PELOTON INTERACTIVE INC

Overview

Peloton is a leading global fitness company with a highly engaged community of over 6.4 million Members as of June 30, 2024 across the United States, United Kingdom, Canada, Germany, Australia, and Austria. 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. Founded in 2012 and headquartered in New York City, Peloton continues to scale across the markets in which it operates. We define a “Member” as any individual who has a Peloton account through a paid Connected Fitness Subscription or a paid Peloton App Subscription, 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, run, or row, or ten or more minutes of “Just Ride”, “Just Run”, or “Just Row” mode.

We define a “Paid 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). “Paid App Subscriptions” include all App One and App+ subscriptions for which we are currently receiving payment.

Our Products

We provide Members with expert instruction and world class content to create impactful and entertaining workout experiences for anyone, anywhere, and at any stage in their fitness journey. At home, outdoors, traveling, or at the gym, we offer an immersive and personalized experience. With tens-of-thousands of classes available across many fitness modalities, Members can access Peloton content via our hardware or via the Peloton App, on their phone, tablet, or TV, allowing them to workout when, where, and how they want.

Our Connected Fitness Products include:

•Peloton Bike: The original Peloton Bike combines fitness, technology, and media to connect riders to live and on-demand workouts led by Peloton Instructors. The Peloton Bike also offers alternative workout experiences like Entertainment (video streaming), Scenic (guided, time, and distance based rides filmed in locations around the world), and Lanebreak (game inspired workout experience). It has a 21.5” HD touchscreen.

•Peloton Bike+: The Peloton Bike+ includes all Bike features and unlocks an even more dynamic workout experience with a rotating screen improving the off-bike workout experience, as well as automatic resistance control with the Bike+ electronic braking system, and a 23.8” HD touchscreen. Designed to keep riders motivated and effortlessly moving from cardio to strength, yoga, and more, the Peloton Bike+ unlocks an even more seamless and integrated total workout experience.

•Peloton Tread: The Peloton Tread combines a cutting-edge treadmill design with Peloton’s compelling Instructor-led running and Tread Bootcamp content, as well as Entertainment, Scenic and Lanebreak. The Tread includes fundamental design elements unique to Peloton, like dial control knobs, jump buttons, and an auto-incline feature. It has a 23.8” HD touchscreen.

•Peloton Tread+: The Peloton Tread+ includes all Tread features and unlocks an elevated comfort experience with slat belt technology. It has an upgraded 32” touchscreen and powerful sound bar designed for the highest quality home workout experience.

•Peloton Guide: Peloton’s first connected strength product, Peloton Guide, is an AI-powered personal trainer that connects to televisions and offers personalized strength training routines, as well as rep and progress tracking. It features exclusive strength programs and workouts only available on Peloton Guide.

•Peloton Row: Peloton Row combines the innovative software, premium hardware design, and exclusive Peloton content to deliver a unique low-impact, full-body cardio, and strength workout. Peloton Row employs proprietary form assistance and form guidance technology for rowers and also features personalized pace target technology. It has a 23.8” HD rotating touchscreen.

Our Connected Fitness Products also include certain Precor products.

Financing options are available for most Peloton products. In select markets, we also provide the opportunity via the Peloton Rental program to rent certain Peloton products and access fitness content for one monthly fee.

Peloton content is accessed via a Membership, and we have created a number of ways for consumers to engage with Peloton’s fitness experience. Monthly membership options include:

•All-Access Membership: The Peloton All-Access Membership is the most value-packed Peloton Membership. With this membership, the entire household can create a unique profile to access the full library of classes and receive tailored content recommendations across many fitness and wellness modalities on the Peloton Bike, Bike+, Tread, Tread+, Row, Guide, and the Peloton App. The All-Access Membership also offers advanced metrics and progress tracking features to help members reach their goals, and the ability to diversify their workout experience through Scenic content, game-inspired experiences including Lanebreak, and the ability to stream favorite TV shows, movies, and sports.

•Peloton App Membership: 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 (App+ or App One). Peloton App+ provides unlimited access to Peloton’s entire library of content, excluding Lanebreak and Scenic classes. Peloton App One is designed for Members who want unlimited access to thousands of classes across Strength, Yoga, Outdoor Running, HIIT, and more. App One Members can also take a limited number of equipment-based cardio classes per month (Bike/Tread/Row).

