Great. We'll get started. Good morning, everyone. Thanks so much for joining us. My name is Nathan Feather. I'm Morgan Stanley's small and mid-cap internet analyst. I am excited to be joined today by Liz Coddington, Peloton's Chief Financial Officer. Thanks so much for being here. Yeah. Thanks for having me. It's always a pleasure. Great. Well, before we begin, a few quick housekeeping items for important disclosures. Please see the Morgan Stanley Research Disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. And with that, let's kick it off. Liz, it's been an eventful year for the company, to say the least. For those who may be new or returning to the story, how has Peloton evolved over the past year, and what are the key priorities over the next? Yeah. So to answer this question, I think what I'd like to do is kind of talk about the last 12 months first and give a bit of a history lesson, if you will, and then I'll talk about our strategic priorities going forward, so we have made a tremendous amount of progress improving the health of our balance sheet over the past 12 months. In May of 2024, we announced a cost restructuring plan to be able to achieve $200 million in run rate cost savings by the end of fiscal 2025, and we are tracking currently ahead of that target, and those cost reductions were a necessary step for us to right-size our cost structure and align it to the current size of our business and enable us to generate meaningfully positive free cash flow and Adjusted EBITDA in fiscal 2025 and beyond. Now, re-architecting our cost structure and stabilizing our free cash flow were also critical to being able to address our balance sheet. Also, in May of 2024, we completed a $1.35 billion holistic refinancing that achieved our goals of extending our debt maturities, achieving more flexible loan terms, and deleveraging on a gross debt basis, all at a reasonable cost of capital. And we're pleased with the fact that we have achieved four consecutive quarters of positive Adjusted EBITDA and free cash flow, and that we expect to generate at least $200 million in free cash flow and between $300 and $350 million in Adjusted EBITDA for fiscal 2025. Now, as of the end of Q2, our trailing 12-month Adjusted EBITDA was roughly $250 million, which is a $375 million year-over-year improvement. And we generated over $150 million in free cash flow over the same time period. And that is enabling us to reduce our net debt by over $280 million, or a 30% year-over-year reduction as of Q2. Pairing that lower net debt with the growing Adjusted EBITDA is enabling us to reduce our reported net leverage ratio. It was roughly 7x in Q1 and has come down to 2.7x as of Q2. And that reduction has also enabled a reduction in our First Lien Net Leverage Ratio, which has now reduced to below 5x as of the end of Q2. And that's creating meaningful savings for us. We achieved a 50 basis point rate step down in our term loan, which equates to roughly $5 million in annualized interest expense savings as long as we stay below that threshold. Now, overall, the improvements that we've made to the health of our balance sheet are really reducing our risk and positioning us well for growth in the future, and over time, we expect that they'll be able to enable us to lower our cost of capital and create more optionality for capital allocation, so that's a little bit of a history lesson. Now, let me talk a little bit about our priorities going forward, so we are really establishing and earning the right to return the business to growth right now. We are continuing to right-size our operating expenses, improve our hardware gross margins, also increase the effectiveness of our marketing through improvements in our LTV to CAC ratio. What this all means is that when it's time to turn to growth, we will have both the financial capacity as well as the confidence to be able to do that in a way that is sustainable, profitable, and as a result, also shareholder-friendly. I'd be remiss if I didn't talk about the arrival of our new CEO, Peter Stern. He joined us in January, and he brings over 20 years of operating experience leading growth in over a dozen subscription businesses across Ford, Apple, and Time Warner Cable. As Peter said on our Q2 earnings call, our focus right now is on delivering our financial and operational objectives for fiscal 25 as we develop our longer-term growth strategy to return to revenue and member growth. Since Peter joined a couple of months ago, there's been a ton of excitement at the company, which is great. He's done a great job of redefining Peloton's purpose, which is to empower our members to live fit, strong, long, and happy. And we are currently undergoing a rigorous strategic planning process, and we'll share more about our long-term growth strategy as the calendar year progresses. Okay. Great. Well, a lot to unpack from that. Let's start maybe on the revenue side. And for fiscal 2025, you're adding to revenue growth of down 9% at the midpoint. How would you break apart that decline between macro headwinds, the weakness within discretionary spend