Beachbody Co (NYSE:BODI) held its first-quarter earnings conference call on Tuesday. Below is the complete transcript from the call.
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Summary
Beachbody Company Inc reported Q1 2026 total revenue of $54.3 million, exceeding guidance, and achieved a net income of $2.3 million, marking the third consecutive quarter of profitability.
The company is pivoting towards a nutrition-focused business model, emphasizing an omni-channel strategy including direct-to-consumer and retail distribution, leveraging brands like P90X, Insanity, and Shakeology.
Beachbody Company Inc announced retail partnerships with Sprouts Farmers Market and Vitamin Shoppe, along with Kahe Distributors, to expand Shakeology's reach.
Gross margins remained strong at 71.8%, and the company has reduced its EBITDA break-even point significantly, allowing strategic investments in growth initiatives.
Management expressed optimism about the long-term potential of the nutrition and energy drink markets, projecting substantial growth opportunities in 2027 and beyond.
Full Transcript
OPERATOR
Good afternoon. Thank you for attending today's Beachbody Co. Inc. First quarter 2026 earnings conference call. My name is Elizabeth and I'll 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. If you would like to ask a question, please press Star one on your telephone keypad. To withdraw your question, please press Star one again. 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 Goldson, 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 Security 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.
Mark Goldson
Thanks very much Bruce and good afternoon everyone. Welcome to the BODI Q1 2026 earnings call. Last quarter we reported our Q4 and full year 25 results. A transformational year where we achieved positive operating income and adjusted net income for the first time since going public today. I'm pleased to report the Momentum continued in Q1 of 2026. Let me start with the numbers in the Q1 26 financial highlights. Total revenue for Q1 was 54.3 million, which came in above the high end of our guidance. As a reminder and as we've consistently noted, Q3 2026 will mark the first quarter where we can make direct year over year comparisons that fully reflect our new business model as the legacy MLM business will have completely cycled out of both periods. More importantly, we delivered our third consecutive quarter of net income at 2.3 million compared to a net loss of 5.7 million in Q1 of 2025, operating income was 3.1 million, marking our third consecutive quarter of profitability on this metric. We posted our 10th consecutive quarter of positive adjusted EBITDA at $8 million, up from 3.7 million in the prior year and gross margin remains strong at 71.8%. And within our guidance, as of March 31st our cash balance was 36.6 million against outstanding debt principal of approximately 25 million providing financial Flexibility to Execute our Growth Strategy the operational discipline that we've built in over the past two plus years is now embedded in how we run the business. We've lowered our EBITDA break even from over 900 million in 2022 to approximately 180 million currently, giving us tremendous operating leverage and the ability to invest strategically in growth initiatives without sacrificing profitability. As we discussed in, March 2026 is the year we're unleashing our Innovation pipeline. With our strong balance sheet and substantially improved financial position, we've got the flexibility to fund our retail exp and the Innovation pipeline without compromising the financial discipline that delivered this turnaround. The cornerstone of our growth strategy is a pivot towards a heavier emphasis on nutrition and that will be executed through an Omni Channel strategy spanning direct to consumer to retail distribution. This represents entry into a nutrition products category with a market opportunity that is more than 12 times the size of the digital fitness category. We're bringing iconic brand names like P90X, Insanity and Shakeology to retail with very high aided brand awareness. Now we're freed from the MLM commission constraints and we can price our new nutritional products at dramatically lower price points than we have done in the past. And in the case of Shakeology we can utilize a much smaller form factor, the 7 serving size which will give us a 3495 retail price point versus our previous price point which was $129 for a 30 serve pack. This represents a significant opportunity for us. As many of you may know, in my career I've got a long history in the consumer products or CPG industry. From my days at Johnson and Johnson and Bristol Myers, Clairol, Cheeseboro, Ponds, Revlon and as president of Faberge which became Faberge Elizabeth Arden and I got background at Reebok, Louisiana Gear and the huge flower company FTD, I've been responsible for the creation and or marketing of billions of dollars worth of some of the most successful consumer products of all time sold through retail distribution. And that's one of our major areas of expansion that I brought to Bodi. The process of submitting samples through our broker sales organization, Advantage Solutions, securing buyer commitments and then waiting for the retailer shelf set planogram to be updated is about a 6 to 12 month process with inflexible adherence dates. We're right now in the midst of that process and over the next 60 to 90 