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,March 31, 20232024

or

 

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 WSBODI

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 ☐

AcceleratedNon-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 176,234,8684,142,743 shares of the registrant’s Class A Common Stock, par value $0.0001 per share, and 136,450,2562,729,003 shares of the registrant’s Class X Common Stock, par value $0.0001 per share, outstanding as of August 2, 2023.April 30, 2024.

 


 

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

24

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

4136

Item 4.

Controls and Procedures

4137

Part II.

Other Information

4137

Item 1.

Legal Proceedings

4137

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

4237

Item 3.

Defaults Upon Senior Securities

4237

Item 4.

Mine Safety Disclosures

4238

Item 5.

Other Information

4238

Item 6.

Exhibits

4339

Signatures

4540

 

 


 

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,

 

 

March 31,

 

December 31,

 

 

2023

 

 

2022

 

 

2024

 

 

2023

 

 

(unaudited)

 

 

 

 

 

(unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

58,686

 

 

$

80,091

 

Inventory, net

 

 

43,364

 

 

 

54,060

 

Cash and cash equivalents (restricted cash of $0.1 million at March 31, 2024 and December 31, 2023, respectively)

 

$

38,929

 

 

$

33,409

 

Restricted short-term investments

 

 

4,250

 

 

 

4,250

 

Inventory

 

 

20,807

 

 

 

24,976

 

Prepaid expenses

 

 

8,549

 

 

 

13,055

 

 

 

10,008

 

 

 

10,715

 

Other current assets

 

 

48,619

 

 

 

39,248

 

 

 

42,448

 

 

 

45,923

 

Total current assets

 

 

159,218

 

 

 

186,454

 

 

 

116,442

 

 

 

119,273

 

Property and equipment, net

 

 

58,205

 

 

 

74,147

 

 

 

36,560

 

 

 

45,055

 

Content assets, net

 

 

29,193

 

 

 

34,888

 

 

 

18,651

 

 

 

21,359

 

Goodwill

 

 

125,166

 

 

 

125,166

 

 

 

85,166

 

 

 

85,166

 

Intangible assets, net

 

 

5,648

 

 

 

8,204

 

Right-of-use assets, net

 

 

4,033

 

 

 

5,030

 

 

 

3,876

 

 

 

3,063

 

Other assets

 

 

9,661

 

 

 

9,506

 

 

 

2,327

 

 

 

2,923

 

Total assets

 

$

391,124

 

 

$

443,395

 

 

$

263,022

 

 

$

276,839

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

13,301

 

 

$

17,940

 

 

$

8,432

 

 

$

10,659

 

Accrued expenses

 

 

49,116

 

 

 

64,430

 

 

 

40,724

 

 

 

42,147

 

Deferred revenue

 

 

107,378

 

 

 

95,587

 

 

 

101,873

 

 

 

97,169

 

Current portion of lease liabilities

 

 

2,095

 

 

 

2,150

 

 

 

1,927

 

 

 

1,835

 

Current portion of Term Loan

 

 

16,250

 

 

 

1,250

 

 

 

5,875

 

 

 

8,068

 

Other current liabilities

 

 

3,356

 

 

 

3,283

 

 

 

3,848

 

 

 

5,325

 

Total current liabilities

 

 

191,496

 

 

 

184,640

 

 

 

162,679

 

 

 

165,203

 

Term Loan

 

 

25,836

 

 

 

39,735

 

 

 

18,680

 

 

 

21,491

 

Long-term lease liabilities, net

 

 

2,249

 

 

 

3,318

 

 

 

2,253

 

 

 

1,425

 

Deferred tax liabilities

 

 

137

 

 

 

181

 

 

 

 

 

 

10

 

Other liabilities

 

 

4,229

 

 

 

3,979

 

 

 

6,669

 

 

 

5,950

 

Total liabilities

 

 

223,947

 

 

 

231,853

 

 

 

190,281

 

 

 

194,079

 

Commitments and contingencies (Note 8)

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

 

 

Preferred stock, $0.0001 par value; 100,000,000 shares
authorized,
none issued and outstanding at June 30, 2023
and December 31, 2022

 

 

 

 

 

 

Preferred stock, $0.0001 par value; 100,000,000 shares
authorized,
none issued and outstanding at March 31, 2024
and December 31, 2023

 

 

 

 

 

 

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: 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

 

 

 

 

 

 

Class A: 4,138,474 and 3,978,356 shares issued and
outstanding at March 31, 2024 and December 31,
2023, respectively;

 

 

1

 

 

 

1

 

Class X: 2,729,003 shares issued and outstanding
at March 31, 2024 and December 31, 2023,
respectively;

 

 

1

 

 

 

1

 

Class C: no shares issued and outstanding at
March 31, 2024 and December 31, 2023

 

 

 

 

 

 

Additional paid-in capital

 

 

641,649

 

 

 

630,709

 

 

 

658,816

 

 

 

654,657

 

Accumulated deficit

 

 

(474,171

)

 

 

(419,235

)

 

 

(586,092

)

 

 

(571,876

)

Accumulated other comprehensive income (loss)

 

 

(333

)

 

 

37

 

 

 

15

 

 

 

(23

)

Total stockholders’ equity

 

 

167,177

 

 

 

211,542

 

 

 

72,741

 

 

 

82,760

 

Total liabilities and stockholders’ equity

 

$

391,124

 

 

$

443,395

 

 

$

263,022

 

 

$

276,839

 

 

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

3


 

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 March 31,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

2024

 

 

2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Digital

 

$

65,214

 

 

$

78,015

 

 

$

129,987

 

 

$

159,760

 

 

$

61,506

 

 

$

64,773

 

Nutrition and other

 

 

64,628

 

 

 

90,516

 

 

 

138,748

 

 

 

188,180

 

 

 

55,512

 

 

 

74,120

 

Connected fitness

 

 

5,106

 

 

 

10,605

 

 

 

11,114

 

 

 

30,118

 

 

 

3,028

 

 

 

6,008

 

Total revenue

 

 

134,948

 

 

 

179,136

 

 

 

279,849

 

 

 

378,058

 

 

 

120,046

 

 

 

144,901

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Digital

 

 

16,336

 

 

 

18,406

 

 

 

31,303

 

 

 

34,831

 

 

 

12,862

 

 

 

14,967

 

Nutrition and other

 

 

27,202

 

 

 

42,002

 

 

 

58,241

 

 

 

86,776

 

 

 

22,284

 

 

 

31,039

 

Connected fitness

 

 

8,666

 

 

 

31,459

 

 

 

16,221

 

 

 

76,165

 

 

 

3,618

 

 

 

7,555

 

Total cost of revenue

 

 

52,204

 

 

 

91,867

 

 

 

105,765

 

 

 

197,772

 

 

 

38,764

 

 

 

53,561

 

Gross profit

 

 

82,744

 

 

 

87,269

 

 

 

174,084

 

 

 

180,286

 

 

 

81,282

 

 

 

91,340

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling and marketing

 

 

76,492

 

 

 

86,624

 

 

 

153,068

 

 

 

193,068

 

 

 

59,261

 

 

 

76,576

 

Enterprise technology and development

 

 

18,650

 

 

 

24,133

 

 

 

37,746

 

 

 

57,830

 

 

 

17,717

 

 

 

19,096

 

General and administrative

 

 

11,887

 

 

 

19,584

 

 

 

29,603

 

 

 

39,657

 

 

 

13,483

 

 

 

17,716

 

Restructuring

 

 

(107

)

 

 

1,332

 

 

 

5,280

 

 

 

8,555

 

 

 

1,644

 

 

 

5,387

 

Total operating expenses

 

 

106,922

 

 

 

131,673

 

 

 

225,697

 

 

 

299,110

 

 

 

92,105

 

 

 

118,775

 

Operating loss

 

 

(24,178

)

 

 

(44,404

)

 

 

(51,613

)

 

 

(118,824

)

 

 

(10,823

)

 

 

(27,435

)

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss on partial debt extinguishment

 

 

(1,209

)

 

 

 

Change in fair value of warrant liabilities

 

 

375

 

 

 

2,070

 

 

 

432

 

 

 

2,334

 

 

 

(724

)

 

 

57

 

Interest expense

 

 

(2,368

)

 

 

(3

)

 

 

(4,699

)

 

 

(22

)

 

 

(1,875

)

 

