Q4 2023 Peloton Interactive Inc Earnings Call
I'll now turn the call over to the operator for our first question.
Thank you ladies and gentlemen, if you have a question or a comment at this time. Please press star one on your telephone if your question that's been answered he wished to move yourself from the queue. Please press star one again, and we ask that you limit yourself to one question and one follow up and one moment for our first question.
Our first question comes from Ron Josey with Citi. Your line is open.
Great. Thanks for taking the question I Wonder Barry you talked about two things I think in the letter you talked about an uptick in sales in the last eight weeks and want to understand a little bit more what do you think is driving this is this.
The result of just new brand spend or maybe seasonality coming back and then in the letter you also talked about free cash flow being part we'd expect it to be in the back half of 'twenty four just talk to us about the drivers that that'll lead to that positive free cash flow and our confidence in getting that metric. Thank you.
I don't know the answer to the first question Ron I wish it did.
If I did we could lean into it.
And try to leverage it.
I imagine there's some macro forces at play there is some seasonality at play.
We just don't have enough.
Inside into the into the cause and effect.
Give you a thoughtful answer.
But the trend seems to be.
The whole thing.
Yeah.
For how long and.
Most of the slope of the line be cannot answer.
Answered that either wish I did.
As it relates to the cash flow and then in the back half of the year.
We.
Okay.
Our forecast is really it.
The tale of two cities.
The second half of the year looks quite a bit different than the first half.
Got it.
We don't have very aggressive growth assumptions in my view, but we.
We need to achieve that growth.
Forecasting in order to be able to generate the financial performance that we're forecasting if we do those things.
The metrics and in the last quarter of the year in particular.
A pretty stellar its double digit revenue growth at 40 plus percent gross margin positive adjusted EBITDA. It is positive.
Free cash flow, we'd all be ecstatic about.
That kind of performance.
If we can achieve it.
<unk>.
Okay.
We have been.
Reasonably good at forecasting our.
Financial performance relative to our ability at least in recent quarters to forecast growth in subs and connected fitness unit sales.
And.
I think there is more upward bias in the forecast.
It's hard to say in one of the reasons.
Think that is because.
The.
In the towards the close of the letter.
<unk> mentioned.
Number of new initiatives that we're working on.
There are a handful.
And I am confident that we will land.
And we haven't built.
Any upside into the plan associated with those things now we haven't landed them. So there is still uncertainty again I can't talk about them until we do but if we do.
It adds even more certainty.
On the back half of the year.
Alex is going to add one additional thing about the free cash flow, which I think Barry mentioned in the letter, which is we are getting into a much more normalized inventory position than we have been.
Last year, and so we are buying more inventory, particularly there.
Our bike and tread product and we're going to have to spend in advance of holiday to build up some of that inventory for the holiday season. We also have our seasonality in our marketing spend and those two things put a bit more cash flow pressure on the front half of the year rather than the back half of the year.
Just the timing of those.
In relation to our hardware sales.
I wanted to call that out as well.
Thank you very much.
One more comment if I could I'm, sorry to be so long winded Brian .
We certainly have had our fair share of.
Anticipated surprises.
And not all of them coupled to the business.
<unk> being the latest example, Linda just settlement being another example.
I don't know how many more of those unwelcomed surprises there are in our future, but it seems to me.
Great.
We have to be getting closer to the end of that story than we are at the beginning.
Understood. Thanks, guys.
One moment for our next question.
Okay.
Okay.
Our next question comes from Doug Anmuth of Jpmorgan. Your line is open.
Thanks, so much for taking the questions. Barry you are about three months into the brand relaunch do I know this has also come during a seasonally lighter period I was hoping you could talk more about the progress that you've seen here and how marketing could evolve in the first half of your fiscal year as you head towards the holidays. Thanks.
Hey, Doug.
Couple of thoughts.
One very high level.
And the team.
You've often heard me speak about the importance of talent density.
No.
Never more true than it is in that sense is not to create more pressure.
Oh and the marketing team.
