Beachbody Q2 2026 Earnings Call Transcript

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Provided by Quartr
August 10, 2026

Key Takeaways

  • Positive Sentiment: Profitability continued to improve: Q2 revenue of $49.6 million exceeded the midpoint of guidance, while net income reached $1.4 million and adjusted EBITDA was $6.7 million, marking the fourth consecutive quarter of positive net income and the 11th consecutive quarter of positive adjusted EBITDA.
  • Positive Sentiment: The company is accelerating its nutrition-led, multi-channel strategy. Shakeology expanded to 131 Sprouts stores with reorders, launched in 481 Vitamin Shoppe locations, and P90X supplements recently became available on Amazon, while energy drinks are scheduled for a Southern California test market in late Q3 or Q4.
  • Negative Sentiment: Revenue remains under pressure during the transition away from the legacy MLM model. Q2 revenue declined 22.4% year over year to $49.6 million, digital subscribers fell 19.1% to 760,000, and free cash flow was negative $5.7 million for the first six months due primarily to inventory investment and declining deferred revenue.
  • Neutral Sentiment: Management guided for Q3 revenue of $44 million to $48 million, net income between a $3 million loss and breakeven, and adjusted EBITDA of $3 million to $6 million. Executives expect Shopify optimization, lower-cost nutrition customer acquisition, retail expansion, Amazon sales, and upcoming fitness launches to begin contributing more meaningfully in late 2026 and into 2027.
AI Generated. May Contain Errors.
Earnings Conference Call
Beachbody Q2 2026
00:00 / 00:00

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Operator

I will now hand the conference over to Bruce Williams, Managing Director of ICR. Bruce, please go ahead.

Bruce Williams
Managing Director at ICR

Welcome, everyone, and thank you for joining us for our second quarter earnings call. With me on the call today are Mark Goldston, Executive Chairman of The Beachbody Company, Carl Daikeler, Co-founder and Chief Executive Officer, and Brad Ramberg, Interim Chief Financial Officer. Following the prepared remarks, we will open the call up for questions. Before we get started, I would like to remind you of the company's safe harbor language. Statements contained in this conference call, which are not historical facts, may be deemed to constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual future results may differ materially from those suggested by such statements due to a number of risks and uncertainties, all of which are described in the company's filings with the SEC, which includes today's press release.

Bruce Williams
Managing Director at ICR

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 very much, Bruce, and good afternoon, everyone. Welcome to the BODi second quarter 2026 earnings call. I am pleased to report that BODi delivered another quarter of consistent execution against the turnaround we have been building for three years now. Total revenue for the second quarter was $49.6 million, above the midpoint of our guidance range of $46 million to $51 million. More importantly, this was our fourth consecutive quarter of both operating income and net income, and it was our 11th consecutive quarter of positive adjusted EBITDA, which came in at $6.7 million, which was above the high end of our guidance range of $3 million to $6 million. That also marks our fourth consecutive quarter of double-digit adjusted EBITDA margin, which tells you that the operational discipline that we have built into this business over the past three years is durable.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

Net income for the quarter was $1.4 million, also above the high end of our guidance range of a loss of $3 million to break even. Across the board, revenue, net income, and adjusted EBITDA, we either met or exceeded our own guidance again this quarter. Let's turn to the balance sheet. We ended the quarter with $32.4 million of cash. That's against a total debt of approximately $23.6 million, so we had a net cash position of $8.8 million. I'm pleased that we modified our lending agreement with Tiger Finance, and we now have a much less restrictive covenant package. Our new agreement demonstrates the conviction and confidence that our partners have in our long-term strategic initiatives. Let me give you an update on the retail expansion, which continues to build momentum.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

Shakeology is off to a great start at Sprouts Farmers Market stores, and they've now expanded our footprint into 131 Sprouts stores nationwide. Importantly, we're already seeing stores coming back for reorders on Shakeology. This quarter, in fact, right now, we've brought Shakeology into 481 The Vitamin Shoppe locations around the country. We've also continued to build on our relationship with KeHE, one of the two largest distributors of natural and organic products in the country, and this gives us a path into their network of grocery accounts. Just recently, we added an account which will open up the UNFI distribution network. That'll happen in November of this year, and UNFI is the other major distributor of consumer goods to the grocery channel. As we've previously discussed, waiting for the retailer shelf set planogram to be updated is a 6 to 12 month process.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

While we continue to actively participate in that process with strong distribution partners, we expect to modestly build distribution this year with the expectation for accelerated growth in 2027 as we become more integrated into retailers' planograms. On the nutrition innovation side, our P90X supplement line, which is pre-workout, hydration, creatine, recovery protein, and fast-acting energy, that just became available on Amazon, which opens up an important channel for us to build brand awareness and drive trial. We're also in the process of preparing for the Southern California test market for our new energy drink lineup. We've hired one of the top beverage distribution companies in the country to represent us in the market, and both our Insanity Liquid Shock and our P90X energy drinks are in production and will soon be ready to ship.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

