Q4 2023 The Beachbody Co Inc Earnings Call

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Operator: Good afternoon, ladies and gentlemen. Welcome to the Beachbody Company fourth quarter 2023 and full year earnings call. At this time, all participants are in a listen only mode.

Good afternoon, ladies and gentlemen, welcome to the Beach body company fourth quarter 2023, and full year earnings call. At this time, all participants are in a listen only mode.

Operator: Following the presentation, we will conduct a question and answer session. Instructions will be provided at that time for you to queue up for questions. If anyone has any difficulties hearing the conference, please press star zero for operator assistance at any time.

During the presentation, we will conduct a question and answer session and instructions will be provided at that time for you to queue up for questions. If anyone has any difficulties hearing the conference. Please press star zero for operator assistance at any time.

Bruce Williams: I would like to remind everyone that this conference call is being recorded. And I will now turn the conference over to your host, Bruce Williams, Managing Director of ICR Investor Relations. Welcome, everyone, and thank you for joining us for our fourth quarter earnings. With me on the call today are Mark Goldston, Executive Chairman of Beachbody; Carl Daikler, Co-Founder and Chief Executive Officer, and Marc Suidan, Chief Financial Officer.

I would like to remind everyone that this conference call is being recorded and I will now turn the conference over to your host Bruce Williams, managing director of ICR Investor Relations.

Welcome everyone and thank you for joining us for our fourth quarter earnings call with me on the call today are Mark Goldstein Executive Chairman of the Beach body.

Karl <unk> co founder and Chief Executive Officer, and Mark Sudan, Chief Financial Officer. Following their prepared remarks, we will open the call up for questions.

Bruce Williams: Following the prepared remarks, we'll open the call up for questions. Before we get started, I would like to remind you of the company's Safe Harbor link. The statements contained in this conference call, which are not historical facts, may be deemed to constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. However, actual future results may differ materially from those suggested in such statements due to a number of risks and uncertainties, all of which are described in the company's filings with the SEC, which includes today's press release. Today's call will include references to non-GA The reconciliation of these nine GAAP financial measures to the most comparable GAAP financial measures is available within the earnings release, which can be found on our website. Now I would like to turn the call over to, Thank you, Bruce, and welcome, everyone.

Before we get started I would like to remind you of the company's safe Harbor language statements contained in this conference call, which are not historical facts may be deemed to constitute forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.

Actual future results may differ materially from those suggested such statements due to a number of risks and uncertainties all of which are described in the company's filings with the SEC team, which includes today's press release todays call will include references to non-GAAP financial measures such as adjusted EBITDA.

A reconciliation of these non-GAAP financial measures to the most comparable GAAP financial measures is available within the earnings release, which can be found on our website now I would like to turn the call over to Mark.

Thank you Bruce and welcome everyone.

Mark Goldston: I joined the company last summer with one goal, to help this team and this amazing company execute a successful turnaround plan, turn Beachbody back to its roots, be solidly profitable, and be the leader in helping people get healthy results with our fitness and nutrition products. We've made incredible strides in the last seven months, and it shows in the results this quarter and for the year. Last quarter, we told you we would lower the breakeven point of our company, improve our liquidity, and expand our sales channels and continue to execute against our turnaround. I'm happy to report that during the fourth quarter, we accomplished all of these goals, dramatically lowered our revenue break even from over 900 million dollars in 2022 to less than 500 million dollars in 2024, and put an agreement in place to expand our sales presence on Amazon.

I joined the company last summer with one goal to help this team and this amazing company executed a successful turnaround plan to return <unk> to its roots of being solidly profitable and as the leader in helping people get healthy results with our fitness and nutrition products. We've made incredible strides in the last seven months in.

It shows in the results this quarter and for the year last quarter. We told you we would lower the breakeven point of our company improve our liquidity and expand our sales channels and continue to execute against our turnaround plan I am happy to report that during the fourth quarter. We accomplished all of these goals, we dramatically lowered our revenue breakeven.

From over $900 million in 2022 to less than $500 million in 2024, we've put an agreement in place to expand our sales presence on Amazon, we improved our liquidity position and we're going to continue to execute against our turnaround plan by posting positive adjusted EBITDA performance this quarter.

Mark Goldston: We improved our liquidity position, and we're going to continue to execute against our turnaround plan by posting positive adjusted EBITDA performance this quarter. We exceeded both revenue and adjusted EBITDA guidance, and we can confidently state that we will achieve a milestone event by becoming cash flow positive in Q1 of 2024, which would be the first time since 2020. We've built significant operating leverage in the P&L, and we're actively deploying several operating strategies this quarter and getting encouraging results. As a reminder, our turnaround plan has been focused on enhancing our liquidity, re-architecting our selling and marketing, digital experience, and nutrition business to drive revenues, and continuing our cost transformation and re-architecture of the company to dramatically reduce our break-even point without undermining the core business model that generate We actually accomplished what we said we would do in each of these areas this quarter.

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We exceeded both revenue and adjusted EBITDA guidance, and we can confidently state that we will achieve a milestone event by becoming cash flow positive in Q1 of 2024, which will be the first time since 2020, we built significant operating leverage in the P&L and we're actively deploying <unk>.

Operating strategies this quarter and getting encouraging results.

As a reminder, our turnaround plan has been focused on enhancing our liquidity.

We architected, our selling and marketing digital experience and nutrition business to drive revenues and continuing our cost transformation and re architecture of the company to dramatically reduce our breakeven point without undermining the core business model that generates the revenue.

We actually accomplished what we said we would do in each of these areas this quarter.

Mark Goldston: Our fourth-quarter performance gives us confidence that we will be cash flow positive in the first quarter of 2024 and puts us in a good position for the remainder of the year and beyond. I'll now expand on our liquidity enhancement before I turn it over to Carl, who will update you on our go-to-market strategy and our digital and nutrition business, and then Mark will close out with an update on our cost transformation initiative. On the liquidity front, we've been enhancing our balance sheet with numerous actions, including a capital raise in Q4, and we're selling non-core assets, and those things will help to enhance the overall liquidity position of the company. The combination of these actions has enhanced the balance sheet by over $10 million to date.

Our fourth quarter performance gives us confidence that we will be cash flow positive in the first quarter of 2024 and puts us in a good position for the remainder of the year and beyond.

I will now expand on our liquidity enhancement before I turn it over to Carl who will update you on our go to market strategy and our digital and nutrition businesses and then Marc will close out with an update on our cost transformation initiatives.

On the liquidity front, we've been enhancing our balance sheet with numerous actions, including a capital raise in Q4 were selling noncore assets and those things that help to enhance the overall liquidity position of the company. The combination of these actions enhance the balance sheet by over $10 million to date.

Mark Goldston: This, along with our reduced break-even point, has put us in a position to generate positive free cash flow in Q1 of 2024. We believe that our improved liquidity position puts us in a better position to execute on our strategic initiatives to take advantage of the competitive advantages of the company and to stabilize and drive revenue while, importantly, building cash. In 2023, we successfully completed a reinvention and simplification of our digital platform, and we're extremely pleased with the results, evidenced by the stable quarter-to-quarter revenues. We also have healthy retention metrics, and we were just awarded the top-rated fitness app in 2023 by CNN.

This along with a reduced breakeven point has put us in a position to generate positive free cash flow in Q1 of 2024.

We believe that our improved liquidity position puts us in a better position to execute on our strategic initiatives to take advantage of the competitive advantages of the company and to stabilize and drive revenue. While importantly building cash in 2023, we successfully completed a reinvention and simplification of our digital platform.

At form and we're extremely pleased with the results evidenced by the stable quarter to quarter revenues. We also have healthy retention metrics and we were just awarded the top rated fitness App in 2023 by CNN I'm also excited to share the new initiatives to rebuild the value of our nutrition business with a robust spotless.

