Beachbody Q2 2025 Earnings Call Transcript

Quartr
Provided by Quartr
August 5, 2025

Key Takeaways

  • Positive Sentiment: The Beachbody Company reported Q2 revenue of $63.9 million and a gross margin of 72.3%, exceeding guidance, with adjusted EBITDA of $4.6 million marking its seventh consecutive positive quarter and generating positive free cash flow of $4.1 million YTD.
  • Negative Sentiment: Revenues declined 42% year-over-year to $63.9 million in Q2 and digital subscribers fell 18% YoY to 940,000 amid the company's transition from an MLM to an omnichannel model, pressuring near-term growth.
  • Positive Sentiment: The company refinanced its debt via a $25 million facility with Tiger Finance and SG Capital, reducing its effective interest rate by over 40% to approximately 15.4% and boosting cash to over $25 million.
  • Positive Sentiment: Beachbody will launch its Shakeology brand in brick-and-mortar retail in early 2026 followed by P90X and Insanity nutritional lines, leveraging cross-marketing with its digital content for a major new growth channel.
  • Positive Sentiment: Management replatformed its affiliate program, rolled out an “invite-a-friend” referral feature, and plans to deploy Shopify and AI enhancements while adding new content from top trainers to improve subscriber acquisition and retention.
AI Generated. May Contain Errors.
Earnings Conference Call
Beachbody Q2 2025
00:00 / 00:00

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Operator

Good afternoon. Thank you for attending today's Beachbody Company Inc. Second Quarter twenty twenty five Earnings Conference Call. My name is Matt, and I'll be the moderator for today's call. All lines will muted during the presentation portion of the call with an opportunity for questions and answers at the end.

Operator

I would now like to pass the conference over to our host, Bruce Williams, Managing Director of ICR. You may proceed, Bruce.

Bruce Williams
Managing Director at ICR

Welcome, everyone, and thank you for joining us for our second quarter earnings call. With me on the call today are Mark Goldstein, Executive Chairman of The Beachbody Company Karl Deipler, Co Founder and Chief Executive Officer and Brad Rambert, Interim Chief Financial Officer. Following the prepared remarks, we'll open the call up for questions. Before we get started, I would like to remind you of the company's Safe Harbor language. Statements contained in this conference call, which are not historical facts, may be deemed to constitute forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Bruce Williams
Managing Director at ICR

Actual future results may differ materially from those suggested by such statements due to a number of risks and uncertainties, all of which are described in the company's filings with the SEC, which includes today's press release. Today's call will include references to non GAAP financial measures such as adjusted EBITDA, net cash and free cash flow. A reconciliation of these non GAAP financial measures to the most comparable GAAP financial measures is available within the earnings release, which can be found on our website. Now I'd like to turn the call over to Mark.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

Thank you. I'd like to welcome everyone to Body's Q2 twenty twenty five earnings call. Our second quarter results exceeded expectations with revenues of $63,900,000 driven by better than expected customer retention during our business model transition. We achieved a gross margin of 72.3% representing a 300 basis point improvement over the prior year. We delivered adjusted EBITDA above guidance, marking our seventh consecutive quarter of positive adjusted EBITDA.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

The seven quarters of consecutive positive adjusted EBITDA has resulted in a cumulative $39,500,000. To put this dramatic financial transformation of the company in perspective, we reduced our revenue breakeven point from approximately $900,000,000 in 2022 to approximately $200,000,000 in 2025, a remarkable $700,000,000 improvement that positions us for sustainable profitability. Our selling and marketing costs have decreased from 51.1% of revenue in q two last year down to 39.9% this quarter, and we're tracking towards our target of sub 35%. We recently financed our debt with Tiger Finance and SG Capital, and we reduced our overall interest rate by more than 40% in the process. Year to date, we've generated positive free cash flow of $4,100,000.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

And looking ahead, we have a line of sight to achieving positive free cash flow for the full year of 2025 for the first time since 2020. The achievement of full year positive free cash flow would mark a critically important milestone in our company's turnaround and transformation. While 2025 will see some temporary revenue declines during the business model transition, we're building towards significant growth opportunities by preparing to leverage our portfolio of billion dollar brands in the retail market. Starting in late q one twenty twenty six, we'll begin rolling out Shakeology, our superfood plus protein shake brand with over $4,000,000,000 in cumulative sales and more than 1,000,000,000 cumulative servings across select grocery, mass merchandiser, and club store accounts in a limited rollout. This will be our first time ever selling the Shakeology brand in the retail marketplace with brick and mortar.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

