The Beachbody Company, Inc.

Good afternoon, ladies and gentlemen. Welcome to the Beachbody Company's fourth quarter and full year 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 call over to your host, Bruce Williams, Managing Director of ICR Investor Relations. Please go ahead.

Welcome, everyone, and thank you for joining us for our fourth quarter and full year 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 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 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 include today's press release. Today's call will include references to non-GAAP financial measures, such as suggested 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, Bruce, and good afternoon, everyone. Okay, first, let's get caught up. On our last earnings call, we presented our expectations for the fourth quarter and our plan to continue bringing costs in line with the dynamic environment, all while we pursue our significant strategic innovation plans for 2023. I'm pleased to say we delivered fourth-quarter revenue in line with our expectations and adjusted EBITDA that was well ahead of our guidance. 2022 was a demanding year, and I'm proud of what our team achieved, despite the challenging economic backdrop and the headwinds faced by our industry. But we met or exceeded guidance in all four quarters of 2022, and we executed on our one brand strategy that we announced exactly a year ago during our 2021 Q4 earnings call. Actually, To put this all in perspective, let me step through the highlights of what we said we would do and the actions we executed in 2022. As you might remember, we made the decision to consolidate the business into one platform to focus capital allocation and centralize all our technology, marketing, and content investment. In July, we initiated the migration of the OpenFit platform, content, and subscribers into the Beachbody On Demand platform. and began engineering the consolidation of the Beachbody On Demand subscription together with our premium body subscription to create one simplified but extremely compelling offer. I'm proud to report that work was completed on time and under budget just a couple weeks ago, and we're now launching the world's first complete health esteem platform under the body brand. With the greatest digital fitness catalog in the business, and its stream of compelling new content every month, a full nutrition section with two incredibly popular eating programs and over 1,000 healthy recipes, plus a brand new positive mindset channel to help our subscribers feel great about themselves in all shapes and sizes. More on what all that means in a minute, but fundamental to all this activity was a thorough approach to taking costs out of the business and formulating a clear roadmap to profitability. by focusing on our customers' biggest problems and their wants and needs. We completed the process of aligning headcount, technology, and production spend with the business plan, and reduced our nutrition skews and key bundle configurations, known as total solution packs, from 190 variations down to five, further simplifying and streamlining the business. In 2022, we improved EBITDA and CAPEX by $125 million. That's ahead of the $110 million target we promised earlier in the year. We're confident that we're on the path to consistent, adjusted EBITDA profitability by Q4 of 2023. And with our 2022 debt raise, we don't foresee any additional need for capital. The business implications of these changes are compelling. This consolidation simplified what our network of body partners offer. We used to call them team Beachbody coaches. Now we call them partners. drastically simplified the array of options body partners offer their prospects. So now the field can spend less time training their teams and focus more on helping people engage with the platform. That dramatically increases their income opportunity, which should in turn attract more people to sign up to be body partners. On the last call, we also introduced our plan to reposition our company and brand to fill a major void in the industry. We spent 2022 rethinking how to best serve the significant ham of people who've been left behind by the legacy fitness and diet industry. We're doing what category leaders do. We're expanding the size of the addressable market. And to that end, we launched the health esteem category. Let me elaborate on this vision before I turn it over to Mark. So you have context of this expansion as you get into the specific KPIs from the quarter. I think you'll see we're extremely well positioned for growth. Because what we've learned, really, since the pandemic, but especially last year, is that the majority of consumers are rejecting the premise of the legacy fitness and nutrition business that runs a playbook convincing prospects that they aren't good enough until they lose the weight or get the six-pack. In fact, we discovered this gap when we had two surprises last year. Of the programs we launched, two of them surpassed our expectations, four-week protocol and fire and flow. both which focus on how you feel while you do the programs versus focusing on the results that you achieve at the end. It became clear to us that our transformation model of P90X and Insanity could be significantly complemented by an ongoing plan that focuses on how people feel today so they stay engaged in the process and appreciate their sense of well-being along the way. This represents a significant business opportunity for us because The data is clear that the legacy industry is failing at this. Overall happiness has declined over the last 49 years, while obesity rates and lifestyle diseases have increased. There are 150 million adults in the U.S. that are overweight or obese. That's 74% of adults, and that number is climbing. The legacy industry has concentrated its efforts on convincing prospects of their faults to motivate them to buy. to buy that treadmill, join that gym. And it's primarily retrading the same cohort of people who move from one solution to the next over and over, trying to find happiness. Once we saw this gap in the