Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Mr. James Marsh, Senior Vice President, Head of Investor Relations. Please go ahead, sir. Thank you, operator. Good morning, and welcome to Peloton's Fourth Quarter Fiscal 2024 Conference Call. Joining today's call are Peloton board members and Interim Co-CEOs Karen Boone and Chris Bruzzo, as well as Chief Financial Officer Liz Coddington. Our comments and responses to your questions reflect management's 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 actual results, please refer to our SEC filings 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. A reconciliation of GAAP to non-GAAP financial measures is provided in today's shareholder letter. I'll now turn over the call to Interim Co-CEO Karen Boone. Good morning, and thank you for joining us today. Before we discuss our Q4 results, I'd like to comment briefly on the CEO transition process, as it is certainly top of mind for us, and we expect the same is true for our shareholders. The CEO search is well underway. We've had no shortage of interest, and we have been working through an impressive group of qualified candidates with the help of a leading executive search firm. Our list of candidates is narrowing. However, at this stage, we cannot speculate on the timing for when Peloton's next CEO will start. We are focused on moving quickly, but our top priority is finding the right leader for Peloton's next chapter and look forward to making that announcement as we close down this important process. In the meantime, Chris and I, in partnership with Peloton's strong leadership team, are continuing to make progress on several key strategic priorities, which include aligning our cost structure to the current size of our business to improve profitability and deliver meaningful free cash flow without requiring growth to get there, and investing strategically in innovation that will deliver sustainable, profitable growth over the long term. This includes software and hardware development to deliver new fitness experiences, evolve our content offerings, and refine our marketing strategy, which we'll discuss in more detail today. One of our most important updates since last quarter relates to our recent refinancing. In May, we completed the successful refinancing of our balance sheet, accomplishing the goals of deleveraging and extending our maturities with more flexible terms at a reasonable cost of capital. Through this holistic transaction, we decreased our debt by roughly $200 million and extended our average maturities out to 2029. Our refinancing was competitively priced and significantly oversubscribed, reflecting strong demand from investors. Overall, we're delighted with the incredible show of support we received and the vote of confidence in Peloton's future from the investor community. With a solid foundation now in place and an expectation to deliver meaningful, sustainable cash flow on an annual basis, we are exploring how best to deploy excess cash as part of an overall capital allocation strategy to deleverage the balance sheet over time. Last quarter, we talked a lot about bringing the business to solid financial footing by generating free cash flow and operating the business towards sustainable, profitable growth. Our Q4 results, which Liz will discuss in greater detail, demonstrate continued progress in achieving these financial objectives, delivering a second consecutive quarter with both positive free cash flow and adjusted EBITDA, something we have not achieved in the last few years. We're intentionally focusing on delivering stronger bottom-line results to support our investments in software, hardware, and content to improve our member experience. We're enthusiastic about our innovative roadmap, but we'll be judicious about deploying marketing dollars until we demonstrate product-market fit and continue to be cautious about marketing spend, given the uncertain consumer backdrop and ongoing macro environment. For now, we are optimizing our business model, planting the seeds for future growth, and will scale these investments over time to ensure we can deliver sustainable, profitable growth. One growth initiative where we continue to learn and optimize is our bike rental program. In Q4, we launched a rental program for Bike+ in the U.K., and early results have outperformed our expectations. Globally, our bike rental offering continues to drive incremental subscribers, and we're pleased to see a continued improvement in retention, with average net monthly paid subscription churn for rental down a hundred and ten basis points year- over- year in Q4. We've shared previously that the ability to use refurbished inventory is key to achieving sustainable unit economics for our original bike rental offering in the U.S. and Canada. As our refurbished inventory levels have come down, we no longer have sufficient inventory to support the original bike rental program, so we ceased this offering as of August first. Since that date, we have seen higher take rates for our other offerings catered toward cost-conscious consumers, including our Bike+ rental program, the outright sale of refurbished original bikes, and our 0% introductory rate financing offers to purchase new bikes. These alternative programs have stronger unit economics than our original bike rental program, with more cash paid upfront and a stronger retention profile. We also continue to explore partnerships that will expand our reach and deliver profitable growth. We continue to be pleased with our Lululemon content licensing arrangement, whereby Lululemon Studio members enjoy Peloton content on their Mirror products. This partnership has delivered a great experience to these Lululemon Studio members, as evidenced by the continued low churn profile, while delivering incremental subscription revenue with accretive gross margins for Peloton. Building on the success we've seen with the content licensing thus far, last week, we announced another multi-year content licensing arrangement with Google Fitbit to offer a wide portfolio of Peloton classes in the U.S., the U.K., Canada, and Australia. Fitbit will distribute best-in-class Peloton content to the highly engaged user base on Fitbit's app. Peloton members will also receive special offers on the Google Pixel Watch and Fitbit Charge 6 devices as part of this partnership. Turning to our hardware business, we are focused on delivering gross margin improvements