The Beachbody Co., Inc. Q2 FY2024 earnings call

• Financial Performance: Revenue was ahead of guidance midpoint, net loss beat guidance, adjusted EBITDA beat guidance. It was the lowest net loss since going public with three consecutive quarters of positive adjusted EBITDA. Overall gross margin was 69%, best since 2021. Digital gross margin was 81% (highest since 2021), nutrition gross margin was 61% (since 2020). • Turnaround Strategies: - Cash Liquidity & Balance Sheet: Amended debt covenant, paid down $4 million debt, reducing outstanding debt to $25 million, and lowered liquidity covenant. - Operating Leverage: Reduced revenue breakeven point by over $400 million, on track to deliver $250 million in cost savings by 2024. - Revenue Stabilization & Growth: Developed revenue-driving strategies, innovation pipeline, strategic collaborations, and rolled out nutrition on body.com. Nutrition is a major growth opportunity with historical peak of nearly $800 million. • Key Achievements: Achieved five key strategic imperatives of turnaround plan, including cutting debt in half, lowering breakeven point, three consecutive quarters of positive adjusted EBITDA, building operating leverage, and cumulative positive free cash flow year-to-date.

Revenue for Q2 2024 was $110 million. Digital revenue was $59 million, accounting for approximately 53.6% of total revenue, with a digital gross margin of 81%. Nutrition revenue was $50 million, making up about 45.5% of total revenue, and its gross margin was 61%. Digital gross margin was the highest since 2021 at 81%, while nutrition gross margin reached 61% for the first time since 2020.

• Third quarter revenues expected to be in the range of $97 million to $107 million. • Net loss expected in the range of $13 million to $9 million. • Adjusted EBITDA expected in the range of $2 million to $6 million.

• Market competition could impact revenue and margin. • Effectiveness of database win back campaign is uncertain as it takes time to reengage without spamming. • Execution of partnerships may face delays or not meet expectations.

Q: About the Nutrition segment, what's driven the bullishness and early reads on DTC site traction?

A: Bullishness comes from large TAM for nutrition ($164 billion) and ability to go after general market outside network. DTC site has just started adding SKUs gradually, with plans to start direct marketing mid-September.

Q: How is the partner network trended since commission changes and about nutrition business outside network and marketing spend?

A: Partner network reaction to commission changes has been better than expected, though market remains volatile. Outside network, nutrition was previously only sold to network members, and marketing spend for nutrition will be based on ROAS and LTV ratios, with a new major nutrition innovation expected in 2025.