This retail expansion will continue in 2026 with the launch of our brand new p 90 x nutritional line, followed by our Insanity branded nutritional supplement products. The p 90 x nutritional line launch will be supported by a brand new p 90 x fitness program, creating powerful and revolutionary cross marketing opportunities at retail where it will be flagged on our product packaging. And we will also be online cross marketing between our nutritional products and our digital fitness content. The retail initiative for body using the p 90 x, Insanity, and Shakeology brands with the new line of products represents a massive revenue and profit opportunity over the next few years. When these products have completed their retail introduction, the turnaround effort, which has been focused on the dramatic restructuring and a change in strategic focus during the past two years since my arrival as executive chairman in June 2023, will be nearing its completion.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

Body will have become a totally new company, one that is no longer an MLM whose products will be sold in multiple channels, delivering growth in revenue and profits while leveraging the massive brand equity inherent in the body portfolio. As we reflect on our progress, q one twenty twenty five marked our first full quarter operating under our new business model, and q two demonstrated continued strong execution against our strategic objectives. We successfully re architected the company for profitability, and we will remain focused on driving long term margin improvement and operating efficiencies. We believe we're well positioned for growth with significantly better operating leverage due to the massive reduction in overhead we've accomplished along with a substantial gross margin improvement. While we're encouraged by our better than expected performance in both q two twenty twenty five and q one twenty twenty five, particularly in customer retention, operational efficiency, and adjusted EBITDA, we recognize that meaningful business transformations require time and sustained focus.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

Success demands intense discipline, total alignment from our management team and employees, creative thinking, and flawless execution. Most importantly, it requires patience. We're confident in our direction and encouraged by our progress, but we remain focused on the disciplined execution needed to complete this transformation and position Body for long term success. I'd now like to turn the mic over to our cofounder and CEO, Carl Dykler.

Carl Daikeler
Carl Daikeler
Co-Founder, CEO & Director at The Beachbody Company

Thanks, Mark, and thanks to everyone for joining us today. This is important. The work we do at Body, which you're supporting, is helping roughly a million people get healthy and lose weight. And as a company, I wish you could see the commitment and passion our people have for returning this business to scale so we can help more people. And I appreciate the opportunity to keep going, to keep innovating, and help millions more people get healthy and fit.

Carl Daikeler
Carl Daikeler
Co-Founder, CEO & Director at The Beachbody Company

Okay. Now last quarter, we told you the most significant activity in q two would be happening in June when we replatformed our affiliate program, launched a refer a friend program, or as I like to call it, invite a friend. We also launched our first complete fitness program of the year into the member library. Our priority for the quarter was replatforming the affiliate program in partnership with a company called Social Ladder. Their SaaS product enables us to bring avid users together, providing them with tools to monetize their enthusiasm and invite friends and family to join them.

Carl Daikeler
Carl Daikeler
Co-Founder, CEO & Director at The Beachbody Company

We call this community the body experience. And as we've seen over our history, community creates a flywheel of people engaging with the content, getting results, and attracting more people to the platform and the community. Part of the body experience community is this invite a friend feature, which we're deploying across the platform and within our apps over the course of the second half of the year. So people invite friends using special offers so they'll join them when they're starting a new fitness and nutrition program. And whenever someone uses their code to join, they earn discounts on body products.

Carl Daikeler
Carl Daikeler
Co-Founder, CEO & Director at The Beachbody Company

This strategy has been very successful for other subscription platforms and introduces the prospect of even more gamification for doing body workouts. So I'm excited to get this referral mechanism deployed across our entire ecosystem. Likewise, those that are inviting people are creating transactions, and then they'll be invited into the new affiliate program. SocialLadder's simplified sign up process and friendly interface should help more of our subscribers monetize their enthusiasm for our content and trainers as their results attract people who wanna know how they manage to get in such great shape. We know from experience, the better the results, the more curiosity and demand, and our programs for sure get results.

Carl Daikeler
Carl Daikeler
Co-Founder, CEO & Director at The Beachbody Company

We launched the new community, invite a friend, and new affiliate platform to complement the launch of our biggest release so far this year called twenty five minute speed train. It's an eight week comprehensive step by step training program from super trainer Joel Freeman. The program launched in mid June and achieved over a million views in just twenty one days. To put that in perspective, that's about 50% faster than it took Joel's prior program lift more to achieve a million views and three times faster than last summer's body lava launch. Okay.

Carl Daikeler
Carl Daikeler
Co-Founder, CEO & Director at The Beachbody Company

Turning to our sales channels. Our performance marketing initiatives during the quarter continued to be highly disciplined and resulted in profitable subscriber acquisition. Now our goal is to move into growth mode. And along those lines, we've organized an aggressive company wide initiative to return to digital subscriber growth coordinated across all our sales channels, performance marketing, affiliate, and CRM. During the quarter, our objective was to drive strong traffic to the site, and that mission was accomplished.

