The Beachbody Company, Inc. (BODI) 8 May 232023 Q1 Earnings call transcript

Good afternoon, ladies and gentlemen. Welcome to The Beachbody Company First Quarter Earnings Call. At this time, all participants are in listen-only mode. [Operator Instructions]. I would like to remind everyone that this conference call is being recorded.

turn Director over of now Bruce your will Managing Williams, ICR I the to conference host And Investor Relations.

thank earnings Officer. on Beachbody Company; and first and Chief Carl everyone you Marc of us Chairman joining Welcome The Officer for Daikeler, quarter Co-Founder, XXXX call Suidan, call. the me and Executive With today are for our Chief Financial

remarks and open the questions. Marc's for prepared we'll Carl Following up call

a The which I started, the SEC, results the facts, Company's Litigation would differ such those with like materially contained you call, number remind conference Reform are the Company's and filings language. to may constitute historical get today's to Safe forward-looking from includes to in of the of all uncertainties, which Harbor described of Act risks Securities Private Actual statements we the statements deemed in of future not release. this in within press Before are may of suggested meaning which due XXXX. statements be

Today's measures, website. can A such earnings most available which call the GAAP financial on non-GAAP found financial as non-GAAP to comparable measures within financial to of these EBITDA. measures reconciliation release, adjusted is include be our references will the

Now, over like turn to I would the call to Carl.

everyone. afternoon, Good

our of our significant three-week and new we As monthly engineering launches built tempo constant completed customer subscription a organized and expensive path business communicated upgrade a into more friendly for evolved model. our and more business We quarter to blocks preparation to simplified marks complex objectives. program a on the from major and the genre model of around content This transition platform economical and first parallel last earnings call. We the our company.

Aligned full content a months And formula. B-O-D-i. mental of and channel, the BODi, the health in into Beachbody to we almost single based nine solution introduced company new our March, And to BODi. that from a subscription we spelled call with total rebranding made successful transition we tests, on pilots integrating

esteem And the platform day-to-day lifestyle doing this, and fitness navigate want health to to approach holistic mindset including comprehensive people a of and format, improve flexible BODi their sensible programs a living synthesizing help to proven obstacles masterclasses the walk the quarter. life mental health. we became team the healthy thank much the nutrition positive first healthy, perseverance in creating in more major accomplish. adjusted subscription midst launch, exceeded so And for guidance met skill, and for for we've of But this their quarter there's sixth incredible this both and the a revenue for us the product. to row, or EBITDA in new I

into the Shakeology subscription to to single demand shake. from effectively annual we're subscription per Beachbody of PXXX, This test is multivitamin the we DVDs moving our we've launched over operate model And did the time successfully $XX-month last purchase it subscription. business one XXXX, a we We the unit. $XXX desert a network first multiple world's when process. learn we innovation, and for in when a superfood And executed times moving scaling decades. on process a two from price the launched When doubling

of that can existing the seeing the drive next promoting to of be dollar But engagement promising multibillion customer launched the stages the most we important reached milestone customers. this confident and based last, since new that biggest premium and I in growth. As the report subscription. reposition opportunity we revenue faster through our long-term demand I'm already are will We're time, expanded these is than we billion each on our company. subscription this scaled $X and sustainable company early the BODi believe innovation transitions, we and renewals

digital by represents upgrades customers with Fix, the of end our and knows release of renewals rich The XXX,XXX programs. but new our the pricing surpassed since that recognizing in as also Day over get bike Insanity, is value are I general customers our our incredible PXXX, exceeding XXth. are BODi That's April results demonstrates consistency BODi monthly primarily QX for. driven new the roughly XXX help and and tremendous BODi double programming XX of mean, associated fitness that blocks company renewals everybody early subscriptions XXXX, forecast. for of our that strength and known catalog

the internal forecasts Likewise, retention nutrition months. retention is over ahead subscription seeing in rate strongest with our of marks XX

increasing at of We aligns engaged LTV to loyal by healthier nutrition This with subscribers. focusing our a platform. subscription BODi on highly also rate customer see our these attach new vision the and

terms XXXX. quarter of the above engagement, quarter first streams our XXXX XX% fourth of In were

a was seasonality of health on at a start refocusing factor year. new the their with While consumers

