The Beachbody Company, Inc. Q2 FY2026 earnings call

Overall Turnaround Progress

• The company has delivered three years of consistent execution on its turnaround, with operational discipline delivering durable double-digit adjusted EBITDA margins for four consecutive quarters, and all core Q2 2026 metrics met or exceeded guidance ranges.
• The company amended its lending agreement with Tiger Finance to a much less restrictive covenant package, reflecting lender confidence in the company's long-term strategy and providing additional operating flexibility for growth initiatives.

Retail Expansion Progress

• Shakeology has expanded to 131 Sprouts Farmers Market locations nationwide, with strong early sell-through resulting in retailer reorders and 45% store count growth from the initial test footprint. Shakeology also recently launched in 481 Vitamin Shoppe locations, 2-4 weeks ahead of schedule.
• The company has secured distribution through major natural/organic product distributors KeHE, and will add UNFI distribution in November 2026, opening access to a broad network of grocery channel accounts. Retail shelf placement is subject to 6-12 month retailer planogram update cycles, with management expecting modest distribution growth in 2026 and accelerated growth in 2027 as integration completes.

Product and Innovation Updates

• The P90X supplement line (preworkout, hydration, creatine, recovery protein, energy) recently launched on Amazon, opening a new channel for brand building and customer trial. New Insanity and P90X branded energy drinks are in production, with a Southern California test market rollout planned for late Q3/Q4 2026, represented by a top national beverage distributor.
• The 10-Minute BODi microdose fitness catalog has expanded to over 400 5-10 minute workouts, filling a gap for time-constrained users and GLP-1 weight loss medication users, who data shows are typically under-exercising even though resistance training is particularly critical for this group. Shakeology is seeing unanticipated strong demand from the GLP-1 audience, and the company is leaning into this positioning in marketing.
• The 30-day Booty Boost program with new Super Trainer Chase Collect launched in early June 2026 to exceptional customer feedback, expanding the company's overall fitness content library. A new simplified strength program Max Built from Shaun T will launch in early September 2026, paired with the P90X supplement line, and the new Insanity Unhinged program led by Hunter McIntyre (executive produced by Shaun T) will launch ahead of the 2026 holiday season.

Strategic and Operational Changes

• The company completed its transition to the Shopify e-commerce platform at the end of Q1 2026 with no business interruption. Shopify has provided new visibility into sales funnel improvements, and the company is aggressively optimizing landing pages, site navigation, and checkout (including enabling Shop Pay) to boost conversion. The transition also unlocks flexible bundling and Subscribe & Save promotions not possible on the legacy platform, and will improve the company's HSA/FSA payment partnership with Truemed for eligible products. Site optimization is the company's top Q3 priority ahead of the 2026 holiday season and 2027 Q1 peak fitness season.
• Management confirmed that customer acquisition cost (CAC) for nutrition customers is substantially lower than CAC for digital fitness-only customers. As a result, the company has reallocated media spending to prioritize nutrition advertising, which also drives increased brand visibility to support retail expansion, and a meaningful share of nutrition-acquired customers convert to digital fitness subscriptions. The company is shifting to a nutrition-first, omnichannel business model, exiting the legacy MLM channel to eliminate prior margin and distribution constraints.

The Beachbody Company reported total Q2 2026 revenue of $49.6 million, down 8.6% sequentially and 22.4% year-over-year, with the year-over-year decline driven by the wind-down of the legacy multilevel marketing (MLM) model. Digital revenue was $31.2 million, accounting for 62.9% of total revenue, representing a 7.2% sequential decrease and a 21.5% year-over-year decrease. Digital subscriptions fell 6.2% sequentially to 760,000 (down 19.1% year-over-year, impacted by legacy customer churn, though new subscriber volumes increased year-over-year), with a digital gross margin of 87.1%. Nutrition and Other revenue was $18.5 million, accounting for 37.1% of total revenue, representing a 10.9% sequential decrease and a 23.7% year-over-year decrease. Nutrition subscriptions increased 16.7% sequentially to approximately 70,000 (flat year-over-year), with a Nutrition and Other gross margin of 46.7%. Consolidated gross margin for Q2 2026 was 72%, at the high end of the company's target range. Operating income was $1.7 million, net income was $1.4 million, and adjusted EBITDA was $6.7 million (13.4% adjusted EBITDA margin), marking the fourth consecutive quarter of positive operating income/net income and 11th consecutive quarter of positive adjusted EBITDA. The company ended the quarter with $32.4 million in cash, $23.6 million in total debt, for a net cash position of $8.8 million.

