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Peloton Interactive, Inc. (PTON) SEC Filing 10-K Annual Report for the fiscal year ending Thursday, June 30, 2022

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    10-K Annual Report September 2020

Peloton Interactive, Inc.

CIK: 1639825 Ticker: PTON

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4Q 2022 Shareholder Letter

August 25, 2022

Dear Shareholders,

When you look at our financial performance in Q4, I suspect what you see will be a function of where you sit. The naysayers will look at our Q4 financial performance and see a melting pot of declining revenue, negative gross margin, and deeper operating losses. They will say these threaten the viability of the business.

But what I see is significant progress driving our comeback and Peloton’s long-term resilience. Important milestones reached include new executive leadership, renegotiated supply contracts, and significantly reduced cash outflow.

We are on a journey to reach sustained positive free cash flow. In the six months leading up to Q4'22, we averaged negative free cash flow of approximately $650 million per quarter. We reduced that outflow to $412 million in Q4. Our goal is to reach breakeven cash flow on a quarterly basis in the second half of FY23. We continue to make steady progress, but we still have work to do.

We reported an operating loss of $1.20 billion in Q4. $415 million of the loss was related to restructuring charges. The loss reflects the substantial progress we made this last quarter re-architecting the business to reduce the current and future inventory overhang, converting fixed to variable costs, and addressing numerous supply chain issues.

This progress, plus the reduced cash flow burn, is the positive story behind the headline loss.

From a supply chain perspective, Q4 was primarily focused on two goals – reducing our inventory commitments, which posed an existential threat to the business, and outsourcing all manufacturing for connected fitness hardware. Both goals were achieved, and as part of this restructuring, we shut down our owned manufacturing activities in Taiwan.

Subsequently, in early August, we announced the rightsizing and outsourcing of roughly half of our Member Support resources and the complete shift to third party providers for last mile delivery in the U.S. and a partial shift internationally. This further simplification of our Supply Chain and Member Support organizations will result in a downsizing of our employee base by roughly 760 team members.

These were difficult decisions, because we’re talking about people’s livelihoods. However, these are important steps on our comeback journey and should reduce expenses annually by approximately $45 million. The overall goal is to reduce the cost of our per-product final mile delivery costs by up to 50% with a CSAT score of 4.8 on a 5-point scale. Additionally, you can expect us to continue to rationalize our cost structure in order to bring overall spending in line with the revenue run rate of the business.

One of the core principles of my management philosophy is that talent density is foundational to success. To help us on our journey, I’m pleased to welcome Liz Coddington to the CFO role at Peloton. Liz was part of my finance team at Netflix and joined us from Amazon’s AWS business. She brings deep operating excellence to the team, and like Andy Rendich, our new head of Supply Chain, she will be based here in New York with me.

Despite the many challenges we’ve faced since I joined the company, the Peloton Studios teams and our instructors continue to perform with distinction. They are a source of creative inspiration and excitement for our Members (as well as our employee team members) and a shining example of what’s uniquely and enduringly Peloton.

In July, our studios in New York and London opened to members for the first time. As anticipated, the response and energy has been electric. Subsequently, we teased a new Tread talk show concept with Ashton Kutcher, inviting members to train alongside him as he uses his Peloton Tread to prepare for his first ever New York City Marathon. And, shortly after the end of the quarter, global culture icon (and Peloton super-fan) Lizzo surprised Members, joining a live cycle class at


The following information was filed by Peloton Interactive, Inc. (PTON) on Thursday, August 25, 2022 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-K Annual Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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Peloton Interactive, Inc.'s Definitive Proxy Statement (Form DEF 14A) filed after their 2022 10-K Annual Report includes:

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Inside Peloton Interactive, Inc.'s 10-K Annual Report:

