Beachbody Q4 2024 Earnings Report

Beachbody EPS Results

• Actual EPS: -$1.89
• Consensus EPS: -$2.88
• Beat/Miss: Beat by +$0.99
• One Year Ago EPS: N/A

Beachbody Revenue Results

• Actual Revenue: $86.37 million
• Expected Revenue: $81.71 million
• Beat/Miss: Beat by +$4.67 million
• YoY Revenue Growth: N/A

Beachbody Announcement Details

• Quarter: Q4 2024
• Date: 3/27/2025
• Time: After Market Closes
• Conference Call Date: Thursday, March 27, 2025
• Conference Call Time: 5:00PM ET

Beachbody (NASDAQ:BODI), Inc., formerly known as The Beachbody Company, is a digital fitness and wellness company that provides workout programs, nutrition products and related support services. The company operates through a subscription-based platform offering on-demand and live-streamed exercise content, including strength training, cardio, yoga and other fitness programs designed for home use.

Its product portfolio has included the Beachbody On Demand platform, the BODi fitness and nutrition service, and nutritional brands such as Shakeology and Beachbody Performance. The company also offers coaching, online communities, meal-planning resources and other tools intended to support members’ fitness and weight-management goals.

Founded in 1998 by Carl Daikeler and Jon Congdon, the company historically marketed its products through direct-to-consumer channels and a network of independent coaches. Its services and products have primarily targeted customers in the United States and Canada. The company has operated under the Beachbody name and later adopted the BODi branding.

Beachbody Q4 2024 Earnings Call Transcript

Key Takeaways

• Highlight the elimination of the multi‐level marketing platform in favor of a simplified single‐level affiliate model and a new omni‐channel strategy spanning direct‐to‐consumer marketing, Amazon and retail distribution.
• In Q4 the company delivered revenue at the high end of guidance, achieved a record 70.5% gross margin, and generated $8.7 million of adjusted EBITDA, marking its fifth consecutive quarter of positive EBITDA.
• Q4 revenue declined 27% year-over-year and 15% sequentially due to the business model transition, and 2025 Q1 guidance anticipates revenues of $60 million to $70 million with a possible adjusted EBITDA loss of up to $2 million.
• Nutrition products, led by the Shakeology brand, are now being marketed outside the legacy network through direct response, Amazon and Walmart.com, with new P90X and Insanity supplements slated for major retail launches.
• The transition from a network marketing structure to the affiliate program met internal targets for seller migration, though adding new affiliates has been slower than expected, prompting targeted recruitment initiatives for spring.

Presentation

[Operator]

I would now like to pass the conference over to your host, Bruce Williams, Managing Director of ICR. You may proceed.

[Bruce Williams, Managing Director at ICR]

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 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 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.

[Bruce Williams, Managing Director at ICR]

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.

[Mark Goldston, Executive Chairman at The Beachbody Company]

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. 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 Daikeler, our CEO, who will discuss our strategic initiatives in more detail. That will be followed by our Interim CFO, Brad Ramberg, who will discuss our financial guidance and outlook. As you're aware, as of November 1, 2024, BODi restructured into essentially a new company as we eliminated our longstanding multi-level marketing platform and moved 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.

[Mark Goldston, Executive Chairman at The Beachbody Company]

The restructuring fundamentally broadens our go-to-market strategy and allows 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 BODi for future success. We phased out the multi-level marketing, or MLM, structure, which had been in place since 2007.

[Mark Goldston, Executive Chairman at The Beachbody Company]

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 omnichannel 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 omnichannel approach by enhancing revenue streams and empowering affiliates with performance-based compensation structure. This transition better aligns with our direct marketing roots and offers a more sustainable economic framework while focusing on profitability and operating efficiency. We've 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.

[Mark Goldston, Executive Chairman at The Beachbody Company]

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 P90X 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 omnichannel opportunity is vast. BODi has never marketed any of our highly rated nutritional supplements outside of the former MLM network due to constraints of the former MLM model.

[Mark Goldston, Executive Chairman at The Beachbody Company]

However, we now have a much more robust go-to-market opportunity 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, etc., 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-$6 million. This marks our fifth consecutive quarter of positive adjusted EBITDA.

