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 June 30, ~~2022~~2023


☐	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.)

400 Continental Blvd, Suite 400 El Segundo, California	90245
(Address of principal executive offices)	(Zip 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,” 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 ☒

There were ~~170,263,772~~176,234,868 shares of the registrant’s Class A Common Stock, par value $0.0001 per share, and ~~141,250,310~~136,450,256 shares of the registrant’s Class X Common Stock, par value $0.0001 per share, outstanding as of August ~~04, 2022.~~2, 2023.

Table of Contents


Part I.	Financial Information	3
Item 1.	Financial Statements	3
	Condensed Consolidated Balance Sheets	3
	Unaudited Condensed Consolidated Statements of Operations	4
	Unaudited Condensed Consolidated Statements of Comprehensive Loss	5
	Unaudited Condensed Consolidated Statements of Stockholders’ Equity	6
	Unaudited Condensed Consolidated Statements of Cash Flows	7
	Notes to Unaudited Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Operations	2224
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3741
Item 4.	Controls and Procedures	3741
Part II.	Other Information	3841
Item 1.	Legal Proceedings	3841
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3842
Item 3.	Defaults Upon Senior Securities	3842
Item 4.	Mine Safety Disclosures	3842
Item 5.	Other Information	3842
Item 6.	Exhibits	4043
Signatures		4145

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

The Beachbody Company, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)


	June 30,			December 31,			June 30,			December 31,
	2022			2021			2023			2022
	(unaudited)						(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	57,060		$	104,054		$	58,686		$	80,091
Restricted cash		-			3,000
Inventory, net		72,271			132,730			43,364			54,060
Prepaid expenses		10,317			15,861			8,549			13,055
Other current assets		44,828			43,727			48,619			39,248
Total current assets		184,476			299,372			159,218			186,454
Property and equipment, net		92,301			113,098			58,205			74,147
Content assets, net		38,098			39,347			29,193			34,888
Goodwill and intangible assets, net		162,361			171,533
Goodwill								125,166			125,166
Intangible assets, net								5,648			8,204
Right-of-use assets, net								4,033			5,030
Other assets		12,803			14,262			9,661			9,506
Total assets	$	490,039		$	637,612		$	391,124		$	443,395
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	22,676		$	48,379		$	13,301		$	17,940
Accrued expenses		62,349			74,525			49,116			64,430
Deferred revenue		107,282			107,095			107,378			95,587
Current portion of lease liabilities								2,095			2,150
Current portion of Term Loan								16,250			1,250
Other current liabilities		4,564			6,233			3,356			3,283
Total current liabilities		196,871			236,232			191,496			184,640
Term Loan								25,836			39,735
Long-term lease liabilities, net								2,249			3,318
Deferred tax liabilities		2,031			3,165			137			181
Other liabilities		10,981			12,830			4,229			3,979
Total liabilities		209,883			252,227			223,947			231,853
Commitments and contingencies (Note 8)

Stockholders’ equity:
Preferred stock, $0.0001 par value; 100,000,000 shares authorized, NaN issued and outstanding at June 30, 2022 and December 31, 2021		—			—
Preferred stock, $0.0001 par value; 100,000,000 shares authorized, none issued and outstanding at June 30, 2023 and December 31, 2022								—			—
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: 170,263,772 and 168,333,463 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively;		17			17
Class X: 141,250,310 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively;		14			14
Class C: 0 shares issued and outstanding at June 30, 2022 and December 31, 2021		—			—
Class A: 176,157,734 and 170,911,819 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively;								18			17
Class X: 136,450,256 and 141,250,310 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively;								14			14
Class C: no shares issued and outstanding at June 30, 2023 and December 31, 2022								—			—
Additional paid-in capital		620,643			610,418			641,649			630,709
Accumulated other comprehensive loss		(75	)		(21	)
Accumulated deficit		(340,443	)		(225,043	)		(474,171	)		(419,235	)
Accumulated other comprehensive income (loss)								(333	)		37
Total stockholders’ equity		280,156			385,385			167,177			211,542
Total liabilities and stockholders’ equity	$	490,039		$	637,612		$	391,124		$	443,395

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

The Beachbody Company, Inc.

Unaudited Condensed Consolidated Statements of Operations

(in thousands, except per share data)


	Three months ended June 30,						Six months ended June 30,						Three months ended June 30,						Six months ended June 30,
	2022			2021			2022			2021			2023			2022			2023			2022

Revenue:
Digital	$	78,015		$	94,325		$	159,760		$	189,475		$	65,214		$	78,015		$	129,987		$	159,760
Nutrition and other														64,628			90,516			138,748			188,180
Connected fitness		10,605			10			30,118			10			5,106			10,605			11,114			30,118
Nutrition and other		90,516			128,773			188,180			259,842
Total revenue		179,136			223,108			378,058			449,327			134,948			179,136			279,849			378,058
Cost of revenue:
Digital		18,406			11,612			34,831			22,734			16,336			18,406			31,303			34,831
Nutrition and other														27,202			42,002			58,241			86,776
Connected fitness		31,459			156			76,165			156			8,666			31,459			16,221			76,165
Nutrition and other		42,002			57,002			86,776			113,997
Total cost of revenue		91,867			68,770			197,772			136,887			52,204			91,867			105,765			197,772
Gross profit		87,269			154,338			180,286			312,440			82,744			87,269			174,084			180,286
Operating expenses:
Selling and marketing		86,624			140,194			193,068			284,890			76,492			86,624			153,068			193,068
Enterprise technology and development		24,133			26,949			57,830			54,038			18,650			24,133			37,746			57,830
General and administrative		19,584			17,231			39,657			35,177			11,887			19,584			29,603			39,657
Restructuring		1,332			—			8,555			—			(107	)		1,332			5,280			8,555
Total operating expenses		131,673			184,374			299,110			374,105			106,922			131,673			225,697			299,110
Operating loss		(44,404	)		(30,036	)		(118,824	)		(61,665	)		(24,178	)		(44,404	)		(51,613	)		(118,824	)
Other income (expense):
Change in fair value of warrant liabilities		2,070			5,390			2,334			5,390			375			2,070			432			2,334
Interest expense		(3	)		(305	)		(22	)		(428	)		(2,368	)		(3	)		(4,699	)		(22	)
Other income, net		189			1,654			125			2,953			411			189			980			125
Loss before income taxes		(42,148	)		(23,297	)		(116,387	)		(53,750	)		(25,760	)		(42,148	)		(54,900	)		(116,387	)
Income tax benefit		281			10,857			987			11,252
Income tax (provision) benefit														12			281			(36	)		987
Net loss	$	(41,867	)	$	(12,440	)	$	(115,400	)	$	(42,498	)	$	(25,748	)	$	(41,867	)	$	(54,936	)	$	(115,400	)

Net loss per common share, basic and diluted	$	(0.14	)	$	(0.05	)	$	(0.38	)	$	(0.17	)	$	(0.08	)	$	(0.14	)	$	(0.18	)	$	(0.38	)
Weighted-average common shares outstanding, basic and diluted		307,205			247,062			306,786			245,049			314,312			307,205			311,740			306,786

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 June 30,						Six months ended June 30,						Three months ended June 30,						Six months ended June 30,
	2022			2021			2022			2021			2023			2022			2023			2022

Net loss	$	(41,867	)	$	(12,440	)	$	(115,400	)	$	(42,498	)	$	(25,748	)	$	(41,867	)	$	(54,936	)	$	(115,400	)
Other comprehensive loss:
Other comprehensive income (loss):
Change in fair value of derivative financial instruments, net of tax		35			(99	)		(150	)		(208	)		(242	)		35			(389	)		(150	)
Reclassification of losses on derivative financial instruments included in net loss		74			172			143			339
Reclassification of (losses) gains on derivative financial instruments included in net loss														61			74			(26	)		143
Foreign currency translation adjustment		(51	)		12			(47	)		54			35			(51	)		45			(47	)
Total other comprehensive income (loss)		58			85			(54	)		185			(146	)		58			(370	)		(54	)
Total comprehensive loss	$	(41,809	)	$	(12,355	)	$	(115,454	)	$	(42,313	)	$	(25,894	)	$	(41,809	)	$	(55,306	)	$	(115,454	)

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		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

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

Balances at December 31, 2021		309,584	$	31	$	610,418	$	(21	)	$	(225,043	)	$	385,385			309,584		$	31		$	610,418		$	(225,043	)	$	(21	)	$	385,385
Net loss		—		—		—		—			(73,533	)		(73,533	)		—			—			—			(73,533	)		—			(73,533	)
Other comprehensive loss		—		—		—		(112	)		—			(112	)		—			—			—			—			(112	)		(112	)
Equity-based compensation		—		—		4,564		—			—			4,564			—			—			4,564			—			—			4,564
Options exercised, net of tax withholdings		1,132		—		1,923		—			—			1,923			1,132			—			1,923			—			—			1,923
Balances at March 31, 2022		310,716	$	31	$	616,905	$	(133	)	$	(298,576	)	$	318,227			310,716		$	31		$	616,905		$	(298,576	)	$	(133	)	$	318,227
Net loss		—		—		—		—			(41,867	)		(41,867	)		—			—			—			(41,867	)		—			(41,867	)
Other comprehensive income		—		—		—		58			—			58			—			—			—			—			58			58
Equity-based compensation		210		—		3,001		—			—			3,001			210			—			3,001			—			—			3,001
Options exercised, net of tax withholdings		588		—		737		—			—			737			588			—			737			—			—			737
Balances at June 30, 2022		311,514	$	31	$	620,643	$	(75	)	$	(340,443	)	$	280,156			311,514		$	31		$	620,643		$	(340,443	)	$	(75	)	$	280,156

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

Balances at December 31, 2022																	312,162		$	31		$	630,709		$	(419,235	)	$	37		$	211,542
Net loss																	—			—			—			(29,188	)		—			(29,188	)
Other comprehensive loss																	—			—			—			—			(224	)		(224	)
Equity-based compensation																	9,736			1			9,554			—			—			9,555
Shares withheld for tax withholdings on vesting of restricted stock																	(3,644	)		—			(2,128	)		—			—			(2,128	)
Balances at March 31, 2023																	318,254		$	32		$	638,135		$	(448,423	)	$	(187	)	$	189,557
Net loss																	—			—			—			(25,748	)		—			(25,748	)
Other comprehensive loss																	—			—			—			—			(146	)		(146	)
Equity-based compensation																	1,377			1			3,160			—			—			3,161
Forfeiture of shares per the Forfeiture Agreement																	(8,000	)		(1	)		1			—			—			—
Issuance of shares due to Employee Stock Purchase Plan																	982			—			384			—			—			384
Tax withholdings on vesting of restricted stock																	(5	)		—			(31	)		—			—			(31	)
Balances at June 30, 2023																	312,608		$	32		$	641,649		$	(474,171	)	$	(333	)	$	167,177

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)


	Six months ended June 30,						Six months ended June 30,
	2022			2021			2023			2022

Cash flows from operating activities:
Net loss	$	(115,400	)	$	(42,498	)	$	(54,936	)	$	(115,400	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense		41,552			25,941			21,632			41,552
Amortization of content assets		13,180			6,119			11,020			13,180
Provision for inventory and net realizable value adjustment		32,019			2,791
Realized losses on hedging derivative financial instruments		143			339
Gain on investment in convertible instrument		—			(3,114	)
Provision for inventory and inventory purchase commitments								5,072			32,019
Realized (gains) losses on hedging derivative financial instruments								(26	)		143
Change in fair value of warrant liabilities		(2,334	)		(5,390	)		(432	)		(2,334	)
Equity-based compensation		7,565			5,095			12,716			7,565
Deferred income taxes		(1,143	)		(11,349	)		(121	)		(1,143	)
Amortization of debt issuance costs								980			—
Paid-in-kind interest expense								746			—
Other non-cash items		311			—			—			311
Changes in operating assets and liabilities:
Inventory		28,400			(194	)		6,037			28,400
Content assets		(11,940	)		(14,237	)		(5,325	)		(11,940	)
Prepaid expenses		5,545			(1,789	)		4,506			5,545
Other assets		167			(5,774	)		(8,912	)		167
Accounts payable		(22,753	)		6,656			(4,179	)		(22,753	)
Accrued expenses		(7,739	)		(461	)		(14,356	)		(7,739	)
Deferred revenue		1,000			16,547			12,221			1,000
Other liabilities		(1,829	)		(4,169	)		(1,010	)		(1,829	)
Net cash used in operating activities		(33,256	)		(25,487	)		(14,367	)		(33,256	)
Cash flows from investing activities:
Purchase of property and equipment		(19,222	)		(27,200	)		(5,030	)		(19,222	)
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		(19,222	)		(74,480	)		(5,030	)		(19,222	)
Cash flows from financing activities:
Proceeds from exercise of stock options		2,968			—			—			2,968
Remittance of taxes withheld from employee stock awards		(308	)		—			—			(308	)
Borrowings under Credit Facility		—			42,000
Repayments under Credit Facility		—			(42,000	)
Business combination, net of issuance costs paid		—			389,775
Net cash provided by financing activities		2,660			389,775
Effect of exchange rates on cash		(176	)		594
Net (decrease) increase in cash and cash equivalents		(49,994	)		290,402
Debt repayments								(625	)		—
Proceeds from issuance of common shares in the Employee Stock Purchase Plan								384			—
Tax withholding payments for vesting of restricted stock								(2,159	)		—
Net cash (used in) provided by financing activities								(2,400	)		2,660
Effect of exchange rates on cash and cash equivalents								392			(176	)
Net decrease in cash and cash equivalents								(21,405	)		(49,994	)
Cash, cash equivalents and restricted cash, beginning of period		107,054			56,827			80,091			107,054
Cash and cash equivalents, end of period	$	57,060		$	347,229		$	58,686		$	57,060
Supplemental disclosure of cash flow information:
Cash paid during the year for interest	$	17		$	283
Cash paid during the year for income taxes, net		310			198
Cash paid during the period for interest							$	2,958		$	17
Cash (received) paid during the period for income taxes, net								(46	)		310
Supplemental disclosure of noncash investing activities:
Property and equipment acquired but not yet paid for	$	2,330		$	15,322		$	128		$	2,330
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:
Business Combination transaction costs, accrued but not paid		—			650
Net assets assumed in the Business Combination		—			293

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

1. Description of Business and Summary of Significant Accounting Policies

Business

The Beachbody Company, Inc. (“~~Beachbody”~~BODi” or the “Company”) is a leading subscription health and wellness 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 ~~the~~ Beachbody On Demand (“BOD”) ~~or Openfit digital platform,~~ and, together with the Company’s live fitness and comprehensive nutrition programs, through subscription to Beachbody On Demand Interactive (“BODi”). ~~Beachbody~~During the three months ended March 31, 2023, the Company launched an improved BODi experience and began migrating all BOD-only members to BODi on their renewal dates. BODi offers nutritional products such as Shakeology nutrition shakes, BEACHBAR snack bars, and Ladder premium supplements, which have been designed and clinically tested to help customers achieve their goals. ~~Beachbody~~BODi also offers a professional-grade stationary cycle with a 360-degree touch screen tablet and connected fitness software. The Company’s revenue has historically been generated primarily through a network of micro-influencers (“~~Coaches”~~Partners”) (previously known as “Coaches”), social media marketing channels, and direct response advertising. ~~During the six months ended June 30, 2022, the Company commenced a process of consolidating its Openfit streaming fitness offering onto a single Beachbody digital platform. See Note 13,~~ ~~Strategic Realignment, for additional information regarding our strategic realignment initiative.~~References to “Coaches” throughout this report have been updated to “Partners.”

