Peloton Interactive, Inc. (PTON) Earnings Call Transcript & Summary

Thanks for joining us today for our first virtual investor and analyst session. I'm Peter Stabler, Head of Investor Relations. We were eager to host you all in person at our new Peloton Studios in New York, but we're hopeful we can be nearly as effective in this video format. Before we get started, I'd like to draw your attention to our safe harbor statement that appears on Page 2 of today's presentation, which following today's event will be posted to the IR section of our website. Today's agenda starts with welcoming remarks by our CEO and Co-Founder, John Foley. Tom Cortese, our COO and Head of Product Development, will then offer a deeper introduction into our newly launched products. President, William Lynch, will discuss engagement levers in our supply chain. And then CFO, Jill Woodworth, will update you on some key metrics. We'll conclude the day with a Q&A session and hope to be finished sometime before 3:00 p.m. Eastern. With that, I'll turn the camera and the mic over to John Foley. John?

Thank you, Peter. Welcome, everybody, to Peloton's First Annual Investor Day, first and hopefully last Virtual Investor Day. Thank you guys for being here, and thank you to our existing investors for your support. And thank you for joining. To our prospective investors, we hope to get you excited as you learn more about our business. Jumping right in, you might know that we are a mission-driven company. We have a mission of using technology and design to connect the world through fitness, empowering people to be the best versions of themselves anywhere, anytime. Obviously, as a fitness company, we are proud of bringing the endorphins and the health and wellness to people in general. But certainly, during this COVID, quarantine, shelter-in-place world, we are even more excited about what we bring to people into their home, and let me go to the word connection in our mission. Really, the connection that people have with other people, the community and the instructors, in today's new world or hopefully short-lived world, we think this connection is not just important for your physical health, but for your mental health. So we've been happy to be a part of people's lives, and we thank our members for being a part. So how do we bring this mission to life? We have a unique vertically integrated business. I'm sure you've kind of pieced this together already, but let's review it. We make our own hardware. We make, at this point, a bike portfolio, both our Bike+ and our original Bike. And we make the Tread and the Tread+ that we launched, the Tread -- lower-priced Tread that we launched last week. And on each one of these platforms is a massive touchscreen with all this vertically integrated or integrated hardware. So the screen and the Bike and the Tread are integrated with the speakers. And they talk to each other. The metrics are all integrated, so it's a very immersive experience. Then you layer on our software. If you're familiar with Marc Andreessen's quote of "software is going to eat the world," we certainly believe that at Peloton, we can't write software or hire software engineers fast enough. There's so many sexy things we get to do in building these platforms, and we're just getting started on the client side and on the cloud side of our software stack. We also are a media company, as you know. We stream our own media live and on-demand to our platforms. I will point out that we stream that content to our Bike and Tread platforms, but we also stream it to other platforms. So we are what's called platform-agnostic, where we stream wherever the consumer wants to take a class, whether it's a yoga class or a strength class or a running class or a cycling class. If you have our hardware, great, you have these immersive experiences. If you don't have our hardware, you can try it on your screen. So we are there on every screen in your hands and in your home as well. We run our own retail stores. We do not sell through channel. We are what's called, as you know, direct-to-consumer. We do not sell through channel partners. You can buy Peloton products at our stores, on our website or through calling and talking to one of our inside sales folks. And then lastly, we are also a logistics provider, where we deliver the majority of our Bikes and Treads globally. In Germany and the U.K. and Canada and the U.S., we deliver the bikes -- the majority of our Bikes and Treads. And in the coming years, I think you're going to be interested to see that this logistics platform that we've built is also going to serve as a reverse logistics platform, as we continue to bring new products into market. And then we will be getting their older products back and launching a more robust certified preowned program that we're very excited about. So how are we doing? You'll see, and hopefully, you were paying attention last week, it's right around triple digits, 100% growth for 6 years running. And if you layer on the top end of our guidance that Jill put out last week, you'll see that we do not plan to slow any time soon. We are investing for growth. We are trying to scale our supply chain to keep up with demand. Today, our supply chain and our operations teams have done an incredible job keeping up with demand. And we plan to make estimates to continue to do so for years and years to come. More than our revenue growth, we are excited about the member growth. Our Connected Fitness subscriptions is growing even faster than our top line. Why this is important is this is the recurring revenue piece of our business model. And so to the extent that our member growth is growing even faster than our revenue growth, it's a great indication of future revenues. And perhaps, even more important than both of those is that our total workouts and the engagement we're seeing from our members is growing even faster than both our revenue and our member growth. This is fueled in part based on more platforms that we're providing our content on more platforms. We're providing more styles of content and more categories, and we're seeing more members in -- for each subscription, more people in one home getting on the platform. So think about you bought the Bike or the Tread 2 years ago, your spouse is now on it, maybe your 15-year-old son or daughter is on it, all for that same $39. So more value and more engagement as we're seeing that you'll also hear more about today. While we are doing this, we are also building a powerful lifestyle brand. You might be interested to know that our apparel business, our boutique apparel business, is growing even faster than our core business top line. I often say it's an exploding demand of people wanting to put Peloton jog bras and leggings and pullovers on both men and women. Our business -- the apparel business is doing great, but it's really funding or fueling the lifestyle piece of our business. And how are our members doing? I think, by now, at least for some of you who have been investors for -- since the IPO or even before that, we have a high Net Promoter Score. Just last month, our U.S. Bike Net Promoter Score for July was 94, which is one of our highest yet. Net Promoter Score is something that we care deeply about. It's how satisfied our members are. And obviously, at 94, if you study this like we do, you'll know that there's not many businesses in the world, not many consumer businesses in the world that have a higher Net Promoter Score and more loyal and happy members than Peloton. And lastly, perhaps the thing we're most excited about is our members and our member community and how engaged they are not just with Peloton and not just with their favorite instructor, but with each other. And that is a very powerful part of what we're building is this community. And the macro Peloton community is very powerful, but the micro Peloton communities are really interesting. I have a couple of them here. Forgive me, I'm going to refer to my notes. When you think about the 100,000 tags that have been created just in the last 6 months, and a tag is a group of people that want to get together and motivate each other and work out together on the Peloton platform, tags like Peloton Teachers, where there's 14,000 Peloton teachers that have found each other and are motivating each other and supporting each other and working out together on Peloton. Hello, Preggers -- Preggos, 5,000 pregnant women who are bonding and finding each other and working out together. Big 4 series of apparently a bunch of accountants, good for you, congrats to the accountants on Peloton. Army Vets, Mamba Mentality, We Are Penn State, Pelatinos, all kinds of different -- I mean, there's literally 100,000 of these affinity groups that are people bonding together and supporting each other on Peloton. So this is a slide that I hope you can digest, I hope you can see. I've been