Carl Daikeler
Carl Daikeler
Co-Founder, CEO & Director at The Beachbody Company

So from this point forward, our focus will be on improving the conversion of the traffic that we generate. Our team has developed some very compelling new offers, which we continue to test with specific objectives of digital subscriber growth while also maintaining our growing average order value and lifetime value. CRM continues to be a priority and a big opportunity for subscriber win back campaigns. Our new VP of CRM hit the ground running and has the kind of experience needed to get the full leverage from our database. Our CRM group will particularly lean into the new content launches coming over the next six months because we have one of the most robust content schedules in our history for the back 2025.

Carl Daikeler
Carl Daikeler
Co-Founder, CEO & Director at The Beachbody Company

To that end, I'm excited to announce that we're licensing new content from the original p 90 x super trainer, Tony Horton. His comprehensive power of four program that he's been marketing on his own platform will go into our body catalog in October, followed by a brand new hybrid program from Sean T called Dig In to kick off our Black Friday and Cyber Monday specials. We're putting together our largest test group we have ever organized in December for dig in, and I suspect we'll have over 10,000 people testing this hybrid of Sean's dig deeper program combined with low impact insanity type cardio. The results our test group will get will be powerful fuel for marketing going into the new year. Those additions to the library plus other special initiatives we'll be testing in partnership with our trainers this fall will carry us into the fourth quarter and into the new year demand cycle.

Carl Daikeler
Carl Daikeler
Co-Founder, CEO & Director at The Beachbody Company

This will set us up for the spring twenty twenty six debut of what we're calling p ninety x generation next with a new trainer and a new p 90 x program. P 90 x is the most successful extreme training program of all time, and it's a big opportunity to expand that brand. The p ninety x will be particularly exciting because, as Mark mentioned, we're all hands on deck to prepare for the launch of the p ninety x supplement line in retail, and this will include a first of its kind purchase incentive that gives the consumer access to a free month of the new p ninety x workouts with the purchase of any p ninety x nutritional supplement product at retail. The entire p ninety x launch will be powered by the transition from our legacy commerce platform to Shopify and its robust set of AI features next spring. In the back half of the year, the tech team is also adding layers of personalization and engagement tools to the Body app that will help people with automated reminders and encouragement to help them keep going.

Carl Daikeler
Carl Daikeler
Co-Founder, CEO & Director at The Beachbody Company

I'd like to close my remarks by saying we've spent the better part of the last twenty four months completely rearchitecting this company with dramatic improvements in our financial performance. In addition, we've improved our efficiency as evidenced by our seven consecutive quarters of positive adjusted EBITDA and the achievement of greater than $4,000,000 of free cash flow in the first half of the year. Looking ahead, we'll build off our new efficiencies and set our sights on our final phase of the turnaround, which is generating top line growth in our respective categories. We feel great about our plans for the rest of this year and the exciting new program and retail product launches in 2026. We truly believe that Body will emerge as a stronger, more diverse, and more profitable company by the 2026.

Carl Daikeler
Carl Daikeler
Co-Founder, CEO & Director at The Beachbody Company

Okay. Now I'll turn the call over to Brad to deliver the specifics of our Q2 results. Brad?

Brad Ramberg
Brad Ramberg
Interim CFO at The Beachbody Company

Thank you, Carl, and thank you, everyone, for joining the call today. I will review our Q2 results and provide our outlook for the third quarter. For the quarter, the company generated revenue of $63,900,000 which exceeded our guidance range of $51,000,000 to $61,000,000 Adjusted EBITDA of $4,600,000 exceeded our guidance range of breakeven to $4,000,000 and we generated our seventh consecutive quarter of positive adjusted EBITDA. Now I'd like to provide more details about the quarter. Total revenues of $63,900,000 declined 11.6% sequentially and declined 42% year over year in line with our expectations as we continue our strategic transition.

Brad Ramberg
Brad Ramberg
Interim CFO at The Beachbody Company

Revenues continue to be impacted in the near term by the shift from a multilevel marketing platform to an omnichannel model. We have rearchitected the company and significantly reduced our cost structure, and we believe that our new model sets us up well over the long term to drive significant operating leverage. Consolidated Q2 gross margins were 72.3%, reflecting an increase of 110 basis points over the prior quarter and an increase of 300 basis points compared to the prior year. We are pleased to report that consolidated gross margins exceeded the high end of our previous long term target of 65% to 70%, underscoring the strength of our operational execution. Moving to digital and nutrition revenues.

