Q3 2024 The Beachbody Co Inc Earnings Call

November 12, 2024

Operator: Attention everyone, please remain holding. The call will begin momentarily. Again, please remain holding. Good afternoon, and thank you for attending today's The Beachbody Company, Inc. Q3 2024 Earnings Conference Call. My name is Jayla, and I'll be your moderator for today. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. I'd now like to turn the conference over to our host of the call. Please proceed.

Attention, everyone. Please remain holding. The call will begin momentarily. Again, please remain holding. The call will begin momentarily.

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Operator: Good afternoon, and thank you for attending today's The Beachbody Company, Inc. Q3 2024 Earnings Conference Call. My name is Jayla, and I'll be your moderator for today. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. I'd now like to turn the conference over to our host of the call. Please proceed.

Jayla: Good afternoon. Thank you for attending today's Beachbody Company Inc. 3rd Quarter 2024 earnings conference call. My name is Jayla, and I'll be your moderator for today. All lines will be muted during the presentation portion of the call. There's an opportunity for questions and answers at the end. I'd now like to turn the conference over to our host of the call. Please proceed.

Speaker Change: Welcome everyone and thank you for joining us for our third quarter earnings call. With me on the call today are Mark Goldston, Executive Chairman of the Beachbody Company.

[Company Representative] (The Beachbody Company Inc): Welcome, everyone, and thank you for joining us for our Q3 Earnings Call. With me on the call today are Mark Goldston, Executive Chairman of The Beachbody Company, Inc., Carl Daikeler, Co-Founder and Chief Executive Officer, and Brad Ramberg, Interim Chief Financial Officer. 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 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 by 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.

[Company Representative] (The Beachbody Company): Welcome, everyone, and thank you for joining us for our Q3 Earnings Call. With me on the call today are Mark Goldston, Executive Chairman of The Beachbody Company, Inc., Carl Daikeler, Co-Founder and Chief Executive Officer, and Brad Ramberg, Interim Chief Financial Officer. 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 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 by 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.

Speaker Change: Carl Dykler, co-founder and Chief Executive Officer and Brad Ramberg, Interim Chief Financial Officer.

Speaker Change: Following the prepared remarks, we'll open the call up for questions.

Speaker Change: Before we get started, I would like to remind you of the company's safe harbor language.

Speaker Change: 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 Dedication Reform Act of 1995.

Speaker Change: Actual future results may differ materially from those suggested by such statements due to a number of risks and uncertainties.

Speaker Change: All of which are described in the company's filings with the SEC, which includes today's press release.

[Company Representative] (The Beachbody Company Inc): Today's call will include references to non-GAAP financial measures such as adjusted EBITDA, net cash, and free cash flows. 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 Goldston.

[Company Representative] (The Beachbody Company): Today's call will include references to non-GAAP financial measures such as adjusted EBITDA, net cash, and free cash flows. 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 Goldston.

Speaker Change: Today's call will include references to non-GAAP financial measures such as adjusted EBITDA, net cash, and free cash flows.

Speaker Change: 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.

Mark Goldston: Now, I would like to turn the call over to Mark.

Mark Goldston: Thank you for joining us today. I'll begin by discussing our recent announcement on the restructuring of the company and the major change to the business model. I'll review some highlights of the Q3 performance and then update you on the progress of our turnaround plan. I'll turn the mic over to Carl Daikeler, our CEO, to discuss our strategic initiatives in more detail, and that'll be followed by our interim CFO, Brad Ramberg, discussing our financial guidance and outlook. As of November 1, 2024, BODi's essentially become a new company from the one that previously existed. I know that's a bold statement, but it's emblematic of the massive change to our business model we effected, which has put BODi in a position to be a dynamic and more nimble company in 2025 and beyond.

Thank you for joining us today.

Mark Goldston: I'll begin by discussing our recent announcement on the restructuring of the company and the major change to the business model, then I'll review some highlights of the third quarter performance and then update you on the progress of our turnaround plan.

Mark Goldston: Then I'll turn the mic over to Carl Deichler, our CEO, to discuss our strategic initiatives in more detail. And that'll be followed by our interim CFO, Brad Ramberg, discussing our financial guidance and outlook.

Mark Goldston: As of November 1st of 2024, BODY has essentially become a new company from the one that previously existed.

Mark Goldston: I know that's a bold statement, but it's emblematic of the massive change to our business model we affected, which has put body in a position to be a dynamic and more nimble company in 2025 and beyond.

Speaker Change: No that's a bold statement, but it's emblematic of the massive change to our business model, we affected which is puts body in a position to be a dynamic and more nimble company in 2025 and beyond.

Mark Goldston: I would ask all investors and the analysts who cover BODi to take a fresh look at the company's new business model and try to avoid direct comparisons with the company that we had prior to 1 November 2024. Let me briefly review what we've done to re-architect this great company and position ourselves for success going forward. First, we decided to eliminate the multi-level marketing, or MLM, structure that's been in place in this company since 2007.

Mark Goldston: I would ask all investors and the analysts who cover body to take a fresh look at the company's new business model and try to avoid direct comparison with the company that we had prior to November 1st of 2024.

Mark Goldston: I would ask all investors and the analysts who cover body to take a fresh look at the company's new business model and try to avoid direct comparisons with the company that we had prior to November one 2024.

Mark Goldston: Let me briefly review what we've done to re-architect this great company and position ourselves for success going forward.

Mark Goldston: Let me briefly review what we've done to re architect this great company and position ourselves for success going forward.

Mark Goldston: First, we decided to eliminate the multi-level marketing or MLM structure that's been in place in this company since 2007.

Mark Goldston: First we decided to eliminate the multi level marketing or MLM structure, that's been in place in this company since 2007.

Mark Goldston: The MLM model is dated, cumbersome, expensive to operate, loaded with passive non-performance compensation expense that's paid to other people other than those who actually sell the product, and it places a time management burden on participants who have to recruit, manage, and also sell, and it carries a negative stigma, which is seemingly associated with all MLMs, and this inhibits new customer sign-ups and the attraction of new sellers. There clearly was a time when the MLM model worked extremely well for this company, and we greatly appreciate the efforts of all those who participated. In today's world, we believe the single-level affiliate model is better suited to our business. The single-level affiliate model, which became effective on 1 November, has no upline or downline management tree, no recruiting of new seller requirements, and importantly, no sharing of commissions with other people.

Mark Goldston: The MLP model is David cumbersome expensive to operate loaded with passive nonperformance compensation expense.

Mark Goldston: The other people other than those who actually sell the product.

Mark Goldston: And it places a time management burden on participants who have to recruit manage and also sell and it carries a negative stigma, which is seemingly associated with all MLM and this inhibits new customer sign ups and the attraction of new sellers.

Speaker Change: There clearly was a time when the MLM model worked extremely well for this company and we greatly appreciate the efforts of all those who participated.

Speaker Change: In today's world, we believe the single level of affiliate model is better suited to our business.

Speaker Change: The single level of affiliate model, which became effective on November one as no applying or down line management tree no recruiting of new seller requirements and importantly, no sharing if conditions are the other people in the new body single affiliate level model, everyone is in business for themselves.