Already exist for them they have done just a spectacular job with the with the relaunch.
The creative has been nothing short of amazing.
And the creative that is going to follow is even more spectacular.
And the early indications are that we are.
Achieving the objective.
Had set for the business.
Attract a younger audience. So we've seen a tremendous increase in engagement with Gen Z by way of example.
Capturing people earlier in their fitness journey than we ever had before so anytime anywhere any place messages.
Yes.
Yes.
Absolutely landing.
And.
Yes.
<unk> objective was to remind people that and particularly with the launch of the App.
That it's more than just a stationary bike company.
And that message is.
We're also finding traction so.
Lots of reasons to be enthusiastic about that.
We are going.
And.
The.
One.
The last point I want to make.
It's in reference to the co okay.
Two co branded deal.
Already announced one libert cooling yesterday University of Michigan.
It's very clear.
From our conversations with those brands are very highly regarded.
Other inbound traffic.
We've had which has been significant.
Yes.
The rest of the World regard the peloton brand.
Barry highly.
Sought after as a partner and.
That affords us the opportunity to capitalize on that youll be hearing us talk about AD nauseum as the year unfolds.
Great. Thank you Barry.
One moment for our next question.
Our next question comes from Justin Post with Bank of America. Your line is open.
Great. Thanks, a couple.
Barry in the letter and on the call already you've mentioned some growth initiatives that youre excited about I.
I think we've already talked about fitness as a service and some of the retail initiatives anything new or something that you would call out that you are really enthusiastic about for the year and then second on churn.
Can you help us quantify how much of the 80000.
I guess you'd say in Activations at the end of the quarter, maybe related to the sheet posts and as people receive them do they do they get back on are you seeing any positive progress this quarter as people received this each thank you.
I'll take the first part and then I'll ask.
That's part.
Part of the question.
With respect to growth initiative Justin.
Yes.
We had articulated.
Year, and a half ago with good better best strategy.
Service increasingly accessible to new users.
The reintroduction of App.
Was it.
<unk>.
A component of that strategy you.
You mentioned <unk>.
This is a service we started that a year ago.
50000 subs about $45 million in revenue.
We will grow it by more than 70% on a year over year basis. If the current trends continue trend was up slightly in the quarter, but.
That was related to the postscript Buffalo and it's likely to come back down.
Yeah.
Certified pre owned.
Yes.
Worked extremely well for us.
<unk>.
And we're seeing good momentum in that side of the.
As well so enormously excited about those initiatives.
In the current year.
International will be a growth opportunity for us it was not this past year because this past year. The objective was to reduce the operating losses of that business, which we did to the tune of about $40 million.
But you'll see us leaning aggressively into growth in existing markets like Germany.
Like Canada like the U K.
With new product launches.
And.
And co branded partnerships like we did with report by way of example.
And then you'll see us in the U S by way of growth initiatives replicating that co branding experience.
Components of those deals will be I think.
Have a couple of common characteristics there'll be multi year there'll be global there'll be exclusive.
There'll be collaborations on content creation.
And.
That will be co marketing and social media components.
And.
If we execute them well.
We will benefit enormously from associates and of our brand with their brand.
And our members will benefit enormously from the content creation.
If that happens as a result of it.
Of those deal.
And all of them combined I think well.
Contribute to an acceleration in our growth.
Okay. I'll go ahead and take the question on churn so one.
You mentioned last quarter in Q4, we did expect to see a model a modest sequential sequential increase in our churn and that's consistent with the seasonal trends that we tend to see over the summer.
Look at our legacy churn metric at one 4% that we had for Q4 was about 10 basis points roughly higher than we expected we expected it to be about one 3%.
And then what we did see in the related to the recall was that we did see our churn rate increase a bit in may and June relative to April and Thats atypical seasonality for us. So we do believe that that was related to the <unk> recall.
When you're referring to the 80000 Europe , referring to the pod subscribers.
Folks are now in our new metric considered churn and you can see that uptick from around $50 55000 range that we've had more typically to about 80000 and that took us to a one 8% churn rate when we consider those pas subscribers churn, we did expect pod subscribers to go up a bit seasonally.
