Introduction
BODi, formally known as The Beachbody Company, Inc., is a leading fitness and nutrition company that has undergone a remarkable transformation over the years. With a rich history spanning over 25 years, BODi has established itself as a pioneer in the health and wellness industry, creating some of the world’s most popular fitness programs, such as P90X, Insanity, and 21-Day Fix.
Company History
The company’s journey began in 1998 when it was founded as Beachbody with the mission of empowering individuals to lead healthier and more active lifestyles. From its inception, Beachbody focused on creating and marketing structured, step-by-step home fitness and nutrition programs that disrupted the global fitness industry by making it accessible for people to get results anytime, anywhere. In 1999, the company launched its first premium superfood nutrition supplement, Shakeology, which has since sold over 1 billion servings.
Over the years, BODi has consistently innovated its product offerings and expanded its fitness and nutrition portfolio, building a loyal customer base. A significant shift in the company’s business model occurred in 2007 when it adopted a multi-level marketing (MLM) structure. This allowed customers to become “Partners” and earn commissions by selling Beachbody products and recruiting others to do the same. The MLM model proved successful for many years, contributing to the company’s rapid growth.
In 2021, Beachbody reached a new milestone by merging with Forest Road Acquisition Corp. and going public, rebranding as The Beachbody Company, Inc. (ticker: BODI). However, the years following the merger presented some challenges for the company, including negative sentiment toward the MLM model, declining customer acquisition, and increasing costs. To address these issues, BODi initiated a comprehensive turnaround effort starting in 2023.
Recent Developments
In recent years, BODi has navigated a series of strategic challenges, culminating in a significant restructuring of its core business model in 2024. Recognizing the changing landscape and the need to adapt, the company made the bold decision to transition from a multi-level marketing (MLM) structure to a single-level affiliate program. This pivotal move, effective as of November 1, 2024, has significantly transformed the way BODi operates and interacts with its customers and partners. As part of this transition, the company also reduced its workforce by approximately 33%, further streamlining its operations.
The transition to the affiliate model has unlocked new opportunities for the company, as it now operates in a more agile and cost-effective manner. By eliminating the complexities and stigma associated with the MLM structure, BODi has been able to focus on expanding its presence across various sales channels, including its direct-to-consumer website, Amazon, and strategic partnerships.
Financials
The financial results of this strategic shift have been impressive. In the third quarter of 2024, BODi reported revenues of $102 million, in line with the midpoint of its guidance range. Notably, the company’s gross margin improved significantly, increasing by 880 basis points year-over-year to 67.3%. This impressive margin expansion reflects the company’s ability to streamline its operations and reduce costs.
Furthermore, BODi achieved its fourth consecutive quarter of positive adjusted EBITDA, reporting $10.1 million in the third quarter of 2024. This marked a remarkable $15.9 million improvement compared to the same period in the prior year, when the company reported an adjusted EBITDA loss of $5.8 million. The company’s focus on cost control and operational efficiency has been instrumental in driving this turnaround.
For the most recent fiscal year (2023), BODi reported revenue of $527.11 million, with a net loss of $152.64 million. Operating cash flow was negative $22.54 million, and free cash flow was negative $29.11 million. In the most recent quarter (Q3 2024), the company reported revenue of $102.19 million, a net loss of $12.00 million, operating cash flow of $1.08 million, and free cash flow of $53,000.
Year-over-year revenue declined 20% in Q3 2024, driven by a 16.5% decrease in digital revenue and a 19.6% decrease in nutrition and other revenue. However, this decrease in revenue was partially offset by an improvement in gross margin from 58.5% to 67.3%.
BODi primarily operates in the United States, with approximately 10% of revenue coming from international markets such as Canada, United Kingdom, and France. No single international country accounted for more than 10% of total revenue.
In terms of liquidity, BODi has a debt-to-equity ratio of 0.39, cash and cash equivalents of $32.31 million, and an available credit line of $25 million with Blue Torch Capital. The company’s current ratio is 0.64, and its quick ratio is 0.52.