Brad Ramberg
Brad Ramberg
Interim CFO at The Beachbody Company

Digital revenue decreased 7.5% from the prior quarter to $39,700,000 and decreased 32.5% year over year. Revenues were impacted by continued pressure on our digital subscriber count, which decreased 7.8% sequentially to 940,000 and declined 18.2% compared to the same period a year ago. The transition away from the MLM has had the most impact on nutritional subscribers because, historically, our nutrition products were almost exclusively sold through our MLM network. Consistent with our expectations, nutrition revenue decreased 15.6% from the prior quarter to 24,200,000.0 and decreased 51.8% year over year. Nutrition subscriptions declined 12.5% sequentially to 70,000 and fell 52.1 year over year.

Brad Ramberg
Brad Ramberg
Interim CFO at The Beachbody Company

Digital gross margin was 87.7% for the quarter, an increase of two twenty basis points from the prior quarter and seven twenty basis points from the prior year. Our digital gross margin was above our previous long term guidance of 85%. The continued strength in year over year gross margin was due to a decrease in digital content amortization and depreciation as a result of a more disciplined production and fixed asset spend. Nutrition and other gross margin was 51.4%, representing a 170 basis point decrease from the prior quarter and a nine forty basis point decline year over year. The decline from the prior quarter was primarily due to a higher level of promotional offerings in the current period, while the decline from the prior year quarter was primarily due to the discontinuation of preferred customer fees on 11/01/2024, which were part of our old business model, where customers paid a monthly fee to purchase products as a discount as well as the higher level of promotional offerings in the current period.

Brad Ramberg
Brad Ramberg
Interim CFO at The Beachbody Company

Operating expenses for the quarter declined 9.1% sequentially and declined 41.5% year over year to 50,200,000.0 Selling and marketing expenses as a percent of revenue decreased two ninety basis points over the prior quarter and declined eleven twenty basis points over the prior year to 39.9%. This significant improvement over the prior year was primarily driven by the pivot away from the multilevel marketing channel as we no longer have partner compensation in our new sales after 11/01/2024. Enterprise technology and development expense as a percent of revenue decreased 80 basis points from the prior quarter and increased 100 basis points year over year to 16.6% of revenue. The improvement compared to prior quarter was primarily due to lower technology spend. The increase as a percent of revenue as compared to the prior year was due to revenue deleverage.

Brad Ramberg
Brad Ramberg
Interim CFO at The Beachbody Company

G and A was 18.1% of revenue, an increase of 200 basis points sequentially and an increase of six ninety basis points from the prior year. Both increases as a percent of revenue were due to revenue deleverage. The Q2 twenty twenty five net loss was $5,900,000 which included $2,500,000 in restructuring charges and $2,200,000 in losses on extinguishment from debt compared to a net loss of $10,900,000 in the prior year quarter, which included $700,000 of debt extinguishment. Adjusted EBITDA was $4,600,000 compared to $3,700,000 in the prior quarter and $4,900,000 in the prior year. Notably, this quarter marks our seventh consecutive quarter of positive adjusted EBITDA.

Brad Ramberg
Brad Ramberg
Interim CFO at The Beachbody Company

As we discussed in our last call, in May, we entered into a new lending agreement with Tiger Finance and SG Capital for a $25,000,000 three year loan facility that allowed us to retire the $17,300,000 of outstanding debt ahead of its February 26 maturity date. This refinancing provided us with approximately $5,000,000 of additional capital on the balance sheet. The effective interest rate on this new facility is approximately 15.4% compared to the approximately 28% in the prior facility. As a result of all of these efforts, our cash balance increased from $18,000,000 in the prior quarter all the way up to over $25,000,000 Our year to date cash provided by operating activities is 6,600,000.0, of which 4,200,000.0 was generated this quarter. Our year to date free cash flow is 4,100,000.0, of which $2,400,000 was generated this quarter.

Brad Ramberg
Brad Ramberg
Interim CFO at The Beachbody Company

And as Mark mentioned, we have a line of sight to full year positive free cash flow, which will be the first time since 2020. Moving on to third quarter guidance. While we are pleased with the execution of our transformation, I want to reiterate that our second quarter results marked the second quarter of the company's new business model. As discussed, we significantly lowered expenses and our revenue breakeven point when we strategically pivoted away from the MLM model to our omnichannel marketing and distribution model. This shift has opened new growth channels that we could not previously access, and we're very excited about the opportunities ahead.

