The Beachbody Company, Inc.

attending today's Beachbody Company Inc. Fourth Quarter 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 like to pass the conference over to your host, Bruce Williams, Managing Director of ICR. You may proceed.

Welcome, everyone, and thank you for joining us for our fourth 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, 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 flow. 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. Now, I would like to turn the call over to Mark.

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. After my remarks, I'll hand it over to Carl Deichler, our CEO, who will discuss our strategic initiatives in more detail. And that'll be followed by our interim CFO, Brad Ramberg, who will discuss our financial guidance and outlook. As you're aware, as of November 1st of 2024, Body restructured into essentially a new company as we eliminated our longstanding multi-level marketing platform and move 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. The restructuring fundamentally broadens our go-to-market strategy in 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 comparisons 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 BODY for future success. We phased out the multi-level marketing or MLM structure, which had been in place since 2007. 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 frameworks 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. 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 T90X 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. Body has never marketed any of our highly rated nutritional supplements outside of the former MLM network due to constraints of the former MLM model. However, we now have much more robust go-to-market opportunities 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 the fourth quarter. 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. This marks our fifth 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. 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 and a half 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. As we look ahead to 2025, we recognize, look, 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 that transitioning to our new omni-channel business model would involve some short-term dislocation, 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 Body. 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 Deichler, and he'll discuss our strategic initiatives as we move into the next phase of our transformation.