Q1 2023 Peloton Interactive Inc Earnings Call
Good day and thank you for standing by welcome to the peloton Interactive first quarter 2023 earnings call. At this time, all participants are in a listen only mode.
After the Safe Harbor, there will be a question and answer session to ask a question. During the session you will need to press star one one on your telephone. Please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today, Peter Stabler head of Investor Relations. Please go ahead.
Good morning, welcome to peloton fiscal first quarter conference call.
Joining today's call, our CEO , Barry Mccarthy and CFO Liz carting.
Our comments and responses to your questions reflect management's views as of today only.
We will include statements related to our business that are forward looking statements under federal Securities law.
Actual results may differ materially from those contained in or implied by these forward looking statements due to risks and uncertainties associated with our business.
For a discussion of the material risks and other important factors that could impact our results. Please refer to our SEC filings and today's shareholder letter both of which can be found on our investor Relations website.
During this call we will discuss both GAAP and non-GAAP financial measures.
A reconciliation of GAAP to non-GAAP financial measures is provided in today's shareholder letter.
I'll now turn the call over to the operator for the first question.
Yes.
Minder to ask a question. Please press star one on your telephone.
Please standby.
Pocket Q&A roster.
Our first question comes from the line of Doug Anmuth from Jpmorgan. Your line is open.
Thanks for taking the questions Barry it's clear you've made progress on our cost structure and free cash flow loss.
Should we think about your plan to drive growth and in particular can you give us an update on the SaaS rental model.
And how that's progressing so far thanks.
Hey, guys. Good morning, Thanks for the question.
Our focus.
Our job one is to ensure the viability of the business rich.
A year ago with readout.
And I believe that is no longer the case.
Because of our focus on driving.
Right sizing the cost structure of <unk> costs.
And driving the business towards our goal of breakeven free cash flow.
Clearly that has come at the expense of growth.
And there will come a time when we begin to.
Focus again on growth.
Okay.
With my leadership team, we have already made that transition.
The question is.
On a previous question that Mike My letter this quarter.
That's what we grow what will the margin structure of the business will begin to see the answers to those questions take shape.
Later this year as we lean into a number of the strategies that we've already articulated.
Fitness is in service.
<unk> certified pre owned.
<unk> expansion.
Our third party retail partners and as we lean into growth in our commercial business.
And as we lean into.
Digital ad business.
In pursuit of that goal of 100 million users, which I talked about when I first joined.
The business.
Yes.
As it relates to SaaS.
<unk>.
It's growing really fast.
About a third less of new sign ups.
We're doing an average over the last.
Two weeks of about 175 a.
Good day.
<unk>.
Okay.
And we've only just begun leaning in on the web to growth.
Theres still unanswered questions about.
Whether or not.
We'll be financially viable for us long term.
But what I've learned from the early growth that you.
We absolutely have to figure out how to make it work for us because it's enormously popular with users.
It's.
There is.
Considerable increments to it and we are attracting.
To our subscriber base.
But a demo which we have not previously been.
To access so it's expanding our Tam.
So.
We need to look at.
The underlying economics, and we do that is by focusing on on the monthly price which drive.
Churn.
And you need to understand more about.
What percentage of folks over time, we'll exercise it.
But to buy out the bike.
And probably we will.
Just over time.
The buyout options.
But is there anything you want to add to my summary, with respect to tax.
No I think I don't know.
I think that I will say is that we.
One thing about fast it's important to note as you think about that across the business the revenue profile and margin profile a little bit different.
Our core business and so as the fast Act gorilla.
We'll see that revenue uptick longer.
We're not getting the benefit of the purchase of the connected fitness hardware interior, Ed because we'll get that rental income from that over time.
Just highlighting that Friday.
And is there any kind of.
I know, it's still early but any kind of target or outlook on what you think fast could represent.
As a reminder, sales overtime.
Of the.
A user base.
Or just new new subscribers.
30% or more of new subscribers.