more broadly, impact of cost reduction actions, kind of any other key factors to call out there? Yeah. So let me kind of break this question into two parts. I'll talk about sort of the macro piece first, and then I'll talk about some of the strategic decisions that we have made to focus on our profitability. So if you look at the overall Connected Fitness market or category in the U.S., our internal estimates using third-party sales data indicate that the Connected Fitness category is continuing to decline year over year post the surge in demand that we experienced from mid-fiscal 2020 to mid-fiscal 2022. Now, despite that continued category decline in the current year, our fiscal 25 guidance implies a more than 30% six-year CAGR on paid ConnectedF fitness subscriptions going back to fiscal 2019. And what that suggests is that even with the demand pull forward that we experienced, our business has maintained a strong long-term growth trajectory. Now, we do expect to continue to see softness in the Connected Fitness category in the short to medium term, and we've incorporated that into our fiscal 2025 guidance. But over the long term, we do remain quite bullish about our growth potential and about growth potential in the connected fitness category and fitness and wellness industry overall. So we are continuing to invest in order to accelerate future growth. Now, let me talk a little bit about some of the strategic decisions that we made to improve our profitability. We've talked about this in prior quarters, really focused on improving our unit economics on two fronts. One is improving our connected fitness gross margins or our hardware gross margins. We've increased prices, and we've changed our promotional strategy both to be less frequent and also to align our promotions more to the margin profile of our product portfolio, and that all improves our LTV. And then we've also reduced our media spending in response to demand trends in order to manage to more efficient CACs. And if you take those together, we are trying to improve our LTV to CAC ratio, and we did see an improvement in Q2 of 15% in our LTV to CAC ratio year over year. Now, we are managing the business in fiscal 2025, assuming that growth does not return this fiscal year. By focusing on what we can control in the near term, we're able to invest in improving member outcomes, enabling to meet our members in more places, and deepening member connections with Peloton and with each other. We believe that our investments in these areas, when combined with a leaner cost structure, position us really well for sustainable and profitable growth over the long term. Great. That's really helpful, and I want to dig a little bit more into that. In the Q2 letter, you outlined a few pillars around the forward growth strategy, and the first one was innovating on products and experience to deliver better outcomes. Given that, what are the one or two areas you see the most opportunity to elevate the member experience? So as Peter said during our Q2 earnings call, Peloton's magic formula really lies in the intersection of our premium fitness equipment, innovative software, and expert human coaching, all underpinned by our special Peloton community. And you can count on us to continue delivering on that formula. There are a lot of companies out there that just make hardware. There's plenty that just produce software. But what is uniquely special about Peloton is that we bring those together with expert human coaching at scale. And we believe that one of our biggest areas to innovate is really around improving our products and experiences in order to improve member fitness and wellness outcomes. On the product side, on the product front, I'm not going to share with you any details about any things that we're doing to improve our hardware products other than to say that we are looking at improvements that would benefit our member experience there. On the software front, we've launched a variety of new features recently. We've launched Personalized Plans, Strength+, Pace Targets, and Teams. All of those are focused on improving our member experience and engagement. There is actually a lot more cool stuff coming. Okay. Well, the next pillar is meeting members in more places. And you mentioned a little bit within that the combination of all these things. And a key part of that is getting hardware into the hands of new members. And so within that is increased distribution, such as the Costco partnership that ran over the past few months. How do you think about balancing channel mix between direct-to-consumer and wholesale? And then given the reduction in the own store footprint we've seen, is there an opportunity to re-expand your physical presence in other ways? Our third-party retail channels are an important part of our fitness equipment sales strategy to be able to meet people in places that they already shop. And that includes online retailers like Amazon. And our Costco partnership, our seasonal partnership with Costco, is a part of that strategy. We offered Costco members a great value on our Bike+ over