PELOTON INTERACTIVE INC
For the period ended Dec 31, 2024. Filed Feb 6, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Dec 31, 2024 · Filed Feb 6, 2025
PTON$5.61-0.9%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-10-31.
0001639825-24-000163
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-12-31; filed 2025-02-06.
0001639825-25-000026
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 202 previous paragraphs and 214 current paragraphs.
138 unchanged; 47 reworded; 29 added; 15 removed; 2 previous and 0 current paragraphs rearranged.
Tables are not compared: 18 previous and 18 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (29)
Current report
Innovating on Our Products and Experiences
Current report
Innovating on our products and experiences so we can deliver even better outcomes for our Members is our most important long-term opportunity. Third-party research studies have shown that people benefit from engaging in multiple fitness disciplines. This variety is not only good for our Members but also for our business, as we believe it drives higher engagement and retention. Our monthly churn rate is roughly 60% lower for Connected Fitness subscriptions engaging with two or more disciplines per month versus those engaging with just one.
Current report
While Peloton is best known for cardio workouts, and Cycling in particular, we are also a leader in Strength workouts 1. Inthe three months ended December 31, 2024, over 2.0 million unique Members completed a Strength workout, representing 735.0 million minutes of total workout time. Furthermore, the number of Strength workouts taken inthe three months ended December 31, 2024 equaled 75% of the total number of Cycling workouts taken. On the cardio side, we also continue to elevate our Tread products, achieving higher new subscription attach rates year over year inthe three months ended December 31, 2024, thanks to our marketing efforts. With the release of our 10K training program inthe three months ended December 31, 2024, Peloton now offers training options for all major race distances. Over 300,000 Members have already trained for a race with Peloton.
Current report
We’re also seeing the impact of innovative, new software features like Pace Targets, which offer running instruction with personalized intensity levels. Nearly 60% of our Members who take Instructor-led workouts on our Tread products are using Pace Targets, and our we're seeing improved running paces as a result.
Current report
Meeting Members in More Places
Current report
Meeting Members in more places is another way to improve our service and grow our business. In December, we launched Strength+, a new app designed for gym-based strength workouts with audio guidance from expert coaches, as well as a custom strength workout generator. It reached over 220,000 monthly active users inthe three months ended December 31, 2024, the vast majority of whom were existing All-Access Members, and represents another value-add for our Members.
Current report
Third-party retail enables us to meet more new Members in places where they already shop. Our new seasonal partnership with Costco drove more Bike+ unit sales than any other third-party retail partner duringthe three months ended December 31, 2024. We also remain focused on meeting more Members around the globe. We are encouraged by hardware sales in International markets inthe three months ended December
Current report
1 Strength workouts include Strength, Bootcamp, Yoga, and Pilates classes, as well as non-class Strength and Yoga workouts taken on the Strength+ App or Peloton App
Current report
31, 2024, which exceeded our expectations, as well as the continued growth in International Connected Fitness Subscriptions, which was accomplished with greater capital efficiency and improved unit economics.
Current report
Deepening Connections Among Our Members
Current report
As you may know, Peloton is named after the pack of cyclists who ride closely together to reduce their collective resistance, thereby going further, faster. And research shows that people achieve better fitness outcomes when they work out together. So we’re focused on deepening connections among our more than 6.0 million Members, both with Peloton and with our supportive community. In September, we launched Teams, which enables Members to share workouts and compete in challenges. 70,000 Teams have been created since launch, and Members who join them are more likely to work out. Inthe three months ended December 31, 2024, we hosted the 11th annual Thanksgiving Day Turkey Burn where over 50,000 Members worked out together live. This year’s Turkey Burn also brought "The Feast," our first Thanksgiving live Strength class and the largest live Strength class in Peloton’s history.
Current report
Improving Our Unit Economics and Right-Sizing Our Costs
Current report
We’ve discussed in recent quarters that improving our unit economics and right-sizing our costs are both critical to our long-term success. During this holiday quarter, we demonstrated continued progress on improving our hardware unit economics by selling a favorable mix of premium priced products and by aligning our discounts with the margins of our products. Inthe three months ended December 31, 2024, we achieved a 12.9% Connected Fitness Products Gross Margin, reaching double digits for the first time in over three years.