sequential to is of the to loyalty accelerated and content. of XXXX, Our growth base very consumer a sign the and of which popularity consistent relative testament a our healthy engagement subscriber our

to continues industry gains fitness during home COVID. from the the normalize While

repositioning Well, our is the category health the was attracting to signs searches since significant over increasing increased LTV up that web spelling the Google. for March We're our versus for that interest of seeing is search BODi prior year. customers And in in esteem subscription XX% XXX% February. Again, already LTV traffic quarter of body. up and as Google BODi first term on benefits digital the seeing our is our just by strategically over to the the XX% searches the February. are March, in sites our We're

Moving on acquisition. customer to deriving

has product the execution we're Now the on that of focused market to completely introduced, go our been strategy.

of advertising coaches, search our significant are sales As into and our called optimization, acquisition and database. network a previously partners through three our direct media channels reminder, sales proprietary

on offense. This to the is time go

share we to growth. plan me how let achieve So

of the forms Our partner majority sales generation. network our

implemented align to drive In addition nutrition training, new digital partners subscriptions. to significant we've our ongoing with goal body our to and incentives

achieve to June, align partners. serve sales network is our them are of over attended who us and typically This helps Partner to long-term and is health which will to in around people TAM training overweight our to our U.S. that the hosting the or annual uniquely immersive an obese strategy with we're million happiness. help This XXX and of platform by alone, whom designed the be massive Summit, tactics XX,XXX

With partners, BODi partner our world. community in create I'm encouraged team largest fitness we network. response help and the to by intend And of our highly the health the enthusiastic of the

enthusiasm see this be we do fully with confident of on the to and partners engagement successful, But that platform, a I'm take and and based significant that Although to time matter it's execution. some train time to we'll going their only the leverage it's optimize transition.

marketing test and direct acquire body an to media front, in media the also to our the to started social new media approach. with test of Through into working into our the process subscribers acquisition On learn we experienced learn message reach and expand platform offline online the TikTok our We're agency and and extremely just advertising. YouTube.

continues economics as ad to spend BODi improve, to expand on this of role subscription. return us Our CAC or gradually ratio, while the LTV acquisition thanks to customer allowing new improved our to maintaining

campaigns. database database building as On both customer customers and email messages, opportunities our our front, expanding past to customer targeted customers, communicate significant new through marketing subscription our within the text and April, app massive as CRM reengagement well more launched activation to in this database with our efforts we're we to well and and engagement, offer marketing and of we more sophisticated present. as to expanding technology sell In cross see drive as

Finally, began we in the into the expansion our desserts of also of supplement QX. testing Superfood Shakeology category

In will again, campaign signs of resonate expected, the Our category. and this are the summary, retention performed that marketing given this total over And the quarter has expanded model. time. just generally early transition begun expand to first the to business market leverage grow as addressable

the what we the of need transition. this with to we and will believe history. company's be understand chapter the experienced of content levers I navigate pull We transformation, opportunity have biggest growth that this level to in

start. we're two is the for hearing green of by only head significant our data right And the we not have but pivot renewals. points, shoots of With customer the and what a we're these based demand industry, months on strategy from times, encouraged

such, that conservative will confident for in our by EBITDA comprehensive a outlook, achieving profitability esteem quarterly remain the do on take time of And network view to train of to but I new reiterate basis health drive our as fully want QX However, more subscribers. our some a taking partner them it about benefits the significant to year. the we're end of platform

Now, detail the pass CFO for I'll it results quarter. more on for quarter, over specifics our the Marc? our Marc to financial to

everybody. afternoon, good And Carl. you, Thank

quarter. body ahead review As and like I'd EBITDA. spend both the of Carl our results our quarter time the impact then our revenue upcoming results, and we launch for provide discussing guidance boasted for outlook and of our financial mentioned, adjusted to financials, quarterly our first

Such let sharing has learnings launch early So in a me transformation with the three milestones. start major from large our BODi March.

second, First, launching success a in was launched and a with sales on. is our features and significant all product budget on we the This the and under launch, efforts. new milestone third, customer and and scope existing marketing that The reaction, planned achieving time, transformation. product

the to been the and received. how has of existing relates pleased it base, are we reaction it As with response customer the

some the pricing. color on provide increasing strategy LTV we are on delivering how first, per Let customer, me of

$XXX last the was from reminder, price annually BODi a $XXX September. down As adjusted to

single XXXX, subscription to only you can a renew on as of March BODi As we move platform.