presenting this for a couple of years now. And basically, it kind of highlights what has happened in several other categories that have been disrupted by digital media. And interestingly, I'll tell you that I study this stuff. My partner, William Lynch, studies the stuff. He was formerly the CEO of Barnes and Noble, so he lived this when he brought the NOOK platform to market. He and I saw firsthand the disruption that was taking the place of books as Amazon, Kindle and Barnes & Noble NOOK were disrupting that via a hardware and software platform that has allowed you to consume content at home. Peloton, in the fitness category, we believe, is one of the last categories that will be meaningfully disrupted by digital media. We're starting to see it. We're seeing it with the engagement. We're seeing it with the Bike sales and the Tread sales. And I just think it's a fascinating study of business with digital media disruption that if you haven't seen this or haven't heard me talk about this, I thought you would be interested. And the summary is that if you have better experiences and more selection in a time-shifted media consumption place so that the class starts when you want the class to start. In the '80s, the movie started on Friday night at 8:00 down at the theater 15 miles away. Similarly, in yesteryear, the class starts at 8 in the morning at some other location. When you have the Peloton platform in your home, the class starts at 6:22 in the morning when you get on the Bike or when you get on the Tread and you press go. So it's just a much better model for the consumer. It's a better location. And what you're going to hear today, hopefully, as we get into some of the metrics and the engagement and the usage, it is also a better value. Last -- I think you heard last week, our engagement has exploded with close to 25 workouts per month per membership. So you think about that on a cost basis of $39 for the month. That's right around $1.50 per workout. I think you're going to start to hear more in the coming years about what a crazy value is -- value Peloton is on a per workout basis, something we're very focused on. And so where are we going? We have, we call, a big hairy audacious goal of 100 Net Promoter Score and 100 million subscribers. This is kind of our true north. We plan to be one of the first companies that has 100 Net Promoter Score. To my knowledge, none do yet. But we, at 94, we know what those next 6 points of detractors are, and we're focused on delighting every one of our members at every touch point. And 100 million subscribers, we believe, is a reasonable goal. For context, there's close to 200 million gym goers in the world. That's 200 million people paying hard money month after month to access what we believe to be inferior fitness equipment at an inferior location. So when we say 100 million subscribers, it's grounded in people already paying. They're saying, "I want to be fit." They're saying, "I'm willing to pay for it." And we believe, in the coming years, they're going to become Peloton members. So what is our plan for 100 million subs? I believe it's a very tight, focused plan, and it has 6 steps. We plan to continue growing in the U.S. For context, we believe that there are 35 million American households that have a treadmill in their basement. Of course, those are dusty treadmills. And they're not used because they're just pieces of hardware. And they're not fun and they're not motivating, and they're not entertaining. And you don't have the Peloton community and instruction and programming and music and all the things that we care about on your fitness journey that we're in it together. I do point that out in the context of how big the opportunity is. How many people have raised their hand and said, "I want fitness equipment in my home." We think tens of millions of households in the U.S. alone could be Peloton membership opportunities in the coming years. Number two, product innovation. Like you saw last week, with the Peloton Bike+, which is an incredible new platform, and the new Peloton Tread, which is a much lower-priced Tread but almost just as awesome as our current Peloton Tread+ that allows you to take boutique fitness classes, boutique boot camp classes from home, not just running classes, but boot camp classes on our Peloton Tread, those are just 2 new innovations from last week that we brought to market. Please trust me when I say we have a lot more innovation, a lot more cool stuff in our R&D lab. We have some of the best mechanical engineers, electrical engineers, software engineers, working on really cool new stuff that is going to surprise people, and we're very excited. One of the things that makes working at Peloton fun, to be totally honest, all the exciting new stuff we're working on. So we will bring new products to the market in the coming years. Third, another obvious way we're going to grow is geographic expansion. We are now in Germany, in the U.K. and Canada and the U.S. Germany, U.K. and the U.S. represent the 3 biggest fitness equipment markets in the world. But in the coming years, we will launch new markets and new geographies, and we look forward to that new languages. We're very excited about being the global digital fitness platform -- technology platform in the world. Greater affordability is something you always hear me talk about. Last week, we launched a lower-priced Tread. And at the same time, we lowered the price of our existing original Peloton Bike, loved by millions, award-winning Peloton Bike. We lowered the price. We will continue to do this type of stuff so that we can be affordable to everyone who wants great fitness in their lives. And with the new Peloton Bike, we're offering it at $49 a month, which, by the way, when you divide it by you and your spouse or your live-in partner, it starts to become a pretty affordable product for just about anybody. But we're not going to stop there. Digital expansion is something you saw a lot in the last 12 months. We launched Roku TV, Amazon Fire TV, Apple TV, Android TV. We plan to continue to make sure that wherever our members want our content, we are there for them, whether it's in their hand or in their home. We are going to make sure that not only are we expanding into different platforms, but we're also expanding our content offering, and you're going to hear more about that from William in a bit. And then lastly, we care about creating the best place to work in the world. It is a very high priority for me. Personally, the fun thing is that I personally want to work at the best company in the world. So with my role and with the support of my senior leadership, our senior leadership and the entire team, we are insanely focused on trying to create what we believe is the best place to work in all of the markets that we operate, whether it's London or Taiwan or Taipei or Tainan or Atlanta or Plano, Texas, we -- or Germany. We want to be the best employer and the best place to work. This is a massive, massive global opportunity. I don't think many people really understand how big this opportunity is and will be. We have deep moats. We have intellectual property. We have our brand. We have our community. We have our stores. We have our logistics. We have all kinds of moats that -- network effects in our software, that we're going to continue to double and triple down on so that we make sure that if this is a winner-take-all opportunity, Peloton is going to take it. I can assure you that we are focused on making sure that we have protection and deep moats. We have a world-class team. You're going to hear from some of those people today. I'm very proud of how strong our founders were and how great our founding team was. But to be totally honest, with every year that ticks by, our team gets stronger as we're able to recruit better and better people, much better than me and the founders at this point. We have a super engaged community. You heard about it. You'll hear more about it. It is the secret sauce and one of those most special things, if not the most special thing, that we are building that is very unique and very powerful, and we're very proud of it. We show up to work in service of this community. We have a strong balance sheet. I think you know that by now, but feel free to poke around. We are very well capitalized. Again, you're going to hear more about this from Jill Woodworth. And then like we talked about on the last slide, I think we have a pretty tight, very tight, very focused plan of how do we continue to deliver this hyper growth for years and years and years to come, and we like our chances. Anyway, I'm going to pass it over now to my Co-Founder, Tom Cortese. He is our Chief Operating Officer, and he also runs product and product innovation. He's our product visionary. I think you're going to really enjoy your time with him. So thank you again. Over to you, Tom.