Product Portfolio and Partnerships
BODi’s product portfolio is divided into three primary segments: Digital, Nutrition and Other, and Connected Fitness. The Digital segment includes revenue from digital subscriptions, such as the BODi streaming service, and digital program sales. In Q3 2024, digital revenue was $53.70 million, a 17% decrease compared to the prior year period, primarily due to fewer subscriptions. However, the digital segment’s gross margin improved to 80.5% from 74.5% in the prior year period.
The Nutrition and Other segment includes revenue from nutritional products such as Shakeology nutrition shakes, Beachbody Performance supplements, and BEACHBAR snack bars. In Q3 2024, nutrition and other revenue was $47.42 million, a 20% decrease compared to the prior year period, primarily due to fewer nutritional subscriptions. Despite this, the segment’s gross margin increased to 58.6% from 54.7% in the prior year period.
The Connected Fitness segment includes revenue from the company’s connected fitness products, such as its commercial-grade stationary cycle. In Q3 2024, connected fitness revenue was $1.07 million, a 78% decrease compared to the prior year period, primarily due to fewer bike deliveries. However, the segment’s gross margin increased significantly to 204.9% from 104.7% in the prior year period, albeit on much lower revenue.
In addition to its existing products, BODi has recently launched its “Belle Vitale” program, a comprehensive women’s hormone health solution developed by its trusted fitness and nutrition expert, Autumn Calabrese. This program includes a specialized nutrition plan, innovative fitness routines, and proprietary supplements.
Furthermore, BODi has partnered with the American Diabetes Association to offer fitness and nutrition solutions to the 136 million Americans living with diabetes or prediabetes. This strategic alliance underscores the company’s commitment to improving the overall health and well-being of its customers.
BODi is also focused on expanding its nutrition business, with plans to launch new supplement lines under the P90X and Insanity brands. The company sees the $164 billion nutrition market as a significant growth opportunity compared to the $13 billion fitness market.
Future Outlook
Despite the challenges faced in recent years, BODi has demonstrated its resilience and ability to adapt to the evolving market conditions. The transition to the affiliate model, combined with the company’s focus on innovation and strategic partnerships, has positioned BODi for continued growth and success in the years to come.
For the fourth quarter of 2024, BODi has provided revenue guidance in the range of $77 million to $87 million. The company expects a net loss in the range of $21 million to $17 million, which includes an estimated $9 million of pivot-related charges. Adjusted EBITDA is expected to be in the range of $2 million to $6 million. It’s worth noting that Q4 2024 is expected to be a transitional quarter as BODi moves from its previous MLM structure to the new single-level affiliate model, with December 2024 being the first “pure affiliate” month.
Legal Challenges
BODi faces several ongoing legal challenges. On May 22, 2023, a class action lawsuit was filed alleging that BODi misclassified its network marketing partners as contractors rather than employees. On September 2023, Dish Technologies and Sling TV filed a patent infringement lawsuit against BODi, though the parties later entered into a tolling agreement to avoid further litigation. Additionally, on June 14, 2024, a shareholder class action lawsuit was filed against BODi and certain officers/directors related to the 2021 merger with Forest Road Acquisition Corp. These lawsuits are in various stages of proceedings and their outcomes remain uncertain.
Conclusion
Overall, BODi’s remarkable journey is a testament to the company’s commitment to its mission of helping people lead healthier and more active lives. With its innovative product offerings, diversified sales channels, and a renewed focus on operational excellence, BODi is well-positioned to capitalize on the growing demand for comprehensive health and wellness solutions. As the company navigates its transition to the affiliate model and expands its presence in the nutrition market, investors and analysts will undoubtedly be closely monitoring BODi’s progress in the coming quarters.
Disclaimer: This article is for informational purposes only. It does not constitute financial, legal, or other types of advice. While every effort has been made to ensure the accuracy of the information presented here, the author and the publisher do not make any guarantees about the completeness, reliability, and accuracy of this information.