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 preparation of unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that ~~impact~~may affect the amounts reported in the unaudited condensed consolidated financial statements and accompanying notes. Significant estimates in our condensed consolidated financial statements include, but are not limited to, the useful life and recoverability of long-lived assets, the valuation of warrant liabilities, the recognition and measurement of income tax assets and liabilities, the valuation of intangible assets, impairment of goodwill, and the net realizable value of 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~~judgments about the carrying amounts of assets and liabilities. Actual results could differ from those estimates.

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 normal recurring adjustments necessary for the fair statement of the Company’s financial position, results of operations, and cash flows. All intercompany transactions and balances with or among our consolidated subsidiaries have been eliminated. The financial data and other financial information disclosed in the notes to these unaudited condensed consolidated financial statements are also unaudited. These unaudited ~~interim~~ 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 year ended December 31, ~~2021.~~2022. Interim results are not necessarily indicative of the results that may be expected for the full fiscal year or any other period.

Summary of Changes in Significant Accounting Estimates

Goodwill and ~~Intangible~~Long-Lived 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 ("RU") below its carrying value or indicate that it is more likely than not that the indefinite-lived asset is impaired. As of June 30, 2023 the Company has

no indefinite-lived intangible assets.

Due to the sustained decline in the ~~Company~~’sCompany’s market capitalization and macro-economic conditions observed in the three months ended June 30, ~~2022,~~2023, the Company performed an interim test for impairment of its goodwill as of June 30, ~~2022.~~2023. In performing the interim impairment test for goodwill, the Company elected to bypass the optional qualitative test and proceeded to perform a quantitative ~~tests~~test by comparing the carrying value of ~~each reporting unit~~its RU to its estimated fair value. The Company previously tested its ~~reporting units~~RU for impairment as of December 31, ~~2021 which resulted in an impairment and write-off of all goodwill in the Company’s Other reporting unit.~~2022. The results of the Company’s interim test for impairment at June 30, ~~2022~~2023 concluded that the fair value of its ~~Beachbody reporting unit~~RU exceeded its carrying value, resulting in 0no impairment.

Long-Lived Assets

~~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 an indefinite life. The Company tested the trade name for impairment before changing the useful life and determined there was no impairment based on its assessment of fair value. The Company will prospectively amortize the trade name over its remaining estimated useful life of ~~two years~~ ~~beginning January 1, 2022. The Company recorded $1.9~~ ~~million, or $0.01~~ ~~per share, and $3.8~~ ~~million, or $0.01~~ ~~per share, of amortization expense as a component of selling and marketing expenses for this trade name during the three and six months ended June 30, 2022, respectively.~~

~~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 comparing their carrying value to the forecasted undiscounted cash flows associated with the assets. If the evaluation of the forecasted cash flows indicates that the carrying value of the assets is not recoverable, the assets are written down to their fair value. The Company performed a test for recoverability at June 30, ~~2022~~2023 and concluded that the carrying value of its long-lived assets is recoverable.

Recently Adopted Accounting Pronouncements

~~In August 2020, the FASB issued ASU 2020-06,~~ ~~Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and 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 the adoption did~~ no~~t have a material effect on its unaudited condensed consolidated financial statements.~~

~~Accounting Pronouncements Not Yet Adopted~~

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which 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 guidance in ASC 805. The ~~guidance in~~ Company adopted this update will be effective for public companies for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years with early adoption permitted. The Company is evaluating the potential impact of adopting thisnew accounting guidance on a prospective basis on January 1, 2023, and the adoption did not have a material effect on its unaudited condensed 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 Company adopted this new accounting guidance on a prospective basis on January 1, 2023, and the adoption did not have a material effect on its unaudited condensed consolidated financial statements.

2. Revenue

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


	Segment						Three months ended June 30,
	Beachbody		Other		Total		2023		2022

Three months ended June 30, 2022
Revenue Type:
Digital	$	71,355	$	6,660	$	78,015
Connected fitness		9,451		1,154		10,605
Nutrition and other		89,416		1,100		90,516
Total revenue	$	170,222	$	8,914	$	179,136

Geographic region:
United States	$	151,107	$	8,914	$	160,021	$	121,067	$	160,021
Rest of world1		19,115		—		19,115		13,881		19,115
Total revenue	$	170,222	$	8,914	$	179,136	$	134,948	$	179,136


	Segment						Six months ended June 30,
	Beachbody		Other		Total		2023		2022

Three months ended June 30, 2021
Revenue Type:
Digital	$	90,488	$	3,837	$	94,325
Connected fitness		—		10		10
Nutrition and other		128,119		654		128,773
Total revenue	$	218,607	$	4,501	$	223,108

Geographic region:
United States	$	194,028	$	4,501	$	198,529	$	251,944	$	338,628
Rest of world1		24,579		—		24,579		27,905		39,430
Total revenue	$	218,607	$	4,501	$	223,108	$	279,849	$	378,058

Segment

Beachbody

Other

Total

Six months ended June 30, 2022

Revenue Type:

Digital

$
145,997

$
13,763

$
159,760

Connected fitness

23,940

6,178

30,118

Nutrition and other

186,392

1,788

188,180

Total revenue

$
356,329

$
21,729

$
378,058

Geographic region:

United States

$
316,899

$
21,729

$
338,628

Rest of world1

39,430

—

39,430

Total revenue

$
356,329

$
21,729

$
378,058

Segment

Beachbody

Other

Total

Six months ended June 30, 2021

Revenue Type:

Digital

$
181,933

$
7,542

$
189,475

Connected fitness

—

10

10

Nutrition and other

258,424

1,418

259,842

Total revenue

$
440,357

$
8,970

$
449,327

Geographic region:

United States

$
392,275

$
8,970

$
401,245

Rest of world1

48,082

—

48,082

Total revenue

$
440,357

$
8,970

$
449,327

(1) Consists of Canada, United Kingdom, and France. NoOther than the United States, no single country accounted for more than 10% of total revenue during the three and six months ended June 30, ~~2022~~2023 and ~~2021.~~2022.

The Company determined that, in addition to the preceding table, the disaggregation of revenue by revenue type as presented in the unaudited condensed consolidated statements of operations achieves the disclosure requirement to disaggregate revenue into categories that depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors.

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 six months ended June 30, 2023, the Company recognized $24.8 million and $77.9 million, respectively, of revenue that was included in the deferred revenue balance as of December 31, 2022. During the three and six months ended June 30, 2022, the Company recognized $25.6 million and $88.1 million, respectively, of revenue that was included in the deferred revenue balance as of December 31, 2021. ~~During the three and six months ended June 30, 2021, the Company recognized $23.6~~ ~~million and $79.2~~ ~~million of revenue that was included in the deferred revenue balance as of December 31, 2020.~~

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):


	June 30, 2022						June 30, 2023
	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3

Assets
Derivative assets	$	—	$	337	$	—	$	—	$	50	$	—
Total assets	$	—	$	337	$	—	$	—	$	50	$	—

Liabilities
Public warrants	$	1,700	$	—	$	—	$	461	$	—	$	—
Private placement warrants		—		—		800		—		—		53
Term Loan warrants								—		—		802
Total liabilities	$	1,700	$	—	$	800	$	461	$	—	$	855

	December 31, 2021						December 31, 2022
	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3

Assets
Derivative assets	$	—	$	314	$	—	$	—	$	462	$	—
Total assets	$	—	$	314	$	—	$	—	$	462	$	—

Liabilities
Public warrants	$	2,701	$	—	$	—
Private placement warrants		—		—		2,133
Public Warrants							$	415	$	—	$	—
Private Placement Warrants								—		—		107
Term Loan Warrants								—		—		1,226
Total liabilities	$	2,701	$	—	$	2,133	$	415	$	—	$	1,333

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, which trade in active markets, is based on quoted market 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 ~~warrants~~and Term Loan Warrants (defined later) are classified within Level 3 of the fair value hierarchy because their fair values are based on significant inputs that are unobservable in the market.

Private Placement Warrants

The Company determined the fair value of the private placement warrants using a Black-Scholes option-pricing model and the quoted price of the Company’s 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, and the risk-free interest rate was based on the implied yield available on U.S. treasury securities with a maturity equivalent to the ~~warrants’~~private placement warrants expected life. The significant unobservable input used in the fair value measurement of the 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 on June 30, ~~2022~~2023 and December 31, ~~2021:~~2022:



	June 30, 2022			December 31, 2021			June 30, 2023			December 31, 2022

Risk-free rate		3.0	%		1.2	%		4.5	%		4.2	%
Dividend yield rate		—			—			—			—
Volatility		75.0	%		65.0	%		75.0	%		75.0	%
Contractual term (in years)		3.99			4.49			2.99			3.49
Exercise price	$	11.50		$	11.50		$	11.50		$	11.50

The following table presents changes in the fair value of the private placement warrants for the three and six months ended June 30, 2023 and 2022 ~~and 2021:~~(in thousands):


	Three months ended June 30,						Six months ended June 30,						Three months ended June 30,					Six months ended June 30,
	2022			2021			2022			2021			2023		2022			2023			2022
Balance, beginning of period	$	1,920		$	—		$	2,133		$	—		$	53	$	1,920		$	107		$	2,133
Assumed in Business Combination		—			26,400			—			26,400
Change in fair value		(1,120	)		(6,027	)		(1,333	)		(6,027	)		—		(1,120	)		(54	)		(1,333	)
Balance, end of period	$	800		$	20,373		$	800		$	20,373		$	53	$	800		$	53		$	800

For the three and six months ended June 30, ~~2022~~2023 and ~~2021,~~2022, the change in the fair value of private placement warrants resulted from the change in price of the Company’s Class A Common 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.

Term Loan Warrants

The Company determined the fair value of the Term Loan Warrants (defined later) using a Black-Scholes option-pricing model and the quoted price of the Company’s 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 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 Term Loan Warrants expected life. The significant unobservable input used in the fair value measurement of the Term Loan Warrants is the implied volatility. Significant changes in the implied volatility would result in a significantly higher or lower fair value measurement, respectively. See Note 9, Debt, and Note 16, Subsequent Events, for additional information regarding the Term Loan Warrants.

The following table presents significant assumptions utilized in the valuation of the Term Loan Warrants at June 30, 2023 and December 31, 2022:


	June 30, 2023			December 31, 2022

Risk-free rate		4.0	%		4.0	%
Dividend yield rate		—			—
Volatility		75.0	%		75.0	%
Contractual term (in years)		6.11			6.61
Exercise price	$	1.85		$	1.85

The following table presents changes in the fair value of the Term Loan Warrants for the three and six months ended June 30, 2023 and 2022 (in thousands):


	Three months ended June 30,					Six months ended June 30,
	2023			2022		2023			2022
Balance, beginning of period	$	1,038		$	—	$	1,226		$	—
Change in fair value		(236	)		—		(424	)		—
Balance, end of period	$	802		$	—	$	802		$	—

For the three and six months ended June 30, 2023, the change in the fair value of the Term Loan Warrants resulted from the change in price of the Company’s Class A Common Stock and the remaining contractual term. 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.

4. Inventory, Net

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


	June 30, 2022		December 31, 2021		June 30, 2023		December 31, 2022

Raw materials and work in process	$	19,039	$	24,436	$	17,680	$	13,380
Finished goods		53,232		108,294		25,684		40,680
Total inventory, net	$	72,271	$	132,730	$	43,364	$	54,060

Adjustments to the carrying value of excess inventory and inventory on hand to net realizable value were $2.3 million and $5.1 million during the three and six months ended June 30, 2023, respectively, and $15.1 million and $32.0 million during the three and six months ended June 30, 2022, ~~respectively, and $0.8~~ ~~million and $2.8~~ ~~million during the three and six months ended June 30, 2021,~~ respectively. These adjustments are included in the unaudited condensed consolidated statements of operations as a component of nutrition and other cost of revenue and connected fitness cost of revenue. The Company recorded approximately zero and $1.4 million of these adjustments in nutrition and other cost of revenue for the three and six months ended June 30, 2023, respectively, and $1.9 million and $4.4 million during the three and six months ended June 30, 2022, respectively. The Company also recorded $2.3 million and $3.7 million of these adjustments in connected fitness cost of revenue for the three and ~~nutrition~~six months ended June 30, 2023 respectively, and ~~other cost of revenue.~~$13.2 million and $27.6 million during the three and six months ended June 30, 2022, respectively.

5. Other Current Assets

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


	June 30, 2022		December 31, 2021		June 30, 2023		December 31, 2022
Deferred coach costs	$	33,633	$	30,928
Deferred partner costs					$	38,332	$	31,270
Deposits		7,070		8,915		6,204		4,527
Accounts receivable, net		1,382		1,225		1,602		866
Other		2,743		2,659		2,481		2,585
Total other current assets	$	44,828	$	43,727	$	48,619	$	39,248

6. Property and Equipment, Net

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



	June 30, 2022			December 31, 2021			June 30, 2023			December 31, 2022

Computer software and web development	$	253,296		$	231,943		$	230,992		$	236,533
Computer equipment		23,449			23,691			23,338			24,240
Buildings		5,158			5,158			5,158			5,158
Leasehold improvements		4,600			5,157			4,600			4,600
Furniture, fixtures and equipment		1,874			2,442			1,207			1,222
Computer software and web development projects in-process		12,876			26,490			738			5,147
Property and equipment, gross		301,253			294,881			266,033			276,900
Less: Accumulated depreciation		(208,952	)		(181,783	)		(207,828	)		(202,753	)
Total property and equipment, net	$	92,301		$	113,098		$	58,205		$	74,147

~~All of the Company’s property and equipment is located in the U.S.~~ 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 June 30,				Six months ended June 30,				Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021		2023		2022		2023		2022

Cost of revenue	$	7,743	$	4,146	$	16,824	$	7,884	$	5,277	$	7,743	$	10,209	$	16,824
Selling and marketing		102		389		381		840		—		102		—		381
Enterprise technology and development		7,486		5,340		14,935		12,651		4,363		7,486		8,866		14,935
General and administrative		49		617		241		1,263		—		49		1		241
Total depreciation	$	15,380	$	10,492	$	32,381	$	22,638	$	9,640	$	15,380	$	19,076	$	32,381

7. Accrued Expenses

Accrued expenses consist of the followings (in thousands):

June 30, 2022

December 31, 2021

Employee compensation and benefits

$
19,372

$
8,996

Coach costs

13,626

19,168

Inventory, shipping and fulfillment

13,927

14,360

Sales and other taxes

4,049

5,097

Information technology

2,222

10,150

Advertising

1,128

4,033

Customer service expenses

643

1,773

Other accrued expenses

7,382

10,948

Total accrued expenses

$
62,349

$
74,525


	June 30, 2023		December 31, 2022
Partner costs	$	15,742	$	14,535
Inventory, shipping and fulfillment		10,940		11,687
Employee compensation and benefits		5,126		20,584
Sales and other taxes		4,523		4,818
Information technology		2,059		2,207
Advertising		3,072		1,176
Customer service expenses		964		956
Other accrued expenses		6,690		8,467
Total accrued expenses	$	49,116	$	64,430

Advertising costs, which are primarily comprised of social media, television media, and internet advertising expenses and also include print, radio, and infomercial production costs, were $8.1 million and $17.1 million for the three and six months ended June 30, 2023, respectively, and $6.9 million and $22.6 million for the three and six months ended June 30, 2022, respectively.