More than that on a net basis because.
There is effectively no churn across the installed base.
So the percentages of gross versus net will be quite a bit different.
20 year in 18 months.
Product is viable, but but not as attractive as if it's two years and so when I talk about the financial viability of the product it's service through that lens that we're thinking about how we tweak pricing option.
And.
And Directionally.
Monthly churn and helpful.
Edward a quote in the ditch lap.
Deemphasized it a little bit.
[noise] strategy is to relaunch the.
<unk> in the new year, it will be a different price.
Price value.
Opportunity that it is currently there'll be a tiered pricing.
Associated with content strategy, a new content strategy Uhm, we're chasing the hundred million digital App users. The current product is never really grown.
Bigger than a million.
We.
The overarching strategy here is to.
Gain access to competitive connected fitness hardware platforms.
About half the users paid users of Ah Gisele App at one time or another youth are connected fitness content.
On someone else's hardware, we'd never actually marketed that use case, we're going to lean into it.
The <unk> had kind of calmed at the end of the bar marketing final, we're going to move it up to the top with a premium offer.
And and tried to the end of that growth opportunity.
In terms of guide.
Customer sat scores are really high.
The unaided brand awareness is really low relative to other products like 17, and the purchase incense scores are.
As high or higher than any of the other products in our product line.
Based on some research I I saw overnight so.
It's an opportunity we we haven't really leaned into I don't think we've quite figured out.
How to market it effectively so it's doing okay, but it's not doing nearly as well as you would think it would do based on the matrix I just described.
Picked a row.
Think Tom Cortese and his team can be justifiably proud and.
And having reinvented the row category like reinvented the bike category.
With the connected fitness content.
Uhm.
The good news and the bad news about ROE is for this fiscal year, we expect to be inventory constrained and to have more demand and we will have units to sell.
Now we're working too.
Uhm to address those issues, but at least for the moment. So it's been critically quite well received now we have just rolled it out through Oh boy.
Showrooms as of yesterday.
And.
Limited number right 16.
And so.
<unk> wrote it continue to grow as as we increase.
Increased people's exposure and the opportunity to get on it and try it and see what's <unk>, Nevada.
Thank you.
Thank you one moment for next question.
Our next question comes from the line of Justin <unk> Bank of America. Your line is open.
Great could you talk a little bit about the the kind of a <unk> guide I think it's 30000 subs and you've got kind of retail kicking and obviously some some rowers and then.
Holiday promotion time, how how do you put that in context.
Overall growth plans, what does it mean for the year and and how are you thinking about you know the kind of reopening in macro challenges being maybe different this year than in future years, maybe put all that in context, and then one quick one on.
Fitness is a service is that.
Contributing to slightly elevated churn or is it still kind of immaterial at this point. Thank you.
Let me just use the term they both did it.
Does have higher term, but it's immaterial would be like a basis point so.
We can ignore the effect of <unk>.
Last one turn for the future.
That's some growth during holiday is paced by the decrease in spending which is quite substantial I'm a year over year basis.
Sequential basis.
Want to spend more could.
We could have significantly more growth.
I guess, the other comment I want to make about gross and then I'll turn it over this is.
[laughter].
It's not very ambitious target.
That's good news and there's bad news and then.
It is I would like it to be higher.
Let's see what happens.
The good news is.
Or ought to be limited downtown.
That number.
From a cash flow perspective.
I think you are on the right side of that equation for planning purposes.
<unk>, Yeah, I was just gonna say that pattern.
We have seen some research that might.
Indicates that the economy is it happened back from my other company.
Certainly having an impact on near term can I can I can set next hardworking [noise].
[noise] sorry about that.
Backfire thrill.
Ron equal.
Yeah.
<unk> one moment for our next question.
Our next question comes from the line of Eric Sheridan from Goldman Sachs. Your line is open.
