The Beachbody Company, Inc. reported a 20 percent drop in sales for the second quarter ended June 30, in line with expectations. Carl Daikeler, co-founder, chairman and CEO, told analysts that the focus will remain on cost control as at-home fitness demand “may remain variable in the short term” as the overall economic climate becomes increasingly uncertain.
“We only see uncertain demand in the fitness space, especially in the in-home fitness space,” Daikeler said at an analyst meeting. “That’s why it’s important that our cost structure is variable as we move through uncertain demand patterns.”
For the quarter ended June 30, total revenue was $179.1 million, a decrease of 20 percent compared to 2021 and a decrease of 3 percent compared to 2019. Revenue was in line with guidance of $175 million in revenue 185 million US dollars.
Marc Suidan, CFO, said the decline reflected “the ongoing shift in consumer priorities that our business and industry is experiencing.” The decline also partly reflects a conscious focus on profitable customer acquisition.
Digital revenue was $78 million, down 17 percent from a year earlier. As was the case last quarter, Beachbody reclassified preferred business services fees from digital to nutrition and other revenue. Adjusted for this shift, digital revenue fell 8 percent.
Digital subscriptions fell 16 percent year-on-year as two years of growth were led by the peak of the pandemic. Digital subscriptions continued to see a 35 percent increase in the second quarter of 2019. The deal includes the Beachbody On Demand (BOD) streaming platform, including its digital live streaming subscription BODi.
Engagement, or DAU/MAU, was down year-on-year but up 140 basis points compared to 2019. Quarterly commitment levels increased year-over-year and Q219.
Nutrition and other revenue was $90.5 million, down 30 percent from a year ago. This decline partially correlates to the decline in digital subscriptions and the launch of new products that are driving the nutrition business.
Suidan said: “Looking ahead, now that we have surpassed the toughest competition of the pandemic era, we believe our robust new product pipeline, enhanced cross-selling and upsell initiatives, and efforts to simplify customer choice to reduce SKU -Number should be improved demand and performance in the future.”
Connected fitness sales, which includes the Beachbody Bike powered by MYXfitness Connected Indoor Bike, were $10.6 million with 8,800 bikes shipped. Suidan said, “We continue to see higher engagement from digital subscribers who own a bike compared to those who don’t own a bike in Q2; This is an encouraging trend that reinforces our belief that the connected fitness business is a valuable contributor to LTV.”
Net loss was $41.9 million compared to a net loss of $12.4 million in 2021 and a net income of $19.6 million in 2019.
Adjusted EBITDA was $1.5 million compared to $4.4 million in 2021 and $17.7 million in 2019. Adjusted EBITDA exceeded Beachbody’s expectations and called for an Adjusted EBITDA Loss in the range of $7 million to $12 million.
Suidan said the better-than-expected earnings reflect progress on rebalancing costs.
“With a clear focus on execution and cash flow management, we achieved material savings in the second quarter, reduced cash burn by nearly $38 million and reduced operating expenses by more than 20 percent compared to the first quarter,” said Daikeler. “This reflects increased variability within our cost structure and ongoing cost discipline.”
As a result, Beachbody ended the quarter with $57 million in cash on hand. Beachbody also announced Monday that it has entered into a $50 million debt financing agreement with Blue Torch Capital, which can potentially be increased by an additional $25 million to improve its financial flexibility.
“During the quarter we also focused on profitable customer acquisition through new content releases, our highly effective proprietary distribution network and disciplined marketing despite continued weakness in the industry,” said Suidan. “These results reflect solid initial progress on our single brand strategy. This strategy, which we initiated earlier this year, demonstrates our ability to adapt quickly to economic realities. The one-brand strategy isn’t just about cost. It’s about realizing the full potential of our vast category and unique assets. As we consolidate the great content from our platforms and leverage the Beachbody on demand subscriber scale.”
Due to the uncertain economic situation, Beachbody has downgraded its outlook for the year. For fiscal 2022, the Company now expects a combined improvement in adjusted EBITDA loss and a reduction in capital expenditures from approximately $110 million to $120 million compared to 2021. Previously, an improvement of approximately $120 million was anticipated aimed at.
For the third quarter, the company expects total sales of 150 to 160 million US dollars; and an Adjusted EBITDA loss of $15 million to $20 million.
“Regardless of the macro backdrop, we will continue to focus on profitable acquisitions, generate demand through our compelling release cadence, and tightly control spending,” Daikeler said. “I am incredibly confident in our ability to both manage near-term pressures and capitalize on the significant opportunities that remain longer term.”
Daikeler said Beachbody continues to operate in “a still large and underpenetrated market.” He pointed out that the global dietary supplement market was US$151.9 billion in 2021 and is expected to grow at a CAGR of 8.9 percent from 2022 to 2030. At the same time, the global home fitness category is expected to grow to $21.8 billion by 2026 at a CAGR of 9.6 percent.
“With more than two million subscriptions, our scale in the at-home fitness segment is significant, and our model of being content-driven and supported by nutrition and community is unlike anything else on the market,” said Daikeler. “We’re confident we can continue to generate demand with our content-driven model, which allows us to quickly pivot to capitalize on emerging trends and needs.”
In a show of confidence, Daikeler noted that Beachbody’s management team collectively purchased more than $6 million worth of stock on the open market during the second quarter. He added: “We did this as individuals for one simple, important reason: Beachbody’s future potential is tremendous. The actions we take to make the company more efficient and productive, such as B. reducing our cash burn and increasing the flexibility of our cost structure allow us to navigate the dynamic near-term environment. And with a strong leadership team and a commitment to continuous innovation, we are incredibly well positioned to capitalize on the significant opportunity that lies ahead.”
Photo courtesy of Beachbody