Thank you, John. I'm so excited to be coming to you from Peloton Studios here in New York, to be talking about the 2 new products that we've introduced to our product lineup. It's really amazing to be able to be here and talk about all the work that our team has been doing, listening to our members over the last 2 years to reach this moment and bring you something wholly new. But before I get into it, we thought we'd let you see a little video that the team put together. [Presentation]

I get so excited seeing those. It's fun to see everything finally coming together. But before I'm able to talk about where we are today and what we're introducing to you today, I've got to start at the beginning because the Peloton Bike changed an entire industry. Before the Peloton Bike, there wasn't the phrase Connected Fitness. It wasn't a thing. Before the Peloton Bike, working out in your home was the absolute worst thing that you had to do. And with Peloton Bike, suddenly, it's the best place on Earth to work out, not just the most convenient. And Peloton has changed not just where folks are working out, moving it from this destination sport into the convenience of home, but it's changed how people think about working out, where all of a sudden, because of my Peloton Bike, I could think about having fun working out. I could think about how entertaining it is to be part of a Peloton class, to be able to be with a community of people while still being in my home. It's completely reshaped the industry and how we think about fitness. And it's been amazing, and it's been amazing for our members. And we've seen the transformation, and you'll see it in our engagement data. You see the way our members love their Peloton Bike, use their Peloton Bike more each year. That's truly a special thing. And so in order for us to take something that special and start to think about how to evolve it, we've got to start with where we came from and ensure that we preserve it all. So that's what we did to bring Peloton Bike+. So let's talk about what those things are, right? Here's a few of them. The Peloton Bike is connected. It's immersive and addictive. It's probably the most positively addictive behavior on Earth. And we know that our members love just being able to be connected to the community, to see their metrics, to be completely immersed in a class and forget what's around them. This is what gets folks up in the morning to get on their Peloton Bike. This is what has made it so special. But it's also convenient, right? And that's obvious. I don't need to say much more. It's convenient. It's compact and quiet. So it fits anywhere in your home. And its value, it's an amazing, amazing series of workouts and classes for everyone in your household. These are the things that we sought to protect and ensure that we were able to keep when we brought to you Peloton Bike+. We knew there was more that we can do because we've been with our members working out with the Peloton Bike for a number of years now. We knew that we have this challenge to take the best cardio machine on the planet and make it even better. And we knew we had to meet our members where they were and give them the Peloton Bike as the centerpiece of their home gym so that they could take full advantage of all that Peloton has to offer, everything that we've been broadcasting from here, Peloton Studios in New York and Peloton Studios in London, from cycling to strength, yoga, stretching and more, all of that being available to our members. And so our members asked for being able to be more immersed in their class, see more of their favorite instructor, hear more of their favorite music, find more ways to get lost in a class. And those were the things that we looked to improve upon for Bike+ while still being able to bring that variety, being able to allow for this idea of a bike boot camp, bike -- total body class where I could be on the bike in having this crazy endorphin-filled cycling class and then hop off and move into a strength routine, all in this really seamless fashion. Those were the areas where we knew we can improve, and those are the areas that we focused on to bring to you Bike+. The team here at Peloton ended up touching almost every part of the Peloton Bike to evolve it into Bike+. But they did so while maintaining that soul of Peloton, that is that Peloton interactive, immersive, addictive experience and that distinctive industrial design that we've all come to associate and love about Peloton. And so I want to talk about just a few of the areas. So let's start with the screen because that's where all of the energy of the class and the instructor comes through. We took the screen. We made it bigger. This is now a 24-inch touch tablet, brighter, clearer, crisper, HD, unbelievable picture. And when you're 4 feet away or 2 feet away on your Peloton Bike from this huge screen, you just feel yourself, get lost in it. And then we add a stereo soundbar built right in and a subwoofer coming right out the back so you're totally enveloped in the sound and the music and the instructor. And that class really has just come home, the whole group class right there, the boutique in your house. It is so, so cool when you see and hear this new screen. The other piece of a class that's so important, the piece of the experience that you're interacting with all the time is the resistance. This is what gives the class variety, right? When Alex Toussaint is encouraging me up the next hill, and he tells me that I've got to get to 30% to 40% resistance, I dig into it, and I reach down and I go at that resistance knob. And we preserved that. You have that in Peloton Bike+. But underlying Peloton Bike+ now is this really amazing, wholly new digital resistance system that actually is driving that break, that resistance system, to exactly where it needs to be. And it gives you this ability to be able to control resistance right from the screen. And we've taken that one step further by adding what we call Auto Follow target metrics. With the tap of the screen, you could lock in at any point in the class to Auto Follow the instructor's metrics. And so as the instructor calls out a new resistance cue, your bike is going to automatically drive itself to the middle of that range. And it's really neat. It can learn. If you then turn the knob to go to the top of the range, because you want to be closer to 50% when the instructor calls out 40% to 50%, if you want to be closer to 50%, you can turn that knob, get yourself closer to 50%. And for the rest of the class, it's going to know you like being at the top of the range. And it's going to drive you to the top of range for the rest of the class. And at any time, if you don't want to follow along, you can unlock and take back over yourself. It unlocks a whole new series of opportunities, this digital resistance platform, and we're really excited to bring Auto Follow target metrics to Bike+. The other thing we've heard -- I've got my Apple Watch on. We've heard from our members, they want more integration. We are ready. Give them the ability on Bike to integrate with Bluetooth audio, Bluetooth heart rate monitor and ANT+ heart rate devices. And with Bike+, we've added an Apple Watch integration. And this Apple Watch integration is so simple and so easy to use. At the beginning of any class, just take your Apple Watch, tap it to the screen, you'll hear a beep, and you'll have a connection between your Apple Watch and your Peloton Bike, sharing calories and heart rate, starting and stopping the class by the control of the bike. It's really neat. It's really special, and it's something that our members have been asking for. And we're excited to be able to bring this Apple Watch integration. And finally, and you've heard me say this, but Peloton Bike+ can truly be the centerpiece of your home gym and offer you this perfect workout. On the Bike and off, being able to take advantage of all that we've invested in this remarkable new screen, the sound, the clarity of color, be able to simply turn the screen to any angle that suits you and be instantly in a yoga class, be instantly doing a strength training workout. Whether you're doing it as part of your cycling routine or on a noncycling day, it's just really an easy, amazing, simple thing to be able to take advantage of that brings you all of what Peloton has to offer in this one Peloton Bike+. And at the end of the day, it is still just a beautiful, beautiful device. I love seeing my Peloton Bike in my home, and I know so many of our members are proud of their Peloton Bikes in their home. And we think with Peloton Bike+, you'll be equally or more proud. So we're so excited. Here's great way for you to quickly compare all the features and everything that we've just talked about. And now that we've talked about the Bike and introducing Bike+, I want to talk about Tread. 24 months ago, we introduced the first Peloton Tread, now called Peloton Tread+. And we sought to create a new special experience for our members in their homes, learning from everything that we had learned with the Bike and everything that we know that our members love about that experience and creating something wholly new for the Tread. This amazing total body on the Tread, running off the Tread, strength and back on again with intuitive controls, amazing audio and visual. And with Tread+, we introduced a slat belt running deck, which is one of the most advanced running decks out there. It's a really neat experience to run on the Tread+ slat. But we know that those slats come at cost. They occupy space. It requires a bigger machine and actual cost to us and to our members. And so we wanted to find a way to preserve all that was magic about Peloton Tread, that same high NPS experience, loved device and class structure that we created on Tread and bring that to the new Peloton Tread. In the same way, I can't talk about the all-new Peloton Tread without talking about where we were just 2 years ago when we introduced the first version of Peloton Tread, now known as Peloton Tread+. Since then, we've seen our members run, walk to boot camp classes, total body classes in about 14 million miles on their Peloton Tread+, and they absolutely love it. And for some of the same reasons as Bike, folks love the immersive, addictive classes, this idea of being able to have an amazing on-the-Tread run and then pop off to do a strength class and right back on with this immersive class, the feeling of the community and the presence of others through the leaderboard and all that Peloton has to offer. It is such a special thing that we were able to bring to Peloton Tread and such a big reason why people became just as addicted to Peloton Tread as they did to Peloton Bike. And on top of that, it's beautiful, comfortable and totally intuitive with these amazing intuitive controls that Peloton created, where you've got this amazing simple system. It's like a throttle, where I'm running on the Tread, and I can just spin the Peloton control knobs to just ratchet up my speed or pull down on it to quickly slow down, same for incline, and then hop off the back of the Tread and back on again. It makes for this multifaceted, quick moving, really immersive and amazing workout. And people absolutely love it. And that was the special part of Peloton Tread and the Peloton Tread experience that we needed to preserve. And of course, people love that Peloton Tread+ is this high-performance connected experience, right, with the leaderboard and the metrics. And something unique to Peloton Tread+ is this slat belt deck. The slat belt deck is a really high-tech running surface that we were able to bring to the consumer market in a way that no one else had. And it's a special running surface to be able to run on it. You can move quick. It's shock absorbing and friction-free in a really unique way. We knew that we can preserve all that was special about that experience and bring it to our members in something that was more affordable, that fit in more homes and was designed for more markets. And that's what we did to bring Peloton Tread. So once again, with Peloton Tread, just like Bike and Bike+, we touched almost every part of Tread+ while still preserving the unique industrial design and the unbelievable immersive, addictive experience that Peloton Tread+ has to offer while making Peloton Tread. If you look at this from the top down, we've taken what we had on Peloton Tread+, there's a 32-inch screen. And we have still now this amazing -- amazingly large 24-inch screen that still has all the amazing visibility, brightness, richness of color, amazing sound that I talked about on Bike+ now on Tread. So that when you're on or off the device, you feel like you're inside the class. And we took the running surface. And when we moved from the high-tech slat belt running surface, we moved toward a more classic running belt surface. But when we moved to a classic running belt surface, we did it in the Peloton way. We preserved almost all the running surface area that you have on Tread+ on Peloton Tread. So it's comfortable for runners of all sizes. We managed to build it into an even more compact packaging than most treadmills and certainly than Tread+. It's 30% smaller in all directions than Tread+ and closer to the ground for a smaller step-up height, too. And on top of that, we added these 6 independent dampeners underneath the deck so that you still have this comfortable suspension system on that running surface. It's really great to run on. I absolutely love it. And on top of that, we made it so that this device is ready for all markets. Designs for certification in U.S., U.K., Canada and Germany, Peloton Tread is just an awesome experience. Here's how Peloton Tread and Peloton Tread+ line up. But really, the simple thing here is that with both Peloton Tread and Peloton Tread+, you get an unbelievable run, an incredible on and off the device workout for this crazy total body experience, the full immersiveness of everything that Peloton offers right here from Peloton Studios in New York and London, plus the immersiveness of our community through the leaderboard in a more affordable and more compact package. We're really thrilled to be able to introduce Peloton Tread today and add it to our lineup of Tread devices. And with that, I want to pass it over to Peloton President, William Lynch, who's going to be talking about engagement and supply chain. Over to you, William.