And in Q4.
Cause of just the seasonality in people at the time when more people pause their membership, but the outsized increase is hard to quantify exactly.
We do believe it's related to the Q3 call now in Q1, I think it's really important because we're guiding to this new metric that we kind of anchor on that one 8% that we that we shared in the letter.
We do expect churn to come down substantially from that one 8% because we don't expect to see an increase in pas subscribers like we did in Q4.
Likely we'll see some level of decrease but we're not really forecasting a huge decrease in Pos for part of the reason that.
Subscribers can pause for up to three months people started pausing.
And kind of the June end of May June timeframe, and we also know that some people are still awaiting their policy. They should all receive them by the end of September but we don't know that people will immediately on pause the moment that they get there.
But it is really important to understand that just by virtue of not having that paused subscriber base increase our churn should come down to more like the one 4% range and perhaps even a little bit better than that we'll also expect to see a little bit of benefit from seasonality as well.
Hopefully that.
Thank you.
One moment for our next question.
Okay.
Yeah.
Our next question comes from Eric Sheridan with Goldman Sachs. Your line is open.
Thanks, So much for taking the question wanted to if I could get some of your more updated thoughts on the digital App strategy. What are some of your key learnings as you continue to position that strategy and how should we be thinking about some of the investments you want to make to sort of drive growth against your longer term goals in terms of building the subscriber base around the digital app. Thanks.
Well look.
We've had.
To date about.
Slightly in excess of 900000 people.
Download the App.
And about 600000 of those roughly.
Or are new to the platform.
So we.
Continue to lean in.
Creating awareness.
Driving trial.
With respect to the to the <unk>.
Paid apps.
We're seeing a higher percentage of app plus users than than we had.
Anticipated.
Which is a good thing.
How do we continue to find success.
With the App.
You need to continue to allocate marketing spending towards it in there as well.
There's this constant tension.
Do we spend it on on connected fitness units.
Two we allocated a larger.
A portion of the slice of the pie.
Spending in the App.
Yes.
See how the needs of the business develop as the year unfolds relative to our.
Our plan.
Secondly, we need to.
And sure that debt.
Okay.
The app.
Interface continues to evolve in ways that make it compelling and easy to access and engaging members right. So it was originally designed to be an adjunct to <unk>.
Membership.
Freestanding app.
So we continue to.
The design and the interaction.
Lastly, we need to continue our our current investment in <unk>.
And personalization.
Yes.
On console for connected fitness unit, so that great.
Great content.
That we create is.
Is discoverable.
Remember.
Sure.
Enjoy it if they only knew that it existed St talent.
Spotify facing challenge that Netflix base.
We are personalization.
We're engaging the user experience will be the stickier the user experience will be the lower the churn will be there.
More satisfied the members will be the organic growth, we'll have that lower the sac will have.
The LTV so.
That's the playbook for success.
Thank you one moment for our next question.
Okay.
Our next question comes from Andrew Boone with JMP Securities. Your line is open.
Good morning, and thanks for taking my questions.
The <unk> 23, gross profit margin guidance seems to imply that connected fitness margins or very near to breakeven.
Do you guys think about pricing and bringing down the price of the trend and the ROE is the right way to think about managing hardware gross profit margins breakeven or how do you guys think about the strategic plan.
Okay.
I was wondering if you take that.
Yeah sure so youre actually Youre about right. That's for Q1 that implies a roughly neutral connected fitness gross margin.
When we look at our unit economics for the business.
All of our unit economics aside from God show that we have the ability to keep our gross margin in the positive territory, but.
What that what that means we do have we thought about based on our variable costs kind of a conference and margin structure and it does it doesn't include things like promotional activity.
And.
And we.
Which we will continue to have some of that it also.
Requires us to have a certain level of volume otherwise we do have some we have fixed costs that we also have to cover.
No.
As our volume growth in our volume scale, we do have the ability to achieve positive gross margin, but in Q1 will be challenged a bit in terms of arps weak hardware sales that we're expecting to have.
