Mar. 01, 2022 10:02 PM ETThe Beachbody Company, Inc. (BODY)1 Comment
The Beachbody Company, Inc. (NYSE:BODY) Q4 2021 Earnings Conference Call March 1, 2022 5:00 PM ET

Company Participants

Eddie Plank - Vice President of Investor Relations

Carl Daikeler - Co-Founder, Chairman & Chief Executive Officer

Sue Collyns - President & Chief Financial Officer

Conference Call Participants

Jonathan Komp - Baird

Operator

Good afternoon, ladies and gentlemen. Welcome to the Beachbody Company’s Fourth Quarter and Full Year 2021 Earnings Call. At this time, all participants are in listen-only mode. [Operator Instructions] 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 VP of Investor Relations. Please go ahead.

Eddie Plank

Welcome, everyone, and thank you for joining us for our fourth quarter 2021 earnings call. With me on the call today is Carl Daikeler, Co-Founder, Chairman and Chief Executive Officer of The Beachbody Company; and Sue Collyns, President and Chief Financial Officer. Following Karl's and Sue'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 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.

Carl Daikeler

Thank you, Eddie, and good afternoon, everyone. Our fourth quarter performance reflects our disciplined execution against the plan we laid out in November. The plan was to increase focus on prioritizing the highest return marketing opportunities, improve the cost of subscriber acquisition to lifetime value ratios, capitalize on new product launches and tightly manage expenses and we did just that. These efforts in conjunction with the multiple new revenue streams we developed in 2021 delivered results that were ahead of our revenue and EBITDA expectations.

Our fourth quarter performance is encouraging, but there's even more we're doing to make the business more productive and more efficient, while continuing to deliver growth that is scalable within our means. Near-term demand patterns will likely be variable but we're very confident in the long-term demand for at-home fitness and demand for our products that confidence is why we are taking decisive action to ensure we can deliver profits, cash flow and create long-term shareholder value in every type of demand environment, regardless of whether there are tailwinds or headwinds. And we're doing all of this while continually advancing our mission to help millions more people achieve their goals and lead healthy fulfilling lives.

2021 was a valuable year of making growth investments, which we are only just starting to deploy. Given that we're currently facing less predictable industry dynamics, we're determined to capitalize on the strengths we've built. To do this, we're moving quickly to focus on the strongest components of our business with the highest ROI and implementing actions to reduce operating and capital expenditures.

As a result, we expect to reduce our cash burn by approximately $110 million in 2022 compared to 2021. And we're taking steps to deliver positive adjusted EBITDA in 2023. This is a playbook we know well. We built Beachbody on a foundation of strong free cash flow and profitability. It's how we grew from a single at-home fitness product over 20 years ago to a subscription-driven health and wellness platform with a synergistic combination of effective products, significant scale and attractive gross margins. And all of this is powered by the best library of original content in the industry, a unique network sales channel and a commitment to constant innovation.

Sue will cover the financial details of the quarter shortly, but first I'd like to spend some time on our go-forward strategy and the actions already underway to accelerate our path to profitability and to strengthen our competitive position. I'll start with digital fitness.

We're implementing a One Brand strategy to strengthen our ecosystem and align all our assets around a single platform, a platform with the best talent and a complete organizational focus on building from the foundation of Beachbody's superior economics and strong brand position. To accomplish this, we're integrating the products and talent from our Openfit platform, with our already extensive Beachbody on-demand library. This powerful combination will enhance our value proposition for all our subscribers. And as for our Connected Fitness bike, we believe our recently launched Q1 promotion combined with our extensive content library all united under the Beachbody brand, will accelerate bike sell-through and extend subscriber retention.

Second, let's talk about marketing. Building on our actions in Q4. We are leveraging the investment we made in brand awareness in 2021 with disciplined marketing for efficient customer acquisition, enhancing the ROI on media spend by pursuing only acquisition opportunities that are immediately accretive to cash flow. Given our expectation that media rates will remain elevated and near-term demand patterns will remain somewhat unpredictable, we're targeting our media spend in 2022 to only the strongest channels while improving post-acquisition upsells to further enhance our CAC to LTV metrics even beyond the progress we made in Q4.

In addition, by offering cost-effective subscription bundles, we'll more fully unlock the power of our coach micro-influencer network. That network is an absolute competitive advantage in the category. This is a channel that has consistently delivered our most profitable and productive subscribers, driven by real customer proof that our total solution approach works. And just as importantly, our coaches provide the accountability and community that are so critical for successful lifestyle change, changes that translate into strong and sustained engagement and retention among our subscribers.

And based on conversations we've had with our most influential coach leaders, we know that they're very excited about the additional focus and synergy this One Brand approach will create. In the second half of 2021, we were managing significant expansion activities including the launch of our preferred customer program, the rollout of BODi, our new premium subscription tier and working the connected bike into the business model.

With those developments now integrated into our ecosystem, we are leveraging those enhancements with the activity that generates momentum with each new program launch. And I'm incredibly excited by the cadence of new launches coming up. Our content launch calendar for 2022, is frankly the strongest in our history including, a significant brand new nutrition and fitness program launching in just two weeks. With new content launches throughout 2022, we believe our coaches will be incredibly well equipped with an abundance of new tools to drive customer acquisition and upsells enhancing both LTV and customer results.

Next, customer lifecycle management is also an incredibly important focus for us to ensure we maximize the opportunity with each new subscriber, through our new data and analytic capabilities, we've identified attractive opportunities to drive LTV within our database of 2.8 million subscriptions that we're just scratching the surface on.

For instance, we are identifying any friction in the purchase funnel and making it much easier for subscribers to order additional nutrition products, which will improve the ROI on each subscription and increase LTV.And we're creating exceptionally appealing and cost effective new bundles that will accompany our content releases with our nutritional supplements plus the BODi premium subscription content.

Which brings me to our focus on capital efficiency. In addition to more efficient marketing spend, focusing on subscriber acquisition into our One Brand strategy and mobilizing around the cadence of new content launches, we're also taking a critical look at all our expenses to identify opportunities to increase organizational efficiency, to eliminate redundancies and to significantly reduce costs.

To that end, in January, we engaged the consulting firm AlixPartners, to conduct a thorough technology review. We're leveraging their highly specialized expertise in assessing technology platforms to help us integrate, streamline and reduce capital spending without compromising the subscriber experience.

The One Brand strategy is already reducing complexity, as we create a leaner organization that's more agile and appropriately sized for a variety of consumer demand environments. Through these actions, as well as, our technology integration efforts, we've reduced headcount by approximately 10%. We're also taking a hard look at every part of our organization, to focus on the highest return and proven projects and to increase the variability of our expense profile to always match the demand environment, as we test and roll out new concepts.

Over the past two decades, a discipline of our company has been our commitment to evaluate our business through the lens of the current reality, with a willingness to adjust as conditions evolve. In the past, our most positive inflection points have all happened in environments like this when we were faced with our most challenging obstacles.

In 2005, we addressed rising competition with the introduction of P90X and a suite of supplements. In 2016, we made the transition from DVDs to a digital subscription model. And most recently, in Q4 of 2021, we quickly and successfully retooled our performance marketing engine in the face of significant pressures in the media environment.

The changes we're making now will serve to strengthen and more fully unlock the power of our competitive advantages. They include a reliable recurring revenue base, driven by multiple subscription streams and strong margin nutritional supplements. The most significant content library in the industry with over 4500 streaming workouts and nutrition content. A scaled platform with over 2.8 million subscriptions and a highly efficient marketing engine, honed over two decades complemented by the coach network, our proprietary sales channel with incredible LTV.

