Okay, good afternoon, everyone. So I'd like to introduce next, Beachbody, which operates the BODi app. Today, we have with us Carl Daikeler, co-founder, chairman, and CEO; Mark Goldston, executive chairman of Beachbody; Marc Suidan, CFO. And I guess I'll kick it off. We're gonna have a Q&A session here. So maybe talk about how, you know, BODi had always been profitable before COVID, and then, a few things I think maybe changed post-COVID. So maybe talk about what's changed in the business and your strategy to get back to profitability. Carl?
Well, you know, we did have an incredible run for 20—we've been profitable 21 / 25 years, largely with infomercials and network marketing working together with synergy. Then digital happened, and we became a digital subscription business and started to wind down the DVD business, and that changed the dynamics of customer acquisition and the way we actually leverage all this content that we've created over 25 years. Got 120 programs in our library. Then the pandemic pulled a lot of demand through. The customer changed, because you had people who were locked out of the gym, and it really sort of muddied the waters of what had been a very clear business model.
And then midway through 2021, going public, we found ourselves in this odd situation where customers were going back to the gym, the advertising market had... the dynamics had changed in the post-pandemic environment, and we really had to do some reinvention to the business. And that's what the team has been doing a great job of figuring out how to be a great digital subscription company, continue to create great fitness and nutrition solutions, and build the nutritional supplement business in this new environment. And that's... One of the things we had to do was take costs out of the business, get more efficient about the business, narrow our focus, and that's what we've been doing for the last 24 months.
Great.
And, Susan, what I'll add to that is, if you look at our cash used in operating and investing activities, it was $340 million in 2021. In 2022, we improved that to $73 million. 2023, in the first three quarters, $24 million, and we announced a 1,000 basis points improvement, which is effectively 10% of revenue. At a $500 million revenue run rate, that's $50 million improvement that starts this week, so 2024.
Right.
Great improvement.
Incredible progress to get it back to its history and roots of being profitable.
I might add, just to Mark's point, just since June, we not only identified the 1,000 bips, which is about $50 million, we also identified another $40 million of fixed cost and CapEx savings. So the company had identified $125 million.
Yep.
We added $40 million to that, that's $165 million. If you get about $50 million off the bips change you're at about $210 million, by which we've lowered the break-even of this company-
Wow
... which is remarkable.
And so that should all start to flow through this year?
Well, that's, that's the plan.
Great. That sounds good. Maybe let's talk about the VMS portfolio for a little bit. You've talked maybe-
Sure
... potentially in the future, taking it to wholesale.
Right.
Talk about the plans there. What do you think the timing of that could be, and how big do you think that portfolio could be longer term?
Well, the nutrition industry is, you know, on fire. The TAM is enormous.
Yep.
You see it all the time. We technically sell our product largely within our walled garden of our network. We've always protected the network to do that. We now realize there is an opportunity over that wall, which is enormous, so that we will be taking certain products that we have and sell them through channels like Amazon, et cetera, to try to address that. The other thing is, we have a massive formulation bench that we've created, that are done, and we've got amazing brand names in our portfolio that have huge awareness-
Wow
... that we could potentially take those formulations with those brand names and sell them outside of the core network, 'cause we have such tremendous products in the network itself. We think that TAM is enormous.
Yep.
We think that we have only just scratched the surface of where it can go, and so to penetrate our digital subscriber base at a higher level, and to also go over the wall and go to the general market and address the total TAM.
And part of the advantage that we have over, you know, there's lots of supplement companies taking advantage of this growth. One of the advantages that we have is the ability to combine content that is so critical to helping people burn more calories and build more muscle, with nutrition to create real efficiency for people. So that's something that we can bring to the market outside of, as Mark said, the walled garden.
Wow, that sounds exciting. Yeah, we were just talking about the Shakeology, and-
Right
... I'm gonna try it when I get home.
It's great.
