Beachbody Company, Inc. (BODI) Q3 2026 Earnings Call Transcript

Hello, everyone. Thank you for joining us and welcome to the Body Third Quarter 2026 Earnings Call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Bruce Williams, Managing Director of ICR. Bruce, please go ahead.

Welcome, everyone, and thank you for joining us for our third quarter earnings call. With me on the call today are Mark Goldstein, Executive Chairman of the Beachbody Company, Carl Deichler, Co-Founder and Chief Executive Officer, and Brad Ramberg, 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 meeting of the Private Securities Litigation Reform Act of 1995. Actual future results may differ materially from those suggested by such statements due to a number of risks and uncertainties, all of which are described in the company's filings with the SEC, which includes today's press release. Today's call will include references to non-GAAP financial measures such as adjusted EBITDA, net cash, and free cash flow, and 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, Bruce, and good afternoon, everyone. Welcome to the BODE third quarter 2026 earnings call. Today, I want to give you an update on two stories. The first story is our financial turnaround, which we've executed better than planned. The second is our growth turnaround, which is taking a little longer than we expected, largely because of retail timing. I'll be candid about both, and I'll also tell you why I remain very optimistic about the longer-term potential of the brands, the products, and the channels that we're building. Let me start with our third quarter results. Total revenue for the third quarter was $45.2 million within our guidance range of $44 to $48 million. This is our cleanest year-over-year comparison of the new business model now that the MLM impact is largely behind us. And while growth is not where we thought it would be, we're focused on what we can control, and I'll lay that out in the plan today. Profitability remains strong. Our gross margin was 71% within our guidance range. Adjusted EBITDA was $6.4 million, above the high end of our guidance range of $3 to $6 million. I want to point out, this was our 12th consecutive quarter of positive adjusted EBITDA, and our 5th consecutive quarter of double-digit adjusted EBITDA margin. Operating income was $1.3 million, and net income was $3.3 million, both above the high end of our guidance range. This marks the fifth consecutive quarter of both operating income and net income. Brad will walk you through the details behind these figures. The financial 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 point to about $125 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 customer 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 urgent actions by reviewing every function, including re-evaluating our marketing spend to align it with where our revenue is today, and have the dry powder to invest in demand creation, etc., 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 Kahee 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. The pace of the distribution rollout has 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 SMS, but also through disciplined, paid social media advertising. We also installed a new database marketing platform called BloomReach 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 lower 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 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, whey, 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, an 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 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. As 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, an 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 Bloomreach 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 of positive adjusted EBITDA, along with our fifth consecutive quarter of double-digit adjusted EBITDA margins. Total revenue was $45.2 million, a decrease of 8.9% sequentially, and a decrease of 24.5% 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 a 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 $27.8 million, a decrease of 10.7% sequentially and 23.5% year-over-year. Digital subscriptions totaled approximately $690,000, a decrease of 9.2% sequentially and 23.3% compared to the same period a year ago. Average digital retention was 95.4%. Nutrition and other revenue was $17.4 million, a decrease of 6% sequentially and 26.1% year-over-year. Nutritional subscriptions totaled approximately $60,000 compared to approximately $70,000 in both the prior quarter and the prior year period. As our business evolves into 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 86.3%, decreasing 80 basis points sequentially and 180 basis points from the prior year. Our digital growth margin was in line with our target range of 86 to 88%. Nutrition and other gross margin was 45.8%, decreasing 90 basis points sequentially and 790 basis points versus last year, reflecting promotional activity and the mid-shift towards new channels. This percentage was above the high end of our guidance range of 42% to 45%. Consolidated third quarter gross margin was 70.7%. Decrease in 130 basis points sequentially and 390 basis points compared to the prior year. We're pleased the consolidated gross margin was at the high end of our estimated range of 68 to 71%. Operating expenses for the quarter decreased 10% sequentially and decreased 22.7% year-over-year to $30.7 million. Selling and marketing expense represented 25.6% of revenue, down 590 basis points sequentially, primarily due to lower media spending, and 630 basis points year over year as partner compensation continued to decline following the shift away from the MLM and from 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 of 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 $22.5 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 of $16.8 million in the prior year period. Cash provided by investing activities was $400,000, reflecting the maturity of 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 30, 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 as part of the dismantling of our MLM structure. Therefore, without this one-time $22.3 million benefit, our free cash flow through the nine months ended September 30, 2025 would have been negative $9.2 million. The year-over-year increase of $2.9 million of negative free cash flow was largely the result of a $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 planning, 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 breakeven level to $125 million from $900 million in 2022. In Q4, we expect to record a restructuring expense of approximately $3 million, primarily related to termination and retention benefits to impacted 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 into the queue who might want to ask questions, we'd be happy to take them from anyone who's in the queue.

