UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, ~~2021~~2022


☐	TRANSITION REPORT PURSUANT TO Section 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission file number: 001-39735

The Beachbody Company, Inc.

(Exact name of registrant as specified in its charter)


Delaware	85-3222090
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

~~3301 Exposition~~400 Continental Blvd,Suite 400 ~~Santa Monica~~El Segundo,, California	~~90404~~90245
(Address of principal executive offices)	(Zip Code)

~~Registrant’s telephone number, including area code:~~ (310) 883-9000

Registrant’s telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, par value $0.0001 per share	BODY	The New York Stock Exchange
Redeemable warrants, each whole warrant exercisable for one Class A common stock at an exercise price of $11.50	BODY WS	The New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting ~~company”~~company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large Accelerated Filer ☐	Accelerated Filer ☐ ☒	Non-Accelerated Filer ☒ ☐	Smaller Reporting Company ☐	Emerging Growth Company ☒☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

~~The number of~~There were 170,911,819 shares of the registrant’s Class A Common Stock, par value $0.0001 per share, ~~outstanding was~~and ~~168,218,173~~141,250,310~~, and the number of~~ shares of the registrant’s Class X Common Stock, par value $0.0001 per share, outstanding ~~was~~ ~~141,250,310~~, as of November ~~10, 2021.~~04, 2022.

Table of Contents


Part I.		~~Page~~
~~PART I.~~	~~FINANCIAL INFORMATION~~Financial Information	3
Item 1.	Financial Statements	3
	Condensed Consolidated Balance Sheets	13
	Unaudited Condensed Consolidated Statements of Operations	24
	Unaudited Condensed Consolidated Statements of Comprehensive Loss	35
	Unaudited Condensed Consolidated Statements of Stockholders’ Equity	46
	Unaudited Condensed Consolidated Statements of Cash Flows	57
	Notes to Unaudited Condensed Consolidated Financial Statements	68
Item 2.	Management’s Discussion and Analysis of Financial Condition and ~~Results of~~ Operations	3224
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4741
Item 4.	Controls and Procedures	4841
~~PART~~Part II.	~~OTHER INFORMATION~~Other Information	42
Item 1.	Legal Proceedings	48
~~Item 1A.~~	~~Risk Factors~~	4842
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4843
Item 3.	Defaults Upon Senior Securities	43
Item 4.	Mine Safety Disclosures	43
Item 5.	Other Information	4844
Item 6.	Exhibits	5045
Signatures		5146

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

The Beachbody Company, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except par value and share data)

As of September 30,

As of December 31,

2021

2020

(unaudited)

Assets

Current assets:

Cash and cash equivalents

$
199,839

$
56,827

Accounts receivable, net

1,378

855

Inventory, net

141,139

65,354

Prepaid expenses

14,014

8,650

Other current assets

48,556

37,364

Total current assets

404,926

169,050

Property and equipment, net

115,338

80,169

Content assets, net

34,786

19,437

Intangible assets, net

92,587

21,120

Goodwill

176,903

18,981

Right-of-use assets, net

27,434

33,272

Other assets

6,847

14,224

Total assets

$
858,821

$
356,253

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable

$
48,298

$
28,981

Accrued expenses

89,844

79,955

Deferred revenue

126,894

97,504

Current portion of lease liabilities

9,977

10,371

Other current liabilities

2,656

3,106

Total current liabilities

277,669

219,917

Long-term lease liabilities, net

23,845

31,252

Deferred tax liabilities

6,415

3,729

Warrant liabilities

19,900

—

Other liabilities

5,362

2,097

Total liabilities

333,191

256,995

Commitments and contingencies (Note 14)

Stockholders' equity:

Preferred stock, $0.0001 par value; 100,000,000 shares authorized,
   NaN issued and outstanding as of September 30, 2021 and
   December 31, 2020

—

—

Common stock, $0.0001 par value, 1,900,000,000 shares authorized
   (1,600,000,000 Class A, 200,000,000 Class X and 100,000,000
   Class C); 168,218,173 and 101,762,614 Class A shares issued and
   outstanding at September 30, 2021 and December 31, 2020,
   respectively; 141,250,310 Class X shares issued and outstanding at
   September 30, 2021 and December 31, 2020, respectively and 0
   Class C shares issued and outstanding at September 30, 2021 and
   December 31, 2020

31

24

Additional paid-in capital

604,665

96,097

Accumulated other comprehensive income (loss)

15

(202
)
Retained earnings (accumulated deficit)

(79,081
)

3,339

Total stockholders’ equity

525,630

99,258

Total liabilities and stockholders' equity

$
858,821

$
356,253

(in thousands, except share and per share data)

~~The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.~~


	September 30,			December 31,
	2022			2021
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	94,063		$	104,054
Restricted cash		-			3,000
Inventory, net		67,993			132,730
Prepaid expenses		7,181			15,861
Other current assets		41,028			43,727
Total current assets		210,265			299,372
Property and equipment, net		82,030			113,098
Content assets, net		36,783			39,347
Goodwill and intangible assets, net		156,800			171,533
Other assets		12,727			14,262
Total assets	$	498,605		$	637,612
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	13,867		$	48,379
Accrued expenses		71,695			74,525
Deferred revenue		102,086			107,095
Current portion of Term Loan		1,250			-
Other current liabilities		3,879			6,233
Total current liabilities		192,777			236,232
Term Loan		39,474			-
Deferred tax liabilities		1,319			3,165
Other liabilities		12,702			12,830
Total liabilities		246,272			252,227
Commitments and contingencies (Note 8)

Stockholders’ equity:
Preferred stock, $0.0001 par value; 100,000,000 shares authorized, none issued and outstanding at September 30, 2022 and December 31, 2021		—			—
Common stock, $0.0001 par value, 1,900,000,000 shares authorized (1,600,000,000 Class A, 200,000,000 Class X and 100,000,000 Class C);
Class A: 170,911,819 and 168,333,463 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively;		17			17
Class X: 141,250,310 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively;		14			14
Class C: no shares issued and outstanding at September 30, 2022 and December 31, 2021		—			—
Additional paid-in capital		626,255			610,418
Accumulated other comprehensive income (loss)		349			(21	)
Accumulated deficit		(374,302	)		(225,043	)
Total stockholders’ equity		252,333			385,385
Total liabilities and stockholders’ equity	$	498,605		$	637,612

~~The Beachbody Company, Inc.~~

~~Unaudited Condensed Consolidated Statements of Operations~~

(in thousands, except per share data)

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Revenue:

Digital

$
94,072

$
99,082

$
283,547

$
239,964

Connected fitness

5,927

0

5,937

0

Nutrition and other

108,053

152,397

367,895

399,335

Total revenue

208,052

251,479

657,379

639,299

Cost of revenue:

Digital

12,124

9,843

34,858

27,507

Connected fitness

10,261

0

10,417

0

Nutrition and other

50,682

61,082

164,679

151,654

Total cost of revenue

73,067

70,925

209,954

179,161

Gross profit

134,985

180,554

447,425

460,138

Operating expenses:

Selling and marketing

153,782

123,980

438,672

352,872

Enterprise technology and development

29,680

23,852

83,718

67,558

General and administrative

23,346

16,523

58,523

46,229

Restructuring gain

0

(1,677
)

0

(1,677
)
Total operating expenses

206,808

162,678

580,913

464,982

Operating income (loss)

(71,823
)

17,876

(133,488
)

(4,844
)
Other income (expense)

Change in fair value of warrant liabilities

30,274

0

35,664

0

Interest expense

(62
)

(89
)

(490
)

(432
)
Other income, net

202

113

3,155

555

Income (loss) before income taxes

(41,409
)

17,900

(95,159
)

(4,721
)
Income tax benefit (provision)

1,487

(4,129
)

12,739

161

Net income (loss)

$
(39,922
)

$
13,771

$
(82,420
)

$
(4,560
)
Net income (loss) per common share, basic

$
(0.13
)

$
0.06

$
(0.31
)

$
(0.02
)
Net income (loss) per common share, diluted

$
(0.13
)

$
0.05

$
(0.31
)

$
(0.02
)
Weighted-average common shares
outstanding, basic

304,599

238,831

265,117

238,374

Weighted-average common shares
outstanding, diluted

304,599

252,085

265,117

238,374

~~The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.~~

~~The Beachbody Company, Inc.~~

~~Unaudited Condensed Consolidated Statements of Comprehensive Loss~~

(in thousands)

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Net income (loss)

$
(39,922
)

$
13,771

$
(82,420
)

$
(4,560
)
Other comprehensive income (loss):

Change in fair value of derivative
   financial instruments, net of tax

(70
)

(209
)

(278
)

(16
)
Reclassification of losses on
   derivative financial instruments
   included in net income (loss)

142

78

481

31

Foreign currency translation
   adjustment

(40
)

52

14

(275
)
Total other comprehensive income
   (loss)

32

(79
)

217

(260
)
Total comprehensive income (loss)

$
(39,890
)

$
13,692

$
(82,203
)

$
(4,820
)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

The Beachbody Company, Inc.

Unaudited Condensed Consolidated Statements of ~~Stockholders’ Equity~~Operations

(in thousands, except per share data)

(in thousands, except share data)

Redeemable

Convertible

Accumulated

Retained

Series A

Additional

Other

Earnings

Total

Preferred

Common

Common Stock

Paid-In

Comprehensive

(Accumulated

Stockholders'

Units

Units

Shares

Amount

Capital

Income (Loss)

Deficit)

Equity

Balances at December 31, 2019, as
   previously reported

$
98,245

$
(35,626
)

—

$
—

$
—

$
12

$
24,771

$
(10,843
)
Retroactive application of
   recapitalization

(98,245
)

35,626

238,142,972

24

62,595

—

—

98,245

Balance at December 31, 2019, after
   effect of reverse acquisition

—

—

238,142,972

24

62,595

12

24,771

87,402

Net loss

—

—

—

—

—

—

(8,328
)

(8,328
)
Other comprehensive income

—

—

—

—

—

60

—

60

Equity-based compensation

—

—

—

—

895

—

—

895

Balances at March 31, 2020

$
—

$
—

238,142,972

$
24

$
63,490

$
72

$
16,443

$
80,029

Net loss

—

—

—

—

—

—

(10,003
)

(10,003
)
Other comprehensive loss

—

—

—

—

—

(241
)

—

(241
)
Equity-based compensation

—

—

—

—

1,013

—

—

1,013

Balances at June 30, 2020

$
—

$
—

238,142,972

$
24

$
64,503

$
(169
)

$
6,440

$
70,798

Net income

—

—

—

—

—

—

13,771

13,771

Other comprehensive loss

—

—

—

—

—

(79
)

—

(79
)
Tax asset contribution adjustment

—

—

—

—

(135
)

—

—

(135
)
Common shared issued in connection
   with acquisition

—

—

4,869,973

—

27,889

—

—

27,889

Equity-based compensation

—

—

—

—

1,261

—

—

1,261

Balances at September 30, 2020

$
—

$
—

243,012,945

$
24

$
93,518

$
(248
)

$
20,211

$
113,505

(in thousands, except share data)

Redeemable

Convertible

Accumulated

Retained

Series A

Additional

Other

Earnings

Total

Preferred

Common

Common Stock

Paid-In

Comprehensive

(Accumulated

Stockholders'

Units

Units

Shares

Amount

Capital

Income (Loss)

Deficit)

Equity

Balances at December 31, 2020, as
   previously reported

$
98,110

$
(1,989
)

—

$
—

$
—

$
(202
)

$
3,339

$
1,148

Retroactive application of
   recapitalization

(98,110
)

1,989

243,012,924

24

96,097

—

—

98,110

Balance at December 31, 2020, after
   effect of reverse acquisition

—

—

243,012,924

24

96,097

(202
)

3,339

99,258

Net loss

—

—

—

—

—

—

(30,058
)

(30,058
)
Other comprehensive income

—

—

—

—

—

100

—

100

Equity-based compensation

—

—

—

—

2,573

-

—

2,573

Balances at March 31, 2021

$
—

$
—

243,012,924

$
24

$
98,670

$
(102
)

$
(26,719
)

$
71,873

Net loss

—

—

—

—

—

—

(12,440
)

(12,440
)
Other comprehensive income

—

—

—

—

—

85

—

85

Equity-based compensation

—

—

—

—

2,522

—

—

2,522

Business Combination, net of
   redemptions and equity issuance
   costs of $47.0 million

—

—

51,616,515

5

333,850

—

—

333,855

Myx acquisition

—

—

13,546,503

2

162,556

—

—

162,558

Balances at June 30, 2021

$
—

$
—

308,175,942

$
31

$
597,598

$
(17
)

$
(39,159
)

$
558,453

Net loss

—

—

—

—

—

—

(39,922
)

(39,922
)
Other comprehensive income

—

—

—

—

—

32

—

32

Options exercised, net of tax
   withholdings

—

—

1,292,541

—

1,323

—

—

1,323

Equity-based compensation

—

—

—

—

5,744

—

—

5,744

Balances at September 30, 2021

$
—

$
—

309,468,483

$
31

$
604,665

$
15

$
(79,081
)

$
525,630


	Three months ended September 30,						Nine months ended September 30,
	2022			2021			2022			2021

Revenue:
Digital	$	72,228		$	94,072		$	231,988		$	283,547
Nutrition and other		90,416			108,053			278,596			367,895
Connected fitness		3,331			5,927			33,449			5,937
Total revenue		165,975			208,052			544,033			657,379
Cost of revenue:
Digital		16,078			12,124			50,909			34,858
Nutrition and other		40,486			50,682			127,262			164,679
Connected fitness		4,745			10,261			80,910			10,417
Total cost of revenue		61,309			73,067			259,081			209,954
Gross profit		104,666			134,985			284,952			447,425
Operating expenses:
Selling and marketing		93,145			153,782			286,213			438,672
Enterprise technology and development		25,686			29,680			83,516			83,718
General and administrative		19,532			23,346			59,189			58,523
Restructuring		1,492			—			10,047			—
Impairment of intangible assets		1,000			—			1,000			—
Total operating expenses		140,855			206,808			439,965			580,913
Operating loss		(36,189	)		(71,823	)		(155,013	)		(133,488	)
Other income (expense):
Change in fair value of warrant liabilities		2,362			30,274			4,696			35,664
Interest expense		(1,152	)		(62	)		(1,174	)		(490	)
Other income, net		571			202			696			3,155
Loss before income taxes		(34,408	)		(41,409	)		(150,795	)		(95,159	)
Income tax benefit		549			1,487			1,536			12,739
Net loss	$	(33,859	)	$	(39,922	)	$	(149,259	)	$	(82,420	)

Net loss per common share, basic and diluted	$	(0.11	)	$	(0.13	)	$	(0.49	)	$	(0.31	)
Weighted-average common shares outstanding, basic and diluted		307,949			304,599			307,178			265,117

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

The Beachbody Company, Inc.

Unaudited Condensed Consolidated Statements of ~~Cash Flows~~Comprehensive Loss

(in thousands)

(in thousands)

Nine Months Ended September 30,

2021

2020

Cash flows from operating activities:

Net loss

$
(82,420
)

$
(4,560
)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Depreciation and amortization expense

40,557

31,881

Amortization of content assets

10,008

5,103

Provision for excess and obsolete inventory

4,431

1,083

Allowance for doubtful accounts

0

77

Change in fair value of derivative financial instruments

294

16

Gain on investment in convertible instrument

(3,114
)

0

Change in fair value of warrant liabilities

(35,664
)

0

Equity-based compensation

10,839

3,169

Deferred income taxes

(12,964
)

398

Other non-cash items

0

6

Changes in operating assets and liabilities:

Accounts receivable

(226
)

(2,150
)
Inventory

(68,765
)

(17,510
)
Content assets

(21,958
)

(9,922
)
Prepaid expenses

(5,364
)

7,838

Other assets

(5,575
)

(4,387
)
Accounts payable

9,095

9,216

Accrued expenses

(406
)

19,806

Deferred revenue

27,041

41,775

Other liabilities

(5,068
)

(9,499
)
Net cash provided by (used in) operating activities

(139,259
)

72,340

Cash flows from investing activities:

Purchase of property and equipment

(61,065
)

(28,107
)
Investment in convertible instrument

(5,000
)

0

Other investment

(5,000
)

0

Cash acquired in acquisition of Ladder

—

1,247

Cash paid for acquisition of Myx, net of cash acquired

(37,280
)

0

Net cash used in investing activities

(108,345
)

(26,860
)
Cash flows from financing activities:

Proceeds from exercise of stock options

4,477

0

Remittance of taxes withheld from employee stock awards

(3,154
)

0

Borrowings under Credit Facility

42,000

32,000

Repayments under Credit Facility

(42,000
)

(32,000
)
Business Combination, net of issuance costs paid

389,125

0

Net cash provided by financing activities

390,448

0

Effect of exchange rates on cash

168

(397
)
Net increase in cash and cash equivalents

143,012

45,083

Cash and cash equivalents, beginning of period

56,827

41,564

Cash and cash equivalents, end of period

$
199,839

$
86,647

Supplemental disclosure of cash flow information:

Cash paid during the year for interest

$
389

$
335

Cash paid during the year for income taxes, net

$
389

$
377

Supplemental disclosure of noncash investing activities:

Property and equipment acquired but not yet paid for

$
13,640

$
3,914

Class A Common Stock issued in connection with the acquisition of Myx

$
162,558

$
0

Fair value of Myx instrument and promissory note held by Old Beachbody

$
22,618

$
0

Old Beachbody Common units issued in connection with acquisition

$
0

$
27,889

Supplemental disclosure of noncash financing activities:

Tax asset contribution

$
—

$
(135
)
Net assets assumed from Forest Road in the Business Combination

$
293

$
—


	Three months ended September 30,						Nine months ended September 30,
	2022			2021			2022			2021

Net loss	$	(33,859	)	$	(39,922	)	$	(149,259	)	$	(82,420	)
Other comprehensive income:
Change in fair value of derivative financial instruments, net of tax		555			(70	)		405			(278	)
Reclassification of losses (gains) on derivative financial instruments included in net loss		(2	)		142			141			481
Foreign currency translation adjustment		(129	)		(40	)		(176	)		14
Total other comprehensive income		424			32			370			217
Total comprehensive loss	$	(33,435	)	$	(39,890	)	$	(148,889	)	$	(82,203	)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

The Beachbody Company, Inc.

Unaudited Condensed Consolidated Statements of Stockholders’ Equity

(in thousands)



									Accumulated			Retained
						Additional			Other			Earnings			Total
	Common Stock					Paid-In			Comprehensive			(Accumulated)			Stockholders’
	Shares			Amount		Capital			Income (Loss)			(Deficit)			Equity

Balances at December 31, 2020		243,013		$	24	$	96,097		$	(202	)	$	3,339		$	99,258
Net loss		—			—		—			—			(30,058	)		(30,058	)
Other comprehensive income		—			—		—			100			—			100
Equity-based compensation		—			—		2,573			—			—			2,573
Balances at March 31, 2021		243,013		$	24	$	98,670		$	(102	)	$	(26,719	)	$	71,873
Net loss		—			—		—			—			(12,440	)		(12,440	)
Other comprehensive income		—			—		—			85			—			85
Equity-based compensation		—			—		2,522			—			—			2,522
Business Combination, net of redemptions and equity issuance costs of $47.0 million		51,617			5		333,850			—			—			333,855
Common shares issued in connection with acquisition		13,546			2		162,556			—			—			162,558
Balances at June 30, 2021		308,176		$	31	$	597,598		$	(17	)	$	(39,159	)	$	558,453
Net loss		—			—		—			—			(39,922	)		(39,922	)
Other comprehensive loss		—			—		—			32			—			32
Equity-based compensation		—			—		5,744			—			—			5,744
Options exercised, net of tax withholdings		1,293			—		1,323			—			—			1,323
Balances at September 30, 2021		309,469		$	31	$	604,665		$	15		$	(79,081	)	$	525,630

									Accumulated
						Additional			Other						Total
	Common Stock					Paid-In			Comprehensive			Accumulated			Stockholders’
	Shares			Amount		Capital			Income (Loss)			Deficit			Equity

Balances at December 31, 2021		309,584		$	31	$	610,418		$	(21	)	$	(225,043	)	$	385,385
Net loss		—			—		—			—			(73,533	)		(73,533	)
Other comprehensive loss		—			—		—			(112	)		—			(112	)
Equity-based compensation		—			—		4,564			—			—			4,564
Options exercised, net of tax withholdings		1,132			—		1,923			—			—			1,923
Balances at March 31, 2022		310,716		$	31	$	616,905		$	(133	)	$	(298,576	)	$	318,227
Net loss		—			—		—			—			(41,867	)		(41,867	)
Other comprehensive income		—			—		—			58			—			58
Equity-based compensation		210			—		3,001			—			—			3,001
Options exercised, net of tax withholdings		588			—		737			—			—			737
Balances at June 30, 2022		311,514		$	31	$	620,643		$	(75	)	$	(340,443	)	$	280,156
Net loss		—			—		—			—			(33,859	)		(33,859	)
Other comprehensive income		—			—		—			424			—			424
Equity-based compensation		647			—		5,601			—			—			5,601
Options exercised, net of tax withholdings		159			—		194			—			—			194
Shares withheld for tax withholdings on vesting of restricted stock		(158	)		—		(183	)		—			—			(183	)
Balances at September 30, 2022		312,162		$	31	$	626,255		$	349		$	(374,302	)	$	252,333

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

The Beachbody Company, Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)


	Nine months ended September 30,
	2022			2021

Cash flows from operating activities:
Net loss	$	(149,259	)	$	(82,420	)
Adjustments to reconcile net loss to net cash used in operating activities:
Impairment of intangible assets		1,000			—
Depreciation and amortization expense		58,858			40,557
Amortization of content assets		18,673			10,008
Provision for inventory and net realizable value adjustment		35,195			4,431
Realized losses on hedging derivative financial instruments		141			481
Gain on investment in convertible instrument		—			(3,114	)
Change in fair value of warrant liabilities		(4,696	)		(35,664	)
Equity-based compensation		13,166			10,839
Deferred income taxes		(1,754	)		(12,964	)
Amortization of debt issuance costs		262			—
Paid-in-kind interest expense		221			—
Other non-cash items		311			—
Changes in operating assets and liabilities:
Inventory		31,676			(68,765	)
Content assets		(16,111	)		(21,958	)
Prepaid expenses		8,681			(5,364	)
Other assets		4,496			(5,762	)
Accounts payable		(30,379	)		9,095
Accrued expenses		(209	)		(406	)
Deferred revenue		(3,690	)		27,041
Other liabilities		(3,525	)		(5,294	)
Net cash used in operating activities		(36,943	)		(139,259	)
Cash flows from investing activities:
Purchase of property and equipment		(23,236	)		(61,065	)
Investment in convertible instrument		—			(5,000	)
Other investment		—			(5,000	)
Cash paid for acquisition, net of cash acquired		—			(37,280	)
Net cash used in investing activities		(23,236	)		(108,345	)
Cash flows from financing activities:
Proceeds from exercise of stock options		3,162			4,477
Remittance of taxes withheld from employee stock awards		(308	)		(3,154	)
Borrowings under Credit Facility		—			42,000
Repayments under Credit Facility		—			(42,000	)
Business combination, net of issuance costs paid		—			389,125
Shares withheld for tax withholdings on vesting of restricted stock		(183	)		—
Borrowings under Term Loan		50,000			—
Repayments under Term Loan		(313	)		—
Payment of debt issuance costs		(4,075	)		—
Net cash provided by financing activities		48,283			390,448
Effect of exchange rates on cash		(1,095	)		168
Net (decrease) increase in cash and cash equivalents		(12,991	)		143,012
Cash, cash equivalents and restricted cash, beginning of period		107,054			56,827
Cash and cash equivalents, end of period	$	94,063		$	199,839
Supplemental disclosure of cash flow information:
Cash paid during the year for interest	$	738		$	389
Cash paid during the year for income taxes, net		365			389
Supplemental disclosure of noncash investing activities:
Property and equipment acquired but not yet paid for	$	789		$	13,640
Class A Common Stock issued in connection with acquisition		—			162,558
Fair value of Myx instrument and promissory note held by Old Beachbody		—			22,618
Supplemental disclosure of noncash financing activities:
Net assets assumed in the Business Combination		—			293
Warrants issued in relation to Term Loan		5,236			—
Debt issuance costs, accrued but not paid		136			—

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

The Beachbody Company, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

~~Organization,~~ Description of Business and Summary of Significant Accounting Policies

~~Organization~~

On June 25, 2021 (the “Closing Date”), Forest Road Acquisition Corp. (“Forest Road”), a special purpose acquisition company, consummated the Business Combination Agreement (the “Business Combination Agreement”) dated as of February 9, 2021, by and among Forest Road, The Beachbody Company Group, LLC (“Old Beachbody”), BB Merger Sub, LLC, (“BB Merger Sub”), MFH Merger Sub, LLC (“Myx Merger Sub”), and Myx Fitness Holdings, LLC (“Myx”).

Pursuant to the terms of the Business Combination Agreement, BB Merger Sub merged with and into Old Beachbody, with Old Beachbody surviving as a wholly-owned subsidiary of Forest Road (the “Surviving Beachbody Entity”); (2) Myx Merger Sub merged with and into Myx, with Myx surviving as a wholly-owned subsidiary of Forest Road; and (3) the Surviving Beachbody Entity merged with and into Forest Road, with Forest Road surviving such merger (the “Surviving Company”, and such mergers the “Business Combination”). On the Closing Date, the Surviving Company changed its name to The Beachbody Company, Inc. (the “Company”, “Beachbody”, “we” or “us”).

Business

The Beachbody Company, Inc. (“Beachbody” or the “Company”) is a leading subscription health and wellness ~~company.~~company and the creator of some of the world’s most popular fitness programs. The Company’s fitness programs are available for streaming through subscription to Beachbody ~~is focused~~On Demand (“BOD”) and, together with the Company’s live fitness and comprehensive nutrition programs, through subscription to Beachbody On Demand Interactive (“BODi”). Prior to July 2022, fitness programs were also available on the Openfit digital ~~platform development, fitness content~~platform. Beachbody offers nutritional products such as Shakeology nutrition shakes, BEACHBAR snack bars, and ~~brand creation, proprietary nutritional product formulation~~Ladder premium supplements, which have been designed and clinically tested to help customers achieve their goals. Beachbody also offers a professional-grade stationary cycle with a 360-degree touch screen tablet and connected fitness ~~across three brands: Beachbody, Openfit and Myx.~~software. The Beachbody On Demand streaming service with workouts from Beachbody’s programs such as P90X, Insanity, and 21 Day Fix, and Openfit, that includes live trainer-led workouts and personalized nutrition, are each available as an app on iOS and Android mobile devices; a streaming channel on OTT devices such as Apple TV, Roku, Amazon Fire, and Chromecast; and online. Myx’s interactive fitness platform provides commercial grade stationary bikes and accessories and on-demand subscription-based instructor-led fitness classes that enable customers to have an all-in-one home fitness studio. Beachbody’sCompany’s revenue ishas historically been generated primarily ~~generated~~ through a network of ~~independent distributors~~micro-influencers (“Coaches” ~~or “micro-influencers”~~), ~~internet~~social media marketing channels, and direct response advertising. ~~Beachbody markets and sells its products primarily in~~During the ~~United States, United Kingdom, and Canada, and approximately~~ 30~~% of Beachbody’s revenues for the three and~~ nine months ended September 30, ~~2021 are attributable to Shakeology, Beachbody’s premium nutritional shake.~~2022, the Company commenced and completed a process of consolidating its Openfit streaming fitness offering onto a single Beachbody digital platform. See Note 14,

~~Summary of Significant Accounting Policies~~Restructuring, for additional information regarding the Company’s strategic realignment initiative.