Maybe if you could talk a little bit about the customer overlap between the fitness portfolio platform and then also the VMS portfolio. I guess, how many of your customers are using both right now, and is there an opportunity there?
I'm not sure what we published in terms of that breakout, but in general, right now, many people come into the ecosystem with a bundle, right? The majority of our new customers come in with a bundle, and then eventually you'll have attrition of the nutrition subscriptions. So it's in the teens, I believe in terms of the percentage of digital subscribers who are also nutritional subscribers. But we've also seen expansion of the product catalog, that we are seeing more customers who are just staying on the nutritionals. We have a First Thing in the morning health shot for people, a nootropic, as they call them. As you mentioned, Shakeology, people using that as a way to get breakfast, as a sort of a alternative to a pure intermittent fasting.
So, as Mark said, as we've seen the growth of nutritionals for nutrition's sake. We think that our bench of n utritional formulations has a market available to us outside of the core of what Beachbody has done over the years, and that's what we're starting to roll out in places like Amazon and others.
You know, one of the things, Susan, that's really interesting is we're fanatical about LTV to CAC. Fanatical. And if you think about it, we've got 1.38 million subs. Carl was saying about 18% of them use nutrition. So essentially, 82% of that populace is not using nutrition-
Yeah
... at a 0 CAC because we already have them.
Yeah.
We also have 14 million people in our CRM base who were former members, that, in an industry with $100 CAC-
Yeah
... that's about $1 billion-plus of acquired customers that we can win back. So if we take our digital fitness and our nutrition, and we take it to those people, we essentially are acquiring them again for nothing.
Yeah.
Everybody in the 82% of the current base that we get to take nutrition has no CAC as well. So it's an infinite LTV.
Yeah.
It's a beautiful business model.
That was gonna be my next question. I guess, what's the strategy to win back some of those 14 million customers, and how do you cross-market the products to the fitness customer, customers of VMS products?
Well, it's interesting. You know, we live in a world with, in the United States, with 145 million people are overweight about 75 million are categorized as clinically obese, and we yo-yo. It's what we do. Make New Year's resolutions you're done by April, you know the drill. So in a sense, you have 14 million people in a bucket who previously will have used your product-
Yeah
... and then they got off of it for whatever reason. Not 'cause they weren't happy, 'cause they went back to where they went back to. So if we can bring them back in with almost any promotional effort our cost is nothing.
Yeah.
'Cause we're selling digital rights-
Yeah
... and we already have the customer. This is just not something the company had done before. So to take that as a competitive advantage in this fitness arena is huge, and that's something that's a big part of our 2024 plan.
Great. Maybe if you could talk about how the sales have been in the nutrition segment, how the sales have been in the fitness segment, and kind of where the opportunities are to grow those sales?
Mark, you wanna take that?
Yeah, look, on the fitness side, it's actually held up pretty well, right?
Yeah.
You saw Q2 to Q3 was pretty stable. Then we introduced a price change when we revamped the platform in March. It went from an average of $99 a year to $180, and the monthly retention stayed the same, which is phenomenal success, and it was just rated two weeks ago by CNN as the top fitness app of 2023.
That's great.
So that's-
Great.
So I think on the fitness side, we feel really good. It's going well. On the nutrition side, it's a lot of, you know, what Marc and Carl have just spoken about, around how do we reinvigorate that, and there's multiple opportunities, right? Then when you think about, usually you either have a price, a product, or a channel issue. In our case, it's really about diversifying the channel, and within the existing channel, increasing that attach rate. It used to be as high as 20%. It's now closer to 12%, so there is lots of upside opportunity. And the beauty about that is the, you know, the average order value per month is close to $100, so when you think about 12 months a year, that, that customer brings north of $1,000 a year, and that's pretty high contribution margin.
At no CAC.
Yeah.
Yeah.
At no CAC.
The gross margin there is right now around 55%, so-
Okay
... even our lowest gross margin at 55% is actually a pretty healthy-
Yeah
... and really good gross margin.