Current report
Global Trade Policies and Tariffs
Current report
We continue to closely monitor changes in international trade policies, relations, legislation and regulations, including those related to tariffs, which could adversely impact the global economy and our business, financial condition, and operating results. The impact of any tariffs will depend on various factors, including whether the tariffs are ultimately implemented, the timing of implementation, and the amount, scope and nature of the tariffs.
Current report
Subscription Revenue decreased $4.0 million for the three months ended December 31, 2024 compared to the three months ended December 31, 2023, primarily due to decreases in Paid Connected Fitness and App Subscriptions, partially offset by improvements in content licensing revenue and Used Equipment Activation Fee revenue, which was introduced during the first quarter of fiscal 2025.
Current report
Our Connected Fitness Products Gross Margin increased to 12.9% for the three months ended December 31, 2024 compared to 4.3% for the three months ended December 31, 2023. This increase was primarily driven by a mix-shift towards higher margin products, lower warehousing and transportation costs, a reduction in inventory reserves including the sale of certain fully reserved units, and lower payroll and rent expense in connection with restructuring efforts.
Current report
Six Months Ended December 31, 2024 and 2023
Current report
Connected Fitness Products Cost of revenue for the six months ended December 31, 2024 decreased $114.6 million, or 23.9%, compared to the six months ended December 31, 2023. This decrease was primarily driven by fewer deliveries across Bike, Tread, and Bike+ resulting from lower demand during the six months ended December 31, 2024 compared to the six months ended December 31, 2023. This decrease was partially offset by Tread+ deliveries during the six months ended December 31, 2024 as deliveries resumed during the third quarter of fiscal 2024, and higher Precor cost of revenue in line with the increased volume of Precor sales.
Current report
Our Connected Fitness Products Gross Margin increased to 11.5% for the six months ended December 31, 2024 compared to 3.9% for the six months ended December 31, 2023. This increase was primarily driven by product mix-shifts towards higher margin products, lower warehousing and delivery costs, and a reduction in inventory reserves.
Current report
Subscription Cost of revenue and Gross Margin remained mostly consistent for the six months ended December 31, 2024 compared to the six months ended December 31, 2023.
Current report
Sales and marketing expense decreased $77.6 million and $141.8 million for the three and six months ended December 31, 2024, respectively, compared to the three and six months ended December 31, 2023, primarily driven by a decrease of $64.4 million and $116.1 million in acquisition, brand, and creative marketing spend for the three and six months ended December 31, 2024, respectively, and a decrease of $4.8 million and $10.3 million in personnel-related expenses, inclusive of stock-based compensation expense, primarily due to decreased average headcount, for the three and six months ended December 31, 2024, respectively.
Current report
Restructuring expense decreased $10.1 million and $25.0 million for the three and six months ended December 31, 2024 compared to the three and six months ended December 31, 2023, primarily due to a $13.5 million decrease in personnel-related expenses, inclusive of stock-based compensation expense during the six months ended December 31, 2024, decreases in exit and disposal costs and professional fees of $6.6 million and $7.7 million for the three and six months ended December 31, 2024, respectively, and decreases in non-cash charges of $3.8 million during both the three and six months ended December 31, 2024 relating to the loss on sale of a manufacturing subsidiary in Taiwan during the three and six months ended December 31, 2023.
Current report
•Foreign exchange gains of $9.6 million and $1.9 million, respectively; and
Current report
(1) Primarily consists of Interest expense of $34.6 million and $70.0 million, foreign exchange losses of $18.5 million and $3.7 million, and Interest income of $(7.7) million and $(15.8) million, for the three and six months ended December 31, 2024, respectively. Primarily consists of Interest expense of $27.7 million and $54.9 million, foreign exchange gains of $(9.6) million and $(1.9) million, and Interest income of $(8.4) million and $(16.9) million, for the three and six months ended December 31, 2023, respectively.
