BODI - NYSE

Good afternoon. Thank you for attending today's Beachbody Company, Inc. First Quarter 2025 Earnings Conference Call. My name is Victoria and I will be your moderator for today's call. All lines will be muted during the presentation portion of the call with the opportunity for questions and answers at the end. [Operator Instructions] I would now like to pass the conference over to your host, Bruce Williams, Managing Director of ICR. You may proceed, Bruce.

Welcome everyone and thank you for joining us for our first quarter earnings call. With me on the call today are Mark Goldston, Executive Chairman of The Beachbody Company; Carl Daikeler, Co-Founder and Chief Executive Officer; and Brad Ramberg, Interim Chief Financial Officer. Following the prepared remarks, we'll open the call up for questions. Before we get started, I would like to remind you of the Company's safe harbor language. Statements contained in this conference call, which are not historical facts, may be deemed to constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual future results may differ materially from those suggested by such statements due to a number of risks and uncertainties, all of which are described in the Company's filings with the SEC, which includes today's press release. 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. I'd like to welcome all of you to the BODi Q1 2025 earnings call. As we stated previously, Q1 2025 marked our first quarter operating under a completely revamped business model, one that is fundamentally different from the old MLM model that the company employed over the last decade. I joined the Beachbody Company, now called BODi, as Executive Chairman almost two years ago in June of 2023 with a clear mandate develop a roadmap for executing a major turnaround. Having spent a great deal of my career conducting corporate turnarounds and having written a book on the subject called The Turnaround Prescription. This was a challenge I was excited about because of my deep belief in the phenomenal digital library of more than 135 titles, the highly efficacious nutritional supplement products in the BODi portfolio of brands, and the vision of the Company's Co-Founder, Carl Daikeler, who was the pioneer of bringing home fitness programs to the masses. To put the scale of this turnaround in context, since going public in 2021, the Company had not recorded positive EBITDA in any quarter through Q3 of 2023. The Company had a $900 million plus cash breakeven level in 2022, $50 million of debt, declining gross margins, and a legacy MLM model that, like many others, struggled to motivate an independent group of salespeople who largely viewed their work as part time. Since my arrival in June 2023, we've conducted a dramatic turnaround of the company's financial fortune. We generated positive adjusted EBITDA for the first time since the 2021 IPO in Q4 of 2023, and we've now registered six consecutive quarters of positive adjusted EBITDA, delivering a healthy guidance beating $3.7 million of adjusted EBITDA in Q1 of 2025 and bringing the sixth consecutive quarter cumulative adjusted EBITDA total to an impressive $34.8 million. In addition, we've cut the debt by more than 50% to $18 million. We've improved gross margins and reduced the cash break-even level of the company from more than $900 million in 2022 to $440 million in 2023, and today the company has a cash break-even level of just under $225 million. That's a $675 million reduction in the cash break-even level during the 2022 to 2025 period. In addition to this, we're thrilled to announce that we've entered into a new lending agreement with Tiger Finance for a $25 million three-year loan facility that allows us to retire the $17.3 million of outstanding debt as of the repayment date of May 13, 2025 with Blue Torch Capital and ahead of the February 2026 maturity date of that loan and it gives us approximately $5 million of additional capital on the balance sheet after paying off the Blue Torch loan. We're grateful for the partnership we had with Blue Torch and we're very excited about our new partner, Tiger Finance