Beachbody Q4 2024 Earnings Call Transcript

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March 27, 2025
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Operator

I would now like to pass the conference over to your host, Bruce Williams, Managing Director of ICR. You may proceed.

Bruce Williams
Managing Director at ICR

Welcome everyone and thank you for joining us for our fourth quarter earnings call. With me on the call today are Mark Goldston, Executive Chairman of The Beachbody Company Carl Deichler, 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.

Bruce Williams
Managing Director at ICR

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 Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

Thanks, Bruce, and thanks everyone for joining us today. I'll start by providing an update on our company's restructuring efforts and the significant changes to our business model that we announced last September. Then I'll highlight our fourth quarter performance and share the progress we've made on our turnaround plan. After my remarks, I'll hand it over to Carl Deichler, our CEO, who will discuss our strategic initiatives in more detail. And that will be followed by our Interim CFO, Brad Ramberg, who will discuss our financial guidance and outlook.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

As you're aware, as of 11/01/2024, Body restructured into essentially a new company as we eliminated our long standing multi level marketing platform and moved to a single level affiliate model. We made decisive and immediate changes to transition from our old model and paved the way for this transformation. The restructuring fundamentally broadens our go to market strategy and allowing us to be more dynamic and nimble by taking advantage of new distribution opportunities that the company could not unlock previously and I'll detail that later. I'd like to emphasize that 2025 is a transition year for the company and we're at the early stages of implementing our new strategy. As I communicated last quarter, it's essential for investors and analysts to view our business model through a fresh lens as year over year comparisons will not be a true representation of our progress given the vastly different business model that we are now employing.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

Let me briefly reiterate our strategic shift to position Bodi for future success. We phased out the multi level marketing or MLM structure, which had been in place since 02/2007. The MLM model, while once effective, had become outdated, costly and burdensome for the negative stigma that hampers new customer and seller acquisition. Instead, we've made a quantum strategic shift to an omnichannel strategy heavily focused on direct to consumer marketing. This includes utilizing direct response, Amazon and conventional retail distribution for our nutrition products and predominantly direct to consumer channels for our digital fitness products.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

The affiliate model, which simplifies our structure, will complement this omnichannel approach by enhancing revenue streams and empowering affiliates with performance based compensation structure. This transition better aligns with our direct marketing roots and offers more sustainable economic framework while focusing on profitability and operating efficiency. We successfully met our internal target for transitioning active sellers from the MLM network to the new affiliate program. In addition to the new affiliate program, we have several exciting initiatives that we believe will be key drivers of our long term growth. Our direct response marketing unit continues to perform well and we continue to experience strong growth in our Amazon business.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

While early, we're also making progress in developing new products in the Nutrition segment under our very popular T90X and Insanity brand names, which we hope to introduce in the next twelve months. These products will be available in major retailers within our affiliate network and through our direct response business. The omni channel opportunity is vast. BODY has never marketed any of our highly rated nutritional supplements outside of the former MLM network due to constraints of the former MLM model. However, we now have much more robust go to market opportunity where we can market our leading products like Shakeology, Energize and additional product lines we're developing direct to consumers through media outlets like Facebook, Instagram, Google, etcetera, which is an opportunity that we could not take advantage of previously and which significantly hamstrung our ability to serve our addressable market.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

While this will take time, I really couldn't be more excited about the growth potential ahead of us. Now let's take a look at our performance highlights for the fourth quarter. Our revenues were in line with the high end of our guidance and we achieved extremely healthy gross margins, which improved by eight thirty basis points year over year. Adjusted EBITDA of $8,700,000 significantly exceeded our guidance range of $2,000,000 to $6,000,000 This marks our fifth consecutive quarter of positive adjusted EBITDA. For the full year, we've generated $28,300,000 of adjusted EBITDA.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

That's a $37,000,000 improvement from the $8,700,000 loss in the prior year. Additionally, we had a dramatic improvement in year over year cash flow. We generated cash flow from operations of $2,600,000 for the year 2024 compared to a cash use of $22,500,000 for the year 2023. That was a $25,100,000 improvement year over year in cash flow. We've made significant progress in our turnaround by restructuring our financial model and we're really pleased that we generated positive full year adjusted EBITDA and cash flow from operations for the first time since 2020.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

As we look ahead to 2025, we recognize, look, this is going to be a transition year. As we implement our new business model, which is a crucial step in moving the company forward in this new direction. We understood that transitioning to our new omni channel business model would involve some short term dislocation, but it was necessary to position the company more competitively for long term success. While we're excited about our new initiatives, we know it will take time for these efforts to fully take hold, but we're fully committed to playing the long game at Boddy. With our new business model now in place, we're entering the next phase of our strategy, which is dedicated to unlocking our top line potential.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

With that being said, I'd like to turn the call over to Carl Deichler and he'll discuss our strategic initiatives as we move into the next phase of our transformation.

