Q4 2020

SHAREH OLD ER L E T T E R

PELOTON INTERACTIVE, INC.

F OU RT H QUAR TER & F Y 2020 H I G H L I G H TS
All financial comparisons are on a year-over-year basis unless otherwise noted.

•	Q4 and FY 2020 ending Connected Fitness Subscriptions
grew 113% to over 1.09 million and paid Digital
subscriptions grew 210% to over 316,800; total Members
grew to approximately 3.1 million•– 1
 .32 million to 1.33 million ending Connected Fitness
Subscriptions, growth of 135% at the midpoint– Average
Net Monthly Connected Fitness Churnunder 0.75%•	Q4 total revenue grew 172% to $607.1 million; FY 2020
total revenue grew 100% to $1.8 billion– $ 720 million to $730 million total revenue, 218%
growth at midpoint•	Connected Fitness Subscription Workouts grew 333% in
Q4 to over 76.8 million, averaging 24.7 Monthly Workouts
per Connected Fitness Subscription, versus 12.0 in thesame period last year•	Average Net Monthly Connected Fitness Churn was 0.52%
for Q4 and 0.62% for FY 2020; Q4 12-month retention rate
was 92%•	Q4 Gross Profit Margin grew to 47.6%; Connected Fitness
Gross Margin was 45.3%, Subscription Gross Margin was
56.8%, and Subscription Contribution Margin was 64.1%•	
Q4 Net Income was $89.1 million, $0.27 per diluted share;
Q4 Adjusted EBITDA was $143.6 million, representing an
Adjusted EBITDA Margin of 23.7%

Q1 FY 2021 guidance:– Gross Profit Margin of approximately 41%– $ 80 million to $90 million Adjusted EBITDA, 11.7%
Adjusted EBITDA Margin at the midpoint•

Full year FY 2021 guidance:– 2
 .05 million to 2.10 million ending Connected Fitness
Subscriptions, growth of 90% at the midpoint– Average
Net Monthly Connected Fitness Churnunder 1.00%– $ 3.50 billion to $3.65 billion total revenue,
96% growth at midpoint– Gross Profit Margin of approximately 41%– $ 200 million to $275 million Adjusted EBITDA, 6.6%
Adjusted EBITDA Margin at the midpoint

CONNECTED FITNESS SUBSCRIPTIONS
1,200

1,091

1,000
600
400

277

362

457

511

563

Q2

200

Q3

Q4

Q1

FY 2019

Q2

Q3

Q4

0

316.7
223.3 228.0

Q1

Q2

Q3

Q4

Q1

FY 2019

Q2

Q3

AV G . M O N T H LY W O R KO U T S P E R S U B
24.7

25

100,000
76,81780,00060,00044,15540,000
7,069

9,336

Q1

Q2

Q4

FY 2020(in $ millions)Q U A R T E R LY W O R KO U T S

0

524.6

112.1

FY 2020(in thousands)

20,000

262.9

300
100

Q1

466.3

400

712

200
0

607.1

600
500

886

800

Q U A R T E R LY T O TA L R E V E N U E

Q3

Q4

Q1

Q2

10

Q3

FY 202013.9

1524,345
17,988 17,759 19,171

FY 2019

17.7

20

Q4

5

8.9

Q1

9.7

Q2

Q3

FY 2019

12.0

11.7

Q4

Q1

12.6

Q2

Q3

Q4

FY 2020(in thousands)

PELOTON Q4: 2020 | 2

Peloton Shareholders,
As our global communities continue to battle the COVID-19 pandemic, we remain incredibly
appreciative of the tireless efforts of all first responders, local health officials, and essential workers
focused on the safe re-opening of our economy. We’re proud to play an important part in ourMembers’ lives during this time by providing a platform where our Members can maintain their
physical and mental well-being, while we continue to expand the breadth of our content offeringand broaden access to the Peloton platform.
FY 2020 was a transformative year for Peloton. We made great progress in scaling our business,from manufacturing and logistics, to member support and field operations. We launched operationsin Germany, our first foreign language market, and continued to grow our footprint in the UnitedStates, Canada, and the United Kingdom. By the end of FY 2020 our Peloton membership basegrew to approximately 3.1 million, compared to 1.4 million Members in the prior year. Fueled in partby the challenges associated with COVID-19, Member engagement reached new highs with 164
million Connected Fitness Subscription workouts completed in FY 2020.

PELOTON Q4: 2020 | 3

In FY 2020, we expanded our fitness and wellness content offerings in strength, yoga, meditation,and new floor-based categories such as Fit Family and Dance Cardio. Our Member engagementlevels continued to increase in FY 2020 in part due to our Members’ use of floor-based content, led
by Strength classes which posted the most significant year-over-year gains.
In addition to broadening our content, we also improved the accessibility of our platform throughour Digital offering. Paid Peloton Digital subscriptions grew 210% year-over-year as we reduced theprice of Peloton Digital to $12.99 and extended our Digital free trial period to 90 days during Marchand April to give access to high-quality fitness content to those sheltering in place. With the goalof being on every screen in your hand and in your home, we launched integrations with the four
leading over-the-top TV platforms including Amazon Fire TV, Android, Apple TV, and Roku.

PELOTON Q4: 2020 | 4

O P E R AT I O N SSHOWROOMSOn June 15, 2020, we began re-opening selectshowrooms in the United States, United
Kingdom, and Canada, following the re-openingof our German stores in late May. Our re-opening
schedule has been guided by state, local, andmunicipal guidelines and is accompanied byextensive safety training for our retail teammembers and stringent cleaning practices.
To date, nearly all 103 showroom locations
have resumed normal operations or are taking
customer appointments.

SIGNIFICANT CONSTRUCTION
PROJECTS
Following COVID-19 related delays, we haveresumed construction of our new headquarters
in New York City and our 11 Floral Street Studioin London. Both are expected to be completedin Spring 2021. Our Floral Street Studio will
have three production studios, allowing us tosignificantly increase production of floor content
as well as foreign language classes for our
growing community of Members in Europe. Lastly,
we expect our new manufacturing plant located in
Shin Ji, Taiwan to be completed by the end of thiscalendar year. The additional factory at Tonic will
provide us with significant additional production
capacity, helping us scale over the next few years.