We expect the test market rollout to begin in late Q3 or into Q4, and we will continue that rollout throughout the end of the year. I'm very pleased with our packaging and the flavors, and they really distinguish us from the competition. The digital fitness category is a $13 billion market, and the nutritional supplement category is a $164 billion market. That's like a lake versus an ocean. By leading with nutrition, which is exactly what we've done with P90X and Shakeology this year, we're acquiring customers more efficiently, and a meaningful share of those nutrition customers are actually converting into our digital fitness subscriptions as well. That combination, what we call the total solution, is what has always driven this company's best results, and it's exactly what's fueling our direct-to-consumer expansion today. With that, let me turn the call over to Carl.

Carl Daikeler
Carl Daikeler
Co-founder and CEO at The Beachbody Company

Thanks, Mark. Coming out of Q1, we outlined a handful of initiatives. We planned to build on the momentum of the P90X Generation Next launch by bringing the P90X supplement line direct-to-consumer and setting it up for retail. We were planning to transition onto the Shopify e-commerce platform, keep expanding our 10 Minute Body microdose fitness catalog, including promotion to the GLP-1 audience. We talked about our plans to launch our new 30 Day Booty Boost program with a new Super Trainer. Our focus in Q2 was also to continue shifting the business toward a nutrition-first multi-channel model, now that we're free of the margin and distribution constraints of the old operating expense structure. Here's where each of those initiatives stand. I'll start with P90X. The Generation Next launch in February was very well-received and it did exactly what we designed it to do.

Carl Daikeler
Carl Daikeler
Co-founder and CEO at The Beachbody Company

It set us up for the direct-to-consumer launch of the P90X supplement line in April. Promoting the P90X brand as a whole puts us in a strong position to build demand for both the P90X supplements and the brand-new P90X ready-to-drink energy beverage. On the retail front, we're navigating the retailer's planogram reset timing, which governs when new products get on the shelf. We don't control the growth as much as we'd like, but the interest is definitely real. As Mark outlined, Shakeology's seeing reorders in our test with Sprouts, and we just launched into 481 The Vitamin Shoppe stores. The P90X and Insanity energy beverage line will launch at retail in the second half of 2026. Our transition to the Shopify platform, which we completed right at the end of Q1, was achieved efficiently and with no business interruption.

Carl Daikeler
Carl Daikeler
Co-founder and CEO at The Beachbody Company

Honestly, the most exciting thing to come out of Q2, in my opinion, was the visibility Shopify has given us to areas where we can make dramatic improvements in the sales funnel, such as improving order conversion from existing traffic, improving engagement in the funnel, and reducing visitor bounce rate. Shopify ran a thorough audit for us, and we're aggressively adjusting our landing pages and promotions to conform to best practices. We'll continue to see benefits with faster checkout using Shop Pay, better conversion, and the flexibility to run bundle and subscribe-and-save offers that we simply couldn't do on our old e-commerce platform. We see real opportunity to improve conversion further as we optimize our landing pages and site navigation. We have new creative and marketing campaigns in development to build on that momentum.

Carl Daikeler
Carl Daikeler
Co-founder and CEO at The Beachbody Company

This is our top priority heading into the third quarter, especially as we set up for the prime health and fitness season in Q1 of 2027. Likewise, the shift to Shopify unlocks our ability to improve our HSA/FSA partnership with industry leader Truemed, which will make it much easier for qualified customers to use their HSA and FSA benefits to save on their purchase of eligible BODi products like Shakeology by using pre-tax dollars. Our 10-Minute Body initiative has proven to be a genuinely valuable addition to the catalog because it fills a need that a fitness app is uniquely qualified to meet versus gyms. We now have a massive catalog of over 400 microdose workouts between five and 10 minutes long for people who are only getting started on their fitness journey or who simply have no more time than that.

Carl Daikeler
Carl Daikeler
Co-founder and CEO at The Beachbody Company

That very much includes GLP-1 users, who the data shows are statistically under-exercising, even though their use of these weight loss medications makes resistance training all the more critical, even if it's just 10 minutes a day. Speaking of GLP-1s, here's something we didn't fully anticipate. Our superfood protein shake, Shakeology, is seeing real demand from that same GLP-1 audience, so we're leaning into that application in our advertising and on our landing pages. In early June, we launched 30 Day Booty Boost with a terrific new Super Trainer, Chace Collett, and the feedback on both the program and the trainer has been exceptional. It continues to add to what is the most substantial library of health and fitness content in the world. The most important observation from Q2 is this.

