The Beachbody Company, Inc.

Good afternoon. Thank you for attending today's Defeat Body Company Inc. Third Quarter 2024 Earnings Conference Call. My name is Jayla, and I'll be your moderator for today. All lines will be muted during the presentation portion of the call, but for opportunity for questions and answers at the end, I'd now like to turn the conference over to our host of the call. Please proceed.

Welcome, everyone, and thank you for joining us for our Third Quarter Earnings Call. With me on the call today are Mark Goldston, executive chairman of the Beachbody Company, Carl Deichler, 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, It 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. Today's call will include references to non-GAAP financial measures such as adjusted EBITDA, net cash, and free cash flows. A reconciliation of these non-GAAP financial measures to the most comparable GAAP financial measures is available within the earnings release, which can be found on our website. Now, I would like to turn the call over to Mark.

Thank you for joining us today. I'll begin by discussing our recent announcement on the restructuring of the company and the major change to the business model, then I'll review some highlights of the third quarter performance, and then update you on the progress of our turnaround plan. Then I'll turn the mic over to Carl Deichler, our CEO, to discuss our strategic initiatives in more detail, and that'll be followed by our interim CFO, Brad Ramberg, discussing our financial guidance and outlook. As of November 1st of 2024, Badi has essentially become a new company from the one that previously existed. I know that's a bold statement, but it's emblematic of the massive change to our business model we affected, which has put Body in a position to be a dynamic and more nimble company in 2025 and beyond. I would ask all investors and the analysts who cover Body to take a fresh look at the company's new business model and try to avoid direct comparisons with the company that we had prior to November 1st of 2024. Let me briefly review what we've done to re-architect this great company and position ourselves for success going forward. First, we decided to eliminate the multi-level marketing or MLM structure that's been in place in this company since 2007. The MLM model is dated, cumbersome, expensive to operate, loaded with passive non-performance compensation expense, that's paid to other people other than those who actually sell the product. And it places a time management burden on participants who have to recruit, manage, and also sell. And it carries a negative stigma, which is seemingly associated with all MLMs. And this inhibits new customer signups and the attraction of new sellers. There clearly was a time when the MLM model worked extremely well for this company. and we greatly appreciate the efforts of all those who participated. But in today's world, we believe the single-level affiliate model is better suited to our business. The single-level affiliate model, which became effective on November 1st, has no upline or downline management tree, no recruiting of new seller requirements, and importantly, no sharing of commissions with other people. in the new body single affiliate level model everyone is in business for themselves they're independent they're not part of a team and they keep 100 of the commissions they earn on everything they sell no more sharing of commission this is a huge change and it's one that provides all body affiliates with an uncapped pay for performance compensation model it's really quite simple The more you sell, the more you make, and you don't share your earnings with anyone, and there's no one to manage. So the affiliate model will result in a material improvement in our return on ad spend, lifetime value, and with our lower cost model, it'll significantly improve our economics. The incentive for new body affiliate sellers is pretty clear. In the affiliate world, where commission rates typically range from 5% to 25%, a body affiliate will earn much more than that with commission levels in the 35% to 50% range. This is a highly attractive proposition to the thousands of sellers who were previously in our network, as well as for the millions of affiliate sellers in the market today. The affiliate model just began taking sign-ups on November 1st. and we're extremely pleased with the number of sign-ups that we have to date. The new body business model features a multi-channel approach that's now unencumbered by the pricing and customer mapping constraints of the former MLM model. In addition to the new affiliate model, we have a dynamic direct response marketing unit of growing Amazon business, and we're developing new products in the nutrition segment under the P90X and Insanity brand names, which are expected to be introduced in 2025 and 2026, respectively, and will be sold in major retailers within the affiliate network and through our direct response business. Remember, Body has never marketed any of our current nutritional supplements in our direct response business due to the pricing and customer mapping constraints of the former MLM model. Now, that's all changed. And for the first time ever, we can actually market products like Shakeology, Energize, and the new product lines we're developing, and we can sell them direct to consumer through our direct response unit and then advertise them on Facebook, Google, TikTok, and YouTube, which we could never do before. Since my arrival as executive chairman 18 months ago, we've conducted a comprehensive turnaround. This involved a massive infrastructure change, and this resulted in a reduction of the company's cash break-even level by several hundred million dollars from where it was in 2022. Today, we're a much leaner company that's poised to generate significant operating leverage when we achieve top-line growth in the future as a result of the major reduction in overhead. Now let's take a look at our performance highlights of the third quarter. Our revenues were in line with the midpoint of our guidance, and we achieved extremely healthy gross margins, which improved by 880 basis points year over year. Adjusted EBITDA significantly exceeded guidance of $2 to $6 million by coming in at $10.1 million. This is a massive $15.9 million improvement versus the third quarter of last year when we posted a $5.8 million adjusted EBITDA loss. This marks our fourth consecutive quarter of positive adjusted EBITDA. Year to date, we've generated $19.6 million of adjusted EBITDA. That is a $31.1 million adjusted EBITDA improvement from the $11.5 million loss in the prior year to date period. Additionally, we've generated more than $5.3 million of positive free cash flow year to date. And that compares to a cash burn of $20.1 million from the comparable period. This reflects a $25.4 million improvement. The first phase of our turnaround centered on lowering our infrastructure costs and re-architecting our financial model. I'm pleased to report that our third quarter and year-to-date results demonstrate that we have successfully completed our goal By generating positive adjusted EBITDA and free cash flow, we've significantly reduced our gap net losses while dramatically lowering the cash breakeven level. Now we're entering the next phase of our journey, and this portion is focused on unlocking the top line potential. With that being said, I'd like to turn the call over to Carl, and he'll discuss our strategic initiatives as we move into the next phase of our transformation. Carl?