Going forward our activities will leverage the synergies of One Brand Beachbody, the comprehensive fitness and nutrition brand with the greatest critical mass of content and services, incredible customer loyalty, a community that supports each other on our proprietary social media platform, all built on one of the most resilient LTV models in the industry.

With a clear path to reduce 2022 cash burn by roughly $110 million and position ourselves to return to profitability in 2023, we are confident in our ability to continue to deliver on our mission to help customers achieve their goals and lead healthy fulfilling lives, while creating long-term value for our stockholders.

So, that's an overview of our business activities. And now I'd like to turn it over to Sue Collyns to cover the financial details of the quarter.

Sue Collyns

Thanks Carl and good afternoon. I'll start with a review of our fourth quarter results and then provide context around our outlook for 2022. As Carl mentioned in the quarter, we adapted quickly to navigate the realities of a dynamic marketplace. We're now taking action to accelerate these efforts to ensure we're optimizing spend to support cost effective growth and a return to profitability in 2023.

Now, turning to the details of the quarter. Total revenue was $216.3 million, declining 3.6% year-over-year, but increasing 31% compared to the fourth quarter of 2019. These results were ahead of our expectations largely driven by stronger nutritional bundles and higher Connected Fitness revenue as we delivered more bikes than previously guided in the quarter.

Digital revenue was $81.9 million and this represented a 14% decline versus the prior year period, but a 41% increase on a two-year basis. Digital subscriptions decreased 3% year-over-year, but were up 50% compared to 2019. And while engagement was lower compared to the pandemic elevated levels of 2020, we saw a 220 basis point improvement on the full year versus 2019.

Importantly, quarterly retention levels also grew on both year-over-year and a two-year basis. And this validates the strength of our offerings and provides a solid foundation for future growth.

Connected Fitness revenue was $36.8 million with 23,900 bikes sold compared to 12,300 bikes sold in Q4 of 2020 on a pre-merger basis. We were pleased with the positive response to the integration of our content library on to the bike which drove higher demand, particularly within our coach network.

Additionally, with bike inventory on hand, we successfully navigated the challenging supply chain and logistics environment to reduce delivery time. This enabled approximately 11,000 more bikes to be delivered in Q4 than indicated on our November 15 guidance.

Overall, in Q4, we delivered 29,700 bikes achieving a strong delivery to sales ratio of 124%. This compares to the delivery to sales ratio of 44% in Q3, immediately following the bike launch when our sales and delivery logistics were in the earlier stages are being optimized.

Nutrition and other revenue was $97.6 million, down 25% compared to Q4 of 2020 and down 9% compared to Q4 of 2019. As the pandemic recovery progressed throughout 2021, we've seen a return to more normalized drivers of demand to the subscription.

Now, historically demand has been driven by both new digital acquisitions as well as new product launches. And looking to 2022 with a strong cadence of new releases, a focused and motivated coach network and a clear plan to more effectively bundle nutritional supplements which we believe will support improved performance over time.

Turning to gross margin. Our gross profit was $97.6 million in the fourth quarter and this was significantly impacted by the negative gross margin in Connected Fitness as well as pandemic-related supply chain and shipping cost increases. Connected Fitness gross profit was negative $19.8 million, which included the impact of a year-end net realizable value charge of $10.1 million. This non-cash charge to cost of revenue was applied to our year-end inventory bike balance in accordance with GAAP and has been added back to net income in our calculation of adjusted EBITDA.

Additionally, Q4 bike margin was pressured by approximately $3 million from higher COVID freight costs that persisted in an challenging supply chain environment. Now as we sell-through, the $80 million of bike inventory on hand we believe we'll will be well positioned to deliver positive gross margins on bike sales from a higher AUV and this cost normalize over time.

Importantly, we continue to view the Connected Fitness business as an extremely valuable product, increased LTV through more retentive high margin subscription revenue, along with our unique ability to drive cross-sell of nutritional products directly on the tablet. Digital gross margin was 83.6% and declined 500 basis points versus 2020, primarily due to the higher content production costs, which were driven by the successful launch of BODi.

Nutrition and other gross margin was 50.2%, a 360 basis point decline from 2020 with most of the change driven by incremental COVID-related shipping and freight costs. These shipping and freight cost are add-backs to our net income in our calculation of adjusted EBITDA.

Turning to operating expenses. Excluding an impairment charge of approximately $95 million which I'll discuss in a moment our total operating expenses increased by approximately $11 million or 7% year-over-year. The year-over-year change was driven by one, higher operating expenses from the integration of mix and technology investments to support new program releases that power our customer acquisition, engagement and retention; and two, by higher public company G&A expenses including accounting legal and insurance costs.

Moving on to impairment. As part of our annual balance sheet review and consolidation to the One Brand strategy, we review the goodwill and intangibles on our balance sheet. As the estimated fair value of goodwill and intangibles was less than the carrying value we recorded a noncash impairment charge of $94.9 million in the fourth quarter. This charge is also added back to net income in our calculation of adjusted EBITDA. Finally, our Q4 adjusted EBITDA loss was $26.6 million and our net loss was $146 million or negative $0.48 per basic and diluted share.

Now turning on to the balance sheet. We ended the quarter with a cash balance of $107 million and no debt. This cash balance and a strong line of sight to a significantly improved 2022 EBITDA and lower CapEx profile than last year gives us confidence that we can effectively manage the business from cash flow from operations and access the capital markets as needed and we'll share more on that in future quarters.

Before I turn to our outlook I'd like to provide an update on our views around demand. Our business looks very different today than it did two years ago at the outset of the pandemic. Since 2019, we've increased our digital subscriptions and our digital revenue by 50% and 46% respectively. And we've achieved these results by driving 220 basis points of higher engagement, 40 basis points of higher retention and a 61% increase in streams across our platform. We've also acquired a Connected Fitness company and with integrated systems processes and employees while making substantial investments in inventory.

And as we look forward, we believe we've an incredibly strong product offering and continue to see significant opportunity in at-home fitness as consumers prioritize health and wellness and digital experiences become more embedded throughout the customers' lives.

Now that said, we believe in the near-term, the environment will remain dynamic with variability in demand patterns, as we exit the pandemic and gain a clearer view on the new normal. That's why we're moving swiftly to consolidate our streaming platforms and human capital with a focus on profit maximization and cash flow generation across a variety of demand environment. With a business that's powered by digital fitness and nutrition subscriptions, we're well positioned to do this and to do it quickly.

As a result of these actions, we expect to reduce our cash to use from operating activities by approximately $110 million in 2022 with immediate and significant improvements weighted towards the back half of the year. We'll achieve this through a series of focus actions. Specifically: one by generating operating efficiencies as a result of the One Brand strategy including a 10% reduction in headcount taken in January; two by reducing capital expenditure as we lap the Myx integration costs and the new platform investments in 2021 as well as a clear focus on in-year highest return opportunities; and three by optimizing our media spend as we focus on performance marketing opportunities that are highly accretive in near cash flow.

In terms of the first quarter 2022, we expect total GAAP revenue of between $170 million to $180 million and keeping in mind that Q1 is our most challenging comparison quarter of the year, as we're lapping a 34% increase over Q1 of 2021, and an adjusted EBITDA loss of between $20 million to $25 million as most of the cost savings we expect to achieve through the One Brand strategy won't materialize until later in the year.