Yeah.
That's one of the things people... You know, it's funny, I, I came in June. I came to the company, took no cash no restricted stock. Everything I have is in stock options.
Yeah.
People say to me, "Why did you do that?" 2+ years ago, this company was worth $3.9 billion. I said, "Well, what were the assets?" "Well, they had the digital library of 120 titles." "Well, what happened to that?" "Well, it has more titles now.
Yeah.
They have a nutrition business that's $250 million that throws off $150 million or thereabouts of gross profit.
Yeah.
What's that worth in terms of return of revenues? And it's got 14 million people in a CRM bucket-
Yeah
... that cost you any number in CAC to get them.
Yeah.
So I look at that and go, "How could that combined asset base be worth $100 million of market cap when it was worth $3.9 billion 2+ years ago?" "Well, the company must have a lot of debt." "No, it only has $35 million in debt.
Yeah.
To me, this is one of the biggest opportunities I've seen in my career. With the turnaround efforts that we have in place and the plan that's in place, and the addressable audience-
Yeah
... I feel like we're in a great position for 2024 and beyond.
Yeah. And Mark, just back to the sales really quick. On the fitness side, I guess you feel like they've kind of stabilized post the COVID bump, and then also on the margin side, can you talk about just the differences? You mentioned the 55%, the nutrition business, where it was historically, and just the opportunity to get back there, and then also the comparison to the fitness business.
Yeah, absolutely. So our digital streaming business is currently running at a 75% gross margin. It used to be as high as 87%-88%, just like two, three years ago. It's largely a factor of scale 'cause when it comes to, you know, the, the biggest driver of cost there is content production and we're probably the most efficient in the industry on that front. So as scale builds back up, that gross margin should go north of 80%. Our nutrition we spoke about, it actually used to be 65%. It went down to 49%. We're bringing it back up. It's now at 55%, and that's largely a factor of we've looked at pricing, we looked at supply chain, we looked at SKU rationalization, we've looked at everything. And frankly, if you look at our inventory, it's actually come down for seven quarters in a row.
So we're being extremely efficient on all fronts.... so that gives you a blended gross margin that's consistently in the 60s%. You know, we'd like it to be 70%.
Okay.
You know, it's interesting, Susan, the moves that we've made, the $165 million of cost savings the $50 million in basis, $50 million in 1,000 basis points, which you count, you take that $200+ million-
Yeah
... then you think about the margin appreciation that Mark just alluded to-
Yeah
... which is potentially 5+ points on nutrition, and could be five-seven points on that. That's on top of the $200+ million.
Yeah.
What we've done is built an enormous amount of operating leverage into this P&L. You lowered the break-even of the company by $200+ million. In 2019, the company did-
Yeah
... 755, and we made about $78 million of EBITDA. In today's construct, if we had done the same $750 million of revenue-
Yeah
... we'd make $160+ million of EBITDA. So that shows you the operating leverage effect that we built in. Now we've just gotta go get the revenue.
Yeah, that sounds exciting. Maybe if you could talk about the fitness content, and just kind of, I guess, you guys have a large library, we all know. You know, how you view that library, when does it need updating, if not at all? Maybe just talk about kind of how consumers view that, and maybe talk about the videos that they watch the most.
That would be for the creator of the library.
Well, it's, it's frankly, probably the most well-known thing about the company, P90X, Insanity, 21 Day Fix.
Yeah.
The interesting thing about it is how long-lasting, how much value they continue to bring to the business. I've had people I've run into, be like, "I started another round of P90X just this week. That's 15 years old.
Yeah.
Right.
You know, the other companies in this space, doing great things, but at the same time, what they're really doing is creating soap operas.
Yeah.
Nobody goes back and watches soap opera reruns.
Yeah.
