The Beachbody Company, Inc.

Good morning, good afternoon, good evening. My name is Catherine and I'll be your conference operator today. At this time, I would like to welcome everyone to the Beachbody Company second quarter fiscal 2021 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this session, simply press star, then followed by the number one on your telephone keypad. If you would like to withdraw your questions, press the pound key. Thank you. I would now like to turn the conference over to Eddie Plank, Beach Buddies Group VP of Investor Relations. Mr. Plank, you may begin your conference.

Good afternoon, everyone, and thank you for joining us for our second quarter 2021 earnings call. With me on the call today is Carl Deichler, co-founder, chairman, and chief executive officer of Beachbody, and Sue Collins, president and chief financial officer. Following Carl's and Sue's 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. The 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. Actual future results may differ materially from those suggested in 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. 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 would like to turn the call over to Carl.

Thanks, Eddie. Good afternoon, everyone, and thank you for joining us today for Beachbody's first earnings call as a publicly traded company after closing our three-way business combination with Mixed Fitness and Forest Road Acquisition Corp on June 25th. With the addition of Connected Fitness to the Beachbody business model and the strengthening of our balance sheet with over $347 million in cash, we believe we've set the stage for a multi-year period of accelerated growth. Now, I know many of you listening are new to the Beachbody Company story. So before we go into a review of our recent performance, I want to spend some time discussing our business and operating model. Then our CFO, Sue Collins, will talk through our second quarter financial results and our full year 2021 outlook. So over the past 22 years, Beachbody has grown from a pioneer in creating and marketing innovative, effective fitness and nutrition programs to into a leading subscription health and wellness company augmenting our core competencies in our massive content library with compelling new digital fitness content and proprietary nutritional products proven to deliver results for our millions of customers now while the fitness industry is undergoing a significant transition in this digital age The underlying premise remains the same as when we hung the mission statement on the wall of our small startup two decades ago. And that mission is to help people achieve their goals and enjoy healthy, fulfilling lives. Now, today, this mission puts Beachbody at the forefront of a $1.5 trillion health and wellness industry that's expanding at a time when When consumers are increasingly looking for effective, affordable, at-home, digitally-enabled fitness and nutrition solutions, with approximately 72% of Americans overweight or obese, and research validating the importance of good health and physical activity in promoting resistance to COVID, we take our mission very seriously. I believe it's more critical than ever that we execute in a way that delivers exceptional value to our customers, provides a compelling opportunity for thousands of coaches and influencers to inspire new customers to be more proactive about their health, and builds long-term value for our shareholders. We believe we're uniquely positioned to capture a meaningful share of the increased focus and spending on health and wellness. And our newly combined company creates a wide moat and unique competitive advantages to deliver cost-effective results to the mass market. That includes the deepest library of premium digital fitness content in the industry. tools to support customers who are looking for healthy results, providing effective step-by-step programs that include meal planning and proprietary nutrition products, and now a high-quality, cost-effective, at-home connected fitness solution with our mixed stationary bike and its 360-degree touchscreen swivel tablet, all underpinned by two scalable platforms that leverage our expertise in distribution, marketing, and compelling content creation. Now, those two platforms are Beachbody On Demand, or what we call BOD, which delivers our extensive and growing content library of fitness programs and new live subscription tier, which I'll describe that in a minute. And OpenFit, what we call the master class of fitness, centered around celebrities and major influencers, offering live instructional workouts and a unique gamified fitness experience. And soon both of these platforms will be available to customers of the Mixed Fitness Bike, which we like to call that the stationary bike for the 99% because of its cost-effective price. But it's also one of the highest quality commercial-grade bikes on the market, and it'll offer a range of content for all fitness levels and preferences. Now, what's unique about our business model is that we've created a compelling value proposition for our customers. So they have all the tools they need to get healthy results in one place. We bundle our content with meal planning and nutritional subscriptions based on