for our premium Connected Fitness products. We have been pleased with the introduction and expansion into third-party distribution channels, both in North America and in our international markets, but are doing work to optimize the economics of these channels. This effort includes evaluating certain product pricing models, discounting strategies, and the way we deploy media dollars. We expect to continue to see improvements in our Connected Fitness segment gross margins in fiscal 2025 as a result of these efforts. We are also pleased with our continued progress in the turnaround of Precor, which delivered strong year-over-year revenue growth in the quarter, driven in part by key product launches, including the fiscal 2024 launch of next-generation cardio consoles and new strength products. Precor is also improving their bottom-line performance, with strong year-over-year improvement in gross margins and reductions in operating expenses. I will now pass the call over to Chris, who will provide an update on our marketing strategy and product development. Chris? Thanks, Karen. As Karen mentioned, we are focused on managing the business for sustainable, profitable growth. I'd like to touch on how this is manifesting in our approach to sales and marketing. In our $200 million cost restructuring plan that we announced in May, which Liz will provide an update on shortly, we included cost reductions in some areas within sales and marketing, such as lower brand and creative spend, lower retail expenses from reducing our showroom footprint, and lower headcount. However, the $200 million cost restructuring plan did not include any media spend reductions. In Q4, we delivered additional cost savings by reducing our media spend year- over- year. We'll continue to optimize our media investment in fiscal 2025 to improve our efficiency, which is an important priority for us. Because while our Q4 LTV to CAC ratio of 1.5 times improved significantly compared to Q4 last year, it is still below our 2-3 times target range. We have more work to do. These efforts are providing additional upside to the bottom line as we reduced total sales and marketing expense by $26 million or 19% year- over- year in Q4. We're also seeing early signals that our approach to reach men via marketing is resonating. We saw significant improvements in awareness of our strength and cycling disciplines for men in the quarter. Next, I'm gonna discuss the new approach we're taking to servicing the secondary market, which is when a customer elects to purchase used Peloton hardware directly from a previous owner. The Secondary Market is an important source of subscribers for us and continues to deliver a steady stream of paid, Connected Fitness subscriber additions, which were up 16% year- over- year in Q4. We believe a meaningful share of these subscribers are incremental, and they exhibit lower net churn rates than rental subscribers. Although these Secondary Market sales are not from Peloton-owned channels or any of our third-party distribution partners, we want to ensure these new members receive the same high-quality onboarding experience Peloton is known for. With that in mind, we're initiating a new one-time $95 used equipment activation fee in the U.S. and Canada. For Peloton Bike and Bike+ purchasers, we offer a virtual custom fitting, so members can get the most out of their bike from ride number one. It's important to point out, especially for these subscribers, that they also have access to a history summary on their pre-owned hardware. We're also offering these new members discounts on accessories such as Bike shoes, Bike mats, and spare parts. We'll continue to lean into this important channel and find additional ways to improve the new member experience. For example, providing early education about the broad range of fitness modalities that we offer and the many series and programs our instructors provide to new members. It's also worth highlighting that this activation fee will be a source of incremental revenue and gross profit for us, helping to support our investments in improving the fitness experience for our members. Now, let's move on to our Tread business. Growing Tread remains a top priority for us, and I'd like to take a moment to provide an update on our progress. Connected Fitness revenue from our treadmill portfolio grew 42% year- over- year in Q4, due to the reintroduction of our higher-priced Tread+ in fiscal 2024. Tread+ continues to deliver a best-in-class running experience, driving member enthusiasm, as evidenced by its Net Promoter Score of 76, the highest across all of our Connected Fitness products. To support our tread growth efforts, we're investing in content offerings and product features designed to enhance the walking and running experience on our platform. We launched Pace Targets in Q4, a new offering that enables instruction for personalized intensity levels as an alternative to treadmill speed. We are already seeing positive responses from repeat usage of pace targets among our performance runners. We also launched our half-marathon training program on Global Running Day in June. This addition expands our race training offering, which has helped over 300,000 members train for a race since the series was first launched in 2019. Under the leadership of Nick Caldwell, our product team's pace of software innovation is increasing. In Q4, we launched the capability to Find Friends, which enhances our platform's community-building potential beyond the leaderboard. New and prospective members may now use Find Friends to connect with their existing network. This and other upcoming social features launching soon are designed to enhance the member experience with organic, community-based motivation. Watch this space for the rollout of some highly requested social features, like private groups and challenges. We expect these social features to drive member retention and organic acquisition over time. In addition to social features, we recently announced public beta testing for experimental software feature developments on our platform, including personalized plans, a Strength+ app, and more game-inspired workouts. Personalized plans are designed to help members create a fitness routine tailored to their specific goals and needs. We'll be testing this new offering on the Peloton app. Our Strength+ app allows us to test a new strength content format with instructor-led workout programs compatible