[Mark Goldston, Executive Chairman at The Beachbody Company]

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. Additionally, 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 $22.5 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.

[Mark Goldston, Executive Chairman at The Beachbody Company]

We understood that transitioning to our new omnichannel business model would involve some short-term dislocations, 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 BODi. 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 Daikeler, and he'll discuss our strategic initiatives as we move into the next phase of our transformation.

[Carl Daikeler, Co-founder and CEO at The Beachbody Company]

Thanks, Mark, and good afternoon, everyone, and thanks for joining us today. Before our Interim CFO, Brad Ramberg, goes through the numbers, I just want to take a second to provide an overview of our initiatives and priorities. First, I want to say how grateful I am for the entire BODi team. This past year has been a big one for us, full of challenges, important changes, and from my perspective as the majority shareholder, we've made significant progress toward positioning the business to serve more people, to return to the kind of growth and profitability we've enjoyed for the majority of our 26-year history, and to get back to a trajectory of a profoundly important and productive public company. None of that happens without our incredible management and staff, plus our affiliate partners, our amazing subscriber community, and our supportive stakeholders.

[Carl Daikeler, Co-founder and CEO at The Beachbody Company]

Now, looking back on 2024, the year was about taking a hard look at what was working and what was underperforming, what aspects of the model had changed since the pandemic and were holding us back from reaching and helping more people. We made the very difficult choices that would return the business to its mission of helping people achieve their goals and celebrating the amazing customer success stories our programs and supplements enable. I believe we're seeing the signs that our recent shifts have great potential to scale. Our focus continues to be on delivering real results for people, helping them get fit, stay active, and feel their best. With this refined business model, we're moving toward a more efficient, more profitable, and more impactful business model with incredible agility and leverage.

[Carl Daikeler, Co-founder and CEO at The Beachbody Company]

We know the demand is there, especially in this new GLP-1 semaglutide age of weight loss pharmaceuticals. More people need our no-nonsense approach to fitness and nutrition than ever. There's real demand there. I maintain that our opportunity is huge. With a clear strategy in place, we're creating momentum for the long term. What we continue to be focused on is building profitable revenue and cash flow, which, as Mark outlined, created the imperative for exiting the network marketing business and simplifying the business to a model that balances affiliate marketing with our roots of highly efficient performance marketing. That also opened up the prospect for sales channel expansion and greater control of the positioning and definition of the BODi brand across multiple sales channels.

[Carl Daikeler, Co-founder and CEO at The Beachbody Company]

That's why our affiliate transition is such a big focus: more visibility of actual customer success, better incentives for the customers who step into the affiliate opportunity, and a smarter approach to customer acquisition. It's all really starting to come together. Now, it's still early in the game. We made the shift to a single-level or more traditional affiliate model, which let us remove the stigma of multi-level marketing from the narrative and direct our marketing spend where it matters most: attracting and rewarding the people who are ready to actually do this incredible thing of lifestyle change, getting results with our programs, and sharing that success with their followers on social media. It's very early in the process, but I'm optimistic about everything we've learned in the three months since it began.

[Carl Daikeler, Co-founder and CEO at The Beachbody Company]

I'm excited for how the team has already spotted significant opportunities to simplify and improve the entire affiliate model. Our marketing initiatives are focused on reaching more people with this incredibly efficient offer of what we call the total solution, combining digital programs with a monthly subscription to Shakeology. Not only is that incredibly effective for the customer, the price point is extremely compelling, especially when compared to the offer propositions of our peers in the equipment space. People get results with our business model more reliably and for less money. This is the first time we've been in a position to mass market this total solution bundle. While it's early in the ramp-up, I have no doubt that it can really scale because we've done it before. We're doubling down on direct response marketing now, leaning into what's driving the best engagement and conversion rates.

[Carl Daikeler, Co-founder and CEO at The Beachbody Company]

While the impact of those changes was not completely realized in the fourth quarter, every week we are learning, finding new wins that generate traffic, improving landing page conversion, and growing average order value. We are gradually getting more and more traction. Our women's hormone health program, Belle Vitale, launched in December. The exit from network marketing was a significant disruption to the original business plan for this new product, but we did see strong demand in the original launch, and now we are ramping up direct marketing with compelling user-generated content. As our first wave of users complete the program next week, the results are consistent with our test groups, and the resulting flood of success stories will be used to drive marketing of Belle Vitale throughout 2025. This is actually the same playbook that worked for P90X and Insanity.

