Thank you everyone for attending our conference today. I'm Susan Anderson, one of Canaccord Genuity's consumer analysts, and we're very pleased to have with us Mark Goldston, Executive Chairman of Beachbody. Mark, maybe if we could just start out by having you give a overview of Beachbody, where the company has come from, the transformation that has been put in place, and the execution on that transformation that you guys have seen so far.
Yeah, thanks, Susan. Beachbody's been around for 25 years. It was co-founded by Carl Daikeler, who is our current co-founder and CEO. It is the premier fitness and nutrition company in America. You remember from the glory days of the infomercials when we would run P90X and Insanity, et cetera.
Sure, I remember.
Sell you DVDs, you'd work out at home. Company transitioned to a direct selling and subscription model many years ago.
Mm-hmm.
Today we offer over 130 programs in digital fitness, from things like P90X
Yeah
21 Day Fix, 80 Day Obsession, et cetera. We have every genre. Think about us like we're the Netflix of fitness. We have seven, eight different genres, programs underneath it, and then we've got an elaborate nutrition program-
Mm
With superfoods and pre and post-energy drinks, et cetera. So we really try to give a holistic solution, and we also have meal plans for people who wanna watch their diets. And so we're all about making you a better version of yourself and the healthiest you can be.
Great, that sounds exciting. Then maybe talk about how you've taken that path to profitability. We're looking forward to better profitability now for the rest of the year. Talk about how you've gotten there, and now after that, what's the next-
Yeah
Leg of the transformation?
So I joined in June of 2023, so I've been here about 14 months. As you know, my background is doing turnarounds-
Mm-hmm
This was a turnaround.
Yep.
In the time since we've been there, we've really done a lot. We've lowered the break-even of the company from over $900 million to less than $500 million.
Wow!
We've cumulatively taken out $250 million of costs, $125 million of which have been in the last year alone. We've improved our gross margins by over 700 basis points in one year.
Wow!
We've cut our debt in half from $50 million to $25 million. So we have really done a.... Because anybody can do cost cutting.
Mm-hmm.
This is not cost cutting. This was a re-architecture of the business, and the thing that we've done that we're really, really excited about is we built operating leverage into our P&L, so that when we do return to top-line growth, which is sort of the last phase of the turnaround, the flow-through economics on the P&L will be substantial. So we're really excited about that.
That's exciting. Yeah, you guys have done an amazing job. Maybe if you can give us a glimpse at the next leg of the transformation, which I think is maybe getting back to a little bit of growth.
Mm-hmm.
How does... You know, how do you kind of jumpstart that growth again?
Right. Well, that's a great question. I mean, think about it like this: we posted our first Adjusted EBITDA positive quarter in Q4 of 2023. Nobody thought we would do that. We've now had three consecutive quarters of positive adjusted. So cumulatively, for nine months, we've made $12.3 million unadjusted EBITDA. So our goal was to take the first 18 months which would end in December of 2024, get the thing re-architected, massively lower the break even-
Mm-hmm
Generate EBITDA, generate positive free cash flow. So the next phase of the turnaround, post the December period, will be to take this innovation pipeline that we have stocked, which is very unusual in a turnaround and start to use some of the cash that we've generated and the new profitability structure that we've generated, and use that to push out some new products, both in digital fitness and nutrition-
Mm-hmm
To hopefully get us back to top-line growth and take advantage of the operating leverage we've built into the P&L.
Yeah. Great. And then, so as you mentioned, you have-
Mm
The nutrition segment and the digital fitness segment-
Right
The exercise segment. Maybe if you could just kind of talk about those two segments. Where do you see the most opportunity? How big is each, and where do you see the growth opportunity?
It's fascinating. If you think about it, the nutrition segment has a TAM of $164 billion. The fitness segment has a TAM of $13 billion. In the glory days of this company, when it was massively successful, over $1 billion in sales, over $140 million of EBITDA, the company at its peak did $800 million in nutrition, and at its peak, did $365 million in fitness. People don't realize that. So the TAM is enormous in nutrition, and we have really focused on it more as part of a bundle. Our folks sell what's called a Total Solution Pack, which includes nutrition and fitness, where competitively you see brands that are out there marketing very heavily in nutrition-
Yeah
Solo products. We are now pivoting, where we're gonna be marketing that as well, 'cause the feature set of our products is superior-
Mm-hmm
To the competitive set. So you're gonna see a change. We've never marketed nutrition in our direct-to-consumer, direct-response marketing. That's gonna change as well. On fitness, what we've done is basically taken more of a holistic approach, where we can pull you through either a health journey, a vanity journey-
Mm-hmm
An overall flexibility journey, et cetera. So you pick what it is you're interested in, and regardless of your level, and regardless of the variety that you pick-
Mm-hmm
We've got a full program for you to utilize, which is why the subscription is so valuable.