Mark Goldston: I'm also excited to share the new initiatives to rebuild the value of our nutrition business, with a robust spotlight schedule on a different supplement every month. We will also continue the expansion of our nutrition business on Amazon, and we've got compelling new product initiatives scheduled to be introduced throughout 2024. In addition, we now believe that our database of 14 million contacts includes potential Beachbody Nutritional Supplement customers who collectively purchased well over $1 billion of our nutritional products since 2016. We intend to create tailored nutritional offers designed to re-engage that massive reservoir of millions of our former nutritional subscribers as part of our nutritional turnaround plan for 2024 and beyond. You know, stepping back.

Schedule on a different supplement every month, we will also continue the expansion of our nutrition business on Amazon and we have got compelling new product initiatives scheduled to be introduced throughout 2024.

In addition, we now believe that our database of $14 million context includes potential beach body nutritional supplement customers, who collectively purchased well over $1 billion of our nutritional products. Since 2016, we intend to create tailored nutritional or.

Offers designed to Reengage that massive reservoir of millions of our former nutritional subscribers as part of our nutritional turnaround plan for 2024 and beyond.

Stepping back.

Mark Goldston: I believe we've barely scratched the surface of the enormous white space that's in front of us. Some of the major opportunities are as follows. We have significant potential to expand our sales aperture through partnerships with large organizations. We'll be expanding our outreach and appeal to the male demographic, which represents roughly 50% of the digital fitness and nutrition TAM and yet is only around 15% of our business today, despite our rich past with the male market. Carl will talk more about the mail market initiative later, and he'll also unveil a significant initiative that builds upon our successful history of leveraging our existing award-winning content in a very new and exciting way that augments our conventional subscription model. As I look across this marketplace, I believe that the fitness industry is still very fragmented, and it's ripe for consolidation.

I believe we've barely scratched the surface on the enormous white space that's in front of us.

Some of the major opportunities are as follows we have significant potential to expand our sales aperture to partnerships with larger organization.

We'll be expanding our outreach and appeal to the male demographic, which represents roughly 50% of the digital fitness and nutrition Tam and yet is only around 15% of our business today, Despite our rich passed with the mail market.

Carl will talk more about the mail market initiative later and he'll also unveil a significant initiative, which builds upon our successful history of leveraging our existing award winning content in a very new and exciting way that augments our conventional subscription model.

As I look across this marketplace I believe that the fitness industry is still very fragmented and it's ripe for consolidation.

Mark Goldston: I've purchased many, many companies during my career, and I believe that once our turnaround is complete, we will be in a strong position to use our $340 million federal NOL and our $385 million state NOL as a powerful vehicle to initiate some meaningful consolidation within the fitness and nutrition industry. I want to reiterate my confidence in the value of the Body Platform. The company holds invaluable assets, including what we believe to be the world's most extensive digital fitness library. We have a range of highly efficacious nutritional products and a massive database in excess of 14 million contacts that will be the focus of our Winback programs, along with our large base of subscribers who have a very low churn rate, and, of course, our highly skilled leadership team. What we've accomplished thus far in our transformation in such a short time is a testament to the power of the platform and the team's hard work. Now, I will turn it over to Carl to discuss the progress we've made on our initiatives. Carl?

Many many companies during my career and I believe that once our turnaround is complete we will be in a strong position to use our $340 million federal NOL and our $385 million state NOL as a powerful vehicle to initiate some meaningful consolidation within the fitness.

And nutrition industries.

I want to reiterate my confidence in the value of the body platform. The company holds in valuable assets, including what we believe to be the world's most extensive digital fitness library, we have a range of highly efficacious nutritional products and our massive database in excess of 14 million contacts that will be the folks.

Of our win back programs, along with our large base of subscribers, who have a very very low churn rate and of course, our highly skilled leadership team.

What we've accomplished thus far in our transformation in such a short time is a testament to the power of the platform and the team's hard work now I will turn it over to Carl to discuss the progress we've made on our initiatives call.

Carl D. Daikeler: Thanks, Mark. Our progress in 2023 marks significant milestones in our turnaround in an environment that has challenged the entire industry. And I'm very pleased with our progress. We lowered our cost structure and positioned the company to substantially improve its operating leverage as we position ourselves for the kind of growth that's possible with our unique and agile business model. We revamped and simplified our digital platform with the launch of the consolidated body subscription in March 2023. We reconfigured our subscription pricing into an annual offering for $179. And I'm pleased that our monthly subscriber retention has remained stable through these changes.

Thanks, Mark our progress in 2023 March significant milestones in our turnaround in an environment that has challenged the entire industry.

Im very pleased with our progress we lowered our cost structure and position the company to substantially improve its operating leverage as we position ourselves for the kind of growth that's possible with our unique and agile business model, we revamped and simplified our digital platform with the launch of the consolidated body subscription in March 2023.

We reconfigured our subscription pricing into an annual offering for $179 and I'm pleased that our monthly subscriber retention has remained stable through these changes.

Carl D. Daikeler: Likewise, as Mark mentioned, we were rated the top workout and fitness app by CNN in 2023. We don't take this recognition lightly, and I'm extremely proud of our team that continues to provide the best fitness and nutrition solutions for the consumer. Now, let me start by updating you on the sales and marketing initiatives that we discussed on our Q3 earnings call. Then I'll outline some of our E-2024 initiatives. Okay, first, we introduced a new compensation plan to our network of partners to better reward their productivity. And I'm pleased that our network has been reinvigorated with the addition of these incentives, along with the launch of our new programs, such as Dig Deeper, a new weightlifting program by super trainer Sean T. that's attracting significant demand. Also, a partnership with Brendan Bouchard, a leading motivator and high performance habits expert, has been very well received by our network of partners.

Likewise as Mark mentioned, we were rated the top workout and fitness App by CNN for 2023, we don't take this recognition lately and.

Extremely proud of our team that continues to provide the best fitness and nutrition solutions for the consumer.

Now let me start by updating you on the sales and marketing initiatives that we discussed on our Q3 earnings call then I'll outline some of our key 2024 initiatives.

First we introduced a new compensation plan to our network of partners to better reward their productivity and I'm pleased that our network has been reinvigorated with the addition of these incentives along with the launch of our new programs such as dig deeper a new weightlifting program by Super trainer Shaun T. That's attracting significant demand.

Also our partnership with Brendan Bouchard, leading motivator and high performance habits expert has been very well received by our network of partners second performance marketing continues to produce strong return on AD spend, particularly as we are working closely with meta to continue expanding our visibility on all of their social networks.

Carl D. Daikeler: Second, performance marketing continues to produce strong return on ad spend, particularly as we're working closely with Meta to continue expanding our visibility on all their social networks. Third, customer database reactivation. We continue to aggressively mine our customer database of prospect email addresses.

Third.

Customer database reactivation, we continued to aggressively mine our customer database of prospect email addresses in the fourth quarter and in the month of January we converted a sizeable cohort in each of those periods conversion rates are very encouraging and exceeded our expectations. We'll keep enhancing this core competence to reactivate paas customers.

Carl D. Daikeler: In the fourth quarter and in the month of January, we converted a sizable cohort in each of those periods. Conversion rates are very encouraging and exceeded our expectations. We'll keep enhancing this core competence to reactivate past customers and improve engagement, retention, and lifetime value KPIs, especially with a new initiative coming in April, which I'll describe in a minute.

<unk> and improve engagement retention and lifetime value Kpis, especially with a new initiative coming in April, which I will describe in a minute.

