Good afternoon. Thank you for attending today's The Beachbody Company, Inc. Third Quarter 2025 earnings conference call. My name is Jayla, 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. I'll now like to pass the conference over to our host, Bruce Williams, the Managing Director of ICR. You may proceed, Bruce. Welcome, everyone, and thank you for joining us for the third quarter 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 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 '24. 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. 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, and good afternoon, everyone. I'd like to welcome you to The Beachbody Company, Inc.'s Third Quarter 2025 Earnings Call. We're pleased with our outstanding third quarter results and the progress and speed of our turnaround that's far exceeded our expectations. Let me put this achievement in perspective. We've now delivered eight consecutive quarters of positive adjusted EBITDA. Our free cash flow performance has been equally strong. We've generated $13.1 million in free cash flow through nine months, with Q3 alone contributing $9 million of free cash flow. Perhaps most significantly, we generated net income this quarter, a seminal milestone that we identified years ago as the ultimate marker of our turnaround effort. Our cash position of $33.9 million substantially exceeds our outstanding debt principal of $25 million, providing us with financial flexibility. Our operational metrics continue to demonstrate the structural improvements we've made. We've maintained strong gross margins while significantly reducing our revenue breakeven point from approximately $900 million in 2022 down to $180 million today. A $720 million lowering of the breakeven that positions us to generate operating leverage at a much lower revenue level. Looking ahead, we're focused on our growth strategy in 2026. This upcoming year will mark our transition from a financial restructuring to capitalizing on new revenue opportunities from our innovation pipeline and from market expansion. We're launching a comprehensive retail initiative that will leverage our portfolio of billion-dollar brands entirely new channels. In 2026, we'll introduce Shakeology to retail for the first time in our company's history. That will be followed by our brand new P90X nutritional supplements line and Insanity branded supplements later in 2026. These products will be distributed in different form factors and different price points made possible by our new business model. Complementing our retail expansion, we will…

Thanks, Mark, and thanks to everyone for joining us today. I'm excited to share our Q3 results, which I believe demonstrate the meaningful progress we're making in executing our long-term strategy. The results that Mark described and that Brad will outline in detail in a moment really tell the story of a company hitting its stride. The vision we've had for over two decades is finally getting a chance to come to fruition. We're executing with more efficiency, thanks to our expanded sales channels, and an aggressive approach to tailoring our marketing for an environment that is definitely showing signs of improved demand. As longevity and health span have entered the mainstream, we've got the library of proven content that's getting deeper every quarter and new content coming online by the end of the year, that's gonna open up the TAM to the real holy grail of helping the more than 185 million non-exercisers in the US who are just looking for an easy way to get the benefits of lifestyle change without devoting thousands of dollars to equipment or hours in the gym. In the near term, there's some very exciting launches going into Black Friday and Cyber Monday, the holidays, and the first quarter. We launched a compelling $19 per month offer in Q3, which we're starting to build momentum around, especially in conjunction with the launch of two brand new alternative subscriptions. What we call a super trainer subscription, where people can subscribe to just the content from one super trainer for just $9.99 a month. These are essentially curated capsules from our world-class trainers. We launched this test with both the Autumn Calabrese collection and the Shaun T collection and are encouraged by the initial response. As you might recall, we said we'd be launching new…

Thank you, Carl. Thank you, everyone, for joining the call today. I will review our Q3 results and provide our outlook for the fourth quarter. We produced major milestones this quarter. We exceeded our guidance for revenue, adjusted EBITDA, and net income. We generated our eighth consecutive quarter of positive adjusted EBITDA and had net income for the first time since going public in 2021. We are on track for positive free cash flow for the full year. I'd like to provide more details about the quarter. Total revenues of $59.9 million declined 6.3% sequentially and declined 41.4% year over year, in line with our expectations as we continue our strategic transition. Revenues continue to be impacted in the near term by the shift away from a multi-level marketing platform to an omnichannel model. Consolidated Q3 gross margins were 74.6%, representing an increase of 230 basis points over the prior quarter and an increase of 730 basis points compared to the prior year. We're pleased to report the consolidated gross margin was at the high end of our long-term target of 70% to 75%, underscoring the strength of our operational execution. Moving to digital and nutrition and other revenues. Digital revenue decreased 8.3% from the prior quarter to $36.4 million and decreased 32.2% year over year. Revenues were impacted by continued pressure on our digital subscription count, which decreased 4.3% sequentially to approximately 900,000 and declined 18.9% compared to the same period a year ago. We continue to experience the impact from our transition away from the MLM, which has had an outsized impact on nutrition subscriptions, as our nutrition products were almost sold exclusively through our MLM network. Nutrition and other revenue decreased 2.8% from the prior quarter to $23.5 million and decreased 50.4% year over year. Nutrition subscriptions…

Thank you, Brad. Operator, Jayla, could you please open it up to questions?