Brad Ramberg
Brad Ramberg
Interim CFO at The Beachbody Company

We now have a stronger balance sheet and a more viable long term business model. But as with companies that are undergoing a transformation, it will take time to develop traction in these new lines of business. We expect third quarter revenues to be in the range of $51,000,000 to 58,000,000 net loss in the range of $4,000,000 to breakeven and adjusted EBITDA to be in the range of $2,000,000 to $6,000,000 As we continue the transition to our new business model, we want to provide additional updates to help you contextualize changes in our new financial model. As of today, we anticipate revenues to approximate 63 percent digital and 37% nutrition. Moving forward, as the result of our extensive efficiency measures, we have increased our long term digital gross margin up from the previous 85% to 86% to 89%.

Brad Ramberg
Brad Ramberg
Interim CFO at The Beachbody Company

Our long term nutrition gross margin target is in the range of 46% to 52%, which is in line with our volume expectations and certain promotional efforts planned. Importantly, we are raising our long term total gross margin target from 65% to 70% to 75%. As we move through twenty twenty five, we're beginning to see early signs of progress from our new product pipeline and expanded sales channel. We remain confident that these initiatives will drive meaningful impact over time, and we look forward to providing updates on our next call.

Operator

If you would like to ask a question, please press star followed by 1 on your telephone keypad. If for any reason you would like to remove that question, please press star followed by 2. Again, to ask a question, press star 1. First question is from the line of Susan Anderson with Canaccord Genuity. Your line is now open.

Susan Anderson
Susan Anderson
MD & Senior Analyst at Canaccord Genuity Group

Hi, good evening. Nice job on the quarter. Thanks for taking my question. I guess just to follow-up really quick on that long term gross margin, I guess, for the digital business. Is that, I guess, what drove the higher gross margin in the quarter?

Susan Anderson
Susan Anderson
MD & Senior Analyst at Canaccord Genuity Group

And then also, I guess, what's driving it higher than what you originally expected?

Brad Ramberg
Brad Ramberg
Interim CFO at The Beachbody Company

Hi, Susan. This Brad. Thanks for asking the question. Yes, that is what's driving it higher in the quarter is a reduced and more judicious production spend and some little little fewer fixed cost allocated to production. And the spend that we saw this quarter is consistent with we expect our long term rate to be.

Brad Ramberg
Brad Ramberg
Interim CFO at The Beachbody Company

So it was 85%, and we're taking it up to 86 to 89%. That matches the the the the spend we have for production for the for the long term.

Susan Anderson
Susan Anderson
MD & Senior Analyst at Canaccord Genuity Group

Great. And then just on the selling and marketing that's come off a lot or down since exiting the MLM model, I guess, maybe if you could talk about what you think the right level is gonna be there going forward. And you talked about putting some more investment behind the business as we look forward and you look kinda to the next stage of driving revenue. So I guess just trying to think about, you know, what that's gonna look like longer term. Thanks.

Brad Ramberg
Brad Ramberg
Interim CFO at The Beachbody Company

Yeah. So I'll talk about the margins, and then I'll have Marco call and talk about the revenue. So the margins, when we exited the MLM business, have come down from literally over 50% a year ago to 39% this quarter. And as Mark mentioned in his in his remarks, in his prepared remarks, that our goal is to get that into the mid thirties over the next couple quarters. So we've taken it from 51%.

Brad Ramberg
Brad Ramberg
Interim CFO at The Beachbody Company

It's just that the the old MLM model had a much higher selling expense due to partner commissions. The model does not have that level of expense. So we've gone from 51 to 39, and our goal is to get that down to the the mid thirties by the end of the year.

Carl Daikeler
Carl Daikeler
Co-Founder, CEO & Director at The Beachbody Company

And as it relates to growth, Susan, this is Carl. As it relates to to growing that, it's always our intention to grow into efficiency. Right? But we as we've talked about for the last few quarters, the most important thing to us is that we're driving profitable sales with a return on ad spend that pays respect to our cash position. So with the new Tiger facility, we have the room for some expansion of our media spending as well as the replatforming of our affiliate program with special promotions that we'll do in there in the third and fourth quarter around all these new content that we're releasing.

Carl Daikeler
Carl Daikeler
Co-Founder, CEO & Director at The Beachbody Company

So while we expect the margins to conform with what Brad outlined, we do think there's room for growth and investment spending within our means to generate profitable sales. So the margins should hold, but we are in a position right now to prioritize expansion of our subscriber acquisition efforts.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

Hey, Susan. This is Mark. I I just wanna clarify something. We are not spending less, less money than we were spending before. It's the sales and marketing combined.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

So getting out of the MLM and into our current structure saved us an enormous amount of money on sort of latent marketing spend that was classified as marketing and sales. So the actual marketing spend that we're doing today is as much or greater as what we were doing previously. We just don't have the burden of those legacy expenses that were on the sales side of the sales and marketing from the MLM. Does that make sense?