They need to watch the next episode. We create long-lasting franchises, basically, that people are like, "P90X worked for me. 21 Day Fix worked for me. That's what I'm gonna do." And in fact, in our top 20 programs, 15 of our top 20 streamed programs are over five years old. So we do bring new content, and we've got innovations where we can solve a problem a little differently, perhaps attract a niche that we aren't currently attracting.
Yeah
... active aging, beginners, and so on. But at the end of the day, each time we add a program, which currently we're adding two year, makes the library that much more valuable. But as a whole, there's no other library like this in the industry. We've got 120 programs that we get to offer people. They can do just one of them if they want, and repeat it over and over, or they can find their way through the entire library for what's right for them at the current time, and that's-
Yeah
... that's something that we're constantly in development of, but at the right pace, so that we're not overspending in content. And as Mark said, or I'm not sure which Mark, the renewal rate or the retention of the subscribers…
Yeah
... demonstrates that they like the pace of content that we're creating, and they continue to engage the platform in a meaningful way.
You know, it's interesting, we got about a 4% monthly churn rate. Back when I was at United, we invented this way of computing digital life of the customer, which is the reciprocal to the churn rate. You take one over the churn rate. If your churn rate is roughly 4% your digital computed life is 25, call it two years. What Carl just said was fascinating. 75% of the top 20 titles that people view predate 2020 which is almost four years ago. But the average tenure of the current subscriber is 2+ years.
Yeah.
It shows you that we're not a movie studio.
Yeah.
We are more a Netflix.
Yeah.
So there is a longevity factor that we keep getting benefits from this library, that really, one of the things that's a big opportunity for 2024 is to market to our current subscribers to tell them all the content we already have-
Yeah
... that they get full access to with their subscription. Everybody else is out there spending hundreds of millions dollars a year to create content.
Yeah.
Our replicability number, to go and recreate this, assuming you had 120 ideas at the ready, would be what? $500 million, $700 million-
Probably
... to go recreate it, and we already have that as our asset.
Yeah, and why not the customer? Why not use it again if-
Exactly.
Yeah.
Yeah.
On that front, I guess maybe talk about where you see the growth of the fitness business. I've heard you talk about partnering with someone like Netflix-
Yes
... maybe potentially down the road. Is that still a probability, and how big do you think that could be?
Well, it's interesting, one of the first things Carl and I talked about when I got here, is I said I felt it was a little bit like a bakery with no samples, or a movie theater with no trailers. You couldn't sample the product unless you signed up.
Yeah. Yeah.
We now, November 9th, we launched this incredible thing called BODi Previews. It's like a $60 value. Every one of our 120 programs has a sample workout you can sample-
Okay
... which is really tremendously valuable. Now, we can go to partners, huge organizations and say, "If you partner with us, we can give your people BODi Previews for free, sample any one of 120 workout, and if they sign up, you, the partner, can get your bounty. We get the cash and it gives us a tool to use to convert people in. Previous to that, you had to sign up-
Okay
... to see what we had.
Yeah.
Imagine going to a movie theater, and there are no trailers.
Yeah.
Just, "Trust me, it's a great movie.
Yeah.
Now we've really solved that. So our opportunities are tremendous in that regard, and we've got the best library in the world.
... So that's, that's one of the reasons, frankly, that we changed the name to, from Beachbody, which was known for one thing, to the more benign BODi. So that insurance companies, institutions, that it's more prone to partnerships-
Yeah.
and fits into what they might do, what their database of prospects and customers might need, so that they can monetize their audience with the greatest library in fitness without having to plaster Beachbody all over it.
Yeah.
We think that's a great opportunity for us, and we have many irons in the fire.
Whatever the bounty is, it will be decidedly below the market cap.
Yeah, yeah.
It's a great thing to do.
That makes sense.
Yeah.
Definitely. Great, I'm excited to see that. And then I guess maybe lastly, can you talk about your capital structure your cash needs over the next one-two years?
Well, as you know, about a month plus ago, we did an RDO. We put $5 million additional cash on the balance sheet. I'll tell you, Susan, I mean, some of it's optics, so it makes no sense where we trade and what it's worth.
