Q1 2022

SHAREH OLD ER L E T T E R

PELOTON INTERACTIVE, INC.

F IRST QUART E R F Y 2022 H I G H L I G H TS
All financial comparisons are on a year-over-year basis unless otherwise noted.

•

Q1 ending Connected Fitness Subscriptions grew 87%
to 2.49 million and paid Digital Subscriptions grew 74%
to 887 thousand; total Members grew to over 6.2 million•

Q1 total revenue grew 6% to $805.2 million•

Q1 Connected Fitness Subscription Workouts grew 55%
to 120.5 million, averaging 16.6 Monthly Workouts per
Connected Fitness Subscription, versus 20.7 in the yearago period•

Q1 Average Net Monthly Connected Fitness Churn was
0.82%; as of Q1, 12-month retention rate was 92%•

Q1 Gross Margin was 32.6%; Connected Fitness Product
Gross Margin was 12.0%, Subscription Gross Margin was
66.7%, and Subscription Contribution Margin was 69.6%•

Q1 Net Loss was $(376.0) million, $(1.25) per diluted
share; Q1 Adjusted EBITDA was $(233.7) million,
representing an Adjusted EBITDA Margin of (29.0)%

Given the unprecedented circumstances presented by the
Covid-19 pandemic, it is more challenging to guide our
expected results. We are therefore returning to presenting
guidance ranges.
•

FY 2022 Q2 guidance:– 2.8 million to 2.85 million ending Connected Fitness
Subscriptions– $1.1 billion to $1.2 billion total revenue– Gross profit margin of approximately 24%– $(325) million to $(350) million Adjusted EBITDA•

Updated Full FY 2022 guidance:– 3.35 million to 3.45 million ending Connected
Fitness Subscriptions– $4.4 billion to $4.8 billion total revenue– Gross profit margin of approximately 32%– $(425) million to $(475) million Adjusted EBITDA

CONNECTED FITNESS SUBSCRIPTIONS
2,400

2,081

2,000
1,200

886

712

1,091

1,334

1,262.3

1,250

1,064.8

500

Q2

Q3

Q4

Q1

Q2

Q3

Q4

FY 2021

Q1

0

466.3

Q2

524.6

Q3

Q4

149,541

150,000

Q3

Q4

FY 2021

Q1
FY 2022

AV G . M O N T H LY W O R KO U T S
PER CONNECTED FITNESS SUB

20.7
20

98,07576,817 77,767

26.0

24.7

25

134,334
120,515

120,000

60,000Q2(in $ millions)

CONNECTED FITNESSQ U A R T E R LY W O R KO U T S

90,000Q1

FY 2020

FY 2022(in thousands)

0

805.2

607.1

250

FY 202030,000

936.9

757.9

750

400
0

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

1,000

1,667

1,600
800

2,331

2,492

15

21.1

19.9

17.7

16.6

12.6

44,15524,345Q210Q3FY 2020

Q4

Q1

Q2

Q3

FY 2021

Q4Q1
FY 20225Q2Q3FY 2020

Q4

Q1

Q2

Q3

FY 2021

Q4Q1
FY 2022(in thousands)