and their conviction in the BODi business plan over the next three years. We've massively re-architected this company. We've eliminated the MLM business model. We've transitioned to a multi-channel approach, featuring a greater emphasis on direct-to-consumer retail distribution channels and the use of an affiliate model featuring independent sellers who are not part of an organization, do not recruit new sellers and keep 100% of the commissions they earn. In the next phase of our turnaround plan, we've implemented what we call a cut and grow strategy. This will result in a temporary reduction in revenue in 2025 due to the dismantling of the MLM model with its tens of thousands of former independent sellers before we begin to see the growth we anticipate in the direct-to-consumer business. In addition, we expect to anticipate growth as we build out major new retail distribution strategies featuring the launch of nutritional products from some of the most prominent, well-known brand names in the fitness and nutrition industry, our own P90X, Insanity and Shakeology. I have a long history as a top executive at major consumer product companies and I'm applying that experience to bear here in spearheading this retail initiative. The retail rollout into the food, drug, mass merchandiser, club store and convenience store channels is anticipated to begin very late in Q4 of 2025 with our initial retail launch of Shakeology, a brand that has cumulative sales in excess of $4 billion. It has more than 1 billion servings since inception and a customer base in the millions since its launch as the first superfood plus protein shake. We will follow the Shakeology retail rollout with the launch of the P90X nutritional line in the first half of 2026, capitalizing on the massive brand awareness of P90X and utilizing innovative formulations and dynamic packaging to tell a compelling story. Later in 2026 and then into 2027, we will take our monster brand name Insanity and its history with more than 40 million qualified views and huge brand awareness and introduce a nutritional line into the retail channels I just mentioned using eye-catching packaging, highly efficacious formulations and the irreverent attitude of the Insanity brand name to clearly differentiate our product lines. In addition, we're going to create a brand new P90X digital fitness program and we'll also be creating a new Insanity program after that. So when the P90X and Insanity nutritional products are launched into the retail network of food, drug, mass merchandiser, club and convenience stores, we will simultaneously launch the new P90X and then Insanity fitness programs along with some other clever and compelling cross marketing between the nutritional products and their namesake fitness programs. The opportunity to market our new P90X and Insanity nutritional products and the new digital fitness programs that will be coming out under those brand names to our more than 12 million current and former customers, along with all of the people we will be exposing the brands to in the retail channels should be a major revenue and profit growth opportunity for our company. Q1 2025 was the first full quarter executing our new business model. However, it's important to emphasize turnarounds are like a long winding road with new things unveiled around every turn. They require intense discipline, total alignment in buy-in by management and the employee base, creative thinking, masterful execution, tenacity and most importantly, patience. We have all of that at BODi and it's rooted in the strong belief in our people, our plan and our performance to-date. Look, we've stated repeatedly over the last 24 months since my arrival that we've got to get our financial house in order before we can successfully grow the business with all the new products that we discussed today. With our sixth consecutive quarter of positive adjusted EBITDA, massively reduced cost infrastructure, we're now poised to enter the growth phase of the turnaround towards the end of 2025 and into 2026. I'd now like to turn the mic over to our Co-Founder and CEO, Carl Daikeler.

