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- [00:00]
Indiana University Announcer
Indiana University is shaping the future of healthcare. Advancing discoveries that become treatments for Alzheimer's, obesity, cancer and rare diseases. And training the providers trusted to deliver them from the lab to the clinic. IU powers medical breakthroughs and the talent behind them. See how IU solves what's next iu Edu Impact.
- [00:25]
Bloomberg Host
Bloomberg Audio Studios Podcasts Radio news It's time now for the stock of the hour and it is Peloton. The shares are falling after the company announced an overhaul of its hardware as well as raising prices. This is Peloton's first major attempt under new leadership to lift the company out of a multi year slump. So perhaps there's no better timing than to bring in the CEO Peter Stern, who is behind this product's revamp. And of course Bloomberg Tech co host Caroline Hyde also joins us now. Peter, welcome to Bloomberg. Thank you for speaking with us. Big hardware line, a big AI platform. Peloton IQ coming out today. Long anticipated but the market appears underwhelmed and I know that you don't follow this stock move on a day to day, minute by minute basis, but what might investors not fully appreciate about this announcement?
- [01:11]
Peter Stern
First of all Scarlett, thanks for having me here. And I leave the day to day gyrations of the stock to the experts, traders, the analysts, folks like yourselves. That being said, if you look at the, if you take the long view, let's look back a year, our stock is almost doubled. Look back a month, way up. So I wouldn't focus on day to day but I would focus on the news that we announced today because it's pretty amazing what we just announced. Completely new lineup of equipment. Peloton iq, our AI powered personal trainer. Big moves into total wellness. So it'll play out over time as people see the value and they start to embrace these things.
- [01:52]
Caroline Hyde
Who sees the value? Not just an investor, but your stakeholder is me who owns Peloton Bike. Thinking about is it me who's going to upgrade? Is a whole new cohort that comes in and buys these more pricey products but with more built in cameras, more effective nature of wellness I'm sure.
- [02:08]
Peter Stern
So Caroline, first of all, thanks so much for being a member. It's great to have a fellow member here and we are focused both on existing members as well as non members. For existing members they're getting so much. Today we are introducing for everyone, regardless of when you bought your equipment, the benefits of Peloton iq and that's just included in your, in your membership. We are now including a new acquisition that we did A company called Breathwork because we know the power of breathing and how it can help people with stress and anxiety and depression and improve heart rate variability and improve blood pressure. So everyone's getting that. Major partnerships, for example, one with the Hospital for Special Surgery to focus on injury prevention and rehabilitation. All of these things happen for existing members. But if you're not an existing member, there has never been a better time to become one. With the launch of this all new equipment lineup, the cross training series. Now we're delivering the benefits of both cardio and strength because we know that adults should be doing a couple of hours, at least a week of cardio and two days of strength training every week. You can do that now all with one piece of equipment that makes it super easy.
- [03:19]
Caroline Hyde
It's almost in many ways like cross training is the way that which you're sort of identifying it. But if I look at the analyst notes and maybe the reaction from the stock is because a lot of this has been baked in. You've already given us full year forecasts that in many way talk about what churn you're expecting, but what subscriber growth, what do you think this will spur in terms of.
- [03:37]
Peter Stern
So we knew of course as we went into this year what we were going to be launching and we were able, as you point out, Caroline, to bake all of that into our guidance for the year. But we also included in our guidance that as the year progresses, we will be inflecting back toward growth. And that's a big, big step for us as a company. You know, we, we had a couple of years where we've been down as we have regrouped after the pandemic and we are now in such a good place where you see us having reignited our innovation engine. Of course, our customer love has never left us. Customers really just appreciate what Peloton does for for them and in particular have that deep connection with our instructors. So we're building on that foundation and now feel even more confident about our future than ever before.
- [04:25]
Bloomberg Host
I like what you said earlier about how existing members will have the benefits of the new software. But will you continue to support the existing hardware and software if customers don't upgrade to the new equipment? Because down the road at some point you want to get everyone to the new model of Peloton equipment, don't you, Scarlett?
- [04:41]
Peter Stern
We build our products to last. These, the bikes that we have today are still beautiful, even the original bikes, they are absolutely beautiful and they are fully functional. Our treads are designed to last the Row is designed to last.