days we expect to see which retailers will be adding shakeology and the P90X line of nutritional supplements. Look, I'm sure you've seen the recent spate of acquisitions in the CPG industry, whether it be Huell, Gruins, Bloom, Aulani, Nui, Poppy and a host of other companies that have sold for between 1 to 2 billion dollars in the past year with brand names that while we have great respect for, are not nearly as well known as the P90X and even Shakeology brand names. So the potential for creating massive brand equity value for shareholders of Bodi within the nutritional supplement and energy drink industry for Bodi is potentially the single largest mid to long term opportunity that we've got at the company. Speaking of securing retail distribution, last week we announced that Shakeology will be carried in more than 80 sprouts farmers market stores around the country starting in late May early June. And we just secured a partnership with Kahe Distributors which is one of the two largest distributors of natural, organic and fresh products to the grocery industry. And this will give us the opportunity to reach the 30,000 grocery, supermarket and online channels that are covered by the Kihi distribution network. And in late breaking news, we just announced in a press release yesterday that Shakeology will now be carried by Vitamin Shop across its more than 640 stores all over the USA later this year, with Vitamin Shop taking all five of the Shakeology flavor variants in our new seven serve $34.99 retail price packaging. This exciting news, along with the Sprouts farmers market news and the Kihe distribution deal, will mark the first time that Shakeology, which is a $4 billion cumulative sales brand with more than 1 billion cumulative servings, the first time it will be available in retail stores across the usa. On the next quarterly earnings call, we hope to have an update on more exciting retail partners for the Shakeology brand and new retailers signed up to carry the P90X line of supplements and the retail stores who will be carrying the insanity and P90X energy drinks in the Southern California test market will be running later this summer. You know, one of the truly unique and compelling aspects of the new Bodi retail distribution initiative as a consumer product company is that we fundamentally created a virtual consumer products company. So what do I mean by that? Well, we've outsourced virtually every aspect of our supply chain and distribution infrastructure. Manufacturing is outsourced to best in class contract manufacturers. Sales and retail distribution are managed through our outside partner Advantage Solutions. Fulfillment and logistics of all of the retail orders are handled by a third party logistics provider or a three plus. And we're evaluating the use of purchase order financing and accounts receivable factoring to optimize our working capital as relates to the retail project. What we keep in house are the core competencies that drive our competitive advantage. Those are marketing, brand management, product innovation and R and D. So this asset light model gives us exceptional financial flexibility, minimal capital requirements, and importantly the ability to scale rapidly without proportional increases in fixed costs since this structure moves the majority of those costs to a variable based cost based on usage and demand. So in conclusion, our financial turnaround has created massive operating leverage, giving us the ability to invest strategically and high return initiatives while maintaining profitability. We're excited about the opportunities ahead, particularly as we move into the second half of 2026 and then beyond. This year marks the opening of our nutritional innovation pipeline. We are actively in the process of developing new products, securing retail placement and building market acceptance. While we expect to see initial traction in the second half of 2026, the substantial yield from these initiatives will materialize in 2027 and beyond as our retail presence expands and our multi channel strategy fully takes hold. We've built a resilient financial foundation that positions us to capitalize on significant growth opportunities in both nutrition and digital fitness, and we're taking a discipline methodical approach to ensure we execute this transition successfully. I'll now turn it over to Carl to discuss our operational progress and product innovation strategy.
Carl Daikeler (Co-Founder and Chief Executive Officer)
Carl thanks Mark. Our Q1 results demonstrate the operational momentum we've been building throughout 2025 and into early 2026. The financial discipline we've established has created an extremely efficient platform with leverage to execute against a compelling innovation pipeline across multiple sales. P90X Generation Next launched in early February to a packed house of media and influencers in New York City, generating millions of impressions in both earned and paid media. Early response from our subscriber base has been very enthusiastic and we're now gathering the success stories from the first wave of participants. That's especially important as we launched our branded nutritional line extensions into P90X supplements which will be sold direct to consumer on Amazon TikTok shops. As Mark mentioned at retail, including an entire Ready to drink line of P90X energy drinks. This is a really big deal with very special formulations which live up to the reputation of