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 2028. During the three and six months ended June 30, 2023, the Company recorded losses on inventory purchase commitments related to connected fitness hardware of $0.3 million and $0.4 million, respectively. During the three and six months ended June 30, 2022, the Company recorded losses on inventory purchase commitments related to connected fitness hardware of $1.8 million and $2.4 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 June 30, ~~2022~~2023 are as follows (in thousands):


Six months ending December 31, 2022	$	30,887
Year ending December 31, 2023		4,019
Six months ending December 31, 2023			$	22,239
Year ending December 31, 2024		1,410		2,160
Year ending December 31, 2025		1,385		1,475
Year ending December 31, 2026		100		100
Year ending December 31, 2027				75
Thereafter		150		75
	$	37,951	$	26,124

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 ~~of which $6.1~~ ~~million is included in other current liabilities and other liabilities in the unaudited condensed consolidated balance sheets,~~ will require payments of approximately $~~1.3~~1.2 million during the six months ending December 31, ~~2022~~2023, $2.1 million for the year ending December 31, 2024 and $~~6.0~~1.5 million in ~~2023 and thereafter.~~total 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~~Debt

On ~~June 25, 2021,~~August 8, 2022 (the “Effective Date”), the Company, ~~acquired~~ Beachbody, LLC as borrower (a wholly owned subsidiary of the Company), and certain other subsidiaries of the Company as guarantors (the “Guarantors”), the lenders (the “Lenders”), and Blue Torch Finance, LLC, ("Blue Torch") as administrative agent and collateral agent for such lenders (the “Term Loan Agent”) entered into a financing agreement which was subsequently amended (collectively with any amendments thereto, the “Financing Agreement”). The Financing Agreement provides for senior secured term loans on the Effective Date in an aggregate principal amount of $~~100~~50.0 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 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 Company. Such security interest consists of a first-priority perfected lien on substantially all property and assets of the Company and subsidiaries, including stock pledges on the capital stock of the Company’s material and direct subsidiaries, subject to customary carveouts. In connection with the Financing Agreement, the Company incurred $4.2 million of third-party debt issuance costs which are recorded in the unaudited condensed consolidated balance sheets as a reduction of long-term debt as of June 30, 2023 and December 31, 2022 and are being amortized over the term of the Term Loan using the effective-interest method. As of June 30, 2023, the principal balance outstanding under the Term Loan was $50.1 million. The Term Loan matures on August 8, 2026. On July 24, 2023 (the "Second Amendment Effective Date") the Company and Blue Torch entered into Amendment No. 2 to the Financing Agreement (the "Second Amendment"), which amended the Company's existing Financing Agreement. See Note 16, Subsequent Events, for additional information on the Second Amendment, including amendments to the debt covenants, maturity date of the Term Loan and the exercise price of the Term Loan Warrants.

The Term Loan borrowings may take the form of base rate (“Reference Rate”) loans or Secured Overnight Financing Rate (“SOFR Rate”) 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 Rate 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 three 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 kind by capitalizing such interest and adding such capitalized interest to the outstanding principal amount of the ~~equity~~Term Loan on each anniversary of ~~Myx pursuant~~the Effective Date. The Term Loan was a SOFR Rate loan, with a cash interest rate of 12.12% at June 30, 2023. The Company recorded $2.4 million and $4.7 million of interest related to the ~~Business Combination Agreement. The Company recognized the acquired assets and assumed liabilities of Myx based on estimates of their acquisition date fair values. There were~~ 0 ~~adjustments to the purchase price allocations~~Term Loan during the three and six months ended June 30, ~~2022.~~2023, respectively.

The ~~following unaudited pro forma~~Financing Agreement contains financial ~~information presents~~covenants that require us to maintain (a) certain minimum revenue levels, to be tested on a quarterly basis, and (b) minimum Liquidity (as defined in the ~~combined results~~Financing Agreement) of ~~operations~~(i) $12.5 million at all times through the Second Amendment Effective Date; (ii) $20.0 million at all times thereafter through March 31, 2024; and (iii) $25.0 million at all times thereafter through the maturity of the Term Loan. If there is an event of default, including not being in compliance with either of the financial covenants, the Term Loan will bear interest from the date of such event of default until the event of default is cured or waived in writing by the Lenders at the Post Default Rate, which is the rate of interest in effect pursuant to the Financing Agreement plus 2.00%. In the event of default the Lenders could also require repayment of the outstanding balance of the Term Loan including the prepayment premium of (a) 5.0% if repaid before the 1st anniversary of the Effective Date, (b) 3.0% if repaid before the 2nd anniversary of the Effective Date, (c) 2.0% if repaid before the 3rd anniversary date of the Effective Date, and (d) 0.0% if repaid after the 3rd anniversary date of the Effective Date. The Company ~~and Myx as if~~was in compliance with these covenants, including amendments to the ~~companies had been combined~~minimum revenue financial covenant in the Second Amendment as of ~~January 1, 2021. The unaudited pro forma financial~~June 30, 2023. See Note 16, Subsequent Events, for additional information ~~includes~~on the ~~accounting effects of~~Second Amendment, including amendments to 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.debt covenants.

(in thousands)

Three Months Ended

Six Months Ended

June 30, 2021

June 30, 2021
Pro forma combined:

Revenue

$237,286

$480,543
Net loss

(25,362)

(67,747)

The Financing Agreement also contains customary representations, warranties, and covenants, which include, but are not limited to, restrictions on indebtedness, liens, restricted payments, asset sales, affiliate transactions, changes in line of business, investments, negative pledges and amendments to organizational documents and material contracts. The Financing Agreement contains customary events of default, which among other things include (subject to certain exceptions and cure periods): (1) failure to pay principal, interest, or any fees or certain other amounts when due; (2) breach of any representation or warranty, covenant, or other agreement in the Financing Agreement and other related loan documents; (3) the occurrence of a bankruptcy or insolvency proceeding with respect to any Loan Party; (4) any failure by a Loan Party to make a payment with respect to indebtedness having an aggregate principal amount in excess of a specified threshold; and (5) certain other customary events of default.

In connection with the Term Loan, the Company issued to certain holders affiliated with Blue Torch warrants for the purchase of 4,716,756 shares of the Company’s Class A Common Stock at an exercise price of $1.85 per share (the "Term Loan Warrants"). The Term Loan 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 Term Loan Warrants have a seven-year term from the Effective Date. See Note 3, Fair Value Measurements, for information on the valuation of the Term Loan Warrants and Note 16, Subsequent Events, for information on amendments to the Term Loan Warrants. The Term Loan Warrants were recorded in the unaudited condensed consolidated balance sheets as warrant liabilities. The initial fair value of the Term Loan Warrants, of $5.2 million, is being amortized as a debt discount over the term of the Term Loan using the effective-interest method.

The aggregate amounts of payments due for the periods succeeding June 30, 2023 and reconciliation of the Company’s debt balances, net of debt discount and debt issuance costs, are as follows (in thousands):


Six months ending December 31, 2023	$	15,625
Year ending December 31, 2024		1,563
Year ending December 31, 2025		2,500
Year ending December 31, 2026		29,062
Total debt	$	48,750
Less current portion		(16,250	)
Less unamortized debt discount and debt issuance costs		(8,008	)
Add capitalized paid-in-kind interest		1,344
Total long-term debt	$	25,836

The payments in the six months ending December 31, 2023 include a prepayment of $15.0 million which was paid on July 24, 2023 as part of the Second Amendment, see Note 16, Subsequent Events, for more information on the amendments to the Term Loan.

The Term Loan amortizes at 2.50% per year from the Effective Date to August 8, 2024, payable on a quarterly basis, and thereafter, at 5.00% per year, payable on a quarterly basis, with the remaining principal amount due on the maturity date of the Term Loan.

10. Stockholders’ Equity

As of June 30, ~~2022,~~2023, 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.

Holders of each share of each class of 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 Preferred Stock outstanding at the time. 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.

On June 15, 2023, the Company and Carl Daikeler, the Company’s co-founder and chief executive officer (“CEO”) entered into a forfeiture agreement (“the Forfeiture Agreement”), pursuant to which Mr. Daikeler as of June 15, 2023 forfeited 8 million shares of the Company’s common stock that he owned, comprised of 3,199,946 shares of Class A common stock and 4,800,054 shares of Class X Common stock, each with a par value of $0.0001. No consideration was provided to Mr. Daikeler for the forfeiture of these shares. The forfeiture of the shares resulted in the reduction of each of common stock and additional paid in capital by $800 in the June 30, 2023 condensed consolidated balance sheets.

Accumulated Other Comprehensive ~~Loss~~Income (Loss)

The following tables summarize changes in accumulated other comprehensive ~~loss~~income (loss) by component during the three months ended June 30, ~~2022~~2023 and ~~2021~~2022 (in thousands):


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

Balances at March 31, 2021	$	(188	)	$	86		$	(102	)
Other comprehensive loss before reclassifications		(78	)		12			(66	)
Amounts reclassified from accumulated other comprehensive income (loss)		172			—			172
Tax effect		(21	)		—			(21	)
Balances at June 30, 2021	$	(115	)	$	98		$	(17	)


Balances at March 31, 2022	$	(148	)	$	15		$	(133	)	$	(148	)	$	15		$	(133	)
Other comprehensive loss before reclassifications		13			(51	)		(38	)
Other comprehensive income (loss) before reclassifications											13			(51	)		(38	)
Amounts reclassified from accumulated other comprehensive income (loss)		74			—			74			74			—			74
Tax effect		22			—			22			22			—			22
Balances at June 30, 2022	$	(39	)	$	(36	)	$	(75	)	$	(39	)	$	(36	)	$	(75	)


Balances at March 31, 2023										$	(103	)	$	(84	)	$	(187	)
Other comprehensive income (loss) before reclassifications											(206	)		35			(171	)
Amounts reclassified from accumulated other comprehensive income (loss)											61			—			61
Tax effect											(36	)		—			(36	)
Balances at June 30, 2023										$	(284	)	$	(49	)	$	(333	)

The following tables summarize changes in accumulated other comprehensive ~~loss~~income (loss) by component during the six months ended June 30, ~~2022~~2023 and ~~2021~~2022 (in thousands):


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

Balances at December 31, 2020	$	(246	)	$	44		$	(202	)
Other comprehensive loss before reclassifications		(170	)		54			(116	)
Amounts reclassified from accumulated other comprehensive income (loss)		339			—			339
Tax effect		(38	)		—			(38	)
Balances at June 30, 2021	$	(115	)	$	98		$	(17	)
										Unrealized Gain (Loss) on Derivatives			Foreign Currency Translation Adjustment			Total

Balances at December 31, 2021	$	(32	)	$	11		$	(21	)	$	(32	)	$	11		$	(21	)
Other comprehensive loss before reclassifications		(149	)		(47	)		(196	)		(149	)		(47	)		(196	)
Amounts reclassified from accumulated other comprehensive income (loss)		143			—			143			143			—			143
Tax effect		(1	)		—			(1	)		(1	)		—			(1	)
Balances at June 30, 2022	$	(39	)	$	(36	)	$	(75	)	$	(39	)	$	(36	)	$	(75	)


Balances at December 31, 2022										$	131		$	(94	)	$	37
Other comprehensive income (loss) before reclassifications											(307	)		45			(262	)
Amounts reclassified from accumulated other comprehensive income (loss)											(26	)		—			(26	)
Tax effect											(82	)		—			(82	)
Balances at June 30, 2023										$	(284	)	$	(49	)	$	(333	)

11. Equity-Based Compensation

Equity Compensation Plans

A summary of the option activity under the Company’s equity compensation plans 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

15,509,878

1.21

Exercised

(1,720,163
)

1.55

Forfeited

(6,075,160
)

2.17

Expired

(167,868
)

1.22

Outstanding at June 30, 2022

49,299,729

$
2.98

6.06

$
1,425

Exercisable at June 30, 2022

24,065,850

$
2.30

2.91

$
—


	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, 2022		48,414,625		$	2.65		6.35	$	—
Granted		27,346,753			0.46
Forfeited		(5,464,000	)		2.85
Expired		(504,898	)		2.66
Outstanding at June 30, 2023		69,792,480		$	1.78		7.06	$	—
Exercisable at June 30, 2023		26,708,560		$	2.38		3.25	$	—

A summary of restricted stock unit ("RSU") activity is as follows:


	RSUs Outstanding
	Number of RSUs			Weighted-Average Fair Value (per RSU)
Outstanding at December 31, 2022		3,159,185		$	1.45
Granted		23,121,170			0.58
Vested		(11,113,084	)		0.68
Forfeited		(974,173	)		0.74
Outstanding at June 30, 2023		14,193,098		$	0.67

The ~~intrinsic~~fair value of ~~options exercised~~RSUs vested during the three and six months ended June 30, 2023 was $~~0.8~~1.7 million ~~for~~and $7.6 million, respectively. No RSUs vested during the three and six months ended June 30, 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

2,606,735

1.23

Vested

(210,146
)

6.68

Forfeited

(251,082
)

4.62

Outstanding at June 30, 2022

2,719,185

$

1.49

On January 1, ~~2022,~~2023, the number of shares available for issuance under the 2021 Incentive Award Plan (the “2021 Plan”) increased by ~~15,479,188~~15,608,106 pursuant to the terms of the 2021 Plan. As of June 30, ~~2022,~~2023, ~~20,319,069~~13,640,317 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 shares of common stock with an aggregate fair value and remitted taxes of $2.1 million during the six months ended June 30, 2023, 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.

On June 14, 2023, the Board of Directors of the Company (“the Board”) adopted the Company’s 2023 Employment Inducement Incentive Award Plan (the “Inducement Plan”) for the grant of non-qualified stock options, stock appreciation rights, restricted stock, RSU's, dividend equivalents and other stock or cash-based awards to prospective employees. The Board reserved 23,883,265 shares of the Company’s common stock for issuance pursuant to the awards granted under the Inducement Plan.

Effective as of June 15, 2023, the Company appointed Mark Goldston as Executive Chairman, replacing the service of Mr. Daikeler in his capacity as Chairman of the Board. Mr. Daikeler continues to serve as the Company’s CEO and as a director. In connection with the employment offer letter to Mr. Goldston, he was granted a stock option under the Inducement Plan, covering an aggregate of 23,883,265 shares of the Company’s Class A common stock, par value $0.0001 per share (the “Option”). Of this amount, 7,961,088 shares subject to the Option will vest based on continued service (the “Time-Vesting Options”) and 15,922,177 shares will vest based on the attainment of applicable performance goals and continued service (the “Performance-Vesting Options”). The Time-Vesting Options will vest and become exercisable with respect to 25% of the Time-Vesting Options subject to the Option on each of the first four anniversaries of June 15, 2023. The Performance-Vesting Options will vest and become exercisable based on both (1) the achievement of pre-determined price per share goals and (2) Mr. Goldston’s service through the applicable vesting date. Any earned Performance-Vesting Options will vest and become exercisable as of the later of (1) June 15, 2024, and (2) the date on which the applicable price per share goal is achieved. The weighted average exercise price of the Performance-Vesting Options was $0.44 per option and none of the Performance-Vesting Options were exercisable as of June 30, 2023.

Vesting tranche Number of Performance -Vesting Options Price per share goal

Tranche 1 3,980,544 $1.00

Tranche 2 3,980,544 $1.50

Tranche 3 3,980,544 $2.00

Tranche 4 3,980,545 $2.50

The share price is measured by averaging the fair market value (as defined in the Inducement Plan) per share over any 30 consecutive trading-day period.

Employee Stock Purchase Plan

In May 2022, the Company established an employee stock purchase plan (the “ESPP”), the terms of which allow for qualified employees to participate in the purchase of designated shares of the Company’s common stock at a price equal to 85% of the lower of the closing price at the beginning or ending of each six-month purchase period.

During the six months ended June 30, 2023, 981,853 shares of the Company’s common stock were issued pursuant to the ESPP at an average price of $0.46 per share.