LTV increased by these As changes, a of digital XX%. result our

enhanced revenues. and is measured our are forecast and March to driving renewals engagement programming Second, new we which which and more windows by the more user mentioned. streams, as while renewals, Carl above Engagement our leads engagement improved early seeing

the While as our renewal we given realizing are price encouraged customers factored are customer programming. we in of our value the churn renewals increase, new for more by rate

of has since As the such, BODi subscriber the beginning the size to in doubled XXX,XXX year. nearly file

cross-selling. Third

with BODi nutrition are are describers the digital which from rates by We pleased nutrition our driven bundle and attach pricing. higher

have we marketing successfully on relates elaborates it customers. and new our from and deploying. efforts, To our response positive strategies sales wrapping Carl to are our summarize, As we received have launched a existing product that up the

three our two that selling drive new marketing critical are acquisitions. on milestones focused is strategy third will and on of efforts now executed the the customer which have one, the and We of

Turning the financials of quarter. to the

Given in is networks one QX quarter-over-quarter attributable changes Digital million largely past new the our guidance revenue BODi which versus partner will were my to XXX.X and year, comments XX.X X.X% our That XXXX. quarter-over-quarter. their XX% was was X.XX focus of million below all the since which Digital performance Revenue of the decreased the was impacted prior contraction changes ahead a million, million, quarter. repositioning quarter. productivity. which and in I XX.X the smallest the were The subscribers solution prior quarter-over-quarter for revenue. on

Solution, and February was decreased quarter. was in subscriptions the We XX of in as BODi by The we marketing number in a subscriptions launched campaign. which nutritional new the mainly revenue Year's revenue the quarter. the increase Connected retention quarter. we with The $X prior million, XXX,XXX, prior increase prior from million bottom Nutrition saw fitness XX% March. line driven delivered with more X% from was up New

XX%, was driven Gross the mix to year, more compared and XX% by was of a margins, improved in prior improvement nutrition margin composed and the product in The revenues. digital gross XX% quarter. and prior nutrition

walk to through prior compared XX%, This product with quarter. me each Let line. still in the XX% was margin year, the line prior and in gross

less revenues BODi year-over-year grow the Solution. in is new to due And year-over-year scale reduction The digital decline given revenues. mainly the with

prior confident quarter. will prior Nutrition gross versus are margin the We XX% margin year, the in digital was improve. XX% XX% and that in gross

improved improve quarter. was minus and in product The stability minus minus the Connected pricing an prior nutrition and The prior gross in XXX% from were margin fitness stabilization supply the versus gross XXX% the benefited margin and management. non-cash XX% lower chain charges. improvements mix, accounting inventory year, from costs

restructuring Moving operating and expenses, our charges. to excluding impairment

prior to The million, of operating the XX% for which a cost prior is expenses with prior direct largely is and several and XX% revenue, quarter. XX% that transformation marketing quarters. were from result been quarter. in and XX% a the in compared the improvement have was in improvement Our $XXX we year line the of year, referencing the represents Selling prior

portion for selling costs our that they our partners, of sell a gig and product. commissions the reminder, and our when As compensation earns bonuses is workforce variable largest marketing

your Our role feedback be direct as media attractive disciplined targets. within acquisition continues and to

more higher We to turn for on dollars capture are in focused acquisitions. driving us which marketing more generates customer LTV,

development of is mentioned of As which want That That the XX% we quarter. strategy. in was and increase, the and the year-over-year of is achieve exactly revenue, revenue stack. driven quarter. in revenue LTV the new in prior simplification digital prior XX% and have from to our prior XX% XX% technology we by what earlier, G&A in year, down dollars up in from XX% year with from our the XX% seen a prior Enterprise our was of reduction spend. technology is improving XX%

deleveraging. G&A from increases year-over-year The

from While G&A dollars fixed, down in it was mainly spend. last is by XX% year

be ensuring We managing our our spend terms. Beachbody expenses to vendor friendly in is continue aggressive and on

reduced successfully have RFPs recent spend year-over-year rising Our despite inflation.