Mark Goldston: In the new BODi single affiliate level model, everyone is in business for themselves. They're independent, they're not part of a team, and they keep 100% of the commissions they earn on everything they sell. No more sharing of commissions. This is a huge change, and it's one that provides all BODi affiliates with an uncapped pay-for-performance compensation model. It's really quite simple. The more you sell, the more you make, and you don't share your earnings with anyone, and there's no one to manage. The affiliate model will result in a material improvement in our return on ad spend, lifetime value, and with our lower cost model, it'll significantly improve our economics. The incentive for new BODi affiliate sellers is pretty clear.

Speaker Change: They are independent they are not part of a team and they keep 100% of the commissions they earn everything they sell no more sharing of commission. This is a huge change and its one that provides all Bobby affiliates was an uncapped pay for performance compensation model.

It's really quite simple the more you sell the more you make and you don't share your earnings with anyone and there is no one to manage so the affiliate model will result in a material improvement in our return on AD spend lifetime value and with our lower cost model.

Speaker Change: Will significantly improve our economics.

Speaker Change: The incentive for new body affiliate sellers is pretty clear.

Mark Goldston: In the affiliate world, where commission rates typically range from 5% to 25%, a BODi affiliate will earn much more than that with commission levels in the 35% to 50% range. This is a highly attractive proposition to the thousands of sellers who were previously in our network, as well as for the millions of affiliate sellers in the market today. The affiliate model just began taking sign-ups on 1 November, and we're extremely pleased with the number of sign-ups that we have to date. The new BODi business model features a multi-channel approach that's now unencumbered by the pricing and customer mapping constraints of the former MLM model.

Speaker Change: The affiliate World, where commission rates typically range from 5% to 25%.

Our body affiliate will earn much more than that with commission levels in the 35% to 50% range.

Speaker Change: This is a highly attractive proposition to the thousands of sellers, who were previously in our network as well as for the millions of affiliate sellers in the market today.

The affiliate model just began taking sign ups on November one.

Speaker Change: We're extremely pleased with the number of sign ups that we had to date.

Speaker Change: The new body business model features a multichannel approach.

Now unencumbered by the pricing and customer mapping constraints of the former MLM model in.

Mark Goldston: In addition to the new affiliate model, we have a dynamic direct response marketing unit, a growing Amazon business, and we're developing new products in the nutrition segment under the P90X and INSANITY brand names, which are expected to be introduced in 2025 and 2026 respectively, and will be sold in major retailers within the affiliate network and through our direct response business. Remember, BODi has never marketed any of our current nutritional supplements in our direct response business due to the pricing and customer mapping constraints of the former MLM model. Now that's all changed, and for the first time ever, we can actually market products like Shakeology, Energize, and the new product lines we're developing, and we can sell them direct to consumer through our direct response unit and then advertise them on Facebook, Google, TikTok, and YouTube, which we could never do before.

Speaker Change: In addition to the new affiliate model, we have a dynamic direct response marketing unit of growing Amazon business, and we're developing new products in the nutrition segment under the <unk> nine, yes, and insanity brand names, which are expected to be introduced in 2025 and 2026 respect.

Speaker Change: Currently and will be sold in major retailers within the affiliate network and through our direct response business.

Speaker Change: Remember body has never marketed any of our current nutritional supplements and our direct response business due to the pricing and customer map and constraints of the former MLM model.

Speaker Change: Now that's all changed and for the first time ever we can actually market products like shake allergy energized and the new product line through developing where we can sell them direct to consumer through our direct response unit and then advertise them on Facebook, Google kicked up and use.

Speaker Change: To which we could never do before.

Mark Goldston: Since my arrival as executive chairman 18 months ago, we've conducted a comprehensive turnaround. This involved a massive infrastructure change, and this resulted in a reduction of the company's cash break-even level by $several hundred million from where it was in 2022. Today, we're a much leaner company that's poised to generate significant operating leverage when we achieve top-line growth in the future as a result of the major reduction in overhead. Now let's take a look at our performance highlights of Q3. Our revenues were in line with the midpoint of our guidance, and we achieved extremely healthy gross margins, which improved by 880 basis points year-over-year. Adjusted EBITDA significantly exceeded guidance of $2 to 6 million by coming in at $10.1 million.

Speaker Change: Since my arrival as executive Chairman 18 months ago, we've conducted a comprehensive turnaround.

Speaker Change: The massive infrastructure change and this resulted in a reduction of the company's cash breakeven level by several hundred million dollars from where it was in 2022 today.

Today, we're a much leaner company that is poised to generate significant operating leverage when we achieved top line growth in the future as a result of the major reduction in overhead.

Speaker Change: Now, let's take a look at our performance highlights of the third quarter our.

Speaker Change: Our revenues were in line with the midpoint of our guidance and we achieved extremely healthy gross margins, which improved by 880 basis points year over year.

Speaker Change: Adjusted EBITDA significantly exceeded guidance of 2% to $6 million coming in at $10 $1 million. This is a massive $15 $9 million improvement versus the third quarter of last year, when we posted a $5 8 million adjusted EBITDA loss. This.

Mark Goldston: This is a massive $15.9 million improvement versus Q3 of last year, when we posted a $5.8 million adjusted EBITDA loss. This marks our fourth consecutive quarter of positive adjusted EBITDA. Year to date, we've generated $19.6 million of adjusted EBITDA. That is a $31.1 million adjusted EBITDA improvement from the $11.5 million loss in the prior year-to-date period. Additionally, we generated more than $5.3 million of positive free cash flow year-to-date, and that compares to a cash burn of $20.1 million from the comparable period. This reflects a $25.4 million improvement. The first phase of our turnaround centered on lowering our infrastructure costs and re-architecting our financial model.

Speaker Change: This marks our fourth consecutive quarter of positive adjusted EBITDA year to date, we generated $19 6 million of adjusted EBITDA that is a $31 $1 million adjusted EBITDA improvement from the $11 $5 million loss in the prior year to date period.

Speaker Change: Additionally, we generated more than five $3 million of positive free cash flow year to date and that compares to a cash burn of $21 million from the comparable period. This reflects a $25 $4 million improvement.

Speaker Change: The first phase of our turnaround centered on lowering our infrastructure costs and re architected, our financial model I am pleased to report that our third quarter and year to date results demonstrate that we have successfully completed our goal.

Mark Goldston: I'm pleased to report that our Q3 and year-to-date results demonstrate that we have successfully completed our goal by generating positive adjusted EBITDA and free cash flow. We've significantly reduced our GAAP net losses while dramatically lowering the cash breakeven level. Now we're entering the next phase of our journey, and this portion is focused on unlocking the top-line potential. With that being said, I'd like to turn the call over to Carl, and he'll discuss our strategic initiatives as we move into the next phase of our transformation. Carl?

Speaker Change: By generating positive adjusted EBITDA and free cash flow, we have significantly reduced our GAAP net losses, while dramatically lowering the cash breakeven level.

Speaker Change: Now we're entering the next phase of our journey and this portion is focused on unlocking that top line potential.

Speaker Change: That being said I'd like to turn the call over to Carl and he'll discuss our strategic initiatives as we move into the next phase of our transformation Carl.