Thanks for taking the question may be following up on Justin's on on retail just how should we be thinking about the contribution from some of the new retail partners beyond just the December quarter, and how do you think they can can help evolved the distribution strategy in light of what may remain sort of damping.
And demand environment short term, but you're wiping out the distribution narrowed around the name how should we think about those countervailing factors in terms of supporting growth, but as return the calendar calendar twenty-three. Thanks.
Let me say, we have some of the same questions.
We broadened our retail strategy because we felt it was important to beaver our customers are.
But the only way to know how successful this strategy will be at the accident into it and see what happens and then based on what we're learning.
The business model in order to capitalize on the success as in <unk>.
Any losses it comes with.
At the cost of some margin.
How's it going so far while Amazon has outperformed their expectations for sure. We just launched Dick's sporting goods, we have high expectations for it but it remains to be seen.
How will perform overtime.
Thank you you want to add to them.
Yeah, I think that I think that covered it but I didn't want to go back to the prior question that got cut off I apologize.
Airline went off for a second.
Ah College unfortunate.
So going back to that question around our guidance forecast I was talking a little bit about the economy and creating a headwind fries.
And from any other business days right now did you want to say that you did have confidence that our our our keeps your guidance forecast incorporate macro the latest on macroeconomic Chang.
And to the point that we do have the ability to grow faster for wanted him, but because we are trying to balance.
And delivering on our cast struggle.
That you know, we we have not been overly aggressive and art and archiving forecast for kids too and I do want to point out that you know again back and.
Service and our C. P L Uhm, which we had to have been strength fast and now will be continuing to grow fast <unk>. They may or may not be able to be honest with you will see but we also have like a secondary market activation staying another opportunity for us to get subscribers.
And in the context of the overall ye we are still not providing any sort of for your guidance on revenue or sauce.
What was that last quarter still hot and that we do actually have anybody area resembled seasonality.
22 in terms of revenue require if that helps.
[laughter].
Let me just comment on a.
One additional comments Elisa touched on the growth and.
In secondary market.
Accurate subscription activation that has grown significantly over the last year and I expected the big of sorts of operating leverage for us and we're talking about how we can lean into that ecosystem.
And ensure that it's healthy and viable so rewarding to doubt. This is this is someone who own device. It became a potted plant in their home they sold it in the secondary market someone bought it and then someone activates the subscription and becomes a monthly subscriber into your request.
Well.
Next question space Victor.
<unk> one moment for next question.
Our next question comes flying online Schenk from Morgan Stanley .
Is open.
Great. Thank you and ask them out here.
Near me.
Yes go ahead Laura.
I'm not connected fitness gross margin I still negative 12 per cent, even including the recall impact I guess, but the restructuring changes largely behind us what what needs to happen to get that back into positive territory and what's the the rough timeline for that thank you.
So so.
For your your correct first of all I guess, you're right. If we are just for the <unk> negative 11.6 per cent, Chris Martin we.
We are we are.
Expecting to see increases.
So I first of all I want to highlight before I, even start talking back to <unk> I want to highlight the and prevent that we've seen in our margin quarter over quarter from too far so it's a tremendous improvement.
And keep to our overall gross margins are expected to be around 36%.
And then for connected fitness, we're not guiding to that but we are expecting to see them and continued and prevent as they improve our middle mile and.
<unk> and <unk>.
Final mile. We'll see those continue to improve over time, one thing things that you put pressure on our gross margin now are things like staff. For example continues to car that will put pressure because of the fact that we do take that accent, but the delivery costs of the bike upfront and.
And then also the the economics of third party retail are such that they can put pressure on our gross margin to consider the marketing expense associated with those channels at <unk> Avenue. So the key thing that I want to point out is that we are managing our business towards generating an improvement in gross margin and then I'll also overall generating positive cash flow.
And and positive adjusted EBITDA. So you know overall white <unk>.
Want to look at gross margin, but you do need to also realize that some of these programs has such a different cost structure in awhile and it may bear out that we have some impact I got smart and that would be a benefit upfront a piano that makes any sense.
