BowFlex Inc.

Good day and welcome to the Bowflex Fiscal Second Quarter 2024 Earnings Results Conference Call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to your host, John Mills with ICR. Please go ahead, sir.

Thank you. Good afternoon, everyone. Welcome to Bowflex's Fiscal 2024 Second Quarter ended September 30th conference call. Participants on the call today from Bowflex are Jim Barr, Chief Executive Officer, and Ina Knoll, Chief Financial Officer. Please note this call is being webcast and will be available for replay for the next 14 days. We'll be happy to take your questions at the conclusion of our prepared remarks. Our earnings press release was issued today at 1.05 p.m. Pacific time and may be downloaded from our website at Corporate www.beauflex.com on the investor relations page. The earnings release including a reconciliation of the non-GAAP financial measures mentioned in today's call to the most directly comparable GAAP measures. For today's call, we have a presentation that management will refer to during their prepared remarks. On slide two is our full safe harbor statement, which we ask everyone to read. You can access the presentation by going to the investors page on our website, and clicking on Events and Webcast. I would like to remind everyone that during the conference call, Bowflex Management will make certain forward-looking statements. These forward-looking statements are based on the beliefs of management and information currently available to us as of today. Such forward-looking statements are not guarantees of future performance, and therefore, one should not place under-reliance on them. Our actual results may be affected by known and unknown risk, trends, uncertainties, and factors that are beyond our control and ability to predict. For additional information concerning these factors, please refer to the safe harbor statement and to our SEC filings, which can be found in the investor relations section of our website. And with that, it is my pleasure to turn the call over to Bowflex's CEO, Mr. Jim Barr.

Thank you, John. And thank you all for joining us on our first earnings call as Bowflex, Inc., following our comprehensive company rebrand. Bowflex is a globally renowned name known as the beacon of fitness excellence. Our new corporate identity mirrors our number one brand and exceptional standing in the connected at-home fitness equipment market and reinforces our unyielding commitment to our strongest brands. Before we dig into results for the quarter, I'd like to first touch on what we're seeing in the industry. As we have moved through Q2 and into Q3, we continue to face a challenging operating environment. The macroeconomic backdrop remains uncertain, weighing on the consumer. Retailers continue to maintain a highly conservative approach to inventory. This market uncertainty is driving an increasingly promotional environment as we head into fitness season. With that being said, it is important to highlight that we are successfully executing on the things we can control, including reducing our cost structure and improving our inventory position, which is enabling us to manage through this near-term environment. At the same time, we are ensuring that we're well-positioned to capitalize on the long-term shift to connected at-home fitness when consumer demand stabilizes. Turning to our second quarter results, We delivered net sales of $49 million during the quarter with direct sales of $21 million. While the direct segment was down year over year, we were encouraged by the positive 15% comp we delivered in strength equipment. We believe these positive results are a testament to the deliberate product enhancements we've made in this area. Similarly, though not a big part of our business, we also returned to growth in our international business. reported under our retail segment. Together, we hope that these bright spots are an indicator that we are nearing a return to broader enterprise growth. On the other hand, domestic retail continued to face softness and overall retail segment net sales were down 30% year over year. Although retailer inventory of our products is down 50% year over year as of October, showing significant progress in right-sizing their inventory positions, retailers are still maintaining their conservative approach to reorders. And we believe it is prudent to plan for this to continue as we enter the peak fitness season. Importantly, over the last several quarters, we have deliberately right-sized our own inventory. This strategic move places us in a favorable position to better maintain our price discipline in an increasingly promotional environment. We continue to offset the top-line softness with diligent cost management and operational excellence efforts, underpinned by our supply chain initiatives, which have led to delivering margin improvements through reduced product landed costs year-over-year for four consecutive quarters, despite declining sales. Notably, these actions also drove a second consecutive quarter of year-over-year improvement in adjusted EBITDA loss during Q2, $17 million cumulative improvement in the first half of fiscal 24 versus fiscal 23. We have made the necessary investments in Journey and taken deliberate steps to scale, to reduce cash spend, and to focus on paid subscriber conversion to accelerate break-even. By the end of Q2, we had nearly 600,000 journey members, up 51% versus second quarter fiscal 23. And we now expect about 650,000 members by the end of the fiscal year versus our original guidance of 625,000. Total subscribers at the end of Q2 24 was up 1% to 143,000. And most importantly, we achieved significant growth in paid subscribers versus the same quarter one year ago. This progress reflects not only additional journey product capabilities, such as motion tracking and form coaching with Select Tech dumbbells, but also our ongoing efforts to optimize our subscriber funnel through shorter trial periods and better communication and merchandising. As we discussed last quarter, we recently launched an exciting pipeline of new connected fitness equipment for this fitness season. two Bowflex products, the Max Trainer SE and the IC Bike SE, and our new Schwinn 490 Elliptical. Paired with our rebranded identity, Bowflex continues to demonstrate its strength in producing consumer-centric equipment that is inclusive and designed for different rooms in your home. These products will be sold through our direct business as we deliberately focus on our focus our new products and innovation efforts to drive continued momentum in this segment. We are encouraged by early reception of these new products, which has been supported by our focused marketing spend. We continually evaluate and optimize our advertising strategy to make sure our products are hitting the right places and the right people. In addition, managing our marketing investments continues to be a lever we can pull quickly and adjust as we monitor the demand environment. Turning to our fiscal 2024 outlook, as I mentioned earlier, as we begin fitness season in Q3, we're seeing the macroeconomic environment continue to impact the consumer. Retailers' reorders have remained slow as our partners continue to largely service the category with existing inventory. Based on these dynamics and the visibility into fitness season orders we have today, we have revised our FY 2024 guidance. We continue to take the necessary steps that position us well to navigate the near term. As previously mentioned, we have right-sized our inventory position, enabling us to maintain our price, support our profitability, and maintain our brand equity in a promotional environment. Our semi-variable operating model enables us to continually manage costs and prioritize investments that will drive the business forward. We have demonstrated our ability to improve to drive improved results as an outcome of these efforts, highlighted by the $17 million year-over-year improvement in adjusted EBITDA for the first half of the year, which is seasonally our softer period. As reflected in our guidance, we continue to believe we can deliver significant year-over-year improvement in adjusted EBITDA this year. While managing near-term temporary headwinds we continue to position ourselves to capitalize on the enduring change in long-term at-home fitness habits as we introduce new products and scale journey. Even as workouts at gyms have risen, the percentage of consumers working out at home has remained consistent over the last two years at significantly elevated levels relative to pre-pandemic. And we are well situated to fulfill the needs of our consumers sustained interest in home workouts with our broad portfolio of strength and cardio equipment at a variety of price points and by highlighting the total cost of ownership advantages that we have. As we look ahead, we continue to be thoughtful and responsive to consumer behavior with calendar year 2024 product priorities focusing on introducing new strength equipment, treadmills, and other products that broaden our portfolio at important price points. I will now turn it over to Ina, who will give us more detail on the second quarter results and our fiscal 2024 guidance. Ina?