Got it that is impacting our gross margin.
Connected fitness gross margin guidance in the quarter, but the key thing to note here is our goal is to really grow our subscriber base.
We're going to continue to work on ways to do that and well evaluate our hardware margin really through the LTV to CAC framework.
As we said before we said it multiple times, our focus on driving efficient subscriber growth through the lens of LTV to CAC and if you think beyond Q1, we're going to look at the tradeoff that we have on.
Reducing price are offering promotional activity those sorts of things, which reduce LTV in relation to efficient marketing spend.
So we'll continue to make those trade off in each quarter evaluate what is the best strategy for us.
Let me jump in and add a slightly different perspective.
If I could Andrew.
Okay.
I've been here about 18 months give or take.
And when I walked in the door it seems to me.
We had a limited number of tools in the toolbox in order to grow the business.
And price promotion was about the only thing we have.
We had a commercial business that it was.
No.
To be re architected from a cost perspective like everything else telecom related I don't mean that in the drug at Torrey way.
We haven't we haven't things, we needed to fix and we haven't priced.
Price promotions.
A tool to drive growth.
That's very different than where the business sits today.
We have a lot of.
Irons in the fire.
I've got a lot of tools in the toolbox.
I don't mean to sound like one of those Ceos is completely disconnected from the stock price because it is not lost anything that walked in the door. When it was 39 and it was hanging out about five blocks at the start of this call.
I have never been more optimistic and we're excited.
The future of the business and there is this enormous disconnect between the stock price and the energy in the building.
Round all of them.
Partnerships and co development things that.
Our our cooking.
If im right about that.
And we are in fact less dependent on price promotions in order to drive growth and that should have positive implications for for hardware margins, which is why I went.
Through that long winded explanation.
For my second question I wanted to ask about the corporate opportunity.
I just need to make any investments on the sales and marketing side to be able to support that or what else needs to happen to really drive growth for hospitality for everything else Thats included there. Thank you so much.
Super Good question.
We just added to the team.
Commercial side.
Senior Exec from American Express, who strategic partnerships there.
Greg table too.
Help build out our sales capability to drive growth.
And commercial and corporate wellness.
So yes.
B some investment.
But.
Okay.
From a macro basis.
<unk> won't be big impact on margin.
Yeah.
Thank you one moment I think.
Alright, just going to add one more point and the other thing that we're excited about propel for the business that can help drive growth. There is that we are working on commercially launching our bike plus and our ROE and that should be coming really soon and that will give us more opportunities for business does too.
To have our hardware and our size.
It'll be great when we're able to offer that same.
And.
And <unk> plus.
Once it's reintroduced in the market as well so yes.
Okay.
One moment for our next question.
Our next question comes from Schweitzer could you area with Evercore ISI. Your line is open.
Okay. Thank you for taking my questions I've got a couple.
Barry.
Of the three things getting to positive free cash flow in the back half of next year.
Your product initiatives.
And your growth initiatives that include marketing spend international expansion corporate partnerships.
Would you say, you're a highest level of confidence in where do you think there is a greater level of uncertainty and then I have a question on forecast in terms of your first quarter forecast how.
How different is your methodology this time than it was last time.
In terms of you given the level of visibility and perhaps uncertainties of how confident do you feel in your current guidance and how different would your math method at this time. Thank you.
Liz do you want to take the second part of your question.
Sure so.
It's a little bit of an odd question. One thing that is a little different about Q1 versus other quarters. So that we are guiding much later in the quarter than we often do.
And so our confidence in our guidance range is higher because there was the last quarter to provide guidance to you there.
There wasn't really a change in the methodology of our guidance. We just added an additional guidance with regard to App subscribers I mean, I guess the other change would be that we are guiding to connected fitness subscribers, excluding paused subscribers.
And then our app subscribers, but otherwise there's really no change to our methodology.
And I think the question from me was how much how much how.
How much risk is.
I perceive in the business related to the upside growth.