PELOTON Q1: 2022 | 2

Peloton Shareholders,
As discussed last quarter, we anticipated fiscal 2022 would be a very challenging year toforecast, given unusual year-ago comparisons, demand uncertainty amidst re-opening
economies, and widely-reported supply chain constraints and commodity cost pressures.
Although we are pleased to have delivered first quarter results that modestly exceeded our
guidance, a softer than anticipated start to Q2 and challenged visibility into our near-term
operating performance is leading us to recalibrate our fiscal year outlook.
While we are reducing our near-term forecast, our confidence in and commitment to ourstrategy is unchanged. Software and streaming media have redefined at-home fitness andare driving a migration of workouts into the home, a consumer behavioral shift that we
believe is still in its early stages. This trend was well-underway prior to the pandemic, andhas clearly been accelerated by the growing awareness and adoption of Connected Fitness
over the past year and a half. In conjunction with our revised demand forecasts, we will betaking concrete steps to re-examine our expense base and adjust our operating costs tobetter align our investments with our revised growth expectations.
We remain convinced that the growth opportunity for Peloton is substantial and thisinforms our decision to prioritize accessibility and household acquisition over near-term
profitability, particularly as our industry-leading net promoter scores (“NPS”) and retention
rates support a very strong consumer LTV (lifetime value) and unit economics.
During the first quarter, we took two significant steps in support of this broader strategy.
First, on August 26, we lowered the price of our original Bike to $1,495, or $39 per monthwith 39-month 0% APR financing. We continue to believe price remains a barrier topurchase for many consumers and this is our latest step to improve the accessibility ofour platform. We are pleased with the consumer response to our new price, which quickly
converted many consumers already in our purchase funnel and is helping to generate
a significant number of new leads. Younger and less affluent consumers continue torepresent our fastest growing demographic, yet among non-Members, there remains alingering perception that Peloton is a luxury item. We intend to amplify the platform’s value
proposition via increased marketing ahead of and during our key seasonal selling period.
We launched our all-new Tread in the U.S. on August 30th, re-launched in Canada andthe U.K. on the same date, and expanded distribution to Germany on September 28th.
The Tread features an industry-first combination of both physical and digital safety keys,
provides an exceptional running experience, and is a portal to a full-body strength andcardio workout. Initial Member feedback has been very positive. When compared with Bike
and Bike+, our Tread has lower product awareness and a longer purchase consideration
path, including many wanting to visit showrooms to see, touch and experience the product.

PELOTON Q1: 2022 | 3

CONTENTSOFTWARE

Engagement remains our North Star, and wecontinue to invest to improve the Peloton
experience for existing Members. During thefirst quarter, we added eight instructors acrossregions and modalities, introduced 60 new
scenic rides and runs, recorded our inauguralclasses from our new Peloton Studios London(PSL), and launched an outdoor running program
called “You Can Run”. We know music is
important to our Members and is a significant
competitive advantage for Peloton. During Q1,
we hit a major milestone by celebrating our100th Artist Series collection and in July, we
hosted our fourth annual “All For One” music
festival, a three-day event featuring 65 classes,
40 instructors, 25 artists, and eight modalities,
resulting in a 9x increase in Member engagement
vs. the prior year. Our music-forward workout
collections are increasingly popular with ourcommunity and reflect our strong relationshipand close collaboration with artists and rightsholders within the music industry.

Our software teams introduced a number of
new features during the quarter to increase
accessibility and reduce Member friction
points. Our launch of real-time subtitles forlive classes increases accessibility for ourdeaf and hearing challenged Members andenjoyment for those who prefer additional visual
guidance for their workouts. Based on Member
feedback, we redesigned our class filtering
tool to make it easier and more intuitive to use,
while also increasing scalability of our filtering
tools as we add new content, instructors, andmodalities in the future. For the first time, ourteams introduced our popular Stacked Class
feature to iOS users, enabling them to preschedule workouts using their iPhones. Since
Stacked Classes launched on our hardware in
January 2021, almost 50 million classes havebeen added to Members’ stacks and we expect
expanding the accessibility of this feature will
drive further engagement.

PELOTON Q1: 2022 | 4

Q1 2022 SUMMARY
We ended the quarter with 2.49 million Connected
Fitness Subscriptions, representing 87% yearover-year growth. Total revenue grew 6% to $805.2
million, driven by demand for our Connected
Fitness Products, healthy gross additions, andsustained low churn levels, partially offset by thecontinued impact of our Tread product recalls.
Average Net Monthly Connected Fitness churnwas 0.82%. Digital subscriptions grew 74% to887 thousand, where we saw a modest but
growing contribution from our Corporate Wellness
partnerships. Operating expense grew 140% yearover-year to $622 million, reflecting a significant
increase in marketing spend when compared withdepressed year-ago levels, continued investments
in headcount and systems, growing researchand development expense, and the impact fromadding Precor’s cost structure. Net loss was$(376.0) million and Adjusted EBITDA totaled$(234) million, yielding a (29.0)% Adjusted EBITDA
margin, compared to a year-ago margin of 15.7%.

two-year basis to 16.6 average monthly workouts
per connected fitness subscription in the
period. Connected Fitness Subscribers worked
out with us 120.5 million times, up from 77.8
million workouts in the same period last year,
representing 55% year-over-year growth. Total
platform workouts (both Connected Fitness andDigital) grew to approximately 138 million in thequarter from 91 million in the year-ago quarter.
When combined with our low average monthly
churn, we continue to believe our platform has
proven uniquely able to captivate, motivate,
and retain Members. As a vertically-integrated,
direct-to-consumer company, we have a strong
understanding of our Member base and willcontinue to utilize engagement data and direct
feedback to guide our investments in content,
music, software, and other areas that influence
our net promoter (NPS) and satisfaction scores.