<unk> one additional nuance.
Could you comment on how long you think it tastes for.
The cost reduction in final mile in middle mile straight those kinds of things to find their way through our balance sheet and into the piano.
I think you know.
This is something that is going to take a little bit of time, but we are seeing the benefits every quarter getting more and more attraction. So I think probably by I don't Wanna give us.
Hopefully by the end of the year, we should be in a much satisfied on.
I'm, just trying to tease out the average.
Versus iPhone.
Mmm.
Okay. Thank you and the only point is that.
As the economy, yes.
<unk>, no afraid cost decline and empty restructure our middle mile and last mile because of the way we accounts are.
Our inventory take awhile for those benefits.
Find their way into the P&L, we have the cash benefit, but we don't see the P&L benefits yeah. That's it that's the point is that like the freight costs for when we brought some of that inventory on debit card and said that will have to work its way through our inventory and any other key is that our storage costs will continue to decline inventory.
Inventory around uhm, so those things will also be benefits ethic.
Lower inventory position and that will be ongoing for the end of the year and probably end up by 24 o'clock and our service clubs had been very significant.
I understand thank you.
Thank you.
For our next question.
Our next question comes from the line of <unk> from Evercore ISI. Your line is open.
Okay. Thanks, a lot for taking my questions how much how how does the accounting for a third party retail partnerships actually work, so whether it's Dick's sporting goods or Amazon or health and how should we think about how your accounting for in terms of subscribers revenue and then you also.
Mentioned there is a contrast revenue aspect of it so it would be great to understand that and then the second is very if you could talk about how how the leadership team and the company's organized now for growth. So how how our growth initiatives internally managed as the leadership team to report to you.
Which segments are you know focused on for a long time, but thank you.
So so as far as the third party retailers go we do have a couple of different models that we use to work with them. So.
A case of Amazon, we have a wholesale model so Amazon will buy the inventory from US and then they will re spell it and our revenue recognition will come at the time that we actually sell the inventory through them rather than Monday sell it to the customer.
And the subscribe or will come even later so they have to solve it they have to sell the bike to the subscriber it has to get delivered and then have to activate to think about that being a longer time frame from when the inventory get sold to when we actually see the subscriber activation that'll get disconnected timing there.
With that we have some we have some.
Wholesale type of model, but we also have a drop ship model. So that's the case, where somebody walks into Dick's sporting goods orders, a bike or tread and then they send a signal to us and we can fulfill the order and deliver it to the customer. So in that case, we recognize the revenue at the time of delivery like we do in our regular.
<unk> and so that and the activation will be similar timing uhm.
Someone that you get the get received their vitamins <unk> Avenue and we got the prescription. So there is a couple of different models going on there and that you know as it is different models, they're out of a time, they're small right now, but they could have an impact on how the model out how how we see that subscription.
Revenue growth in comparison to that connected.
And then there was a part of the question about Contra revenue.
Yeah, well, they're they're.
Basically what happens is you know.
We do have some marketing expenses that way better than our agreement.
You'll go with Amazon the way that those show up in our financials as it is a reduction to revenue and so that that is that it's a it's just a different model then it doesn't show up in a marketing expense line.
Thanks to them.
With respect to the leadership team and and growth.
And read the effort.
There is virtually no piece of the business that we haven't reorganized in some form or fashion.
And and it's been Ah.
A substantial change in in the leaders and the composition of the leadership team.
Last quarter.
Restructured our approach to.
The market.
Some <unk>.
People left the businesses result, and you're in the process of.
Leading a search for a new head of marketing.
In the interim the marketing team is reporting to me.
And.
And.
And I'm spending a considerable amount of time focused on you know how we grow the business, how we work cross functionality rolled out.
Initiatives I'm quite proud of the team's performance prescribed for the launch of.
Amazon by way of example is virtually.
No functions within the business it wasn't touched by the complexity that launch Uhm fix this is equally complicated fast is equally complicated certified pre owned Lewis.
