives. The modification resulted in incremental stock-based compensation expense of $21.9 million in the aggregate.

Current wording

On July 1, 2022, the Compensation Committee approved a one-time repricing of certain stock option awards that had been granted under the 2019 Plan. The repricing impacted stock options held by all employees who remained employed through July 25, 2022. The repricing did not apply to our U.S.-based hourly employees (or employees with equivalent roles in non-U.S. locations) or our C-level executives. The modification resulted in incremental stock-based compensation expense of $21.9 million in the aggregate.

Previous wording

Comparison of the Three and Six Months Ended December 31, 2023 and 2022

Current wording

Comparison of the Three and Nine Months Ended March 31, 2024 and 2023

Previous wording

Connected Fitness Products revenue decreased $62.3 million and $85.9 million for the three and six months ended December 31, 2023, respectively, compared to the three and six months ended December 31, 2022. These decreases were primarily attributable to fewer Row, Bike, and Accessories deliveries driven by less demand, partially offset by revenues generated from our rental program and Tread.

Current wording

Connected Fitness Products revenue decreased $44.2 million and $130.2 million for the three and nine months ended March 31, 2024, respectively, compared to the three and nine months ended March 31, 2023. These decreases were primarily attributable to fewer Bike, Accessories, and Row deliveries driven by less demand, partially offset by higher demand from our rental program and Tread+.

Previous wording

Subscription revenue increased $13.3 million and $15.9 million for the three and six months ended December 31, 2023 compared to the three and six months ended December 31, 2022. These increases were primarily attributable to the year-over-year growth in our Connected Fitness Subscriptions, primarily driven by the number of Connected Fitness Products delivered during the fiscal year ended June 30, 2023 under new Subscriptions and our low Average Net Monthly Paid Connected Fitness Subscription Churn of 1.2% and 1.3% for the three and six months ended December 31, 2023, respectively.

Current wording

Subscription revenue increased $13.1 million and $29.0 million for the three and nine months ended March 31, 2024, respectively, compared to the three and nine months ended March 31, 2023. These increases were primarily attributable to continued growth in our Connected Fitness Subscriptions, primarily driven by the number of Connected Fitness Products delivered during the fiscal year ended June 30, 2023 and the six months ended December 31, 2023 under new Subscriptions, as well as other subscription revenue, and our low Average Net Monthly Paid Connected Fitness Subscription Churn of 1.2% and 1.3% for the three and nine months ended March 31, 2024.

Previous wording

Connected Fitness Products cost of revenue for the three months ended December 31, 2023 decreased $119.0 million, or 28.0%, compared to the three months ended December 31, 2022. This decrease was primarily driven by fewer deliveries driven by less demand for the three months ended December 31, 2023 compared to the three months ended December 31, 2022.

Current wording

Connected Fitness Products cost of revenue for the three months ended March 31, 2024 decreased $73.4 million, or 21.5%, compared to the three months ended March 31, 2023. This decrease was primarily driven by fewer deliveries stemming from lower demand during the three months ended March 31, 2024 compared to the three months ended March 31, 2023.

Previous wording

Our Connected Fitness Products Gross Margin increased to 3.9% for the six months ended December 31, 2023 compared to (16.8)% for the six months ended December 31, 2022, primarily driven by lower inventory write downs, richer promotional pricing in place during the three months ended December 31, 2022, lower shipping and logistics costs, and a reduction in recall related reserves.

Current wording

Our Connected Fitness Products Gross Margin increased to 4.2% for the three months ended March 31, 2024 compared to (5.4)% for the three months ended March 31, 2023, primarily driven by lower inventory write downs and lower shipping and logistics costs compared to the three months ended March 31, 2023.

Previous wording

Subscription cost of revenue for the three months ended December 31, 2023 increased $5.6 million, or 4.2%, compared to the three months ended December 31, 2022. This increase was primarily driven by increases in platform streaming costs of $2.2 million, personnel related expenses of $2.2 million, and content production costs of $0.7 million.

Current wording

Subscription cost of revenue for the three months ended March 31, 2024 increased $2.8 million, or 2.1%, compared to the three months ended March 31, 2023. This increase was primarily driven by increases in platform streaming and content productions costs of $4.1 million and personnel related expenses of $2.5 million, partially offset by decreases in music royalties of $2.8 million and depreciation and amortization expense of $1.3 million.

Previous wording

Connected Fitness Products cost of revenue for the six months ended December 31, 2023 decreased $203.9 million, or 29.8%, compared to the six months ended December 31, 2022. This decrease was primarily driven by fewer deliveries driven by less demand for the six months ended December 31, 2023 compared to the six months ended December 31, 2022.

Current wording

Connected Fitness Products cost of revenue for the nine months ended March 31, 2024 decreased $277.3 million, or 27.0%, compared to the nine months ended March 31, 2023. This decrease was primarily driven by fewer deliveries stemming from lower demand during the nine months ended March 31, 2024 compared to the nine months ended March 31, 2023.