Carl Daikeler
Carl Daikeler
Co-Founder, Chairman & Chief Executive Officer at The Beachbody Company

Thanks, Mark, and good afternoon, everyone, and thanks for joining us today. Before our Interim CFO, Brad Ramberg, goes through the numbers, I just want to take a second to provide an overview of our initiatives and priorities. But first, I want to say how grateful I am for the entire Body team. This past year has been a big one for us, full of challenges, important changes and from my perspective as the majority shareholder, we've made significant progress toward positioning the business to serve more people, to return to the kind of growth and profitability we've enjoyed for the majority of our twenty six year history and to get back to a trajectory of a profoundly important and productive public company. But none of that happens without our incredible management and staff, plus our affiliate partners, our amazing subscriber community and our supportive stakeholders.

Carl Daikeler
Carl Daikeler
Co-Founder, Chairman & Chief Executive Officer at The Beachbody Company

Now looking back on 2024, the year was about taking a hard look at what was working and what was underperforming, what aspects of the model had changed since the pandemic and were holding us back from reaching and helping more people. And we made the very we're we're seeing the signs that our recent shifts have great potential to scale. Our focus continues to be on delivering real results for people, helping them get fit, stay active and feel their best. And with this refined business model, we're moving toward a more efficient, more profitable and more impactful business model with incredible agility and leverage. We know the demand is there, especially in this new GLP-one semiglutide age of weight loss pharmaceuticals.

Carl Daikeler
Carl Daikeler
Co-Founder, Chairman & Chief Executive Officer at The Beachbody Company

More people need our no nonsense approach to fitness and nutrition than ever. There's real demand there. So I maintain that our opportunity is huge. And with a clear strategy in place, we're creating momentum for the long term. What we continue to be focused on is building profitable revenue and cash flow, which as Mark outlined, created the imperative for exiting the network marketing business and simplifying the business to a model that balances affiliate marketing with our roots of highly efficient performance marketing.

Carl Daikeler
Carl Daikeler
Co-Founder, Chairman & Chief Executive Officer at The Beachbody Company

That also opened up the prospect for sales channel expansion and greater control of the positioning and definition of the body brand across multiple sales channels. That's why our affiliate transition is such a big focus. More visibility of actual customer success, better incentives for the customers who step into the affiliate opportunity and a smarter approach to customer acquisition. It's all really starting to come together. Now it's still early in the game.

Carl Daikeler
Carl Daikeler
Co-Founder, Chairman & Chief Executive Officer at The Beachbody Company

We made the shift to a single level or more traditional affiliate model, which let us remove the stigma of multilevel marketing from the narrative and direct our marketing spend where it matters most, attracting and rewarding the people who are ready to actually do this incredible thing of lifestyle change, getting results with our programs and sharing that success with their followers on social media. It's very early in the process, but I'm optimistic about everything we've learned in the three months since it began. And I'm excited for how the team has already spotted significant opportunities to simplify and improve the entire affiliate model. Our marketing initiatives are focused on reaching more people with this incredibly efficient offer of what we call the total solution, combining digital programs with a monthly subscription to Shakeology. Not only is that incredibly effective for the customer, the price point is extremely compelling, especially when compared to the offer propositions of our peers in the equipment space.

Carl Daikeler
Carl Daikeler
Co-Founder, Chairman & Chief Executive Officer at The Beachbody Company

People get results with our business model more reliably and for less money. And this is the first time we've been in a position to mass market this total solution bundle. And while it's early in the ramp up, I have no doubt that it can really scale because we've done it before. We're doubling down on direct response marketing now, leaning into what's driving the best engagement and conversion rates. And while the impact of those changes weren't completely realized in the fourth quarter, every week we're learning, finding new wins that generate traffic, improving landing page conversion and growing average order value.