Carl Daikeler
Carl Daikeler
Co-founder and CEO at The Beachbody Company

Our cost to acquire a customer through nutrition products like Shakeology, P90X, and others is substantially lower than the cost of acquiring a customer through fitness program advertising. So to act on that insight, we've inverted our media allocation toward nutrition advertising. That's driving more traffic to the site, and that shift has an added benefit. It increases the visibility of these nutrition products and helps drive our retail presence at the same time as we expand our direct-to-consumer footprint. Q3 has been about integration and testing. We're putting the Shopify improvements to work across our e-commerce platform, taking advantage of the flexibility to test promotions and bundling configurations that used to be tedious, if not impossible, on our old technology. The move toward nutrition advertising has been productive, and we expect the benefits of these changes to begin materializing at the end of this quarter and into Q4.

Carl Daikeler
Carl Daikeler
Co-founder and CEO at The Beachbody Company

We've launched a significant affiliate promotion in August, running in parallel with the launch of an exciting new lifting program from Shaun T called MAX BUILT, a simplified strength program launching in early September. It pairs extremely well with the P90X supplement stack, and it's well-timed to serve the households shifting back into their normal routine as the kids head back to school. Looking forward to the end of the year, we're particularly excited about our November promotions around Black Friday and Cyber Monday, which will be built around a brand-new program and pre-workout supplement under the Insanity brand. We're just wrapping up principal photography on what we're calling Insanity Unhinged, led by one of the most recognizable faces in hybrid fitness, three-time HYROX World Champion, Hunter McIntyre.

Carl Daikeler
Carl Daikeler
Co-founder and CEO at The Beachbody Company

Shaun T, who originated the Insanity program, has signed on as executive producer and is really supporting how we're making Insanity attractive to a broader audience with this iteration. I can tell you, this program is going to be outstanding, and it's the perfect launch heading into the end of the year and into Q1 of 2027. Taken together, what our Q2 results demonstrate is agility. Because we significantly reduced our operating expenses and moved on to Shopify, we can now iterate and operate with far more flexibility to test, to learn, and to reposition the business to return to growth as a multi-channel, nutrition-led company. That's exactly the platform we set out to build, and the team is doing outstanding work to continue making progress with our turnaround. Okay.

Carl Daikeler
Carl Daikeler
Co-founder and CEO at The Beachbody Company

With that, I will turn it over to Brad Ramberg, our CFO, to walk you through the Q2 financial details and our guidance. Brad?

Brad Ramberg
Brad Ramberg
Interim CFO at The Beachbody Company

Thank you, Carl, and thank you everyone for joining the call today. I will review our second quarter results and provide our outlook for the third quarter of 2026. We continue to make significant progress on our transformation and in driving operating efficiencies. For the quarter, revenue exceeded the midpoint of our guidance, and both net income and adjusted EBITDA exceeded the high end of our guidance. We generated our fourth consecutive quarter of both positive net income and operating income and our 11th consecutive quarter of positive adjusted EBITDA. For the quarter, total revenue was $49.6 million, a decrease of 8.6% sequentially and a decrease of 22.4% year-over-year. Keep in mind, revenues continue to be impacted in the near term by our shift from a multi-level marketing platform to our current omni-channel model.

Brad Ramberg
Brad Ramberg
Interim CFO at The Beachbody Company

Turning to revenue by category, please note the direct year-over-year comparisons I am about to disclose for digital and nutrition revenue are still skewed by the fact that 2026 numbers reflect the new business model versus the 2025 numbers, which still had a major component of revenue that was driven in part by the legacy MLM. 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 the former MLM will have burned off, and those customers who remain from that cohort will become part of the new BODi business model's revenue base. I will go into more detail regarding Q3 guidance later on the call. With that said, digital revenue decreased 7.2% sequentially to $31.2 million and decreased 21.5% year-over-year.

Brad Ramberg
Brad Ramberg
Interim CFO at The Beachbody Company

Digital revenues reflect continued pressure on our digital subscriptions, which decreased 6.2% sequentially to 760,000 and decreased 19.1% compared to the same period a year ago. The number of digital subscribers continues to be impacted by churn from our legacy file. However, the number of new subscribers has increased over the prior year period. Nutrition and other revenue decreased 10.9% sequentially to $18.5 million and decreased 23.7% year-over-year. Nutritional subscriptions increased approximately 16.7% sequentially to approximately 70,000 and were essentially flat to the same period a year ago. As our business evolves into a multi-channel model, generating higher one-time sales and retail sales, the nutrition subscription metric will become a less relevant KPI. Digital gross margin was 87.1%, decreasing approximately 30 basis points sequentially and approximately 60 basis points from the prior year. Our digital gross margin was in line with our target.

