Following The Beachbody Company Inc.'s (BODI:NYSE) fourth quarter of 2023 results (4Q23), Roth MKM analysts, George Kelly and John-Paul Wollam, maintained their Buy rating and US$15 price target.
The analysts believe that while revenue trends remain mixed, positive EBITDA and free cash flow are on the horizon as management continues to address the cost structure and focus on cash while implementing initiatives to stabilize the nutrition business.
Financial Results and Projections
According to the report, BODI reported 4Q revenue of US$119.0 million and EBITDA of US$2.8 million, surpassing the analysts' estimates of US$112.4 million and (US$1.0 million).
The analysts stated that for the first quarter of this year, management issued guidance "calling for" revenue between US$113 million and US$121 million, adjusted EBITDA of US$0 million to US$5 million, and positive free cash flow.
The analysts have updated their model, raising EBITDA and FCF estimates on GPM and opex, while lowering revenue to account for continued sequential declines in the nutrition business.
Industry/Market Overview
"The digital business is stabilizing as the subscription price increase last year offsets declining subscriptions," the analysts wrote, stating that they believe that the digital business may see improvements from the new free preview tier and entitlements in 2Q and beyond.
Meanwhile, the nutrition segment remains more challenged, with revenue and subscriptions down roughly 30% year-over-year.
Recent Business Developments
Management has attempted to improve the nutrition segment, including expanding SKUs available on Amazon, initially selling single products instead of package solutions, and launching product spotlights each month.
The analysts wrote that "Together, these initiatives should lower barriers to customer entry and allow BODI to sell nutrition with direct marketing for the first time in six years."
Alongside this, Beachbody's total cost reduction is now at US$200 million since 2021. The analysts think that content amortization (which cost US$24 million in 2023) will give the company substantial rolloff through the rest of 2025.
Executive Commentary
The analysts report that BODI's management continues to prudently address the cost structure and focus on cash while implementing initiatives to stabilize the nutrition business. They also note that the new annual price for the digital business has rolled through roughly 80% of members with no material change in churn.
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Disclosures for Roth MKM, The Beachbody Company Inc., March 12, 2024
Regulation Analyst Certification ("Reg AC"): The research analyst primarily responsible for the content of this report certifies the following under Reg AC: I hereby certify that all views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. I also certify that no part of my compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.
Disclosures: Within the last twelve months, ROTH Capital Partners, or an affiliate to ROTH Capital Partners, has received compensation for investment banking services from The Beachbody Company, Inc.. ROTH makes a market in shares of The Beachbody Company, Inc. and as such, buys and sells from customers on a principal basis. ROTH and/or its employees, officers, directors and owners own options, rights or warrants to purchase shares of The Beachbody Company, Inc. stock. Roth or its affiliates beneficially own(s) 1% or more of an equity security of The Beachbody Company, Inc..
ROTH Capital Partners, LLC expects to receive or intends to seek compensation for investment banking or other business relationships with the covered companies mentioned in this report in the next three months. The material, information and facts discussed in this report other than the information regarding ROTH Capital Partners, LLC and its affiliates, are from sources believed to be reliable, but are in no way guaranteed to be complete or accurate. This report should not be used as a complete analysis of the company, industry or security discussed in the report. Additional information is available upon request. This is not, however, an offer or solicitation of the securities discussed. Any opinions or estimates in this report are subject to change without notice. An investment in the stock may involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Additionally, an investment in the stock may involve a high degree of risk and may not be suitable for all investors. No part of this report may be reproduced in any form without the express written permission of ROTH. Copyright 2024. Member: FINRA/SIPC.
