Beachbody’s Earnings Call: Transition and Challenges

Beachbody Company Inc ((BODI)) has held its Q4 earnings call. Read on for the main highlights of the call.

The latest earnings call from Beachbody Company Inc. paints a picture of a company in transition. While the call highlighted significant restructuring efforts leading to improved financial metrics and cost efficiency, it also acknowledged challenges such as a decline in revenue and difficulties with the affiliate program uptake. The sentiment reflected a balanced outlook, with promising financial improvements tempered by ongoing challenges in key revenue streams.

Transition to Affiliate Model

Beachbody has successfully transitioned from a multi-level marketing model to a single-level affiliate model. This strategic shift aims to broaden the market strategy and enhance revenue streams. However, the transition has been moderate, with fewer new affiliates joining than expected, indicating a slower pace in acquiring new affiliates.

Improved Financial Metrics

The company reported an adjusted EBITDA of $8.7 million, significantly exceeding the guidance range of $2 million to $6 million. This achievement marks the fifth consecutive quarter of positive adjusted EBITDA, showcasing the company’s ability to improve its financial metrics amidst a challenging transition.

Significant Cash Flow Improvement

Beachbody generated a cash flow from operations of $2.6 million for 2024, compared to a cash use of $22.5 million for 2023. This marks a remarkable $25.1 million improvement year-over-year, highlighting the company’s efforts in enhancing its cash flow position.

Digital Gross Margin Improvement

The company reported a digital gross margin increase to 85.9%, up 540 basis points from the prior quarter and representing a 1,280 basis point improvement from the prior year. This improvement underscores Beachbody’s focus on optimizing its digital operations.

Revenue Decline

Despite the positive financial metrics, Beachbody experienced a decline in total revenues, which amounted to $86.4 million, down 15% sequentially and 27% year-over-year. This decline was impacted by the transition from a multi-level marketing platform.

Nutrition Revenue and Subscription Decline

The company faced challenges in its nutrition segment, with revenue decreasing 26.6% from the prior quarter to $34.8 million and declining 32.8% year-over-year. Nutrition subscriptions also saw a 29.2% sequential decline, reflecting the difficulties in this area.

Net Loss

Beachbody reported a Q4 2024 net loss of $34.6 million, which included $20 million of goodwill impairment expenses. Excluding these impairments, the net loss was $14.6 million, indicating the financial challenges the company is navigating.

Forward-Looking Guidance

Looking ahead, Beachbody anticipates a shift in its revenue composition, with 60% expected to come from digital channels and 40% from nutrition in 2025. The company projects gross margins of approximately 85% for digital and 50% for nutrition. For the first quarter, revenues are expected to be between $60 million and $70 million, with adjusted EBITDA projected between negative $2 million to $2 million, indicating a transition phase as they implement their new business model.

In summary, Beachbody Company Inc.’s earnings call reflects a company in the midst of a strategic transition. While the financial improvements are promising, the challenges in revenue decline and affiliate program uptake present a balanced outlook. The company’s forward-looking guidance suggests a focus on digital and nutrition channels, as it navigates through its transition phase.