Wow! And then on the recent quarterly call, you kind of talked about doubling down on the nutrition business-
Right.
You know, given that TAM there. Maybe talk about how you're going to be launching new supplements, and, like, as you mentioned, you're taking the business DTC, maybe talk about the timeline there.
Yeah, so this company has some tremendous assets. It has two brands that have reached a cumulative $1 billion in sales. One is P90X
Mm-hmm.
Which is probably the best-known name in the fitness industry.
Yeah.
Even better than the name Beachbody was.
Yeah.
Then Shakeology, which is our superfood-
Yeah
Which has cumulatively reached $1 billion in sales. So on a go-forward basis, we're gonna do some brand leveraging. So we're actually contemplating developing a line of products under the P90X name
Mm-hmm
Which has an almost 70% unaided awareness.
Mm.
Going into the various segments of nutritional supplements where that brand might make sense, and that's probably a 2025 initiative. And then, in addition, what we're basically doing is we're taking the products that we've got and the brands that we've got, and we're repurposing them to meet the needs of the consumer in the market today. If you look at what's going on, people are very health conscious today.
Yeah
They're doing it themselves.
Mm-hmm.
A lot of people wanna do it in the privacy of their own home. If people happen to be either overweight or out of shape or not used to exercising, a lot of people don't want to go to a health club.
Mm-hmm.
They wanna go to a health club when they're in shape, but a lot of people don't wanna go. So what we can do is give you the safety, security, and confidence in your own home.
Mm-hmm
To be able to go through our process and see, not only vanity results, frankly, but health results, which is really why we're here. I mean, sure, we wanna make people look good, but in the end of the day, the mission of the company, going back to the beginning, was always to make you the best version of yourself.
Mm-hmm.
That's eating well, it's exercising, it's being healthy, and it's a lifestyle approach, and we are all about that.
Great. Historically, have you seen a lot of overlap in the customers utilizing the fitness program as well as the nutritional products, or has-
That's the opportunity. I f you look at it today, we have a little over 1.15 million digital subscribers.
Mm-hmm.
We have about 140,000 nutritional subscribers. So the opportunity... And by the way, if you take the delta between the 1.15 million who are on fitness-
Mm-hmm
The 145,000 on nutrition, I'll guarantee you that a lot of those people are using nutritional products-
Yeah
Don't happen to be using ours.
Mm-hmm.
Our opportunity is, instead of just selling you bundle packs, more people eat than exercise.
Mm-hmm.
So if I'm only offering you a bundled pack, you've got to be into the fitness component as well.
Mm-hmm.
If you happen to not be into the fitness component, but you wanna make yourself healthier-
Mm-hmm
You wanna take nutritional supplements, we should be marketing that directly to you. We've not really been doing that as much in the past. We're gonna be doing that more going forward.
Okay, great. And then maybe if you could talk about the win-back campaign.
Mm-hmm.
You guys have 14 million customers in your database-
Yeah
From history.
Yeah.
Talk about how you're, what you're doing to get those customers back.
Yeah, that's been really a major opportunity and challenge for us. The 14 million go back to 2016. You know, it's interesting, Susan, the category has a CAC-
Mm-hmm
Of close to $100, as you know.
Yeah.
To acquire 14 million people would take you $1.4 billion.
Yeah.
We've got this reservoir. What we've had to do is we've had to cleanse it-
Mm-hmm
Scrub it to make sure the emails are valid, and then, you know, having spent many years running NetZero and Juno ISPs.
Mm-hmm
I know better than anybody, you don't wanna hit the spam tripwire-
Yeah
By just bombarding people. So what we've done is we've brought in a new head to come in. He came from HBO.
Okay.