 

(2,331

)

Other income, net

 

 

411

 

 

 

189

 

 

 

980

 

 

 

125

 

 

 

477

 

 

 

569

 

Loss before income taxes

 

 

(25,760

)

 

 

(42,148

)

 

 

(54,900

)

 

 

(116,387

)

 

 

(14,154

)

 

 

(29,140

)

Income tax (provision) benefit

 

 

12

 

 

 

281

 

 

 

(36

)

 

 

987

 

Income tax provision

 

 

(62

)

 

 

(48

)

Net loss

 

$

(25,748

)

 

$

(41,867

)

 

$

(54,936

)

 

$

(115,400

)

 

$

(14,216

)

 

$

(29,188

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per common share, basic and diluted

 

$

(0.08

)

 

$

(0.14

)

 

$

(0.18

)

 

$

(0.38

)

 

$

(2.10

)

 

$

(4.72

)

Weighted-average common shares outstanding, basic and diluted

 

 

314,312

 

 

 

307,205

 

 

 

311,740

 

 

 

306,786

 

 

 

6,761

 

 

 

6,183

 

 

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

4


 

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 March 31,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

2024

 

 

2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(25,748

)

 

$

(41,867

)

 

$

(54,936

)

 

$

(115,400

)

 

$

(14,216

)

 

$

(29,188

)

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

(242

)

 

 

35

 

 

 

(389

)

 

 

(150

)

 

 

 

 

 

(147

)

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

 

 

61

 

 

 

74

 

 

 

(26

)

 

 

143

 

Reclassification of gains (losses) on derivative financial instruments
included in net loss, net of tax

 

 

80

 

 

 

(87

)

Foreign currency translation adjustment

 

 

35

 

 

 

(51

)

 

 

45

 

 

 

(47

)

 

 

(42

)

 

 

10

 

Total other comprehensive income (loss)

 

 

(146

)

 

 

58

 

 

 

(370

)

 

 

(54

)

 

 

38

 

 

 

(224

)

Total comprehensive loss

 

$

(25,894

)

 

$

(41,809

)

 

$

(55,306

)

 

$

(115,454

)

 

$

(14,178

)

 

$

(29,412

)

 

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

5


 

The Beachbody Company, Inc.

Unaudited Condensed Consolidated Statements of Stockholders’ Equity

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Other

 

 

Total

 

 

Common Stock

 

 

Paid-In

 

 

Accumulated

 

 

Comprehensive

 

 

Stockholders’

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Income (Loss)

 

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at December 31, 2021

 

 

309,584

 

 

$

31

 

 

$

610,418

 

 

$

(225,043

)

 

$

(21

)

 

$

385,385

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(73,533

)

 

 

 

 

 

(73,533

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(112

)

 

 

(112

)

Equity-based compensation

 

 

 

 

 

 

 

 

4,564

 

 

 

 

 

 

 

 

 

4,564

 

Options exercised, net of tax withholdings

 

 

1,132

 

 

 

 

 

 

1,923

 

 

 

 

 

 

 

 

 

1,923

 

Balances at March 31, 2022

 

 

310,716

 

 

$

31

 

 

$

616,905

 

 

$

(298,576

)

 

$

(133

)

 

$

318,227

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(41,867

)

 

 

 

 

 

(41,867

)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

58

 

 

 

58

 

Equity-based compensation

 

 

210

 

 

 

 

 

 

3,001

 

 

 

 

 

 

 

 

 

3,001

 

Options exercised, net of tax withholdings

 

 

588

 

 

 

 

 

 

737

 

 

 

 

 

 

 

 

 

737

 

Balances at June 30, 2022

 

 

311,514

 

 

$

31

 

 

$

620,643

 

 

$

(340,443

)

 

$

(75

)

 

$

280,156

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Other

 

 

Total

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Other

 

 

Total

 

 

Common Stock

 

 

Paid-In

 

 

Accumulated

 

 

Comprehensive

 

 

Stockholders’

 

 

Common Stock

 

 

Paid-In

 

 

Accumulated

 

 

Comprehensive

 

 

Stockholders’

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Income (Loss)

 

 

Equity

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Income (Loss)

 

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at December 31, 2022

 

 

312,162

 

 

$

31

 

 

$

630,709

 

 

$

(419,235

)

 

$

37

 

 

$

211,542

 

 

 

6,243

 

 

$

2

 

 

$

630,738

 

 

$

(419,235

)

 

$

37

 

 

$

211,542

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(29,188

)

 

 

 

 

 

(29,188

)

 

 

 

 

 

 

 

 

 

 

 

(29,188

)

 

 

 

 

 

(29,188

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(224

)

 

 

(224

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(224

)

 

 

(224

)

Equity-based compensation

 

 

9,736

 

 

 

1

 

 

 

9,554

 

 

 

 

 

 

 

 

 

9,555

 

 

 

195

 

 

 

 

 

 

9,555

 

 

 

 

 

 

 

 

 

9,555

 

Shares withheld for tax withholdings on vesting of restricted stock

 

 

(3,644

)

 

 

 

 

 

(2,128

)

 

 

 

 

 

 

 

 

(2,128

)

Tax withholdings on vesting of restricted stock

 

 

(73

)

 

 

 

 

 

(2,128

)

 

 

 

 

 

 

 

 

(2,128

)

Balances at March 31, 2023

 

 

318,254

 

 

$

32

 

 

$

638,135

 

 

$

(448,423

)

 

$

(187

)

 

$

189,557

 

 

 

6,365

 

 

$

2

 

 

$

638,165

 

 

$

(448,423

)

 

$

(187

)

 

$

189,557

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Other

 

 

Total

 

 

Common Stock

 

 

Paid-In

 

 

Accumulated

 

 

Comprehensive

 

 

Stockholders’

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Income (Loss)

 

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at December 31, 2023

 

 

6,707

 

 

$

2

 

 

$

654,657

 

 

$

(571,876

)

 

$

(23

)

 

$

82,760

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(25,748

)

 

 

 

 

 

(25,748

)

 

 

 

 

 

 

 

 

 

 

 

(14,216

)

 

 

 

 

 

(14,216

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(146

)

 

 

(146

)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

38

 

 

 

38

 

Equity-based compensation

 

 

1,377

 

 

 

1

 

 

 

3,160

 

 

 

 

 

 

 

 

 

3,161

 

 

 

61

 

 

 

 

 

 

4,365

 

 

 

 

 

 

 

 

 

4,365

 

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

)

 

 

(24

)

 

 

 

 

 

(206

)

 

 

 

 

 

 

 

 

(206

)

Balances at June 30, 2023

 

 

312,608

 

 

$

32

 

 

$

641,649

 

 

$

(474,171

)

 

$

(333

)

 

$

167,177

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pre-funded warrants exercised

 

 

123

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at March 31, 2024

 

 

6,867

 

 

$

2

 

 

$

658,816

 

 

$

(586,092

)

 

$

15

 

 

$

72,741

 

 

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

6


 

The Beachbody Company, Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)

 

 

Six months ended June 30,

 

 

Three months ended March 31,

 

 

2023

 

 

2022

 

 

2024

 

 

2023

 

 

 

 

 

 

 

 

 

 

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(54,936

)

 

$

(115,400

)

 

$

(14,216

)

 

$

(29,188

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

 

 

 

 

 

Depreciation and amortization expense

 

 

21,632

 

 

 

41,552

 

 

 

5,378

 

 

 

10,713

 

Amortization of content assets

 

 

11,020

 

 

 

13,180

 

 

 

4,540

 

 

 

5,561

 

Provision for inventory and inventory purchase commitments

 

 

5,072

 

 

 

32,019

 

 

 

635

 

 

 

2,734

 

Realized (gains) losses on hedging derivative financial instruments

 

 

(26

)

 

 

143

 

 

 

64

 

 

 

(87

)

Change in fair value of warrant liabilities

 

 

(432

)

 

 

(2,334

)

 

 

724

 

 

 

(57

)

Equity-based compensation

 

 

12,716

 

 

 

7,565

 

 

 

4,365

 

 

 

9,555

 

Deferred income taxes

 

 

(121

)

 

 

(1,143

)

 

 

(3

)

 

 

(53

)

Amortization of debt issuance costs

 

 

980

 

 

 

 

 

 

585

 

 

 

479

 

Paid-in-kind interest expense

 

 