Showroom in Berlin, Germany

PELOTON Q4: 2020 | 5

CONNECTED FITNESS PRODUCTP O R T F O L I O E X PA N S I O NEarlier this week we announced an exciting
new addition to our category-leading bikeoffering: Bike+. Offered at $2,495, Bike+ builds
on our groundbreaking connected fitness bike
experience by offering a new 24” touchscreenwith a powerful built-in and integrated soundbar
and subwoofer system. The 360-degree rotating
display allows Members to easily pivot and tilt
the screen adding strength, yoga, or stretching totheir routine or take our new Bike Bootcamp classseries. Resistance on Bike+ is controlled digitally
so Members can “Auto Follow” instructors’class programs and control resistance fromthe touchscreen. In conjunction with the new
Bike+ introduction, we reduced the price of ourexisting Bike to $1,895 (now $49 per monthwith our 39-month financing plan), broadening
accessibility to the Peloton platform. Bike+ iscurrently available for purchase in the UnitedStates, Canada, United Kingdom, and Germany.

a 24” touchscreen with a powerful built-in andintegrated soundbar and subwoofer system aswell as ergonomic pace and incline control knobs
with jump buttons. With an immersive audio
and video experience and heart rate monitor
integration, Peloton Tread is designed for bothon-Tread as well as floor-based bootcamp
content. Peloton Tread will be available in the
United Kingdom starting December 26th, in the
United States and Canada starting early 2021,
and in Germany later in 2021.

We’re also thrilled to announce an important
addition to our Tread line, “Peloton Tread” (ourcurrent Tread is “Peloton Tread+”). Offered
at $2,495, Peloton Tread has all the essential
elements of the Peloton Tread+ experience but
in a more affordable and compact form factor.
Despite the smaller size, the Peloton Treadhas ample running surface area and provides
running comfort on a sleek belt drive. It features

PELOTON Q4: 2020 | 6

THE PELOTON PLEDGE
Recent events have raised our collective
consciousness of the systemic inequities
existing across our society today. Peloton iscommitted to being an anti-racist organizationand to help achieve that goal, we have madean important commitment to our Members,
employees, and the communities we serveby pledging $100 million over the next four
years across internal and external initiatives
to fight racism. The Peloton Pledge is focusedon investing across three areas: a $60 million

commitment for a substantial increase inwages for our hourly employees, a $20 million
investment in learning and development programs
designed to expand opportunities for upward
mobility among our hourly wage employees,
and a $20 million commitment to third party
organizations fighting systemic inequities
prevalent across the United States. While we havealways believed Peloton and our community has
embraced inclusiveness and diversity, we know
we can, and will, be doing more.

“T O G E T H E R W E G O FA R, A N D
T H I S I S J U S T T H E B E G I N N I N G .”—JOHN FOLEY, PELOTON FOUNDER AND CEO

PELOTON Q4: 2020 | 7

ESPN All-Star Ride graphic

FITNESS PROGRAMMINGTAG SOn May 26th, we welcomed our instructors backto our new Peloton New York Studio (PSNY) to
resume filming. Though classes remain closed tothe public, the re-opening of our studios will allow
us to increase the production of new classes topre-COVID-19 levels over time.

We are continually inspired by our incredible
Member community, and look for ways to bringour Members closer together through interactive
social software features, such as “Tags”.
Launched in April, Tags is a simple yet highly
flexible way for Members to express themselves,connect with others, and workout together.
Members create Tags to represent their sharedinterests like their favorite sports team, college,charity, employer, and more. With Tags, ourMembers have a new way to build, inspire, andinteract with their community while enhancing
the discovery and workout experience. To date,over 100,000 unique Tags have been created byover 795,000 participating Members.

During the height of the pandemic in New York
City, we began “Live from Home” class production
from our instructors’ homes. Over 9.8 million
Live from Home workouts have been taken, with
one highlight being Alex Toussaint’s support of
ESPN’s The Last Dance tribute to Michael Jordan,
which has logged 215,000 workouts. Other
highlights from the quarter include the launch of
our “No Equipment Needed” collection of Strengthworkouts, and our ESPN All-Star Partnership in
July where 16 elite professional male and female
athletes participated in a live broadcast cycling
competition on the Peloton Bike.
Our new workouts for families, Fit Family,
provided welcome relief to those Members
sheltering in place, with over 300,000 workouts
completed between our April 3rd launch and theend of the quarter. Our new Dance Cardio classes
were also an instant hit, with Member workouts
in the quarter surpassing 500,000. Offering
themed music experiences remains a key Member
request, and in the quarter we delivered eight new
Artist Series, including Dolly Parton, BTS, Ricky
Martin, and King Princess.
During the quarter we also announced the additionof two world class fitness instructors, Chelsea
Jackson Roberts and Adrian Williams. Chelsea
adds additional depth to our growing team of
Yoga and Meditation instructors, while Adrian ismotivating Members through highly engaging
Running, Strength, and Bootcamp classes.

CHELSEA JACKSON ROBERTS

ADRIAN WILLIAMSPELOTON Q4: 2020 | 8

PELOTON INTERACTIVE, INC.

F INANC IAL DIS CUSSI ON

Beginning this quarter we have folded “Other” segment (which primarily
consists of apparel) into the “Connected Fitness Product” segment. This
realignment reflects how we manage our business. A table detailing
how this change impacts prior reported quarters is provided in the
Appendix of this letter. All periods presented as well as comparisons toprior periods reflect the change to our segment presentation.
In Q4 we saw strong sustained momentum in Connected Fitness
subscriber and revenue growth due to COVID-19 while wecontinued to pause the majority of our media spend and kept mostshowrooms closed.

REVENUEWe generated total revenue of $607.1 million in Q4, representing
172% year-over-year growth. Connected Fitness segment revenue
was $485.9 million in Q4, representing 199% year-over-year growthand 80% of total revenue. Growth of our Connected Fitness
segment reflects both a significant carryover of undelivered
Bikes from Q3 as well as continued strong organic demand dueto the ongoing COVID-19 pandemic. Apparel sales growth also
accelerated in the quarter, reflecting improved sell-through rates
and our Memorial Day and Homecoming sales events in May.

