What happened
Shares of The Beachbody Company (BODY 1.89%) plummeted 50.6% in November, according to data from S&P Global Market Intelligence. This compares with the S&P 500 index's 0.8% decline last month. The primary catalyst for the subscription fitness and wellness company stock's drop was its release of a weak third-quarter report, which included a significant reduction in full-year guidance.
Since Beachbody went public on June 28 via a special acquisition purpose company (SPAC), its shares have plunged 80%, as of Dec. 6. The S&P 500 index has returned 7.9% over this period.
Image source: The Beachbody Company.
So what
On Nov. 16, Beachbody stock dropped nearly 21% following the company's release of its third-quarter results after the market close on the prior day. It continued downward for the rest of the week, racking up a four-day post-earnings release loss of 40%.
In Q3, revenue fell 17% year over year to $208.1 million. Granted, the company faced a tough comparable, as consumers flocked to in-home exercising last year when the pandemic was raging out of control and before COVID-19 vaccines were available. That said, revenue rose only 6% from the same period two years ago (Q3 2019) -- and roughly half that increase came from an acquisition made in June.
Third-quarter digital revenue dropped 5% year over year (YOY) to $94.1 million. While the number of digital subscriptions edged up 1% YOY to 2.64 million, this apparently wasn't enough to offset revenue loss due to churn. Average month-over-month digital retention was 95.6% in the quarter. Engagement was down from 2020, with total streams declining 26% to 35.9 million, but this number was 35% higher than in the two-years-ago period.
Connected-fitness revenue was $5.9 million, compared to none in the year-ago period. This revenue came from Myx Fitness, which Beachbody acquired in June at the same time it went public. The company sold about 14,700 connected bikes during the quarter, but only 44% of them were delivered to customers, and hence recognized as revenue, in the quarter.
Nutrition and other revenue fell 29% YOY to $108.1 million. This drop was driven by the number of nutrition subscriptions decreasing to 0.34 million, from 0.44 million in the third quarter of last year.
The bottom-line picture was equally bad. Net loss was $39.9 million, or $0.13 per share, compared to net income of $13.8 million, or $0.05 per share, in the year-ago period.
Now what
Management lowered its full-year revenue guidance, citing "delayed product launches, media spend reassessment, COVID-related consumer behavior and market uncertainty." For 2021, it now expects the following:
- Revenue between $820 million and $830 million, down from the prior outlook of $930 million to $960 million.
- Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) between negative $110 million and negative $100 million. This outlook is unchanged.
Investors should keep an eye on Beachbody's cash situation. In Q3, the company used cash of $113.8 million running its operation and burned through total cash of $147.4 million. It ended the quarter with cash and cash equivalents of $199.8 million. At the current cash-burn rate, the company would run out of cash in about one and one-third quarters. It will have to raise cash soon -- through either taking on debt or issuing more shares, which would dilute current shareholders' ownership.
Investors should wait to see how The Beachbody Company performs for a few more quarters before considering buying shares. This newly public company's performance hasn't yet shown it deserves your investment dollars.