Basis of Presentation and Principles of Consolidation

The Company prepares its consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information as determined by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) and pursuant to the regulations of the U.S. Securities and Exchange Commission (“SEC”).

The merger between BB Merger Sub and Old Beachbody was accounted for as a reverse recapitalization in accordance with GAAP (the “Reverse Recapitalization”). Under this method of accounting, Forest Road is treated as the acquired company and Old Beachbody is treated as the acquirer for financial reporting purposes.

Accordingly, for accounting purposes, the Reverse Recapitalization was treated as the equivalent of Old Beachbody issuing stock for the net assets of Forest Road, accompanied by a recapitalization. The net assets of Forest Road are stated at historical cost, with no goodwill or other intangible assets recorded, see Note 2.

~~Old Beachbody was determined to be the accounting acquirer based on the following predominant factors:~~



~~Old Beachbody’s shareholders have the largest portion of the voting rights in the Company;~~



~~the Board and Management are primarily composed of individuals associated with Old Beachbody; and~~



~~Old Beachbody was the larger entity based on historical operating activity and Old Beachbody had the larger employee base at the time of the Business Combination.~~

The consolidated assets, liabilities and results of operations prior to the Reverse Recapitalization are those of Old Beachbody. The shares and corresponding capital amounts and income (losses) per share, prior to the Business Combination, have been retroactively restated based on shares reflecting the exchange ratio established in the Business Combination.

~~Old Beachbody was determined to be the accounting acquirer in the acquisition of Myx. As such, the acquisition is considered a business combination under ASC 805,~~ ~~Business Combinations~~, and was accounted for using the acquisition method of accounting. Beachbody recorded the fair value of assets acquired and liabilities assumed from Myx, see Note 9. The presented financial information for the nine months ended September 30, 2021 includes the financial information and activities for Myx for the period from June 26, 2021 to September 30, 2021.

~~The unaudited condensed consolidated financial statements include the accounts of the Company and its controlled subsidiaries. All intercompany transactions and balances have been eliminated.~~

~~Use of Estimates~~

~~The~~ preparation of ~~the~~ unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that ~~affect~~impact the amounts reported in the unaudited condensed consolidated financial statements and accompanying notes. Significant estimates include, but are not limited to, the useful life and recoverability of long-lived assets, the valuation of ~~acquired~~warrant liabilities, the recognition and measurement of income tax assets and liabilities, the valuation of intangible ~~assets, revenue arrangements with multiple performance obligations, equity-based compensation, amortization of content~~ assets, impairment of goodwill, and the ~~useful lives and recoverability~~net realizable value of ~~long-lived assets.~~inventory. The Company bases these estimates on historical experience and on various other assumptions that it believes are reasonable under the circumstances, the results of which form the basis for making judgements about the carrying amounts of assets and liabilities. Actual results could differ from those estimates.

~~Unaudited Interim Condensed Financial Statements~~

The unaudited ~~interim~~ condensed consolidated financial statements have been prepared on the same basis as the annual audited ~~annual~~ consolidated financial statements and, in the opinion of management, include all ~~adjustments consisting of only~~ normal recurring adjustments necessary for the fair statement of the Company’s financial position, ~~as of September 30, 2021, its~~ results of operations, ~~for the three and nine months ended September 30, 2021 and 2020~~ and cash ~~flows for the nine months ended September 30, 2021 and 2020.~~flows. The financial data and other financial information disclosed in the notes to these unaudited condensed consolidated financial statements ~~related to the three- and nine-month periods~~ are also unaudited. ~~The results of operations~~These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes included in the Company’s Annual Report on Form 10-K for the ~~three and nine months~~year ended ~~September 30, 2021~~December 31, 2021. Interim results are not necessarily indicative of the results expected for the full fiscal year or any other period.

Segments

Operating segments are defined as the components of an entity for which separate financial information is available and that are regularly reviewed by the Chief Operating Decision Maker (“CODM”) in assessing performance and in deciding how to allocate resources to an individual segment. Prior to the three months ended September 30, 2022, the Company concluded it had two operating segments, Beachbody and Other, and one reportable segment, Beachbody. During the three months ended September 30, 2022, in connection with the consolidation of its Openfit streaming fitness offering onto a single Beachbody digital platform, the Company determined that it has one consolidated operating segment and changed its segment reporting accordingly.

~~These unaudited~~

The Company considers its chief executive officer to be the Company’s CODM. The CODM manages business operations, evaluates performance, and allocates resources based on the Company’s consolidated net revenues and contribution margin.

Summary of Changes in Significant Accounting Estimates

Goodwill and Intangible Assets, Net

Interim Impairment Test

Goodwill represents the excess of the fair value of the consideration transferred in a business combination over the fair value of the underlying identifiable assets and liabilities acquired. Goodwill and intangible assets deemed to have an indefinite life are not amortized, but instead are assessed for impairment annually as of October 1 and between annual tests if an event or change in circumstances occurs that would more likely than not reduce the fair value of a reporting unit below its carrying value or indicate that it is more likely than not that the indefinite-lived asset is impaired.

Due to the sustained decline in the Company’s market capitalization and macro-economic conditions observed in the three months ended June 30, 2022, the Company performed an interim ~~condensed consolidated financial statements should be read~~test for impairment of its goodwill as of June 30, 2022. In performing the interim impairment test for goodwill, the Company elected to bypass the optional qualitative test and proceeded to perform quantitative tests by comparing the carrying value of each reporting unit to its estimated fair value. The Company previously tested its reporting units for impairment as of December 31, 2021 which resulted in ~~conjunction with the consolidated financial statements~~an impairment and ~~the related notes included~~write-off of all goodwill in the Company’s ~~annual financial statements as~~Other reporting unit. The results of ~~and~~the Company’s interim test for impairment at June 30, 2022 concluded that the ~~fiscal year ended December 31, 2020.~~fair value of its Beachbody reporting unit exceeded its carrying value, resulting in no

~~Fair Value Option~~ impairment.

As a result of the change in segment reporting discussed above, the Company completed a qualitative assessment for testing its goodwill by reporting unit for impairment both prior to and subsequent to the change. The ~~guidance in ASC 825,~~ ~~Financial Instruments, provides a~~qualitative assessment is an evaluation of whether it is more likely than not that the fair value ~~option election that allows entities to make an irrevocable election~~ of ~~fair value as~~a reporting unit is less than its carrying amount. In performing its qualitative assessment, the ~~initial and subsequent measurement attribute for certain eligible financial assets and liabilities. Unrealized gains and losses on items for~~Company considered the significant margin by which the fair value ~~option~~of its reporting unit exceeded carrying value in its most recent quantitative test in addition to events and changes in circumstances since its most recent quantitative test that could have significantly impacted the assumptions used in the valuation. Based on this qualitative assessment, the Company concluded that no impairment indicators existed for goodwill both prior to and subsequent to the change in segment reporting.

Indefinite-lived Intangible Assets

During the three months ended March 31, 2022, the Company determined that one of its acquired trade names no longer has ~~been elected are reported in earnings. The decision to elect the fair value option is determined on~~ an ~~instrument-by-instrument basis, must be applied to an entire instrument, and is irrevocable once elected.~~indefinite life. The Company ~~elected to measure~~tested the ~~investment in~~trade name for impairment before changing the ~~convertible instrument from Myx using the~~useful life and determined there was no impairment based on its assessment of fair value option at each reporting date. Assets and liabilities measured at fair value pursuant to this guidance are required to be reported separately in the unaudited condensed consolidated balance sheets or the footnotes from those instruments using another measurement method.

~~Fair Value~~

value. The Company applies fair value accounting for assets and liabilities measured on a recurring and nonrecurring basis. For assets and liabilities that are measured using quoted prices in active markets for identical assets or liabilities,is prospectively amortizing the ~~total fair value is the published market price per unit multiplied by the number~~trade name over its remaining estimated useful life of units held without consideration of transaction costs (Level 1). Assets and liabilities that are measured using significant other observable inputs are valued by reference to similar assets or liabilities, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data (Level 2). For all remaining assets and liabilities for which there are no significant observable inputs, fair value is derived using an assessment of various discount rates, default risk, credit quality, and the overall capital market liquidity (Level 3). These valuations require significant judgment.two years

~~Accounts Receivable, Net~~

beginning January 1, 2022. The Company ~~provides credit in the normal course~~recorded $1.8 million, or $0.01 per share, and $5.6 million, or $0.02 per share, of ~~business to its customers. Accounts receivable consists primarily~~amortization expense for this trade name as a component of credit card receivables arising from the sale of products to customers on an installment basis, which generally have payment terms ranging from one to three months. Receivables are individually insignificantselling and are due from a large number of geographically dispersed customers. Accounts receivable is reported net of allowances for doubtful accounts which were approximately zero as of September 30, 2021 and December 31, 2020. The allowance for doubtful accounts is evaluated and adjusted to reflect the Company’s expected credit losses based on collection history and an analysis of the accounts receivable aging. ~~The change in the allowance for doubtful accounts~~marketing expenses during the three and nine months ended September 30, ~~2021 and 2020 is as follows (in thousands):~~

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Balance, beginning of period

$
16

$
41

$
16

$
69

Charges

0

45

0

77

Write-offs

—

(56
)

—

(116
)
Balance, end of period

$
16

$
30

$
16

$
30

~~Business Combinations~~2022, respectively.

~~The~~Due to reduced revenue and margin forecasts for certain products, the Company ~~accounts~~performed an interim test for ~~business combinations under the acquisition method~~impairment of accounting. The cost of an acquired company is assigned to the tangible and identifiable assets purchased and the liabilities assumed on the basis of their fair values at the date of acquisition. Any excess of the purchase price over the fair value of tangible andindefinite-lived intangible assets ~~acquired is assigned to goodwill. The transaction costs associated with business combinations are expensed as they are incurred.~~

~~Common Stock Warrant Liability~~

~~The Company assumed~~ ~~10,000,000~~ ~~warrants originally issued in Forest Road’s initial public offering (the “Public Warrants”) and~~ ~~5,333,333~~ warrants issued in a private placement that closed concurrently with Forest Road’s initial public offering, (the “Private Placement Warrants”) upon the Business Combination. The Public and Private Placement Warrants entitle the holder to purchase 1 ~~share of Class A Common Stock at an exercise price of $11.50~~ ~~per share. All of the Public and Private Placement Warrants remained outstanding~~ as of September 30, ~~2021.~~2022. The ~~Public Warrants~~fair value of the indefinite-lived trade name was calculated using a relief-from-royalty approach and was determined to be lower than its carrying value, primarily due to the reduced revenue and margin forecasts for certain supplements. The Company recorded a $1.0 million non-cash impairment charge for these intangible assets during the three and nine months ended September 30, 2022.

Long-Lived Assets

Management reviews long-lived assets (including property and equipment, content assets, and definite-lived intangible assets) for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Recoverability of assets is determined by first grouping the long-lived assets at the lowest level for which there are ~~publicly traded~~identifiable cash flows, and ~~become exercisable on~~ ~~November 30, 2021~~ ~~provided~~then comparing the carrying value of each asset group to its forecasted undiscounted cash flows. If the evaluation of the forecasted undiscounted cash flows indicates that the carrying value of the asset group is not recoverable, an impairment test of the asset group is performed. Impairment is recognized if the carrying amount of the asset group exceeds its fair value. The Company ~~has an effective registration statement~~performed a test for recoverability at June 30, 2022 and ~~are exercisable for cash unless certain conditions occur, such as~~concluded that the failure to have an effective registration statement related to the shares issuable upon exercise or redemption by the Company under certain conditions, at which time the warrants may be cashless exercised. The Private Placement Warrants are transferable, assignable or salable in certain limited exceptions. The Private Placement Warrants were not transferable, assignable or salable until ~~July 25, 2021~~, subject to certain limited exceptions. The Private Placement Warrants are exercisable for cash or on a cashless basis, at the holder’s option, and are non-redeemable so long as they are held by the initial purchasers or their permitted transferees. If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will cease to be Private Placement Warrants, and become Public Warrants and will be redeemable by the Company and exercisable by such holders on the same basis as the other Public Warrants.carrying value of its long-lived assets was recoverable.

Due to reduced revenue and margin forecasts for certain supplements, the Company tested the related asset group for recoverability as of September 30, 2022 and determined that the asset group was not recoverable. The fair value of the assets within the asset group was then calculated to determine if an impairment loss should be recognized. The fair value of the formulae intangible assets, which is the long-lived asset within the asset group, was estimated primarily using a replacement cost methodologyand calculated to be greater than the carrying value. As a result, no impairment was recognized.

Recently Adopted Accounting Pronouncements

~~The Company evaluated~~In August 2020, the ~~Public~~FASB issued ASU 2020-06, Debt – Debt with Conversion and ~~Private Placement Warrants under ASC 815,~~Other Options (Subtopic 470-20) and Derivatives and ~~Hedging—~~Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40), to simplify the accounting for certain financial instruments with characteristics of liabilities and equity. The FASB reduced the number of accounting models for convertible debt and convertible preferred stock instruments and made certain disclosure amendments to improve the information provided to users. In addition, the FASB amended the derivative guidance for the “own stock” scope exception and certain aspects of the EPS guidance. The Company adopted this new accounting guidance on a prospective basis on January 1, 2022, and ~~concluded they do not meet~~ the ~~criteria to be classified in stockholders’ equity. Specifically, the exercise of the Public and Private Placement Warrants may be settled in cash upon the occurrence of~~adoption did not have a tender offer or exchange that involves 50% or more of our Class A stockholders. Because not all of the voting stockholders need to participate in such tender offer or exchange to trigger the potential cash settlement and the Company does not control the occurrence of such an event, the Company concluded that the Public and Private Placement Warrants do not meet the conditions to be classified in equity. Since the Public and Private Placement Warrants meet the definition of a derivative under ASC 815, the Company recorded these warrants as liabilities in the unaudited condensed consolidated balance sheets at fair value, with subsequent changes in their respective fair values recognized in the change in fair value of warrant liabilities within the unaudited condensed consolidated statements of operations at each reporting date. The Public Warrants were publicly traded and thus had an observable market price to estimate fair value. The Private Placement Warrants were valued using a Black-Scholes option-pricing model as described in Note 4 to thematerial effect on its unaudited condensed consolidated financial statements.

~~Investment in Convertible Instrument~~

~~In December 2020, the Company purchased a $10.0~~ ~~million convertible instrument from Myx. The convertible instrument was scheduled to mature~~ ~~18 months~~ ~~from issuance and bore interest of~~ 11% per annum. The principal and accrued interest on the convertible instrument was to automatically convert into preferred shares upon the closing by Myx of a convertible preferred equity financing with gross proceeds of at least $~~35.0~~ ~~million (a “Qualified Financing”) at a conversion price equal to~~ 85% of the lowest price per unit paid in cash by investors in such Qualified Financing. Upon a change in control involving the Company and a special purpose acquisition company, immediately prior to the change in control transaction, the principal and accrued interest was to be automatically converted into preferred equity units of Myx at a conversion price equal to 85~~% of the price per unit contemplated in the change of control transaction. Such preferred equity units were to automatically convert into common shares of the surviving entity.~~

~~In March 2021, the Company increased the principal of the convertible instrument from Myx from $10.0~~ ~~million to $15.0~~ ~~million.~~

~~In connection with the Business Combination, the principal and interest were effectively settled at a fair value of $18.4~~ ~~million. As of December 31, 2020, the convertible instrument was included within other assets in the consolidated balance sheets.~~

Prior to the Business Combination, the Company elected to measure the investment in convertible instrument from Myx using the fair value option at each reporting date. Under the fair value option, bifurcation of an embedded derivative was not necessary, and all related gains and losses on the host contract and derivative due to change in the fair value was reflected in other income, net in the condensed consolidated statements of operations.

~~Other Investment~~

~~As of September 30, 2021, the Company has an investment in equity securities of $5.0~~ million, with no readily determinable fair value. This equity investment is reported within other assets on the unaudited condensed consolidated balance sheets. The Company uses the measurement alternative for this investment, and its carrying value is reported at cost, adjusted for impairments or any observable price changes in ordinary transaction with identical or similar instruments. As of September 30, 2021, 0 ~~adjustments to the carrying value of this investment were made.~~

~~Revenue Recognition~~

The Company’s primary sources of revenue are from sales of digital subscriptions, nutritional products and connected fitness equipment. The Company records revenue when it fulfills its performance obligation to transfer control of the goods or services to its customer. Control of shipped items is generally transferred when the product is delivered to the customer.

The amount of revenue recognized is the consideration that the Company expects it will be entitled to receive in exchange for transferring goods or services to its customers. Control of services, which are primarily digital subscriptions, transfers over time, and as such, revenue is recognized ratably over the subscription period (up to 12 months), using a mid-month convention. The Company sells a variety of bundled products that combine digital subscriptions, nutritional products, and/or other fitness products. The Company considers these sales to be revenue arrangements with multiple performance obligations and allocates the transaction price to each performance obligation based on its relative stand-alone selling price. The Company defers revenue when it receives payments in advance of delivery of products or the performance of services.

Revenue is recorded net of expected returns, discounts, and credit card chargebacks, which are estimated using the Company’s historical experience. Revenue is presented net of sales taxes and value added taxes (VAT and GST/HST) which are collected from customers and remitted to applicable government agencies.

The Company is the principal in all its relationships where third parties sell or distribute the Company’s goods or services. Payments made to the third parties are recorded in selling and marketing expenses within the unaudited condensed consolidated statements of operations.

~~Recently Adopted Accounting Pronouncements or~~ Accounting Pronouncements Not Yet Adopted

In ~~December 2019,~~October 2021, the FASB issued ASU ~~2019-12,~~2021-08, ~~Income Taxes~~Business Combinations (Topic ~~740)~~805): ~~Simplifying the~~ Accounting for ~~Income Taxes~~Contract Assets and Contract Liabilities from Contracts with Customers, which ~~removes specific exceptions~~requires an acquirer to apply ASC 606 to recognize and measure contract assets and liabilities from contracts with customers acquired in a business combination on the acquisition date rather than the general ~~principles~~guidance in ~~Topic 740 in addition to simplifying other areas of Topic 740.~~ASC 805. The guidance in this update iswill be effective for public ~~business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020 and is effective for all other entities~~companies for fiscal years beginning after December 15, ~~2021 and~~2022, including interim periods within those fiscal years with early adoption permitted. The Company is evaluating the potential impact of adopting this guidance on its consolidated financial statements.

In September 2022, the FASB issued ASU 2022-04, Liabilities-Supplier Finance Programs (Topic 405-50) - Disclosure of Supplier Finance Program Obligations, which requires that a buyer in a supplier finance program disclose sufficient information about the program to allow a user of financial statements to understand the program’s nature, activity during the period, changes from period to period, and potential magnitude. The guidance in this update will be effective for fiscal years beginning after December 15, 2022, ~~with early adoption permitted.~~except for the amendment on roll forward information which is effective for fiscal years beginning after December 15, 2023. The Company ~~adopted~~ ~~ASU 2019-12 in~~is evaluating the ~~first quarter~~potential impact of ~~2021, and the adoption had~~ no ~~material impact to the Company’s unaudited condensed~~this guidance on its consolidated financial ~~statements.~~ statements and related disclosures.

~~Business Combination~~

As discussed in Note 1, on June 25, 2021, the Company consummated the Business Combination Agreement dated February 9, 2021, with Old Beachbody surviving the merger as a wholly-owned subsidiary of the Company.

At the effective time of the Merger (the “Effective Time”), and subject to the terms and conditions of the Business Combination Agreement, each equity unit of Old Beachbody, other than those held by Carl Daikeler and certain of his affiliated and related entities, was canceled and converted into the right to receive ~~3.359674941~~ ~~shares (the “Exchange Ratio”) of the Company’s Class A Common Stock, $0.0001~~ par value per share (the “Class A Common Stock”), and each equity unit of Old Beachbody held by Carl Daikeler and certain of his affiliated and related entities was canceled and converted into the right to receive the number of shares of the Company’s Class X Common Stock, par value $~~0.0001~~ ~~per share, (the “Class X Common Stock,” and, together with the Class A Common Stock, the “Common Stock”)~~ ~~equal~~ ~~to the Exchange Ratio.~~

~~Pursuant to the Business Combination Agreement,~~ ~~3,750,000~~ shares held by Forest Road Acquisition Sponsor LLC (the “Sponsor”) will be unvested and are subject to forfeiture if certain earnout conditions are not satisfied (“Forest Road Earn-out Shares”). Subject to certain other terms and conditions, the Forest Road Earn-out Shares will vest, in equal tranches of 10~~% each,~~ co~~mmencing on December 22, 2021, upon the occurrence of the Company’s last sale price on the New York Stock Exchange (“NYSE”) exceeding each of the following price-per-share thresholds for any~~ 20 ~~trading days within any consecutive~~ 30~~-day trading period,: $12.00, $13.00, $14.00, $15.00~~ ~~and $16.00. Any Sponsor Shares that do not vest within~~ 10 years after Closing will be forfeited. The Forest Road Earn-out Shares are accounted for as equity-classified equity instruments, were included as merger consideration as part of the Reverse Recapitalization, and recorded in additional paid-in capital. As of September 30, 2021, all Forest Road Earn-out Shares are unvested.

Upon the closing of the Business Combination, the Company’s certificate of incorporation was amended and restated to, among other things, increase the total number of authorized shares of all classes of capital stock to ~~2,000,000,000~~ ~~shares, $0.0001~~ ~~par value per share, of which,~~ ~~1,600,000,000~~ ~~shares are designated as Class A Common Stock,~~ ~~200,000,000~~ ~~shares are designated as Class X Common Stock,~~ ~~100,000,000~~ ~~shares are designated as Class C Common Stock and~~ ~~100,000,000~~ ~~shares are designated as Preferred Stock. The holder of each share of Class A Common Stock is entitled to~~ ~~one vote, the holder of each share of Class X Common Stock is entitled to~~ ~~ten votes~~ ~~and except as otherwise required by law, the holder of each share of Class C Common Stock is not entitled to any voting powers.~~

~~In connection with the Business Combination, a number of subscribers purchased an aggregate of~~ ~~22,500,000~~ ~~shares of Class A Common Stock (the “PIPE”) from the Company, for a purchase price of $10.00~~ ~~per share and an aggregate purchase price of $225.0~~ ~~million (the “PIPE Shares”), pursuant to separate subscription agreements entered into effective as of February 9, 2021.~~

~~At the Effective Time, and subject to the terms and conditions of the Business Combination Agreement, each Myx equity unit was canceled and converted into the right to receive approximately~~ ~~13.5~~ ~~million shares of Class A Common Stock; provided, however, that certain holders of Myx units received an amount in cash equal to the value of such shares not to exceed $37.7~~ ~~million.~~

The following table reconciles the elements of the Business Combination to the unaudited condensed consolidated statement of cash flows and the unaudited condensed consolidated statement of stockholders’ equity for the nine months ended September 30, 2021 (in thousands):2. Revenue

Recapitalization

Cash- Forest Road trust and cash, net of redemptions

$
216,444

Cash- PIPE Financing

225,000

Less: Non-cash net assets assumed from Forest Road

293

Less: Fair value of Public and Private Warrants

(60,900
)
Less: Transaction costs and advisory fees for Beachbody
allocated to equity

(19,923
)
Less: Transaction costs and advisory fees for Forest Road

(27,059
)
Net Business Combination

333,855

Less: Non-cash net assets assumed from Forest Road

(293
)
Less: Transaction costs and advisory fees for Beachbody
allocated to warrants

(5,337
)
Add: Non-cash fair value of Forest Road warrants

60,900

Net cash contributions from Business Combination

$
389,125

The Company recorded transaction costs and advisory fees allocated to warrants as a component of change in fair value of warrant liabilities in the unaudited condensed consolidated statements of operations.

~~The number of shares of common stock issued immediately following the consummation of the Business Combination:~~


~~Common stock of Forest Road, net of redemptions~~			~~21,616,515~~
~~Forest Road shares held by the Sponsor (1)~~			~~7,500,000~~
~~Shares issued in PIPE Financing~~			~~22,500,000~~
Business Combination and PIPE Financing shares - Class A common stock			~~51,616,515~~
~~Myx equity units- Class A common stock~~			~~13,546,503~~
~~Old Beachbody equity units - Class A Common Stock (2)~~			~~101,762,614~~
~~Old Beachbody equity units - Class X Common Stock (3)~~			~~141,250,310~~
Total shares of common stock immediately after Business Combination			~~308,175,942~~

~~(1)~~

~~Includes~~ ~~3,750,000~~ ~~Forest Road Earn-out Shares.~~

~~(2)~~

~~The number of Old Beachbody equity units - Class A Common Stock was determined from~~ ~~20,220,589~~ ~~common units and~~ ~~10,068,841~~ ~~preferred units of Old Beachbody outstanding immediately prior to the closing of the Business Combination converted at the Exchange Ratio.~~

~~(3)~~

~~The number of Old Beachbody equity units - Class X Common Stock was determined from~~ ~~42,042,850~~ ~~common units of Old Beachbody outstanding immediately prior to the closing of the Business Combination converted at the Exchange Ratio.~~

~~Revenue~~

The Company’s revenue disaggregated by revenue type and geographic region is as follows (in thousands):


	Reportable Segment						Three months ended September 30,
	Beachbody		Other		Total		2022		2021
Three Months Ended September 30, 2021

Revenue Type:
Digital	$	86,879	$	7,193	$	94,072	$	72,228	$	94,072
Nutrition and other								90,416		108,053
Connected fitness		—		5,927		5,927		3,331		5,927
Nutrition and other		107,411		642		108,053
Total revenue	$	194,290	$	13,762	$	208,052	$	165,975	$	208,052

Geographic region:
United States	$	173,935	$	13,762	$	187,697	$	149,132	$	187,697
Rest of world1		20,355		—		20,355		16,843		20,355
Total revenue	$	194,290	$	13,762	$	208,052	$	165,975	$	208,052


	Reportable Segment						Nine months ended September 30,
	Beachbody		Other		Total		2022		2021
Three Months Ended September 30, 2020


Revenue Type:
Digital	$	95,950	$	3,132	$	99,082	$	231,988	$	283,547
Nutrition and other		152,318		79		152,397		278,596		367,895
Connected fitness								33,449		5,937
Total revenue	$	248,268	$	3,211	$	251,479	$	544,033	$	657,379

Geographic region:
United States	$	225,533	$	3,211	$	228,744	$	487,760	$	588,942
Rest of world1		22,735		—		22,735		56,273		68,437
Total revenue	$	248,268	$	3,211	$	251,479	$	544,033	$	657,379

Reportable Segment

Beachbody

Other

Total

Nine Months Ended September 30, 2021

Revenue Type:

Digital

$
268,812

$
14,735

$
283,547

Connected fitness

—

5,937

5,937

Nutrition and other

365,835

2,060

367,895

Total revenue

$
634,647

$
22,732

$
657,379

Geographic region:

United States

$
566,210

$
22,732

$
588,942

Rest of world1

68,437

—

68,437

Total revenue

$
634,647

$
22,732

$
657,379

Reportable Segment

Beachbody

Other

Total

Nine Months Ended September 30, 2020

Revenue Type:

Digital

$
233,746

$
6,218

$
239,964

Nutrition and other

399,255

80

399,335

Total revenue

$
633,001

$
6,298

$
639,299

Geographic region:

United States

$
577,478

$
6,298

$
583,776

Rest of world1

55,523

—

55,523

Total revenue

$
633,001

$
6,298

$
639,299

(1)

Consists of Canada, United Kingdom, and France.

No single country accounted for more than 10% of total revenue during the three and nine months ended September 30, 2022 and 2021.