[Carl Daikeler, Co-founder and CEO at The Beachbody Company]

Neither of those programs were blockbusters out of the gate, but once the success stories started to come in and were integrated into the marketing message, the momentum builds and word of mouth starts to spread really fast. I expect that same dynamic to happen for Bell vitale based on the enthusiasm we're seeing as women complete the program. We also launched two new programs to expand our audience. We call them specials. One is called Walk Week with Lacee Green. This is an indoor walking program, which is very appealing for people who want something easy to get started with. The other special is called the GLP-1 Fitness Formula, which we launched at the end of February and represents our initiative to help people who are using those pharmaceuticals to have a healthier and more permanent healthy outcome. As we mentioned last quarter, channel expansion is also a priority.

[Carl Daikeler, Co-founder and CEO at The Beachbody Company]

We're seeing continued success with Amazon and adding subscribe-and-save nutrition subscribers at a faster clip than expected. We believe this will compound as this channel expands. We've started taking what we learned from the Amazon channel and launched a subscribe-and-save option within our own BODi checkout flow, which is also building our nutrition continuity file and driving long-term retention. That's a very healthy sign for the turnaround. We also launched on Walmart.com in February. It'll start small, but the growth potential is significant, especially given the retail initiative that Mark referenced, a project that he's personally leading for us. That's meaningful given his background scaling major CPG brands over the course of his impressive career. Which leads me to talk about nutrition. We know our nutrition and supplements are some of the best out there, led by the Shakeology brand.

[Carl Daikeler, Co-founder and CEO at The Beachbody Company]

Historically, our nutrition products have mostly been sold within our network, which is all the more reason to be impressed with the fact that we've sold over a billion servings of Shakeology. Now we can expand that distribution via our own CRM activities, alternative marketplaces like Amazon and Walmart.com. In the near future, Shakeology will be at retail. I'm also pleased to say that we've retained more of the legacy nutrition subscription file than we might have expected through the transition out of network marketing, which speaks to the positive customer experience of that product. In addition to getting brand new nutrition subscribers, we're seeing returning customers who are resubscribing to our nutritionals. That's a very promising sign. We also discussed partnerships in our last earnings call. Partnerships continue to be a significant opportunity for BODi. Here's where we stand.

[Carl Daikeler, Co-founder and CEO at The Beachbody Company]

Helping people leverage their HSA and FSA accounts is a particularly important focus. 40% of adults have a funded HSA FSA account, and 80% of adults in the U.S. have access to these pre-tax funds. We're working with Dr. B and now even the leader, TruMed, to make these payment options available in the BODi checkout flow. We also just announced a partnership with telehealth provider Hello Alpha, who's excited to offer our products to their subscribers, especially the Belle Vitale Women's Hormone Health Program. We've just begun offering their telehealth services to our database on a revenue share basis. Okay. Now, to sum things up quickly, we're building a stronger, more profitable business from a foundation of dramatically reduced operating expenses and synthesized marketing. Performance marketing, affiliate marketing, strategic partnerships, and new sales channels will set us up for scaling the business profitably.

[Carl Daikeler, Co-founder and CEO at The Beachbody Company]

2024 was about taking a hard look at what was underperforming, holding us back from reaching more people, and making hard but important choices so we can better achieve our objectives to help more people. 2025 is now about smart and careful acceleration. After the important step back, we can now work from a stronger foundation, and we're ready to really push forward. I'm excited about where we're headed, and I can't wait to see the impact of everything we're rolling out. Now, I'll turn it over to our Interim CFO, Brad Ramberg, to walk you through the numbers for Q4. Brad?

[Brad Ramberg, Interim CFO at The Beachbody Company]

Thank you, Carl, and thank you, everyone, for joining the call today. I will review our Q4 results and provide our outlook for the first quarter. For the fourth quarter, the company generated revenue of $86.4 million, which was at the high end of our guidance range of $77 million-$87 million. Adjusted EBITDA of $8.7 million significantly exceeded our guidance range of $2 million-$6 million, and we generated our fifth consecutive quarter of positive adjusted EBITDA. Now, I'd like to provide more details about the quarter. Total revenues of $86.4 million declined 15% sequentially and declined 27% year-over-year. As expected, revenues were impacted as we strategically transitioned from a multi-level marketing platform to an omnichannel model.