Stock-based compensation expense associated with the Company’s ESPP is based on fair value estimated on the date of grant using the Black-Scholes option pricing valuation model and the following weighted-average assumptions for grants during the six months ended June 30, 2023:


	Six months ended June 30,
	2023
Risk-free rate		4.6	%
Dividend yield rate		—
Volatility		55.3	%
Expected term (in years)		0.50
Weighted-average grant date fair value	$	0.14

Equity-Based Compensation Expense

The fair value of each award that vests solely based on time 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 time vested option grants:

Six months ended June 30,

2022

2021

Risk-free rate

2.8
%

0.7
%
Dividend yield rate

0

0

Volatility

52.6
%

53.9
%
Expected term (in years)

6.25

6.23

Weighted-average grant date fair value

$
0.64

$
4.91


	Six months ended June 30,
	2023			2022
Risk-free rate		3.8	%		2.8	%
Dividend yield rate		—			—
Volatility		54.8	%		52.6	%
Expected term (in years)		5.92			6.25
Weighted-average grant date fair value	$	0.27		$	0.64

1719

The fair value of the Performance-Vesting Options as of the date of grant is estimated using a Monte Carlo simulation. The following table summarizes the weighted average assumptions used to determine the fair value of the Performance-Vesting Options:


	Six months ended June 30,
	2023
Risk-free rate		3.7	%
Dividend yield rate		—
Volatility		53.7	%
Expected term (in years)		10.00
Weighted-average grant date fair value	$	0.26

Equity-based compensation expense for the three and six months ended June 30, ~~2022~~2023 and ~~2021~~2022 was as follows (in thousands):


	Three months ended June 30,					Six months ended June 30,				Three months ended June 30,					Six months ended June 30,
	2022			2021		2022		2021		2023		2022			2023		2022

Cost of revenue	$	382		$	91	$	717	$	182	$	327	$	382		$	1,756	$	717
Selling and marketing		1,018			1,616		2,657		3,333		1,771		1,018			5,157		2,657
Enterprise technology and development		(17	)		357		910		663		140		(17	)		703		910
General and administrative		1,618			458		3,281		917		923		1,618			5,100		3,281
Total equity-based compensation	$	3,001		$	2,522	$	7,565	$	5,095	$	3,161	$	3,001		$	12,716	$	7,565

In connection with the restructuring activity that took place during the three and six months ended June 30, 2023, the Company modified certain stock awards of terminated employees (approximately 100 employees). The modifications included accelerating the vesting of any options that would have vested within three months of the employees termination date, and all vested options will be available for exercise for a total of six months after the employees’ termination date (that is, three months in addition to the standard three months per original agreement). As a result of these modifications, the Company recognized a $0.4 million and $1.0 million reduction to equity-based compensation expense within general and administrative expense in the unaudited condensed consolidated statements of operations for the three and six months ended June 30, 2023, respectively.

As of June 30, ~~2022,~~2023, the total unrecognized equity-based compensation expense was $~~52.5~~40.7 million, which will be recognized over a weighted-average remaining period of ~~2.95~~2.85 years.

~~12.~~12. Derivative Financial Instruments

As of June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the notional amount of the Company’s outstanding foreign exchange options was $~~26.5~~15.4 million and $~~30.4~~17.6 million, respectively. There were 0no outstanding forward contracts as of June 30, ~~2022~~2023 and December 31, ~~2021.~~2022.

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 June 30,						Six months ended June 30,							Three months ended June 30,						Six months ended June 30,
	Financial Statement Line Item	2022			2021			2022			2021			Financial Statement Line Item	2023			2022			2023			2022

Unrealized gains (losses)	Other comprehensive income (loss)	$	13		$	(78	)	$	(149	)	$	(170	)	Other comprehensive income (loss)	$	(206	)	$	13		$	(307	)	$	(149	)

Losses reclassified from accumulated other	Cost of revenue	$	(32	)	$	(65	)	$	(62	)	$	(138	)
comprehensive loss into net loss	General and administrative		(42	)		(107	)		(81	)		(201	)
Gains (losses) reclassified from accumulated other														Cost of revenue	$	(25	)	$	(32	)	$	11		$	(62	)
comprehensive income (loss) into net loss														General and administrative		(36	)		(42	)		15			(81	)
Total amounts reclassified		$	(74	)	$	(172	)	$	(143	)	$	(339	)		$	(61	)	$	(74	)	$	26		$	(143	)

Gains (losses) recognized on derivatives not designated as hedging instruments	Cost of revenue	$	6		$	(20	)	$	(45	)	$	(41	)	Cost of revenue	$	(54	)	$	6		$	(95	)	$	(45	)

13. ~~Strategic Realignment~~Restructuring

In ~~January~~2023, restructuring charges primarily relate to activities focused on aligning the Company's operations with its key growth priorities. Restructuring charges in 2022 relate to the ~~Company commenced a strategic alignment initiative to consolidate its~~consolidation of our streaming fitness and nutrition offerings into a single Beachbody platform. The Company recognized restructuring costs of $(0.1) million and $5.3 million during the three and six months ended June 30, 2023, respectively, comprised primarily of termination benefits related to headcount reductions, of which $0.3 million is included in accrued expenses in the unaudited condensed consolidated balance sheets at June 30, 2023. The Company recognized restructuring costs of $1.3 million and $~~8.5~~8.6 million during the three and six months ended June 30, 2022, respectively, comprised primarily of termination benefits related to headcount ~~reductions, of which $1.3~~ ~~million is included in accrued expenses in the unaudited condensed consolidated balance sheets.~~reductions. In accordance with GAAP, employee termination benefits were recognized at the date employees were notified and post-employment benefits were accrued as the obligation was probable and estimable. Benefits for employees who ~~provide future~~provided service greater than 60 days from the date of notification ~~will be~~were recognized ratably over the ~~future~~ service period.

The following table summarizes activity in the Company’s restructuring-related liability during the three months ended June 30, 2023 and 2022, respectively (in thousands):


	Balance at		Restructuring			Payments /			Liability at
	March 31, 2023		Charges			Utilizations			June 30, 2023
Employee-related costs	$	1,389	$	(107	)	$	(1,026	)	$	256
Total costs	$	1,389	$	(107	)	$	(1,026	)	$	256


	Balance at		Restructuring		Payments /			Liability at
	March 31, 2022		Charges		Utilizations			June 30, 2022
Employee-related costs	$	4,618	$	1,332	$	(4,630	)	$	1,320
Total costs	$	4,618	$	1,332	$	(4,630	)	$	1,320

The following table summarizes the activity in the Company’s restructuring ~~costs activity~~related liability during the six months ended June 30, 2023 and 2022, respectively (in thousands):


	Balance at		Restructuring		Payments /			Liability at
	December 31, 2022		Charges		Utilizations			June 30, 2023
Employee-related costs	$	469	$	5,280	$	(5,493	)	$	256
Total costs	$	469	$	5,280	$	(5,493	)	$	256


	Balance at		Restructuring		Payments /			Liability at
	December 31, 2021		Charges		Utilizations			June 30, 2022
Employee-related costs	$	—	$	8,555	$	(7,235	)	$	1,320
Total costs	$	—	$	8,555	$	(7,235	)	$	1,320

During the six months ended June 30, 2022, the Company determined that the useful life of certain computer software and web development assets 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 $1.2 million ~~or $0.00~~ ~~per share,~~ 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 six months ended June 30, 2022, respectively. The Company also accelerated amortization of these content assets and recorded $1.5 million ~~or $0.00~~ ~~per share,~~ and $2.6 million ~~or $0.01~~ ~~per share,~~ of additional amortization as a component of digital cost of revenue during the three and six months ended June 30, 2022, respectively.

14. Income Taxes

The Company recorded a benefit and provision for income taxes of approximately zero for the three and six months ended June 30, 2023, and a benefit for income taxes of $0.3 million and $1.0 million for the three and six months ended June 30, 2022, ~~respectively,~~respectively. The effective tax rate was 0.0% and ~~a benefit for income taxes of $10.9~~0.1 ~~million and $11.3~~ ~~million~~% for the three and six months ended June 30, ~~2021, respectively. The~~2023, respectively, and the effective ~~benefit~~ tax rate was 0.7% and 0.8% for the three and six months ended June 30, 2022, ~~respectively, and~~ ~~46.6% and~~ ~~20.9% for the three and six months ended June 30, 2021,~~ respectively.

The tax provision for interim periods is determined using an estimate of the Company’s annual effective tax rate, adjusted for discrete items arising in that quarter. The Company’s effective tax rate differs from the U.S. statutory tax rate in the three and six months ended June 30, ~~2022~~2023 primarily due to changes in valuation allowances on deferred tax assets as it is more likely than not that some or all of the Company’s deferred tax assets will not be realized.

The Company evaluates its tax positions on a quarterly basis and revises its estimate accordingly. There were no material changes to the Company’s uncertain tax positions, interest, or penalties during the three and six months ended June 30, ~~2022.~~2023.

15. Earnings (Loss) per Share

The computation of 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 June 30,

Six months ended June 30,

2022

2021

2022

2021

Numerator:

Net loss

$
(41,867
)

$
(12,440
)

$
(115,400
)

$
(42,498
)

Denominator:

Weighted-average common shares outstanding, basic and diluted

307,204,999

247,062,134

306,786,192

245,048,715

Net loss per common share, basic and diluted

$
(0.14
)

$
(0.05
)

$
(0.38
)

$
(0.17
)


	Three months ended June 30,						Six months ended June 30,
	2023			2022			2023			2022
Numerator:
Net loss	$	(25,748	)	$	(41,867	)	$	(54,936	)	$	(115,400	)

Denominator:
Weighted-average common shares outstanding, basic and diluted		314,311,797			307,204,999			311,740,463			306,786,192

Net loss per common share, basic and diluted	$	(0.08	)	$	(0.14	)	$	(0.18	)	$	(0.38	)

Basic net loss per common share is the same as dilutive net loss per common share for each of the three and six months ended June 30, ~~2022~~2023 and ~~each of the three and six months ended June 30, 2021~~2022 as the inclusion of all potential common shares would have been antidilutive. The weighted average common shares outstanding (basic and diluted) in the above table exclude the

19 million shares that were forfeited by Mr. Daikeler for the period of time after they were forfeited (June 15, 2023).

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:

June 30,

2022

2021

Options

49,299,729

34,588,520

RSUs

2,719,185

—

Compensation warrants

3,980,656

3,980,656

Public and private placement warrants

15,333,333

15,333,333

Earn-out shares

3,750,000

3,750,000

75,082,903

57,652,509


	June 30,
	2023		2022

Options		69,792,480		49,299,729
RSUs		14,193,098		2,719,185
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
		111,766,323		75,082,903

16~~. Segment Information~~

The ~~Company applies ASC 280,~~options balance as of June 30, 2023 in the table above includes ~~Segment Reporting~~15.9~~, in determining reportable segments for financial statement disclosure. Segment information is presented~~ million Performance-Vesting Options, which vest based on the ~~financial~~attainment of applicable performance goals and continued service. See Note 11, Equity-Based Compensation, for additional information on the ~~Company uses to manage the business which is organized around the Company’s digital platforms. The Company has~~ Performance-Vesting Options.

222

~~operating segments, Beachbody and Other, and~~ 1

reportable segment, Beachbody. The Beachbody segment primarily derives revenue from BOD and BODi digital subscriptions, nutritional products, connected fitness equipment (bikes and accessories), and other fitness-related products. Other derives revenue primarily from Openfit digital subscriptions, nutritional products, and connected fitness equipment. 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 segment is as follows (in thousands):~~

Segment

Beachbody

Other

Consolidated

Three months ended June 30, 2022

Revenue

$
170,222

$
8,914

$
179,136

Contribution

37,607

(451
)

37,156

Three months ended June 30, 2021

Revenue

$
218,607

$
4,501

$
223,108

Contribution

49,545

(6,411
)

43,134

Six months ended June 30, 2022

Revenue

$
356,329

$
21,729

$
378,058

Contribution

65,698

(1,827
)

63,871

Six months ended June 30, 2021

Revenue

$
440,357

$
8,970

$
449,327

Contribution

96,020

(11,547
)

84,473

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

Three months ended June 30,

Six months ended June 30,

2022

2021

2022

2021

Consolidated contribution

$
37,156

$
43,134

$
63,871

$
84,473

Amounts not directly related to segments:

Cost of revenue (1)

14,749

8,118

28,572

15,960

Selling and marketing (2)

21,762

20,872

48,081

40,963

Enterprise technology and development

24,133

26,949

57,830

54,038

General and administrative

19,584

17,231

39,657

35,177

Restructuring

1,332

—

8,555

—

Change in fair value of warrant liabilities

(2,070
)

(5,390
)

(2,334
)

(5,390
)
Interest expense

3

305

22

428

Other expense (income), net

(189
)

(1,654
)

(125
)

(2,953
)
Loss before income taxes

$
(42,148
)

$
(23,297
)

$
(116,387
)

$
(53,750
)

~~(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. 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 and an acquired trade name are also included in this line.

~~17.~~16. Subsequent Events

On ~~August 8, 2022~~July 24, 2023 (the ~~“Closing”~~"Second Amendment Effective Date"), the Company and Blue Torch entered into ~~an agreement with~~the Second Amendment, which amended the Company's existing Financing Agreement. The Second Amendment, among other things, amended certain terms of the Financing Agreement including , but not limited to, (1) amending the minimum revenue financial covenant to test revenue levels for each fiscal quarter on a ~~third-party lender for a~~standalone basis, and to adjust the minimum revenue levels to (a) $~~50.0~~100.0 million, ~~senior secured term loan (the “Term Loan”)~~commencing with a the fiscal quarter ended June 30, 2023, for each fiscal quarter ending on or prior to March 31, 2024 and (b) $~~four-year~~120.0 ~~maturity. The Term Loan includes an incremental facility of up~~million for each fiscal quarter thereafter and or prior to ~~an additional~~December 31, 2025; (2) amending the minimum liquidity financial covenant to adjust the minimum liquidity levels to (a) $20.0 million at all times from the Second Amendment Effective Date through March 31, 2024 and (b) $25.0 million ~~subject to certain terms and conditions. The~~at all times thereafter through the maturity of the Term Loan; (3) modifying the maturity date of the Term Loan ~~was funded at Closing~~from August 8, 2026 to February 8, 2026; and ~~bears interest at the Company’s option of either (i) the~~ ~~Secured Overnight Financing Rate based upon an interest period of three months plus~~ ~~7.15%, or (ii) a reference rate as defined in the agreement, plus~~ ~~6.15%. In addition, borrowings will bear interest at~~ ~~3.00%, which will be paid in kind by capitalizing such interest and adding it to the outstanding principal, annually.~~ ~~The Company paid an upfront fee of $1.5~~ ~~million at Closing and is 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. The Term Loan provides customary restrictions, including prepayment premiums, and requires compliance with~~(4) amending certain financial definitions, reporting covenants and other ~~covenants. The Company expects to use the proceeds for general corporate purposes and to pay transaction fees and expenses related to the Term Loan.~~covenants thereunder.

In connection with the Second Amendment, on the Second Amendment Effective Date, the Company made a partial prepayment on the Term Loan of $15.0 million (which amount was classified as a current obligation at June 30, 2023) along with the related prepayment premium of 5% ($0.8 million) and accrued interest ($0.1 million). The Company also incurred a 1% fee as paid in kind on the outstanding Term Loan balance prior to the prepayment (fee of $0.5 million). The amounts related to the Second Amendment will be recorded in the quarter ending September 30, 2023. After the prepayment and the paid in kind fee on July 24, 2023, the principal amount outstanding on the Term Loan was $35.6 million.

In connection with the Second Amendment, the Company ~~issued warrants~~also amended and restated the Term Loan Warrants for the purchase of 4,716,756 ~~million~~ shares of the Company’s Class A Common ~~Stock at an~~Stock. The amendment of the Term Loan Warrants amends the exercise price offrom $1.85 per share to $0.41 per share. The ~~warrants vest on a monthly basis over four years, with~~ amended exercise price increased the fair value of the Term Loan Warrants as of the Second Amendment Effective Date from $300.8%, million to $301.6%, 20% million and 20~~% vesting~~will be recorded in the ~~first, second, third and fourth years, respectively. The warrants have a~~ ~~seven-year~~ ~~term from the date of Closing.~~quarter ending September 30, 2023.