As expected, historical seasonality associatedwith summer months has returned to ourbusiness and engagement declined sequentiallyand year-over-year, but still increased 42% on a

PELOTON Q1: 2022 | 5

PELOTON INTERACTIVE, INC.

F INANC IAL DIS CUSSI ON

REVENUEWe generated total revenue of $805.2 million, growing 6% yearover-year and over 250% vs. Q1 2020. Connected Fitness segment
revenue, which includes the contribution from Precor, was $501.0
million, representing a 17% year-over-year decline and 62% of
total revenue. The decline primarily reflected fewer Bike portfoliodeliveries compared to the year-ago period, as well as the impact of
the August 2021 price reduction on our original Bike. Subscription
revenue grew to $304.1 million, representing 94% year-over-year
growth and 38% of total revenue, driven by growth in Connected
Fitness subscriptions from product sales as well as low Average
Net Monthly Connected Fitness Churn of 0.82%. Our Connected
Fitness subscription base climbed to 2.49 million at the end of
Q1, representing year-over-year growth of 87%. As of September
30, 98% of our Connected Fitness Subscribers were on month-tomonth payment plans.

FIRST QUARTERFISCAL 2022––––––––––––––––––––––––––––––REVENUE$805.2 million+6% Y/YCONNECTEDFITNESS REVENUE$501.0 million-17% Y/YSUBSCRIPTIONREVENUE$304.1 million+94% Y/YCONNECTEDFITNESS ACTIVITY
120.5 million workouts+55% Y/YPELOTON Q1: 2022 | 6

PELOTON INTERACTIVE, INC.

F INANC IAL DIS CUSSI ON

GROSS PROFIT

Gross profit in Q1 was $262.7 million and 32.6% of revenue,
representing a 20% year-over-year decline. Connected Fitness
segment gross profit was $60.0 million in Q1, representing a
75% year-over-year decline. Our Connected Fitness Product
Gross Margin decreased to 12.0% from 39.4% for the threemonths ended September 30, 2021 compared to the threemonths ended September 30, 2020. Compared to the year-ago
period, our Connected Fitness gross profit margin was primarily
impacted by the August 2021 Peloton Bike price reduction,
increased supply chain and logistics expenses, and an increasein our Tread recall reserves.

FIRST QUARTERFISCAL 2022––––––––––––––––––––––––––––––GROSS PROFIT$262.7 million
32.6% of revenue
CONNECTEDFITNESS GROSSPROFIT$60.0 million

Subscription gross profit was $202.7 million in Q1, representing
121% year-over-year growth. Subscription gross margin was 66.7%,
up from 58.5% in the year-ago period. Subscription Contribution
was $211.7 million in Q1, representing 111% year-over-year growth.
Subscription Contribution Margin was 69.6%, versus prior yearof 64.1%. The improvement versus last year reflected continued
fixed cost leverage, as well as modest efficiencies associated withcertain variable costs.
For a reconciliation of non-GAAP financial measures to theircorresponding GAAP measures, please refer to the reconciliationtables in the section titled “Key Operating Metrics and Non-GAAP
Financial Measures--Non-GAAP Financial Measures.”12.0% of revenue
SUBSCRIPTIONGROSS PROFIT$202.7 million
66.7% of revenue
SUBSCRIPTIONCONTRIBUTION$211.7 million
69.6% of revenue

PELOTON Q1: 2022 | 7

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 $622.4 million, and grew 140%
year-over-year, representing 77.3% of total revenue versus theprior year period of 34.3%.
Sales and marketing expense was $284.3 million, and grew
148% year-over-year, representing 35.3% of total revenue versus
the prior year period of 15.1%. The year-over-year increase
was primarily driven by advertising and marketing spending in
support of our original Bike price reduction and the launch of
our lower-priced Tread.
General and administrative expense was $240.3 million, andgrew 121% year-over-year, representing 29.8% of total revenue
versus 14.3% in the prior year. Year-over-year growth was driven
by increased professional services fees, continued investment
in our systems and teams, and acquisition integration costs.
Research and development expense was $97.7 million
and grew 167% year-over-year, representing 12.1% of total
revenue, versus 4.8% in the year-ago period. Growth was
driven primarily by increased personnel-related expenses andresearch costs associated with development of new softwarefeatures and products.