Susan Anderson
Susan Anderson
MD & Senior Analyst at Canaccord Genuity Group

Yeah. That makes sense. Yeah. I I guess one last one for me just on the nutrition side, I guess. Are you still thinking about kind of rolling out a number of, you know, new supplements to complement that business and, I guess, get that back growing again kind of similar to what you're doing on the digital side with some new products coming out? Thanks.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

Yes.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

Yes. So we we're going to be launching the the body brands retail initiative in 2026 as we've previously spoken. The first brand out of the gate will be Shakeology, which is interesting. Shakeology is a brand that is cumulatively done, as you know, $4,000,000,000 in sales and had over a billion servings, and it has never been sold in the retail marketplace in brick and mortar. So that will be the first brand that we sell into the retail community in early twenty six, and that will be followed by the p 90 x launch of nutritional supplements.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

Again, first time in the retail market. And the second quarter and third quarter and then towards the back half of the year, our intention is to launch the Insanity line into the retail marketplace. So when we launch these new products and they're in retail brick and mortar, they will also be available on the body.com website and available to be sold by people in our network. So and our and our affiliate network. So we will be in a position to have a much broader, deeper product portfolio with multiple brands in the nutrition segment.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

And our hope is that by the '26 and into '27, you'll start to see some real growth in the nutritional side of the business because of that.

Susan Anderson
Susan Anderson
MD & Senior Analyst at Canaccord Genuity Group

Great. That sounds good. Thanks so much. Good luck for the rest of the year.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

Thank you, Susan. Look forward to seeing you next week.

Operator

Thank you for your question. Next question is from the line of George Kelly with Roth Capital Partners. Your line is now open.

George Kelly
MD & Senior Research Analyst at Roth Capital Partners, LLC

Everybody. Thanks for taking my questions.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

Hey, George.

George Kelly
MD & Senior Research Analyst at Roth Capital Partners, LLC

First, maybe a follow-up just on that last question. Is there anything else you can share with respect to the Nutrition retail launch in in early next year, I'm just I guess, I'm curious if if you have distribution partners signed up. How how broadly you expect that sort of launch? You know, not looking for too much specificity around doors or anything, but just how should we think about that launch? It's such a big brand.

George Kelly
MD & Senior Research Analyst at Roth Capital Partners, LLC

So I just I I don't know sort of any more context would be helpful.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

Yeah. George, it's Mark. Good to talk to you, bud. So, I would say the following, George. We, we've hired a firm that is essentially going to be doing our selling for us, a major major firm at doing this, handles lots of large CPG companies. And as you know, when you sell into retail, many of them have a planogram in the store, and those planograms are typically reset either once or twice a year. So typically happens in the early fall and the early spring.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

So we are in the process now of preparing the sales presentations for that group, the materials, that they will then take out to the retailers who have got planogram dates coming up in August and September, and then we will follow that up with people who have plan again dates that are happening later in the year. And you typically add six months after the planogram date to actually physically appear in the store. So if you make a presentation to a retailer in September, for example, you would be in the store probably in February. So that's why we're talking about q one as being when Shakeology would show up at retail. And the group that we partner with is just now putting together the sales program and the selling presentations to go out to these planogram meetings with these major retailers, and that will start over the next four to six weeks.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

So on the next call, we'll be able to give you more specific color. And then for p 90 x, which will be happening probably more towards q two and into q three, they'll do the same thing, and they'll run the same offense. And so we plan to go on a limited rollout with certain people by grocery, food, drug, mass merchant, club store, convenience stores. We'll pick select retail chains. And then after we show our traction, we will then expand into more chains in those trade classes as we go.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

So I would say next earnings call will be a lot more color on the Shakeology sell in progress and where we stand with the p 90 x.

George Kelly
MD & Senior Research Analyst at Roth Capital Partners, LLC

Okay. Understood. And on Shakeology, as part of your retail launch, do you anticipate going out with a product that looks similar to what you have online today, or should we Great. Think about it being a refresh?

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

That's a great question, and the answer is we have a complete refresh. We hired an outside design firm, same people that did our beautiful new p 90 x and insanity packaging, and they totally reimagined Shakeology. Because remember, Shakeology was originally not sold at retail, and it wasn't designed to be such. So that packaging was just a direct to consumer sold through an MLM bag. We now have this incredibly dynamic, beautiful packaging for Shakeology, which is what this organization is gonna go out and sell to the retailers, a whole new look.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

And we will then follow our direct to consumer Shakeology business with the same new packaging. So total refresh and a lot of features on the front of the package, George. So a lot of the claims that we make in terms of gut health, losing weight, etcetera, will be on the front of the package. We also have across the top of the package for retail over 1,000,000,000 servings sold. So we're gonna show people that this is a major brand.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

It's been around a long time, and now we're bringing it to the retail market.

