BODI earnings call transcript, November 10, 2026

Total turnaround has definitely gone better than expected. Our early October restructuring reduced our cost base by more than $30 million. That brings our break even points to about 100 and $25 million. That's down from over $900 million four years ago. We've strategically aligned our cost structure to where our revenues are today and our cost reduction efforts allow us to have more dry powder to invest in our growth opportunities. On the growth turnaround, it's not yet at the level we expected. That being said, some legacy attrition remains from the former MLM business and new customers and subscriber additions are not yet offsetting that. We've identified where to improve. One is in our marketing mix and two is in our retention and our retail outreach. And we're taking urge. actions by reviewing every function, including reevaluating our marketing spend to align it with where our revenue is today and have the dry powder to invest in demand creation, et cetera. as the business scales. With that said, I want to be as clear as I can about why I remain optimistic about the longer term. We own some of the best known brands in fitness and nutrition. As I've mentioned on previous calls, Shakeology sold more than a billion servings and P90X and Insanity had very high customer awareness levels. For years, our old compensation model forced us to price these products largely out of the reach of many shoppers. That constraint is gone. Now we're able to price and provide new form factors that align with what customers actually want.

The nutritional supplement category is about $164 billion. Compare that with about $13 billion for the digital fitness category. So we're strategically directing our resources to address this. Larger nutritional supplement opportunity. We recognize that building customer awareness through our direct-to-consumer channel and building wholesale distribution is going to take time. But we believe it's the right long-term path. For this company and for our shareholders. The wholesale opportunity gives us a chance to put our brands in front of millions of shoppers where they already shop and we're building that foundation. Sprouts Farmers Market has expanded our Shakeology footprint to 181 stores and we've seen some reorders there. Shakeology is also in 481 vitamin shop stores. Retailers add new. products on their own planogram reset schedules one to two times a year. I know I've said this in previous calls and nothing has changed. The timing is what the timing is and it's outside of our control. And frankly, it's been a little slower than we had originally hoped, but that's largely because the next planogram cycle is still ahead of us. And that's the only time when you can get added to a retail shelf. However, we have some of the best brands and products in the space. And we're working diligently to secure further commitments that we think will bear fruit. The opportunity is enormous. And with Kayhee as a distributor, we have a path to thousands of

grocery and natural food retailers as well. I'd like to update you on our newest product launches. Insanity Liquid Shock energy drink and our P90X line of energy drinks. We've received very positive feedback. And we think the flavors and the packaging distinguish us from the competition very clearly. We recently launched our expanded nutritional supplements, including our line of P90X products and energy drinks on our website. At body.com. On Amazon, our P90X supplement line, energy drinks, and our seven-serve Shakeology are now available. With old pricing constraints gone, we can meet. Shoppers at the price point they expect to pay on Amazon. While our Southern California energy drink test market is just launching with Insanity Liquid Shock and our P90X line of energy drinks, we remain excited about this opportunity within that test market. Our Innovation Pipeline is full, we're enhancing our DTC capabilities through our partnership with Shopify, and we're excited about the long-term distribution. opportunities of our nutritional supplements. We've done a fantastic job of generating profitability, and we've got some of the best-known brands in fitness and nutrition, and that's a great formula. distribution rollout's been a little bit slower than we had hoped, but we believe our strong brands, robust innovation pipeline, and importantly, our disciplined financial foundation position us well for long-term growth.

with that i'd like to turn the call over to carl thanks mark coming out of the second quarter we said we were moving toward a nutrition first multi-channel business using our iconic brands our shopify platform and our digital fitness platform to build a more efficient growth model in the third quarter we put that model to work as we continue to move beyond our fitness first legacy to build a multi-channel nutrition company complemented by digital fitness we've improved our agility reduced operating expenses and sharpened our marketing mix we're leading customer acquisition with nutrition because that's where we see the greatest opportunity for growth particularly through shakeology with its history of more than a billion servings sold and through the expanding supplement portfolios under the p90x and insanity brands three things are noteworthy from the third quarter first our customer relationships are valuable when we activate them properly as we've said in prior earnings updates the customer database we've built over more than 20 years is one of our most valuable assets beginning in july we focused on leveraging those relationships more deliberately not only through email and s ms but also through disciplined paid social media advertising we also installed a new database marketing platform called bloom reach into our customer relations management ecosystem with the goal of making customer data segmentation

lifecycle communications and on-site experiences work together more effectively by focusing on converting existing customers during the seasonally softer and less predictable third quarter we were able to generate roughly the same level of sales as we expected at a substantially lower cost of acquisition returning customers accounted for most of our sales allowing us to conserve cash on media spending as we refined our marketing approach and focused on our shift to nutrition that's a double-edged sword of course efficiently serving our prior customers is valuable but sustainable growth also requires new customer acquisition the opportunity is to use the strength of our existing relationships that have low our customer acquisition costs while improving our marketing efficiencies to acquire new customers that work included continued refinement of our shopify storefront landing pages and customer journey it also exposed the next level of work in front of us making our product stories clearer and more differentiated from the competition for instance for Shakeology we're refining our messaging around specific functional benefits over the past six months we've been testing several approaches to focus our messaging and narrowing our market positioning towards the messages we believe can improve new customer acquisition while also supporting amazon and retail demand as we approach 2027. and second as mark mentioned we're building a broader new