the best selling extreme home fitness program of all time. We've launched a P90X pre workout, P90X hydration, P90X creatine, P90X recovery protein and P90X fast acting energy that can be used to fuel longer training sessions or in my case for a midday boost of energy. Each SKU in the line has something called a P90X Factor, a proprietary aspect of the formulation which makes it fast acting, potent and effective so you get the performance benefits as promised. The P90X supplement line launched with our long overdue transition over to the Shopify Equipment Commerce platform which will make it easier for us to offer special bundle configurations, subscribe and save discounts and improve AOV using Shopify's Add to Cart recommendation engine. Combine these entire new product lines with the new ease of shopping and thousands of success stories coming in from the first wave of P90X generation next users. We expect that to propel momentum of the fitness program and the P90X supplement line in every channel over the next 12 months. Meanwhile, the 10 Minute Body initiative continues to gain traction. The category of Microdose Fitness, which we launched under the 10 Minute Body brand just before Christmas, continues to be a very popular program on the platform. Since our last call, we've expanded the catalog with three new targeted programs. 10 minute speed train by Joel Freeman 10 minute active aging led by Debbie Siebers for those 60 and older. He'll recognize Debbie from her recent appearance on ABC's Golden Bachelor. She is also one of the first super trainers to help us launch the company. We also just launched the 10 minute GLP1 fitness formula specifically designed to help people on GLP1 medications to build and preserve muscle mass. The platform now features over 400 science backed 10 minute workouts and this high volume low price subscription at $10 a month is successfully opening up our addressable market to the over 185 million Americans who are overweight or obese and may be intimidated by longer workout programs. Ok, looking ahead to the summer, we have a new super trainer joining us, Chase Collette with The brand new 30 day Booty Boost program launching in June. This has been one of the most requested additions to the catalog by subscribers and prospects and we'll integrate the P90X supplement line to help people get the maximum gains from the program where it counts using the pre workout P90X creatine and P90X protein. And that's exactly how nutrition has been fundamental to our success since we founded the company, helping people get the best results from their effort. And Shakeology, the world's first superfood protein shake, which we launched in 2009, probably our most significant nutrition innovation in the company's history. To put that in perspective, during our peak revenue years, fitness programs accounted for roughly one third of total revenue, while Nutrition drove about 2/3, largely driven by Shakeology. Now that we're freed from the margin and distribution constraints of the network marketing model, we can offer all our supplements, Whether it's Shakeology, B90X or other brands, all at more accessible price points, with healthy margins dramatically expanding our opportunities to grow and scale in multiple sales channels like Amazon, TikTok shops and retail as Mark outlined. But what makes this nutrition expansion especially compelling is how it transforms our customer engagement and results model. Our data continues to show that we scale customer acquisition at a lower cost when offering Nutrition first and bundling fitness with it as opposed to offering digital fitness first. I believe that's because of the significant size of the nutrition market and the ease of consumption relative to the decision to start a new fitness program. By leading with nutrition in this substantially larger category, we can attract customers through a wider top of the funnel and then introduce them to our digital fitness platform through free trial offers. Every customer who enters the ecosystem with a nutrition purchase is offered a free trial to join the fitness platform, a major value add and a competitive advantage in the massive supplement market. This nutrition first approach with Fitness Second enables us to deliver the total solution, the unique combination of comprehensive lifestyle change and that has consistently driven our best customer results over nearly three decades. We think this construct could be especially potent for the digital app experience now that we just launched the ability to add up to four additional profiles to one membership, meaning anyone who's in a free trial of the digital app can invite up to four members of their household to set up their own profile under the same membership at no extra cost. This could help overall conversion as more household use should translate into retention. And what follows of course is more people using the Bodi app in the household means more people who would likely consume our P90X supplements, our pre workouts, Shakeology and so on in order to maximize their results. All of these improvements work together to optimize our marketing model that will drive traffic across multiple channels and improve the customer experience at every touch point. And all of this should position us well to build on the momentum of our turnaround. Now I'll turn it over to Brad Ramberg, our CFO, to walk you through the Q1 financial details and our guidance for Q2.