Current report
The 2029 Notes will mature on December 1, 2029, unless earlier converted, redeemed, or repurchased. The 2029 Notes will be convertible at the option of the holders at certain times and upon the occurrence of certain events. A holder may convert its 2029 Notes during any calendar quarter (and only during such calendar quarter), if the last reported sale price per share of the Class A common stock exceeds 130% of the conversion price for each of at least 20 trading days (whether or not consecutive) during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter. The last reported sale price of the Class A common stock exceeded 130% of the conversion price of the 2029 Notes for more than 20 trading days during the 30 consecutive trading days ended December 31, 2024. Accordingly, as of January 1, 2025, the 2029 Notes may be converted at the option of the applicable holder through March 31, 2025.
Current report
On or after September 1, 2029, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of their 2029 Notes, in multiples of $1,000 principal amount, at the option of the holder.
Current report
The Company may satisfy any conversion obligation under the 2029 Notes by paying and/or delivering, as the case may be, cash, shares of the Class A common stock or a combination of cash and shares of the Class A common stock, at the Company’s election, in the manner and subject to the terms and conditions provided in the 2029 Notes Indenture. If all of the 2029 Notes were to be converted prior to March 31, 2025, the Company’s current intention would be to settle such conversion in shares of the Class A common stock.
Current report
The decrease in cash provided by investing activities during the six months ended December 31, 2024 compared to the six months ended December 31, 2023 is due to less cash proceeds from sale of Peloton Output Park land parcel during the six months ended December 31, 2024 when compared to the proceeds received from sale of a manufacturing subsidiary in Taiwan during the six months ended December 31, 2023, partially offset by less capital expenditures during the six months ended December 31, 2024.
Removed paragraphs (15)
Previous report
Connected Fitness Sales Channels
Previous report
Innovative Content Offerings
Previous report
In addition to our annual All for One programming event, we recently rolled out a number of new programs to serve our Member base’s diverse interests, including Strength for Soccer, and new offerings across Barre, Pilates, Yoga and Meditation. We also expanded our low-impact workout offering with the launch of Walking Bootcamps, the latest in a series of Walking and Hiking content. We also delivered content for the performance athlete segment, releasing more 75, 90 and 120-minute classes in response to Member interest. Lastly, in addition to Lanebreak, we have been conducting a beta test for a new immersive, game-inspired cycling experience designed for competitive and social engagement.
Previous report
New and Expanded Partnerships
Previous report
We’re leaning into existing partnerships and exploring opportunities to partner with other businesses strategically to reach incremental audiences with our world-class Connected Fitness experience.
Previous report
•We launched a new partnership with TrueMed in October, making it easier for qualified US-based Peloton customers to use pre-tax Health Savings Account (HSA)/Flexible Spending Account (FSA) dollars to purchase applicable Peloton products through a payment integration on our website.
Previous report
•We expanded our partnership with Hyatt during the three months ended September 30, 2024 by rolling out the Earn More, Move More program for World of Hyatt loyalty members. This first-of-its-kind global program enables Members to earn World of Hyatt loyalty points by completing Peloton workouts at participating Hyatt hotels.
Previous report
•Our partnership with Google Fitbit launched in September with 100 Peloton classes on the Fitbit Premium Platform and 5 sample classes on the Fitbit Free App. Early customer feedback generally has been positive.
Previous report
•We continue to be pleased with our content licensing arrangement with lululemon, which delivers a meaningful, consistent revenue stream from their subscriber base.
Previous report
Our Connected Fitness Products Gross Margin increased to 9.2% for the three months ended September 30, 2024 compared to 3.1% for the three months ended September 30, 2023, primarily driven by product mix-shifts towards higher margin Precor and Bike rental products, reduced personnel-related expenses, and lower warehousing costs. These margin improvements were partially offset by higher expenses associated with our standard warranty reserves during the three months ended September 30, 2024 compared to the three months ended September 30, 2023. Our extended warranty business did not have a material impact on our year-over-year change in Connected Fitness Products Gross Margin.
Previous report
Sales and marketing expense decreased $64.2 million for the three months ended September 30, 2024 compared to the three months ended September 30, 2023, primarily driven by a $51.7 million decrease in advertising and marketing spend and a $5.5 million decrease in personnel-related expenses, inclusive of stock-based compensation expense, primarily due to decreased average headcount.