Thanks Mark. In our last earnings call, we outlined several key initiatives aimed at refining our business model and enhancing customer engagement, including the transition from the MLM to an affiliate model, addressing the women's hormone health market as well as the GLP-1 weight loss drug market, optimizing ad spending for profitability and fast return on ad spend and leaning into our Total Solution bundle, combining our digital subscription with a monthly subscription to Shakeology. And I'm pleased to report that we've made real progress in the first quarter. We completed the transition to our new affiliate model on December 31, 2024, which completed what was a productive chapter of our business model. But for creating our next chapter of scale and helping the most possible, we removed the MLM stigma from our overall business model. We're now focused on helping as many people as possible get healthy and fit and on expanding the opportunity to increase our addressable market. This change has improved profitability and as we hoped, we retained our most enthusiastic subscribers, many of whom are truly committed to helping people get healthy results. The next chapter in this transition happens in June when we launch a much simplified platform for our affiliates that will feature a central supportive community, an easier signup process, and improved online conversion tools. We're also introducing a Refer a Friend program to incentivize sharing and engagement for all our subscribers. Our launch into women's hormone health with the Belle Vitale fitness and nutrition program was affected by the transition out of the network model. However, we’re pleased that our customers are seeing better than expected results with the program and the Belle Vitale program is evolving similarly to what we saw when we first launched P90X. We’re in the early days of this new and emerging non-pharmaceutical women’s hormone health market, which is expected to reach close to $10 billion by 2031. As with any emerging category, pioneering programs like Belle Vitale will take some time to gain traction as we determine the right approach to increase awareness and stimulate demand. However, our belief in the market size and the credibility of the program based on the encouraging results that we’ve received gives us hope that Belle Vitale can be a major long-term success and asset for the company. That aligns well with our goal to have a broad spectrum of programs designed to solve common problems for everyone from the novice to the fitness devotee who just wants the best programming for the fastest results. To that end, we’ve developed two new programs, the GLP-1 fitness formula, which is a tailored fitness solution for anyone taking a weight loss medication. This program has been well received with strong demand driven by targeted advertising, which will expand in the upcoming quarters. In addition, we designed Walk Week in partnership with super trainer Lacee Green. For beginners who want to start an exercise program with BODi movements that will start them on their health journey and the active aging demographic who want a safe and convenient way to stay active inside. And our next big program launch is coming in June. It’s called 25 Minute Speed Train by Joel Freeman. You might know Joel from the very popular LIIFT4 and LIIFT MORE programs, which are currently two of our top streamed programs on the platform. 25 Minute Speed Train will be launched at the same time as we rollout our new simplified affiliate platform that I discussed earlier. This launch will have some compelling call to action offers, so I’m very optimistic that Joel will notch another winner in his string of successes this summer. On the performance marketing front, profitable customer acquisition remains our top priority. The shift in the business model from MLM has empowered our performance marketing team with more room to test compelling offers, to refine creative positioning and to integrate campaign themes with customer onboarding. To expedite our efforts, we hired a new digital agency with strong data analytics capabilities in February. We’ve already seen improvements with higher click through rates on social ads, increased landing page conversions, and gains in both average order value and lifetime value following the launch of our Total Solution bundle. And while pleased with these early results, we continue to be disciplined with our marketing spend to assure that we get profitable return on ad spend. By concentrating ad spend on the most efficient channels and crafting creatives that address the specific needs of our target audience, I’m confident that we’ll continue to see improvement in performance marketing, especially as we rollout new creative going into the summer months and with the launch of 25 Minute Speed Train. In addition, I’m excited about our recent launch of the Total Solution bundle, which combines a digital BODi platform subscription with a Shakeology subscription. Customers are responding well to its compelling value as well as to the launch of smaller pack sizes for Shakeology, which was previously only really marketed in 30-day bag sizes. While early, the Total Solution bundle is more accessible to more people. It’s an incredible value and it’s helping us rebuild our nutrition subscriber file. As we introduce the brand to more consumers, we’re seeing a quick payback on our advertising and promotion spend through improved click through and landing page conversion metrics. All this is to say that again, the business is in a very good position with offers and configurations going into the summer launch. Moving on to our expanded omni-channel platforms, we’re seeing ongoing growth of the Amazon channel. Amazon Subscribe and Save has surpassed our initial expectations and the Subscribe and Save file continues to grow month-over-month. Based on those observations, we reconfigured our own Subscribe and Save offer on bodi.com with a 5% discount and free shipping to people who sign up for recurring monthly shipments. As we mentioned last quarter, our products are now available on Walmart.com as of February, and while we expect that platform to grow slowly at first, we’re already seeing promising demand and steady growth. As I mentioned in our last call, we continue to pursue partnerships, which can enhance our reach or improve the experience for our customers. We’re expanding our partnerships in the areas of HSA and FSA payment options with Dr. B and Truemed to offer HSA and FSA payment options directly at checkout, making our programs more accessible and affordable to more people. And we partnered with Hello Alpha, a female focused telehealth provider, to offer the Belle Vitale hormone health program to their subscribers. And we’re offering a discount to their Hello Alpha telehealth service to our members. As we look out over the next several quarters, we’ll introduce several initiatives that we believe will improve engagement and retention for our subscribers. And while we’re excited about the broad opportunities that our omni-channel strategy unlocks, we remain focused and disciplined in allocating capital efficiently to drive sustainable, profitable growth. Bottom line, I think we’re in a very good place to return to profitable growth in the coming quarters. Okay. Now, I’ll turn the call over to Brad Ramberg, our Interim CFO, for a detailed financial overview of the quarter. Brad?

