The Beachbody Company (NYSE: BODY) – Slashing $165 Million In Costs, Path To Cash Flow Positive And Benefiting From The Ozempic Wave

December 14, 2023 at 09:25 AM EST

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By Meg Flippin, Benzinga

The pandemic-driven Peloton Interactive Inc. (NASDAQ: PTON) craze may be over, but that doesn’t mean people aren’t focused on health and wellness. Many of the trends that arose during shutdowns seem to still be in place, and that’s particularly true when it comes to working out in your living room.

Despite the fact that gyms are open across the country, the online/virtual fitness market seems poised for continued growth. It is projected to grow at a CAGR of 32.7% through 2032, becoming a $250.7 billion market. In 2022, the market was worth just $14.9 billion.

That presents opportunities for at-home fitness companies, and among those competing for fitness enthusiasts is The Beachbody Company, Inc. (NYSE: BODY), a leader in the at-home workout space. Going by BODi, the company has made a name for itself thanks to fitness programs like P90X, Insanity and 21 Day Fix, which seem to have devoted followings. At last count, it has a library of over 120 different workouts. That’s not the only thing BODi is known for. It also reports doing brisk business selling Shakeology and other fitness-focused supplements and drinks.

Cutting Costs

The company saw some tough times like most at-home fitness businesses immediately following the end of the pandemic, but it's in turnaround mode under new executive chairman Mark Goldston, and its efforts seem to be paying off. Since 2021, the company has taken $125 million of costs out of the business and has identified an additional $40 million in cost savings. That will bring the total to $165 million in aggregate in annualized cost savings since 2021. Looking further out, BODi expects selling and marketing costs as a percentage of revenue to decline 1,000 basis points to 45% by the end of 2024.

“Last quarter, I told investors that our main focus is on the generation of cash in the near to midterm, and we're developing programs designed to deliver on that goal,” said Goldston during the company’s quarterly earnings call. “As a result of the $165 million in expected cost savings, along with the key elements of the turnaround plan…we believe there's a clear path to becoming cash flow positive, which would indeed be a milestone, for the turnaround effort at BODi.”

Growth Drivers

There are potentially several drivers of BODi’s growth. Earlier this year, BODi overhauled its digital platform which it reports has resonated with users. About 60% of subscribers of its legacy Beachbody on Demand platform have renewed with the new BODi offering, exceeding internal expectations. BODi is also focusing on its Partner network, its biggest and most effective marketing strategy, by providing more support to independent sellers. Early next year it will provide results-based compensation incentives which will reward high performers and is designed to boost sales.

There is also its database of more than 14 million previous customers. BODi is focused on bringing them back into the fold. The company expects little in the way of reactivation costs, which it said can result in “significant upside.” Most recently it launched a free preview to give potential customers access to BODi workout programs without having to commit. Exercisers can try over 120 samples of its fitness programs, nutrition plans and personal development content. The idea is to bring people in without having to provide a credit card and hopefully turn them into paying customers.

BODi Says Weight Loss Drugs Helping Business

As for concerns that GLP-1 weight loss drugs like Ozempic will render working out obsolete, BODi isn’t worried. BODi digital subscriptions grew 27% sequentially in the third quarter, exceeding 900,000 subscribers and that’s even as these weight loss drugs took off with the masses.

“We're actually encouraged about treatments that can help some of the 74% of Americans that are overweight or obese, but we also recognize that a chemical solution is only a single step towards sustaining a healthy lifestyle and does nothing to improve skeletal muscle mass, which is critical to health and functioning in the world,” said co-founder and CEO Carl Daikeler on the company’s recent earnings call. “It's really vital that people supplement these weight loss drugs with healthier lifestyle choices, including fitness and nutrition. That's where we come in… We don't see GLP-1 treatment as a headwind for us, but rather a very significant tailwind, as it brings the importance of reducing obesity to the forefront and makes lifestyle change an important component of that decision.”

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