The Beachbody Company, Inc. Q1 FY2025 earnings call

Management Statement and Operational Highlights:

• The company has transitioned from an MLM model to a multi-channel direct-to-consumer approach with an affiliate model where independent sellers keep 100% of commissions.
• Achieved sixth consecutive quarter of positive adjusted EBITDA, with Q1 2025 adjusted EBITDA at $3.7 million. Cut debt by over 50% to $18 million and reduced cash break-even level.
• Implemented a 'cut and grow' strategy, with retail rollout plans for Shakeology (late Q4 2025), P90X (H1 2026), and Insanity (2026-2027) nutritional products.
• Product initiatives include Belle Vitale program in women's hormone health, GLP-1 fitness formula, Walk Week, and launch of 25 Minute Speed Train in June.
• Affiliate model updates: Simplified platform launch in June with central community, easier signup, and Refer a Friend program.
• Omni-channel growth: Amazon Subscribe and Save growth, Walmart.com availability, HSA/FSA payment options, and partnership with Hello Alpha for Belle Vitale program.

Segment Performance:

• Digital: Q1 2025 digital revenue was $42.9 million, decreasing 14.8% sequentially and 30.2% year-over-year. Digital gross margin was 85.5%, down 40 basis points from the prior quarter but up 640 basis points from the prior year.
• Nutrition: Nutrition revenue was $28.7 million, decreasing 17.7% sequentially and 48.4% year-over-year. Nutrition and other gross margin was 53.1%, up 80 basis points from the prior quarter but down 680 basis points year-over-year. Moving forward, revenues are anticipated to be approximately 63% digital and 37% nutrition.

Guidance:

• Second quarter 2025 guidance: Revenues expected to be in the range of $51 million to $61 million, net loss in the range of $7 million to $3 million, and adjusted EBITDA in the range of breakeven to $4 million.
• Nutrition gross margin adjusted to a range of 47% to 50% due to focus on one-time purchases.
• Anticipated revenue mix moving forward: Approximately 63% digital and 37% nutrition.

Risks:

• Transition challenges: Time required for new programs like Belle Vitale to gain traction in the emerging women's hormone health market.
• Retail launch risks: Uncertainty in market reception and competition during the retail rollout of nutritional products.
• Affiliate model execution: Initial affiliate performance not meeting expectations; need for simpler platform to drive growth among subscribers.

Question and Answer: Q: Color on retention/transition of sellers from old model to new affiliate model.

A: Pleased with outliers but transitioning to a user-friendly model in mid-June to deputize more subscribers as affiliates, as the initial platform wasn't simple enough for widespread participation.

Q: Selling and marketing going forward.

A: Selling and marketing expenses as a percentage of revenue have changed; will reinvest savings into marketing to generate gross profit while balancing LTV and CAC.

Q: Nutrition business pricing and retail launch.

A: Focus on one-time nutrition purchases, with lower gross margin initially; retail launch end of 2025 will have different margins than direct-to-consumer.

Q: Connected fitness segment.

A: Bikes sold through inventory, exploring partnerships to supply content to other hardware; no new equipment production or sales going forward.