Thank you, Carl, and thank you, everyone for joining the call today. I will review our Q1 results and provide our outlook for the second quarter. As a reminder, the first quarter was our first full quarter under our new model and the company generated revenue of $72.4 million, which exceeded the high end of our guidance range of $60 million to $70 million. Adjusted EBITDA of $3.7 million significantly exceeded our guidance range of a $2 million loss to $2 million and we generated our sixth consecutive quarter of positive adjusted EBITDA. Now I would like to provide more details about the quarter. Total revenues of $72.4 million declined 16.2% sequentially and declined 39.7% year-over-year in line with our expectations as we continue our strategic transition. Revenues were impacted in the near-term by the shift from a multi-level marketing platform to an omni-channel model. We strongly believe that the shift to the new omni-channel model will provide additional flexibility and ultimately revenue growth over the next 24 months. Consolidated Q1 gross margins were 71.2% reflecting an increase of 70 basis points over the prior quarter and an increase of 350 basis points compared to the prior year. We are pleased to report that consolidated gross margins exceeded the high end of our long-term target of 65% to 70%, underscoring the strength of our operational execution. Moving to Digital and Nutrition revenues. Digital revenue decreased 14.8% from the prior quarter to $42.9 million and decreased 30.2% year-over-year. Revenues were impacted by continued pressure on our digital subscriber count, which decreased 5.1% sequentially to $1.02 million and declined 16.6% compared to the same period a year ago. While we’ve experienced some expected declines in the digital fitness subscriptions in the early days of the new business model, the transition away from the MLM has had the most impact on nutritional subscribers because historically, our nutrition products were almost exclusively sold through our product network. Consistent with our expectations, Nutrition revenue decreased 17.7% from the prior quarter to $28.7 million and decreased 48.4% year-over-year. Nutrition subscriptions declined 13.1% sequentially to 80,000 and fell 47.7% year-over-year. Digital gross margin was 85.5% for the quarter, down 40 basis points from the prior quarter and representing a 640 basis point improvement from the prior year. Our digital gross margin was in line with our guidance of 85%. The continued strength in year-over-year gross margin was due to a decrease in digital content amortization as a result of a more disciplined production spend. Nutrition and other gross margin was 53.1% representing an 80 basis point increase from the prior quarter and a 680 basis point decline year-over-year. The increase from the prior quarter was primarily due to a decrease in inventory adjustments in the current quarter while the decline from the prior year quarter was primarily due to the discontinuation of preferred customer fees on November 1, which were part of our old business model where customers paid a monthly fee to purchase products at a discount. In line with our previously stated strategy, we are going to more aggressively pursue new one time nutrition purchasers with promotional techniques who will ultimately convert to becoming paid subscribers. As a result of increased focus on promotional pricing activity within both the subscriber base and one-time purchasers, we have adjusted our long-term gross margin for nutrition to be in the range of 47% to 50%. Moving on to operating expenses, which were the major focus of our turnaround restructuring efforts over the past 24 months. Operating expenses for the quarter declined 41.1% sequentially and declined 40.0% year-over-year to $55.2 million. Q4 2024 included a $20 million goodwill impairment charge, exclusive of that charge, operating expenses decreased 25.1% sequentially. Selling and marketing expenses as a percent of revenue decreased 230 basis points over the prior quarter and declined 660 basis points over the prior year to 42.8%. This significant improvement over the prior year was primarily driven by the pivot away from the multi-level marketing channel as we no longer have partner compensation in our new sales after November 1, 2024. Enterprise technology and development expense as a percent of revenue decreased 820 basis points from the prior quarter and increased 260 basis points year-over-year to 17.4% of revenue. The significant improvement as compared to the prior quarter was due to accelerated depreciation recorded in the fourth quarter due to pivot. The increase as a percent of revenue as compared to the prior year was due to revenue deleverage. G&A was 16.1% of revenue, an increase of 270 basis points sequentially and an increase of 490 basis points from the prior year. Both increases as a percent of revenue were due to revenue deleverage. The Q1 2025 net loss was $5.7 million compared to a net loss of $14.2 million from the prior year. The net loss represents an improvement of $8.5 million versus the same quarter last year which included $1.6 million in restructuring charges. Adjusted EBITDA was $3.7 million compared to $8.7 million in the prior quarter and $4.6 million in the prior year. Notably, this quarter marks our sixth consecutive quarter of positive adjusted EBITDA. Next, moving on to the balance sheet and cash flows. Our cash balance is $18.1 million compared to $20.2 million in the prior quarter. Our cash generated from operations for the quarter was $2.3 million. Moving on to second quarter guidance. While we are pleased with the execution of our transformation, I want to reiterate that our first quarter results marked the first quarter of the company's new business model. As discussed, we significantly lowered expenses and our revenue breakeven when we strategically pivoted away from the MLM model to our omni-channel marketing and distribution model. This shift has opened new growth channels that we could not previously access and we are very excited about the opportunities ahead. We now have a stronger and more viable long-term business model, but as with companies that are undergoing a transformation, it will take time to develop traction in these new lines of business. We expect second quarter revenues to be in the range of $51 million to $61 million and net loss in the range of $7 million to $3 million and adjusted EBITDA to be in the range of breakeven to $4 million. As we transition to our new business model, we want to reiterate additional color that we provided on our last call to help you contextualize changes in the new financial model. As of today, we anticipate revenues to approximate 63% digital and 37% nutrition moving forward. This is the second quarter of giving guidance in our new model and should this trend change in the future, we'll update you accordingly. As we move through 2025, we're beginning to see early signs of progress from our new product pipeline and expanded sales channels. We remain confident, these initiatives will drive meaningful impact over time and we look forward to keeping you updated on our progress throughout the year. Now let me turn the call back over to Mark for closing comments before we start our Q&A.