We're working on culling the list, trying to determine what people previously had bought.
Okay
When they were members, and trying to come up with tailored versus carpet bomb solutions, smart bombing, if you will-
Mm-hmm
Where we can tailor a solution based on what you had done previously. We're also gonna be using those people in a way where we can promote to them differently than we can go out to the general public, because there's no CAC.
Mm-hmm.
So if you go out and run an ad on Facebook or Google or on television, you have a customer acquisition cost that you need to recover to create-
Yeah
A lifetime value. Here, we already have those people, so there's essentially a de minimis CAC.
Mm-hmm.
So you can be more aggressive in how you promote. So we're just starting to see the green shoots from that, and we're really hopeful-
Okay
That as we go forward, that will be something that we will not abuse, and we don't wanna overdo it, but it's a great resource to have.
Okay, great. And then maybe just going back to the fitness segment for a little bit-
Mm.
Maybe if you could talk about the growth drivers there. How do you see the growth? Is it also bringing in new customers and, you know, how you think about marketing the product to new customers?
Yeah, interesting. I think, today we're being aided by things that are in the market which are touting health, whether it's longevity-
Mm-hmm
NMN, GLP, I mean, you name it. There's... Everybody out there is trying to find a way, not only increase longevity, but the big thing today is people are focused on health span-
Mm-hmm
Not so much lifespan. Not that you don't wanna live a long time-
Mm
It's the quality of your life.
Yeah.
That's what we call health span. What we're trying to do is to make sure that we're not just viewed as an iron-pumping, ab-crunching company. Certainly, we check that box, but we also can make somebody more healthy, because they're getting their vitals in line, they're losing weight, they're feeling better, they're getting cardiovascular health, hopefully getting their A1C down if they're diabetic or pre-diabetic. We've done a partnership with the American Diabetes Association to try to basically address that universe. So we are taking the approach that we're letting the market do the education to people of how y ou can take health into your own hands.
Mm-hmm.
Then we're providing the tools and the programs to allow you to then do that on your own with our guidance as you go through the process.
Yeah. Okay, great, and then I guess we can't not mention the GLP-1 drug.
Yeah.
So I guess, you know, with the popularity of those and a lot of people taking them now, how has that impacted your business? And then but also, how can you capitalize on that?
Yeah. Well, not to use a pun, which I'm famous for doing, but that could be a shot in the arm-
Mm-hmm
For our business, and I'll tell you why. So GLP-1 drugs, which are really designed for diabetics-
Mm-hmm
A lot of people are taking them who are not diabetic-
Yeah
For weight loss, and it's an appetite suppressant, for lack of a better term.
Yeah.
One of the major things that they have said as a by-product of these drugs is the loss of lean muscle mass.
Mm.
That is the warning.
Yeah.
Well, what do we mean by that? When a normal person goes on a diet and loses 20 lbs, 75% of the weight that they lose is fat, 25% is muscle.
Mm-hmm.
What I've read is that when you go on a GLP-1 drug and you lose 20 lbs, 75% of what you lose is muscle, 25% is fat.
Yeah.
You still want to get your weight down, still better for you to be thinner than heavier, but if you lose lean muscle mass and you're over 40 years old, that leads to all kinds of problems: balance, core strength, et cetera. So what we're trying to do is be a supportive adjunct to the GLP-1 drug trend.
Mm-hmm.
Saying, "Look, take them, get your weight down, but don't lose your body's lean muscle." That doesn't mean big bicep muscle mass.
Yeah.
That means your core muscle mass-
Yeah
That allows you to maintain your balance, your stability-
Mm-hmm
And your overall... I mean, they tell you your strength is an indicator of your longevity.
Yeah.
So we can be really helpful there, and as these things penetrate more and more, our programs will become more and more relevant to those people. So we actually think that could be a boon to us.
Yeah, and I think it's becoming pretty well known now that you lose a lot of muscle mass.
Well, you definitely do.
Those customers are looking for ways to-
Correct
Help keep that on. Okay, great. And then maybe if we could talk about just the competitive landscape for fitness and digital fitness-
Mm-hmm
For a minute here. That we definitely saw a boom during COVID-
Right
Then it kind of died down. How are you seeing that competitive landscape? Have you seen some players drop out, or are you still seeing as many new players come in, and where do you guys feel like you're positioned there?