Thanks, Tom, and hello, everybody. Every day, this company is investing to improve our service and drive engagement and continue to differentiate Peloton as the best streaming fitness service in the world. Let's dig into engagement a bit. Evidence of how fast we're moving in both our content and engagement can be seen in the many fitness verticals we've launched just over the last 2-plus years: Tread, boot camp, outdoor, audio, yoga, meditation; internationally, U.K. cycling, German cycling; family fitness and dance cardio during COVID to service our members, the list goes on and on. And we're going to press our advantage here and continue to launch new verticals. We have announcements in the next few months on 2 exciting new verticals that our members have asked for. No other fitness service can match Peloton's variety and breadth. Our database has thousands of classes in it and counting. And the scale of our community, we can leverage these classes across a bigger audience than anyone else in Connected Fitness. Just to illustrate some of that. Emma's Crush Your Core workout, Emma Lovewell, one of our instructors, 10-minute series around abs mostly, but also core workouts. On that series, we've had over 1 million workouts taken. Another example in the artist series with Britney Spears, Britney Spears Rides, and Britney was a new artist we launched. In the Britney Spears Ride with Cody Rigsby, those rides have been taken close to 1 million times by our members. So again, the engagement, the community gets very excited as we program new things. In addition to our growing list of fitness disciplines, we're sitting on a mountain of member data on what they prefer. This is a strategic advantage for Peloton. We can use this data and do use this data to inform our programming. For example, as strength has exploded, and we'll talk about that in a moment, we continue to lean into more and more strength series, Andy Speer's strength series, which has been massively popular. Also, as we've launched things in yoga and meditation like sleep meditation, and we see tens of thousands of our members taking sleep meditation to help them go to bed, with high usage between 10:00 Eastern and 3:00 am Eastern with West Coast users, we can continue to program into that. We knew Prince was one of the most requested artists on the service. We launched Prince. That was a massively exciting artist series, and we'll have more and more Prince to offer. Other examples include events that we annualize like the Turkey Burn, where we set the Guinness Book of World's Record for most interactive cycling participants in one workout. So as we get more and more audience, get bigger and bigger, this member data increasingly differentiates our service. And we're not done. I mentioned Dance Cardio. We just launched this. Again, it came from member requests, and we've had almost 1 million workouts taken. This was launched during COVID, which also shows the resourcefulness of this team and our content and production group. We have the largest Connected Fitness music catalog in the industry by far, over 2 million songs and counting. Since our settlement with the NMPA, we've had labels and publishers literally pouring in to try to be part of the service. As meaningfully as that, artists and their managers continue to view Peloton as an amazing discovery platform for their music to an attractive audience. You see, just since July, some of the artist series we've launched: Whitney Houston, the Grateful Dead, Lil Wayne. We just launched The Weeknd in the last few weeks. Huge engagement, huge ridership, both live and on-demand with those artists. And we're just getting started. This fall, we will have the biggest artist lineup that we've ever had and will increasingly put Peloton on the mark as one of the most important players in the music industry today. We've also spent a lot of time at Peloton and are excited to unlock the biggest capability in terms of streaming fitness content production on the market. Here are 2 pictures of our super studios, shrines to fitness. The first is Peloton Studios New York. As we announced, we launched it last spring. It's 35,000 square feet and 4 studios of the most high-tech, high-end production facility. One studio will be for cycling; 1 for Tread and boot camp; 1 for strength and floor, which we call our Flex studio; and another for yoga and meditation. We also have an outdoor audio-only capability for outdoor runs and outdoor workouts. This content facility will have 4K technology, 8 to 10 cameras per studio and deliver an unmatched experience to members at home in terms of fidelity and production quality. Additionally, we're very excited about our London Studio at Floral Street that will open in spring of 2021. Similar to Peloton Studios New York, it's 31,000 square feet of an unbelievable fitness and streaming experience. It will have 3 studios and again will allow us to produce not only cycling and tread and boot camp content, but a lot of these new modalities of content, strength, outdoor, floor, et cetera, and stream it internationally. These 2 facilities will enable us to offer over 1,200 new classes a month of programming. This will increase our breadth and variety of program beyond what any other streaming fitness competitor can do. There's a lot of buzz around Peloton instructors. Our instructors are massively popular with over 4 million followers. We handpick our instructors to look for only the best. We also invest in growing our instructor base in areas we view as strategic. Strength is one example. Meditation and yoga, you will see us make more and more announcements there. These instructors are also emotionally tied to the platform, some of them having helped build Peloton from the beginning. They're also financially tied on long-term contracts. We continue to believe we will offer the best instruction and personal training in the entire Connected Fitness industry. So what has been the result of all this investment? Well, it's paid off in high returns. In Q4 of our last fiscal year 2020 ending June, on average, each membership worked out 24.7 times a month. If you were to do the math on our all access, what we call our Connected Fitness membership, on a per unit basis, that's about $1.57 per workout. We believe it's one of the reasons why our word-of-mouth acquisition has been exploding, because not only do our members love the experience of the service, they're also telling their friends, colleagues at work that Peloton was the best value in fitness as well. And it's not just cycling that's taken off in terms of engagement. This is our Connected Fitness percent of classes taken by fitness vertical. What you see in fiscal year '20 is huge jumps in strength and floor and medication and yoga. While we were perceived as a bike company perhaps in 2017, Peloton is now seen as the fitness platform for the home as our members take more and more variety and more and more types of workouts. This dynamic of strength and floor growing is even more pronounced with our exploding number of digital members. So if you took strength, floor and all the alternatives to cycling, it's a higher share of the workout types than cycling are for digital members. I'll talk about how we've increased access to consuming this content through TVs and other mediums in a second, and we'll understand why. This chart shows the percent of Connected Fitness subs using different workout types. Think of the red line in cycling as about 100%, given how much of our Connected Fitness members are Bike users. What you see here is that in 2020, again, the percent of our members also using strength, floor, yoga and meditation is increasing by leaps and bounds. We think this is another validating point for all the investments we've made in the content. And this chart shows that it's not the U.S. Our formula and playbook is working globally. As you see on the left, average workouts per sub in the U.K., Canada and Germany are tracking very closely to the U.S., that 24 -- astounding 24.7 workouts per month per membership. And so as we launch new content, new instructors, different languages, subtitles, new software I'll discuss in a minute, this playbook's working globally, and it's why we're having the success we're having in our international markets. Part of the reason we're success is how we've extended the ways and screens with which you can consume and take workouts with Peloton. This is a chart that shows how we've increased the number of screens we've been on. We started with iOS mobile, then went to Android mobile. And in the last 18 months, we've had a big focus on TVs. What you see is we started with Amazon Fire TV at the end of 2019 and then in the last 8 months have launched 3 new TV interfaces and distribution platforms, including Apple TV, Roku and Android TV, giving us now coverage of 4 of the most popular TV distribution platforms for members to enjoy Peloton to work out. To the point on software and engagement, these stats indicate how some of those features have been adopted. Incredibly, in fiscal year '20, we had almost 250 million high fives that our members sent to each other. That means that strangers, that means that friends, relatives, some of the tag affinity groups that John talked about earlier, are giving each other supports on cycling rides, on Tread rides as they're doing burpees, as they're trying to end push-ups. It's an incredibly differentiating element of our community and our software features. In addition to that, you can see how excited our community gets. What other streaming fitness platform has over 300,000 people on its Facebook group? We talked about our instructors earlier. Peloton instructors have 4 million followers, and that number adds thousands by the week. We're really excited about everything social going on at Peloton. And we feel that the software, our community and these community and social features give us a strategic moat that no other streaming fitness competitor can match. What may be most encouraging to all of us is, obviously, we've had a ton of growth and added a lot of members in the last year. So you would think, "Okay, well, your newest members are going to work out more." And while that's true, our members that we've added in the last 12 months are working out more in their first 12 months than the members who started in 2016, 2017, 2018, 2019. So our newest members are working out more. But what's notable is that those members from previous classes are also working out more than when they got their Bike, Tread or started with us on digital. What that means is that everyone is enjoying the Peloton service more and getting more value. And again, it's another big reason why we think we get the kind of retention that we get on the Peloton platform. Now I'll turn to supply chain, the all-important supply chain. What's very hard about the Connected Fitness industry is you have to be great at hardware. And to be great at hardware, it's both a design equation, but it's also manufacturing and delivering those products in a way that drives the kind of NPS and the standard that we have at Peloton that John discussed. Historically, the fitness equipment industry has been very fragmented. It's been a lot of players making a lot of SKUs in small volumes. So with Peloton, we were really the first company in the premium fitness market with the Bike to not make thousands of things or tens of thousands of things, but literally hundreds of thousands of things. We own and control much of our manufacturing and supply chain. And so that also gives us control over quality and cost, and I'll talk about that in a minute. Our goal, and what this team is executing against, is no less than to be the scale, cost, quality and the fastest speed to market leader in the Connected Fitness market. As mentioned, we own Tonic, one of our largest manufacturing sources. We also own many of our warehouses. The majority of our products also get delivered by our own people and in vans that we own. We have close to 100 of our own retail stores and 2,000 people, Peloton employees, who are answering phones, answering chats from members both waiting for their delivery as well as members who might have an issue or questions on their service or their product. This vertical integration that John talked about allows us to control the experience, and it's unique actually to the Connected Fitness market. And it's one of the reasons we keep investing in our supply chain, in our field ops and logistics so aggressively. We've been and will continue to ramp investment in key areas to support our growth. We're automating our factories, and we do that to better control quality and also drive costs down. We're building new factories to expand capacity, and we're launching assembly lines and supply chains for new products like everything that Tom talked about earlier. We're improving our logistics to ensure we get our products out of those factories into our trading areas faster and cheaper in a higher quality to meet our member expectations. Here's a hot-off-the-press picture, literally 2 weeks, of our brand-new factory in Shin Ji, Taiwan. This land was dirt 14 months ago and talks to the resourcefulness and aggressiveness of this company and this team. Shin Ji was one of the underpinnings of our Tonic acquisition and sits less than 15 minutes from the Tonic factories that have supported our growth all these years. This facility will begin production at the end of this year, we're very proud to say, and is outfitted to support both Bike manufacturing as well as Tread manufacturing, giving us flexibility, depending on inventory needs. It's also a scaled facility. It can build up a 1.5 million Connected Fitness units a year. So when you take our existing Tonic facilities, add Shin Ji and valued manufacturing partners like Rexon and other plans we've gotten to work, we are hard at work ensuring that we can support our growth over the next several years. I mentioned quality and speed to market, and that's huge for us at Peloton. Again, John talked about NPS and we obsess about it. Well, one of the reasons we have such high NPS is the reliability of our products. And this is not by error. We work very hard on it. And we continue to invest. These are 3 new quality labs we've launched, 2 in Taiwan, 1 in Shin Ji, 1 in Taichung, and then the other in Secaucus, New Jersey, which gives us a domestic facility. These quality labs not only ensure our existing product lines, our high reliability, but also help us with R&D and speed to market on a lot of new exciting products we're working on. Here's a picture of our 6,000 square foot quality lab in Taichung. We have engineers as well as R&D folks sitting here, very technical people that can get to both our Rexon partner as well as our Tonic facilities within a matter of hours, if they need to address an issue or if we want to test something. We're a technology company. And to build the best tech products, we need the best tech infrastructure. Here's just a list of some of the automated testing equipment we've invested in over the last 18 months. We spent millions on this infrastructure. And what we expect going forward is, as we look at new types of enabling tech, whether it's electronics in our tablet, whether it's belts, whether it's things endemic to our fitness equipment, we're going to be well ahead of the game because of the investments we made today. Lastly, perhaps one of the biggest advantages we have is our assets and our people and our logistics network. In the U.S. alone in fiscal year '20, we'll have what we call 7 super distribution centers that comprise over 1.2 million square feet. These warehouses allow us to put literally hundreds of thousands and over 1 million Bikes, Treads and other accessories. What it also allows us to do, given their strategic location, is service our over 105 hubs that are located near population centers in the U.S. In fact, these hubs, in total, cover over 95% of the U.S. population within a 75 square mile perimeter. What this means is not only can we deliver our products faster, but also, and this is meaningful in Connected Fitness, as a service, if a Peloton Tread or Bike or other accessory or new product we may launch has an issue, we usually can get to that member within 24 to 48 hours. Again, and we talked about strategic advantages, to play in the Connected Fitness market, you have to have this kind of service level. And our technicians in these 105 hubs are out there every day, ensuring our members are happy riding and using the service. Thank you again. It's an exciting time at Peloton. Now it's my pleasure to turn it over to our CFO, Jill Woodworth.

