Q4 2024 Beachbody Co Inc Earnings Call

March 27, 2025

Operator: Good afternoon. Thank you for attending today's The Beachbody Company, Inc. Q4 2024 Earnings Conference Call. My name is Tania, and I will be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press Star followed by one on your telephone keypad. I would now pass the conference over to your host, Bruce Williams, Managing Director of ICR. You may proceed.

Tania: Good afternoon. Thank you for attending today's Beachbody Company Inc. 4th quarter 2024 earnings conference call. My name is Tania and I will be your moderator for today's call.

Speaker Change: All lines will be needed during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star followed by one on your telephone keypad. I would ask to pass the conference over to your host Bruce Williams, manager director of ICR. He may proceed.

Bruce Williams: Welcome, everyone, and thank you for joining us for our Q4 earnings call. With me on the call today are Mark Goldston, Executive Chairman of The Beachbody Company, 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: Welcome, everyone, and thank you for joining us for our fourth quarter earnings call. With me on the call today, our Mark Goldston, executive chairman of the Beachbody Company, Kyle Dykla, 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's question.

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 security's litigation or formback of 1995.

Speaker Change: 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 filing with the SEC that concludes today's press release.

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

Speaker Change: Today's call will include references to non-GAAP financial measures such as the Jesse Davidoff, Netcash, and Freecash Club.

Speaker Change: And 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: Thanks, Bruce, and thanks everyone for joining us today. I'll start by providing an update on our company's restructuring efforts and the significant changes to our business model that we announced last September. I'll highlight our Q4 performance and share the progress we've made on our turnaround plan. After my remarks, I'll hand it over to Carl Daikeler, our CEO, who will discuss our strategic initiatives in more detail. That'll be followed by our Interim CFO, Brad Ramberg, who will discuss our financial guidance and outlook. As you're aware, as of 1 November 2024, BODi restructured into essentially a new company as we eliminated our long-standing multi-level marketing platform and moved to a single-level affiliate model. We made decisive and immediate changes to transition from our old model and paved the way for this transformation.

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

Mark Goldston: Thanks Bruce and thanks everyone for joining us today. I'll start by providing an update on our company's restructuring efforts and the significant changes to our business model that we announced last September . Then I'll highlight our fourth quarter performance and share the progress we've made on our turnaround plan.

Mark Goldston: The restructuring fundamentally broadens our go-to-market strategy and allowing us to be more dynamic and nimble by taking advantage of new distribution opportunities that the company could not unlock previously, and I'll detail that later. I'd like to emphasize that 2025 is a transition year for the company, and we're at the early stages of implementing our new strategy. As I communicated last quarter, it's essential for investors and analysts to view our business model through a fresh lens as year-over-year comparison will not be a true representation of our progress given the vastly different business model that we are now employing. Let me briefly reiterate our strategic shift to position BODi for future success. We phased out the multi-level marketing or MLM structure, which had been in place since 2007.

Mark Goldston: We're at the early stages of implementing our new strategy.

Mark Goldston: As I communicated last quarter.

Mark Goldston: Central for investors and analysts to view, our business model through a fresh lens as year over year comparisons will not be a true representation of our progress given the vastly different business model, but we are now employing.

Mark Goldston: Let me briefly reiterate our strategic shift to position body for future success, we phased out the multi level marketing are MLM structure, which had been in place since 2007, the MLM model, while once effective I'd become outdated costly and burdensome with a negative stigma that.

Mark Goldston: The MLM model, while once effective, had become outdated, costly, and burdensome with a negative stigma that hampers new customer and seller acquisition. Instead, we've made a quantum strategic shift to an omni-channel strategy, heavily focused on direct-to-consumer marketing. This includes utilizing direct response, Amazon, and conventional retail distribution for our nutrition products, and predominantly direct-to-consumer channels for our digital fitness products. The affiliate model, which simplifies our structure, will complement this omni-channel approach by enhancing revenue streams and empowering affiliates with performance-based compensation structure. This transition better aligns with our direct marketing roots and offers more sustainable economic framework while focusing on profitability and operating efficiency. We successfully met our internal target for transitioning active sellers from the MLM network to the new affiliate program. In addition to the new affiliate program, we have several exciting initiatives that we believe will be key drivers of our long-term growth.

Mark Goldston: Hampers, new customer and seller acquisition instead, we've made a quantum strategic shifts to an omnichannel strategy heavily focused on direct to consumer marketing.

Mark Goldston: This includes utilizing direct response, Amazon and conventional retail distribution for our nutrition products and predominantly direct to consumer channels for our digital fitness products.

Mark Goldston: <unk> model, which simplifies our structure will complement this omnichannel approach by enhancing revenue streams and empowering affiliates with performance based compensation structure.

Mark Goldston: This transition better aligns with our direct marketing routes and offers more sustainable economic framework, while focusing on profitability and operating efficiency.

Mark Goldston: Definitely met our internal targets for transitioning active sellers from the MLM network. So the new affiliate program.

In addition to the new affiliate program, we have several exciting initiatives that we believe will be key drivers of our long term growth.

Mark Goldston: Our direct response marketing unit continues to perform well, and we continue to experience strong growth in our Amazon business. While early, we're also making progress in developing new products in the nutrition segment under our very popular P90X and Insanity brand names, which we hope to introduce in the next 12 months. These products will be available in major retailers within our affiliate network and through our direct response business. The omni-channel opportunity is vast. BODi has never marketed any of our highly rated nutritional supplements outside of the former MLM network due to constraints of the former MLM model.

Mark Goldston: Our direct response marketing unit continues to perform well and we continue to experience strong growth in our Amazon business. While early we're also making progress in developing new products and the nutrition segment under our very popular <unk> and then Saturday brand names, which we hope to introduce in the next 12 months.

Mark Goldston: These products will be available in major retailers within our affiliate network and through our direct response business.

Mark Goldston: The omni channel opportunity is vast.

Speaker Change: Body has never marketed any of our highly rated nutritional supplement.

Speaker Change: Outside of the former MLM network due to constraints of the former MLM model.

Mark Goldston: However, we now have a much more robust go-to-market opportunity where we can market our leading products like Shakeology, Energize, and additional product lines we're developing direct to consumers through media outlets like Facebook, Instagram, Google, et cetera, which is an opportunity that we could not take advantage of previously and which significantly hamstrung our ability to serve our addressable market. While this will take time, I really couldn't be more excited about the growth potential ahead of us. Now let's take a look at our performance highlights for Q4. Our revenues were in line with the high end of our guidance, and we achieved extremely healthy gross margins, which improved by 830 basis points year-over-year. Adjusted EBITDA of $8.7 million significantly exceeded our guidance range of $2 million to $6 million.

Speaker Change: However.

Speaker Change: We now have a much more robust go to market opportunities, where we can market, our leading products like shake allergy energized and additional product lines with developing direct to consumers and media outlets like Facebook, Instagram, Google et cetera, which is an opportunity that we could not pay.

Speaker Change: The advantage of previously and which significantly hand strong our ability to serve our addressable market.

Speaker Change: While this will take time I really couldnt be more excited about the growth potential ahead of us.

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

Speaker Change: Our revenues were in line with the high end of our guidance and we achieved extremely healthy gross margins, which improved by 830 basis points year over year.

Speaker Change: Adjusted EBITDA of $8 7 million significantly exceeded our guidance range of 2 million to $6 million.

Mark Goldston: This marks our 5th consecutive quarter of positive adjusted EBITDA. For the full year, we've generated $28.3 million of adjusted EBITDA. That's a $37 million improvement from the $8.7 million loss in the prior year. Additionally, we had a dramatic improvement in year-over-year cash flow. We generated cash flow from operations of $2.6 million for the year 2024, compared to a cash use of $22.5 million for the year 2023. That was a $25.1 million improvement year over year in cash flow. We've made significant progress in our turnaround by restructuring our financial model, and we're really pleased that we generated positive full-year adjusted EBITDA and cash flow from operations for the first time since 2020.

Speaker Change: This marks our fifth consecutive quarter of positive adjusted EBITDA.

Speaker Change: The full year, we generated $28 $3 million and adjusted EBITDA.