million of prior EBITDA was year $XX.X the of $XX.X loss a in $XX.X to loss the loss a of was a our million loss compared prior million quarter. the of Net prior loss Adjusted XX% in million Adjusted $X.X net prior compared $X improvement net and quarter. a and the was a EBITDA from in of a million year ahead profit million prior year. $XX in guidance the of to a and

from at drive growth our break to structure have this the EBITDA. level, profitable body our We and all will new cost platform designed even

to balance the sheet. on Moving

$XX prior quarter. Our in cash million balance $XX the to was million, compared

We coming have improve position including severance million non-recurring and are payments, from will million, quarter. down in the in was in QX our costs restructuring bonuses. use $XX quarters. Inventory $XX liquidity prior a cash strong in some the XXXX

supply demand in exercise and reduction. XX% resulting a to favorable We and chain balance inventory discipline continue management,

our inventory on. off inventory been level has balance here coming for should to The seven start quarters. down fact, In consecutive from levels

cash to flows. on Moving

minus cash prior the payments, had down from year. of $XX in bonus operations. Our was would million costs XXXX out the cash severance from in we million from $X first Factoring positive flow have inflow operations minus quarter

reduction million the $XX.X in from was PP&E last of $X.X the substantial for year. first quarter million, a CapEx Our

$X.X content from CapEx in year. the million Our of last $X.X million, first down was quarter

This new CapEx CapEx be rate. down combined So from with improvement should a $XX $X year. XX% the million, run million, our prior from

run In of we to new additional facility $XX business without needing terms capital. continue access million, of capital an so needs, we credit have to the

shoots QX. encouraged for by Now, our turning outlook the to to we strategy. I'm seeing our response are green that in

and engagement seeing improvements are in We rates. renewals, nutrition attach

is based transformation in guidance stand on our where we Our journey.

We have new our BODi platform. successfully launched

we our are customers in And now existing sales are our Our ramping of EBITDA reacting with objectives line profitability. efforts well. very and marketing up

Adjusted million guiding million. summit follows. we're XX million to the of $XXX upcoming EBITDA that $XXX X EBITDA of the the in was incurred of several QX. up from the occurrence, but where cash minus annual event, the occurred Revenues With as million. in event. different expense year, quarters recognized to quarter loss is leading reflects the last quarter This over outlay minus to This is where summit

a be will so by Stock be we $XX has our been just I New million. to not want QX in cashews below the our Our clients Also, I've New improved investors Exchange about exchange will notice. confirmed few be stock York York listing asked delisted. this remediate the

can open With up that for we questions. operator it

America. comes question Joanna of first the Bank of The Instructions] [Operator from line of Zhao

comment Just still then remaining help please understand the you subscribers some And a of percentage understand the question My out the rate loss the data? you If the signals, positive and What is XXX for is renewal were from the us or Can and can chain offset them please percentage the after remaining uplift you're net premiums any seeing after trying the subscriber's rate for both seeing are better. understand? you focused you of seeing both help that early BODi, price peers price XXXK to that revenue also, what bit there renewal you're the of turn XXX? then on out you because for annual And change little are a change? any turn on the price tier? cohorts of subscribers and $XXX can is seeing premium on what on just or subscribers. but business? on us turn the tier? $XXX for And understand And of the are

I up cohort cohort, me was call ago right to year Overall, now Let it's pleased a rate. commenting. ago. onto $XX off Because the they a now think same bond that signed what if we're the BOD that $XX BODi right people, renewing from to about by you rate a churn at year that at the BODi. start people They're were with very who the renewing

had with great It's renewal we So of rate, that more we're it's a sign. materializing. very churn, not factor happy but

think platform, signals in all they're I which equation seeing activity, people more for that streams the appreciating engaging we're are them. it, and the value more they're seeing

So that's good news really there.

past now, of have When of January which we means been half those people frankly, up said around since the the that. in XXX,XXX of it's primarily would now, people second doubled and file them in January half signed X, that the most of would There's X. those renewing very six because little have so you months, size