the holidays, bundled with an extended warranty. And we sold more Bike+ through Costco than any other third-party retail channel partner over the holiday period. And as you mentioned, as we continue to reduce our own showroom footprint to be able to reduce fixed costs, we do see a value in maintaining a physical presence so that people can touch and feel our hardware products. And that is reliant on third-party partnerships like we had with Costco, also with Dick's Sporting Goods. And then our third-party partnerships are also that our third-party channels are important for our existing international markets. For example, in Germany, we've shifted entirely to a third-party distribution and retail model. And so all of our sales growth in that market is going through our two partners there, which are Fitshop and Amazon. Now, that being said, we are looking and testing ways that we can sort of reimagine a physical retail experience. And in November, we launched a pilot test of a microstore concept in Nashville. And our hypothesis there was really to test and see if we could operate a premium physical retail experience in an asset-light model. Now, for comparison, our national microstore is roughly 300 sq ft. Our largest retail Peloton showroom is roughly 6,000 sq ft. It's early days, and we're getting a lot of valuable insights from the microstore test. So it's really too early to call it a new physical retail strategy for us at this point, but we're excited to continue to test it. Okay. Very exciting. Now, you've also talked about deepening connections and fostering community with the recent highlight of the Teams launch. What areas of the Peloton experience can you infuse with additional community aspects? And what impact of engagement and churn have you seen from social features you've launched in the past? The leaderboard, those of you who know the leaderboard where you give people a high five when they're working out, has been fostering community on our Peloton platform for years. But over time, we have seen our members connect with each other on social media sites. And we've seen an opportunity to try to bring some of that engagement onto the Peloton platform by enhancing our community features. Kind of our start on some of this was in 2024 when we launched something called Find Friends, which enabled our members to sync their contacts to their Peloton profile and then connect with members that they already know. And then in September of 2024, we launched something called Invite Only Teams. That enabled our members to create teams of up to 100 people. And it was really designed to allow members to share their workout information as well as compete in challenges together, really about connecting friends and family. And in our Q2 earnings call, we mentioned that as of the end of the quarter, nearly 70,000 Invite Only Teams had been created. More recently, we expanded Teams to enable community-based teams of up to 50,000 members. And the goal there is to enable our members to connect with communities of people that either share a common interest or a common fitness goal. We're really pleased, actually, with the engagement on our Teams features. And we do see that members who join a team do work out slightly more after doing so, which is great. But it is really early days, and we see much more ways that we can deepen member connections with Peloton and with each other. We expect to continue to evolve our community features and add new features and functionality over time. That's great. Now, I also want to spend a minute on the app business. Can you talk through the updated strategy for that segment across both the standalone app and some of the partnerships you've launched? Sure. So our app, it's a great product. It actually has a high NPS and a lot of usage by our paid connected fitness members. But that being said, app-only offerings generally involve a lower level of user commitment to join. And as a result, tend to have a lower level of user commitment to stay. And so for us, as we think about our app offering, we do see it as an important part of our ecosystem because it provides prospective members with a low-cost way to enter the Peloton ecosystem. We view the app as both a gateway as well as a companion to enhance the full Peloton experience. Now, our connected fitness subscribers who have Peloton equipment get a lot of value out of the app as a companion to enhance their overall member experience. Actually, 80% of our weekly app usage comes from our connected fitness subscriptions, and they use it for a variety of different things. They use it to select their classes, to stack their workouts, to check their stats, and also to take a variety of classes through our app, including Strength+. The app continues to be a really important part of the Peloton ecosystem, just maybe not so much as a focus on standalone app subscriptions. That being said, I do want to point out that the app subscription business is also an important potential way for us to partner strategically with other businesses. For example, we currently are piloting a gym