Deferred Revenue

Deferred revenue is recorded for nonrefundable cash payments received for the Company’s performance obligation to transfer, or stand ready to transfer, goods or services in the future. Deferred revenue consists of subscription fees billed that have not been recognized and physical products sold that have not yet been delivered. During the three and nine months ended September 30, 2022, the Company recognized $14.1 million and $102.2 million of revenue that was included in the deferred revenue balance as of December 31, 2021. During the three and nine months ended September 30, 2021, the Company recognized $11.3 million and $90.5 million ~~respectively,~~ of revenue that was included in the deferred revenue balance as of December 31, 2020. ~~During the three and nine months ended September 30, 2020, the Company recognized $8.5~~ ~~million and $64.7~~ ~~million, respectively, of revenue that was included in the deferred revenue balance as of December 31, 2019.~~

3. Fair Value Measurements

The Company’s financial assets and liabilities subject to fair value measurements on a recurring basis and the level of inputs used for such measurements were as follows (in thousands):

September 30, 2021

Level 1

Level 2

Level 3

Assets

Derivative assets

$
—

$
187

$
—

Total Assets

$
—

$
187

$
—

Liabilities

Common stock warrants (Public)

$
11,900

$
—

$
—

Common stock warrants (Private Placement)

—

—

8,000

Total Liabilities

$
11,900

$
—

$
8,000


							September 30, 2022
	December 31, 2020						Level 1		Level 2		Level 3
	Level 1		Level 2		Level 3
Assets
Derivative assets	$	—	$	164	$	—	$	—	$	996	$	—
Investment in convertible instrument		—		—		10,288
Total Assets	$	—	$	164	$	10,288
Total assets							$	—	$	996	$	—

Liabilities
Public warrants							$	1,621	$	—	$	—
Private placement warrants								—		—		640
Term Loan warrants								—		—		3,113
Total liabilities							$	1,621	$	—	$	3,753

							December 31, 2021
							Level 1		Level 2		Level 3

Assets
Derivative assets							$	—	$	314	$	—
Total assets							$	—	$	314	$	—

Liabilities
Public warrants							$	2,701	$	—	$	—
Private placement warrants								—		—		2,133
Total liabilities							$	2,701	$	—	$	2,133

Fair values of cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses approximate the recorded value due to the short period of time to maturity. The fair value of the ~~Public Warrants,~~public warrants, which trade in active markets, is based on quoted market ~~prices for identical instruments.~~prices. The fair value of derivative instruments is based on Level 2 inputs such as observable forward rates, spot rates, and foreign currency exchange rates. The Company’s ~~Private Placement~~private placement and Term Loan warrants ~~and investment in the convertible instrument~~ are classified within Level 3 of the fair value hierarchy because their fair values are is based on significant inputs that are unobservable in the market. ~~The fair value of goodwill and intangible assets is based on a valuation performed by a third-party using Level 3 inputs.~~

~~The valuation of the~~ Private Placement Warrants and, prior to the Business Combination, the investment in convertible instrument use assumptions and estimates the Company believes would be made by a market participant in making the same valuations. The Company assesses these assumptions and estimates on an on-going basis as additional data impacting the assumptions and estimates are obtained.

The Company determined the fair value of the ~~Private Placement Warrants~~private placement warrants using a Black-Scholes option-pricing model and the quoted price of the Company’s ~~common stock.~~Class A Common Stock. Volatility was based on the implied volatility derived primarily from the average of the actual market activity of the Company’s peer group. The expected life was based on the remaining contractual term of the ~~Private Placement Warrants,~~private placement warrants, and the risk-free interest rate was based on the implied yield available on U.S. ~~Treasury Securities~~treasury securities with a maturity equivalent to the warrants’ expected life. The significant unobservable input used in the fair value measurement of the ~~Private Placement Warrants~~private placement warrants is the implied volatility. Significant changes in the implied volatility would result in a significantly higher or lower fair value measurement, respectively.

The following table presents significant assumptions utilized in the valuation of the ~~Private Placement Warrants~~private placement warrants on ~~the Closing Date of the Business Combination~~September 30, 2022 and ~~at September 30,~~December 31, 2021:



	As of September 30,			As of June 25,			September 30, 2022			December 31, 2021
	2021			2021
Risk-free rate		0.9	%		0.9	%		4.2	%		1.2	%
Dividend yield rate		0.0	%		0.0	%		—			—
Volatility		55.0	%		45.0	%		80.0	%		65.0	%
Contractual term (in years)		4.74			5.00			3.74			4.49
Exercise price	$	11.50		$	11.50		$	11.50		$	11.50

The following table presents changes in the fair value of the ~~Private Placement Warrants~~private placement warrants for the three and nine months ended September 30, 2022 and 2021:


							Three months ended September 30,						Nine months ended September 30,
	Three Months Ended September 30, 2021			Nine Months Ended September 30, 2021			2022			2021			2022			2021
Balance, beginning of period	$	20,373		$	0		$	800		$	20,373		$	2,133		$	—
Assumed in Business Combination		—			26,400			—			—			—			26,400
Change in fair value		(12,373	)		(18,400	)		(160	)		(12,373	)		(1,493	)		(18,400	)
Balance, end of period	$	8,000		$	8,000		$	640		$	8,000		$	640		$	8,000

For the three and nine months ended September 30, 2022 and 2021, the change in the fair value of ~~Private Placement Warrants~~private placement warrants resulted from the change in ~~fair value~~price of the Company’s Class A Common ~~Stock.~~Stock, remaining contractual term, and risk-free rate. The changes in fair value are included in the unaudited condensed consolidated statements of operations as a component of change in fair value of warrant liabilities and in the unaudited condensed consolidated balance sheets as other liabilities.

~~Prior to~~Term Loan Warrants

The Company determined the Business Combination and as of December 31, 2020, the convertible instrument was valued using a scenario-based analysis. Two primary scenarios were considered to arrive at the valuation conclusion for the convertible instrument. The first scenario considers the probability-weighted value of conversion at the stated discount to the issue price in a change in control event. The second scenario considers the probability-weighted value of conversion at the stated discount to the issue price in a Qualified Financing event. As of the date of the investment in the convertible instrument, an implied yield was calculated such that the sum of thefair value of the ~~straight debt~~Term Loan warrants using a Black-Scholes option-pricing model and the ~~value~~quoted price of the ~~conversion feature~~Company’s Class A Common Stock. Volatility was ~~equal~~based on the implied volatility derived primarily from the average of the actual market activity of the Company’s peer group. The expected life was based on the remaining contractual term of the Term Loan warrants, and the risk-free interest rate was based on the implied yield available on U.S. treasury securities with a maturity equivalent to the ~~principal investment amount. The implied yield of the investment is carried forward with a market adjustment and used as the primary discount rate for subsequent valuation dates.~~

warrants’ expected life. The significant unobservable ~~inputs~~input used in the fair value measurement of the ~~Company’s investment in convertible instrument are~~Term Loan warrants is the probabilities of Myx closing a future Qualified Financing or change of control, which would trigger conversion of the convertible instrument, probabilities as to the periods in which the outcomes are expected to be achieved and discount rate.implied volatility. Significant changes in the ~~probabilities of the completion of the future Qualified Financing or change in control~~implied volatility would result in a significantly higher or lower fair value measurement, respectively. ~~Significant changes~~See Note 10, Debt, for additional information regarding the Term Loan warrants.

The following table presents significant assumptions utilized in the ~~probabilities as~~valuation of the ~~period in which outcomes will be achieved would result in a significantly lower or higher fair value measurement, respectively.~~Term Loan Warrants on the Effective Date and at September 30, 2022:


	September 30, 2022			August 8, 2022

Risk-free rate		4.0	%		2.9	%
Dividend yield rate		—			—
Volatility		80.0	%		75.0	%
Contractual term (in years)		6.86			7.00
Exercise price	$	1.85		$	1.85

The following table presents changes in the ~~Level 3 investment in convertible instrument from Myx measured at~~ fair value of the Term Loan warrants for the three and nine months ended September 30, 2022 and 2021:


	Three months ended September 30,					Nine months ended September 30,
	2022			2021		2022			2021
Balance, beginning of period	$	—		$	—	$	—		$	—
Issued in connection with Term Loan		5,236			—		5,236			—
Change in fair value		(2,123	)		—		(2,123	)		—
Balance, end of period	$	3,113		$	—	$	3,113		$	—

Nine Months
Ended
September 30, 2021

Balance, beginning of period

$
10,288

Investment in convertible note

5,000

Change in fair value

3,114

Conversion of investment

(18,402
)
Balance, end of period

$
0

4. Inventory, Net

For the nine months ended September 30, 2021, the change in the fair value of the investment in convertible instrument resulted from the effective settlement of the instrument. The changes in fair value are included in the unaudited condensed consolidated statements of operations as a component of other income, net. There was 0 ~~change in the fair value of the investment in convertible instrument from Myx for the three months ended September 30, 2021.~~

~~Inventory, net~~

Inventory, net consists of the following (in thousands):


	September 30,		December 31,		September 30, 2022		December 31, 2021
	2021		2020
Raw materials and work in process	$	28,675	$	26,480	$	18,361	$	24,436
Finished goods		112,464		38,874		49,632		108,294
Total inventory	$	141,139	$	65,354
Total inventory, net					$	67,993	$	132,730

Adjustments to ~~change~~ the carrying value of excess inventory and ~~obsolete~~ inventory on hand to ~~the lower of cost or~~ net realizable value were $0.3 million and $32.3 million during the three and nine months ended September 30, 2022, respectively, and $1.6 million and $4.4 million during the three and nine months ended September 30, 2021, ~~respectively and $1.2~~ ~~million and $1.1~~ ~~million during the three and nine months ended September 30, 2020,~~ respectively. These adjustments are included in the unaudited condensed consolidated statements of operations as a component of connected fitness cost of revenue and nutrition and other cost of revenue.

5. Other Current Assets

Other current assets consist of the following (in thousands):


	September 30,		December 31,
	2021		2020		September 30, 2022		December 31, 2021
Deferred coach costs	$	32,287	$	29,967	$	32,690	$	30,928
Deposits		12,087		3,035		4,263		8,915
Accounts receivable, net						871		1,225
Other		4,182		4,362		3,204		2,659
Total other current assets	$	48,556	$	37,364	$	41,028	$	43,727

6. Property and Equipment, Net

Property and equipment, net consists of the following (in thousands):



	September 30, 2022			December 31, 2021

Computer software and web development	$	234,473		$	231,943
Computer equipment		23,779			23,691
Buildings		5,158			5,158
Leasehold improvements		4,600			5,157
Furniture, fixtures and equipment		1,777			2,442
Computer software and web development projects in-process		7,008			26,490
Property and equipment, gross		276,795			294,881
Less: Accumulated depreciation		(194,765	)		(181,783	)
Total property and equipment, net	$	82,030		$	113,098

All of the Company’s property and equipment is located in the U.S. During the three and nine months ended September 30, 2022, primarily due to the consolidation of the Company's digital platforms and office lease assignment, the Company disposed of certain property and equipment no longer in use. The Company recognized a net loss of $0.3 million and $0.7 million during the three and nine months ended September 30, 2022, respectively, which is reflected in nutrition and other cost of revenue and technology and development, general and administrative, and restructuring expenses in the unaudited condensed consolidated statements of operations.

September 30,

December 31,

2021

2020

Computer software

$
225,721

$
194,314

Leasehold improvements

24,197

24,197

Computer equipment

23,307

21,172

Computer software and web development
projects in-process

24,373

12,380

Furniture, fixtures and equipment

6,978

7,016

Buildings

5,158

—

Property and equipment, gross

309,734

259,079

Less: Accumulated depreciation

(194,396
)

(178,910
)
Property and equipment, net

$
115,338

$
80,169

The Company recorded depreciation expense related to property and equipment in the following expense categories of its unaudited condensed consolidated statements of operations as follows (in thousands):


									Three months ended September 30,				Nine months ended September 30,
	Three Months Ended September 30,				Nine Months Ended September 30,				2022		2021		2022		2021
	2021		2020		2021		2020
Cost of revenue	$	4,375	$	3,568	$	12,259	$	9,644	$	5,068	$	4,375	$	21,892	$	12,259
Selling and marketing		323		566		1,163		1,634		—		323		381		1,163
Enterprise technology and development		6,055		5,435		18,706		15,649		7,676		6,055		22,611		18,706
General and administrative		533		784		1,796		2,404		1		533		242		1,796
Total depreciation	$	11,286	$	10,353	$	33,924	$	29,331	$	12,745	$	11,286	$	45,126	$	33,924

~~Content Assets, Net~~

~~Content assets, net consist of the following (in thousands):~~

September 30,

December 31,

2021

2020

Released, less amortization

$
26,237

$
17,306

In production

8,549

2,131

Content assets, net

$
34,786

$
19,437

~~The Company expects $16.8~~ ~~million of content assets to be amortized during the next 12 months and~~ ~~100% of the balance within~~ ~~four years. The Company recorded amortization expense for content assets of $3.9~~ ~~million and $10.0~~ ~~million during the three and nine months ended September 30, 2021, respectively and $1.9~~ ~~million and $5.1~~ ~~million during the three and nine months ended September 30, 2020, respectively.~~

~~Acquisitions~~

~~Myx~~

~~The Company acquired~~ ~~100% of the equity of Myx pursuant to the Business Combination Agreement. The following summarizes the consideration transferred on the Closing Date for the Myx acquisition (in thousands):~~

Purchase Price

Cash consideration (1)

$
37,700

Share consideration (2)

162,558

Fair value of Myx instrument held by Old Beachbody (3)

18,402

Promissory note held by Old Beachbody (4)

4,216

Total consideration

$
222,876

~~(1)~~

Cash consideration includes, among other things, the payoff of certain of Myx’s existing debt obligations, payments of certain of Myx’s transaction expenses, and cash payments as consideration for certain Myx equity units.

~~(2)~~

~~Share consideration was calculated based on~~ ~~13,546,503~~ ~~shares of Class A Common Stock issued multiplied by the share closing price on the Closing Date of $12.00~~.

~~(3)~~

~~Fair value of Myx instrument held by Old Beachbody was effectively settled on the Closing Date, see Note 1.~~

~~(4)~~

~~In April and June 2021, Old Beachbody entered into promissory note agreements with Myx. Such promissory notes were effectively settled on the Closing Date.~~

The acquired assets and assumed liabilities of Myx were recorded at their preliminary acquisition date fair values. The purchase price allocations are subject to material change as the Company continues to gather information relevant to its determination of the fair value of the assets and liabilities acquired primarily related to, but not limited to, inventory, intangible assets, deferred revenue, and deferred income taxes. There were 0 ~~adjustments to the purchase price allocations during the three months ended September 30, 2021.~~

~~Adjustments to the purchase price allocations will be made as soon as practicable but no later than one year from the acquisition date.~~ ~~The following table summarizes the preliminary fair value of assets acquired and liabilities assumed as of September 30, 2021 (in thousands):~~

Allocation

Goodwill

$
157,922

Intangible assets:

Trade name/ Trademark

43,700

Developed technology

14,000

Customer relationships

20,400

78,100

Cash acquired

420

Inventory, net

11,447

Other assets

3,354

Content assets

3,400

Deferred revenue

(2,168
)
Other liabilities

(14,039
)
Deferred tax liabilities

(15,560
)

$
222,876

The fair values of the trade name and trademark intangible assets were determined using an “income approach”, specifically, the relief-from royalty approach, which is a commonly accepted valuation approach. This approach is based on the assumption that in lieu of ownership, a firm would be willing to pay a royalty in order to exploit the related benefits of this asset. Therefore, a portion of Myx’s earnings, equal to the after-tax royalty that would have been paid for the use of the asset, can be attributed to the firm’s ownership. The fair value of the developed technology intangible asset was also determined by the relief-from-royalty approach. The fair values of the customer relationship intangible assets were determined by using an “income approach,” specifically a multi-period excess earnings approach, which is a commonly accepted valuation approach. Under this approach, the net earnings attributable to the asset or liability being measured are isolated using the discounted projected net cash flows. These projected cash flows are isolated from the projected cash flows of the combined asset group over the remaining economic life of the intangible asset or liability being measured. Both the amount and the duration of the cash flows are considered from a market participant perspective. Where appropriate, the net cash flows were adjusted to reflect the potential attrition of existing customers in the future, as existing customers are a “wasting” asset and are expected to decline over time.

The revenue and operating results from Myx included in the Company’s unaudited condensed consolidated statements of operations for the three and nine months ended September 30, 2021 is not discernible as the acquisition has been integrated within the Company's existing operations. During the three and nine months ended September 30, 2021, Company incurred $~~0.1~~ ~~million and $1.9~~ ~~million in transaction expenses associated with the Myx acquisition, which are included in general and administrative expenses in the unaudited condensed consolidated statements of operations.~~

The following unaudited pro forma financial information presents the combined results of operations of the Company and Myx as if the companies had been combined as of January 1, 2020. The pro forma financial information includes the accounting effects of the business combination, including amortization of intangible assets. The unaudited pro forma financial information is presented for information purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of the periods presented, nor should it be taken as indication of the Company’s future consolidated results of operations.

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Pro forma combined:

Revenue

$
208,052

$
260,603

$
688,595

$
651,378

Net income (loss)

(41,977
)

3,129

(109,725
)

(23,945
)

~~Ladder~~

On September 18, 2020, the Company acquired Ladder, a sports nutrition company, to enhance the Openfit platform by providing premium, NSF-certified supplements developed and endorsed by elite athletes.

The Company recognized the assets and liabilities of Ladder based on its estimates of their acquisition date fair values. The purchase price allocations were subject to change as the Company continued to gather information relevant to its determination of the fair value of the assets and liabilities acquired primarily related to, but not limited to, deferred income taxes. There were no adjustments to the purchase price allocations during the three and nine months ended September 30, 2021. ~~The following table summarizes the components of consideration and the fair value estimates of assets acquired and liabilities assumed (in thousands):~~

Purchase Price

Common units issued in connection with acquisition (1)

$
27,889

Allocation

Goodwill

$
11,606

Intangible assets:

Trade name

7,500

Customer-related

300

Formulae

1,950

Talent and representation contracts

10,300

20,050

Cash acquired

1,247

Other assets acquired

1,132

Liabilities acquired

(1,834
)
Deferred tax liabilities

(4,312
)

$
27,889

~~(1)~~

~~The fair value of common units issued in connection with the acquisition was calculated based on~~ ~~1,449,537~~ ~~common units of Old Beachbody multiplied by the estimated fair value per unit of $19.24~~.

The excess of the purchase price over the estimated fair values of the net assets acquired, including identifiable intangible assets, is recorded as goodwill. Goodwill is primarily attributable to the assembled workforce of Ladder and expected synergies from combining operations. Goodwill recognized was allocated to the Company’s Other operating segment and is generally not deductible for tax purposes. The revenue from Ladder included in the Company’s unaudited condensed consolidated statements of operations for the three and nine months ended September 30, 2021 was $~~0.7~~ ~~million and $1.2~~ ~~million, respectively. The operating loss from Ladder included in the Company’s unaudited condensed consolidated statements of operations for the three and nine months ended September 30, 2021 was $0.5~~ ~~million and $1.0~~ ~~million, respectively.~~

The following unaudited pro forma financial information presents the combined results of operations as if Ladder had been combined with the Company as of January 1, 2020. The pro forma financial information includes the accounting effects of the business combination, including amortization of intangible assets. The unaudited pro forma financial information is presented for information purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of the periods presented, nor should it be taken as indication of the Company’s future consolidated results of operations.

Three Months
Ended
September 30,

Nine Months
Ended
September 30,

2020

2020

Pro forma combined:

Revenue

$
252,230

$
641,474

Net (loss) income

9,599

(12,401
)

~~10.~~

~~Goodwill and Acquired Intangible Assets~~

~~Goodwill~~

~~Changes in goodwill for the nine months ended September 30, 2021 is as follows (in thousands):~~

September 30,

2021

Goodwill, beginning of period

$
18,981

Acquisition of Myx

157,922

Goodwill, end of period

$
176,903

~~Intangible Assets, Net~~

~~Intangible assets as of September 30, 2021 and December 31, 2020 consisted of the following (in thousands):~~

September 30, 2021

December 31, 2020

Acquired
Intangibles,
Gross

Accumulated
Amortization

Acquired
Intangibles,
Net

Acquired
Intangibles,
Gross

Accumulated
Amortization

Acquired
Intangibles,
Net

Weighted-Average Remaining Useful Life (years)

Contract-based

$
300

$
(225
)

$
75

$
300

$
(150
)

$
150

0.8

Customer-related

21,100

(2,344
)

18,756

700

(337
)

363

2.7

Technology-based

20,200

(7,124
)

13,076

6,200

(4,650
)

1,550

2.6

Talent and representation
contracts

10,300

(2,575
)

7,725

10,300

(644
)

9,656

3.0

Formulae

1,950

(195
)

1,755

1,950

(49
)

1,901

9.0

Trade name

51,200

—

51,200

7,500

—

7,500

Indefinite

$
105,050

$
(12,463
)

$
92,587

$
26,950

$
(5,830
)

$
21,120

~~Amortization expense for acquired intangible assets was $3.3~~ ~~million and $6.6~~ ~~million during the three and nine months ended September 30, 2021 and $0.9~~ ~~million and $2.6~~ ~~million during the three and nine months ended September 30, 2020, respectively.~~

~~The estimated future amortization expense of acquired intangible assets as of September 30, 2021 is as follows (in thousands):~~

Three months ended December 31, 2021

$
3,330

Year ended December 31, 2022

13,233

Year ended December 31, 2023

13,070

Year ended December 31, 2024

8,932

Year ended December 31, 2025

1,896

Thereafter

926

$
41,387

~~11.~~

7. Accrued Expenses

Accrued expenses consist of the followings (in thousands):


	September 30,		December 31,		September 30, 2022		December 31, 2021
	2021		2020

Employee compensation and benefits					$	27,313	$	8,996
Coach costs	$	19,077	$	19,126		16,905		19,168
Inventory, shipping and fulfillment						11,028		14,360
Sales and other taxes						4,483		5,097
Information technology						3,247		10,150
Advertising		10,924		3,626		800		4,033
Employee compensation and benefits		10,968		28,855
Information technology		15,725		5,621
Inventory, shipping and fulfillment		16,733		10,244
Sales and income taxes		4,173		4,132
Customer service expenses						531		1,773
Other accrued expenses		12,244		8,351		7,388		10,948
Total accrued expenses	$	89,844	$	79,955	$	71,695	$	74,525

~~12.~~

~~Credit Facility~~

In December 2018, Beachbody, LLC, as borrower, and Old Beachbody and certain of Beachbody, LLC’s subsidiaries, as guarantors, entered into a credit agreement with Bank of America, N.A., as lender, administrative agent and letter of credit issuer for a $35 ~~million revolving credit facility with a $~~10 ~~million sublimit for letters of credit (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Facility”).~~

The Credit Facility was amended in April 2020 to extend the maturity date to December 2021, amend certain pricing provisions and financial covenants, and amend other provisions including the definition of applicable rates based on consolidated EBITDA pricing levels. The Credit Facility was further amended in September 2020, whereby Old Beachbody assumed the Company’s obligations under the Credit Facility, and in March 2021 to extend the maturity date to ~~June 2022, amend financial covenants, and temporarily increase the Credit Facility by $~~20 ~~million for a period of either~~ ~~90 days, or until the consummation of the Business Combination.~~

In connection with the transactions contemplated by the Business Combination Agreement, on June 23, 2021, the Credit Facility was amended, which, among other things, (a) permitted the consummation of the Business Combination and certain other transactions contemplated by the Business Combination Agreement, and (b) amended certain terms of the Credit Facility to, among other things, (i) enable Old Beachbody and Beachbody, LLC to consummate the Business Combination and certain other transactions contemplated by the Business Combination Agreement, (ii) require that the Company join the Credit Facility as a parent guarantor thereunder, and (iii) require that Myx join the Credit Facility as a subsidiary guarantor thereunder.

Borrowings may be either Bloomberg Short-Term Bank Yield Index (“BSBY”) rate loans or base rate loans at the Company’s election. BSBY rate loans bear interest at an annual rate equal to the BSBY rate plus ~~1.75% to~~ ~~2.25~~%~~. Base rate loans are at the base rate, as defined in the amended Credit Facility, plus~~ ~~0.75% to~~ ~~1.25%. The Company also pays a~~ ~~1.75% to~~ ~~2.25% fee on the letters of credit outstanding and a~~ ~~0.375% to~~ ~~0.5% commitment fee on the unused Credit Facility. The Company incurred approximately~~ 0 ~~and $0.3~~ ~~million of interest and approximately~~ 0 ~~and $0.1~~ ~~million of fees under the Credit Facility during the three and nine months ended September 30, 2021 and approximately~~ 0 ~~and $0.2~~ ~~million of interest and approximately~~ 0 ~~and $0.1~~ ~~million of fees under the Credit Facility during the three and nine months ended September 30, 2020.~~

~~As of September 30, 2021 and December 31, 2020, there were~~ 0 ~~borrowings outstanding, and a letter of credit was issued under the Credit Facility for $3.0~~ ~~million.~~

~~In November 2021, the Company terminated the Credit Facility and will maintain a compensating cash balance for the $3.0~~ ~~million letter of credit.~~

~~13.~~

~~Leases~~

~~The Company~~ ~~leases facilities under noncancelable operating leases expiring through 2025, with payments due through 2024,~~ ~~and~~ ~~certain equipment under a finance lease expiring in 2024.~~

~~At September 30, 2021 and December 31, 2020, the Company had operating lease liabilities of $33.5~~ ~~million and $41.2~~ ~~million, respectively, and right-of-use assets of $27.1~~ ~~million and $32.9~~ ~~million, respectively. As of September 30, 2021 and December 31, 2020, the Company had finance lease liabilities $0.3~~ ~~million and $0.4~~ ~~million, respectively, and right-of-use assets of $0.3~~ ~~million and $0.4~~ ~~million, respectively.~~

The Company’s leases do not require any contingent rental payments, impose any financial restrictions, or contain any residual value guarantees. Certain of the Company’s leases include renewal options and escalation clauses; renewal options have not been included in the calculation of lease liabilities and right-of-use assets as the Company is not reasonably certain to exercise these options. Variable expenses generally represent the Company’s share of the landlord operating expenses.

~~The following summarizes the Company’s leases (in thousands):~~

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Finance lease costs:

Amortization of right-of-use assets

$
37

$
37

$
110

$
110

Interest on lease liabilities

3

5

11

16

Operating lease costs

2,342

2,390

7,245

7,309

Short-term lease costs

32

28

54

160

Variable lease costs

196

��
191

532

78

Sublease income

(22
)

—

(22
)

—

Total lease costs

$
2,588

$
2,651

$
7,930

$
7,673

Nine Months Ended September 30,

2021

2020

Cash paid for amounts included in the measurement of lease liabilities

Operating cash flows from finance leases

$
11

$
19

Operating cash flows from operating leases

9,226

9,192

Financing cash flows from finance leases

110

105

Right-of-use asset obtained in exchange for new finance lease liabilities

—

—

Right-of-use asset obtained in exchange for new operating lease liabilities

—

421

Weighted-average remaining lease term - finance leases

2.6

3.5

Weighted-average remaining lease term - operating leases

3.3

4.2

Weighted-average discount rate - finance leases

4.0
%

4.0
%
Weighted-average discount rate - operating leases

5.5
%

5.5
%

~~Maturities of our operating and finance lease liabilities, excluding short-term leases, are as follows (in thousands):~~

Operating Leases

Finance Leases

Total

Three Months Ended December 31, 2021

$
1,278

$
40

$
1,318

Year ended December 31, 2022

11,183

161

11,344

Year ended December 31, 2023

11,780

123

11,903

Year ended December 31, 2024

12,616

3

12,619

Total

36,857

327

37,184

Less present value discount

(3,349
)

(13
)

(3,362
)
Lease liabilities at September 30, 2021

$
33,508

$
314

$
33,822

As the Company’s lease agreements do not provide an implicit rate, the discount rates used to determine the present value of lease payments are generally based on the Company’s estimated incremental borrowing rate for a secured borrowing of a similar term as the lease.