FIRST QUARTERFISCAL 2022––––––––––––––––––––––––––––––TOTA LO P E R AT I N G
EXPENSES$622.4 million
77.3% of revenue
SALES AND
MARKETING$284.3 million
35.3% of revenue
GENERAL AND
A D M I N I S T R AT I V E$240.3 million
29.8% of revenue
RESEARCH AND
DEVELOPMENT$97.7 million
12.1% of revenue

PELOTON Q1: 2022 | 8

PELOTON INTERACTIVE, INC.

F INANC IAL DIS CUSSI ON

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

Net loss for Q1 was $(376.0) million versus net income of $69.3
million in the same period last year. Q1 Adjusted EBITDA was$(233.7) million representing an Adjusted EBITDA Margin of(29.0)% versus 15.7% in the same period last year. Basic anddiluted earnings per share were $(1.25).

BALANCE SHEETWe ended Q1 with $924.2 million in cash, cash equivalents, andinvestments in marketable securities. We also have a $285.0
million revolving credit facility, which remains undrawn to-date.
First quarter operating cash flow was $(561) million. Capital
expenditures were $87.2 million, primarily reflecting investments
in Peloton Output Park, our Plano location expansion and our
Tonic manufacturing facility.

FIRST QUARTERFISCAL 2022––––––––––––––––––––––––––––––NET LOSS$(376.0) million
ADJUSTEDEBITDA$(233.7) million(29.0)% margin
CASH, CASHE Q U I VA L E N T S ,A N D M A R KE TA B L E
SECURITIES$924.2 million

PELOTON Q1: 2022 | 9

PELOTON INTERACTIVE, INC.

Q2 AND FULL FI SCA L Y EA R 2022
BU SINE SS OUTLOOKF Y 2022 Q2 GUIDANCEU P DAT E D F U L L F Y 2022 G U I DA N C E• 2.8 million to 2.85 million ending Connected
Fitness Subscriptions• 3.35 million to 3.45 million ending Connected
Fitness Subscriptions• $1.1 billion to $1.2 billion total revenue• $4.4 billion to $4.8 billion total revenue• Gross profit margin of approximately 24%• Gross profit margin of approximately 32%• $(325) million to $(350) million Adjusted EBITDA• $(425) million to $(475) million Adjusted EBITDA

We are reintroducing ranges for our guidance. The

and higher than anticipated variable costs including

overall consumer environment has been very challenging

commodities and freight. As the year progresses weto predict coming out of COVID and we are reducing FY

believe we can identify areas within our CF COGS where

2022 ending Connected Fitness Subscriptions by ~6% at

we can realize meaningful fixed cost savings while

the midpoint.

remaining focused on long-term growth. We expect

With the benefit of adequate inventories and order-todelivery windows that are now back to pre-pandemic
levels, we expect a healthy holiday selling season. Our

our Subscription Contribution Margin will continue tomodestly expand year-over-year as we continue to realize
efficiencies against fixed content production costs.

forecast assumes unit sales modestly ahead of last

For the full year, we now expect a Gross Margin of

year’s Q2 levels, driven by growing consumer interest in

approximately 32%, a reduction from our previous forecast

the Connected Fitness category and a resumption of ourof 34%, reflecting the same factors as listed above. For

marketing and promotional activity.

the full year, we expect a Connected Fitness ProductWe expect approximately $1.1 billion to $1.2 billion ofrevenue in Q2, representing growth at the midpoint of 8%

Gross Margin of approximately 16% and a Subscription
Contribution Margin of approximately 70%.

compared to last year and a 57% two-year growth CAGR.