Brad Ramberg
Brad Ramberg
Interim CFO at The Beachbody Company

Nutrition and other gross margin was 46.7%, flat sequentially and down approximately 470 basis points versus last year. Our nutrition and other growth margin was in line with our target, considering volume expectations and promotional efforts during the quarter. Consolidated Q2 gross margin was 72%, increasing 20 basis points sequentially and declining 30 basis points compared to the prior year. We are pleased to report that consolidated gross margin is at the high end of our estimated gross margin range of 69%-72%. Operating expenses for the quarter decreased 5% sequentially and decreased 32.1% year over year to $34.1 million. Selling and marketing expense as a percent of revenue decreased approximately 310 basis points sequentially. The decrease compared to the prior quarter was due to seasonally higher media spend in Q1. Selling and marketing expense decreased approximately 840 basis points year over year to 31.5%.

Brad Ramberg
Brad Ramberg
Interim CFO at The Beachbody Company

The significant improvement over prior year stems from eliminating the MLM seller compensation following our December 31st, 2024, exit from the multi-level marketing channel. Enterprise technology and development expense was approximately 19.9% of revenue, increasing approximately 260 basis points sequentially and approximately 330 basis points year over year. The increase was primarily due to product development and revenue de-leverage. G&A was 17.3% of revenue, increasing approximately 310 basis points sequentially due to lower capitalized labor and revenue de-leverage, and decreasing approximately 80 basis points year over year. Operating income for the quarter was $1.7 million, compared to $3.1 million in the prior quarter and an operating loss of $4 million in the prior year period, marking our fourth consecutive quarter of positive operating income.

Brad Ramberg
Brad Ramberg
Interim CFO at The Beachbody Company

Net income for the quarter was $1.4 million compared to $2.3 million in the prior quarter and a net loss of $5.9 million in the prior year period, marking our fourth consecutive quarter of positive net income. Adjusted net income was $0.9 million for the quarter compared to $2.5 million in the prior quarter and an adjusted net loss of $2.8 million in the prior year period. Adjusted EBITDA was $6.7 million compared to $8.0 million sequentially and $4.6 million in the prior year period, marking our 11th consecutive quarter of positive adjusted EBITDA. Our adjusted EBITDA margin was approximately 13.4% in the quarter, our fourth consecutive quarter of double-digit adjusted EBITDA margin. Now turning to the balance sheet. Our cash balance was $32.4 million compared to $36.6 million in the prior quarter and $39 million at the end of last year. Our net cash position was $8.8 million.

Brad Ramberg
Brad Ramberg
Interim CFO at The Beachbody Company

As Mark mentioned, we are also pleased to announce that on August 3rd, we amended our credit agreement to a more flexible covenant structure, which reflects our lenders' continued confidence in the long-term trajectory of our business. For the six months ended June 30th, 2026, cash used in operating activities was $4.3 million compared to cash provided by operating activities of $6.6 million in the prior year period. Cash used in investing activities was $1.4 million compared to $2.5 million in the prior year period. Free cash flow was negative $5.7 million compared to $4.1 million generated in the prior year period. The decline in free cash flow in the current year is primarily due to cash used for inventory purchases as we have shifted our focus to nutrition and our retail rollout, and a continued decline in deferred revenue. Now turning to our third quarter guidance.

Brad Ramberg
Brad Ramberg
Interim CFO at The Beachbody Company

As mentioned previously, Q3 will be the first quarter since winding down our legacy MLM model that we are able to compare our new business model year-over-year. We expect third quarter revenues to be in the range of $44 million-$48 million, net income to be in the range of negative $3 million to breakeven, and adjusted EBITDA to be in the range of $3 million-$6 million. For the quarter, we continue to anticipate revenues to approximate 60% digital and 40% nutrition and other. However, in line with the strategies 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 growth margin target is expected to be in the range of 86%-88%.

Brad Ramberg
Brad Ramberg
Interim CFO at The Beachbody Company

Our nutrition and other growth margin target is forecast to be in the range of 42%-45%, which is in line with our volume expectations and certain promotional efforts planned. Our total growth margin target is expected to be in the 68%-71% range. In closing, we continue to make considerable progress against our business transformation. We have strengthened our financial position and lowered our breakeven point, putting us on a solid 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. I will now turn the call back over to Mark for closing remarks.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

Thank you, Brad. Thank you, everyone. We will now turn it over to Sarah, who will get people into the Q&A queue so we can go through, because I see there are some people waiting there. Sarah, can you please process those with questions?

Operator

Yes. We will now begin the question and answer session, everyone. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, 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&A roster. Your first question comes from the line of Susan Anderson with Canaccord Genuity. Your line is open. Please go ahead.