Carl Daikeler
Carl Daikeler
Co-Founder, Chairman & Chief Executive Officer at The Beachbody Company

And we're gradually getting more and more traction. Our women's hormone health program, Belvatale, launched in December. The exit from network marketing was a significant disruption to the original business plan for this new product, But we did see strong demand in the original launch and now we're ramping up direct marketing with compelling user generated content. As our first wave of users complete the program next week, the results are consistent with our test groups and the resulting flood of success stories will be used to drive marketing of Belvatal throughout 2025. This is actually the same playbook that worked for P90X and Insanity.

Carl Daikeler
Carl Daikeler
Co-Founder, Chairman & Chief Executive Officer at The Beachbody Company

Neither of those programs were blockbusters out of the gate. But once the success story started to come in and were integrated into the marketing message, the momentum builds and word-of-mouth starts to spread really fast. And I expect that same dynamic to happen for Belvatal based on the enthusiasm we're seeing as women complete the program. We also launched two new programs to expand our audience. We call them specials.

Carl Daikeler
Carl Daikeler
Co-Founder, Chairman & Chief Executive Officer at The Beachbody Company

One is called Walk Week with Lacy Green. This is an indoor walking program which is very appealing for people who want something easy to get started with. The other special is called the GLP one fitness formula, which we launched at the February and represents our initiative to help people who are using those pharmaceuticals to have a healthier and more permanent healthy outcome. As we mentioned last quarter, channel expansion is also a priority. We're seeing continued success with Amazon and adding subscribe and save nutrition subscribers at a faster clip than expected, and we believe this will compound as this channel expands.

Carl Daikeler
Carl Daikeler
Co-Founder, Chairman & Chief Executive Officer at The Beachbody Company

We started taking what we learned from the Amazon channel and launched a subscribe and save option within our own body checkout flow, which is also building our nutrition continuity file and driving long term retention. That's a very healthy sign for the turnaround. We also launched on walmart.com in February. It will start small, but the growth potential is significant, especially given the retail initiative that Mark referenced, a project that he's personally leading for us. That's meaningful given his background scaling major CPG brands over the course of his impressive career, which leads me to talk about nutrition.

Carl Daikeler
Carl Daikeler
Co-Founder, Chairman & Chief Executive Officer at The Beachbody Company

We know our nutrition and supplements are some of the best out there led by the Shakeology brand. Historically, our nutrition products have mostly been sold within our network, which is all the more reason to be impressed with the fact that we've sold over a billion servings of Shakeology. Well, now we can expand that distribution via our own CRM activities, alternative marketplaces like Amazon and Walmart.com. And in the near future, Shakeology will be at retail. I'm also pleased to say that we've retained more of the legacy nutrition subscription file than we might have expected through the transition out of network marketing, which speaks to the positive customer experience of that product.

Carl Daikeler
Carl Daikeler
Co-Founder, Chairman & Chief Executive Officer at The Beachbody Company

Now in addition to getting brand new nutrition subscribers, we're seeing returning customers who are resubscribing to our Nutritionals. That's a very promising sign. We also discussed partnerships in our last earnings call. Partnerships continue to be a significant opportunity for Body. And here's where we stand.

Carl Daikeler
Carl Daikeler
Co-Founder, Chairman & Chief Executive Officer at The Beachbody Company

Helping people leverage their HSA and FSA accounts is a particularly important focus. Forty percent of adults have a funded HSA FSA account and eighty percent of adults in The U. S. Have access to these pretax funds. We're working with Doctor.

Carl Daikeler
Carl Daikeler
Co-Founder, Chairman & Chief Executive Officer at The Beachbody Company

B and now even the leader TruMed to make these payment options available in the body checkout flow. We also just announced a partnership with telehealth provider, Hello Alpha, who is excited to offer our products to their subscribers, especially the Belvatau Women's Hormone Health Program. And we've just begun offering their telehealth services to our database on a revenue share basis. Okay. Now to sum things up quickly, we're building a stronger, more profitable business from a foundation of dramatically reduced operating expenses and synthesized marketing.

Carl Daikeler
Carl Daikeler
Co-Founder, Chairman & Chief Executive Officer at The Beachbody Company

Performance marketing, affiliate marketing, strategic partnerships and new sales channels will set us up for scaling the business profitably. Twenty twenty four was about taking a hard look at what was underperforming, holding us back from reaching more people and making hard but important choices so we can better achieve our objectives to help more people. 2025 is now about smart and careful acceleration. After the important step back, we can now work from a stronger foundation and we're ready to really push forward. I'm excited about where we're headed and I can't wait to see the impact of everything we're rolling out.