nutrition portfolio to serve the multi-channel strategy last spring we introduced a new performance nutrition portfolio under the p90x brand that includes pre-workout fast-acting energy weigh hydration and creatine and we're all excited about the recent launch of p90x ready-to-drink energy cans these are important products for us and we're continuing to refine how we communicate their benefits we're also bringing new products to market under the insanity brand including the ready to drink insanity liquid shock energy drink targeted to a younger demographic and the upcoming rocket pop flavored pre-workout insanity off your rocket and rainbow rampage a sweet candy inspired flavor these products are designed to appeal to different customer segments expanding our tam rather than everything simply competing for the same customer in november we'll support these insanity products with the launch of insanity unhinged a new 100-day hybrid training program led by three-time high rocks champion hunter mcintyre and executive produced by sean t the originator of the insanity franchise and third digital fitness continues to play an important role in the customer relationship the body subscription remains a high margin platform for serving customers and reinforcing daily engagement insanity the unhinged will add new content while supporting the related supplement portfolio and we're also developing new content for 2027 that reflects growing interest in wellness longevity and consistent daily activity we're calling it body 365.

our first full year-long program with a new workout for every day of the year the goal is simple give customers a practical reason to stay consistent with roughly a half hour a day of activity while strengthening the connection between digital engagement and our nutrition products we also took important steps in the operating model behind the products during the quarter we laid the groundwork for moving supplement manufacturing from an in-house function to a turnkey model with manufacturing partners we expect this to improve production speed and gradually move raw ingredient inventory off our books preserving more liquidity for marketing and customer acquisition mark mentioned we also initiated a sweeping reorganization early in the fourth quarter to reduce redundancies improve agility reduce costs and increase speed of execution within marketing we're continuing to strengthen leadership and coordination across growth marketing crm creative seo and geo amazon and creator and affiliate activity it hasn't been easy to transition from more than two decades of a fitness first marketing mentality to a model built around nutrition innovation and multi-channel growth but we believe that the asset portfolio we've built will work together to create growth due to our large customer base iconic brands and expanding nutrition portfolio a high margin digital platform and a more flexible operating structure the legacy business continues to provide valuable customer relationships and demand and with the sophisticated technology within the bloom reach crm platform we believe

we're now in a position to unlock the value of the customer database within the nutrition pivot with the opportunity to grow those relationships reach new customers and build a larger business across direct to consumer amazon retail and digital fitness that's our focus as we enter the fourth quarter execute a focused and disciplined black friday and cyber monday promotion support the insanity launches improve the productivity of our marketing investments and continue building the customer and product systems that can support growth into 2027. now i'll let our cfo brad ramberg walk you through the results of the third quarter in detail brad thank you carl and thank you everyone for joining the call today i will review our third quarter results and provide our outlook for the fourth quarter of 2026. for the quarter revenue was within our guidance range and both net income and adjusted ebitda exceeded the high end of our guidance we generated our fifth consecutive quarter of both positive net income and positive operating income and our 12th consecutive quarter a positive adjusted ebitda along with our fifth consecutive quarter double digit adjusted ebitda margin total revenue was 45.2 million dollars a decrease of 8.9 percent sequentially and a decrease of 24.5 percent year over year as we noted last quarter this is the first quarter in which we can make a direct year-over-year comparison

because the remaining revenue associated with the legacy mlm has largely burned off customers who remain from that cohort are now part of the new body business model revenue base keep in mind that revenue continues to reflect our shift from a multi-level marketing platform to our current omni-channel model digital revenue was twenty seven point eight million dollars a decrease of ten point seven percent sequentially and twenty three point five percent year-over-year digital subscriptions total approximately six hundred and ninety thousand a decrease of nine point two percent sequentially and twenty three point three percent compared to the same period a year ago average digital retention was nine fifty five point four percent nutrition and other revenue was seventeen point four million dollars a decrease of six percent sequentially and twenty six point one percent year over year. Nutritional subscriptions totaled approximately sixty thousand compared to approximately seventy thousand in both the prior quarter and the prior year period. As our business evolves and. To a multi-channel model with more one time sales and retail sales the nutrition subscription metric will become a less relevant KPI. Digital growth margin was eighty six point three percent. Decreasing eighty basis points sequentially and a hundred and eighty basis points from the prior year. Our digital growth margin was in line with our target range of eighty six to eighty eight percent. Nutrition and other