Previous report
Restructuring expense decreased $14.9 million for the three months ended September 30, 2024 compared to the three months ended September 30, 2023, primarily due to a $7.2 million decrease of restructuring related stock-based compensation expense, as there was no incremental stock-based compensation expense for restructuring related terminations that required modification to equity awards during the three months ended September 30, 2024, and a $6.6 million decrease in cash severance and other personnel costs.
Previous report
•Foreign exchange gains of $14.8 million; and
Previous report
(1) Primarily consists of Interest expense of $35.4 million and $27.2 million, foreign exchange (gains) losses of $(14.8) million and $7.8 million, and Interest income of $(8.1) million and $(8.4) million, for the three months ended September 30, 2024 and 2023, respectively.
Previous report
The change in cash provided by (used in) investing activities during the three months ended September 30, 2024 compared to the three months ended September 30, 2023, was driven by the sale of the remaining Peloton Output Park land parcel.
Reworded paragraphs (47)
Previous wording
Peloton is a leading global fitness company with a highly engaged community of 6.2 million Members as of September 30, 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 one 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 6.2 million Members as of December 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, inclusive of a Strength+ App Membership, and completes one or more workouts in the trailing 12 month period. We define a completed workout as either completing (i) at least 50% of an instructor-led class, scenic ride, scenic run, or coach-led Strength+ program, (ii) ten or more minutes of “Just Ride”, “Just Run”, “Just Row”, or (iii) a custom Strength+ workout.
Previous wording
Our Connected Fitness Products portfolio includes the Peloton Bike, Bike+, Tread, Tread+, Guide, Row and various Precor products. 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).
Current wording
Our Connected Fitness Products portfolio includes the Peloton Bike, Bike+, Tread, Tread+, Guide, Row and various Precor products. 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. Access to the Strength+ App is available with an All Access, Guide, or App+ Membership or through a standalone Strength+ subscription. 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 and launch of the Strength+ App in December 2024. 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).
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First Quarter Fiscal 2025 Update and Recent Developments
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Second Quarter Fiscal 2025 Update and Recent Developments
Previous wording
We’ve made progress in implementing the Restructuring Plans and achieving the goals outlined in Note 4 - Restructuring. In fiscal year 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, successfully exited our owned-manufacturing operations, and reduced our global retail showroom footprint. In September 2024, we completed the sale of the remaining Peloton Output Park land parcel and received net proceeds of $4.2 million. We expect substantial further improvements in the above as well as a number of other measures by which we measure the success of our restructuring initiatives and will continue optimizing our showroom footprint over the remainder of fiscal year 2025.
Current wording
We’ve made progress in implementing the Restructuring Plans and achieving the goals outlined in Note 4 - Restructuring. In fiscal year 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, successfully exited our owned-manufacturing operations, and reduced our global retail showroom footprint. In September 2024, we completed the sale of the remaining Peloton Output Park land parcel and received net proceeds of $4.2 million. We expect substantial further improvements in the goals outlined in Note 4 - Restructuring as well as a number of other measures by which we measure the success of our restructuring initiatives and expect to continue optimizing our showroom footprint over the remainder of fiscal year 2025.
Previous wording
Refer to Note 4 - Restructuring in the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for discussion around charges incurred to date and future expected charges under the Restructuring Plans. Upon full implementation, we expect the plan to result in reduced annual run-rate expenses by more than $200 million by the end of fiscal year 2025.
Current wording
Refer to Note 4 - Restructuring in the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for discussion around charges incurred to date and future expected charges under the Restructuring Plans. We expect the plan to result in reduced annual run-rate expenses by more than $200 million by the end of fiscal year 2025.
Previous wording
Ending Paid App Subscriptions include all App One and App+ subscriptions for which we are currently receiving payment.
Current wording
Ending Paid App Subscriptions include all App One, App+, and Strength+ subscriptions for which we are currently receiving payment.
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Subscription Revenue primarily consists of revenue generated from our Connected Fitness Subscription and Peloton App Subscription, which are offered on a month-to-month or prepaid basis.
Current wording
Subscription Revenue primarily consists of revenue generated from our Paid Connected Fitness Subscriptions and Paid Peloton App Subscriptions, inclusive of the Strength+ App, which are offered on a month-to-month or prepaid basis.
