Financial Data and Key Metrics Changes - The company generated revenue of $72.4 million in Q1 2025, exceeding the guidance range of $60 million to $70 million, but reflecting a 16.2% sequential decline and a 39.7% year-over-year decline [24][25] - Adjusted EBITDA was $3.7 million, significantly exceeding the guidance range of a $2 million loss to $2 million profit, marking the sixth consecutive quarter of positive adjusted EBITDA [24][31] - The net loss for Q1 2025 was $5.7 million, an improvement from a net loss of $14.2 million in the prior year [31] Business Line Data and Key Metrics Changes - Digital revenue decreased 14.8% sequentially to $42.9 million and decreased 30.2% year-over-year, with digital subscribers declining 5.1% sequentially to 1,020,000 [26] - Nutrition revenue decreased 17.7% sequentially to $28.7 million and fell 48.4% year-over-year, with nutrition subscriptions declining 13.1% sequentially to 80,000 [26] Market Data and Key Metrics Changes - The company has transitioned from a multilevel marketing (MLM) model to an omnichannel approach, which is expected to provide additional flexibility and revenue growth over the next 24 months [25][33] - The cash breakeven level has been significantly reduced from over $900 million in 2022 to just under $225 million in 2025 [6][7] Company Strategy and Development Direction - The company has eliminated the MLM model and is focusing on a multichannel approach with an emphasis on direct-to-consumer and retail distribution channels [8] - A new lending agreement with Tiger Finance for a $25 million loan facility has been established to retire existing debt and provide additional capital [7][60] - The company plans to launch nutritional products in retail channels starting late Q4 2025, with a focus on well-known brands [9][10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the turnaround strategy, emphasizing the need for patience and discipline as the company transitions to its new business model [11][12] - The company anticipates growth as new products are launched and the affiliate program is simplified to attract more participants [15][19] Other Important Information - The company has seen improvements in gross margins, with consolidated gross margins at 71.2%, exceeding the long-term target of 65% to 70% [25] - The transition to the new affiliate model is expected to enhance customer engagement and retention [15][19] Q&A Session Summary Question: How is the transition of sellers from the old model to the new direct affiliate model performing? - Management is pleased with some strong affiliates but acknowledges that overall performance has not met expectations due to the complexity of the current platform. A simpler model is set to launch in mid-June [37][38] Question: How will selling and marketing be balanced going forward? - The company plans to reinvest savings from the new business model into marketing to maximize gross profit dollars, focusing on the relationship between lifetime value and customer acquisition cost [39][40] Question: What changes are being made to the new affiliate platform? - The new platform will be user-friendly, integrating community features and simplifying the process for subscribers to become affiliates, launching in mid-June [46][50] Question: How is the nutrition business adjusting pricing ahead of retail launches? - The company is focusing on one-time purchases to attract new customers, which may lower overall gross margins but is expected to increase gross profit through higher unit sales [52][55] Question: What are the terms of the new credit facility? - The new loan has an interest rate of SOFR plus nine, approximately 13.3%, with a one-year moratorium on principal repayment, significantly improving the company's financial flexibility [58][60]

Financial Data and Key Metrics Changes - The company generated revenue of $72.4 million in Q1 2025, exceeding the guidance range of $60 million to $70 million [25] - Adjusted EBITDA was $3.7 million, significantly above the guidance range of a $2 million loss to $2 million [25] - Total revenues declined 16.2% sequentially and 39.7% year over year, aligning with expectations due to the strategic transition [25][26] - Consolidated gross margins were 71.2%, reflecting an increase of 70 basis points over the prior quarter and an increase of 350 basis points year over year [26] Business Line Data and Key Metrics Changes - Digital revenue decreased 14.8% from the prior quarter to $42.9 million and decreased 30.2% year over year [27] - Nutrition revenue decreased 17.7% from the prior quarter to $28.7 million and fell 48.4% year over year [27] - Digital subscriber count decreased 5.1% sequentially to 1,020,000 and declined 16.6% compared to the same period a year ago [27] Market Data and Key Metrics Changes - The company is transitioning from a multilevel marketing (MLM) model to an omnichannel model, which