Peloton CFO Discusses Strategic Roadmap, Personalization, and Growth Initiatives at Citi Global TMT Conf. 2025

Key Takeaways

TL;DR: PTON CFO Liz Coddington detailed a multi-phase turnaround: cost discipline, improved unit econ., and mgmt. overhaul have driven strong FCF and rapid de-leveraging. Sub growth remains soft due to tight mktg. spend, but churn is stabilizing and engagement is up. Focus is shifting to innovation in personalization, category expansion (strength, wellness, sleep, nutrition), and more efficient retail/distribution. Upside potential from new HW, AI/ML features, and prudent cap. alloc. (debt reduction, possible buybacks). LT sustainable growth model emerging, but no near-term sub growth expected.

1. Turnaround Progress & Financial Foundation

• Multi-phase plan:
  • Phase 1 (2022-24): Cost alignment/restructuring, shift to variable cost base, focus on unit econ. → enabled $1.35B debt refi (May '24).
  • Phase 2 (2025): Proving sustainable/profitable ops while investing for growth, resource re-allocation.
  • Phase 3 (upcoming): Targeting return to growth w/ de-risked B/S and robust cap. alloc.
• FCF:
  • FY25 FCF: $324M (+$400M YoY), net leverage down $343M (-43% YoY) to 1.1x.
  • FY26 FCF guide: ≥$200M (min.), as prior year’s $125M inv. wind-down is non-recurring.
• Cost reduction:
  • $200M run-rate savings in FY25; targeting add'l $100M by FY26 (half via workforce reduction, rest from SG&A, R&D, COGS, 15% via lower SBC).
  • “Fit for Growth”: Ongoing optimization, reallocating savings to strategic growth.

2. Subscriber Base, Churn & Engagement

• Subs: ~2.8M Connected Fitness Subs (~6M members). Growth challenged by reduced mktg. spend.
• Churn: Q4 churn 1.8% (seasonally high); 10bps YoY improvement, first annual improvement since Mar '21.
  • Maturing base = higher engagement, lower churn.
  • Avg. monthly workout time/sub up +4% YoY in Q4.
• LTV/CAC:
  • Improved ~+30% YoY in FY25; Q4 ratio “just shy” of 2x-3x target, aided by 35% YoY mktg. spend.
• CFO quote: “Sustainable/profitable sub growth...requires us to optimize mktg. spend... LTV to CAC ratio of ~2x to 3x.”
• Challenge: Mktg. discipline constrains sub growth; even w/ low churn, ~500K gross annual “churned” subs.

3. Product, Content, and AI/Personalization Initiatives

• Category expansion:
  • Strength: 2M+ engaged in Q4; “#1 strength sub svc.” Strong science for strength+cardio.
  • Sleep & recovery: 1.2M Q4 users; investing in 3rd party integrations for recs.
  • Mental well-being: 400K Q4 users; exploring breathing/mindfulness add-ons.
  • Nutrition & hydration: Early; launched Peloton Kitchen (instructor/dietician content) on social, iterating.
• AI/Personalization:
  • “Personalized Plans” launched Jan. '25; 700K set up by June, higher engagement vs. baseline.
  • Roadmap for deeper personalization, onboarding, wearables not yet public.
  • “Opportunity for deeper personalized guidance...”