Absolutely. At this time, if you would like to ask a question, the first question comes from Suzanne Anderson with the company Canaccord Genuity. Suzanne, your line is now open.

Hi, good evening. Thanks for taking my questions. Nice job on the quarter. I guess maybe if you could talk about I'm curious just the customer base, if you're seeing any big change with the new business model, and then maybe if you could share any details on what type of customers are signing for the unbundled super trainer subscription. Are these new customers that The Beachbody Company, Inc. that maybe, you know, will kind of tack on more subscriptions down the road or were they existing customers?

Thanks. Well, thanks, Susan. Nice to hear from you. We're really dealing with the same type of customer that we've had for twenty-six years, quite honestly. The people who are too busy to go for a gym membership. They want the convenience of doing things at home, and they want it somewhere between twenty to forty-five minutes per workout. So in general, we're seeing the demographic be similar. In terms of the specific subscriptions, the Autumn Calabrese collection and the Shaun T collection, those are doing both a great job of winning back customers who are really just interested in the affinity with their particular trainer, but we are seeing a nice percentage of those people upgrade to the full subscription. So it's doing the job of what you might see from a high volume, low price gym, where people are attracted to the $9.99 per month but then seeing the value of the overall subscription and upgrading to the full, full monthly or annual price. So, in terms of new customer acquisition, we're seeing that come from really the more broad advertising of, you know, helping people get healthy, helping people improve their overall well-being, and that is sort of business as usual as we go into the fourth quarter. And we're very excited by the prospect of bringing in new customers with the launch of Shaun T's Dig In program, the promise of the largest test group that we've ever run as a company.

Okay. Great. And then maybe if you can give some more color just on your new product pipeline. It sounds like you have a number of things lined up through the holiday and then maybe into next year. Maybe if you could just talk about the timing of the rollouts and any color you could give maybe around the new P90X product. Then also other products that are gonna roll out whether they're in the digital or nutrition segment. Oh, and then also I was wondering sorry. Go ahead. And then I have my follow-up.

Okay. So, just real quick, as we mentioned, we're very excited by the number of products that we're launching into the catalog nutrition products in 2026. We haven't launched this many new products, particularly at a price point that's much more affordable to our database, to our current subscribers, and to new prospective customers, since we launched the MLM. Obviously, we had to support the compensation plan for the MLM when that was such a big part of the business model. Now that we don't have the MLM, we can be far more competitive in the nutrition segment with our pricing and with our unit economics, both the form factor in the seven to fourteen servings versus everything being in a monthly unit. So we've got the P90X line of supplements, and we have the Insanity line of supplements, and we have the expansion of Shakeology as we take that out into retail. So nutrition is largely expanding in 2026. For the balance of 2025, we have the, as I mentioned on the call, we just launched Tony Horton's Power of Four program, which we licensed from him. We just launched a series of new bike programs called Chasing the West, which has gotten a great response from our subscribers. We're launching Shaun T's Dig In program, which is a hybrid between a low-impact Insanity program plus a very popular Dig Deeper weightlifting program. I'll also say we're launching something at the end of the year. I can't go into too much detail right now. But I happen to want to say to you particularly, it was inspired by a conversation that you and I had because you love running so much, but I know you want to keep doing your resistance training to help your bone density and your overall muscle tone, and I think you're gonna love what we're coming out with at the end of December. P90X Generation Next just started to get teased last week, and the response to that just blew us away, both in terms of attracting new subscribers and in terms of the current subscribers being excited for that program. And that launches on February 3. That's the extent of what we've announced so far, and I think it's frankly '25 was such a transition year for us. We didn't put that much new content into the pipeline. I think between now and 2026, our subscribers and subscribers are gonna be very impressed with what the platform offers.

Okay. Great. That sounds exciting. I'm excited to see the new product. Maybe if you could talk about oh, I was just curious. Too. Should we think about any increase, the increase in investment in the new products should that impact the P&L at all in the op expense or have you guys already kind of planned for that? Thanks. And that's all.

It's all in line with the economics that we've been running for the business. I'll let Brad speak to any specifics, but we're really running the business in a responsible way that takes advantage and maintains the advantage of the operational leverage that we built into the business over the last two years. The company is just such an incredible job of being both disciplined but maintaining our product quality, and the innovation pipeline, which resulted in, you know, we're so excited by having an in-home Pilates program. You know, the whole fitness industry is aware of how big Pilates has gotten, and the fact that we have a Track Pilates program that people can do for $100 of equipment is just an exciting asset for us to take into 2026. So bottom line is we're gonna maintain our economics, and we feel very good about the base of assets that we have to work with.

Hi, Susan. This is Brad. Nice to hear from you. No. We are very disciplined with our spend. We are excited about our spend, and the numbers are baked into our guidance for the fourth quarter.

