Good day, and thank you for standing by. Welcome to the Peloton Interactive first quarter 2023 earnings call. At this time, all participants are in a listen only mode. After the safe harbor, there will be a question- and- answer session. To ask a question during the session, you will need to press star one one on your telephones. Please be advised that today's conference is being recorded. I would now like to hand the conference over to speaker today, Peter Stabler, Head of Investor Relations. Please go ahead. Good morning, and welcome to Peloton's fiscal first quarter conference call. Joining today's call are CEO, Barry McCarthy, and CFO, Liz Coddington. Our comments and responses to your questions reflect management views as of today only and will include statements related to our business that are forward-looking statements under federal securities law. Actual results may differ materially from those contained in or implied by these forward-looking statements due to risks and uncertainties associated with our business. For a discussion of the material risks and other important factors that could impact our results, please refer to our SEC filing and today's shareholder letter, both of which can be found on our investor relations website. During this call, we will discuss both GAAP and non-GAAP financial measures. The reconciliation of GAAP to non-GAAP financial measures is provided in today's shareholder letter. I'll now turn the call over to the operator for the first question. Thank you. you. As a reminder, to ask a question, you will need to press star one one on your telephone. Please stand by while we compile the Q&A roster. Our first question comes from the line of Doug Anmuth from JP Morgan. Your line is open. Thanks for taking the questions. Barry, it's clear you've made progress on the cost structure and free cash flow loss, but how should we think about your plan to drive growth? In particular, can you give us an update on the FaaS rental model, and how that's progressing so far? Thanks. Hey, Doug, good morning. Thanks for the question. Well, look, our focus, our job one is to ensure the viability of the business, which a year ago was in doubt. I believe that is no longer the case because of our focus on driving right-sizing the cost structure, variablizing costs, and driving the business towards our goal of a break-even free cash flow. Clearly that has come at the expense of growth. There will come a time when we begin to focus again on growth. With my leadership team, we were already made that transition. The question is, and I framed this question at the end of my letter this quarter. You know, how fast will we grow? What will the margin structure of the business be? We'll begin to see the answers to those questions take shape later this year as we lean into a number of the strategies that we've already articulated, like Fitness as a Service and certified pre-owned and expansion into our third-party retail partners. As we lean into growth in our commercial business and as we lean into relaunching the digital app business in pursuit of that goal of 100 million users, which I talked about when I first joined the business. As it relates to FaaS, it's growing really fast, about a third with lots of new signups. We're doing an average over the last two weeks of about 175 signups a day. We've only just begun leaning in on the web to growth. There's still unanswered questions about whether or not it will be financially viable for us long term. What I've learned from the early growth is that we absolutely have to figure out how to make it work for us because it's enormously popular with users. There's considerable incrementality to it, and we are attracting to our subscriber base a demo which we have not previously been able to access. It's expanding our TAM. We need to look at the underlying economics, and the way we do that is by focusing on the monthly price, which drives churn. We need to understand more about what percentage of folks over time will exercise the option to buy out the bike. Probably we will adjust over time the buyout options. Liz, anything you wanna add to my summary with respect to FaaS? No, I think the only thing that I will say is that one thing about FaaS that's important to note as you think about the growth of the business is that the revenue profile and gross margin profile are a little bit different from our core business. As FaaS grows, we'll see that the revenue will take longer, you know, to be. We're not getting the benefit of the purchase of the connected fitness hardware in period because we'll get the rental income from that over time. Just highlighting that for everyone. Is there any kind of, I know it's still early, but any kind of target or outlook on what you think FaaS could represent as a. Well, in my nerve. Part of sales over time? You mean of the user base? New subscribers. 