Carl Daikeler
Carl Daikeler
Co-Founder, Chairman & Chief Executive Officer at The Beachbody Company

Now I'll turn it over to our Interim CFO, Brad Ramberg, to walk you through the numbers for Q4. Brad?

Brad Ramberg
Brad Ramberg
Interim Chief Financial Officer at The Beachbody Company

Thank you, Carl, and thank you, everyone, for joining the call today. I will review our Q4 results and provide our outlook for the first quarter. For the fourth quarter, the company generated revenue of $86,400,000 which was at the high end of our guidance range of $77,000,000 to $87,000,000 Adjusted EBITDA of $8,700,000 significantly exceeded our guidance range of $2,000,000 to $6,000,000 and we generated our fifth consecutive quarter of positive adjusted EBITDA. Now I'd like to provide more details about the quarter. Total revenues of $86,400,000 declined 15% sequentially and declined 27% year over year.

Brad Ramberg
Brad Ramberg
Interim Chief Financial Officer at The Beachbody Company

As expected, revenues were impacted as we strategically transitioned from a multi level marketing platform to an omni channel model. Consolidated Q4 gross margins were 70.5%, representing an increase of three twenty basis points over the prior quarter and an increase of eight thirty basis points compared to the prior year. Q4 gross margins were our highest quarterly rate since 2020, reaching the high end of our long term target of 65% to 70%. Moving to digital and nutrition revenues. Digital revenue decreased 6.2% from the prior quarter to $50,400,000 and decreased 21.4% year over year.

Brad Ramberg
Brad Ramberg
Interim Chief Financial Officer at The Beachbody Company

Revenues were impacted by continued pressure on our digital subscriber count, which decreased 3.4% sequentially to $1,070,000 and declined 19.1% compared to the same period a year ago. It's important to note that the transition from an MLM structure to the current omni channel model was primarily driven by the need to reduce the unsustainable overhead costs associated with the operation of an MLM. From a business standpoint, the transition away from the MLM has the most impact on the monthly nutrition sales. Therefore, our Q4 twenty twenty four guidance reflected the fact that we expected to see a significant decline in both revenues and the number of subscribers in our Nutrition business post the announcement of the elimination of the MLM model. Consistent with that expectation, nutrition revenue decreased 26.6% from the prior quarter to $34,800,000 and decreased 32.8% year over year.

Brad Ramberg
Brad Ramberg
Interim Chief Financial Officer at The Beachbody Company

Nutrition subscriptions declined 29.2% sequentially to 91,000 and fell 44.1% year over year. Digital gross margin was 85.9% for the quarter, up five forty basis points from the prior quarter and representing a twelve eighty basis point improvement from the prior year. Our digital gross margin results exceeded our previous long term target of 80%. 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 and a decrease in depreciation as well as the end of useful life of certain fixed assets. Nutrition and other gross margin was 52.3%, representing a six thirty basis point decline from the prior quarter and a 90 basis point decline year over year.

Brad Ramberg
Brad Ramberg
Interim Chief Financial Officer at The Beachbody Company

The decline from the prior 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 as well as increased inventory reserves and higher product costs as a percent of revenue. Moving on to operating expenses. Operating expenses for the quarter, which included $20,000,000 in goodwill impairment charges, increased 14.6% sequentially and declined 30.2% year over year to $93,800,000 Excluding impairments, operating expenses declined 9.8% from the previous quarter and declined 19.2% year over year. Selling and marketing expense as a percent of revenue increased 50 basis points over the prior quarter and declined five thirty basis points year over year to 45.1. This significant improvement over the prior year was driven by changes to our partner compensation plan and a decrease in media spend.

Brad Ramberg
Brad Ramberg
Interim Chief Financial Officer at The Beachbody Company

Enterprise technology and development expense as a percent of revenue increased six sixty basis points in the prior quarter and increased ten seventy basis points year over year to 25.6% of revenue. The increase was primarily due to accelerated depreciation of $8,200,000 in the current quarter related to assets that will not be used after the 12/31/2024, attributed to Pivot. G and A was 13.4% of revenue, an increase of 190 basis points sequentially and an increase of 200 basis points from the prior year. The Q4 twenty twenty four net loss was $34,600,000 compared to a net loss of $12,000,000 from the prior quarter. This quarter's net loss included $20,000,000 of goodwill impairment expenses.

