The Beachbody Company, Inc.

Good afternoon, ladies and gentlemen. Welcome to the Beachbody Company's second quarter 2022 earnings call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question and answer session. Instructions will be provided at that time for you to queue up for questions. If anyone has any 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.

Welcome, everyone, and thank you for joining us for our second quarter 2022 earnings call. With me on the call today are Carl Deichler, co-founder, chairman, and chief executive officer of the Beachbody Company, and Mark Sweden, chief financial officer. Following Carl's and Mark'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 Security 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.

Thank you, Eddie, and good afternoon, everyone. We're very proud of our performance in the second quarter. We were able to adapt quickly, focus, and execute in the face of a challenging macro environment. And as a result, we delivered revenue in line with our guidance and adjusted EBITDA that was ahead of our guidance, reflecting continued progress on our strategy to make Beachbody more efficient, effective, and productive. With laser focus on execution and cash flow management, we achieved material savings in the second quarter. reducing cash burn by nearly $38 million and lowering operating expenses by more than 20% compared to the first quarter. This reflects increased variability within our cost structure and continued expense discipline. As a result of these actions, we ended the quarter with $57 million of cash on hand. In addition, today we announced that we entered into a $50 million debt financing agreement with Blue Torch Capital. with the potential to increase by another $25 million. The transaction will enhance our financial flexibility as we continue to execute on our strategic goals. During the quarter, we also focused on profitable customer acquisitions through new content releases, our highly effective proprietary sales network, and disciplined marketing, despite continued softness across the industry. These results reflect solid initial progress on our one brand strategy. This strategy, which we initiated at the beginning of the year, demonstrates our ability to adapt quickly to economic realities. The one brand strategy isn't just about costs. It's about unlocking the full potential of our massive category and our unique assets as we consolidate the great content of our platforms and leverage the subscriber scale of Beachbody On Demand. Last month, We reached an important milestone as we completed the migration of all our content onto the Beachbody platform, adding 20 additional programs and roughly 1,000 standalone workouts all in a single day, creating the largest content drop in our history and adding to our already significant library of evergreen content. This considerable library of assets is what powers our flywheel, where each program title can drive new customer acquisition. customer engagement, and ultimately brand loyalty. We also delivered profitable subscriber acquisition and nutrition upsells with three recently launched programs, Four Week Gut Protocol, Fire & Flow, and Four Weeks for Everybody. These strategic offerings both bolster our future category and market potential over time and can drive immediate revenue and expanding the LTV of our current customers. As you know, in tough times, Strengthening and expanding relationships with current customers is key. In the third quarter, we're continuing to grow our nutritional portfolio with the introduction of the First Thing and Last Thing supplements, a nutritional combination that's ideal for customers looking to improve overall wellness, improve mental clarity, reduce stress, and improve sleep. These completely unique new products represent a powerful lever to drive both LTV and near-term revenue. as we market to existing customers who are predisposed to buying what Beachbody develops because they appreciate the quality of our product line. We also recently launched another fitness program called Lift More, a program that features super trainer Joel Freeman and is the follow-up to his highly successful Lift franchise. Response has been very positive, especially as we see men and even couples choosing to follow this eight-week program together. With respect to Connected Fitness, we also continue to drive higher LTV from demand for bikes across our subscriber base. Our focus remains on creating great indoor cycling content and an experience that is tied to our broad and deep content library. And it's that content, not price, which creates the distinct Beachbody biking experience. Heart rate-based training with great content is our unique selling proposition, and ultimately, We're a platform powered by content and experience, and devices like the bike are the conduit to that experience. And soon, we'll be making it even easier for customers to join our ecosystem with an extremely compelling digital subscription offer. But we'll talk a little bit more about that later in the year. Now, turning to marketing. During the second quarter, our coach network continued to serve as a powerful and profitable driver of acquisitions and nutrition subscriptions. with high levels of motivation and excitement around this year's launch calendar. While we're pleased with our coaches' enthusiasm for reaching more people this quarter, we continue to pilot new incentives and training programs to enhance their role as brand ambassadors. For instance, with the recent launch of Lift More, we offered a select group of coaches the opportunity to participate in what we call a BOD group. That group completed the program with direct coaching and guidance from Joel Freeman. which has enhanced their ability to represent the program to their prospects. And a few weeks ago, we mobilized more than 15,000 coaches as