Now in terms of our full year 2022 outlook, given the ongoing work with AlixPartners, we're not providing specific guidance on full year revenue or adjusted EBITDA at this time. That said, our belief in the total addressable market and Beachbody's unique product market fit of convenience, simplicity and exceptional quality gives us confidence that both the opportunity and our growth potential remains very strong.

And with that, I'll hand the call back over to Carl.

Carl Daikeler

Thanks, Sue. There is no doubt our industry is facing some near-term headwinds, as we move through the pandemic recovery. But in my 23 years of experience at Beachbody, I can tell you, we've seen challenging moments like this before and we've come out ahead every time. The total addressable market in fitness and nutrition remains significant and I firmly believe in the fundamentals of demand for our products within this category. We're moving quickly to align behind the strongest elements of our business and a return to profitability next year. As the company's largest stockholder, I'm confident in the long-term opportunity to drive sustainable, profitable growth and deliver on our mission to help millions more customers.

With that operator, would you please open the call up for questions?

Question-and-Answer Session

Operator

Certainly. [Operator Instructions] The first question is from the line of Jonathan Komp with Baird. You may proceed.

Jonathan Komp

Yeah, hi, thank you. Maybe one clarification first, Sue, could I just go back and clarify? Are there shipping expenses that you're excluding from the adjusted EBITDA? I missed that. And does that carry-forward into 2022 on any piece of that?

Sue Collyns

We did add-back COVID-related shipping costs in general. And in Q4, a total of about $2.6 million and that related to incremental shipping on nutrition. We didn't add-back the incremental shipping on the bikes. And that was because we didn't have a basis for that in the previous year. It was higher than the pre-merger forecast we were given by the management team from Myx, but it wasn't something we experienced. So we wanted to highlight it in the script, but we didn't added-back in the reconciliation of net loss to adjusted EBITDA. The total overall COVID-related costs totaled $11.7 million for the 12 months ended December 31.

Jonathan Komp

And then just on the forward projection, are you excluding some piece of the shipping or COVID-related costs going forward for 2022?

Sue Collyns

No. We don't have any adjustments in that adjusted EBITDA. I think the only thing that might occur ultimately would be add-backs associated with the reduction enforced.

Jonathan Komp

Okay. Great. Thanks for clarifying. And then Carl, I want to ask more about the drivers of the shift in the One Brand strategy. I'm curious maybe a little more specifically what you see in the business in terms of the drivers and the reasons, and more importantly, the benefits or the impacts that we should see going forward from that move?

Carl Daikeler

Yes. Thanks Jonathan. So, obviously, we were excited about Openfit and the prospect of casting a wider net to attract as much as the massive TAM available to health and fitness. But in this environment, it's a really difficult environment to allocate capital to two platforms much less on newer platforms. So it made much more sense for us to reduce redundancies, focus on marketing and technology and content into one brand particularly the Beachbody brand, which has better cost of acquisition efficiencies and much more mature and stronger lifetime value.

So by bringing that all together frankly, we think that we're also treating all of the subscribers cumulative better because they get access to all this content that we've been developing over two decades. So strategically, we don't think we're sacrificing much particularly in this environment as opposed to the strengths that we pick up by really taking advantage of the flagship Beachbody brand.

Jonathan Komp

Okay. Great. And just last one for me Sue on the balance sheet. I know you said we may hear more at a later date. But can you maybe comment on how long the current cash on the balance sheet with your current plans will be able to fund the business? I don't know if we can think about it in a number of months or quarters or any other context around that comment? Thank you.

Sue Collyns

Yes, sure. I mean, the fact that we've obviously got no debt at $107 million of cash at year-end, it's obviously a really strong starting position. And the other data point that we're looking at is budget projections for 2022 is really what gives us the confidence that we can service our working capital needs for at least the next 12 months without accessing the capital markets.

So it doesn't mean we won't access the capital markets, it just means we don't need to. And part of the reason for that, of course, is we've got an incredibly strong inventory balance, and our ability to flex on CapEx and media in the year. So those are the big levers that are giving us that level of confidence.

Jonathan Komp

Understood. Thank you.

Operator

Thank you Mr. Komp. There are no additional questions waiting at this time. I would like to pass the conference over -- back over to Carl Daikeler for any closing remarks.

Carl Daikeler

No, I think we've pretty much covered it. I just appreciate everyone joining us today. I know you're busy, so we appreciate your interest in the Beachbody Company, and look forward to speaking with you again in the next few months. Take care everybody.

Operator

That concludes the Beachbody Company's fourth quarter and full year 2021 earnings conference call. I hope you all enjoy the rest of your day. You may now disconnect your lines.

I'll post the shares count below.. but all info is summarized already, as presented.

Operator

Good afternoon, ladies and gentlemen. Welcome to the Beachbody Company Third Quarter Fiscal 2020 Earnings Call. At this time, all participants are in listen-only mode. [Operator Instructions] I would like -- this call is being recorded.

And I will now turn the conference over to Eddie Plank Richards Group Vice President of Investor Relations. Please go ahead.

Edward Plank

Welcome, everyone, and thank you for joining us on our third quarter 2021 earnings call. With me on the call today is Carl Daikeler, Co-Founder, Chairman and Chief Executive Officer of The Beachbody Company; and Sue Collyns, President and Chief Financial Officer. Following Karl's and Sue'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 SEC filings, 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.

And now, I would like to turn the call over to Carl.

Carl Daikeler

Thank you, Eddie, and good afternoon, everyone. On today's call, I'd like to provide some context on the current environment, including the shifts we've seen in consumer dynamics, what we've learned from them and the actions we're taking to optimize Beach Body's performance against a challenging backdrop.

Before turning to the details of the quarter, I'd like to underscore two important points about our business. First, we have a differentiated offering, a leading position in the mass market and an extremely resilient business model with 3 million highly loyal and engaged customers that provides us with a significant opportunity to drive LTV through our diverse catalog and comprehensive product offering. Second, the solid subscription growth we delivered versus the 2019 baseline reflects the strong long-term secular trend of demand for digital fitness and quality nutrition. Taken together, I'm confident in our future prospects despite the confluence of factors that impacted us during the quarter.

Now, let me get into specifics. After results in July and August that were generally in line with our expectations, September was more challenging than we anticipated. -- softer consumer demand, a challenging media environment and delays in key product launches and rollouts resulted in new subscriber acquisitions that were below our expectations. This was despite strong retention among existing subscribers. The team and I are taking decisive steps to respond to results, improve customer acquisition and lifetime value metrics and get us back on course to deliver on our long-term outlook. 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.

Our results are unacceptable. But at the same time, I can see very clearly the reasons behind those results and how best to respond. I am laser-focused on growing the business and ensuring that we are positioned to create value for our shareholders and deliver on our mission. Over the past two decades, we've grown this business across a variety of economic cycles, technology disruptions and changing consumer preferences and sentiment. We've successfully navigated market dislocations before. We know firsthand that environments like this may be challenging, but they also present vivid insights and opportunities.

Frankly, confronting challenging circumstances led us to see the opportunity to create innovations like P90X and to introduce Shakeology. As long as the focus remains on the customer and getting them results in the most cost-effective way possible, the strategy of providing the total solution of fitness, nutrition and community at an affordable price always regains traction and mass market customer demand returns, always. 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.

During the quarter, we saw people return to traveling, socializing and spending time outside the home after more than 1.5 years for quarantines and social distancing. Softer demand also coincided with a more challenging media environment, rising media costs and the new privacy settings associated with Apple's iOS 14.5, made performance marketing more costly and less efficient, resulting in ROI below historic levels. Added to that, our results were impacted with the launch of BOD Interactive, what we call BODi, our new premium tier live group fitness subscription was delayed from the first half of September to late October. We needed additional time to ensure the technology would deliver the immersive, personalized and interactive experience that we envisioned before we started selling the subscription.