746

 

 

 

 

 

 

214

 

 

 

374

 

Other non-cash items

 

 

 

 

 

311

 

Loss on partial debt extinguishment

 

 

1,209

 

 

 

 

Change in lease assets

 

 

(813

)

 

 

 

Gain on sale of property and equipment

 

 

(784

)

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

Inventory

 

 

6,037

 

 

 

28,400

 

 

 

3,497

 

 

 

3,056

 

Content assets

 

 

(5,325

)

 

 

(11,940

)

 

 

(1,831

)

 

 

(2,224

)

Prepaid expenses

 

 

4,506

 

 

 

5,545

 

 

 

707

 

 

 

1,652

 

Other assets

 

 

(8,912

)

 

 

167

 

 

 

4,084

 

 

 

(4,958

)

Accounts payable

 

 

(4,179

)

 

 

(22,753

)

 

 

(2,212

)

 

 

(1,366

)

Accrued expenses

 

 

(14,356

)

 

 

(7,739

)

 

 

(1,362

)

 

 

(8,768

)

Deferred revenue

 

 

12,221

 

 

 

1,000

 

 

 

4,907

 

 

 

4,746

 

Other liabilities

 

 

(1,010

)

 

 

(1,829

)

 

 

(554

)

 

 

(38

)

Net cash used in operating activities

 

 

(14,367

)

 

 

(33,256

)

Net cash provided by (used in) operating activities

 

 

9,134

 

 

 

(7,869

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

(5,030

)

 

 

(19,222

)

 

 

(1,699

)

 

 

(3,417

)

Net cash used in investing activities

 

 

(5,030

)

 

 

(19,222

)

Proceeds from sale of property and equipment

 

 

5,600

 

 

 

 

Net cash provided by (used in) investing activities

 

 

3,901

 

 

 

(3,417

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

 

Proceeds from exercise of stock options

 

 

 

 

 

2,968

 

Remittance of taxes withheld from employee stock awards

 

 

 

 

 

(308

)

Debt repayments

 

 

(625

)

 

 

 

 

 

(7,013

)

 

 

(313

)

Proceeds from issuance of common shares in the Employee Stock Purchase Plan

 

 

384

 

 

 

 

Tax withholding payments for vesting of restricted stock

 

 

(2,159

)

 

 

 

 

 

(206

)

 

 

(2,128

)

Net cash (used in) provided by financing activities

 

 

(2,400

)

 

 

2,660

 

Net cash used in financing activities

 

 

(7,219

)

 

 

(2,441

)

Effect of exchange rates on cash and cash equivalents

 

 

392

 

 

 

(176

)

 

 

(296

)

 

 

29

 

Net decrease in cash and cash equivalents

 

 

(21,405

)

 

 

(49,994

)

Net increase (decrease) in cash and cash equivalents

 

 

5,520

 

 

 

(13,698

)

Cash, cash equivalents and restricted cash, beginning of period

 

 

80,091

 

 

 

107,054

 

 

 

33,409

 

 

 

80,091

 

Cash and cash equivalents, end of period

 

$

58,686

 

 

$

57,060

 

 

$

38,929

 

 

$

66,393

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

 

 

 

 

Cash paid during the period for interest

 

$

2,958

 

 

$

17

 

 

$

1,111

 

 

$

1,464

 

Cash (received) paid during the period for income taxes, net

 

 

(46

)

 

 

310

 

 

 

29

 

 

 

(265

)

Supplemental disclosure of noncash investing activities:

 

 

 

 

 

 

 

 

 

 

Property and equipment acquired but not yet paid for

 

$

128

 

 

$

2,330

 

 

$

453

 

 

$

1,291

 

 

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

7


 

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. (“BODi” or the “Company”) is a leading subscription health and wellnessfitness company and the creator of some of the world’s most popular fitness programs. The Company’s fitness programs are available for streaming through subscription to Beachbody On Demand (“BOD”)BOD and, together with the Company’s live fitness and comprehensive nutrition programs, through subscription to Beachbody On Demand Interactive (“BODi”).BODi. 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, Beachbody Performance supplements and BEACHBAR snack bars, and Ladder premium supplements, which have been designed and clinically tested to help customers achieve their goals. BODi also offers a professional-gradecommercial-grade stationary cycle withwhich can include 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 (“Partners”) (previously known as “Coaches”), social media marketing channels, and direct response advertising. 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 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 judgments about the carrying amounts of assets and liabilities. Actual results could differ from those estimates. We periodically review estimates and assumptions and we reflect the effects of changes, if any, in the unaudited condensed consolidated financial statements in the period that they are determined.

The unaudited condensed consolidated financial statements have been prepared on the same basis as the annual audited 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.eliminated in consolidation. The financial data and other financial information disclosed in the notes to these unaudited condensed consolidated financial statements are also unaudited. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.2023. 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 Long-Lived Assets, NetReverse Stock Split

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’s market capitalization and macro-economic conditions observed in the three months ended June 30, 2023, the Company performed an interim test for impairment of its goodwill as of June 30, 2023. In performing the interim impairment test for goodwill, the Company elected to bypass the optional qualitative test and proceeded to perform a quantitative test by comparing the carrying value of its RU to its estimated fair value. The Company previously tested its RU for impairment as of December 31, 2022. The results of the Company’s interim test for impairment at June 30, 2023 concluded that the fair value of its RU exceeded its carrying value, resulting in no impairment.

Long-Lived Assets

8


 

Management reviews long-lived assets (including propertyOn November 21, 2023, we effected a 1-for-50 reverse stock split of our issued and equipment, content assets,outstanding common stock. Each stockholder's percentage ownership and definite-lived intangible assets) for impairment whenever events or changesproportional voting power generally remained unchanged as a result of the reverse stock split. All applicable share data, per share amounts and related information in circumstances indicate that their carrying amount may not be recoverable. Recoverability of assets is determined by comparing their carrying valuethe unaudited condensed consolidated financial statements and notes thereto have been adjusted retroactively to give effect to the forecasted undiscounted cash flows associated with1-for-50 reverse stock split. See Note 10, Stockholders' Equity,for additional information regarding 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, 2023 and concluded that the carrying value of its long-lived assets is recoverable.reverse stock split.

Recently Adopted Accounting Pronouncements

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 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.

 

8


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.

Accounting Pronouncements Not Yet Adopted

In November 2023, the FASB issued ASU 2023-07, Improvements to Reportable Segment Disclosures, to improve disclosures about a public entity's reportable segments through enhanced disclosures about significant segment expenses. The guidance in this update will be effective for public companies for annual periods beginning after December 15, 2023 and interim periods for years beginning after December 15, 2024. The Company is evaluating the potential impact of adopting this guidance on its unaudited condensed consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures, to improve disclosures about a company's income taxes paid and the effective rate reconciliation table. The guidance in this update will be effective for public companies for annual periods beginning after December 15, 2024 and interim periods for years beginning after December 15, 2025. The Company is evaluating the potential impact of adopting this guidance on its unaudited condensed consolidated financial statements.

2. Revenue

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

 

 

 

Three months ended June 30,

 

 

 

2023

 

 

2022

 

 

 

 

 

 

 

 

Geographic region:

 

 

 

 

 

 

United States

 

$

121,067

 

 

$

160,021

 

Rest of world1

 

 

13,881

 

 

 

19,115

 

Total revenue

 

$

134,948

 

 

$

179,136

 

 

Six months ended June 30,

 

 

Three months ended March 31,

 

 

2023

 

 

2022

 

 

2024

 

 

2023

 

 

 

 

 

 

 

 

 

 

 

 

 

Geographic region:

 

 

 

 

 

 

 

 

 

 

United States

 

$

251,944

 

 

$

338,628

 

 

$

106,750

 

 

$

130,877

 

Rest of world1

 

 

27,905

 

 

 

39,430

 

 

 

13,296

 

 

 

14,024

 

Total revenue

 

$

279,849

 

 

$

378,058

 

 

$

120,046

 

 

$

144,901

 

 

(1) Consists of Canada, United Kingdom, and France. Other than Canada at 10.2% during the United States,three months ended March 31, 2024, no single country accounted for more than 10% of total revenue during the three and six months ended June 30, 2023March 31, 2024 and 2022.2023.