30% or more of new subscribers, more than that on a net basis because there's effectively no churn across the installed base. The percentages of gross versus net would be quite a bit different. Yeah. Okay, great. Thank you both. Yep. Thank you. One moment for our next question. Our next question comes off the line of Edward Yruma from Piper Sandler. Your line is open. Hey, good morning, guys. Thanks for taking the questions. I wanna rotate a little bit towards this construct of growth. Two vectors, though, the app, I guess, which I think you guys noted you saw some softer results, and then maybe any insight into your view, Barry, on some of the newer modalities like Guide, and Row. Thank you. Sorry, Guide and what was the second? Row. Row. Coming back to FaaS for a moment, Doug, one additional comment. I mean, my nirvana would be that we see attractive payback in somewhere between a year and 18 months. I think the product is viable, but not as attractive if it's 2 years. When I talk about the financial viability of the product, it's sort of through that lens that we're thinking about how we tweak price and buyout options and directionally monthly churn, if that's helpful. Edward, growth in the digital app. De-emphasized it a little bit. Our strategy is to relaunch the digital app in the new year. It will be a different price value opportunity than it is currently. There'll be a tiered pricing associated with a content strategy, a new content strategy. We're chasing 100 million digital app users. The current product has never really grown bigger than 1 million. The overarching strategy here is to gain access to competitive connected fitness hardware platforms. About half the users, paid users of our digital app at one time or another use our connected fitness content on someone else's hardware. We've never actually marketed that use case. We're gonna lean into it. The digital app has kind of come at the end of our marketing funnel. We're gonna move it up to the top with a premium offer and try to lean into that growth opportunity. In terms of Guide, customer sat scores are really high. The unaided brand awareness is really low relative to our other products like the bike, and the purchase intent scores are as high or higher than any of the other products in our product line based on some research I saw overnight. It's an opportunity we haven't really leaned into, and I don't think we've quite figured out how to market it effectively. It's doing okay, but it's not doing nearly as well as you would think it would do based on the metrics I just described. With respect to Row, I think Tom Cortese and his team can be justifiably proud in having reinvented the Row category like they reinvented the bike category with the connected fitness content. The good news and the bad news about Row is, at least for this fiscal year, we expect to be inventory constrained and to have more demand than we will have units to sell. You know, we're working to address those issues. At least for the moment, it's been incredibly well received. Now we have just rolled it out through all of our showrooms as of yesterday. It's been in a limited number, like 16, physically. I expect demand for Row to continue to grow as we increase people's exposure and the opportunity to get on it and try it and see what the customers feel about it. Thank you. Thank you. One moment for our next question. Our next question will come from the line of Justin Post from Bank of America. Your line is open. Great. Can we talk a little bit about the kind of the 2Q sub guide? I think it's 30,000 subs, and you've got kind of retail kicking in, obviously some Rowers, and then, you know, it's holiday promotion time. How do you put that in context, you know, of your overall growth plans? What does it mean for the year? How are you thinking about, you know, the kind of reopening and macro challenges being, you know, maybe different this year than in future years? Maybe you put all that in context. Then one quick one on the Fitness as a Service. Is that contributing to slightly elevated churn, or is it still kind of immaterial at this point? Thank you. Let me just do the churn piece both. It does have higher churn, but it's immaterial, it'd be like a basis point. So I think we can ignore the effect of FaaS on churn for the foreseeable future. The sub growth during holiday is paced by the decrease in the spending, which is quite substantial on a year-over-year basis and on a sequential basis. We wanna spend more. We could have significantly more growth. I guess the other comment I wanna make about growth, and then I'll turn it over to Liz, is it's not a very ambitious target, is it? There's good news and there's bad news in that. The bad news is we'd like it to be higher, and we'll see what happens. The good news is there ought to be limited downtime in that number. From a cash flow perspective, I think we're on the right side of that equation for planning purposes. Liz, anything you wanna add? Yeah, I was just gonna say that, you know, we have seen some research that indicates that the economy is a headwind for us, as it is for many other companies. That is certainly having an impact on