Enterprise technology and development expense was approximately 19.9% of revenue, increasing approximately 260 basis points sequentially and approximately 330 basis points year over The increase was primarily due to product development and revenue deleverage. G&A was 17.3% of revenue, increasing approximately 310 basis points sequentially due to lower capitalized labor and revenue deleverage and decreasing approximately 80 basis points year over year. Operating income for the quarter was $1.7 million compared to $3.1 million in the prior quarter and an operating loss of $4 million in the prior year period, marking our fourth consecutive quarter of positive operating income. Net income for the quarter was $1.4 million compared to $2.3 million in the prior quarter and a net loss of $5.9 million in the prior year period, marking our fourth consecutive quarter of positive net income. Adjusted net income was $0.9 million for the quarter compared to $2.5 million in the prior quarter and an adjusted net loss of $2.8 million in the prior year period. adjusted EBITDA was $6.7 million compared to $8.0 million sequentially and $4.6 million in the prior year period, marking our 11th consecutive quarter of positive adjusted EBITDA. Our adjusted EBITDA margin was approximately 13.4% in the quarter, our fourth consecutive quarter of double-digit adjusted EBITDA margin. Now turning to the balance sheet, our cash balance was $32.4 million compared to $36.6 million in the prior quarter and $39 million at the end of last year. Our net cash position was $8.8 million. As Mark mentioned, we're also pleased to announce that on August 3rd, we amended our credit agreement to a more flexible covenant structure, which reflects our lenders' continued confidence in the long-term trajectory of our business. For the six months ended June 30, 2026, cash used in operating activities was $4.3 million compared to cash provided by operating activities of $6.6 million in the prior year period. And cash used in investing activities was $1.4 million compared to $2.5 million in the prior year period. Free cash flow was negative $5.7 million compared to $4.1 million generated in the prior year period. The decline in free cash flow in the current year is primarily due to cash use for inventory purchases as we have shifted our focus to nutrition and our retail rollout and a continued decline in deferred revenue. Now, turning to our third quarter guidance, As mentioned previously, Q3 will be the first quarter since winding down our legacy MLM model so we're able to compare our new business model year over year. We expect third quarter revenues to be in the range of $44 million to $48 million, net income to be in the range of negative $3 million to breakeven, and adjusted EBITDA to be in the range of $3 million to $6 million. For the quarter, we continue to anticipate revenues to approximate 60% digital and 40% nutrition and other. However, in line with the strategies articulated on this call, we currently expect a shift by the end of 2026 to a larger percentage of our business being in nutrition and the attendant margins that come along with it. For the quarter, our digital growth 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 42% to 45%, which is in line with our volume expectations and certain promotional efforts planned. Our total gross margin target is expected to be in the 68% to 71% range. In closing, we continue to make considerable progress against our business transformation. We strengthened our financial position and lowered our breakeven points, putting us on a solid foundation to execute against our growth initiatives that will drive long-term shareholder value. I look forward to updating you on our progress on our next earnings call. I'll now turn the call back over to Mark for closing remarks.

Thank you, Brad. Thank you, everyone. We will now turn it over to Sarah, who will get people into the Q&A queue, so we can go through, because I see there's some people waiting there. So, Sarah, can you please process those with questions?

Yes, we will now begin the question and answer session, everyone. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Susan Anderson with Canaccord Genuity. Your line is open. Please go ahead.

Hi, good evening. Thanks for taking my questions. I was wondering about, So it looks like the nutritional segment is starting to see some traction there. I guess I'm curious, is that being driven by, you know, the rollout to, say, vitamin shops, sprouts, Amazon, et cetera? Are you seeing that really kind of drive the sales there? Or I guess, is it related to the increased marketing spin that you spent in the quarter? And then also, what should we expect for marketing going forward?

Hey, Susan. Thanks for the question. No, it's organic. It's not from the retail yet because Sprouts is doing great, but we got the initial order from Sprouts, put it into Kahee, who feeds Sprouts. So while they have reordered and it's doing well, that's really not what's reflected there. And the vitamin shop just started literally this week. So that's a Q3 number, not Q2. So what you're seeing is Q2 organic traction in nutrition, and as a result of the pivot that we announced a couple months ago, where we're putting more of our money into the nutritional marketing. In terms of going forward, yes, we expect to see more traction on Amazon. We just launched recently the 7Serve Shakeology, as you know. We used to sell the 30Serve bag on that for like $149. Now we've got a 7Serve that's selling at $34.99, which is a huge difference. And P90X just this week went up, actually just the end of last week, went up on Amazon for the first time. So on a go-forward basis, we should see Amazon become a little bit more of a factor. We may look at some other marketplaces. We will have retail rollouts continuing, hopefully get sell-through and replenishment from Vitamin Shop, from Sprouts. And then as we move towards the end of this year, Susan, and into the beginning of 27, we should have a broader distribution footprint for both Shake and P90X. And we will also have the SoCal test market results in full swing for the Insanity Liquid Shock Energy Drink and the P90X Energy Drink.