Brad Ramberg
Brad Ramberg
Interim Chief Financial Officer at The Beachbody Company

Excluding impairment, the net loss was $14,600,000 The net loss represents an improvement of $65,000,000 versus the same quarter last year, which included $43,100,000 in goodwill and intangible asset impairments. Adjusted EBITDA was $8,700,000 compared to $10,100,000 in the prior quarter and $2,800,000 in the prior year. Notably, this quarter marks our fifth consecutive quarter of positive adjusted EBITDA. Next, moving on to the balance sheet and cash flows. Our cash balance of $20,200,000 compared to $33,400,000 in the prior year, which reflects our net cash balance after paying $15,800,000 of principal on our outstanding loan with Blue Torch Capital during 2024.

Brad Ramberg
Brad Ramberg
Interim Chief Financial Officer at The Beachbody Company

After making the principal payments, we've reduced the outstanding balance of our debt on the balance sheet to $19,200,000 as of December 31. We had a dramatic improvement to cash generation versus cash usage in 2024 versus 2023. Our cash generated from operations for the year was $2,600,000 compared to cash used in operations of $22,500,000 in the prior year, a $25,000,000 improvement in cash generated from operations. Moving on to first quarter guidance. I want to reiterate that our fourth quarter results marked the final quarter of the company's old business model.

Brad Ramberg
Brad Ramberg
Interim Chief Financial Officer at The Beachbody Company

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 cannot previously access and we are very excited about these 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. Therefore, our Q1 outlook reflects our new business model. We expect first quarter revenues to be in the range of $60,000,000 to $70,000,000 Given that we are in a new business model and therefore do not have historical trends that reflect the business that we have today, we are not certain as to the indexing that each individual quarter of the year will have for 2025.

Brad Ramberg
Brad Ramberg
Interim Chief Financial Officer at The Beachbody Company

Having said that, historically Q1 has over indexed the average quarterly revenue by approximately 15%. We will closely monitor this as we go throughout the year and hopefully have a more accurate quarterly indexing as we get to the back half of this year and into 2026. For Q1 twenty twenty five, we expect a net loss in the range of $11,000,000 to $7,000,000 and we expect adjusted EBITDA to be in the range of negative $2,000,000 to $2,000,000 dollars As we transition to our new business model, we want to provide some additional color to help you conceptualize changes in our financial model. As of today, we expect revenues to approximate 60% digital and 40% nutrition moving forward. This is the first quarter of giving guidance in our new model and should this trend change in the future, we'll update you accordingly.

Brad Ramberg
Brad Ramberg
Interim Chief Financial Officer at The Beachbody Company

Additionally, we expect our gross margin target for digital fitness to be approximately 85 and our nutrition target to be approximately 50%. As we progress throughout 2025 and into 2026, you will see the benefits of our new product pipeline and programs as well as the development of the additional channels we can now sell, which we believe will bear fruit. We look forward to updating you on our progress throughout the year.

Operator

Thank you. The first comes from Susan Anderson with Canaccord Genuity. You may proceed.

Susan Anderson
Managing Director & Senior Analyst at Canaccord Genuity - Global Capital Markets

Hi. Good evening. Thanks for taking my questions. I was curious maybe if you could give some more color just on kind of the movement you saw with the affiliates as you moved over to the new business model. I guess, what was the reaction?

Susan Anderson
Managing Director & Senior Analyst at Canaccord Genuity - Global Capital Markets

And did you see the majority want to continue to work on the new platform and continue to drive sales? Or have you been also maybe acquiring new affiliates that see the new platform as an opportunity for them? Thanks.

Carl Daikeler
Carl Daikeler
Co-Founder, Chairman & Chief Executive Officer at The Beachbody Company

Thanks, Susan. It's Carl. Good to hear from you. Yes, the transition to affiliate, I would say was right about where we expected it to be at the beginning. As you can imagine, the transition out of network marketing can be extremely turbulent and upsetting to the people who were committed to that model.

Carl Daikeler
Carl Daikeler
Co-Founder, Chairman & Chief Executive Officer at The Beachbody Company

However, the people and what I think is the most important affinity is those people who are using the product and most passionate specifically about our products and those are the people that came over. And I would say from a transition perspective, while we hit the numbers expected in the initial transition to affiliate, we have not been adding new affiliates as fast as we would like. However, we have started to bring in outside affiliates, meaning people who were not originally involved in our network marketing operations. And we're launching an initiative later in the late spring, early summer to dramatically attract more affiliates, particularly from our own current subscriber base. So, again, I would say it was a moderate success in the transition from network to affiliate.