REVENUE$607.1 million
172% Y/Y
ENDINGCONNECTEDFITNESSSUBSCRIPTIONS
1.09 million
113% Y/Y
AV G . N E T M O N T H LY
CONNECTEDFITNESS CHURN
0.52%

Subscription revenue grew to $121.2 million in Q4, representing
99% year-over-year growth and 20% of total revenue, driven bystrong Connected Fitness Product sales and continued low Average
Net Monthly Connected Fitness Churn of 0.52%. Our Connected
Fitness Subscription base reached 1.09 million at the end of Q4,
representing year-over-year growth of 113%. Our low churn was theresult of continued high engagement with our platform and elevatedsubscription reactivations. As of June 30, 95% of our Connected
Fitness Subscription base were on month-to-month plans.
Member engagement grew in Q4 with 24.7 Average Monthly
Workouts per Connected Fitness Subscription versus 12.0
Workouts in the same period last year. Members with a Connected
Fitness Subscription worked out with us 76.8 million times, up from
17.8 million Workouts in the same period last year, representing
333% year-over-year growth. In addition, we ended the quarter withover 316,800 paying Digital subscriptions, up 210% year-over-year.

PELOTON Q4: 2020 | 9

PELOTON INTERACTIVE, INC.

F INANC IAL DIS CUSSI ON

GROSS PROFITGROSS PROFIT

Gross profit in Q4 was $288.8 million representing 188% yearover-year growth and a 47.6% gross margin, an improvement of
275 basis points versus the prior year period.

$288.8 million

Connected Fitness segment gross profit was $220.0 million in
Q4, representing 223% year-over-year growth. Our Connected
Fitness segment gross margin was 45.3%, a 327 basis point
increase versus last year. Compared to the year-ago period, ourConnected Fitness gross profit margin benefited from a mix-shift
to Bike deliveries and product cost efficiencies, partially offset by
expense growth in supply chain and logistics, including expedited
shipping and COVID-19-related costs.
Subscription gross profit was $68.8 million in Q4, representing
116% year-over-year growth. Subscription gross margin was
56.8%, up from 52.3% in the year-ago period. Subscription
Contribution was $77.7 million in Q4, representing 112% yearover-year growth. Subscription Contribution Margin was 64.1%,
versus the prior year period of 60.0%. Year-on-year margin
improvement was driven primarily by leverage against fixed
content production expenses.

47.6% gross margin
CONNECTEDFITNESS GROSSPROFIT$220.0 million
45.3% gross margin
SUBSCRIPTIONGROSS PROFIT$68.8 million
56.8% gross margin
SUBSCRIPTIONCONTRIBUTION$77.7 million
64.1% contribution
marginFor a reconciliation of non-GAAP financial measures to theircorresponding GAAP measures, please refer to the reconciliationtables in the section below titled “Key Operating Metrics and NonGAAP Financial Measures--Non-GAAP Financial Measures.”

PELOTON Q4: 2020 | 10

PELOTON INTERACTIVE, INC.

F INANC IAL DIS CUSSI ONO P E R AT I N G E X P E N S E S

Total operating expense was $198.8 million in Q4, and grew 33%
year-over-year, representing 33% of total revenue versus the prioryear period of 67%.

TOTA LO P E R AT I N G
EXPENSES$198.8 million
33% of revenue

Sales and marketing expense was $84.2 million in Q4, and grew
8% year-over-year, representing 14% of total revenue versus theprior year period of 35%. Given the robust organic demand due to
COVID-19 and strong brand awareness, we continued to pause themajority of our media spend through the end of the quarter. At theclose of Q4, our global showroom count was 95, up from 74 in theyear prior.
General and administrative expense was $86.2 million in Q4, andgrew 58% year-over-year, representing 14% of total revenue versus
the prior year period of 24%. Year-over-year growth was driven bycontinued investment in our teams and systems, public company
costs, legal expenses, and lease expense related to our new
headquarters in New York City.
Research and development expense was $28.4 million in Q4,
and grew 67% year-over-year, representing 5% of total revenue,
versus the prior year period of 8%. This expense growth reflects
continued investments in new Connected Fitness Productdevelopment and software features.

SALES AND
MARKETING$84.2 million
14% of revenue
GENERAL AND
A D M I N I S T R AT I V E$86.2 million
14% of revenue
RESEARCH AND
DEVELOPMENT$28.4 million
5% of revenue

PELOTON Q4: 2020 | 11

PELOTON INTERACTIVE, INC.

F INANC IAL DIS CUSSI ON

P R O F I TA B I L I T Y

NET INCOME

Net income for Q4 was $89.1 million versus a net loss of $(47.4)
million in the same period last year. Q4 Adjusted EBITDA was$143.6 million, representing an Adjusted EBITDA Margin of
23.7%, compared to (10.6)% in the same period last year. Basicand diluted earnings per share in Q4 were $0.31 and $0.27,
respectively.

$89.1 million

BALANCE SHEETCASH ANDM A R KE TA B L E
SECURITIESWe ended Q4 with $1.8 billion in cash, cash equivalents, andmarketable securities. We also have additional liquidity of $250.0
million in the form of a revolving credit facility, which remains
undrawn to-date.

ADJUSTEDEBITDA$143.6 million
23.7% margin$1.8 billion

For fiscal year 2020, operating cash flow was $376.4 million.
Capital expenditures were $156.4 million, the majority of which
was related to the build out of our New York City headquarters,
our new Peloton Studios in New York City and London, our new
manufacturing facility in Taiwan, and new showrooms.

PELOTON Q4: 2020 | 12

PELOTON INTERACTIVE, INC.