Carl Daikeler: Thanks, Mark. The Q3 results are a great indication of how the company is navigating this turnaround and how disciplined the team has been in delivering on exactly what we've outlined. We know the demand is there. We know the opportunity is significant. As we've done for 26 years, we're determined to help people get fit and healthy. This mission is more important than ever, especially with the rise of GLP-1 drugs that require a healthy lifestyle to truly get the benefit of this new category of pharmaceuticals. We're staying focused on execution. As proud as I am of our Q3 results, our focus is now on helping our thousands of partners transition to affiliates, making this shift from network marketing productive for them and for the company.

Carl Deichler: Thanks, Mark the third quarter results are a great indication of how the company is navigating this turnaround and how disciplined the team has been delivering on exactly what we've outlined.

Carl Deichler: We know the demand is there we know the opportunity is significant and as we've done for 26 years. We are determined to help people get fit and healthy. This mission is more important than ever, especially with the rise of <unk> drugs that require a healthy lifestyle to truly get the benefit of this new category of pharmaceuticals.

Carl Deichler: So we're staying focused on execution and as proud as I am of our third quarter results. Our focus is now on helping our thousands of partners transition to affiliates, making this shift from network marketing productive for them and for the company.

Carl Daikeler: Let me give a little more color on the rationale of this transition, because the 17 years we spent in the network were incredibly productive. Over the last 2 years, negative sentiment toward the multi-level model has made acquiring new customers increasingly difficult. We were running a bifurcated strategy where we de-emphasized our offerings on our primary direct-to-consumer website to drive customers to the network website called teambeachbody.com. Not only did this cause confusion and increased friction, but we also noticed that conversion rates on the Team Beachbody site were significantly lower than our direct-to-consumer site. We have some of the best fitness programs and nutrition products in the industry, but we were creating an obstacle for the customer to purchase because of growing resistance to the MLM business model.

Speaker Change: Can you give a little more color on the rationale of this transition because the 17 years, we spent in the network, we're incredibly productive but.

Speaker Change: Over the last two years negative sentiment toward the multi level model was made acquiring new customers increasingly difficult.

Speaker Change: Running a bifurcated strategy, where we deemphasize our offerings on our primary direct to consumer website to drive customers to the network website called <unk> Dot com not only did this cause confusion and increased friction.

Speaker Change: Also noticed that conversion rates on the team Beach body site were significantly lower than our direct to consumer site.

Speaker Change: Some of the best fitness programs and nutrition products in the industry, but.

Speaker Change: But we were creating an obstacle for the customer to purchase because of growing resistance to the MLM business model at the same time, our field of partners. We are increasingly challenged to recruit new sellers and with managing their down line organizations, which took their focus away from the important work of selling and helping new customers get started.

Carl Daikeler: At the same time, our field of partners were increasingly challenged to recruit new sellers and with managing their downline organizations, which took their focus away from the important work of selling and helping new customers get started. Likewise, the majority of our partners weren't optimizing their earning potential because their compensation was being shared, and that resulted in declining motivation and productivity. By changing to an affiliate model, we're modernizing the way we sell by keeping our field of partners 100% focused on selling without the additional burden of recruiting and managing a team. Now our partners have the opportunity to maximize their earnings because they no longer have to share it with an upline, which we believe will lead to increased motivation and sales productivity.

Speaker Change: Likewise, the majority of our partners, we're optimizing their earning potential because their compensation was being shared and that resulted in declining motivation and productivity.

Speaker Change: By changing to an affiliate model, we are modernizing the way we sell by keeping our field of partners, 100% focused on selling without the additional burden of recruiting and managing a team and now our partners have the opportunity to maximize their earnings because they no longer have to share. It was up line, which we believe will lead to incur.

Speaker Change: <unk> motivation and sales productivity.

Carl Daikeler: This change not only unlocks the selling opportunity for our partners, but also opens up all our sales channels to be far more cooperative with each other and competitive in the marketplace, which means we can help more people get healthy and active, which has been the thing that has set us apart for 26 years. These changes have allowed us to expand our presence on Amazon with new products and aligned pricing. We're launching on Walmart.com in Q4, and we're also planning to expand our affiliate program to TikTok shops by Q2 2025. It really is liberating for the company because it gives our stellar products a chance to reach more people through a much wider variety of channels without competing with ourselves, but instead with the kind of promotional synergy that drove our growth for 2 decades.

Speaker Change: Change not only unlocks the selling opportunity for our partners, but also opens up all our sales channels to be far more cooperative with each other and competitive in the marketplace, which means we can help more people get healthy enacted which has been the thing that has set us apart for 26 years. These changes have.

Speaker Change: Allowed us to expand our presence on Amazon with new products and aligned pricing, we're launching on Walmart dot com in the fourth quarter and we're also planning to expand our affiliate program to tick tock shops by Q2 2025.

Speaker Change: It really is liberating for the company because it gives our stellar products a chance to reach more people through a much wider variety of channels without competing with ourselves, but instead with the kind of promotional synergy that drove our growth for two decades after announcing the change to the affiliate model many of our partners actually express.

Carl Daikeler: After announcing the change to the affiliate model, many of our partners actually expressed relief at no longer having to dodge the question, "Is this an MLM?" Some of our most successful partners who had stopped promoting BODi because affiliate marketing is just simpler and more productive, well, they're now excited to return and promote our products and programs. I recently read that 90% of people won't even answer a call if they think it's related to an MLM. What an obstacle to helping people. Like, we're already doing something difficult trying to help people exercise and improve their nutrition, so it just didn't make sense anymore to also try to overcome the MLM stigma, despite the incredible work and determination of our partners.

Speaker Change: Relief at no longer having to Dodge. The question is this an MLM and some of our most successful partners who had stopped promoting body because affiliate marketing is just simpler and more productive while theyre now excited to return and promote our products and programs and I recently read that 90% of people won't even <unk>.

Speaker Change: Answer a call if they think it's related to an MLM.

Speaker Change: What is the obstacle to helping people.

Speaker Change: Already doing something difficult trying to help people exercise and improve their nutrition. So it just didn't make sense anymore to also try to overcome the MLM stigma. Despite the incredible work and determination of our partners. So we've collaborated with top affiliate marketers to create a program that's compelling for our partners while also financially.

Carl Daikeler: We've collaborated with top affiliate marketers to create a program that's compelling for our partners while also financially viable and immediately scalable for the company. This program leverages our experience rewarding our customers for sharing their success on social media without the MLM burden. I'll provide a full update on the affiliate transition at our next earnings call after Q4. However, while still early, I can already say that we're very pleased with the number and quality of partners who signed up to be affiliates since the 1 November launch. This should bode well for the highly anticipated launch of our new program coming in December called Belle Vitale, which we believe will be a significant addition to the portfolio. Belle Vitale is our comprehensive women's hormone health program that was developed by Autumn Calabrese.

Speaker Change: Liable and immediately scalable for the company. This program Leverages, our experience rewarding our customers for sharing their success on social media without the MLM burden.

Speaker Change: I will provide a full update on the affiliate transition at our next earnings call. After Q4, however, while still early I can already say that we're very pleased with the number and quality of partners, who signed up to be affiliates since the November 1st launch.