Brad Ramberg (Interim Chief Financial Officer)
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 of 2026. We continue to make significant progress on our transformations and on driving operating efficiencies. For the quarter we exceeded the high end of our guidance for revenue, net income and adjusted EBITDA. We generated our third conSECutive quarter of net income and operating income and our 10th conSECutive quarter of positive adjusted EBITDA. For the quarter, total revenues of 54.3 million declined 2.3% sequentially and declined 25% year over year, better than expectations. As we continue to execute in our strategic transformation, revenues continue to be impacted in the near term by a shift from a multilevel marketing platform to our current omnichannel model, moving to digital and nutrition and other revenues. It's important to reiterate that the year over year decline continues to be heavily influenced by by remnant revenue from the former MLM legacy business, which was shut down December 31, 2024. Therefore, there's a component of MLM legacy digital and nutrition revenue that will remain through the first half of this year. As we move to Q3 of 2026, we will be able to show a direct year over year comparison because the remaining legacy revenue associated with a former MLM will have burned off and those who remain from that cohort will become part of the body New Business Model Revenue base To be clear, this is not to suggest that we're projecting year over year revenue growth in Q3 of 26. We are not providing guidance for Q3 of 2026 as that will occur on our next earnings release. Now note the direct year over year comparisons I'm about to disclose for digital nutrition revenue are still skewed by the fact that the 20 numbers reflect a new business model versus the 2025 numbers, which still had a major component of revenue that was part of the legacy MLM. Digital revenue decreased 2.1% sequentially to 33.6 million and 21.8% year over year. Digital revenues reflect continued pressure on our digital subscriptions, which decreased 6.9% quarter over quarter to approximately 810,000 and declined 20.6% compared to the same period a year ago. Nutrition and Other revenue decreased 2.5% from the prior quarter to 20.7 million and decreased 27.7% year over year. Nutrition subscriptions decreased 25% sequentially to approximately 60,000 and fell 18.5% year over year. As our business evolves into an omnichannel model, generating higher one time sales and retail sales, the subscription metric will be a less relevant KPI. Digital Gross Margin was 87.4% increasing 10 basis points sequentially and up 190 basis points from prior year. Our digital gross margin was in line with our target. The continued strength in year over year gross margin was primarily due to a decrease in digital content amortization and depreciation due to more disciplined production and fixed asset spending. Nutrition and other gross margin was 46.7% decreasing 700 basis points sequentially and down 640 basis points versus last year. Nutrition and other gross margin was in line with our target. As a reminder, Q4 2025 nutrition gross margin of 53.7% included certain one time benefits exclusive of those benefits. Nutrition and other gross margins declined 390 basis points sequentially. The decrease in nutrition and other gross margin was primarily due to inventory adjustments in the current quarter. Consolidated Q1 gross margins were 71.8% reflectinG&A decrease of 270 basis points sequentially but an increase of 60 basis points compared with the prior year. We're pleased to report the consolidated gross margin remained within our target gross margin range. Operating expenses for the quarter increased 8.2% sequentially and declined 35% year over year to 35.9 million. SellinG&And marketing expense as a percent of revenue increased 230 basis points over the prior quarter. The increase from the prior quarter was due to planned higher advertising spend and new product launch expense. SellinG&And marketing expense declined 820 basis points year over year to 34.6%. The significant improvement over prior year stems from eliminating MLM seller compensation following our December 31, 2024 exit from the multilevel marketing channel. Enterprise technology and development expense was 17.3% of revenue, up 160 basis points sequentially and declined 10 basis points year over year. As a reminder, Q4 2025 enterprise technology and development expense of 15.7% included certain one time benefits. Excluding these benefits, Enterprise technology and development expense increased 40 basis points sequentially. G&A was 14.2% of revenue, increasing 240 basis points sequentially. As a reminder, Q4 2025's G A expense of 11.8% included certain one time benefits. Excluding these benefits, G&A expense increased 70 basis points sequentially. G& A declined 190 basis points from the prior year due to a decrease in personnel related expenses, professional fees Operating income for the quarter was 3.1 million compared to a loss of 3.7 million in the prior year, marking our third conSECutive quarter of operating income. Net income for the quarter was 2.3 million compared to a net loss of 5.7 million in the prior year, marking our third conSECutive quarter of net income. Adjusted net income was 2.5 million for the quarter versus a 5.1 million adjusted net loss in the prior year. Adjusted EBITDA was 8.0 million compared to 12.9 million sequentially and 3.7 million in the prior year, marking our 10th conSECutive quarter of positive adjusted EBITDA. Now turning to the balance sheet, our cash balance was 36.6 million compared to 39.0 million in the prior quarter and 18.1 million last year. Our net cash position was 13.0 million. Cash used in operations for the quarter was 1.0 million compared to cash generated from operations of 2.3 million in the prior year. Free cash flow was negative 1.7 million compared to positive 1.6 million in the prior year. Now turning to our SECond quarter guidance while we're pleased with the execution of our transformation, I want to reiterate that this guidance should not be compared to Q2 of 2025 because Q2 of 2025 still had revenue recognized from the legacy MLM model, we continue to drive operating leverage and we're excited about the opportunities ahead. We have a stronger balance sheet, a sustainable and viable long term business model that allows us to grow without the structural impediment of the previous MLM model. However, we're still in the early stages of the new distribution model and it will take time to develop traction in these new lines of business. As a reminder, the tail of our legacy business is winding down and we expect that the first time we'll be able to do a year over year comparison of our new business model will be comparing Q3 of 26 to Q3 of 25. We expect SECond quarter revenues to be in the range of 46 million to 51 million, net income to be in the range of negative 3 million to break even and adjusted EBITDA to be in the range of 3 million to 6 million. For the quarter. We anticipate revenues to approximate 60% digital and 40% nutrition. Another however, in line with the strategies we articulated on this call, we currently expect a shift by the end of 2026 to a larger percentage of our business being in nutrition and the attendant margins that come along with it for the quarter, our digital gross margin target is expected to be in the range of 86% to 88%. Our nutrition and other gross margin target is forecasted to be in the 43 to 47% range, which is in line with our volume expectations and certain promotional efforts planned. Our total gross margin target is expected to be in the 69% to 72% range. In closing, we continue to make considerable progress against our business transformation. We significantly lowered our breakeven point and strengthened our financial position, putting us on a solid financial foundation to execute against our growth initiatives that will drive long term shareholder value. I look forward to updating you on our progress on our next earnings call.