Thanks, Brad. That was a very fulsome summary by the prepared remarks. Victoria, can we please start the queue for the question and answers?

Of course. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from the line of Susan Anderson with Canaccord Genuity. Your line is now open.

Hi, good evening. Alec Legg on for Susan. Really nice job on the quarter. I guess, the question is on just the retention or the transition of sellers in the old model to the new direct affiliate model. Are you able to provide any color there? Is it performing in line with initial expectations?

Yes. Thanks for joining us. We – I would say that we have – we're pleased with the performance of some of the outliers. We've got some really strong affiliates. But I would say, overall, the platform that we're working with is a little bit more institutional than we had hoped for. So we're actually making a transition in mid-June to a very user friendly model that will actually deputize many more of our subscribers to become affiliates for us, because it's much simpler and easy for them to promote the program that they love so much. So while we do see productivity from the affiliate program, it hasn't lived up to our expectations because we didn't make it simple enough for more of our subscribers to get involved. So while it's productive, we're looking forward to the next few quarters to actually see growth in that area.

Perfect, that makes sense. And then just to follow-up, how are we – how should we think about selling and marketing going forward and how is management thinking about balancing maybe reinvesting some of the savings from the change in the business model into your own marketing and brand building activities?

Brad?

Hi, this is Brad. Good to talk to you again. Now that we're in a new business model, our selling and marketing percentage of revenue has changed. In the old network model, the amount that we paid to our partners was significantly higher than we're paying under the new model. I'll tell you, as we gain traction in the new model, we will continue to use cash generated to reinvest into selling and marketing. Because at the end of the day, what we care most about is gross profit dollars. But we're very conscious of our relationship between LTV and CAC, but we will continue to invest to generate the highest level of gross profit dollars that we can.

Yes. We have more room in the P&L because we don't have all that residual comp.

That makes sense.

Okay, thank you so much. Yeah, of course. Thank you so much for your question. Our next question comes from the line of George Kelly with Roth Capital Partners. Your line is now open.

Hey everybody, thanks for taking my questions. Maybe if we could circle back just to the first question that was just asked about the affiliate platform. Can you expand on sort of what changes you're making with the new platform, how you're making it simpler and the plan to attract more affiliates in your network?

Yes. Thanks, George. Good to hear from you again. It's Carl. So really excited about it. The company we're going to be working with called SocialLadder has made it their business to really focus on, I would call it, the mom and pop affiliate, which is our bread and butter. That's what built the MLM. And frankly, the transition from the MLM was in order to reward the seller with 100% of the earnings potential from the demand that they create. So what SocialLadder does is combines a community. This will be a centralized community for all our subscribers to participate in for free. And within that community sits right next to that is the affiliate program. So they don't have to go to a separate platform, they don't have to go through a separate sign on process. And all the tools that they need and references and links and promo codes all sit right within our BODi.com ecosystem. It's much simpler. I was super impressed with the platform and it's just a different approach where the traditional affiliate model is more institutional for people who have blogs or listicles that they're running. What we're doing is we're helping people who lose 20, 30, 50 pounds with our programs and they – whenever they walk into a room, they create demand for their stunning results. We want to make it as easy as possible for them to help their friends and family order and they get the credit. And that's what the SocialLadder platform does by taking out a lot of the extraneous business stuff that a more institutional platform is built for. So that'll launch in mid-June. We've already done user acceptance testing of that with a group of current affiliates and they are super excited about the usability of this platform.