Absolutely. We will now begin the question and answer session. If you'd 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 Susan Anderson with Canaccord Genuity. Susan, your line is open.

Hi, good evening. Thanks for taking my questions. I guess I'm curious, just, hey, maybe if you could give some additional color just on how the nutritional products are doing at retail, where you have expanded those, and then the new launches that you've had as well.

Yeah, thanks, Susan. This is Mark. So in terms of retail, we decided that we're not going to give specific sell-through information. One, we don't have the permission from the retailers, and two, as we start getting additional retailers, it would just become unwieldy to give account-specific And so overall, we're happy with where we are. As you can see from the remarks, we expanded our footprint in Sprouts from where we were originally. I think we were originally in like 88 stores. Now I think we're in 181. We're in 480-plus vitamin shop stores. The planogram cycles are what they are. They haven't changed since the last two earnings calls. Some of them happen in November. Most of them happen in the spring. There's not a lot we can do to jump that line. The Southern California test market that we talked about for the energy drinks is just getting underway right now. It's in the initial stages. We have hired LA Libations. Which is probably the best beverage broker firm in America, as you probably know, they're representing us. We've gone through the distributor selection process and selected them. We've set up our initial route to take this thing to market. They think that we're in a really good position for a strong sort of Q1 broad presence in SoCal. And in the meantime, over the next 90 days... We think we're going to have the chance to be in our first, call it, 100 retail locations here in Southern California, and then we can grow significantly from that. So the reason I said in my prepared remarks that our expectations were to go quicker, that's our own impatience. If I'm being totally candid with you, planogram dates didn't change. They are what they are. We were just surprised. That so many accounts, and I don't mean this critically, I'm just stating a fact, have this intransigence with regard to resetting their sections. They just, you don't get in intermittently by and large. You must wait for the reset cycle. So while we're waiting for the reset cycle, we're launching into Amazon, which we've done. We've launched on our website, which we've done, and we're preparing to launch into this test market, which we've done. So we feel good about all of that.

Okay, great. And I guess I'm just curious, do you think that you're getting new customers into the brand or customers that already knew about the brand at retail? And then maybe if you could just talk about, I'm curious on your marketing expense, how you're kind of allocating that to digital versus nutrition and how it's changed from back when you were at MLM. Thanks.

Well, for example, on the customers, we don't have direct feedback yet because we can't track it, but our assumption is that this retail distribution is going to get us a large component of new customers. I don't know that I would say the same thing for Amazon because, as you know, just as an individual consumer, when you find the product that you've been using is available on Amazon because of their delivery process, a lot of people will order. From Amazon. So we're getting some new people, obviously, but you'll get existing people. From a marketing standpoint, you know, we did make that pivot, as we talked about a couple of months ago, more towards nutrition and spending more of our dollars on that. But as Carl said in his remarks, we've pared back the actual spend because what we were seeing is that a large portion of the people that we were converting, both digital and nutrition, were former members. And so, as opposed to getting top of the funnel, broader scope, bringing in new people, the algorithm was putting us in a position where we were bringing back people that, frankly, already exist in our CRM base and can be more efficiently reached that way. So, as Carl said, we're going to leave our powder dry while we revamp the marketing tools that we're going to use to go top of funnel and broaden the aperture and then use those dollars to drive it.

Okay, great. Thanks for all the details here. Good luck the rest of the year.

Thank you very much, Susan.

Our next question comes from the line of JP Wollum with Roth Capital Partners. JP, your line is open.

Great. Good afternoon, guys. Appreciate you taking my questions today. If we could just start on the digital side, you know, wondering if you could, a couple there, but wondering if you could maybe start with just any sort of additional engagement metrics that you're seeing that are, you know, giving you some good positive signals, whether that's around continued next-gen T90X usage or some of those micro workouts you launched a while back. But just any engagement metrics. And then the second part is just, you know, as we think about kind of the decline year over year there. How aggressive are you guys trying to be in terms of retention offers for that legacy base? And as you think about new subs, you know, are you seeing the conversion from the nutrition side that you had expected and hoped for?