In November 2021, the Company entered into an agreement to assign the lease of its Santa Monica office to another party in January 2022. This assignment will result in a modification of the Company’s lease term and is expected to reduce right-of-use assets by $~~22.6~~ ~~million and lease liabilities by $28.5~~ ~~million and increase operating income by $2.7~~ ~~million, which is net of brokers' commissions and accelerated depreciation of leasehold improvements and furniture, fixtures and equipment.~~

~~14.~~

8. Commitments and Contingencies

Inventory Purchase and Service Agreements

The Company has noncancelable inventory purchase and service agreements with multiple service providers which expire at varying dates through ~~2025.~~2028. During the three and nine months ended September 30, 2022, the Company recorded losses on inventory purchase commitments related to connected fitness hardware of approximately zero and $2.3 million, respectively. These losses are included in accrued expenses in the unaudited condensed consolidated balance sheets and connected fitness cost of revenue in the unaudited condensed consolidated statements of operations. Service agreement obligations include amounts related to fitness and nutrition trainers, future events, information systems support, and other technology projects.

Future minimum payments under noncancelable service and inventory purchase agreements for the periods succeeding September 30, ~~2021~~2022 are as follows (in thousands):

Three Months Ended December 31, 2021

$
58,646

Year ended December 31, 2022

16,466

Year ended December 31, 2023

1,932

Year ended December 31, 2024

1,250

Year ended December 31, 2025

1,250

$
79,544


Three months ending December 31, 2022	$	22,507
Year ending December 31, 2023		7,235
Year ending December 31, 2024		1,844
Year ending December 31, 2025		1,385
Year ending December 31, 2026		100
Thereafter		150
	$	33,221

The preceding table excludes royalty payments to fitness trainers, talent, and others that are based on future sales as such amounts cannot be reasonably estimated.

Lease Commitments

The Company leases facilities under noncancelable operating leases expiring through 2027 and certain equipment under a finance lease expiring in 2024. These lease obligations will require payments of approximately $0.6 million during the three months ending December 31, 2022 and $6.0 million for the year ending December 31, 2023 and thereafter through 2027.

Contingencies

The Company is subject to litigation from time to time in the ordinary course of business. Such claims typically involve its products, intellectual property, and relationships with suppliers, customers, distributors, employees, and others. Contingent liabilities are recorded when it is both probable that a loss has occurred and the amount of the loss can be reasonable estimated. Although it is not possible to predict how litigation and other claims will be resolved, the Company does not believe that any currently identified claims or litigation matters will have a material adverse effect on its consolidated financial position or results of operations.

9. Acquisition

On June 25, 2021, the Company acquired 100% of the equity of Myx Fitness Holdings, LLC. The Company recognized the acquired assets and assumed liabilities of Myx based on estimates of their acquisition date fair values.

~~15.~~The following unaudited pro forma financial information presents the combined results of operations of the Company and Myx as if the companies had been combined as of January 1, 2021. The unaudited pro forma financial information includes the accounting effects of the business combination, including amortization of intangible assets. The unaudited pro forma financial information is presented for information purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of the period presented, nor should it be taken as indication of the Company’s future consolidated results of operations.

~~Common Stock Warrant Liability~~


(in thousands)	Three Months Ended			Nine Months Ended
	September 30, 2021			September 30, 2021
Pro forma combined:
Revenue	$	208,052		$	688,595
Net loss		(41,977	)		(109,725	)

~~At September 30, 2021, there were~~

~~10,000,000~~ ~~Public Warrants and~~ ~~5,333,333~~ ~~Private Placement Warrants outstanding.~~10. Debt

~~As part~~

On August 8, 2022 (the “Effective Date”), the Company, Beachbody, LLC as borrower (a wholly owned subsidiary of ~~Forest Road’s initial public offering,~~ ~~10,000,000~~ ~~Public Warrants were sold.~~the Company), and certain other subsidiaries of the Company as guarantors on the signature pages (the “Guarantors”), the lenders (the “Lenders”), and Blue Torch Finance, LLC, as administrative agent and collateral agent for such lenders (the “Term Loan Agent”) entered into a financing agreement (the “Financing Agreement”). The ~~Public Warrants entitle~~Financing Agreement provides for senior secured term loans on the ~~holder thereof to purchase one share of Class A Common Stock at a price~~Effective Date in an aggregate principal amount of $~~11.50~~50.0 ~~per share,~~million (the “Term Loan”) which was drawn on the Effective Date. In addition, the Financing Agreement permits the Company to borrow up to an additional $25.0 million, subject to ~~adjustments. The Public Warrants may only be exercised for a whole number of shares of Class A Common Stock. No fractional shares will be issued upon exercise~~the terms and conditions set forth in the Financing Agreement. Borrowings under the Term Loan are unconditionally guaranteed by the Guarantors, and all present and future material U.S. and Canadian subsidiaries of the ~~warrants. The Public Warrants will become exercisable~~Company. Such security interest consists of a first-priority perfected lien on ~~November 30, 2021, provided that the Company has an effective registration statement.~~

~~Simultaneously with Forest Road’s initial public offering, Forest Road consummated a private placement~~substantially all property and assets of~~5,333,333~~ ~~Private Placement Warrants with Forest Road’s sponsor. Each Private Placement warrant is exercisable for one share of Class A Common Stock at a price of $11.50~~ ~~per share, subject to adjustment.~~

The Private Placement Warrants are identical to the Public Warrants, except that the Private Placement Warrants and the Class A Common Stock issuable upon exercise of the Private Placement Warrants were not transferable, assignable or salable until July 25, 2021, subject to certain limited exceptions. Additionally, the Private Placement Warrants will be non-redeemable so long as they are held by the initial purchasers or such purchasers’ permitted transferees. If the Private Placement Warrants are held by someone other than the initial shareholders or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and ~~exercisable by such holders~~subsidiaries, including stock pledges on the ~~same basis as~~capital stock of the ~~Public Warrants.~~

~~Once~~Company’s material and direct subsidiaries, subject to customary carveouts. In connection with the ~~warrants become exercisable,~~Financing Agreement, the Company ~~may redeem the Public Warrants:~~



~~in whole and not in part;~~



~~at a price of~~incurred $~~0.01~~4.2 ~~per warrant;~~



~~upon not less than 30 days’ prior written notice~~million of ~~redemption to each warrant holder; and~~



~~if, and only if, the closing price of Class A Common Stock equals or exceeds $18.00~~ per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date onthird-party debt issuance costs which ~~the Company sends the notice of redemption to the warrant holders.~~

The Company will not redeem the warrants as described above unless an effective registration statement under the Securities Act covering the Class A Common Stock issuable upon exercise of the warrants is effective and a current prospectus relating to those Class A Common Stock is available throughout the 30-day redemption period, except if the warrants may be exercised on a cashless basis and such cashless exercise is exempt from registration under the Securities Act. If and when the warrants become redeemable,

~~the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws.~~

The exercise price and number of shares of common stock issuable upon exercise of the Public Warrants may be adjusted in certain circumstances, including in the event of a share dividend, or recapitalization, reorganization, merger or consolidation.

If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. In no event will the Company be required to net cash settle any warrant.

~~The Company concluded the Public Warrants and Private Placement Warrants meet the definition of a derivative under ASC 815 (as described in Note 1) and~~ are ~~recorded as liabilities. Upon consummation of the Business Combination, the fair value of the Public Warrants and Private Placement Warrants were~~ recorded in the unaudited condensed consolidated balance ~~sheets. The fair value~~sheets as a reduction of ~~the Public Warrants and Private Placement Warrants was remeasured~~long-term debt as of September 30, ~~2021, resulting~~2022 and are being amortized over the term of the Term Loan using the effective-interest method. As of September 30, 2022, borrowings outstanding under the Term Loan were $49.7 million. The Term Loan matures on August 8, 2026.

The Term Loan borrowings may take the form of base rate (“Reference Rate”) loans or Secured Overnight Financing Rate (“SOFR”) loans. Reference Rate loans bear interest at a rate per annum equal to the sum of an applicable margin of 6.15% per annum, plus the greater of (a) 2.00% per annum, (b) the Federal Funds Rate plus 0.50% per annum, (c) the “SOFR Rate” (based upon an interest period of 1 month) plus 1.00% per annum, and (d) the rate last quoted by The Wall Street Journal. SOFR loans bear interest at a rate per annum equal to the sum of an applicable margin of 7.15% and the “SOFR Rate” (based upon an interest period of 3 months). The “SOFR Rate” is subject to a floor of 1.00%. In addition, the Term Loan borrowings bear additional interest at 3.00% per annum, paid in akind by capitalizing such interest and adding such capitalized interest to the outstanding principal amount of the loans on each anniversary of the Effective Date. The $~~30.3~~50.0 million ~~and~~Term Loan was a SOFR loan, with an effective interest rate of 19.40%. The Company recorded $~~41.0~~1.2 million ~~non-cash change in fair value in~~of interest related to the ~~unaudited condensed consolidated statements of operations for~~Term Loan during the three and nine months ended September 30, ~~2021, respectively. Transaction costs and advisory fees allocated~~2022.

In connection with the Term Loan, the Company issued to certain holders affiliated with Blue Torch Finance, LLC warrants for the ~~issuance~~purchase of 4,716,756 shares of the ~~Public and Private Placement Warrants~~Company’s Class A Common Stock at an exercise price of $~~5.3~~1.85 ~~million~~per share. The warrants vest on a monthly basis over four years, with 30%, 30%, 20% and 20% vesting in the first, second, third and fourth years, respectively. The warrants have a seven-year term from the Effective Date. See Note 3, Fair Value Measurements, for information on the valuation of the warrants. The warrants were ~~also~~ recorded ~~as a component of change in~~at an initial fair value of ~~warrant liabilities~~$5.2 million in the unaudited condensed consolidated ~~statements~~balance sheets as warrant liabilities and a reduction of ~~operations, resulting in a net change in fair~~long-term debt as of September 30, 2022. The initial value of ~~warrant liabilities~~the warrants is being amortized as a debt discount over the term of $the Term Loan using the effective-interest method.

~~35.7~~

~~million~~

The aggregate amounts of payments due for the ~~nine months ended~~periods succeeding September 30, ~~2021.~~2022 and reconciliation of the Company’s debt balances, net of debt discount and debt issuance costs, are as follows (in thousands):


Three months ending December 31, 2022	$	312
Year ending December 31, 2023		1,250
Year ending December 31, 2024		1,563
Year ending December 31, 2025		2,500
Year ending December 31, 2026		44,063
Total debt	$	49,688
Less current portion		(1,250	)
Less unamortized debt discount and debt issuance costs		(9,185	)
Add capitalized paid-in-kind interest		221
Total long-term debt	$	39,474

The Term Loan amortizes at 2.50% per year from the Effective Date to the date that is the second anniversary of the Effective Date, payable on a quarterly basis, and thereafter, at 5.00% per year, payable on a quarterly basis. The Financing Agreement contains certain customary covenants with which the Company was in compliance as of September 30, 2022.

~~16.~~

11. Stockholders’ Equity

As of September 30, ~~2021,~~2022, 2,000,000,000 shares, $0.0001 par value per share are authorized, of which, 1,600,000,000 shares are designated as Class A Common Stock, 200,000,000 shares are designated as Class X Common Stock, 100,000,000 shares are designated as Class C Common Stock and 100,000,000 shares are designated as Preferred Stock.

~~Common Stock~~

Holders of each share of Class A Common Stock are entitled to dividends when, as and if declared by the Company’s board of directors, subject to the rights and preferences of any holders of outstanding series of Preferred Stock holders. As of September 30, 2021, the Company had 0~~t declared any dividends.~~ ~~The holder of each Class A Common Stock is entitled to~~ ~~one vote, the holder of each share of Class X Common Stock is entitled to~~ ~~ten votes~~ ~~and except as otherwise required by law, the holder of each share of Class C Common Stock is not entitled to any voting powers.~~

~~Old Beachbody~~

Prior to the Business Combination, Old Beachbody’s preferred units were convertible into common units, at the option of the holders at any time, with no additional consideration required. The preferred units were to convert to common units at a rate of ~~1-for-1~~, subject to adjustment for certain events including unit split, unit dividend or recapitalization. The preferred units were subject to automatic conversion if the Company consummates an initial public offering that meets certain criteria.

The holders could redeem the preferred units at any time after December 14, 2024, at a price equal to the greater of (i) the fair market value of the common units into which such preferred units are convertible or (ii) approximately $~~9.93~~ ~~per unit, or $100.0~~ million in aggregate (the “Capital Contribution”), reduced by general distributions previously made to the holders plus any declared but unpaid distributions as of the date of the redemption notice.

The holders were entitled to distributions, in the amount, if any, of available cash flows, as determined by a majority of the Board of Managers. Distributions were to be made to common unit members and preferred unit members in proportion to their percentage of ownership interests, with priority to certain tax distributions and distributions to reimburse Beachbody Holdings and the holders for certain third-party expenses that have not been previously paid.

The redemption by the holders or the completion of an initial public offering was not solely within the control of Old Beachbody, and as such, the preferred units were classified as mezzanine members’ equity. In connection with the Business Combination, ~~10,068,841~~ ~~preferred units were converted into~~ ~~33,828,030~~ ~~shares of Class A Common Stock.~~

~~As of December 31, 2020,~~ ~~100,000,000~~ ~~common units of Old Beachbody were authorized, and~~ ~~62,263,439~~ ~~common units were outstanding. In connection with the Business Combination,~~ ~~62,263,439~~ ~~common units of Old Beachbody were converted into~~ ~~67,934,584~~ ~~shares of Class A Common Stock and~~ ~~141,250,310~~ ~~shares of Class X Common Stock.~~

Old Beachbody members’ personal liability for the obligations or debts of the Company were limited. The Company’s operating agreement called for the Company to be dissolved and terminated upon the earliest occurrence of the following events: bankruptcy of the Company, decision by a majority of both the common and preferred unit holders to dissolve the Company, or the date the Company may otherwise be dissolved by operation of law or judicial decree.

Accumulated Other Comprehensive Income (Loss)

The following tables summarize changes in accumulated other comprehensive income (loss)~~, net of tax~~ by component during the three months ended September 30, 2022 and 2021 (in thousands):


	Unrealized Gain (Loss) on Derivatives			Foreign Currency Translation Adjustment			Total

Balances at June 30, 2021	$	(115	)	$	98		$	(17	)
Other comprehensive loss before reclassifications		(17	)		(40	)		(57	)
Amounts reclassified from accumulated other comprehensive income (loss)		142			—			142
Tax effect		(53	)		—			(53	)
Balances at September 30, 2021	$	(43	)	$	58		$	15


Balances at June 30, 2022	$	(39	)	$	(36	)	$	(75	)
Other comprehensive loss before reclassifications		444			(129	)		315
Amounts reclassified from accumulated other comprehensive income (loss)		(2	)		—			(2	)
Tax effect		111			—			111
Balances at September 30, 2022	$	514		$	(165	)	$	349

The following tables summarize changes in accumulated other comprehensive loss by component during the nine months ended September 30, 2022 and 2021 (in thousands):

Foreign

Unrealized

Currency

Gain (Loss) on

Translation

Derivatives

Adjustment

Total

Balances at December 31, 2019

$
(99
)

$
111

$
12

Other comprehensive income (loss)
   before reclassifications

(12
)

(275
)

(287
)
Amounts reclassified from accumulated
   other comprehensive income (loss)

31

—

31

Tax effect

(4
)

—

(4
)
Balances at September 30, 2020

$
(84
)

$
(164
)

$
(248
)
Balances at December 31, 2020

$
(246
)

$
44

$
(202
)
Other comprehensive income (loss)
   before reclassifications

(187
)

14

(173
)
Amounts reclassified from accumulated
   other comprehensive income (loss)

481

—

481

Tax effect

(91
)

—

(91
)
Balances at September 30, 2021

$
(43
)

$
58

$
15


	Unrealized Gain (Loss) on Derivatives			Foreign Currency Translation Adjustment			Total

Balances at December 31, 2020	$	(246	)	$	44		$	(202	)
Other comprehensive loss before reclassifications		(187	)		14			(173	)
Amounts reclassified from accumulated other comprehensive income (loss)		481			—			481
Tax effect		(91	)		—			(91	)
Balances at September 30, 2021	$	(43	)	$	58		$	15


Balances at December 31, 2021	$	(32	)	$	11		$	(21	)
Other comprehensive loss before reclassifications		295			(176	)		119
Amounts reclassified from accumulated other comprehensive income (loss)		141			—			141
Tax effect		110			—			110
Balances at September 30, 2022	$	514		$	(165	)	$	349

~~17.~~

12. Equity-Based Compensation

Equity Compensation Plans

Prior to the Business Combination, the Company maintained its 2020 Beachbody Company Group LLC Equity Compensation Plan (the “2020 Plan”), under which, grants were awarded to certain employees, consultants, and members of the Company’s board of directors through the granting of one or more of the following types of awards: (a) nonqualified unit options, (b) unit awards, and (c) unit appreciation rights. The Company granted nonqualified unit options with vesting periods ranging from ~~three~~ to ~~five years~~.

Upon closing of the Business Combination, awards under the 2020 Plan were converted at the Exchange Ratio, and the Company’s board of directors approved the 2021 Incentive Award Plan (the “2021 Plan”). The 2021 Plan provides for the grant of stock options, including ISOs and nonqualified stock options (“NSOs”), SARs, restricted stock, dividend equivalents, restricted stock units (“RSUs”) and other stock or cash-based awards.

~~Under the 2021 Plan, up to~~ ~~30,442,594~~ shares of Class A Common Stock will be available for issuance under the Plan. In addition, the number of shares of Class A Common Stock available for issuance under the 2021 Plan will be increased on January 1 of each calendar year beginning in 2022 and ending in 2031 by an amount equal to the lesser of (i) five percent (5%) of the total number of shares of Class A and Class X Common Stock outstanding on the final day of the immediately preceding calendar year and (ii) the number of shares determined by the Company’s board of directors. As of September 30, 2021, ~~21,730,778~~ ~~shares of Class A Common Stock are available for issuance under the 2021 Plan.~~

All options and awards typically expire ten years from the date of grant if not exercised. In the event of a termination of employment, all unvested options are forfeited immediately. Generally, any vested options may be exercised within three months, depending upon the circumstances of termination, except for instances of termination “with cause” whereby any vested options or awards are forfeited immediately.

A summary of the option activity under the Company’s equity compensation plans ~~are~~is as follows:


	Options Outstanding
	Number of Options			Weighted-Average Exercise Price (per option)		Weighted-Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2021		41,753,042		$	3.86		5.92	$	11,379
Granted		20,830,554			1.21
Exercised		(1,879,095	)		1.52
Forfeited		(8,768,491	)		4.47
Expired		(1,017,340	)		1.99
Outstanding at September 30, 2022		50,918,670		$	2.79		6.19	$	—
Exercisable at September 30, 2022		23,886,065		$	2.65		2.94	$	—

Options Outstanding

Weighted-

Weighted-

Average

Average

Remaining

Exercise

Contractual Term

Number of

Price

Term

Options

(per option)

(in years)

Outstanding at December 31, 2020 (as
   previously reported)

10,170,288

$
7.04

5.70

Conversion of awards due to
   recapitalization

23,998,437

(4.94
)

Outstanding at December 31, 2020, effect of
   reverse acquisition

34,168,725

$
2.10

Granted

9,321,807

9.82

Exercised

(1,292,541
)

1.02

Forfeited

(490,662
)

2.48

Outstanding at September 30, 2021

41,707,329

$
3.86

6.11

Exercisable at September 30, 2021

23,788,979

$
1.97

4.04

The intrinsic value of options exercised was $~~7.3~~0.8 million for the nine months ended September 30, ~~2021.~~2022.

A summary of RSU activity is as follows:


	RSUs Outstanding
	Number of RSUs			Weighted-Average Fair Value (per RSU)
Outstanding at December 31, 2021		573,678		$	5.97
Granted		3,693,286			1.21
Vested		(856,697	)		2.51
Forfeited		(251,082	)		4.62
Outstanding at September 30, 2022		3,159,185		$	1.45

On January 1, 2022, the number of shares available for issuance under the 2021 Incentive Award Plan (the “2021 Plan”) increased by 15,479,188 pursuant to the terms of the 2021 Plan. As of September 30, 2022, 15,188,356 shares of Class A Common Stock were available for issuance under the 2021 Plan.

Vested RSUs included shares of common stock that the Company withheld on behalf of certain employees to satisfy the minimum statutory tax withholding requirements, as defined by the Company. The Company withheld an aggregate amount of $0.2 million for the nine months ended September 30, 2022 which were classified as financing cash outflows in the unaudited condensed consolidated statements of cash flows. The Company canceled and returned these shares to the 2021 Plan, which are available under the plan terms for future issuance.

Equity-Based Compensation Expense

The fair value of each award as of the date of grant is estimated using a Black-Scholes option-pricing model. The following table summarizes the weighted-average assumptions used to determine the fair value of option grants:

Nine Months Ended September 30,

2021

2020

Risk-free rate

1.0
%

0.5
%
Dividend yield rate

0.0
%

0.0
%
Volatility

53.6
%

55.0
%
Expected term (in years)

6.21

6.23

Weighted-average exercise price

$
9.82

$
8.44


	Nine months ended September 30,
	2022			2021
Risk-free rate		2.9	%		1.0	%
Dividend yield rate		—			—
Volatility		52.5	%		53.6	%
Expected term (in years)		6.08			6.21
Weighted-average grant date fair value	$	0.63		$	5.03

The vesting periods are based on the terms of the option grant agreements. The risk-free interest rates are based on the U.S. Treasury rates as of the grant dates for the expected terms of the options. Given the lack of public market for the Company’s common units prior to the Business Combination and minimal history as a public company subsequent to the Business Combination, the price volatilities represent calculated values based on the historical price volatilities of publicly traded companies within the Company’s industry group over the options’ expected terms. The expected terms of the options granted were estimated using the simplified method by taking an average of the vesting periods and the original contractual terms. Prior to the Business Combination, the exercise prices represent the estimated fair values of one common unit of the Company’s equity on the grant dates. Subsequent to the Business Combination, the fair value of the Common Stock is based on the closing market price on the date of grant.

~~A summary of the unvested option activity is as follows:~~

Weighted-

Average

Grant Date

Number of

Fair Value

Options

(per option)

Unvested at December 31, 2020 (as previously reported)

3,701,114

$
4.34

Conversion of awards due to recapitalization

8,733,309

(3.05
)
Unvested at December 31, 2020, effect of reverse
acquisition

12,434,423

$
1.29

Granted

9,321,807

5.03

Vested

(3,347,219
)

1.25

Forfeited

(490,661
)

1.19

Unvested at September 30, 2021

17,918,350

$
3.24

2620

~~The fair value of options granted during the nine months ended September 30, 2021 and 2020 was $46.9~~ ~~million (or $5.03~~ ~~weighted average per option) and $5.5~~ ~~million (or $4.34~~ ~~weighted average per option), respectively. The total fair value of awards which vested during the nine months ended September 30, 2021 and 2020 was $4.2~~ ~~million and $3.7~~ ~~million, respectively.~~

~~A summary of RSU activity is as follows:~~

RSUs Outstanding

Weighted-

Average

Aggregate

Number of

Fair Value

Intrinsic Value

RSUs

(per RSU)

(in thousands)

Outstanding at December 31, 2020

—

$
—

Granted

280,309

7.67

Outstanding at September 30, 2021

280,309

$
7.67

$
1,553

~~Compensation Warrants~~

~~During the year ended December 31, 2020, the Company issued warrants for the purchase of~~ ~~1,184,834~~ ~~of Old Beachbody’s common units at an exercise price of $8.44~~ ~~per unit. The warrants vest~~ 25~~% at the grant date and~~ 25~~% at each of the first, second, and third anniversaries of the grant date. The warrants have a~~ ~~10-year~~ ~~contractual term. In connection with the Business Combination, the Old Beachbody warrants were exchanged for~~ ~~3,980,656~~ ~~warrants for the purchase of the Company’s Class A Common Stock at an exercise price of $2.52~~ ~~per share.~~

~~As of September 30, 2021,~~ ~~1,990,328~~ ~~warrants were exercisable. Compensation cost associated with the warrants will be recognized over the requisite service period, which is~~ ~~4.25~~ ~~years.~~

~~Equity-Based Compensation Expense~~

Equity-based compensation expense for the three and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 was as follows (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Cost of revenue

$
385

$
68

$
567

$
174

Selling and marketing

2,359

290

5,692

683

Enterprise technology and
development

919

410

1,582

1,004

General and administrative

2,081

493

2,998

1,308

Total equity-based
compensation

$
5,744

$
1,261

$
10,839

$
3,169


	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021

Cost of revenue	$	413	$	385	$	1,130	$	567
Selling and marketing		2,578		2,359		5,235		5,692
Enterprise technology and development		364		919		1,274		1,582
General and administrative		2,246		2,081		5,527		2,998
Total equity-based compensation	$	5,601	$	5,744	$	13,166	$	10,839

As of September 30, ~~2021,~~2022, the total unrecognized equity-based compensation expense was $~~67.3~~48.4 million, ~~and has~~which will be recognized over a weighted-average ~~recognition~~remaining period of ~~3.29~~2.81 years.

~~18.~~

13. Derivative Financial Instruments

As of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the notional amount of the Company’s outstanding foreign exchange options was $~~32.6~~24.2 million and $~~34.0~~30.4 million, respectively. There were 0no outstanding forward contracts as of September 30, ~~2021~~2022 and December 31, ~~2020.~~

~~The following table presents the fair value of the Company’s derivative instruments which are included in other current assets in the unaudited condensed consolidated balance sheets (in thousands):~~

September 30,

December 31,

2021

2020

Derivatives designated as hedging instruments

$
140

$
134

Derivatives not designated as hedging instruments

47

30

Total derivative assets

$
187

$
164

~~There were~~ 0 ~~derivative liabilities as of September 30, 2021 and December 31, 2020.~~2021.

The following table shows the pre-tax effects of the Company’s derivative instruments on its unaudited condensed consolidated statements of operations (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

Financial Statement Line Item

2021

2020

2021

2020

Unrealized (losses) gains

Other comprehensive income
   (loss)

$
(17
)

$
(258
)

$
(187
)

$
(12
)
(Losses) gains reclassified from
   accumulated other comprehensive

Cost of revenue

(56
)

(27
)

(194
)

(14
)
   income (loss) into net income (loss)

General and administrative

(86
)

(51
)

(287
)

(17
)
Total amounts reclassified

(142
)

(78
)

(481
)

(31
)
(Losses) gains recognized derivatives
   not designated as hedging instruments

Cost of revenue

(6
)

(69
)

(47
)

(38
)


		Three months ended September 30,						Nine months ended September 30,
	Financial Statement Line Item	2022			2021			2022			2021

Unrealized gains (losses)	Other comprehensive income (loss)	$	444		$	(17	)	$	295		$	(187	)

Gains (losses) reclassified from accumulated other	Cost of revenue	$	3		$	(56	)	$	(59	)	$	(194	)
comprehensive income into net loss	General and administrative		(1	)		(86	)		(82	)		(287	)
Total amounts reclassified		$	2		$	(142	)	$	(141	)	$	(481	)

Gains (losses) recognized on derivatives not designated as hedging instruments	Cost of revenue	$	159		$	(6	)	$	114		$	(47	)

14. Restructuring

Restructuring charges relate primarily to the Company’s 2022 strategic alignment initiative to consolidate its streaming fitness and nutrition offerings into a single Beachbody platform. The Company ~~expects that~~recognized restructuring costs of $~~0.1~~1.5 million ~~of existing losses recorded in accumulated other comprehensive income (loss) will be reclassified into net income (loss) over the next~~ and $~~12 months~~10.0~~. The Company assessed its derivative instruments and determined that they were effective~~ million during the three and nine months ended September 30, ~~2021~~2022, respectively, comprised primarily of termination benefits related to headcount reductions, of which $1.9 million is included in accrued expenses in the unaudited condensed consolidated balance sheets. In accordance with GAAP, employee termination benefits were recognized at the date employees were notified and ~~2020.~~post-employment benefits were accrued as the obligation was probable and estimable. Benefits for employees who provided service greater than 60 days from the date of notification were recognized ratably over the service period.