BOD Interactive is an important step forward our customers have been asking for as we use technology to deliver engaging affordable and compelling content with a live interactive experience unlike anything else in the marketplace. However, this delay limited the ability of our coach network to drive new subscriber acquisition and sales of corresponding nutritional bundles. Given that the BOD Interactive subscription also includes our interactive cycling content, the October launch had a domino effect on bike sales within our customer base. 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. We're now executing on our business plan as we go into the holidays and then on to the seasonally important first quarter when people refocus on health and wellness.

While external factors will always play a role in our results as they do for everyone in the sector, we are committed to controlling what we can control, our strategy and our actions. With that in mind, I'd like to take some time to walk you through the action plan that's in progress to improve near-term results and prioritize ROI while continuing to advance our long-term growth strategy across six key focus areas: marketing, growth initiatives, the coach network, nutrition, expenses and leadership.

So let's start with marketing, where we're sharpening the focus. Given the current environment, we're taking a very disciplined approach to prioritize performance marketing in the near term to maximize response and ROI through direct channels. We're also addressing the gap created by the iOS 14.5 changes. We're working closely with various media platforms to develop new solutions as well as harnessing our own data and advanced attribution models to optimize media. In an environment like the one we're in today, agility is paramount. This is why we've streamlined our marketing organization and are now operating with a significantly faster feedback loop between our creative team, media strategy and data and analytics. This allows us to move quickly to find winners and invest behind them while tightly managing acquisition costs of the most valuable customer cohorts.

While we continue to believe top-of-the-funnel brand marketing can serve as a powerful accelerant we paused brand spend in the near term. Our intention is to resume these activities after the holiday season when consumers typically refocus on their personal goals and overall wellness. Second, let's talk about growth. We're allocating resources to the highest return demand creation activities. We want to make sure that the organization has got the right levels of resources and that everyone is aggressively focused on solid execution.

With the launch of BOD Interactive in late October, we now have a powerful lever to drive acquisition, upsell and increase lifetime value with an offering that replicates the immersive and personalized experience of boutique fitness classes in a digital context. Also, we're continuing to scale our Connected Fitness business. While this remains a competitive market, we have a clear and differentiated value proposition, an existing base of 3 million subscriptions, a superior quality bike and touchscreen best-in-class fitness content that's personalized and heart rate driven and then ability to pair our fitness offerings with high-quality, effective nutrition plans and supplements. We expect sales of the Connected Bike will significantly enhance the lifetime value of our customer base by increasing penetration of highly retentive digital subscriptions at a very attractive gross margin.

Heading into the holidays in the first quarter, we are now fully operational on both the Beachbody on-demand and open-fit platforms. Our focus is on continuing to refine our marketing to optimize the combination of creative and media through this test and learn approach that will power customer acquisition and boost lifetime value while tightly managing acquisition cost efficiency. That's the power of our model.

Third, the coach network. With the return of in-person live events and a robust pipeline of product, we're once again in a position to maximize the impact of our network of coaches. Our coach network is not immune to the environment that I referenced at the beginning of this call. But with our first live event in over 18 months in October, the launch of BOD Interactive and the addition of the bike to our lineup, we have brought the field back to focus and put them in a powerful position to drive subscriber growth and lifetime value. Last month, I attended events with thousands of coaches in four different cities and the passion for the Beachbody mission and the excitement for the new BOD Interactive subscription tier and the Connected Bike was on full display. They are excited about the innovations we've recently launched and are already anticipating the next program called Job 1, our first program by Super Trainer Jennifer Jacobs, which will roll out in December. This program brings it all together, great content, our nutrition programs and obviously, the prospect of combining it with rides created by one of the most sought-after trainers in cycling. That is synergy.

Fourth; with respect to nutrition, we will invigorate our nutrition business. And one of the advantages of our business model is that as momentum returns to digital fitness subscription starts, this will power nutritional starts as part of our bundled product offerings. Also, we have some exciting new products planned for 2022 user testing.

Fifth; with respect to our expense profile, we remain laser-focused on growing the business and reaccelerating the top line. But at the same time, we are always focused on controlling expenses and smart capital allocation.

And sixth, we've made four key appointments to strengthen our leadership team. I'm pleased to announce that Jon Congdon, my Co-Founder, will become Vice Chairman, where we'll work more closely together on critical, long term strategy, business development and M&A opportunities. Over the past two decades, Jon and I have partnered together to create and then reinvent this business several times over. And we work best when operating alongside each other rather than on separate efforts. As a result of this move, I will in product development, including Openfit. To further expand our reach, we've also added Jean-Michel Fournier in the newly created role of President, Global Partnerships and Corporate Development. Jean-Michel joined the Beachbody Company from Les Mills Media. As CEO at Less Mills, Jean-Michel oversaw significant growth in the company's digital fitness business. He'll play a critical role in accelerating digital subscribers to Openfit through collaborations across corporate, brand and other wellness partners while also organizing Beachbody's international expansion.

We also recently appointed Christina Cartwright to the role of Senior Vice President, Nutrition, reporting directly to me. This newly created role brings together all our nutrition businesses under one leader. In this role, Christy will deploy her deep knowledge and extensive experience in driving subscriber growth, drawing on our experience at Dollar Shave Club and Abbott Laboratories, where she oversaw significant growth of the PediaSure and Pedialyte brands.

Lastly, we recently added Blake Bilstad as Chief Legal Officer and Corporate Secretary. Blake has significant public company and M&A experience as well as a deep understanding of high-growth, technology-driven content companies that include the WWE.

The plan I just outlined for you is already underway. And as I said at the outset, my confidence in our future is stronger than ever. We've built our business on appealing to a broad base of customers with an emphasis on helping the mass market get healthy and fit. As we continue to add to our offering, we intend to grow our market share by delivering proven and accessible fitness and nutrition solutions that I would put head-to-head with anything else in the marketplace at any price point. Our content offerings and subscription-driven business model remain a source of strength and resilience. Our $3 million digital fitness and nutrition subscriptions, power a more than 75% recurring revenue base with monthly digital retention levels that remain above 95%. This is all driven by our engaging content, paired with high-quality nutrition that gets people results. It's that content that not only drives our flywheel, but also allows us to remain relevant in a way no one else can. We reinvent ourselves through our content.

We respond to customer needs and emerging trends in fitness with new, innovative and relevant programming. That content powers new customer acquisition and drives engagement and loyalty within our subscriber base. Although external factors will continue to be outside our control, we will focus on solid execution, keeping our eye on the ball. While we anticipate continued pressure in the fourth quarter, I expect to see these actions begin to move the needle on the top and bottom line in a meaningful way as we move into 2022.

With that, I'll turn the call over to Sue Collyns, our CFO, to walk through the details of the quarter.

Sue Collyns

Thanks, Carl, and good afternoon, everyone. I'll start with a review of our third quarter results and then provide additional context around our updated guidance. 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.

In the meantime, we're controlling what we can control, maintaining our strong cost discipline and using the flexibility of our business model to our advantage. Importantly, our performance versus 2019 is evidence of strong digital fitness adoption and retention and reinforces our conviction in the market opportunity ahead. During my remarks today, I'll include comparisons to 2019 and 2020 as each provides [indiscernible] context.