OPERATOR
We will now begin the question and answer session. If you would like to ask a question, please press Star one to raise your hand. To withdraw your question, please press Star one 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 and A roster. Your first question comes from the line of Susan Anderson with Canaccord Genuity. Your line is open. Please go ahead.
Susan Anderson (Equity Analyst)
Hi, good evening. Thanks for taking my questions. Nice job on the quarter. I was wondering maybe if you could give some more color on the new P90X launch and then the 10 minute body programs, it sounds like they're doing well, particularly the 10 minute body, I guess. Is there any way to quantify what percent utilizing the program or new subscribers versus existing subscribers?
Mark Goldson
Thanks Susan, you can hear me okay? Yeah. Okay, great. So I just wanted to make sure so we don't break them out like that. But I will say that as we pivoted to the nutrition where we're advertising nutrition, I will say that the P90X supplements are attracting both new traffic, but also doing a really good job of activating new customers from the large database that we've got. So it's a reactivation play that's actually we're pleasantly surprised by how it's working within the database. 10 Minute Body is where we're seeing more of a new subscriber acquisition volume happen because of that high volume, low price opportunity where we're advertising 10 day free trial and a $10 per month subscription, but seeing a nice proportion of those people coming in for the 10 day free trial, $10 level up to the $19 a month full subscription. So that's the way we're looking at those two particular aspects of the content. But like I said, P90X is in its very early days. We're just collecting all the success stories from the first wave. And that's what's going to propel the next 12 to 18 months of traffic and excitement about that particular program. And then we layer on top of it with the new programs like the 30 Day Booty Boost that'll come out this summer. But again, all of it is secondary to the strength of customer acquisition that we're seeing from advertising. Nutrition first, digital second.
Susan Anderson (Equity Analyst)
Okay, great, that sounds really positive. And then maybe if you could give us an update on the Shopify transition. I think that happened late March. Any, any changes there, any color on how that transition went?
Mark Goldson
Yeah, well, that's. That is probably my favorite thing to talk about. I'll try not to monopolize this, but we are definitely seeing across the board. That was a very good decision. What we're even more encouraged by is how we're improving conversion of the current rate of traffic based on the ease of use of both the Shopify platform and now adding the Shop pay option so that people who already have their information with one click of the purple button have an easier time to check out. But I think maybe what's most encouraging to me, there's two things. One, we're seeing that from a competitive standpoint, our website is actually converting better than some competitors that we're appropriately compared to. But there's also some low fruit on the tree for us to make improvements in our conversion and our landing page and landing pages and site navigation so we can even make more efficient use of the traffic that we're already generating. So again, we've got two levers here to work with. One is nutrition is generating traffic at a much more efficient cost of acquisition and the ease of use of the Shopify platform is converting more of those customers. And we see low fruit on the tree to improve on that traffic already. So overall it's been a very good transition for us, despite being at the end of the quarter and a lot of stuff going on.
Susan Anderson (Equity Analyst)
Very pleased with the effort that the team put into that. Okay, great. And then maybe if I could just add one more, I guess just trying to get a sense of what the top line will look like once we cycle the MLM departure. So I guess when you look at the top line right now, it seems like kind of the quarters are about 50 million run rates, I guess. Do you have any insight into if you think there's still a lot of legacy MLM subscribers left to cancel or kind of what that run rate will look like once we're done with that.
Mark Goldson
Most of the, most of that's going to be cleaned by Q3. That's why we say Q3. Susan. This is Mark is going to be the first sort of a year on year clean quarter read. So we're just getting to the remnants of it right now and you know, through the end of Q2. And then when we get to Q3, that should be a rather de minimis amount and it'll be a pure read of Q3 26 versus Q3 25.