The following table summarizes activity in the Company’s restructuring-related liability during the three months ended September 30, 2022 (in thousands):


	Balance at		Restructuring		Payments /			Liability at
	June 30, 2022		Charges		Utilizations			September 30, 2022
Employee-related costs	$	1,320	$	1,492	$	(879	)	$	1,933
Total costs	$	1,320	$	1,492	$	(879	)	$	1,933

The following table summarizes the Company’s restructuring costs activity during the nine months ended September 30, 2022 (in thousands):


	Balance at		Restructuring		Payments /			Liability at
	December 31, 2021		Charges		Utilizations			September 30, 2022
Employee-related costs	$	—	$	10,047	$	(8,114	)	$	1,933
Total costs	$	—	$	10,047	$	(8,114	)	$	1,933

During the nine months ended September 30, 2022, the Company determined that the useful life of certain computer software, web development, and content assets would end upon the completion of its platform consolidation. The Company accelerated depreciation of these computer software and web development assets and recorded no accelerated depreciation, and $3.4 million, or $0.01 per share, of additional depreciation expense as a component of digital cost of revenue and nutrition and other cost of revenue during the three and nine months ended September 30, 2022, respectively. The Company also accelerated amortization of these content assets and recorded $0.1 million, or $0.00 per share, and $2.7 million, or 0.01 per share, of additional amortization as a component of digital cost of revenue during three and nine months ended September 30, 2022, respectively.

~~19.~~

15. Income Taxes

The Company recorded a benefit for income taxes of $0.5 million and $1.5 million for the three and nine months ended September 30, 2022, respectively, and a benefit for income taxes of $1.5 million and $12.7 million for the three and nine months ended September 30, 2021, respectively. The ~~Company recorded a provision for income taxes of $~~effective benefit tax rate was ~~4.1~~1.6 ~~million~~% and ~~benefit for income taxes of $0.2~~1.0 ~~million~~% for the three and nine months ended September 30, ~~2020, respectively. The effective benefit tax rate was~~2022, respectively, and 3.6% and 13.4% for the three and nine months ended September 30, 2021, respectively. ~~The effective tax rate was~~ ~~23.1% and the effective benefit tax rate was~~ ~~3.4% for the three and nine months ended September 30, 2020, respectively.~~

~~Our~~The tax provision for interim periods is determined using an estimate of ~~our~~the Company’s annual effective tax rate, adjusted for discrete items arising in that quarter. ~~Our~~The Company’s effective tax rate differs from the U.S. statutory tax rate in the three and nine months ended September 30, ~~2021~~2022 primarily due to changes in valuation allowances on ~~our~~ deferred tax assets as it is more likely than not that some or all of ~~our~~the Company’s deferred tax assets will not be realized. As a result of the Myx acquisition, which was a discrete second quarter 2021 event, the Company recorded deferred tax liabilities which partially reduced our need for a valuation allowance, resulting in an income tax benefit being recorded.

The Company evaluates its tax positions on a quarterly basis and revises its estimate accordingly. There ~~are~~were no material changes to the Company’s uncertain tax positions, interest, or penalties during the three and nine months ended September 30, ~~2021.~~

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted into law, and the new legislation contains several key tax positions, including the five-year net operating loss carryback, an adjustment business interest limitation, and payroll tax deferral. The Company is required to recognize the effect of tax law changes in the period of enactment. The Company has assessed the applicability of the CARES Act and determined there to be no material impact to the Company other than its ability to use the entire $~~4.6~~ million of net operating loss carryback from 2020 to 2019 for federal income tax purposes. On December 27, 2020 the Consolidated Appropriations Act, 2021 was signed into law. It provides additional COVID-19 focused relief and extends certain provisions of the CARES Act. At this time, the Company does not believe that the Consolidated Appropriations Act, 2021 will have a material impact on its consolidated financial statements.2022.

~~20.~~

16. Earnings (Loss) per Share

Basic net income (loss) per common share is calculated by dividing net income (loss) allocable to common shareholders by the weighed-average number of common shares outstanding during the period. Diluted net income (loss) per common share adjusts net income (loss) and net income (loss) per common share for the effect of all potentially dilutive shares of the Company’s common stock. Basic and diluted earnings (loss) per share are the same for each class of common stock because they are entitled to the same liquidation and dividend rights.

The computation of ~~earnings (loss)~~loss per share of Class A and Class X Common Stock is as follows (in thousands, except share and per share information):

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Numerator:

Net income (loss) available to common shareholders-basic
and diluted

$
(39,922
)

$
13,771

$
(82,420
)

$
(4,560
)
Denominator:

Weighted-average common shares outstanding- basic

304,599,205

238,831,118

265,117,012

238,374,028

Dilutive options

—

13,253,925

—

—

Weighted-average common shares outstanding- diluted

304,599,205

252,085,043

265,117,012

238,374,028

Net income (loss) per common shareholder, basic

$
(0.13
)

$
0.06

$
(0.31
)

$
(0.02
)
Net income (loss) per common shareholder, diluted

$
(0.13
)

$
0.05

$
(0.31
)

$
(0.02
)


	Three months ended September 30,						Nine months ended September 30,
	2022			2021			2022			2021
Numerator:
Net loss	$	(33,859	)	$	(39,922	)	$	(149,259	)	$	(82,420	)

Denominator:
Weighted-average common shares outstanding, basic and diluted		307,949,355			304,599,205			307,178,173			265,117,012

Net loss per common share, basic and diluted	$	(0.11	)	$	(0.13	)	$	(0.49	)	$	(0.31	)

Basic net ~~income (loss)~~loss per common share is the same as dilutive net ~~income (loss)~~loss per common share for each of the three and nine months ended September 30, ~~2021~~2022 and ~~for~~each of the three and nine months ended September 30, ~~2020~~ 2021as the inclusion of all potential common shares would have been antidilutive.

The following table presents the common shares that are excluded from the computation of diluted net loss per common share as of the periods presented because including them would have been antidilutive:

As of September 30,

2021

2020

Options

41,707,329

33,819,320

RSUs

280,309

-

Compensation Warrants

3,980,656

3,980,656

Public and Private Placement Warrants

15,333,333

-

Forest Road Earn-out Shares

3,750,000

-

65,051,627

37,799,976


	September 30,
	2022		2021

Options		50,918,670		41,707,329
RSUs		3,159,185		280,309
Compensation warrants		3,980,656		3,980,656
Public and private placement warrants		15,333,333		15,333,333
Term Loan warrants		4,716,756		—
Earn-out shares		3,750,000		3,750,000
		81,858,600		65,051,627

~~21.~~

~~Related Party Transactions~~

In 2018, the Company entered into a lease agreement with a company owned by the controlling shareholder. In July 2021, the Company purchased the building from the related party for its appraised value of $~~5.1~~ ~~million. Total lease payments to the related party were approximately~~ 0 ~~and $0.1~~ ~~million for the three and nine months ended September 30, 2021, respectively and $0.1~~ ~~million and $0.2~~ ~~million for the three and nine months ended September 30, 2020, respectively. There were~~ 0 ~~material amounts due to the related party as of September 30, 2021 and December 31, 2020.~~

The Company has a royalty agreement with a company related to the controlling shareholder. The related party assisted the Company with the development of several products and receives royalties based on the sales of these products. Total payments to the related party were approximately 0 ~~and $0.9~~ ~~million during the three and nine months ended September 30, 2021, respectively and were approximately $0.1~~ ~~million and $0.2~~ ~~million during the three and nine months ended September 30, 2020, respectively. As of September 30, 2021 and December 31, 2020, $0.1~~ ~~million and $0.7~~ ~~million, respectively, was due to the related party pursuant to the royalty agreement.~~

~~A minority shareholder and board member of Company is also a shareholder in a law firm that provides legal services to the Company. Total payments to the related party were $0.4~~ ~~million and $2.0~~ ~~million during the three and nine months ended September 30, 2021, respectively and were $0.7~~ ~~million and $1.2~~ ~~million during the three and nine months ended September 30, 2020,~~

~~respectively. The Company’s accounts payable related to the firm was approximately~~ 0 ~~and $0.5~~ ~~million as of September 30, 2021 and December 31, 2020, respectively.~~

~~22.~~

~~Segment Information~~

~~The Company applies ASC 280,~~ ~~Segment Reporting~~, in determining reportable segments for financial statement disclosure. Segment information is presented based on the financial information the Company uses to manage the business which is organized around our digital platforms. The Company has 2 ~~operating segments, Beachbody and Other, and~~ 1 reportable segment, Beachbody. The Beachbody segment primarily derives revenue from Beachbody on Demand digital subscriptions, nutritional products, and other fitness related products. Other derives revenue primarily from Openfit digital subscriptions and nutritional products and from connected fitness equipment (bikes and accessories) and monthly subscription revenue for workout content. The Company uses contribution as a measure of profit or loss, defined as revenue less directly attributable cost of revenue and certain selling and marketing expenses including media, Coach and social influencer compensation, royalties, and third-party sales commissions. Contribution does not include allocated costs as described below as the CODM does not include these costs in assessing performance. There are no inter-segment transactions. The Company manages its assets on a consolidated basis, and, as such, does not report asset information by segment.

~~Summary information by reportable segment is as follows (in thousands):~~

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Beachbody:

Revenue

$
194,290

$
248,268

$
634,647

$
633,001

Contribution

31,037

82,329

127,057

186,646

Other:

Revenue

13,762

3,211

22,732

6,298

Contribution

(10,589
)

(2,615
)

(22,136
)

(15,257
)
Consolidated:

Revenue

$
208,052

$
251,479

$
657,379

$
639,299

Contribution

20,448

79,714

104,921

171,389

~~Reconciliation of consolidated contribution to income (loss) before income taxes (in thousands):~~

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Consolidated contribution

$
20,448

$
79,714

$
104,921

$
171,389

Amounts not directly related to
   segments:

Cost of revenue (1)

9,600

7,361

25,560

20,809

Selling and marketing (2)

29,645

15,779

70,608

43,314

Enterprise technology and
   development

29,680

23,852

83,718

67,558

General and administrative

23,346

16,523

58,523

46,229

Restructuring gain

0

(1,677
)

0

(1,677
)
Change in fair value of
   warrant liabilities

(30,274
)

0

(35,664
)

0

Interest expense

62

89

490

432

Other income, net

(202
)

(113
)

(3,155
)

(555
)
Income (loss) before income taxes

$
(41,409
)

$
17,900

$
(95,159
)

$
(4,721
)

~~(1)~~

Cost of revenue not directly related to segments includes certain allocated costs related to management, facilities, and personnel-related expenses associated with quality assurance and supply chain logistics. Depreciation of certain software and production equipment and amortization of formulae and technology-based intangible assets are also included in this line.

~~(2)~~

Selling and marketing not directly related to segments includes indirect selling and marketing expenses and certain allocated personnel-related expenses for employees and consultants. Depreciation of certain software and amortization of contract-based intangible assets are also included in this line.

~~23.~~

~~Subsequent Events~~

~~The Company has evaluated subsequent events through the date the unaudited condensed consolidated financial statements were issued.~~

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis should be read in conjunction with our financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q (this “Report”) and the section entitled “Risk Factors.” Unless otherwise indicated, the terms “Beachbody,” “we,” “us,” or “our” refer to The Beachbody Company, Inc., a Delaware corporation, together with its consolidated subsidiaries.

Forward-Looking Statements

This Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended ~~or the~~ (“Securities ~~Act,~~Act”), and Section 21E of the Securities Exchange Act of 1934, as amended ~~or the~~ (“Exchange ~~Act)~~Act”), including statements about and the financial condition, results of operations, earnings outlook and prospects of the Company. Forward-looking statements are typically identified by words such as “plan,” “believe,” “expect,” “anticipate,” “intend,” “outlook,” “estimate,” “forecast,” “project,” “continue,” “could,” “may,” “might,” “possible,” “potential,” “predict,” “should,” “would” and other similar words and expressions, but the absence of these words does not mean that a statement is not forward-looking.

The forward-looking statements are based on our current expectations as applicable and are inherently subject to uncertainties and changes in circumstances and their potential effects and speak only as of the date of such statement. There can be no assurance that future developments will be those that have been anticipated. These forward-looking statements involve a number of risks, uncertainties or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to the following:

•

our future financial performance, including our expectations regarding our revenue, cost of revenue, gross profit, operating expenses including changes in selling and marketing, general and administrative, and enterprise technology and development expenses (including any components of the foregoing), Adjusted EBITDA (as defined below) and our ability to achieve and maintain future profitability;

•

our anticipated growth rate and market opportunity;

•

our liquidity and ability to raise ~~financing in the future;~~financing;

•

our success in retaining or recruiting, or changes required in, officers, key employees or directors;

•

our warrants are accounted for as liabilities and changes in the value of such warrants could have a material effect on our financial results;

•

our ability to effectively compete in the fitness and nutrition industries;

•

our ability to successfully acquire and integrate new operations;

•

our reliance on a few key products;

•

market conditions and global and economic factors beyond our control;

•

intense competition and competitive pressures from other companies worldwide in the industries in which we will operate;

•

litigation and the ability to adequately protect our intellectual property rights;



costs related to the Business Combination and the failure to realize anticipated benefits of the Business Combination or to realize any financial projections or estimated pro forma results and the related underlying assumptions; and

•

other risk and uncertainties set forth in this Report under the heading “Risk Factors.”

Should one or more of these risks or uncertainties materialize or should any of the assumptions made by management prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements.

Except to the extent required by applicable law or regulation, we undertake no obligation to update these forward-looking statements to reflect events or circumstances after the date of this Report or to reflect the occurrence of unanticipated events.

Overview ~~of Our Business~~

Beachbody is a leading subscription health and wellness company. We focus primarily on digital content, supplements, connected fitness, and consumer health and wellness. Our goal is to continue to provide holistic health and wellness content and subscription-based solutions. We are the creator of some of the world’s most popular fitness programs, including P90X,®, Insanity,® and 21 Day Fix,®, which transformed the ~~in-home~~at-home fitness market and disrupted the global fitness industry by making it accessible for people to get results—anytime, anywhere. ~~We have also developed~~Our comprehensive nutrition-first programs, Portion Fix® and 2B Mindset,®~~, which~~ teach

healthy eating habits and promote healthy, sustainable weight loss. ~~All~~These fitness and nutrition programs are available through our Beachbody On Demand and Beachbody On Demand Interactive streaming services.®

~~streaming service. In addition, we~~We offer ~~nutritionals~~nutritional products such as Shakeology® nutrition shakes, BEACHBAR snack bars, and ~~BEACHBAR~~® ~~snack bars.~~

~~In the health, wellness~~Ladder premium supplements as well as a professional-grade stationary cycle with a 360-degree touch screen tablet and ~~fitness industry, we focus primarily on digital content,~~ connected fitness ~~and consumer health & wellness. Our goal is to continue to provide leading holistic health and wellness content and subscription-based solutions.~~software. Leveraging our history of fitness content creation, nutrition innovation, and our network of micro-influencers, whom we call Coaches, we ~~have been successful in identifying~~plan to continue market ~~trends and expanding our market share. With our 2021 expansion~~penetration into connected fitness through the integration of Myx’s professional grade stationery cycle and 360-degree touch screen tablet connected fitness software, weights, and accessories, we plan to leverage our distribution, marketing and content creation capabilities to reach a wider health, wellness and fitness audience.

Historically, our revenue has ~~primarily~~ been generated primarily through aour network of ~~micro-influencers,~~Coaches, social media marketing channels, and direct response advertising. Components of revenue include recurring digital subscription revenue, connected fitness revenue, and revenue from the sale of nutritional and other products. In addition to selling individual products on a one-time basis, we ~~also~~ bundle ~~fitness~~digital and ~~nutrition~~nutritional products together at discounted prices.

On June 25, 2021 we consummated the Business Combination by and among Forest Road, Old Beachbody and Myx. The Business Combination resulted in cash proceeds, net of issuance costs and cash paid for the acquisition of Myx, net of cash acquired of approximately $351.8. In addition it drove increases of $78.1 million in intangible assets and $157.9 million in goodwill as of September 30, 2021, compared to our balance sheet as of December 31, 2020. The following financial information for the three months and nine months ended September 30, 2021 includes the financial information and activities for Myx for the period from June 26, 2021 to September 30, 2021.

For the three months ended September 30, ~~2021,~~2022, as compared to the three months ended September 30, ~~2020:~~2021:

•

Total revenue was ~~$208.1~~$166.0 million, a ~~17%~~20% decrease;

•

Digital revenue was ~~$94.1~~$72.2 million, a 5%23% decrease;



~~Connected fitness revenue was $5.9 million;~~

•

Nutrition and other revenue was ~~$108.1~~$90.4 million, a ~~29%~~16% decrease;

•

Connected fitness revenue was $3.3 million, a 44% decrease;

•

Net loss was ~~$39.9~~$33.9 million, compared to net ~~income~~loss of ~~$13.8~~$39.9 million; and

•

Adjusted EBITDA was ($~~43.4)~~6.2) million, compared to ~~$31.4~~($43.4) million.

For the nine months ended September 30, ~~2021,~~2022, as compared to the nine months ended September 30, ~~2020:~~2021:

•

Total revenue was ~~$657.4~~$544.0 million, a ~~3% increase;~~17% decrease;

•

Digital revenue was ~~$283.5~~$232.0 million, ana 18% ~~increase;~~decrease;



~~Connected fitness revenue was $5.9 million;~~

•

Nutrition and other revenue was ~~$367.9~~$278.6 million, ~~an 8%~~a 24% decrease;

•

Connected fitness revenue was $33.4 million;

•

Net loss was ~~$82.4~~$149.3 million, compared to a net loss of ~~$4.6~~$82.4 million; and

•

Adjusted EBITDA was ($~~59.5)~~26.8) million, compared to ~~$34.9~~($59.5) million.

~~For a definition of digital subscriptions see the section titled “—Key Operational and Business Metrics.”~~

See ~~the section titled “—Non-GAAP~~“Non-GAAP Information” below for information regarding our use of Adjusted EBITDA and a reconciliation of net ~~income (loss)~~loss to Adjusted EBITDA.

~~Impact of COVID-19~~Recent Developments

~~The novel coronavirus continues~~We believe post-pandemic consumer behavior, the general slowdown of the global economy, and rising prices for consumer products and services have adversely impacted demand for at-home fitness solutions. These adverse conditions, combined with unprecedented supply chain surcharges and disruptions, have contributed to declines in our gross margins. Given the uncertainty for how long these macroeconomic factors will continue, we currently anticipate the negative impact to our gross margins to continue at least through the remainder of fiscal year 2022. We plan to mitigate these challenging macroeconomic factors with strategies that we expect will drive our future success and growth.

Digital Gross Margin

We believe our “One Brand” strategy, which consolidated our streaming content into a single Beachbody platform and was implemented during the third quarter of 2022, will simplify our product offerings for customers and lead to an increase in customer acquisition. We believe that strengthening our Coach network will generate additional digital revenue from our Coach business management online platform as well as drive growth in digital and nutritional subscriptions. Since the second quarter of 2022, we have been testing new incentives and training programs for our Coach network to improve Coach recruitment and retention and their ability to reach more customers.

Nutrition and Other Gross Margin

Our nutritional products are often bundled with digital content offerings, and we continue to develop enhancements to our upsell and cross-sell capabilities. We are also currently reviewing our nutritional product portfolio and will simplify our offerings with nutritional products that meet our profitability requirements and/or reflect market demand. We also intend to test price increases to counteract rising supply chain costs.

Connected Fitness Gross Margin

We anticipate that our connected fitness gross margin will remain negative until we sell through our current inventory on hand. As a ~~significant impact~~result of supply chain constraints, we have adjusted our inventory to net realizable value based on ~~most businesses, including Beachbody. During~~ the ~~year ended December 31, 2020,~~costs to manufacture, transport, fulfill, and ship a Beachbody Bike. Incremental costs of revenue excluded from this adjustment, such as customer service, personnel-related expenses, and amortization of acquired intangible assets, have led to an unprofitable margin. We have been limited in our ability to sufficiently increase pricing to mitigate costs due to the highly competitive nature of the connected fitness market. For the remainder of 2022, we ~~saw strong~~will explore different strategies such as pricing and bundling to accelerate demand for our ~~digital subscriptions as~~current inventory. Consumer response to these strategies is uncertain, and we may be required to continue to reduce the ~~government ordered closures~~carrying value of connected fitness inventory through the remainder of the year. See “Risk Factors - Risks Related to Our Business and restrictions on gyms and as consumers were reluctant to return to gyms as the COVID-19 pandemic continued. We also experienced modestly slower product fulfillment to customers and supply chain delays. During the second and third quarters of 2021, the pandemic has resulted in higher shipping, freight, and fulfillment costs and the cancellation of certain Coach events.

~~The ultimate impact of COVID-19 on our financial and~~Industry - Our operating results is unknown and will depend on the length of time that these restrictions continue and whether the demand for many of our digital subscriptions continue. COVID-19 has had a significant impact and may continue to have a significant impact, the full extent of which is unknown, but which could be ~~material. Although COVID-19 increased~~adversely affected if we are unable to accurately forecast consumer demand for our ~~digital solutions,~~products and services and adequately manage our inventory” in our Annual Report on Form 10-K.

Key Operational and Business Metrics

We use the following key operational and business metrics to evaluate our business, measure our performance, develop financial forecasts, and make strategic decisions.


	As of September 30,
	2022		2021

Digital subscriptions (millions)		2.10		2.64
Nutritional subscriptions (millions)		0.24		0.34


	Three months ended September 30,						Nine months ended September 30,
	2022			2021			2022			2021

Average digital retention		95.7	%		95.6	%		95.6	%		95.5	%
Total streams (millions)		27.5			35.9			96.7			136.4
DAU/MAU		29.5	%		29.6	%		30.4	%		32.1	%

Revenue (millions)	$	166.0		$	208.1		$	544.0		$	657.4
Gross profit (millions)	$	104.7		$	135.0		$	285.0		$	447.4
Gross margin		63	%		65	%		52	%		68	%

Net loss (millions)	$	(33.9	)	$	(39.9	)	$	(149.3	)	$	(82.4	)
Adjusted EBITDA (millions)	$	(6.2	)	$	(43.4	)	$	(26.8	)	$	(59.5	)

Please see “Non-GAAP Information” below for a reconciliation of net loss to Adjusted EBITDA and an explanation for why we ~~believe the structural shift towards wellness and fitness solutions like our platform existed before the impact of COVID-19, and we anticipate that this structural change~~consider Adjusted EBITDA to ~~the fitness industry will continue after COVID-19.~~be a helpful metric for investors.

Digital Subscriptions

Our ability to expand the number of digital subscriptions is an indicator of our market penetration and growth. Digital subscriptions include BOD, BODi, and prior to Q3 2022, Openfit subscriptions. Digital subscriptions include paid and free-to-pay subscriptions, with free-to-pay subscriptions representing approximately 1% of total digital subscriptions on average. Digital subscriptions are inclusive of all billing plans, currently for annual, semi-annual, quarterly and monthly billing intervals.

Nutritional Subscriptions

Nutritional subscriptions include monthly subscriptions for nutritional products such as Shakeology, Beachbody ~~has business continuity~~Performance, BEACHBAR, Bevvy and Ladder Supplements. We also package and bundle the content experience of digital subscriptions with nutritional subscriptions to optimize customer results.

Average Digital Retention

We use month-over-month digital subscription retention, which we define as the average rate at which a subscription renews for a new billing cycle, to measure customer retention.

Total Streams

We use total streams to quantify the number of fitness or nutrition programs ~~in place~~viewed per subscription, which is a leading indicator of customer engagement and retention. While the measure of a digital stream may vary across companies, to ~~ensure that employees are safe and that the businesses continue to function while employees are working remotely. We have been closely monitoring the impact~~qualify as a stream on any of ~~working from home and the potential strain on internet connectivity but have not seen any adverse impact on the ability~~our digital platforms, a program must be viewed for a minimum of 25% of the ~~businesses~~total running time.

Daily Active Users to ~~function and we have not seen any network connectivity issues that would have an adverse impact~~Monthly Active Users (DAU/MAU)

We use the ratio of daily active users to monthly active users to measure how frequently digital subscribers are utilizing our service in a given month. We define a daily active user as a unique user streaming content on our ~~customers’ ability to access~~platform in a given day. We define a monthly active user as a unique user streaming content on our ~~product offerings.~~platform in that same month.

Non-GAAP Information

~~This Report includes~~We use Adjusted EBITDA, which is a non-GAAP performance measure, ~~that we use~~ to supplement our results presented in accordance with GAAP. We believe Adjusted EBITDA is useful in evaluating our operating performance, as it is similar to measures reported by our public competitors and is regularly used by security analysts, institutional investors, and other interested parties in analyzing operating performance and prospects. Adjusted EBITDA is not intended to be a substitute for any GAAP financial measure and, as calculated, may not be comparable to other similarly titled measures of performance of other companies in other industries or within the same industry.

We define and calculate Adjusted EBITDA as net income (loss) adjusted for impairment of goodwill and intangible assets, depreciation and amortization, amortization of capitalized cloud computing implementation costs, amortization of content assets, interest expense, income ~~taxes,~~tax provision (benefit), equity-based compensation, inventory net realizable value adjustment, and other items that are not normal, recurring, operating expenses necessary to operate the Company’s business as described in the reconciliation below.

We include this non-GAAP financial measure because it is used by management to evaluate Beachbody’s core operating performance and trends and to make strategic decisions regarding the allocation of capital and new investments. Adjusted EBITDA excludes certain expenses that are required in accordance with GAAP because they are non-cash (for example, in the case of depreciation and amortization, equity-based ~~compensation)~~compensation, and net realizable value adjustment) or are not related to our underlying business performance (for example, in the case of interest income and expense).

The table below presents our Adjusted EBITDA reconciled to our net ~~income (loss),~~loss, the closest GAAP measure, for the periods indicated:


													Three months ended September 30,						Nine months ended September 30,
(in thousands)	Three Months Ended September 30,						Nine Months Ended September 30,						2022			2021			2022			2021
	2021			2020			2021			2020
Net income (loss)	$	(39,922	)	$	13,771		$	(82,420	)	$	(4,560	)
Net loss													$	(33,859	)	$	(39,922	)	$	(149,259	)	$	(82,420	)
Adjusted for:
Impairment of intangible assets														1,000			—			1,000			—
Depreciation and amortization		14,616			11,203			40,557			31,881			17,306			14,616			58,858			40,557
Amortization of capitalized cloud computing implementation costs		168			—			504			—			126			168			462			504
Amortization of content assets		3,889			1,907			10,008			5,103			5,493			3,889			18,673			10,008
Interest expense		62			89			490			432			1,152			62			1,174			490
Income tax (benefit) provision		(1,487	)		4,129			(12,739	)		(161	)
Income tax benefit														(549	)		(1,487	)		(1,536	)		(12,739	)
Equity-based compensation		5,744			1,261			10,839			3,169			5,601			5,744			13,166			10,839
Inventory net realizable value adjustment (1)														(1,867	)		—			23,569			—
Transaction costs		677			612			2,819			612			—			677			2			2,819
Restructuring gain		—			(1,677	)		—			(1,677	)
Restructuring and platform consolidation costs (2)														1,745			—			11,718			—
Change in fair value of warrant liabilities		(30,274	)		—			(35,664	)		—			(2,362	)		(30,274	)		(4,696	)		(35,664	)
Other adjustment items (1)		3,044			—			9,082			—
Non-operating items (2)		71			77			(3,017	)		131
Other adjustment items (3)														—			3,044			—			9,082
Non-operating (4)														(15	)		71			61			(3,017	)
Adjusted EBITDA	$	(43,412	)	$	31,372		$	(59,541	)	$	34,930		$	(6,229	)	$	(43,412	)	$	(26,808	)	$	(59,541	)

(1)

~~Other~~Represents a non-cash expense to reduce the carrying value of our connected fitness inventory and related future commitments. This adjustment ~~items includes incremental~~is included because of its unusual magnitude due to disruptions in the connected fitness market.