You know, it's interesting. During COVID, just still hard to believe we were all kind of locked inside for a year, but-
Yeah
We came out of the bat cave, but a lot of people were doing, you know, connected fitness. They were buying bikes and mirrors and home Tonals, et cetera. That's kind of the top, the top of the pyramid that kind of petered out. So what we're seeing today is, everybody and their brother is touting that you need to get yourself in shape.
Mm-hmm.
So as you come towards the summer months, it's more of a vanity pitch.
Mm-hmm.
As you get towards the winter months, et cetera, it's more of a health pitch. What we don't want to do is to create a common theme in the market of which we are a part.
Mm-hmm.
We are the leader in fitness. We've always been the leader in fitness. We have really innovative programs.
Mm-hmm.
We've got Super trainers who take you through this. So what we're pitching is the fact that we've got a community that you can be a part of from your own living room.
Mm-hmm.
The program that you're on, you've got other people who are also doing that program, and there are groups that we have where you can share your progress. So it's a way of having sort of a workout buddy on a virtual basis, but depending on what your goals are. Some of these people get in these groups, and it's all about weight loss. We have a program coming out in our innovation pipeline in December called Belle Vitale.
Mm-hmm.
It features our Super Trainer, Autumn Calabrese, and it's all about women's hormonal health.
Mm
Which is a major issue.
Yeah
For women starting at age 30 and beyond.
Yeah.
This program is comprehensive. It's got an equipment component, it's got an exercise component, and it's got a supplement component, which are-
Mm
Hormonal supplements.
Okay.
It's got an actual plan, which there's a liver detox plan, for example, in there.
Mm.
We're basically addressing people's health needs.
Mm-hmm
While we're addressing their needs to become more flexible, to have more core strength, et cetera. That's not something that you see in general online.
No. Yeah.
That takes a lot of time, takes a lot of capital, it takes a lot of innovation, but that's what we do. That's what the BODi company is all about. Be the best version of yourself, utilizing our tools. We're there to support you. We've got a holistic approach, and nobody else does that.
Yeah. No, that sounds exciting. I guess maybe if you could talk about, too, just how BODi really is kind of a value offering. So, you know, I guess how does the company traditionally act during recessionary times, and-
That's a great question.
You know, as consumers are feeling pinched in the wallet, maybe, you know, BODi's a good offering for them.
Yeah, well, what we found and our EVP of Finance, who's sitting here, Oswaldo Busquets, and I were actually just talking about that this morning. In recessionary times, historically-
Mm-hmm
This company has done very well.
Mm-hmm.
Listen, we're a value proposition.
Yeah.
For $179 a year, you have access to the Netflix of 130+ programs.
Yeah.
So if you think about it, gym memberships tend to be expensive.
Mm-hmm.
And the utilization factor is, you know, January to March-
Mm-hmm
And then kind of people-
Yeah
Don't show up again till their New Year's resolutions come back around.
Mm-hmm.
So we have the ability to give you a solution that's economical.
Mm-hmm.
We also now have digital program purchase-
Yep.
Which we did not have before.
Yep.
So you could go buy an individual program, forget about a subscription-
Mm-hmm.
$59.95, and you have access to it forever-
Mm-hmm.
Through our CNN-named Best in the World app-
Okay.
Where you would go to access this.
Yeah.
In a recessionary period where money is tight, we become a preferred choice.
Yeah.
And that's really important. Because I think we're sort of heading into that direction economically.
Mm-hmm.
It's not a political statement, it's a reality statement.
Yep.
As money gets tight, you know, with what we have to offer, I think we're in a great position.
Yeah. Great. And then maybe with the few minutes left here, if you could just talk about the margin differences between the fitness segment and the nutrition segment, and where you think those could be longer term.
Yeah, so when I joined, 14 months ago, our margins were, like, around 53% in nutrition.
Mm-hmm.
We're now up to basically 60%.
Mm-hmm.
In digital fitness, we were in the low 70s, and now we're up at 80.5%.
Okay.
We had set our target was to be at 80% or higher in digital fitness, we're there.
Mm-hmm .
We said it was to be in 60% or higher in nutrition. We're there.
Okay.