Turning to our Q3 results. Total GAAP revenue of $208.1 million decreased 17% year-over-year, however, increased 6% over the third quarter of 2019. As Carl mentioned, July and August performed largely in line with our forecast. Approximately 75% of our Q3 revenue shortfall versus forecast occurred in the month of September, driven by the delays in product launches, a more pronounced slowdown in consumer demand and a media investment that fell short of subscriber acquisition goals.

Moving on to the components of revenue. Digital revenue was $94.1 million, a 5% decrease compared to Q3 of 2020 due to the reasons I just described above, but increased 38% compared to Q3 of 2019. Compared to last year, digital subscriptions increased 1% to approximately $2.6 million in the third quarter and increased 55% over 2019. In terms of engagement, daily active users to monthly active users or down now was 29.6%, down 250 basis points versus prior year, but up 20 basis points versus 2019. Finally, digital streams were down 26% versus last year, but up 35% compared with the third quarter of 2019. We're encouraged to see that engagement remained high on a two year basis, and that's a positive indicator for the long term.

Additionally, average digital retention increased 50 basis points over last year and 40 basis points over Q3 of 2019, demonstrating the retentive power of our model. Connected business revenue was $5.9 million in the third quarter with 14,700 bikes sold compared to 8,600 bakes old in Q3 of 2020 on a pro forma basis. This was below our initial expectations as the delayed launch of BOD Interactive limited our ability to effectively market the bike in September.

Revenue was also impacted by a timing shift as GAAP only allows revenue recognition upon physical goods delivery. Given the significant number of late September bike sales, only 44% of Q3 bikes sold were actually delivered in the quarter and the remaining 56% were delivered in early Q4 and will be recorded as part of our Q4 revenue.

Looking ahead, like sales have accelerated thus far into Q4 as compared to Q3. However, given the current environment, we're now taking a more conservative view of bikes forecast to be sold as well as bikes delivered in the fourth quarter. Nutrition & Other revenue of $108.1 million was down 29% compared to Q3 2020 and down 16% compared to Q3 2019, primarily due to 23% lower nutritional subscriptions and onetime purchases of nutritional products.

I'd like to reinforce Carl's point that nutritional starts are linked to digital subscriptions, and so the demand headwinds, launch delays and marketing inefficiencies that impacted digital also had a domino effect on our Nutrition business. Gross profit dollars were $135 million, digital gross margin was 87.1% and declined by 300 basis points versus 2020, primarily due to an increased amount of content and associated production costs compared to last year.

Connected Fitness gross margin was negative 73.1%, which was in line with our expectations and reflected the higher near-term freight and distribution expenses caused by widespread supply chain pressures. This margin pressure was less impactful to our total gross margin rate of 64.9% as Connected Fitness accounted for less than 3% of our total sales mix in the quarter. Nutrition & Other gross margin was 53.1% compared with 59.9% in the prior year period, with the decrease primarily due to higher shipping and freight costs associated with COVID-related disruptions and deleverage of fixed costs, given the revenue decline.

Moving down the P&L. Despite the factors that negatively impacted our revenue, our disciplined cost control during the quarter did allow us to deliver Q3 EBITDA results that were in line with our internal forecast. Selling and marketing expenses increased to $153.8 million or 73.9% of revenue from $124 million or 49.3% of revenue last year. The percent deleverage was driven by both an increase in absolute media dollars as well as launching the brand awareness campaign. Given highly inefficient media rates, we've reassessed that ROI and a materially reducing brand marketing until the new year.

Enterprise technology and development expenses totaled $29.7 million or 14.3% of revenue compared to 9.5% of revenue in the prior year period. The increase was primarily due to strategic investments to drive future growth, including higher personnel and enterprise system-related expenses. G&A expenses were $23.3 million or 11.2% of revenue versus 6.6% of revenue in Q3 of 2020. The increase was primarily due to higher D&O insurance, personnel costs and other public company expenses.

Moving on to other income. The most material component of other income for us was the change in fair value of the liability for our 15.3 million warrants, which resulted in a noncash accounting benefit of $30.3 million in Q3. Our adjusted EBITDA loss was $43.4 million, and our net loss for Q3 was $39.9 million or a loss of $0.13 per basic and diluted share.

Turning to our balance sheet. As of September 30, we had approximately $200 million of cash and no debt. The change in cash from Q2 was primarily driven by four items: one, a $50 million media spend; two, capital investment as we built the Board Interactive platform; three, the acquisition of a content production studio; and four, approximately $70 million of inventory for connected fitness bikes to mitigate supply chain disruptions. Our cash position and access to the capital markets provides us with ample financial resources to ensure adequate liquidity to execute on our growth strategy.

Now, I'd like to move to our updated full year 2021 guidance. As I mentioned, the majority of the Q3 revenue decline versus forecast occurred in September. And thus far into Q4, media rates remain elevated and consumer demand continues to be difficult to predict, making for an overall challenging operating environment. Additionally, because Q3 sales were below our expectations, we began the fourth quarter with a lower subscription base from which to build revenue. So in light of these factors, we're taking a more conservative view for 2021 sales, and we now expect total GAAP revenue of between $820 million to $830 million versus prior guidance of $930 million to $960 million.

As noted in our press release, despite reducing our overall revenue guidance, our adjusted EBITDA loss remains in line with our prior guidance of negative $110 million to negative $100 million. And part of the reason we're able to maintain EBITDA guidance is due to our strong cost management, which is in our DNA. And the two drivers of this specific cost management in Q4 are one, refocusing our marketing on the most efficient media to drive customer acquisition, which is forecasted to reduce spend by more than $20 million. And two, the pandemic highlighted that our work from anywhere environment is an advantage. And as such, we've assigned the remaining three years of our Santa Monica office lease, saving approximately $5 million in 2021 and $9 million annually through 2025.

And with that, I'll turn the call back over to Carl.

Carl Daikeler

Thank you, Sue. Before opening the call for Q&A, I wanted to provide some perspective on the long-term opportunity for Beachbody. My confidence in our future is unwavering. There are millions of people out there who are looking to transform their lives to be healthier and happier. Our solution is unique in its ability to enable them to get to a healthy lifestyle through rich experiences created by bringing together the best fitness content and nutrition products alongside community support and accountability. Nobody does it quite like Beachbody because we don't cut corners, and we focus on the best possible customer experience and results.

The pandemic showed people that working out at home is effective, efficient and economical. And technology, combined with an emerging hybrid work model means now more than ever, the home can and should be the greatest health center in everyone's life. And it's not just technology for the sake of technology. It's about technology, enhancing the human experience, the connection and accountability that is so critical in helping people achieve their goals. That's the premise of BOD Interactive, of Openfit, of the Connected Bike and of many of the exciting new products in our pipeline, and we'll continue to do what we've done for 23 years, invent, innovate and refine with a relentless commitment to our mission of helping millions of people achieve healthy and fulfilling lives. That is what we do. We'll stay agile, adjusting and adapting and [Technical Difficulty].

Question-and-Answer Session

Linda Bolton-Weiser

Marketing spend. I guess I would expect Gusto maybe decline again sequentially in the fourth quarter. Is that a fair assumption? And then if that's the case, -- So you head into the first part of 2022 would possibly subs actually down year-over-year?

Sue Collyns

Yes, it wouldn't surprise you, Linda. I think your instinct is right, that what happens in Q4, even though we have a lot of renewals on the digital side of the portfolio, customers typically make other nutritional choices in Q4 from Thanksgiving on. And so we'd expect that nutritional file to continue to decline, and that's in line with seasonal trends. As we go into Q1 of next year, even though the heavy lifting has been done in terms of many of the product launches associated by interactive as well as the integration of mix on to both platforms. We are lapping a pretty big increase in digital subscribers and nutritional subscribers from last year, and would expect that to take time to build?