Carl Daikeler
Carl Daikeler
Co-Founder, Chairman & Chief Executive Officer at The Beachbody Company

It has slowed down since, but we have plans for it to pick up from external sources and internal sources throughout the spring.

Susan Anderson
Managing Director & Senior Analyst at Canaccord Genuity - Global Capital Markets

Okay, great. Thank you. And then maybe if I could just have a follow-up. I guess, how should we think about just the P and L structure? Should we think about this quarter?

Susan Anderson
Managing Director & Senior Analyst at Canaccord Genuity - Global Capital Markets

I know it was two out of the three months, but being as kind of the new base for gross margin and operating expense? Or are you guys expecting changes as we move forward and the new business model kind of progresses? If you could just give any color on gross margin and OpEx throughout the year, that would be great. Thanks.

Brad Ramberg
Brad Ramberg
Interim Chief Financial Officer at The Beachbody Company

Susan, this is Brad. Good to hear from you. As we said on the prerecorded comments, what we're expecting is that the revenues will approximate 60% digital and about 40% nutrition. And given that this is a new model, we'll watch it and we'll continue to update you as the quarters progress. For gross margin, we're expecting our digital gross margin to be in the range of 85% and our nutritional gross margin to be in the range of 50%.

Brad Ramberg
Brad Ramberg
Interim Chief Financial Officer at The Beachbody Company

And then we've also provided guidance on EBITDA for the quarter of negative 2% to positive 2%.

Susan Anderson
Managing Director & Senior Analyst at Canaccord Genuity - Global Capital Markets

Okay, great. Thanks so much. Good luck to have the

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

Susan, this is Mark. Nice to talk to you. Yes, just for context, as I said in my remarks, this is essentially a new business right now. So our ability to predict quarter to quarter right now in a brand new business model is getting better every day, but there is uncertainty there. So I think the most important thing to note is with brands, which is that 60% of the business is anticipated to be digital fitness and 40% is anticipated to be nutrition.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

And with the margins at 8550% respectively, that's a weighted average margin of about 71%. And typically, first quarter has indexed, as we've said previously, around 110,

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

one hundred

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

and 12 for the year. We don't know that that's going to be in the new model the same thing, but absent that, we're using that as a compass. So we're learning every day as we're going. We really enjoy having this omni channel approach versus being wholly dependent on the previous MLM. But it's also giving us a lot of learnings on the fly, which is what we're responding to every day.

Susan Anderson
Managing Director & Senior Analyst at Canaccord Genuity - Global Capital Markets

Okay, great. Thanks so much. We look forward to

Brad Ramberg
Brad Ramberg
Interim Chief Financial Officer at The Beachbody Company

We'll update you through the year as we learn more.

Susan Anderson
Managing Director & Senior Analyst at Canaccord Genuity - Global Capital Markets

Sounds good. Yes, we look forward to watching the progression as well.

Bruce Williams
Managing Director at ICR

Thank you, Susan.

Operator

Thank you. The following comes from JP Wallum with Roth Capital Partners. You may proceed.

John-Paul Wollam
Equity Research Associate at Roth Capital Partners, LLC

Great. Thank you guys for taking my question. If I could maybe just start a little bit more on the sort of Q1 guide and understanding a bit of what you talked about in terms of the mix and thinking through the lens of a sort of new business. But I just want to maybe get a little clarification. If we think about the sequential step down, are you guys really attributing the entirety of that step down from the affiliate change or kind of like how much of the decline are you bucketing to affiliate change and what else might be involved in sort of that decline across segments?

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

Yes. It's definitely, as we said last quarter, we anticipated a certain percentage of the active sellers that were in the former MLM to migrate over. And that's essentially what has migrated over. That being said, there were many people who did not choose to become affiliates and have since left the Body Network. And so that is where you see the difference in the volume.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

The Direct Response business continues to be strong. The Amazon business continues to be strong. Both of those things will become a bigger part of our business going forward. The retail that we will be doing hopefully at the end of twenty twenty five and 2026 will be another component, which will be brand new. But we had always said that in this shift, we are going from a MLM dependent model to an omnichannel model where affiliates are now a component of the mix, but not nearly at the level as they were in the former MLM.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

And so the guidance is reflective of the fact that this is the first pure quarter of the new business model and that's why we are what we are.