 

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. The Company expects to recognize approximately 89% of the remaining performance obligations as revenue in the next 12 months, and the remainder thereafter. During the three and six months ended June 30, 2023,March 31, 2024, the Company recognized $24.849.8 million and $77.9 million, respectively, of revenue that was included in the deferred revenue balance as of December 31, 2022.2023. During the three and six months ended June 30, 2022,March 31, 2023, the Company recognized $25.653.1 million and $88.1 million, respectively, of revenue that was included in the deferred revenue balance as of December 31, 2021.2022.

9


 

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, 2023

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

Derivative assets

 

$

 

 

$

50

 

 

$

 

Total assets

 

$

 

 

$

50

 

 

$

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

Public warrants

 

$

461

 

 

$

 

 

$

 

Private placement warrants

 

 

 

 

 

 

 

 

53

 

Term Loan warrants

 

 

 

 

 

 

 

 

802

 

Total liabilities

 

$

461

 

 

$

 

 

$

855

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2022

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

Derivative assets

 

$

 

 

$

462

 

 

$

 

Total assets

 

$

 

 

$

462

 

 

$

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

Public Warrants

 

$

415

 

 

$

 

 

$

 

Private Placement Warrants

 

 

 

 

 

 

 

 

107

 

Term Loan Warrants

 

 

 

 

 

 

 

 

1,226

 

Total liabilities

 

$

415

 

 

$

 

 

$

1,333

 

9


 

 

March 31, 2024

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

Restricted short-term investments

 

$

 

 

$

4,250

 

 

$

 

Total assets

 

$

 

 

$

4,250

 

 

$

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

Public Warrants

 

$

 

 

$

 

 

$

19

 

Private Placement Warrants

 

 

 

 

 

 

 

 

10

 

Term Loan Warrants

 

 

 

 

 

 

 

 

493

 

Common Stock Warrants

 

 

 

 

 

 

 

 

3,327

 

Total liabilities

 

$

 

 

$

 

 

$

3,849

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2023

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

Restricted short-term investments

 

$

 

 

$

4,250

 

 

$

 

Total assets

 

$

 

 

$

4,250

 

 

$

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

Public Warrants

 

$

 

 

$

 

 

$

17

 

Private Placement Warrants

 

 

 

 

 

 

 

 

9

 

Term Loan Warrants

 

 

 

 

 

 

 

 

392

 

Common Stock Warrants

 

 

 

 

 

 

 

 

2,707

 

Total liabilities

 

$

 

 

$

 

 

$

3,125

 

 

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 valueRestricted short-term investments of the public warrants, which trade in active markets, is based$4.3 million at March 31, 2024 consist of a one-year certificate of deposit (“CD”) that matures on quoted market prices. The fair valueJuly 26, 2024 with an interest rate of derivative instruments is based on Level 2 inputs such as observable forward rates, spot rates, and foreign currency exchange rates.4.8%. The Company’s private placement andPrivate Placement Warrants (as defined below), Term Loan Warrants (defined later)(as defined below) and Common Stock Warrants (as defined below), and the Company's Public Warrants (as defined below) after they ceased trading on an active market, 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 outstanding warrants for the private placement warrantspurchase of 106,667 shares of the Company's Class A common stock at an exercise price of $575.00 per share (the "Private Placement Warrants") using a Black-Scholes option-pricing model and the quoted price of the Company’s Class A Common Stock.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.Company's historical volatility. The expected life was based on the remaining contractual term of the private placement warrants,Private Placement Warrants, and the risk-free interest rate was based on the implied yield available on U.S. treasury securities with a maturity equivalent to the private placement warrantsPrivate Placement Warrants expected life. The significant unobservable input used in the fair value measurement of the private placement warrantsPrivate 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 warrantsPrivate Placement Warrants on June 30, 2023March 31, 2024 and December 31, 2022:2023:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2023

 

 

December 31, 2022

 

 

March 31, 2024

 

 

December 31, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk-free rate

 

 

4.5

%

 

 

4.2

%

 

 

4.5

%

 

 

4.1

%

Dividend yield rate

 

 

 

 

 

 

 

 

 

 

 

 

Volatility

 

 

75.0

%

 

 

75.0

%

 

 

100.0

%

 

 

97.6

%

Contractual term (in years)

 

 

2.99

 

 

 

3.49

 

 

 

2.23

 

 

 

2.48

 

Exercise price

 

$

11.50

 

 

$

11.50

 

 

$

575.00

 

 

$

575.00

 

 

10


 

 

 

The following table presents changes in the fair value of the private placement warrantsPrivate Placement Warrants for the three and six months ended June 30,March 31, 2024 and 2023 and 2022 (in thousands):

 

 

Three months ended June 30,

 

 

Six months ended June 30,

 

 

Three months ended March 31,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

2024

 

 

2023

 

 

Balance, beginning of period

 

$

53

 

 

$

1,920

 

 

$

107

 

 

$

2,133

 

 

$

9

 

 

$

107

 

 

Change in fair value

 

 

 

 

 

(1,120

)

 

 

(54

)

 

 

(1,333

)

 

 

1

 

 

 

(54

)

 

Balance, end of period

 

$

53

 

 

$

800

 

 

$

53

 

 

$

800

 

 

$

10

 

 

$

53

 

 

 

For the three and six months ended June 30,March 31, 2024 and 2023, and 2022, the change in the fair value of private placement warrantsPrivate Placement Warrants resulted from the change in price of the Company’s Class A Common Stock,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.

Public Warrants

The Company determined the fair value of the outstanding warrants for the purchase of 200,000 shares of the Company's Class A common stock at an exercise price of $575.00 per share (the "Public Warrants"), which traded in active markets until November 24, 2023, based on quoted market prices during the period it was traded in active markets. The Company determined the fair value of the Public Warrants after November 24, 2023 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 Company's historical volatility. The expected life was based on the remaining contractual term of the Public 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 Public Warrants expected life. The significant unobservable input used in the fair value measurement of the Public 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 Public Warrants on March 31, 2024 and December 31, 2023:

 

 

March 31, 2024

 

 

December 31, 2023

 

 

 

 

 

 

 

 

Risk-free rate

 

 

4.5

%

 

 

4.1

%

Dividend yield rate

 

 

 

 

 

 

Volatility

 

 

100.0

%

 

 

97.6

%

Contractual term (in years)

 

 

2.23

 

 

 

2.48

 

Exercise price

 

$

575.00

 

 

$

575.00

 

The following table presents changes in the fair value of the Public Warrants for the three months ended March 31, 2024 and 2023 (in thousands):

 

 

Three months ended March 31,

 

 

 

 

2024

 

 

2023

 

 

Balance, beginning of period

 

$

17

 

 

$

415

 

 

Change in fair value

 

 

2

 

 

 

185

 

 

Balance, end of period

 

$

19

 

 

$

600

 

 

For the three months ended March 31, 2024 and 2023, the change in the fair value of the Public Warrants resulted from the change in the price of the Public Warrants as traded on an active market and after November 24, 2023 the change in the fair value of the Public 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 consolidated balance sheets as other liabilities.

Term Loan Warrants

The Company determined the fair value of the Term Loan Warrants (defined later)(as defined below) using a Black-Scholes option-pricing model and the quoted price of the Company’s Class A Common Stock.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.group and the Company's historical volatility. 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

11


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, 15, 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, 2023March 31, 2024 and December 31, 2022:2023:

 

 

June 30, 2023

 

 

December 31, 2022

 

 

March 31, 2024

 

 

December 31, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk-free rate

 

 

4.0

%

 

 

4.0

%

 

 

4.2

%

 

 

3.8

%

Dividend yield rate

 

 

 

 

 

 

 

 

 

 

 

 

Volatility

 

 

75.0

%

 

 

75.0

%

 

 

77.4

%

 

 

74.5

%

Contractual term (in years)

 

 

6.11

 

 

 

6.61

 

 

 

5.35

 

 

 

5.60

 

Exercise price

 

$

1.85

 

 

$

1.85

 

 

$

20.50

 

 

$

20.50

 

 

The following table presents changes in the fair value of the Term Loan Warrants for the three and six months ended June 30,March 31, 2024 and 2023 and 2022 (in thousands):

 

 

Three months ended June 30,

 

 

Six months ended June 30,

 

 

Three months ended March 31,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

2024

 

 

2023

 

 

Balance, beginning of period

 

$

1,038

 

 

$

 

 

$

1,226

 

 

$

 

 

$

392

 

 

$

1,226

 

 

Change in fair value

 

 

(236

)

 

 

 

 

 

(424

)

 

 

 

 

 

101

 

 

 

(188

)

 

Balance, end of period

 

$

802

 

 

$

 

 

$

802

 

 

$

 

 

$

493

 

 

$

1,038

 

 

 

For the three and six months ended June 30,March 31, 2024 and 2023, the change in the balance of the Term Loan Warrants was due to the change in the fair value of the Term Loan Warrants resultedresulting from the change in price of the Company’s Class A Common Stock andcommon stock, the remaining contractual term.term and the 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.

