PTON

• Despite reporting net income in FY2026, Peloton may not sustain profitability due to past operating losses and rising investments in growth, product development, and international expansion.
• Subscription levels could decline from factors like failure to innovate, brand harm, pricing issues, safety concerns, or economic downturns, directly threatening revenue growth.
• Tariff exposure remains material and fluid: IEEPA tariffs were invalidated but Section 122 tariffs of 10% apply, and new investigations could impose additional ad valorem tariffs on imports from key manufacturing countries like Taiwan, China, and Thailand.
• The company continues to face significant product safety and liability risks, including ongoing litigation and regulatory proceedings related to voluntary recalls of the Tread+ and Bike products, which could result in material costs and reputational harm.
• Execution risk is high as Peloton scales its multi-channel strategy, integrating Precor into a Commercial Business Unit, transitioning to micro-stores and third-party retail, and expanding into new wellness offerings like the Strength+ app.
• Reliance on a limited number of suppliers and contract manufacturers, primarily in Taiwan, China, and Thailand, exposes the business to supply chain disruptions from geopolitical tensions, trade disputes, or natural disasters.

• Corporate headquarters are in New York City (~336,000 sq ft, lease to 2035) and London, with Member Support in Plano, Texas.
• Warehouse and distribution facilities are primarily in North America and support the Connected Fitness Products segment.
• Production studios in New York City and London support the Subscription segment.
• The company leases retail properties including microstores in the U.S., Canada, and Germany but is reducing showrooms under Restructuring Plans.
• Peloton Output Park in Troy Township, Ohio, was fully sold—building and partial land in January 2024 ($31.9M net) and remaining land in September 2024 ($4.2M net).
• Certain corporate offices, warehouses, and distribution facilities are subleased to third parties and do not support current operations.

From time to time, we may be involved in claims and proceedings arising in the ordinary course of our business. The outcome of any such claims or proceedings, regardless of the merits, is inherently uncertain. For a discussion of legal and other proceedings in which we are involved, see Note 12, Commitments and Contingencies in the Notes to Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.

• Total revenue declined 1.8% to $2.45B as a 5.7% drop in Connected Fitness Products revenue to $770.4M was nearly offset by flat Subscription revenue of $1.68B.
• Subscription Gross Margin improved to 71.4% from 69.1%, helped by lower music royalty costs and subscription price increases, while Connected Fitness Products Gross Margin fell to 11.7% from 13.6% due to higher tariffs and a $13.5M seat-post recall charge.
• Operating expenses fell $178.5M, with General and administrative down $97.0M on lower headcount and Sales and marketing down $21.3M on reduced acquisition spend, contributing to a swing to $160.7M in income from operations.
• Adjusted EBITDA rose to $468.2M from $403.6M, and Free Cash Flow reached $377.6M, supported by $387.6M in operating cash flow and minimal capital expenditures.
• Ending Paid Connected Fitness Subscriptions declined to 2.553M from 2.800M, and Average Net Monthly Churn ticked up to 1.7% from 1.6%, while the company repaid the remaining $199.0M of its 2026 Notes at maturity.
• Liquidity remained strong with $1.21B in cash and equivalents; management expects existing resources to fund operations for at least the next 12 months, though it flagged tariff uncertainty and potential future recall costs.

• A hypothetical 10% change in interest rates or the Term Loan rate would not materially impact consolidated financials.
• International sales and intercompany balances are primarily in foreign currencies, exposing results to exchange rate fluctuations.
• Foreign exchange losses were $10.1M in FY2026 versus gains of $22.4M in FY2025, driven by remeasurement of intercompany balances.
• The company may use foreign currency forwards and options to hedge exposures, and foreign-currency inflows partially offset expenses naturally.
• Inflationary pressures on supply chain, materials, and labor costs have affected results and may continue to pressure gross margins.

• Ernst & Young LLP issued an unqualified opinion on Peloton's consolidated financial statements for the fiscal year ended June 30, 2026.
• The auditor also issued an unqualified opinion on the effectiveness of Peloton's internal control over financial reporting as of June 30, 2026.
• The critical audit matter involved auditing the existence of $135.4 million in inventory dispersed across company-operated and third-party logistics centers in five countries.
• Audit procedures to address the inventory matter included testing controls over the inventory count process and performing test counts at a sample of locations.
• The report confirms the financial statements present fairly, in all material respects, the company's financial position and results of operations in conformity with U.S. GAAP.