Is there room for some incremental growth there? Sure, but with that kind of a margin structure, our blended gross margin is 69.1%. So think about it, I mean, we're generating eco nutrition, you know, if we do $220 million or thereabout-
Mm-hmm
We're generating 60+ points of gross margin, you're getting $130 million-$135 million of gross profit just out of your nutrition business.
Yeah.
And then digital fitness with an 80%+ margin, if you do $200+ million of revenue there, you're getting $160 million of contribution.
Mm-hmm.
The amortization of these programs occurs rather rapidly, so it's pretty much all profit. By the way speaking of recession in economics and the benefit of us, if you could put up on the screen the QR code, sir, in the back. Sir, could you put the QR code on the screen?
The last slide.
Sorry. Didn't mean to get you away from your music.
Great.
This is a special offer for everybody in this room. It's gonna be live for the next hour. We have a $179 annual subscription to BODi, and you get access to the entire 130+ fitness library. If you take this QR code and you go within the next hour, you can sign up and get a free $179 membership, so you can start your own fitness journey, compliments of the BODi company.
Great, and I see everyone clicking on that.
Yeah. It's great.
Perfect. Maybe with a couple minutes left here, I wanted to ask you about your thoughts around potentially partnering with Netflix?
Mm-hmm
... or Amazon for your digital fitness library. Is that still a possibility? And, you know-
Yeah, I think it is. Look, we provide somebody with an amazing opportunity to have a plug-and-play complete fitness channel. So whether it's Netflix or Amazon or whoever it might be, instead of going through the process of having to then go create content, which is time-consuming and hugely expensive-
Yeah
We already have it.
Yeah.
I mean, we've got multiple genres and 130+. We have 9,000 streaming videos.
Yeah.
So we could go to somebody and say, "If you're willing to create a dedicated fitness channel we are a complete plug-and-play solution.
Mm-hmm.
There's any number of people that we can do it with, including the two that you mentioned, and that's absolutely on our roadmap for 2025.
Great. And then, so just the final question that we're asking all of our companies today, and you've mentioned it a little bit already, but maybe if you could talk about, you know, how healthy do you think the consumer is today versus where they were at last year? And then, you know, as we head into the back half in 2025, where do you think the consumer goes in terms of consumer spending? You know, is there concerns over recession, you know, slowing consumer spending?
Well, back when I was at the Kellogg School, and we studied micro and macroeconomics, somehow I think that word didn't get out to everybody who was planning monetary policy. I think what happened was, with the increase in interest rates-
Yeah
Which were essentially done to cool what was considered to be an inflationary economy.
Mm-hmm.
If you think about it, the reason why prices were inflated, a big reason-
Mm-hmm
Was we had a global shipping crisis.
Mm-hmm.
We were in a situation where people were shipping things from Asia in containers that cost $25,000 a container, that normally cost $2,400 a container.
Mm-hmm.
So these costs swelled, and they were passed on to the consumer.
Mm-hmm
Because those companies couldn't eat that.
Mm-hmm.
That caused us to see an increase in consumer pricing not because of an excess of demand over supply but because of climatic conditions caused by a global shipping crisis-
Mm-hmm
And global shortages in, you know, chips-
Mm-hmm
Ingredients. We have a policy that we took of raising the interest rates to cool down an inflationary environment, when it actually wasn't being caused by overheated consumer spending.
Yeah.
I think the consumer spending environment is still challenged.
Mm-hmm.
I think people's disposable income is still challenged. Unless we see a significant reduction in interest rates-
Mm-hmm
I think you're gonna see that through the election and into next year depending on what the administration is. So we, at the BODi Company, look at that and say, "Listen, our pricing is designed for people to be able to do it on an affordable basis.
Yeah.
This is not something that is a high hurdle to entry from a pricing standpoint. So while we hope the economy performs well-
Mm-hmm
We hope consumer spending increases-
Mm-hmm
We plan for the fact that if it doesn't-
Mm-hmm
How do we position ourselves in the right way to be able to give the consumer what they want?
Yeah
At a fair and affordable price? And that's really what we're all about.
Yeah. No, you guys are well-positioned, definitely.
Yeah.
Okay. Well, thank you so much, Mark-
Thank you, Susan.
For joining us, and thank you everyone in the audience.
My pleasure. Nice to see you. Thank you. Okay, guys.