In response to our revised sales and margin outlook for

Our Q2 forecast contemplates the continuation of a year-

FY 2022, we have identified material savings across ouron-year mix-shift of our Bike portfolio to our original Bike

operating expenses, though some of these actions mayfrom Bike+.

take a quarter or two to show improvement. Inclusive

For the full year, we anticipate revenue of $4.4 billion to$4.8 billion, representing growth at the midpoint of 14%
compared to last year and a 59% two-year growth CAGR.
The primary drivers of our reduced forecast are a more
pronounced tapering of demand related to the ongoing
opening of the economy, and a richer than anticipated mix

of supply chain related headwinds in COGS and planned
cost efficiency initiatives, our current range estimate of
Adjusted EBITDA loss for 2Q is $(325) million and $(350)
million. Our revised outlook for full year FY 2022 is a rangeof $(425) million to $(475) million. We continue to expect
to be adjusted EBITDA profitable for full year FY 2023.

of sales to our original Bike. Though we are no longer

A reconciliation of non-GAAP guidance measures tooffering formal churn guidance, we expect monthly churncorresponding GAAP measures is not available on alevels to remain consistent with recent trends.

forward-looking basis without unreasonable effort due to

For Q2, we expect a Gross Margin of approximately
24%, embedding expectations for a Connected Fitness
Product Gross Margin of approximately 7% and a
Subscription Contribution Margin of approximately
69%. The year-over-year reduction in our Connected

the uncertainty regarding, and the potential variability of,many of the costs and expenses that may be incurred in
the future. We have provided a reconciliation of GAAP to
non-GAAP financial measures for the first quarter in thereconciliation tables at the end of this letter.

Fitness gross margin will be driven primarily by the pricereduction of our original Bike, a richer mix of original Bike
sales, deleveraging of fixed costs in our supply chain,

PELOTON Q1: 2022 | 10

PELOTON INTERACTIVE, INC.

Q1 2022 CONFE REN CE CA L L
A ND WE B C ASTWEBCAST
We will host a Q&A session at 5:00pm ET on Thursday,
November 4th, 2021 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 8173296. 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.
We want to thank our entire Peloton Family for all their
hard work, especially our delivery, warehouse, andMember experience teams who continue to work underchallenging circumstances to service our Members. We
continue to be inspired by the courage and commitmentof our growing Peloton community and remaincommitted to delivering the world’s leading connected
fitness experience.
Stay safe and well,
Team Peloton

S A F E H A R B O R S TAT E M E N T
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 second quarter of fiscal year 2022 andfull fiscal year 2022, the potential impact of COVID-19 on
the fitness and wellness industry in general as well as
our business, our business strategy and plans, including
the pace that we scale our organization to meet highglobal demand for our products, the effectiveness andefficiency of our investments in technology, content,
manufacturing capabilities, supply chain, shipping,and operational systems and people initiatives, andour ability to minimize our order-to-delivery windows,
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 anduncertainties. Accordingly, actual results could differ
materially due to a variety of factors, including: our ability

to attract and retain our Connected Fitness and Digital
Subscription base; our limited operating history; ourability to anticipate and satisfy consumer preferences;the effects of the highly competitive market in which we
operate; market acceptance of our Connected Fitness
Products, including our recently launched Peloton Tread;
our ability to successfully develop and timely introduce
new products and services; our ability to accurately
forecast consumer demand and correspondingly manage
our inventory; our ability to maintain the value andreputation of the Peloton brand; the level of sales of ourBike and 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
to achieve our objectives of strategic and operational
initiatives, including to produce material savings across
our operating expenses; litigation and related costs; theimpact 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 included under thecaption “Risk Factors” in our Annual Report on Form
10-K for the fiscal year ended June 30, 2021, our mostrecent Quarterly Report on Form 10-Q, and our other
Securities and Exchange Commission (SEC) filings,
which are available on the Investor Relations page of
our website at https://investor.onepeloton.com/investorrelations/ 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 Q1: 2022 | 11

PELOTON INTERACTIVE, INC.