<unk> is also quite complicated.
So it's about executing.
With precision and speed.
And and breathtaking.
Thanks, very thanks list.
Okay. Thank you one moment for next question.
Our next question comes from the line of Deepak <unk> from Woof Research. Your line is open.
Great. Thanks for taking the questions. So first Barry John after making the adjustment about Canada is around like 1.2%, it's certainly better than one Q, but are you comfortable with these levels as you think about the next day.
To 24 months can you give some color on the profile of customers that are kind of atoning right now and then the second question a little more strategic one the channel expansion on distribution makes a lot of sense, but of curious we have explored opportunities to kind of leverage peloton Brandon content that you have or something.
In person, maybe either under a franchise model or through partnerships with other in person fitness studios and.
Would love to hear your thoughts on that thank you so much.
I think the first part of the question the backwards.
Any color in his turning the short answer is no.
Turn is one of the aspects of the business along with.
Computation product group and and <unk>.
Content to you don't.
Don't focus on and the reason I don't focus on it is because it works well and it's not.
One moment broken.
And.
There is no operating leverage to be had in in my trying to reduce turned by.
A couple of four basis points, it's just not gonna happen.
What a hand focused on with pumpkin with Jens team is in improving the user experience.
Primarily by leaning into personalization.
We've made that a large focus area, where there are a number of improvements that have already happened to enter in process. Both on your screen on a connected fitness device and then the digit lap.
My belief is that with.
With a more deeply personalized experience we will see you.
We'll continue to see improvements.
An engagement engagement.
Engagement improved versus <unk> pre COVID-19 period.
About.
Just shy of 20 per cent in the current quarter.
So I don't mean to signal that we'd have engagement issues, but I think it can be better still and if it is better still I think we will grow faster.
At a lower cost because we will have more organic growth because you'll have more delighted subscribe you can't believe that because that was a phenomenon. We thought that was just a moment, let me select Netflix.
So this is my comments on Chern and.
Leveraging the brand through in person.
Fitness.
It's been.
Quite a bit of time thinking about this and this is a use case that that I'm trying to attack with our with our digital App.
And I think doing it that way is the better go to market strategy, you've been trying to negotiate.
Uhm revenue sharing splits with other commercial businesses and having to pay what I think would be considerably higher music right. So as a consequence of becoming a commercial application. So I'd rather sell you may have you take your digital have wherever you want to take it to engage in <unk>.
Content.
Could be your home could be the gym with your friend's house could be outside while your money.
That's a much larger tamper us as a as a better margin structure for us.
Got it. Thank you alright. So next question please.
Thank you.
<unk> for next question.
Our next question comes from the line of Ron Josie from City. Your line is open.
Great. Thanks for taking my question I wanted to maybe work that to turnaround here in just about the free cash flow guidance I think the letter talked about reaching near breakeven and 23. So if you could just help us a little bit more on the investments and and also what what makes you feel better about beating that one year timeline and begin the goal here to getting.
Breakeven questions on on free cash flow and breakeven in the back half and then any update on the AD campaign I think we saw it in mid September obviously, we know the guidance here for the holiday quarter, but I'm talking just curious about the recipe receptivity of the campaign. Thank you.
I'm Gonna ask us to talk about the the free cash flow runs.
And then I might ask you to repeat the second part of the question I have a hard time hearing it I'm sorry.
So while we haven't specifically guidance cashed phone number uhm at all we you know we've talked about like all of it can free cash flow breakeven or near breakeven by the second for the second half of the year.
And you know, we we remain on track to being able to achieve that call uhm, it's not certain there's always some risk it's not a guarantee dotcom, but you can see an R. In this quarter you know we've reduced our cash prize significantly from the prior quarter and affordable for that so we're making a tremendous amount of progress.
Towards that goal.
And we continue to remain focused on it so you know that.
Yeah, that's that's like Wallenberg, continuing to maintain it will be able to give up on it.