I'll speak to the digital component of this, JP. Thanks for calling in. The good news is we're seeing that the retention of customers continues to be fairly consistent, around 95%, and the... Frankly, the consumption of content tends to favor the last program launched. So in that case, right now, we've got Max Bilt from Shanti. Coming up, we'll have Insanity Unhinged from Hunter McIntyre. And before that, as you mentioned, we had P90X Generation Next and the... Lower Body Booty Program that we launched in the summer. So we sort of see these peaks and valleys as new content gets launched. But overall, we're seeing good engagement from our subscriber base, but constantly working on retention and also looking for that sweet spot in terms of offers that both retain current subscribers and legacy subscribers, but acquire new subscribers. So for instance, we recently put out a good, better, best offer, which gives our customers the prospect of a quarterly subscription. Between that's at a different value between the annual subscription and the monthly. So in general, I would say digital continues to perform consistently with what we've seen in past trends, but we're not acquiring the customers as inexpensively as we are nutrition customers, which is why we made this inversion of the business model.

And Carl, just adding on to what you said, you know, with the Bloomreach program and all the things you and the CRM team are doing, I think, JP, we have determined that because we were getting such a high percentage of people on our digital advertising responses who had been with us before, that rather than spending CAC money to go get those people, that we could use a much more effective approach to our CRM base. And reach the same people, and if we convert them, convert them at a fraction of the cost. So they're working really hard on putting programs in place so we can have that bear fruit.

Very helpful. Switching gears, I know you don't want to comment on retail sell-through, but hoping just between the sort of month of energy drinks online on DTC and some of the other new P90X products, you could just maybe give us some at least directional thoughts on how those new products are performing.

Well, it's early days. You know, two, three weeks does not a trend make, but we're getting a really good response. One thing I will say about these products is the taste of the Insanity Liquid Shock and the P90X Energy Drink is phenomenal. And as you probably know, because you've read the same things we've read, several of the people who got off to a big start in these categories and didn't sustain, in almost every instance, it had to do with the taste of the product. So we have been fanatical, and the LA Libations guys have been great partners to us in helping to guide us since they've been involved with almost every major successful launch in that business. And so we feel great about what we've got there. And Carl, you want to add some color on that?

Yeah, that's, you know, what you said, Mark, is actually perfectly accurate. In this business where flavor and the actual experience of an energy drink, for instance, or a hydration drink, what you feel when you do it, that needs to get reviewed. So all these products are going through the machine and we're getting very positive, you know, four or five star reviews of these products as they roll out. As you start to get that word of mouth, get that credibility, then people are comfortable trying it because they can't go into a convenience store currently and just try one can. They got to buy a 12-pack or they have to buy a box of the drink. So it's building or compounding that word of mouth that's going to be the big unlock. That's actually why we tempered our expectations for the third and fourth quarter, because we want to get the marketing message and build that compounding to the extent that now we're loaded for bear as we go into the first and second quarter of next year.

Yep. Got it. And last one, if I could, and then I'll get back in the queue. Just on the cost side, the sort of extra $34 million that you've identified, just curious if you can maybe break out how much of that $34 million should we see in the 4Q number? And then as we go into 2027, you know, the remaining chunk, will that be a 1Q? We'll see the full run rate, or does that progress over the year? Thank you, guys.

Hi, JP. Hi, JP. It's Brad. You're going to start to see that in late Q4, because what this had to do with was a reduction in force, termination of some technology that we're no longer new with the pivot to nutrition. So, it's going to really start in late Q4 and then run through the balance of the year. So, it's going to happen sort of pro rata over the course of the year. There's a couple of changes, as I said, in the prepared remarks. There's about $27 million. That's a reduction in kind of overhead and consulting payments. Another thing we're very excited about doing is getting out of the inventory production business. We've got about $8 million of raw materials on our books right now. Historically, we bought the raw materials, sold them to a co-man who manufactured them, and then we bought the product back. We're going to be basically buying finished goods from co-mans. So over time, as we work through that $8 million, we're going to be out of the raw material business. And we're going to be very diligent in our media spend. We're going to be spending media where it makes the most sense. So you'll see a bit of a reduction in media spend next year. So it's going to happen over the course of the year, starting in kind of December-ish of Q4.

Great. Best of luck, guys.

And, JP, that $34-ish million is what allowed us now to get the breakeven of the company, which was $900 million four years ago. Now the breakeven level for EBITDA and the company is $120 million, which is $125. It's crazy.

Yep. Very much so. Agreed. Thank you, guys.

Thank you, JP.

Your next question comes from the line of Michael Kupinski with Noble Capital Markets. Michael, your line is open.

Thank you for taking my question. It's Jacob Mutchler on for Michael today. So this has already been partially covered, but, you know, for the nutrition customers who use the 30-day digital trial, could you give us a sense on how the renewals are pacing, you know, once that free trial expires? That's your attention compared with subscribers acquired through traditional digital advertising. Any color around that would be appreciated. Thanks.