Susan Anderson
Susan Anderson
Managing Director at Canaccord Genuity

Hi. Good evening. Thanks for taking my questions. I was wondering about, it looks like the nutritional segment is starting to see some traction there. I guess I am curious, is that being driven by the rollout to, say, The Vitamin Shoppe, Sprouts, Amazon, et cetera? Are you seeing that really kind of drive the sales there? Or, I guess, is it related to the increased marketing spend that you spent in the quarter? What should we expect from marketing going forward? Thanks.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

Hey, Susan. Thanks for the question. No, it is organic. It is not from the retail yet because Sprouts is doing great, but we got the initial order from Sprouts, put it into KeHE, who feeds Sprouts. While they have reordered and it is doing well, that is really not what is reflected there. The Vitamin Shoppe just started literally this week, so that is a Q3 number, not Q2.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

What you are seeing is Q2 organic traction in nutrition, as a result of the pivot that we announced a couple of months ago, where we are putting more of our money into the nutritional marketing. In terms of going forward, yes, we expect to see more traction on Amazon. We just launched recently the seven-serve Shakeology, as you know. We used to sell the 30 serve bag on that for $149. Now we have got a seven-serve that is selling at $34.99, which is a huge difference.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

P90X, just this week, went up actually just the end of last week, went up on Amazon for the first time. On a go-forward basis, we should see Amazon become a little bit more of a factor. We may look at some other marketplaces. We will have retail rollouts continuing, hopefully get sell-through and replenishment from The Vitamin Shoppe, from Sprouts. As we move towards the end of this year, Susan, and into the beginning of 2027, we should have a broader distribution footprint for both shake and P90X, and we will also have the SoCal test market results in full swing for the Insanity Liquid Shock energy drink and the P90X energy drink.

Susan Anderson
Susan Anderson
Managing Director at Canaccord Genuity

Okay, great. That sounds exciting. Maybe just one follow-up.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

Yeah

Susan Anderson
Susan Anderson
Managing Director at Canaccord Genuity

on the digital side. Maybe if you could just talk about the consumer response, what it's been to the 10 Minute BODi programs that you've rolled out. How are those trending? And also, I guess, what are you doing around the marketing on the digital front to get new customers into the brand? Thanks.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

Thanks, Susan. We're continuing the playbook that we started with the 10 Minute BODi series as a complement to the overall subscription, plus its own unique subscription for $10 a month. I would say the most interesting finding there is how it is proving to be applicable for GLP-1 users. We're really riding in the tailwind of the growth of the GLP-1 segment, as these are people who are generally under-exercising, according to statistics. Our GLP-1 fitness formula, the 10-minute program that we designed for that, plus the overall catalog, specifically for the 10-minute beginner program, is definitely appealing to that segment. Our advertising that is putting GLP-1 messaging forward is benefiting both the 10-minute series plus our catalog overall from a digital perspective. I'll add, it's also benefiting Shakeology, which is a great nutritional complement to people who are taking a GLP-1.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

Overall, I would say that 10 Minute BODi has been successful for us. Otherwise, as I mentioned, we've got the 30 Day Booty Boost that came out this summer, which got very warm reception, and we have a new program called MAX BUILT coming from Shaun T, which I'm personally excited about because it's a simpler approach to weightlifting resistance training, which aligns very well with the P90X supplement story for people who want to increase their metabolic health, improve bone density, and overall just improve their metabolism with weightlifting. We continue to build the catalog in a way that is both on trend, complements the overall catalog, and expands the catalog with these short-form workouts, micro-dose fitness workouts, so that we're appealing to the customer who might not be interested in going to the gym. They're not going to do 10-minute workouts at the gym.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

They're going to do it at home, and that's where we really appeal with this catalog.

Susan Anderson
Susan Anderson
Managing Director at Canaccord Genuity

Okay, great. That's exciting. I'll go ahead and pass it on. Good luck the rest of the year.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

Thanks, Susan.

Operator

Your next question comes from the line of Michael Kupinski with Noble Capital Markets. Your line is open. Please go ahead.

Michael Kupinski
Michael Kupinski
Director of Research at Noble Capital Markets

Thank you, and good afternoon, everyone. Mark, I was wondering if you can just provide us some early indications from Shakeology's rollout in Sprouts. I know that you were talking about that you're already getting some reorders, but was wondering if you had any early indications in terms of sell-through, repeat purchases, or probably more importantly, I would think, what the performance is relative to the retailer's expectations, and then maybe what you have learned from the rollout that could influence your much broader rollout.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

Great question, Michael. Here's what I can tell you. We were originally, as you know, in 90 Sprouts stores. Then we got expanded, I think, to 110. Now, I think we're up to 131. They've continued to expand within Sprouts. I think some of the Sprouts store GMs are seeing what's being posted about what's selling through, one. Two, KeHE, our distributor, actually ran low on stock from what we had originally sold into them. There was a little bit of a gap, and they had to reorder, which, of course, is a good thing because that means that it's selling through well at Sprouts. They've expanded our store count. We're 40 stores more now than we were then, which is a 45% increase from the 90 where we were at.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

We're feeling really good about that, and we will start to get specific sell-through data as we move forward. But thus far, they're happy with it, evidence the 45% expansion of the stores that we're in. KeHE obviously is happy because they were running low on goods and had to reorder from us. All of that's a good thing.

