The Beachbody Company, Inc.

Good afternoon. Thank you for attending today's Beachbody Company Inc. First Quarter 2025 Earnings Conference Call. My name is Victoria and I will be your moderator for today's call. All lines will be muted during the presentation portion of the call with the 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, Bruce.

Welcome, everyone, and thank you for joining us for our first 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 nine GAAP financial measures, such as adjusted EBITDA, net cash, and free cash flow. And a reconciliation of these nine 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. I'd like to welcome all of you to the body Q1 2025 earnings call. As we stated previously, Q1 2025 marked our first quarter operating under a completely revamped business model. one that is fundamentally different from the old MLM model that the company employed over the last decade. I joined the Beachbody Company, now called Body, as executive chairman almost two years ago in June of 2023 with a clear mandate, develop a roadmap for executing a major turnaround. Having spent a great deal of my career conducting corporate turnarounds and having written a book on the subject called The Turnaround Prescription, This was a challenge I was excited about because of my deep belief in the phenomenal digital library of more than 135 titles, the highly efficacious nutritional supplement products in the body portfolio of brands, and the vision of the company's co-founder, Karl Deichler, who was the pioneer of bringing home fitness programs to the masses. To put the scale of this turnaround in context, since going public in 2021, the company had not recorded positive EBITDA in any quarter through Q3 of 2023. The company had a $900 million-plus cash break-even level in 2022, $50 million of debt, declining gross margins, and a legacy MLM model that, like many others, struggled to motivate an independent group of salespeople who largely viewed their work as part-time. Since my arrival in June 2023, we've conducted a dramatic turnaround of the company's financial fortune. We generated positive adjusted EBITDA for the first time since the 2021 IPO in Q4 of 2023, and we've now registered six consecutive quarters of positive adjusted EBITDA, delivering a healthy, guidance-beating $3.7 million of adjusted EBITDA in Q1 of 2025, and bringing the six consecutive quarter cumulative adjusted EBITDA total to an impressive $34.8 million. In addition, we've cut the debt by more than 50% to 18 million. We've improved gross margins and reduced the cash break-even level of the company from more than $900 million in 2022 to $440 million in 2023. And today, the company has a cash break-even level of just under $225 million. That's a $675 million reduction in the cash break-even level during the 2022 to 2025 period. In addition to this, we're thrilled to announce that we've entered into a new lending agreement with Tiger Finance for a $25 million three-year loan facility It allows us to retire the $17.3 million of outstanding debt as of the repayment date of May 13, 2025 with Blue Torch Capital and ahead of the February 2026 maturity date of that loan. And it gives us approximately $5 million of additional capital on the balance sheet after paying off the Blue Torch loans. We're grateful for the partnership we had with Blue Torch, and we're very excited about our new partner, Tiger Finance, and their conviction in the body business plan over the next three years. We've massively re-architected this company. We've eliminated the MLM business model. We transitioned to a multi-channel approach featuring a greater emphasis on direct-to-consumer, retail distribution channels, and the use of an affiliate model featuring independent sellers who are not part of an organization, do not recruit new sellers, and keep 100% of the commissions they earn. In the next phase of our turnaround plan, we've implemented what we call a cut and grow strategy. This will result in a temporary reduction in revenue in 2025 due to the dismantling of the MLM model with its tens of thousands of former independent sellers before we begin to see the growth we anticipate in the direct to consumer business. In addition, we expect to anticipate growth as we build out major new retail distribution strategies featuring the launch of nutritional products from some of the most prominent, well-known brand names in the fitness and nutrition industry, our own P90X, Insanity, and Shakeology. I have a long history as a top executive at major consumer product companies, and I'm applying that experience to bear here in spearheading this retail initiative. The retail rollout into the food, drug, mass merchandiser, club store, and convenience store channels is anticipated to begin very late in Q4 of 2025 with our initial retail launch of Shakeology, a brand that has cumulative sales in excess of $4 billion. It has more than 1 billion servings since inception and a customer base in the millions since its launch as the first superfood plus protein shake. We will follow the Shakeology retail rollout with the launch of the P90X nutritional line in the first half of 2026, capitalizing on the massive brand awareness of P90X and utilizing innovative formulations and dynamic packaging to tell a compelling story. Later in 2026 and then into 2027, will take our monster brand name insanity and its history with more than 40 million qualified views and huge brand awareness and introduce a nutritional line into the retail channels i just mentioned using eye-catching packaging highly efficacious formulations and the irreverent attitude of the insanity brand name to clearly differentiate our product lines in addition we're going to create a brand new P90X digital fitness program, and we'll also be creating a new Insanity program after that. So when the P90X and Insanity nutritional products are launched into the retail network of food, drug, mass merchandiser, club, and convenience stores, we will simultaneously launch the new P90X and then Insanity fitness programs, along with some other clever and compelling cross-marketing between the nutritional products and their namesake fitness programs. The opportunity to market our new P90X and Insanity nutritional products and the new digital fitness programs that will be coming out under those brand names to our more than 12 million current and former customers, along with all of the people we will be exposing the brands to in the retail channels, should be a major revenue and profit growth opportunity for our company. Q1 2025 was the first full quarter executing our new business model. However, it's important to emphasize turnarounds are like a long, winding road with new things unveiled around every turn. They require intense discipline, total alignment and buy-in by management and the employee base, creative thinking, masterful execution, tenacity, and most importantly, patience. We have all of that at body and it's rooted in the strong belief in our people, our plan, and our performance to date. Look, we've stated repeatedly over the last 24 months since my arrival that we've got to get our financial house in order before we can successfully grow the business with all the new products that we discussed today. With our sixth consecutive quarter of positive adjusted EBITDA, massively reduced cost infrastructure we're now poised to enter the growth phase of the turnaround towards the end of 25 and into 2026. i'd now like to turn the mic over to our co-founder and ceo carl daikler thanks mark in our last earnings call we outlined several key initiatives aimed at refining our business model and enhancing customer engagement including