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As of September 30, 2024, 99% and 84% of our Connected Fitness Subscription and Paid App Subscription bases, respectively, were paying month-to-month.
Current wording
As of December 31, 2024, 99% and 83% of our Connected Fitness Subscription and Paid App Subscription bases, respectively, were paying month-to-month.
Previous wording
Connected Fitness Products Cost of revenue consists of our portfolio of Connected Fitness Products, related accessories, and branded apparel product costs, including third party manufacturing costs, duties and other applicable importing costs, shipping and handling costs, packaging, warranty replacement and service costs, fulfillment costs, warehousing costs, costs related to our commercial business, depreciation of property and equipment, and certain costs related to management, facilities, and personnel-related expenses associated with supply chain logistics. Inventory write-downs and related obsolescence reserve expense are also included within Connected Fitness Products Cost of revenue.
Current wording
Connected Fitness Products Cost of revenue consists of our portfolio of Connected Fitness Products, related accessories, Precor branded fitness products, and branded apparel product costs, including third party manufacturing costs, duties and other applicable importing costs, shipping and handling costs, packaging, warranty replacement and service costs, fulfillment costs, warehousing costs, costs related to our commercial business, depreciation of property and equipment, and certain costs related to management, facilities, and personnel-related expenses associated with supply chain logistics. Inventory write-downs and related obsolescence reserve expense are also included within Connected Fitness Products Cost of revenue.
Previous wording
Sales and marketing expense consists of performance marketing media spend, asset creation, and other brand creative, costs to operate our retail showrooms including rent and occupancy charges, payment processing fees incurred in connection with the sale of our Connected Fitness Products, sales and marketing personnel-related expenses, expenses related to the Peloton App, and depreciation of property and equipment.
Current wording
Sales and marketing expense consists of performance marketing media spend, asset creation, and other brand creative, costs to operate our retail showrooms including rent and occupancy charges, payment processing fees incurred in connection with the sale of our Connected Fitness Products, sales and marketing personnel-related expenses, expenses related to the Peloton App and Strength+ App, and depreciation of property and equipment.
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Comparison of the Three Months Ended September 30, 2024 and 2023
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Comparison of the Three and Six Months Ended December 31, 2024 and 2023
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Connected Fitness Products Revenue decreased $20.9 million for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. This decrease was primarily attributable to fewer direct deliveries driven by lower demand across all Connected
Current wording
Connected Fitness Products Revenue decreased $65.8 million and $86.7 million for the three and six months ended December 31, 2024, respectively, compared to the three and six months ended December 31, 2023. This decrease was primarily attributable to fewer deliveries driven by lower demand across all Connected Fitness product categories, except Tread+, which resumed sales during the third quarter of fiscal 2024. The decrease was also partially offset by growth in Precor revenue.
Previous wording
Subscription Revenue increased $11.4 million for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. This increase was primarily attributable to incremental content licensing revenue for the three months ended September 30, 2024, partially offset by decreases in both Paid Connected Fitness Subscriptions and Paid App Subscriptions.
Current wording
Subscription Revenue increased $7.4 million for the six months ended December 31, 2024 compared to the six months ended December 31, 2023, primarily due to incremental content licensing revenue and lower churn during the period. This increase was partially offset by a decrease in Paid Connected Fitness and App Subscriptions.
Previous wording
We continue to optimize our sales and distribution channels. During the three months ended September 30, 2024, we continued our retail store closure efforts, and next month we plan to evaluate a more cost-efficient retail model by testing a reimagined smaller store concept. Ahead of the holiday season, we are expanding our third party retail channels as well. The Peloton Bike+ will be available at Costco with special pricing for Costco members across 300 US locations and Costco's website for a limited time. We also shifted our German retail and distribution model to Amazon and FitShop, allowing us to operate in a capital efficient way that we believe may serve as a model for future International expansion.
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Three Months Ended December 31, 2024 and 2023
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Connected Fitness Products Cost of revenue for the three months ended September 30, 2024 decreased $29.9 million, or 17.1%, compared to the three months ended September 30, 2023. This decrease was primarily driven by fewer deliveries stemming from lower demand during the three months ended September 30, 2024 compared to the three months ended September 30, 2023.