Q1 AND FU LL FI SCA L Y EA R 2021
BU SINE SS OUTLOOKF Y 2021 Q1 GUIDANCEFULL FISCAL YEAR 2021 GUIDANCE•	
1.32 million to 1.33 million ending
Connected Fitness Subscriptions, growth of
135% at the midpoint•	
2.05 million to 2.10 million ending Connected
Fitness Subscriptions, growth of 90% at the
midpoint•	
Average Net Monthly Connected Fitness
Churn under 0.75%•	
Average Net Monthly Connected Fitness
Churn under 1.00%•	$720 million to $730 million total revenue,
218% growth at midpoint•	$3.50 billion to $3.65 billion total revenue,
96% growth at midpoint•	
Gross Profit Margin of approximately 41%•	Gross Profit Margin of approximately 41%•	$80 million to $90 million Adjusted EBITDA,
11.7% Adjusted EBITDA Margin at the midpoint•	$200 million to $275 million Adjusted EBITDA,
6.6% Adjusted EBITDA Margin at the midpoint

We entered Q1 FY 2021 with a backlog of $230 million

invest in improving the variety, depth, and quality of ourBike deliveries in all geographies and sales continue

fitness and wellness programming. While we expect someto surpass expectations in the first two months of theleveraging of the fixed costs of content production, thesequarter. While we had expected demand to moderate,

efficiencies will be largely offset by increases in variable

the unexpected resurgence of COVID-19 cases incosts associated with continued high engagement of ourmany states has perpetuated the imbalance of supply

Members, a mix shift to Digital subscriptions, and content

and demand in many geographies, causing continued

investments including new fitness verticals and increasing

elongated order-to-delivery windows for our customers.

our library of international and foreign language classes.

While we have significantly increased our production

Our long term target of achieving a 70%+ Subscription

capacity in recent months and continue to grow ourContribution Margin remains intact.

manufacturing capabilities, we do not expect to return tonormalized order-to-delivery windows in the United States

With strong sales flow-through, leveraging of fixed costs,

prior to the end of Q2 FY 2021.

and reductions to media spend, we expect Q1 FY 2021
Adjusted EBITDA of $80 million to $90 million, representing

In Q1 FY 2021 and full year FY 2021, we expect a grossan Adjusted EBITDA Margin of 11.7% at the midpoint of the

profit margin of approximately 41%, though we could see

range. For FY 2021, we expect Adjusted EBITDA of $200

some fluctuation quarter to quarter based on product mix

million to $275 million, representing an Adjusted EBITDA

and other factors. We expect Connected Fitness ProductMargin of 6.6% at the midpoint of the range.

gross margin to decline year-over-year driven by the pricereduction of our existing Bike, the mix shift to Peloton

A reconciliation of non-GAAP guidance measures to

Tread+ which carries a lower gross profit margin, andcorresponding GAAP measures is not available on afurther investments to scale our supply chain and logistics

forward-looking basis without unreasonable effort due tooperations.

the uncertainty regarding, and the potential variability of,many of the costs and expenses that may be incurred in the

We expect Subscription Contribution Margin in Q1 FY

future. We have provided a reconciliation of GAAP to non-2021 and full year FY 2021 to be flat year-over-year. WithGAAP financial measures for the fourth quarter and for thethe massive opportunity in front of us, we will continue tofull year in the reconciliation tables at the end of this letter.

PELOTON Q4: 2020 | 13

PELOTON INTERACTIVE, INC.

Q1 AND FU LL FI SCA L Y EA R 2021
BU SINE SS OUTLOOKWEBCAST
We will host a Q&A session at 5:00pm ET on Thursday,
September 10, 2020 to discuss our financial results. To
participate in the live call, please dial 1 (877) 667-0469(US / Canada) or 1 (346) 406-0807 (international) andprovide conference ID 7223628. A live webcast of thecall will be available at https://investor.onepeloton.
com/investor-relations/ and will be archived on our site
following the call.
As our communities continue to struggle with the global
pandemic and resulting macroeconomic issues, weare proud to provide a platform where our Members
can maintain their physical and mental well-being. We
want to thank our entire Peloton Family for all their
hard work, especially our delivery, warehouse, sales,
and Member experience teams who continue to work
tirelessly in service to our Members. We are grateful forour amazing Peloton community as a constant sourceof inspiration for our teams as we continue to build theworld’s best connected fitness experience.
Together we go far,Team Peloton
SAFE HARBOR STATEMENT
This shareholder letter includes forward-looking
statements, which are statements other thanstatements of historical facts and statements in the
future tense. These statements include, but are notlimited to, statements regarding our future performanceand our market opportunity, including expected financial
results for the first quarter of fiscal year 2021 and full
fiscal year 2021, the potential impact of COVID-19 on
the fitness and wellness industry in general as wellas our business, our business strategy and plans,
our expectations regarding timing for completionof our new headquarters, the opening of our Floral
Street Studio, and our new Tonic manufacturing plant,
and our objectives and future operations. Forwardlooking statements are based upon various estimatesand assumptions, as well as information known to
us as of the date hereof, and are subject to risks
and uncertainties. Accordingly, actual results could

differ materially due to a variety of factors, including:our ability to attract and retain Connected Fitness
and Digital Subscription base; our limited operating
history; our ability to anticipate and satisfy consumer
preferences; the effects of the highly competitivemarket in which we operate; market acceptance of
our Connected Fitness Products, including our newly
introduced products, Bike+ and Peloton Tread; ourability to successfully develop and timely introduce
new products and services; our ability to accurately
forecast consumer demand and adequately manage
our inventory; our ability to maintain the value andreputation of the Peloton brand; a decrease in sales of
our Bike; the continued growth of the connected fitness
market; the loss of any one of our third-party suppliers,
manufacturers, or logistics partners; our ability toachieve the objectives of strategic and operational
initiatives; litigation and related costs; the impact
of privacy and data security laws; and other generalmarket, political, economic, and business conditions.
Additional risks and uncertainties that could affect our
financial results and business are or will be included
under the caption “Risk Factors” in our Annual Reporton Form-K for the fiscal year ended June 30, 2020, ourmost recent Quarterly Report on Form 10-Q, and ourother SEC filings, which are available on the Investor
Relations page of our website at https://investor.
onepeloton.com/investor-relations and on the SEC
website at www.sec.gov.
All forward-looking statements contained herein are
based on information available to us as of the datehereof and you should not rely upon forward-looking
statements as predictions of future events. The eventsand circumstances reflected in the forward-looking
statements may not be achieved or occur. Although
we believe that the expectations reflected in theforward-looking statements are reasonable, we cannot
guarantee future results, performance, or achievements.
We undertake no obligation to update any of theseforward-looking statements for any reason after thedate of this shareholder letter or to conform thesestatements to actual results or revised expectations,
except as required by law. Undue reliance should not be
placed on forward-looking statements.