George Kelly
MD & Senior Research Analyst at Roth Capital Partners, LLC

Okay. Okay. That's helpful. And then a couple questions just on your OpEx lines. You talked about enterprise tech and G and A in your prepared remarks.

George Kelly
MD & Senior Research Analyst at Roth Capital Partners, LLC

I guess the question is, where did there was a $2,500,000 charge that you backed that that you included in the EBITDA reconciliation. Where did that fall? And what's a good kind if we back that out of whatever line it hit, are we now at a pretty good run rate for those two expense lines?

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

Brad?

Brad Ramberg
Brad Ramberg
Interim CFO at The Beachbody Company

Yeah. It comes out of sort of all of those lines. And then when we take that out, the the run rate should be about right in enterprise tech and g and a.

George Kelly
MD & Senior Research Analyst at Roth Capital Partners, LLC

Okay. So it falls in primarily in both of those expense lines, not in selling and marketing?

Brad Ramberg
Brad Ramberg
Interim CFO at The Beachbody Company

It no. It also falls in it also falls in selling and marketing. It falls it it falls across all four lines. It falls across cost of goods, selling and marketing, enterprise tech, and g and a. So when okay.

Brad Ramberg
Brad Ramberg
Interim CFO at The Beachbody Company

When when you see next quarter's numbers, you will see this sort of ongoing run rate. We're not guiding to specific line items. We're sort of guiding to total EBITDA and revenue. But when we see next quarter's results, those will be the the ongoing run rates by line item.

George Kelly
MD & Senior Research Analyst at Roth Capital Partners, LLC

And Yeah. Basically, what I'm trying to get to is there a lot of expense still coming out in those two lines. And aside from that restructuring, it sounds like we're in a pretty good place right now. Is that fair?

Brad Ramberg
Brad Ramberg
Interim CFO at The Beachbody Company

Yeah. That that I think that's fair. Yes.

George Kelly
MD & Senior Research Analyst at Roth Capital Partners, LLC

Okay. Great. And then maybe just one last a a quick one. Carl, you mentioned you were talking about the digital business and seeing a I'm not sure the exact language if you said you you kinda have visibility into that stabilizing and growing. But maybe if you could just talk to the renewal process in digital and your pricing at renewals and just how that's looking and, like I mean, I know you have new content coming in the back half.

George Kelly
MD & Senior Research Analyst at Roth Capital Partners, LLC

So, like, I mean, is it fair to say we should really start to see stability there starting as soon as March or April?

Carl Daikeler
Carl Daikeler
Co-Founder, CEO & Director at The Beachbody Company

That's certainly the plan, George. I mean, we we are pleased with our retention through the first half of this year, and that was with a slower than usual content release schedule. The content release schedule has been an indicator of adding subscribers, and that really picks up this month through the end of the year. But the numbers, the general numbers of retention have been stable, and our front end conversion numbers on traffic that hits the site have also been fairly stable. So so, yeah, I do think that the business has achieved a level of predictability.

Carl Daikeler
Carl Daikeler
Co-Founder, CEO & Director at The Beachbody Company

And with the recent changes in operating expenses, we're in a, I think, a good position to continue to deliver stability while we now look for areas where we can grow the business.

George Kelly
MD & Senior Research Analyst at Roth Capital Partners, LLC

Okay. Thanks again.

Carl Daikeler
Carl Daikeler
Co-Founder, CEO & Director at The Beachbody Company

Thank you, George.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

Thanks, George.

Operator

Thank you for your question. Next question is from the line of Alex Hantman with Sidoti and Co. Your line is now open.

Alex Hantman
Equity Research Analyst at Sidoti & Company

Hi, everybody. Congrats on the quarter. Thanks for taking my questions.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

Sure. Thanks, Alex.

Alex Hantman
Equity Research Analyst at Sidoti & Company

Yes. The first question was just expanding a little bit on the prepared remarks. I know you've mentioned growing order values and lifetime values in the prepared remarks. But could you provide a little bit more color about the impact of the new affiliate model on those compared to the prior MLM model now that you have another quarter of data?