membership with the YMCA of Metropolitan Chicago, where all of their adult gym members have access to an unlimited app-only subscription as part of their YMCA gym membership. You mentioned in that answer briefly the Strength+ app, which launched recently. Interested to hear more about the early learnings there. Has that been better for user retention or acquisition? And given the early learnings, how do you think about the opportunity to build out additional unique digital experiences? So I just talked about the YMCA partnership and connecting with members in the gym. Our Strength+ app is a way for us to meet members in the gym as well. It was designed for strength workouts in a gym-type setting. It includes this custom workout generator as well as plans and programs with audio guidance from our expert coaches. The Strength+ app is actually included as part of your connected fitness membership as well as an App+ subscription. And since we launched officially in early December, as of the end of Q2, and we shared this on the earnings call, we had over 220,000 monthly active users. Now, while we do offer Strength+ as a standalone subscription, the vast majority of those 220,000 MAUs were existing members. And our focus with Strength+ is really on adding value for our members. You asked about adding unique digital experiences. I don't have anything specific to share on that front. But what I will reiterate is that we expect that our app innovations will be focused on improving the value of the experience for our members, and we'll likely be prioritizing that over growing standalone paid app subscriptions. Great. Well, switching over to the cost side, and you've made remarkable progress in the expense base over the course of the past few months with EBITDA now set to grow $300 million or more year on year. Can you help us break down the primary buckets of savings you found as you've gone through the cost reduction program? Sure, so as I mentioned earlier, in May of 2024, we announced a cost restructuring plan to achieve $200 million in annualized run rate savings by the end of fiscal 2025, and we are currently tracking ahead of that commitment, which is great. The savings split out, roughly half are coming from payroll savings. The other half are coming from non-payroll-based operating expenses, primarily fixed operating expenses. In addition to that, we are seeing additional savings from media spend, which is down year on year as we continue to optimize on that front as well. Great. Well, following up on that, what opportunity do you see to further take costs out of the business, both through the remainder of fiscal 2025 and beyond, and any particular areas that stand out to you? Sure. So we're pleased with the progress that we have made on optimizing our cost structure. But we do see more opportunity to do that. We know that our OpEx as a percentage of revenue is still too high, and that is especially true within our G&A. And we do see some specific areas where we can continue to optimize G&A. I mentioned a few of these on our Q2 earnings call, but I'll just highlight them again here. One of them is reducing the considerable amount of tech debt that we have, where we are currently solving technology gaps inefficiently with manual work. We also see opportunities to continue to lower our legal spending as we close out legal matters and bring more of the work in-house. And then we see opportunities to lower our corporate real estate expenses over time as well. I want to hone in on some of the specific expense lines, starting with connected fitness gross margin. Just returned to double digits, really encouraging. Can you break down the primary levers that enabled that improvement? And going forward, do you feel that has additional room to expand or are we in kind of the right place? Yeah. So our connected fitness gross margins were 12.9% in Q2, which is the first time we have achieved double-digit connected fitness gross margins in over three years. So we're really pleased with that. The main drivers of that improvement are a mixed shift to our higher margin products and channels. We also had lower warehousing, transportation, and payroll costs as a result of our restructuring efforts. And then we had reductions in inventory reserves as well. Now, going forward and looking at Q3 and the remainder of the fiscal year, you can expect our gross margins to remain in the double digits. And that's mainly due to the mixed shift to our higher margin products. You mentioned something about low-hanging fruit or additional cost optimizations. I think in the near term, those cost optimizations will continue to come from pricing optimizations. In Q2, over the holiday period, we talked about the fact that our promotional strategy was better aligned with the margin portfolio across our products, and you can expect that to continue. You can also expect that we will have lesser promotional frequency compared to last year. Great. So that's connected fitness gross margin. I also want to talk about the ability to drive further efficiencies across your marketing spend. Despite