Susan Anderson (Equity Analyst)
Okay, great. Thanks so much. Good luck the rest of your day.
OPERATOR
Sure. Thanks. Thanks, Susan. Your next question comes in the line of Eric DeLaure with Craig Hallam Capital Group. Your line is open. Please go ahead.
Eric DeLaure (Equity Analyst)
Thank you for taking my questions. Congrats on the continued impressive progress here. So my first question is a bit of a follow on to the last question. So sequential revenue declines here. They've improved now to less than 3%. And then average revenue per digital subscriber increased sequentially for the first time in nearly two years. Average revenue per nutrition subscriber also up sequentially. Can you talk about just kind of trying to parse that out, the impact of any recent price increases on that sort of average revenue per nutrition subscriber and I guess digital as well. And then just whether we should take that, you know, these sequential increases as signs of the MLM headwinds easing or if there's other sort of pricing or customer dynamics to sort of be aware of here. Just wondering how you expect that average revenue per subscriber number to, to progress and if that's a sign of MLM headwind season.
Mark Goldson
Yeah. Hey Eric, those are great question. So essentially it's not really because of the headwinds easing. We really didn't have pricing increases to speak of. As we talked about in the last call, we started a pivot and we're pushing nutrition more than we did before. We were using the digital fitness sort of as the lead before and then we would convert people to nutrition, but realized that digital Fitness is a $13 billion category and nutrition is 164 billion. It was kind of like the tail was wagging the do. So since we changed our pivot, one, our CACs are lower even though we don't publicly disclose the actual CAC, our CACs are lower and the conversion rates are great. And there's a very high percentage of people who take nutritional supplements in general, as you know, who exercise. And so we're seeing organic improvement in that nutrition business and part of it is, up until about nine months ago, ten months ago, we never even advertised it. I mean, by and large, you know, it was only done by the MLM where they sold it direct or they sold it as an add on. So we're making the public, which previously had not seen these products, aware of them and the results have been quite effective. And so that's a big reason why we made the pivot and why we feel so emboldened by the results that we're seeing. So not saying it's going to be on a high glide path because we don't know that we're not projecting that, but we do see as our future goes that because this company in its past had 66% of its revenue in nutrition, that the opportunity for us to significantly grow that part of our business is real and we're going after it.
Eric DeLaure (Equity Analyst)
Yeah, certainly a very attractive growth opportunity and outlook here. I guess. Just one more on that. So should I understand the increase in sort of average revenue per subscriber as lowered customer acquisition costs as you were kind of just touching on or you know, lower contra revenue items or is there some other sort of just organic growth aspect that's that's helping drive that average revenue per subscriber number up?
Brad Ramberg (Interim Chief Financial Officer)
I think. Eric, this is Brad. In terms of nutrition in particular, we are having more one time sales, especially now that we're advertising it. So as I mentioned in my sort of prepared remarks, I think the nutrition sub number isn't necessarily the best metric to use going forward. And over the time we'll come up with a better sense of guidance. But there is certainly more one time sales in addition to the nutrition orders that are sold via subscription.
Mark Goldson
Yeah, and remember Eric, a lot of people don't just buy a single product. So if they buy a bundle or buy a stack as the case may be, that obviously helps to build aov.
Eric DeLaure (Equity Analyst)
Yeah, absolutely. That's helpful. Thank you. And then I was wondering if you could expand on the impact of Kahe distribution. I mean, does this simply sort of get you a seat at the table with grocers or is Kehi itself doing any marketing on behalf of Beachbody? If you could just expand on what you expect with that partnership, that'd be great.
Mark Goldson
Great question. As you know, Kahe is a huge company, one of the two dominant distributors in the food industry. They've got, as I understand, over 30,000 individual grocers who are in their network. So the way it works is for example, we're sell sprouts. Sprouts is part of The Kahe network. And so when you get sprouts, you get added to Kahee and now you're in their system. And Kahey has its own sales organization which goes out to these 30,000 retailers as well. So separate from our broker organization that we've hired at Advantage, they have their own internal organization so they can now make their client companies that the 30,000 grocers aware of the fact that they now carry our product and it is available for purchase. So we intend to work closely with Kahe to help indoctrinate their sales organization so that they can do effective communications out to their grocer member network so that they can potentially buy our Shakeology product. And this is for Shakeology.
Eric DeLaure (Equity Analyst)
That's all very encouraging. Thank you.
OPERATOR
Yes, thank you, Eric. Your next question comes in the line of George Kelly with Roche Capital Partners. Your line is open. Please go ahead.