PELOTON Q4: 2020 | 14

PELOTON INTERACTIVE, INC.

KE Y OPE RATIN G METR I CS A N D N ON-G A A P
F INANC IAL M E A SURESIn addition to the measures presented in our consolidated financial statements, we use the following key operating
metrics to evaluate our business, measure our performance, develop financial forecasts, and make strategic decisions.

Three Months Ended June 30,

2020
Ending Connected Fitness Subscriptions
Average Net Monthly Connected Fitness ChurnYear Ended June 30,

2019

2020

2019

1,091,100

511,200

1,091,100

511,200

0.52%

0.79%

0.62%

0.65%

Total Workouts (in millions)

76.8

17.8

164.5

52.2

Average Monthly Workouts per Connected Fitness Subscription

24.7

12.0

17.9

11.5

Subscription Gross Profit (in millions)$68.8 $

31.9$

208.0 $

77.4

Subscription Contribution (in millions) (1)$77.7 $

36.6$

232.1 $

91.9

Subscription Gross Margin
Subscription Contribution Margin (1)

56.8%

52.3%

64.1%

60.0%

57.2%

42.7%

63.8%

50.8%

Net income (loss) (in millions)$89.1 $(47.4)$(71.6) $(195.6)

Adjusted EBITDA (in millions)(2)$

143.6 $

(23.6)$

117.7 $

(71.3)

6.4%(7.8)%

Adjusted EBITDA Margin(2)

23.7%(10.6)%(1) Please see the section titled “Non-GAAP Financial Measures” for a reconciliation of Subscription Gross Profit to Subscription Contribution
and an explanation for why we consider Subscription Contribution to be a helpful metric for investors.
(2) P lease see the section titled “Non-GAAP Financial Measures” for a reconciliation of net loss to Adjusted EBITDA and an explanation for why weconsider Adjusted EBITDA to be a helpful metric for investors.

CONNECTED FITNESS SUBSCRIPTIONS
Our ability to expand the number of Connected Fitness
Subscriptions is an indicator of our market penetrationand growth. We define a Connected Fitness Subscription
as a person, household, or commercial property, suchas a hotel or residential building, who has either paid
for a subscription to a Connected Fitness Product (aConnected Fitness Subscription with a successful
credit card billing or with prepaid subscription credits or
waivers) or requested a “pause” to their subscription for
up to 3 months. We do not include canceled or unpaid
Connected Fitness Subscriptions in the Connected
Fitness Subscription count.

AV E R A G E N E T M O N T H LY C O N N E C T E D
FITNESS CHURN
We use Average Net Monthly Connected Fitness Churnto measure the retention of our Connected Fitness
Subscriptions. We define Average Net Monthly Connected
Fitness Churn as Connected Fitness Subscription
cancellations, net of reactivations, in the quarter, divided
by the average number of beginning Connected Fitness
Subscriptions in each month, divided by three months.
This metric does not include data related to our Digital
subscriptions for Members who pay a monthly fee foraccess to our content library on their own devices.

PELOTON Q4: 2020 | 15

PELOTON INTERACTIVE, INC.

KE Y OPE RATIN G METR I CS A N D N ON-G A A P
F INANC IAL M E A SUREST O TA L W O R KO U T S A N D AV E R A G E
M O N T H LY W O R KO U T S P E R C O N N E C T E D
FITNESS SUBSCRIPTION
We review Total Workouts and Average Monthly
Workouts per Connected Fitness Subscription tomeasure engagement, which is the leading indicatorof retention for our Connected Fitness Subscriptions.
We define Total Workouts as all workouts completed
during a given period. We define a Workout as aConnected Fitness Subscription for Members either
completing at least 50% of an instructor-led or scenic
ride or run or ten or more minutes of “Just Ride”
or “Just Run” mode. We define Average Monthly
Workouts per Connected Fitness Subscription as the
Total Workouts completed in the quarter divided by theaverage number of Connected Fitness Subscriptions
in each month, divided by three months.

NON-GAAP FINANCIAL MEASURESIn addition to our results determined in accordancewith accounting principles generally accepted in the
United States, or GAAP, we believe the following nonGAAP financial measures are useful in evaluating ouroperating performance.
These non-GAAP financial measures have limitations
as analytical tools in that they do not reflect all of theamounts associated with our results of operations
as determined in accordance with GAAP. Because of
these limitations, Adjusted EBITDA, Adjusted EBITDA
Margin, Subscription Contribution, and Subscription
Contribution Margin should be considered along withother operating and financial performance measurespresented in accordance with GAAP.
The presentation of these non-GAAP financial
measures is not intended to be considered inisolation or as a substitute for, or superior to, financial
information prepared and presented in accordancewith GAAP. Investors are encouraged to review thereconciliation of these non-GAAP financial measures
to their most directly comparable GAAP financial
measures. A reconciliation of the non-GAAP financial
measures to such GAAP measures can be found below.

PELOTON Q4: 2020 | 16

PELOTON INTERACTIVE, INC.

ADJUSTED EBITDA AND ADJUSTED EBITDA MARGIN

Adjusted EBITDA and Adjusted EBITDA Margin are key
performance measures that our management uses toassess our operating performance and the operating
leverage in our business. Because Adjusted EBITDA and
Adjusted EBITDA Margin facilitate internal comparisonsof our historical operating performance on a moreconsistent basis, we use these measures for businessplanning purposes. We also believe this information will
be useful for investors to facilitate comparisons of ouroperating performance and better identify trends in ourbusiness. We expect Adjusted EBITDA Margin to increaseover the long-term as we continue to scale our businessand achieve greater leverage in our operating expenses.