So terms people. basis. efforts the in LTV the the starts being up, And base. of sales in overall as LTV an acquisition that's It's pretty, digital It pretty I new offsetting favorable subscriber subscriber new on those when decline and it ramps point per we're is, seeing customer change added higher. our

just follow-up LTV to a on And the CAC.

next like comment LTV can impact CAC cleanse and you your ratio, remainder to the your to CAC long-term customers. If year as And on just price new your really your that kind acquire of for year of you about ratio for what ratio LTV after has spend thinking price change expectation change? this is rebranding and the new marketing latest or how the how strategy are

aim is for from What in that The a that now. but relates sales currently coaches sales the for when afterwards And of spend, And to of we becomes as that for healthy profit a of say one. we're of aiming payback partners. everything that to and haven't majority about CAC row to past compensation standpoint our then lifetime value I around network a reminder revenue is think running we our the in we shared marketing, which aim would in margin. LTV and and XX% year variable continue is healthy great customer a a for we ratio advertising

will and lends price allowable the strong BODi acquisition. I because higher add just the media take of that point their to of our customer for annual higher we the XXX of are, itself a subscription at obviously rate Marc that

marketing benefit the roll learn that So in and as this test out can we as new product. phase we're

Just I can. as two more

is next on question my recession So risk. the

guide into recession? your year-over-year put declined for and industry percentage context will year U.S. XX% think last half Obviously, So that in how assuming done navigate the we're double-digit Given each macro you foresee this go we're look is revenue? about do recession? similar Beachbody through How implies years? to of XXXX. that's heading XQ memberships XXXX by XX% reopening a if Maybe you in and this plan given heading recession into research during so? at trend low just that the us? fitness also then to this IHRSA, year? will the do you down assumption And by BODi into And recession, impact in that versus challenges a does all of second And help prior

I we're It's uniquely well. question. Joanna. a quite think positioned great we And great Actually did the recession

We are comes at be it they the looking when gyms cost-effective wanting their people and budget. to protocols household nutrition to continue the fitness when alternative a very to might

now, to mindset uptake, So And our we're fitness, we well with XXXX, positioned masterclasses. think for XXXX. uptick an positive and holistic that approach saw nutrition we in

this our supplemental labor that add tight to the It's network channel to, a a some add a for partners, of second third market. income house. is sales in actually cases, also a since to I'll household difficult in to get job primary or our

we this that opportunity again, year not are us an excel anyway. is to really money. beginning people monetize a things, through those give of a of it's of opportunity certainly their to the expense, them realizing ecosystem factors income kind the that those it's is optional where for an is is extra And they're that's back lifestyle. And the to that part opportunity of and referring to two they both earn an half the into the earn this the two into think need XXXX. doing So something thing by And people

half is would the year, model business about asked our You second I what of the say as change,

the completes its to in the classic, classic more half favorable different our be would seasonality half, the view industry, implementation, build the of first is this lead momentum which than second up than

give or the And to what to opportunity us question you investors opportunity most this company an think stock? my give last is to is just do an about point us, you explain at misunderstood help by your

both and This approach be very assets are thing fifth business well Home that flow, growth, in this before to particularly loss eye innovation And incredible compelling have way, deepest subscription. as such and can I environment a is a looking works on always bit would consumers sometimes the prescriptions. look body people and look of But a the I and and an engaging category I model, that, when be grow XX and to of of around way change. the preserving we company again my run a for is have set And if launch think toward this weight while which of of that company. innovate in have dramatic to now at basis. our the is quarterly little we've looking operated aren't the and happening what's up in say literally think cash a industry clear the a is I there our fitness now, this we've market this are keeping that's the Fitness around to such catalog stamina environment, on and really with been season companies that that and they're at app years myopic the this nutrition lot we solutions, you kind managed over this health a new big an and esteem company and playbook will over then has

lifestyle positive at medication. We mindset the and the to they for nutrition change prescription same that holistic people fitness, are resource their contemplate who time need

It XX feels like the everything we've led to this like, for position. ideal has done up we're years in last moment. So really this that

we recognizes we of approach good And our where feel about we forward. a value very So good in company, that we hope are the going the the really are. position market and that

Let add that. me to

you we're about structure our at. cost adjusted the to his track we've, in it, for record, think If addition we've level

in you was loss X So this profit adjusted minus that a a see million in quarter. QX can our past EBITDA was

So we've definitely down healthy And XX% kind on. gross on our very the cost moved we margin, only gross of the getting aggressive the we improved will margin, the came at very margins, go see cash equation comments, it of gross just from like in so I burn in side here. here better from said

change as to revenue So March the we talking the others but turning now just outside benefit all it the just start like to profits, down may -- Carl changes, major implementing that of while should kind all as and flowing, should implemented be our said, about fall in bottom-line.