George Kelly (Equity Analyst)
Hey everyone, thanks for taking my questions.
Mark Goldson
Sure. Hey George.
George Kelly (Equity Analyst)
First one. Hey Mark. First one is on the Southern California test. Can you just update us on the status of that test and and what you've learned? I'm not sure what the distribution looks like or just any kind of update on that test would be great.
Mark Goldson
We literally just got off a call an hour ago on this. So we have hired the best beverage distributors beverage company to help with distribute and country which is LA Libations out of Los Angeles. They are just top drawer. In fact they just ran their beverage forum two weeks ago was massively attended. So they are representing us in the Southern California market to go out to distribution. Remembering that we are George, off planogram cycle right now. So most of these retailers are, you know, already have their store shelves set. So they're going to be going out with what they would call an interruptive sale which is you're going in off cycle to show two very compelling products. So Insanity, which is going to be called Insanity Liquid Shock, that's what we're calling it. And then we've got our P90X product. And so that product is in the process of going through final stages for production. We will have production quantities available in July and then they're ready to ship. So we anticipate probably being on shelf in Southern California stores that the LA Libation sales organization will be selling over the next call it six to eight weeks really probably be on shelf at some point in August which is exactly when we thought we would be. So we are tracking, it's on schedule. And the plan would be put it in the test market, read the results and then a lot of retailers have their meetings in October and November for their spring 27 planogram resets. So the planogram resets for most retailers is in March of 2027. And the presentations to get into those planograms, this is for national, will be in October and November. So the goal is get on shelf end of the summer, get some great reads hopefully of P90X and insanity energy drinks in the Southern California market and then use that as a proxy to go into those October and November national meetings to secure distribution. That will then occur in the spring of 2027.
George Kelly (Equity Analyst)
Okay, okay, that's, that's great. And then a follow up to that. As you build both the business you were just Talking about, the P90X and insanity stuff as well as the shakeology at retail, how should we think about gross margin? Is it going to be a material kind of impact as those revenue lines grow? And this. Any kind of context there would be helpful.
Mark Goldson
I think the best way to think about it and Brad, feel free to jump in here is those margins in nutrition as wholesale becomes a bigger and bigger part of the business, which not quite it will, will probably be in and around the mid-40s. And so for nutrition. So that's the best way to think about that. And so on a weighted average basis versus where we were, which is 48 to 50, it won't be a huge difference. And the way we look at it, George, is while that will be the margin component as we move into 2027, we're looking at the material gross profit dollars themselves because this should become a volume business at some point where we're just looking at actual gross profit. So we know going in that a wholesale business in nutrition will be in the 40 plus range of margin. And so the question will become what percentage of our overall company is that? And then where do your weighted average gross margins go? But at this point we really can't project that yet because we're in such early days.
George Kelly (Equity Analyst)
Yep, understood. And then last question for you. I know it's less a focus, but the digital fitness side of your business,
Mark Goldson
how the sort of content spend and new programming and like how much are you scaling all of that back and marketing around your digital fitness business? Like how quickly should we think about the shift in focus, like starting to sort of play through the numbers or am I. Yeah, I really wouldn't state how much it's. Yeah, I wouldn't look at it that way, George. What we're really seeing, like it's still a very critical and frankly a Competitive advantage that we have with the size of the library, the scope of the over 160 programs in the library and frankly we have kept the capital allocation to new content the same for about the last two and a half, three years. So that's consistent. What we've found though is we are acquiring customers into both the digital subscription and the nutritional products at a more efficient rate by leading with the nutritional. So if you think about it just from a consumer standpoint, they're thinking about a healthy lifestyle change. They see Shakeology or they see the new P90X supplements being advertised D to C and they go, oh, you know what, I'd like to make a lifestyle change. They come in and then see the digital subscription offerings available to them and we are still converting people into digital. So plus when they buy for instance a Shakeology, let's say they buy a bag of Shakeology and that's about $120, they might get a little discount on that. If they're a first time customer, we will offer them a free 30 day trial into the digital subscription that rolls over into whether either a monthly or an annual subscription. So it is still what we call the total solution, which is what has driven the company to growth since we started it. So it's so digital fitness is still fundamental, we're still investing in it and it's still, I think, an important competitive advantage that we've got in all these sales channels where we're leading with nutrition. George value that we get to add to the purchase. Let me add something on to what Carl just said and think about it like this because this is really a very clever move that we're making here with the digital fitness market being 13 billion. Just imagine you're fishing in a lake. The nutritional category at 164 billion is literally an ocean. And what we're finding is that it's a much more efficient catchment mechanism to go into that larger nutritional market because 60 plus percent of the people who take nutritional supplements exercise. So we're now taking a focus and we're going to get you out there with the advertising on nutrition. And when you come to the Bodi website and you see that we are the premier player in the world in digital fitness, we're getting a lot of upselling occurring. So people not only buying the supplements of buying the digital fitness, so what does that do? That brings your CAC down. So you're getting much more efficient CAC because you're promoting nutrition and you're getting the add on of digital Fitness or they're going right to digital fitness and they just were attracted by the advertising and nutrition. So what we're finding is that with the same level of dollar spend, we're actually getting a preferential customer acquisition cost which gives us a better yield and lifetime value. Does that make sense?