Previous wording

Subscription cost of revenue for the six months ended December 31, 2023 increased $1.3 million, or 0.5%, compared to the six months ended December 31, 2022, primarily driven by increases in personnel related expenses of $3.8 million, platform streaming costs of $2.3 million, depreciation and amortization expense of $0.6 million, and payment processing fees of $0.4 million. These increases were partially offset by decreases in music royalties of $3.1 million and stock-based compensation expense of $3.0 million, primarily driven by the acceleration of certain restricted stock unit vesting schedules and the repricing of certain stock option awards during the six months ended December 31, 2022.

Current wording

Subscription cost of revenue for the nine months ended March 31, 2024 increased $4.1 million, or 1.0%, compared to the nine months ended March 31, 2023, primarily driven by increases in personnel related expenses of $6.2 million and platform streaming costs of $6.2 million. These increases were partially offset by decreases in music royalties of $5.9 million and stock-based compensation expense of $2.8 million.

Previous wording

Subscription Gross Margin remained consistent for the six months ended December 31, 2023 compared to the six months ended December 31, 2022.

Current wording

Subscription Gross Margin remained consistent for the nine months ended March 31, 2024 compared to the nine months ended March 31, 2023.

Previous wording

Sales and marketing expense increased $13.2 million and $20.6 million in the three and six months ended December 31, 2023, respectively, compared to the three and six months ended December 31, 2022, primarily driven by increases in spending on advertising and marketing programs of $32.4 million and $63.4 million for the three and six months ended December 31, 2023, respectively. These increases were partially offset by decreases in personnel-related expenses of $8.5 million and $18.7 million for the three and six months ended December 31, 2023, respectively, primarily due to decreased average headcount, decreases in rent and occupancy costs of $6.0 million and $10.4 million for the three and six months ended December 31, 2023, respectively, primarily driven by a reduction in our retail showroom presence, decreases in depreciation and amortization expense of $2.2 million and $4.3 million for the three and six months ended December 31, 2023, respectively, and decreases in stock-based compensation expense of $1.5 million and $7.4 million for the three and six months ended December 31, 2023, respectively, primarily driven by the acceleration of certain restricted stock unit vesting schedules and the repricing of certain stock option awards during the prior year.

Current wording

Sales and marketing expense increased $15.7 million for the three months ended March 31, 2024 compared to the three months ended March 31, 2023, primarily driven by an increase in spending on advertising and marketing programs of $27.4 million, partially offset by decreases of personnel-related expenses of $5.9 million, primarily due to decreased average headcount, decreases in rent and occupancy and other retail related costs of $3.4 million, primarily driven by a reduction in our retail showroom presence, and decreases in depreciation and amortization expense of $1.8 million. Sales and marketing expense increased $36.3 million for the nine months ended March 31, 2024, compared to the nine months ended March 31, 2023, primarily driven by an increase in spending on advertising and marketing programs of $90.8 million, partially offset by decreases in personnel-related expenses of $24.6 million, primarily due to decreased average headcount, decreases in rent and occupancy and other retail related costs of $13.8 million, primarily driven by a reduction in our retail showroom presence, decreases in stock-based compensation expense of $8.3 million, primarily driven by the acceleration of certain restricted stock unit vesting schedules and the repricing of certain stock option awards during the prior year, and decreases in depreciation and amortization expense of $6.1 million.

Previous wording

General and administrative expense decreased $31.9 million and $74.3 million for the three and six months ended December 31, 2023, respectively, compared to the three and six months ended December 31, 2022, largely due to decreases in professional services fees (comprised of legal, accounting, and consulting fees) of $25.0 million and $32.8 million for the three and six months ended December 31, 2023, respectively, and decreases in stock-based compensation expense of $8.4 million and $25.3 million for the three and six months ended December 31, 2023, respectively, largely due to the acceleration of certain restricted stock unit vesting schedules and the repricing of certain stock option awards during the three and six months ended December 31, 2022.

Current wording

General and administrative expense decreased $96.1 million for the three months ended March 31, 2024 compared to the three months ended March 31, 2023, primarily driven by decreases in professional services fees (comprised of legal, accounting, and consulting fees) of $81.9 million, primarily due to the $75.0 million Dish settlement during the three months ended March 31, 2023. General and administrative expense decreased $170.4 million for the nine months ended March 31, 2024, compared to the nine months ended March 31, 2023, primarily driven by decreases in professional services fees (comprised of legal, accounting, and consulting fees) of $114.7 million, primarily due to the $75.0 million Dish settlement during the nine months ended March 31, 2023, decreases in stock-based compensation expense of $28.2 million, primarily driven by the acceleration of certain restricted stock unit vesting schedules and the repricing of certain stock option awards during the prior year, and decreases in personnel-related expenses of $16.3 million primarily due to decreased average headcount.