Okay, great. That sounds exciting. And then maybe just one follow-up on the digital side. Maybe if you could just talk about the consumer response, what it's been to the 10-Minute Body programs that you've rolled out. How are those trending? And then also, I guess, what are you doing around the marketing on the digital front to get new customers into the brand?

Thanks, Susan. We're continuing the playbook that we started with the 10-Minute Body series as a complement to the overall subscription plus its own unique subscription for $10 a month. I would say the most interesting finding there is that how it is proving to be applicable for GLP-1 users. So we're really riding in the tailwind of the growth of the GLP-1 segment as these are people who are generally under-exercising according to statistics and And our GLP-1 fitness formula, the 10-minute program that we designed for that, plus the overall catalog specifically for the 10-minute beginner program, is definitely appealing to that segment. So our advertising that is putting GLP-1 messaging forward is benefiting both the 10-minute series plus our catalog overall from a digital perspective. And I'll add, it's also benefiting Shakeology, which is a great nutritional complement to people who are taking a GLP-1. So overall, I would say that the 10-Minute Body has been successful for us. Otherwise, as I mentioned, we've got the 30-Day Booty Boost that came out this summer, which got very warm reception. And we have a new program called Max Built coming from Sean T., which I'm personally excited about because it's a simpler approach to weightlifting resistance training, um, which aligns very well with the P90X supplement story for people who want to increase their metabolic health, improve bone density, and, uh, and overall just improve their metabolism with weightlifting. So we, we continue to build the catalog in a way that is both on trend, complements the overall catalog and expands the catalog with these short form workouts, microdose fitness workouts, so that we're appealing to the customer who might not be interested in going to the gym. They're not going to do 10 minute workouts at the gym. They're going to do it at home. And that's where we really appeal with this catalog.

Okay, great. That's exciting. I'll go ahead and toss it on. Good luck the rest of the year.

Thanks, Susan.

Your next question comes from the line of Michael Kapunsky with Noble Capital Markets. Your line is open. Please go ahead.

Thank you, and good afternoon, everyone. Mark, I was wondering if you can just provide us some early indications from Shakeology's rollout in Sprouts. I know that you were talking about that you're already getting some reorders, but I was wondering if you had any early indications in terms of sell through repeat purchases or probably more importantly i would think um you know what the performance is relative to the retailer's expectations and then maybe what you have learned about um learn from the rollout that could influence your you know much broader rollout uh great question michael um here's what i can tell you um we were originally as you know in 90 Sprout stores.

Then we got expanded, I think, to 110. Now I think we're up to 131. So they've continued to expand within Sprouts. I think some of the Sprout store GMs are seeing what's being posted about what's selling through. One. Two, Kehi, our distributor, actually ran low on stock from what we had originally sold into them. So there was a little bit of a gap and they had to reorder, which of course is a good thing because that means that it's selling through well at sprouts so they've expanded our store count um we're 40 stores more now than we were then which is a 45 increase from the 90 where we were at and um so we're feeling really good about that and we will start to get specific sell-through data as we move forward but thus far they're happy with it evidence the 45 expansion of the stores that we're in and kahi obviously is happy because they were running low on goods and had a reorder from us. So all of that's a good thing.

Gotcha. And I know that the free cash flow was a little negative. I was just wondering if you can talk a little bit about cash usage. I assume it's associated with the preparing for retail expansion. Just wondering when we should start to see working capital begin to normalize on that.

Hi, Michael. This is Brad. Yes, you're absolutely right. So the decline in free cash flow was due to two things. One, primarily an increase in inventory as we shifted the strategy to more nutrition and the retail rollouts. We needed to invest a little bit in inventory. And then likewise, as we shifted to inventory, we have a little less deferred revenue. So the decline in free cash flow was due to those two factors.

Gotcha. And then you've been highlighting more flexible covenant structure on your new credit agreement, I was just wondering if you could just talk a little bit about the changes and maybe how this might give you the ability to invest in growth or deploy capital. I was just wondering if you could just give some color there.