Financial Statements, Disclosures and Schedules

Inside this 10-K Annual Report

Audit Information
Cover
Consolidated Balance Sheets
Consolidated Balance Sheets (Parenthetical)
Consolidated Statements Of Cash Flows
Consolidated Statements Of Operations And Comprehensive (Loss) Income
Consolidated Statements Of Stockholders??? Equity
Consolidated Statements Of Stockholders??? Equity (Parenthetical)
Accounts Payable And Accrued Expenses
Accounts Payable And Accrued Expenses (Details)
Accounts Payable And Accrued Expenses (Tables)
Acquisitions
Acquisitions - Narrative (Details)
Commitment And Contingencies (Tables)
Commitments And Contingencies
Commitments And Contingencies - Minimum Guarantee Royalty Payments Due (Details)
Commitments And Contingencies - Narrative (Details)
Concentration Of Credit Risk And Major Customers And Vendors
Concentration Of Credit Risk And Major Customers And Vendors (Details)
Debt
Debt (Tables)
Debt - Components Of Convertible Debt (Details)
Debt - Components Of Interest Expense (Details)
Debt - Convertible Notes And Indenture (Details)
Debt - Second Amended And Restated Credit Agreement (Details)
Description Of Business And Basis Of Presentation
Equity-Based Compensation
Equity-Based Compensation (Tables)
Equity-Based Compensation - Narrative (Details)
Equity-Based Compensation - Summary Of Fair Value Assumptions (Details)
Equity-Based Compensation - Summary Of Restricted Stock And Restricted Stock Units (Details)
Equity-Based Compensation - Summary Of Sock-Based Compensation Expense (Details)
Equity-Based Compensation - Summary Of Stock Options Outstanding (Details)
Equity-Based Compensation - Summary Of Unvested Stock Option Activity (Details)
Fair Value Measurements
Fair Value Measurements (Tables)
Fair Value Measurements - Narrative (Details)
Fair Value Measurements - Other Financial Instruments (Details)
Goodwill And Intangible Assets
Goodwill And Intangible Assets (Tables)
Goodwill And Intangible Assets - Accumulated Amortization Of Intangible Assets (Details)
Goodwill And Intangible Assets - Future Amortization Of Intangible Assets (Details)
Goodwill And Intangible Assets - Narrative (Details)
Goodwill And Intangible Assets - Schedule Of Changes In Carrying Value Of Goodwill (Details)
Income Taxes
Income Taxes (Tables)
Income Taxes - Narrative (Details)
Income Taxes - Schedule Of Components Of Income Tax Expense (Benefit) (Details)
Income Taxes - Schedule Of Deferred Tax Assets (Liabilities) (Details)
Income Taxes - Schedule Of Effective Income Tax Rate Reconciliation (Details)
Income Taxes - Schedule Of Loss Before Income Taxes (Details)
Income Taxes - Schedule Of Unrecognized Tax Benefits (Details)
Inventories
Inventories (Details)
Inventories (Tables)
Inventories- Narrative (Details)
Leases
Leases (Tables)
Leases - Narrative (Details)
Leases - Schedule Of Maturities Of Lease Liabilities For Operating Leases (Details)
Leases - Schedule Of Supplemental Balance Sheet Information (Details)
Leases - Schedule Of Supplemental Cash Flow And Other Information Related To Leases (Details)
Net Loss Per Share
Net Loss Per Share (Tables)
Net Loss Per Share - Narrative (Details)
Net Loss Per Share - Schedule Of Computation Of Basic And Diluted Net (Loss) Income Per Share (Details)
Net Loss Per Share - Schedule Of Potentially Diluted Securities Not Included In Calculation Of Diluted Shares Outstanding (Details)
Property And Equipment
Property And Equipment (Tables)
Property And Equipment - Narrative (Details)
Property And Equipment - Schedule Of Property And Equipment (Details)
Property And Equipment - Schedule Of Useful Lives (Details)
Quarterly Financial Data (Unaudited)
Quarterly Financial Data (Unaudited) (Details)
Quarterly Financial Data (Unaudited) (Tables)
Restructuring
Restructuring (Tables)
Restructuring - Narrative (Details)
Restructuring - Schedule Of Restructuring Charges (Details)
Restructuring - Schedule Of Restructuring Related Liabilities (Details)
Revenue
Revenue (Tables)
Revenue - Disaggregation Of Revenue (Details)
Revenue - Narrative (Details)
Revenue - Standard Product Warranty (Details)
Segment Information
Segment Information (Tables)
Segment Information - Reconciliation Of Segment Gross Profit To Consolidated (Details)
Segment Information - Schedule Of Key Performance Measures By Segment (Details)
Stockholders' Equity
Stockholders' Equity (Details)
Subsequent Events
Subsequent Events (Details)
Summary Of Significant Accounting Policies
Summary Of Significant Accounting Policies (Details)
Summary Of Significant Accounting Policies (Policies)
Ticker: PTON
CIK: 1639825
Form Type: 10-K Annual Report
Accession Number: 0001639825-22-000117
Submitted to the SEC: Tue Sep 06 2022 6:07:31 PM EST
Accepted by the SEC: Wed Sep 07 2022
Period: Thursday, June 30, 2022
Industry: Electronic And Other Electrical Equipment No Computer Equip

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