George Kelly (Equity Analyst)
It does, yeah, it does. Thank you.
OPERATOR
Sure. Your next question comes from the line of Alex Hantman with Sidoti and Company. Your line is open. Please go.
Alex Hantman (Equity Analyst)
Good evening and thanks for taking our questions. my first question, just following up on the retail launch. I know you spoke about Vitamin Shop coming into play later this year. Could you talk a little bit about, you know, how many stores might be used at launch and if there's any metrics that you might be looking to hit for the rollout to be expanded.
Mark Goldson
So luckily they were very impressed with the product line. So it's going to, I think it's going chain wide to the over 600 vitamin shop stores out of the gate. So it's not a, it's not a limited roll. See how it does and then roll it out. We are going chain wide nationwide with Vitamin Shop at present. So it should be in stores, you know, probably sometime maybe late August into early September. That's the plan. So, yeah, they're a great partner and they're excited about it and so are we.
Alex Hantman (Equity Analyst)
That's great.
Mark Goldson
Congrats, Mark.
Alex Hantman (Equity Analyst)
Yeah, thank you. Is Sprouts also. Is Sprouts also starting, you know, at the full rollout?
Mark Goldson
No Sprouts. I think we're going to be at 90 stores and that was, you know, basically laid out by them and us as the best places for us to be out of the gate. And assuming we have great success there, I assume there will be more stores obviously added after that. But we have a great component of stores that we're going in and enough to really do a meaningful business. And they're again, a fantastic partner to be in. Incredibly well respected, not only by the consumer but by their brethren in the grocery business.
Alex Hantman (Equity Analyst)
That's great momentum.
Mark Goldson
Thank you. Yeah. And then just, yeah, a couple, couple more from us. You know, I know you've spoken about nutrition being, you know, much more efficient catchment, you know, and providing a lot of cross selling opportunities. I know we mentioned, you know, that the retail products will come with complementary digital access. Do you have, you know, conversion rate assumptions, basically? How are you thinking about the cross selling success of that channel after launch measuring?
Alex Hantman (Equity Analyst)
Well, we don't really know because we're still waiting on. We have like 30, 40 sets of samples that are sitting in retail buyers offices waiting to get responses from them as to who will be adding the product line. So hard to make any kind of an estimate when we're not really sure where that distribution is going. So I said in my prepared remarks, hopefully on the next call, we'll have an update as to who's carrying these products, where and what kind of doors we'll have. But there's really no way to know that out of the gate. I mean, we can make an educated guess, but you don't really know that. And so we're going to have to see how it plays out. But it's a tremendously effective tool. And so it just depends on how many doors promote our product, whether we get end cap displays or just in line, and whether there will be in store signage that towers the fact that when you buy the product, you're getting a month of free access to Bodi. So. But that will all start to materialize as we get the distribution nailed down.
OPERATOR
Understood. That's great. Thank you. Sure. Thank you. As a reminder, if you would like to ask a question, please press star one. To raise your hand to withdraw your question, please press star one. 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. Your next question comes from the line of Michael Kopinski with Noble Capital Markets. Your line is open. Please go ahead. Hi, Michael. Michael, you might be muted on your end. Yeah, Michael, we're not hearing you. Michael, I'll have you try one more time. Your line is open. Please go ahead. looks like the string to the Dixie cup may have been disconnected. Well, that concludes our Q and A session for today. I'll now turn the call back to Mark Goldston for closing remarks.
Mark Goldston (Executive Chairman)
Thanks very much, Elizabeth. Really appreciate everybody attending today. We're really, really proud of the quarter that we just put up. And we're really excited about what the future holds for the company, as we've articulated. So, as always, if you have any questions, please feel free to reach out to the company, either through ICR or directly to Brad Ramberg, our cfo. So thanks everyone. Have a great evening.
Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.
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