Yeah. I mean, thanks, Michael. But the lender and we meet all the time. As you know, they're very happy with how we're operating this business. I mean, the fact that we've made almost 80 million dollars over the past 11 quarters and EBITDA has been very impressive to them so what we did was we renegotiated the covenant package so that the thresholds are even lower than they were so there's not anything to be concerned about one and two as you remember we used to have to have 4.6 million dollars above the outstanding debt level in order to not test covenants that was going to be about 29.6 million dollars. That has now been lowered by almost seven million dollars to 22 and a half million. So what does that do? It buys us seven plus million dollars of additional cushion vis-a-vis the hurdle rate that they use to measure the covenants. So as long as we keep our cash balance above that 22 and a half million dollar level then the covenants never get tested. And so we have that plus we have the $18 million minimum liquidity against the $25 million outstanding loan. So much better situation, lower metrics in terms of hurdles to hit on billable subscribers, billings. So it's just an overall response from the lender that they recognize the operational excellence that we've had in this turnaround, and they've given us essentially more room to operate with all of these growth initiatives in front of us.

Yeah, that's terrific. One last question. Just a little bit about your Q3 guide, your revenue of 44 to 48 million. What are the major variables that would determine whether or not those results land at the high end or the low end of those ranges? is?

This is Carl. I would say that it's really looking at the market dynamics, meaning we have said for a couple of years that we want to be pursuing revenue that is profitable, right? Not just revenue or billings for billing sake. So the variables are obviously efficiency of media. And also we're looking at the variables of how the sell through at retail continues to go. So So we're balancing those factors, but not being overly optimistic that the marketplace is going to respond to any one particular promotion. So we're cautiously optimistic about what we're pursuing right now in the launch of Max Built and the launch of the P90X supplements on Amazon and how those will relate, how the marketing will all contribute to uh all channels performing is sort of the unknown and but uh but ultimately we're going to do it in the most efficient way possible to get the most out of our media spin so michael the best thing for you to think the best thing for you to think about as an analyst would be if you look at the buckets so you got a legacy bucket people who've been here

renew, et cetera. Then you've got the newly acquired DTC customers. Some of them are one-time nutritional purchasers. Some of them are subscribers. And then you've got these subscribers that you get on the digital side. Then you've got the marketplaces, the principal one being Amazon. Now that you've got these new products on Amazon, if you want to try to get to the high end of that range or better, whatever the case may be, that performance will also be critical. And then lastly, but much less, you have the retail component, because as the retail rollouts start to occur, the orders will start to roll in, but you're going to have some free fill and slotting, et cetera, that occurs. So the Q3 revenue will not be wholly dependent at all on any one element. And if I had to rank them, I would say it would be, you know, it would be legacy one, DTC two, marketplaces three, retail four. Now, we have this discussion in Q1, Q2 at 2027. We'll have a different mix, but for right now, that's what we're looking at.

Great. Thanks, Mark, for the color. I appreciate that. That's all I have. Thank you. Thank you, Michael.

Your next question comes from the line of Alex Handman with Sudodi and Company. Your line is open. Please go ahead.

Thank you and good afternoon, everybody. Maybe just to piggyback on the retail rollout, can we talk about Vitamin Shop? I know it's live at a little under 500 stores.

I think that was ahead of the fall timeline you discussed in June, so I was curious what pulled the launch forward and how you think about building towards the full chain. yeah uh alex great to hear from you listen uh they were great they're very excited about this i mean they've really gotten behind it such that we were able to get in those stores you know probably two to three two to four weeks ahead of when we thought so um the folks at vitamin shop have been great partners they're very bullish on the opportunity as are we and so uh yeah so that's what's going on and we're in 481 of those stores and we just got in there a couple days ago and and we have a whole plan that we're laying out for the next several months on how to try to support Vitamin Shoppe and our distribution there. But yeah, we're looking for really good things.

Great, thanks, Mark. And I know you touched on the sample sets in the prepared remarks. My understanding, it's November, April, planogram resets. Is there any update on how many decisions might land for the next window?

It's a great question. Carl and I just had a status meeting on that with the team four days ago. And there are, I think there are 12 decisions pending between middle of September and the end of November. So we'll wait to see how those go. Listen, right now, in addition to Vitamin Shop and Sprouts, which combined are about 610 doors, I think altogether we have another 100, 150 doors on top of that, and that's going to continue to roll and gain momentum. Getting in Vitamin Shop and getting P90X and Shakeology manufacturers on Amazon and being now in 131 Sprouts will help the other retailers who are looking at and considering Shake and P90X. It will definitely help because those are pinnacle retailers that a lot of other retail buyers look to for proof of concept, et cetera. So that's what you'll start to see probably as we get into the middle of Q4.

Great context.

Your next question comes from the line of Eric DeLaurier with Craig Halla, Capital Group. Your line is open. Please go ahead.

Thanks for taking my questions. Congrats on another strong bottom line quarter and the great progress of Sprouts. Thanks, Eric. My first question here is just on the P90X Amazon launch. I think you said it's just launched recently. I believe you've had Shakeology on Amazon for about a year or two now. How have those learnings from Shakeology sort of informed your P90X strategy on Amazon? And then overall, as you or I guess as Amazon potentially comes a larger mix of sales, how does that sort of impact your customer acquisition, retention efforts? Overall, you know, how should we think about the sort of roadmap for product launches on Amazon and the kind of impact that you have on your model?