And this should bode well for the highly anticipated launch of our new program coming in December called Bell, The Tau, which we believe will be a significant addition to the portfolio Melba Tau is our comprehensive women's hormone health program that was developed by autumn Calabrese. She is the fitness and nutrition expert who also created the successful.

Carl Daikeler: She's the fitness and nutrition expert who also created the successful 4 Week Gut Protocol for us in 2022. This new program addresses issues associated with women's hormone imbalances, including persistent weight loss struggles and symptoms like low energy, night sweats, and hot flashes. Belle Vitale offers a specific step-by-step nutrition plan, an incredibly innovative fitness program using the inexpensive door track device to replicate the experience of studio Pilates equipment, and two new proprietary supplements for metabolism, blood sugar, hormone, and stress support. Belle Vitale will also include access to the award-winning Breathwrk app. This program is a big deal. In over two decades of running this company, I have never seen 12-week results like we've seen from the testing of Belle Vitale. Our partners are excited to sell the program as affiliates, since they'll no longer share commissions with the multi-level upline.

Speaker Change: <unk> four we got protocol for us in 2022.

Speaker Change: This new program addresses issues associated with womens hormone imbalances, including persistent weight loss struggles and symptoms like low energy night Sweats and hot flashes Silva Tao offers a specific step by step nutrition plan, an incredibly innovative fitness program using the inexpensive door attractive.

Speaker Change: <unk> to replicate the experience of studio Pilates equipment, and two new proprietary supplements for metabolism blood sugar hormone and stress support.

Speaker Change: <unk> will also include access to the award winning breath work at this program is a big deal in over two decades of running this company I have never seen 12 week results like we've seen from the testing of <unk> and our partners are excited to sell the program as affiliates since they will no longer share commissions with the multilevel.

Speaker Change: <unk>.

Carl Daikeler: Our plan to further expand our nutrition business is also enhanced by this change to the affiliate model. The affiliate model and performance marketing work together to increase visibility and demand for products like Shakeology and the Beachbody Performance line, which have never been marketed outside the network model before. As we roll out advertising for our supplements, affiliates will now promote the same special offers to their audience on social media, creating a rising tide that lifts all ships. The launch of 2 new supplements with the Belle Vitale program is particularly exciting, as test participants actually asked to buy the supplements they used in the test so they could continue taking them. This is unprecedented demand coming out of a test group and further positions us for profitable top-line growth, given the far larger TAM, about 12 times for nutrition supplements compared to digital fitness.

Speaker Change: Our plan to further expand our nutrition business is also enhanced by this change to the affiliate model the affiliate model and performance marketing work together to increase visibility and demand for products like shake allergy and the body performance line, which have never been marketed outside the network model before so as we rollout advertising.

Speaker Change: For our supplements affiliates will now promote the same special offers to their audience on social media, creating a rising tide that lifts all ships. The launch of two new supplements with the Velvet Tau program is particularly exciting as test participants actually asked to buy the supplements. They used in the test so they could continue.

Speaker Change: Taking them.

Speaker Change: This is unprecedented demand coming out of a test group and further positions us for profitable top line growth given the far larger Tam about 12 times for nutrition supplements compared to digital fitness.

Carl Daikeler: Finally, our partnerships activity is gaining momentum. We're launching a special offer in conjunction with the American Diabetes Association going into the new year, including a fitness program and effective, easy-to-follow eating plans. We're ramping up promotion of our collaboration with Dr. B and Truemed to offer HSA and FSA reimbursement for our programs and supplements, allowing customers to save 40% by paying with pre-tax dollars. All this is to say, we're actively executing on the second phase of our turnaround. Our products are second to none, and we're very excited about the renewed opportunity to create velocity as we go into the new product launches at the end of this quarter, plus aggressive promotional strategies for Q1 2025. Okay. Now let me turn the call over to our interim CFO, Brad Ramberg, for the details on Q3.

Speaker Change: Finally, our.

Speaker Change: Our partnerships activity is gaining momentum we're launching a special offer in conjunction with the American diabetes Association going into the new year, including a fitness program, an effective easy to follow eating plant and we're ramping up promotion of our collaboration with Dr. B and true med to offer HSA and FSA Reimbursable.

Speaker Change: <unk> for our programs and supplements, allowing customers to say, 40% by paying with pretax dollars. All of this is to say.

Speaker Change: We are actively executing on the second phase of our turnaround our products are second to none and we are very excited about the renewed opportunity to create velocity as we go into the new product launches at the end of this quarter plus aggressive promotional strategies for the first quarter of 2025, Okay. Now, let me turn the call over to our interim.

Speaker Change: CFO, Brad Ramberg for the details on Q3.

Brad Ramberg: Thanks, Carl, and thank you everyone for joining the call today. I will review our Q3 results and provide our outlook for Q4. Just to reiterate, the company achieved revenue of $102 million, which was the midpoint of our guidance range of $97 million to $107 million. We substantially beat our Adjusted EBITDA guidance of $2 million to $6 million, coming in at $10.1 million for Q3 2024. This quarter marks our fourth consecutive quarter of positive Adjusted EBITDA. Now let me get into the specifics of Q3. Revenues for Q3 were $102 million, in line with the midpoint of our guidance range. Sequentially, revenues declined 7%, and year-over-year, revenues declined 20%.

Brad Ramberg: Thanks, Carl and thank you everyone for joining the call today I will review, our Q3 results and provide our outlook for the fourth quarter.

Just to reiterate the company achieved revenue of $102 million, which was the midpoint of our guidance range of $97 million to 107 billion and we substantially beat our adjusted EBITDA guidance of 2 million to $6 million coming in at $10 1 million for Q3 2024.

Brad Ramberg: This quarter marks our fourth consecutive quarter of positive adjusted EBITDA.

Brad Ramberg: Now, let me get into the specifics of Q3 revenues.

Brad Ramberg: Revenues for the third quarter were $102 million in line with the midpoint of our guidance range sequentially revenues declined 7% and year over year revenues declined 20% Q.

Brad Ramberg: Q3 gross margins were 67.3% and declined 200 basis points over the prior quarter, but increased 880 basis points compared to the prior year. We're pleased to report that consolidated gross margins are within our long-term target of 65% to 70%. Moving to digital and nutrition revenue and gross margins. Digital revenue decreased by 8.6% from the prior quarter to $53.7 million and decreased by 16.5% year-over-year. Revenues were impacted due to pressure in our digital subscriber count, which decreased 3.8% sequentially to 1.0 million and declined 19.7% compared to the same period a year ago. Nutrition revenue decreased 5.4% from the prior quarter to $47.4 million and decreased 19.6% year-over-year.

Brad Ramberg: Q3, gross margins were 67, 3% and declined 200 basis points over the prior quarter, but increased 880 basis points compared to the prior year.

Brad Ramberg: Pleased to report that consolidated gross margins are within our long term target of 65% to 70%.

Brad Ramberg: Moving to digital and nutrition revenue and gross margins.

Brad Ramberg: Digital revenue decreased by eight 6% from the prior quarter to $53 7 million and decreased by 16, 5% year over year.

Brad Ramberg: Revenues were impacted due to pressure in our digital subscriber count, which decreased three 8% sequentially to $1 1 million and declined 19, 7% compared to the same period a year ago.