And then in the second half of the year and then short answer is.
Not much.
I mean, it's pretty it's.
It's a pretty low bar.
And if we can't deliver against that bar then what the heck are we doing.
So.
And at the moment, we're all are consumed.
The potential upside.
Yes.
We haven't announced it.
We're kind of in process. So.
At the moment.
The optimism now bunch of those things fall by the wayside.
Be singing a different Tim but.
Today.
Feeling pretty good.
Okay. Thanks, Barry Thanks Louis.
One of them is for our next question.
Our next question comes from Mario Lu with Barclays. Your line is open.
Great. Thanks for taking my questions. The first one is on the free App.
It's only been three months, but any early data points to share with regards to these free users eventually converting to either all access or paid members over time.
And then on a separate note is there are opportunities for the free apps similar to Spotify.
Let me do the second part of the question and ask list to do the first part so.
A little bit familiar with that business since I ran it at Spotify.
And.
One of my takeaways from that experience when is that advertisers buy reach which means.
It requires scale and your business.
In order to be a viable player in don't have that for a long time.
And secondly, as Barry.
Resource intensive.
It requires a lot of engineers, writing a lot of code with a lot of complexity in order to.
Have the.
Measurement and other tools you need.
And automation required at scale to properly.
<unk> account for.
Yes.
<unk>.
The only way in which we would be able to participate I think as a practical matter would be to outsourcing.
I'm, just sort of a lot of that.
Netflix model.
And and.
And if we did that I think.
Would not be the user experience that we would all aspire to add.
For our members to have.
And so.
I don't perceive that as a practical matter.
Any scenario under which.
The foreseeable future.
Yes.
I think the question was.
Great version.
Yes. So the question was about early data points regarding the free app and getting people to convert to paid.
So as Barry mentioned, we have had over 900000 downloads of the App over 600000 of those have been related to users that are new to peloton, we have about a quarter a quarter million dollars.
Mostly active users of the App. So there are certainly opportunities to drive further engagement.
We believe that a lot more of these people are earlier in their fitness journeys and as Barry mentioned that we have work to do on the app to make it easier for people to get started and drive that engagement. We really do believe that building a free tier base is important for long term growth, we're very focused on driving awareness and that's been really good because they've had.
A large number of downloads, but a lot of these people I need a peloton and they haven't decided yet to upgrade to up one or what.
But that's one of the key things that we're working on how to engage them better and get them to.
To convert.
To a paid membership.
Great. That's helpful. And then second question is on a fixed cost.
Our reducer in fixed.
Opex items by 25% to 30% year on year. This quarter I'm just curious if theres any color you can provide in terms of how much further improvements we can expect to see it.
Fiscal 'twenty four in terms of the fixed cost reductions.
Yeah. So I'm wondering if I'll just talk about I'll talk about our opex kind of more in general.
Arent offering any specific targets, but we are going to continue to optimize our fixed cost base over the course of the year for.
For G&A, we're going to continue to optimize.
And reduce costs in areas like that we called out staff augmentation legal spending and customer service, it's worth calling out that in Q4, we did have a onetime benefit and our legal expenses that we don't expect to repeat but on a full year basis, we have line of sight to over $100 million and expense reduction versus fiscal 'twenty three.
For areas like R&D, we expect R&D expenditures to be similar to FY2023 as we continue to invest in our platform.
But the primary focus being on software improvements such as personalization that Gary mentioned and also improving our app, but I do think it is worth just mentioning very briefly that we are making a change in how we think about our R&D costs. So we mentioned it in the shareholder letter that we will not be capitalizing any longer a substantial.
Majority of our R&D for internal use software and so you may see that in the P&L as more of our R&D cost will be expensed, rather than capitalized it's about roughly estimating about a $10 million impact to Q1 R&D expense.
Hopefully that helps.
I did want to mention one last thing let me just mention one more thing just on sales and marketing.
Some of our sales and marketing costs, we will continue to be reducing our retail stores footprint.