•Guide Membership: Includes App+ Membership and content exclusively for Guide.

Our Integrated Fitness Platform

Technology

Our content delivery and interactive software platform is critical to our Member experience. We thoughtfully invest in research and development to enhance our platform, develop new products and features, and improve the speed, scalability, and security of our platform infrastructure. Our research and development organization consists of engineering, product, and design teams. We seek to continuously improve our Connected Fitness Products, as well as the Peloton App (including the Peloton mobile app, watch apps, and TV apps), through frequent software updates, iterations of feature enhancements, and innovations. For example, last year we launched Peloton Entertainment, where Members can watch sports, shows, and movies via certain entertainment platform partners while working out. We’ve also launched a number of performance based features, including personalized pace targets on the Peloton Tread and Row, and continue to invest in the Peloton App to create a more social experience. In addition, we recently added a new marathon training collection on Tread and Tread+, including featuring a series of Scenic classes filmed on a well known marathon course. In a first-of-its-kind experience, these classes provide Members the ability to train on a marathon course with auto-incline functionality that matches the course's gradient fluctuations. Lastly, we use AI/ML to power proprietary personalization and discovery models across all of our software platforms and unique fitness features.

Content

We create engaging, original fitness and wellness content in an authentic studio environment that is immersive and motivating, while also creating a sense of community. We are constantly building and evolving our content library and offering, which includes Instructor-led classes, Scenic content, Entertainment, Just Work Out, and game-inspired workout options. Tens-of-thousands of classes and content types are produced at our production studios in New York City and London, featuring our proprietary Instructors, across many fitness and wellness modalities. Our content breadth and depth is vast, reaching a wide range of consumers. Fitness modalities include: Strength, Yoga, Meditation, Cardio, Stretching, Cycling, Outdoor, Running, Walking, Tread Bootcamp, Bike Bootcamp, Boxing, Pilates, Barre, Rowing, and Row Bootcamp. We have Scenic Content that includes Instructor-guided classes, as well as non-guided time and distance-based options, all shot in beautiful destinations. We also have game-inspired workout experiences like our Lanebreak feature, which allows Members to experience an animated workout as an alternative to Instructor-led programming. Lastly, we have a number of training programs, as well as collections of classes that are catered to our Members’ interests and fitness goals. These are produced and developed using features that are exclusively available on Peloton.

Our Peloton Studios in New York City and London provide an in-person Peloton content experience. Regular studio member classes and events are held in these spaces combining a high-energy live production environment with fitness classes in seven active production studios. We currently produce our content in three languages: English, German, and Spanish. We also have classes featuring subtitles and a selection of classes that are dubbed in German.

We have become noteworthy as a brand providing the opportunity for our Members to engage in a new way with the fitness modalities they love. Our technology allows our Instructors to integrate curated music and class plans into our programming in a way that we believe aligns with our Members’ musical tastes. We feature and celebrate some of the biggest artists and genres in the world through collaboration with music providers.

Sales and Marketing

We sell our products directly to customers through a multi-channel sales platform and via third parties. We also sell Peloton Connected Fitness Products to business-to-business (“B2B”) customers and provide the opportunity for employers, insurers, and other enterprise partners to offer their employees and members subsidized access to Peloton App subscriptions and All-Access Memberships. Our sales associates use customer relationship management tools to deliver an elevated, personalized, and educational purchase experience, regardless of channel of capture and conversion.

•E-Commerce and Inside Sales: Our desktop and mobile websites provide an elevated brand experience where visitors can learn about our products and services and access product reviews. Our Inside Sales team engages with customers by phone, email, and online chat on our websites, and offers one-on-one sales consultations seven days a week.

•Peloton for Business: Peloton For Business is a unified portfolio of B2B well-being solutions for enterprise clients, offered across seven key verticals: Hospitality, Corporate Wellness, Multi-Family Residential, Education, Healthcare, Gyms and Community Wellness. The full-service offering includes a range of equipment and content-based solutions.