A couple of things one is a grown increasingly confident in our ability to forecast the Tesla based on a recent performance over the last three quarters.
<unk> Entertainment.
I've done quite a good job there and we've made considerable progress.
So that's one two is a little color on cash flow.
Quarter or two ago I think there was the impression that because we have our inventory at least in the first half of the year, we got a big tailwind as lucrative inventory.
Pay to replace it that is true, but we also had a big headwind and that was the the the.
The settlement payments.
With our suppliers.
When when we realized that.
We had contractually committed the more inventory then and we had understood back in the <unk>.
And those too.
No no no.
Across the entire ear.
There's a net benefit.
6 million something like that.
And entirely and Mr. Note for the business and I just wanted to make sure that that.
Nuance.
Was.
Well understood.
Certainly street corner for sure that in Q1 that you know that any inventory benefits that you see with anti balance is coming down about that by credit card.
The last point I want to make is with respect to restructurings.
We've recently.
Eliminated roughly.
Roughly 500 heads.
In order to complete our right sizing up the cost structure of.
Of the business. So we are done now.
And and in my humble opinion.
There are no morehead has to be taken out of the business.
S O from a cash flow perspective, we're gonna need outperformance the rest of the business.
Needs to perform this when you expect the business to perform.
Meaning no R.
Working capital dynamics needs to be more or less aligned with.
Our forecast.
Growth needs to be more or less in line with our forecasts cost per <unk> per line with our forecasts, we're not gonna get there.
By taking the additional heads out of the business.
<unk> operating expenses.
And I just wanted to I wanted to increment investors about that I might be clear with our employees about that we are done.
<unk>.
The one thing that I will caveat.
A complete yesterday is that we are still working through our first party reached health insurance.
So we are you know that is that is one of those processes that just takes time to get out of somebody it's Sharon laces and so that will be one ongoing piece that we will still have through the end of the fiscal twenty-three migraines.
Four o'clock already announced.
<unk> could you repeat your question about the advertising campaign, we didn't understand it.
Yeah, that's it thanks, Peter and appreciate the answers on the free cash flow just on the AD campaign I think we saw it started at least a new campaign sort of mid September and understood. We have guidance here for the holiday quarter, but just curious on the receptivity of this recent campaign and we're seeing ads for for the broader peloton family of products.
So any insights that would be helpful. Thank you.
Let's think about it in terms of.
Ron purchase intent for.
For the brand.
Is.
Up slightly everywhere.
Except for Germany, where it's taken a slight hip.
Because of the advertising campaign or not.
Hard to say honestly.
Second point I would make a bad advertising generally and lots of campaign specifically is it in the current market environment. Our dollars are going a lot farther than they were a few months ago, because the advertising market has softened considerably and so we were able to acquire.
More media impressions $4 spent.
Then we were expecting coming into the holiday season.
Nice to be seeing how that translates into and growth.
But it was the first tailwind we've seen him in that marketplace in la.
<unk>.
Next question. Please <unk>.
Thank you one moment.
Our next question comes from mine.
Ah Nisha Sherman <unk>.
Yeah. Good morning, Thanks for taking my question. So uhm, let you get some great color on the hardware gross margins in the trajectory I Wonder if you could talk about the subject gross margin where do you think this could go as it scales up and what can you give some color on where it was on an underlying basis. It seems like you had someone.
<unk> music and things like that so where are we underlying and then where could it go as it scales up and then I have another question on inventory and was down 100 million. Obviously, you have a lot more distribution points and fast et cetera is $100 million a good run right. I mean is that what you're kind of modeling through the rest of the year as you work through your existing inventory. Thank you.
Okay, well I think that that's part of that question around subscription margin first so we did see some pressure on subscription Martin, particularly in desperate it down about 64 and mine roughly with the prior year. There are a couple of drivers of that one of them was just hire music licensing.
Guarantees and that's related to test our subscriber growth and.