We calculate Adjusted EBITDA as net loss adjusted to
exclude: other income, net; provision for income taxes;
depreciation and amortization expense; stock-based
compensation expense; transaction costs; certain litigation
expenses, consisting of legal settlements and related fees
for specific proceedings that arise outside of the ordinary
course of our business; the ground lease expense related
to build-to-suit lease obligations under ASC 840; and nonrecurring incremental costs primarily consisting of hazard
pay as a result of COVID-19. Adjusted EBITDA Margin is
calculated by dividing Adjusted EBITDA by total revenue.

Three Months Ended June 30,(dollars in millions)2020
Net income (loss) (1)$

Fiscal Year Ended June 30,(dollars in millions)

2019

2020

89.1 $(47.4)

Other income, net(2.8)

Income tax (benefit) expense

3.8

Depreciation and amortization expense

$

2019

(71.6) $(195.6)(1.8)(12.4)

(6.7)

(0.1)

3.3

0.1

12.0

6.7

40.2

21.7

Stock-based compensation expense

32.5

13.5

88.8

89.5

Litigation and settlement expenses

1.1

2.3

60.1

12.1

Other adjustment items (2)

8.0

3.3

9.4

7.6

143.6 $

(23.6)

117.7 $

(71.3)

6.4%(7.8)%

Adjusted to exclude the following:

Adjusted EBITDA$

Adjusted EBITDA margin

23.7%

$

(10.6)%(1) Included in net loss are content costs for past use as follows:

Three Months Ended June 30,(dollars in millions)2020
Content costs for past use (1)$Fiscal Year Ended June 30,(dollars in millions)

2019
0.6 $

2020
–

$

2019
1.6 $

16.4

(1) From time-to-time, we execute music royalty agreements with various music rights holders. As part of these go-forward license agreements, we may also enter into agreements whereby we arereleased from all potential licensor claims regarding our alleged past use of copyrighted material in our content in exchange for a mutually-agreed payment. We refer to these payments as content
costs for past use. Included in Adjusted EBITDA are content costs for past use. These costs had a negative basis point impact on Adjusted EBITDA Margin of 9 for each of the three months andfiscal year ended June 30, 2020, and zero and 180 for the three months and fiscal year ended June 30, 2019, respectively.
(2) Includes incremental costs associated with COVID-19 of $8.5 million for the fiscal year ended June 30, 2020 and the ground lease expense related to build-to-suit lease obligations under ASC 840 of  $7.2 million  for the fiscal year ended June 30, 2019.

PELOTON Q4: 2020 | 17

PELOTON INTERACTIVE, INC.

S U B S C RI PTI O N CO NTRIB U TIO N A ND SU B SCRIPTION
CO N TRI B U TI O N M A RGIN

We use Subscription Contribution and Subscription
Contribution Margin to measure our ability to scaleand leverage the costs of our Connected Fitness
Subscriptions. The continued growth of our Connected
Fitness Subscription base will allow us to improve our
Subscription Contribution Margin. While there are variable
costs, including music royalties, associated with ourConnected Fitness Subscriptions, a significant portionof our content creation costs are fixed given that we
operate with a limited number of production studios andinstructors. The fixed nature of those expenses should
scale over time as we grow our Connected Fitness
Subscription base.

Subscription Contribution and Subscription Contribution
Margin in conjunction with financial measures prepared inaccordance with GAAP for planning purposes, including the
preparation of our annual operating budget, as a measureof our core operating results and the effectiveness of ourbusiness strategy, and in evaluating our financial performance.

We believe that these non-GAAP financial measures areuseful to investors for period-to-period comparisonsof our business and in understanding and evaluating
our operating results because our management uses

The following table presents a reconciliation of Subscription
Contribution to subscription gross profit, the most directlycomparable financial measure prepared in accordance with
GAAP, for each of the periods indicated:

We define Subscription Contribution as subscription revenue
less cost of subscription revenue, adjusted to exclude fromcost of subscription revenue, depreciation and amortization
expense and stock-based compensation expense. Subscription
Contribution Margin is calculated by dividing Subscription
Contribution by subscription revenue.

Three Months Ended June 30,

Fiscal Year Ended June 30,(dollars in millions)2020
Subscription Revenue

$

61.0

52.4

29.1

$

Subscription Gross Margin2020

121.2 $

Less: Cost of Subscription (1)Subscription Gross Profit(dollars in millions)2019

68.8 $

31.9

56.8%

$

$

52.3%

2019

363.7 $

181.1

155.7

103.7

208.0 $

77.4

57.2%

42.7%

Add back:
Depreciation and amortization expense$

Stock-based compensation expense
Subscription Contribution$

Subscription Contribution Margin

4.9 $

3.8

3.9

0.8

77.7 $

36.6

64.1%

$

$

60.0%

16.6 $

11.3

7.5

3.2

232.1 $

91.9

63.8%

50.8%

(1) Included in cost of subscription are content costs for past use as follows:

Three Months Ended June 30,

Fiscal Year Ended June 30,(dollars in millions)(dollars in millions)2020
Content costs for past use (1)

$

2019
0.6 $

2020
–

$

2019
1.6 $

16.4

(1) From time-to-time, we execute music royalty agreements with various music rights holders. As part of these go-forward license agreements, we may also enter into agreements whereby we arereleased from all potential licensor claims regarding our alleged past use of copyrighted material in our content in exchange for a mutually-agreed payment. We refer to these payments as content
costs for past use. Included in Subscription Contribution and Subscription Contribution Margin are content costs for past use. These costs had a negative basis point impact on Subscription
Contribution Margin of 47 and 44 for the three months and fiscal year ended June 30, 2020, and zero and 908 for the three months and fiscal year ended June 30, 2019, respectively.  

PELOTON Q4: 2020 | 18

PELOTON INTERACTIVE, INC.