CO N D E N S E D CO N SO L IDATE D B A L A NCE SHE ETS(in millions, except share and per share amounts)

ASSETS

09/30/2021
UNAUDITED

Current assets:
Cash and cash equivalents

06/30/2021$

612.6 $

1,134.8

Marketable securities

311.6

472.0

Accounts receivable, net

81.1

71.4

1,269.2

937.1

280.7

202.8

2,555.1

2,818.1

Property and equipment, net

682.2

591.9

Intangible assets, net

238.1

247.9

Goodwill

212.7

210.1

0.9

0.9

Operating lease right-of-use assets, net

684.3

580.1

Other assets

41.3

36.7

$

4,414.5 $

4,485.6$

1,012.8 $989.1

Customer deposits and deferred revenue

205.2

164.8

Operating lease liabilities, current

70.5

61.9

Other current liabilities

15.2

27.2

1,303.7

1,243.0

Convertible senior notes, net

838.2

829.8

Operating lease liabilities, non-current

726.3

620.4

Other non-current liabilities

39.5

38.3

2,907.6

2,731.5——

2,748.6

2,618.9

17.1

18.2

Accumulated deficit(1,258.8)(883.0)Total stockholders’ equity

1,506.9

1,754.1

4,414.5 $

4,485.6

Inventories, net
Prepaid expenses and other current assets
Total current assets

Restricted cash

Total assets
LIABILITIES AND STOCKHOLDERS’ EQUIT Y
Current liabilities:
Accounts payable and accrued expenses

Total current liabilities

Total liabilities
Commitments and contingencies
Stockholders’ equity
Common stock, $0.000025 par value; 2,500,000,000 and 2,500,000,000 Class A shares authorized, 273,978,403 and 270,855,356 sharesissued and outstanding as of September 30, 2021 and June 30, 2021, respectively; 2,500,000,000 and 2,500,000,000 Class B sharesauthorized, 28,785,575 and 29,291,774 shares issued and outstanding as of September 30, 2021 and June 30, 2021, respectively.

Additional paid-in capital
Accumulated other comprehensive income

Total liabilities and stockholders’ equity$

PELOTON Q1: 2022 | 12

PELOTON INTERACTIVE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONSAND COMPREHENSIVE (INCOME) LOSSU N A U D I T E D (in millions, except share and per share amounts)

Three Months Ended September 30,

2021

2020

Revenue:
Connected Fitness Products$

Subscription

501.0 $

601.4

304.1

156.5

805.2

757.9

Connected Fitness Products

441.0

364.2

Subscription

101.4

65.0

Total cost of revenue

542.5

429.2

Gross profit

262.7

328.7

Total revenue
Cost of revenue:

Operating expenses:
Sales and marketing

284.3

114.6

General and administrative

240.3

108.6

Research and development

97.7

36.6

Total operating expenses

622.4

259.8

(Loss) income from operations(359.7)68.9

Interest expense

(8.6)

(0.4)

Interest income

0.6

2.8

Other (expense) income, net:

Foreign exchange losses

(5.2)

(0.9)

Other (expense) income, net

(0.7)

0.2

Total other (expense) income, net(13.9)

1.7(Loss) income before provision for income taxes(373.6)

70.6

2.4

1.3

Income tax expense
Net (loss) income$(376.0) $69.3

Net (loss) income attributable to Class A and Class B common stockholders$(376.0) $69.3

Net (loss) income per share attributable to common stockholders, basic$(1.25) $0.24

Net (loss) income per share attributable to common stockholders, diluted$(1.25) $0.20

Weighted-average Class A and Class B common shares outstanding, basic

301,161,474

288,719,834

Weighted-average Class A and Class B common shares outstanding, diluted

301,161,474

342,101,984

Other comprehensive (loss) income:Net unrealized losses on marketable securities(0.2) $

(1.3)

Change in foreign currency translation adjustment

0.2

3.9

Net unrealized loss on hedging derivatives

(1.0)

–

Total other comprehensive (loss) income

(1.1)

2.6

(377.1) $71.9

Comprehensive (loss) income$$

PELOTON Q1: 2022 | 13

PELOTON INTERACTIVE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONSAND COMPREHENSIVE (LOSS) INCOME (CO NT INU E D)
U N A U D I T E D (in millions, except share and per share amounts)(1) Includes stock-based compensation expense as follows:
Three Months Ended September 30,

2021

2020

Cost of revenue
Connected Fitness Products$

Subscription
Total cost of revenue

4.4 $

1.5

3.6

4.5

8.0

5.9

Sales and marketing

6.5

3.4

General and administrative

29.5

16.7

Research and development

8.9

3.6

52.9 $

29.6

Total stock-based compensation expense$(2) Includes depreciation and amortization expense as follows:
Three Months Ended September 30,