Speaker Change: That's a $37 million improvement from the $8 7 million dollar loss in the prior year. Additionally.

Speaker Change: Additionally, we had a dramatic improvement in year over year cash flow, we generated cash flow from operations of $2 6 million for the year 2024 compared to a cash use of <unk>.

Speaker Change: Two and a half million dollars for the year 2023.

Speaker Change: That was at $25 $1 million improvement year over year in cash flow.

Speaker Change: <unk> made significant progress in our turnaround by restructuring our financial model and we're really pleased that we generated positive full year adjusted EBITDA and cash flow from operations for the first time since 2020.

Mark Goldston: As we look ahead to 2025, we recognize, look, this is gonna be a transition year as we implement our new business model, which is a crucial step in moving the company forward in this new direction. We understood that transitioning to our new omni-channel business model would involve some short-term dislocations, but it was necessary to position the company more competitively for long-term success. While we're excited about our new initiatives, we know it'll take time for these efforts to fully take hold, but we're fully committed to playing the long game at BODi. With our new business model now in place, we're entering the next phase of our strategy, which is dedicated to unlocking our top-line potential. With that being said, I'd like to turn the call over to Carl Daikeler, and he'll discuss our strategic initiatives as we move into the next phase of our transformation.

Speaker Change: As we look ahead to 2025.

Speaker Change: We recognize this is going to be a transition year as we implement our new business model, which is a crucial step in moving the company forward in this new direction.

We understood the transition into our new Omni channel business model would involve some short term dislocation, but it was necessary for <unk>.

Speaker Change: <unk> the company more competitively for long term success.

Speaker Change: While we're excited about our new initiatives, we know it'll take time for these efforts to fully take hold.

Speaker Change: Fully committed to playing the long game its body.

Speaker Change: Our new business model now in place we're entering the next phase of our strategy, which is dedicated to unlocking our top line potential.

Speaker Change: With that being said I'd like to turn the call over to Karl <unk> and he'll discuss our strategic initiatives as we move into the next phase of our transformation.

Carl Daikeler: Thanks, Mark, and good afternoon, everyone, and thanks for joining us today. Before our Interim CFO, Brad Ramberg, goes through the numbers, I just wanna take a second to provide an overview of our initiatives and priorities. First, I wanna say how grateful I am for the entire BODi team. This past year has been a big one for us, full of challenges, important changes, and from my perspective as the majority shareholder, we've made significant progress toward positioning the business to serve more people, to return to the kind of growth and profitability we've enjoyed for the majority of our 26-year history, and to get back to a trajectory of a profoundly important and productive public company. None of that happens without our incredible management and staff, plus our affiliate partners, our amazing subscriber community, and our supportive stakeholders.

Karl Deichler: Thanks, Mark and good afternoon, everyone and thanks for joining us today before our interim CFO, Brad Ramberg goes through the numbers I just wanted to take a second to provide an overview of our initiatives and priorities, but first I want to say, how grateful I am for the entire body team. This past year has been a big one for us full of Chi.

Karl Deichler: <unk> important changes and from my perspective, as the majority shareholder we've made significant progress towards positioning the business to serve more people to return to the kind of growth and profitability. We've enjoyed for the majority of our 26 year history and to get back to a trajectory of a profoundly important.

Karl Deichler: Productive public company.

Karl Deichler: But none of that happens without our incredible management and staff plus our affiliate partners are amazing subscriber community and our supportive stakeholders.

Carl Daikeler: Now, looking back on 2024, the year was about taking a hard look at what was working and what was underperforming, what aspects of the model had changed since the pandemic, and were holding us back from reaching and helping more people. We made the very difficult choices that would return the business to its mission of helping people achieve their goals and celebrating the amazing customer success stories our programs and supplements enable. I believe we're seeing the signs that our recent shifts have great potential to scale. Our focus continues to be on delivering real results for people, helping them get fit, stay active, and feel their best. With this refined business model, we're moving toward a more efficient, more profitable, and more impactful business model with incredible agility and leverage.

Karl Deichler: Looking back on 2020 for the year was about taking a hard look at what was working and what was underperforming what aspects of the model had changed since the pandemic and we are holding us back from reaching and helping more people and we made the very difficult choices that would return the business to its mission of helping people achieve their go.

Karl Deichler: And celebrating the amazing customer success stories are programs and supplements enabled.

Karl Deichler: I believe we're seeing the signs that our recent shifts have great potential to scale. Our focus continues to be on delivering real results for people, helping them get fit.

Stay active and feel their best and with this refined business model, we're moving toward a more efficient more profitable and more impactful business model with incredible agility and leverage we know the demand is there, but especially in this new G. L. P. One semi glu tied age of weight loss pharmaceuticals or people need.

Carl Daikeler: We know the demand is there, especially in this new GLP-1 semaglutide age of weight loss pharmaceuticals. More people need our no-nonsense approach to fitness and nutrition than ever. There's real demand there. I maintain that our opportunity is huge, and with a clear strategy in place, we're creating momentum for the long term. What we continue to be focused on is building profitable revenue and cash flow, which, as Mark outlined, created the imperative for exiting the network marketing business and simplifying the business to a model that balances affiliate marketing with our roots of highly efficient performance marketing. That also opened up the prospect for sales channel expansion and greater control of the positioning and definition of the BODi brand across multiple sales channels. That's why our affiliate transition is such a big focus.

Karl Deichler: Our no nonsense approach to fitness and nutrition than ever.

Karl Deichler: Real demand there so.

Karl Deichler: So I maintain that our opportunity is huge and with a clear strategy in place, we're creating momentum for the long term.

Karl Deichler: While we continue to be focused on is building profitable revenue and cash flow, which as mark outlined created the imperative for exiting the network marketing business and simplifying the business to a model that balances affiliate marketing with our roots of highly efficient performance marketing.

Karl Deichler: That also opens up the prospect for sales channel expansion and greater control of the positioning and definition of the body brand across multiple sales channels. That's why our affiliate transition is such a big focus more visibility of actual customer success better incentives for the customers who stepped into the affiliate opportunity.

Carl Daikeler: More visibility of actual customer success, better incentives for the customers who step into the affiliate opportunity, and a smarter approach to customer acquisition. It's all really starting to come together. Now, it's still early in the game. We made the shift to a single level or more traditional affiliate model, which let us remove the stigma of multi-level marketing from the narrative and direct our marketing spend where it matters most, attracting and rewarding the people who are ready to actually do this incredible thing of lifestyle change, getting results with our programs, and sharing that success with their followers on social media. It's very early in the process, but I'm optimistic about everything we've learned in the three months since it began, and I'm excited for how the team has already spotted significant opportunities to simplify and improve the entire affiliate model.

Karl Deichler: And a smarter approach to customer acquisition, it's all really starting to come together now it's still early in the game, we made the shift to a single level or more traditional affiliate model, which let us remove the stigma of multi level marketing from the narrative and direct our marketing spend where it matters, most attracting and rewarding the people.

Karl Deichler: Who are ready to actually do this incredible thing of lifestyle change getting results with our programs and sharing that success with their followers on social media.

Karl Deichler: Very early in the process, but I'm optimistic about everything we've learned in the three months since it began and I'm excited for how the team is already spotted significant opportunities to simplify and improve the entire affiliate model.

Carl Daikeler: Our marketing initiatives are focused on reaching more people with this incredibly efficient offer of what we call the total solution, combining digital programs with a monthly subscription to Shakeology. Not only is that incredibly effective for the customer. The price point is extremely compelling, especially when compared to the offer propositions of our peers in the equipment space. People get results with our business model more reliably and for less money. This is the first time we've been in a position to mass-market this total solution bundle. While it's early in the ramp-up, I have no doubt that it can really scale because we've done it before. We're doubling down on direct response marketing now, leaning into what's driving the best engagement and conversion rates.

Karl Deichler: Our marketing initiatives are focused on reaching more people with this incredibly efficient offer what we call. The total solution combining digital programs with a monthly subscription to shake allergy not only is that incredibly effective for the customer the price point is extremely compelling, especially when compared to the offer.

Karl Deichler: Positions of our peers in the equipment space people get results with our business model more reliably and for less money and this is the first time, we've been in a position to mass market. This total solution bundle and while it's early in the ramp up I have no doubt that it can really scale because we've done it before.