Brad Ramberg: Nutrition revenue decreased five 4% from the prior quarter to $47 4 million and decreased 19, 6% year over year.

Brad Ramberg: Nutrition subscriptions declined 11.2% sequentially to 130,000 and fell 27.3% year-over-year. Now, as Carl and Mark mentioned earlier, we are very excited about our move away from the MLM distribution model to a single-level affiliate model, which will broaden our points of distribution and unlock our sales potential. Digital gross margin was 80.5% for the quarter, in line with the prior quarter and representing a 600 basis point improvement from the prior year. The continued strength in year-over-year gross margin was due to lower depreciation expenses, driven by the end of useful life, certain fixed assets, and lower content CapEx and related amortization as we continue to lower our production spend.

Brad Ramberg: Nutrition subscriptions declined 11, 2% sequentially to 130000 and fell 27, 3% year over year.

Speaker Change: Now, it's Carl and Mark mentioned earlier, we're very excited about our move away from the MLP distribution model to a single level of affiliate model, which will broaden our points of distribution and unlock our sales potential.

Speaker Change: Digital gross margin was 85% for the quarter in line with the prior quarter and representing a 600 basis point improvement from the prior year.

Speaker Change: <unk> strength in year over year gross margin was due to lower depreciation expenses and delivered by the end of useful life of certain fixed assets and lower content capex related amortization as we continue to lower our production spend.

Brad Ramberg: Nutrition gross margin was 58.6%, representing a 220 basis point decline from the prior quarter and a 390 basis point improvement year-over-year. The decline from the prior quarter gross margin was primarily due to seasonal MLM-related events. The gross margin strength from prior year was primarily driven by lower depreciation expense and a slight decrease in freight expenses. Moving on to operating expenses. Operating expenses for the quarter, which included $5.1 million in restructuring charges related to the pivot, declined 4.7% sequentially and 21.4% year-over-year to $81.8 million. Selling and marketing expense as a percent of revenue declined 650 basis points over the prior quarter and 930 basis points year-over-year to 44.6%.

Speaker Change: Nutrition gross margin was 58, 6%, representing a 220 basis point decline from the prior quarter and a 390 basis point improvement year over year.

Decline from the prior quarter gross margin was primarily due to seasonal MLM related to that the gross.

Speaker Change: Margin strength from prior year was primarily driven by lower depreciation expense and a slight decrease in freight expenses.

Speaker Change: Moving on to operating expenses operating expenses for the quarter, which included $5 1 million in restructuring charges related to the pivot declined four 7% sequentially and 21, 4% year over year to $81 8 billion.

Speaker Change: Selling and marketing expense as a percent of revenue declined 650 basis points over the prior quarter and 930 basis points year over year to 44, 6%.

Brad Ramberg: This significant improvement over the prior year was driven by a decrease in media spend and changes to our partner compensation plan. The improvement over the prior quarter was driven by a decrease in media spend and fewer MLM-related events. Enterprise technology and development expense increased 340 basis points from the prior quarter and increased 430 basis points year-over-year to 19% of revenue. The increase was primarily due to approximately $2.9 million in accelerated depreciation expense recorded in the current quarter related to pivot-impacted assets. G&A was 11.5% of revenue, increasing 30 basis points sequentially, essentially in line with prior year. We continue to drive expenses to the run rate of our business. Net loss was $12 million compared to a net loss of $10.9 million from the prior quarter.

Speaker Change: This significant improvement over the prior year was driven by a decrease in media spend and changes to our partner compensation plan.

Speaker Change: The improvement over the prior quarter was driven by a decrease in media spend and fewer MLM related events.

Speaker Change: Enterprise technology and development expense increased 340 basis points from the prior quarter and increased 430 basis points year over year to 19% of revenue.

Speaker Change: The increase was primarily due to approximately $2 9 million in accelerated depreciation expense recorded in the current quarter related to pivot impacted asset.

Speaker Change: G&A was 11, 5% of revenue, increasing 30 basis points sequentially essentially in line with prior year.

Speaker Change: We continue to drive expenses to the run rate of our business.

Speaker Change: Net loss was $12 million compared to a net loss of $10 9 million in the prior quarter.

Brad Ramberg: Our net loss in Q3 included $9.2 million of pivot-related restructuring expenses. Without these restructuring expenses, our net loss would have been $2.8 million for the quarter. Net loss improved from the $32.7 million net loss from the prior year. Adjusted EBITDA was $10.1 million compared to $4.9 million in the prior quarter and a $5.8 million loss in the third quarter of last year. This is our fourth consecutive quarter of positive adjusted EBITDA. Next, moving on to the balance sheet and cash flows. Our cash balance of $32.3 million was unchanged compared to $32.3 million in the prior quarter, and our net cash position was $10.6 million at the end of the quarter.

Speaker Change: Our net loss in Q3 included $9 2 million of pivot related restructuring expenses.

Speaker Change: Without these restructuring expenses, our net loss would have been $2 8 million for the quarter.

Speaker Change: Net loss improved from the $32 7 million net loss in the prior year.

Speaker Change: Adjusted EBITDA was $10 1 million compared to $4 9 million in the prior quarter and a $5 8 million loss in the third quarter of last year.

Speaker Change: This is our fourth consecutive quarter of positive adjusted EBITDA.

Speaker Change: Next moving on to the balance sheet and cash flows.

Speaker Change: Our cash balance of $32 $3 million was unchanged compared to $32 3 million in the prior quarter and our net cash position was $10 6 million at the end of the quarter.

Brad Ramberg: Our cash generated in operations for the nine months ended was $9.3 million versus cash used in operations of $14.6 million for the nine months ended last year, a $24 million positive swing in cash generated from operations. Year to date, we generated $5.3 million in positive free cash flow compared to a negative $20 million over the same period last year. We are pleased that we are generating positive free cash flow as we execute through the first phase of our turnaround. The outstanding principal balance of our debt was $25.3 million as of September 30. In October, we worked with our lender, Blue Torch Capital, to align our covenants with a new business model that we have just embarked on. This resulted in the removal of minimum revenue requirements.

Speaker Change: Our cash generated in operations for the nine months ended was $9 3 million versus cash used in operations of $14 6 million for the nine months ended last year at $24 million positive swing in cash generated from operations.

Speaker Change: Year to date, we generated $5 3 million in positive free cash flow compared to a negative $20 million over the same period last year.

Speaker Change: We are pleased that we are generating positive free cash flow as we execute through the first phase of our turnaround.

Speaker Change: The outstanding principal balance of our debt was $25 3 million as of September 30th.

Speaker Change: October we worked with our lender allude towards capital to align our covenants with a new business model that we have just embarked on.

Speaker Change: This resulted in the removal of minimum revenue requirements, we implemented a reduced minimum liquidity covenant and we've added a minimum consolidated adjusted EBITDA covenant.

Brad Ramberg: We implemented a reduced minimum liquidity covenant, and we've added a minimum consolidated adjusted EBITDA covenant. Lastly, turning to our outlook for Q4. We expect Q4 revenues to be in the range of $77 to 87 million. We expect a net loss in the range of $21 to 17 million, which includes an estimated $9 million of pivot-related charges. We expect adjusted EBITDA in the range of $2 million to 6 million. Now let me turn the call back over to Mark for closing comments before we start our Q&A.