(2)

Includes restructuring expense and non-recurring personnel costs associated primarily with the consolidation of our digital platforms.

(3)

Incremental costs associated with COVID-19.

~~(2)~~(4)

~~Non-operating primarily includes~~Includes interest income, and during the nine months ended September 30, 2021, also includes the gain on investment on the Myx convertible instrument.

~~Key Operational and Business Metrics~~

In addition to the measures presented in our unaudited condensed consolidated financial statements, we use the following key operational and business metrics to evaluate our business, measure our performance, develop financial forecasts, and make strategic decisions.

As of September 30,

2021

2020

Digital Subscriptions (millions)

2.64

2.61

Nutritional Subscriptions (millions)

0.34

0.44

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Average Digital Retention

95.6
%

95.1
%

95.5
%

95.4
%
Total Streams (millions)

35.9

48.5

136.4

137.2

DAU/MAU

29.6
%

32.1
%

32.1
%

31.9
%

Revenue (millions)

$
208.1

$
251.5

$
657.4

$
639.3

Gross profit (millions)

$
135.0

$
180.6

$
447.4

$
460.1

Gross margin

65
%

72
%

68
%

72
%

Net income (loss) (millions)

$
(39.9
)

$
13.8

$
(82.4
)

$
(4.6
)
Adjusted EBITDA (millions) (1)

$
(43.4
)

$
31.4

$
(59.5
)

$
34.9

~~(1)~~

Please see the section titled “—Non-GAAP Information” for a reconciliation of net loss to Adjusted EBITDA and an explanation for why we consider Adjusted EBITDA to be a helpful metric for investors.

~~Digital Subscriptions~~

Our ability to expand the number of digital subscriptions is an indicator of our market penetration and growth. Digital subscriptions include Beachbody On Demand, Nutrition+, and Openfit subscriptions. Digital subscriptions include paid and free-to-pay subscriptions. Free-to-pay subscriptions, on average, represent less than 2% of total digital subscriptions. Digital subscriptions are inclusive of all billing plans, currently for annual, semi-annual, quarterly and monthly billing intervals.

~~Nutritional Subscriptions~~

We package and synthesize the content experience of digital subscriptions with nutritional subscriptions that work together. Nutritional Subscriptions are monthly subscriptions to nutritional products such as, Shakeology, Beachbody Performance, BEACHBAR, Bevvy and Ladder Supplements.

~~Average Digital Retention~~

We use month over month digital subscription retention to measure the retention of our digital subscriptions. We define digital subscription retention as the average rate at which a subscription renews for a new billing cycle.

~~Total Streams~~

We measure streams and total streams to quantify the number of fitness or nutrition programs viewed per subscription which is a leading indicator of customer engagement and retention. While the measure of a digital stream may vary across companies, to qualify as a stream on either our Beachbody on Demand or Openfit platforms, a program must be viewed for a minimum of 25% of the total running time.

~~Daily Active Users to Monthly Active Users (DAU/MAU)~~

We use the ratio of daily active users to monthly active users to measure how frequently digital subscribers are utilizing our service in a given month. We define a daily active user as a unique user streaming content on our platform in a given day. We define a monthly active user as a unique user streaming content on our platform in that same month.

~~Components of our Operating Results and~~ Results of Operations

~~We operate~~Prior to the three months ended September 30, 2022, we operated and ~~manage~~managed our business in two operating segments, Beachbody and ~~Other. For financial reporting purposes, we have~~Other, and one reportable segment, Beachbody. ~~We identified~~During the ~~reportable segment~~three months ended September 30, 2022, in connection with the consolidation of our Openfit streaming fitness offering onto a single Beachbody digital platform and based on the information used by management to monitor performance and make operating ~~decisions.~~decisions, we changed our segment reporting as it was determined that there is one consolidated operating segment. See ~~Notes~~Note 1, Description of Business and 22Summary of ~~the notes~~Significant Accounting Policies, to our unaudited condensed consolidated financial statements included elsewhere in this Report for additional information regarding our ~~reportable~~ segment.

The following discussion of our results and operations is on a consolidated ~~basis as the Other non-reportable operating segment is not material to the understanding of our business taken as a whole.~~basis.


(in thousands)	Three months ended September 30,						Nine months ended September 30,
	2022			2021			2022			2021

Revenue:
Digital	$	72,228		$	94,072		$	231,988		$	283,547
Nutrition and other		90,416			108,053			278,596			367,895
Connected fitness		3,331			5,927			33,449			5,937
Total revenue		165,975			208,052			544,033			657,379
Cost of revenue:
Digital		16,078			12,124			50,909			34,858
Nutrition and other		40,486			50,682			127,262			164,679
Connected fitness		4,745			10,261			80,910			10,417
Total cost of revenue		61,309			73,067			259,081			209,954
Gross profit		104,666			134,985			284,952			447,425
Operating expenses:
Selling and marketing		93,145			153,782			286,213			438,672
Enterprise technology and development		25,686			29,680			83,516			83,718
General and administrative		19,532			23,346			59,189			58,523
Restructuring		1,492			—			10,047			—
Impairment of intangible assets		1,000			—			1,000			—
Total operating expenses		140,855			206,808			439,965			580,913
Operating loss		(36,189	)		(71,823	)		(155,013	)		(133,488	)
Other income (expense)
Change in fair value of warrant liabilities		2,362			30,274			4,696			35,664
Interest expense		(1,152	)		(62	)		(1,174	)		(490	)
Other income, net		571			202			696			3,155
Loss before income taxes		(34,408	)		(41,409	)		(150,795	)		(95,159	)
Income tax benefit		549			1,487			1,536			12,739
Net loss	$	(33,859	)	$	(39,922	)	$	(149,259	)	$	(82,420	)

(in thousands)

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Revenue:

Digital

$
94,072

$
99,082

$
283,547

$
239,964

Connected fitness

5,927

—

5,937

—

Nutrition and other

108,053

152,397

367,895

399,335

Total revenue

208,052

251,479

657,379

639,299

Cost of revenue:

Digital

12,124

9,843

34,858

27,507

Connected fitness

10,261

—

10,417

—

Nutrition and other

50,682

61,082

164,679

151,654

Total cost of revenue

73,067

70,925

209,954

179,161

Gross profit

134,985

180,554

447,425

460,138

Operating expenses:

Selling and marketing

153,782

123,980

438,672

352,872

Enterprise technology and development

29,680

23,852

83,718

67,558

General and administrative

23,346

16,523

58,523

46,229

Restructuring gain

—

(1,677
)

—

(1,677
)
Total operating expenses

206,808

162,678

580,913

464,982

Operating income (loss)

(71,823
)

17,876

(133,488
)

(4,844
)
Change in fair value of warrant liabilities

30,274

—

35,664

—

Interest expense

(62
)

(89
)

(490
)

(432
)
Other income, net

202

113

3,155

555

Income (loss) before income taxes

(41,409
)

17,900

(95,159
)

(4,721
)
Income tax benefit (provision)

1,487

(4,129
)

12,739

161

Net income (loss)

$
(39,922
)

$
13,771

$
(82,420
)

$
(4,560
)

Revenue

Revenue includes digital subscriptions, nutritional supplement subscriptions, one-time nutritional sales, connected fitness products, access to our online Coach business management platform, preferred customer program memberships, and other fitness-related products. ~~Subscription~~Digital subscription revenue is recognized ratably over the subscription period ~~(up~~of up to 12 ~~months).~~months. We often sell bundled products that combine digital subscriptions, nutritional products, and/or other fitness ~~and nutritional programs.~~products. We consider these sales to be revenue arrangements with multiple performance obligations and allocate the transaction price to each performance

obligation based on its relative stand-alone selling price. We defer revenue when we receive payments in advance of delivery of products or the performance of services.


	Three Months Ended September 30,									Three months ended September 30,
	2021		2020		$ Change			% Change		2022		2021		$ Change			% Change
	(dollars in thousands)									(dollars in thousands)
Revenue
Digital	$	94,072	$	99,082	$	(5,010	)	(5%)		$	72,228	$	94,072	$	(21,844	)		(23	%)
Nutrition and other											90,416		108,053		(17,637	)		(16	%)
Connected fitness		5,927		—		5,927			—		3,331		5,927		(2,596	)		(44	%)
Nutrition and other		108,053		152,397		(44,344	)	(29%)
Total revenue	$	208,052	$	251,479	$	(43,427	)	(17%)		$	165,975	$	208,052	$	(42,077	)		(20	%)

The decrease in digital revenue for the three months ended September 30, ~~2021,~~2022, as compared to the three months ended September 30, ~~2020,~~2021, was primarily due to ~~lower growth~~an $11.9 million decrease in revenue generated from our online Coach business management platform as a result of fewer Coaches. The decrease in Coaches was primarily attributable to our preferred customer membership program, which launched at the end of Q3 2021, as certain Coaches elected to become preferred customers rather than remain in our Coach network. The change in digital ~~subscriptions as the demand for at-home fitness slowed.~~revenue was also due to a $9.2 million decrease in revenue from our digital streaming services due to 20% fewer subscriptions.

~~The increase in connected fitness revenue for the three months ended September 30, 2021, as compared to the three months ended September 30, 2020, was due to the acquisition of Myx in June 2021.~~

The decrease in nutrition and other revenue for the three months ended September 30, ~~2021,~~2022, as compared to the three months ended September 30, ~~2020,~~2021, was primarily due to a ~~$33.6~~$23.4 million decrease in revenue from ~~nutritionals primarily driven by the decrease in~~ nutritional ~~subscriptions and lower customer acquisition~~products and a ~~$4.3~~$1.8 million decrease in associated shipping revenue as we ended Q3 2022 with 29% fewer nutritional subscriptions compared to Q3 2021. These decreases were partially offset by $8.1 million of revenue associated with our preferred customer membership program, which launched at the end of Q3 2021.

The decrease in connected fitness revenue for the three months ended September 30, 2022, as compared to the three months ended September 30, 2021, was primarily due to ~~a sales composition shift~~lower demand resulting from ~~nutritional~~reduced promotional activity compared to ~~digital.~~the launch of the Beachbody Bike beginning in Q3 2021.


	Nine months ended September 30,
	2022		2021		$ Change			% Change
	(dollars in thousands)
Revenue
Digital	$	231,988	$	283,547	$	(51,559	)		(18	%)
Nutrition and other		278,596		367,895		(89,299	)		(24	%)
Connected fitness		33,449		5,937		27,512		NM
Total revenue	$	544,033	$	657,379	$	(113,346	)		(17	%)

NM = not meaningful

Nine Months Ended September 30,

2021

2020

$ Change

% Change

(dollars in thousands)

Revenue

Digital

$
283,547

$
239,964

$
43,583

18
%
Connected fitness

5,937

—

5,937

—

Nutrition and other

367,895

399,335

(31,440
)

(8%)

Total revenue

$
657,379

$
639,299

$
18,080

3
%

The ~~increase~~decrease in digital revenue for the nine months ended September 30, ~~2021,~~2022, as compared to the nine months ended September 30, ~~2020,~~2021, was primarily due to a $36.3 million decrease in revenue generated from our online Coach business management platform as a result of fewer Coaches. The decrease in Coaches was primarily attributable to ~~year-over-year growth~~our preferred customer membership program, which launched at the end of Q3 2021, as certain Coaches elected to become preferred customers rather than remain in our Coach network. The change in digital ~~subscriptions during the first half of 2021.~~revenue was also due to a $14.3 million decrease in revenue from our digital streaming services which was due, in part, to 20% fewer digital subscriptions.

~~The increase in connected fitness revenue for the nine months ended September 30, 2021, as compared to the nine months ended September 30, 2020, was due to the acquisition of Myx in June 2021.~~

The decrease in nutrition and other revenue for the nine months ended September 30, ~~2021,~~2022, as compared to the nine months ended September 30, ~~2020,~~2021, was primarily due to a $99.7 million decrease in revenue from nutritional products and a $9.4 million decrease in associated shipping revenue as we ended Q3 2022 with 29% fewer nutritional subscriptions compared to Q3 2021. These decreases were partially offset by $25.4 million of revenue associated with our preferred customer membership program, which launched at the end of Q3 2021.

The increase in connected fitness revenue for the nine months ended September 30, 2022, as compared to the nine months ended September 30, 2021 was primarily due to the ~~decrease in~~acquisition of Myx on June 25, 2021; there was minimal connected fitness revenue ~~from nutritionals as a result of lower demand experienced during~~for the ~~third quarter of~~six months ended June 30, 2021.

Cost of Revenue

Digital Cost of Revenue

Digital cost of revenue includes costs associated with digital content creation including amortization and ~~revisions~~revision of content assets, depreciation of streaming platforms, ~~and e-commerce websites,~~ digital streaming costs, and amortization of acquired digital platform intangible assets. It also includes customer service costs, ~~credit card~~payment processing fees, depreciation of production equipment, live trainer costs, facilities, and related personnel expenses.

~~Connected Fitness Cost of Revenue~~

Connected Fitness cost of revenue consists of product costs, including hardware costs, duties and other applicable importing costs, shipping and handling costs, warehousing and logistics costs, costs associated with service calls and repairs of the product under

~~warranty, payment processing and financing fees, customer service expenses, and personnel-related expenses associated with supply chain and logistics.~~

Nutrition and Other Cost of Revenue

Nutrition and other cost of revenue includes product costs, shipping and handling, fulfillment and warehousing, customer service, and ~~credit card~~payment processing fees. It also includes depreciation of nutrition-related e-commerce websites and social commerce platforms, amortization of acquired formulae intangible assets, facilities, and related personnel expenses.

Connected Fitness Cost of Revenue

Three Months Ended September 30,

2021

2020

$ Change

% Change

(dollars in thousands)

Cost of revenue

Digital

$
12,124

$
9,843

$
2,281

23
%
Connected fitness

10,261

—

10,261

—

Nutrition and other

50,682

61,082

(10,400
)

(17%)

Total cost of revenue

$
73,067

$
70,925

$
2,142

3
%

Gross profit

Digital

$
81,948

$
89,239

$
(7,291
)

(8%)

Connected fitness

(4,334
)

—

(4,334
)

—

Nutrition and other

57,371

91,315

(33,944
)

(37%)

Total gross profit

$
134,985

$
180,554

$
(45,569
)

(25%)

Gross margin

Digital

87
%

90
%

Connected fitness

(73
%)

—

Nutrition and other

53
%

60
%

Connected fitness cost of revenue consists of product costs, including bike and tablet hardware costs, duties and other applicable importing costs, shipping and handling costs, warehousing and logistics costs, costs associated with service calls and repairs of products under warranty, payment processing and financing fees, customer service expenses, and personnel-related expenses associated with supply chain and logistics.


	Three months ended September 30,
	2022			2021			$ Change			% Change
	(dollars in thousands)
Cost of revenue
Digital	$	16,078		$	12,124		$	3,954			33	%
Nutrition and other		40,486			50,682			(10,196	)		(20	%)
Connected fitness		4,745			10,261			(5,516	)		(54	%)
Total cost of revenue	$	61,309		$	73,067		$	(11,758	)		(16	%)

Gross profit
Digital	$	56,150		$	81,948		$	(25,798	)		(31	%)
Nutrition and other		49,930			57,371			(7,441	)		(13	%)
Connected fitness		(1,414	)		(4,334	)		2,920			67	%
Total gross profit	$	104,666		$	134,985		$	(30,319	)		(22	%)

Gross margin
Digital		78	%		87	%
Nutrition and other		55	%		53	%
Connected fitness		(42	%)		(73	%)

The increase in digital cost of revenue for the three months ended September 30, ~~2021,~~2022, as compared to the three months ended September 30, ~~2020,~~2021, was ~~primarily driven by~~due to a ~~$2.0~~$2.5 million increase in personnel-related expenses as a result of a shift in headcount focused on our digital streaming services and a $1.6 million increase in the amortization of content assets ~~amortization due~~primarily related to ~~a content asset library (new and existing content) with higher costs being amortized during~~BODi which launched in the fourth quarter of 2021. The decrease in digital gross margin for the three months ended September 30, ~~2021~~2022 compared to the three months ended September 30, ~~2020. The digital gross margin~~2021 was ~~lower for~~primarily the ~~three months ended September 30, 2021 compared to~~result of the ~~three months ended September 30, 2020 primarily due to~~ higher fixed expenses - content assets amortization, depreciation, and ~~higher customer service~~personnel-related expenses ~~as more contacts were related to~~- on lower digital ~~products, partially offset by lower credit card processing as we achieved rate-reducing initiatives.~~revenue.

The increase in connected fitness cost of revenue for the three months ended September 30, 2021, as compared to the three months ended September 30, 2020, was primarily driven by the acquisition of Myx in June 2021.

The decrease in nutrition and other cost of revenue for the three months ended September 30, ~~2021,~~2022, as compared to the three months ended September 30, ~~2020,~~2021, was primarily due to a ~~$8.7~~$5.7 million decrease in product costs ~~$2.1 million~~as the result of the decrease in ~~shipping costs,~~nutrition and ~~$0.6~~other revenue and a $3.6 million decrease in customer service ~~expense as~~due to a decrease in the ~~result~~volume of ~~lower~~contacts related to nutrition and other revenue. ~~These decreases were partially offset by a $1.1 million increase in freight and fulfillment expense. Despite the decrease in product costs, shipping and customer service costs, nutrition~~Nutrition and other gross margin ~~decreased~~increased primarily as a result of ~~a higher reserve for excess and obsolete inventory, higher~~the favorable shift in revenue from the preferred customer

3831

~~freight~~membership program and ~~shipping rates due to COVID-19, and the deleveraging of~~lower customer service expense, partially offset by higher fixed ~~costs~~expenses such as depreciation and personnel-related expenses on lower nutrition and other revenue.

The decrease in connected fitness cost of revenue was driven by lower connected fitness revenue. The negative connected fitness gross margin improvement for the three months ended September 30, 2022 compared to the three months ended September 30, 2021 was primarily due to lower product costs as a result of the reduced value of inventory compared to the prior year quarter, partially offset by higher fulfillment costs.

Nine Months Ended September 30,

2021

2020

$ Change

% Change

(dollars in thousands)

Cost of revenue

Digital

$
34,858

$
27,507

$
7,351

27
%
Connected fitness

10,417

—

10,417

—

Nutrition and other

164,679

151,654

13,025

9
%
Total cost of revenue

$
209,954

$
179,161

$
30,793

17
%

Gross profit

Digital

$
248,689

$
212,457

$
36,232

17
%
Connected fitness

(4,480
)

—

(4,480
)

—

Nutrition and other

203,216

247,681

(44,465
)

(18%)

Total gross profit

$
447,425

$
460,138

$
(12,713
)

(3%)

Gross margin

Digital

88
%

89
%

Connected fitness

(75
%)

—

Nutrition and other

55
%

62
%


	Nine months ended September 30,
	2022			2021			$ Change			% Change
	(dollars in thousands)
Cost of revenue
Digital	$	50,909		$	34,858		$	16,051			46	%
Nutrition and other		127,262			164,679			(37,417	)		(23	%)
Connected fitness		80,910			10,417			70,493		NM
Total cost of revenue	$	259,081		$	209,954		$	49,127			23	%

Gross profit
Digital	$	181,079		$	248,689		$	(67,610	)		(27	%)
Nutrition and other		151,334			203,216			(51,882	)		(26	%)
Connected fitness		(47,461	)		(4,480	)		(42,981	)	NM
Total gross profit	$	284,952		$	447,425		$	(162,473	)		(36	%)

Gross margin
Digital		78	%		88	%
Nutrition and other		54	%		55	%
Connected fitness		(142	%)		(75	%)

The increase in digital cost of revenue for the nine months ended September 30, ~~2021,~~2022, as compared to the nine months ended September 30, 2020, was primarily driven by a $4.9 million increase in content assets amortization due to a content asset library (new and existing content) with higher costs being amortized during the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. Additional customer service expense of $1.0 million, depreciation of $0.9 million, credit card processing expense of $0.5 million, and Openfit live training costs of $0.2 million were attributable to the increase in revenue. The slight decrease in digital gross margin from the nine months ended September 30, 2020 to the nine months ended September 30, 2021, was primarily ~~due to higher program amortization, partially offset~~driven by ~~lower streaming costs and lower credit card processing due to rate-reducing initiatives.~~

~~The~~an $8.7 million increase in ~~connected fitness~~the amortization of content assets primarily related to BODi, which launched in the fourth quarter of 2021, and content acquired from Myx in June 2021. The change in digital cost of revenue was also due to a $6.2 million increase in depreciation expense primarily related to the BODi platform and a change in useful life of certain assets in connection with our digital platform consolidation. The decrease in digital gross margin for the nine months ended September 30, ~~2021, as~~2022 compared to the nine months ended September 30, ~~2020,~~2021 was primarily ~~driven by~~ the ~~acquisition~~result of ~~Myx in June 2021.~~higher fixed content assets amortization and depreciation on lower digital revenue.

The ~~increase~~decrease in nutrition and other cost of revenue for the nine months ended September 30, ~~2021,~~2022, as compared to the nine months ended September 30, ~~2020,~~2021, was primarily due to a ~~$5.7~~$36.5 million ~~increase~~decrease in product, ~~costs, $3.2 million increase in shipping costs, $1.7 million increase in depreciation, $1.5 million increase in~~freight, fulfillment, and ~~$1.1 million~~shipping expense as the result of the decrease in ~~personnel-related expenses.~~nutrition and other revenue. Nutrition and other gross margin slightly decreased primarily as a result of higher fixed depreciation and personnel-related expenses on lower nutrition and other revenue, partially offset by the favorable shift in revenue from the preferred customer membership program.

The increase in connected fitness cost of revenue was primarily due to the acquisition of Myx on June 25, 2021; there was no connected fitness cost of revenue for periods prior to the acquisition. The negative connected fitness gross margin for the nine months ended September 30, 2022 was primarily due to $28.3 million in adjustments for excess and obsolete inventory and to reduce the carrying value of connected fitness inventory to its net realizable value in addition to higher product, freight, and shipping costs due to supply chain surcharges and constraints and lower pricing in line with a highly-competitive connected fitness market. The decline in the connected fitness gross margin was primarily related to the inventory adjustments as no such adjustments were made during the nine months ended September 30, 2021 as a result of higher freight and shipping rates, a higher reserve for excess and obsolete inventory, and increases in personnel-related costs and depreciation expense for which there is no commensurate revenue.2021.

Operating Expenses

Selling and Marketing

Selling and marketing expenses primarily include the cost of ~~micro-influencer~~Coach compensation, advertising, royalties, ~~content revisions,~~ promotions and events, and third-party sales commissions as well as the ~~related~~ personnel expenses for employees and ~~consultants.~~

~~We intend to continue to invest in our selling and marketing capabilities and expect this expense to increase in future periods as we release new products and expand internationally.~~consultants who support these areas. Selling and marketing expense as a percentage of total revenue may fluctuate from period to period based on total revenue, timing of new content and nutritional product launches, and the timing of our media ~~investments.~~investments to build awareness around launch activity.


												Three months ended September 30,
	Three Months Ended September 30,											2022			2021			$ Change			% Change
	2021			2020			$ Change		% Change			(dollars in thousands)
	(dollars in thousands)
Selling and marketing	$	153,782		$	123,980		$	29,802		24	%	$	93,145		$	153,782		$	(60,637	)		(39	%)
As a percentage of total revenue		73.9	%		49.3	%							56.1	%		73.9	%

The ~~increase~~decrease in selling and marketing expense for the three months ended September 30, ~~2021,~~2022, as compared to the three months ended September 30, ~~2020,~~2021, was primarily due ~~an increase~~to a $45.5 million decrease in online and television media expense and ~~online advertising expenses~~a $14.1 million decrease in Coach compensation, which was in line with ~~our strategic focus to invest~~the decrease in ~~building brand awareness and driving customer acquisition.~~commissionable revenue.

Selling and marketing expense ~~increased,~~ as a percentage of total revenue decreased by 1,780 basis points primarily due to ~~increased~~a decrease in our media investments ~~which were less effective at acquiring new customers as~~ compared to the three months ended September 30, ~~2020.~~2021. We have reduced our media spend as part of our strategic realignment and in an effort to invest in media that has the highest probability of return on investment.


												Nine months ended September 30,
	Nine Months Ended September 30,											2022			2021			$ Change			% Change
	2021			2020			$ Change		% Change			(dollars in thousands)
	(dollars in thousands)
Selling and marketing	$	438,672		$	352,872		$	85,800		24	%	$	286,213		$	438,672		$	(152,459	)		(35	%)
As a percentage of total revenue		66.7	%		55.2	%							52.6	%		66.7	%

The ~~increase~~decrease in selling and marketing expense for the nine months ended September 30, ~~2021,~~2022, as compared to the nine months ended September 30, ~~2020,~~2021, was primarily due to a ~~$54.8~~$111.1 million decrease in television media and online advertising expense and a $50.4 million decrease in Coach compensation, which was in line with the decrease in commissionable revenue. These decreases were partially offset by a $9.0 million increase in ~~media costs to build awareness and customer acquisition. Additional increases were $16.9 million in~~ expenses ~~for personnel and systems that support customer acquisition activities, $4.4 million in~~from Coach events ~~expenses, $3.1 million in intangible assets amortization, $2.6 million in production of marketing materials, and $0.9 million in royalties.~~due to the return to in-person events during the nine months ended September 30, 2022.

Selling and marketing expense ~~increased,~~ as a percentage of total revenue decreased by 1,410 basis points primarily due to ~~increased~~the decrease in media investments compared to the nine months ended September 30, 2021. We have reduced our media spend as part of our strategic realignment and in an effort to invest in media that has the highest probability of return on ~~lower revenue.~~investment.

Enterprise Technology and Development

Enterprise technology and development expenses primarily relate ~~primarily~~ to enterprise systems applications, hardware, and software that serve as the technology infrastructure for the Company and are not directly related to services provided or tangible goods sold. This includes maintenance and enhancements of the Company’s enterprise resource planning ~~(ERP)~~ system, which is the core of our accounting, procurement, supply chain and other business support systems. Enterprise technology and development also includes reporting and business analytics tools, security systems such as identity management and payment card industry compliance, office productivity software, research and development tracking tools, and other ~~non—customer~~non-customer facing applications. Enterprise technology and development expenses include personnel-related expenses for employees and consultants who create improvements to and maintain technology systems and are involved in the research and development of new and existing nutritional products, depreciation of enterprise technology-related assets, software licenses, hosting expenses, and technology equipment leases.


												Three months ended September 30,
	Three Months Ended September 30,											2022			2021			$ Change			% Change
	2021			2020			$ Change		% Change			(dollars in thousands)
	(dollars in thousands)
Enterprise technology and development	$	29,680		$	23,852		$	5,828		24	%	$	25,686		$	29,680		$	(3,994	)		(13	%)
As a percentage of total revenue		14.3	%		9.5	%							15.5	%		14.3	%

The ~~increase~~decrease in enterprise technology and development expense for the three months ended September 30, ~~2021,~~2022, as compared to the three months ended September 30, ~~2020,~~2021, was primarily due to ana $5.6 million decrease in personnel-related expenses related to lower headcount. This decrease was partially offset by a $1.6 million increase in ~~personnel and enterprise systems-related expenses.~~depreciation expense related to the technology initiatives that were completed in Q4 2021.