[Brad Ramberg, Interim CFO at The Beachbody Company]

Consolidated Q4 gross margins were 70.5%, representing an increase of 320 basis points over the prior quarter and an increase of 830 basis points compared to the prior year. Q4 gross margins were our highest quarterly rate since 2020, reaching the high end of our long-term target of 65%-70%. Moving to digital and nutrition revenues. Digital revenue decreased 6.2% from the prior quarter to $50.4 million and decreased 21.4% year over year. Revenues were impacted by continued pressure on our digital subscriber count, which decreased 3.4% sequentially to 1.07 million and declined 19.1% compared to the same period a year ago. It's important to note that the transition from an MLM structure to the current omnichannel model was primarily driven by the need to reduce the unsustainable overhead costs associated with the operation of an MLM.

[Brad Ramberg, Interim CFO at The Beachbody Company]

From a business standpoint, the transition away from the MLM has the most impact on the monthly nutrition sales. Therefore, our Q4 2024 guidance reflected the fact that we expected to see a significant decline in both revenues and the number of subscribers in our nutrition business post the announcement of the elimination of the MLM model. Consistent with that expectation, nutrition revenue decreased 26.6% from the prior quarter to $34.8 million and decreased 32.8% year-over-year. Nutrition subscriptions declined 29.2% sequentially to 91,000 and fell 44.1% year-over-year. Digital gross margin was 85.9% for the quarter, up 540 basis points from the prior quarter and representing a 1,280 basis point improvement from the prior year. Our digital gross margin results exceeded our previous long-term target of 80%.

[Brad Ramberg, Interim CFO at The Beachbody Company]

The continued strength in year-over-year gross margin was due to a decrease in digital content amortization as a result of a more disciplined production spend and a decrease in depreciation, as well as the end-of-useful life of certain fixed assets. Nutrition and other gross margin was 52.3%, representing a 630 basis point decline from the prior quarter and a 90 basis point decline year over year. The decline from the prior quarter was primarily due to the discontinuation of preferred customer fees on November 1, which were part of our old business model, where customers paid a monthly fee to purchase products at a discount, as well as increased inventory reserves and higher product costs as a percent of revenue. Moving on to operating expenses. Operating expenses for the quarter, which included $20 million in goodwill impairment charges, increased 14.6% sequentially and declined 30.2% year over year to $93.8 million.

[Brad Ramberg, Interim CFO at The Beachbody Company]

Excluding impairments, operating expenses declined 9.8% from the previous quarter and declined 19.2% year-over -year. Selling and marketing expense as a percent of revenue increased 50 basis points over the prior quarter and declined 530 basis points year-over-year to 45.1%. This significant improvement over the prior year was driven by changes to our partner compensation plan and a decrease in media spend. Enterprise technology and development expense as a percent of revenue increased 660 basis points from the prior quarter and increased 1,070 basis points year-over-year to 25.6% of revenue. The increase was primarily due to accelerated depreciation of $8.2 million in the current quarter related to assets that will not be used after December 31, 2024, attributed to Pivot. G&A was 13.4% of revenue, an increase of 190 basis points sequentially, and an increase of 200 basis points from the prior year.

[Brad Ramberg, Interim CFO at The Beachbody Company]

The Q4 2024 net loss was $34.6 million compared to a net loss of $12 million from the prior quarter. This quarter's net loss included $20 million of goodwill impairment expenses. Excluding impairments, the net loss was $14.6 million. The net loss represents an improvement of $65 million versus the same quarter last year, which included $43.1 million in goodwill and intangible asset impairments. Adjusted EBITDA was $8.7 million compared to $10.1 million in the prior quarter and $2.8 million in the prior year. Notably, this quarter marks our fifth consecutive quarter of positive adjusted EBITDA. Next, moving on to the balance sheet and cash flows. Our cash balance of $20.2 million compared to $33.4 million in the prior year, which reflects our net cash balance after paying $15.8 million of principal on our outstanding loan with Blue Torch Capital during 2024.