Thanks, William. Hi, everyone. We've covered a lot so far today. But before we start Q&A, I wanted to provide some thoughts on our addressable market, member retention and churn metrics and the changing demographic profile of our members. First, our addressable market. There are over 180 million people around the globe that belong to a gym. 90 million of those are in our 4 current markets: the U.S., U.K., Canada and Germany, making the fitness market a massive global market opportunity for Peloton. But with that said, last year, leading up to our IPO, we wanted to produce a deep bottoms-up survey to address concerns that our price points were limiting our ability to tackle this very large and growing market. To address this concern, we produced an analysis that showed both our total addressable market as well as our serviceable addressable market within our current geographies in our current fitness verticals and at our current pricing. This work consisted of large, statistically significant consumer surveys conducted in each of our markets. We've recently rerun that very same analysis in each of our markets in order to measure the progress we've made in growing our market opportunity. We filtered our results to include 95 million households with people ages 18 to 70 years old and who make at least $50,000 in annual household income. We define TAM as households that may or not be interested in purchasing a Peloton product today, but could be interested in the future. These households have broadband Internet and have or are open to purchasing subscription fitness. Our TAM today is 75 million households. This is versus the 67 million we measured last summer. Of those 75 million households, 52 million were interested in a current Peloton product without knowing the price, a similar number to what we saw last year. Once exposed to our pricing for both our Connected Fitness products as well as Peloton Digital, our SAM for all products, including digital, at our current pricing, is 20 million households. Our SAM for Connected Fitness products only is 15 million households. Because we expect a growing percentage of households to own multiple products over time, likely going from the low single-digit percentages today to north of 20% to 30% in the longer term, the Connected Fitness unit SAM is 20 million units. Our SAM increased 43% versus last year's SAM of 14 million and shows that we are still only 7% penetrated into our serviceable addressable market. We know TAM will expand as we add more geographies, and SAM will continue to expand as we add more products and fitness verticals, continue to grow our brand and product awareness and continue to make our products more affordable. As William covered earlier, we know our investments behind content and making our platform more accessible are paying off. We remain incredibly excited about the multiple ways we will significantly grow our market opportunity over time. We've frequently been asked whether we believe COVID-19 has impacted the market size for Connected Fitness. And our answer to that is most definitely yes. But as John mentioned, we've long believed that Connected Fitness in the home is the future of fitness. And COVID-19 has just accelerated a market shift that we always expected. The pandemic has led many fitness-committed adults to reevaluate their fitness routines going forward. In recent survey work among consumers in our market, nearly 50% said they are likely to quit their gym memberships, and 90% believe their interest in Connected Fitness products will either sustain or increase following the lifting of COVID-related restrictions. Everything we do at Peloton is to increase engagement with our platform and provide more and more value to our members, making the Peloton Connected fitness subscription an indispensable utility for the entire household. As a result of these efforts, we are very proud to consistently produce strong retention and very low average net monthly churn metrics for our Connected Fitness subscribers. Since the beginning of fiscal year 2017, we have achieved a low 0.64% average net monthly churn for our Connected Fitness subscriptions. At the same time, we have significantly improved the value proposition through our vast library of thousands of classes and increasing breadth and quality of our fitness programming. Last week, we guided to an average net monthly churn in Q1 for our Connected Fitness subscribers that represents a sequential increase from the second half of fiscal year '20, as we believe stay-at-home and work-from-home mandates have contributed to our recent engagement trends. As COVID restrictions ease over time, as we all hope they do, we likely see seasonality in our churn figures moving forward as we witnessed in prior years. We do typically see higher levels of churn in summer months when people are traveling and enjoying outdoor activities, and this will impact our first and fourth fiscal quarters. A few reminders: one, net churn is calculated as the number of canceled subscriptions, net of reactivations, divided by the average number on subscriptions at the beginning of each month in the quarter. Churn is not a function of high sub count at the end of Q4, because churn is measured against the average beginning-of-month Connected Fitness subscription count. Two, 95% of our subscriber base is on a month-to-month basis and not locked into a subscription. And three, in fiscal 2020, we launched Home Trial. This allows customers to return the Bike within 30 days risk-free. While return rates modestly increased and are still in the low single digits, these incremental product returns do have a small negative impact to our churn calculation starting at the beginning of fiscal 2020. We're frequently asked about member retention. And here, you can see our strong overall retention curve. You see that we've maintained 12-month retention rates north of 90%. And what's so encouraging to us is that the flattening of our retention as members reach 18, 24 and 36 months, when the Peloton platform is firmly embedded as part of their fitness routine and lifestyle. Also, the overall weighted average retention of those that finance their Bike or Tread purchase is nearly identical to those that don't. As you have heard many times today, we are committed to expanding the accessibility of the Peloton platform. Our aim is to break down barriers to purchase and broaden our reach, and we have implemented strategies along the way to achieve both of these goals. Early on, in the fall of 2017, we addressed the price barrier by introducing 39-month financing. This was a powerful way for us to express the price of the Peloton Bike in terms of monthly payments, as most people think of fitness spend in terms of monthly membership fees. 39-month financing allows members to buy the Peloton Bike using 0 APR financing for just $58 per month. When you combine that with the $39 per month subscription price and, on average, the fact that there are 2 members per Connected Fitness subscription, that represents $49 per month per person while paying off the Bike, which compares very favorably to the average U.S. gym membership price of $58. Last fall, we addressed the "will I use it" barrier by introducing Home Trial. This gives prospective members the ability to try the Bike for 30 days risk-free. This drove significant increases to conversion, while only modestly increasing our return rates. Also, lowering the price of the Peloton Bike by $350 to $1,895 or $49 a month on 39-month financing and introducing the lower-price Tread have been important steps to increasing the accessibility of our products. Through all of these strategies, we have been able to significantly move the needle and attract both younger and less affluent members to the platform. Here, you can see the progression, starting on the bottom of the slide, in fiscal 2014. The under-35 age group has nearly doubled from 16% of our members in fiscal '14 to 31% in fiscal '20, our fastest-growing age group. We've also seen a similar trend in average annual household income. Households earning less than $100,000 per year has grown from 29% of our members in fiscal '14 to 46% in fiscal 2020. So in summary, we've expanded our addressable market by 43% in 1 year. We continue our relentless focus on driving an incredible value proposition of our subscription, which has led to increasing engagement, allowing us to achieve incredibly high retention rates. And lastly, our efforts to increase affordability and trial of our products has led to significant broadening of our member demographics. But before I turn it over to Peter to lead the Q&A session, I did want to address our growth and profitability. While we certainly had tailwinds associated with COVID in the back half of fiscal 2020, we were very excited last week to post yet another year of 100% or more year-over-year revenue growth, and our revenue guidance for fiscal '21 represents another year of 100% growth, at the top end of our revenue guidance range. As a result of the continued acceleration of our growth and our desire to be the largest global Connected Fitness platform in the world, we must continue to smartly invest in scaling our operations and teams, developing new Connected Fitness products, adding new fitness modalities and continuing to innovate for our members every day. And as we've said before, we will continue to prioritize growth over profitability, but it is now the case with our fiscal '20 results that our growth has led to an adjusted EBITDA profitability faster than we expected, underscoring the strength of our financial model. Last week, we guided to adjusted EBITDA profitability for fiscal year '21 of $200 million to $275 million, giving us the opportunity to reinvest in our members by making our products more affordable while driving significant growth going forward. We are excited to reach this important inflection point in our financial model, where we can now deliver growth and profitability. With a highly profitable U.S. bike business, plus our strong balance sheet with over $2 billion of liquidity, we are excited to further invest in our member experience and grow our international footprint. We want to thank our community, employees and investors for their continued support. Together, we go far. Thanks so much for your time today. I will now hand it over to Peter to moderate our Q&A session. Thank you.