Enterprise technology and development expense as a percentage of total revenue increased by ~~480~~120 basis points due to ~~the deleveraging of fixed costs, such as personnel-related expense and depreciation, on~~ lower total revenue.


												Nine months ended September 30,
	Nine Months Ended September 30,											2022			2021			$ Change			% Change
	2021			2020			$ Change		% Change			(dollars in thousands)
	(dollars in thousands)
Enterprise technology and development	$	83,718		$	67,558		$	16,160		24	%	$	83,516		$	83,718		$	(202	)	NM
As a percentage of total revenue		12.7	%		10.6	%							15.4	%		12.7	%

The ~~increase~~decrease in enterprise technology and development expense for the nine months ended September 30, ~~2021,~~2022, as compared to the nine months ended September 30, ~~2020,~~2021, was primarily due to a ~~$13.0~~$3.7 million ~~increase~~decrease in personnel-related expenses as the result of lower headcount and a ~~$3.1~~$0.4 million decrease in research and development expenses, partially offset by a $3.9 million increase in depreciation ~~expense.~~ expense related to technology initiatives that were completed in Q4 2021.

Enterprise technology and development expense as a percentage of total revenue increased by ~~210~~270 basis points due to ~~the deleveraging of fixed costs, such as personnel-related expense and depreciation, on~~ lower total revenue.

General and Administrative

General and administrative expense includes personnel-related expenses and facilities-related costs primarily for our executive, finance, accounting, legal and human resources functions. General and administrative expense also includes fees for professional services principally comprised of legal, audit, tax, and insurance.


												Three months ended September 30,
	Three Months Ended September 30,											2022			2021			$ Change			% Change
	2021			2020			$ Change		% Change			(dollars in thousands)
	(dollars in thousands)
General and administrative	$	23,346		$	16,523		$	6,823		41	%	$	19,532		$	23,346		$	(3,814	)		(16	%)
As a percentage of total revenue		11.2	%		6.6	%							11.8	%		11.2	%

The ~~increase~~decrease in general and administrative expense for the three months ended September 30, ~~2021,~~2022, as compared to the three months ended September 30, ~~2020,~~2021, was primarily due to ~~increases~~a $1.6 million decrease in rent expense due to our Santa Monica office lease assignment, a $1.2 million decrease in recruiting expense due to fewer headcount additions, and a $0.7 million decrease in personnel-related expenses ~~and other general corporate expenses, including additional expenses as a result of operating as a public company.~~ due to lower headcount.

General and administrative expense as a percentage of total revenue increased by ~~460~~60 basis points due to ~~the deleveraging of costs on~~ lower total revenue.


												Nine months ended September 30,
	Nine Months Ended September 30,											2022			2021			$ Change		% Change
	2021			2020			$ Change		% Change			(dollars in thousands)
	(dollars in thousands)
General and administrative	$	58,523		$	46,229		$	12,294		27	%	$	59,189		$	58,523		$	666		1	%
As a percentage of total revenue		8.9	%		7.2	%							10.9	%		8.9	%

The increase in general and administrative expense for the nine months ended September 30, ~~2021,~~2022, as compared to the nine months ended September 30, ~~2020,~~2021, was primarily due to ~~increases~~a $5.0 million increase in ~~transaction costs related to the Business Combination,~~ personnel-related expenses and a $2.7 million increase in accounting and other ~~general corporate expenses.~~ professional fees as a result of operating as a public company. These increases were partially offset by a $4.9 million decrease in rent expense due to our Santa Monica office lease assignment and a $2.2 million decrease in recruiting expenses due to fewer headcount additions.

General and administrative expense as a percentage of total revenue increased by ~~170~~200 basis points ~~primarily~~ due to ~~the deleveraging of transaction~~higher fixed costs on lower total revenue.

Restructuring

Restructuring charges ~~relates~~primarily relate to our ~~2017~~2022 strategic alignment initiative to consolidate our streaming fitness and ~~2018 restructuring plans, which were initiated to realign business priorities and optimize operations to maximize digital subscription scale and growth.~~nutrition offerings into a single Beachbody platform. The charges incurred ~~primarily~~mainly relate to ~~lease~~employee termination ~~adjustments~~costs.


	Three months ended September 30,
	2022		2021		$ Change		% Change
	(dollars in thousands)

Restructuring	$	1,492	$	—	$	1,492	NM


	Nine months ended September 30,
	2022		2021		$ Change		% Change
	(dollars in thousands)

Restructuring	$	10,047	$	—	$	10,047	NM

Impairment of Intangible Assets

In testing for impairment of our indefinite-lived intangible asset, we compared the carrying value of the trade name to its estimated fair value. Fair value was estimated using an income approach, specifically the relief-from-royalty approach, and ~~employee-related costs, with the restructuring benefit~~included significant assumptions related to the royalty rate and revenue growth. Based on this analysis, we recognized an impairment charge as the fair value of the indefinite-lived trade name was determined to be less than its carrying value primarily due to lower ~~final lease termination expenses compared to initial estimates.~~revenue in the current year and long-term forecast.

Three Months Ended September 30,

2021

2020

$ Change

% Change

(dollars in thousands)

Restructuring gain

$
—

$
(1,677
)

$
1,677

(100%)


	Three months ended September 30,
	2022		2021		$ Change		% Change
	(dollars in thousands)

Impairment of intangible assets	$	1,000	$	—	$	1,000	—


	Nine months ended September 30,
	2022		2021		$ Change		% Change
	(dollars in thousands)

Impairment of intangible assets	$	1,000	$	—	$	1,000	—

Nine Months Ended September 30,

2021

2020

$ Change

% Change

(dollars in thousands)

Restructuring gain

$
—

$
(1,677
)

$
1,677

(100%)

~~Restructuring gain for the three and nine months ended September 30, 2020 reflect adjustments to the estimated liability associated with the 2017 restructuring lease terminations.~~

Other Income ~~(Expenses)~~(Expense)

The change in fair value of warrant liabilities consists of the fair value changes of the ~~Public Warrants~~public, private placement, and ~~Private Warrants and the transaction costs and advisory fees for the Business Combination allocated to the~~Term Loan warrants. Interest expense primarily consists of interest expense associated with our borrowings and amortization of debt discount and issuance costs for our Financing Agreement in 2022 and Credit ~~Facility.~~Facility in 2021. Other income, net, consists of interest income earned on investments and gains (losses) on foreign currency.


												Three months ended September 30,
	Three Months Ended September 30,											2022			2021			$ Change			% Change
	2021			2020			$ Change		% Change			(dollars in thousands)
	(dollars in thousands)
Change in fair value of warrant liabilities	$	30,274		$	—		$	30,274		—		$	2,362		$	30,274		$	(27,912	)		(92	%)
Interest expense		(62	)		(89	)		27		30	%		(1,152	)		(62	)		(1,090	)		1,758	%
Other income, net		202			113			89		79	%		571			202			369			183	%

The decrease in change in fair value of warrant liabilities ~~of $30.3 million~~ during the three months ended September 30, 2022, as compared to three months ended September 30, 2021, primarily resulted from ~~the decrease~~a relatively lower decline in our stock price during the ~~third quarter of 2021.~~quarter. The ~~decrease~~increase in interest expense ~~for~~was due to borrowings under the Term Loan during the three months ended September 30, ~~2021, as~~2022 compared to no borrowings outstanding during the three months ended September 30, ~~2020, was primarily due to lower lease-related interest expense.~~2021. The increase in other income ~~net~~ was primarily due to higher interest income as a result of higher interest rates on our cash balances and increased foreign ~~exchange rate fluctuations.~~currency gains.

Nine Months Ended September 30,

2021

2020

$ Change

% Change

(dollars in thousands)

Change in fair value of warrant liabilities

$
35,664

$
—

$
35,664

—

Interest expense

(490
)

(432
)

(58
)

-13
%
Other income, net

3,155

555

2,600

468
%


	Nine months ended September 30,
	2022			2021			$ Change			% Change
	(dollars in thousands)

Change in fair value of warrant liabilities	$	4,696		$	35,664		$	(30,968	)		(87	%)
Interest expense		(1,174	)		(490	)		(684	)		140	%
Other income, net		696			3,155			(2,459	)		(78	%)

The decrease in change in fair value of warrant liabilities ~~of $35.7 million~~ during the nine months ended September 30, 2022, as compared to the nine months ended September 30, 2021, primarily resulted from ~~the decrease~~a relatively lower decline in our stock price ~~following consummation of the Business Combination on June 25, 2021, partially offset by the transaction costs and advisory fees for the Business Combination allocated to the warrants.~~during 2022. The increase in interest expense ~~for~~was due to higher interest rates on borrowings outstanding during the nine months ended September 30, ~~2021, as~~2022 compared

to during the nine months ended September 30, ~~2020, was primarily due to higher outstanding borrowings and for a longer period in 2021 compared to 2020.~~2021. The ~~increase~~decrease in other income ~~net~~ was primarily due to the gain on the investment in the convertible instrument from Myx prior to June 25, 2021; there was no similar investment ~~during the nine months ended September 30, 2020.~~in 2022.

Income Tax Benefit ~~(Provision)~~

Income tax benefit ~~(provision)~~ consists of income taxes related to USU.S. federal and state jurisdictions as well as those foreign jurisdictions where we have business operations.

Three Months Ended September 30,

2021

2020

$ Change

% Change

(dollars in thousands)

Income tax benefit (provision)

$
1,487

$
(4,129
)

$
5,616

136
%


	Three months ended September 30,
	2022		2021		$ Change			% Change
	(dollars in thousands)

Income tax benefit	$	549	$	1,487	$	(938	)		(63	%)

The income tax benefit ~~during~~decrease for the three months ended September 30, ~~2021,~~2022, as compared to the income tax provision during the three months ended September 30, 2020 was primarily due to a loss position in the third quarter of 2021 compared to a taxable income position in the third quarter of 2020. The effective benefit tax rate for the three months ended September 30, 2021, was ~~3.6%~~primarily due to the decrease in operating loss and ~~differed from~~a decrease in the ~~federal statutory rate primarily because of valuation allowances and an increase in~~ net ~~benefits from discrete events. The effective tax rate for the three months ended September 30, 2020 was 23.1% and differed from the federal statutory rate primarily because of additional expense~~benefit from discrete events.

Nine Months Ended September 30,

2021

2020

$ Change

% Change

(dollars in thousands)

Income tax benefit (provision)

$
12,739

$
161

$
12,578

7812
%


	Nine months ended September 30,
	2022		2021		$ Change			% Change
	(dollars in thousands)

Income tax benefit	$	1,536	$	12,739	$	(11,203	)		(88	%)

The ~~increase in~~ income tax benefit decrease for the nine months ended September 30, ~~2021,~~2022, as compared to the nine months ended September 30, ~~2020,~~2021, was primarily ~~due to~~driven by a decrease in the ~~increase in~~ net ~~benefits~~benefit from discrete ~~events, primarily related to~~events. We recorded significant deferred tax liabilities in connection with the acquisition of ~~Myx. The effective~~Myx, which was a discrete Q2 2021 event, for which we will not incur future taxable income. This partially reduced our need for a valuation allowance, resulting in income tax benefit ~~tax rate was 13.4% for~~recorded during the nine months ended September 30, ~~2021 and 3.4% for~~2021; there was no similar benefit recorded during the nine months ended September ~~20, 2020. The increase in the effective benefit tax rate was primarily related to the increase in net benefits from discrete events, partially offset by an increase in valuation allowances.~~30, 2022.

Liquidity and Capital Resources

Historically, our operations were financed primarily through cash flow from operating activities and borrowings under our Credit Facility. In connection with the Business Combination, we received cash proceeds, net of issuance costs and cash paid for the acquisition of Myx, net of cash acquired of approximately $351.8 million.


	Nine months ended September 30,
	2022			2021
	(dollars in thousands)

Net cash used in operating activities	$	(36,943	)	$	(139,259	)
Net cash used in investing activities		(23,236	)		(108,345	)
Net cash provided by financing activities		48,283			390,448

As of September 30, ~~2021,~~2022, we had cash and cash equivalents ~~of $199.8 million and $32.0 million of borrowing capacity available under our Credit Facility (defined below).~~totaling $94.1 million.

~~We believe our existing~~Net cash and cash equivalent balances and cash flow from operations will be sufficient to meet our working capital and capital expenditure needs for at least the next 12 months. Our future capital requirements may vary materially from those currently planned and will depend on many factors, including our rate of revenue growth, the timing and extent of growth initiatives, the expansion of selling and marketingused in operating activities the timing of new nutrition product introductions, market acceptance of our nutrition products, and overall economic conditions. To the extent that current and anticipated future sources of liquidity are insufficient to fund our future business activities and requirements, we may be required to seek additional equity or debt financing. The sale of additional equity would result in additional dilution to our shareholders. The incurrence of debt financing would result in debt service obligations and the instruments governing such debt could provide for operating and financing covenants that would restrict our operations. There can be no assurances that we will be able to raise additional capital. The inability to raise capital would adversely affect our ability to achieve our business objectives.

~~Amended and Restated Credit Agreement~~

On December 14, 2018, Beachbody, LLC, as borrower, and Old Beachbody and certain of Beachbody, LLC’s subsidiaries, as guarantors, entered into a credit agreement with Bank of America, N.A., as lender, administrative agent and letter of credit issuer for a $35was $36.9 million revolving credit facility with a $10 million sublimit for letters of credit (the “Credit Facility”). During the nine months ended September 30, 2021, the Credit Facility was amended to revise certain financial covenants, to extend the maturity date to June 2022, and temporarily increase the Credit Facility by $20 million for a period of either 90 days, or until the consummation of the Business Combination.

In connection with the transactions contemplated by the Business Combination Agreement, on June 23, 2021, the Credit Facility was amended, which, among other things, (a) permits the consummation of the Business Combination and certain other transactions contemplated by the Business Combination Agreement, and (b) amends certain terms of the Credit Facility to, among other things, (i) enable Old Beachbody and Beachbody, LLC to consummate the Business Combination and certain other transactions contemplated by the Business Combination Agreement, (ii) require that the Company join the Credit Facility as a parent guarantor thereunder, and (iii) require that Myx join the Credit Facility as a subsidiary guarantor thereunder.

As of September 30, 2021 and December 31, 2020, we had no borrowings outstanding under the Credit Facility and a letter of credit was issued for $3.0 million. Borrowings may be either Bloomberg Short-Term Bank Yield Index (“BSBY”) rate loans or base rate loans at our election. BSBY rate loans bear interest at an annual rate equal to the BSBY Rate plus 1.75% to 2.25%, with a minimum

BSBY of 0.75%. Base rate loans are at the base rate, as defined in the Credit Facility, plus 0.75% to 1.25%. We also pay a 1.75% to 2.25% fee on the letters of credit outstanding and a 0.375% to 0.5% commitment fee on the unused Credit Facility.

~~In November 2021, the Company terminated the Credit Facility and will maintain a compensating cash balance for the $3.0 million letter of credit.~~

~~Cash Flows~~

~~The following table summarizes our cash flows~~ for the nine months ended September 30, ~~2021 and 2020:~~

Nine Months Ended September 30,

2021

2020

(dollars in thousands)

Net cash provided by (used in) operating activities

$
(139,259
)

$
72,340

Net cash used in investing activities

(108,345
)

(26,860
)
Net cash provided by financing activities

390,448

—

~~Operating Activities.~~ ~~Net~~2022 compared to net cash used in operating activities of $139.3 million for the nine months ended September 30, ~~2021 was primarily due to the net loss of $82.4 million and the net change~~2021. The decrease in cash used in operating assets and liabilities of $71.2 million, partially offset by non-cash adjustments of $14.4 million. Non-cash adjustments primarily consisted of depreciation and amortization of $40.6 million, change in fair value of warrant liabilities of ($35.7) million, deferred income taxes of ($13.0) million, equity-based compensation of $10.8 million, and amortization of content assets of $10.0 million. The change in net operating assets and liabilities was primarily due to a $68.8 million increase in inventory, $22.0 million increase in content assets, and a $5.6 million increase in other assets; partially offset by a $27.1 million increase in deferred revenue as a result of the increase in digital subscriptions and connected fitness hardware sold but not yet delivered.

~~Net cash provided by operating~~ activities ~~of $72.3 million for~~during the nine months ended September 30, ~~2020~~2022, compared to the prior year quarter, was primarily due to ~~the net change~~reduced purchases of inventory and media, in operating assets and liabilities of $35.2 million and non-cash adjustments of $41.7 million, partially offset by the net loss of $4.6 million. The increase in net operating assets and liabilities was primarily due to a $41.8 million increase in deferred revenue as a result of an increase in digital subscriptions, $29.0 million increase in accounts payable and accrued expenses related to increased expenditures to support general business growth; partially offset by a $17.5 million increase in inventory as a result of building up nutritional products and accessories, a $9.9 million increase in content assets and an increase other assets driven by general growth. Non-cash adjustments primarily consisted of depreciation and amortization of $31.9 million, amortization of content assets of $5.1 million, and equity-based compensation expense of $3.2 million.

~~Investing Activities.~~ ~~Net used in investing activities for~~line with expectations. During the nine months ended September 30, ~~2021~~2022, we returned to a performance marketing model which drives in-quarter or next-quarter payback and which reduced media spend by approximately $98.3 million compared to the prior year period. Also, as of ~~$108.3 million was related~~September 30, 2022, we expect that our connected fitness inventory is sufficient to ~~$37.3 cash consideration for~~meet expected demand over the ~~acquisition of Myx, net of cash acquired, capital expenditures of $61.1 million, the investment in a convertible instrument of $5.0 million, and an equity investment of $5.0 million.~~next year.

Net cash used in investing activities ~~for the nine months ended September 30, 2020 of $26.9~~was $23.2 million ~~was related to capital expenditures, partially offset by cash acquired through the acquisition of Ladder.~~

~~Financing Activities.~~ ~~Net cash provided by financing activities of $390.4~~and $108.3 million for the nine months ended September 30, 2022 and 2021, respectively. The decrease in net cash used in investing activities was primarily due to a $37.8 million decrease in capital expenditures. As expected, capital expenditures are lower in 2022 compared to prior year due to the completion of significant projects at the end of 2021. The decrease in net cash used in investing activities was also due to $47.3 million related to the ~~$389.1 million~~Myx acquisition, investment in ~~net proceeds received from~~ the ~~Business Combination~~convertible instrument in Myx, and ~~$1.3 million of proceeds from stock option exercises, net of tax withholdings.~~other investment during the nine months ended September 30, 2021, compared to no similar acquisition or investments during the nine months ended September 30, 2022.

Net cash provided by financing activities was $0 $48.3 millionand $390.4 millionfor the nine months ended September 30, ~~2020. Gross borrowings~~2022 and ~~repayments under~~2021, respectively. The decrease in net cash provided by financing activities was primarily due to the ~~Credit Facility were $32.0 million.~~

~~Contractual Obligations~~completion of the Business Combination during the nine months ended September 30, 2021 compared to the Term Loan borrowing, net of debt issuance costs during the nine months ended September 30, 2022. See below and ~~Other Commitments~~Note 10, Debt, for additional discussion of the debt financing entered into during Q3 2022. We are using the proceeds for general corporate purposes and to pay transaction fees and expenses related to the Term Loan.

On August 8, 2022 (the “Effective Date”), we entered into a financing agreement with a third-party lender which provides for senior secured term loans in an aggregate principal amount of $50.0 million and permits borrowing up to an additional $25.0 million, subject to certain terms and conditions. The ~~following table summarizes~~$50.0 million Term Loan was funded on the Effective Date and bears interest at our ~~contractual cash obligations~~option of either (i) the reference rate as defined in the agreement or (ii) the Secured Overnight Financing Rate (“SOFR”) as defined in the agreement. In addition, the Term Loan borrowings bear interest at 3.00% per annum, paid in kind by capitalizing such interest and adding such capitalized interest to the outstanding principal amount of the loans on each anniversary of the Effective Date. During the three months ended September 30, 2022, the Term Loan was a SOFR loan, with an effective interest rate of 19.40%. We paid $4.1 million of third-party debt issuance costs during the three months ended September 30, 2022, and are required to pay an annual fee of $0.25 million. The Term Loan requires annual amortization of 2.50% in the first two years and 5.00% in the final two years, paid quarterly, and certain mandatory repayments as defined in the agreement. As of September 30, 2022, borrowings outstanding under the Term Loan were $49.7 million. The Term Loan matures on August 8, 2026. The Term Loan provides customary restrictions and requires compliance with certain financial and other covenants, with which we are in compliance as of September 30, ~~2021:~~2022.

In connection with the Term Loan, we issued warrants to certain holders affiliated with the lender for the purchase of 4,716,756 million shares of the Company’s Class A Common Stock at an exercise price of $1.85 per share. The warrants vest on a monthly basis over four years, with 30%, 30%, 20% and 20% vesting in the first, second, third and fourth years, respectively. The warrants have a seven-year term from the Effective Date.

Total

Less than
1 Year

1-3 Years

3-5 Years

More than
5 Years

(in thousands)

Operating lease obligations

$
36,857

$
1,278

$
22,963

$
12,616

$
—

Finance lease obligations

327

40

284

3

—

Noncancelable service and inventory
purchase obligations

79,544

58,646

18,398

2,500

—

Total

$
116,728

$
59,964

$
41,645

$
15,119

$
—

~~The commitment amounts in the table above are~~As of September 30, 2022, we have $39.9 million of lease obligations and purchase commitments associated with contracts that are enforceable and legally binding and that specify all significant terms, including fixed or minimum services to be used, fixed, minimum or variable price provisions, and the approximate timing of the actions under the contracts. See Note 8,

Commitments and Contingencies

~~In November 2021,~~, for discussion of our contractual commitments that are primarily due within the Company entered into an agreement to assign the lease of its corporate headquarters to another party in January 2022. This assignment will result in a modification of the Company’s lease term and is expected to reduce right-of-use assets by $22.6 million and lease liabilities by $28.5 million and increase operating income by $2.7 million, which is net of brokers' commissions and accelerated depreciation of leasehold improvements and furniture, fixtures and equipment.

~~Off-Balance Sheet Arrangements~~next year.

Our future capital requirements may vary materially from those currently planned and will depend on many factors, including our rate of revenue growth and overall economic conditions. We ~~did~~continue to assess and efficiently manage our working capital, and expect to generate additional liquidity through continued cost control initiatives. We believe that existing cash and cash equivalents and cost control initiatives will provide the Company with sufficient liquidity to meet our anticipated cash needs, including debt service requirements, for the next twelve months.

We may explore additional equity or debt financing to supplement our anticipated working capital balances and further strengthen our financial position, but do not ~~have any off-balance sheet arrangements as~~at this time know which form it will take or what the terms will be. The incurrence of ~~September 30, 2021.~~additional debt financing would result in debt service obligations and the instruments governing such debt could provide for operating and financing covenants that would restrict our operations. The sale of additional equity would result in additional dilution to our shareholders. There can be no assurances that we will be able to raise additional capital in amounts or on terms acceptable to us.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our unaudited condensed consolidated financial statements, which have been prepared in accordance with GAAP. In preparing the unaudited condensed consolidated financial statements, we make estimates and judgments that affect the reported amounts of assets, liabilities, stockholders, revenue, expenses, and related disclosures. We re-evaluate our estimates on an on-going basis. Our estimates are based on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Because of the uncertainty inherent in these matters, actual results may differ from these estimates and could differ based upon other assumptions or conditions. The critical accounting policies that reflect our more significant judgments and estimates used in the preparation of our condensed consolidated financial statements include those noted below.

~~Revenue Recognition~~

We record revenue when we fulfill our performance obligation to transfer control of the goods or services to our customers. Control of shipped items is generally transferred when the product is delivered to the customer. The amount of revenue recognized is the consideration that we expect we will be entitled to receive in exchange for transferring goods or services to its customers. Control of services, which are primarily digital subscriptions, transfers over time, and as such, revenue is recognized ratably over the subscription period (up to 12 months), using a mid-month convention. We sell a variety of bundled products that combine digital subscriptions, nutritional products and/or other fitness products. We consider these sales to be revenue arrangements with multiple performance obligations and allocates the transaction price to each performance obligation based on its relative stand-alone selling price. We defer revenue when we receive payments in advance of delivery of products or the performance of services. Revenue is recorded net of expected returns, discounts and credit card chargebacks, which are estimated using our historical experience. Revenue is presented net of sales and value added taxes collected from customers and remitted to applicable government agencies.

Goodwill and Intangible Assets Impairment

~~Goodwill represents the excess of the fair value of the consideration transferred over the fair value of the underlying identifiable assets and liabilities acquired in a business combination.~~

Goodwill and intangible assets deemed to have an indefinite life are not amortized, but instead are assessed for impairment annually ~~in the fourth quarter as of~~at October ~~1. Additionally,~~1 and between annual tests if an event or change in circumstances occurs that would more likely than not reduce the fair value of ~~the~~a reporting unit below its carrying value ~~we would evaluate goodwill and other intangibles at that time.~~

~~In testing for goodwill impairment, we have the option to first assess qualitative factors to determine whether the existence of events~~ or ~~circumstances lead to a determination~~indicate that it is more likely than not that an indefinite-lived intangible asset is impaired. We carry our definite-lived intangible assets at cost less accumulated amortization. If an event or change in circumstances occurs that indicates the carrying value may not be recoverable, we would evaluate our definite-lived intangible assets for impairment at that time.

We test goodwill for impairment at a level within the Company referred to as the reporting unit. Prior to the three months ended September 30, 2022, we concluded we had two reporting units, Beachbody and Other, because none of the components of either operating segment constituted a business for which discrete financial information was available or had operating results which were regularly reviewed by segment management. There was no goodwill held by the Other reporting unit. Due to the sustained decline in our market capitalization and macroeconomic factors observed during the three months ended June 30, 2022, we performed an interim test for impairment of our Beachbody reporting unit goodwill.

In performing the interim impairment test for goodwill, we elected to bypass the qualitative assessment and proceed to performing the quantitative test. We compared the carrying value of the reporting unit to its estimated fair value. Fair value is estimated using a combination of a market approach and an income approach, with significant assumptions related to guideline company financial multiples used in the market approach and significant assumptions about revenue growth, long-term growth rates, and discount rates used in a discounted cash flow model in the income approach. As of June 30, 2022, the Beachbody reporting unit’s fair value exceeded the carrying value by approximately 60%.

During the three months ended September 30, 2022, in connection with the consolidation of the Openfit streaming fitness offering onto a single Beachbody digital platform, we changed our segment reporting as we determined that there is one consolidated operating segment. As a result of the change in segment reporting, we tested our goodwill by reporting unit for impairment both prior to and subsequent to the change. We assessed the carrying value of goodwill by reporting unit and determined, based on qualitative factors, that no impairment indicators existed for goodwill.

Due to reduced revenue and margin forecasts for certain supplements, we performed an interim test for impairment of certain indefinite-lived intangible assets as of September 30, 2022. The fair value of the indefinite-lived trade name was calculated using a relief-from-royalty approach and was determined to be lower than its carrying value, primarily due to the reduced revenue and margin forecasts for certain supplements. We recorded a $1.0 million non-cash impairment charge for these intangible assets during the three and nine months ended September 30, 2022.

Due to reduced revenue and margin forecasts for certain supplements, we tested the related asset group for recoverability as of September 30, 2022. In testing for recoverability, we compared the carrying value of the asset group to its forecasted undiscounted cash flows to determine whether it was recoverable. Because the carrying value of the asset group did not exceed its future undiscounted cash flows, we then calculated the fair value of the ~~reporting unit~~assets within the asset group. The fair value of the formulae intangible assets, which is ~~less~~the long-lived asset within the asset group, was calculated to be greater than its carrying ~~amount. If, after assessing~~value. As a result, no impairment was recognized.