near-term connected fitness hardware demand. Sorry about that, folks. Apparently, we're having a fire drill. Ron, you go ahead. We can come back. One moment for our next question. Our next question will come from the line of Eric Sheridan from Goldman Sachs. Your line is open. Thanks for taking the question. Maybe following up on Justin's on retail, just how should we be thinking about the contribution from some of the new retail partners beyond just the December quarter, and how you think they can help evolve the distribution strategy in light of what may remain sort of dampened end demand environment short term, but you're building out the distribution narrative around the name. How should we think about those countervailing factors in terms of supporting growth but as we turn the calendar into calendar 2023? Thanks. Let me say we have some of the same questions. We broadened our retail strategy because we felt it was important to be where our customers are. But the only way to know how successful the strategy will be is to actually lean into it and see what happens. Then based on what we're learning, flex the business model in order to capitalize on the successes and minimize any losses. It comes at the cost of some margin. How's it gone so far? Well, Amazon has outperformed our expectations for sure. We just launched DICK'S Sporting Goods. We have high expectations for it, but it remains to be seen how we'll perform over time. Anything you wanna add, Liz? No, I think that covered it, but I do wanna go back to the prior question that got cut off. I apologize, the fire alarm went off for a second in the middle of our call, which is unfortunate. Going back to that question around our guidance forecast. I was talking a little bit about the economy and creating a headwind for us, and for many other businesses right now. I do wanna say that we do have confidence that our Q2 guidance forecast incorporates the latest on macroeconomic trends. To Barry's point, we do have the ability to grow faster if we wanted to, but because we are trying to balance on delivering on our cash flow goals, that, you know, we have not been overly aggressive in our guidance forecast for Q2. I do wanna point out that, you know, again, FaaS and a Fitness as a Service and our CPO, which we've, you know, has been strengths for us and we, you know, will be continuing to grow fast CPO, we may or may not be able to do in Q2, we'll see. But we also with the secondary market activations being another opportunity for us to grow subscribers as well. In the context of the overall year, we are still not providing any sort of full year guidance on revenue or subs. What we said last quarter still holds, in that we do expect revenue for the year to resemble the seasonality of fiscal 2022 in terms of revenue per quarter, if that helps folks with their modeling. Let me just add one additional comment. Liz touched on the growth in secondary market active subscription activation. That has grown significantly over the last year, and I expect it to be a source of operating leverage for us. We're talking about how we can lean into that ecosystem and ensure that it's healthy and viable. For the avoidance of doubt, this is someone who owned a bike, it became a potted plant in their home. They sold it in the secondary market. Someone bought it, and that new someone activates a subscription and becomes a monthly subscriber at zero cost to us. Next question, please, Victor. Thank you. One moment for our next question. Our next question comes from the line of Lauren Schenk from Morgan Stanley. Your line is open. Great. Thank you. Can you hear me? Yes. Go ahead, Lauren. On the connected fitness gross margin, like still - 12% even including the recall impact. I guess with the restructuring changes largely behind us, what needs to happen to get that back into positive territory and what's the rough timeline for that? Thank you. You're correct. First of all, yes, you're right. If we adjust for the Tread+ recall, we would have been at - 11.6% gross margin. We are, you know, expecting to see increases. First of all, I wanna highlight before I even start talking about Q2, I wanna highlight the improvement that we've seen in our gross margin quarter-over-quarter from Q4. It's a tremendous improvement. In Q2, our overall gross margin, we're expecting to be around 36%. For connected fitness, we're not guiding to that, but we are expecting to see some continued improvement as we improve our middle mile and logistics costs, and sorry, for final mile. We'll see those continue to improve over time. One thing, things that do put pressure on our gross margin, though, are things like FaaS, for example. As FaaS continues to grow, that will put pressure because of the fact that we do take the expense for the delivery cost of the bike upfront. And then also the economics of third-party retail are such that they do put pressure on our gross margins since we consider the marketing expense associated with those channels as contra revenue. You know, the