Great. Thanks so much. Good luck for the rest of the year.

Thank you. Thank you, Susan.

Our next question comes from JP Wollam with the company Roth Capital Partners. JP, your line is now open.

Great. Good afternoon, guys. Appreciate you taking my questions. If we could just maybe start on the nutrition side. So it looks like, you know, that kind of sequential decline there was actually pretty minimal maybe given some expectations out there. But just wondering if there's any more detail you can share on kind of what drove that? I think there might have been some mention of promotional activity. So if there's anything specific to call out in terms of promotions that worked well, that'd be helpful.

Hi, JP. This is Brad. Nice to talk to you. Thanks for asking the question. You know, our previous before the strategic transition, we were selling an MLM-based product. Our hero product was Shakeology at $130 a month.

So as we've moved away from that, we are doing more price testing.

We are coming up with lower price SKUs, as Carl and Mark said. We'll be introducing a new Shakeology at a smaller form factor, lower servings, lower price. We've been doing more bundle activities and more price testing, and we are seeing good demand at these new price points. We're able to maintain the number of subs, and we're able to do that at a lower price point, which makes sense given the transition away from the MLM to the new omnichannel model.

Perfect. And then maybe just as we kind of oh, go ahead.

No. I think, JP, and this is Mark. And just on a go-forward basis, because remember we started basically a new company on January 1. So there's really no year-over-year comparisons because we dismantled the MLM, as you know, in the last year. But going forward, these new nutrition products we're bringing out under the P90X brand name, which will range in price from, you know, probably $15 to $39. And the new smaller form factor lower price Shakeology and then Insanity. These are price points that the company has, like, never offered before and certainly never offered in the retail market. So not only excited about the potential in a brick-and-mortar store, but from a direct-to-consumer standpoint, between our Amazon channel and our body website and our affiliates, you've now got something in the arsenal that we just haven't had before is these monster brand name products under P90X and Insanity and Shakeology. At much more affordable price points because we were hamstrung in the previous model by the costs and the compensation costs related to the MLM, which no longer exists. So going forward into '26, and into '27, I think you're gonna see, you know, nutritional business with much different character in terms of its composition because of our ability to sell a lower price, broader appealing product line.

Perfect. And then, you know, I think on the last call, we were talking about you guys being sort of in the early stages still of working with a broker in terms of getting some wins in terms of retail. And I'm just wondering if there's anything you can update us on in terms of visibility for that retail launch coming up next year.

Yeah. Great question. So as you know or maybe you don't, the retail marketplace, most of the major retailers work on something called a planogram, which is the shelf set that you see when you walk in the store. And they usually have planogram revision dates that are either one time or two times a year. So our broker partner is coordinating our sell-in meetings based on the calendars of these new planogram reset dates. And typically, when you go to an account, a major retailer, and they say, yes, I'd love to add this product, going to put it into my new planogram shelf set, it's usually about five to six months from that day when you're accepted until you actually physically appear on the retail shelf. So our teams are out there right now selling in the product, making presentations. We're expecting to get answers on how that's going in the next four to six weeks. And assuming it goes the way we all expect and hope it will, we should start appearing on the shelf in some of these places, Q1, most of them into Q2. So the majority of that revenue will start to materialize Q2 and then into Q3 and four. But as you know, it's a rollout. And so, essentially, first, you gotta get it sold in. Then they have to reset the section. Then you launch and then you grow after that. So all according to how our plan was expected to go. Now that does not apply to the DTC business. So when we launch these brand new products, starting in January, we'll be able to immediately start making them available on a DTC basis and on an Amazon basis. But for brick-and-mortar, we have to run the offense, which is the planogram date, acceptance, reset of the shelf, and you show up probably five to six months later.

Understood. Appreciate that color. If I could just slide one more in quickly here. As we look at the selling and marketing line, obviously, great sequential step down there in terms of managing costs. But wondering if you could, one, just kind of provide a bridge from 2Q to 3Q. I think there's a little bit of an advertising reduction and maybe a reduction in some deferred commissions. But one, if you could provide that bridge at all, and two, just you know, now being sort of 32% of sales, like, how are you feeling about that line item and whether there's more cost to come out there?