in a gym setting, paired with expert coaching audio guidance. And through game-inspired workouts, we are testing experimental cycling experiences meant to encourage social engagement in a virtual training environment. We will test, learn, and iterate on these software development projects, and we look forward to sharing more about these and other software-based feature developments expected to roll out in the upcoming quarters of fiscal 2025. We're confident about our new software-driven experiences, and as excited as we always are to innovate on software, it's our instructor-led content that is the core of our business. Looking ahead, we are using the extensive expertise of our instructors in new ways, and we'll look to complement the team with guest and potentially new instructors as we find the right voices to reach our incredibly high standard. Two recent examples of this guest instructor strategy that our members responded positively to were the return of accomplished fitness coach Irène Scholz in Germany, and Christian Vande Velde, a professional cyclist in the U.S. There is no doubt that the connection and authenticity that our instructors bring to our members is a significant part of our competitive differentiation today, and we will work side by side with these incredible athletes to continue to evolve our content offerings and serve our members in new and innovative ways. In fact, on Tuesday of this week, we announced the addition of three new entertainment partners that are now accessible through our Connected Fitness platform, AMC+, Kindle, and DIRECTV. We also launched a new feature called Just Guidance, which allows members to follow workout plans created by instructors while enjoying their favorite entertainment content. Now Liz will take us through a review of financial performance. Thank you, Chris. First, I'd like to touch on how we are tracking against the cost restructuring plan we announced at our last earnings call back in May. We made substantial progress toward achieving our plan to deliver over $200 million in run rate cost savings by the end of fiscal 2025, delivering approximately $15 million of cost savings in the quarter. Roughly $11 million of the cost savings came from payroll reductions, and the remaining $4 million came from other non-payroll savings. We remain on track to achieve the full $200 million in run rate cost savings by the end of the fiscal year. We also expect to deliver additional efficiency through reductions to media spends that are not part of the restructuring plan, and we continue to look for opportunities to further reduce our operating costs and improve our working capital efficiency. Now, let's spend a few minutes on our Q4 results. We ended the quarter with 2.98 million paid Connected Fitness subscribers, reflecting a net decrease of 75,000 in the quarter. This exceeded the high end of our guidance range as a result of higher than expected gross additions in first-party, third-party retail, and secondary market channels. Average net monthly paid Connected Fitness subscription churn was 1.9%, which was in line with internal expectations and up roughly 10 basis points year- over- year. We ended the fourth quarter with 615,000 paid app subscriptions, reflecting a net decrease of 59,000 in the quarter. This result exceeded the high end of our guidance range, primarily from favorable average monthly paid app subscription churn, which was 8.4% in the quarter. While app churn was down roughly eighty basis points quarter over quarter in Q4, we anticipated churn to remain somewhat elevated in the quarter due to the roll-off of subscribers associated with a specific corporate wellness client that did not renew their agreement. As Chris discussed earlier, we are continuing to invest in new content and features for the app, focused on enhancing our strength content offerings, personalization, and social features. While we develop these enhancements, which we believe will result in a significant improvement in our overall app experience over time, we are reducing the amount of media spend supporting growth in paid app subscriptions for now to maximize our media efficiency. Total revenue was $644 million in the quarter, comprising $212 million of Connected Fitness segment revenue and $431 million of Subscription segment revenue. Total revenue was slightly above the high end of our $618 million-$643 million guidance range, and up modestly year- over- year by 0.2%. Total gross profit was $312 million in the fourth quarter, yielding a gross margin of 48.5%, which was above the high end of our guidance range. Our Connected Fitness segment gross margin was 8.3%, ahead of our internal expectations. This included $10.7 million of inventory write-offs for excess and returned inventory. Excluding the impact of inventory write-offs and one-time COGS items, adjusted Connected Fitness gross margin was 10.2%, expanding over 15 percentage points compared to the same period a year ago. Total operating expenses, including restructuring and impairment expenses, were $375 million in the fourth quarter, compared to $427 million for the period a year ago. Sales and marketing expense decreased to $26 million versus the year ago period, reflecting lower spending on media, retail showrooms, and brand and creative spend. Research and development expense decreased $2.8 million versus the year ago period, primarily driven by reductions in business operations and product development and research costs. General and administrative expense increased by $23 million versus the year ago period, driven by an increase in stock-based compensation, primarily related to expense recognized in connection with the CEO transition, partially offset by lower depreciation and amortization expense. This quarter, we recognized $7.8 million of impairment and restructuring expense, of which $8.2 million was non-cash. The non-cash charges were primarily driven by impairment losses related to Connected Fitness assets. The cash charges were primarily driven by a $3.5 million benefit to severance and other personnel costs due to reversals in severance accruals, which were partially offset by $3.1 million relating to exit and disposal costs and professional fees. Adjusted EBITDA was $70 million in the fourth quarter, a $105 million improvement from the period a year ago. We generated $26 million in Free Cash Flow in the quarter, the second consecutive quarter of positive Free Cash Flow, something