[Brad Ramberg, Interim CFO at The Beachbody Company]

After making the principal payments, we've reduced the outstanding balance of our debt on the balance sheet to $19.2 million as of December 31. We had a dramatic improvement to cash generation versus cash usage in 2024 versus 2023. Our cash generated from operations for the year was $2.6 million compared to cash used in operations of $22.5 million in the prior year, a $25 million improvement in cash generated from operations. Moving on to first quarter guidance, I want to reiterate that our fourth quarter results mark the final quarter of the company's old business model. As discussed, we significantly lowered expenses and our revenue break-even when we strategically pivoted away from the MLM model to our omnichannel marketing and distribution model. This shift has opened new growth channels that we could not previously access, and we are very excited about these opportunities ahead.

[Brad Ramberg, Interim CFO at The Beachbody Company]

We now have a stronger and more viable long-term business model, but as with companies that are undergoing a transformation, it will take time to develop traction in these new lines of business. Therefore, our Q1 outlook reflects our new business model. We expect first quarter revenues to be in the range of $60 million-$70 million. Given that we are in a new business model and therefore do not have historical trends that reflect the business that we have today, we are not certain as to the indexing that each individual quarter of the year will have for 2025. Having said that, historically, Q1 has over-indexed the average quarterly revenue by approximately 15%. We will closely monitor this as we go throughout the year and hopefully have a more accurate quarterly indexing as we get to the back half of this year and into 2026.

[Brad Ramberg, Interim CFO at The Beachbody Company]

For Q1 2025, we expect a net loss in the range of $11 million-$7 million, and we expect adjusted EBITDA to be in the range of negative $2 million-$2 million. As we transition to our new business model, we want to provide some additional color to help you conceptualize changes in our financial model. As of today, we expect revenues to approximate 60% digital and 40% nutrition moving forward. This is the first quarter of giving guidance in our new model, and should this trend change in the future, we'll update you accordingly. Additionally, we expect our gross margin target for digital fitness to be approximately 85% and our nutrition target to be approximately 50%.

[Brad Ramberg, Interim CFO at The Beachbody Company]

As we progress throughout 2025 and into 2026, you will see the benefits of our new product pipeline and programs, as well as the development of the additional channels we can now sell, which we believe will bear fruit. We look forward to updating you on our progress throughout the year.

[Operator]

Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason at all you would like to remove that question, please press star followed by two. Again, to ask a question, please press star one. As a reminder, if you're using a speakerphone, please remember to pick up your handset before asking your question. The first comes from Susan Anderson with Canaccord Genuity. You may proceed.

[Susan Anderson, Managing Director and Senior Analyst at Canaccord Genuity]

Hi, good evening. Thanks for taking my questions. I was curious maybe if you could give some more color just on kind of the movement you saw with the affiliates as you moved over to the new business model. I guess, you know, what was the reaction and did you see the majority, you know, want to continue to work on the new platform and continue to drive sales? Or have you been also maybe acquiring new affiliates that see the new platform as an opportunity for them? Thanks.

[Carl Daikeler, Co-founder and CEO at The Beachbody Company]

Thanks, Susan. It's Carl. Good to hear from you. Yeah, the transition to affiliate, I would say, was right about where we expected it to be at the beginning. As you can imagine, the transition out of network marketing can be extremely turbulent and upsetting to the people who were committed to that model. However, the people, and what I think is the most important affinity, is those people who are using the product and most passionate specifically about our products, and those are the people that came over. I would say from a transition perspective, while we hit the numbers expected in the initial transition to affiliate, we have not been adding new affiliates as fast as we would like.

[Carl Daikeler, Co-founder and CEO at The Beachbody Company]

However, we have started to bring in outside affiliates, meaning people who were not originally involved in our network marketing operations, and we are launching an initiative later in the late spring, early summer, to dramatically attract more affiliates, particularly from our own current subscriber base. Again, I would say it was a moderate success in the transition from network to affiliate. It has slowed down since, but we have plans for it to pick up from external sources and internal sources throughout the spring.