Carl Daikeler

The only thing I would add, Linda, if I could, is December marks one of the biggest launches of the year for us, which takes us our coach network into the first quarter. This year, it happens to be a program called -- I mentioned called Job 1, which is 20 minutes a day, five days a week. And as you can imagine, quite marketable. So the seasonality of what Sue was mentioning, is offset to a certain degree by the fact that the coaches and the indications that we're getting are quite enthusiastic about this program, and we do see quite a bit of activity around that launch, which kicks off in the first week of December.

Linda Bolton-Weiser

Okay. And then can you just talk about -- when you talk about events with the coach network, are you talking about a convention like a live convention versus a virtual convention. And if so, usually those live convention expenses are quite a bit more than virtual. So are we facing a real negative expense comparison in that business kind of going into 2022?

Carl Daikeler

Not at all. First, just to describe that. I'll let Sue speak to the actual expense. But we've been doing events with this business model for over 10 years, and they're actually quite productive for us. But there's two kind of events that we finally got to experience in October. One was a leadership event where we get to get -- we get to bring our most proactive coaches, the people who are helping the most people together to talk about the product launches that are coming in the third and fourth quarter and into the first quarter. This is where we got to celebrate the addition of the bike to the platform and the launch of our BOD Interactive platform. The other type of event is something that we call a Super Weekend, which happens actually at the coach expense where what we call market councils pulled together and put on many conventions on their own. We do send our super trainers and I also travel to many of these events, and it gives us an opportunity to meet with the other coaches that didn't come to leadership to give them that same visibility to the product lineup ahead of us. So this particular event was the combination of leadership and then explaining what's coming to the entire network in the fourth and first quarter in our quarterly super-weak event.

Sue Collyns

Yes. And just back on that question, Linda. All events costs will be part of the guidance we share for FY '22. But I'll just tell you directionally, they'll be in line with sort of pre-pandemic expenses and nothing out of the ordinary.

Linda Bolton-Weiser

Okay. And then, there's a lot going on with Peloton. And one of the things going on is they seem to have lowered the price of kind of their entry-level bike. So the price gap between you and Peloton has probably narrowed. So is that the case? Are you taking action to kind of maintain the gap in pricing? Or can you just talk about kind of the pricing environment on the bike side?

Carl Daikeler

Yes. I can't speak to their strategy necessarily, but our strategy finally can be about bringing this incredibly high-quality commercial grade like to our 3 million subscription holders and doing that with the most immersive, exciting platform frankly, in digital fitness in what we call BOD Interactive. Just today, we put up our Black Friday special, which will go up through the end of the month. So we expect to lean into this business model, which we believe has a lot of runway because as we've seen over a decade, this is a very marketable genre as Fitness goes. What started with spinning and has now evolved into the home is something that gets people results, and that's what Beachbody has been about since we launched the company. It's unnatural to be a part of what we offer. And we finally, like literally finally are getting to offer it to our database; so we're quite excited by it. We think we're price competitive, but more so, our content and total solution, including nutrition, will give the customer the results that they're looking for. So we feel quite good about the direction that it's going and especially going into the first quarter.

Linda Bolton-Weiser

And I know that last quarter, you had actually raised your projection for unit by now, I believe, to 95,000. Do you wish to modify that or give any sort of a projection now for the year in terms of like sales?

Sue Collyns

Yes. I mean we're obviously taking a more conservative approach, as I said, in relation to the bike units from that guidance we shared on August 12. You're right, it was around 95,000 on a pro forma basis as if we own mix for the full year. And now, in reality, we've moved it down to about 60,000. And that's due to really three factors: one, the reduction in consumer demand and the consumer distraction that Carl spoke about to that delayed launch of BODi, which impacted the Q3 results; and three, taking those learnings from Q3 and the delivery issues during the holidays. And basically, what we've done now, Linda, is eliminated a full month of revenue in Q4 for the bike. So even with that reduction in the 60,000 units now on a pro forma basis for this year, it's still more than double the number of bikes that mix sold last year, I think it came in around 27,500...

Linda Bolton-Weiser

Okay. And then, my last question is just having to do with cash flow. I mean it looks like your operating cash flow in the quarter was, I don't know, somewhere around negative $100 million something like that. So I mean, what do you think their cash balance is going to be like at year-end? I mean, do you think it will be over $100 million? Or what's kind of your view on the cash flow side of things?

Sue Collyns

Yes. Well, as of the end of Q3, as you know, we've got about $200 million of cash, and we have no debt. And of course, an extremely resilient business model with more than 75% of the revenue stream being subscription related. So that's a really strong foundation. In our Q that we actually just released , you may not have gotten to it yet, but we did terminate our credit facility in November. It is only the line that was only $35 million, and we've established premerger and the intent is always to secure a larger facility post-merger. So the termination of that line is in line with the plan. But we plan to go out, and we are very confident of securing some ample capital to fuel the growth, primarily for working capital needs, things like inventory, CapEx, marketing opportunities and in due course, possible M&A. And yes, I mean, at the end of Q4, we'll definitely be above that $100 million mark.

Linda Bolton-Weiser

Okay. Thank you very much.

Operator

We have your next question from John Heinbockel with Guggenheim. Your line is open.

John Heinbockel

Carl, maybe talk about opportunities related to Ladder and cross-selling the 3 million digital subscribers nutrition, right? That would seem to be a big opportunity with not a lot of costs attached to it.

Carl Daikeler

Yes. Thanks. We remain really excited about it. And it's one of the reasons that we hastened this reorganization, Christy Cartwright, who's running Ladder and now the whole nutrition component has sort of two approaches to nutritional marketing. One is the network model, which bundles nutrition with digital fitness, so that's where we get the bulk of our subscriptions. But she's also got experience where the nutrition is the lead where we actually leverage the digital subscription as value-added for people who acquire our supplements. So that's what she'll do with Ladder taking advantage of the brand opportunities since we that brand was created by LeBron James and Arnold Shwartzenager, and they're still involved in helping us promote ladder.

We're looking forward to how Christy will now shape that to sell the product, and we're hoping to have some news actually I can announce towards the end of the year in terms of being a nutrition -- having a nutrition first acquisition strategy in addition to our bundling component that really built the company.

John Heinbockel

Okay. And then, maybe as a follow-up. If you think about so body, I know it's early, but your take on how many of the -- maybe order of magnitude of the 3 million subscribers might be good candidates right for that upgrade? Do you think it's 10%, 20%? What do you think?

Carl Daikeler

I don't think I'm allowed to wager any guesses on these kind of calls. But obviously, it's an important part of our strategy to maximize the crossover between these the subscriber bases. And one of the things that we're doing, for instance, as an example, with Job 1, which launches the first week of December, not only will that be a normal sort of a predictable program, a Beachbody type of program that goes for four weeks and people can do on the Beachbody on-demand platform. There's also a program made in parallel called Job 1 hybrid, which includes rides with Jennifer Jacobs. That lives on the bad interactive subscription layer. So for people with bikes who've enjoyed Jennifer's rides on whatever platform she's ever been on, now they'll have access to her rides as part of the job 1 program. So it's an important part of our strategy and one that I'm excited to work with our performance team and our data and analytics team to maximize conversion, which we've seen very good indications in the early days and then maximize retention.