the magnitude of cost reduction, LTV to CAC is still running a little bit below your 2-3x longer-term target. What's the roadmap to get back within that range? And is that at all dependent on improving macro backdrop? Yeah. So on the marketing front, we are managing what is within our control, which is our media spend and our unit economics. And we are seeing progress there. At the highest level, our marketing strategy, since Lauren and our new CMO joined us a little over a year ago, is really focused on three areas. One is growth audience targeting. Another one is optimizing our level of investment. And the third one is really improving the effectiveness of our marketing organization. I'll take a minute and talk through all three of those. On the growth audience targeting side, as many of you may know, and we've talked about it before, men are a growth audience for us because our member base over-indexes toward women. And our Find Your Power campaign that we recently had featuring J.J. Watt and T.J. Watt, the Watt brothers, really resonated well with men. We saw 42% of our gross additions in Q2 come from men, which is up 280 basis points quarter over quarter, which is really great, and we are really pleased with our progress on that front because it is still very early days for us in terms of trying to create demand from growth audiences. Another area that we've talked about with regard to marketing is elevating Tread in our marketing campaigns. And the reason that we want to do this is because we have research that indicates that the at-home treadmill market is more than 2x the size of the at-home stationary bike market, and yet our sales, our Bikes, are more than our Treads. And our marketing campaigns recently have really focused on elevating our Tread and Strength offerings, and we've been pleased with the results there as well. Our Tread sales exceeded our internal expectations in Q2. And we also saw a higher mix of new subscription attach rates to our Tread products than we had seen in prior quarters, which is great. In terms of optimizing investment, which is another area of focus, we manage our business using the LTV to CAC framework. You had alluded to LTV to CAC earlier. And let me talk a little bit about kind of both sides of that. So on the LTV front, we've made some progress there, improving our connected fitness gross margins. The 12.9% connected fitness gross margin that we had in Q2 reflects some of the optimizations that we made there. Additionally, when I mentioned earlier about selling more of our Tread products to new members versus existing than we had in prior quarters, that also improves our LTV because we're able to count the LTV from the subscription as part of that sale, which is great. Now, on the CAC side of the equation, we've really been disciplined, much more disciplined with our marketing and advertising spend. In Q2, our marketing and advertising spend was down roughly 38% year on year, which is a significant improvement. We do expect to continue to be down year on year for the remainder of the fiscal year. And then so that is, as a result, our LTV to CAC ratio is improving. We're still in the 1 to 2x range. We are not in the 2 and ideally closer to 3x range that we would like to be longer term. But we did see a 15% year-over-year improvement in LTV to CAC in Q2. Now, the last area around improving the effectiveness of our marketing organization, we've really made some great strides there. Our membership marketing has been a real bright spot for us. In Q2, we had reactivation campaigns that exceeded our expectations in reactivating lapsed subscriptions. So that's really great. We've also made some critical hires on the marketing team in the areas of product marketing, lifecycle marketing, and also creative. And then last but not least, we are improving our measurement capabilities for marketing. We're able to test, learn, and iterate much more effectively. And that is helping us improve our marketing efficiency. Clearly, you've made a step function improvement in profitability. As you pivot increasingly to focus on revenue growth, how do you balance investing for growth while maintaining the strong DOS discipline and margin base you built over the course of fiscal 2025? So I think what is really important to say here is that it is not an either/or. We need to continue to be disciplined with our costs. We're focused on leveraging our balance sheet. And we will not overspend to acquire customers that are not profitable for us. Now, that being said, Peter did just join us in January. And we are working on developing our longer-term strategy. And we will share more about that at the appropriate time. OK. Great. Now, relative to many companies at the conference, Generative AI hasn't been as core to the Peloton story. Interested to hear what might be some potential use cases for Peloton, and where does GenAI fit within the priority list? So one of the things that is special about Peloton is our commitment to expert human coaching. And when I say human, I mean actual people. But that being said, we are taking