Karl Deichler: We're doubling down on direct response marketing now leaning into what's driving the best engagement and conversion rates and while the impact of those changes were completely realized in the fourth quarter every week, we're learning finding new wins that generate traffic improving landing page conversion and growing average order value and work.

Carl Daikeler: While the impact of those changes weren't completely realized in Q4, every week we're learning, finding new wins that generate traffic, improving landing page conversion, and growing average order value. We're gradually getting more and more traction. Our women's hormone health program, Belle Vitale, that launched in December. The exit from network marketing was a significant disruption to the original business plan for this new product. We did see strong demand in the original launch, and now we're ramping up direct marketing with compelling user-generated content. As our first wave of users complete the program next week, the results are consistent with our test groups, and the resulting flood of success stories will be used to drive marketing of Belle Vitale throughout 2025. This is actually the same playbook that worked for P90X and Insanity.

Karl Deichler: Gradually getting more and more traction.

Karl Deichler: Our womens hormone Health program Bell Hotel at launched in December.

Karl Deichler: Exit from network marketing was a significant disruption to the original business plan for this new product, but we did see strong demand in the original launch and now we're ramping up direct marketing with compelling user generated content.

Karl Deichler: As our first wave of users complete the program next week. The results are consistent with our test groups and the resulting flood of success stories will be used to drive marketing of Bell Vitale. Throughout 2025. This is actually the same playbook that worked for <unk> insanity. Neither of those programs were blockbusters out of the gate.

Carl Daikeler: Neither of those programs were blockbusters out of the gate. Once the success stories started to come in and were integrated into the marketing message, the momentum builds and word of mouth starts to spread really fast. I expect that same dynamic to happen for Belle Vitale based on the enthusiasm we're seeing as women complete the program. We also launched two new programs to expand our audience. We call them specials. One is called Walk Week with Lacee Green. This is an indoor walking program, which is very appealing for people who want something easy to get started with. The other special is called the GLP-1 Fitness Formula, which we launched at the end of February, and represents our initiative to help people who are using those pharmaceuticals to have a healthier and more permanent healthy outcome.

But once the success stories started to come in and we're integrated into the marketing message. The momentum built in word of mouth starts to spread really fast and I expect that same dynamic to happen for bell. The Tau based on the enthusiasm we're seeing as women complete the program.

Karl Deichler: We also launched two new programs to expand our audience, we call them specials. One is called work week with Lacey Green. This is an indoor walking program, which is very appealing for people, who want something easy to get started with the other special is called the G. L. P. One fitness formula, which we launched at the end of <unk>.

Karl Deichler: During and represents our initiative to help people who are using those pharmaceuticals to have a healthier and more permanent healthy outcome.

Carl Daikeler: As we mentioned last quarter, channel expansion is also a priority. We're seeing continued success with Amazon and adding Subscribe & Save nutrition subscribers at a faster clip than expected, and we believe this will compound as this channel expands. We started taking what we learned from the Amazon channel and launched a Subscribe & Save option within our own BODi checkout flow, which is also building our nutrition continuity file and driving long-term retention. That's a very healthy sign for the turnaround. We also launched on Walmart.com in February. It'll start small, but the growth potential is significant, especially given the retail initiative that Mark referenced, a project that he's personally leading for us. That's meaningful given his background scaling major CPG brands over the course of his impressive career. Which leads me to talk about nutrition.

Karl Deichler: As we mentioned last quarter channel expansion is also a priority. We're seeing continued success with Amazon and adding subscribe and save nutrition subscribers at a faster clip than expected and we believe this will compound as this channel expands.

Karl Deichler: We started taking what we learned from the Amazon channel and launched a subscribe and save option within our own body checkout flow, which is also building our nutrition continuity file and driving long term retention, that's a very healthy sign for the turnaround.

Mark Goldston: We also launched on Walmart Dot Com in February it'll start small, but the growth potential is significant especially given the retail initiatives that mark referenced a project that he is personally leading for us that's meaningful given his background scaling major CPG brands over the course of his impressive career wished.

Karl Deichler: Which leads me to talk about nutrition.

Carl Daikeler: We know our nutrition and supplements are some of the best out there, led by the Shakeology brand. Historically, our nutrition products have mostly been sold within our network, which is all the more reason to be impressed with the fact that we've sold over 1 billion servings of Shakeology. Well, now we can expand that distribution via our own CRM activities, alternative marketplaces like Amazon and Walmart.com, and in the near future, Shakeology will be at retail. I'm also pleased to say that we've retained more of the legacy nutrition subscription file than we might have expected through the transition out of network marketing, which speaks to the positive customer experience of that product. Now, in addition to getting brand new nutrition subscribers, we're seeing returning customers who are resubscribing to our nutritionals. That's a very promising sign. We also discussed partnerships in our last earnings call.

Karl Deichler: We know our nutrition and supplements or some of the best out there led by the shake allergy brand historically, our nutrition products have mostly been sold within our network, which is all the more reason to be impressed with the fact that we've sold over a billion servings of shake allergy. So now we can expand that distribution via our own CRM activities all.

Karl Deichler: Turning to marketplaces, like Amazon and Walmart Dot com.

Karl Deichler: And in the near future Shake allergy will be a retail I'm also pleased to say that we've retained more of the legacy nutrition subscription file than we might've expected through the transition out of network marketing, which speaks to the positive customer experience so that product.

Karl Deichler: Now in addition to getting brand new nutrition subscribers, we're seeing returning customers who are re subscribing to our nutritionals, that's a very promising sign.

Karl Deichler: We also discussed partnerships in our last earnings call partnerships continue to be a significant opportunity for body and here's where we stand helping people leverage their HSA and FSA accounts is a particularly important focus 40% of adults have a funded HSA FSA account and 80% of adults in the U S.

Carl Daikeler: Partnerships continue to be a significant opportunity for BODi, and here's where we stand. Helping people leverage their HSA and FSA accounts is a particularly important focus. 40% of adults have a funded HSA/FSA account, and 80% of adults in the US have access to these pre-tax funds. We're working with Dr. B and now even the leader, TrueMed, to make these payment options available in the BODi checkout flow. We also just announced a partnership with telehealth provider Hello Alpha, who's excited to offer our products to their subscribers, especially the Belle Vitale Women's Hormone Health Program. We've just begun offering their telehealth services to our database on a revenue share basis. Okay. Now to sum things up quickly. We're building a stronger, more profitable business from a foundation of dramatically reduced operating expenses and synthesized marketing.

Karl Deichler: Have access to these pre tax funds, we're working with Doctor B and now even the leader true bet to make these payments options available in the body checkout flow.

Karl Deichler: We also just announced a partnership with telehealth provider Hello, Alpha who is excited to offer our products to their subscribers, especially the bell Vitale women's hormone health program and we've just begun offering their telehealth services to our database on a revenue share basis.

Karl Deichler: Okay now to sum things up quickly we're building a stronger more profitable business from a foundation of dramatically reduced operating expenses and synthesize marketing performance marketing affiliate marketing strategic partnerships and new sales channels will set us up for scaling the business profitably.

Carl Daikeler: Performance marketing, affiliate marketing, strategic partnerships, and new sales channels will set us up for scaling the business profitably. 2024 was about taking a hard look at what was underperforming, holding us back from reaching more people, and making hard but important choices so we can better achieve our objectives to help more people. 2025 is now about smart and careful acceleration. After the important step back, we can now work from a stronger foundation, and we're ready to really push forward. I'm excited about where we're headed, and I can't wait to see the impact of everything we're rolling out. Now I'll turn it over to our Interim CFO, Brad Ramberg, to walk you through the numbers for Q4. Brad?

Karl Deichler: 24 was about taking a hard look at what was underperforming holding us back from reaching more people and making hard but important choices. So we can better achieve our objectives to help more people 2025, it's now about smart and careful acceleration after the important step back we can now work from a.

Karl Deichler: Anger Foundation, and we're ready to really push forward I'm excited about where we're headed and I can't wait to see the impact of everything we're rolling out.