So we will see some of those costs come out from a more of a fixed marketing costs that will be reinvesting some of those into sales and marketing and also in other channels that are much more efficient as well.
Thank you one moment for our next question.
Alright.
Our next question comes from Edward <unk> with Piper Sandler Your line is open.
Hey, good morning, Thanks for taking the question. So I guess, just a bigger picture question and maybe in light of what happened to seat post I guess I know you haven't reported like workouts per user in a long time, but Barry curious how you think about overall engagement within your connected fitness subscriber base.
Has it been trending to the seat post have an issue with that and then just real quickly on inventory.
I know there were a lot of extraordinary cost that we're kind of capitalized on some of the older layers of inventory I guess going forward, how should we think about kind of directionally kind of cost of goods and how the bike price compares to maybe some of the legacy inventory you had on the balance sheet. Thank you.
Maybe Liz could take the inventory piece and on safety engagement piece first and listen.
If there's anything you want to add is in place.
Two.
Macro engagement has remained strong.
But as mentioned that there were number of folks.
So.
Cause their account related to see post, but amongst the members who didn't and notwithstanding the fact that.
Notification, we ask them to stop using.
Thereby they just kept using your bike.
And as if we.
As if there was no notification.
So.
And I think that probably explains why we didnt see an aggregate.
A dip in engagement like perhaps you might have expected given the Cooper around C post.
But if you want to comment on inventory.
Correct anything like yourself.
Alright.
Nothing to correct, but I will let me let me, let me talk a little bit about inventory.
So.
From an inventory perspective inventory will continue to be a source of cash for us.
<unk> 24.
But we are in a much more normalized inventory position than we were last year.
And we are already worked we're purchasing more hardware we participate in fact for purchasing more bike inventory and.
Hi.
Inventory this quarter.
I think your question was talking about the cost of goods sold and have our cost of goods sold come down.
For products like tread, we have seen our cost of goods sold come down substantially that's part of one of the reasons why we were able to share.
To reduce the price for tread. So the freight inbound is down from what it was for the old inventory because they know it.
It's no longer and that's really expensive rates that we had to pay for freight.
We also arent storing as much inventory as we had in the past our storage costs have come down and also <unk>.
Logistics costs have come down and we have and we're continuing to make progress even in our middle mile as well and that will come in throughout the year. So all of those things have reduced our overall cost of goods and in the case of Trident rower.
Those reductions, we decided to give back to our customers in the form of a price reduction.
We haven't seen as big of an impact to our bike from that perspective.
But more to try the margin specifically.
I did want to correct one thing about various comment about the 80000 subs.
Scrubbers related to the feedstocks that was really more around 15 to 20.
20000 incremental.
I see.
Yes, it is the aggregate, 15% to 20000 incremental costs.
Yes.
Thank you.
One moment for our next question.
Okay.
Our next question comes from John Blackledge with CD Cowen Your line is open.
Great. Thanks, two questions on the college initiatives can you talk about the pipeline.
For that opportunity and then second on the rental program launched in Germany on August 9th I know, it's just a couple of weeks in but just curious how you see that opportunity in Germany. Thank you.
In reverse order in Germany, John as you May know.
Culturally accustomed.
Rental models.
And which is why the team thought that.
Fitness is a service program with land well.
It's really too early to know although there.
Yes, that's about it initially.
No.
We currently estimate <unk> and with respect to the college pipeline.
I understand where youre coming from and the question really don't want to answer it.
But you could imagine that.
Program like the one we were fortunate enough to have announced.
With Michigan.
Could scale across other.
Division one programs in for some time.
And I certainly hope that is true.
I think the opportunity to do co branded bikes.
Yeah.
On college campuses and elsewhere.
Are enormous.
And if.
I'm wondering if we're going to be the dogs at quite the car because if.
Thing really takes off then the supply chain guys are going to be pulling their hair out of course, because that's going to create enormous pressure on them.
So demand amongst rabid fan base.
I hope, we're lucky enough to have that problem.
Sure.
Okay. Thank you.
One moment for our next question.
Yes.
Okay.