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”) as well as our financial statements and the ~~section entitled “Risk Factors.”~~"Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our Annual Report on Form 10-K for the year ended December 31, 2022 (our "Form 10-K"). Unless otherwise indicated, the terms ~~“Beachbody,~~“BODi,” “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 ~~(“Securities~~(the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended ~~(“Exchange~~(the “Exchange 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;

•

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; and

•

other risk and uncertainties ~~set forth in this Report~~ under the heading “Risk ~~Factors.~~Factors” set forth in this Report as well as our most recent Form 10-K.

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.

You should not place undue reliance upon our 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.

2224

Overview

~~Beachbody~~BODi 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 at-home fitness market and disrupted the global fitness industry by making it accessible for people to get results—anytime, anywhere. Our comprehensive nutrition-first programs, Portion Fix and 2B Mindset, teach healthy eating habits and promote healthy, sustainable weight loss. These fitness and nutrition programs are available through our Beachbody On Demand and Beachbody On Demand Interactive streaming ~~services, and in January 2022, we began the process of consolidating our Openfit streaming fitness offerings onto a single Beachbody platform.~~services.

We offer nutritional products such as Shakeology nutrition shakes, BEACHBAR snack bars, and Ladder premium supplements as well as a professional-grade stationary cycle with a 360-degree touch screen tablet and connected fitness software. Leveraging our history of fitness content creation, nutrition innovation, and our network of micro-influencers, whom we call ~~Coaches,~~“Partners” (previously known as “Coaches”), we plan to continue market penetration into connected fitness to reach a wider health, wellness and fitness audience.

~~Historically, our~~Our revenue ~~has been~~is generated primarily through our network of ~~micro-influencers,~~Partners, 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.~~products, and connected fitness revenue. In addition to selling individual products on a one-time basis, we bundle digital and nutritional products together at discounted prices.

Our key growth priorities for 2023 include: revamping our Beachbody on Demand (“BODi”) digital platform, growing Shakeology in the Healthy Dessert market, and improving the affordability of our connected fitness bike. In March 2023, we relaunched the BODi digital platform with a new form of fitness programming called BODi Blocks, the addition of positive mindset content, and digital recipes to extend Shakeology into a Healthy Dessert. We also began migrating all BOD-only members to BODi on their renewal dates. During the first quarter of 2023, to align our operations with our key growth priorities, we executed certain restructuring activities, including a reduction in headcount. These actions resulted in aggregate charges of $5.3 million, consisting primarily of termination benefits during the six months ended June 30, 2023.

For the three months ended June 30, ~~2022,~~2023, as compared to the three months ended June 30, ~~2021:~~2022:

•

Total revenue was ~~$179.1~~$134.9 million, a ~~20%~~25% decrease;

•

Digital revenue was ~~$78.0~~$65.2 million, a ~~17%~~16% decrease;

•

Nutrition and other revenue was $64.6 million, a 29% decrease;

•

Connected fitness revenue was ~~$10.6 million;~~

•

~~Nutrition and other revenue was $90.5~~$5.1 million, a ~~30%~~52% decrease;

•

Net loss was ~~$41.9~~$25.7 million, compared to net loss of ~~$12.4~~$41.9 million; and

•

Adjusted EBITDA was ($~~1.5)~~4.8) million, compared to ($~~4.4)~~1.5) million.

For the six months ended June 30, ~~2022,~~2023, as compared to the six months ended June 30, ~~2021:~~2022:

•

Total revenue was ~~$378.1~~$279.8 million, a ~~16%~~26% decrease;

•

Digital revenue was ~~$159.8~~$130.0 million, a ~~16%~~19% decrease;

•

Nutrition and other revenue was $138.7 million, a 26% decrease;

•

Connected fitness revenue was ~~$30.1 million;~~

•

~~Nutrition and other revenue was $188.2~~$11.1 million, a ~~28%~~63% decrease;

•

Net loss was ~~$115.4~~$54.9 million, compared to net loss of ~~$42.5~~$115.4 million; and

•

Adjusted EBITDA was ~~($20.6)~~$(5.7) million, compared to ~~($16.1)~~$(20.6) million.

See “Non-GAAP Information” below for information regarding our use of Adjusted EBITDA and a reconciliation of net loss to Adjusted EBITDA.

~~Recent Developments~~

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 through the remainder of fiscal year 2022. We plan to mitigate the challenging macroeconomic factor with strategies that we expect will drive our future success and growth.25

Recent Developments

~~Digital Gross Margin~~

~~We believe our “One Brand” strategy, which will consolidate our streaming content into a single Beachbody platform and which we expect to be fully implemented by~~Effective as of June 15, 2023, the ~~middle~~Company appointed Mark Goldston as Executive Chairman, replacing the service of Mr. Daikeler in his capacity as Chairman of the ~~third quarter~~Board. Mr. Daikeler will continue to serve as the Company’s CEO and director. In connection with the employment offer letter to Mr. Goldston, he was granted a stock option under the Company’s 2023 Employment Inducement Incentive Award Plan (the “Inducement Plan”) covering an aggregate of ~~2022,~~23,883,265 shares of the Company’s Class A common stock (the “Option”). Of this amount, 7,961,088 shares subject to the Option will ~~simplify our product offerings~~ vest based on continued service (the “Time-Vesting Options”) and 15,922,177 shares will vest based on the attainment of applicable performance goals and continued service (the “Performance-Vesting Options”). See Note 11, Equity-Based Compensation, for ~~customers~~additional information on the Inducement Plan and ~~lead~~the Options granted 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. During the second quarter and for the remainder of 2022, we began testing new incentives and training programs for our Coach network to improve Coach recruitment and retention and their ability to reach more customers.Mr. Goldston.

~~Nutrition and Other Gross Margin~~

~~Our nutritional products are often bundled with digital content offerings,~~On June 15, 2023, the Company and ~~we are in~~Carl Daikeler the ~~process~~Company’s co-founder and chief executive officer (“CEO”) entered into a forfeiture agreement (“the Forfeiture Agreement”), pursuant to which Mr. Daikeler as of ~~developing enhancements~~June 15, 2023 forfeited 8 million shares of the Company’s common stock that he owned, comprised of 3,199,946 shares of Class A common stock and 4,800,054 shares of Class X Common stock. No consideration was provided to our upsell and cross-sell capabilities. We are also currently reviewing our nutritional product portfolio and may reduce our offerings to only those nutritional products that meet our profitability requirements and/or reflect market demand. This rationalization strategy could result in future one-time charges to write downMr. Daikeler for the ~~carrying value~~forfeiture of ~~certain nutritional inventory. We also intend to test price increases to counteract rising supply chain costs.~~these shares. See Note 10, Stockholders’ Equity, for additional information on the forfeiture of these shares.

~~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 result of supply chain constraints,~~On July 24, 2023 (the "Second Amendment Effective Date"), the ~~costs~~Company and Blue Torch entered into Amendment No. 2 to ~~manufacture, transport, fulfill, and ship a Beachbody Bike have led to an unprofitable margin. As~~ the ~~connected fitness market is highly competitive, we have been limited in our ability to sufficiently increase pricing to mitigate costs. For~~Financing Agreement (the "Second Amendment"), which amended the remainder of 2022, we will explore different strategies such as pricing and bundling to accelerate demand for our current inventory. Consumer response to these strategies is uncertain, and we may be required to continue to reduce the carrying value of connected fitness inventory through the remainderCompany's existing Financing Agreement. The Second Amendment amends, among other things, certain terms of the ~~year.~~ Financing Agreement including without limitation, to (1) amend the minimum revenue financial covenant, (2) amend the minimum liquidity financial covenant, (3) modify the maturity date of the Term Loan, and (4) amend certain financial definitions, reporting covenants and other covenants thereunder.

In connection with the Second Amendment, the Company also amended and restated the Term Loan Warrants for the purchase of 4,716,756 shares of the Company’s Class A Common Stock.

See “Note 16, ~~Risk Factors - Risks Related~~Subsequent Events, for additional information on the Second Amendment and amendments to ~~Our Business and Industry - Our operating results could be adversely affected if we are unable to accurately forecast consumer demand for our products and services and adequately manage our inventory~~the Term Loan Warrants.

~~” 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 June 30,				As of June 30,
	2022		2021		2023		2022

Digital subscriptions (millions)		2.28		2.72		1.53		2.28
Nutritional subscriptions (millions)		0.28		0.42		0.20		0.28


	Three months ended June 30,						Six months ended June 30,						Three months ended June 30,						Six months ended June 30,
	2022			2021			2022			2021			2023			2022			2023			2022

Average digital retention		95.6	%		94.9	%		95.6	%		95.4	%		95.2	%		95.6	%		95.5	%		95.6	%
Total streams (millions)		31.0			44.5			69.2			100.4			25.3			31.0			55.0			69.2
DAU/MAU		30.0	%		31.9	%		31.6	%		33.5	%		31.6	%		30.0	%		32.1	%		31.6	%

Revenue (millions)	$	179.1		$	223.1		$	378.1		$	449.3		$	134.9		$	179.1		$	279.8		$	378.1
Gross profit (millions)	$	87.3		$	154.3		$	180.3		$	312.4		$	82.7		$	87.3		$	174.1		$	180.3
Gross margin		49	%		69	%		48	%		70	%		61	%		49	%		62	%		48	%

Net loss (millions)	$	(41.9	)	$	(12.4	)	$	(115.4	)	$	(42.5	)	$	(25.7	)	$	(41.9	)	$	(54.9	)	$	(115.4	)
Adjusted EBITDA (millions)	$	(1.5	)	$	(4.4	)	$	(20.6	)	$	(16.1	)	$	(4.8	)	$	(1.5	)	$	(5.7	)	$	(20.6	)

Please see “Non-GAAP Information” below 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 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 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~~is defined as the average rate at which ~~a subscription renews~~the total subscriber file is retained for ~~a new billing cycle,~~the next period, to measure customer retention. For instance, a 95% average digital retention rate would correspond with retaining each month an average of 95% of digital subscribers existing at the beginning of that month. A 95% average digital retention rate would translate into a loss at the end of the quarter of approximately 15% of the subscribers existing at the beginning of the quarter. This calculation excludes new customer acquisitions or subscribers added in a specific month, so this calculation can never exceed 100%.

Total Streams

We use total streams to quantify the number of fitness, or nutrition and mindset programs viewed, ~~per subscription,~~ which is ~~a leading~~an indicator of customer engagement and retention. While the measure of a digital stream may vary across companies, to qualify as a stream on any of our digital 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.

Non-GAAP Information

We use Adjusted EBITDA, which is a non-GAAP performance measure, to supplement our results presented in accordance with ~~GAAP.~~accounting principles generally accepted in the United States of America ("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 depreciation and amortization, amortization of capitalized cloud computing implementation costs, amortization of content assets, interest expense, income 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~~BODi’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 and equity-based ~~compensation, and net realizable value adjustment)~~compensation) 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 loss, the closest GAAP measure, for the periods indicated:


	Three months ended June 30,						Six months ended June 30,						Three months ended June 30,						Six months ended June 30,
(in thousands)	2022			2021			2022			2021			2023			2022			2023			2022

Net loss	$	(41,867	)	$	(12,440	)	$	(115,400	)	$	(42,498	)	$	(25,748	)	$	(41,867	)	$	(54,936	)	$	(115,400	)
Adjusted for:
Depreciation and amortization		19,965			12,215			41,552			25,941			10,919			19,965			21,632			41,552
Amortization of capitalized cloud computing implementation costs		168			168			336			336			40			168			81			336
Amortization of content assets		7,016			3,302			13,180			6,119			5,459			7,016			11,020			13,180
Interest expense		3			305			22			428			2,368			3			4,699			22
Income tax benefit		(281	)		(10,857	)		(987	)		(11,252	)
Income tax provision (benefit)														(12	)		(281	)		36			(987	)
Equity-based compensation		3,001			2,522			7,565			5,095			3,161			3,001			12,716			7,565
Inventory net realizable value adjustment (1)		10,502			—			25,436			—
Transaction costs		—			1,509			2			2,142
Employee incentives, expected to be settled in equity (1)														—			—			(5,466	)		—
Inventory net realizable value adjustment (2)														—			10,502			—			25,436
Restructuring and platform consolidation costs ~~(2)~~(3)		2,086			—			9,973			—			(107	)		2,086			5,952			9,973
Change in fair value of warrant liabilities		(2,070	)		(5,390	)		(2,334	)		(5,390	)		(375	)		(2,070	)		(432	)		(2,334	)
Other adjustment items (3)		—			6,038			—			6,038
Non-operating (4)		5			(1,757	)		76			(3,088	)		(479	)		5			(963	)		78
Adjusted EBITDA	$	(1,472	)	$	(4,385	)	$	(20,579	)	$	(16,129	)	$	(4,774	)	$	(1,472	)	$	(5,661	)	$	(20,579	)

(1)

The non-cash charge for employee incentives which were expected to be settled in equity was recorded and included in the Adjusted EBITDA calculation during the year ended December 31, 2022. During the three months ended March 31, 2023, we reclassified the non-cash charge from employee incentives expected to be settled in equity to equity-based compensation because we settled certain employee incentives with restricted stock unit ("RSU") awards during the period.

(2)

Represents a non-cash expense to reduce the carrying value of our connected fitness inventory and related future commitments. This adjustment iswas included during the three and six months ended June 30, 2022 because of its unusual magnitude due to disruptions in the connected fitness market.

~~(2)~~(3)

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

~~(3)~~

~~Incremental costs associated with COVID-19.~~

~~(4)~~

~~Includes interest income, and~~key growth priorities during the three and six months ended June 30, ~~2021, also~~2023 and with the consolidation of our digital platforms during the three and six months ended June 30, 2022.

(4)

Primarily includes ~~the gain on investment on the Myx convertible instrument.~~interest income.

2629

Results of Operations

~~We operate and manage our business in two~~The Company has one operating segments, Beachbody and Other. For financial reporting purposes, we have one reportable segment, Beachbody. We identified the reportable segment based on the information used by management to monitor performance and make operating decisions. See Note 16, ~~Segment Information, 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 June 30,						Six months ended June 30,						Three months ended June 30,						Six months ended June 30,
	2022			2021			2022			2021			2023			2022			2023			2022

Revenue:
Digital	$	78,015		$	94,325		$	159,760		$	189,475		$	65,214		$	78,015		$	129,987		$	159,760
Nutrition and other														64,628			90,516			138,748			188,180
Connected fitness		10,605			10			30,118			10			5,106			10,605			11,114			30,118
Nutrition and other		90,516			128,773			188,180			259,842
Total revenue		179,136			223,108			378,058			449,327			134,948			179,136			279,849			378,058
Cost of revenue:
Digital		18,406			11,612			34,831			22,734			16,336			18,406			31,303			34,831
Nutrition and other														27,202			42,002			58,241			86,776
Connected fitness		31,459			156			76,165			156			8,666			31,459			16,221			76,165
Nutrition and other		42,002			57,002			86,776			113,997
Total cost of revenue		91,867			68,770			197,772			136,887			52,204			91,867			105,765			197,772
Gross profit		87,269			154,338			180,286			312,440			82,744			87,269			174,084			180,286
Operating expenses:
Selling and marketing		86,624			140,194			193,068			284,890			76,492			86,624			153,068			193,068
Enterprise technology and development		24,133			26,949			57,830			54,038			18,650			24,133			37,746			57,830
General and administrative		19,584			17,231			39,657			35,177			11,887			19,584			29,603			39,657
Restructuring		1,332			—			8,555			—			(107	)		1,332			5,280			8,555
Total operating expenses		131,673			184,374			299,110			374,105			106,922			131,673			225,697			299,110
Operating loss		(44,404	)		(30,036	)		(118,824	)		(61,665	)		(24,178	)		(44,404	)		(51,613	)		(118,824	)
Other income (expense)
Change in fair value of warrant liabilities		2,070			5,390			2,334			5,390			375			2,070			432			2,334
Interest expense		(3	)		(305	)		(22	)		(428	)		(2,368	)		(3	)		(4,699	)		(22	)
Other income, net		189			1,654			125			2,953			411			189			980			125
Loss before income taxes		(42,148	)		(23,297	)		(116,387	)		(53,750	)		(25,760	)		(42,148	)		(54,900	)		(116,387	)
Income tax benefit		281			10,857			987			11,252
Income tax (provision) benefit														12			281			(36	)		987
Net loss	$	(41,867	)	$	(12,440	)	$	(115,400	)	$	(42,498	)	$	(25,748	)	$	(41,867	)	$	(54,936	)	$	(115,400	)

2730

Revenue

Revenue includes digital subscriptions, nutritional supplement subscriptions, one-time nutritional sales, connected fitness products, access to our online ~~Coach~~Partner business management platform, preferred customer program memberships, and other fitness-related products. ~~Digital subscription revenue is recognized ratably over the subscription period of up to 12 months.~~ We often sell 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 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. Digital subscription revenue is recognized ratably over the subscription period of up to 38 months.