[Susan Anderson, Managing Director and Senior Analyst at Canaccord Genuity]

Okay, great. Thank you. Maybe if I could just have a follow-up, I guess, how should we think about just the P&L structure? Should we think about this quarter? I know it was two out of the three months, but being as kind of the new base for, you know, gross margin and operating expense, or are you guys expecting changes as we move forward and the new business model kind of progresses? If you could just give any color on gross margin and operating expense throughout the year, that'd be great. Thanks.

[Brad Ramberg, Interim CFO at The Beachbody Company]

Hi, Susan. This is Brad. Good to hear from you. As we said on the prerecorded comments, what we're expecting is that the revenues will approximate 60% digital and about 40% nutrition. Given that this is a new model, we'll watch it and we'll continue to update you as the quarters progress. For gross margin, we're expecting our digital gross margin to be in the range of 85% and our nutritional gross margin to be in the range of 50%. We have also provided guidance on EBITDA for the quarter of negative two to positive two.

[Susan Anderson, Managing Director and Senior Analyst at Canaccord Genuity]

Okay, great. Thanks so much. Good luck with it.

[Mark Goldston, Executive Chairman at The Beachbody Company]

Susan, this is Mark. Nice to talk to you. Yeah, just for context, you know, as I said in my remarks, this is essentially a new business right now. Our ability to predict quarter to quarter right now in a brand new business model, you know, is getting better every day, but there is uncertainty there. I think the most important thing to note is what Brad said, which is that 60% of the business is anticipated to be digital fitness and 40% is anticipated to be nutrition. With the margins at 85% and 50% respectively, that's a weighted average margin of about 71%. You know, typically first quarter has indexed, as we've said previously, around 110, 112 for the year. We don't know that that's going to be in the new model, the same thing, but absent that, we're using that as a compass.

[Mark Goldston, Executive Chairman at The Beachbody Company]

We're learning every day as we're going. We really enjoy having this omnichannel approach versus being wholly dependent on the previous MLM, but it's also giving us a lot of learning on the fly, which is what we're responding to every day.

[Susan Anderson, Managing Director and Senior Analyst at Canaccord Genuity]

Okay, great. Thanks so much.

[Mark Goldston, Executive Chairman at The Beachbody Company]

As we learn, we'll look forward to.

[Carl Daikeler, Co-founder and CEO at The Beachbody Company]

We'll update you through the year as we learn more.

[Susan Anderson, Managing Director and Senior Analyst at Canaccord Genuity]

Sounds good. Yeah, we look forward to watching the progression as well.

[Mark Goldston, Executive Chairman at The Beachbody Company]

Thank you, Susan.

[Operator]

Thank you. The following comes from JP Wollam with Roth Capital Partners. You may proceed.

[JP Wollam, Equity Research Associate at ROTH Capital Partners]

Great. Thank you, guys, for taking my question. If I could maybe just start a little bit more on the sort of Q1 guide and understanding a bit of what you talked about in terms of the mix and, you know, thinking through the lens of a sort of new business, but I just want to maybe get a little clarification. If we think about this sequential step down, are you guys really attributing the entirety of that step down from the affiliate change or, you know, kind of like how much of the decline are you bucketing to affiliate change and what else might be involved in sort of that decline across segments?

[Mark Goldston, Executive Chairman at The Beachbody Company]

Yeah, it's definitely, as we said last quarter, we anticipated a certain percentage of the active sellers that were in the former MLM to migrate over, and that's essentially what has migrated over. That being said, there were many people who did not choose to become affiliates and have since left the BODi network. That is where you see the difference in the volume. The direct response business continues to be strong. The Amazon business continues to be strong. Both of those things will become a bigger part of our business going forward. The retail that we will be doing, hopefully at the end of 2025 into 2026, will be another component, which will be brand new.

[Mark Goldston, Executive Chairman at The Beachbody Company]

We had always said that in this shift, we are going from an MLM-dependent model to an omnichannel model where affiliates are now a component of the mix, but not nearly at the level as they were in the former MLM. The guidance is reflective of the fact that this is the first pure quarter of the new business model, and that's why we are where we are.