Carl D. Daikeler: We continue to ramp up activity on Amazon with our new agency and should start to see benefits through improved listing optimization and increased SKU count on the platform throughout the year. And, fifth, we launched body previews in Q4, where customer prospects can view over 120 sample workouts for free. These prospects are now seeing the value of our content before we ask for the order, resulting in a strong conversion ratio of free sign-ups to paying subscribers, and conversion is exceeding our expectations. Now we're focused on increasing the visibility of this channel through YouTube, new partnerships, and capturing the significant traffic that visits our sites every month, moving to 2024 in this. First, in late March, we're making our programs available for digital program purchase and download, allowing customers to buy a title and stream it over our platform without being a subscriber.

We continue to ramp up activity on Amazon with our new agency and should start to see benefits through improved listing optimization and increased SKU count on the platform throughout the year.

And fifth.

We launched body previews in Q4, where customer prospects can view over 120 sample workouts for free.

These prospects are now seeing the value of our content before we ask for the order, resulting in a strong conversion ratio of free sign ups to paying subscribers and conversion is exceeding our expectations now we're focused on increasing the visibility of this channel through Youtube, new partnerships and capturing significant traffic that visits are.

Sites every month.

Moving to 2024 initiatives first.

In late March were making our programs available for digital program purchase and download, allowing customers to buy a title and stream it over our platform without being a subscriber similar to the DVD purchase model, which is very profitable and the cornerstone of scaling our business for two decades, we believe this new initiative.

Carl D. Daikeler: Similar to the DVD purchase model, which was very profitable and the cornerstone of scaling our business for two decades, we believe this new initiative will satisfy consumers who have a strong affinity for titles in our catalog or for people who just prefer to own and download the content. This is an exciting complement to our current subscription business and will leverage our competitive advantage of monetizing our strong branded library of titles. Imagine the latent demand in the market for programs like P90X, 21 Day Fix, and Insanity. This is a big opportunity, and no other platform has the capability and library that Body has.

We'll satisfy consumers who have a strong affinity for titles in our catalog or where people who've just prefer to own and download the content.

This is an exciting complement to our current subscription business and we will leverage our competitive advantage of monetizing our strong branded library of titles imagine the latent demand in the market to own programs like <unk> 'twenty, one they fix and insanity.

As a big opportunity and no other platform has the capability and library the bodies.

Carl D. Daikeler: Next, we intend to have a greater focus on targeting men. Currently, over 85% of our subscribers are women, so there's a substantial, untapped market opportunity. Our legacy programs, such as P90X, and newer weightlifting programs like Dig Deeper and Lift More, provide content that's super effective and appealing to the male audience.

Next we intend to have a greater focus on targeting men.

Currently over 85% of our subscribers are women. So there is a substantial untapped market opportunity our legacy programs, such as <unk> and newer weightlifting programs like dig deeper and lift more provide content, that's super effective and appealing to the male audience.

We don't need to build a new skill set to reach men because in our 25 year history, we've had a significant content and supplement business with men with new efficiencies we've achieved in performance marketing.

Carl D. Daikeler: We don't need to build a new skill set to reach men because, in our 25-year history, we've had a significant content and supplement business with men. With the new efficiencies we've achieved in performance marketing, we're confident we can return to attracting and retaining a significant number of male customers. And last, as Mark also mentioned, we'll be focusing on rebuilding our nutrition business with special bundling configurations, monthly nutrition product spotlights, in-app merchandising, and new products launching in Q3 and Q4. Okay, in summary, I'm very pleased that our strategic efforts are beginning to yield the results intended, as evidenced by, one, delivering a much lower break-even point to provide some safety as we navigate These results reflect the progress we aim for in our turnaround plan. And as I think about 2024, I'm excited about the road ahead for the company and the prospect of helping more people find the right solution for their overall health and fitness.

We're confident we can return to attracting and retaining a significant number of male customers.

And last as Mark also mentioned, we will be focusing on rebuilding our nutrition business with special bundling configurations monthly and nutrition products spotlights.

Merchandising and new products launching in Q3 and Q4, Okay. In summary, I am very pleased that our strategic efforts are beginning to yield the results intended as evidenced by one delivering a much lower breakeven point to provide some safety as we navigate the turbulence in the health and fitness sector.

To generating positive adjusted EBITDA and guiding to be free cash flow positive in Q1 2024.

These results reflect the progress we aim for in our turnaround plan and as I think about 2024.

About the road ahead for the company and the prospect of helping more people find the right solution for their overall health and fitness needs. We're a unique company in that respect and I. Appreciate the effort of our team in support of our investors to provide this incredibly important service.

Okay now, let me turn the call over to marks we Dan to walk through the specifics of our fourth quarter financials.

Marc Suidan: We're a unique company in that respect, and I appreciate the effort of our team and the support of our investors to provide this incredibly important service. Okay, now, let me turn the call over to Marc Suidan to walk through the specifics of our fourth quarter financials. Thanks, Carl, and hello everyone.

Thanks, Karl and Hello, everyone. We are excited to share that we exceeded guidance on revenue and adjusted EBITDA in the fourth quarter of 2023.

Including our first positive adjusted EBITDA quarter for the year.

We continue to execute on our turnaround plan and the results are starting to bear fruit as demonstrated by our lower cost structure and our stabilized digital streaming revenue.

Marc Suidan: We are excited to share that we exceeded guidance on revenue and adjusted EBITDA in the fourth quarter of 2023, including our first positive adjusted EBITDA quarter for the year. We continue to execute on our turnaround plan, and the results are starting to bear fruit, as demonstrated by our lower cost structure and our stabilized digital streaming revenue. With the company's new operating leverage and cost structure in place, we can be free cash flow positive at this level of revenue. As Carl discussed, we believe that the foundation is set for us to return to growth. Getting into the financial results for the quarter, let me start with revenue. Revenues for the quarter came in at $119 million, which exceeded the company's high point of guidance and was 8% higher than the guidance minimum. Revenues were 7% below the prior quarter and 20% below the prior year fourth quarter. However, the year-over-year decline in quarterly revenue improved each quarter throughout 2024. Digital revenue of $64 million was essentially flat compared to the last quarter. However, on a year-over-year basis, digital revenue was down 7% from the fourth quarter of last year.

With the company's new operating leverage and cost structure in place, we can be free cash flow positive at this level of revenue.

I will discuss we believe that the foundation is set for us to return to growth.

Getting into the financial results for the quarter, let me start with revenues.

Revenues for the quarter came in at $119 million, which exceeded the company's high point of guidance and was 8% higher than the guidance midpoint.

Revenues were 7% below the prior quarter and 20% below the prior year fourth quarter.

Year over year decline in quarterly revenue improve each quarter throughout 2024.

Digital revenue of $64 million was essentially flat compared to the last quarter on a year over year basis digital revenue was down 7% from the fourth quarter of last year.

We had $1 3 million digital subscribers as of December 31 of which 80% of them were on their premium body platform.

Nutrition revenue of $52 million declined by 12% quarter over quarter and 31% from the prior year fourth quarter.

At the end of the year, we had 160000 nutrition subscriptions.

Marc Suidan: We had 1.3 million digital subscribers as of December 31, of which 80% of them were on the premium body platform. Nutrition revenue of $52 million declined by 12% quarter over quarter and 31% from the prior year fourth quarter. At the end of the year, we had 160,000 nutrition subscriptions. As Mark and Carl mentioned, we are now laser focused on turning around the nutrition supplement business. Connected fitness revenue, which is our connected bikes, was $3.2 million, down from $4.9 million in the prior quarter and $4.7 million in the prior year's fourth quarter.

As Mark and Karl mentioned, we are now laser focused on turning around the nutrition supplement business.

Connected fitness revenue, which is our connected bikes was $3 2 million.

Down from $4 9 million in the prior quarter.

And $4 7 million in the prior year fourth quarter, we continued to strategically use promotions to sell our existing inventory.