Current wording
Connected Fitness Products Cost of revenue for the three months ended December 31, 2024 decreased $84.7 million, or 27.7%, compared to the three months ended December 31, 2023. This decrease was primarily driven by fewer deliveries across Bike, Tread, Bike+, and Row, resulting from lower demand during the three months ended December 31, 2024 compared to the three months ended December 31, 2023. The decrease was partially offset by Tread+ deliveries during the three months ended December 31, 2024, as deliveries resumed during the third quarter of fiscal 2024, as well as higher Precor cost of revenue in line with the increased volume of Precor sales.
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Subscription Cost of revenue and Subscription Gross Margin remained consistent for the three months ended September 30, 2024 compared to the three months ended September 30, 2023.
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Subscription Cost of revenue and Gross Margin remained mostly consistent for the three months ended December 31, 2024 compared to the three months ended December 31, 2023.
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General and administrative expense decreased $31.5 million for the three months ended September 30, 2024 compared to the three months ended September 30, 2023, primarily driven by an $18.0 million decrease in personnel-related expenses, inclusive of stock-based compensation expense, primarily due to decreased average headcount and an $8.5 million decrease in professional services fees.
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General and administrative expense decreased $29.5 million and $61.0 million for the three and six months ended December 31, 2024, respectively, compared to the three and six months ended December 31, 2023, primarily driven by a decrease of $20.5 million and $27.9 million in settlement costs and professional services fees (comprised of legal, accounting, and consulting fees), for the three and six months ended December 31, 2024, respectively, and a $5.7 million and $23.7 million decrease in personnel-related expenses, inclusive of stock-based compensation expense, primarily due to decreased average headcount, for the three and six months ended December 31, 2024, respectively.
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Research and development expense decreased $20.1 million for the three months ended September 30, 2024 compared to the three months ended September 30, 2023, primarily driven by a $15.7 million decrease in personnel-related expenses, inclusive of stock-based compensation expense, primarily due to decreased average headcount and a $4.0 million decrease in product development and research costs.
Current wording
Research and development expense decreased $19.6 million and $39.8 million for the three and six months ended December 31, 2024 respectively, compared to the three and six months ended December 31, 2023, primarily driven by $12.3 million and $28.0 million decreases in personnel-related expenses, inclusive of stock-based compensation expense, primarily due to decreased average headcount, for the three and six months ended December 31, 2024, respectively, and $4.7 million and $8.7 million decreases in product development costs, primarily due to a reduction in contractor spend for the three and six months ended December 31, 2024, respectively.
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Impairment expense decreased $19.2 million for the three months ended September 30, 2024 compared to the three months ended September 30, 2023, primarily driven by decreases in asset write-downs and write-offs related to restructuring initiatives.
Current wording
Impairment expense increased $13.1 million for the three months ended December 31, 2024 compared to the three months ended December 31, 2023, primarily due to incremental asset write-downs and write-offs in the quarter related to restructuring initiatives, including asset impairments related to the exit of retail showroom locations. Impairment expense decreased $6.1 million for the six months ended December 31, 2024 compared to the six months ended December 31, 2023, primarily driven by decreases in asset write-downs and write-offs related to restructuring initiatives, including impairments related to Peloton Output Park during the six months ended December 31, 2023, which was partially offset by increases in asset impairments related to the exit of retail showroom locations during the six months ended December 31, 2024.
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Supplier settlements increased $23.5 million for the three months ended September 30, 2024 compared to the three months ended September 30, 2023, primarily due to accruals for the three months ended September 30, 2024 related to settlement of disputes with a third-party supplier about certain alleged past and future commitments.
Current wording
Supplier settlements were flat for the three months ended December 31, 2024 compared to the three months ended December 31, 2023, and increased $25.0 million for the six months ended December 31, 2024 compared to the six months ended December 31, 2023 due to settlement of disputes with a third-party supplier about certain alleged past and future commitments.