One of the tools that we have to our disposal right now for the first time is the day pass. We've never been able to give the customer the ability to buy just one day's access to Beachbody On Demand. And with the launch of BOD Interactive, we -- at the end of October, we now have the ability for our coaches to invite people into the BOD Interactive ecosystem or Beachbody On Demand for a day to try it and then apply that to $7 day pass, if you will, apply that to a full subscription. So, we have -- like Sue mentioned, now we finally -- we have all the levers at our disposal, which the timing is just perfect as we go into what we call Q5, which starts into the fifth quarter, if you will, that starts the day after Christmas and then going into the all-important first quarter.

John Heinbockel

And then, one real quick last. Where are you going to be on daily hours of programming on Body? Where are you now? Where will you be by year-end? What do you think you are by the spring...

Carl Daikeler

We -- right now, we're producing between 130 new work out a month on the body platform and correspondingly about 100 workouts a month on the Openfit platform. And I think we'll be right about there. We do have some new modalities or a different variety of content that we're adding to the platform in the first quarter, but we think we'll be at about that rate of production through the foreseeable future.

John Heinbockel

Okay, thank you.

Operator

[Operator Instructions] We have your next question from Jonathan Komp with Baird. Your line is open.

Jonathan Komp

Hi, thank you. First, sue, maybe just a follow-up. Did you share when you look at the third quarter results, how close they were to your internal projections or quantify the shortfall at all?

Sue Collyns

Yes. What we said, John, was that the Q3 numbers, 75% of the sales shortfall occurred in the month of September, right? But overall, the themes where the softer consumer demand, the delayed product launches that definitely had a more pronounced impact in September and then the media investment that fell below those acquisition target forecast. So 75% of the sales shortfall occurred in September. What I can say though is that the digital numbers, we had met our expectations just due to the highly predictable nature of deferred revenue. It was really the bikes and nutritionals that fell short of the forecast. And bikes are about 70% of that shortfall. -- nutritional was the rest. And of course, with the bikes we were hit with knowing the delay of the launch which impacted our Coach's ability to sell. But then also the timing of that meant that those bats were not shipped within the quarter, they spilled into in Q4.

And I think what's helpful to know about Q4 as we go into this is, obviously, the sales composition is going to change from Q3, largely as a result of those known by deliveries, right, with only six weeks to go. And specifically, the bank revenue is estimated to be about 15% of Q4 sales versus digital, which will be about 50% with nutrition, the rest because, as I mentioned earlier, seasonally, this is the time of the year when consumers make other nutritional choices. So, we typically see a reduction in our sales side. But as I think about Q4 revenue, there are three sort of helpful data points that I think about. One is that our October revenue was in line with our expectations. The second is that by the end of November, we're forecasting our bike sales to be locked in for the quarter.

So we've derisked that component of revenue, frankly, that caught us out in Q3. And then with only six weeks to go, because from now to December 31, with no highly dependent product launches. There are no real internal derailers and that place has been very in a very solid position as we talk to you today.

Jonathan Komp

Okay. And if I could follow up on the sort of the core nutrition business, it looks like it's going to be well below the 2019 levels back when you had less than two million total digital subscriptions. So I just want to understand with more subscriptions today, why you're not attaching nutrition at a similar level? Or what's going on to impact some of those comparisons on Nutrition?

Carl Daikeler

Yes. The biggest driver of the nutrition business is the digital fitness start. The retention of nutrition is not quite as long term as the retention in digital, that's why those numbers can start to get misaligned, if you will. So what's important, this is where the launch -- the product launch and the content strategy matters so much. So when we were delayed on the BOD interactive launch that delayed the growth in the nutrition file. But again, now that we've got those tools now that we have the whole machine working and as we look ahead to the launch of job one; we expect to rebuild those nutrition files, but that's the relationship of how the digital starts and nutrition file sizes work together.

Jonathan Komp

Okay, understood. Maybe one last one for me. Just a broader question. If I look back in history, I know in 2019, you did less than $800 million of revenue, but close to a 10% EBITDA margin. And I'm just wondering, as you look at the business today and really the current composition, what type of sales level do you think you might need to get back to flat or positive margin performance? And maybe a related question, how long would you consider sort of pursuing the same strategic direction versus reevaluating some of the individual business pieces?

Sue Collyns

Well, I think we have a very clear view of the levers that will help drive a positive EBITDA back to acceptable levels. And I think it's worth knowing that this year as well as last year, frankly, were material investment years, right? Because we did a few things. One, we acquired Ladder to emerge with Mix and integrated the Bionote platforms, be bought an open pit. And three, we built body a third platform in record time, and we also grew our headcount by 30%. So -- and now that headcount investment we made, that included people like content developers that further differentiate digital products and increased engagement that we're seeing to data scientists, they'll give us insights to drive acquisition and retention that we've never optimized in our 22-year history. So those investments are really what we expect to drive revenue. And as they do, it will create leverage on our cost profile.

Carl Daikeler

If I can just add to that, the one thing that we have never had, John, is the ability to pursue partnerships. And with the advent of open Fit and bringing in John Michelle Fournier to drive that initiative that literally just got started three weeks ago. So it opens up an entirely new TAM to our expertise of creating specific content to help people get results. Likewise, strategically, because we've seen the effect of digital subscribers on growing the all-important nutrition subscriber files, we've accelerated our launch tempo into the first half of 2022. And in fact, the mix, the product mix going into 2022 is specifically designed to maximize helping people get the type of results that they need today, including nutritionals. And like I mentioned in my opening comments, I'm very excited by the in-home user feedback that we're getting from two new nutritionals coming out next year.

So we're not leaving anything to chance, nor are we sitting on our hands just waiting for an old normal to return. It's the same reason that we are approached to responding to the iOS change at Apple is that we're not relying on outside parties for our data and analytics. We brought that in-house and have a formidable team to make sure that we're maximizing our ROI on media. So, as I think you've seen over the course of our relationship with Baird and others is this company is quite ambitious and aggressive about reaching as many customers as possible and making sure that they get results. And I feel very good about our plan over the course of the next 12 to 24 months.

Sue Collyns

One other point I'll add to that, John, just to give you a bit of insight into Q3 as we do post more to monitor ourselves. Cost management is part of our DNA. And we made a significant investment, as I mentioned in 2021 on last year. And we'll drive leverage as revenue increases. But immediately, we know that there's a big opportunity in cost of goods, specifically in relation to the bike. And I'm also happy to report that our LTV to PAC has improved significantly from around 1x in Q3 where we put up it on the gas trite didn't all work. So now we're tracking comfortably well over 3.4%, 3.5x in Q4. So we're able to pivot and see improvements in the business relatively quickly, and we're pleased with that. And we know as we acquire more customers, we'll get more leverage and that EBITDA percent of revenue increase.

Jonathan Komp

Okay, understood. Thank you.

Operator

I'm showing no further questions at this time. I would now like to turn the conference back to Mr. Carl Daikeler, CEO, for any closing remarks.

Carl Daikeler

Okay. Well, I really appreciate everyone joining us and appreciate the follow-up and the questions that were provided. So thanks for joining us today and for your interest in Beachbody. We look forward to speaking with you again when we report our fourth quarter results and wishing everybody a healthy and safe holiday. Thanks so much, everybody.