Sure, JP. This is Brad. I'll take that question. One, if you look back at the end of last year while we were still in the MLM model, we had upwards of $2,526,000,000 of deferred partner costs on the books. We've been expensing that over the course of the year, and we're now down to about $3.5 million of deferred partner costs. So that's all costs related to the legacy business. As that has declined over time, we're really looking at the advertising and marketing rates on the new business. And so we're at about 31.9% for Q3. I would expect going forward it to be in the mid-thirties-ish with some variation of seasonality. But the sequential decline really is driven by the transition away from the MLM business. And, JP, just to provide additional color on that. So there are seasonal fluctuations, you know, between the quarters because Q1 is always your highest marketing spend quarter. But what's important is that that sales and marketing line, which was reduced from the $25.5 million in Q2 down to $19.1 million in Q3, really was not a result of spending less money on actual advertising and marketing. A lot of that was the cost that Brad just alluded to, which were associated with the former MLM, which are now sort of burning off. So we've not reduced our spend to the consumer. We did not cut the media budget. We just shed all those legacy marketing costs that were affiliated with the MLM. You will not see that similar type of decline obviously in Q1, because Q1 will be your higher spending quarter. But I just want to put color around that because when you look at the sales and marketing line, your first inclination is to say, the company cut its marketing spend level to the consumer. The answer to that is an emphatic no, we did not.

Perfect. Appreciate the detail, and best of luck going forward, guys.

Thank you, JP.

Our next question comes from Michael Lipinski with the company Noble Capital Markets. Michael, your line is now open.

Thank you and thanks for taking my questions and congratulations on a stellar quarter and reaching your profit milestones.

Thank you.

I believe that in Q3 you kind of indicated that you felt like most of your restructuring of your Salesforce was gonna be complete. I was just wondering, is that now all been completed?

Yeah. Generally, the reorganization has taken place, and we're now multichannel with, as Mark mentioned, the performance marketing or direct-to-consumer business. We've got the Amazon business. We've got a small contribution from affiliates and obviously CRM, and we're excited to launch into retail next year. And, Mike, this is Brad. I'll say we're always looking for cost efficiencies, and we'll continue to do so. But the financial restructuring, it's, for the most part, complete. Now we're really looking at growth mode beginning now and in '26.

Okay. Perfect. I was wondering in terms of margins, with all these distribution retail distribution rollouts and also with the new products that you're talking about. I was just wondering if you can just talk a little bit about margin. Are you anticipating giving up any margin? You know, if you obviously, with some of the lower price points that you're talking about with some of your products, if you could just add a little color on that.

Sure. I'll take the case on that. So I'll tell you. So in Q3, we hit a nutrition margin of about 53%. And right now, with a lower price point and more promotional activities, we are guiding to a lower nutrition margin. We're guiding to a steady state between 46-52%. So retail in '26 is not a significant driver of revenue, at least in Q1, like in Q3, certainly not in Q4. We'll continue to adjust our margin as we gain more experience in retail. Right now, we are looking to a little bit of a decline in the nutrition margin. As we're looking to a pickup in the number of units and subscribers. At the end of the day, it really is about generating dollars. It's about generating the most number of subscribers.

Gotcha. And we're also, you know, the margin is also reflective of our increased focus on selling one-time purchases versus just selling subscriptions. So because we're actually expanding the audience, those people will ultimately end up subscribing.

And I was just wondering, do you guys frame for us like the anticipated marketing spend around the retail rollout of P90X release?

I'm sorry. Say that again.

Can you just kind of frame maybe the anticipated marketing spend around the retail rollout for your P90X release? Maybe just give us the timeline for the new P90X exercise program?

Yeah. Well, the new P90X exercise program is a Q1 program. And that will certainly be part of our overall marketing spend because of its high profile and ability to attract people into the franchise. In terms of the actual retail products, the marketing spend will be in line with what we end up getting in terms of wholesale orders. And what that revenue line will look like. So we do not have that number right now. But it will be on a normalized advertising to sales ratio based on the wholesale volume that we generate, and that's all gonna be baked into our numbers.

Gotcha. That's all I have. Congratulations again.

Great. Thank you very much. Appreciate it.

Thanks, Michael.

At this time, there are no more questions registered. There are no more questions registered in queue at this time. I would like to pass the conference back over to our hosting team for closing remarks.

Thank you, Jayla, and thanks, everybody, for attending today. I just want to say in closing, again, this was not only an outstanding and seminal milestone quarter for us, achieving net income positivity, but the fact that in our opinion, the financial turnaround has largely been completed. Well ahead of schedule, almost I would say almost twelve months ahead of schedule. So the headline is, you know, great new operating structure, much reduced breakeven level down to the $180 million level. And now we're at the point where instead of waiting till 2026, we can actually open up this innovation pipeline starting in '26. You'll see a lot of new exciting programs, which will expand this franchise, take advantage of the operating leverage that's now been built into this P&L, and give us the opportunity to achieve all of the goals that Carl has been articulating for years. But not trying to reach just the serious exerciser, the serious nutrition consumer, but to go out to the broader audience and that huge TAM, the 185 million Americans who do not currently exercise on a regular basis and who are taking nutritional supplement products, and we want to drive them to our franchise. So thanks, everybody. We look forward to talking to you on the next quarter's earnings call.

That concludes today's call. Thank you for your participation, and enjoy the rest of your day.

Thank you.