Management will continue to monitor its reporting unit for changes in the ~~totality~~business environment that could impact its fair value. Examples of events or circumstances that could result in changes to the underlying key assumptions and circumstances, we conclude that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is not required. If we conclude otherwise, we are required to perform the two-step impairment test. Thejudgments used in our goodwill impairment ~~test is performed at the reporting unit level by comparing~~tests, and ultimately impact the estimated fair value of aour reporting unit ~~with~~may include the duration of the COVID-19 global pandemic, its ~~respective carrying value. If~~impact on the ~~estimated fair value exceeds~~global economy, supply chain disruptions and demand for at-home fitness solutions; adverse macroeconomic conditions; volatility in the ~~carrying value, goodwill at~~equity and debt markets which could result in higher weighted-average cost of capital and our subscriber growth rates. Changes in any of the assumptions used in the valuation of the reporting unit, ~~level is not impaired. If the estimated fair value is less than the carrying value, an impairment charge will be recorded to reduce the reporting unit to fair value.~~

~~We also evaluate qualitative factors to determine whether~~ or ~~not its indefinite lived intangible assets have been impaired and then performs a quantitative test if required.~~

Intangible assets deemed to have finite lives are amortized on a straight-line basis over their estimated useful lives, where the useful life is the period over which the asset is expected to contribute directly, or indirectly, to our future cash flows.

~~Equity-Based Compensation~~

We measure and recognize expense for all equity-based awards based on their estimated fair values as of the grant date using the Black-Scholes option-pricing model. We recognize the expense on a straight-line basis over the requisite service period, and forfeitures are accounted for as they occur. Equity-based compensation expense is included in cost of revenue, selling and marketing, enterprise technology and development, and general and administrative expense within the unaudited condensed consolidated statements of operations.

Equity-based compensation expense for options granted to nonemployees is measured based on the fair value of the options issued, which is more reliably determined than the value of goods and services received. The fair value of the equity instruments issued is measured at the performance completion date.

~~Common Unit Valuations~~

Prior to the Business Combination, we granted common unit options at an exercise price equal to the fair value as determined by the Board of Managers on the date of grant. Given the absence of a public market for our common units, we were required to estimate the fair value of our common units at the time of each grant of an equity-based award. We utilized various valuation methodologies in accordance with the framework of the American Institute of Certified Public Accountants’ Technical Practice Aid, Valuation of Privately-Held Company Equity Securities Issued as Compensation, to estimate the fair value of our common units. These estimates and assumptions include numerous objective and subjective factors to determine the fair value of our common units at each grant date, including the following factors:



~~Relevant precedent transaction including our capital units;~~



~~the liquidation preferences, rights, preferences, and privileges of our preferred units relative to the common units;~~



~~our actual operating and financial performance;~~



~~current business conditions and projections;~~



~~our stage of development;~~



the likelihood and timing of achieving a liquidity event for the common units underlying the options, such as an initial public offering, given prevailing market conditions; any adjustment necessary to recognize a lack of marketability of the common units underlying the granted options;



~~the market performance of comparable publicly traded companies; and~~



~~U.S. and global capital market conditions.~~

~~Subsequent to the Business Combination, the Board determines the fair value of the Common Stock based on the closing market price on or around the date of grant.~~

~~Income Taxes~~

Effective April 2, 2019, Old Beachbody made an election with the United States taxing authorities to change its entity status to a regarded C-Corporation from a regarded pass-through entity for income tax purposes. The consequences of this election were the

recognition of a tax provision on our net income earned after that date and the recording of a net deferred tax asset as of the election date of $16.6 million as a benefit for income taxes from operations. The accumulated deficit and other comprehensive loss as of the election date have been eliminated against common units and preferred units with the allocation determined in accordance with the terms of the Beachbody, LLC Operating Agreement.

~~We are subject to income taxes~~changes in the ~~United States, Canada, and the United Kingdom. We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for~~business environment could materially affect the expected ~~future tax consequences of events that have been included~~cash flows, and such impacts could potentially result in the financial statements. Under this method, deferred tax assets and liabilities are determined on the basis of the differences between the financial statement and tax basis of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a ~~change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.~~

In evaluating its ability to recover deferred tax assets, we consider all available positive and negative evidence, including historical and current operating results, ongoing tax planning, and forecasts of future taxable income on a jurisdiction-by-jurisdiction basis. Based on the level of losses, we have established a valuation allowance to reduce our net deferred tax assets to the amount that is more likely than not to be realized.

We record uncertain tax positions on the basis of a two-step process in which (1) we determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.

We recognize interest and penalties related to unrecognized tax benefits in interest expense and other income, net, respectively, in the accompanying unaudited condensed consolidated statements of operations. Accrued interest and penalties are included in accrued expenses and other liabilities in the unaudited condensed consolidated balance sheets.material non-cash impairment charge.

Recent Accounting Pronouncements

See Note 1, ~~Organization,~~Description of Business and Summary of Significant Accounting Policies, of the notes to our unaudited condensed consolidated financial statements included elsewhere in this Report for recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

~~Quantitative and Qualitative Disclosure About Market Risk~~

Foreign Currency Risk

We are exposed to foreign currency exchange risk related to transactions in currencies other than the U.S. Dollar, which is our functional currency. Our foreign subsidiaries, sales, certain inventory purchases and operating expenses expose us to foreign currency exchange risk. For ~~the~~ three ~~and nine~~ months ended September 30, 2022 and 2021, approximately 10% ~~of our revenue was in foreign currencies. For the three and nine months ended September 30, 2020 approximately 9%~~ of our revenue was in foreign currencies. These sales were primarily denominated in Canadian dollars and British pounds.

We use derivative instruments to manage the effects of fluctuations in foreign currency exchange rates on our net cash flows. We primarily enter into option ~~and forward~~ contracts to hedge forecasted payments, typically for up to 12 months, for cost of revenue, selling and marketing expenses, general and administrative expenses and intercompany transactions not denominated in the local currencies of our foreign operations. We designate some of these instruments as cash flow hedges and ~~records~~record them at fair value as either assets or liabilities within the consolidated balance sheets. Some of these instruments are freestanding derivatives for which hedge accounting does not apply.

Changes in the fair value of cash flow hedges are recorded in accumulated other comprehensive income (loss) until the hedged forecasted transaction affects earnings. Deferred gains and losses associated with cash flow hedges of third-party payments are recognized in cost of revenue, selling and marketing or general and administrative expenses, as applicable, during the period when the hedged underlying transaction affects earnings. Changes in the fair value of certain derivatives for which hedge accounting does not apply are immediately recognized directly in earnings to cost of revenue.

A hypothetical 10% change in exchange rates, with the U.S. dollar as the functional and reporting currency, would not result in a material increase or decrease in cost of revenue and operating ~~expenses.~~

expenses due to the derivative instruments we use to hedge any foreign currency exposure.

The aggregate notional amount of foreign exchange derivative instruments at September 30, ~~2021~~2022 and December 31, ~~2020~~2021 was ~~$32.6~~$24.2 million and ~~$34.0~~$30.4 million, respectively.

~~Interest Rate Risk~~

We are primarily exposed to changes in short-term interest rates with respect to our cost of borrowing under our Credit Facility. We monitor our cost of borrowing under our facility, taking into account our funding requirements, and our expectations for short-term rates in the future. As of September 30, 2021, there were no outstanding borrowings under the Credit Facility, and a letter of credit was issued for $3.0 million. A hypothetical 10% change in the interest rate on our Credit Facility for all periods presented would not have a material impact on our financial statements.

~~Inflation Risk~~

We do not believe that inflation has had a material effect on our business, financial condition or results of operations. If our costs become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition, and operating results.

Item 4. Controls and Procedures.

Management’s Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of September 30, ~~2021.~~2022. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this ~~report.~~Report.

Changes in Internal Control Over Financial Reporting

There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Effectiveness of Controls and Procedures

Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives, as specified above. Our management recognizes that any control system, no matter how well designed and operated, is based upon certain ~~judgments~~judgements and assumptions and cannot provide absolute assurance that its objectives will be met.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

We are and, from time to time, we may become, involved in legal proceedings or be subject to claims arising in the ordinary course of our business. There ~~are~~have been no material ~~updates to~~changes from the information previously reported under Part I, Item 3 of our Annual Report on Form ~~S-4 declared effective on May 27,~~10-K for the fiscal year ended December 31, 2021.

Item 1A. Risk Factors.

~~There~~Other than as set forth below, there have been no material ~~changes~~developments with respect to the ~~risk factors as disclosed in~~information previously reported under Part ~~II,~~I, Item 1A ~~Risk Factors in~~of our ~~most recent Quarterly~~Annual Report on Form ~~10-Q.~~10-K for the fiscal year ended December 31, 2021. These risk factors describe some of the assumptions, risks, uncertainties and other factors that could adversely affect our business or that could otherwise result in changes that differ materially from our expectations. We may disclose changes to such risk factors or disclose additional risk factors from time to time in our future filings with the SEC, including as set forth below.

Risks Related to Our Indebtedness

The Financing Agreement restricts our current and future operations and our ability, and the ability of our future subsidiaries, to engage in certain business and financial transactions, and, as a result, may adversely affect our business, financial position, results of operations and cash flows.

The Financing Agreement contains a number of covenants that limit our ability, and the ability of certain of our subsidiaries party to the Financing Agreement, to:

•

incur additional indebtedness;

•

incur additional liens;

•

consolidate, merge, sell or otherwise dispose of all or substantially all of our assets;

•

pay dividends or make other distributions;

•

make investments and acquisitions; and

•

enter into certain transactions with affiliates.

In addition, the Financing Agreement requires us to maintain certain minimum revenue levels and maintain minimum Liquidity (as defined in the Financing Agreement). The Financing Agreement also contains other customary representations, warranties and covenants. Events beyond our control can affect our ability to meet these covenants. As a result of these covenants and restrictions, we may be limited in how we conduct our business, and we may be unable to raise additional debt or equity financing to compete effectively or to take advantage of new business opportunities.

Our failure to comply with our obligations under the Financing Agreement as described above, as well as others contained in any future debt instruments from time to time, may result in an event of default under the Financing Agreement. A default, if not cured or waived, may permit acceleration of our indebtedness. If our indebtedness is accelerated, we may not have sufficient funds available to pay the accelerated indebtedness or the ability to refinance the accelerated indebtedness on terms favorable to us or at all. If we are forced to refinance these borrowings on less favorable terms or cannot refinance these borrowings, our business, financial position, results of operations and cash flows could be adversely affected.

Our ability to generate the significant amount of cash needed to pay interest and principal on our indebtedness and our ability to refinance all or a portion of our indebtedness or obtain additional financing depends on many factors beyond our control.

Our ability to make scheduled payments on, or to refinance our obligations under, our indebtedness depends on the financial and operating performance of our subsidiaries, which, in turn, depends on their results of operations, cash flows, cash requirements, financial position and general business conditions and any legal and regulatory restrictions on the payment of dividends to which they may be subject, many of which may be beyond our control.

We may be unable to maintain a level of cash flows from operating activities sufficient to permit us to pay the principal and interest on our indebtedness. If our cash flow and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay capital expenditures, sell assets, seek to obtain additional equity capital or restructure our indebtedness. In the future, our cash flow and capital resources may not be sufficient for payments of interest on and principal of our indebtedness, and such alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations.

The Credit Facility pursuant to the Financing Agreement is scheduled to mature on August 8, 2026. We may be unable to refinance any of our indebtedness prior to maturity or obtain additional financing. If we are unable to refinance our indebtedness or access additional credit, or if short-term or long-term borrowing costs dramatically increase, our ability to finance current operations and meet our short-term and long-term obligations could be adversely affected.

Any of these actions could have a material adverse effect on our business, financial position, results of operations and cash flows.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

~~Not applicable.~~Unregistered Sales of Equity Securities and Use of Proceeds.

Warrants

On August 8, 2022 (the “Effective Date”), The Beachbody Company, Inc., a Delaware corporation (the “Company”), Beachbody, LLC, a Delaware limited liability company and wholly-owned direct subsidiary of the Company and certain subsidiaries of the Company (together with the Company and the Borrower, each, a “Loan Party” and, collectively, the “Loan Parties”), entered into a senior secured term loan facility (the “Credit Facility”). The loan documents for the Credit Facility include a Financing Agreement (the “Financing Agreement”) entered into by the Company, the other Loan Parties, the lenders party thereto, and Blue Torch Finance, LLC, as administrative agent and collateral agent for such lenders.

Pursuant to the Financing Agreement, on August 8, 2022, the Company issued to certain holders affiliated with Blue Torch Finance, LLC warrants (each, a “Warrant” and, collectively, the “Warrants”) to purchase, in the aggregate, 4,716,756 shares of Class A common stock of the Company, $0.0001 par value per share (the “Common Stock”), at an exercise price of $1.85 per share. The shares of Common Stock underlying the Warrants shall vest in accordance with the schedule set forth in the Warrants (the “Vested Shares”). The Warrants are exercisable for all or part of the unexercised Vested Shares from time to time on or after the Effective Date.

The foregoing summary of the Warrant is qualified in its entirety by reference to the full text of the form of Warrant, which is referenced hereto as Exhibit 4.1 and is incorporated herein by reference.

We deemed the issuance of the Warrants to be exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”) in reliance on Section 4(a)(2) of the Securities Act, including Regulation D and Rule 506 promulgated thereunder, relative to transactions by an issuer not involving a public offering. The holders of the Warrants represented to the Company that they were accredited investors and were acquiring the Warrants, and the shares to be acquired upon exercise of the Warrants by such holders (the “Underlying Shares”), for investment for such holder’s account and not with a view to the public resale or distribution of the Warrants or the Underlying Shares and that they could bear the economic risks of the investment. The holders of the Warrants received written disclosures that the Warrants and the Underlying Shares had not been registered under the Securities Act and that the Warrants and the Underlying Shares must be held indefinitely unless subsequently registered under the Securities Act and qualified under applicable state securities laws, or unless exemption from such registration and qualification are otherwise available.

Issuer Repurchase of Equity Securities.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosure.

None.

Item 5. Other Information.

None.

~~In November 2021, the Company terminated the Credit Facility and will maintain a compensating cash balance for the $3.0 million letter of credit.~~

On November 11, 2021, at the request of Mr. Daikeler and Mr. Congdon, the Compensation Committee approved the reduction of base salaries of Mr. Daikeler and Mr. Congdon to $1 per year, effective November 15, 2021.

Item 6. Exhibits.


Exhibit Number		~~Incorporated by Reference~~				~~Filed or~~ Furnished Herewith
Exhibit Number	~~Description~~	~~Form~~	~~File No.~~	~~Exhibit~~	~~Filing Date~~	~~Filed or~~ Furnished Herewith

~~10.1~~	~~Offer of Employment Letter, dated September 27, 2021, by and between The Beachbody Company and Blake Bilstad~~					X
~~31.1~~	~~Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~					X

~~31.2~~	~~Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~					X

~~32.1~~	~~Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~					X

~~32.2~~	~~Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~					X

~~101.INS~~	~~Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.~~					X

~~101.SCH~~	~~Inline XBRL Taxonomy Extension Schema Document.~~					X

~~101.CAL~~	~~Inline XBRL Taxonomy Extension Calculation Linkbase Document.~~					X

~~101.DEF~~	~~Inline XBRL Taxonomy Extension Definition Linkbase Document.~~					X

~~101.LAB~~	~~Inline XBRL Taxonomy Extension Label Linkbase Document.~~					X

~~101.PRE~~	~~Inline XBRL Taxonomy Extension Presentation Linkbase Document.~~					X

~~104~~	~~Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101.INS).~~					X


Exhibit		Incorporated by Reference				Filed or Furnished herewith
Exhibit			Form	Exhibit	Filing Date	Filed or Furnished herewith	File No.

2.1	Agreement and Plan of Merger, dated as of February 9, 2021, by and among Forest Road Acquisition Corp., BB Merger Sub, Inc., Myx Merger Sub, LLC, The Beachbody Company Group, LLC, And Myx Fitness Holdings, LLC.	8-K/A	2.1	2/16/2021	001-39735
3.1	Amended and Restated Certificate of Incorporation of The Beachbody Company, Inc.	8-K	3.1	7/1/2021	001-39735
3.2	Amended and Restated Bylaws of The Beachbody Company, Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed July 1, 2021).	8-K	3.2	7/1/2021	001-39735
4.1	Form of Warrant.	10-Q	10.3	8/8/2022	001-39735
10.1	Financing Agreement, dated August 8, 2022, by and among Beachbody, LLC, a Delaware limited liability company, The Beachbody Company, Inc., a Delaware corporation (the “Parent”), each subsidiary of the Parent from time to time party thereto, the lenders from time to time party hereto (each a “Lender” and collectively, the “Lenders”), and Blue Torch Finance, LLC, as collateral agent and as administrative agent for the Lenders.	10-Q	10.2	8/8/2022	001-39735
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a)					*

31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a)					*

32.1	Certification of Chief Executive Officer and Chief Financial Officer of Periodic Report Pursuant to 18 U.S.C. Section 1350					**

101.INS	Inline XBRL Instance Document					*

101.SCH	Inline XBRL Taxonomy Extension Schema Document					*

101.CAL	Inline XBRL Taxonomy Calculation Linkbase Document					*

101.DEF	Inline XBRL Taxonomy Definition Linkbase Document					*

101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document					*

101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document					*
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* Filed herewith

50** Furnished herewith.

^ Indicates management contract or compensatory plan.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



	The Beachbody Company, Inc.

Date: November ~~15, 2021~~9, 2022	By:	/s/ Carl Daikeler
		Carl Daikeler
		Chief Executive Officer
		(Principal Executive Officer)

Date: November ~~15, 2021~~9, 2022	By:	/s/ ~~Sue Collyns~~Marc Suidan
		~~Sue Collyns~~Marc Suidan
		~~President and~~ Chief Financial Officer
		(Principal Financial Officer)

5146


(in thousands, except par value and share data)
	As of September 30,			As of December 31,
	2021			2020
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	199,839		$	56,827
Accounts receivable, net		1,378			855
Inventory, net		141,139			65,354
Prepaid expenses		14,014			8,650
Other current assets		48,556			37,364
Total current assets		404,926			169,050
Property and equipment, net		115,338			80,169
Content assets, net		34,786			19,437
Intangible assets, net		92,587			21,120
Goodwill		176,903			18,981
Right-of-use assets, net		27,434			33,272
Other assets		6,847			14,224
Total assets	$	858,821		$	356,253
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	48,298		$	28,981
Accrued expenses		89,844			79,955
Deferred revenue		126,894			97,504
Current portion of lease liabilities		9,977			10,371
Other current liabilities		2,656			3,106
Total current liabilities		277,669			219,917
Long-term lease liabilities, net		23,845			31,252
Deferred tax liabilities		6,415			3,729
Warrant liabilities		19,900			—
Other liabilities		5,362			2,097
Total liabilities		333,191			256,995
Commitments and contingencies (Note 14)
Stockholders' equity:
Preferred stock, $0.0001 par value; 100,000,000 shares authorized, NaN issued and outstanding as of September 30, 2021 and December 31, 2020		—			—
Common stock, $0.0001 par value, 1,900,000,000 shares authorized (1,600,000,000 Class A, 200,000,000 Class X and 100,000,000 Class C); 168,218,173 and 101,762,614 Class A shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively; 141,250,310 Class X shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively and 0 Class C shares issued and outstanding at September 30, 2021 and December 31, 2020		31			24
Additional paid-in capital		604,665			96,097
Accumulated other comprehensive income (loss)		15			(202	)
Retained earnings (accumulated deficit)		(79,081	)		3,339
Total stockholders’ equity		525,630			99,258
Total liabilities and stockholders' equity	$	858,821		$	356,253


(in thousands, except share data)
	Redeemable
	Convertible													Accumulated			Retained
	Series A										Additional			Other			Earnings			Total
	Preferred			Common			Common Stock				Paid-In			Comprehensive			(Accumulated			Stockholders'
	Units			Units			Shares		Amount		Capital			Income (Loss)			Deficit)			Equity
Balances at December 31, 2019, as previously reported	$	98,245		$	(35,626	)		—	$	—	$	—		$	12		$	24,771		$	(10,843	)
Retroactive application of recapitalization		(98,245	)		35,626			238,142,972		24		62,595			—			—			98,245
Balance at December 31, 2019, after effect of reverse acquisition		—			—			238,142,972		24		62,595			12			24,771			87,402
Net loss		—			—			—		—		—			—			(8,328	)		(8,328	)
Other comprehensive income		—			—			—		—		—			60			—			60
Equity-based compensation		—			—			—		—		895			—			—			895
Balances at March 31, 2020	$	—		$	—			238,142,972	$	24	$	63,490		$	72		$	16,443		$	80,029
Net loss		—			—			—		—		—			—			(10,003	)		(10,003	)
Other comprehensive loss		—			—			—		—		—			(241	)		—			(241	)
Equity-based compensation		—			—			—		—		1,013			—			—			1,013
Balances at June 30, 2020	$	—		$	—			238,142,972	$	24	$	64,503		$	(169	)	$	6,440		$	70,798
Net income		—			—			—		—		—			—			13,771			13,771
Other comprehensive loss		—			—			—		—		—			(79	)		—			(79	)
Tax asset contribution adjustment		—			—			—		—		(135	)		—			—			(135	)
Common shared issued in connection with acquisition		—			—			4,869,973		—		27,889			—			—			27,889
Equity-based compensation		—			—			—		—		1,261			—			—			1,261
Balances at September 30, 2020	$	—		$	—			243,012,945	$	24	$	93,518		$	(248	)	$	20,211		$	113,505


	Recapitalization
Cash- Forest Road trust and cash, net of redemptions	$	216,444
Cash- PIPE Financing		225,000
Less: Non-cash net assets assumed from Forest Road		293
Less: Fair value of Public and Private Warrants		(60,900	)
Less: Transaction costs and advisory fees for Beachbody allocated to equity		(19,923	)
Less: Transaction costs and advisory fees for Forest Road		(27,059	)
Net Business Combination		333,855
Less: Non-cash net assets assumed from Forest Road		(293	)
Less: Transaction costs and advisory fees for Beachbody allocated to warrants		(5,337	)
Add: Non-cash fair value of Forest Road warrants		60,900
Net cash contributions from Business Combination	$	389,125


Purchase Price
Cash consideration (1)	$	37,700
Share consideration (2)		162,558
Fair value of Myx instrument held by Old Beachbody (3)		18,402
Promissory note held by Old Beachbody (4)		4,216
Total consideration	$	222,876


Allocation
Goodwill	$	157,922
Intangible assets:
Trade name/ Trademark		43,700
Developed technology		14,000
Customer relationships		20,400
		78,100
Cash acquired		420
Inventory, net		11,447
Other assets		3,354
Content assets		3,400
Deferred revenue		(2,168	)
Other liabilities		(14,039	)
Deferred tax liabilities		(15,560	)
	$	222,876


Purchase Price
Common units issued in connection with acquisition (1)	$	27,889
Allocation
Goodwill	$	11,606
Intangible assets:
Trade name		7,500
Customer-related		300
Formulae		1,950
Talent and representation contracts		10,300
		20,050
Cash acquired		1,247
Other assets acquired		1,132
Liabilities acquired		(1,834	)
Deferred tax liabilities		(4,312	)
	$	27,889


	Three Months Ended September 30,		Nine Months Ended September 30,
	2020		2020
Pro forma combined:
Revenue	$	252,230	$	641,474
Net (loss) income		9,599		(12,401	)


	September 30,
	2021
Goodwill, beginning of period	$	18,981
Acquisition of Myx		157,922
Goodwill, end of period	$	176,903


	September 30, 2021							December 31, 2020
	Acquired Intangibles, Gross		Accumulated Amortization			Acquired Intangibles, Net		Acquired Intangibles, Gross		Accumulated Amortization			Acquired Intangibles, Net		Weighted-Average Remaining Useful Life (years)
Contract-based	$	300	$	(225	)	$	75	$	300	$	(150	)	$	150		0.8
Customer-related		21,100		(2,344	)		18,756		700		(337	)		363		2.7
Technology-based		20,200		(7,124	)		13,076		6,200		(4,650	)		1,550		2.6
Talent and representation contracts		10,300		(2,575	)		7,725		10,300		(644	)		9,656		3.0
Formulae		1,950		(195	)		1,755		1,950		(49	)		1,901		9.0
Trade name		51,200		—			51,200		7,500		—			7,500	Indefinite
	$	105,050	$	(12,463	)	$	92,587	$	26,950	$	(5,830	)	$	21,120


Three months ended December 31, 2021	$	3,330
Year ended December 31, 2022		13,233
Year ended December 31, 2023		13,070
Year ended December 31, 2024		8,932
Year ended December 31, 2025		1,896
Thereafter		926
	$	41,387


	Operating Leases			Finance Leases			Total
Three Months Ended December 31, 2021	$	1,278		$	40		$	1,318
Year ended December 31, 2022		11,183			161			11,344
Year ended December 31, 2023		11,780			123			11,903
Year ended December 31, 2024		12,616			3			12,619
Total		36,857			327			37,184
Less present value discount		(3,349	)		(13	)		(3,362	)
Lease liabilities at September 30, 2021	$	33,508		$	314		$	33,822


Three Months Ended December 31, 2021	$	58,646
Year ended December 31, 2022		16,466
Year ended December 31, 2023		1,932
Year ended December 31, 2024		1,250
Year ended December 31, 2025		1,250
	$	79,544


				Foreign
	Unrealized			Currency
	Gain (Loss) on			Translation
	Derivatives			Adjustment			Total
Balances at December 31, 2019	$	(99	)	$	111		$	12
Other comprehensive income (loss) before reclassifications		(12	)		(275	)		(287	)
Amounts reclassified from accumulated other comprehensive income (loss)		31			—			31
Tax effect		(4	)		—			(4	)
Balances at September 30, 2020	$	(84	)	$	(164	)	$	(248	)
Balances at December 31, 2020	$	(246	)	$	44		$	(202	)
Other comprehensive income (loss) before reclassifications		(187	)		14			(173	)
Amounts reclassified from accumulated other comprehensive income (loss)		481			—			481
Tax effect		(91	)		—			(91	)
Balances at September 30, 2021	$	(43	)	$	58		$	15


	Options Outstanding
							Weighted-
				Weighted-			Average
				Average			Remaining
				Exercise			Contractual Term
	Number of			Price			Term
	Options			(per option)			(in years)
Outstanding at December 31, 2020 (as previously reported)		10,170,288		$	7.04			5.70
Conversion of awards due to recapitalization		23,998,437			(4.94	)
Outstanding at December 31, 2020, effect of reverse acquisition		34,168,725		$	2.10
Granted		9,321,807			9.82
Exercised		(1,292,541	)		1.02
Forfeited		(490,662	)		2.48
Outstanding at September 30, 2021		41,707,329		$	3.86			6.11
Exercisable at September 30, 2021		23,788,979		$	1.97			4.04


				Weighted-
				Average
				Grant Date
	Number of			Fair Value
	Options			(per option)
Unvested at December 31, 2020 (as previously reported)		3,701,114		$	4.34
Conversion of awards due to recapitalization		8,733,309			(3.05	)
Unvested at December 31, 2020, effect of reverse acquisition		12,434,423		$	1.29
Granted		9,321,807			5.03
Vested		(3,347,219	)		1.25
Forfeited		(490,661	)		1.19
Unvested at September 30, 2021		17,918,350		$	3.24


	Total		Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years
	(in thousands)
Operating lease obligations	$	36,857	$	1,278	$	22,963	$	12,616	$	—
Finance lease obligations		327		40		284		3		—
Noncancelable service and inventory purchase obligations		79,544		58,646		18,398		2,500		—
Total	$	116,728	$	59,964	$	41,645	$	15,119	$	—