	Three months ended June 30,										Three months ended June 30,
	2022		2021		$ Change			% Change			2023		2022		$ Change			% Change
	(dollars in thousands)										(dollars in thousands)
Revenue
Digital	$	78,015	$	94,325	$	(16,310	)		(17	%)	$	65,214	$	78,015	$	(12,801	)		(16	%)
Nutrition and other												64,628		90,516		(25,888	)		(29	%)
Connected fitness		10,605		10		10,595		NM				5,106		10,605		(5,499	)		(52	%)
Nutrition and other		90,516		128,773		(38,257	)		(30	%)
Total revenue	$	179,136	$	223,108	$	(43,972	)		(20	%)	$	134,948	$	179,136	$	(44,188	)		(25	%)

~~NM = not meaningful~~

The decrease in digital revenue for the three months ended June 30, ~~2022,~~2023, as compared to the three months ended June 30, ~~2021,~~2022, was primarily due to a $12.6 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 revenue was also due to a $3.9 million decrease in revenue from our digital streaming services due to ~~16%~~33% fewer ~~subscriptions.~~subscriptions due to lower demand and a decrease of $1.3 million in fees from partners due to a 24% decrease in the number of partners, partially offset by an increase in revenue per subscription.

~~The increase in connected fitness revenue was primarily due to the acquisition of Myx on June 25, 2021; there was minimal connected fitness revenue for the three months ended June 30, 2021.~~

The decrease in nutrition and other revenue for the three months ended June 30, ~~2022,~~2023, as compared to the three months ended June 30, ~~2021,~~2022, was primarily due to a ~~$42.4~~$20.7 million decrease in revenue from nutritional products ~~and~~due to 30% fewer nutritional subscriptions due to lower demand, a ~~$3.1~~$2.3 million decrease in ~~associated shipping~~ revenue ~~as we ended Q2 2022 with 33% fewer nutritional subscriptions compared~~generated from our preferred customer fees due to ~~Q2 2021. These decreases were~~a 30% decrease in preferred customers and a $1.3 million decrease in fitness accessories revenue, partially offset by ~~$8.5~~a $1.6 million ~~of revenue associated with our preferred customer membership program,~~increase in ticket sales due primarily to Summit 2023 which ~~launched at~~occurred in June 2023 (in the ~~end of Q3 2021.~~prior year the Summit occurred in July).

Six months ended June 30,

2022

2021

$ Change

% Change

(dollars in thousands)

Revenue

Digital

$
159,760

$
189,475

$
(29,715
)

(16
%)
Connected fitness

30,118

10

30,108

NM

Nutrition and other

188,180

259,842

(71,662
)

(28
%)
Total revenue

$
378,058

$
449,327

$
(71,269
)

(16
%)

The decrease in connected fitness revenue for the three months ended June 30, 2023, as compared to the three months ended June 30, 2022, was primarily due to a 37% decrease in number of bikes delivered and a 19% decrease in the average sales price for a bike.


	Six months ended June 30,
	2023		2022		$ Change			% Change
	(dollars in thousands)
Revenue
Digital	$	129,987	$	159,760	$	(29,773	)		(19	%)
Nutrition and other		138,748		188,180		(49,432	)		(26	%)
Connected fitness		11,114		30,118		(19,004	)		(63	%)
Total revenue	$	279,849	$	378,058	$	(98,209	)		(26	%)

The decrease in digital revenue for the six months ended June 30, ~~2022,~~2023, as compared to the six months ended June 30, ~~2021,~~2022, was primarily due to a $24.4 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 revenue was also due to a $5.1 million decrease in revenue from our digital streaming services due to ~~16%~~33% fewer ~~subscriptions.~~subscriptions due to lower demand and a decrease of $2.9 million in fees from partners due to a 27% decrease in the number of partners, partially offset by an increase in revenue per subscription.

~~The increase in connected fitness revenue was primarily due to the acquisition of Myx on June 25, 2021; there was minimal connected fitness revenue for the six months ended June 30, 2021.~~

The decrease in nutrition and other revenue for the six months ended June 30, ~~2022,~~2023, as compared to the six months ended June 30, ~~2021,~~2022, was primarily due to a ~~$76.3~~$41.1 million decrease in revenue from nutritional products due to 30% fewer nutritional subscriptions due to lower demand and a ~~$7.6~~$4.1 million decrease in ~~associated shipping~~ revenue ~~as we ended Q2 2022 with 33% fewer nutritional subscriptions compared~~generated from our preferred customer fees due to ~~Q2 2021. These decreases were~~a 28% decrease in preferred customers and a $2.7 million decrease in fitness accessories revenue, partially offset by ~~$17.3~~a $2.5 million ofincrease in ticket sales due primarily to Summit 2023 which occurred in June 2023 (in the prior year the Summit occurred in July).

The decrease in connected fitness revenue ~~associated with our preferred customer membership program, which launched at~~for the ~~end of Q3 2021, and $2.3 million of revenue from Coach events, which were not held in 2021~~six months ended June 30, 2023, as compared to the six months ended June 30, 2022, was primarily due to a 60% decrease in the ~~COVID-19 pandemic.~~number of bikes delivered and a 7% decrease in the average sales price for a bike.

2831

Cost of Revenue

Digital Cost of Revenue

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

Nutrition and Other Cost of Revenue

Nutrition and other cost of revenue includes product costs, shipping and handling, fulfillment and warehousing, customer service, and 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

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.

~~Nutrition and Other Cost of Revenue~~


	Three months ended June 30,
	2023			2022			$ Change			% Change
	(dollars in thousands)
Cost of revenue
Digital	$	16,336		$	18,406		$	(2,070	)		(11	%)
Nutrition and other		27,202			42,002			(14,800	)		(35	%)
Connected fitness		8,666			31,459			(22,793	)		(72	%)
Total cost of revenue	$	52,204		$	91,867		$	(39,663	)		(43	%)

Gross profit
Digital	$	48,878		$	59,609		$	(10,731	)		(18	%)
Nutrition and other		37,426			48,514			(11,088	)		(23	%)
Connected fitness		(3,560	)		(20,854	)		17,294			83	%
Total gross profit	$	82,744		$	87,269		$	(4,525	)		(5	%)

Gross margin
Digital		75	%		76	%
Nutrition and other		58	%		54	%
Connected fitness		(70	%)		(197	%)
Total gross margin		61	%		49	%

Three months ended June 30,

2022

2021

$ Change

% Change

(dollars in thousands)

Cost of revenue

Digital

$
18,406

$
11,612

$
6,794

59
%
Connected fitness

31,459

156

31,303

NM

Nutrition and other

42,002

57,002

(15,000
)

(26
%)
Total cost of revenue

$
91,867

$
68,770

$
23,097

34
%

Gross profit

Digital

$
59,609

$
82,713

$
(23,104
)

(28
%)
Connected fitness

(20,854
)

(146
)

(20,708
)

NM

Nutrition and other

48,514

71,771

(23,257
)

(32
%)
Total gross profit

$
87,269

$
154,338

$
(67,069
)

(43
%)

Gross margin

Digital

76
%

88
%

Connected fitness

(197
%)

NM

Nutrition and other

54
%

56
%

The ~~increase~~decrease in digital cost of revenue for the three months ended June 30, ~~2022,~~2023, as compared to the three months ended June 30, ~~2021,~~2022, was ~~driven, in part, by~~due to a ~~$3.7~~$1.6 million ~~increase~~decrease in the amortization of content assets 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 $2.4 million increase in depreciation expense primarily related to a change in useful life of certain assets in connection with our digital platform consolidation, and a $1.5 million increase in personnel-related expenses as a result of ~~additional headcount focused on our digital streaming services. These increases were partially offset by~~lower production spend and a ~~$0.8~~$0.7 million decrease in ~~intangible assets amortization as certain assets reached the end of their useful life prior~~streaming costs due to ~~Q2 2022.~~lower platform usage. The decrease in digital gross margin for the three months ended June 30, ~~2022~~2023 compared to ~~the three months ended June 30, 2021 was primarily the result of the higher fixed expenses - content assets amortization, depreciation, and personnel-related expenses - on lower digital revenue.~~

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 three months ended June 30, 2022 was primarily ~~due to $15.0 million in adjustments for excess and obsolete inventory and to reduce the carrying value~~as a result of ~~connected fitness inventory to its net realizable value as well as high product, freight, fulfillment, and shipping costs due to supply chain surcharges and constraints and~~fixed expenses on lower ~~pricing in line with a highly-competitive connected fitness market.~~digital revenue.

The decrease in nutrition and other cost of revenue for the three months ended June 30, ~~2022,~~2023, as compared to the three months ended June 30, ~~2021,~~2022, was primarily due to a ~~$13.0~~$6.4 million decrease in product costs ~~freight,~~and a $4.2 million decrease in fulfillment and shipping expense ~~as the result of~~related to the decrease in nutrition and other revenue, a $1.7 million decrease in depreciation expense as a result of the end of the useful life of certain fixed assets, and a ~~$2.5~~$1.2 million decrease in customer service asexpense due to a decrease in the volume of contacts related to nutrition and other ~~comprises less of our total~~ revenue. ~~These were partially offset by a $1.2 million increase in depreciation expense. Despite a favorable impact from the preferred customer membership program, nutrition~~Nutrition and other gross margin ~~decreased~~increased for the three months ended June 30, 2023 compared to the three months ended June 30, 2022 primarily as a result of ~~higher~~lower shipping and lower depreciation expense.

The decrease in connected fitness cost of revenue for the three months ended June 30, 2023, as compared to the three months ended June 30, 2022, was driven by lower inventory value adjustments of $12.7 million, a $7.1 million decrease in product costs and a $1.4 million decrease in freight, fulfillment, and shipping expenses as the result of a decrease in the number of bikes sold. The connected fitness negative gross margin improvement for the three months ended June 30, 2023 compared to the three months ended June 30, 2022

primarily as a result of lower inventory value adjustments, partially offset by the impact of fixed ~~expenses such as depreciation and personnel-related~~warehousing expenses on lower ~~nutrition and other~~connected fitness revenue.


	Six months ended June 30,												Six months ended June 30,
	2022			2021			$ Change			% Change			2023			2022			$ Change			% Change
	(dollars in thousands)												(dollars in thousands)
Cost of revenue
Digital	$	34,831		$	22,734		$	12,097			53	%	$	31,303		$	34,831		$	(3,528	)		(10	%)
Nutrition and other														58,241			86,776			(28,535	)		(33	%)
Connected fitness		76,165			156			76,009		NM				16,221			76,165			(59,944	)		(79	%)
Nutrition and other		86,776			113,997			(27,221	)		(24	%)
Total cost of revenue	$	197,772		$	136,887		$	60,885			44	%	$	105,765		$	197,772		$	(92,007	)		(47	%)

Gross profit
Digital	$	124,929		$	166,741		$	(41,812	)		(25	%)	$	98,684		$	124,929		$	(26,245	)		(21	%)
Nutrition and other														80,507			101,404			(20,897	)		(21	%)
Connected fitness		(46,047	)		(146	)		(45,901	)	NM				(5,107	)		(46,047	)		40,940			89	%
Nutrition and other		101,404			145,845			(44,441	)		(30	%)
Total gross profit	$	180,286		$	312,440		$	(132,154	)		(42	%)	$	174,084		$	180,286		$	(6,202	)		(3	%)

Gross margin
Digital		78	%		88	%								76	%		78	%
Nutrition and other														58	%		54	%
Connected fitness		(153	%)	NM										(46	%)		(153	%)
Nutrition and other		54	%		56	%
Total gross margin														62	%		48	%

The ~~increase~~decrease in digital cost of revenue for the six months ended June 30, ~~2022,~~2023, as compared to the six months ended June 30, ~~2021,~~2022, was ~~primarily driven by~~due to a ~~$7.1~~$3.1 million ~~increase~~decrease in depreciation expense as a result of the end of the useful life of certain fixed assets, a $2.2 million decrease in the amortization of content assets 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 $5.6 million increase in depreciation expense primarily related to a change in useful life of certain assets in connection with our digital platform consolidation. These increases were partially offset by a decrease in variable costs of digital revenue as a result of ~~the~~lower production spend and a $1.1 million decrease in ~~digital revenue.~~streaming costs due to lower platform usage. The decrease in digital gross margin for the six months ended June 30, ~~2022~~2023 compared to ~~the six months ended June 30, 2021 was primarily the result of higher fixed content assets amortization and depreciation on lower digital revenue.~~

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 six months ended June 30, 2022 was primarily ~~due to $30.5 million in adjustments for excess and obsolete inventory and to reduce the carrying value~~as a result 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~~fixed expenses on lower ~~pricing in line with a highly-competitive connected fitness market.~~digital revenue.

The decrease in nutrition and other cost of revenue for the six months ended June 30, ~~2022,~~2023, as compared to the six months ended June 30, ~~2021,~~2022, was primarily due to a ~~$25.1~~$12.8 million decrease in product ~~freight,~~costs and a $8.0 million decrease in fulfillment and shipping expense ~~as the result of~~related to the decrease in nutrition and other revenue, a $3.5 million decrease in depreciation expense as a result of the end of the useful life of certain fixed assets, and a ~~$5.0~~$2.8 million decrease in customer service asexpense due to a decrease in the volume of contacts related to nutrition and other ~~comprises less of our total~~ revenue. ~~These were partially offset by a $3.4 million increase in depreciation expense.~~ Nutrition and other gross margin ~~decreased~~increased for the six months ended June 30, 2023 compared to the six months ended June 30, 2022 primarily as a result of ~~higher~~lower shipping and depreciation expense.

The decrease in connected fitness cost of revenue for the six months ended June 30, 2023, as compared to the six months ended June 30, 2022, was driven by lower inventory value adjustments of $26.9 million and a $21.5 million decrease in product costs and a $7.8 million decrease in freight, fulfillment, and shipping expenses as the result of a decrease in the number of bikes sold. The connected fitness negative gross margin improvement for the six months ended June 30, 2023 compared to the six months ended June 30, 2022 was primarily as a result of lower inventory value adjustments, partially offset by the impact of fixed ~~depreciation and personnel-related~~warehousing expenses on lower ~~nutrition and other~~connected fitness revenue.

3033

Operating Expenses

Selling and Marketing

Selling and marketing expenses primarily include the cost of ~~Coach~~Partner compensation, advertising, royalties, promotions and events, and third-party sales commissions as well as the personnel expenses for employees and 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 to build awareness around launch activity.