we haven't accomplished since the second quarter of fiscal year 2021. We ended the quarter with $698 million in unrestricted cash and cash equivalents. We also have access to a $100 million revolving credit facility, which remains undrawn to date. Overall, our Q4 performance reflects our continued leadership in the Connected Fitness category and the strength of our subscription business, as well as the tremendous progress we have made in re-architecting our cost structure. Next, I'd like to provide context on our financial outlook for the first quarter and fiscal year 2025. Our guidance for first quarter fiscal 2025, ending paid Connected Fitness subscriptions, reflects an expected year-over-year decline in hardware sales based on multiple factors. From a market perspective, the first quarter is typically a seasonally low quarter for hardware sales as consumers shift their discretionary spending toward categories like travel and sporting goods during the summer months. We also expect continued sales headwinds as a result of an uncertain macroeconomic environment. Additionally, with our focus on improving profitability, our sales outlook reflects some decisions we've made that we expect to have an impact on our hardware sales in the quarter. We are reducing sales and marketing spend year- over- year as we continue to focus on optimizing media spend. We have also decided to run fewer promotions within the quarter compared to the same period last year. And as Karen previously mentioned, we made the decision to no longer offer a rental option for our original bike starting August first, due to limited refurbished bike inventory available. While we are not providing specific guidance on average net monthly paid Connected Fitness churn, we expect our churn rate to be relatively similar to Q4 fiscal 2024. Our first quarter paid app subscription guidance reflects an expected sequential decline in gross additions due to seasonality, coupled with sequential improvement in average monthly paid app subscription churn. We expect our churn rate to improve quarter over quarter due to stabilization in our corporate wellness paid app subscription base. Our first quarter revenue guidance reflects the impact of these hardware sales and subscription trends, combined with our business decisions to improve profitability. We expect a sequential increase in first quarter total gross margin as a result of a seasonal mix toward our subscription segment. We also expect significant year-over-year improvement in first quarter Adjusted EBITDA, mainly due to lower sales and marketing expense and continued progress toward achieving our $200 million cost reduction plan. Our full year fiscal 2025 guidance reflects the expectation that hardware sales will decline year- over- year, as well as an expectation that average net monthly paid Connected Fitness churn will continue to increase modestly year- over- year and follow our historical seasonal pattern. Our full year guidance range for paid Connected Fitness subscriptions reflects a broad range of outcomes. We will continue to refine our strategy over the course of the fiscal year, which may include potential changes in pricing, promotional strategies, and other levers we may pull to achieve our financial targets. Any changes in these areas may affect our gross additions for paid Connected Fitness subscriptions and paid app subscriptions across the fiscal year.... Additionally, as we continue to improve our member experience, we see clear opportunities to improve engagement, which could result in improvement to our average net monthly paid churn rates for both Connected Fitness and App. While we are optimistic we can improve engagement through product and content innovation and evolving our marketing strategy, the timing of when we will start to see meaningful impact from these efforts is uncertain. Our guidance for paid app subscriptions reflects a year-over-year decline at the midpoint. We have made the decision to reduce our media spending supporting the app while we invest in innovating the product to improve the member experience and lower churn. Most importantly, our focus for fiscal 2025 is on delivering our key financial results, which include revenue, gross margin, and Adjusted EBITDA. We are prioritizing these metrics along with delivering free cash flow. Our revenue outlook is tempered by uncertainty surrounding our ability to efficiently grow paid Connected Fitness and App subscribers, including an assumption that our investments in new initiatives will not deliver any upside to subscriber growth within the fiscal year, as well as an uncertain macroeconomic outlook. Gross margin is expected to improve year- over- year as a result of Connected Fitness gross margin expansion, as well as revenue mix shift toward our subscription segment. Our Adjusted EBITDA guidance of $200 million-$250 million reflects continued improvements in profitability, largely due to gross margin expansion, the operating cost savings we expect to achieve related to our previously announced cost restructuring plan, and lower year-over-year media spend. We also expect to deliver meaningful free cash flow on a full year basis of at least $75 million. It is worth noting that we do expect Q1 free cash flow to be negative due to timing of inventory payments as we build up inventory to support the holiday season in Q2. Our outlook for fiscal year 2025 reflects our prioritization of improving profitability and delivering meaningful free cash flow. Our improved bottom-line financials enable us to focus on innovation in a more strategic way. We remain optimistic about the investments we are making in our software and hardware innovation, and also evolving our content offerings. We look forward to sharing more about new product features and fitness experiences in upcoming quarters. As we test new fitness and wellness offerings to meet our members' needs, we're allowing time to learn and iterate to ensure that our offerings have signals of strong product market fit before we scale them. As a result, our outlook does not assume subscriber growth from these new initiatives in fiscal 2025. And with our cost structure better aligned to the current size of our business and a planned path to sustainable positive free cash flow, we now have a solid foundation in place that we can build upon to drive long-term profitable growth and shareholder value. And now, I'd like to turn it back to Chris