A Message from John Foley, Peloton's Co-Founder, Executive Chair

The following is a note Peloton Co-Founder and Executive Chair John Foley sent to the Peloton Team on February 8, 2022:

Team,

Thank you very much for your patience over the last few weeks. As we were in our pre-earnings “Quiet Period”, there were restrictions on what information I could share with you, and I know it has not been easy to wait for clarity. Today, I will update you on where we are as a company, and the changes we’re making to position Peloton for long-term success.

I recently shared that we have been in the process of re-evaluating our costs across the entire organization to ensure we are appropriately structured for the post-COVID landscape. After careful review, we’ll be driving strategic initiatives across our global team that will help us focus on areas that are in need of adjustment, including implementing a comprehensive restructuring program.

As part of this program, we’ve made the difficult decision to reduce the size of the Peloton team by approximately 2,800 positions globally. We are making changes at every level of the organization, including within our leadership team. Let me start with that:

Effective today, I will be moving into a new role as Executive Chair, and Barry McCarthy will be joining Peloton as CEO & President. Barry is an incredible leader who has held senior executive roles at Spotify and Netflix and is a longtime advisor and board member at public and private technology companies. This appointment is the culmination of a months-long succession plan that I’ve been working on with our Board of Directors, and we are thrilled to have found in Barry the perfect leader for the next chapter of Peloton. I look forward to working with him and invite you to welcome him with open arms.

In addition, William Lynch, who has served as President since January 2017, will be transitioning from his role, effective today. He will remain on our Board as a non-executive Director. William has had an immense impact on our growth as a business over the years, as well as in our transition from a private to a public company. We thank him profusely for his contributions and look forward to his continued expertise and contributions as a Director on the Board.

Amongst a number of other senior-level departures across various areas of the business that you’ll learn of in the coming days, I wanted to give a special shout out to my wife, Jill Foley, who will be transitioning from her role as VP of Apparel in the coming months. Jill has been with Peloton since its inception. She founded and built our incredible Apparel business from the ground up. We are all very proud and grateful to Jill and the team that has helped her develop that sector of our business into what it is today.

As a team with a culture as close and tight-knit as ours, saying goodbye to teammates at any level is hard. We aspire to be the best place to work and we know that doesn’t only mean making Peloton a great place to be at, but it also means ensuring Peloton is a place you are proud to be from. And, while today is one of the more challenging ones in our history, we are doing everything we can to ensure you can remain proud of what we have done together. Let me be clear about one thing: this team has built Peloton into what it is today. And this means YOU. Brick by brick, this team has developed the hardware, software, content, delivery and retail experience that is helping improve the lives of millions of Members. This is rare and powerful. Building Peloton is something that has always been, and will always be, a part of each and every one of us.

I want to provide some context behind what led us to this point and what you can expect next . . .

How + why we got here

For many of us, the last two years have been a whirlwind of a learning experience. We navigated COVID-19 together, did our best to meet unprecedented demand, increased the size of our team, and grew our product portfolio. But with this growth, we have also faced our fair share of challenges / pivots / the unexpected.

We often had to act quickly, with limited visibility. For example, in the face of supply chain disruptions and delivery delays, we invested heavily in near-term capacity, inventories, and logistics to protect our Member experience. However, as our post-COVID demand picture looks different than anticipated, these investments no longer align with how we intend to operate our business going forward.

For our North American team, separation conversations will happen today, Tuesday, February 8. Although we are one team, it is important to note we are working through our strategic proposals on a country by country basis. Each country has its own considerations and legal processes, which we must follow and respect. This means that different countries will follow different timelines.

Taking care of our team

This team has always stopped at nothing to get the job done. This is one of the many reasons why being faced with this decision is all the more difficult. We are equipping every team member leaving Peloton with helpful tools to make them as comfortable as possible as they explore their career path post-Peloton.