Thanks, Jill. Now we'll get going on Q&A. We're going to start with taking questions from the analyst community. And our first question comes from the line of Jason Helfstein with Oppenheimer. Jason, go ahead.

And good job with the webinar. To the first, William, maybe talk about the way you're addressing the backlog challenge. You shared the new facility will allow you to do 1.5 million bikes a year, which I think kind of should cover most estimates through fiscal 2022. Is there -- so kind of on paper, that covers it. But what other challenges are there in addition? So -- and then if ultimately that does improve enough, how fast would you ramp another facility that could do another 1.5 million bikes? And then I have one quick follow-up on the Apple news.

Thanks for the question. So if what we've said we'll have protracted OTD through our first 2 quarters, which, as you know, Jason, takes us through the end of the year. The good news, as it relates to that, is as you've seen since May, we have ticked down that order to delivery. We had that surge, which no one could have predicted, related to the pandemic, and which threw us off plan, frankly, in our forecast. And so we've been able to catch up and been able to drive down OTD from where we were in May. We expect to continue to do that through the first 2 quarters. And it's not -- to your point, it's not just manufacturing that has to do with capacity around warehousing deliveries. And so absent another COVID flare-up that would cause us to have to close warehouses or delivery facilities, we feel very good against the guidance that Jill provided and our own internal forecast that, that we'll be in good shape. Mid- to long-term, as it relates to Shin Ji, in general, yes, we're planning our supply chain out strategically at 3 years. So the way we look at it is some of those investments we talked about, we're looking at placing groundwork and foundational elements to where do we need to be 3 years from now. And I'm not talking specifically to your point about the Shin Ji volume. We haven't given guidance beyond the guidance we provided for fiscal year '21. I'm talking, in general, sort of how we think about where we need to be and the investments we need to be making now to prepare us out for 3 years-plus. So -- and we think about that through the network, not only, to your point, manufacturing, but how are we getting those products over, how are we warehousing them, do we have enough vans, do we have enough people to deliver them. Member experience plays a big part because that can be a choke point if we don't have people answering the phones around transactions, inside sales. So it's the whole system. And as you might imagine, we're busy thinking about all that. And we're excited that -- by all this growth and the ability to continue to invest against it.

And then just a quick follow-up, just for John, on the Apple announcement they just made. I think Apple Fitness+ subscription will be $9.99 a month, still a few dollars less than your digital-only, $12.99. Just any initial thoughts you want to share?

Yes. Listen, I'm guessing this would come up. We're just adjusting to the announcement like everybody. The biggest thing I'll say is it's quite a legitimization of fitness content. I mean to the extent the biggest company in the world, a $2 trillion company, is coming in and saying fitness content matters, that it's a meaningful enough for Apple, I think it kind of legitimizes our -- what we've seen as a massive, massive global opportunity ourselves. What we think separates Peloton as always is our vertical integration, is our -- the hardware, software content that we use, plus the deliveries and the experience we deliver, with our community layered on top of it, there's nothing like it. They're not coming into that category. They're just going to do the content. And we think the special sauce, the magic, is our Connected platforms. And in order to work out at home, you need a stationary bike, if you're going to do biking; you need a treadmill, if you're going to do running. We're going to have the best products. We're going to continue to lean on price. We're going to continue investing in our software and our content. Specific to content-only, we just heard 0.5 hour ago their announcement like you did, and they said they're going to have new classes every week. We are getting to a point where we're going to have in, call it, 6 months, hopefully, if London is open, our London Super Studio, and New York's open with our 7 studios across the 2 geographies, we're getting to a point where we're going to have 50 new live classes a day. And when you think about that scale of that content, when you wake up tomorrow morning and you want to have a -- you want to do a '70s country ride -- a 20-minute '70s country ride with Hannah Corbin, or you want to do a 60-minute '80s hip-hop ride with Alex Toussaint, you think about the permutations of the length, the instructor, the style of class, the style of music. When you talk about 1,500 classes a month that we're going to be producing in the coming quarters, the scale of that matters because it allows selection for the -- for our members. So we're very excited about continuing to invest in content. Again, Apple coming in legitimizes the opportunity. Lastly, I will say, with respect to just the Digital offering, like, let's say, the app or whether it's on your TV or the phone, all of our Connected Fitness members, if you bought a Bike or if you bought a Tread and you're paying us the $39, you effectively get all of our other content on all of our other platforms for free. You're not paying $9.99. You're not paying $12.99. You're paying nothing. You're just paying your $39 Peloton membership. And with that, you get your Bike content or your Tread content, and you get all the other styles of content. So we're very excited about why what we're doing is very unique, why we're going to continue to be the leader. But we're still reacting. So we'll have more thoughts in the coming weeks, I guess.

Thanks, Jason. Our next question will come from the line of Justin Post with Bank of America.

John, earlier, you mentioned the 200 million gym members in your markets. Can you talk a little bit about what percent of your incoming members don't have a gym membership and at the TAM, could even be larger than that? And then secondly, on the Tread, the prior Tread was quite a good product, but we didn't see the kind of member adoption that you saw with the Bike. Do you really think this is a breakthrough and really can help unlock that market, given there's more treads than bikes? Is this really a kind of an inflection point for your Tread sales?

John, do you want to take the second question and then I can double back with some stats around gym memberships of our member base? So why don't you take the first one -- or the second question first?