a hard look at how we can improve our level of personalization. And that naturally lends itself to artificial intelligence. So we have taken some steps there. You can see that with our launch of personalized plans, which leverages AI to create weekly class recommendations for our members based on their goals as well as their workout history. But this is just really early stages for us in evolving our level of personalization. Additionally, as AI capabilities for content subtitling and dubbing continue to improve, we could consider leveraging that to expand geographically in an efficient and scalable way. And then a third area around AI is it promises to deliver benefits and improvements to business processes. So we see opportunities for ourselves there as well, both in improving our member support experience leveraging AI, as well as automating back office processes to lower our costs using AI. So as I think overall about AI, it promises to deliver benefits in terms of speed, efficiency, and innovation. And our goal is to take advantage of all of these benefits, but in a measured and responsible way. Next question, I'm excited to be able to ask. You're guiding to at least $200 million in free cash flow this year, successfully restructured the debt stack. And so interested to hear how you're thinking about capital allocation. And specifically, with around $1.5 billion or so of debt on the balance sheet, how do you plan to manage the debt load going forward? So let me just first do a quick recap of our current debt structure. So we have a $1 billion five-year term loan at SOFR plus 6%. We have $200 million in 0% coupon convertible notes due in February 2026. We have $350 million in convertible notes due in 2029 that are priced at 5.5%. And then we have a $100 million revolving credit facility five-year that remains undrawn. We have excess cash on our balance sheet right now if we wanted to pay off those $200 million in convertible notes that are due next year. But because they are 0% coupon, we're in no rush to pay them down until the debt matures in February of 2026. I also mentioned earlier the improvement in our First Lien Net Leverage Ratio below 5x, which has enabled us to achieve roughly $5 million in annual interest expense savings as long as we stay below the 5x threshold, which is great. Now, in terms of other levers that we have to reduce our interest expense over time, outside of our control, if interest rates come down, we will benefit from that, from the floating rate of our term loan. If any of our 2029 convert holders elect to convert, that would be a benefit to our interest rate expense as well, and then as we continue to deliver Free Cash Flow and improve our Adjusted EBITDA over time, we will become a better credit, which we expect could allow us to consider refinancing our term loan for more flexible terms at the appropriate time. OK. Now, two more before we wrap up. First, it's been nearly four years since you purchased Precor. Interested to hear how that business has been performing recently. Where does it sit within the overall strategy going forward? Sure. So on Precor, the business has improved year over year. We don't talk about it a lot. At one point, we were trying to sell that business actively a couple of years ago. We decided to keep it and restructure it internally. We've made a ton of progress there. The business is continuing to grow. And it is approaching free cash flow break-even, which is great. As of now, we haven't made any decisions to change our thinking around Precor. But we are not actively selling it. And we're looking at potential synergies with the Precor team. OK. I have a few minutes left here. Interested to hear, Liz, what are the one or two things you think investors most underappreciate or misunderstand about the Peloton story? I think one of the things that investors often miss is really the strength and resilience of our subscription business. Our subscription segment includes roughly 2.9 million connected fitness subscriptions. They churn at an average monthly net churn rate of less than 1.5%, resulting in roughly $1.7 billion in annualized revenue at a 68% gross margin. The strength and resilience of our connected fitness subscription business really speaks to the quality of our more than 6 million loyal Peloton members. Another area that I think investors underappreciate is the real transformation that we've had on the cost structure of our business over the past couple of years. We are also deleveraging at a rapid rate. And we are earning the right to return our business back to growth. And then you asked for just a couple. But I want to give you one more. I think one other area that investors really underestimate is the tremendous value of the Peloton brand and our loyal member community, both the value that that brings to us today as well as the value that it can bring to us in the future as we focus on delivering the next phase of sustainable and profitable growth for the company. Thanks so much, Liz. Really appreciate you being here. Happy to do it. It's great to see everyone. Thanks.