key thing that I wanna point out is that we are managing our business towards generating an improvement in gross margin and then also overall generating positive cash flow and positive adjusted EBITDA. You know, overall, you wanna look at gross margin, but you need to also realize that some of these programs have just a different cost structure and profile, and it may bear out that we have some impact to gross margin, but we see a benefit elsewhere in the P&L, if that makes any sense. If I could just tease out one additional nuance. Could you comment on how long you think it takes for the cost reduction in final mile and middle mile freight, those kinds of things, to find their way through our balance sheet and into the P&L? I think, you know, this is something that is gonna take a little bit of time, but we are seeing the benefits every quarter and gaining more and more traction. I think probably by, I don't wanna give the specifics, but hopefully by the end of the year, we should be in a much better spot on that. Just trying to tease out the average, you know, pricing versus bike sales. In the. Okay. Thank you. The only point is that, as the economy shifts and, you know, freight costs decline and we restructure our middle mile and last mile because of the way we account for our inventory, it's gonna take a while for those benefits. Yes. To find their way into the P&L. We have the cash benefit, but we don't see the P&L benefit. Yes. That's it. The point is that like the freight costs for when we brought some of that inventory on that was more expensive, that will have to work its way through our inventory. The other piece is that our storage costs will continue to decline as we have less inventory around. Those things will also be benefits as we lower our inventory position. And our. That will be ongoing through the end of the year and probably into FY 2024 as well. Our storage costs have been very significant. Understood. Thank you. Thank you. One moment for our next question. Our next question comes from the line of Shweta Khajuria from Evercore ISI. Your line is open. Okay. Thanks a lot for taking my questions. How does the accounting for these third-party retail partnerships actually work? Whether it's DICK'S Sporting Goods or Amazon or Hilton, how should we think about how you're accounting for in terms of subscribers, revenue, and then you, Liz, you also mentioned there's a contra revenue aspect of it, so it'd be great to understand that. The second is, Barry, if you could talk about how the leadership team and the company is organized now for growth. How are growth initiatives internally managed as the leadership team reports to you, and which segments are, you know, focused on for long-term growth? Thank you. As far as the third-party retailers go, we do have a couple of different models that we use to work with them. In the case of Amazon, we have a wholesale model. Amazon will buy the inventory from us, and then they will resell it, and our revenue recognition will come at the time that we actually sell the inventory to them rather than when they sell it to the customer. The subscriber will come even later, so they have to sell the bike to the subscriber, it has to get delivered, and then the sub has to activate. Think about that being a longer timeframe from when the inventory gets sold to when we actually see the subscriber activation. There will be a disconnect in timing there. With DICK'S we have some wholesale type of models, but we also have a drop ship model. That's the case where somebody walks into a DICK'S Sporting Goods, orders a bike or a tread, and then they send a signal to us, and we then fulfill the order and deliver it to the customer. In that case, we recognize the revenue at the time of delivery like we do in our regular web sales. The activation will be similar timing, we expect, as someone may receive their bike when we recognize revenue and we get the subscription. There is a couple different models going on there, that, you know, as these different models bear out over time, they're small right now, but they could have an impact on how we see the subscription growth, revenue growth in comparison to the connected fitness. There was a part of the question about contra revenue. Yes. Well, it's basically what happens is, you know, we do have some marketing expenses that are in our agreements with, particularly with Amazon. The way that those show up in our financials is a reduction to revenue. That is just a different model than it doesn't show up in a marketing expense line. Thanks for that. With respect to the leadership team and growth, I lead the effort. There's virtually no piece of the business that we haven't reorganized in some form or fashion. It's been a substantial change in the composition of the leadership team. Last quarter, we restructured our approach to the market. Some people left the business as a result, and we're in the process of leading a search for a new head of marketing. In the interim, the marketing team is reporting