Previous wording

Impairment expense decreased $6.1 million and $44.9 million for the three and six months ended December 31, 2023, compared to the three and six months ended December 31, 2022, primarily driven by decreases in asset write-downs and write-offs related to restructuring initiatives, including less Connected Fitness and capitalized software asset impairments, and asset impairments at certain corporate office and retail locations which the Company exited during the three and six months ended December 31, 2022.

Current wording

Impairment expense decreased $20.3 million for the three months ended March 31, 2024 compared to the three months ended March 31, 2023, primarily driven by the impairment recognized in the three months ended March 31, 2023 related to the previously planned Peloton Output Park. Impairment expense decreased $65.2 million for the nine months ended March 31, 2024, compared to the nine months ended March 31, 2023, primarily driven by decreases in asset write-downs and write-offs related to restructuring initiatives, including less Connected Fitness and capitalized software asset impairments, and asset impairments at certain corporate office locations which the Company exited during the nine months ended March 31, 2023.

Previous wording

Supplier settlements decreased $19.4 million and $20.6 million for the three and six months ended December 31, 2023, compared to the three and six months ended December 31, 2022, respectively. These costs, which consisted of settlement and related costs paid to third-party suppliers to terminate certain future inventory purchase commitments, were $17.9 million and $19.1 million for the three and six months ended December 31, 2022, respectively.

Current wording

Supplier settlements decreased $3.8 million and $24.3 million for the three and nine months ended March 31, 2024, compared to the three and nine months ended March 31, 2023, respectively. These costs, which consisted of settlement and related costs paid to third-party suppliers to terminate certain future inventory purchase commitments, were $2.9 million and $22.0 million for the three and nine months ended March 31, 2023, respectively.

Previous wording

Total Other Expense, Net and Income Tax (Benefit) Expense

Current wording

Total Other Expense, Net and Income Tax Expense (Benefit)

Previous wording

Total other expense, net, was composed of the following for the three and six months ended December 31, 2023:

Current wording

Total other expense, net, was composed of the following for the three and nine months ended March 31, 2024:

Previous wording

•Interest expense primarily related to the Term Loan, the Notes, and deferred financing costs of $27.7 million and $54.9 million, respectively;

Current wording

•Interest expense primarily related to the Term Loan, the Notes, and deferred financing costs of $27.7 million and $82.6 million, respectively;

Previous wording

•Interest income from cash, cash equivalents, and short-term investments of $8.4 million and $16.9 million, respectively;

Current wording

•Interest income from cash, cash equivalents, and short-term investments of $9.3 million and $26.2 million, respectively;

Previous wording

•Other income, net of $2.4 million and $2.6 million, respectively.

Current wording

•Other income, net of zero and $0.5 million, respectively.

Previous wording

Total other expense, net, was composed of the following for the three and six months ended December 31, 2022:

Current wording

Total other expense, net, was composed of the following for the three and nine months ended March 31, 2023:

Previous wording

•Interest expense primarily related to the Term Loan, the Notes, and deferred financing costs of $22.2 million and $43.2 million, respectively;

Current wording

•Interest expense primarily related to the Term Loan, the Notes, and deferred financing costs of $26.6 million and $69.7 million, respectively;

Previous wording

•Interest income from cash, cash equivalents, and short-term investments of $5.8 million and $9.8 million, respectively;

Current wording

•Interest income from cash, cash equivalents, and short-term investments of $7.9 million and $17.7 million, respectively;

Previous wording

•Other income, net of $0.1 million and $0.4 million, respectively.

Current wording

•Other income, net of $0.4 million and $3.0 million, respectively.

Previous wording

Income tax (benefit) expense for the three and six months ended December 31, 2023 and 2022 was primarily due to state and international taxes.

Current wording

Income tax expense (benefit) for the three and nine months ended March 31, 2024 and 2023 was primarily due to state and international taxes.

Previous wording

•Adjusted EBITDA does not reflect certain litigation expenses, consisting of legal settlements and related fees for specific proceedings that we have determined arise outside of the ordinary course of business based on the following considerations which we assess regularly: (1) the frequency of similar cases that have been brought to date, or are expected to be brought within two years; (2) the complexity of the case; (3) the nature of the remedy(ies) sought, including the size of any monetary damages sought; (4) offensive versus defensive posture of us; (5) the counterparty involved; and (6) our overall litigation strategy;

Current wording

•Adjusted EBITDA does not reflect certain litigation expenses, consisting of legal settlements and related fees for specific proceedings that we have determined arise outside of the ordinary course of business and are nonrecurring, infrequent or unusual based on the following considerations which we assess regularly: (1) the frequency of similar cases that have been brought to date, or are expected to be brought within two years; (2) the complexity of the case; (3) the nature of the remedy(ies) sought, including the size of any monetary damages sought; (4) offensive versus defensive posture of us; (5) the counterparty involved; and (6) our overall litigation strategy;