The Beachbody Co., Inc. Q3 FY2024 earnings call

• Restructuring: Eliminated the MLM structure effective November 1, 2024, moving to a single level affiliate model. This new model has no upline/downline management, no recruiting requirements, and affiliates keep 100% of commissions.
• Q3 Performance: Revenues were in line with guidance midpoint. Gross margins improved 880 basis points Y/Y. Adjusted EBITDA was $10.1 million, exceeding guidance of $2M - $6M, marking the fourth consecutive quarter of positive adjusted EBITDA. Year-to-date adjusted EBITDA was $19.6 million, a $31.1 million improvement from the prior year.
• Strategic Initiatives: Launch of Belle Vitale program in December, a comprehensive women's hormone health program with innovative fitness, nutrition plan, Breathwrk app access, and proprietary supplements. Expansion to Walmart.com in Q4, planning to expand affiliate program to TikTok shops by Q2 2025. Partnerships with American Diabetes Association and Dr. B for special offers and HSA/FSA reimbursement.

In the third quarter, digital revenue was $53.7 million, with digital gross margin at 80.5% for the quarter. Nutrition revenue was $47.4 million, with nutrition gross margin at 58.6%. For the fourth quarter, revenue is expected to be in the range of $77 million to $87 million, with no specific breakdown by segment mentioned other than the overall range applying to both digital and nutrition businesses.

• Q4 revenues expected to be $77 million to $87 million.
• Net loss expected to be $21 million to $17 million, including an estimated $9 million of pivot-related charges.
• Adjusted EBITDA expected to be $2 million to $6 million.
• Q4 is a transitional quarter as the company moves from MLM to affiliate model, with December being the first full month of all affiliate sales.

• MLM stigma which inhibited new customer signups and seller attraction prior to the model change.
• Seasonality in Q4, which is traditionally a softer quarter, and challenges with transitioning affiliates to the new system including training and system adaptation.

Q: Expand on the revenue guidance for fourth quarter, specifically the step down from third quarter and consistency across digital and nutrition businesses.

A: Q4 is traditionally a softer quarter. It's a transitional quarter as the company moves to the affiliate model. There is seasonality, and Q4 is a bridge to the affiliate model with the mix between digital and nutrition expected to remain steady.

Q: Expand on the transition to the affiliate program, including logistics and marketing.

A: Existing partners are transitioning to affiliates, with incentives for them to sign up. The company is approaching it from three levels: maximizing former network partners, opening to current subscribers and LAPS, and launching on impact.com. Q4 is the time to execute the bridge to the affiliate model as it's seasonally lower.

Q: Details on the Belle Vitale program, including testing phase and composition.

A: Belle Vitale finished testing late summer with incredible results. It's a comprehensive program including innovative fitness using inexpensive equipment, step-by-step nutrition plan, Breathwork app access, and two proprietary supplements. It will be sold as a $299 bundle starting December 10.

Q: About the e-commerce platform, how it differs from previous offerings.

A: Body.com is the primary DTC website, replacing the bifurcated approach. Team Beachbody is gone, and all products will be sold on body.com. Affiliates will send customers to body.com to transact.

Q: Plans for subscription models and mobile sales of digital content.

A: The company has a digital subscription model for fitness, with individual programs also available for purchase. While specific mobile sales percentage isn't disclosed, mobile usage in e-comm is typically over 70%, and the new platform will likely see increased mobile use.