El Segundo-based health and wellness business Beachbody Co. Inc. is laying off roughly one-third of its workforce – nearly 200 employees – amidst a restructuring that abandons its multi-level marketing model.

These steps – detailed in a Sept. 30 announcement – are the latest in a series of moves over the past 12 months aimed at turning around Beachbody’s sagging financial and market performance.

Beachbody was cofounded in 1998 by Carl Daikeler and Jon Congdon as a distributor of home exercise DVDs. Since then, the company has gone digital with workouts and a range of diet products. It went public in January 2021 in a deal valued at $2.9 billion.

But since going public, the company’s market cap has plunged by more than 95% and cumulative losses for 2021, 2022 and 2023 reached $575 million.

Last year, as it faced the prospect of delisting from the New York Stock Exchange, the company implemented a 1 to 50 stock split, launched a corporate rebranding with the new name BODi, added a C-level performance coach and began altering its payment structure for its fitness partners.

“The first phase of our turnaround is centered on lowering our infrastructure costs and re-architecting our financial model,” Mark Goldston, executive chair of BODi, said in the Sept. 30 announcement.

Goldston said the moves yielded some positive results, including reducing costs enough to lower the revenue break-even point by $400 million to about $430 million and generating positive adjusted earnings before interest, taxes, depreciation and amortization.

But in the year since, the company continued to report losses on its quarterly earnings statements and the share price after the stock split has plunged more than 60%, closing at $5.72 on Sept. 30, just hours before the announcement of layoffs and further restructuring.

Second phase of restructuring

Last week’s moves are aimed at expanding direct-to-consumer sales and partnerships while further reducing costs.

On the cost cutting side, Beachbody said the 33% workforce reduction – translating to about 195 employees – aims to save roughly $54 million a year. Details of when and where the cuts would be made were not released. A required filing under the federal Worker Adjustment and Retraining Notification Act that might contain further details had also not yet been disclosed by the state Employment Development Department.

On the sales front, Beachbody said that ending the multi-level marketing model that has existed since shortly after the company’s founding should allow its sales team to stop spending time and resources on recruiting new salespeople and instead focus solely on selling the company’s products and services.

“We recognize that in light of today’s current market dynamics, as well as consumer preferences, the multi-level marketing distribution model is outdated and unsustainable,” Goldston said in the Sept. 30 announcement. “The evolution to the affiliate model offers a simpler, more modern approach to customer acquisition and will directly reward the seller for their effort. The organizational challenges and complexity of the MLM approach has weighed on the company’s turnaround and the ability of partners to optimize their potential.”

The transition is expected to be completed by the end of this year.

Beachbody also announced it intends to expand sales partnerships and sales through Amazon.com Inc.’s platform.

“The next phase of our journey is to optimize and broaden our points of distribution by converting the existing MLM to a single-level affiliate network, and expanding our direct-to-consumer, Amazon and partnership-driven sales channels, which we believe will further open the sales aperture and diversify our revenue sources,” Goldston said.

The goal of this second phase of restructuring is to reduce the revenue break-even point down to $225 million.

After initial hesitation, the market ultimately welcomed the restructuring news. On Oct. 1, the first full trading day following the announcement, shares fell 5.6% to $5.40. But the stock price surged the next day, Oct. 2, rising nearly 27% to $6.85.