The Beachbody Company, Inc.

Good afternoon, ladies and gentlemen. Welcome to the Beachbody Company third quarter fiscal 2021 earnings call. At this time, all participants are in listen-only mode. Following the presentation, we will conduct a question and answer session. Instructions will be provided at the time for you to queue up for questions. If anyone has difficulties hearing the conference, please press star zero for operator assistance at any time. I would like to remind everyone that this conference call is being recorded. And I will now turn the conference over to Eddie Plank, Beachbody's Group Vice President of Investor Relations. Please go ahead.

Welcome, everyone, and thank you for joining us on our third quarter 2021 earnings call. With me on the call today is Carl Deichler, Co-Founder, Chairman, and Chief Executive Officer of the Beachbody Company, 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 SEC filings, 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.

Thank you, Eddie, and good afternoon, everyone. On today's call, I'd like to provide some context on the current environment, including the shifts we've seen in consumer dynamics, what we've learned from them, and the actions we're taking to optimize Beachbody's performance against the challenging backdrop. Before turning to the details of the quarter, I'd like to underscore two important points about our business. We have a differentiated offering, a leading position in the mass market, and an extremely resilient business model with 3 million highly loyal and engaged customers that provides us with a significant opportunity to drive LTV through our diverse catalog and comprehensive product offering. Second, the solid subscription growth we delivered versus the 2019 baseline reflects the strong long-term secular trend of demand for digital fitness and quality nutrition. Taken together, I'm confident in our future prospects despite the confluence of factors that impacted us during the quarter. Now, let me get into specifics. After results in July and August that were generally in line with our expectations, September was more challenging than we anticipated. Softer consumer demand, a challenging media environment, and delays in key product launches and rollouts resulted in new subscriber acquisitions that were below our expectations. This was despite strong retention among existing subscribers. The team and I are taking decisive steps to respond to results, improve customer acquisition, and lifetime value metrics, and get us back on course to deliver on our long-term outlook. Make no mistake, as the single largest shareholder, as well as CEO of Beachbody, but more so because I believe in the importance of our mission to serve as many people as possible, this is deeply personal to me. Our results are unacceptable, but at the same time, I can see very clearly the reasons behind those results and how best to respond. I am laser focused on growing the business and ensuring that we are positioned to create value for our shareholders and deliver on our mission. Over the past two decades, we've grown this business across a variety of economic cycles, technology disruptions, and changing consumer preferences and sentiment. we've successfully navigated market dislocations before. We know firsthand that environments like this may be challenging, but they also present vivid insights and opportunities. Frankly, confronting challenging circumstances led us to see the opportunity to create innovations like P90X and to introduce Shakeology. As long as the focus remains on the customer and getting them results in the most cost-effective way possible, The strategy of providing the total solution of fitness, nutrition, and community at an affordable price always regains traction, and mass market customer demand returns, always. Put plainly, at-home fitness is not a passing trend that grew out of the pandemic. It's here to stay. Our performance versus 2019, including solid growth in subscriptions and solid retention and engagement, is evidence of that long-term trend. There's no denying the consumer is experiencing a moment of distraction. During the quarter, we saw people return to traveling, socializing, and spending time outside the home after more than a year and a half of quarantines and social distancing. Softer demand also coincided with a more challenging media environment. Rising media costs and the new privacy settings associated with Apple's iOS 14.5 made performance marketing more costly and less efficient, resulting in ROI below historic levels. Added to that, our results were impacted when the launch of BOD Interactive, what we call BODY, our new premium tier live group fitness subscription, was delayed from the first half of September to late October. We needed additional time to ensure the technology would deliver the immersive, personalized, and interactive experience that we envisioned before we started selling the subscription. Bot Interactive is an important step forward our customers have been asking for as we use technology to deliver engaging, affordable, and compelling content with a live interactive experience unlike anything else in the marketplace. However, this delay limited the ability of our coach network to drive new subscriber acquisition and sales of corresponding nutritional bundles. Given that the BOD Interactive subscription also includes our interactive cycling content, the October launch had a domino effect on bike sales within our customer base. As a result, we did not begin to aggressively promote the bike in our coach network and on social media until late October, as we needed the BOD Interactive launch to be able to truly unlock the full value proposition. We're now executing on our business plan as we go into the holidays and then onto the seasonally important first quarter when people refocus on health and wellness. While external factors will always play a role in our results, as they do for everyone in the sector, we are committed to controlling what we can control, our strategy and our actions. With that in mind, I'd like to take some time to walk you through the action plan that's in progress to improve near-term results and prioritize ROI while continuing to advance our long-term growth strategy across six key focus areas. Marketing, growth initiatives, the coach network, nutrition, expenses, and leadership. So let's start with marketing, where we're sharpening the focus. Given the current environment, we're taking a very disciplined approach to prioritize performance marketing in the near term to maximize response and ROI through direct channels. We're also addressing the gap created by the iOS 14.5 changes. We're working closely with various media platforms to develop new solutions as well as harnessing our own data and advanced attribution models to optimize media. In an environment like the one we're in today, agility is paramount. This is why we've streamlined our marketing organization and are now operating with a significantly faster feedback loop between our creative team, media strategy, and data and analytics. This allows us to move quickly to find winners and invest behind them while