Karl Deichler: Now I'll turn it over to our interim CFO, Brad Ramberg to walk you through the numbers for Q4 breath.

Brad Ramberg: Thank you, Carl, and thank you everyone for joining the call today. I will review our Q4 results and provide our outlook for the Q1. For the Q4, the company generated revenue of $86.4 million, which was at the high end of our guidance range of $77 million to $87 million. Adjusted EBITDA of $8.7 million significantly exceeded our guidance range of $2 million to $6 million, and we generated our fifth consecutive quarter of positive adjusted EBITDA. Now I'd like to provide more details about the quarter. Total revenues of $86.4 million declined 15% sequentially and declined 27% year-over-year. Revenues were impacted as we strategically transitioned from a multi-level marketing platform to an omnichannel model.

Brad Ramberg: Thank you Carl and thank you everyone for joining the call today I'll review, our Q4 results and provide our outlook for the first quarter.

Brad Ramberg: For the fourth quarter, the company generated revenue of $86 $4 million, which was at the high end of our guidance range of 77 million to $87 million.

Adjusted EBITDA of $8 7 million significantly exceeded our guidance range of 2 million to $6 million and we generated our fifth consecutive quarter of positive adjusted EBITDA.

Brad Ramberg: Now I'd like to provide more details about the quarter.

Brad Ramberg: Total revenues of $86 4 million declined 15% sequentially and declined 27% year over year.

Brad Ramberg: As expected revenues were impacted at least strategically transitioned from a multilevel marketing platform to an omnichannel model.

Brad Ramberg: Consolidated Q4 gross margins were 70.5%, representing an increase of 320 basis points over the prior quarter and an increase of 830 basis points compared to the prior year. Q4 gross margins were our highest quarterly rate since 2020, reaching the high end of our long-term target of 65% to 70%. Moving to digital and nutrition revenues. Digital revenue decreased 6.2% from the prior quarter to $50.4 million and decreased 21.4% year-over-year. Revenues were impacted by continued pressure on our digital subscriber count, which decreased 3.4% sequentially to 1.07 million and declined 19.1% compared to the same period a year ago.

Brad Ramberg: Consolidated Q4 gross margins were 75%, representing an increase of 320 basis points over the prior quarter and an increase of 830 basis points compared to the prior year.

Brad Ramberg: Q4, gross margins were our highest quarterly rate in 2020, reaching the high end of our long term target of 65% 70%.

Brad Ramberg: Moving to digital and equipment revenues.

Brad Ramberg: Digital revenue decreased six 2% from the prior quarter to $50 4 million and decreased 21, 4% year over year revs.

Brad Ramberg: Revenues were impacted by continued pressure on our digital subscriber count, which decreased three 4% sequentially to one point <unk> 7 million and declined 19, 1% compared to the same period a year ago.

Brad Ramberg: It's important to note that the transition from an MLM structure to the current omnichannel model was primarily driven by the need to reduce the unsustainable overhead costs associated with the operation of an MLM. From a business standpoint, the transition away from the MLM has the most impact on the monthly nutrition sales. Therefore, our Q4 2024 guidance reflected the fact that we expected to see a significant decline in both revenues and the number of subscribers in our nutrition business post the announcement of the elimination of the MLM model. Consistent with that expectation, nutrition revenue decreased 26.6% from the prior quarter to $34.8 million and decreased 32.8% year-over-year. Nutrition subscriptions declined 29.2% sequentially to 91,000 and fell 44.1% year-over-year.

Brad Ramberg: It's important to note that the transition from an MLM structure to the current Omnichannel model was primarily driven by the need to reduce the unsustainable overhead costs associated with the operation of an MLM.

Brad Ramberg: From a business standpoint, the transition away from the MLM has the most impact on the monthly Christmas sale.

Brad Ramberg: Therefore, our Q4 2024 guidance, reflecting the fact that we expected to see a significant decline in both revenue and the number of subscribers in our nutrition business post the announcement of the elimination of the MLP model.

Brad Ramberg: Consistent with that expectation nutrition revenue decreased 26, 6% from the prior quarter to $34 8 million and decreased 32, 8% year over year.

Brad Ramberg: Nutrition subscriptions declined 29, 2% sequentially to 91000 and fell 44, 1% year over year.

Brad Ramberg: Digital gross margin was 85.9% for the quarter, up 540 basis points from the prior quarter and representing a 1,280 basis points improvement from the prior year. Our digital gross margin results exceeded our previous long-term target of 80%. The continued strength in year-over-year gross margin was due to a decrease in digital content amortization as a result of a more disciplined production spend, and a decrease in depreciation, as well as the end of useful life of certain fixed assets. Nutrition and other gross margin was 52.3%, representing a 630 basis point decline from the prior quarter and a 90 basis point decline year-over-year.

Brad Ramberg: Digital gross margin was 85, 9% for the quarter up 540 basis points from the prior quarter and representing a 1280 basis point improvement from the prior year.

Brad Ramberg: Our digital gross margin results exceeded our previous long term target of 80%.

Brad Ramberg: The continued strain and year over year gross margin was due to a decrease in digital content amortization as the result of a more disciplined production spend and a decrease in depreciation as well as the end of useful life of certain fixed assets.

Brad Ramberg: Nutrition and other gross margin was 52, 3%, representing a 630 basis point decline from the prior quarter and a 90 basis point decline year over year.

Brad Ramberg: The decline from the prior quarter was primarily due to the discontinuation of preferred customer fees on 1 November, which were part of our old business model where customers paid a monthly fee to purchase products at a discount, as well as increased inventory reserves and higher product costs as a percent of revenue. Moving on to operating expenses. Operating expenses for the quarter, which included $20 million in goodwill impairment charges, increased 14.6% sequentially and declined 30.2% year-over-year to $93.8 million. Excluding impairments, operating expenses declined 9.8% from the previous quarter and declined 19.2% year-over-year. Selling and marketing expense as a percent of revenue increased 50 basis points over the prior quarter and declined 530 basis points year-over-year to 45.1%.

Brad Ramberg: The decline from the prior quarter was primarily due to the discontinuation of preferred customer fees on November one which were part of our old business model, where customers pay a monthly fee to purchase products at a discount as well as increased inventory reserves and higher product costs as a percent of revenue.

Brad Ramberg: Moving on to operating expenses operating expenses for the quarter, which included $20 million in goodwill impairment charges increased 14, 6% sequentially and declined 32% year over year to $93 8 million.

Brad Ramberg: Excluding the impairment operating expenses declined nine 8% from the previous quarter and declined 19, 2% year over year.

Brad Ramberg: Selling and marketing expense as a percent of revenue increased 50 basis points over the prior quarter and declined 530 basis points year over year to 45, 1%.

Brad Ramberg: This significant improvement over the prior year was driven by changes to our partner compensation plan and a decrease in media spend. Enterprise technology and development expense as a percent of revenue increased 660 basis points in the prior quarter and increased 1,070 basis points year-over-year to 25.6% of revenue. The increase was primarily due to accelerated depreciation of $8.2 million in the current quarter related to assets that will not be used after December 31, 2024 attributed to Pivot. G&A was 13.4% of revenue, an increase of 190 basis points sequentially and an increase of 200 basis points from the prior year. The Q4 2024 net loss was $34.6 million, compared to a net loss of $12 million from the prior quarter.

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

Enterprise technology and development expense as a percent of revenue increased 660 basis points from the prior quarter and increased 1070 basis points year over year to 25, 6% of revenue.

Brad Ramberg: The increase was primarily due to accelerated depreciation of $8 2 million in the current quarter related to assets that will not be used after December 31, 2024 attributed to pivot.

Brad Ramberg: G&A was 13, 4% of revenue an increase of 190 basis points sequentially and an increase of 200 basis points from the prior year.

Brad Ramberg: The Q4 2024 net loss was $34 6 million compared to a net loss of $12 million from the prior quarter.

