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01/11 11:30
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call reveals mixed results: positive cash flow and reduced net loss are offset by significant revenue declines in digital and nutrition segments. The transition away from MLM is decreasing costs but also impacting sales. Positive guidance on future product launches and reduced expenses is tempered by unclear management responses and lower digital revenue. The market reaction is likely to be neutral, as improvements are balanced by ongoing challenges.
Revenue $63.9 million, declined 42% year-over-year. The decline was attributed to the shift from a multilevel marketing platform to an omnichannel model.
Gross Margin 72.3%, increased by 300 basis points year-over-year. The improvement was due to operational execution and cost structure optimization.
Adjusted EBITDA $4.6 million, compared to $4.9 million in the prior year. This marks the seventh consecutive quarter of positive adjusted EBITDA.
Free Cash Flow $4.1 million year-to-date, with $2.4 million generated in Q2. This is the first time since 2020 that the company has achieved positive free cash flow.
Digital Revenue $39.7 million, decreased 32.5% year-over-year. The decline was due to pressure on digital subscriber count, which fell 18.2% year-over-year.
Nutrition Revenue $24.2 million, decreased 51.8% year-over-year. The decline was attributed to the transition away from the MLM model, which historically drove nutrition product sales.
Selling and Marketing Costs 39.9% of revenue, down from 51.1% in Q2 last year. The improvement was due to the pivot away from the MLM model and reduced partner compensation.
Digital Gross Margin 87.7%, increased by 720 basis points year-over-year. The improvement was due to reduced digital content amortization and disciplined production spending.
Nutrition Gross Margin 51.4%, declined by 940 basis points year-over-year. The decline was due to higher promotional offerings and the discontinuation of preferred customer fees.
Net Loss $5.9 million, compared to $10.9 million in the prior year. The improvement was due to restructuring charges and reduced debt extinguishment losses.
Shakeology retail rollout: Starting in late Q1 2026, Shakeology, a superfood plus protein shake brand, will be introduced in select grocery, mass merchandiser, and club store accounts. This marks the first time Shakeology will be sold in brick-and-mortar retail.
P90x nutritional line launch: In 2026, the P90x nutritional line will be launched, supported by a new P90x fitness program, creating cross-marketing opportunities between retail products and digital fitness content.
INSANITY branded nutritional supplements: INSANITY branded nutritional supplement products will also be introduced in 2026 as part of the retail expansion.
25-minute Speed Train program: Launched in mid-June 2025, this 8-week training program achieved over 1 million views in 21 days, significantly faster than previous programs.
Transition to omnichannel model: The company shifted from a multilevel marketing (MLM) platform to an omnichannel model, opening new growth channels and reducing dependency on MLM.
Retail market entry: The company is entering the retail market with its Shakeology, P90x, and INSANITY brands, marking a strategic shift to brick-and-mortar sales.
Cost structure improvement: Reduced revenue breakeven point from $900 million in 2022 to $200 million in 2025, achieving a $700 million improvement.
Gross margin improvement: Achieved a gross margin of 72.3% in Q2 2025, a 300 basis point improvement year-over-year.
Positive free cash flow: Generated $4.1 million in positive free cash flow year-to-date, with a line of sight to achieving full-year positive free cash flow for the first time since 2020.
Debt refinancing: Refinanced debt with Tiger Finance and SG Capital, reducing the overall interest rate by more than 40%.
Business model transformation: Rearchitected the company for profitability, transitioning from MLM to omnichannel, and focusing on long-term margin improvements.
Retail expansion strategy: Preparing for significant retail expansion in 2026 with Shakeology, P90x, and INSANITY brands, leveraging brand equity for growth.
Digital subscriber growth initiative: Launched initiatives to drive digital subscriber growth, including new offers, CRM campaigns, and content launches.
Revenue Decline: The company experienced a 42% year-over-year revenue decline and an 11.6% sequential decline in Q2 2025, attributed to the transition from a multilevel marketing (MLM) model to an omnichannel model. This shift has caused near-term revenue pressures.