Moving onto gross margin.

Our gross margin for the fourth quarter was 62, 2% up from 58, 5% in the prior quarter and up from 57, 1% in the prior year fourth quarter.

For the year. The gross margin was 61, 3% up from 53, 4% in 2022, representing a 790 basis point improvement.

Marc Suidan: We continue to strategically use promotions to sell our existing inventory. Moving on to gross margin. Our gross margin for the fourth quarter was 62.2%, up from 58.5% in the prior quarter and up from 57.1% in the prior fourth quarter. For the year, our gross margin was 61.3%, up from 53.4% in 2022, representing a 790 basis point improvement. Our digital gross margin was 73.1%, down from 74.5% in the prior quarter and down from 77.4% in the prior fourth quarter. The decline from the prior year is largely due to sales delivery.

Our digital gross margin was 73, 1% down from 74, 5% in the prior quarter and down from 77, 4% in the prior year fourth quarter.

The decline from the prior year is largely due to sales deleverage. However, we are at the tail end of our 2021 content that amortization.

And our capitalized content with significantly higher so the 2024 digital gross margin will now benefit from lower content amortization.

We have been shifting to a more efficient content production schedule, which has dramatically reduced our capitalized expenditures.

Nutrition gross margin was 53, 2% in line with the prior quarter and above the 49, 8% in the prior year fourth quarter.

Marc Suidan: However, we are at the tail end of our 2021 content amortization, when our capitalized content was significantly higher, so the 2024 digital gross margin will now benefit from lower content amortization. We have been shifting to a more efficient content production schedule, which has dramatically reduced our capitalized expenditure.

Despite losing scale, our nutrition gross margin improved compared to the prior year, given our focus on pricing supply chain optimization and tighter inventory management.

Connected fitness gross margin was minus 13%.

Significant improvement sequentially and from the prior year fourth quarter when the gross margin was greater than minus the 100% for both of those comparable periods.

Marc Suidan: Nutrition gross margin was 53.2%, in line with the prior quarter and above the 49.8% in the prior year fourth quarter. Despite losing scale, our nutrition gross margin improved compared to the prior year given our focus on pricing, supply chain optimization, and tighter inventory management. Connected fitness gross margin was minus 13%, a significant improvement sequentially and from the prior fourth quarter, when the gross margin was greater than minus 100% for both of those comparable peers. Moving on to operating expenses, Excluding the asset impairment and restructuring charges, our operating expenses were 76.7% of revenue, an improvement from 80.1% in the prior year and in line with 76.8% in the fourth quarter of last year. In terms of absolute dollars, our operating expenses, excluding the asset impairments and restructuring charges, improved by 11% from the prior quarter and by 20% from the prior year.

Moving onto operating expenses.

Excluding the asset impairment and restructuring charges. Our operating expenses were 76, 7% of revenue an improvement from 81% in the prior year and in line with 76, 8% in the fourth quarter of last year.

In terms of absolute dollars, our operating expenses, excluding the asset impairment and restructuring charges improved by 11% from the prior quarter and by 20% from the prior year, we continued to aggressively manage our costs and are in a great position to drive operating leverage.

Selling and marketing was 50% of revenue this quarter, an improvement from 64% in the prior quarter and in line with the prior year fourth quarter.

Generally we spend less on media in the fourth quarter, given the caustic business seasonality.

Going forward, we will have a 1000 basis points improvement in selling and marketing that will be reflected in our 2024 results.

Second development was 15% of revenue same as the prior quarter and higher than the 14% of revenue in the prior year fourth quarter in absolute dollars, we reduced our expenses by 6% from the prior quarter and by 15% over the prior year.

Marc Suidan: We continue to aggressively manage our costs and are in a great position to drive operating levels. Selling and marketing was 50% of revenue this quarter, an improvement from 54% in the prior quarter and in line with the prior year fourth quarter. Generally, we spend less on media in the fourth quarter given the constant fitness season out. Going forward, we will have a 1000 basis points improvement in selling and marketing that will be reflected in our 2024 results. Tech in development was 15% of revenue, the same as the prior quarter and higher than the 14% of revenue in the prior fourth quarter.

G&A is 11% of revenue this quarter in line with the prior quarter and down from 13% in the prior year in absolute dollars, we reduced our G&A by 8% from the prior quarter and by 30% from the fourth quarter of last year.

Overall, we continue to find ways to make our business more efficient and reduce our breakeven point.

Compared to 2021, we have reduced our fixed cost and capital expenditures by $165 million annually.

In 2024, we are planning an additional $35 million in savings to bring the total savings to $200 million.

Marc Suidan: In absolute dollars, we reduced our expenses by 6% from the prior quarter and by 15% over the prior year. GNA accounts for 11% of revenue this quarter, in line with the prior quarter and down from 13% in the prior year. In absolute dollars, we reduced our GNA by 8% from the prior quarter and by 30% from the fourth quarter of last year. Overall, we continue to find ways to make our business more efficient and reduce our breakeven point. Compared to 2021, we have reduced our fixed costs and capital expenditures by $165 million annually. In 2024, we are planning an additional $35 million in savings to bring the total savings to $200 million compared to 2021. As it relates to our net loss, we had goodwill and intangible asset impairment charges of $43 million, which increased our net loss to $65 million in Q4, compared to a $33 million loss in the prior quarter and $45 million loss in the fourth quarter of last year. Excluding these charges, the net loss would have been $22 million, which is a substantial improvement from $33 million loss in the prior quarter and a $26 million loss in the prior year fourth quarter, exclusive of intangible asset impairment charges.

Compared to the 2021.

As it relates to our net loss, we had goodwill and intangible asset impairment charges of $43 million, which increased our net loss of $65 million in Q4 compares to a $33 million loss in the prior quarter and $45 million loss in the fourth quarter of last year.

Excluding these charges the net loss would have been $22 million.

Which is a substantial improvement from $33 million loss in the prior quarter and a $26 million loss in the prior year fourth quarter exclusive of intangible asset impairment charges.

As for adjusted EBITDA, We reported a positive adjusted EBITDA of $3 million.

This was well ahead of our guidance and a meaningful improvement from the prior quarter loss of $6 million.

The prior year fourth quarter also had a similar positive adjusted EBITDA, but was driven by the bonus amount that we decided to settle an equity.

Factoring out the prior year anomaly. This was the first positive adjusted EBITDA quarter since going public in 2021.

Moving on to the balance sheet, our cash balance finished at 33 million $5 million less than the prior quarter.

Given seasonality Q4 has the lowest cash billings and our new selling and marketing cost structure have not taken effect.

We did a capital raise to improve our liquidity and that enhanced our cash position by $5 million.

Marc Suidan: As for Adjusted EBITDA, we reported a positive Adjusted EBITDA of $3 million. This was well ahead of our guidance and a meaningful improvement from the prior quarter loss of $6 million. The prior year fourth quarter also had a similar positive adjust to EBITDA, but it was driven by the bonus amount that we decided to settle in equity. Factoring out the prior anomaly, this was the first positive adjusted EBITDA quarter since going public in 2021. Moving on to the balance sheet, our cash balance finished at $33 million, $5 million less than the prior quarter.

We also announced last week the sale of our <unk> production facility.

The sales leaseback transaction further enhances our liquidity position in the first quarter of 2024.

Inventory was $25 million down from $32 million from the prior quarter. This is the 10th consecutive quarter of net inventory reduction as we continue to tightly balanced our demand and supply requirements.

Our content in that Capex was in line with prior quarters at $3 7 million.

For the year, the Capex was $15 6 million.