Michael Kupinski
Michael Kupinski
Director of Research at Noble Capital Markets

Got you. I know that the free cash flow was a little negative. I was just wondering if you can talk a little bit about cash usage. I assume it's associated with the preparing for a retail expansion. Just wondering when we should start to see working capital begin to normalize on that.

Brad Ramberg
Brad Ramberg
Interim CFO at The Beachbody Company

Hi, Michael, this is Brad. Yes, sir, you're absolutely right. The decline in free cash flow was due to two things. One, primarily an increase in inventory as we shifted the strategy to more nutrition and the retail roll-outs. We needed to invest a little bit in inventory. Likewise, as we shifted to inventory, we have a little less deferred revenue. The decline in free cash flow was due to those two factors.

Michael Kupinski
Michael Kupinski
Director of Research at Noble Capital Markets

Got you. You've been highlighting more flexible covenant structure on your new credit agreement. I was just wondering if you could just talk a little bit about the changes and maybe how this might give you the ability to invest in growth or deploy capital. I was just wondering if you could just give some color there.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

Yeah, thanks, Michael. The lender and we meet all the time. As you know, they're very happy with how we're operating this business. The fact that we've made almost $80 million over the past 11 quarters in EBITDA has been very impressive to them. So what we did was we renegotiated the covenant package so that the thresholds are even lower than they were, so there's not anything to be concerned about, one. And two, as you remember, we used to have to have $4.6 million above the outstanding debt level in order to not test covenants. That was going to be about $29.6 million. That has now been lowered by almost $7 million-$22.5 million. So what does that do? It buys us $7+ million of additional cushion vis-a-vis the hurdle rate that they use to measure the covenants.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

As long as we keep our cash balance above that $22.5 million level, then the covenants never get tested. We have that, plus we have the $18 million minimum liquidity against the $25 million outstanding loan. So much better situation. Lower metrics in terms of hurdles to hit on billable subscribers, billings. It's just an overall response from the lender that they recognize the operational excellence that we've had in this turnaround, and they've given us essentially more room to operate with all of these growth initiatives in front of us.

Michael Kupinski
Michael Kupinski
Director of Research at Noble Capital Markets

Yeah, that's terrific. One last question, just a little bit about your Q3 guide. Your revenue of $44 million to $48 million. What are the major variables that would determine whether or not those results land at the high end or the low end of those ranges?

Carl Daikeler
Carl Daikeler
Co-founder and CEO at The Beachbody Company

This is Carl. I would say that it's really looking at the market dynamics, meaning we have said for a couple of years that we want to be pursuing revenue that is profitable, right? Not just revenue or billings for billing's sake. The variables are obviously efficiency of media, and also we're looking at the variables of how the sell-through at retail continues to go. We're balancing those factors, but not being overly optimistic that the marketplace is going to respond to any one particular promotion. We're cautiously optimistic about what we're pursuing right now in the launch of MAX BUILT and the launch of the P90X supplements on Amazon and how those will relate, how the marketing will all contribute to all channels performing is sort of the unknown.

Carl Daikeler
Carl Daikeler
Co-founder and CEO at The Beachbody Company

Ultimately, we're going to do it in the most efficient way possible to get the most out of our media spend.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

Michael,

Michael Kupinski
Michael Kupinski
Director of Research at Noble Capital Markets

Thanks, Carl. Yeah.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

The best thing for you to think about as an analyst would be if you look at the buckets. You got a legacy bucket, people who've been here, renew, et cetera. Then you got the newly acquired DTC customers. Some of them are one-time nutritional purchasers, some of them subscribers, and then you've got these subscribers that you get on the digital side. Then you've got the marketplaces, the principal one being Amazon. Now that you've got these new products on Amazon, if you want to try to get to the high end of that range or better or whatever the case may be, that performance will also be critical.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

Lastly, but much less, you have the retail component, because as the retail rollouts start to occur, the orders will start to roll in, but you're going to have some free fill and slotting, et cetera that occurs. The Q3 revenue will not be wholly dependent at all on any one element, and if I had to rank them, I would say it would be Legacy, one, DTC, two, marketplaces, three, retail, four. Now, we have this discussion in Q1, Q2 of 2027, we'll have a different mix, but for right now, that's what we're looking at.