Brad Ramberg: This quarter's net loss included $20 million of goodwill impairment expenses. Excluding impairment, the net loss was $14.6 million. The net loss represents an improvement of $65 million versus the same quarter last year, which included $43.1 million in goodwill and intangible asset impairments. Adjusted EBITDA was $8.7 million compared to $10.1 million in the prior quarter and $2.8 million in the prior year. Notably, this quarter marks our fifth consecutive quarter of positive adjusted EBITDA. Next, moving on to the balance sheet and cash flows. Our cash balance of $20.2 million compared to $33.4 million in the prior year, which reflects our net cash balance after paying $15.8 million of principal on our outstanding loan with Blue Torch Capital during 2024.

Brad Ramberg: This quarters net loss included $20 million of goodwill impairment expenses.

Brad Ramberg: Excluding impairment the net loss was $14 6 million. The net loss represents an improvement of $65 million versus the same quarter last year, which included $43 1 million in goodwill and intangible asset impairments.

Brad Ramberg: Adjusted EBITDA was $8 7 million compared to $10 1 million in the prior quarter and $2 8 million in the prior year.

Brad Ramberg: Notably this quarter marks our fifth consecutive quarter of positive adjusted EBITDA.

Brad Ramberg: Next moving on to the balance sheet and cash flows.

Brad Ramberg: Our cash balance of $20 2 million compared to $33 4 million in the prior year, which reflects our net cash balance after paying $15 $8 million of principal on our outstanding loan, but look towards capital during 2024.

Brad Ramberg: After making the principal payment, we've reduced the outstanding balance of our debt on the balance sheet to $19.2 million as of 31 December. We had a dramatic improvement to cash generation versus cash usage in 2024 versus 2023. Our cash generated from operations for the year was $2.6 million compared to cash used in operations of $22.5 million in the prior year. A $25 million improvement in cash generated from operations. Moving on to Q1 guidance. I want to reiterate that our Q4 results marked the final quarter of the company's old business model. As discussed, we significantly lowered expenses and our revenue breakeven when we strategically pivoted away from the MLM model to our omni-channel marketing and distribution model.

Brad Ramberg: After making the principal payments, we've reduced the outstanding balance of our debt on the balance sheet to $19 2 million as of December 31.

Brad Ramberg: We had a dramatic improvement to cash generation versus cash usage in 2024 versus 2023.

Brad Ramberg: Our cash generated from operations for the year was $2 6 million compared to cash used in operations of $22 5 million in the prior year at.

Brad Ramberg: $25 million.

Brad Ramberg: <unk> and cash generated from operations.

Brad Ramberg: Moving on to first quarter guidance.

Brad Ramberg: I want to reiterate that our fourth quarter results marked the final quarter of the company's old business model as discussed we significantly lowered expenses and our revenue breakeven when we strategically pivoted away from the MLM model through our Omnichannel marketing and distribution model.

Brad Ramberg: This shift has opened new growth channels that we could not previously access, and we are very excited about these opportunities ahead. We now have a stronger and more viable long-term business model. As with companies that are undergoing a transformation, it will take time to develop traction in these new lines of business. Therefore, our Q1 outlook reflects our new business model. We expect Q1 revenues to be in the range of $60 million to $70 million. Given that we are in a new business model and therefore do not have historical trends that reflect the business that we have today, we are not certain as to the indexing that each individual quarter of the year will have for 2025. Having said that, historically, Q1 has over-indexed the average quarterly revenue by approximately 15%.

Brad Ramberg: This shift has opened new growth channels that we cannot previously access and we are very excited about these opportunities ahead.

Brad Ramberg: We now have a stronger and more viable long term business model, but as with companies that are undergoing a transformation. It will take time to develop traction in these new lines of business.

Brad Ramberg: Therefore, our Q1 outlook reflects our new business model.

Brad Ramberg: First quarter revenues to be in the range of 60 million to $70 million.

Given that we are in a new business model and therefore do not have historical trends reflect the business that we have today, we are not certain as to the indexing the each individual quarter of the year, we'll have for 2025, having.

Brad Ramberg: Having said that historically Q1 has over index the average quarterly revenue by approximately 15%.

Brad Ramberg: We will closely monitor this as we go throughout the year and hope we have a more accurate quarterly indexing as we get to the back half of this year and into 2026. For Q1 2025, we expect a net loss in the range of $11 million to $7 million, and we expect adjusted EBITDA to be in the range of negative $2 million to $2 million. As we transition to our new business model, we want to provide some additional color to help you conceptualize changes in our financial model. As of today, we expect revenues to approximate 60% digital and 40% nutrition moving forward. This is the first quarter of giving guidance in our new model, and should this trend change in the future, we'll update you accordingly.

Brad Ramberg: We will closely monitor this as we go throughout the year and hope we have a more accurate quarterly index thing as we get to the back half of this year and into 2026.

For Q1 2025, we've got a net loss in the range of 11 million to $7 million.

Brad Ramberg: Adjusted EBITDA to be in the range of negative 2 million to $2 million.

Brad Ramberg: As we transition to our new business model, we wanted to provide some additional color to help you conceptualize changes in our financial model.

Brad Ramberg: As of today, we expect revenues to approximate 60% digital and 40% nutrition moving forward.

Brad Ramberg: This is the first quarter of giving guidance and our new model and should this trend change in the future we'll update you accordingly.

Brad Ramberg: Additionally, we expect our growth margin target for digital fitness to be approximately 85% and our nutrition target to be approximately 50%. As we progress throughout 2025 and into 2026, you will see the benefits of our new product pipeline and programs, as well as the development of the additional channels we can now sell, which we believe will bear fruit. We look forward to updating you on our progress throughout the year.

Brad Ramberg: Additionally, we expect our gross margin target for digital fitness to be approximately 85% and our nutrition target to be approximately 50%.

Brad Ramberg: As we progress throughout 2025 and enter 2026, you will see the benefits of our new product pipeline and programs as well as the development of the additional channels. We can now sell which we believe will bear fruit. We look forward to updating you on our progress throughout the year.

Operator: Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason at all you would like to remove that question, please press star followed by two. Again, to ask a question, please press star one. As a reminder, if you're using a speakerphone, please remember to pick up your handset before asking your question. The first comes from Susan Anderson with Canaccord Genuity. You may proceed.

Brad Ramberg: Thank you if you would like to ask a question. Please press star followed by one on your telephone keypad. If for any reason at all you would like to remove that question. Please press star followed by two again to ask a question. Please press star one.

Speaker Change: A minor if you are using a speaker phone. Please remember to pick up your handset before asking your question.

Speaker Change: The first comes from Susan Anderson with Canaccord Genuity you May proceed.

Speaker Change: Yes.

Susan Anderson: Hi. Good evening. Thanks for taking my questions. I was curious maybe if you could give some more color just on kind of the movement you saw with the affiliates as you moved over to the new business model. I guess, you know, what was the reaction and, did you see the majority, you know, want to continue to work on the new platform and continue to drive sales? Or have you been also maybe acquiring new affiliates that see the new platform as an opportunity for them? Thanks.

Susan Anderson: Hi, good evening, thanks for taking my questions.

I was curious maybe if you could give us some more color just on kind of the movement you saw with the affiliates as you moved over to the new business model I guess, what was the reaction and.

Susan Anderson: Did you see the majority went to continued.

Susan Anderson: Work on the new platform and continue to drive sales or have you been also maybe acquiring new affiliates that see the new platform as an opportunity for them.

Carl Daikeler: Thanks, Susan. It's Carl. Good to hear from you. Yeah, the transition to affiliate, I would say, was right about where we expected it to be at the beginning. As you can imagine, the transition out of network marketing can be extremely turbulent and upsetting to the people who were committed to that model. However, the people and what I think is the most important affinity is those people who are using the product and most passionate specifically about our products, and those are the people that came over. I would say from a transition perspective, while we hit the numbers expected in the initial transition to affiliate, we have not been adding new affiliates as fast as we would like.

Karl Deichler: Thanks, Susan it's Karl good to hear from you.

Karl Deichler: Yes.

Speaker Change: Ill transition to affiliate I would say was right about where we expected it to be at the beginning.

Speaker Change: As you can imagine the transition out of network marketing could can be extremely turbulent and upsetting to the people who were committed to that model.

Speaker Change: However, the people and then what I think is the most important affinity is those people who are using the product and most passionate specifically about our products and those are the people that came over.

Speaker Change: I would say from a from a transition perspective, while we hit the numbers expected in the initial transition to affiliate.