market, we were quick to organize and expand the platform to serve this new category of health esteem. This is what's been missing from the model, a comprehensive solution that fits with real life, that delivers happiness on day one, not just physical results at the end of a program. What most adults are looking for today is the support to reduce anxiety in their lives, to feel better, and to improve their self-esteem. People don't want to be deprived of the freedom to take days off from training or enjoy the foods they love, bread for instance. When did food become enemy number one? In fact, As we surfaced this new category, we discovered a bold way to help people get healthy while they still enjoy the food they love. We actually encourage people to eat more dessert. And that's a whole new category we're moving into with existing products. Back in 1998, when we founded Beachbody, we defined the home fitness category with our content. Then we saw a dramatic period of growth when we created the category of superfood health shake. And we're now taking everything we learned from the last two decades and our observations since the pandemic and expanding the market by opening it to this holistic new category of health esteem. You'll see this materialize in five significant ways. First, as I said, we consolidated our subscription tiers of BOD and BODY into one simplified complete bundle. We call it BODY for an annual subscription price of $179. or around $15 a month for access to our library of 120 fitness programs or over 8,500 on-demand videos. That services the business model we're best known for, which is the foundation of our revenue model. Second, we've launched an ongoing series of four new workout plans each month called Body Blocks. These are new three-week programs starting the first Monday of every month serving beginners, general overall fitness, lifting, and a specific plan each month for our connected bike subscribers. The body block plans are the incremental layer to appeal to the audience that's not project-oriented, like our P90X customers, for instance, but just looking for a cost-efficient and effective alternative to joining a gym or hiring a personal trainer with the flexibility to take time off during the month. Our partners use that monthly cadence of new body blocks to start a new wave of subscribers every month. rather than only when a new program is launched, which was the trend of our old model. Third, we've added positive mindset masterclasses to our platform, and it's a game changer for retention. This content makes Body the only platform offering complete fitness, nutrition, and mindset content in one subscription. These monthly masterclasses help people manage their mindset so they overcome obstacles and reduce their anxieties. while they work to achieve their overall lifestyle objectives. This month, for instance, we're introducing a masterclass called Happiness Habits with best-selling author Petra Colbert. You see, gyms or other fitness services just expect members to navigate life's ups and downs and stay consistent. Just figure it out, which is unrealistic and obviously leads to higher churn. Our Mindset Masterclasses give people the tools to start with a positive mindset that enhances their experience and improves their self-esteem. As we saw from those two feel-good launches last year, when people feel good physically and are feeling good about themselves, that content has incredibly high value to subscribers, and they're less likely to churn. Fourth, we're also expanding the positioning of Shakeology to not only be the first superfood nutrition shake, but also the world's first superfood dessert. a smart dessert, if you will, with hundreds of recipes that take advantage of the incredible flavor variety of the Shakeology product line. The product is a delicious alternative to traditional desserts, and it has incredible health benefits. Healthy desserts fit perfectly into the health-esteem category and represent a massive, new, $48 billion market opportunity for bodies. There are tens of millions of people who may not be ready to start one of our fitness or eating plans but who will absolutely take the logical first step of swapping their normal dessert choice for a superfood dessert that actually helps them lose weight and makes them feel great. And finally, all of this is driven by the powerful catalyst of changing the name of the platform from Beachbody to Body, demonstrating our commitment to our network, who feel strongly that the Beachbody name was poorly aligned with our mission and holding them back from expanding their market. I can confidently add that our body partners are extremely enthusiastic about these initiatives, including the name change, the simplicity, the price points, and especially the addition of positive mindset content to the platform. They're engaged and have been promoting aggressively since the March 2nd launch. There are also some other important operational improvements we look forward to in 2023, such as simplifying our digital experience by reducing clicks at checkout, and adding alternative payment options later this year, such as PayPal and Apple Pay. These are all powerful changes that are enhancing the productivity of our proven business model, a model which has been consistently successful whenever we innovate our approach to fitness and nutrition based on our observations within our ecosystem. I'm extremely grateful to the teams who believe so passionately in this mission that They delivered on this initiative on an incredibly tight timeline and budget. But our mission is clear, and they're on board. We're determined to help as many people as possible to achieve their goals and lead healthy, fulfilling lives, generating long-term, sustainable, profitable growth and shareholder value. We know we're executing all this in an unpredictable environment, but that's exactly when there's the most room and demand for radical transformations. and body is taking the lead. We never stand still. Now, let me turn it over to our CFO, Mark Sweetan, with the details of the quarter and the full year 2022 results. Mark.