Okay, okay, that's helpful info. Thanks. And then next question is on your nutrition business, specifically pricing. I guess, just curious how you plan to, I think, you said in your prepared remarks that you're going to – your gross margin will settle in nutrition a little bit lower than where it's been running. So I guess, is a lot of that just sort of resetting prices a bit lower and especially as you prepare for your retail launch in a bigger way later this year. How are you thinking about pricing going into that?

Well, George, part of what Brad had talked about and Carl too in the prepared remarks is, we are selling more one time nutrition. So you have to remember when we were the MLM last year, those people are 100% focused on selling subscriptions, not selling one time, because their commission would be higher. Now that we're defocused on that and we're much more focused now on bringing in new people to the franchise, we will have a higher incidence of one time purchases. So the good news to that is we'll bring in more people and potentially they then can convert to become a subscribers. Think about the magazine business, some people buy in the newsstand, some people have a subscription. There's a place for both. But what that does is that will lower your overall gross margin, because obviously if you were 95%, 98% subscription, your margins would be higher. But – because we no longer have the tens of thousands of MLM sellers and we're going out direct to the consumer, we must focus more than we did before on one time purchases. When we go into retail, end of this year and into next year, obviously, going to retail and wholesale margins will be different than the margins that we experienced in direct-to-consumer. But you will dwarf the number of people that you can reach by using food, drug, mass merchant, convenience and club stores. And so as Brad said, We are 1,000% focused on the generation of gross profit, not transfixed on the market margin per se. If we can drive many more unit sales, even at a lower margin, our gross profit will be dramatically higher. And as you know, that's what you use to cover your overhead and make a profit. So that's how we're focused. It's much more can we bring new people right now and going forward into the franchise while still managing to serve the people who have subscriptions with us.

Okay, understood. And then just two last quick ones. On your new credit facility, congrats on getting that done.

Thank you.

Can you give any of the terms such as the interest rate or any kind of covenants?

Yes.

And then secondly, in the prepared remarks, you talked about expecting to see growth I think by the end of 4Q or into 2026, were you a bit – meaning sort of sequential stability or can you just be more specific on exactly what you're expecting?

Yes. I'll start with the second one first to avoid giving guidance on that. We were talking growth in the macro sense, not in providing strict numerical. What we're talking about is when we get the retail program ready to launch and when the new affiliate program that Carl talked about, which will come into the summer, starts to take hold. Our feeling is that we will likely experience some growth from a higher level of productivity from the affiliates because they're on an easier to use platform. And then as we embark on the retail initiative and we'll have a new program that comes out as well, we hope that that will help us drive growth on that. As relates to the loan facility, yes, great thanks to Blue Torch Capital for being our partner for the past two plus years, almost three years. That loan was going to come due, as you know, in February of 2026. So we were able to retire at nine months early. We're thrilled with our new partner, Tiger Finance and SG and basically the loan that we got. And you'll see tomorrow when we file the 10-Q, George, there will be an attachment of the credit agreement to the 10-Q. But just sort of high line cliff notes. The interest rate is SOFR plus nine. So in today's numbers, that would be about a 13.33% interest rate. The interest rate we had on the old loan, just the interest alone, including the PIK [ph] was 14.68%. So we picked up about a point and a half just on the interest rate alone. And you have to remember the amortization costs of all the other things that we had in that Blue Torch loan were another 13.1%. So we were paying a notional rate of 27.8% between the interest and all the other amortized costs. And if you compare that to this loan, which only has about 2% added into the base interest rate, it's about 15.33%. So 27.8% all costs, including interest and amortized costs, 27.8% before, 15.33% now. So a big step up for us in terms of improvement. We also managed to have a one year moratorium on principal repayment. So we will have 12 months where we don't have to do that. So this is a great situation for us. We're really excited about our new partners at Tiger and SG and we really – it gives us some room. It will also give us, frankly, after the payoff of the Blue Torch loan and all the fees and legal fees we'll add about, Brad, correct me if I'm wrong, we'll add about $5 million of incremental capital to the balance sheet after paying off Blue Torch and all the legal fees associated with this.