Speaker Change: We have not been adding new affiliates.

Speaker Change: As fast as we would like however, we have started to bring in outside affiliates, meaning people who were not originally involved in our network marketing operations <unk>.

Mark Goldston: However, we have started to bring in outside affiliates, meaning people who were not originally involved in our network marketing operations. We're launching an initiative later in the late spring, early summer to dramatically attract more affiliates, particularly from our own current subscriber base. Again, I would say it was a moderate success in the transition from network to affiliate. It has slowed down since, but we have plans for it to pick up from external sources and internal sources throughout the spring.

Carl Daikeler: However, we have started to bring in outside affiliates, meaning people who were not originally involved in our network marketing operations. We're launching an initiative later in the late spring, early summer to dramatically attract more affiliates, particularly from our own current subscriber base. Again, I would say it was a moderate success in the transition from network to affiliate. It has slowed down since, but we have plans for it to pick up from external sources and internal sources throughout the spring.

Speaker Change: And we're launching an initiative later.

Speaker Change: The late spring early summer too dramatically.

Speaker Change: Attract more affiliates, particularly from our own current subscriber base. So.

Speaker Change: Again.

Speaker Change: I would say it was a moderate success in the transition from network to affiliate it has slowed down since but we have plans for it to pick up from external sources and internal sources throughout the spring.

Susan Anderson: Okay, great. Thank you. Maybe if I could just have a follow-up. I guess how should we think about just the P&L structure? Should we think about this quarter, I know it was two out of the three months, but being as kind of the new base for, you know, gross margin and operating expense? Or are you guys expecting changes as we move forward and the new business model kind of progresses? If you could just give any color on gross margin and op expense throughout the year, that'd be great. Thanks.

Speaker Change: Okay, great. Thank you and then maybe if I could just have a follow up.

Speaker Change: I guess, how should we think about just the P&L structure should we think about this quarter I know it has to happen three months, but being as kind of the new base for gross margin and operating expense or are you guys expecting.

Speaker Change: Changes as we move forward and the new business model kind of progressive if you could just give any color on gross margin and opex.

Speaker Change: Yeah, that'd be great. Thanks.

Brad Ramberg: Hi, Susan, this is Brad. Good to hear from you. As we said on the prerecorded comments, what we're expecting is that the revenues will approximate 60% digital and about 40% nutrition. Given that this is a new model, we'll watch it, and we'll continue to update you as the quarters progress. For gross margin, we're expecting our digital gross margin to be in the range of 85% and our nutritional gross margin to be in the range of 50%. Then we've also provided guidance on EBITDA for the quarter of -$2 to $2.

Brad Ramberg: This isn't this is Brad.

Speaker Change: To hear from you.

Speaker Change: As we said on the prerecorded comments, what we're expecting is that right.

Speaker Change: The revenues will approximate 60% digital and about 40% nutrition.

Speaker Change: And given that this is a new model where watch it and we'll continue to update you as the quarters progress.

Speaker Change: For gross margin, we're expecting our digital gross margin to be in the range of 85% and our nutritional gross margin to be in the range of 50%.

Speaker Change: And then we've also provided guidance on EBITDA for the quarter of negative two to positive two.

Susan Anderson: Okay, great. Thanks so much. Good luck with FDF.

Speaker Change: Okay, great. Thanks, so much.

Speaker Change: Uh huh.

Mark Goldston: Susan, this is Mark.

Mark Goldston: Isn't this is mark.

Susan Anderson: Yeah.

Mark Goldston: Nice to talk to you. Yeah, just for context, you know, as I said in my remarks, this is essentially a new business right now. Our ability to predict quarter to quarter right now in a brand new business model, you know, is getting better every day, but there is uncertainty there. I think the most important thing to note is.

Speaker Change: Talk to you.

Speaker Change: Yes, just for context.

Speaker Change: As I said in my remarks. This is essentially a new business right now so our ability to predict quarter to quarter right now and a brand new business model is.

Speaker Change: Is getting better every day, but there is uncertainty there. So I think the most important thing to note is that Brad.

Susan Anderson: Yeah.

Mark Goldston: What Brad said, which is that 60% of the business is anticipated to be digital fitness and 40% is anticipated to be nutrition. With the margins at 85% and 50% respectively, it's a weighted average margin of about 71%. You know, typically the first quarter has indexed, as we said previously, around 110, 112 for the year. We don't know that that's gonna be in the new model the same thing, but absent that, we're using that as a compass. We're learning every day as we're going. We really enjoy having this omni-channel approach versus being wholly dependent on the previous MLM. But it's also giving us a lot of learning on the fly, which is what we're responding to every day.

Speaker Change: 60% of the business is anticipated to be digital.

Speaker Change: And 40% is anticipated to be nutrition, and with the margins at $85 50, respectively. The weighted average margin of about 71 and typically first quarter is index. As we said previously around 110 112 for the year, we don't know that that's going to be in the new model the same thing.

Speaker Change: But absent that we're using that as a company. So we're learning every day as we're going we really enjoyed having this omnichannel approach versus being wholly dependent on the previous MLM.

Speaker Change: But it's also giving us a lot of learning on the fly which is which is what we're responding to every day.

Susan Anderson: Okay, great. Thanks so much.

Speaker Change: Okay great.

Mark Goldston: As we learn, we will continue to.

Susan Anderson: We look forward to.

Speaker Change: And we will open the lines for that.

Mark Goldston: We'll update you through the year as we learn more.

Speaker Change: Well that you had through the year as we learn more.

Susan Anderson: Sounds good. Yeah. We look forward to watching the progression as well.

Speaker Change: Sounds good yes, when you look forward to watching the progression as well.

Mark Goldston: Thank you, Susan.

Susan Anderson: Thank you Susan.

Operator: Thank you. The following comes from JP Wollam with Roth Capital Partners. You may proceed.

Speaker Change: Thank you. The following comes from J P. <unk> with Roth Capital Partners you May proceed.

JP Wollam: Great. Thank you guys for taking my question. If I could maybe just start a little bit more on the sort of Q1 guide and understanding a bit of what you talked about in terms of the mix and, you know, thinking through the lens of a sort of new business. I just wanna maybe get a little clarification. If we think about the sequential step down, are you guys really attributing the entirety of that step down from the affiliate change? Or, you know, kinda like how much of the decline are you bucketing to affiliate change, and what else might be involved in sort of that decline across segments?

Speaker Change: Great. Thank you guys for taking my question.

Speaker Change: If I could maybe just start.

Speaker Change: A little bit more on the Q1 guide and understanding a bit of what you talked about in terms of the mix in <unk>.

Speaker Change: Thinking through the lens of a sort of new business, but I.

Speaker Change: I just wanted to maybe get a little clarification. If we think about the sequential step down are you guys really attributing the entirety of that step down from the affiliate change or kind of like how much of the chip.

Speaker Change: The decline are you budgeting to affiliate change and what else might be.

Speaker Change: Involved in sort of that decline across segments.

Mark Goldston: Yeah. It's definitely as we said last quarter, we anticipated a certain percentage of the active sellers that were in the former MLM to migrate over, and that's essentially what has migrated over. That being said, there were many people who did not choose to become affiliates and have since left the BODi network. That is where you see the difference in the volume. The direct response business continues to be strong. The Amazon business continues to be strong. Both of those things will become a bigger part of our business going forward. The retail that we will be doing, hopefully at the end of 25 into 26, will be another component which will be brand new.

Speaker Change: Yeah, it's definitely as we said last quarter.

Speaker Change: We anticipated a certain percentage of the active sellers that were in the former MLM to migrate over.

Speaker Change: That's essentially what has migrated over that being said there were many people who did not choose to become affiliates and have since left the body network and so that is where you see the difference in the volume. The direct response business continues to be strong the Amazon business continues to be strong both of those things will become a bigger.

Speaker Change: Part of our business going forward the retail that we will be doing hopefully at the end of 'twenty five 'twenty six will be another component, which will be brand new but we had always said that in this shift we are going from a MLM dependent model.

Mark Goldston: We had always said that in this shift, we are going from a MLM-dependent model to an omni-channel model where affiliates are now a component of the mix, but not nearly at the level as they were in the former MLM. The guidance is reflective of the fact that this is the first pure quarter of the new business model, and that's why we are where we are.