I like where your head is, Jill. So yes, we think the Tread opportunity in the coming years is bigger than the existing Bike opportunity. We are excited about Peloton Bike sales, and they continue to outpace our expectations. The Peloton Bike+ is going to crush it, just like the original Peloton Bike did. But to your question, we do think that the treadmill is a massive game-changing opportunity for the Peloton business and our SAM and TAM globally. You might be interested to know that, in general, over the last 20 years, there's been about 5 million treadmills sold in the U.S. every year. That compares to about 1.6 million stationary bikes sold in the U.S. every year, so almost 3x more units. Even more than that, when you think about the dollars because a unit -- a treadmill on a unit basis is more expensive than traditional bikes, so the treadmill category is massive, just on the hardware side. But let's talk about the content. Do people want boot camp classes? So the treadmill, obviously, you can run on a treadmill, but we're most excited about the full-body experience that Tom described, where you're on and off the treadmill. And for context, there are -- at the high point, I think there were 93 SoulCycles. SoulCycle is a big brand, as you know. I think they're closing stores, unfortunately, given the current situation. But let's say, close to 100 SoulCycles for context. There were over 1,200 Orangetheory studios pre-COVID, so 12x more Orangetheory studios. And then you think about CrossFit, there were over 10,000 CrossFit locations. And the reason why I bring up Orangetheory and CrossFit is they were both big on -- they both are big on circuit training and instructor-led group fitness. But strength and cardio and circuits and boot camp workouts that we're very excited about, full-body training, that's not just cardio, like, say, an indoor-cycling class might be. So we think between the hardware sales historically, the 35 million treadmills in homes that I alluded to earlier in the call and then the content side of the house, we think as soon as consumers understand that the new Peloton Tread that Tom described, that's now under $2,500 under a $64 a month finance, once the consumers in the markets that we play understand that it's not a traditional treadmill, it's a portal to a full-body workout and allows you to take these boot camp workouts from home, once that education takes place, which we're going to have to educate, just like we did with the Peloton Bike, the Peloton Bike created a new category, the Peloton Tread is going to create a new category that's never existed. It looks like a treadmill of yesteryear, but it's not. So we have some education. But as we do that, as we get to TV in the coming quarters, with some fantastic spots on the Peloton Tread and why it's awesome, we're very, very excited about how big that TAM is. And interestingly, in the SAM and TAM analysis that Jill showed you, there's still almost no awareness of how awesome the Peloton Tread is because we haven't done any marketing. I would say 95%, if not 99%, of the marketing dollars that we've used at Peloton for the last 6 years have been educating on the bike. Almost none have gone towards educating on the treadmill. So we're very excited about getting the word out and expanding our opportunity into that category.

Great. And on your other question, Justin, I like where you're going because I think we're not just looking at people that have current gym memberships today. As we know, we're attracting a lot of people to our platform that don't currently belong to a gym. I would -- there are a ton of people out there that don't feel comfortable going to a boutique fitness class or walking into a big-box gym without any instruction and knowing what to do. So we certainly think the opportunity expands well beyond those that just have gym memberships today. While I don't have a precise answer for you, I can give you a couple of data points that could help you triangulate that opportunity. If you look at new buyers post-COVID, and I would emphasize these are people, for the most part, who no longer could continue with their existing fitness routines, we did have about 80% of our post-COVID buyers previously belonging to a gym. So 20% were new to Peloton that didn't belong to a gym prior to that. I'd also point out that based on some member surveys that we do every year, we have seen a decreasing amount of our members have outside gym memberships. I think this speaks to the utility and the breadth of content that we continue to add on the Peloton platform. But for context, a few years ago, about 60% of our members had gym memberships. About 2 years ago, that was around 50%. And our latest member survey earlier this year, it was around 40%. So we are seeing a growing percentage of our member base not need a supplemental gym membership. And then lastly, I would highlight that roughly 70% of our SAM that we identified in that upside-down triangle slide, we believe, do have gym memberships today as self-identified. And we know that based on additional research that we've done, about half of those that we surveyed said that they are likely to permanently cancel their gym memberships. So we think there's a lot of opportunity there. But I think you're on point. Our TAM is much bigger than what the gym memberships globally would represent. But those are hopefully some helpful data points just to try to triangulate on gym memberships in Peloton.

Thanks, Jill. Thanks, John. Thanks, Justin. Our next question is going to come from the line of Ed Yruma with KeyBanc.

My Bike+ came in today, so I'm excited to give it a shot, and the trade-in process went very smoothly. I guess 2 from me. First, on the scalability of your finance solution, obviously, it's worked pretty well for you. But kind of -- if you can give us an update on Affirm? Do you need other providers? And then second, from an international perspective, as you guys start to catch supply up with demand, how quickly can you add other countries? And certainly, have you considered China?

Great. So I'll take the financing portion. And then, William, if you want to come back in on international growth, that would be great. So in terms of our partnerships, we work with Affirm in the U.S. and Canada. And in Europe, we use Klarna as our partnership as Affirm is not in Europe today. I would say, at this juncture, we have a very strong partnership with Affirm. We haven't really seen any changes or fluctuations in terms of our financing penetration over the last several months. And we feel very comfortable with our relationship with Affirm that they're able to continue to service our needs and support our growth over the next several years. So we feel very good about that. But of course, we're always analyzing other ways in which we can service our members through financing. And so we always have things on the back burner that we're considering. But at this juncture, we love working with Affirm. We feel like they're a very like-minded partner with us in terms of the way that they approach their customer base. And so we feel very comfortable, and it's been a highly successful program for us that has really an increased conversion of our sales over time. So no changes now, but we're always thinking of things in the background to make sure that we're belt-and-suspenders as it relates to our financing program.

Thanks for the question, Ed. Thanks, Jill. Well, we're glad you had a great trade-in experience to John's NPS. That's -- that means a lot to us, and thanks for being a member. Well, first, I think it's notable that this -- our launches last week were the first global launches we've ever architected. So if you, which I'm sure you did, read through our Bike+ and Prism, our global launches for us, which means the 4 markets we currently trade in, which is U.S., Canada, U.K. and Germany, so congrats to Tom, the marketing team, ops, everybody on executing that. In fact, Prism will be in the U.K. even before the U.S. and Canada, which has us excited in terms of the ability to execute on those kind of strategies. In terms of international expansion, John mentioned that we're in the top 3 fitness markets in the world. Our -- Germany being our first foreign-language market, we love the momentum that we've got in those markets. We feel like this needs to be a global platform. Certainly, the community is celebrating the globalness of the community. I was on a ride this morning with Kendall, and she called out someone from Germany and someone from, I think it was Idaho, and someone from West Virginia in one shout-out, and that was exciting. There's a lot of growth there, a lot of upside in terms of the kind of numbers and members we can penetrate as we grow Connected Fitness. Last year, our Connected Fitness growth was over 4.5x internationally in just a year. And so we are looking at new markets, we do, and we have nothing to announce today. But as you might imagine, we've done a ton of analysis on a lot of different vectors, size of the market, ability to go in and execute on our model. In terms of how easy or hard that is for us, I think last year was a big one in that we proved we can go into a foreign-language market that required a ton of localization, not just on the product and the UX, but on things like the website, product documentation. The team did an amazing job on that. We're a lot better positioned to be able to go into new foreign-language markets at the point in which we do that. And so as you can imagine, nothing to announce now, excited about further penetration in the U.K. and Germany. And so we're not going to talk about China either as part of that, but we feel great about our international strategy and how it's going so far.

Great. Thanks, Ed. Our next question is going to come from the line of Doug Anmuth with JPMorgan. Doug, go ahead.

So I have a couple. First, just let me ask, I appreciate you haven't launched on the CPO model yet, but hoping, John and William, you can maybe share some early thoughts there just in terms of how that's going to work, what kind of price point, and then perhaps how quickly can reverse logistics get that bike back into the market. And then just from a TAM/SAM kind of perspective, how do you keep that from conflicting with the existing Bike business? And how does it expand TAM/SAM on the lower end? And then I have a follow-up as well.

Great. What's up, Doug? The CPO opportunity is obviously exciting. Think about it existentially as a citizen of the world, the idea that there's never going to be a Peloton Bike or a Tread in a landfill. We're always going to take them and refurbish them and give them some TLC and put them back in the world. That feels pretty good. So independent of the financial opportunity, you can get excited about that on all kinds of fun feelings. But to answer your question, CPO has never been a real opportunity for us because there's -- no one is meaningfully coughing up their bikes or treads because the churn is so low and people love the product and 94 Net Promoter Score. And so there's been a few, here and there, bikes on eBay or Craigslist over the years, but nothing meaningful. As we, in the coming years, like we did last week, introduce new products, all of a sudden, the idea that there might be some meaningful inventory come back and play is now for the first time becoming a reality. So to answer your question on timing, it's going to take us a few quarters to get enough inventory, to have a meaningful-of-enough offering to talk about it. Right now, there's effectively no original bikes in our warehouses, although Ed's might have just come up a couple of days ago. But it's going to be that type of thing. In the coming months, we will build the inventory. It's not going to take us months to turn them. Hopefully, we'll have a kind of a just-in-time system, but that's still very much TBD on how that rolls out. But we are getting our sea legs. We're excited about it. We're planning on it, but nothing to announce for a few months or quarters for sure.