for some closing remarks. Thanks, Liz. As a global leader in fitness, Peloton enables our members all over the world to unlock their power, to achieve their fitness and wellness goals, and be part of a community who shares their passion. Our fitness experiences are delivered through the world's leading fitness experts, premium hardware and innovative software, a variety of ways to work out that include multiple content formats from instructor-led classes to scenic, outdoor audio, gaming-inspired, and entertainment. As we look forward, together with our team of talented employees, we'll continue to blaze new trails with personalized fitness delivered anywhere consumers want to work out. Our goal is for Peloton to be the most trusted fitness companion, whether at home, outside, or at the gym. We want to be with our millions of members through every step of their fitness and wellness journey, regardless of the destination. Thank you for your time this morning, and we can now open the line for Q&A. Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, press star one one again. Due to time restraints, we ask that you please limit yourself to one question and one follow-up question. Please stand by while we compile the Q&A roster, and our first question will come from the line of Douglas Anmuth with J.P. Morgan. Your line is open. Hey, it's Brian Smilek on for Doug. Thanks for taking the question. Just to start, last quarter, you had talked about the Connected Fitness market becoming closer to recovery. Can you just update us on the trajectory of return to growth across the industry and maybe what you're seeing on the macro side? And more specific for Peloton, what would be the one to two key growth initiatives that you're focused on for fiscal year 2025? Thank you. Sure, so why don't I start off with kind of what we're seeing on the macro front? This is Liz. If we look at the overall Connected Fitness market, similar to what we talked about last quarter, our internal estimates that use third-party data indicate that the Connected Fitness category is still declining year- over- year, post-COVID. We still see that those year-over-year declines have lessened dramatically since fiscal 2022, and that does indicate that we are getting closer to an inflection point where the category could start growing again within the next few quarters. With that, in the short to medium term, we do expect softness in Connected Fitness hardware demand, given the category trends and also macroeconomic uncertainty. But over the long term, we do still really remain bullish on the growth potential for the Connected Fitness category, and we expect to grow our share of total fitness and wellness spending as we invest in product and content innovation and re-evolve our marketing strategy. Yeah, and let me build on that. This is Chris. I think some of the things to be excited about in the coming year, certainly, a bunch of what we shared today, a lot of innovation in software and in the overall experience with members. We talked about social features, we talked about personalization, we talked about gaming. It's very exciting to see those things start to come to life. And then we have to always, always point to Tread. Tread remains an incredible opportunity, underdeveloped for Peloton. It's one of our highest potential growth levers. And so I think, you know, between those improvements in the experience, capitalizing on the Tread opportunity, and then just becoming much more effective with our marketing investments, and in particular, targeting key audiences, new audiences, like men and the Latinx population, those are some of the things to be excited about. Great. Thank you. Thank you. One moment for our next question, and that will come from the line of Eric Sheridan with Goldman Sachs. Your line is open. Thank you so much for taking the questions. I want to come back to some of the comments you made during the prepared remarks. When you think about improving your LTV to CAC, looking out over the next couple of years, what do you see as the key gating factors to improve LTV to CAC? And how are you thinking about which components of that are within your control versus an output of the broader, either marketing or competitive environment generally? Thanks so much. Yeah, I mean, I think... this is Chris. I think, you're seeing us continue to focus on that. In fact, we discussed last quarter how, Lauren Weinberg's jumped into the business here at Peloton and brought us a really great eye to marketing spend, and we're already seeing some of the benefits of that. So, you know, we shared today that our LTV to CAC ratio for the last quarter was 1.5x, and that's short of where we want to be, but it's good, it's good improvement. And the way we're getting there is by being more focused, on efficiency and on the parts of our business that we can have, I think, the most control. We talked today about shifting our focus away from app because from a marketing standpoint, because we're busily taking the learnings from the last year and making that experience better. That creates an opportunity for us. So actually, it's both sides of the equation that are going to improve our LTV to CAC ratio. We're both seeing improvements in the financial foundation and our gross margin. That's gonna help the LTV, and then we're just becoming far more effective with lower spend, fewer promotions, and that's having a positive impact on CAC. I'll just build on the LTV piece. This is Karen. One of the things we're really focused on is improving our hardware margins. In the Connected Fitness segment, hardware margins have come down significantly over the last couple of years, and we're working on restoring those, and that's gonna look at, you know, both unit economics on our individual SKUs, but also how we're approaching different markets and different channels. You're gonna see us evaluating pricing, you're gonna see us be a little less promotional, both the depth and the frequency, and we're just gonna optimize that over time as well. Yeah, I just wanna hit on the CAC point one more time. You know, we, as we've talked about, we've decreased our media spend, because we are very focused on making sure that our media is being spent efficiently. And as Lauren and her team work on evolving our messaging and improving our channel strategy with regard to media, we'll start to see that manifest in lower CAC. And so for now, we've pulled back on marketing