Release Date: May 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Achieved quarter-over-quarter revenue growth for the first time since Q4 of 2021.
- Exceeded the midpoint of adjusted EBITDA guidance, delivering positive adjusted EBITDA for two consecutive quarters.
- Became free cash flow positive this quarter, a first since 2020.
- Successfully reduced the breakeven revenue threshold from over $900 million in 2022 to less than $500 million in 2024.
- Implemented strategic actions including a sale leaseback transaction and divesting a non-core investment, resulting in a $7 million debt reduction.
Negative Points
- First quarter revenues declined 17% year-over-year.
- Connected Fitness revenue was down 50% from the previous year's first quarter.
- The process of reactivating former and prospective customers is taking longer than anticipated.
- Nutrition revenue, despite sequential growth, decreased 25% year over year.
- Guidance for Q2 indicates expected revenue to be lower than Q1, reflecting seasonality and ongoing turnaround initiatives.
Q & A Highlights
Q: What drove the sequential growth in the Nutrition business? Was it Amazon or something else?
A: Marc Suidan, CFO of Beachbody Company Inc, explained that the growth was due to a mix of factors, including early signs of a turnaround in the Nutrition business, better volume of orders, and a reduction in discounts from 25% to 20%, which effectively increased revenue.
Q: Can you share more about the entitlement campaign launched and the progress of the reactivation campaign?
A: Carl Daikeler, CEO of Beachbody, noted that the entitlement campaign is in its early stages, focusing on marketing specific programs. The reactivation campaign is progressing slower than expected due to regulatory compliance, but it remains a productive channel.
Q: What is the impact of the commission changes on the selling and marketing expenses?
A: Marc Suidan clarified that the changes in commission structure are reflected in the cash spend profile and the deferred cost from the balance sheet, contributing to a more efficient expense structure.
Q: How do you see the digital business stabilizing, and what are the key metrics for its success?
A: Mark Goldston, Executive Chairman, emphasized broadening the customer base by offering individual programs alongside subscriptions, aiming to increase total engagement and revenue.
Q: What gives you confidence in expanding into other retailers or channels following the success on Amazon?
A: Carl Daikeler mentioned the quality of the supplement catalog and the potential for growth in other sales channels, emphasizing the importance of managing contribution margins for each transaction.
Q: Could you detail the buckets of expense savings this quarter, particularly changes in the commission structure?
A: Marc Suidan outlined that the company is on track to achieve $250 million of savings, with $200 million from reducing overall operating and capital expenditures and $50 million from improved sales and marketing.
Q: What is the strategy behind partnerships, and do you expect them to be meaningful to revenue?
A: Carl Daikeler discussed a partnership with Dr. B for HSA and FSA reimbursements, which should help boost subscriptions. He also hinted at a solid pipeline of potential partnerships that align with the company's fitness and nutrition solutions.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
