Launch delays, challenging media environment, distracted consumers: CEO says the company will “control what we can control.”
Beachbody shares (NYSE: BODY) dropped 27.5% as investors responded to less-than-stellar third-quarter results. The fitness company reported that sales were down 17%, with CEO Carl Daikeler calling the results “unacceptable.” Despite lukewarm numbers, Beachbody says at-home fitness is here to stay and is looking ahead towards digital and connected fitness.
In the earnings call before the drop in shares, Daikeler, Beachbody co-founder and CEO, said that July and August were in line with the company’s expectations but noted that September was more challenging than anticipated. Daikeler said new subscriber acquisitions were lower due to softer consumer demand, a complex media environment, and delays in key product launches. He noted that Beachbody retained existing subscribers but that the company would be improving customer acquisitions.
“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,” Daikeler said on the call before Beachbody shares plummeted.
Beachbody reported a 5% drop in digital revenue, and nutritional revenue took a 29% dive, which Beachbody said resulted from nutrition being linked to digital subscriptions. Launch delays and marketing inefficiencies led to a disastrous domino effect for the nutrition segment, says the fitness company.
Calling Beachbody’s results “unacceptable,” he went on to say that the company knows how to respond with a focus on the consumer and continue delivering a fitness and nutrition system that is cost-effective for its customers. Daikeler noted that consumers might just be distracted with returning to pre-pandemic life, like traveling, socializing, or spending time outside the home.
“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,” the CEO said in the call.
Beachbody leaders also point to rising media costs and Apple’s iOS 14.5’s new privacy settings, which they say made performance marketing increase in price and less efficient. BOD Interactive, a new live group fitness subscription, was also delayed because the company needed more time to ensure that the tech used would provide its desired immersive experience. Calling it a domino effect, the delay of BOD Interactive also had an impact on bike sales because of its interactive cycling content.
“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,” Daikeler explained.
Beachbody is now focusing on the holidays and then looking to the first quarter when the company says most people reset and refocus on health.
Beachbody noted that it has streamlined its marketing organization, allowing for a “faster feedback loop” between creative, media, data, and analytic teams. The company says this will assist with identifying winners.
The company will also scale its connected fitness business. Beachbody’s CEO acknowledges this is a competitive market but says that the company’s existing 3 million subscribers, bike, and nutrition plans and supplements, put the fitness company in a position to accelerate. The Connected Bike, Daikeler said, will enhance the lifetime value of Beachbody’s customer base.
The fitness giant said it would put its attention on the network of coaches. Beachbody will be releasing a program called Job 1, by Super Trainer Jennifer Jacobs, which will roll out in December. The company will also be launching new nutritional products in 2022.
“Like others in the industry, the volatility in consumer demand we experienced in the third quarter as the economy began to reopen, was greater than anticipated. But looking past the near-term turbulence, we remain confident in our unique value proposition and the long-term secular tailwinds at our back,” said Sue Collyns, President and CFO.