tightly managing acquisition costs of the most valuable customer cohorts. While we continue to believe top of the funnel brand marketing can serve as a powerful accelerant, we paused brand spend in the near term. Our intention is to resume these activities after the holiday season when consumers typically refocus on their personal goals and overall wellness. Second, let's talk about growth. We're allocating resources to the highest return demand creation activities. We want to make sure that the organization has got the right levels of resources and that everyone is aggressively focused on solid execution. With the launch of Bot Interactive in late October, we now have a powerful lever to drive acquisition, upsell, and increase lifetime value with an offering that replicates the immersive and personalized experience of boutique fitness classes in a digital context. Also, we're continuing to scale our connected fitness business. While this remains a competitive market, we have a clear and differentiated value proposition, an existing base of 3 million subscriptions, a superior quality bike and touchscreen, best-in-class fitness content that's personalized and heart rate driven, and an ability to pair our fitness offerings with high-quality, effective nutrition plans and supplements. We expect sales of the connected bike will significantly enhance the lifetime value of our customer base by increasing penetration of highly retentive digital subscriptions at a very attractive gross margin. Heading into the holidays and first quarter, we are now fully operational on both the Beachbody OnDemand and OpenFit platforms. Our focus is on continuing to refine our marketing to optimize the combination of creative and media through this test and learn approach that will power customer acquisition and boost lifetime value while tightly managing acquisition cost efficiency. That's the power of our model. Third, the coach network. With the return of in-person live events and a robust pipeline of product, we're once again in a position to maximize the impact of our network of coaches. Our coach network is not immune to the environment that I referenced at the beginning of this call, but with our first live event in over 18 months in October, the launch of BOD Interactive and the addition of the bike to our lineup, we have brought the field back to focus and put them in a powerful position to drive subscriber growth and lifetime value. Last month, I attended events with thousands of coaches in four different cities, and the passion for the Beachbody mission and the excitement for the new BOD Interactive subscription tier and the connected bike was on full display. They are excited about the innovations we've recently launched and are already anticipating the next program called Job One, our first program by super trainer Jennifer Jacobs, which will roll out in December. This program brings it all together, great content, our nutrition programs, and obviously the prospect of combining it with rides created by one of the most sought-after trainers in cycling. That is Synergy. Fourth, with respect to nutrition, We will invigorate our nutrition business. One of the advantages of our business model is that as Momentum returns to digital fitness subscription starts, this will power nutritional starts as part of our bundled product offerings. Also, we have some exciting new products planned for 2022 that have received very positive feedback from in-home user testing. Fifth, With respect to our expense profile, we remain laser focused on growing the business and re-accelerating the top line. But at the same time, we are always focused on controlling expenses and smart capital allocation. And sixth, we've made four key appointments to strengthen our leadership team. I'm pleased to announce that John Congdon, my co-founder, will become vice chairman, where we'll work more closely together on critical long-term strategy, business development, and M&A opportunities. Over the past two decades, John and I have partnered together to create and then reinvent this business several times over, and we work best when operating alongside each other rather than on separate efforts. As a result of this move, I will directly oversee all marketing and product development, including OpenFit. To further expand our reach, we've also added Jean-Michel Fournier in the newly created role of President, Global Partnerships, and Corporate Development. Jean-Michel joined the Beachbody company from Les Mills Media. As CEO at Les Mills, Jean-Michel oversaw significant growth in the company's digital fitness business. He'll play a critical role in accelerating digital subscribers to OpenFit through collaborations across corporate, brand, and other wellness partners, while also organizing Beachbody's international expansion. We also recently appointed Christina Cartwright to the role of Senior Vice President, Nutrition, reporting directly to me. This newly created role brings together all our nutrition businesses under one leader. In this role, Chrissy will deploy her deep knowledge and extensive experience in driving subscriber growth, drawing on her experience at Dollar Shave Club and Abbott Laboratories, where she oversaw significant growth of the PediaSure and PediaLite brands. Lastly, we recently added Blake Bilstadt as Chief Legal Officer and Corporate Secretary. Blake has significant public company and M&A experience, as well as a deep understanding of high-growth technology-driven content companies that include the WWE. The plan I just outlined for you is already underway. And as I said at the outset, my confidence in our future is stronger than ever. We've built our business on appealing to a broad base of customers with an emphasis on helping the mass market get healthy and fit. As we continue to add to our offering, we intend to grow our market share by delivering proven and accessible fitness and nutrition solutions that I would put head-to-head with anything else in the marketplace at any price point. Our content offerings and subscription-driven business model remain a source of strength and resilience. Our 3 million digital fitness and nutrition subscriptions power a more than 75% recurring revenue base with monthly digital retention levels that remain above 95%. This is all driven by our engaging content paired with high-quality nutrition that gets people results. It's that content that not only drives our flywheel, but also allows us to remain relevant in a way no one else can. We reinvent ourselves through our content. We respond to customer needs and emerging trends in fitness with new, innovative, and relevant programming. That content powers new customer acquisition and drives engagement and loyalty within our subscriber base. Although external factors will continue to be outside our control, we will focus on solid execution, keeping our eye on the ball. While we anticipate continued pressure in the fourth quarter, I expect to see these actions begin to move the needle on the top and bottom line in a meaningful way as we move into 2022. With that, I'll turn the call over to Sue Collins, our CFO, to walk through the details of the quarter.