Yes. That's correct. We will add about $5 million to the balance sheet this week.

So we feel great about this. And it's a three-year term.

Okay. Understood. Thank you.

Okay. Thank you, George.

Thank you for your questions. Our next question comes from the line of Chris Sakai with Singular Research. Your line is now open.

Yes. I'm in for Gowshi. I've got a question. Nutrition subscriptions sell 47.7% year-over-year, but retail launches are pending. How are you tracking customer migration from subscriptions to one time purchases and what retention strategies are in place for this shift?

Obviously – thanks for the question. Obviously, the – just the transition from MLM alone, we knew that there would be some disruption to that file size. As I mentioned in the prepared comments, institutionalizing our own subscribe and save program, similar to the success we're seeing on Amazon, has started to rebuild the nutritional subscription file and at the same time now we can advertise in performance marketing for our nutritional. So we're generating one time orders or trial orders if you will, that now our CRM team works to win back or give special offers to the one time trial customer to convert them into a subscriber. It's early days in that. I'm sure we're not providing guidance on what those percentages are, but we've got a very strong team in terms of building that affinity against what the objective of the customer is and what the benefit to them now joining the subscription file will be. However, because of the shift from the MLM to what I would consider to be a more customer centric approach, we don't have a problem that people just buy one time every month like some people. They would prefer. You've got subscription fatigue out there. We are seeing returning customers and repeat customers in the one-time file. Like I said though, it's early, we just launched the marketing initiative against nutrition midway through the first quarter. So it's going to take us a few months if not a quarter or two to understand the customer behavior to make that predictable.

And just adding on to what Carl said when we do launch the retail initiative end of the year and into next year, obviously, by definition those are one time sales. I mean most of those people will continue to go back to whether it's a grocery store, drugstore, food, mass merchant, whatever the case may be, and buy products on their visits – on their shopping visits. And so those are always essentially one time sales. So we as a company have really never focused on it before because when we had an MLM, which we know longer have, but when we had it, their incentive was to sell subscriptions because that was a higher ticket value and therefore they could get higher commission and the ongoing payments, whether or not that was the right thing to do to actually grow your franchise story for another day. So right now we're looking at this with a completely fresh perspective.

Okay. Thanks. And so connected fitness revenue fell about 74% year-over-year, but 1500 bikes were delivered. Is this segment being phased out or are you exploring partnerships, like white label partnerships?

Yes. We – I can't comment too much, but we are absolutely both supporting the bike that we sold. And we want to make sure that those customers have a great experience, but we have essentially sold through that inventory. However, we do have the opportunity now because the bike content on our platform that we continue to produce is so good. It's actually quite attractive for, as you said, for people who are selling the equipment in other channels to be able to partner with us so that we are the content to their hardware. So we've got some of those conversations going, and we do think that it can be a part of our overall business model.

But just to be clear, going forward, we are not producing new equipment for sale. We are not selling any more bikes going forward. When the last bike is out the door, we will not be making it. As Carl said, our special sauce, our go to war skill [ph] as a company is that we are the best producers of content in this industry. And so going forward, not only can we serve the people that have our own bikes that to Carl's point, we can supply content to anyone who has a bike using our terrific content, but we will not be making any more bikes.

Okay, great. Thanks for the answers.

Sure. Thanks for the question.

Thank you for your question. No additional questions waiting at this time. I would now like to hand the call back over to Mark Goldston.

Thank you, Victoria. And thank you everybody for attending today. Just in summary, we're thrilled with the performance that we had in our sort of first quarter with our new business model. We really outperformed what we thought we would do, which is really terrific. And we are thrilled with our new Tiger Finance, financing deal that we just announced. And you will see that attached to the 10-Q that will be filed tomorrow. But it gives us a lot of flexibility and we have a lot of plans going forward that are growth plans and having this flexibility with the new loan agreement, plus the new products that we've got in the pipeline and as Carl mentioned, the revamped affiliate platform, which will be much more appealing and easier to use. We think there are great green shoots ahead of us, and we're pretty excited about it. So as always, if you have any questions, please feel free to reach out to the company and funnel them through Brad Ramberg, our CFO. And thank you for attending.

That concludes today's call. Thank you for your participation and enjoy the rest of your day.