the customer's individual goals. For $99 a year, for instance, we bundle our Beachbody On Demand digital streaming platform along with discounts on various Beachbody nutritional products based on a customer's specific needs. We're following the same model with OpenFit for $96 a year, bundled with discounts on ladder nutritional supplements, which was that supplement line was developed and used by LeBron James and Arnold Schwarzenegger. Now, BOD was launched in 2016, and now that platform features over 3,600 on-demand streaming workouts across 87 completely different programs. That's a lot of variety right there. combining fitness and nutrition plans, meditation, and our own internal social media component, kind of like our own Facebook groups and daily progress tracking. OpenFit launched in 2019 using the same core competencies in content development. But OpenFit was built around a unique technology that creates a virtual live small group exercise experience where certified trainers supervise over 400 live classes a week in a variety of workouts, including strength training, Pilates, kickboxing, yoga, and meditation, to name just a few. Now, these classes allow for guidance with a live certified personal trainer who can help the subscriber during the workouts using the camera on their smartphone or tablet. While the entry door to Beachbody or OpenFit is often through our fitness content, another entry point and driver of lifetime revenue is through supplement subscriptions and meal planning. This creates this synergy of providing a one-stop resource for fitness and nutrition, harmonizes the experience of the product, increases lifetime value, and ultimately improves gives customers the best results. We currently offer 25 different proprietary nutrition products created by our world-class R&D and product development teams to meet specific needs and solve nutritional gaps for our customers. For example, Shakeology, our well-known nutritional shake formulated with superfoods, phytonutrients, herbs, free and probiotics, and clean protein. That helps Beachbody On Demand customers get healthy while they make changes in their diet that supports their overall goals. And on OpenFit, we feature ladder supplements, which were originally created, like I said, to optimize LeBron James on-court performance, but can do the same for any customer who's becoming more active. We acquired the ladder business in Q3 of 2020 and are in the process of expanding and scaling distribution of the ladder product line. Our comprehensive approach is now enhanced with the addition of stationary cycling to both the Beachbody and OpenFit platforms. The acquisition of MIX, enables us to offer high-quality, connected fitness to more people with a commercial-grade bike that offers an indoor cycling experience based on the rider's heart rate for a truly personalized experience. The mixed product line is priced approximately 20% to 30% lower than the competition, depending on the configuration. Both the BOD and OpenFit subscriptions can be streamed onto the Mix 360-degree swivel touchscreen, which gives customers the greatest variety from which to choose, with access to our comprehensive library of proven on- and off-bike fitness services. meditation and nutrition content. It's an unprecedented value proposition and will also allow us to cross-sell other products right there on the touchscreen by delivering personalized offers to customers. We're the only provider in the connected fitness market with the ability to cross-sell our products directly through the tablet. And beyond this compelling bundling synergy with our business model, what attracted us to Mix was their focus on getting people results. Mix found that there's this fast audience who are intimidated by the pressure of the leaderboard on other platforms. Most users surveyed said they prefer a less competitive experience based more on their own results and personalized workout intensity as measured by their heart rate. We believe that pairing our content with the technology that Mix has developed allows us to create an innovative and compelling experience that will drive acquisition of customers who want healthy results that come from our total solution. This entire ecosystem, both our digital platforms and the Mix bike, is now being supported by strategic marketing investments that drive that customer acquisition, retention, and cross-sell opportunities. This isn't new to the company. We've been executing on a refined approach to direct marketing over the past two decades, and we view our approach as a key competitive advantage. But now, we have the product lineup, capital, and the resources to drive real growth. We currently acquire new customers in two ways. through performance marketing or paid advertising, and through our substantial micro-influencer network, which consists of roughly 400,000 people. We call them coaches. They serve as the foundation of our online community. And with the merger just complete, our proven business model gives us a real competitive edge with $347 million of cash on our balance sheet, the broadest fitness content library in the world, the ability to cross-sell products on Connected Fitness, And this 400,000-strong army of influencers, we're in the best position in our history