part of our annual summit. It was our first summit in three years, and it was clear as we left St. Louis that the coaches were invigorated and excited about our substantial category potential, our offerings, and the meaningful difference we can and do make in millions of people's lives. Our coach network, is profitable and productive, providing a foundation for future success that no one else can replicate. Given the income earning opportunity for coaches, this proprietary sales channel also provides some counter cyclical momentum to the business during these times of economic uncertainty. During tough times, Beachbody is even more valuable to our coaches, and the income we provide becomes more important to offset pressure from higher costs or as a way to offset loss of income in other parts of their lives. But as you know, we have an omni-channel revenue strategy. Throughout Q2, we continued to successfully execute our direct-to-consumer marketing strategy, bringing our average CAC down by over 40% versus Q1 and achieving immediate cash payback on our media investments. LTV for our subscriber base remains strong, with a significant portion of new customers signing up for our annual membership, and we continue to capitalize on multiple levers to enhance LTV. During the quarter, we increased the price of BOD subscriptions by roughly 20%, with no material impact to conversion rates, reflecting the strength of our product offering and our ability to drive profitable subscriber acquisition through target marketing. We've also seen continued success in increasing LTV as we upsell our premium body experience to existing Beachbody On Demand subscribers. Our body users have some of the highest levels of retention across our user base, and we're expecting that part of the subscription to become a central part of the value equation in the months ahead. And with the completion of our platform consolidation this quarter, we'll now be able to market our entire suite of products, including Beachbody supplements, to our full user base for the first time, representing an important opportunity to drive enhanced LTV over time. Looking to the second half of the year, we're taking a prudent view of the environment, given our expectation that demand patterns for at-home fitness could remain variable in the near term, with greater levels of uncertainty around the broader economic climate. Regardless of the macro backdrop, we'll continue to focus on profitable acquisition, generating demand through our compelling cadence of new releases and tightly managing expenses. I'm incredibly confident in both our ability to manage through any near-term pressures as well as taking advantage of the significant opportunity that remains over the longer term. Specifically, we're operating in what is still a large and underpenetrated market. The global dietary supplements market was $151.9 billion in 2021 and is expected to expand at a CAGR of 8.9% from 2022 to 2030. And the global home fitness category is expected to grow to $21.8 billion in 2026 at a CAGR of 9.6%. With more than 2 million subscriptions, our scale is significant in the at-home fitness segment. And our models which is powered by content and supported by nutrition and community, is unlike anything else in the market. We're confident we can continue to generate demand with our content-driven model that allows us to pivot quickly to capitalize on emerging trends and need states. And as the future of health and fitness becomes more digital, our unique value proposition is particularly compelling, given the simplicity of one platform and our suite of integrated fitness and nutrition products. And finally, we have a strong and collaborative management team in place with clear alignment on our objectives and all working from the same focused playbook. We've made several additions to the team recently, including Mark Swedan, who joined as CFO a few months ago. In his first quarter as CFO, Mark has provided significant strategic and operational insight, identified additional opportunities to enhance efficiency, and served not only as a thought partner to me, but also a real leader to the finance organization. His experience and perspective are already proving to be invaluable in delivering on our strategic goals. In addition, we recently promoted Kathy Brabeck to the role of COO. Kathy joined Beachbody last year as Chief Strategy Officer and played a central role in a number of key initiatives, including the development and execution of the One Brand Strategy. She also brings with her extensive experience in the technology and consumer sectors, including senior roles at Electronic Arts and Activision. Likewise, Irfan Ronmel has taken on an expanded role as our Chief Product and Technology Officer. Before joining Beachbody, he held key leadership roles at Disney, Hulu, Activision, and DirecTV. Uniting our product, data insights, and technology teams, under his leadership has allowed us to make better and faster decisions and more fully deliver on the power of our digital platform. Let me sum it up with this. My confidence and the confidence of our leadership team is unwavering. In fact, our management team collectively purchased more than $6 million worth of shares on the open market during the second quarter. We did this as individuals for one simple, powerful reason, Beachbody's future potential is massive. The actions we're taking to make the business more efficient and productive, such as reducing our cash burn and increasing the flexibility of our cost structure, are allowing us to navigate the dynamic near-term environment. And with a strong leadership team and a commitment to continued innovation, we are incredibly well positioned to capitalize on the significant opportunity ahead. So with that, I'm very pleased to turn it over to Mark for more detail on our performance in the second quarter.