11


Common Stock Warrants

The Company determined the fair value of the Common Stock Warrants (as defined below), which were issued on December 13, 2023, 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 from the average of the actual market activity of the Company’s peer group and the Company's historical volatility. The expected life was based on the remaining contractual term of the Common Stock 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 Common Stock Warrants expected life. The significant unobservable input used in the fair value measurement of the Common Stock 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 Common Stock Warrants on March 31, 2024 and December 31, 2023:

 

 

March 31, 2024

 

 

December 31, 2023

 

 

 

 

 

 

 

 

Risk-free rate

 

 

4.2

%

 

 

3.8

%

Dividend yield rate

 

 

 

 

 

 

Volatility

 

 

78.1

%

 

 

75.2

%

Contractual term (in years)

 

 

5.20

 

 

 

5.44

 

Exercise price

 

$

11.24

 

 

$

11.24

 

 

12


The following table presents changes in the fair value of the Common Stock Warrants for the three months ended March 31, 2024 (in thousands):

 

 

Three months ended March 31,

 

 

 

2024

 

Balance, beginning of year

 

$

2,707

 

Change in fair value

 

 

620

 

Balance, end of year

 

$

3,327

 

For the three months ended March 31, 2024, the change in the fair value of the Common Stock 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 consolidated balance sheets as other liabilities.

4. Inventory Net

Inventory net consists of the following (in thousands):

 

 

June 30, 2023

 

 

December 31, 2022

 

 

March 31, 2024

 

 

December 31, 2023

 

 

 

 

 

 

 

 

 

 

 

Raw materials and work in process

 

$

17,680

 

 

$

13,380

 

 

$

9,763

 

 

$

10,354

 

Finished goods

 

 

25,684

 

 

 

40,680

 

 

 

11,044

 

 

 

14,622

 

Total inventory, net

 

$

43,364

 

 

$

54,060

 

Total inventory

 

$

20,807

 

 

$

24,976

 

 

Adjustments to the carrying value of excess inventory and inventory on hand to net realizable value were $2.30.6 million and $5.12.7 million during the three and six months ended June 30,March 31, 2024 and 2023, respectively, and $15.1 million and $32.0 million during the three and six months ended June 30, 2022, 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 $(zero0.3) million and $1.41.3 million of these adjustments in nutrition and other cost of revenue forduring the three and six months ended June 30,March 31, 2024 and 2023, respectively, and $1.90.9 million and $4.41.4 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 six months ended June 30,March 31, 2024 and 2023, respectively, and $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, 2023

 

 

December 31, 2022

 

 

March 31, 2024

 

 

December 31, 2023

 

Deferred partner costs

 

$

38,332

 

 

$

31,270

 

Deferred Partner costs

 

$

36,734

 

 

$

36,169

 

Deposits

 

 

6,204

 

 

 

4,527

 

 

 

2,107

 

 

 

6,788

 

Accounts receivable, net

 

 

1,602

 

 

 

866

 

 

 

1,613

 

 

 

1,270

 

Other

 

 

2,481

 

 

 

2,585

 

 

 

1,994

 

 

 

1,696

 

Total other current assets

 

$

48,619

 

 

$

39,248

 

 

$

42,448

 

 

$

45,923

 

 

 

1213


 

 

6. Property and Equipment, Net

 

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

 

 

 

 

 

 

 

 

 

 

 

June 30, 2023

 

 

December 31, 2022

 

 

March 31, 2024

 

 

December 31, 2023

 

 

 

 

 

 

 

 

 

 

 

Computer software and web development

 

$

230,992

 

 

$

236,533

 

 

$

229,436

 

 

$

229,527

 

Computer equipment

 

 

23,338

 

 

 

24,240

 

 

 

23,945

 

 

 

23,738

 

Buildings

 

 

5,158

 

 

 

5,158

 

 

 

-

 

 

 

5,158

 

Leasehold improvements

 

 

4,600

 

 

 

4,600

 

 

 

4,600

 

 

 

4,600

 

Furniture, fixtures and equipment

 

 

1,207

 

 

 

1,222

 

 

 

1,166

 

 

 

1,166

 

Computer software and web development projects in-process

 

 

738

 

 

 

5,147

 

 

 

3,739

 

 

 

2,157

 

Property and equipment, gross

 

 

266,033

 

 

 

276,900

 

 

 

262,886

 

 

 

266,346

 

Less: Accumulated depreciation

 

 

(207,828

)

 

 

(202,753

)

 

 

(226,326

)

 

 

(221,291

)

Total property and equipment, net

 

$

58,205

 

 

$

74,147

 

 

$

36,560

 

 

$

45,055

 

On February 29, 2024, the Company sold its Van Nuys production facility which had a net carrying value of $4.8 million for $6.2 million. The Company recognized a gain on the sale of the facility of $0.8 million, which is recorded as a reduction in general and administrative expenses. Simultaneous with the sale, the Company entered into a five year lease of the facility at an annual base rate of $0.3 million per year which increases by 3% annually. The Company recorded at the inception of the lease a right-of-use asset and lease liability of $1.3 million using a discount rate of 12.5% and classified this lease as an operating lease. The total operating lease costs recognized for the Van Nuys production facility was $0.1 million for the three months ended March 31, 2024.

 

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 March 31,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

2024

 

 

2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenue

 

$

5,277

 

 

$

7,743

 

 

$

10,209

 

 

$

16,824

 

 

 

$

2,058

 

 

$

4,932

 

 

Selling and marketing

 

 

 

 

 

102

 

 

 

 

 

 

381

 

 

Enterprise technology and development

 

 

4,363

 

 

 

7,486

 

 

 

8,866

 

 

 

14,935

 

 

 

 

3,320

 

 

 

4,503

 

 

General and administrative

 

 

 

 

 

49

 

 

 

1

 

 

 

241

 

 

 

 

 

 

 

1

 

 

Total depreciation

 

$

9,640

 

 

$

15,380

 

 

$

19,076

 

 

$

32,381

 

 

 

$

5,378

 

 

$

9,436

 

 

 

7. Accrued Expenses

Accrued expenses consist of the followings (in thousands):

 

 

June 30, 2023

 

 

December 31, 2022

 

 

March 31, 2024

 

 

December 31, 2023

 

Employee compensation and benefits

 

$

10,351

 

 

$

4,334

 

Partner costs

 

$

15,742

 

 

$

14,535

 

 

 

9,345

 

 

 

13,971

 

Inventory, shipping and fulfillment

 

 

10,940

 

 

 

11,687

 

 

 

5,663

 

 

 

6,869

 

Employee compensation and benefits

 

 

5,126

 

 

 

20,584

 

Sales and other taxes

 

 

4,523

 

 

 

4,818

 

 

 

3,697

 

 

 

3,963

 

Advertising

 

 

2,645

 

 

 

872

 

Information technology

 

 

2,059

 

 

 

2,207

 

 

 

2,609

 

 

 

3,176

 

Advertising

 

 

3,072

 

 

 

1,176

 

Customer service expenses

 

 

964

 

 

 

956

 

 

 

369

 

 

 

437

 

Other accrued expenses

 

 

6,690

 

 

 

8,467

 

 

 

6,045

 

 

 

8,525

 

Total accrued expenses

 

$

49,116

 

 

$

64,430

 

 

$

40,724

 

 

$

42,147

 

 

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 $8.19.1 million and $17.19.0 million for the three and six months ended June 30,March 31, 2024 and 2023, respectively,respectively.