Well, the one thing to think about, as you asked about Shakeology performance on Amazon over the last, call it, year and a half, is we were basically selling a 30-serve that we normally sell for $129.95. That thing was on Amazon for $149 to $169, which is, you know, not to be humorous. it's like you're in charge of sales prevention. That's not what's going on in Amazon. People are buying Amazon products for between $29 and $69. And so we were on Amazon, but we were being protective of that former business model, the MLM, that we couldn't undercut. We have just now started to seed the multiple SKUs of Shakeology in the seven-serve bag, which is a $34.95 product, which is a completely different pitch to the consumer same thing on p90x we just got up in amazon it was like four days ago but that line is a 15 to 39.95 product line so between shake and p90x everything that we're selling other than the big bag which will still be there everything is sub 40 that opens up a whole because as you know in most nutrition companies and they don't know how it will be for us. But most nutrition companies do 25 to 30% of their total revenue on Amazon. These are all of the nutrition companies that you know. So how it will play out for us, don't know yet. But we were with one arm behind our back before because of our price points and because of the limitations that the MLM had placed on our pricing. Those shackles are now gone. So we got pricing, we got form factor, we got distribution. So there's a much bigger opportunity there. And in terms of retaining those customers, look, they'll either retain by coming to us for a repurchase or they'll go back to Amazon. Either way, we're happy. What we want to do is get a wider aperture of distribution and therefore get more customers. And whether they buy it from us or they buy it directly on Amazon or they buy it in Sprouts or Vitamin Shoppe or wherever else, we're happy regardless. And that assumption mix is what went into Brad's guidance that he gave you on nutritional gross margin.

That's certainly exciting. We'll be excited to track that progress. You also called out a meaningful share of nutrition customers that are converting to digital subscriptions. I was wondering if you could share any more detail on that and just overall how that might compare to your internal expectations?

I don't think we break that out individually, but we're offering everybody who comes in on a nutrition subscription gets a 30-day trial into the digital subscription. So if they don't cancel, they renew into a monthly subscription and have the opportunity then to upgrade. You can imagine in a world where supplements are growing so quickly, we're definitely seeing the improvement in demand and efficiency on the front end by selling nutritionals. But it's also an additional value add or increases the value proposition by offering a free month of digital subscription and access to 225 fitness programs that we've developed over 20 years that people are getting that additional value with their purchase. So we're pleased with the number of starts that we're getting from the digital subscription being attached to nutritionals. We haven't implemented that out into retail yet, but we do think, as we've mentioned before, that that'll be a part of our strategy of the value equation that we can offer uniquely.

That's great, Cole. I appreciate that. And then just last one from me, you called out a few insights you learned from Shopify. in terms of, I suppose, overall optimizing the user experience and minimizing friction. You mentioned aggressively adjusting the website. So I guess we have a little over kind of three months until the holiday season. How confident do you feel in being able to get all those adjustments done in time? Just any other color that you want to share on some of those improvements you're making? Great. Thank you.

Yeah, thank you. This is the thing I'm most excited about because we can easily watch the KPIs as these things improve. Harmonizing the front-end ads with the landing pages is something that is a best practice of Shopify, obviously. And this gives us the ability now to show the actual price that somebody is going to get from a special offer or special promotion, which both improves traffic from the front end, but then can add to cart and ultimate conversion on the back end. So we are rapidly iterating and, in fact, have one of the best companies that works with Shopify clients to make improvements to our landing pages so that we can increase our conversion. We've recently started to consolidate landing pages, so we have multiple URLs that are now coming right into the Shopify platform. So we're getting all this organic traffic coming into a better performing, a better converting website experience that people are familiar with rather than our old e-commerce platform, which was unique to us. So I think as we go into Black Friday, Cyber Monday, we're definitely going to see the benefits of the Shopify platform and that familiarity and the fact that people already have accounts with Shopify, that'll in order to the benefit of the promotions that we have going into the holidays in Q1. you have a lot of exciting things upcoming um congrats on all the progress guys looking forward to um good someone else thank you thanks thanks eric appreciate you there are no further questions at this time i will now turn the call back over to mark goldson thank you sarah and thanks everybody for attending um as always if you have any questions etc please reach out to the company

um we are going to be presenting tomorrow at the canaccord conference here canaccord growth here in boston and so uh we will have a webcast of that and again we look forward to keeping you uh informed on our progress as we talk to you on the next quarter earnings call so thanks very much have a great evening this concludes today's call thank you for attending you may now disconnect.