Our next question comes from Nisha Sherman with Bernstein. Your line is open.
Thank you.
Historically Q1 has been your weakest quarter in Q2 to three have driven more than 60% of your sales. So as you talk about seasonality impacting Q1 do you then expect to see similar cadence through the year and Q Q2 to three.
And then I have a kind of follow on but a bit more medium term, how do you effectively kind of lowered the dollar commitment for new members over a new pricing scheme do you don't expect the seasonality in the business to get sharper and do you believe your cost basis now aligned for just generally more seasonal business.
Yes.
Okay.
Let me, let me start with that I can take the question about the revenue seasonality. So we're not going to offer our full year guidance for revenue.
But in the past you've shared sort of what the revenue phasing, we expect for the year and I'm not sure that again with you. So we expect our fiscal 'twenty four revenue seasonality to be most closely resemble our fiscal 'twenty three but we do expect it to be more heavily weighted to the back half of the year. This year as Barry mentioned.
Not quite as heavy a fiscal 'twenty one.
Heavier than it was weighted in fiscal 'twenty three.
Now the second half of the second part of the question, but what about will our seasonality change with pricing changes I think that that is a.
Tougher question to answer because.
Well now as we go along.
But the business.
It also affects Theres also factors related to the macro economy and some of that and also some of the things that we're going to do to drive.
Improvements in our App, which will improve our app experience, which should improve the growth in that part of the business as well. So I think the answer is what kind of know when we know but for now our expectation is that the seasonality will be the way I described it.
Anything else to add.
One minor point I agree with everything we've said.
I think it's.
We'll know more over time, but I think it's possible.
The App business.
Will be less seasonal than <unk>.
Connected fitness business, because our connected fitness unit stays indoors when people are outdoors.
But the App travels with you wherever you are in a number of those workouts are designed to be done.
Anywhere anytime any place.
When you're running.
We're doing yoga outside where strength in the gym.
Or if youre using the connected fitness content.
And as Jim by way of example.
Okay.
Thank you that's really helpful color.
One moment for our next question.
Okay.
Our last question comes from Jonathan Komp with Baird. Your line is open.
Yes, hi, Thank you I just wanted to follow up area. I think you mentioned, some pretty robust growth expectations by the fourth quarter could you maybe just share a little bit more what's what's driving those assumptions and then Liz just a modeling question are you willing to talk about the relative size of the pre core business on a quarterly or.
Our annual basis. Thank you.
This is going to vote.
And if I talk more about the forecast I'm certain so I mean.
I will answer it but I'm sure my answer would be unsatisfactory.
Frank to the to the year over year growth.
And.
Yes.
And.
Sure.
Yes.
1.2.
Whether or not we achieve it depends greatly on how.
Yes.
The year the quarters preceding it unfold.
So it's not like we're projecting.
Linking back to comments was just made about.
The seasonal cadence of the business, we're not seeing a big change in the seasonal cadence. So it's not like we're suddenly blowing out.
Q4.
So we stand on the shoulders of the quarters that have come before.
Yeah, I do think it is worth adding just on the revenue growth side. Just you mentioned the fact that when we do bring tread path back to market that will that will impact the second half of the year as well from a revenue perspective.
Based on how.
How we're thinking about the limited inventory that we'll have available to sell.
Now your question about <unk>, we don't provide specifics and we don't really break out that core business.
It is less than 10 expected to be less and less than 10% of our business in fiscal 'twenty four.
We are making progress on that business, though and I do want to call out that we have put in a new management team in place there they are still relatively new.
And we expect that that business should be in a much better spot.
They've made some restructuring changes we are closing a precast facility in North Carolina, we've announced the closure of that.
There'll be improving or they are adjusted EBITDA and free cash flow throughout the course of the year.
Okay. That's helpful. Thank you.
And now I'd like to turn the call back over to Peter Stabler for any closing remarks.
Thanks, everyone for joining us today, we will speak to you next quarter have a great day.
Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.
Okay.
Okay.
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Yes.
Yes.
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Okay.
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