•Retail Showrooms: Our showrooms allow customers to experience and try our products. We provide interactive product demonstrations and select showrooms have private areas where customers can take a “test class” on our Bike, Bike+, Tread, Tread+, and Row products. We frequently host Peloton community events in our showrooms, which help deepen brand engagement and customer loyalty.

•Third Party Retailers: Our products are also available to purchase from a number of third party retailers, at times including Amazon, Dick’s Sporting Goods, John Lewis, and Fitshop.

To market our products, we use a combination of brand and product specific performance marketing, which includes seasonal promotions to build brand awareness, generate sales of our Connected Fitness Products, and drive Paid Connected Fitness subscriptions and Paid App subscriptions.

Manufacturing and Logistics

We utilize third-party manufacturing partners for many of our new products. The components used in our products are procured on our behalf using our designs by our contract manufacturers, according to our required design specifications and high standards, from a variety of suppliers. In order to account for technology evolution and market fluctuations, we regularly review our relationships with our existing contract manufacturers and the components suppliers that they contract with, while evaluating prospective new partnerships. We use a combination of leased and operated as well as contracted third-party logistics providers (“3PLs”) in our logistics and service network which primarily includes middle mile and last mile operations centers in the United States, Canada, Germany, the United Kingdom, Australia, and Austria.

Intellectual Property

The protection of our technology and intellectual property is an important aspect of our business. We rely upon a combination of patents, trademarks, trade secrets, copyrights, confidentiality procedures, contractual commitments, and other legal rights to establish and protect our intellectual property. We generally enter into confidentiality agreements and invention or work product assignment agreements with our employees and consultants to control access to, and clarify ownership of, our proprietary information.

As of June 30, 2024, we held 180 U.S. issued patents and had 82 U.S. patent applications pending. We also held 429 issued patents in foreign jurisdictions and 119 patent applications pending in foreign jurisdictions. Our U.S. issued patents expire between February 9, 2025 and August 5, 2046. As of June 30, 2024, we held 58 registered trademarks in the United States, including the Peloton mark and our “P” logo and also held 950 registered trademarks in foreign jurisdictions. We continually review our development efforts to assess the existence and patentability of new intellectual property. We intend to continue to file additional patent applications with respect to our technology.

Intellectual property laws, procedures, and restrictions provide only limited protection and any of our intellectual property rights may be challenged, invalidated, circumvented, infringed, or misappropriated. Further, the laws of certain countries do not protect proprietary rights to the same extent as the laws of the United States, and, therefore, in certain jurisdictions, we may be unable to protect our proprietary technology.

Competition

We believe that our first-mover advantage, leading market position, brand recognition, best-in-class content, and integrated platform set us apart in the market for connected, technology-enabled fitness. We provide a superior value proposition with our Connected Fitness Subscription and App offerings, giving us a competitive advantage versus traditional fitness and wellness products and services, and future potential entrants.

While we believe we are changing the consumption patterns for fitness and over time growing the market, our main sources of competition include at-home fitness equipment and content, health and wellness apps, fitness clubs, and in-studio fitness classes.

The areas in which we compete include:

•Consumers and Engagement: We compete for consumers to join our platform through Connected Fitness Subscriptions or Peloton App Subscriptions, and we seek to engage and retain them through an integrated experience that combines content, hardware, software, service, and community.

•Product and App Offering: We compete with producers of fitness products, services, and apps and work to ensure that our platform maintains the most innovative technology and user-friendly features.

•Business-to-Business (B2B) Clients and Employers: We compete with commercial fitness equipment manufacturers and wellness benefits providers to offer fitness products and services to B2B clients and employers.

•Talent: We compete for talent in every vertical across our company including technology, media, fitness, design, supply chain, logistics, content, marketing, finance, strategy, legal, and retail. As our platform is highly dependent on technology, hardware, and software, we require a significant base of engineers to continue innovating.

The principal competitive factors that companies in our industry need to consider include, but are not limited to: total cost, supply chain efficiency across sourcing and procurement, manufacturing and logistics, enhanced products and services, original content, product quality and safety, competitive pricing policies, vision for the market and product innovation, strength of sales and marketing strategies, technological advances, and brand awareness and reputation. We believe we compete favorably across all of these factors and we have developed a business model that is difficult to replicate.