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Total other expense, net, was composed of the following for the three months ended September 30, 2024:
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Total other expense, net, was composed of the following for the three and six months ended December 31, 2024:
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•Interest expense primarily related to term loan, convertible notes, and deferred financing costs of $35.4 million;
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•Interest expense primarily related to term loan, convertible notes, and deferred financing costs of $34.6 million and $70.0 million, respectively;
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•Interest income from cash, cash equivalents, and short-term investments of $8.1 million;
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•Interest income from cash, cash equivalents, and short-term investments of $7.7 million and $15.8 million, respectively;
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•Foreign exchange losses of $7.8 million; and
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•Foreign exchange losses of $18.5 million and $3.7 million, respectively, primarily driven by the remeasurement of certain intercompany balances; and
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•Other expense, net of $0.1 million.
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•Other expense, net of $0.2 million and $0.1 million, respectively.
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Total other expense, net, was composed of the following for the three months ended September 30, 2023:
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Total other expense, net, was composed of the following for the three and six months ended December 31, 2023:
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•Interest expense primarily related to term loan, convertible notes, and deferred financing costs of $27.2 million;
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•Interest expense primarily related to term loan, convertible notes, and deferred financing costs of $27.7 million and $54.9 million, respectively;
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•Interest income from cash, cash equivalents, and short-term investments of $8.4 million;
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•Interest income from cash, cash equivalents, and short-term investments of $8.4 million and $16.9 million, respectively;
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•Other income, net of $0.3 million.
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•Other income, net of $0.1 million and $0.4 million, respectively.
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Income tax expense for the three months ended September 30, 2024 and 2023 of $0.8 million and $0.8 million, respectively, was primarily due to state and international taxes.
Current wording
Income tax expense for the three and six months ended December 31, 2024 of $0.7 million and $1.6 million, respectively, was primarily due to state and international taxes. Income tax benefit for the three and six months ended December 31, 2023 of $1.7 million and $1.0 million, respectively, was primarily due to state and international taxes.
Previous wording
•Adjusted EBITDA does not reflect nonrecurring supplier settlements that are outside of the ordinary course of business and are nonrecurring, infrequent or unusual based on factors such as the nature of the settlements, as well as our frequency and past practice of performing refinancing activities; and
Current wording
•Adjusted EBITDA does not reflect supplier settlements that are outside of the ordinary course of business and are nonrecurring, infrequent or unusual based on factors such as the nature of the settlements, as well as our frequency and past practice of performing refinancing activities; and
Previous wording
(3)Represents accrual for the three months ended September 30, 2024 related to settlement of disputes with a third-party supplier about certain alleged past and future commitments, which occurred due to part of an unusual, one-time effort to adjust the Company’s forecasted inventory during its fiscal years 2022 and 2023. With this settlement, we have substantially settled our purchase commitments related disputes with our suppliers that were linked to our one-time effort to evaluate and adjust the Company’s forecasted inventory needs with its suppliers during fiscal years 2022 and 2023. As such, we currently do not expect to add-back in the future any additional supplier settlements related to that effort.
Current wording
(3)Represents accrual for the six months ended December 31, 2024 related to settlement of disputes with a third-party supplier about certain alleged past and future commitments, which occurred due to part of an unusual, one-time effort to adjust the Company’s forecasted inventory during its fiscal years 2022 and 2023. With this settlement, we have substantially settled our purchase commitments related disputes with our suppliers that were linked to our one-time effort to evaluate and adjust the Company’s forecasted inventory needs with its suppliers during fiscal years 2022 and 2023. As such, we currently do not expect to add-back in the future any additional supplier settlements related to that effort.
Previous wording
(4) Represents adjustments and charges primarily associated with our Tread+ and Bike Seat Post product recall related matters, as well as accrual adjustments. These include adjustments to Connected Fitness Products Revenue for actual and estimated future returns of $(1.6) million and recorded benefits in Connected Fitness Products Cost of revenue associated with recall related matters of $(0.1) million for the three months ended September 30, 2023.
Current wording
(4) Represents adjustments and charges primarily associated with our Tread+ and Bike Seat Post product recall related matters, as well as accrual adjustments. These include adjustments to Connected Fitness Products Revenue for actual and estimated future returns of $(2.3) million and $(3.9) million, respectively, for the three and six months ended December 31, 2023. These also include recorded benefits in Connected Fitness Products Cost of revenue associated with recall related matters of $(4.2) million and $(4.3) million, respectively, for the three and six months ended December 31, 2023.