Marc Suidan: Given seasonality, Q4 has the lowest cash billings, and our new selling and marketing cost structure has not taken effect. We did a capital raise to improve our liquidity, and that enhanced our cash position by $5 million. We also announced last week the sale of our Van Nuys production facility. This sale leaseback transaction further enhances our liquidity position in the first quarter of 2024. Inventory was $25 million, down from $32 million in the prior quarter.

Compared to $38 7 million in 2022, representing a 60% improvement.

We continue to be judicious in our technology investments and our production schedule.

We are producing new content that significantly less production costs, which requires less capex.

It should be noted that we have a major advantage in our program library as we have a large selection of evergreen content that continues to resonate with our subscriber base.

Looking at our cash flows our cash used in operations for the year was $23 million compared to $47 million in 2022, representing an improvement of 51%.

Marc Suidan: This is the 10th consecutive quarter of net inventory reduction as we continue to tightly balance our demand and supply requirements. Our content and tech CapEx was in line with prior quarters at $3.7 million. For the year, CapEx was $15.6 million, compared to $38.7 million in 2022, representing a 60% improvement. We continue to be judicious in our technology investments and our production schedule.

Our free cash flows which is the combination of cash flows used in operating activities in capex on the investing activities.

Proved by 59% for the year in 2023 compared to 2022.

Looking at the quarter ahead, we will start to see benefits of both our $200 million savings over 2021, and the targeted 1000 basis points improvement in selling and marketing.

Marc Suidan: We are producing new content at significantly lower production costs, which requires less capital expenditure. It should be noted that we have a major advantage in our program library as we have a large selection of evergreen content that continues to resonate with our subscriber base. Looking at our cash flows, our cash use and operations for the year was $23 million, compared to $47 million in 2022, representing an improvement of 51%. Free cash flows, which is the combination of cash flows used in operating activities and CapEx on their investing activities, improved by 59% per year in 2023 compared to 2022.

All of this sets up the next quarter to be free cash flow positive.

We expect the first quarter revenues to be in the range of $113 million to $121 million.

We expect a net loss in the range of $15 million to $10 million and an adjusted EBITDA in the range of $0 to positive $5 million.

We are also expecting to be free cash flow positive in Q1 of 2024, which will be the first time. Since 2020, we are very proud of our accomplishments to date and look forward to keep sharing results from our turnaround now I will turn the call back over to the operator to open it up for questions.

Absolutely we will now begin the Q&A session, if you'd like to ask a question at this time you can do so by dialing star one on your telephone keypad.

If for any reason you would like to remove that question you can dial star two.

Marc Suidan: Looking at the quarter ahead, we will start to see benefits of both our $200 million savings over 2021 and the targeted 1,000 basis points improvement in selling in March. All this sets up the next quarter to be free cash flow positive. We expect first quarter revenues to be in the range of $113 million to $121 million.

Again to ask a question it is starwood.

As a reminder, if youre using a speakerphone on todays call. Please be sure to pick up your handset before asking your question, we'll pause here briefly to allow questions to generate in the queue.

Yeah.

The first question is from the line of George Kelly with Ralph Your line is now open.

Hi, everybody thanks for taking my questions.

So a fair amount to go through first maybe I'll start on the commission structure changes I'm curious.

Marc Suidan: We expect a net loss in the range of $15 million to $10 million and an adjusted EBITDA in the range of $0 to positive $5 million. We are also expecting to be free cash flow positive in Q1 of 2024, which will be the first time since 2020. We are very proud of our accomplishments to date and look forward to continuing to share results from our turnaround. Now, I will turn the call back over to the operator to open it up for questions. Absolutely. We will now begin the Q&A session. If you'd like to ask a question at this time, you can do so by dialing star one on your telephone keypad. If, for any reason, you would like to remove that question, you can dial star 2. Again, to ask a question, it is star number 1.

Is the full impact of those changes reflected in your Q1 guide or is it something where we'll see a lot of it but there will be sort of.

Continued tailwind throughout the year.

Is it greater.

Impact to Q2 through Q4.

Sure.

Hey, George.

This is mark.

So what I would say on that one Georges as you know, we said theres going to be a 1000 basis points improvement in 2024.

Turn it off in January that's a factor of multiple things, including.

The incentive comp line as well as the aggressive wind back body previews and so on so I just want to make sure everybody knows it's a multiple of factor.

That influenced that number.

Operator: As a reminder, if you're using a speakerphone on today's call, please be sure to pick up your handset before asking your question. We'll pause here briefly to allow questions to generate in the queue. The first question is from the line of George Kelly with Ross. Your line is now open.

I do I do think it should have tailwind throughout the year because remember when you start off in January you also have deferred cost right that's coming in from the prior year on the on the balance sheet. So it kind of takes effect all throughout the year at an accelerating pace.

George Kelly: Hey, everybody. Thanks for taking my question. So, a fair amount to go through. First, maybe I'll start on the commission structure changes. I'm curious.

Okay.

And now here, we are several months past when you first announced those changes and I'm just curious what you've seen as far as the reaction from from your partner network.

George Kelly: Is the full impact of those changes reflected in your Q1 guide, or is it something where, you know, we'll see a lot of it, but there will be sort of a continued tailwind throughout the year that is a greater impact on Q2 through Q3? Hey, George, great to have you on. This is Marc Suidan.

Has it been pretty consistent.

People are still engaged or has there been much pullback.

Hi, George this is Carl and I. Appreciate the question. So we're actually very pleased with the response within the network because what we're doing is rewarding productivity. So it's really had.

Marc Suidan: So what I would say on that one, George, as we said, there's going to be a 1000 basis points improvement in 2024. It started off in January, that's a factor of multiple things, including the incentive comp plan, as well as the aggressive win back, body previews, and so on. So I just want to make sure everybody knows there are a multiplicity of factors that influence that number. I do, I do think it should have tailwinds throughout the year because remember, when you start off in January, you also have deferred costs, right, that's coming in from the prior year on the balance sheet. So it kind of takes effect all throughout the year at an accelerating pace. Okay, and now here we are several months past when you first announced those changes. And I'm just curious what you've seen as far as the reaction from your partner network has been pretty concerned. And people are still engaged, or has there been much blowback?

Great Galvanizing effect to get the network back in gear understanding their role in.

Getting the word out bringing in new customers in.

We're definitely seeing the momentum since that we gain when we first announced the changes into the actual deployment of the changes in January it's continuing to build so.

The mood and demeanor of the network is actually very positive.

Intent on growing.

Okay. Thanks, and then a couple of other topics I wanted to cover.

First and this is sort of a broad question, but.

I'll just leave it that way.

Your Q1 guidance.

Calls for kind of a flattish sequential growth.

Carl D. Daikeler: Hi George, this is Carl, and I appreciate the question. So we're actually very pleased with the response within the network because what we're doing is rewarding productivity. So it's really had a great galvanizing effect to get the network back in gear, understanding their role in getting the word out, and bringing in new customers, and we're definitely seeing the momentum that we gained when we first announced the changes to the actual deployment of the changes in January. It's continuing to build. So the mood and demeanor of the network is actually very positive and intent on growing. Okay, thanks. And then there are a couple other topics I wanted to cover. First, and this is sort of a broad question, but...

And I'm curious.

Can you give any any kind of direction on your segment level growth.

What's baked into your guide as far as the sequential digital and sequential nutrition growth and then part two to that question is.

You listed a whole bunch of initiatives in both businesses and I'm curious.

Do you anticipate them.

Should we see that sort of sequential declines we've seen in the nutrition business should those stabilized midyear like what's your anticipation for.

For the rest of the year and both businesses are we going to start seeing.

George Kelly: I'll just leave it that way. Your Q1 guide calls for a kind of flattish sequential growth. And I'm curious.

The impact of these various initiatives.

George what I would say is.

Well, we don't want to give guidance ahead of Q1 as you noted our initiatives are really a healthy mix of both the digital and nutrition.