Speaker Change: Lastly, turning to our outlook for the fourth quarter, we expect fourth quarter revenues to be in the range of $77 million to $87 million. We expect the net loss in the range of 21% to $17 billion, which includes an estimated $9 million of pivot related charges, we expect adjusted EBITDA.

Speaker Change: In the range of 2 million to $6 million.

Speaker Change: Now, let me turn the call back over to Mark for closing comments before we start our Q&A.

Mark Goldston: In closing, I want to emphasize the transformative journey BODi has undertaken. By pivoting from an MLM network to a single-level affiliate network, we have massively unburdened our infrastructure. This strategic shift not only positions us to significantly increase our profitability, but also enhances our agility and allows us to respond swiftly to market demand. We successfully removed the stigma associated with the MLM, and this has enabled us to maximize individual channels without constraints of our MLM. With these strategic changes, we're now poised to run a pure direct-to-consumer business. This new model unlocks the top-line potential for BODi, providing us with a clear path to sustainable growth. Okay, operator, we can now open it up for questions, please.

Mark Goldston: In closing I want to emphasize the transformative journey body has undertaken.

Mark Goldston: By pivoting from an MLM network to a single level of affiliate network, we have massively unburdened or infrastructure.

Mark Goldston: This strategic shift not only positions us to significantly increase our profitability.

Mark Goldston: Also enhances our agility and allows us to respond swiftly to market demand.

Mark Goldston: We successfully removed the stigma associated with the MLM and this has enabled us to maximize individual channels without constraints of our MLM.

Mark Goldston: With these strategic changes, we're now poised to run a pure direct to consumer business. This new model unlocks that top line potential for body, providing us with a clear path to sustainable growth.

Speaker Change: Okay. Operator, we can now open it up for questions. Please.

Operator: If you would like to ask a question, it is star followed by one on your telephone keypad. If for any reason you would like to remove that question, please press star followed by two. Again, to ask a question, it is star one. As a reminder, if you're using a speakerphone, please remember to pick up your handset before asking a question. We'll pause briefly here as questions are registered. Our first question comes from Susan Anderson with the company Canaccord Genuity. Susan, your line is now open.

Speaker Change: If you would like to ask a question. It is star followed by one what are your telephone keypad, if any new anything you would like to remove a question. Please press star followed by two again to ask a question. It is star one as a reminder fees on a speakerphone. Please pick up your handset looked by asking a question we'll pause briefly.

Speaker Change: Here's questions are registered.

Speaker Change: Our first question comes from Susan Anderson with accompany Canaccord Genuity.

Speaker Change: Your line is now open.

Susan Anderson: Hi. Good evening. Thanks for taking my questions. I was wondering if maybe you could expand on the revenue guidance for Q4. It looks like it's a little bit of a step down from Q3. I'm curious, is this gonna be consistent across the digital and nutrition businesses, or is it one over the other? I guess, how should we just think about that step down? Thanks.

Speaker Change: Hi, good evening, thanks for taking my questions.

Speaker Change: I was wondering if maybe you could expand on the revenue guidance for fourth quarter. It looks like it's a little bit of a step down from third quarter. So I'm curious is this going to be consistent across the digital and nutrition businesses or is it one over the other and then I guess, how should we think about that step down.

Brad Ramberg: Hi, Susan. Thanks for calling today. This is Brad.

Brad Ramberg: Hi, Susan Thanks for calling in today this is Brad.

Brad Ramberg: So I think that four is traditionally a soft.

Susan Anderson: Hi, Brad.

Brad Ramberg: Hello? Can you hear me?

Brad Ramberg: Hello.

Brad Ramberg: Can you hear me.

Mark Goldston: Yes.

Susan Anderson: I can hear you.

Brad Ramberg: Yes, I can hear you.

Brad Ramberg: Okay, great. Oh, perfect. Hi, Susan. Now, Q4 is traditionally a softer quarter for the company, so we do have some seasonality. In addition, this is a bit of a transitional quarter for us. This is the first quarter that we're going into the affiliate model. As Carl mentioned, we're very happy with the number of affiliates that are starting to sign up with the company, and there's some training that takes time for them to get used to the new software. That is well underway.

Brad Ramberg: Okay.

Brad Ramberg: But right now.

Speaker Change: Now Q4 is traditionally a softer quarter for the company. So we do have some seasonality. In addition, we are this is a bit of a transitional quarter for us. This is the first quarter that we're going into the affiliate model. So as Carl mentioned, we're very happy with the number of affiliates that are starting to sign up with the company and there is some training that takes time for them to do.

Speaker Change: Get used to the new software.

So that is well underway. So I would view really Q4 as really a transition away from the network into the affiliate model and I would expect the mix between digital and nutrition to remain to remain steady as it's been the last couple of quarters I wouldn't expect much of a shift in this quarter and as the affiliates gained traction will.

Mark Goldston: I would view really Q4 as really a transition away from the network into the affiliate model. I would expect the mix between digital and nutrition to remain steady as it's been the last couple quarters. I wouldn't expect much of a shift in this quarter. As the affiliates gain traction, we'll report on that when we report next quarter earnings.

Brad Ramberg: I would view really Q4 as really a transition away from the network into the affiliate model. I would expect the mix between digital and nutrition to remain steady as it's been the last couple quarters. I wouldn't expect much of a shift in this quarter. As the affiliates gain traction, we'll report on that when we report next quarter earnings.

Speaker Change: Report on that when we report next quarter earnings.

Susan Anderson: Okay, great. That's helpful. That makes sense. I know you're not giving too many details yet on the new business model, but maybe if you could just kinda talk about the logistics on how that transition to the affiliate program is gonna work. It sounds like you mentioned that there's already been some former partners sign up. I guess, do existing partners basically go on the platform, re-sign up, and then start selling? I'm curious just how you're marketing this new program to maybe some other potential people out there that may wanna be part of it. Thanks.

Speaker Change: Okay, Great that's helpful that makes sense.

Speaker Change: And then I know youre, not giving too many details yet on the new business model, but maybe if you could just kind of talk about the logistics on how that transition to the affiliate program is going to work. So it sounds like you mentioned that theres already been some former partners sign up so I guess two existing partners basically go on the platform refined that and then sorry.

Speaker Change: Selling and then also I'm curious just how you are marketing this new program and maybe some other putting some people out there that may want to be part of it.

Carl Daikeler: Hi, Susan. It's Carl. Great question. Yeah, we're very pleased with the transition of former network partners over to affiliate and the enthusiasm that they've got for the more agile business model. Really, we're approaching this from three levels. Obviously, we wanna maximize the opportunity for our former network partners, so we've given them the incentive to come over and sign up in November in order to be participating in the highest bonus tier, which as Mark mentioned, unlocks the potential for commissions between 35% and 50%. We will continue then to open it up to our very broad database to allow for both our current subscribers and lapsed subscribers to come in and participate in this almost like a refer-a-friend type of program.

Speaker Change: Hi, Susan it's Karl Great question. So, yes, we're very pleased with the transition of former network partners over to affiliate and and the enthusiasm that they've got for the more agile business model.