spend as we optimize some of that, and when we see the efficiency improve, we will lean into it and spend more as our LTV to CAC ratios improve. And so, you know, Lauren's really focused on efficiency in the lower funnel, and then, you know, and also improved engagement with our marketing end to drive that on the LTV side. Great. Thank you. One moment for our next question, and that will come from the line of Nathan Feather with Morgan Stanley. Your line is open. Hey, everyone, and congrats on the progress. You know, thinking about the subscriber decline that you're looking at in fiscal 2025, if you help us think, right, the key components between the lower marketing spends, you know, the macro, stoppage of the bike rental program, et cetera, and then is the bike rental program something that you may expect to toggle on and off, depending on the level of used inventory? Thank you. Why don't I start with just some of the overall subscriber trends? Because I do think that harkens back to where we were coming out of the pandemic. We saw slight sales slow down, and it's easier now to see what was happening, but I do think there was that pull forward. So I think we've you know, we believe that we're coming out of it, but we don't quite know if we're all the way out of it. So there's that, and there's the macro that is hard to discern. So there's certainly some of those trends when you think about the subscribers and maybe having pulled some of those forward. So that's certainly one of the things going on. Yeah, for sure. That's true on the macro front. But, you know, again, some of it is decisions that we have made that we are gonna focus on sustainable, profitable growth, and we're not going to spend inefficiently to acquire unprofitable subscribers. And so we have pulled back, and that's a decision that we made to reduce our marketing spend there. The other thing I do want to point out, you mentioned rental, and that is a factor. You know, as we looked at our bike rental program, for the original bike, you know, we've talked about this in the past, that the economics are great when we have refurbished inventory, but are challenged when we are having to supply that program with new inventory. As our inventory has come down, we determined the right thing to do financially for us was to just to cease that program, and that will have, you know, some impact, although we are starting to see some benefits with more people taking Bike+, but it will have some impact intentionally, as we, you know, as we're using the refurbished inventory just for refurbished sales right now. So and your question about toggling rental on and off, at this point, we don't see that happening, because our return rates are still quite low. And the way that we replenish the inventory for our refurbished program is primarily through people who return their bikes through the thirty-day home trial. And since that's so low, we don't expect to have a huge amount of inventory. Our plan for now is to just use that to supply the refurbished original Bike program, and then not to return to rental. But we may, at some point, decide to change our minds on that, but that's where we are for now. We do still plan to keep the Bike+ program for rental in place. The economics work quite well for us there, both with refurbished and new inventory. And so we have no plans to eliminate that program at any point at this time. Very helpful. Thank you. One moment for our next question and that will come from the line of Ron Josey with Citi. Your line is open. Hi, thanks for taking the question. Two, please. Maybe bigger picture and guidance talks about potential change in pricing overall. I wanted to see if there's any changes as you think about subscription pricing, or is it just hardware? Meaning subscriptions around tiers as newer products come out, like the strength app or tread adoption. Any insights on pricing for subs? It's question one. And then, Liz, I wanna understand a little bit more your comments on churn ticked up year- over- year in the quarter. Understand seasonality here, though. I think you also said expected to remain high going forward. Any insights on what's keeping that churn as high as it is relative to historicals would be helpful. Thank you. Sure. So, I'll take the sub one. We are looking at all of the pricing across the business. There are no plans right now to increase our subscription price. We do think it's a great value, and as we do deliver more value with some of these experiences we're talking about, something we might consider in the future, but at this point, we don't have any plans for that. On the hardware pricing front, it's easier to think about what we might do in certain markets, especially where the penetration of third party, such as international, is more significant. There are certain markets where we're entirely third-party distributors, and so the margins there need to be a little bit higher to support those. So again, that reflects our looking at the unit economics across all products and across all channels. Right now, the subscription margins are quite good. It's the hardware margins that are a little more challenged. So doesn't mean that we won't ever entertain a subscription price increase, but it's not something that we're planning for anytime in the immediate future. Sure. And then I'll take the churn question. So at a high level, our business continues to benefit from really strong retention rates. We still have a relatively low churn. It was around 1.9% in Q4, and I did mention that it will likely be around the 1.9% range for Q1, which is an uptick year- over- year. In Q1 of last year, we benefited from a number of members unpausing their subscriptions following an elevated pause rate as a result of the seat post recall that we had in Q4 of fiscal 2023. When we compare year-over-year churn rates, this creates a headwind for us this year because of last year, we had that one-time benefit. That's about half of the year-over-year increase in churn is coming from that. We're also seeing a slight impact from worsening churn rates, and then we do see some mix shift into our higher churn populations, namely our Secondary Market subscribers, which we've talked about. They do have a slightly higher churn rate than those who purchase outright from us via first party or third-party channels, and then also a slightly higher churn rates that we do see from our bike rental program. That's