Carl Daikeler
Carl Daikeler
Co-Founder, CEO & Director at The Beachbody Company

The we don't I don't think we break those numbers out specifically, but I will say that the the models are so dramatically different that we really have to look at it at like, it's a completely different business. The compensation construct is very different, obviously dealing with a single layer so that the seller gets all of the commission. But it's a very different commission structure, including, as Mark said, we're no longer beholden to paying long term aggressive sales and marketing expenses to the network marketer like we had in the prior model. So the margins are all different, but also the demand equation is very different. So it's it's really difficult to compare these two things, but I will say that since we replatformed the affiliate program last month, we are seeing that it's much more simplified, which makes it that our affiliate program is now more viable to our entire subscriber community.

Carl Daikeler
Carl Daikeler
Co-Founder, CEO & Director at The Beachbody Company

So we do expect that to grow through the third and fourth quarter.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

Yeah. And if I could just add, Alex, without getting into heavy specifics. You know before in the MLM model, we paid on renewals. So if I signed you up to an annual $1.79, I would get paid, call it, illustratively, my 40% commission. If you then renewed one year later, I got paid again.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

And so that was the old model. That's not the new model. So if you think about lifetime value, if Alex signs up for two years at a $179, that's $358 that we get. We were paying the commission, the high commission on each of those years before. Now we're paying it on the first year.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

So, essentially, the lifetime value of that customer is far higher to us because we don't have that latent residual ongoing comp.

Alex Hantman
Equity Research Analyst at Sidoti & Company

Perfect. Thanks for the context. One more from me. Yeah. I know you've you've talked about launching the redesigned, you know, P90X and other, packages.

Alex Hantman
Equity Research Analyst at Sidoti & Company

Was curious if you guys have explored sort of making those dynamic, with any sort of AI driven fitness coaching or or sort of, you know, nutrition planning as well.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

Well, without getting into Oh, go ahead, Carl.

Carl Daikeler
Carl Daikeler
Co-Founder, CEO & Director at The Beachbody Company

Yeah. Just just currently, you know, we're sticking to our model of keeping it as simple as possible for the user. However, corporately, I will say there's not a single department at the company that's not looking at how AI can complement and improve what we deliver to the customer. But the real bottom line is we're navigating an environment where we wanna make sure that we're getting people results, and and that's what the model's delivering. And while we look at the possibility of implementing AI for the purposes of the p 90 x launch, that's gonna comply with the model that made that a billion dollar franchise.

Carl Daikeler
Carl Daikeler
Co-Founder, CEO & Director at The Beachbody Company

And that is great talent. We've got a great new trainer we're excited to announce, great production value, and training that is at the very forefront of functional fitness and an approach to nutrition that's very easy for people to follow and still enjoy the foods they love. So we're working our business model that's worked for years that gets people results and deploying AI as we see that it will add some efficiency, particularly to the subscriber acquisition model and then keeping people engaged in the back end. But we'll talk about that in future quarters.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

And and, also, Alex, we said in the in in my prepared remarks, when we launched the t n 90 x line at retail, we will for the first time, nobody has done this, we will be able to cross sell against a new p 90 x fitness line. So you're gonna be able to get on the package. You're gonna be able to get through QR coding the ability to get an offer on the new p 90 x exercise program when you buy one of the p 90 x nutritional products. That has not been done by anybody before. That's a great example of cross marketing that we're gonna be doing, and we really think that could give us a great shot in the arm with the retail launch.

Alex Hantman
Equity Research Analyst at Sidoti & Company

Context. Thank you.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

Sure. Thank you, Alex.

Carl Daikeler
Carl Daikeler
Co-Founder, CEO & Director at The Beachbody Company

Thanks, Alex.

Operator

Thank you for your question. There are no additional questions waiting at this time. I will now like to hand the call back over to Mark Goldstein.

Mark Goldston
Mark Goldston
Executive Chairman at The Beachbody Company

Thank you very much, Matt. Well, I really appreciate everybody calling in today. And thank you to Susan, George and Alex for your questions. And as always, if you have any further information requests or meeting requests you'd like to set up, please reach out to the company through Brad Ramberg, our CFO, to do that. So thanks, everybody. Have a wonderful evening.

Operator

That concludes the conference call. Thank you for your participation. You may now disconnect your lines.

Executives
    • Mark Goldston
      Mark Goldston
      Executive Chairman
    • Carl Daikeler
      Carl Daikeler
      Co-Founder, CEO & Director
    • Brad Ramberg
      Brad Ramberg
      Interim CFO
Analysts
    • Bruce Williams
      Managing Director at ICR
    • Susan Anderson
      MD & Senior Analyst at Canaccord Genuity Group
    • George Kelly
      MD & Senior Research Analyst at Roth Capital Partners, LLC
    • Alex Hantman
      Equity Research Analyst at Sidoti & Company
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