John-Paul Wollam
Equity Research Associate at Roth Capital Partners, LLC

Okay. Understood there. And then maybe just a little bit of a follow-up from Susan's question, but if I kind of go to the EBITDA guidance and work my way through OpEx, I just want to get a sense, is that sort of number the kind of fully baked number we should think about going forward in terms of all of the cost reductions you were able to pull with the model change? Or are there still some steps left as we progress through the rest of 2025 that could see OpEx move even further?

Brad Ramberg
Brad Ramberg
Interim Chief Financial Officer at The Beachbody Company

What you're seeing in the guidance is the way we're looking at the business right now. So that's what we're expecting the first quarter to be. As we continue to learn as the model progresses, we of course will continue to look at every operating expense line to make sure we're getting the appropriate leverage that we can. But the guidance we gave is the way we are seeing the business right now for Q1 in 2025.

John-Paul Wollam
Equity Research Associate at Roth Capital Partners, LLC

Okay.

John-Paul Wollam
Equity Research Associate at Roth Capital Partners, LLC

Fair enough. And if I could just squeeze one last one. Just want to kind of give the opportunity to talk about the Nutrition business a little bit more. It sounds like certainly a lot of progress and some positives in terms of the Amazon business and the, what sounds like increasing subscriptions. So just how are you thinking about you talked about retail, we've talked about this whole outside the walled garden, like what more can you share in terms of just positives?

John-Paul Wollam
Equity Research Associate at Roth Capital Partners, LLC

And if you're able to quantify at all, kind of what can you share in terms of how well that's going?

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

Well, it's early days, but let's talk about nutrition because it is a major opportunity for the company. So the Shakeology product, which you're familiar with, I think cumulatively in its life has done $3,000,000,000 4 billion dollars of revenue and over 1,000,000,000 servings and has never been sold in a retail store and had never been marketed in Facebook, Google, etcetera. So now that there is no MLM anymore, that can be marketed. So that alone is a significant potential opportunity that we will start to tap later in this year from a retail perspective. But from a marketing standpoint, we're starting to advertise and you'll see it now and it's doing very well.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

The other nutrition products that we've got, forget about the existing portfolio, the new stuff we talked about, P90X, SANITY, etcetera, those will probably be out either end of 'twenty five and into 'twenty six. Those are major, major retail revenue opportunities. So we're talking about two of the best known brand names in the history of the fitness business. So unlike brands that walk into retail environment starting from scratch, they have to build awareness, we're going with two huge awareness brands right out of the gate. And so we are now working on our formulations across the categories that will enter JT and this could be a major new part of this company as we go into 'twenty six and beyond.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

So we talked about omnichannel, but that was starting on January 1. That channel has not yet been developed and it will be. The unburdening of the nutrition channel is just starting to take hold and the digital will obviously continue to be a great part of the business and the affiliate will be one of those four or five streams that we've got. So nutrition for us, once we expose this to the general consuming public, both as existing products and the new products, should become a much bigger part of the company in the next twenty four months. And Carl, you want to add something on that?

Carl Daikeler
Carl Daikeler
Co-Founder, Chairman & Chief Executive Officer at The Beachbody Company

I just want to add that one thing that we have not been able to do for the last almost eighteen years with the network marketing business was literally advertise our nutritionals, which are best in class and the synergy of what we call the total solution, and that is leveraging the content, access to our brand leading content with our nutritionals. We just started doing that this first quarter and we're seeing very strong signs in the direct marketing channel now that we have the ability to market both nutrition and content together that that bundle is a very efficient way to acquire new digital and nutritional subscribers. So that synergy is something that is a core competency and competitive advantage that the company has that now we are completely, untethered to do now that we've retired the network marketing model. And that's pretty exciting.

John-Paul Wollam
Equity Research Associate at Roth Capital Partners, LLC

Perfect. Great. I'll leave it there. Best of luck going forward, guys.

Carl Daikeler
Carl Daikeler
Co-Founder, Chairman & Chief Executive Officer at The Beachbody Company

Thanks, JP.

Operator

Thank you. The next question comes from Ghoshish Sreed with Singular Research. You may proceed.

Gowshihan Sriharan
Analyst at Singular Research

Good afternoon. Can you hear me?

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

Yes, we can hear you. Yes.

Gowshihan Sriharan
Analyst at Singular Research

Okay, great. Thanks for taking my questions. I think you might have alluded to it, but maybe you can give us a little more color. Given the significant changes in the business model, how are you guys thinking about the long term composition of your revenue streams? Do you anticipate a shift from between subscription to one time purchases?

Gowshihan Sriharan
Analyst at Singular Research

And now that you're in retail and the omni channel, is it more nutritional products? Can you give us some color on how you think about the long term?