14


On September 29, 2023, the Company entered into a financing agreement with IPFS Corporation of California ("IPFS") to finance certain of its annual insurance premiums. The Company financed $2.5 million, which will be paid over a ten month period with the first payment due on November 1, 2023. The financing has an interest rate of 8.83% and IPFS has a security interest in the underlying policies that have been financed. The $6.91.0 million and $22.61.8 million foroutstanding as of March 31, 2024 and December 31, 2023, respectively, is recorded in other current liabilities in the threecondensed consolidated balance sheet and six months ended June 30, 2022, respectively.

the interest expense is recorded in interest expense in the condensed consolidated statement of operations.

 

13On October 6, 2023, the Company entered into a financing agreement with First Insurance Funding ("FIF") to finance certain of its annual insurance premiums. The Company financed $2.0 million, which will be paid over a nine month period with the first payment due on November 1, 2023. The financing has an interest rate of 8.75% and FIF has a security interest in the underlying policies that have been financed. The $0.7 million and $1.4 million outstanding as of March 31, 2024 and December 31, 2023, respectively, is recorded in other current liabilities in the condensed consolidated balance sheet and the interest expense is recorded in interest expense in the condensed consolidated statement of operations.


 

 

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 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, 2023March 31, 2024 are as follows (in thousands):

 

Six months ending December 31, 2023

 

$

22,239

 

Year ending December 31, 2024

 

 

2,160

 

Nine months ending December 31, 2024

 

$

18,489

 

Year ending December 31, 2025

 

 

1,475

 

 

 

2,106

 

Year ending December 31, 2026

 

 

100

 

 

 

324

 

Year ending December 31, 2027

 

 

75

 

 

 

75

 

Thereafter

 

 

75

 

Year ending December 31, 2028

 

 

75

 

 

$

26,124

 

 

$

21,069

 

 

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. During the three months ended March 31, 2024 the Company paid $1.2 million of royalty payments exclusive of guaranteed payments.

 

Lease Commitments

 

The Company leases facilities under noncancelable operating leases expiring through 20272029 and certain equipment under a finance lease expiring in 2024. These lease obligations will require payments of approximately $1.21.8 million during the sixnine months ending December 31, 2023,2024, $2.11.0 million for the year ending December 31, 20242025 and $1.52.0 million in 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.

 

14On May 22, 2023, Jessica Lyons, an individual, and a group of other plaintiffs filed a class action complaint with the Los Angeles County Superior Court alleging that the Company misclassified its Partners as contractors rather than as employees and committed other violations of the California Labor Code. The Company understands that the plaintiffs in this matter intend on filing additional claims under the Private Attorney General Act of 2004. The Company and certain executive officers are listed as defendants in the complaint. The plaintiffs are seeking monetary damages. This matter is pending as of the date of this quarterly report.


 

15


On September 6, 2023 Dish Technologies LLC and SLING TV LLC (the "DISH Entities") filed a complaint with the United States District Court for the District of Delaware alleging that the Company infringed on the DISH Entities' patents and used technology belonging to the DISH Entities without their permission. The plaintiffs are seeking monetary damages and injunctive relief. In an effort to avoid any further unnecessary litigation costs, the parties entered into a Confidential Standstill and Tolling Agreement as of April 16, 2024 which included a dismissal of the case by the DISH Entities without prejudice and an agreement by the DISH Entities not to institute any litigation proceedings against the Company under the patents any earlier than December 31, 2026 in exchange for a one-time immaterial payment to the DISH Entities by the Company.

The Company disputes the allegations in the above referenced active matters and intends to defend the matters vigorously. Some of our legal proceedings, such as the above referenced complaints, may be based on complex claims involving substantial uncertainties and unascertainable damages. Accordingly, it is not possible to determine the probability of loss or estimate damages for any of the above matters, and therefore the Company has not established reserves for any of these proceedings. When the Company determines that a loss is both probable and reasonably estimable, the Company records a liability, and, if the liability is material, discloses the amount of the liability reserved. Given that such proceedings are subject to uncertainty, there can be no assurance that such legal proceedings, either individually or in the aggregate, will not have a material adverse effect on our business, results of operations, financial condition or cash flows.

 

9. Debt

 

On August 8, 2022 (the “Effective Date”), the Company, 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 $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, 2023March 31, 2024 and December 31, 20222023 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 Term Loan on each anniversary of the Effective Date. The Term Loan was a SOFR Rate loan, with an effective interest rate of 21.83% and a cash interest rate of 12.1212.65% at June 30, 2023.for the three months ended March 31, 2024. The Company recorded $2.4 million and $4.71.8 million of interest expense related to the Term Loan during the three months ended March 31, 2024.

On July 24, 2023 (the "Second Amendment Effective Date"), the Company and six monthsBlue Torch entered into Amendment No. 2 to the Financing Agreement (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) amended the minimum revenue financial covenant to test revenue levels for each fiscal quarter on a standalone basis, and to adjust the minimum revenue levels to (a) $100.0 million, commencing with the fiscal quarter ended June 30, 2023, respectively.for each fiscal quarter ending on or prior to March 31, 2024 and (b) $

120.0

The Financing Agreement contains million for each fiscal quarter thereafter and or prior to December 31, 2025; (2) amended the minimum liquidity financial covenants that require uscovenant to maintain (a) certainadjust the minimum revenueliquidity levels to be tested on a quarterly basis, and (b) minimum Liquidity (as defined in the Financing Agreement) of (i) $12.5 million at all times through the Second Amendment Effective Date; (ii)(a) $20.0 million at all times thereafterfrom the Second Amendment Effective Date through March 31, 2024;2024 and (iii)(b) $25.0 million at all times thereafter through the maturity of the Term Loan; (3) modified the maturity date of the Term Loan from August 8, 2026 to February 8, 2026; and (4) amended certain financial definitions, reporting covenants and other 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 along with the related prepayment premium of 5% ($0.8 million) and accrued interest ($0.1 million). The

16


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) which is recorded as incremental third party debt issuance costs and is being amortized over the amended term of the Term Loan using the effective-interest method. The partial prepayment of $15.0 million was accounted for as a partial debt extinguishment and the Company wrote off the proportionate amount of unamortized debt discount and debt issuance costs as of the Second Amendment Effective Date ($2.4 million) which in addition to the prepayment premium ($0.8 million) was recorded as a loss on partial debt extinguishment of $3.2 million in the three months ended September 30, 2023.

On January 9, 2024 (the "Third Amendment Effective Date"), the Company and Blue Torch entered into Consent No. 1 and Amendment No. 3 to the Financing Agreement (the "Third Amendment"), which amended the Company's existing Financing Agreement. The Third Amendment, among other things, amended certain terms of the Financing Agreement including, but not limited to, amended the minimum liquidity financial covenant to adjust the minimum liquidity levels to (a) $19.0 million at all times from the Third Amendment Effective Date through March 31, 2024 and (b) $24.0 million at all times thereafter through the maturity of the Term Loan.

In connection with the Third Amendment, on the Third Amendment Effective Date, the Company made a partial prepayment on the Term Loan of $1.0 million along with the related prepayment premium of 3% and accrued interest. The partial prepayment of $1.0 million was accounted for as a partial debt extinguishment and the Company wrote off the proportionate amount of unamortized debt discount and debt issuance costs as of the Third Amendment Effective Date ($0.2 million) which in addition to the prepayment premium was recorded as a loss on partial debt extinguishment of $0.2 million in the three months ended March 31, 2024.

On February 29, 2024 (the "Fourth Amendment Effective Date"), the Company and Blue Torch entered into Consent No. 2 and Amendment No. 4 to the Financing Agreement (the "Fourth Amendment"), which amended the Company's existing Financing Agreement. The Fourth Amendment, among other things, amended certain terms of the Financing Agreement including, but not limited to amended the minimum liquidity financial covenant to adjust the minimum liquidity levels to (a) $17.0 million at all times from the Fourth Amendment Effective Date through March 31, 2024 and (b) $22.0 million at all times thereafter through the maturity of the Term Loan. The Company was in compliance with these covenants as of March 31, 2024.

In connection with the Fourth Amendment, on the Fourth Amendment Effective Date, the Company made a partial prepayment on the Term Loan of $5.5 million along with the related prepayment premium of 3% ($0.2 million) and accrued interest. The partial prepayment of $5.5 million was accounted for as a partial debt extinguishment and the Company wrote off the proportionate amount of unamortized debt discount and debt issuance costs as of the Fourth Amendment Effective Date ($0.8 million) which in addition to the prepayment premium ($0.2 million) was recorded as a loss on partial debt extinguishment of $1.0 million in the three months ended March 31, 2024. As of March 31, 2024, the principal balance outstanding (including capitalized paid in kind interest) under the Term Loan was $28.9 million.