helpful. Thank you. One moment for our next question, and that will come from the line of Arpine Kocharyan with UBS. Your line is open. Hi, thanks for taking my question, and you addressed some parts of this already. Could you go back to your kind of underlying assumption for Connected Fitness subs for 2025 and maybe kind of dissect how much of that decline is increasing churn versus addition of new subscribers? And then, just some housekeeping question. In terms of Q4, could you clarify contribution from Lululemon deal? Thank you. Sorry, I missed the last part of your question. Q4 from what was that? From Lululemon deal. Oh, Lululemon. Oh, sure. So we don't actually share externally any information about the revenue that we get from our Lululemon deal. We've shared it somewhat in the past. It's remained pretty constant and consistent. We aren't seeing any, you know, we're seeing really good retention rates from the Lululemon members, and so, you know, so we're pleased with that. Your question about underlying subs for 2025, you know, it's really hard to break out the factors into in a way that we can piece and parse them for you, of how much is this and how much is macro, how much is certain different things. But I do wanna really just kind of circle back to the fact that there are some macroeconomic factors at play. There's still some COVID impact at play that we are, you know, we believe is really tapering off this year, and hopefully by next year, will be won't be a factor for us anymore. You know, some of the things are really related to decisions that we are making about the business, that where we're where we, we do see and we also are leaving. If you look at our guidance for fiscal 2025 for subscribers, it does it does suggest that we are gonna be declining in subscribers, and the range is pretty broad. And the reason for that is that as we evolve our strategy over the course of the fiscal year, we may make changes to pricing. Karen alluded to some things that we're thinking about there. We're evolving our promotional strategies, and then we may also pull other levers to achieve our financial targets. And And so all of those things may affect how our gross additions flow in. We also see a lot of opportunities through some of the things that Chris was talking about, not only to potentially drive subscriber growth, but also just to improve engagement, which could also result in an improvement in our churn rate. And so examples of where we expect to see that could be our beta tests, some of the new products and content offerings, and then also just as we evolve our member marketing strategy. However, you know, we need to learn how our members are going to respond to these offerings, and the timing of when we might see some of the impact from those efforts on churn is uncertain. So it's really hard for me to parse out how those different things are going to manifest over the fiscal year, but we really do feel good about the range that we provided. And, you know, it does suggest that in fiscal 2025, our ability to grow subscribers remains unlikely, although we're going to work on improving that over the course of the year as we go. Thank you very much. One moment for our next question. And that will come from the line of Lee Horowitz with Deutsche Bank. Your line is open. Great. Thanks so much. You know, 2025 is clearly become a year where you right-size the cost structure and get the business to healthy, profitable base. But looking forward, how do you think about how much white space is actually left in the Connected Fitness market for Peloton to attack? And how may that view on sort of the, you know, the ability to attack the overall market, inform the attributes you're looking for in your next CEO? And then maybe one on gross margin. Can you help us unpack sort of the meaningful Connected Fitness gross margin improvements that you were looking for in 2025 a bit more? How are you planning to affect that outcome in 2025? And how much more room do you think there is to sort of rightsize that cost structure on product gross margins going forward, sort of absent any benefits you may get from this? Okay, there's a lot there. Let's start with what we're the white space and what we're excited about. I'd say there are still a lot of people who think about us as a bike and/or cardio company, so I think that is white space. I think we have 16 modalities, but not everyone knows all the modalities we have. We're really excited about Tread and running, both from the, you know, selling more Treads, but also the content, the experiences, and run clubs and, you know, social features that we're thinking about. We're really bullish on strength. I think there's so much of a movement towards strength. I think people understand the science behind it and why it's important. It is the number two modality for us, but I still think there's a lot of people who come for the cardio and then understand the strength. We're not yet known for strength, so I think you'll see with the beta test we're having, with other things we're, you know, planning to make sure that's better understood and more well known. I think you'll see that as more of a white space for us in the future with new members and even kind of going deeper with our existing members. And then I think there's more we can do just with broadening, you know, beyond just fitness over time. These are things that we'll test and, you know, beta and make sure they're working before we scale them and invest a lot of money behind them. But I think there's an incredible amount of white space over time for us, both in the U.S. and in our international markets. With international specifically, we're very focused on reducing the losses there and our go-to-market strategy, so it's more capital light. But as we kind of optimize the current markets, we'll be able to go into additional markets. So I do believe there's a lot of white space over time. Yeah, and, you know, the things that Karen's talking about, strength, tread, even, our efforts to become more focused in marketing, where we build up demand, you know, before we, we try to, deliver it via promotions, et cetera. All these things are made possible because we're putting the company on solid financial footing. So we're, we say in our remarks, we're planting the seeds here, for growth, and some of these seeds will take some time. We've got to change that perception that, it's only about the bike, that it's