Yeah, I don't know that we break those statistics out specifically. I will say that it continues to be a powerful lever for us and a differentiator in terms of the value add that we can provide the customers of our nutritionals versus competitors. Um, but, uh, there's the process of like people opt into that. It's not something that that is forced on them. So they're already opting in to a free trial, a 30 day or a seven day free trial. And it really varies on how much they've got in their cart, obviously how much they can afford them for the next month. But, uh, I don't think we break those. specific retention metrics out by cohort.

Gotcha. And then just one more question. You know, as nutrition becomes a larger part of the business, just curious how you're thinking about the long-term revenue mix between nutrition and digital. Just curious if you're targeting a particular balance. Any color around that would be appreciated. Thanks.

Hi. So right now, we guided for the quarter for Q4. It's going to be still about 64% digital, 36% nutrition. As we said on the last call, over time, we expect to get to around the 50-50 range, and then maybe even slightly more towards nutrition. But right now, we're at kind of two-thirds digital, one-third nutrition, and working over time to more like the 50-50-ish level.

Gotcha. Thank you for taking my questions.

Thank you.

Your next question comes from the line of Alex Hantman with Sidoti and Company. Alex, your line is open.

Thank you. Thanks for taking questions. I know earlier you shared, you know, as much as you could on tracking nutritional retail rollout for now, but I was wondering if you could talk a little bit more as you sit down with Sprouts and Vitamin Shop ahead of the next reset and share a little bit about what they're looking for in terms of metrics or What are those qualitative aspects that would lead them to expand the products they carry or the floor space or enter even other retailers?

Well, one, I think those metrics are confidential with regard to those individual retailers. I'm not sure they would want us. To espouse what their weekly SKU turn metrics are. I'm going to leave that up to them. And we've got our SKUs in representation in those stores. And so at this point, there's no need for us to double up on facings. I think we have an appropriate level of inventory on the shelves for the turn rates that we would be experiencing. And so typically, as you know, what would happen is if you had a Super, super high rate of turn, you might get additional facings. But by and large, you don't see that in that category. You get your SKUs on the shelf, and they usually have a single facing per flavor or per SKU, which, as you know, stands for a stock keeping unit. And so your rate of sale is determined against their individual chain benchmark, and each chain is different. So food, drug, mass merchant, specialty, convenience, club stores, all have a different turnover metric that they look for. So as long as we're adhering to their metric. We're doing great. If we exceeded, even better. But there is no rule of thumb as to a specific rate of turn per skew at retail across all trade channels.

Okay. Yeah, thank you for sharing. And, Mark, I know you said, you know, the old compensation model kept the products priced out of reach for many shoppers. So, with that constraint now gone, you know, I'm curious what you're learning so far about demand at different price points and packaging and how maybe it's opened up customers you couldn't reach before.

Yeah, listen, that's a great question. I'll give you an example. The P90X supplement line that we created. Had we created this line when we had the MLM, there is absolutely no way that we would have a five product line ranging from $15 to $34.99 retail. It would be impossible because you were paying out 50% in sales commission. So those same products would have probably been $25 to $65. Because we can sell them for $15 to actually $39.99 for the large whey protein, we're in a position now to go after a whole group of people, especially in the Amazon world, that we just wouldn't have gotten before. And so we're early days, and we're just starting to really market these things. But we're appealing to an entirely new group of people who heretofore... Would have been shut out from buying sub $40 nutritional products from BODY.

Absolutely. And last one from us, you know, I know you've talked about Body365 and helping people build daily consistency, daily habits. I'm curious, you know, about how you see, you know, sort of daily digital engagement linking to daily nutrition routines or sort of nutrition product innovations that might go along with that.

It's obviously a major part of our strategy and right on trend to both promote wellness and longevity and not just the before and after photo or transformation that was the company's legacy for 25 years. So the way we're approaching Body365 is to fully integrate a daily habit of... Drinking your Shakeology every day. That will be both promoted through our CRM activities, our organic social activities, and within the digital app. Within the digital app, we're obviously promoting people to do a workout a day of about 30 minutes for the entire year. We unlock badges throughout the year, and then those badges also integrate into earning them discounts on Shakeology or hydration or pre-workout or creatine. All these things also are integrated into our approach to SEO and GEO so that we're fanning out our messaging of a total wellness and longevity platform, which is unique to body, which includes both fitness, nutrition, and mindset, to help people with their overall well-being, which is right on trend. So hopefully we're going to show up in those searches. Hopefully we'll show up in those questions that people ask their large language model AI services. And that's how we think that the company is going to turn this corner from a perspective of getting back to growth as we become more than just that 21-day program, 60-day program, or 90-day program fitness company to a holistic wellness business.