CO N S O L I DATE D BA L A NCE SHE ETS(in millions, except share and per share amounts)

ASSETS

06/30/2020

06/30/2019

Current assets:
Cash and cash equivalents$

1,035.5 $162.1

Marketable securities

719.5

216.0

Accounts receivable, net

34.6

18.5

Inventories, net

244.5

136.6

Prepaid expenses and other current assets

124.5

48.4

2,158.6

581.7

Property and equipment, net

242.3

249.7

Intangible assets, net

16.0

19.5

Goodwill

39.1

4.3

Restricted cash

1.5

0.8

Total current assets

Right-of-use assets, net

492.5

—

Other assets

31.8

8.5

$

2,981.8 $

864.5

$

Total assets
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK,AND STOCKHOLDERS’ EQUIT Y (DEFICIT)
Current liabilities:
Accounts payable

135.8 $

92.2

Accrued expenses

225.9

104.5

Customer deposits and deferred revenue

363.6

90.8

Current portion of lease liabilities and other current liabilities
Total current liabilities
Deferred rent
Build-to-suit liability

46.9

3.3

772.2

290.8

—

23.7

—

147.1

Long term lease liabilities, net

508.2

—

Other non-current liabilities

23.4

0.4

1,303.8

462.0

—

941.1

—

—

2,361.8

90.7

10.1

0.2

Total liabilities
Commitments and contingencies
Redeemable convertible preferred stock, $0.000025 par value, zero and 215,443,468 shares authorized; zero and 210,640,629 sharesissued and outstanding as of June 30, 2020 and June 30, 2019, respectively.

Stockholders’ equity (deficit)
Common stock, $0.000025 par value; 2,500,000,000 and zero Class A shares authorized, 237,518,574 and zero shares issued and outstanding asof June 30, 2020 and June 30, 2019, respectively; 2,500,000,000 and 400,000,000 Class B shares authorized, 50,538,538 and 25,301,604 shares issued
and outstanding as of June 30, 2020 and June 30, 2019, respectively.

Additional paid-in capital
Accumulated other comprehensive income
Accumulated deficit
Total stockholders’ equity (deficit)
Total liabilities, redeemable convertible preferred stock, and stockholders’ equity (deficit)$(693.9)(629.5)

1,678.0(538.6)

2,981.8 $864.5

PELOTON Q4: 2020 | 19

PELOTON INTERACTIVE, INC.

CO N S O L I DATE D S TATEM ENTS O F O PE RATIO NS
AN D CO M PRE H E NSIV E LO SS(in millions, except share and per share amounts)

Three Months Ended June 30,

2020

Fiscal Year Ended June 30,

2019

2020

2019

Revenue:
Connected Fitness Products$

485.9 $

162.3$

1,462.2 $733.9

Subscription

121.2

61.0

363.7

181.1

Total Revenue

607.1

223.3

1,825.9915.0

Connected Fitness Products

265.9

94.1

833.5

427.8

Subscription

52.4

29.1

155.7

103.7

Total cost of revenue

318.3

123.2

989.1

531.4

Gross profit

288.8

100.1

836.7

383.6

Sales and marketing

84.2

77.9

477.0

324.0

General and administrative

86.2

54.6

351.6

207.0

Research and development

28.4

17.0

89.0

54.8

Total operating expenses

198.8

149.5

917.6

585.5

Income (loss) from operations

90.0(49.4)(80.8)(202.3)

Interest income, net

3.5

1.8

16.2

7.0

Cost of revenue:

Operating expenses:

Other income, net:

Other expense, net

(0.7)

—

(3.8)

(0.3)

Total other income, net

2.8

1.8

12.4

6.7

Income (loss) before provision for income taxes

92.8(47.6)(68.4)(195.6)

Income tax (benefit) expense

3.8

(0.1)

3.3

0.1

Net Income (loss)$

89.1 $(47.4)$(71.6) $(195.6)

Net income (loss) attributable to Class A and Class B
common stockholders$

89.1 $(47.4)$(71.6) $(245.7)

Net income (loss) per share attributable to Class A
and Class B common stockholders, basic$

0.31 $(2.07)$(0.32) $(10.72)

Net income (loss) per share attributable to Class A
and Class B common stockholders, diluted$

0.27 $(2.07)$(0.32) $(10.72)

Weighted-average Class A and Class B commonshares outstanding, basic

284,501,249

22,907,234

220,952,237

22,911,764

Weighted-average Class A and Class B commonshares outstanding, diluted

330,894,767

22,907,234

220,952,237

22,911,764

Other comprehensive income:Net unrealized gains on marketable securities$

Change in foreign currency translation adjustment
Total other comprehensive income (loss)
Comprehensive income (loss)

$

7.1 $

0.2

$

0.2

(1.0)

6.0

—

7.4

(0.8)

9.9

0.2

96.4 $(48.2)$

3.9 $(61.7) $0.2(195.4)

PELOTON Q4: 2020 | 20

PELOTON INTERACTIVE, INC.

CO N S O L I DATE D S TATEM ENTS O F O PE RATIO NS
AN D CO M PRE H E NSIV E LO SS (CO NT INU E D)
(in millions, except share and per share amounts)(1) Includes stock-based compensation expense as follows:
Three Months Ended June 30,

2020

Fiscal Year Ended June 30,

2019

2020

2019

Cost of revenue
1.9 $

0.2

3.2 $

0.3

Subscription

Connected Fitness Products

3.9

0.8

7.5

3.2

Total cost of revenue

5.9

1.0

10.7

3.5

Sales and marketing

9.4

1.2

15.3

8.4

General and administrative

14.3

9.5

52.4

70.5

Research and development

3.0

1.7

10.4

7.1

32.5 $

13.5

88.8 $

89.5

Total stock-based compensation expense

$

$

$

$

(2) Includes depreciation and amortization expense as follows:
Three Months Ended June 30,

2020

Fiscal Year Ended June 30,

2019

2020

2019

Cost of revenue
1.1 $

0.4

3.2 $

1.2

Subscription

Connected Fitness Products

4.9

3.8

16.6

11.3

Total cost of revenue

6.0

4.3

19.9

12.6

Sales and marketing

2.8

1.3

9.3

4.0

General and administrative

3.1

1.1

10.6

5.2

Research and development

0.1

—

0.3

—

12.0 $

6.7

40.2 $

21.7

Total depreciation and amortization expense

$

$

$

$

PELOTON Q4: 2020 | 21

PELOTON INTERACTIVE, INC.