2021

2020

Cost of revenue
Connected Fitness Products

$

3.5 $

1.2

5.4

4.4

Total cost of revenue

9.0

5.6

Sales and marketing

4.4

2.9

General and administrative

9.8

2.8

Research and development

4.9

0.1

28.1 $

11.4

Subscription

Total depreciation and amortization expense$

PELOTON Q1: 2022 | 14

PELOTON INTERACTIVE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSU N A U D I T E D (in millions)Three Months Ended September 30,

2021

2020

Cash Flows from Operating Activities:
Net (loss) income$(376.0) $69.3

Depreciation and amortization expense

28.1

11.4

Stock-based compensation expense

52.9

29.6

Non-cash operating lease expense

19.2

13.3

Amortization of premium from marketable securities

2.5

1.7

Amortization of debt discount and issuance costs

8.5

0.1

Impairment of long-lived assets

0.6

1.3

Net foreign currency adjustments

5.2–

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

Changes in operating assets and liabilities:
Accounts receivable(9.8)(15.0)

Inventories(332.4)(118.0)Prepaid expenses and other current assets(40.4)(18.2)

Other assets

(8.4)

5.9

Accounts payable and accrued expenses

56.0

156.4

Customer deposits and deferred revenue

40.6

157.4

Operating lease liabilities, net

(9.0)

11.3

Other liabilities

1.3

5.5

(561.0)312.1

Maturities of marketable securities

120.3

124.5

Purchases of property and equipment(87.2)(49.2)

Internal-use software costs and other(3.8)(12.9)Net cash provided by investing activities

29.3

62.4

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

Cash Flows from Financing Activities:
Proceeds from employee stock purchase plan withholdings

6.2

3.3

Proceeds from exercise of stock options

23.8

15.4

Principal repayments of finance leases

(0.5)

–

Net cash provided by financing activities

29.6

18.8

Effect of exchange rate changes(20.1)

1.7

Net change in cash, cash equivalents, and restricted cash

(522.2)395.0

Cash, cash equivalents and restricted cash — Beginning of period

1,135.7

1,037.0

Cash, cash equivalents and restricted cash — End of period$

613.5 $

1,432.0

Cash paid for interest

$

0.3 $

0.3

Cash paid for income taxes

$

1.9 $

0.5

Property and equipment accrued but unpaid$

66.4 $

19.6

Stock-based compensation capitalized for software development costs

$

2.5 $

0.7

Supplemental Disclosures of Cash Flow Information:

Supplemental Disclosures of Non-Cash Investing and Financing Information:

PELOTON Q1: 2022 | 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 SURESIn addition to the measures presented in our interim condensed consolidated financial statements, we use thefollowing key operational and business metrics and non-GAAP financial measures to evaluate our business,measure our performance, develop financial forecasts, and make strategic decisions.

Three Months Ended September 30,

Ending Connected Fitness Subscriptions

2021

2020

2,491,711

1,334,400

Average Net Monthly Connected Fitness Churn

0.82%

0.65%

Total Workouts (in millions)

120.5

77.8

Average Monthly Workouts per Connected Fitness Subscription

16.6

20.7

Subscription Gross Profit (in millions)$202.7 $

91.5

Subscription Contribution (in millions) (1)$211.7 $

100.4

Subscription Gross Margin

66.7%

58.5%

Subscription Contribution Margin (1)

69.6%

64.1%

(376.0) $69.3

Net (loss) income (in millions)$

Adjusted EBITDA (in millions) (2)$Adjusted EBITDA Margin (2)(233.7) $118.9(29.0)%

15.7%(1) Please see the section titled “Non-GAAP Financial Measures—Subscription Contribution and Subscription Contribution Margin”
for a reconciliation of Subscription Gross Profit to Subscription Contribution and an explanation for why we consider Subscription
Contribution and Subscription Contribution Margin to be a helpful metric for investors.
(2) Please see the section titled “Non-GAAP Financial Measures—Adjusted EBITDA and Adjusted EBITDA Margin” for a reconciliation ofnet (loss) income to Adjusted EBITDA and an explanation for why we consider Adjusted EBITDA to be a helpful metric for investors.