Michael Kupinski
Michael Kupinski
Director of Research at Noble Capital Markets

Great. Thanks, Mark, for the color. I appreciate that. That's all I have. Thank you.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

Thank you, Michael.

Operator

Your next question comes from the line of Alex Hantman with Susquehanna. Your line is open. Please go ahead.

Alex Hantman
Alex Hantman
Analyst at Susquehanna

Thank you, and good afternoon, everybody. Maybe just to piggyback on the retail rollout, can we talk about The Vitamin Shoppe? I know it is live at a little under 500 stores. I think that was ahead of the fall timeline you discussed in June. I was curious

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

Yeah

Alex Hantman
Alex Hantman
Analyst at Susquehanna

what pulled the launch forward and how you think about building towards the full chain.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

Yeah, Alex, great to hear from you. Listen, they were great. They are very excited about this. They have really gotten behind it, such that we were able to get in those stores probably 2-3, 2-4 weeks ahead of when we thought. The folks at The Vitamin Shoppe have been great partners. They are very bullish on the opportunity, as are we. That is what is going on, and we are in 481 of those stores, and we just got in there a couple of days ago, and we have a whole plan that we are laying out for the next several months on how to try to support The Vitamin Shoppe and our distribution there. We are looking for really good things.

Alex Hantman
Alex Hantman
Analyst at Susquehanna

Great. Thanks, Mark.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

Sure

Alex Hantman
Alex Hantman
Analyst at Susquehanna

You touched on the sample sets in the prepared remarks. My understanding, it is November, April planogram resets. Is there any update

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

Yep

Alex Hantman
Alex Hantman
Analyst at Susquehanna

on how many decisions might land for the next window?

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

It is a great question. Carl and I just had a status meeting on that with the team four days ago, and I think there are 12 decisions pending between middle of September and the end of November. So we will wait to see how those go. Listen, right now, in addition to The Vitamin Shoppe and Sprouts, which combined are about 610 doors, I think altogether, we have another 100, 150 doors on top of that, and that is going to continue to roll and gain momentum. Getting in The Vitamin Shoppe and getting P90X and Shakeology factors on Amazon and being now in 131 Sprouts will help the other retailers who are looking at and considering Shake and P90X. It will definitely help because those are pinnacle retailers that a lot of other retail buyers look to for proof of concept, et cetera.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

That's what you'll start to see probably as we get into the middle of Q4.

Alex Hantman
Alex Hantman
Analyst at Susquehanna

Great context. Thank you, Mark.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

Sure. Thank you.

Operator

Your next question comes from the line of Eric Des Lauriers with Craig-Hallum Capital Group. Your line is open. Please go ahead.

Eric Des Lauriers
Eric Des Lauriers
Analyst at Craig-Hallum Capital Group

Great. Thanks for taking my questions. Congrats on another strong bottom line quarter and the great progress with Sprouts.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

Thanks, Eric.

Eric Des Lauriers
Eric Des Lauriers
Analyst at Craig-Hallum Capital Group

My first question here is just on the P90X Amazon launch. I think you said this just launched recently. I believe you've had Shakeology on Amazon for about a year or two now. How have those learnings from Shakeology sort of informed your P90X strategy on Amazon? Overall, as Amazon potentially becomes a larger mix of sales, how does that sort of impact your customer acquisition, retention efforts? Overall, how should we think about the sort of roadmap for product launches on Amazon and the kind of impact that could have on your model?

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

Well, the one thing to think about, as you asked about Shakeology performance on Amazon over the last, call it year and a half, is we were basically selling a 30 serve that we normally sell for $129.95. That thing was on Amazon for $149-$169, which is, not to be humorous, it's like you're in charge of sales prevention. That's not what's going on in Amazon. People are buying Amazon products for between $29 and $69. We were on Amazon, but we were being protective of that former business model, the MLM, that we couldn't undercut. We have just now started to seed the multiple SKUs of Shakeology in the seven-serve bag, which is a $34.95 product, which is a completely different pitch to the consumer. Same thing on P90X. We just got up in Amazon, it was like four days ago.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

That line is a $15-$39.95 product line. So between Shakeology and P90X, everything that we are selling, other than the big bag, which will still be there, everything is sub $40. That opens up a whole. Because as you know, in most nutrition companies, and I do not know how it will be for us, but most nutrition companies do 25%-30% of their total revenue on Amazon. These are all of the nutrition companies that you know. So how it will play out for us, do not know yet, but we were with one arm behind our back before because of our price points and because of the limitations that the MLM had placed on our pricing. Those shackles are now gone. So we got pricing, we got form factor, we got distribution. So there is a much bigger opportunity there.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

In terms of retaining those customers, look, they will either retain by coming to us for a repurchase or they will go back to Amazon. Either way, we are happy. What we want to do is get a wider aperture of distribution and therefore get more customers, and whether they buy it from us or they buy it directly on Amazon, or they buy it at Sprouts or The Vitamin Shoppe or wherever else, we are happy regardless. That assumption, Eric, is what went into Brad's guidance that he gave you on nutritional gross margin.