You know, it's interesting. The market data suggests that about 61% of all the people who either do an exercise program or go to a gym, that 61% of those people also use nutritional supplements. We have historically, as we've publicly stated, had a sub-10% crossover, meaning sub-10% of our digital people were using our former nutritional supplements. A big reason for that was the price that we had to sell them for because of our former MLM architecture. So now, especially with P90X and this new launch of its Insanity pre-workout, we're in a position where we can go after our digital fitness people with a much more aggressive and a brand new array of nutritional products and try to see if we can get closer. to what the market number is, which is the 61% crossover usage, because we have really never seen that, and a large reason for that has been how we used to be priced.

Great comment, guys. Thank you very much.

Thank you.

Your next question comes from the line of Eric Delorier with Craig Howlem. Eric, your line is open. Great. Thank you for taking my questions.

First one from me, just hoping if you could expand upon the... Um, MLM sort of, uh, remnants that remain in the business. Um, you know, I know that the MLM architecture is now sort of fully behind us. Obviously, uh, top line pressure continues. Can you just kind of expand a bit more on like, what, what is it about the MLM structure that is continuing to impact the declines? If you could just expand on that for us, that'd be helpful. Thanks.

Brad?

They are. Well, we still have a certain number of subscribers that had originally come in through the coach network or the MLM. So they are still our legacy subscribers. But it's been well over a year right now. So none of those people have connections or relationships to their prior coaches. So we're really viewing them as part of the new body business model. They're part of the current revenue base. But they were initially acquired through the old MLM. So we still have very low-tax people within our revenue base because we're no longer paying coach commissions, but we still have them within the revenue model. So they're still in the subscriber base.

I mean, just to put it in a nutshell, not to be engaging in rhyme, but our rate of attrition has exceeded our rate of addition. And some of that has to do with the marketing tactics that we use. Some of it has to do with the fact that a lot of our marketing appeals to people that used to be with us. And so as we're changing this nutrition first strategy, you know, we believe we may have been having the tail wag the dog previously and that we were using the $13 billion digital fitness segment to try to attract people in and cross them over to the $154 billion nutritional segment. Now we're doing just the opposite. We're going to the ocean and trying to convert people into the pond, where before it was completely misguided. And so, not that it was a mistake, it's just we learned that the yields were not what they needed to be. So, our hope is that we're going to bring in more people on nutrition who will then see the opportunities that we offer on fitness and that we can cross them And that that will help us increase the rate of addition.

All right, that's helpful, caller. And then can you just expand a bit more? You've touched on it on a couple comments and obviously on the prepared remarks, but On the marketing changes, so understood you guys are looking to preserve tax spend and basically not go after customers that are already in your CRM, but could you just expand on what you're doing that's either new or what you're kind of doubling down on to specifically reach new customers and be more efficient in that top of funnel?

Yeah, one of the things that we're very excited about is, as we've seen the evolution away from a multi-level marketing business to an affiliate business, we've got the opportunity, particularly with these nutritionals, so many new products that we've just launched, to expand into a fulsome, like, creator army. So that is a focus of the business. That's both upper funnel and mid funnel. As I mentioned earlier, the comments and feedback and reviews of our new products are what get that momentum going. Well, we've got such good experience of mobilizing our customers as affiliates and mobilizing influencers that now we take that skill set and mobilize it into these new nutritional products with these great brands. They've got recognizable brands with P90X in categories that have strong tailwinds, energy and hydration and creatine and whey protein. We've got new flavors with Shakeology, as Mark mentioned, in new form factors of seven servings. That'll be far more conducive to being sold on, for instance, TikTok shops and in Amazon for new customers. I think the focus that we've got is taking our skill set that built the company for 28 years and now applying it to a contemporary framework that uses influencers. Creator Army now expands into SEO and GEO so that we're taking advantage of all this visibility in multi-channels, D2C, Amazon, and retail. And that's how all this effort inures to the benefit of the whole. Rising tide floats all ships.

All right. Thank you for taking my questions.

We'll see you at your conference on Tuesday in New York when we meet with some investors there, so we're looking forward to that, Eric.

Yes, sir. Looking forward to that as well.

Thank you.

We have reached the end of the Q&A portion. I will now turn the call back to Mark Goldston for closing remarks.

Hey, thanks, everyone. Really appreciate you guys attending the call, and thanks for some really great questions today as well. As always, if you want to reach the company or potentially set up a meeting, please feel free to reach out to Brad Ramberg, our CFO, and we will attempt to accommodate you. So thanks, everyone, everyone. Have a great evening. Bye.

This concludes today's call. Thank you for attending. You may now disconnect.