growth margin was forty five point eight percent. Decreasing ninety basis points sequentially and seven hundred and ninety basis points versus last year. Reflecting promotional activity and the mixed shift towards new channels. This person. percentage was above the high end of our guidance range of forty two to forty five percent. Consolidated third quarter growth margin was seventy point seven percent. Decreasing hundred and thirty basis points sequentially and three hundred. Ninety basis points compared to the prior year. We're pleased the consolidated gross margin was at the high end of our estimated range of sixty eight to seventy one percent. Operating expenses for the quarter decreased ten percent. And decays twenty two point seven percent year over year to thirty point seven million dollars. Selling and marketing expense represented twenty five point six percent of revenue down five hundred ninety. Basis points sequentially, primarily due to lower media spending and six hundred and thirty basis points year over year as partner compensation continued to decline following the shift away from the MLM and. Media spending decreasing. We strategically moderated media spending this quarter, applying discipline as we evaluate our marketing investment ahead of the launch of our innovation pipeline. Enterprise technology and development expense was 22.6% of revenue, increasing 270 basis points sequentially and 520 basis points year over year, primarily due to revenue deleverage.

G&A was 19.7% of revenue, increasing 240 basis points sequentially and 280 basis points year over year, also primarily due to revenue deleverage. Operating income for the quarter was $1.3 million compared to $1.7 million in the prior quarter and $5 million in the prior year period, marking our fifth consecutive quarter of positive operating. income. Net income was $3.3 million compared to $1.4 million in the prior quarter and $3.6 million in the prior year period, marking our fifth consecutive quarter. A positive net income. Net income this quarter included a non-cash gain of $2.7 million from the change in fair value of warrant liabilities. Adjusted net income was approximately $600,000 compared to approximately $900,000 in the prior quarter and $4.3 million in the prior year period. Adjusted EBITDA was $6.4 million compared to $6.7 million sequentially and $9.5 million in the prior year period, marking our 12th consecutive. quarter of positive adjusted EBITDA. Our adjusted EBITDA margin was approximately 14.1% in the quarter. Now turning to the balance sheet. Our cash balance was $27.5 million. Compared to $32.4 million in the prior quarter. And $39 million at the end of last year. Total balance sheet debt was approximately $22.9 million. Resulting in. A net cash position of $4.6 million. As a reminder, under the credit agreement we amended on August 3rd, covenants are not tested as long as our cash level remains above $22.6 million.

We ended the quarter above that level. For the nine months ended, September 30, 2026, cash used in operating activities was $10.1 million. Compared to cash provided by operating activities, a $16.8 million in the prior year period. Cash provided by investing activities was $400,000, reflecting the maturity. Restricted short-term investments compared to cash used in investing activities of $3.7 million in the prior year period. Free cash flow was negative $12.1 million. For the nine months ended September 30th, 2026 compared to positive $13.1 million generated in the prior year nine month period. For clarity purposes, the prior year. Had a $22.3 million benefit resulting from the discontinuation of partner compensation. It's part of the dismantling of our MLM structure. Therefore, without this one time 22 point. $3 million benefit. Our free cash flow through the nine months ended September 30th 2025 would have been negative $9.2 million. The year over year increase of 2 point. $9 million of negative free cash flow was largely the result of $5 million buildup of inventory in support of our nutritional product launches. As Mark and Carl mentioned the first week. of October, we executed a major restructuring designed to better align the company's infrastructure with our recently articulated strategy of focusing more heavily on nutrition. With regard to our 2027 overhead plan. We effectively reduced 2027 anticipated overhead by approximately $27 million and have identified an additional $7 million savings in media efficiencies and in moving to a turnkey production model.

This total of $34 million in overall spending reduction will help create substantial operating leverage when future growth materializes, and it has further reduced the company's adjusted EBITDA. Even level to $125 million from $900 million in 2022. In Q4, we expect to record a restructuring expense of approximately $300 million. Primarily related to termination and retention benefits to impacting employees. Over the course of 2027, we expect to reduce our inventory raw material position as we move primarily to a turnkey manufacturing model where all raw material expense will be borne primarily by the manufacturer. And in the near to medium term, we expect capital expenditures. and content investments to be at or below the current levels. Now turning to our fourth quarter guidance, we expect fourth quarter revenues to be in the range of 38 million to 42 million. Net income to be in the range of negative 2 million to 1 million. And adjusted EBITDA to be in the range of 6 million to 9 million. For the quarter we anticipate revenues to approximate 64% digital and 36% nutrition and other. For the quarter our digital gross margin target is expected to be in the range of 86 to 88%. our nutrition and other gross margin target is forecast to be in the range of 41 to 44% in line with promotional activities planned for the quarter. our total gross margin target is expected to be in the 68 to 70% range. with that i'll turn the call back over to mark for closing remarks.

thanks very much brad and thanks everybody for being on the call today. operator if we can get people. to the queue who might want to ask questions we'd be happy to take them from anyone who's in the queue.

your first question comes from Susan Anderson with Canaccord Genuity. Susan your line is open.

This concludes today's call.