CO N S O L I DATE D S TATEM ENTS O F CA SH FLOWS(in millions)Fiscal Year Ended June 30,

2020

2019

Cash Flows from Operating Activities:
Net loss$(71.6) $(195.6)

Depreciation and amortization expense

40.2

21.7

Stock-based compensation expense

88.8

89.5

Non-cash operating lease expense

47.7

—

Other non-cash items

6.4

(1.4)

Accounts receivable

11.3

(9.1)

Inventories(96.8)(111.3)

Prepaid expenses and other current assets(33.1)(30.3)

Other assets(22.1)(5.5)

Accounts payable and accrued expenses

133.4

117.3

Customer deposits and deferred revenue

272.3

2.2

Operating lease liabilities, net(23.6)—

Other liabilities

23.5

13.8

376.4

(108.6)

Purchases of marketable securities(1,199.6)(249.8)Maturities of marketable securities

435.4

36.0

Sales of marketable securities

224.3

—

Cash paid for cost method investment

(0.1)

(0.6)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Changes in operating assets and liabilities:

Net cash provided by (used in) operating activities
Cash Flows from Investing Activities:

Acquisition of business, net of cash acquired(45.0)(0.1)

Purchases of property and equipment(156.4)(83.0)(741.3)(297.5)

Net cash used in investing activities
Cash Flows from Financing Activities:
Proceeds from issuance of common stock upon initial public offering, net of offering costs

1,195.7——(130.3)

Proceeds from issuance of redeemable convertible preferred stock, net of issuance costs

—

539.1

Proceeds from employee stock purchase plan withholdings

7.0—

Debt issuance costs

—

(0.9)

Repurchase of common and convertible preferred stock, including issuance costs

Proceeds from exercise of stock options
Net cash provided by financing activities

37.4

9.3

1,240.2

417.2

Effect of exchange rate changes

(1.2)

0.2

Net change in cash, cash equivalents, and restricted cash

874.0

11.3

Cash, cash equivalents and restricted cash — Beginning of period

163.0

151.6

$

1,037.0 $163.0Cash paid for interest

$

1.9 $

1.1

Cash paid for income taxes

$

4.1 $

—

Conversion of convertible preferred stock to common stock$(941.1) $—Property and equipment accrued but unpaid$

18.2 $

12.6

Building — build-to-suit asset

$

— $

147.1

Stock-based compensation capitalized for software development costs

$

2.2 $

0.8

Cash, cash equivalents and restricted cash — End of period
Supplemental Disclosures of Cash Flow Information:

Supplemental Disclosures of Non-Cash Investing and Financing Information:

PELOTON Q4: 2020 | 22

PELOTON INTERACTIVE, INC.

Q UARTE RLY CO N SO LIDATE D STATE M E NTS O FO PE RATI O N S — AS REA L IGNE D TO NEW SEGM E NTSUNAUDITED(in millions)Three Months Ended

Jun. 30,
2020

Mar. 31,2020

Dec. 31,2019

Sept. 30,
2019

Jun. 30,
2019Mar. 31,2019

Dec. 31,2018

Sept. 30,
2018

Revenue:
Connected Fitness Products

$

485.9

$

426.4

$

389.1

$

160.8

$

162.3

$

265.6

$

225.5

$

80.4

Subscription

121.2

98.2

77.1

67.2

61.0

51.1

37.3

31.7

Total Revenue

607.1

524.6

466.3

228.0

223.3

316.7

262.9

112.1

265.9

237.4

236.7

93.4

94.1

158.1

131.2

44.3

Cost of revenue:
Connected Fitness Products
Subscription

52.4

41.4

32.4

29.5

29.1

38.0

20.3

16.3

Total cost of revenue

318.3

278.8

269.1

122.9

123.2

196.1

151.5

60.6

Gross profit

$

288.8

$

245.8

$

197.1

$

105.1

$

100.1

$

120.6

$

111.3

$

51.5

Gross margin
Connected Fitness Products

45.3 %

44.3 %

39.2 %

41.9 %

42.0 %

40.5 %

41.8 %

44.9 %

Subscription

56.8 %

57.8 %

58.0 %

56.1 %

52.3 %

25.6 %

45.5 %

48.7 %

Total gross margin47.6 %

46.8 %

42.3 %

46.1 %

44.8 %

38.1 %

42.4 %

45.9 %

Mar. 31,2019

Dec. 31,2018

Sept. 30,
2018

Quarterly Consolidated Statements of Operations - As previously disclosed
Three Months Ended

Jun. 30,
2020

Mar. 31,2020

Dec. 31,2019

Sept. 30,
2019

Jun. 30,
2019

Revenue:
Connected Fitness Products

$

475.5

$

420.2

$

381.1

$

157.6

$

158.4

$

261.6

$

221.3

$

77.9

Subscription

121.2

98.2

77.1

67.2

61.0

51.1

37.3

31.7

Other

10.4

6.1

8.0

3.3

4.0

4.0

4.2

2.5

Total Revenue

607.1

524.6

466.3

228.0

233.3

316.7

262.9

112.1

Connected Fitness Products

257.5

230.0

226.7

89.8

89.7

152.3

126.5

42.2

Subscription

52.4

41.4

32.4

29.5

29.1

38.0

20.3

16.3

Other

8.4

7.5

10.0

3.6

4.4

5.8

4.6

2.1

318.3

278.8

269.1

122.9

132.2

196.1

151.5

60.6

Cost of revenue:

Total cost of revenue
Gross profit

$

288.8

$

245.8

$

197.1

$

105.1

$

100.1

$

120.6

$

111.3

$

51.5

Gross margin
Connected Fitness Products

45.8 %

Subscription
Other
Total gross margin45.3 %

40.5 %

43.0 %

43.4 %

41.8 %

42.8 %

45.8 %

56.8 %

57.8 %

58.0 %

56.1 %

52.3 %

19.1 %(21.6) %25.3 %(11.2) %(12.1) %25.6 %

45.5 %

48.7 %(44.3) %(10.3) %16.3 %

47.6 %

46.8 %

42.3 %

46.1 %

44.8 %

38.1 %

42.4 %

45.9 %PELOTON Q4: 2020 | 23