	Three months ended June 30,												Three months ended June 30,
	2022			2021			$ Change			% Change			2023			2022			$ Change			% Change
	(dollars in thousands)												(dollars in thousands)

Selling and marketing	$	86,624		$	140,194		$	(53,570	)		(38	%)	$	76,492		$	86,624		$	(10,132	)		(12	%)
As a percentage of total revenue		48.4	%		62.8	%								56.7	%		48.4	%

The decrease in selling and marketing expense for the three months ended June 30, ~~2022,~~2023, as compared to the three months ended June 30, ~~2021,~~2022, was primarily due to a ~~$35.8~~$12.3 million decrease in ~~online and television media expense and~~Partner compensation as a ~~$19.0~~result of lower commissionable revenue, a $3.8 million decrease in ~~Coach compensation, which was~~personnel-related expenses due to lower headcount primarily related to the restructuring activities that occurred in ~~line with~~ the first quarter of 2023 and in the prior year, and a $2.5 million decrease in ~~commissionable revenue. These decreases were partially offset by a $2.8 million increase in~~the amortization of intangible assets due to the ~~acquisition~~impairment of ~~Myx~~certain assets in the fourth quarter of 2022 partially offset by a $7.1 million increase in event expenses due primarily to Summit 2023 which occurred in June ~~2021.~~2023 (in the prior year this event was held in July) and a $2.0 million increase in online and television media expense.

Selling and marketing expense as a percentage of total revenue ~~decreased~~increased by ~~1,440~~830 basis points ("bps") primarily due to the timing of Summit 2023 and a decrease in media investments compared to the three months ended June 30, 2021. We have reduced our media spend as part of our strategic realignment and in an effort to use our cash in the manner that has the highest probability of return on investment.revenue.


	Six months ended June 30,												Six months ended June 30,
	2022			2021			$ Change			% Change			2023			2022			$ Change			% Change
	(dollars in thousands)												(dollars in thousands)

Selling and marketing	$	193,068		$	284,890		$	(91,822	)		(32	%)	$	153,068		$	193,068		$	(40,000	)		(21	%)
As a percentage of total revenue		51.1	%		63.4	%								54.7	%		51.1	%

The decrease in selling and marketing expense for the six months ended June 30, ~~2022,~~2023, as compared to the six months ended June 30, ~~2021,~~2022, was primarily due to a ~~$65.5~~$26.2 million decrease in ~~television media and online advertising expense and~~Partner compensation as a ~~$36.2~~result of lower commissionable revenue, a $9.9 million decrease in ~~Coach compensation, which was~~personnel-related expenses due to lower headcount primarily related to the restructuring activities that occurred in ~~line with~~ the first quarter of 2023 and in the prior year, a $5.0 million decrease in ~~commissionable revenue. These decreases were partially offset by a $4.8 million increase in personnel-related expenses, a $5.7 million increase in~~the amortization of intangible assets due to the ~~acquisition~~impairment of ~~Myx~~certain assets in ~~June 2021,~~the fourth quarter of 2022 and a ~~$3.4~~$4.0 million decrease in online and television media expense, partially offset by a $7.8 million increase in event expenses ~~from Coach events.~~due primarily to Summit 2023 which occurred in June 2023 (in the prior year this event was held in July).

Selling and marketing expense as a percentage of total revenue ~~decreased~~increased by ~~1,230 basis points~~360 bps primarily due to the timing of Summit 2023 and a decrease in media investments compared to the six months ended June 30, 2021. We have reduced our media spend as part of our strategic realignment and in an effort to use our cash in the manner that has the highest probability of return on investment.revenue.

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 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 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 June 30,												Three months ended June 30,
	2022			2021			$ Change			% Change			2023			2022			$ Change			% Change
	(dollars in thousands)												(dollars in thousands)

Enterprise technology and development	$	24,133		$	26,949		$	(2,816	)		(10	%)	$	18,650		$	24,133		$	(5,483	)		(23	%)
As a percentage of total revenue		13.5	%		12.1	%								13.8	%		13.5	%

The decrease in enterprise technology and development expense for the three months ended June 30, ~~2022,~~2023, as compared to the three months ended June 30, ~~2021,~~2022, was primarily due to a ~~$4.9~~$3.1 million decrease in depreciation expense as a result of the end of the useful life of certain fixed assets and a $2.4 million decrease in personnel-related expenses ~~related~~due to lower headcount primarily related to the restructuring activities that occurred in the first quarter of 2023 and in the ~~completion of certain technology initiatives by Q2 2022. This decrease was partially offset by a $2.1 million increase in depreciation expense.~~prior year.

Enterprise technology and development expense as a percentage of total revenue increased by ~~140 basis points~~30 bps due to ~~higher fixed depreciation expense on lower total~~the decrease in revenue.


	Six months ended June 30,											Six months ended June 30,
	2022			2021			$ Change		% Change			2023			2022			$ Change			% Change
	(dollars in thousands)											(dollars in thousands)

Enterprise technology and development	$	57,830		$	54,038		$	3,792		7	%	$	37,746		$	57,830		$	(20,084	)		(35	%)
As a percentage of total revenue		15.3	%		12.0	%							13.5	%		15.3	%

The ~~increase~~decrease in enterprise technology and development expense for the six months ended June 30, ~~2022,~~2023, as compared to the six months ended June 30, ~~2021,~~2022, was primarily due to a ~~$2.3~~$14.1 million ~~increase~~decrease in personnel-related expenses due to lower headcount primarily related to the restructuring activities that occurred in the first quarter of 2023 and in the prior year and a $6.1 million decrease in depreciation expense ~~and~~as a ~~$1.9 million increase in personnel-related expenses related to~~result of the end of the useful life of certain ~~technology initiatives.~~fixed assets.

Enterprise technology and development expense as a percentage of total revenue ~~increased~~decreased by ~~330 basis points~~180 bps due to ~~higher~~lower fixed ~~depreciation and personnel-related costs on lower total revenue.~~expenses.

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 June 30,											Three months ended June 30,
	2022			2021			$ Change		% Change			2023			2022			$ Change			% Change
	(dollars in thousands)											(dollars in thousands)

General and administrative	$	19,584		$	17,231		$	2,353		14	%	$	11,887		$	19,584		$	(7,697	)		(39	%)
As a percentage of total revenue		10.9	%		7.7	%							8.8	%		10.9	%

The ~~increase~~decrease in general and administrative expense for the three months ended June 30, ~~2022,~~2023, as compared to the three months ended June 30, ~~2021,~~2022, was primarily due to a ~~$3.2~~$5.0 million ~~increase~~decrease in personnel-related expenses ~~($2.0 million in incentive compensation and $1.2 million in equity-based compensation) and a $2.6 million increase in insurance expense and accounting fees~~ as a result of ~~operating as~~lower headcount, primarily related to the restructuring activities that occurred in the first quarter of 2023 and in the prior year, and a ~~public company. These increases were partially offset by a $1.8~~$1.2 million decrease in ~~rent~~insurance expense ~~due~~as some of our insurance is based on the level of the Company's revenues or the number of employees, which both have declined in the current period compared to ~~our Santa Monica lease~~the prior period.

~~assignment, $1.5 million decrease in transaction costs as there was no acquisition activity in Q2 2022, and a $0.5 million decrease in recruiting expense due to fewer headcount additions in Q2 2022.~~

General and administrative expense as a percentage of total revenue ~~increased~~decreased by ~~320 basis points~~210 bps due to ~~higher~~lower fixed ~~costs on lower total revenue.~~expenses.


	Six months ended June 30,											Six months ended June 30,
	2022			2021			$ Change		% Change			2023			2022			$ Change			% Change
	(dollars in thousands)											(dollars in thousands)

General and administrative	$	39,657		$	35,177		$	4,480		13	%	$	29,603		$	39,657		$	(10,054	)		(25	%)
As a percentage of total revenue		10.5	%		7.8	%							10.6	%		10.5	%

The ~~increase~~decrease in general and administrative expense for the six months ended June 30, ~~2022,~~2023, as compared to the six months ended June 30, ~~2021,~~2022, was primarily due to a ~~$5.1~~$7.2 million ~~increase~~decrease in personnel-related expenses ~~($2.7 million in incentive compensation and $2.4 million in equity-based compensation) and a $6.2 million increase in insurance expense and accounting, legal, and other professional service fees~~ as a result of ~~operating as~~lower headcount primarily related to the restructuring activities that occurred in the first quarter of 2023 and in the prior year, and a ~~public company. These increases were partially offset by a $3.3~~$1.7 million decrease in ~~rent~~insurance expense ~~due~~as some of our insurance is based on the level of the Company's revenues or the number of employees, which both have declined in the current period compared to our Santa Monica lease assignment, $2.1 million decrease in transaction costs as there was no acquisition activity in 2022, and a $1.0 million decrease in recruiting expenses due to fewer headcount additions in 2022.the prior period.

General and administrative expense as a percentage of total revenue ~~increased by 270 basis points due to higher fixed costs on lower total revenue.~~was relatively flat with the prior period.

Restructuring

In 2023, restructuring charges primarily relate to activities focused on aligning our operations with our key growth priorities, including a reduction in headcount. Restructuring charges in 2022 relate to ~~our 2022 strategic alignment initiative to consolidate~~the consolidation of our streaming fitness and nutrition offerings into a single Beachbody platform. The charges incurred primarily ~~relate to~~consist of employee termination costs.

Three months ended June 30,

2022

2021

$ Change

% Change

(dollars in thousands)

Restructuring

$
1,332

$
—

$
1,332

NM


	Three months ended June 30,
	2023			2022		$ Change			% Change
	(dollars in thousands)

Restructuring	$	(107	)	$	1,332	$	(1,439	)	NM

Six months ended June 30,

2022

2021

$ Change

% Change

(dollars in thousands)

Restructuring

$
8,555

$
—

$
8,555

NM


	Six months ended June 30,
	2023		2022		$ Change			% Change
	(dollars in thousands)

Restructuring	$	5,280	$	8,555	$	(3,275	)		(38	%)

Other Income (Expense)

The change in fair value of warrant liabilities consists of the fair value changes of the public, ~~and~~ private placement, and Term Loan warrants. Interest expense primarily consists of interest expense associated with our borrowings and amortization of debt discount and issuance costs for our Term Loan (defined below) in 2022 and Credit Facility in 2021. Other income, net, consists of interest income earned on investments and gains (losses) on foreign currency.


	Three months ended June 30,												Three months ended June 30,
	2022			2021			$ Change			% Change			2023			2022			$ Change			% Change
	(dollars in thousands)												(dollars in thousands)

Change in fair value of warrant liabilities	$	2,070		$	5,390		$	(3,320	)		(62	%)	$	375		$	2,070		$	(1,695	)		(82	%)
Interest expense		(3	)		(305	)		302			(99	%)		(2,368	)		(3	)		(2,365	)	NM
Other income, net		189			1,654			(1,465	)		(89	%)
Other income (expense), net														411			189			222		NM

The decrease in change in fair value of warrant liabilities during the three months ended June 30, 2023, as compared to the three months ended June 30, 2022, primarily resulted from a relatively lower decline in our stock price during the current quarter. The ~~decrease~~increase in interest expense was due to borrowings under the Term Loan during the three months ended June 30, 2023 compared to no borrowings outstanding during the three months ended June 30,

~~2022 compared to $22.0 million during the three months ended June 30, 2021.~~ 2022. The ~~decrease~~increase in other income was primarily due to ~~the gain~~higher interest income as a result of higher interest rates on ~~the investment in the convertible instrument from Myx prior to June 25, 2021; there was no similar investment in 2022.~~our cash balances.


	Six months ended June 30,
	2023			2022			$ Change			% Change
	(dollars in thousands)

Change in fair value of warrant liabilities	$	432		$	2,334		$	(1,902	)		(81	%)
Interest expense		(4,699	)		(22	)		(4,677	)	NM
Other income, net		980			125			855		NM

Six months ended June 30,

2022

2021

$ Change

% Change

(dollars in thousands)

Change in fair value of warrant liabilities

$
2,334

$
5,390

$
(3,056
)

(57
%)
Interest expense

(22
)

(428
)

406

(95
%)
Other income, net

125

2,953

(2,828
)

(96
%)

The decrease in change in fair value of warrant liabilities during the six months ended June 30, 2023, as compared to the six months ended June 30, 2022, primarily resulted from a relatively lower decline in our stock price during ~~2022.~~the current period. The ~~decrease~~increase in interest expense was due to borrowings under the Term Loan during the six months ended June 30, 2023 compared to no borrowings outstanding during the six months ended June 30, ~~2022 compared to $42.0 million during the six months ended June 30, 2021.~~2022. The ~~decrease~~increase in other income was primarily due to ~~the gain~~higher interest income as a result of higher interest rates on ~~the investment in the convertible instrument from Myx prior to June 25, 2021; there was no similar investment in 2022.~~our cash balances.

Income Tax (Provision) Benefit

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

Three months ended June 30,

2022

2021

$ Change

% Change

(dollars in thousands)

Income tax benefit

$
281

$
10,857

$
(10,576
)

(97
%)


	Three months ended June 30,
	2023		2022		$ Change			% Change
	(dollars in thousands)

Income tax benefit	$	12	$	281	$	(269	)		(96	%)

The income tax benefit decrease for the three months ended June 30, ~~2022,~~2023, as compared to the three months ended June 30, ~~2021,~~2022, was primarily driven by ~~a reduction~~changes in our projected net deferred taxes after valuation allowance and a decrease in ~~Q2 2021. We recorded significant deferred tax liabilities in connection with~~ the ~~acquisition of Myx, which was a~~net expense from 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 recorded during the three months ended June 30, 2021; there was no similar benefit recorded during the three months ended June 30, 2022.events.

Six months ended June 30,

2022

2021

$ Change

% Change

(dollars in thousands)

Income tax benefit

$
987

$
11,252

$
(10,265
)

(91
%)


	Six months ended June 30,
	2023			2022		$ Change			% Change
	(dollars in thousands)

Income tax (provision) benefit	$	(36	)	$	987	$	(1,023	)	NM

The income tax ~~benefit decrease~~provision increase for the six months ended June 30, ~~2022,~~2023, as compared to the six months ended June 30, ~~2021,~~2022, was primarily driven by ~~a reduction~~changes in our projected net deferred taxes after valuation allowance and a decrease in ~~Q2 2021. We recorded significant deferred tax liabilities in connection with~~ the ~~acquisition of Myx, which was a~~net expense from 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 recorded during the six months ended June 30, 2021; there was no similar benefit recorded during the six months ended June 30, 2022.events.

3438

Liquidity and Capital Resources


	Six months ended June 30,						Six months ended June 30,
	2022			2021			2023			2022
	(dollars in thousands)						(in thousands)

Net cash used in operating activities	$	(33,256	)	$	(25,487	)	$	(14,367	)	$	(33,256	)
Net cash used in investing activities		(19,222	)		(74,480	)		(5,030	)		(19,222	)
Net cash provided by financing activities		2,660			389,775
Net cash (used in) provided by financing activities								(2,400	)		2,660

As of June 30, ~~2022,~~2023, we had cash and cash equivalents totaling ~~$57.1~~$58.7 million.

Net cash used in operating activities was $14.4 million and $33.3 million for the six months ended June 30, 2023 and 2022, ~~compared to net cash used in operating activities of $25.5 million for the six months ended June 30, 2021.~~respectively. The ~~increase~~decrease in cash used in operating activities during the six months ended June 30, ~~2022,~~2023, compared to the prior year ~~quarter,~~period, was primarily due to ~~the following:~~

•

~~an increase in net loss;~~

•

~~payments for 2021 payables, including connected fitness inventory, freight and duties, and media;~~

•

a decrease in ~~subscription revenue receipts from customers in advance~~net loss of ~~service or product delivery; partially offset by~~

•

$60.5 million and an increase in cash received ~~from~~attributable to deferred revenue of $11.2 million partially offset by a decrease in provision for inventory ~~sold.~~

~~We expect to reduce our cash used~~and inventory purchase commitments of $26.9 million and a decrease in ~~operating activities over the next year, primarily through reduced inventory purchases~~depreciation and ~~investment in media. As~~amortization expense of June 30, 2022, our purchases of bike inventory were substantially completed as our inventory level is sufficient to meet expected connected fitness demand over the next year. Also, during the six months ended June 30, 2022, we returned to a performance marketing model which drives in-quarter or next-quarter payback and which reduced media spend by approximately $50.2 million compared to the prior year period.$22.1 million.