We also had some elevated at Comcast.
<unk> and that was specifically related to our equity hyphen investing acceleration and so we don't expect any further pressure pressure subscription Martin going forward, but I.
Wouldn't expect in the very near term for it to go up substantially from where I'm at right now.
The other question about inventory so yeah, we do expect inventory declines throughout the year I don't necessarily have a view of how much. It's gonna decline quarterback border. One thing I do want to point out as soon as you have some inventory that we need to buy specifically related to like a rower.
And you know, but we will see uhm continued sequential declines in inventory rectorate over the course of the year and beyond.
Okay, let and one follow up.
Do you have any color on what the subs margin was X those one off this quarter.
I couldn't quite I'm, sorry could you repeat that I couldn't quite hear the first part of that Oh, sorry, I I just had a quick clarification on the subsequent do you have any color on where the subs margin would've been X those one off costs this quarter.
I don't have a specific number for ya.
Okay.
It's it's.
The state is that if it came down from where it was and two four you can say it's hard to.
Give you exact percentage of how much of that that's related to related to see that the minimum guarantee.
I would say that use it set up where we're at now is a reasonable rough approximation.
It will be for awhile.
Okay. Thank you [noise].
Thank you one moment for next question.
Our next question comes line of Mario Lou from Barclays. Your line is open.
Great. Thanks for taking a question just wanted to follow up on the comment you made earlier in terms of revenue seasonality for the rest of the year I. Just wanted to confirm is that is that related to total revenue or you know.
Just connective fitness revenue for the rest of the year.
If that would be total revenue.
Got it and then and then Barry you mentioned half of the digital subs.
Currently a slightly using somebody else's hardware.
I understand some of the classes right now on Palestine dies and in the future wrote classes may be dated to only owners of telephone devices can you talk a bit about this potential strategy updating classes and you.
That could be a significant uplift to convert digital subs overtime.
I'm gonna hold off I'm talking about the digital strategy uhm until we roll it out.
Other than to say that there.
It will have a premium component there will be good.
Great. Thanks.
Thank you one moment for next question.
And our last question comes from the line of Andrew Food from JMP Securities.
Mine is open.
Thanks, So much for taking my questions on the guide it feels like Opex declines are starting to slow as we think about next quarter can you provide a little bit more detail around R&D and G&A.
Understood head count is kind of stable, but any help in terms of other items that may be involved there.
And then can you talk about the consumer reception to self assembly and how that Scott next month.
Or as a consumer reaction to what.
Self along with some animal.
Oh.
So with regard to the <unk> <unk>.
We some of that change that that changes that we made.
Regarding a reduction in force for it those where it keeps you again, so we will see some declines in such an a and R. M b Okay <unk>.
<unk>, but you'll see in Q2 and that's reflected in our adjusted EBITDA guidance is the fact that we will be sending more clear of require a marketing that's part of our holiday is part of the holidays kind of promotion timing uhm. So that's so to the extent that you were looking at the guidance and turn it back on.
It's Virginia, and I hate I will still be some decline Sir uhm.
Uhm upset by some higher spending in quarter for sales and marketing.
I hope that that addresses that question.
And we'd say last longer term teenage it's gotta come down as per cent of revenue just to be clear.
Structurally broken currently I can see the past to fixing it.
Be some additional spending along the way.
From the 19 perspective.
There are a number of things that.
When they're sick today.
They become the roadmap towards.
Gotcha.
And then do you Wanna since you're the.
Okay.
An expert.
[noise] mm.
The the there have I haven't seen much about self assembly aside from the fact that there hasn't been a lot of complaints about that so to the extent that you know that customers are not complaining about it a second thing and.
And yeah, so that that would be the we are getting good star ratings by now my son, So that you know that again gets confidence desktop assembly it's working.
Thank you.
Okay.
And that's all the time, we have for Q&A today and this does conclude today's conference call. Thank you for participating you may now disconnect everyone have a great day.
Thank you very much.
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