Yeah.
The only thing that it could be is that people are concerned about your liquidity. Because you've got a tremendous library, you've got a great nutrition business-
Yeah
... the huge member base. Why would you be trading here? Must be liquidity.
Yeah.
We've hyper-focused on the liquidity. We've put that extra $5 million on the balance sheet, and we have three main strategies for 2024. First one is cash generation. Second one is cash generation, and the third one is cash generation. That's what we're focused on. So if we build that balance sheet, where we build the cash base, and then we start showing these new revenue opportunities, we should be in a position where that capital is generated by the business. Never say what you're going to be doing in the future-
Yeah
... and I'm not making a prediction, but the business is designed to reach cash flow positivity and positive EBITDA, and if and when you do that, with that balance sheet structure, you should be in a great position.
Yeah. I guess since we have a little bit of time left, maybe if you could just talk about the competitive landscape in the digital fitness market, and obviously it's changed a lot. You know, it was on its way pre-COVID, but post-COVID, and kinda how you're thinking about that, and where you see-
Carl?
BODi fitting in.
Frankly, there's a shakeout, 'cause there was so much demand during the pandemic that, everybody wanted to get into the content business, and it became... It looked like just the easiest business to run. All we're seeing is, frankly, the people who really misunderstood what it takes to get people results and to retain those customers are now getting out of the business.
Yeah.
There was, you know, obviously a surge in connected fitness and that really creamed off the top of the people who could afford to put those machines in their houses, but then you have to service those machines with content.
Yeah.
We've been doing this for 25 years. I don't know of another company that has been doing what we've been doing for 25 years as successfully as we have, and that's because we focus on one thing. We focus on giving people a predictable outcome from the program that they start, rather than come in, guess, do this workout. And, and frankly, there's tons of free workouts on YouTube-
Yeah
... on Instagram. There's no shortage of content-
Yeah
... and never has been.
Yeah.
The reason people come to us and have paid for us for 25 years is because of the millions of before-and-after photos that demonstrate that our structured programs work.
Yeah.
So, in terms of the competitive landscape, you know, there's always gonna be competition.
Yeah.
Our job is to focus on the customer, get them results, and then they will be amplifiers of the effectiveness of your platform.
Yeah.
That's what our job is, is to make sure that people understand when they want results that are healthy and good for them, even if they're doing GLP-1 semaglutides-
Yeah
... you're gonna need lifestyle change.
Yeah.
We wanna be the productive, cost-efficient lifestyle change that fits into their lifestyle, and that's what we've been-
I wanna follow on to that, 'cause, listen, the big topic of the day is the GLP-1 drugs, right?
Yeah.
Yeah, and that's great. Listen, 145 million people in America are overweight, 75 million obese.
Yeah.
Bless their heart, if they can use a GLP-1-
Yeah
... they should. Having said that, one of the byproducts of GLP-1, as you know, is a reduction in lean muscle mass. It does nothing for cardio. There's a ton of people out there who are too heavy-
Yeah
... to be able to exercise safely and/or self-conscious. So if, in fact, they use a GLP-1 drug, no pun intended-
Yeah
... it could be a tremendous shot in the arm-
Yeah
... for a business like this.
Yeah.
Because we provide you with a at-home solution to exercise, where you don't-
Yeah
... have to go out in public and the-
Yeah.
You get yourself healthy.
Yeah.
You get into the zone where you can start to exercise.
Yeah.
We can give you a meal plan, nutritional supplements-
Yeah
... and an exercise program.
Yeah.
I actually think that's going to be a boon-
Jumpstart
... to what we do.
Exactly.
Yeah.
I agree, yeah. Well, thanks so much, you guys, for taking the time today.
Absolutely, Susan.
Really nice to see you.
Nice to learn more. Nice to see you.
Thank you.
Thanks, everybody.
Thanks, everybody.