Net cash used in investing activities was ~~$19.2~~$5.0 million and ~~$74.5~~$19.2 million for the six months ended June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. The decrease in net cash used in investing activities was ~~primarily~~ due to a ~~$8.0 million~~ decrease in capital expenditures ~~and $47.3~~due to increased focus by management on capital expenditures, in particular related to technology. The current decrease of capital expenditures as compared to the prior period is expected to continue in future periods.

Net cash used in financing activities was $2.4 million for ~~certain investing activities which occurred during~~ the six months ended June 30, 2021, but not during the six months ended June 30, 2022. These investing activities include cash paid for the Myx acquisition, investment in the convertible instrument in Myx, and another investment. We expect lower capital expenditures in 20222023 compared to ~~prior year due to the completion of significant projects at the end of 2021.~~

~~Net~~net cash provided by financing activities ~~was~~of $2.7 ~~millionand $389.8~~ million for the six months ended June 30, ~~2022 and 2021, respectively.~~2022. The ~~decrease~~change in net cash ~~provided by~~from financing activities was primarily due to taxes associated with the ~~completion~~vesting of ~~the Business Combination~~restricted stock during the six months ended June 30, ~~2021; we had no similar financing~~2023 and debt repayments on our Term Loan compared to proceeds from stock option exercises during the six months ended June 30, 2022.

On August 8, 2022, the Company, Beachbody, LLC, a Delaware limited liability company and wholly-owned direct subsidiary of the Company (the “Borrower”), and certain subsidiaries of the Company (together with the Company, the “Guarantors”), entered into a financing agreement (as amended, the “Financing Agreement”) with the lenders party thereto and Blue Torch Finance, LLC, ("Blue Torch") as administrative agent and collateral agent for such lenders, providing for a senior secured term loan facility in an initial aggregate principal amount of $50.0 million (the “Term Loan”). Obligations under the Financing Agreement are guaranteed by the Guarantors, and secured by a lien on and security interest in substantially all of the assets of the Borrower and the Guarantors (together with the Borrower, the “Loan Parties”), subject to customary exceptions. As of June 30, 2023, the principal balance outstanding under the Term Loan was $50.1 million. On July 24, 2023 the Company and Blue Torch entered into the Second Amendment. In connection with the Second Amendment, on the Second Amendment Effective Date, the Company made a partial prepayment on the Term Loan of $15.0 million (which was classified as a current obligation at June 30, 2023). During the three and six months ended June 30, 2023, the Term Loan was a secured overnight financing rate ("SOFR") loan, with an effective interest rate of 18.69% and a cash interest rate of 12.12%.

The Financing Agreement contains financial covenants, customary representations, warranties, covenants and customary events of default. We were in compliance with the financial covenants, including amendments to the minimum revenue financial covenant in the Second Amendment, as of June 30, 2023. See Note 9, Debt, for additional information on the Term Loan. See Note 16, Subsequent Events, for additional information on the amendments to the Term Loan including amendments to the financial covenants and the maturity date of the Term Loan.

As of June 30, 2023, we have ~~$45.3~~$30.9 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, for discussion of our contractual commitments that are primarily due inwithin the 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 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.~~months as well as for the longer-term (i.e., beyond the next twelve months).

On August 8, 2022 (the “Closing”), we entered into an agreement with a third-party lender for a $50.0 million senior secured term loan (the “Term Loan”) with a four-year maturity. The Term Loan includes an incremental facility of up to an additional $25.0 million subject to certain terms and conditions. The Term Loan was funded at Closing and bears interest at our option of either (i) the Secured Overnight Financing Rate based upon an interest period of three months plus 7.15%, or (ii) a reference rate as defined in the agreement, plus 6.15%. In addition, borrowings will bear interest at 3.00%, which will be paid in kind by capitalizing such interest and adding it to the outstanding principal, annually. We paid an upfront fee of $1.5 million at Closing 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. The Term Loan provides customary restrictions, including prepayment premiums, and requires compliance with certain financial and other covenants.

In connection with the Term Loan, we issued warrants 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 date of Closing.

~~We expect to use the proceeds for general corporate purposes and to pay transaction fees and expenses related to the Term Loan.~~ We may explore additional equity ~~or debt~~ financing to supplement our anticipated working capital balances and further strengthen our financial position, but do not at this time know which form it will take or what the terms will be. 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. 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

There have been no material changes to the Company's critical accounting policies and estimates discussed in the 2022 Annual Report on Form 10-K in Item 7 under the heading Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates other than noted below.

Goodwill and ~~Intangible~~Long-Lived Assets Impairment

Goodwill and intangible assets deemed to have an indefinite life are not amortized, but instead are assessed for impairment annually at 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 ("RU") below its carrying value or 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 RU. Due to the continued sustained decline in our market capitalization and macroeconomic factors observed during the three months ended June 30, ~~2022,~~2023, we performed an interim test for impairment of our ~~Beachbody reporting unit goodwill and tested our definite-lived intangible assets for recoverability as of June 30, 2022.~~ goodwill.

In performing the interim impairment test for goodwill, we elected to bypass the qualitative assessment and ~~proceed~~proceeded to performing the quantitative test.

In testing for impairment of our definite-lived intangible assets, we compared the carrying value of each asset group to its forecasted undiscounted cash flows to determine whether it was recoverable. The carrying values of each of our asset groups exceed their future undiscounted cash flows and are therefore recoverable.

We test goodwill for impairment at a level within the Company referred to as the reporting unit. We have determined that our reporting units are our operating segments, Beachbody and Other, because none of the components of either operating segment constitutes a business for which discrete financial information is available or has operating results which are regularly reviewed by segment management. There is no goodwill held by the Other reporting unit.

~~In testing for goodwill impairment, we~~ compared the carrying value of the ~~Beachbody reporting unit~~RU to its estimated fair value. Fair value ~~was~~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,~~2023, the ~~Beachbody reporting unit’s~~RUs fair value exceeded the carrying value by approximately ~~60%~~11%. ~~We will continue to monitor changes that would impact the significant assumptions used in the valuation.~~

Due to reduced revenue and margin forecasts we tested the related asset group for recoverability as of June 30, 2023. 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 assets within the asset group. The fair value of the formulae intangible assets, which is the long-lived asset within the asset group, was calculated to be greater than its carrying value. As a result, no impairment was recognized.

Management will continue to monitor its ~~reporting units~~RU for changes in the business environment that could impact ~~their~~its fair value. Examples of events or circumstances that could result in changes to the underlying key assumptions and judgments used in our goodwill impairment tests, and ultimately impact the estimated fair value of our ~~reporting unit~~RU may include ~~the duration of the COVID-19 global pandemic, its impact on the global economy,~~ supply chain disruptions and demand for at-home fitness solutions; adverse macroeconomic conditions; volatility in the 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,~~RU, or changes in the business environment could materially affect the expected cash flows, and such impacts could potentially result in a material non-cash impairment charge.

Recent Accounting Pronouncements

See Note 1, 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.~~pronouncements.

3640

Item 3. Quantitative and Qualitative Disclosures 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 ~~three~~the six months ended June 30, 2023 and 2022, ~~and 2021,~~ approximately ~~11%~~10% 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 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 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 due to the derivative instruments we use to hedge any foreign currency exposure.

The aggregate notional amount of foreign exchange derivative instruments at June 30, ~~2022~~2023 and year ended December 31, ~~2021~~2022 was ~~$26.5~~$15.4 million and ~~$30.4~~$17.6 million, respectively.

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 June 30, ~~2022.~~2023. Based upon that evaluation, as a result of the material weaknesses identified in our 2022 Form 10-K, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this Report.

Changes in Internal Control Over Financial Reporting

We continue to be in the process of implementing changes, as more fully described in our 2022 Form 10-K, to our internal control over financial reporting to remediate the material weaknesses as described in our 2022 Form 10-K.

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 ~~judgements~~judgments 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 have been no material changes from the information previously reported under Part I, Item 3 of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021.~~2022.

Item 1A. Risk Factors.

There have been no material developments with respect to the information previously reported under Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021.~~2022. 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.

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

Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Issuer Repurchase of Equity Securities.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosure.

None.

Item 5. Other Information.

~~Financing Agreement~~None.

~~On August 8, 2022 (the “Effective Date”),The Beachbody Company, Inc., a Delaware corporation (the “Parent” or the “Company”), Beachbody, LLC, a Delaware limited liability company and wholly-owned direct subsidiary of the Company (the “Borrower”), 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 (the “Loan Documents”) 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 (the “Term Loan Agent”) for such lenders.~~

~~The Financing Agreement provides for senior secured term loans on the Effective Date in an aggregate principal amount of $50.0 million (the “Term Loan~~”) which was drawn on the Effective Date. The proceeds of the Credit Facility will be used for general business purposes and to pay transaction fees and expenses related to the Credit Facility. In addition, the Credit Facility contains an incremental facility feature which permits the Borrower to borrow up to an additional $25.0 million, subject to the terms and conditions set forth in the Financing Agreement. The Credit Facility matures on August 8, 2026.

The Borrower’s obligations under the Financing Agreement are guaranteed by the other Loan Parties, including the Company. Pursuant to the Financing Agreement and the other Loan documents, the Company and the other Loan Parties granted a lien to the Term Loan Agent in substantially all of the assets now owned or hereafter acquired by any Loan Party, including, without limitation: accounts, cash and cash equivalents, chattel paper, deposit accounts, documents, equipment, fixtures, general intangibles, instruments, intellectual property and intellectual property licenses, inventory, investment property, letter of credit rights, supporting obligations, insurance policies, goods, books and records, commercial tort claims, and the proceeds and products of each of the foregoing, in each case, subject to certain customary exceptions.

3842

~~The Term Loan borrowings under the Credit Facility may take the form of base rate (“Reference Rate”) loans or Secured Overnight Financing Rate (“SOFR~~”) loans. Reference Rate loans will bear interest at a rate per annum equal to the sum of an applicable margin of 6.15% per annum, plus the greatest 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 will 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 under the Credit Facility will bear interest at a rate per annum equal to 3.00%, which interest will be paid in kind by capitalizing such interest and adding such capitalized interest to the then outstanding principal amount of the loans annually on each anniversary of the Effective Date.

The Financing Agreement contains certain customary covenants, including requirements to prepay the loans in an amount equal to (i) 100% of the net cash proceeds from certain asset dispositions, extraordinary receipts and debt issuances, subject to certain reinvestment rights and other exceptions and (ii) 50% of excess cash flow of the Company and its subsidiaries, subject to certain exceptions. The Credit Facility will amortize 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.

Amounts outstanding under the Term Loan Credit Agreement may become due and payable upon the occurrence of specified events of default, which among other things include (subject to certain exceptions and cure periods): failure to pay principal, interest, or any fees or certain other amounts when due; breach of any representation or warranty, covenant, or other agreement in the Financing Agreement and other related loan documents; the occurrence of a bankruptcy or insolvency proceeding with respect to any Loan Party; any failure by a Loan Party to make a payment with respect to indebtedness having an aggregate principal amount in excess of a specified threshold; and certain other customary events of default.

The Financing Agreement contains financial covenants whereby the Loan Parties are required to (a) maintain certain minimum revenue levels, to be tested on a quarterly basis, beginning on the fiscal quarter ending September 30, 2022, and (b) maintain minimum Liquidity (as defined in the Financing Agreement) of (i) $10.0 million at all times from the Effective Date through December 31, 2022, (ii) $12.5 million at all times thereafter through June 30, 2023, and (iii) $15.0 million at all times thereafter through the maturity of the Credit Facility. The Financing Agreement also contains customary representations, warranties, and covenants, which include, but are not limited to, restrictions on indebtedness, liens, fundamental changes, restricted payments, asset sales, affiliate transactions, line of business, investments, negative pledges and amendments to organizational documents and material contracts.

Any amounts voluntarily or mandatorily prepaid under the Credit Facility are subject to a prepayment penalty, subject to certain exceptions, equal to (i) 5.00% of the principal amount prepaid if the prepayment occurs on or prior to the first anniversary of the Effective Date, (ii) 3.00% of the principal amount prepaid if the prepayment occurs after the first anniversary and on or prior to the second anniversary of the Effective Date, (iii) 2.00% of the principal amount prepaid if the prepayment occurs after the second anniversary and on or prior to the third anniversary of the Effective Date, and (iv) 0.00% thereafter.

~~The foregoing summary does not purport to be complete and is qualified in its entirety by reference to the Financing Agreement which is attached hereto as~~ ~~Exhibit 10.2~~ ~~and is incorporated by reference herein.~~

~~Warrant~~

~~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, a copy of which is attached hereto as~~ ~~Exhibit 10.3~~ ~~and incorporated herein by reference.~~

Item 6. Exhibits.

Exhibit

Incorporated by Reference

Filed or

Furnished herewith

Incorporated by Reference

Filed or

Furnished herewith

Form

Exhibit

Filing Date

File No.

Form

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

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

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

Amended and Restated Form of Warrant.

10.1

Revised Offer of Employment Letter, dated as of May 10, 2022, as amended, by and between Beachbody, LLC and Kathy Vrabeck

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

10.2

10.3

Form of Warrant.

10.2+

Amendment No. 1 to Financing Agreement, dated as of July 24, 2023 by and among the Company, the Borrower, each subsidiary of the Company party thereto, the lenders party thereto and Blue Torch, as collateral agent and as administrative agent.

10.3+

Amendment No. 2 to Financing Agreement, dated as of July 24, 2023 by and among the Company, the Borrower, each subsidiary of the Company party thereto, the lenders party thereto and Blue Torch, as collateral agent and as administrative agent.

8-K

10.1

7/26/2023

001-39735

10.4^

The Beachbody Company, Inc. Deferred Compensation Plan for Directors

10-K

10.10

3/16/2023

001-39735

10.5^

Offer Letter, dated as of June 15, 2023, by and between The Beachbody Company, Inc. and Mark Goldston

8-K

10.1

6/15/2023

001-39735

10.6^

The Beachbody Company, Inc. 2023 Employment Inducement Incentive Award Plan.

8-K

10.2

6/15/2023

001-39735

10.7^

Option Agreement under 2023 Employee Inducement Incentive Award Plan, dated as of June 15, 2023, by and between The Beachbody Company, Inc. and Mark Goldston

8-K

10.3

6/15/2023

001-39735

10.8^

Forfeiture Agreement, dated as of June 15, 2023, by and between The Beachbody Company, Inc. and Carl Daikeler

8-K

10.4

6/15/2023

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

** Furnished herewith.

+ Schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company will furnish copies of any such schedules and exhibits to the SEC upon request.

^ Indicates management contract or compensatory plan.

4044

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: August 8, ~~2022~~2023	By:	/s/ Carl Daikeler
		Carl Daikeler
		Chief Executive Officer
		(Principal Executive Officer)

Date: August 8, ~~2022~~2023	By:	/s/ Marc Suidan
		Marc Suidan
		Chief Financial Officer
		(Principal Financial Officer)

4145


(in thousands)	Three Months Ended	Six Months Ended
	June 30, 2021	June 30, 2021
Pro forma combined:
Revenue	$237,286	$480,543
Net loss	(25,362)	(67,747)