[JP Wollam, Equity Research Associate at ROTH Capital Partners]

Okay. Understood there. Maybe just a little bit of a follow-up from Susan's question, but if I kind of go to the EBITDA guidance and work my way through OpEx, I just want to get a sense, is that sort of number the kind of fully baked number we should think about going forward in terms of all of the cost reductions you were able to pull with the model change, or are there still some steps left as we progress through the rest of 2025 that could see OpEx moving in further?

[Mark Goldston, Executive Chairman at The Beachbody Company]

What you're seeing in the guidance is the way we're looking at the business right now. That is what we're expecting the first quarter to be. As we continue to learn as the model progresses, we, of course, will continue to look at every operating expense line to make sure we're getting the appropriate leverage that we can. The guidance we gave is the way we are seeing the business right now for Q1 and 2025.

[JP Wollam, Equity Research Associate at ROTH Capital Partners]

Okay. Fair enough. If I could just squeeze one last one, you know, just want to kind of give the opportunity to talk about the nutrition business a little bit more. It sounds like, you know, certainly a lot of progress and some positives in terms of the Amazon business and what sounds like increasing subscriptions. You know, just how are you thinking about, you talked about retail, you know, we've talked about this whole outside the walled garden, like what more can you share in terms of just positives? If you're able to quantify at all, kind of what can you share in terms of how well that's going?

[Mark Goldston, Executive Chairman at The Beachbody Company]

It's early days, but let's talk about nutrition because it is a major opportunity for the company. The Shakeology product, which you're familiar with, I think cumulatively in its life has done $3 billion-$4 billion of revenue and over a billion servings. It has never been sold in a retail store and had never been marketed in Facebook, Google, etc. Now that there is no MLM anymore, that can be marketed. That alone is a significant potential opportunity that we will start to tap later in this year from a retail perspective. From a marketing standpoint, we're starting to advertise it, and you'll see it now, and it's doing very well. The other nutrition products that we've got, forget about the existing portfolio, the new stuff we talked about, P90X, Insanity, etc., those will probably be out either end of 2025 into 2026.

[Mark Goldston, Executive Chairman at The Beachbody Company]

Those are major, major retail revenue opportunities. We are talking about two of the best-known brand names in the history of the fitness business. Unlike brands that walk into the retail environment starting from scratch and have to build awareness, we are going with two huge awareness brands right out of the gate. We are now working on our formulations across the categories that will enter JP, and this could be a major new part of this company as we go into 2026 and beyond. We talked about omnichannel, but that was starting on January 1. That channel has not yet been developed, and it will be.

[Mark Goldston, Executive Chairman at The Beachbody Company]

The unburdening of the nutrition channel is just starting to take hold, and the digital will obviously continue to be a great part of the business, and the affiliate will be one of those four or five streams that we've got. Nutrition for us, once we expose this to the general consuming public, both of the existing products and the new products, should become a much bigger part of the company in the next 24 months. Carl, you want to add something on to that?

[Carl Daikeler, Co-founder and CEO at The Beachbody Company]

Yeah, I just want to add that one thing that we have not been able to do for the last almost 18 years with the network marketing business was literally advertise our nutritionals, which are best in class, and the synergy of what we call the total solution, and that is leveraging the content, access to our brand leading content with our nutritionals. We just started doing that this first quarter, and we're seeing very strong signs in the direct marketing channel now that we have the ability to market both nutrition and content together, that that bundle is a very efficient way to acquire new digital and nutritional subscribers. That synergy is something that is a core competency and competitive advantage that the company has that now we are completely untethered to do now that we've retired the network marketing model. That is pretty exciting.

[JP Wollam, Equity Research Associate at ROTH Capital Partners]

Perfect. Great. I'll leave it there. Best of luck going forward, guys.

[Mark Goldston, Executive Chairman at The Beachbody Company]

Thanks, JP.

[Operator]

Thank you. The next question comes from Goshi Sri with Singular Research. You may proceed.

[Operator]

Good afternoon. Can you hear me?

[Mark Goldston, Executive Chairman at The Beachbody Company]

Yeah, we can hear you.

[Mark Goldston, Executive Chairman at The Beachbody Company]

Yep. Okay, great. Thanks for taking my questions. I think you might have alluded to it, but maybe you can give us a little more color. Given the significant changes to the business model, how are you guys thinking about the long-term composition of your revenue strips? Do you anticipate any shift between subscription to one-time purchases and now that you're in retail and the omnichannel, is it more nutritional products? Can you give us some color on how you're thinking about the long-term?

