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| And then also, Lauren, as I mentioned, just recently joined us, has seen a lot of opportunity to improve our marketing efficiency, both in terms of media efficiency as well as optimizing our brand and creative spend |
| And even given our premium price point for Tread+, it is an incredible value for someone, who is looking for a really best-in-class running experience on the treadmill |
| And then we've also been benefiting from the fact that we have been able to use a large portion of refurbished bikes for that program over time |
| While our Bike demand has been down a bit year-over-year, our demand for Tread has been up year-over-year, and that is promising for us |
| And that gives us confidence that we have product market fit internationally and that we have the ability to scale into key markets around the world in the medium to longer term |
| And that's been tracking well ahead of expectations |
| Number one is our -- what we believe is best-in-class retention that we have for our member base |
| And we've seen some great successes with that |
| And we do see really great success when they choose Peloton to offer as part of their benefits program |
| And with those consumer trends are really important to us, and we believe that those trends actually, we are well positioned to benefit from those trends going forward |
| And so it's nice that we have that offering, as Barry has talked about the good, better, best strategy that we have, to be able to offer a lower price point to customers, who are willing to get a used bike |
| So we see an opportunity to do much better in terms of helping them find the right fitness experiences for them and discover the right content, so they can be much more engaged with our platform over time |
| For Tread, we are seeing substantial year-over-year growth in our sales |
| So overall, we continue to see strong resilience in the fitness industry |
| And that's proven to be a pretty strong complement to the full price offering |
| And our Tread+ also has been reviewed several times since it's been launched, and it was selected as CNN's Best Treadmill for 2024, which is really great |
| When we do that, we believe that our marketing efficiency will improve, both because we'll have better retention and better conversion rates |
| And that has proven to be successful, because we are seeing customers select the right offering for them, and we are benefiting from the fact that we are getting more revenue from the customers, who are getting more value out of the platform through App Plus and also higher gross margin from them in that respect |
| Now that being said, we do see the opportunity to continue to offer the Bike program and achieve an attractive return on investment using a higher mix of new inventory than we're using today |
| Some of the ones that have been successful include our Bike rental model, our refurbished Bike product, and also our third-party channel partners, partners like Amazon and DICK'S Sporting Goods and also Sport-Tiedje in Europe, and we're seeing great success there |
| And then even aside from the preorders that we took for our Tread+, we saw growth year-over-year in our treadmill, 17% year-over-year growth in Q2, which is pretty amazing |
| And then moving forward into fiscal '25, we expect to be positive free cash flow on the full year |
| And we have seen success in higher conversion from those offerings and having those |
| And we see that as a huge opportunity for us actually in terms of being able to grow awareness of all that Peloton has to offer across our platform |
| We see a lot of opportunity to improve both by understanding a little bit more about user preferences and goals, to improve the content discovery and the ability to engage members with our app because what we found is that we need to figure out ways to better engage them during the trial period, that they convert to paid and then also keep them engaged over time, so that they will retain at a higher rate |
| So that has proven there has been some benefits in the market there |
| And we see really high renewal rates from our corporate wellness partners |
| And it makes sense, because flat-based treadmills are a superior treadmill experience |
| We see that as a great opportunity for us in terms of lead generation, again, because people try our hardware and then they hopefully enjoy it and engage with it and want to be Peloton members |
| And that is proving to be an opportunity for us |
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| Since the back half of '21, I mean, the connected fitness industry as a whole has been pressured |
| And as you noted and as Barry noted in the last shareholder letter as well, I think one of the biggest difficulties has been returning to substantial growth at scale |
| So as we've mentioned, we saw softer Bike sales in the holiday season in Q2 |
| And so as a result, our Bike inventory has positioned as the softness of the holidays has created a bit of a headwind to free cash flow in the back half of the year |
| And so in the month that a Bike rental member joins us, there is negative Connected Fitness gross margin hit, because of that fee being less than the cost |
| We are seeing, and our internal data suggests this, that the rate of decline of the Connected Fitness segment has slowed significantly from where it was a year ago, though |
| The way that we calculate that is we've talked about all those different components that I just went through, and we're also burdened with a customer acquisition cost associated with acquiring those members and, of course, the churn curves over time that we expect to see and achieve that blended payback period |
| We've also seen some areas that have not been quite as successful and we talked about in our shareholder letter about the co-branded University of Michigan Bike being an area that was not as successful as we had hoped |
| And so since relaunching the app, there's been a few quarters a row of sequential digital subscriber declines, granted certainly some contribution from the price increase in December |
| While our international growth has been -- their scaling has been slower than we had anticipated, we do see that our international members are just -- they retain just as well and are just as engaged as our U.S |
| And I think it would be difficult for us to see a world where our churn rate for the Bike rental was the same as our overall All-Access Membership is |
| And so post COVID, the Connected Fitness market has seen some pressure as a portion of the market has shifted back to in-person experiences like gyms |
| And what we quickly found out was that, that free tier was cannibalizing our funnel and conversion to free trial and then to pay |
| And if we have to shift to using a larger portion of new inventory, if nothing else changes about our business, our payback period will be worse |
| And in Q2, we actually saw that they were slightly lower household income than our overall member base |
| And if we're not failing sometimes, then we're probably not taking enough smart risks |
| And so those -- that continues to be a bit of a drag on our LTV to CAC in the near term |
| While our bike demand was down year-over-year, we talked about that in [indiscernible] it was down year-over-year in Q2, our subscriber base was relatively stable |
| But the key to growth is innovation, right? And in order to innovate successfully, you have to take smart risks |
| It tends to grow nominally with GDP each year, although our data -- our internal tracking data suggests that it did decline very slightly in 2023 overall |
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