Operator

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

168,218,173 Class A shares issued and outstanding at September 30, 2021

141,250,310 Class X shares issued and outstanding at September 30, 2021

and NO Class C shares issued and outstanding at September 30, 2021 and

(1)Includes 133,649,614 shares of Class X Common Stock owned by the Carl Daikeler & Isabelle Brousseau Daikeler Revocable Trust, over which Mr. Daikeler has sole voting and dispositive power.
(2) Calculations of the percentage of the shares of Class A Common Stock and Class X Common Stock beneficially owned assumes 163,175,632 shares of Class A Common Stock and 141,250,310 shares of Class X Common Stock outstanding, based on information included in the Issuer’s Current Report on Form 8-K filed on July 1, 2021.
(3) Pursuant to the Issuer’s charter, upon the earlier of
(a) The date Mr. Daikeler is no longer providing services to the Company as a senior executive officer or director of the Company or
(b) The date on which the holders of Class X Common Stock as of the Closing Date have sold 75% of their shares (other than pursuant to certain permitted transfers),
ONLY in THOSE a) or b) conditions
(Each share of Class X Common Stock will be converted to one share of Class A Common Stock.)

https://www.cnbc.com/2019/01/08/tim-cook-teases-new-apple-services-tied-to-health-care.html

“If you zoom out into the future, and you look back, and you ask the question, ‘What was Apple’s greatest contribution to mankind?’ It will be about health,” Cook tells the “Mad Money” host.

Finally, the Apple CEO once again doubled down on Apple’s bullish view of augmented reality:

There are so many, to be honest with you. I think that we are on the front end of many things. We’re on the front end of AR. AR is exciting to me because, unlike VR that becomes all-encompassing, AR allows us to have a conversation. And it can become even a livelier conversation because you might be talking about something that was the magazine. And we could just pull it up and look at it.
https://9to5mac.com/2020/12/09/tim-cook-podcast-interview-health-fitness/

Enter: the Metaverse
While we wait on VR, the future is taking shape.
https://insider.fitt.co/issue-no-131-fitness-3-0/

In tech circles, the Metaverse is the holy grail. As physical reality collides with digital worlds, the Metaverse is a kind of virtual shared space — think Ready Player One. This always-on, plugged-in existence is far off, but it’s not hard to see how we get there.

Fortnite is foreshadowing of what’s to come. A social network of sorts, Fortnite has become a virtual gathering space. Combining social media and streaming content with cross-platform capabilities and a limitless cap on users, Fortnite transcends gaming — it’s shaping culture.

All told, Fortnite counts 350M registered players. In April, 12M concurrent players participated in Travis Scott’s virtual concert. Last year, 10.7M attendees watched Marshmello’s concert.

Takeaway
With Fortnite as the blueprint, streaming and connected fitness doesn’t seem all that revolutionary. But the Metaverse of Fitness will be.

As our quest to achieve the next great innovation persists, the implications for building community, providing coaching, and improving adherence are seemingly limitless. But short of improving health and curbing obesity, all this tech is simply exertainment for the already fit or individuals who can afford it.

Let’s not forget, for the vast majority of people, walking more, eating well, and spending more time outdoors will do the trick. Which begs the question: maybe we’re solving the wrong problem?

The Wrap “Acquire or Die: Navigating the Era of Mega-Mergers & SPACS” will address the explosion of Hollywood mergers and the ramifications of ongoing industry consolidation" https://www.thewrap.com/thegrill-kevin-mayer-tom-staggs-jeff-sagansky-faiza-saeed/

Corning is enabling the ultimate fitness experience with a Fitness Mirror prototype that debuted at the 2017 Consumer Electronics Show. Featuring Beachbody® On Demand programs and nutrition guides on a durable, touch-sensitive surface, access to fitness content to get your sweat on has never been more seamless. Receive biometric updates through your wearable that seamlessly syncs to the mirror. And with personal training capabilities through augmented reality and a time of flight camera, you’ll be able to achieve your fitness goals. #CES2017 #GlassAgeToday

For more information on Corning’s Fitness Mirror Prototype, visit: https://www.corning.com/worldwide/en/innovation/the-glass-age/inspiration/inspired-by-glass--cornings-fitness-mirror-prototype-.html

Allied Market Research
What was the total market value of the Online/Virtual Fitness Market? and How the major current trends will shape the market in the future?
Let’s find out now…!
The global online/virtual fitness market is projected to reach $59,231 million by 2027, growing at a CAGR of 33.1% from 2020 to 2027.

Note: BODY and Riot games are sharing the is the same office building, as as Sept 2021, Santa Monica is plugged in with video game developers and major esports operators. Sources told Commercial Observer that Riot Games is set to sublease about 131,000 square feet from The Beachbody Company

Les Mills' Jean-Michel Fournier believes that in the longer-term the fitness industry will utilize advances in augmented reality and holographic telepresence, rather than VR. @LesMills
https://www.fittechglobal.com/fit-tech-features/Class-action/34412
The Beachbody Company Appoints Jean-Michel Fournier to Lead Global Partnership and International Development Efforts
November 1, 2021

Ankit Phophalia
https://www.linkedin.com/feed/update/urn:li:activity:6833939853961523200/
Director of Software Engineering, Cloud Applications at Beachbody
2mo • Edited • 2 months ago
My Team and The Beachbody Company are in Hyper-Growth mode. It's an exciting time to join us.
If solving challenges around High Scalability, Availability, Performance, and Cloud Migrations excites you then below job profile might interest you. Reach out to me if you or anyone you know is interested.
Principal Engineer, Cloud Platform(Remote)-
https://lnkd.in/gydc_5F
Staff Engineer,AWS(Remote)-
https://lnkd.in/gxsZXtg
Staff Engineer,Customer Identity and Access Management (Remote)-
https://lnkd.in/gQXXqrC

# Newly listed on NYSE on June 28th 2021, by a three way merger
(Valuation/Service Offerings/Growth/Guidance
https://www.sec.gov/Archives/edgar/data/1826889/000121390021007925/ea135103ex99-2_forestroad.htm
The Beachbody Company, a Leader in Digital Fitness Streaming to Become Publicly Traded Company//The Beachbody Company, Forest Road Acquisition Corp. and Myx Fitness Enter Three-Way Merger
https://www.businesswire.com/news/home/20210210005414/en/The-Beachbody-Company-a-Leader-in-Digital-Fitness-Streaming-and-Nutrition-Solutions-to-Become-Publicly-Traded-Company

For HIRE Exec Director of Technology,
https://careers.beachbody.com/us/en/job/R-1550/Executive-Director-Infrastructure
Why is the Executive Director, Infrastructure important to Beachbody?
Beachbody is currently in a rapid growth phase in all aspects of the business. The technology infrastructure is the backbone of all of Beachbody services.
Knowledge/Skills
Good team leadership skills, with the ability to develop and communicate, influence, and collaborate
Deep knowledge of hybrid datacenter services with AWS
Preferably experience with VMware, containerization, Pure Storage and Cisco UCS, ServiceNow, Jira
Enabling Enterprise Virtual and Augmented Reality with VMware
Augmented Reality (AR) and Virtual Reality (VR)
Remote Rendering with VMware vSphere, VMware Horizon and NVIDIA CloudXR https://pathfinder.vmware.com/activity/projectvxr

Already OnBoard From LesMIlls,
Les Mills' Jean-Michel Fournier believes that in the longer-term the fitness industry will utilize advances in augmented reality and holographic telepresence, rather than VR. @LesMills
https://www.fittechglobal.com/fit-tech-features/Class-action/34412
The Beachbody Company Appoints Jean-Michel Fournier to Lead Global Partnership and International Development Efforts
November 1, 2021

The Beachbody Company Names Blake Bilstad Chief Legal Officer https://investors.thebeachbodycompany.com/news/news-details/2021/The-Beachbody-Company-Names-Blake-Bilstad-Chief-Legal-Officer/default.aspx
Former $WWE Exec ++
Mergers and Acquisition Expert