to me. I'm spending a considerable amount of time focused on, you know, how we grow the business, how we work cross-functionally to roll out, you know, our various initiatives. I'm quite proud of the team's performance with respect to the launch of Amazon, by way of example. There's virtually no function group in the business that wasn't touched by the complexity of that launch. DICK'S is equally complicated. FaaS is equally complicated. Certified Pre-Owned is also quite complicated. It's about executing with precision and speed and risk-taking. Thanks, Barry. Thanks, Liz. Thank you. One moment for our next question. Our next question comes from the line of Deepak Mathivanan from Wolfe Research. Your line is open. Great. Thanks for taking the questions. First, Barry, churn after making the adjustments for Canada is around like 1.2%. Now it's certainly better than 1Q, but are you comfortable with these levels as you think about the next, say, you know, 18-24 months? Can you give some color on the profile of customers that are kind of churning, you know, right now? The second question, a little more strategic one. The channel expansion and distribution makes a lot of sense, but curious if you have explored opportunities to kind of leverage, you know, Peloton brand and content that you have for something in person, maybe either under a franchise model or through kind of partnerships with other, you know, in-person fitness studios. Would love to hear your thoughts on that. Thank you so much. I think the first part of the question, Deepak, was who, any color on who's churning? The short answer is no. Churn is one of the aspects of the business along with Tom Cortese's product group and Jen Cotter's content team I don't focus on. The reason I don't focus on it is because it works well, and it's not even remotely broken. There is no operating leverage to be had in my trying to say reduce churn by a couple or four basis points. It's just not gonna happen. What I am focused on with Tom's team, with Jen's team, is on improving the user experience primarily by leaning into personalization. We've made that a large focus area. There are a number of improvements that have already happened and are in process, both on your screen on a connected fitness device and in the digital app. My belief is that with a more deeply personalized experience, we will continue to see improvements in engagement. Engagement improved versus pre-COVID period about just shy of 20% in the current quarter. I don't mean to signal that we have engagement issues, but I think it can be better still, and if it is better still, I think we will grow faster at a lower cost because we will have more organic growth because we'll have more delighted subscribers. I believe that because that was the phenomenon we saw at Spotify, and that was the phenomenon we saw at Netflix. Those are my comments on churn. As it relates to leveraging the brand through in-person fitness, I spend quite a bit of time thinking about this, and this is a use case that I'm trying to attack with our digital app. I think doing it that way is the better go-to-market strategy than trying to negotiate revenue sharing splits with other commercial businesses and having to pay what I think would be considerably higher music rights as a consequence of it becoming a commercial application. I'd rather sell to you and have you take your digital app wherever you wanna take it to engage in our content. Could be your home, could be the gym, could be your friend's house, could be outside while you're running. That's a much larger TAM for us and has a better margin structure for us. Got it. Thank you. Next question, please. Thank you. Thank you. One moment for next question. Our next question comes from the line of Ron Josey from Citi. Your line is open. Great. Thanks for taking the question. Barry, I wanted to maybe walk back to turnaround here and just about the free cash flow guidance. I think the letter talked about reaching near breakeven in 2023. If you could just help us a little bit more on the investments and also what makes you feel better about beating that one year timeline and beating the goal here to getting to breakeven. Questions on free cash flow and breakeven in the back half, and then any update on the ad campaign. I think we saw it in mid-September. Obviously, we know the guidance here for the holiday quarter, but talking just curious about the receptivity of the campaign. Thank you. I'm gonna ask Liz to talk about the free cash flow guidance. I might ask you to repeat the second part of the question. I had a hard time hearing it. I'm sorry. While we haven't specifically guided to a free cash flow number at all, you know, we talked about our goal of reaching free cash flow breakeven or near breakeven by the second half of the year. You know, we remain on track to being able to achieve that goal. It's not certain, there's always some risk. It's not a guaranteed outcome. You can see in this quarter, you know, we reduced our cash burn significantly