George Kelly: Can you give any kind of direction on your segment level growth under, you know, what's baked into your guide as far as the sequential digital and sequential nutrition growth? And then, part two to that question is, You listed a whole bunch of initiatives in both businesses. And I'm curious, do you anticipate them?

So we're attacking on all fronts, our focus is being cash flow positive.

From a free cash flow definition standpoint on a sustainable basis. So I don't based on that I would say you shouldnt see nutrition declined the way that in the past.

George Kelly: Like, should we see the sort of sequential declines we've seen in the nutrition business? Should those stabilize mid year? Like what's your anticipation for the rest of the year in both businesses? When are we going to start seeing the impact of these various? George, what I would say is, Well, we don't want to give guidance ahead of Q1. As you noted, our initiatives are really a healthy mix of both digital and nutrition. So we're attacking it on all fronts.

In the coming year.

Yes, George this is mark Olson, thanks for coming on.

In terms of the nutritional questions in terms of when you can possibly return to growth and one of the things that.

We mentioned in our prepared remarks, and Youre going to see is this monthly spotlight on individual nutrition programs, which is really new for us I mean by and large the majority of our nutrition is typically sold as part of a total solution package bundle by the organization versus an individual focus on.

Marc Suidan: Our focus is being cash flow positive, from a free cash flow definition standpoint on a sustainable basis. So I don't, based on that, I would say you shouldn't see nutrition decline the way it did in the past in the coming year. Yeah, and George. This is Mark Goldston. Thanks for coming on.

But with the huge growth in that category.

Mark Goldston: In terms of the nutritional questions, in terms of when you can possibly return to growth, one of the things that we mentioned in our prepared remarks, and you're going to see, is this monthly spotlight on individual nutrition programs, which is really new for us. I mean, by and large, the majority of our nutrition is typically sold as part of a total solution pack bundle by the organization versus an individual focus on nutrition. But with the huge growth in that category and the number of people that we've got in our network, both in terms of members and partners, The team really felt that focusing on individual spotlighted items month to month would raise the awareness within our own organization of selling nutrition and actually appeal to the people who are driving up the tremendous TAM in that market.

And the number of people that we've got in our network both in terms of members and partners.

The team really felt that focusing on individuals' spotlighted items month to month would raise the awareness within our own organization of selling the nutrition and actually appeal to the people who are driving up the tremendous Tam in that market. So we feel really good about it and youre going to see as we even get towards the back half of the year, We've got a lot of.

Five ideas coming down the pike as it relates to nutrition. So I think what we've really done Georgia, we bifurcated this into being a focus on building back the nutrition business versus just selling it as part of a total package of products inclusive of digital fitness.

Mark Goldston: So we feel really good about it, and you'll see as we even get towards the back half of the year, we've got a lot of innovative ideas coming down the pike as relates to nutrition. So I think what we've really done, George, is we've bifurcated this into being a focus on building back the nutrition business versus just selling it as part of a total package of products inclusive of digital fitness. Okay, I understand. That's helpful.

Okay understood. That's helpful. Thank you and then just two last quick questions.

In your prepared remarks, you said that.

<unk>.

On the digital side of your business your content amortization should step down.

And that will benefit.

Digital gross margin in 2004 can you.

George Kelly: Thank you. And then just two last quick questions, um, in your prepared remarks, you said that on the digital side of your business, your content amortization should step down. And that'll benefit the digital gross margin by 24. Can you maybe provide a little bit more quantification on that? How meaningful is that? And then the second question is on the balance sheet. I saw the transaction that was announced here recently about the property sale, but is there anything else that's non-core that you're contemplating monetizing? And that's all I have. Yeah, George.

Maybe provide a little bit more quantification.

Vacation on that.

To close that and then the second question is.

On the balance sheet.

Solid transaction that was announced here recently about the property sale, but is there anything else thats non core that youre contemplating monetizing.

That's all I had thanks.

Yeah, George so on the first one on Capex.

If you go back to our financials in 2021 for instance.

The level of Capex was significantly higher than what it is now.

I mean, if I think 2021.

Marc Suidan: So on the first one, CapEx. If you go back to our financials in 2021, for instance, the level of CapEx was significantly higher than what it is now. I mean, if I take 2021 as an example, I think it was over $100 million. So if you look at our current run rate right now, like if I take this past year, that same number is around the 15, 16 million mark. So based on that, you can see that whatever we had capitalized on the balance sheet, we are kind of just in the process of finishing the tail end of it. So as the year passes, you're just not going to see that come through into the P&L because we typically amortize those over three years. That's the amortization question about the digital library. On the question of Van Nuys, you did see this past quarter that as part of enhancing our liquidity, we sold non-core assets. Van Nuys was a principal one, real estate that we sold in a sale leaseback transaction.

As an example.

It was.

I think it was like over $100 million.

So if you look at our current run rate right now like if I think this past year that same number is around the 15 16 million Mark.

So based on that you could see that whatever we had capitalized on the balance sheet.

Kind of just in the process of finishing the tail end of it so as the year passes you're just not going to see that come through into the P&L, because we typically amortize those over three years.

On the.

Amortization question of the digital library.

On the question of an ice you did see this past quarter part of enhancing our liquidity, we sold noncore assets.

Then ice was was the principal one real estate.

That we sold.

And the sales leaseback transaction.

I don't think we have anything else on the balance sheet to expect at this point.

Marc Suidan: I don't think we have anything else on the balance sheet to expect at this point. Like I said, inventory has been run incredibly well. You've had 10 quarters of that coming down, but that's a core asset. But in terms of anything else, we had a startup investment. We also sold in Q1. Those are subsequent events, both that and the Van Nuys sales leaseback. Okay, thanks. Thank you, George.

Like I said inventory has been run incredibly well you've had 10 quarters of that coming down, but that's a core asset but in terms of anything else. We had a startup investments. We also sold in Q1 those are subsequent events, both that and the Venice sales leaseback.

Okay. Thanks.

Thank you George.

Thank you. The next question is from Jonathan Komp with Baird. Your line is now open.

Operator: Thank you. The next question is from Jonathan Komp with Baird. Your line is now open.

Yes, hi, good afternoon.

Mark screen that I have a follow up question I believe you said in your prepared remarks about giving me the operating cost structure you are at today.

Jonathan Robert Komp: Yeah, hi, good afternoon. Marc Suidan, I have a follow-up question. I believe you said in your prepared remarks that given the operating cost structure you're at today, you're at a level to be free cash flow positive at the current level of revenue. Could you maybe be more specific?

You are at a level.

To be free cash flow positive at the current level of revenue could you just maybe be more specific what level of revenue on an annual or ongoing basis does that refer to.

Jonathan Robert Komp: What level of revenue on an annual or ongoing basis does that refer to? Yeah. Hey, John. Thanks for that. Marc Suidan here.

Yeah, Hey, John Thanks for that Mark Sudan here.

Marc Suidan: As Mark Goldston stated in his section, we've taken our revenue breakeven point from above $900 million to below $500 million. So if you think about this level we're at, times four, we are, you know, we gave guidance that we would be both EBITDA zero to five million, which is positive in Q1, and free cash flow positive. So you know, the changes we've been talking about and have been making for a while have set up the company to have incredible operating leverage. Sorry, John, go ahead.

As as Mark stated in his section we've taken our revenue breakeven point.

From above $900 million to below $500 million. So if you're thinking about this level were at times four we are.

We gave guidance that we would be both the EBITDA.

Zero to $5 million right, which is a positive in Q1 and free cash flow positive.

So the changes have been talking about and been making for a while or have set up the company to have incredible operating leverage sorry, John go ahead.

Yeah.