Subscriber Decline: Digital subscribers decreased by 7.8% sequentially and 18.2% year-over-year, while nutrition subscribers declined by 12.5% sequentially and 52.1% year-over-year. This decline is linked to the discontinuation of the MLM model, which previously drove nutrition product sales.
Transition Challenges: The shift from MLM to an omnichannel model has created operational and financial challenges, including the need to establish new sales channels and adapt to a different revenue structure.
Debt and Financing Costs: Although the company refinanced its debt at a lower interest rate, the new facility still carries a high effective interest rate of 15.4%, which could strain financial resources.
Profitability Pressures: Despite achieving positive adjusted EBITDA for seven consecutive quarters, the company is still facing profitability pressures due to revenue declines and the costs associated with its business model transition.
Market Competition: The company faces competitive pressures in the fitness and nutrition market, particularly as it transitions to retail and digital channels, which require strong brand positioning and marketing efforts.
Execution Risks: The success of the company's transformation depends on flawless execution, including the rollout of new products, retail expansion, and digital subscriber growth. Any missteps could adversely impact performance.
Economic Uncertainty: Broader economic uncertainties could impact consumer spending on fitness and nutrition products, posing a risk to revenue growth.
Revenue Expectations: The company expects third quarter revenues to be in the range of $51 million to $58 million. Long-term revenue growth is anticipated through new product launches and expanded sales channels.
Margin Projections: The company has increased its long-term digital gross margin target to 86%-89% and its total gross margin target to 70%-75%. Nutrition gross margin is expected to be in the range of 46%-52%.
Capital Expenditures and Cash Flow: The company has a line of sight to achieving full-year positive free cash flow for 2025, marking the first time since 2020. Year-to-date free cash flow is $4.1 million.
Retail Expansion: Starting in late Q1 2026, the company will roll out Shakeology in select grocery, mass merchandiser, and club store accounts. This will be followed by the launch of the P90x nutritional line and INSANITY branded nutritional products in 2026.
Product Launches: The company plans to launch a new P90x fitness program in spring 2026, along with a hybrid program from Shaun T called 'Dig In' in late 2025. Additional content and programs are scheduled for release in the back half of 2025.
Operational Changes: The company is transitioning to Shopify's AI-powered commerce platform in spring 2026 and adding personalization and engagement tools to the BODi app in late 2025.
Market Trends and Strategic Focus: The company is shifting from a multilevel marketing model to an omnichannel model, focusing on retail and digital channels. This transition is expected to open new growth opportunities and improve operating leverage.
The selected topic was not discussed during the call.
The company's strategic shift from MLM to an omnichannel model led to a significant revenue decline, but improved gross margins and reduced operating expenses. The positive cash position and reduced revenue breakeven point are encouraging, yet the unclear guidance on marketing spend and the decline in digital and nutrition revenues raise concerns. The Q&A session highlighted ongoing product launches and retail expansion plans, but management's vague responses on key details tempered optimism. Overall, the sentiment is neutral, reflecting mixed signals from financial performance and future growth prospects.
The earnings call reveals mixed results: positive cash flow and reduced net loss are offset by significant revenue declines in digital and nutrition segments. The transition away from MLM is decreasing costs but also impacting sales. Positive guidance on future product launches and reduced expenses is tempered by unclear management responses and lower digital revenue. The market reaction is likely to be neutral, as improvements are balanced by ongoing challenges.
The earnings call presents a mixed picture: strong adjusted EBITDA and gross margins, debt reduction, and strategic restructuring are positives. However, significant revenue declines, supply chain challenges, subscriber retention risks, and vague responses in the Q&A indicate potential headwinds. The positive shareholder return plan and improved financial health are offset by weak current performance metrics and uncertainties in transitioning business models. Overall, the sentiment is balanced, suggesting a neutral stock price movement in the short term.
The earnings call shows mixed results with significant revenue decline and competitive, regulatory, and economic risks. Despite improved EBITDA and gross margins, the transition from MLM to affiliate model hasn't met expectations, impacting digital and nutrition revenues. The lack of a share repurchase program and vague guidance from management further add to investor concerns. The company's strategic plan, while promising, faces execution risks. Overall, the negative aspects outweigh the positives, suggesting a likely negative stock price movement in the coming weeks.
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