is expected to provide additional flexibility and revenue growth over the next 24 months [26] - The shift to the new model has impacted nutritional subscribers significantly, as these products were historically sold through the MLM network [27] Company Strategy and Development Direction - The company has eliminated the MLM business model and transitioned to a multichannel approach, emphasizing direct-to-consumer and retail distribution channels [8] - A new lending agreement with Tiger Finance for a $25 million loan facility has been established, allowing the company to retire existing debt and improve its financial position [7][56] - The company plans to launch nutritional products in retail channels, starting with Shakeology in late Q4 2025, followed by P90X and Insanity nutritional lines in 2026 [9][10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the turnaround strategy, noting the importance of patience and discipline in executing the new business model [11] - The company anticipates growth as it builds out its retail distribution strategy and launches new products [12][34] - Management acknowledged the challenges faced during the transition but remains optimistic about future performance and profitability [33] Other Important Information - The company has cut its debt by more than 50% to $18 million and reduced its cash breakeven level from over $900 million in 2022 to just under $225 million [6][7] - The company is focusing on performance marketing to improve customer acquisition and retention, with a new digital agency hired to enhance marketing efforts [19][20] Q&A Session Summary Question: How is the transition of sellers from the old model to the new direct affiliate model performing? - Management indicated that while there are strong affiliates, overall performance has not met expectations due to the complexity of the current platform. A simpler model is expected to launch in June [38][39] Question: How is management balancing reinvestment in marketing with the new business model? - Management stated that selling and marketing expenses as a percentage of revenue have decreased, and they plan to reinvest cash generated into marketing to maximize gross profit dollars [40][41] Question: What changes are being made to the new affiliate platform? - The new platform will be user-friendly, allowing subscribers to easily promote programs and earn commissions, which is expected to enhance affiliate participation [44][46] Question: How is the company tracking customer migration from subscriptions to one-time purchases? - Management noted that they are institutionalizing a Subscribe and Save program to rebuild the nutritional subscription file while also focusing on one-time purchases to attract new customers [62][63] Question: Is the Connected Fitness segment being phased out? - Management confirmed that no new bikes will be produced, but they will continue to support existing customers and explore partnerships for content delivery [67][68]

Core Insights - Klaviyo has been recognized as the best text messaging service for businesses in 2025 by Consumer365, emphasizing its data-driven approach and the importance of SMS marketing in multichannel strategies [1][13] Company Overview - Klaviyo is a B2C-focused CRM platform that integrates SMS, email, and AI-powered insights to enhance customer engagement [2] - The platform allows businesses to adopt a holistic approach to customer engagement, selecting the most effective communication channel based on real-time customer behavior [3] SMS Marketing Significance - SMS remains a reliable communication channel, with 74% of consumers subscribing to SMS from multiple brands and 72% preferring weekly text updates [4] - 65% of consumers have made unplanned purchases due to SMS messages, highlighting the channel's influence on buying decisions [4] Engagement and Effectiveness - Text messages are read within three minutes of receipt, making SMS effective for urgent communications like limited-time offers and appointment reminders [5] - Klaviyo's multichannel orchestration capabilities allow brands to balance SMS with email and push notifications, preventing over-messaging and enhancing customer engagement [7][8] Business Impact - Businesses using Klaviyo for both SMS and email have experienced a 19% increase in gross merchandise value (GMV) growth rate, demonstrating the effectiveness of a multichannel strategy [8] - Klaviyo provides businesses with control, insights, and performance tracking, centralizing customer data from various marketing channels [9] Future of SMS Marketing - SMS marketing is becoming a significant revenue driver for B2C brands, with average revenue per recipient (RPR) for SMS campaigns slightly higher than that of email [11] - The strategic use of SMS, focusing on delivering high-value content without overwhelming subscribers, is crucial for successful marketing [12]