Jonathan Robert Komp: Yeah, thank you. And just to follow up, I think the last two years' first quarters were roughly 27% to 29% of full year revenue. Are there factors that would cause that to be different this year?

Yes, Thank you and just a follow up I think the last two years in the first quarter with roughly.

27% to 29% of full year revenue are there factors that would cause about three different this year.

Carl D. Daikeler: And then maybe relatedly, when you think about all the initiatives, how far off do you think the business might be to be in a state where, you know, revenue is flat or growing again on a year over year basis? Hey, John. It's Carl Daikler.

And then maybe Relatedly when do you think about all the initiatives.

How far off do you think the business might be to be stay where the revenue is flat or growing again on a year over year basis.

Hey, John.

Carl D. Daikeler: I'll let Mark answer that last part of the question. But, as we outlined in terms of the initiatives, frankly, I'm more excited about the last three quarters of the year than I am even about the first quarter because of the initiatives. The depth of our library and moving that into this concept of digital program purchases, which is something unique to Body and our catalog that we've built over 25 years, is that we have the ability to monetize those now, total additive and extra. So we still have the subscription business. We still have the nutrition business.

Carl Daigler I'll, let mark answer that last part of the question, but as we outlined in terms of the initiatives frankly I'm more excited about the last three quarters of the year than I am even about the first quarter because of the initiatives.

The depth of our library and moving that into this concept of digital program purchases, which is something unique to body in our catalog that we built over 25 years as we have the ability to monetize those now.

Total additive in extra.

Part of the business. So we still have the subscription business, we still have the nutrition business now we have the ability to sell the programs. The way we did for basically 20 years on DVD.

Carl D. Daikeler: Now we have the ability to sell the programs the way we did for basically 20 years on DVD. So we do expect, as those start to roll out in April, that that will be additive to the overall revenue picture. Likewise, as Mark outlined, the nutrition spotlight and the diversification of our sales channels into Amazon and our database marketing will also be compounding as we roll through the year. And we expect all of that to bode well for this, the first quarter, to not necessarily be the primary quarter of strength for us for the year. You know, and just to follow on, John, from what Carl just said, this is really important because the legacy of the company, which is what made this the pioneer of the fitness industry, was that it sold entitlements.

So we do expect as those start to rollout in April.

That will be additive to the overall revenue picture Likewise as mark outlined the nutrition spotlights and the diversification of our sales channels in the Amazon into our database marketing.

I'll also be compounding as we roll through the year and expect all of that to bode.

Bode well for this.

The first quarter to not necessarily be the primary quarter of strength for us for the year.

And just a follow on John to what Karl just said this is really important because the legacy of the company, which is what made this the pioneer in the fitness industry was it sold entitlements you brought <unk> you brought insanity you bought body Beast and then of course, we transitioned to being purely subscription.

Carl D. Daikeler: You bought P90X, you bought Insanity, you bought Body Beast, and then, of course, we transitioned to being purely subscription. Now that we're going back with this dual mode, where we'll have subscription, but we'll also have these entitlements where you can buy them, it gives us an additional catchment mechanism that we really have not had here for years. Because if for some reason you don't want to subscribe... to assist them, but you want to own the content.

Now that we're going to go back with this dual mode will have subscription, but we'll also have these entitlements, where you can buy it gives us an additional catchment mechanism that we really have not had here for years because if for some reason you don't want to subscribe to our system, but you want to own the content.

Mark Goldston: We've not been able to serve that to you, and now we can. We can also use that, frankly, as a lever to try to push people into the subscription business by using our ability to buy content as an incentive. So there's a lot of exciting stuff coming down the pike.

We've not been able to serve that to you and now we can we can also use that frankly as a lever to try to push people into the subscription business by using our ability to buy the content as an incentive so theres a lot of exciting stuff coming down. The Pike you know, we're hyper focused on cash cash and cash.

Carl D. Daikeler: You know we're hyper-focused on cash, cash, and cash, and that's still part of the program throughout the first half of this year. We will absolutely not lower our cash focus in the second half, but these growth programs, as they start to come out, can actually help us both focus on growth on a top-line basis and also focus on liquidity. But you have to get through the turnaround before you can really hit the gas pedal on any of those other initiatives, and that's about where we are right now. Okay, great last one for me, just as a follow-up.

And that's still part of the program throughout the first half of this year, we will absolutely not lower our cash focus in the second half, but these growth programs as they start to come out can actually help us to both focus on growth for top line basis, and also focus on liquidity, so, but he has to get through the turnaround.

Before you can really hit the gas pedal on any of those other initiatives and Thats about where we are right now.

Okay, Great last one from me.

As a follow up.

Carl D. Daikeler: How can you give any more context on the pricing of the new content model, is there any risk of cannibalizing potential subscribers who are just interested in how you're planning to price um the individual uh library and then Just on the nutrition business, one separate question on pricing now that you're selling The Nutrition Online is a standalone on Amazon. Is there any feedback on the compare comparability of pricing or any other reaction from the coach network that you're selling selling that separately? Thank you. Yeah, so I'll answer the latter first.

Can you give any more context on the okay.

Pricing of the new content model.

Is there any risk of cannibalizing potential subscribers.

Interested how you're planning to price.

The individual.

Library and then.

Just on the nutrition business one separate question on pricing.

Now that you are selling.

Okay.

Nutrition online as a stand alone on Amazon I mean is there any.

Feedback on <unk>.

<unk> ability of pricing or any other reactions from the coach network that you're selling.

Separately. Thank you.

Yeah. So.

I'll answer the latter first we're very careful to make sure that the value of the supplements are reflected wherever we sell them and obviously the network is extremely important for holding people accountable to their health and wellness goals. So our pricing is respectable.

Carl D. Daikeler: We're very careful to make sure that the value of the supplements is reflected wherever we sell them. And obviously, the network is extremely important for holding people accountable for their health and wellness goals. So our pricing is respectable, is respecting the diversification of channels, so we're not letting any one channel dominate, if you will, from a pricing perspective. So, that all is basically a strategy of a rising tide will float all boats in this. As it relates to the cannibalization question, this is a big opportunity for us because the TAM is so large. There's really a very small opportunity for cannibalization, but frankly, we open up the aperture for reaching more people because many people just aren't interested in a subscription. They want to own that program.

<unk> is respecting.

The diversification of channels. So we're not letting any one channel.

Dominate if you will from a pricing perspective.

So that all is it basically the strategy of a rising tide.

We will float all boats in this.

And this strategy of diversification as it relates to the cannibalization question. This is a big opportunity for us because the Tam is so large.

There is really a very small opportunity for cannibalization, but frankly, we open up the aperture for reaching more people because many people just aren't interested in a subscription they want to own that program.

Carl D. Daikeler: So now we haven't been able to do this for six years basically, but it's how the company thrived from 1999 to 2018, effectively. So now we're going to be able to serve people where they want to be served, but also, at the same time, have leverage. This is what Mark was talking about.

So now we haven't been able to do this for six years basically but it is how the company thrived from 1999 to 2000.

18, effectively so so now we're going to be able to serve people where they want to be served but also at the same time.

Have the leverage this is what mark was talking about we have the leverage of using the digital entitlement to incentivize people to actually upgrade to the subscription and this is going to be a competitive advantage. So you can imagine somebody coming in to buy <unk> for $59 Thats half of what you used to be able to buy at half the <unk>.

Carl D. Daikeler: We have the leverage of using the digital entitlement to incentivize people to actually upgrade to the subscription. And this is going to be a competitive advantage. So you can imagine somebody coming in to buy P90X for $59. That's half of what you used to be able to buy it for on DVD.

So you buy for on DVD, but then we have the ability to say hey, if you'd like to upgrade to the subscription. We can give you a special offer on that so there's a lot of additional creativity and flexibility that we can provide to make sure that the customers getting what they want.