The from of next question Linda comes Davidson. Bolton Weiser

you in assume the was with I cash that operating that severance occurred you those? bonuses. you payments non-recurring I that quantify I Can guess quarter quantify if first the curious cash impacted could said flow. So and

the I we from you the would bonus those positive $XX why would severance operations been factor cash I in cost $XX that with be range. 'XX million said million have QX. if say to would That's in out, combined flow cash

that assuming correct? to be every bonuses consider will So year, cash cash non-recurring? bonuses you pay why I'm don't you

funded sell depends, we we that's funder how against plan, and an sell beat, we target so it long set funded. as bonus. as Well our We've what's we ourselves aggressive

this kind I point of digital here, subs through I then, until is or work what XXXX? occur sequentially? can the guess, but out year that bottom Like will And model at not

is Yes, basic half we're is, now. through the because out, bottom that year I mainly file would this of second Linda should say when bot cycling

-- of kind of the the to decline body in as a is while it takes to size that starts it, bates increases, the through bot offsetting smaller the cycle it file. While year increases file

Tuttle of Singular question Research next from comes The the of Darin line

I that for think you're there an right had line the quarter. be EBITDA you would almost in positive

deferred on just I on that. revenue. congrats question a the So had

expected was and, I million the at around with that that transitional and is revenue The premium new to in on everybody So deferred think an or something do XX you this the quarter. the the is for looking pretty understanding be billing that of going kind guidance forward? subscription this there change solid going deferred I'm that in is revenue of period, model, way

point most as it's we're and say signing a signups I'd higher guess more XX-month at price on I over up ARPU people XXX period. Darin, the

will that So cash But the a comes later. you that's see upfront where benefits we from billing what standpoint. defer

So LTV per will increasing deferred the increase ARPU given we're customer revenue. favorably it and the the

forward? end that the going the how a to directly of on us? marketing risk in how back TikTok That's And with look had the that. what that of if if platform? is much potentially the compensation of the, terms that, of as new then your the I then banned digital for right, much that TikTok? in for well. on guidance the And marketing advertising then levels, expecting Would was at just at towards look we digital Carl inventory the things platforms significant and be revenue or we getting TikTok expenses partners mentioned that say variable spend, like Is maybe And is potentially

now, and exposure Meta most It's exactly we advertising our digital So zero do because to at of between the We our to is that a do exists. Google any TikTok this really don't it business. extent channel point. expansion right of probably

all. So and network. the let I'll that's between expense an ratio exposure media spend Mark variable to speak not the to at

from is pretty our Right it, the of drive now variable network we drive side. the look much Darin, everything Yes, majority it. side does so

so So past quarter in our million. notes for advertising to was $X the financial we on do we list this how spend spend, much

balance the sales $X in for drive from selling it it we we marketing, and clicks So really variable all we the on way. Or if do that brand, compensation. million, you the don't And really allowables. back variable, out for focus would the be

driving customer new acquisitions. So it's

There time. are registered currently this additional at no questions

I So team any will conference for back pass remarks. the closing over the to management

mission much, want for I support and in up. our Well, thank thanks direction. shareholders today's our to call everybody. I'll your just Okay. just our wrap so for enthusiasm

and as we've incredible the over of are accomplishments decades. success two much our proud last As had

their XXs Our healthy, fulfilling aspirations millions achieve are of help lives. of to lead people goals and

that to this in this exciting and let moment aspirations company. those And time new us ambitions frankly, for exactly this chapter

we're have of proud you So ahead aboard. what's and I'm us, excited about to

forward next everybody. second everybody look care quarter hope our I has and So Take the a update night. after good to

for that participating. will conclude you today's And call. Thank

You may lines. now disconnect your