from the prior quarter and the quarter before that. We are making a tremendous amount of progress towards that goal. We continue to remain focused on it. You know, that's our goal and we're continuing to maintain that we'll be able to deliver on it. I would add that, a couple things. One is I'm growing increasingly confident in our ability to forecast free cash flow based on our recent performance over the last few quarters. Liz and her team have done quite a good job there, and we've made considerable progress. That's point one. Point two is a little color on cash flow. A quarter or two ago, I think there was the impression that because we had a lot of inventory, at least in the first half of the year, we've got a big tailwind as we liquidated that inventory and didn't pay to replace it. That is true, but we also had a big headwind, and that was the settlement payments that we negotiated with our suppliers, when we realized that we had contractually committed to more inventory than we had understood back in the March timeframe. Those two kind of netted out across the entire year. I think there's a net benefit in the order of $86 million, something like that. It's entirely immaterial to the business, and I just wanna make sure that nuance was well understood. That is certainly true this quarter for sure that in Q1, that, you know, any inventory benefit that you see with the inventory balances coming down is offset by supplier settlements for the quarter, more than offset. The last point I wanna make is with respect to restructurings. We recently eliminated roughly 500 heads in order to complete our right sizing of the cost structure of the business. We are done now. In my humble opinion, there are no more heads to be taken out of the business. From a cash flow perspective, if we're gonna meet our performance, the rest of the business needs to perform as we expect the business to perform. Meaning, you know, our working capital dynamics need to be more or less aligned with our forecast. Our growth needs to be more or less aligned with our forecast. Cost for inventory needs to be aligned with our forecast. We're not gonna get there by taking additional heads out of the business and reducing operating expenses. I just wanna be clear with investors about that. I wanna be clear with our employees about that. We are done. This is the go-forward team. The one thing that I will caveat to that, just to, for completeness, Barry, is that we are still working through our first-party retail showrooms. Thank you. We are, you know, that is one of those processes that just takes time to get out of some of these showroom leases. That will be the one ongoing piece that we will still have through the end of fiscal 2023 and likely into fiscal 2024 as well. Already announced but ongoing. Yeah. Thanks for the clarity. Ron, could you repeat your question about the advertising campaign? We didn't understand it. Yeah. Thanks, Peter, and appreciate the answers on the free cash flow. Just on the ad campaign, I think we saw it started, at least a new campaign started mid-September. Understood we have guidance here for the holiday quarter, but just curious on the receptivity of this recent campaign that we're seeing ads for the broader Peloton, you know, family of products. Any insights there would be helpful. Thank you. Well, let's think about it in terms of purchase intent, Ron. Purchase intent for the brand is up slightly everywhere except for Germany where it's taken a slight hit. Is it because of the advertising campaign or not, hard to say honestly. Second point I would make about advertising generally, and not the campaign specifically, is that in the current market environment, our dollars are going a lot farther than they were a few months ago because the advertising market has softened considerably. We were able to acquire more media impressions for dollars spent than we were expecting coming into the holiday season. Nice to be seeing how that translates into growth. It is the first tailwind we've seen in that marketplace in a long time. Next question, please, Victor. Thank you, Barry. Thank you. One moment. Our next question will come from the line of Aneesha Sherman from Bernstein. Your line is open. Yeah, good morning. Thanks for taking my question. Liz, you gave some great color on the hardware gross margins and the trajectory. I wonder if you could talk about the subs gross margin and, you know, where do you think this could go as it scales up? What can you give some color on where it was on an underlying basis? It seems like you had some one-off costs on music and things like that. Where are we underlying? Where could it go as it scales up? I have another question on inventory. It was down $100 million. Obviously, you have a lot more distribution points and FaaS, et c. Is $100 million a good run rate? I mean, is that what you're kind of modeling through the rest of the year as you work through your existing inventory? Thank you. Okay. Well, I'll take the part of that question around subscription