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

That's actually without giving guidance, that's actually a great question. We have previously been, as you know, heavily dependent on subscriptions. And we still see that as being an important part of the business. But now that we're no longer network bound and we can go into the general consuming public, you will see more one time purchases as we bring new people into the franchise. And when we develop the retail part of our business over the next twelve months, more in the latter part of this year, early next year, a lot of those will be single purchases because that's how people buy at retail.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

So you're going to start to see a mixture here of the digital fitness product being heavily subscription oriented and a component of the nutrition being subscription oriented and a component of the online business or nutrition being one time and then all of the retail being one time. That's how the business will play out. And if I'm taking a twenty four to thirty six month horizon and you ask me what will this look like in two or three years, once that retail has taken hold, it will become a much bigger part of the total mix.

Gowshihan Sriharan
Analyst at Singular Research

Got you. I know

Gowshihan Sriharan
Analyst at Singular Research

you guys have mentioned the success of the Amazon channel. Any color on the Walmart channel, the walmart.com? Will it grow to be successful or bigger? How do you see that playing out?

Brad Ramberg
Brad Ramberg
Interim Chief Financial Officer at The Beachbody Company

Carl?

Carl Daikeler
Carl Daikeler
Co-Founder, Chairman & Chief Executive Officer at The Beachbody Company

It's very early in the process. We just launched Walmart about a month ago. So I think that will be covered in our Q1 earnings call, so that we can provide what clarity and progress there is on that. But we are seeing it generally perform with the same kind of ramp in the early days that we saw from Amazon.

Gowshihan Sriharan
Analyst at Singular Research

Okay. Awesome. And I'll just squeeze in one

Gowshihan Sriharan
Analyst at Singular Research

more. Just to how do

Gowshihan Sriharan
Analyst at Singular Research

you evade or manage any kind of potential cannibalization between the direct to consumer and the affiliate network channels?

Carl Daikeler
Carl Daikeler
Co-Founder, Chairman & Chief Executive Officer at The Beachbody Company

Frankly, they're complementary. The more successful and the more scale we get with direct marketing, the more wind it puts at the back of the affiliate marketer. That's definitely what we saw in the early days of the network marketing business. And the reason we lost that dynamic was there needed to be such a my most favored nation relationship with the network that it was holding back our ability to expand direct marketing. Now that we've sort of retooled it and made it simpler and and just easier for more people to participate in, we expect that more of our subscriber base will actually be able to benefit from the exposure that we generate from new programs.

Carl Daikeler
Carl Daikeler
Co-Founder, Chairman & Chief Executive Officer at The Beachbody Company

Like we have got some very exciting coming stuff coming out this summer that is specifically being designed to have, a significant scaling performance marketing, advertising campaign that with that exposure, now our affiliates will be able to leverage their audience with promo codes and discounts to help convert more of their audience into subscribers. So I think it's going to have synergy frankly that we haven't enjoyed for about a decade.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

The best way to think

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

of it is all affiliates need air cover for the brands they sell. It's really important. And so the marketing that we do with the direct response marketing that we do is providing air cover to anyone who is an affiliate selling our product.

Gowshihan Sriharan
Analyst at Singular Research

Okay. Awesome. I'll take the rest offline. Thank you for taking my questions.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

Thank you.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

Thanks for coming.

Operator

Thank you. There are currently no more questions in the queue, so I will pass it back to Mark Goldston for closing remarks.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

Well, I just want

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

to thank everybody for attending today. And again, if you have any questions, please feel free to reach out to us either through ICR or directly through Brad Ramberg, our CFO, and we'd be happy to speak with you. So thanks everybody for attending.

Operator

This concludes today's conference call. Thank you for your participation. You may now disconnect your line.

Executives
    • Mark Goldston
      Mark Goldston
      Executive Chairman
    • Carl Daikeler
      Carl Daikeler
      Co-Founder, Chairman & Chief Executive Officer
    • Brad Ramberg
      Brad Ramberg
      Interim Chief Financial Officer
Analysts
    • Bruce Williams
      Managing Director at ICR
    • Susan Anderson
      Managing Director & Senior Analyst at Canaccord Genuity - Global Capital Markets
    • John-Paul Wollam
      Equity Research Associate at Roth Capital Partners, LLC
    • Gowshihan Sriharan
      Analyst at Singular Research
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Earnings Conference Call
Beachbody Q4 2024
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