Speaker Change: Two a omni channel model, where affiliates are now a component of the mix, but not nearly at the level as they were in the former MLM and so the guidance is reflective of the fact that this is the first pure quarter of the new business model and that's why we are where we are.

JP Wollam: Okay. Understood there. Maybe just a little bit of a follow-up from Susan's question, but if I kinda go to the EBITDA guidance and work my way through OpEx, I just wanna get a sense, is that sort of number the kind of fully baked number we should think about going forward in terms of all of the cost reductions you were able to pull with the model change? Or are there still some steps left as we progress through the rest of 2025 that could see OpEx move even further?

Speaker Change: Okay.

Speaker Change: Understood there.

Speaker Change: And then maybe just a little bit of a follow up from Susan's question, but.

Speaker Change: If I kind of go to the EBITDA guidance and work my way through Opex I'm just wanted to get a sense is that sort of number the kind of.

Speaker Change: Holy baked number we should think about going forward in terms of all of the cost reductions you were able to pull with the model changed or are there still some steps left as we progress through the rest of 2025 that could see opex move even further.

Brad Ramberg: What you're seeing in the guidance is the way we're looking at the business right now. That's what we're expecting Q1 to be. As we continue to learn, as the model progresses, we of course will continue to look at every operating expense line to make sure we're getting the appropriate leverage that we can. The guidance we gave is the way we are seeing the business right now for Q1 in 2025.

Speaker Change: So what youre seeing in the guidance is the way we're looking at the business right now so that's what we're expecting in the first quarter to be as we continue to learn as the model progresses. We of course, we will continue to look at every operating expense line to make sure we're getting the appropriate leverage that we can but the guidance.

Speaker Change: We gave us the way we are seeing that business right now for Q1 and 25.

JP Wollam: Okay. Fair enough. If I could just squeeze one last one. You know, I just want to kinda get the opportunity to talk about the nutrition business a little bit more. It sounds like, you know, certainly a lot of progress and some positives in terms of the Amazon business and what sounds like increasing subscriptions. You know, just how are you thinking about? You talked about retail, you know, we've talked about this whole outside the walled garden, like what more can you share in terms of just positives? If you're able to quantify at all, kind of what can you share in terms of how well that's going?

Speaker Change: Okay Fair.

Speaker Change: Fair enough and then if I could just squeeze one last one.

Speaker Change: Just want to kind of give the opportunity to talk about the nutrition business a little bit more it sounds like you know certainly a lot of progress and some positives in terms of the Amazon business and the which.

Speaker Change: So it sounds like increasing subscriptions.

Speaker Change: So.

Speaker Change: Just how are you thinking about you.

Speaker Change: You talked about retail we've talked about this whole outside of the walled garden like what more can you share in terms of just positives and if youre able to quantify at all kind of what can you share in terms of how well that's going.

Mark Goldston: Well, it's early days, but let's talk about nutrition 'cause it is a major opportunity for the company. The Shakeology product, which you're familiar with, I think cumulatively in its life has done $3 or 4 billion of revenue and over 1 billion servings, and has never been sold in a retail store and has never been marketed in Facebook, Google, et cetera. Now that there is no MLM anymore, that can be marketed. That alone is a significant potential opportunity that we will start to tap later in this year from a retail perspective. From a marketing standpoint, we're starting to advertise it, and you'll see it now, and it's doing very well.

Speaker Change: Well, it's early days, but let's talk about nutrition, because it is a major.

Speaker Change: The opportunity for the company so the psychology product, which you are familiar with.

Speaker Change: I think cumulatively.

Speaker Change: We've done three or $4 billion of revenue and over 1 billion serving it has never been filled in a retail store and has never been marketed Facebook, Google et cetera. So now that there is no MLM anymore that can be marketed so that alone is a significant potential opportunity.

Speaker Change: That we will start to tap later this year from a retail perspective and from a marketing standpoint, we're starting to advertise it and you'll see it now and it's doing very well the other nutrition products that we've got forget about the existing portfolio of the new stuff. We talked about you know yet sanity et cetera, those will probably be out EBIT and the 25.

Mark Goldston: The other nutrition products that we've got, forget about the existing portfolio, the new stuff we talked about, P90X, Insanity, et cetera, those will probably be out either end of 25 into 2026. Those are major retail revenue opportunities. We're talking about two of the best-known brand names in the history of the fitness business. Unlike brands that walk into retail environments starting from scratch and have to build awareness, we're going in with two huge awareness brands right out of the gate. We are now working on our formulations across the categories that we'll enter, JP, and this could be a major new part of this company as we go into 2026 and beyond. We talked about omni-channel, but that was starting on January 1. That channel has not yet been developed, and it will be.

Speaker Change: Into 2006, those are major major retail revenue opportunities. So we're talking about two of the best known brand names.

Speaker Change: History of the fitness business. So unlike brands that walk into retail environment, starting from scratch and you have to build awareness, we're going with two huge awareness brand right out of the gate and so we are now working on our formulation across the categories that will enter JP and this could be a major new part of this company.

Speaker Change: As we go into 2006 and beyond so we talked about omni channel, but that was starting on January one that channel has not yet been developed and it will be the unburdening of the nutrition channel is just starting to take hold and the digital will obviously continue.

Mark Goldston: The unburdening of the nutrition channel is just starting to take hold, and the digital will obviously continue to be a great part of the business, and the affiliate will be one of those 4 or 5 streams that we've got. Nutrition for us, once we expose this to the general consuming public, both as existing products and the new products, should become a much bigger part of the company in the next 24 months. Carl, you wanna add something else to that?

Karl Deichler: To be a great part of the business and the affiliate will be one of those four or five streams that we've got the nutrition for us once we expose it to the general consuming public both of existing products and the new product should become a much bigger part of the company in the next 24 months and Carl you want to add something.

Carl Daikeler: I just wanna add that, one thing that we have not been able to do for the last almost, you know, 18 years with the network marketing business was literally advertise our nutritionals, which are best in class, and the synergy of what we call the total solution, and that is leveraging the content, access to our brand leading content with our nutritionals. We just started doing that this Q1, and we're seeing very strong signs in the direct marketing channel now that we have the ability to market both nutrition and content together, that bundle is a very efficient way to acquire new digital and nutritional subscribers.

Carl: Yeah, I just wanted to add that.

Speaker Change: One thing that we have not been able to do for the last.

Speaker Change: 18 years with the network marketing business was was literally advertise our nutritionals, which are best in class and the.

Speaker Change: The synergy of what we call the total solution and that is leveraging the content access to our.

Speaker Change: Brand, leading content with our Nutritionals. We just started doing that this first quarter and we're seeing very strong signs in the direct marketing channel now that we have the ability to market, both nutrition and content together that that bundle.

Speaker Change: Is a very efficient way to acquire new digital and nutritional subscribers. So that synergy is something that is a core competency and competitive advantage that the company has that now we are completely untether to do now that we've retired the network marketing model.

Carl Daikeler: That synergy is something that is a core competency and competitive advantage that the company has that now we are completely untethered to do now that we've retired the network marketing model. That's pretty exciting.

Speaker Change: And that's pretty exciting.

JP Wollam: Perfect. Great. I'll leave it there. Best of luck going forward, guys.

Speaker Change: Perfect Great I'll leave it there best of luck going forward guys.

Mark Goldston: Thanks, JP.

Carl Daikeler: Appreciate it.

Speaker Change: J P.

Operator: Thank you. The next question comes from Gowshi Sri with Singular Research. You may proceed.

Speaker Change: Thank you.

Speaker Change: The next question comes from the <unk> suite with singular research you May proceed.

Gowshi Sri: Good afternoon. Can you hear me?

Gowshihan Sriharan: Good afternoon. Can you hear me?

Jamie: Good afternoon can you hear me question Jamie Yeah.

Mark Goldston: Yeah, we can hear you.