Government Regulation

We are subject to many varying laws and regulations in the United States, the United Kingdom, the European Union and throughout the world, including those related to privacy, data protection, content regulation, intellectual property, consumer protection, e-commerce, marketing, advertising, messaging, rights of publicity, health and safety, environmental, social, and governance factors, employment and labor, product quality and safety, accessibility, competition, customs and international trade, and taxation. These laws often require companies to implement specific information security controls to protect certain types of information, such as personal data, “special categories of personal data” or health data. These laws and regulations are constantly evolving and may be interpreted, applied, created, or amended in a manner that could harm our current or future business and operations. In addition, it is possible that certain governments may seek to block or limit our products and services or otherwise impose other restrictions that may affect the accessibility or usability of any or all of our products and services for an extended period of time or indefinitely.

Seasonality

Historically, we have experienced higher Connected Fitness Products sales in the second and third quarters of the fiscal year compared to other quarters, due in large part to seasonal holiday demand, New Year’s resolutions, and cold weather. We also have historically incurred higher sales and marketing expenses during these periods. For example, in fiscal year 2024, our second and third quarters combined represented 60% of Connected Fitness Products revenue and 54% of our Total revenue.

Human Capital

Our Culture

We’re fostering an environment that attracts extraordinary talent, helps every individual become their best self, and unlocks each person’s greatest potential, shaped by the following fundamental values:

•Put Members First

•Operate with a Bias for Action

•Empower Teams of Smart Creatives

•Together We Go Far

•Be the Best Place to Work

We live these values through our approach to human capital management, summarized below.

Employees

As of June 30, 2024, we employed 2,322 individuals in the United States across our offices, retail showrooms, field operations warehouses, and remote roles, of which 2,257 were full-time employees. Internationally, we employed 596 individuals primarily across corporate, retail showrooms, and warehouse functions. We may also hire additional seasonal employees, primarily in our showrooms, during the holiday season. We are not signatories to any agreements with any labor organization, or a party to any collective bargaining agreements.

Diversity, Equity, and Inclusion

We cultivate a culture of inclusion by creating physiologically, emotionally, physically, and psychologically safe spaces so all team members feel valued, heard, and secure.

We’re proud of our concrete action plan to combat systemic inequities, the Peloton Pledge. Created in 2020, the Peloton Pledge is a multi-pronged, multi-faceted action plan to address Peloton’s internal culture and principles as well as a strategy to amplify change both in our company and our community. We are pushing ourselves from the inside out and partnering with community-based organizations to deliver meaningful and measurable impact.

Through the Peloton Pledge we are investing across five pillars:

•Pay Equity: We continue to offer competitive rates for our hourly workforce and equally competitive rates for equivalent roles in all markets. We’re also committed to maintaining pay equity for our team and continue to conduct an annual global pay equity study.

•Learning and Development: We offer content that supports internal mobility, individual growth, and ongoing skills development, and training around diversity, equity, and inclusion (DEI) topics.

•Community Investments: We partner with leading action-oriented organizations addressing systemic racism through partnerships that drive real, sustainable transformation;

•Democratizing Fitness: We continuously evaluate progress and apply learnings to do our part to democratize access to fitness and cultivate a diverse and inclusive Member community;

•Long-Term DEI Strategy: We invest in various programs to support long-term DEI strategy, as further described below.

The Peloton Pledge has sharpened our focus on delivering value-add, business-wide DEI programming. In our ongoing push for shared learning, we continue to create psychologically safe spaces for our team members to learn and grow together. For example, we have introduced specific learning programs for managers to support our ambition to be an anti-racist organization. We will continue to evolve our learning content to support our team members and managers while remaining relevant and engaged to the best practices in this space.

We continue to offer support, engagement, and development opportunities to our team members through our Employee Resource Groups (“ERGs”) and Inclusion Forums, fostering a diverse and inclusive workplace and providing space to grow our team member ally population.

Through the delivery of our DEI strategy, we’re increasing cross-business, multi-market collaboration that energizes our team members and leaders to innovate, leverage diversity of thought, and create responsive and culturally relevant programming to drive the system and behavioral changes required to be a truly, globally inclusive business.