- [04:57]
Bloomberg Host
So it's not.
- [04:58]
Peter Stern
We're continuing to support them. We are not in the obsolescence business. Whatever it takes for you to get and stay fit, we want to support you on that journey.
- [05:07]
Caroline Hyde
You said about the growth trajectory, the inflection, is that profitable growth, when are we going to get?
- [05:13]
Peter Stern
Absolutely. So we, you know, I'm so pleased that we have now been able to deliver five consecutive quarters of significant free cash flow. And so this is now a company that we're running in a very disciplined way and we're delivering real profitability. And I think you can see that in the year over year changes in the stock price where we're up considerably because people now feel so confident about.
- [05:39]
Caroline Hyde
The future and you're confident in the price point. What's so interesting is at what, what point do you see that elasticity? How high can you push me when I've got loyalty to attendee to a Cody Risby? How much do you think that I will continue to add on price points when it comes to the bike, to the tread, to the subscription?
- [05:54]
Peter Stern
So we know that, you know, every dollar is precious and people are considering how to spend their money these days. And so we're very careful about what we do here. But we're also looking at the value that we deliver. And we know that, you know, if people are going to invest in something, they should be investing in their health, in their well being, in their longevity and how they feel both physically and about themselves. And Peloton allows them to get a great return on that investment. So we did do a price increase. It was the first change in our All Access membership in over three years. We were very thoughtful about what that was and we hope that our members appreciate all of the additional benefits that we've provided them over the last year. For example, adding about 12,000 more classes, 40 more programs, more modalities, things like weighted vest workouts, as well as what we just announced today, which is the introduction of Peloton iq, which provides basically the benefits of a personal trainer in your home.
- [06:49]
Bloomberg Host
I want to get your sense of the competitive landscape. When you look at music streaming services, people usually have only one. They pick Spotify Spotify or they pick Apple Music for actual streaming of television shows. Maybe they have a couple of them. When it comes to fitness and wellness, what's your sense of how many people are willing to hold on to and pay for?
- [07:06]
Peter Stern
Yeah, so first of all, we are happy for you to work out in whatever ways you choose to and in as many ways as you do. But our focus is on making sure that peloton can be the answer for you, regardless of, of what aspect of total health you're focused on. So cardio, of course, is where we started and we're known for that between our row, our tread and of course the bike. But now strength is a huge area of focus for us. We know people are recognizing the importance of strength training in particular as we grow older in terms of building and maintaining muscle mass and what it does, for example, for our metabolic function. So we're a great solution for that. With our, the cameras that we launched today in our plus line, we're able to count your reps, we're able to give you feedback, we're able to suggest when you should be upping your weights. Then we get to things like mental well being. We talk about breathwork, our meditations, the work that we do with yoga. All these things help.
- [08:06]
Caroline Hyde
So I mean, and I can see that the strength. Halle Berry, perimenopausal. You're thinking about a wellness trajectory very briefly, five years from now. How do you, how do you see yourself in the fitness landscape?
- [08:17]
Peter Stern
Yeah. So we intend to be your essential partner in the journey to feeling better about yourself and living your best life. And that means not just focusing on the, the quantity of years that you have on this planet, but the quality of those years. And we know that, that there are choices that we can make, behavioral choices that we can make that make a difference in the quality of those years. Those are, am I doing cardio? Am I doing strength? Am I taking care of my mental well being? Am I eating right? If I need supplements, Am I taking the right supplements? Am I sleeping right? We can make a difference in every one of those areas and we intend to.
- [08:55]
Bloomberg Host
Peter Stern, a pleasure. Thank you so much for joining us today. CEO of Peloton Peter Stern joining us along with Bloomberg Tech co host Caroline Hyde.
- [09:03]
Indiana University Announcer
Indiana University is shaping the future of health care. Advancing discoveries that become treatments for Alzheimer's, obesity, cancer and and other rare and complex diseases. And training the next generation of providers, doctors and nurses trusted to address health challenges with skill, compassion and purpose. From the lab to the clinic, from research teams to patient care, IU talent is driving medical innovation, improving health outcomes and strengthening communities. See how IU solves what's next IU Edu Impact.
- [09:36]
Bloomberg Event Promoter
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