actually also about strength. In fact, strength is our second most popular way of exercising, with Peloton. It's also about running, and we're doing some very cool stuff, around, Pace Targets and running content. So, those are efforts that have... We're very excited about and we think create lots of white space, for Peloton, but they'll take time to develop. On the margin front, so first of all, we are expecting substantial improvement in our connected gross margin, Connected Fitness gross margins in fiscal 2025. One, one of the reasons for that are the fact that we are not expecting to have the inventory write-offs and reserves that we've been challenged with in the past. We've much more, or much more right-sized in our, our inventory, and we're going to continue to lean on making that more and more efficient over time, so that we can, you know, we can reduce our days on hand and just have a much more efficient supply chain going forward. We also talked about the fact that we are focused on hardware pricing, and also on reducing the amount of promotional activity that we have in the year. Those things directly affect our gross margins, and then, you know, in terms of how high can it get, I'm not going to throw out a specific target for you, but our goal would be to get our Connected Fitness margins back into the low, at least the low double digits range, and then continue to... Yeah, and then continue to improve it over time. Another thing, you know, it's worth pointing out, is that some of our marketing messaging in the past has really been focused on promotions, and we are moving away from that to really focus on the full value proposition of what you get with Peloton and your overall membership, as part of our messaging. The goal there is, again, to make it less about promotions and more about the value of Peloton over time. Very helpful. Thank you. One moment. We do have time for one final question, and that will come from the line of Shweta Khajuria with Wolfe Research. Your line is open. Thanks for taking my question. I'm not sure if you addressed what you're looking for in the next CEO. If you could please comment on that, that'd be great. And then the second thing is of these new initiatives that you are talking about, as the new CEO comes in, how could the strategy change potentially? Because that it may depend on him or her a little bit as well. And as it stands now, which, if you were to put it in a spectrum, which top two strategies do you think will have the most impact in the near to midterm? Thanks. Sure. So I'll take the CEO question. As I said in my prepared remarks, this is a very high priority for us. We've been very focused on it. We are far along in the process. We've done a lot of vetting, a lot of conversations, and we've narrowed it down to some very highly qualified candidates. That said, we're not done until we're done. Because we're pretty far along with some candidates, we're not gonna go through the specific profiles, but I would say we're just really excited about the process and the interest that there has been and the quality of the candidates we're talking to. So I'm not gonna give specifics on what we're looking for. Again, we have some very specific folks in mind at this point. But that person will absolutely opine and weigh in on the strategy. I think some of the things we're doing right now are intentionally something like a subscription price increase. That is a one-way door we probably wouldn't go through without a new CEO, as an example. But the things we're doing now and the things we're focused on in the very near term, all the things we're talking about today, are what I would consider sort of no-brainers. We're being more judicious with our spend both on marketing, which we've talked about, but really up and down the P&L, and we're making sure that our unit economics and our margins make sense, and that can, you know, those things fund CAC and future growth in the future. And we're planting the seeds with what we think are some really exciting content and offerings for all of our members, new members and existing members alike. So, I think we're focused on that, and I think the new CEO coming in will pick right back up, and we won't miss a beat. Totally. And Karen and I like to talk about preparing the way for the next leader and making some of the smart moves now that we can make to create the best possible environment. So, getting the company on solid financial footing, planting seeds for growth. These are the learnings, becoming more effective in how we're using our resources, especially in marketing and in creating demand and in helping Peloton become known for things like strength and tread and running. These are the important things. So we see that as preparing the environment, and we think that that's just gonna create a great runway for the next leader. Thank you. Thank you. I would now like to turn the call over to Karen Boone for closing remarks. Okay, thank you for the time today. I do wanna stress that the entire board is highly focused on the CEO search, and we do hope to have some news to share there in the very near term. In the meantime, Chris and I and the entire leadership team are highly focused on what we can control. We're executing against our reduction plan, and we're delivering those expense reductions. And we talked a lot about media efficiency today, but I do wanna stress that we're looking at further optimizing our spend up and down the P&L, including on hardware gross margins and ensuring our unit economics work in all of our markets and in all of our channels. And we're also very focused on working capital efficiency to deliver the inventory reductions. Importantly, we are making investments for future growth, where we will test and learn before scaling the spend. We're excited about the opportunity with Tread, the work we're doing to lean into strength, both with content and delivery formats, and with new community features and additional experiences on the come for both existing and new members. I do wanna thank our amazing instructors and the many talented employees who bring the magic of Peloton to our millions of members day in and day out. I should probably underpromise here, but I am excited to say that I do believe you will be speaking to and hearing from the new CEO of Peloton on this call next quarter. Thank you. This concludes today's program. Thank you all for participating. You may now disconnect.