The Beachbody Company, Inc. Q2 FY2025 earnings call

• Second quarter revenues were $63.9 million, exceeding expectations, driven by better customer retention during business model transition.
• Gross margin was 72.3%, a 300 basis point improvement over prior year. Adjusted EBITDA was above guidance, marking seventh consecutive quarter of positive adjusted EBITDA, cumulative $39.5 million.
• Reduced revenue breakeven point from ~$900M in 2022 to ~$200M in 2025. Selling and marketing costs decreased from 51.1% of revenue in Q2 last year to 39.9% this quarter, tracking towards sub-35% target.
• Refinanced debt with Tiger Finance and SG Capital, reducing overall interest rate by over 40%. Year-to-date positive free cash flow of $4.1 million, with line of sight to full-year positive free cash flow in 2025.
• Retail expansion plans: Shakeology to launch in select grocery, mass merchandiser, club store accounts in late Q1 2026; P90x nutritional line launch in 2026 with new fitness program; INSANITY branded supplements in 2026.
• Content launches: Licensed Tony Horton's Power of 4 program in October, Shaun T's Dig In program for Black Friday/Cyber Monday; large test group for Dig In in December.

For the second quarter, Digital revenue was $39.7 million, a 7.5% sequential decrease and 32.5% year-over-year decrease. Nutrition revenue was $24.2 million, a 15.6% sequential decrease and 51.8% year-over-year decrease. Digital gross margin was 87.7%, an increase of 220 basis points from the prior quarter and 720 basis points from the prior year. Nutrition and other gross margin was 51.4%, a 170 basis point decrease from the prior quarter and a 940 basis point decline year-over-year. Digital revenue contribution: approximately 63% of total revenues, Nutrition revenue contribution: approximately 37% of total revenues.

• Q3 revenues expected to be in range of $51 million to $58 million, net loss in range of $4 million to breakeven, adjusted EBITDA in range of $2 million to $6 million.
• Long-term digital gross margin target raised from 85% to 86%-89%, nutrition gross margin target 46%-52%, total gross margin target 70%-75%.
• Line of sight to achieving positive free cash flow for the full year of 2025 for the first time since 2020.

Q: Susan Anderson asked about long-term gross margin for digital business and what drove higher margin in the quarter.

A: Brad Ramberg said it was due to reduced and more judicious production spend and fewer fixed costs allocated to production, and the spend matches the long-term rate of 86%-89%.

Q: Susan Anderson also asked about selling and marketing and the right level going forward.

A: Brad Ramberg said selling and marketing margins came down from over 50% a year ago to 39% this quarter, goal is to get to mid-30s by end of year; Carl Daikeler added they plan to grow into efficiency with room for expansion of subscriber acquisition efforts within means.

Q: George Kelly asked about nutrition side new supplements and retail launch.

A: Mark Goldston said BODi Brands retail initiative in 2026, Shakeology first to launch in early 2026 in retail, followed by P90x nutritional supplements in 2026, and INSANITY line later; next earnings call will have more color on Shakeology sell-in progress and P90X.

Q: George Kelly asked about Shakeology product in retail being similar to online.

A: Mark Goldston said there's a complete refresh with new packaging, hired outside design firm, and new packaging will be used for direct-to-consumer too.

Q: Alex Hantman asked about impact of new affiliate model on order values and lifetime values.

A: Carl Daikeler said it's a different business with different margin and demand equations; Mark Goldston added old MLM model paid on renewals, new model doesn't, so lifetime value is higher now.

Q: Alex Hantman asked about exploring AI-driven fitness coaching or nutrition planning with P90x.

A: Carl Daikeler said currently keeping it simple, but corporate is looking at AI to complement, but focus is on getting people results with existing model, and cross-marketing with P90x fitness line at retail will be new.