On April 5, 2024 (the "Fifth Amendment Effective Date") the Company and Blue Torch entered into Amendment No. 5 to the Financing Agreement (the "Fifth Amendment") which amended the Company's existing Financing Agreement. See Note 15, Subsequent Events, for additional information on the Fifth Amendment, including amendments to the debt covenants and the exercise price of the Term Loan Warrants (as defined below).

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, or voluntary prepayment of a portion of the Term Loan by the Company, 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 was in compliance with these covenants, including amendments to the minimum revenue financial covenant in the Second Amendment as of June 30, 2023. See Note 16, Subsequent Events, for additional information on the Second Amendment, including amendments to the debt covenants.

 

The Financing Agreement also contains customary representations, warranties, and covenants, which include, but are not limited to, restrictions on indebtedness, liens, payment of dividends, 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.

 

15


In connection with the Term Loan, the Company issued to certain holders affiliated with Blue Torch warrants for the purchase of 4,716,75694,335 shares of the Company’s Class A Common Stockcommon stock at an exercise price of $1.8592.50 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,

17


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, 15, Subsequent Events, for information on amendments to the Term Loan Warrants.Warrant Second Amendment (as defined below). 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. In connection with the Second Amendment, the Company also amended and restated the Term Loan Warrants (the "Warrant First Amendment"). The Warrant First Amendment amended the exercise price of the Term Loan Warrants from $92.50 per share to $20.50 per share. The amended exercise price increased the fair value of the Term Loan Warrants as of the Second Amendment Effective Date by $0.8 million and was recorded as of the Second Amendment Effective Date as an incremental debt discount, and in addition to the remaining debt discount is being amortized over the amended term of the Term Loan using the effective-interest method. In connection with the Equity Offering (as defined below), the Term Loan Warrants conversion ratio was amended resulting in an increase in the number of shares purchased upon the exercise of the Term Loan Warrants to 97,482 shares of the Company's Class A common stock.

 

The aggregate amounts of payments due for the periods succeeding June 30, 2023March 31, 2024 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

 

Nine months ending December 31, 2024

 

$

5,250

 

Year ending December 31, 2025

 

 

2,500

 

 

 

2,500

 

Year ending December 31, 2026

 

 

29,062

 

 

 

20,528

 

Total debt

 

$

48,750

 

 

 

28,278

 

Less current portion

 

 

(16,250

)

 

 

(5,875

)

Less unamortized debt discount and debt issuance costs

 

 

(8,008

)

 

 

(4,361

)

Add capitalized paid-in-kind interest

 

 

1,344

 

 

 

638

 

Total long-term debt

 

$

25,836

 

 

$

18,680

 

 

The payments in the sixnine months ending December 31, 20232024 include a prepayment of $15.04.0 million which was paid on July 24, 2023April 5, 2024 as part of the SecondFifth Amendment, see Note 16, 15, Subsequent Events, for more information on the amendments to the Term Loan.

 

ThePrincipal payments on the Term Loan amortizes at are $2.501.3% million per year from the Effective Date to August 8,September 30, 2024, payable on a quarterly basis, and thereafter, at are $5.002.5% million per year, payable on a quarterly basis, with the remaining principal amount due on the maturity date of the Term Loan.February 8, 2026.

 

At March 31, 2024 and December 31, 2023, the Company had one irrevocable standby letter of credit outstanding, totaling $0.1 million which is collateralized by $0.1 million of cash. This letter of credit expires on December 6, 2024 and is automatically extended for one-year terms unless notice of non-renewal is provided 60 days prior to the end of the applicable term. At March 31, 2024 and December 31, 2023, the cash collateralizing this letter of credit is classified as current restricted cash in our unaudited condensed consolidated balance sheet.

 

10. Stockholders’ Equity

As of June 30, 2023,March 31, 2024, 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,common stock, 200,000,000 shares are designated as Class X Common Stock,common stock, 100,000,000 shares are designated as Class C Common Stockcommon stock and 100,000,000 shares are designated as Preferred Stock.preferred stock.

Holders of each share of each class of Common Stockcommon stock are entitled to dividends when, as, and if declared by the Company’s board of directors (the "Board"), subject to the rights and preferences of any holders of Preferred Stockpreferred stock outstanding at the time. As of March 31, 2024, the Company had not declared any dividends. The holder of each Class A Common Stockcommon stock is entitled to one vote, the holder of each share of Class X Common Stockcommon stock is entitled to ten votes and except as otherwise required by law, the holder of each share of Class C Common Stockcommon stock is not entitled to any voting powers.

On June 15,December 10, 2023, the Company and Carl Daikeler, the Company’s co-founder and chief executive officer (“CEO”) entered into a forfeituresecurities purchase agreement (“for 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, comprisedissuance and sale of 3,199,946420,769 shares of Class A common stock at a purchase price of $9.75 per share and pre-funded warrants to purchase up to 4,800,054122,821 shares of Class X CommonA common stock eachat a pre-funded purchase price of $9.7499 per share with certain institutional investors in a par valueregistered direct offering. The pre-funded warrants were immediately exercisable and had an exercise price of $0.0001. No consideration was provided to Mr. Daikeler per share. The pre-funded warrants are exercisable at any time after their original issuance at the option of the holder, in the holder's discretion, by (1) payment in full in cash for the forfeiturenumber of these shares. The forfeiture of the shares resulted in the reduction of each of common stock and additional paidpurchased upon such exercise or (2) a cashless exercise, in capital bywhich case the holder would receive upon such exercise the net number of shares of common stock determined accruing to the formula set forth in the pre-funded warrant. The Company also issued 543,590 warrants (the "Common Stock Warrants") to purchase 543,590 shares of Class A common stock at an exercise price

18


of $80011.24 per share in a concurrent private placement. The issuance of the June 30, 2023 condensed consolidated balance sheets.Class A common stock, the pre-funded warrants and the Common Stock Warrants is collectively called the "Equity Offering". On January 12, 2024, all of the pre-funded warrants were exercised by the investor and converted into 122,821 shares of Class A common stock.

 

16Reverse Stock Split


 

At the 2023 Annual Shareholder Meeting, which was held on November 20, 2023, our stockholders approved an amendment to our second amended and restated certificate of incorporation to effect a reverse stock split of all of our issued and outstanding common stock by a ratio in the range of 1-for-10 to 1-for-50. On November 21, 2023, we effected a 1-for-50 reverse stock split of our issued and outstanding common stock. The reverse stock split ratio and the implementation and the timing of the reverse stock split were determined by our Board. The reverse stock split did not change the authorized number of shares or the par value of our common stock or preferred stock, but did effect a proportional adjustment to the number of common stock outstanding, the per share exercise price and the number of shares of common stock issuable upon the exercise of outstanding stock options, the number of shares of common stock issuable upon the vesting of restricted stock awards ("RSU's"), the number of shares of common stock under the Employee Stock Purchase Plan (the "ESPP"), the conversion rate of our outstanding warrants into common stock and the number of shares of common stock eligible for issuance under our 2021 Stock Plan (the "2021 Plan"). No fractional shares were issued in connection with the reverse stock split. Each stockholder's percentage ownership and proportional voting power generally remained unchanged as a result of the reverse stock split.

All applicable outstanding equity awards discussed below in Note 11, Equity-Based Compensation, have been adjusted retroactively for the 1-for-50 reverse stock split.