Just to build on -- Doug, just to build on John's point, I mean I think what has us excited is that in research, if you look at who that might appeal to you, and again, we're not announcing anything today, digital subscribers have the highest appeal in terms of any prospect for CPO. And so in a world where part of our blueprint, part of the playbook, is to get as many digital subs as we can, and we've been really effective at that, especially in the last year with a lot of the tactics we've had, and then convert them into Connected Fitness, and we're super focused on that KPI, that conversion to Connected Fitness, having more tools in our arsenal in order to do that, we already have with this lower-price bike. I mean, a $49 V1, we've never been -- obviously, we've never been able to offer that to our digital subs. But you can imagine CPO doing the same thing. And so that's the goal here, as John led us with, in true north. It's how do we bring this amazing fitness experience. And we do think hardware is part of that. It's just better with our hardware. To your -- the question about the other announcement, that vertical solution of hardware, software content, magically together the way Tom described on the new products, that matters. And so yet another quiver -- yet another arrow in the quiver. And as John said, we'll be excited when we can announce that. But nothing to announce.

Okay. And if I could just follow up with one for Jill. You talked about 36% Connected Fitness product gross margin for '21 given the new products rolling out. Just curious, Jill, if you can help us understand what this assumes in terms of getting any kind of scale benefit as you ramp up production and whether you would expect to gain similar leverage on those hardware products as you have in the past.

Yes. So the lower gross profit margin in our Connected Fitness segment is due to the price drop, right? And then you can think of our Bike portfolio as having then a similar margin across the 2 products and then in the back end of the year, the introduction of new Tread. And then, of course, throughout the course of this year, we're mix-shifting back into Tread+, which we began selling at the very tail end of June. So it's really the combination of all of those things, getting us to the guidance that we gave at 37% and 36%, respectively, for Q1 and for the full year. So for this year, obviously, with 2 new products, there is really no built-in expectation at this juncture to really get the type of cost efficiencies that you've essentially seen us achieve on our original Bike, which did take a few years to get to the type of product cost efficiencies that we're achieving today to put us in this great position to lower the price of our original Bike. So I would say, this year, there really won't be a lot of product cost efficiencies. But certainly, as you move out a year or 2, when we're producing millions of Connected Fitness units, most definitely, we expect to see efficiencies as we continue to move forward, especially when you think about a lot of the investments that we're making in our supply chain around automation and limiting some of the labor that's involved in making some of our products. So we're really trying to be forward-thinking about not only getting cost efficiencies, but how do we scale manufacturing in a way where that is a built-in guarantee for us moving forward. Again, it's going back to wanting to preserve our ability, continuing into the future for us to be able to continue to make our products affordable.

Thanks, Doug. Our next question is going to come from Heath Terry from Goldman Sachs.

John, just to dig a little bit deeper into the mobile product. You've obviously got a -- you've got a product with a lower price point, no hardware cost upfront. People are getting access to a content library that's multiples of what any other comparable product is likely to offer, and you don't have to have any of the logistical limitations. Why aren't we talking about the digital-only business being much bigger than your Connected Fitness business within the next few years?

Yes. I mean it could be, Heath. It's a good question. It could be from a member basis. You think about 10 million members on that platform 5 years from now, I could definitely see that world. As we've said publicly in the past, though, the stickiness just isn't there on that type of Digital platform. So you've got to acquire the members and then you've got to -- they churn and you got to reacquire them. You've got to pay the Apple tax or the Android Play tax. You've got to pay your music partners. So the unit economics just aren't as gorgeous as the rest of our business. I mean obviously, with Connected Fitness, we make great margins in our hardware and then even better margins in subscription. And the LTV is off the chart, the stickiness, the low churn, all that stuff that makes the Connected Fitness business the core of what we do and 99% of our top line and 100% of our contribution. But it's not to say that we're not investing for growth in our Digital business. It's just not really a business. It's -- we've been running at a breakeven, pouring anything we get back into marketing and growth. And we announced on the earnings call last week, there were right around 500,000 paying Digital subscribers. So it's grown faster than our Connected Fitness business. So with that type of graph that's growing faster, you could see a world where it passes at just in the number of people on the platform. But the reason why we talk about Connected Fitness so much is it is the beautiful business. It's the great unit economics. It pays the bills. It's what is going to allow -- it's what I think you guys are underwriting as analysts and investors. And so it's not that we don't love the Digital business. That team is incredible under Karina's leadership. And it's a good business, and it's getting better as we figure out more things and we launch more products and we launch more content. So we love it. It's just not what drives the financial model that you guys see.

Yes. No, I certainly understand that here in the short term. And running it for breakeven, I think it was also a lot of Reed's strategy with Netflix early on. Is it fair to think that maybe that's not where the comparison between the 2 businesses end, and that given that your content economics potentially even look better than that over time, you maybe start off in the same place with 500,000 users, but potentially end up in a similar place over time as the business scales?

Yes. I don't know whether, Jill, you have thoughts. I will say that our Connected Fitness, from a lead gen perspective, has become our fastest-growing lead gen to connected -- to our Connected Fitness. So we get people into digital and then they -- like William has said, they end up buying our hardware because they're so excited about the content and about the community. And they are asking their spouse for their birthday or their anniversary to upgrade them to a Peloton Tread or a Peloton Bike. So it is a beautiful wheelhouse that, like to your point, quite candidly, Netflix didn't have. Netflix had to create a business out of just their app only if in our terms. I don't know whether I'm answering your question, but we love it. We're going to invest in it, but it's just not a beautiful stand-alone opportunity at this point.

The only other thing I might just add on to that is we talked earlier about the fact that we've funneled the majority of our marketing spend into Bike over the last several years. And we talked about the fact that our awareness, therefore, for Tread is less than half of that on the Bike. Digital is even lower than that. So Heath, to your point, there could be an opportunity for us as we continue to grow awareness in Digital and again, not getting too far over our skis and still trying to invest judiciously in Digital to run it towards breakeven. I do think we have a lot of ground to cover in terms of making people aware of the utility of Peloton Digital as a stand-alone business, and it still is a very nascent product for us. We only really, in earnest, started adding content and, of course, the different ways to access that content over the last year. So it is still a very early stage in that business model. So hopefully, we have more interesting updates on that business as time progresses.

Our next question is going to come from Dana Telsey.

As you think about investing in member experiences and what you talked through, what do you see as most impactful in the size of the investment? And then I just have one follow-up.

William, why don't you take that one?

Yes. Just a thought on where a lot of the growth was. We don't break it out and Jill obviously doesn't break out G&A spend and OpEx investments or capital for that matter. But as you might imagine, with the company growing this fast, we've funneled a lot of money into supply chain. We don't want people to wait on order to delivery. We want them excited to get into their Connected Fitness unit as quickly as possible and the systems and IT, which would include member experience support as well as logistics, trying to get people their Bike and Tread faster and get it serviced faster. And then content is also -- if you look at -- and again, we're not going to break out the numbers, but that's another area John talked about a lot, Tom talked about in his presentation, I obviously covered it thoroughly. We're exploding the amount of content we put into the membership. Our aim is to make that $39 a month all-access Connected Fitness membership more and more valuable over time. So you'll see us do that. We talked about Family Fit Fun. We talked about Dance Cardio. We'll do that also with software and access. John referenced all the new interfaces with Apple TV, Roku. You will be able -- our aim is to be on every screen that our members want to access Peloton content, so -- and with more and more content, for more and more people in the family, that $39 a-month across the entire family or partners, spouses. It starts to scale in really fun, interesting ways in terms of value and utility. And so I would say some of -- those are some of the areas where we've funneled investment in '21 and beyond.

And then as you think about vertical integration, are there other areas of vertical integration that would be an opportunity for Peloton? Do you see anything out there that would enhance either the revenue growth or cost structure?

John or Jill, do you want to take that one?

Yes. I'll point out that, I mean, we're opportunistic where -- as it relates to running a good business and delighting our members. We didn't plan on being a delivery platform and service in the early days, but we just wanted to delight our members. And we decided to invest in a global fulfillment platform, and we're very happy we did. Similarly, last year, it wasn't always our goal to own contract manufacturers or manufacturers in Taiwan. But we decided that in order to control our supply chain and have a leg up in R&D and be able to invest aggressively into growth and capacity, we decided to vertically integrate into becoming a manufacturer. And so we're just trying to make smart decisions that make sense for our business in order to increase scale and increase capacity, delight our members. So I'm not sure I'm answering your question, but we're trying to take a thoughtful approach and make -- do what makes sense for all our stakeholders, including shareholders, as you can imagine.

Thanks, Dana. Our next question is going to come from Aaron Kessler at Raymond James. Aaron, go ahead.