• Third quarter 2026 revenue is guided to a range of $44 million to $48 million, with an expected mix of approximately 60% Digital and 40% Nutrition and Other; management expects the Nutrition share to increase by the end of 2026.
• Q3 2026 net income is guided to a range of negative $3 million to breakeven, while adjusted EBITDA is guided to a range of $3 million to $6 million.
• Digital gross margin is targeted between 86% to 88%, Nutrition and Other gross margin is targeted between 42% to 45%, and total consolidated gross margin is targeted between 68% to 71%.
• Q3 2026 will be the first quarter after the full wind-down of legacy MLM revenue, enabling clear year-over-year comparisons of the new business model starting in this period. There is no change to long-term strategic guidance for the company's turnaround and growth trajectory.

• Retail expansion growth is partially out of the company's control, as new product placement is dependent on third-party retailer planogram reset timelines, which can delay revenue growth from new distribution.
• Revenue performance within the guided Q3 range is dependent on variable factors including media efficiency, retail sell-through, and consumer response to new product launches, which have uncertain near-term outcomes.
• Legacy digital subscriber churn continues to pressure total digital subscription counts, as the business transitions from the legacy MLM model to the new omnichannel structure.
• Negative free cash flow in the first half of 2026 is driven by working capital investments in inventory for retail expansion, which will pressure cash balances until retail growth scales and working capital normalizes.

Q: What is driving recent nutrition traction, is it retail rollout or increased marketing spend, and what should we expect for nutrition marketing going forward?

A: Q2 2026 nutrition traction is organic, driven by the company's recent pivot to increased nutrition marketing, not yet reflecting retail rollout. Shakeology was added to Sprouts earlier but has only just launched at Vitamin Shoppe, so retail revenue will show up in Q3 2026. Going forward, new lower-priced SKUs (7-serve $34.99 Shakeology, $15-$39.95 P90X supplements) on Amazon, ongoing retail expansion, and 2027 broader distribution after planogram resets are expected to drive increasing nutrition traction, with energy drink test market results available by early 2027.

Q: What early indicators do you have from the Shakeology Sprouts rollout, and what have you learned for broader retail expansion?

A: Sprouts has continued to expand Shakeology's footprint, growing 45% from the initial 90-store test to 131 stores, as store general managers and distributors have seen strong sell-through. Distributor KeHE experienced stockouts and placed a reorder early in the rollout, confirming strong consumer demand. The retailer has been satisfied with performance to date, which builds credibility for future expansion with other retail chains.

Q: How did prior Shakeology experience on Amazon inform the P90X Amazon launch, and how will growing Amazon sales impact the company's customer model?

A: The company previously only sold high-priced 30-serve Shakeology on Amazon (over $149) due to legacy MLM pricing constraints, which limited sales as most Amazon nutrition purchases fall between $29-$69. With MLM constraints eliminated, the company is now launching lower-priced SKUs for both Shakeology and P90X (all under $40), opening significant new demand. The company is happy to acquire customers regardless of where they purchase, and the lower price point strategy aligns with current nutrition market norms on Amazon.

Q: How confident is management that Shopify site optimizations will be completed in time for the 2026 holiday season?

A: Management is highly confident, as Shopify provides clear real-time KPIs to track improvement from ongoing optimizations. The company is working with specialist Shopify consultants to align landing pages with ad creative, consolidate URLs to capture more organic traffic, and leverage built-in Shopify user familiarity and Shop Pay functionality to reduce friction. These improvements will be fully in place to drive improved conversion for Black Friday/Cyber Monday promotions and the 2027 Q1 peak fitness season.