Eric Des Lauriers
Eric Des Lauriers
Analyst at Craig-Hallum Capital Group

That is certainly exciting. We will be excited to track that progress. You also called out a meaningful share of nutrition customers that are converting to digital subscriptions. I am just wondering if you could share any more detail on that and just overall how that might compare to your internal expectations.

Carl Daikeler
Carl Daikeler
Co-founder and CEO at The Beachbody Company

I do not think we break that out individually, but we are offering everybody who comes in on a nutrition subscription gets a 30 day trial into the digital subscription. So if they do not cancel, they renew into a monthly subscription and have the opportunity then to upgrade. You can imagine in a world where supplements are growing so quickly, we are definitely seeing the improvement in demand and efficiency on the front end by selling nutritionals, but it is also an additional value add or increases the value proposition by offering a free month of digital subscription and access to 225 fitness programs that we have developed over 20 years, that people are getting that additional value with their purchase. So, we are pleased with the number of starts that we are getting from the digital subscription being attached to nutritionals.

Carl Daikeler
Carl Daikeler
Co-founder and CEO at The Beachbody Company

We haven't implemented that out into retail yet, but we do think, as we've mentioned before, that that'll be a part of our strategy of the value equation that we can offer uniquely.

Eric Des Lauriers
Eric Des Lauriers
Analyst at Craig-Hallum Capital Group

That's great, Carl. I appreciate that. Just last one from me. You called out a few insights you learned from Shopify, in terms of, I suppose, overall optimizing the user experience and minimizing friction. You mentioned aggressively adjusting the website. I guess we have a little over three months until the holiday season. Just how confident do you feel in being able to get all those adjustments done in time? Just any other color that you want to share on some of those improvements you're making, would be great. Thank you.

Carl Daikeler
Carl Daikeler
Co-founder and CEO at The Beachbody Company

Yeah. Thank you. This is the thing I'm most excited about because we can easily watch the KPIs as these things improve. Harmonizing the front-end ads with the landing pages is something that is a best practice of Shopify, obviously, and this gives us the ability now to show the actual price that somebody's going to get from a special offer or special promotion, which both improves traffic from the front end, but then add to cart and ultimate conversion on the back end. We are rapidly iterating and in fact, have one of the best companies that works with Shopify clients to make improvements to our landing pages so that we can increase our conversion. We've recently started to consolidate landing pages. We had multiple URLs that are now coming right into the Shopify platform.

Carl Daikeler
Carl Daikeler
Co-founder and CEO at The Beachbody Company

We're getting all this organic traffic coming into a better performing, a better converting website experience that people are familiar with, rather than our old e-commerce platform, which was unique to us. I think as we go into Black Friday, Cyber Monday, we're definitely going to see the benefits of the Shopify platform and that familiarity and the fact that people already have accounts with Shopify. That'll in order the benefit of the promotions that we have going into the holidays in Q1.

Eric Des Lauriers
Eric Des Lauriers
Analyst at Craig-Hallum Capital Group

Well, you have a lot of exciting things upcoming. Congrats on all the progress, guys. Looking forward to seeing what else comes.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

Thanks.

Eric Des Lauriers
Eric Des Lauriers
Analyst at Craig-Hallum Capital Group

Thanks.

Carl Daikeler
Carl Daikeler
Co-founder and CEO at The Beachbody Company

Thanks, Eric. Appreciate you.

Operator

There are no further questions at this time. I will now turn the call back over to Carl Daikeler.

Carl Daikeler
Carl Daikeler
Co-founder and CEO at The Beachbody Company

Thank you, Sarah, and thanks to everybody for attending. As always, if you have any questions, please reach out to the company. We are going to be presenting tomorrow at the Canaccord Conference here, Canaccord Growth here in Boston. We will have a webcast of that. Again, we look forward to keeping you informed on our progress as we talk to you on the next quarter earnings call. Thanks very much. Have a great evening.

Operator

This concludes today's call. Thank you for attending. You may now disconnect.

Executives
    • Mark Goldston
      Mark Goldston
      Executive Chairman
    • Carl Daikeler
      Carl Daikeler
      Co-founder and CEO
    • Brad Ramberg
      Brad Ramberg
      Interim CFO
Analysts
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