Speaker Change: Really we're approaching this from three levels, obviously want to maximize the opportunity for our former network partners. So we've given them the incentive to come over and sign up in November in order to be participating in the highest bonus tier, which as mark mentioned unlocks the potential for commissions between 35.

Speaker Change: And 50%.

Speaker Change: So and we will continue then to then open it up to our very broad database.

Speaker Change: To allow for both our current subscribers and lapsed subscribers to come in and participate in this almost like our refer a friend type of program because it's the barrier of entry is so low there is no cost to get started.

Carl Daikeler: 'Cause it's the barrier of entry is so low, there's no cost to get started. It's very easy just to put a link up and say, "Hey, why don't you join it? Join me and do this program with me." It's an opportunity for everybody to monetize their health and fitness. Finally, we launched this affiliate program on probably the largest affiliate platform in the world, impact.com, with the intent that we might be able to penetrate into their over 300,000 existing affiliates on their platform with one of the most aggressive commission structures in the industry. We are hoping and initiating in the end of November, going into December, to see how many of those existing affiliates on the impact.com platform we might be able to bring in.

Very easy just to put a link up and say hey wanted to join US join me and due to this program with me. So it's an opportunity for everybody monetize their health and fitness.

Speaker Change: Finally, we.

Speaker Change: We launched this affiliate program on.

Speaker Change: Probably the largest affiliate platform in the world impact Dot com.

Speaker Change: With the intent that we might be able to penetrate into their over 300000 existing affiliates on their platform with one of the most aggressive commission structures in the industry. So we are hoping and initiating in the end of November going into December two.

Speaker Change: How many of those existing affiliates on the impact dot com platform that might be able to bring in.

Mark Goldston: Susan, this is Mark. Hey, just to follow on.

Mark Goldston: Susan This is mark.

Mark Goldston: Hey, just a follow on to close the loop with Carl just said and what what Brad shared with you. So.

Susan Anderson: Hi

Mark Goldston: To close the loop with what Carl just said and what Brad shared with you. This Q4 is really sort of a transition trough quarter for us because we announced in October that we were gonna be moving out of the network. You had a little bit of the, you know, Band-Aid pull-off and that. We didn't start taking affiliates as signups until 1 November. That's continuing. We're barely two weeks into that, and they have to get used to selling on a new structure with a new system. Really, December will be the first sort of pure affiliate month 'cause October is still a little bit of a hybrid, and November is a little bit of a hybrid, a little bit of network, a little bit of affiliate. December will be all affiliate.

Mark Goldston: This fourth quarter is really sort of a transition trough quarter for us because we announced in October that we were going to be moving out of the network. So you had a little bit of the bandaid pull off in that and then we didn't start taking affiliates sign ups until November one so thats continue.

Mark Goldston: We're barely two weeks into that and they have to get used to selling on a new structure with the new system. So really December will be the first sort of pure affiliate months because October is still a little bit of a hybrid in November is a little bit of a hybrid a little bit of network a little bit of affiliate December will be all affiliates. So.

Mark Goldston: We had a bridge somewhere, and we decided Q4, since it's a seasonally lower quarter anyway, was the time to execute the bridge to the other side. 'Cause you definitely would not want to do that in Q1, which is your seasonally strongest period.

Mark Goldston: We had a we had a bridge somewhere and we decided Q4 since it's a seasonally lower quarter anyway was the time to execute the bridge to the other side because you definitely would not want to do that in Q1, which is your seasonally strongest periods.

Susan Anderson: Yeah. Okay. That definitely makes sense. And then maybe if you could just expand on the Belle Vitale program. It looks. Is this still in test phase? Or I guess when you guys expect it to be up and running? And I guess in terms of just like fitting into your existing programs, is it mainly gonna be nutritional products that come out of that as well as, you know, key advice for women, or how should we think about that? Thanks.

Speaker Change: Yeah, Okay that that definitely makes sense and then maybe if you could just expand on that a bell the Tau program.

Speaker Change: It looks is this still in test phase or I guess, when do you guys expect it to be up and running and I guess in terms of just like fitting into your existing programs is it mainly going to be nutritional products that come out of that as well as key advice for for women or how should we think about that thanks.

Carl Daikeler: Yeah. This is a super exciting program. It's done its testing. We finished that testing late this summer with incredible results. Everybody in it had improvement in their overall symptoms from hormone imbalances and significant weight loss, upwards of, I think, our highest was a little over 26 pounds in 12 weeks. It is a comprehensive program, including this innovative fitness program, which mimics the kind of Pilates moves that you would do on an expensive reformer or Cadillac machine with inexpensive equipment you can use at home, an easy-to-follow step-by-step nutrition plan that has phases over the course of the 12 weeks. It has access to the Breathwrk app, so to help people reduce stress with breathing exercises, and two proprietary supplements that we're excited to add to the catalog.

Speaker Change: Yeah. This is a super exciting program.

Speaker Change: It's done it's testing we finish that testing late this summer with incredible results everybody.

Speaker Change: And it had.

Speaker Change: <unk> in their overall symptoms from hormone imbalances and significant weight loss upwards of I think our highest was a little over 26 pounds in 12 weeks.

Speaker Change: It is a comprehensive program, including this innovative fitness program, which mimics the kind of pilates moves that you would do on an expensive reformer or Cadillac machine with inexpensive equipment you can use at home.

Speaker Change: And easy to follow.

Speaker Change: Step by step nutrition plan that has phases over the course of the 12 weeks it has a.

Speaker Change: Access to the breadth work app, so to help people reduce stressed with reading exercises and two proprietary supplements that that we're excited to add to the catalog.

Carl Daikeler: We will sell this as one bundle for $299 starting 10 December. We already have thousands of reservations effectively, based on letting people register for early bird access to it back in August. We're very excited about this launch, about what it does for the end of December and also going into Q1.

Speaker Change: We will sell this as one bundle for $299 starting December 10th.

Speaker Change: And we already have thousands of reservations effectively.

Speaker Change: Based on our letting people register for the early bird access to it back in August. So we're very excited about this launch about what it does for the end of December and also going into the first quarter.

Susan Anderson: Okay, great. That sounds exciting. Was that $299, you mentioned, was it a couple of months or something like that?

Speaker Change: Okay, great that sounds exciting and was that $2 99.

Speaker Change: Was it a couple of months or something like that.

Carl Daikeler: It's $299 for the comprehensive three-month program. The nutritionals are on what we call a continuity. When they buy, they get the first month, and then they automatically ship until they cancel. That's an interesting footnote to it. I mentioned in my opening remarks that for the first time, we had a test group that finished, like a test group, they get it for free, right? This is the first time we've ever had participants in a test group actually offer to buy the supplements after that test was done, which was very encouraging in terms of what the ongoing demand for these supplements will be when people finish the 12-week program.

Speaker Change: It's it's $299 for the comprehensive three month program.

Speaker Change: The Nutritionals are on what we call a continuity so when they buy they get the first month and then they automatically ship until they cancel and that's an interesting footnote to what I mentioned in my opening remarks that for the first time, we had a test group that finished like a test group they get it for free right. This is the first time, we've ever had participants in it.

Speaker Change: <unk> group actually offered to buy the supplements after that test was done which was.