to accelerate growth in the years ahead. Now, our plans with this capital and our plans to go forward include, first, accelerating customer acquisition. Beachbody has always acquired customers opportunistically, and we believe... we can supercharge growth by doubling down on customer acquisition with this same disciplined approach that we've used for the past 20 years, enhanced by the leverage created by our first branded advertising campaign. Second, expanding internationally. Beachbody is currently a 99% North America-based business. We believe we can scale the business model into new international markets, particularly in parts of Europe. Third, increasing technology and data and analytics investments. Our September launch of the BOD interactive platform is a good example of leveraging existing resources and skill sets to dramatically expand the TAM with live interactive content featuring our very popular super trainers. We believe this can expand lifetime value by adding an additional subscription tier of $19.95 a month to our BOD membership while maintaining the low entry membership price of $99 a year for BOD. Likewise, We're investing in significant data and analytics expertise and technology to leverage the substantial user insights we receive from our multiple subscription offerings. This vastly improves our ability to ensure customers have the best possible experience and to help steer future capital allocation in the direction that will create the most enterprise value. And fourth, opportunistic M&A. We're seeing many attractive inbound M&A opportunities in the market that would benefit from Beachbody's scale, distribution, and marketing expertise. Over the last two years, we've acquired the Gixxo Technology Platform, Ladder Supplements, and of course, most recently, Mixed Fitness. And we're excited to pursue additional M&A activity that supports our growth plans. Now, turning to our recent performance. As we noted in our press release, Completion of the merger was delayed by approximately a quarter, but despite this delay, we continued to execute our business model during the second quarter, introducing new digital content and nutritional products that have been well-received by new and existing subscribers. On BOD, this included an all-new dance fitness program led by super trainer Sean T. called Let's Get Up, which has already been streamed nearly 3 million times since its launch in April. OpenFit announced a new initiative to bundle OpenFit streaming content with gym memberships, starting with an agreement with Fitness International and their LA Fitness Gym members. This demonstrates our focus on continuing to capitalize on innovative distribution opportunities with OpenFit. And finally, we've made a strategic minority investment in Feed Media Group, the company behind Feed FM, the leading B2B music licensing subscription service in the fitness space. This followed our agreement with FeedFM to implement its cost-effective solution to further elevate the experience of our fitness content with popular music. With FeedFM's unique business model, users can follow the trainer's curated playlist or choose from multiple stations so they can work out to music of their choice while staying on the beat with the rest of the class. We're excited to feature this innovative service in the BOD Interactive subscription that I mentioned. With the merger complete, the business is now poised to accelerate via several drivers, including our first-ever Beachbody brand advertising campaign launching this month across social, digital, and TV, as well as an incremental $33 million investment in marketing above our prior plans to spend $156 million on a combined full-year basis for a total of $189 million on a combined basis in 2021. This is a 112% increase over 2020 or a 250% increase over 2019. Finally, starting late this quarter, we'll begin offering the recently upgraded mixed bike to our database and powerful network of coaches. This is something they have been asking for. Purchase intent is high, and we're increasing our forecasted bike units by roughly 30% from approximately 73,000 units to 95,000 units for 2021. So, in summary, We're very excited for what lies ahead for the Beachbody Company. No doubt the challenging macro backdrop and its impact on the predictability of consumer behavior right now does present some near-term unknowns, which we're watching and reacting to on a day-by-day basis to do what's best for the business. I won't sugarcoat the volatility of the current environment. And that said... I couldn't be more optimistic about our long-term prospects. With entry points across multiple platforms and our long history of successfully acquiring, engaging, and retaining customers, I'm confident that we will efficiently deploy our substantial financial resources to scale the business and create significant shareholder value over the long term. The business we've built provides a strong foundation for growth, combined with the many levers we have to drive both revenue and earnings acceleration, and most importantly, allocate capital in a way that will help tens of millions more people get healthy. So I'll now turn the call over to Sue to discuss the second quarter results and our guidance for the remainder of fiscal 2021.