margin first. We did see some pressure on subscription margin, particularly in this quarter. It's down a bit from Q4, in line roughly with the prior year. There were a couple of drivers of that. One of them was just higher music licensing reserves for minimum guarantees, and that's related to just our subscriber growth, and reserving for those. We also had some elevated stock-based comp costs for Q1, and that was specifically related to our equity repricing investing acceleration. We don't expect any further pressure on subscription margin going forward. We wouldn't expect in the very near term for it to go up substantially from where it's at right now. The other question about inventory, you know, we do expect inventory to decline throughout the year. I don't necessarily have a view of how much it's gonna decline quarter by quarter. One thing I do wanna point out is we do have some inventory that we need to buy, specifically related to, like, the Row. You know, we will see continued sequential declines in inventory as we work through it over the course of the year and beyond. Okay. Next question please, Victor. One follow-up. Do you have any color on what the subs margin was ex those one-offs this quarter? I'm sorry. Could you repeat that? I couldn't quite hear the first part of that. Oh, sorry. I just had a quick clarification on the subs point. Do you have any color on where the subs margin would have been ex those one-off costs this quarter? The sub margin ex. I don't have a specific number for you, but it's. Okay. It's that it came down from where it was in Q4. You could say a few. It's hard to give you exact percentage of how much of that was related to the minimum guarantees and each piece. I would say that where we're at now is a reasonable, rough approximation of where we'll be for a while. Okay. Thank you. Thank you. One moment for our next question. Our next question comes from the line of Mario Lu from Barclays. Your line is open. Great. Thanks for taking the question. Just wanted to follow up on the comment you made earlier in terms of revenue seasonality for the rest of the year. I just wanted to confirm, is that related to total revenue or, you know, just connected fitness revenue for the rest of the year? Thanks. That would be total revenue. Got it. Barry, you mentioned half of the digital subs currently is likely using somebody else's hardware. I understand some of the classes right now on Peloton Guide in the future, row classes may be gated to only owners of Peloton devices. Can you talk a bit about this potential strategy of gating classes and, you know, if that could be a significant uplift to convert digital subs over time? I'm gonna hold off on talking about the digital strategy until we roll it out, other than to say that it will have a framing component, and there will be gated content. Great. Thanks. Thank you. One moment for our next question. Our last question will come from the line of Andrew Boone from JMP Securities. Your line is open. Thanks so much for taking my questions. On the guide, it feels like OpEx declines are starting to slow as we think about next quarter. Can you provide a little bit more detail around R&D and G&A? Understood headcount is kind of stable, but any help in terms of other items that may be involved there? Can you talk about the consumer reception to self-assembly and how that's going? Thanks so much. Sorry, the consumer reaction to what? Self-assembly. Self-assembly. Oh. With regard to the OpEx, the changes that we made regarding the reduction in force, those were Q2 events. We will see some declines in both G&A and R&D over the coming quarters. What you'll see in Q2, and that's reflected in our adjusted EBITDA guidance, is the fact that we will be spending more quarter-over-quarter on marketing, as part of the holiday kind of promotion timing. To the extent that you're looking at the guidance and trying to back into what that implies for G&A and R&D, there will still be some declines there, offset by some higher spending in quarter for sales and marketing. I hope that addresses that question. I would say longer term, G&A just gotta come down as a% of revenue, just to be clear. It's structurally broken currently. I can see the path to fixing it. There'd be some additional spending along the way. From an IT perspective, there are a number of things that need to be fixed, and when they're fixed, they become the roadmap towards significant cost reduction. Then do you wanna, Liz, since you're there, jump to that? Expert comment on self-assembly? I haven't seen much about self-assembly aside from the fact that there haven't been a lot of complaints about that. To the extent that, you know, that customers are not complaining about it's a good thing. We are getting good star ratings on Amazon. That, you know, that again gives confidence that the self-assembly is working. Thank you. Okay. Thank you. That's all the time we have for Q&A today. This does conclude today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day.