[Mark Goldston, Executive Chairman at The Beachbody Company]

That's actually, without giving guidance, that's actually a great question. We have previously been, as you know, heavily dependent on subscriptions, and we still see that as being an important part of the business. Now that we're no longer network-bound and we can go into the general consuming public, you will see more one-time purchases as we bring new people into the franchise. When we develop the retail part of our business over the next 12 months, more in the latter part of this year, early next year, a lot of those will be single purchases because that's how people buy at retail. You're going to start to see a mixture here of the digital fitness product being heavily subscription-oriented and a component of the nutrition being subscription-oriented and a component of the online business or nutrition being one-time and then all of the retail being one-time.

[Mark Goldston, Executive Chairman at The Beachbody Company]

That's how the business will play out. If I'm taking a 24 to 36-month horizon and you ask me what will this look like in two or three years, once that retail has taken hold, it will become a much bigger part of the total mix.

[Mark Goldston, Executive Chairman at The Beachbody Company]

I know you guys have mentioned the success of the Amazon channel. Any color on the Walmart channel, the Walmart.com? Will it grow to be successful or bigger? How do you see that playing out?

[Mark Goldston, Executive Chairman at The Beachbody Company]

Carl?

[Carl Daikeler, Co-founder and CEO at The Beachbody Company]

It's very early in the process. We just launched Walmart about a month ago, so I think that'll be covered in our Q1 earnings call so that we can provide what clarity and progress there is on that. We are seeing it generally perform with the same kind of ramp in the early days that we saw from Amazon.

[Carl Daikeler, Co-founder and CEO at The Beachbody Company]

Okay, awesome. I'll just squeeze in one more. Just to, how do you evade or manage any kind of potential cannibalization between the direct-to-consumer and the affiliate network channels?

[Mark Goldston, Executive Chairman at The Beachbody Company]

Frankly, they're complementary. The more successful and the more scale we get with direct marketing, the more wind it puts at the back of the affiliate marketer. That is definitely what we saw in the early days of the network marketing business. The reason we lost that dynamic was there needed to be such a most favored nation relationship with the network that it was holding back our ability to expand direct marketing. Now that we've sort of retooled it and made it simpler and just easier for more people to participate in, we expect that more of our subscriber base will actually be able to benefit from the exposure that we generate from new programs.

[Mark Goldston, Executive Chairman at The Beachbody Company]

We have got some very exciting stuff coming out this summer that is specifically being designed to have a significant scaling performance marketing advertising campaign. With that exposure, now our affiliates will be able to leverage their audience with promo codes and discounts to help convert more of their audience into subscribers. I think it's going to have synergy, frankly, that we haven't enjoyed for about a decade.

[Carl Daikeler, Co-founder and CEO at The Beachbody Company]

The best way to think of it is, you know, all affiliates need air cover for the brands they sell. It's really important. And for the marketing that we do, with the direct response marketing that we do, is providing air cover to anyone who is an affiliate selling our product.

[Carl Daikeler, Co-founder and CEO at The Beachbody Company]

Okay. Awesome. I'll take the rest offline. Thank you for taking my questions.

[Mark Goldston, Executive Chairman at The Beachbody Company]

Thank you. Thanks for coming.

[Operator]

Thank you. There are currently no more questions in the queue, so I will pass it back to Mark Goldston for closing remarks.

[Mark Goldston, Executive Chairman at The Beachbody Company]

I just want to thank everybody for attending today. If you have any questions, please feel free to reach out to us either through ICR or directly through Brad Ramberg, our CFO, and we'd be happy to speak with you. Thanks, everybody, for attending.

[Operator]

This concludes today's conference call. Thank you for your participation. You may now disconnect your line.

Participants

Executives

• Mark Goldston, Executive Chairman
• Carl Daikeler, Co-founder and CEO
• Brad Ramberg, Interim CFO

Analysts

• JP Wollam, Equity Research Associate at ROTH Capital Partners
• Analyst at Singular Research
• Bruce Williams, Managing Director at ICR
• Susan Anderson, Managing Director and Senior Analyst at Canaccord Genuity