Gowshi Sri: Yep. Okay, great. Thanks for taking my questions. I think you might have alluded to it, but maybe you can give us a little more color. Given the significant changes in the business model, how are you guys thinking about the long-term composition of your revenue streams? Do you anticipate any shift from between subscription to one-time purchases? Now that you're in retail and the omni-channel, is it more nutritional products? Can you give us some color on how you're thinking about the long-term?

Gowshihan Sriharan: Yep. Okay, great. Thanks for taking my questions. I think you might have alluded to it, but maybe you can give us a little more color. Given the significant changes in the business model, how are you guys thinking about the long-term composition of your revenue streams? Do you anticipate any shift from between subscription to one-time purchases? Now that you're in retail and the omni-channel, is it more nutritional products? Can you give us some color on how you're thinking about the long-term?

Speaker Change: We can hear you.

Speaker Change: Okay great.

Jamie: Thanks for taking my questions.

Jamie: I think that you might have alluded to it but maybe you can.

Jamie: Give us a little more color given the significant changes to the business model. How are you guys thinking about the long term composition of your revenue do you anticipate any ship from between subscription to onetime purchases and not that joined retail and the omnichannel or was it more nutritional products can you give us some color on how you're thinking.

Jamie: The long term.

Mark Goldston: That's actually, without giving guidance, that's actually a great question. We have previously been, as you know, heavily dependent on subscriptions, and we still see that as being an important part of the business. But now that we're no longer network bound and we can go into the general consuming public, you will see more one-time purchases as we bring new people into the franchise. When we develop the retail part of our business over the next 12 months, more in the latter part of this year, early next year, a lot of those will be single purchases because that's how people buy at retail.

Jamie: It's actually.

Jamie: Without giving guidance is actually a great question.

Jamie: We have previously been as you know heavily dependent on subscription and we still see that as being an important part of the business, but now that we're no longer network bound and we can go into the general consuming public you will see more onetime purchases as we bring new people into the franchise.

And when we develop the retail part of our business over the next 12 months more in the latter part of this year early next year a lot of those will be single purchases because thats how people buy at retail so youre going to start to see a mixture here of the digital fitness product being heavily subscription oriented.

Mark Goldston: You're gonna start to see a mixture here of the digital fitness product being heavily subscription-oriented, and a component of the nutrition being subscription-oriented, and a component of the online business or nutrition being one time, and then all of the retail being one time. That's how the business will play out. If I'm taking a 24- to 36-month horizon, and you ask me, what will this look like in 2 or 3 years? Once that retail has taken hold, it will become a much bigger part of the total mix.

Jamie: And a component of the nutrition being subscription oriented.

Jamie: <unk> of the online business for nutrition being one time and then all of the retail being one time.

Jamie: That's how the business will play out and if I'm, taking a 24% to 36 month Horizon and you asked me what will this look like in two or three years once that retail has taken hold it will become a much bigger part of the total mix.

Gowshi Sri: Got you. I know you guys have mentioned the success of the Amazon channel. Any color on the Walmart channel, the Walmart.com? Will it grow to be successful or bigger? How do you see that playing out?

Gowshihan Sriharan: Got you. I know you guys have mentioned the success of the Amazon channel. Any color on the Walmart channel, the Walmart.com? Will it grow to be successful or bigger? How do you see that playing out?

Jamie: Yes.

Jamie: I know you guys have mentioned.

Speaker Change: I mentioned the success of the Amazon channel any color on the Walmart channel. The Walmart Dot Com is it will it grow to be successful a bigger how do you see that playing out.

Mark Goldston: Carl?

Speaker Change: Carl it's very early in the process, we just launched Walmart.

Carl Daikeler: It's very early in the process. We just launched Walmart about a month ago. I think that'll be covered in our Q1 earnings call, so that we can provide what clarity and progress there is on that. We are seeing it generally perform with the same kind of ramp in the early days that we saw from Amazon.

Speaker Change: About a month ago, so I think that'll be covered in our Q1 earnings call.

Speaker Change: So that we can provide more clarity and progress there is on that but we are seeing it generally perform with the same kind of ramp in the early days that we saw from Amazon.

Gowshi Sri: Okay, awesome. I'll just squeeze in one more. How do you evade or manage any kind of potential cannibalization between the direct-to-consumer and the affiliate network channels?

Gowshihan Sriharan: Okay, awesome. I'll just squeeze in one more. How do you evade or manage any kind of potential cannibalization between the direct-to-consumer and the affiliate network channels?

Speaker Change: Okay awesome.

Speaker Change: I'll just squeeze in one more.

Speaker Change: Just two how do you.

Speaker Change: Uh huh.

Speaker Change: Oh manage any kind of potential.

Speaker Change: Cannibalization between the direct to consumer and the affiliate network channels.

Carl Daikeler: Frankly, they're complementary. The more successful and the more scale we get with direct marketing, the more wind it puts at the back of the affiliate marketer. That's definitely what we saw in the early days of the network marketing business. The reason we lost that dynamic was there needed to be such a most favored nation relationship with the network that it was holding back our ability to expand direct marketing. Now that we've sort of retooled it and made it simpler and just easier for more people to participate in, we expect that more of our subscriber base will actually be able to benefit from the exposure that we generate from new programs.

Speaker Change: Frankly, they're complementary.

Speaker Change: The more successful and more scale, we get with direct marketing the more wind it puts at the back of the affiliate marker that's definitely what we saw in the early days of the network marketing business.

Speaker Change: The reason, we lost that dynamic was there there needed to be such a my most favorite nation relationship with the network that was holding back our ability to expand direct marketing now that we've sort of re tooled it and made it simpler and easier for more people to participate in we.

Speaker Change: Expect that more of our subscriber base will actually be able to benefit from the exposure that we generate from new programs that we have got some very exciting coming stuff coming out. This summer that is specifically being designed to have.

Carl Daikeler: Like, we have got some very exciting stuff coming out this summer that is specifically being designed to have a significant scaling performance marketing advertising campaign that with that exposure, now our affiliates will be able to leverage their audience with promo codes and discounts to help convert more of their audience into subscribers. I think it's gonna have synergy, frankly, that we haven't enjoyed for about a decade.

Speaker Change: A significant scaling performance marketing advertising.

Speaker Change: Our campaign that with that exposure now our affiliates will be able to leverage their audience.

Speaker Change: With promo codes and discounts to help convert more of their audience into subscribers. So I think it's gonna have synergy frankly that we havent enjoyed for about a decade.

Mark Goldston: The best way to think of it is, you know, all affiliates.

Speaker Change: It is the best way to think of it as you know.

Gowshi Sri: Got you.

Gowshihan Sriharan: Got you.

Mark Goldston: All affiliates need air cover for the brands they sell. It's really important. The marketing that we do with the direct response marketing that we do is providing air cover to anyone who's an affiliate selling our product.

Speaker Change: All affiliates need air cover to the brands they sell it's really important and so the marketing that we do.

Speaker Change: With your direct response marketing that we do is providing air cover to anyone who is an affiliate of selling our product.

Speaker Change: Okay.

Gowshi Sri: Okay, awesome. I'll take the rest offline. Thank you for taking my questions.

Gowshihan Sriharan: Okay, awesome. I'll take the rest offline. Thank you for taking my questions.

Speaker Change: Okay awesome.

Speaker Change: Take the rest offline.

Mark Goldston: Thank you. Thanks for coming.

Speaker Change: Taking my questions. Thank you. Thanks again.

Operator: Thank you. There are currently no more questions in the queue, so I will pass it back to Mark Goldston for closing remarks.

Speaker Change: Thank you.

Speaker Change: There are currently no more questions in the queue. So I will pass it back to Mark Goldstein for closing remarks.

Mark Goldston: Great. Well, I just wanna thank everybody for attending today. Again, if you have any questions, please feel free to reach out to us either through ICR, or directly through Brad Ramberg, our CFO, and we'd be happy to speak with you. Thanks everybody for attending.

Well I just want to thank everybody for attending today and.

Speaker Change: Again, if you have any questions. Please feel free to reach out to us either through ICR.

Brad Ramberg: Directly through Grad, Ramberg, our CFO and we'd be happy to speak with you. So thanks everybody for attending.

Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect your line.

Brad Ramberg: This concludes today's conference call. Thank you for your participation you may now disconnect your line.

Brad Ramberg: Okay.

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