Speaker Change: Very encouraging in terms of what the ongoing demand for the supplements will be when people finished the 12 week program.

Susan Anderson: Okay, great. That sounds exciting. I'll go ahead and pass along.

Speaker Change: Okay, great that sounds exciting I will go ahead and pass along.

Carl Daikeler: Thanks.

Mark Goldston: Thank you, Susan.

Alright, Thank you Susan.

Operator: Our next question comes from Chris Sakai with the company Singular Research. Chris, your line is now open.

Speaker Change: Our next question comes from Chris Sakai with accompanying singular research Chris Your line is now open.

Chris Sakai: Hi. Yes, I'm in for Gaoshi. Can you provide more details on the features and capabilities of the centralized e-commerce platform at bodi.com? How does it differ from your previous digital offerings?

Speaker Change: Hi, Yes, I'm in for Galaxy.

Speaker Change: Can you provide more details on the features and capabilities of the centralized e-commerce platform form.

Speaker Change: Bobby Dot com, how does that differ from your previous digital offerings.

Mark Goldston: Well, essentially, this is Mark. Essentially, in the previous structure with the MLM, we didn't really have a very robust bodi.com direct-to-consumer website because we were somewhat hamstrung by some of the equivalency issues that were posed by the MLM. People were sent by those in the network who would sell them. They were sent to a site called teambeachbody.com. We had sort of a bifurcated approach. Our general consumer website, bodi.com, didn't even sell our nutritional products direct to the consumer. You actually had to come in through a referral from the former MLM network. That's all going away. Team Beachbody will be, you know, gone. bodi.com will be the primary DTC website for the company. You'll be able to buy all of our products there.

Mark Goldston: Well essentially this is mark essentially.

Mark Goldston: In the previous structure with the MLM.

Mark Goldston: We didn't really have a very robust body of dot com direct to consumer website, because we were somewhat hamstrung by some of the equivalency issues that were posed by the MLM. So people were sent by those in the network, who would sell them. They were sent to a site called team Beach body Dot com.

Mark Goldston: So we had sort of a bifurcated approach and our general consumer website body dot com didn't even sell our nutritional products direct to the consumer you actually had to come in through a referral from the former MLR network. That's all going away <unk> Beach body will be gone.

Mark Goldston: Body Dot com will be the primary DTC website for the company, you'll be able to buy all of our products there and when an affiliate provides you with.

Mark Goldston: When an affiliate provides you with a link, which gives them credit for the sale, they'll be sending you there to transact your purchases. It's no more captive sales, no more captive MLM, no more bifurcated approach. Everything will be focused against a single powerful direct-to-consumer website called bodi.com. All of our products will be sold there, and that's where people will be directed to transact.

Mark Goldston: With the link.

Which gives them credit for the sale of there'll be sending is there to transact your purchases. So it's no more captive sales no more captive MLM no more bifurcated approach everything will be focused against the single powerful direct to consumer website called <unk> Dot com all of our products will be sold there and that's where people.

Mark Goldston: We will be directed to transact.

Carl Daikeler: I'll also add, Mark-

Speaker Change: I'll also add Mark sounds good cause of the change in business model, we have the ability now to actively market our products within the body App itself, where we actually serve up the content. So now we can actually market right along the workouts with.

Chris Sakai: Okay, sounds good.

Carl Daikeler: Because of the change in business model, we have the ability now to actively market our products within the BODi app itself, where we actually serve up the content. Now we can actually market right along the workouts with our various supplements that can help you get results with those workouts, and it takes you right to the bodi.com site. We couldn't do that before because of the conflict with the network marketing organization. Now it's really, like I said, a rising tide floats all ships.

Speaker Change: Our various supplements that can help you get results with those work out then that takes you right to the body Dot Com site, we couldnt do that before because of the conflict with the network marketing organization. So now it's really like I said, a rising tide floats all ships.

Chris Sakai: Great. As you continue to expand your digital offerings and promotional activities, are there plans to introduce any subscription models or tiered access options to your digital content?

Speaker Change: Great.

Speaker Change: As you continue to expand our digital offerings and promotional activities are there plans to introduce any subscription models or geared access options for digital content.

Mark Goldston: As you probably are aware, we are right now a digital subscription model. That's what we are in our digital fitness business. You can buy it for a number of months or a year, but you are a subscriber to the process. We also have individual programs that we will sell you, so you could buy P90X, you know, for $59.95 and own it for the rest of your days. The primary focus of our business has been, and will continue to be, on the fitness side, subscription-based.

Speaker Change: So as you probably are aware we are right now a digital subscription model. That's what we are in our digital fitness business you can buy it for a number of months or a year, but you are you are a subscriber to the process. We also had individual programs.

Speaker Change: That we will sell you. So you could buy <unk> for a 50, 995% and own it for the rest of your days, but the primary focus of our business has been and will continue to be on the fitness side subscription base.

Chris Sakai: Okay. Great. What percentage of your current sales come from mobile devices, and how do you expect this to change with the new e-commerce platform?

Speaker Change: Okay.

Speaker Change: Great what percentage of your current sales come from mobile devices and how do you expect this to change with the new E Commerce platform.

Mark Goldston: Well, it's an interesting question. We don't disclose the specifics, but in general, within the e-com world, you know, 70+% of consumers utilize a mobile platform, and about 25 to 30% in general use a computer platform, so a desktop or a laptop, et cetera. As we go forward, I think you'll see more and more people using mobile devices for sure, and we're also gonna see more and more people using an app-based structure versus just using pure website access.

Speaker Change: Well, it's an interesting question, we don't disclose the specifics, but in general within the E Com World.

Speaker Change: 70% of consumers utilize a mobile platform and about 25% to 30% in general use.

Speaker Change: Tutor platform, so a desktop or laptop et cetera. So as we go forward I think youll see more and more people using mobile devices for sure and we're also going to see more and more people are using an app based structure versus just using pure web site access.

Chris Sakai: Okay, great. Thanks for the answer.

Okay, great. Thanks for the answers.

Mark Goldston: Sure. Thank you.

Speaker Change: Sure. Thank.

Speaker Change: Thank you.

Operator: At this time, there are no more questions registered in the queue. Again, if you would like to ask a question, it is star followed by one. No more questions registered in the queue. I'd like to pass the conference back over to our hosting team for closing remarks.

Speaker Change: At this time then my question is where are you seeing and Kim who can it feels like to ask a question. It is star followed by one.

Speaker Change: And there are no questions registered in queue I would like to pass the conference back over to our host <unk> for closing remarks.

Mark Goldston: Thank you very much, operator. Well, I wanna thank everybody for attending the call today. We're really excited about this business model transition at BODi, and we look forward to talking to you on the next earnings call to be able to provide you with some color on how the new affiliate marketing program is going. Thanks, everyone. Bye.

Thank you very much operator, well I want to thank everybody for attending the call. Today, we're really excited about this business model transition and body and we look forward to talking to you on the next earnings call to be able to provide you with some color on how the new affiliate marketing program is going so thanks every much everyone bye.

Operator: That will conclude today's conference call. Thank you for your participation, and enjoy the rest of your day.

Speaker Change: That will conclude today's conference call. Thank you for your participation and then Joe the rest of your day.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Yeah.

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