CONNECTED FITNESSSUBSCRIPTIONSAV 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

Our ability to expand the number of Connected
Fitness Subscriptions is an indicator of our market
penetration and growth. We define a Connected
Fitness Subscription as a person, household, orcommercial property, such as a hotel or residentialbuilding, who has either paid for a subscription toa Connected Fitness Product (a Connected Fitness
Subscription with a successful credit card billingor with prepaid subscription credits or waivers) orrequested 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.

We use Average Net Monthly Connected Fitness
Churn to 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 thequarter, 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 for access to our content libraryon their own devices.

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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 thecompletion of at least 50% of an instructor-led classor scenic ride or run, or ten or more minutes of “JustRide” or “Just Run” mode by a Member associated witha Connected Fitness Subscription. We define AverageMonthly Workouts per Connected Fitness Subscription
as the Total Workouts completed in the quarter
divided by the average 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.

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PELOTON INTERACTIVE, INC.

ADJUSTED EBITDA AND ADJUSTEDEBITDA 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 comparisons of
our historical operating performance on a more consistentbasis, we use these measures for business planningpurposes. We also believe this information will be usefulfor investors to facilitate comparisons of our operating
performance and better identify trends in our business.

We calculate Adjusted EBITDA as net (loss) income adjusted
to exclude: other expense (income), net; income tax expense;
depreciation and amortization expense; stock-based
compensation expense; product recall costs; litigation andsettlement expenses; transaction and integration costs; andother adjustment items that arise outside the ordinary courseof our business. Adjusted EBITDA Margin is calculated by
dividing Adjusted EBITDA by total revenue.
The following table presents a reconciliation of Adjusted
EBITDA to net (loss) income, the most directly comparable
financial measure prepared in accordance with GAAP, foreach of the periods indicated:

Three Months Ended September 30,(dollars in millions)2021
Net (loss) income

$

2020

(376.0) $69.3

Other expense (income), net

13.9

(1.7)

Income tax expense

2.4

1.3

Depreciation and amortization expense

28.1

11.4

Stock-based compensation expense

52.9

29.6

Product recalls (1)

12.9

—

Litigation and settlement expenses (2)

26.5

3.1

Transaction and integration costs (3)3.1—

Other adjustment items (4)

2.5

5.9

(233.7) $118.9(29.0)%

15.7%

Adjusted to exclude the following:

Adjusted EBITDA
Adjusted EBITDA Margin$(1) Represents adjustments and charges associated with the Tread and Tread+ product recall, as well as accrual adjustments. These include a reduction to connected fitness
products revenue for actual and estimated future returns of $11.4 million and recorded costs in connected fitness products cost of revenue associated with logistic costs of$0.5 million and operating expenses of $1.0 million associated with recall-related hardware development costs.
(2) Includes litigation related expenses for certain non-recurring patent infringement litigation, consumer arbitration, and product recalls for the three months ended September 30, 2021.
(3) Includes transaction and integration costs primarily associated with the acquisition and integration of Precor Fitness for the three months ended September 30, 2021.
(4) Includes short-term non-cash purchase accounting adjustment amortization of $1.9 million and an asset impairment charge of $0.6 million for the three months ended September
30, 2021 and includes $5.9 million of incremental costs associated with COVID-19 for the three months ended September 30, 2020.

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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 arevariable costs, including music royalties, associatedwith our Connected Fitness Subscriptions, a significant
portion of our content creation costs are fixed given that
we operate with a limited number of production studios
and instructors. The fixed nature of those expenses
should scale over time as we grow our Connected
Fitness Subscription base.

Margin in conjunction with financial measures prepared inaccordance with GAAP for planning purposes, including
the preparation of our annual operating budget, as ameasure of our core operating results and the effectivenessof our business 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
Subscription Contribution and Subscription Contribution

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 September 30,(dollars in millions)

2021
Subscription Revenue$

Less: Cost of Subscription
Subscription Gross Profit$

Subscription Gross Margin2020

304.1 $

156.5

101.4

65.0

202.7 $
66.7 %

91.5
58.5%

Add back:
Depreciation and amortization expense$

Stock-based compensation expense
Subscription Contribution
Subscription Contribution Margin

$

5.4 $

4.4

3.6

4.5

211.7 $

100.4

69.6 %

64.1%

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