Our commitments to diversity, equity, and inclusion extend to our compensation practices to ensure our team members are paid fairly based on the work they perform. We annually partner with a third-party firm to review team members’ pay. We aim to act on any pay gaps we find through this analysis to support our commitment to achieve true pay equity across Peloton and to ensure we’re a globally inclusive business. Our pay equity study is in addition to any market-specific obligations we have to undertake pay gap analyses, such as our Gender Pay Gap Study in the United Kingdom.

Team Member Safety

We prioritize the health and safety of our team members, our Members, and the impact our operations have on the environment. The core elements of our team member health and safety program include workplace injury reporting, site risk analysis, incident management, documented processes and standards, environmental programs, training, and occupational health programs, and we are continually striving to improve these processes. Concerns about the health and safety of our team members can be reported through our PeloSafe portal, and concerns about Peloton suppliers or business partners are reportable through our Integrity Helpline or online Integrity Portal, which is maintained through an external third-party platform and monitored by our Safety, Ethics, and Compliance Team.

Training, Development, and Engagement

We have a dedicated Global Talent Development Team that develops and delivers company-wide learning experiences across all functions. These include, but are not limited to, programs focusing on Peloton’s approach to onboarding new team members, people and business leadership, dedicated coaching, function and role specific training offerings, and internal hiring and mobility to support personal and professional growth.

We are committed to cultivating an equitable and inclusive culture that enables people to thrive in the best career experiences of their lives by consistently engaging with, and listening to, our team members. We maintain ongoing connection with our team members through our company intranet, “Pelonet,” regular all-hands meetings and business performance reviews, team town halls, and company-wide engagement surveys throughout the year.

Our Patent Incentive Program provides rewards and recognition to qualifying team members whose inventions are included in a patent application submitted by Peloton.

Competitive Compensation and Work-Life Harmony

Our compensation program is structured around our overarching philosophy of rewarding demonstrable performance and aligning team members with our goals and strategy. Consistent with this approach, we provide market competitive compensation and benefits that will attract, motivate, reward, and retain a highly talented team and foster work-life harmony. We take a comprehensive view of the tools and programs we use to attract, reward, and retain top talent, including comprehensive health benefits, family and lifestyle services and support, financial, legal and retirement benefits, product discounts, free App access, and studio rides. Our workforce is diverse – so our benefits must be too.

At Peloton, we encourage our team members to foster kindness, support, empathy, respect, compassion, and a sense of community in all interactions every day. We believe our approach to maintaining healthy work-life harmony has contributed to making Peloton a great place to work for our team members.

Corporate Information

Our website address is www.onepeloton.com. The information contained on, or that can be accessed through, our website is not incorporated by reference into, and is not a part of, this Annual Report on Form 10-K. Investors should not rely on any such information in deciding whether to purchase our Class A common stock.

Peloton, the Peloton logo, Peloton Bike, Peloton Bike+, Peloton Tread, Peloton Tread+, Peloton Guide, Peloton Row, Peloton Gym, Peloton App, and other registered or common law trade names, trademarks, or service marks of Peloton appearing in this Annual Report on Form 10-K are the property of Peloton. This Annual Report on Form 10-K contains additional trade names, trademarks, and service marks of other companies that are the property of their respective owners. We do not intend our use or display of other companies’ trade names, trademarks, or service marks to imply a relationship with, or endorsement or sponsorship of us by, these other companies. Solely for convenience, our trademarks and tradenames referred to in this Annual Report on Form 10-K appear without the ® and ™ symbols, but those references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights, or the right of the applicable licensor, to these trademarks and tradenames.

Available Information

Our reports filed with or furnished to the Securities and Exchange Commission (“SEC”) pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, are available, free of charge, on our Investor Relations website at https://investor.onepeloton.com as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. The SEC maintains a website at http://www.sec.gov that contains reports, proxy and information statements, and other information regarding us and other companies that file materials with the SEC electronically. We use our Investor Relations website (https://investor.onepeloton.com/investor-relations) and Press Newsroom (https://www.onepeloton.com/press) as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD. Accordingly, investors should monitor our Investor Relations website and Press Newsroom in addition to following our press releases, SEC filings, and public conference calls and webcasts.