Carl D. Daikeler: But then we have the ability to say, hey, if you'd like to upgrade to the subscription, we can give you a special offer on that. So there's a lot of additional creativity and flexibility that we can provide to make sure that the customer is getting what they want. And, again, that's a competitive moat that we've got. No other company has a library of over 120 branded programs that they can offer to people so that we're solving a specific problem with a unique selling proposition that will help them.

And again, that's a that's a competitive moat that we've got because.

No. Other company has a library of over 120 branded programs that they can offer to people. So that they are being we're solving a specific problem with a unique selling proposition that will help them and that's why we think this is such a big opportunity for us.

Mark Goldston: And that's why we think this is such a big opportunity. Yeah, but also, listen, if you go back to the legacy of the company, I mean, today, as we said, the male audience is a huge opportunity for us. It's only about 15% of the business, where it used to be over half. So when the company was in its glory days, and it was selling in title.

Yeah. We also listen if you go back to the legacy of the company I mean today as we said.

Male audience is a huge opportunity for us is only about 15% of the business where it used to be over half. So when the company was in its glory days and it was selling entitlements.

Carl D. Daikeler: You know, half of the business was from men, so there's every reason to believe that when we go back and focus on this, in addition to the subscription, we have a great stimulus for tapping into the male market. Understandable. Thanks again.

Half of the business. So it's met so Theres every reason to believe that when we go back and focus on this in addition to the subscription we have a great stimulus for tapping into the mail market.

Understood. Thanks again.

Jonathan Robert Komp: Thank you, John. Thank you. The next question is from the line of B.J. Cook with Singular Research.

Thank you John.

Thank you. The next question is from the line of P. J Cook with singular research. Your line is now open.

B.J. Cook: Your line is now open. Hey guys, thanks for taking my call. Just kind of a question regarding your cost-cutting initiatives in combination with your new sales initiatives. Looks like a lot of cost-cutting comes from, you know, both G and A. I'm just wondering, you know, if you guys are able to reinvigorate revenue growth, does that change? For instance, you got to touch on this too, but... Yeah, Mark, we're going to go up from there, www.beachbody.com at work in our. Hi BJ.

Hey, guys. Thanks for taking my call.

Kind of a question.

Regarding your cost cutting initiatives.

In combination with your new sales initiatives so.

We're putting a lot of cost cutting come from both G&A and selling and marketing I'm. Just wondering if you guys are able to reinvigorate revenue growth.

Does that change.

You guys touched on this too.

Sales and marketing going to go up from there. This is seasonally lower fixed cost structure is working on.

B J. This is Marc this is a sustainable cost reduction.

Mark Goldston: This is Mark. This is a sustainable cost reduction. Nothing we've done in the cost reduction impacts demand generation.

We've done and the cost reduction impacts demand generation, it's quite the opposite.

Mark Goldston: It's quite the opposite. While cutting back our costs, we've simplified our model, reinvigorated our digital platforms, and got named the number one fitness platform by CNN for 2023. Our retention, our monthly retention stayed the same. And all the initiatives we're talking about, whether it's Amazon, aggressive win back from the database, our body previews, our targeting... None of this stuff is capital intensive. It all fits within this new economic model we've created. So the cost savings we're doing do not impact demand, quite the opposite.

Cutting back our costs, we've simplified our model.

Reinvigorated or a digital platform God named the number one fitness platform by CNN for 2023.

Our retention our monthly retention stayed the same.

And all the initiatives, we're talking about whether it's Amazon.

Aggressive went back from the database.

Our body previews are targeting mill.

None of them none of this stuff is capital intensive it all fit within this new economic model we've created.

So the cost savings, we're doing does not impact <unk>.

Carl D. Daikeler: And further to that, if I just could add, we have a very sophisticated way of analyzing our return on invested capital. Internally, we call it the allowable in terms of what we'll pay to acquire a customer. And our TLV to CAC calculations are really as sophisticated as anybody's around.

Quite the opposite.

And further to that if I just could add.

We have a very sophisticated way of analyzing our return on invested capital internally, we call. It the allowable in terms of what we will pay to acquire a customer and our <unk> to CAC calculations are they really as sophisticated as anybody's around and so there is no governor.

Carl D. Daikeler: And so there is no governor on the spend as long as the yield is at or above your threshold levels. And so, and they have been. And so we can continue to feed the fuel into the fire as long as we maintain the allowables. And our team does a phenomenal job of being disciplined against that.

On the spend as long as the yield is at or above your threshold levels and so and they have been and so we can continue to feed this fuel into the fire as long as we maintain the allowable and our team does a phenomenal job of being disciplined against that so.

Carl D. Daikeler: So, you know, it will generate its own capital to reinvest. Do you have another question? No, thank you very much. That's all I have.

It will generate its own capital to reinvest.

Do you have another question.

No. Thank you very much it's all ahead.

BJ Cook: Sure. Thank you. Thank you. There are no further questions in queue, so as a final reminder, if you'd like to ask a question, it is star one. Again, if you'd like to ask a question, there's star one. There are no further questions in queue.

Sure.

<unk>.

Thank you.

There are no further questions in queue. So as a final reminder, if you'd like to ask a question. It is star one.

Yeah.

Yeah.

Thank you and if you'd like to ask a question star one.

Yeah.

There are no further questions in queue with that I'd like to turn the call back over to the team for concluding remarks. Thank.

Operator: With that, I'd like to turn the call back over to the team for closing remarks. Thank you very much, operator. Just in closing, I'd love to say that, you know, the turnaround is well underway. We're really pleased with the performance and the discipline that's been instilled in the company toward this common goal of a major improvement in our liquidity. The huge milestone of adjusted EBITDA positive in Q4, roughly $3 million, is really a major move for the company, as is being cash flow positive, as we projected in Q1 of 2024. I mean, that's going to be the first time since 2020 that the company is cash flow positive. And that's a real testament to the collective turnaround effort here. So in addition, and Mark had mentioned this, I mean, the order of magnitude of understanding how a company, in essentially two years..., can lower its positive break-even from $900 million to less than $500 million. It's really quite incredible.

Thank you very much operator, just in closing I'd love to say that the turnaround is well underway. We're really pleased with the performance and the discipline that's been instilled in the company towards this common goal or of a major improvement in our liquidity.

A huge milestone of adjusted EBITDA positive in Q4, roughly $3 million is really a major move for the company as frankly is being cash flow positive as we projected in Q1 of 2024, I mean, that's going to be the first time since 2020 that the company would be cash flow positive.

That's a real testament to the collective turnaround effort here. So in addition, and Mark had mentioned this I mean, the order of magnitude of understanding how a company in essentially two years.

Ken lower it positive breakeven for $900 million.

The less than $500 million is really really quite incredible.

Mark Goldston: And it really puts us in a great position to generate a significant amount of operating leverage as we go forward. So, at this point, our turnaround is working extremely well. We feel great about the efforts of the organization to help us achieve our goals and, most importantly, to maximize shareholder value, which is why we're all here.

And it really puts us in a great position to generate a significant amount of operating leverage as we go forward. So at this point our turnaround is working extremely well we feel great about the efforts of the organization to help us achieve our goals and most importantly to maximize shareholder value, which is why we're all here so.

Mark Goldston: So I want to thank everybody for attending the call today. And, as always, if you have any additional questions, please feel free to reach out to ICR or to the company directly. Everybody have a great day. Thank you. That concludes today's conference call. Thank you for your participation. You may now disconnect your line. www.beachbody.com

Everybody for attending the call today and as always if you have any additional questions. Please feel free to reach out to ICR or to the company directly everybody have a great day. Thank you.

That concludes today's conference call. Thank you for your participation you may now disconnect your lines.

Okay.