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Mindbody CEO on ClassPass acquisition: 'in-person class reservations are surpassing pre-pandemic levels'

Mindbody CEO Josh McCarter joins Yahoo Finance Live to discuss the company's acquisition of ClassPass.

Video Transcript


- Mindbody has agreed to buy ClassPass Now, Mindbody is a platform for booking workout and health classes. ClassPass is a subscription service to book workout classes and other types of classes, for that matter. So now the two are coming together. Financial terms not disclosed here, but we're joined by Josh McCarter, Mindbody CEO, to talk about the deal. Morning, Josh. Tell us about how these two are going to integrate. I'm someone who has used both platforms. And so I'm curious for the users, now, what that experience is going to look like.

- So with Mindbody, Mindbody is best known probably for our B2B application. And from that lens, for the businesses that use Mindbody, there's not going to be a lot of differences. Now, what we're looking for on the consumer side is for those Mindbody businesses that don't participate with ClassPass that will now be able to offer more of their inventory if they elect to participate with ClassPass. We also have a very large consumer marketplace with Mindbody where millions of consumers are searching and booking for classes. But it's not a membership product and it's not at a discount. And so for those consumers that are looking for that variety through a membership with discounts, then we also hope to be able to offer that to the Mindbody consumer base, as well.

- And so for the sort of B2B offering is you're trying to incentivize more of the Mindbody customers to become ClassPass clients, as well. Are there various incentives you're going to be offering, are there ways that the two are going to be working together that are going to make it more attractive for people to also sign on to ClassPass?

- Well, the number one thing that we're looking at right now is more of a product integration so that aspects of ClassPass can appear within Mindbody's core operating system. So think about the dashboarding, and the performance results, and information on class pricing and utilization, and so forth. ClassPass has a depth of knowledge around this and some very intelligent tools they call smart tools, that we're looking at bringing some of that data and information into the core product. And we think just by doing that it'll be a much more compelling proposition than just standalone marketing that most of the wellness space uses today.

- Josh, when I first saw this deal I couldn't help but to think when Facebook bought Instagram. Is that a valid comparison?

- Yeah, I think it is because also in that type of transaction there was a desire to keep a very strong brand and keep the teams in place. And so as we look at the complementary aspects of the businesses, 97% of Mindbody's employees are focused on our B2B operations, whereas 100% of ClassPass' team is focused on its B2C. So we really see the opportunity to continue investing on both sides, both in B2B and in B2C, and the $500 million that we secured from Sixth Street as part of this acquisition will certainly enable us to do that.

- Right, and Sixth Street known for investing in companies like Airbnb and Spotify. Looking at some of the numbers here, 9 in 10 of the top activities right now booked on ClassPass are for in-person experiences and classes. I mean, ClassPass definitely struggled during the pandemic, right? There wasn't anywhere for people to go and a lot of people paused or canceled their subscriptions. So besides that figure I just cited, give us sort of a state of play of what ClassPass is looking like right now in terms of engagement.

- Yeah, so I would just first start with the broader industry. I mean, 90% of consumers are looking to get back to in-person classes as soon as they're able to. And 80% of consumers are saying that wellness is more important than ever. So what we see on the ClassPass side is that when a market has reopened and subscriptions have been reactivated-- ClassPass actually proactively pauses subscriptions versus the consumers doing that-- And so as they're reactivating, and they attend one class, then they start attending more classes at 110% of what they did pre-COVID, we also see on the Mindbody side, through the B2B lens and the transactions that run through our system, that on average when a market reopens the businesses are booking above their 2019 levels. So we really see the surge back into in-person classes and that's why, as you mentioned, 9 out of 10 classes on ClassPass are being booked in versus virtual now.

- Josh, this is a pretty-- It just became what looks to be a more compelling business here, a more compelling business to potentially pitch to public market investors. When's the IPO?

- [LAUGHS] Well, right now we just made the announcement and we're looking at working on the integration plans. But obviously the story here is a better together story. Faster growth for the businesses, being able to expand, being able to look at industry consolidation, and certainly looking to get back to the public markets at some point. Mindbody was taken private by Vista Equity Partners in 2019, and now we have additional PE backers, including L Catterton, and Temasek, and Apax with ClassPass' investors coming into Mindbody's cap table. And we're certain that at some point in the not too distant future that we'll be looking at a return to public markets, but as of today we just don't have a line of sight on the timing for that.

- And Josh, I also wanted to go back for just a moment to the ClassPass sort of shrinking and then re-expansion here, in terms of engagement with users. ClassPass also cut a lot of staff during the pandemic because the business shrank. How many staff has it brought back, and is it at its pre-COVID levels in terms of the number of folks?

- So it's not at its pre-COVID levels yet, in terms of headcount, but it's close to 400 people. So it's a very large business, and it'll be joining a team of Mindbody members that are 1,500 strong around the world. And right now I'm actually coming to you from the ClassPass office in New York City. So it was great to be here and meet some of the employees, many that have been here for five to seven years. So it's really nice to see what's going to happen with the cultures when we bring these teams together.

- I think that calls for a group team work out, Josh.

- Excellent. I'll have to ditch my jacket for that.

- Definitely. Yes, I think that probably would be a good idea. Josh McCarter is Mindbody CEO. Let's keep in touch, Josh. Looking forward to talking to you again. All right.