Mindbody CEO addresses layoffs, furloughs due to coronavirus
SAN LUIS OBISPO COUNTY, Calif. - Mindbody, a health and wellness tech company headquartered in San Luis Obispo, says the company is planning for layoffs and furloughs due to the ongoing COVID-19 crisis.
The company, which has an office in Santa Maria in addition to their main campus in San Luis Obispo, announced the upcoming staff cuts in a statement on Thursday.
"We are nothing without our Mindbody community of valued employees, business customers and consumer clientele. After weeks of studying the effect of COVID-19 on our global customers, we have faced the unavoidable truth that our own business is impacted, and we must reduce the size of our team with layoffs and furloughs."
Mindbody statement
The company said they hoped to be able to bring back many of the employees who are being let go once "the impacts of the pandemic subside."
CEO Rick Stollmeyer tells NewsChannel 12 that 700 of the company's 2,000-plus global employees will be laid off or furloughed.
Mindbody has offices in Australia, India, and the U.K. They were founded in San Luis Obispo in 2001, and it remains the company headquarters. About 300 members of the local workforce are affected by the cutbacks.
Stollmeyer spoke with NewsChannel 12 Anchor Scott Hennessee late Thursday afternoon, emphasizing Mindbody remains committed to the Central Coast. Below is a lightly edited transcript of their interview:
How has the Coronavirus affected Mindbody over the course of the last few weeks?
It's been very deep and very dramatic. Our customers are almost all bricks-and-mortar businesses that involve direct human interaction. These are the fitness studios, gyms, clubs, salons, spas, wellness centers. All of those - as we all are well aware - have been mandated to shut down in most regions in the world. This really hit quite dramatically for us in the last 3 to 4 weeks.
Our principal question was, how long is this going to go on? I think as best as we can see right now, this is going to go on in some form or another for two to three months, probably best-case [scenario].
We might be easing some restrictions in some areas but other areas are going into deeper restriction. So this directly impacts our business.
About 40 percent of our revenue is derived directly from transactions. It's from the payments that are made from the consumers to our customers as well as our MindBody app and consumer platform, which we earn revenue off of as well. That 40 percent of our revenue was collapsed to a tiny fraction of normal. Then the rest of our revenue is subscription fees that our customers - the business owners - pay us and of course with many of their businesses shut down, we have been giving fee relief or fee holiday to many of them. It's the right thing to do, but it also costs us many millions of dollars.
Regarding that, more businesses in the health and beauty sectors that you work with are moving towards more online connections out of necessity, and that is something your company helps with, isn't it?
That is. In fact, that's one of the silver linings happening here. I think that long term will be very good for these businesses.
We just released a virtual wellness platform. Basically it's an easy to use system that allows that teacher, that trainer, that therapist, to upload on demand a video library that they can then access to their members or their other customers. We just released that in Beta last week and in full release this week. We've been developing it for months, but with this crisis we stepped on the gas and accelerated that.
We think this will be a long-term part of the industry. It's something that was already happening over the last couple of years and of course it's really accelerated now, but we also believe that the face-to-face bricks-and-mortar experience, that's going to always remain. I think whether it's a restaurant, a bar, a coffee shop or a yoga studio, or a spa or a salon, we all crave that kind of human connection. So we believe these businesses will all come roaring back when we're all able to go to them, but right now it's quite difficult.
But as far as your business goes right now, that part of the business is not enough to sustain what's going on, and you're also allowing some forgiveness to people who use that service?
That's right, it's not nearly enough. It's a tiny fraction of our revenue coming from the virtual base. I think as it's adopted more, it will become more significant, but it doesn't begin to make up for the normal revenue streams that we've lost.
I think what we needed to do just to get down to the basis of it is - to keep our business viable, to keep our business here for the long term - we needed to dramatically and immediately cut costs. Over the last few weeks we've been going through our business end to end to look for every cost that we could cut before having to resort to cutting jobs because it's something we really really didn't want to do. Those efforts helped reduce the amount of layoffs, but we couldn't avoid the layoffs.
Some of the people affected are being laid off and some are being furloughed?
For people that we have a reasonable probability that we'll be able to bring them back in the next 90 to 120 days, we place them in a furlough category. We're hoping to bring most or all of them back in the next 3 to 4 months as things start to begin to return to normal.
The layoffs were just folks, as we said, "Can we reasonably expect to bring these people back before the end of the year?" and we just couldn't in our best-guess scenarios of where everything was going to go. If things progress better than our models, and we're trying to be conservative on our models, then of course we're going to start rehiring, and we'd love to welcome back as many of our veteran team members as possible.
What are you telling employees who have been furloughed or laid off today? What is your message to them?
First and foremost that they're all excellent professionals and people. We don't employ "B" players at MindBody.
We didn't want to do this. We did everything we could to avoid it. It pains us greatly to have to do this.
We told them, number one, that we're deeply sorry that we needed to do this. That we know that these are highly capable people, and for those that have been laid off, we hope that they'll find other work soon and we strongly believe the vast majority of them will.
We did everything we can to take care of them. There's a severance package that we offered to our employees that are being laid off. Those that are being furloughed, we're still carrying their health insurance costs, the company share. We have a really good insurance plan. I know it was a shock to a lot of team members. Everyone in the company could kind of see the stress that was going on, they could see what's happening with our customers. But, it's really heart-breaking to see something like this coming, so it's been a hard day."
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Stollmeyer declined to specify the number of employees who have been laid off versus those who have been furloughed. Before concluding the interview, Stollmeyer added that the people remaining in the company all took pay and benefit cuts to further reduce the impact, and reduce the number of people who needed to be furloughed or laid off.
Stollmeyer said he's not taking any pay for the balance of the year. His final message was "We remain fully committed to the Central Coast."
For more information about Mindbody, click here.