For our North American team members who are impacted today, I want to share some of the things we are doing:

• Cash Compensation: We will be offering a meaningful cash severance allotment to impacted team members, based on job level and tenure with Peloton.

• Equity: We’ll be extending equity vesting periods for team members through the end of February.

• Healthcare: We'll extend healthcare coverage for those currently enrolled in our benefits, as well as benefits through LYRA, for a period of time.

• Career Services: We’re offering career services through RiseSmart, a leading third party vendor. This includes transition services, dedicated 1:1 sessions, a Certified Resume Writer, Job Leads and Career Tools. Through this vendor, we’ll also be providing the option to voluntarily opt-in to a talent directory, which will showcase our incredible talent to leading employers.

• Membership: The Peloton monthly membership will be complimentary for impacted team members for an additional 12 months.

Other changes to our business

Though reducing the size of our team has been the toughest decision we have had to make in order to operate a more focused, flexible business, it is not the only one.

Within manufacturing operations, we have decided to wind down our Peloton Output Park (POP) plan. Rather than develop this new plant, we believe Tonic and our third party manufacturing partners can support our growth over the next few years. Our Tonic team members bring a wealth of expertise and heart to our team, and have been such critical partners in our journey since the very beginning of Peloton.

We’ve also embarked on a significant realignment and reduction of our North American warehousing and first party logistics operations. During the pandemic, we were forced to rapidly expand our warehouse infrastructure and Last Mile delivery teams, while also scaling our third party relationships. As our growth has moderated and returned to a more typical seasonal pattern, we’ve made the decision to significantly reduce our owned and operated warehousing and delivery footprint.

We're also taking a clear-eyed look at our culture and, if we're honest with ourselves, we see some things that need to change. One of these things is optimizing processes for making decisions -- which includes creating more space for debate to get to the right decisions, empowering the right folks to be decision makers, and supporting decisions once made so we can enhance our execution. You can expect this to be a priority for Barry and our leadership team in the coming year.

What this means for the future of Peloton

We will be doing everything in our power to return to our roots and once again rally around our shared purpose of improving our Members’ lives through fitness. Connected fitness is here to stay; it makes a consistently healthy lifestyle more attainable. We will continue to provide our Members with a world-class fitness experience they can enjoy at home and on-the-go from running, cycling, and strength to boxing, yoga, and meditation. Together, we will continue to provide more and more people with the motivation they need to get healthy, stay healthy, and have fun doing it, consistently on their schedule. Everything we are doing today is to restore our focus and double down on what we do best. The true magic of Peloton. The content. The software. The hardware. The community. The music. The experience. The brand.

Our restructured organization will enable us to improve our execution and incrementally remove added stress from our team. A lot has changed at Peloton in a relatively short period of time. I get that. I know at times that’s come with lots of adversity and challenges. However, I deeply believe that getting back to basics, in many ways, will help us execute with precision and innovation, and that will lead to even greater impact in the long term for all of us who are part of the Peloton journey.

Here’s what to expect next

I know I couldn’t have possibly answered all of your questions in this note. More information will be shared later today, but I wanted you to hear this news from me first, in my own words. Our team deserves that. . . you deserve that. And importantly, I want to keep the lines of communication open.

To our North American team members who will be leaving: I want you to know this is not a reflection of your very important contribution to Peloton. We are grateful for you and your time here. I want to thank you, from the bottom of my heart, for sharing your talent and commitment with Peloton. I hope your experience while working here was a meaningful one, and will help you succeed in your next chapter.

We plan to hold our regularly scheduled February All Hands tomorrow, which Barry will join, and we will devote our time to talking about all of these changes. Together. Also, stay tuned for invitations to individual Team Town Halls in the coming days, where your leaders will help you better understand what some of the changes I’ve shared here mean for your specific team or function.

The choices we’ve made today, some of which were very difficult, will help us get closer to creating a more focused, stronger Peloton for tomorrow.

John