Previous wording
(5) Includes litigation-related expenses for certain patent infringement litigation, consumer arbitration, and product recalls for the three months ended September 30, 2023, that arise outside of the ordinary course of business and are nonrecurring, infrequent, or unusual.
Current wording
(5) Includes litigation-related expenses for certain patent infringement litigation, consumer arbitration, and product recalls for the three and six months ended December 31, 2023, that arise outside of the ordinary course of business and are nonrecurring, infrequent, or unusual.
Previous wording
Our operations have been funded primarily through net proceeds from the sales of our equity and convertible debt securities, and our term loan, as well as cash flows from operating activities. As of September 30, 2024, we had Cash and cash equivalents of approximately $722.3 million.
Current wording
Our operations have been funded primarily through net proceeds from the sales of our equity and convertible debt securities, and our term loan, as well as cash flows from operating activities. As of December 31, 2024, we had Cash and cash equivalents of approximately $829.0 million.
Previous wording
Refer to Note 4 - Restructuring in the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for discussion around charges incurred to date and future expected charges under the Restructuring Plans. Upon full implementation, we expect the plan to result in reduced annual run-rate expenses by more than $200 million by the end of fiscal year 2025.
Current wording
Refer to Note 4 - Restructuring in the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for discussion around charges incurred to date and future expected charges under the Restructuring Plans. We expect the plan to result in reduced annual run-rate expenses by more than $200 million by the end of fiscal year 2025.
Previous wording
During the three months ended September 30, 2024 and 2023, we incurred total commitment fees of $0.1 million and $0.3 million, respectively, which are included in Interest expense in the Consolidated Statements of Operations and Comprehensive Loss.
Current wording
During the three and six months ended December 31, 2024, we incurred total commitment fees of $0.1 million and $0.3 million, respectively, and $0.3 million and $0.7 million during the three and six months ended December 31, 2023, respectively, which are included in Interest expense in the Condensed Consolidated Statements of Operations and Comprehensive Loss.
Previous wording
As of September 30, 2024, we had drawn the full amount of the Term Loan and had not drawn on the Revolving Facility, and we had $997.5 million total outstanding borrowings under the Third Amended and Restated Credit Agreement.
Current wording
As of December 31, 2024, we had drawn the full amount of the Term Loan and had not drawn on the Revolving Facility, and we had $995.0 million total outstanding borrowings under the Third Amended and Restated Credit Agreement.
Previous wording
As of September 30, 2024, we had not drawn any amount under the Revolving Facility and as such did not have to test the financial covenants under the Third Amended and Restated Credit Agreement. We are required to pledge or otherwise restrict a portion of cash and cash equivalents as collateral for standby letters of credit. As of September 30, 2024, the Company had outstanding letters of credit totaling $49.7 million, which are classified as Restricted cash on the Consolidated Balance Sheets.
Current wording
As of December 31, 2024, we had not drawn any amount under the Revolving Facility and as such did not have to test the financial covenants under the Third Amended and Restated Credit Agreement. We are required to pledge or otherwise restrict a portion of cash and cash equivalents as collateral for standby letters of credit. As of December 31, 2024, the Company had outstanding letters of credit totaling $47.9 million, which are classified as Restricted cash on the Condensed Consolidated Balance Sheets.
Previous wording
Upon entering into the Term Loan, the effective interest rate was 12.4% and the current effective interest rate as of September 30, 2024 is 11.9%.
Current wording
Upon entering into the Term Loan, the effective interest rate was 12.4% and the current effective interest rate as of December 31, 2024 is 11.4%.
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Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
Fitness product categories, except Tread+, which resumed sales during the third quarter of fiscal 2024, partially offset by higher demand from our Bike rental products and improvements in Precor revenue.
Previous report — wording carried elsewhere
The change in cash provided by financing activities during the three months ended September 30, 2024 compared to the three months ended September 30, 2023, was driven by a decrease in proceeds from employee stock plans.