Accumulated Other Comprehensive Income (Loss)

The following tables summarize changes in accumulated other comprehensive income (loss) by component during the three months ended June 30,March 31, 2024 and 2023 and 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, 2022

 

$

(148

)

 

$

15

 

 

$

(133

)

Balances at December 31, 2022

 

$

131

 

 

$

(94

)

 

$

37

 

Other comprehensive income (loss) before reclassifications

 

 

13

 

 

 

(51

)

 

 

(38

)

 

 

(101

)

 

 

10

 

 

 

(91

)

Amounts reclassified from accumulated other comprehensive income (loss)

 

 

74

 

 

 

 

 

 

74

 

 

 

(87

)

 

 

 

 

 

(87

)

Tax effect

 

 

22

 

 

 

 

 

 

22

 

 

 

(46

)

 

 

 

 

 

(46

)

Balances at June 30, 2022

 

$

(39

)

 

$

(36

)

 

$

(75

)

Balances at March 31, 2023

 

$

(103

)

 

$

(84

)

 

$

(187

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at March 31, 2023

 

$

(103

)

 

$

(84

)

 

$

(187

)

Other comprehensive income (loss) before reclassifications

 

 

(206

)

 

 

35

 

 

 

(171

)

Balances at December 31, 2023

 

$

(7

)

 

$

(16

)

 

$

(23

)

Other comprehensive loss before reclassifications

 

 

 

 

 

(42

)

 

 

(42

)

Amounts reclassified from accumulated other comprehensive income (loss)

 

 

61

 

 

 

 

 

 

61

 

 

 

64

 

 

 

 

 

 

64

 

Tax effect

 

 

(36

)

 

 

 

 

 

(36

)

 

 

16

 

 

 

 

 

 

16

 

Balances at June 30, 2023

 

$

(284

)

 

$

(49

)

 

$

(333

)

Balances at March 31, 2024

 

$

73

 

 

$

(58

)

 

$

15

 

 

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

 

Unrealized Gain (Loss) on Derivatives

 

 

Foreign Currency Translation Adjustment

 

 

Total

 

 

 

 

 

 

 

 

 

 

Balances at December 31, 2021

$

(32

)

 

$

11

 

 

$

(21

)

Other comprehensive loss before reclassifications

 

(149

)

 

 

(47

)

 

 

(196

)

Amounts reclassified from accumulated other comprehensive income (loss)

 

143

 

 

 

 

 

 

143

 

Tax effect

 

(1

)

 

 

 

 

 

(1

)

Balances at June 30, 2022

$

(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

)

 

 

1719


 

 


 

11. Equity-Based Compensation

Equity Compensation Plans

A summary of the option activity under the Companys 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, 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

 

 

$

 

 

Time Vested 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, 2023

 

839,479

 

 

$

32.53

 

 

 

7.25

 

 

$

 

Forfeited

 

(23,819

)

 

 

17.35

 

 

 

 

 

 

 

Expired

 

(3,711

)

 

 

17.35

 

 

 

 

 

 

 

Outstanding at March 31, 2024

 

811,949

 

 

$

33.04

 

 

 

7.04

 

 

$

 

Exercisable at March 31, 2024

 

333,391

 

 

$

37.03

 

 

 

5.12

 

 

$

 

 

Performance Vested 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, 2023

 

318,440

 

 

$

22.02

 

 

 

9.45

 

 

$

 

Outstanding at March 31, 2024

 

318,440

 

 

$

22.02

 

 

 

9.20

 

 

$

 

Exercisable at March 31, 2024

 

 

 

$

 

 

 

 

 

$

 

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

 

 

RSUs Outstanding

 

RSUs Outstanding

 

Number of RSUs

 

 

Weighted-Average Fair Value
(per RSU)

 

 

 

Number of RSUs

 

 

Weighted-Average Fair Value
(per RSU)

 

 

Outstanding at December 31, 2022

 

 

3,159,185

 

 

$

 

1.45

 

 

Outstanding at December 31, 2023

 

 

301,881

 

 

$

 

31.97

 

 

Granted

 

 

23,121,170

 

 

 

0.58

 

 

 

 

132,635

 

 

 

8.57

 

 

Vested

 

 

(11,113,084

)

 

 

0.68

 

 

 

 

(61,400

)

 

 

28.84

 

 

Forfeited

 

 

(974,173

)

 

 

0.74

 

 

 

 

(11,517

)

 

 

23.93

 

 

Outstanding at June 30, 2023

 

 

14,193,098

 

 

$

 

0.67

 

 

Outstanding at March 31, 2024

 

 

361,599

 

 

$

 

24.03

 

 

 

The fair value of RSUs vested during the three and six months ended June 30,March 31, 2024 and 2023 was $1.71.8 million and $7.65.9 million, respectively.No RSUs vested during the three and six months ended June 30, 2022.

 

On January 1, 2023,2024, the number of shares available for issuance under the 2021 Incentive Award Plan (the “2021 Plan”) increased by 15,608,106335,295 pursuant to the terms of the 2021 Plan. As of June 30, 2023,March 31, 2024, 13,640,317508,629 shares of Class A Common Stockcommon 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 $2.10.2 million during the sixthree months ended June 30, 2023,March 31, 2024, 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.20


 

18


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 sixthree months ended June 30,March 31, 2024 and 2023:

 

 

Six months ended June 30,

 

 

Three months ended March 31,

 

 

2023

 

 

2024

 

 

2023

 

Risk-free rate

 

 

4.6

%

 

 

5.2

%

 

 

4.6

%

Dividend yield rate

 

 

 

 

 

 

 

 

 

Volatility

 

 

55.3

%

 

 

107.5

%

 

 

55.3

%

Expected term (in years)

 

 

0.50

 

 

 

0.50

 

 

 

0.50

 

Weighted-average grant date fair value

 

$

0.14

 

 

$

2.44

 

 

$

7.08

 

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,

 

 

 

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

 

19


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,March 31, 2024 and 2023 and 2022 was as follows (in thousands):

 

 

Three months ended June 30,

 

 

Six months ended June 30,

 

 

Three months ended March 31,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

2024

 

 

2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenue

 

$

327

 

 

$

382

 

 

$

1,756

 

 

$

717

 

 

$

376

 

 

$

1,429

 

Selling and marketing

 

 

1,771

 

 

 

1,018

 

 

 

5,157

 

 

 

2,657

 

 

 

1,502

 

 

 

3,386

 

Enterprise technology and development

 

 

140

 

 

 

(17

)

 

 

703

 

 

 

910

 

 

 

240

 

 

 

563

 

General and administrative

 

 

923

 

 

 

1,618

 

 

 

5,100

 

 

 

3,281

 

 

 

2,247

 

 

 

4,177

 

Total equity-based compensation

 

$

3,161

 

 

$

3,001

 

 

$

12,716

 

 

$

7,565

 

 

$

4,365

 

 

$

9,555

 

 

In connection with the restructuring activityactivities that took place during the three and six months ended June 30,March 31, 2024 and 2023, the Company modified certain stock awards of terminated employees (approximately 40 employees in the three month period ended March 31, 2024 and approximately 100 employees)employees in the three months ended March 31, 2023). See Note 12, Restructuring, for additional information on the restructuring activities. 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 $0.40.5 million and $1.00.6 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,March 31, 2024 and 2023, respectively.

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

12. Derivative Financial Instruments

AsThe fair value of June 30, 2023 and December 31, 2022, the notional amounteach award that vests solely based on time as of the Company’s outstanding foreign exchange options was $15.4 million and $17.6 million, respectively.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 for the three months ended March 31, 2023. There were no outstanding forward contracts as of June 30, 2023 and Decemberoptions granted during the three months ended March 31, 2022.2024:

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,

 

 

 

Financial Statement Line Item

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

 

 

 

 

 

 

 

 

Unrealized gains (losses)

 

Other comprehensive income (loss)

 

$

(206

)

 

$

13

 

 

$

(307

)

 

$

(149

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

$

(61

)

 

$

(74

)

 

$

26

 

 

$

(143

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gains (losses) recognized on derivatives
  not designated as hedging instruments

 

Cost of revenue

 

$

(54

)

 

$

6

 

 

$

(95

)

 

$

(45

)

 

 

Three months ended March 31,

 

 

 

2023

 

Risk-free rate

 

 

3.6

%

Dividend yield rate

 

 

 

Volatility

 

 

56.4

%

Expected term (in years)

 

 

5.16

 

Weighted-average grant date fair value

 

$

16.00

 

 

The vesting periods are based on the terms of the option grant agreements, generally four to five years. The risk-free interest rates are based on the U.S. Treasury rates as of the grant dates for the expected terms of the options. The price volatilities represent calculated values based on the historical price volatilities of publicly traded companies within the Company’s industry group and the Company's historical volatility over the options’ expected terms. The expected terms of the options granted were estimated using the simplified method by taking an average of the vesting periods and the original contractual terms.

2012. Restructuring

21


 

13. Restructuring

In 2023,2024, restructuring charges primarily relate to the Company's key initiatives. Restructuring charges in 2023 primarily relate to activities focused on aligning the Company's operations with its key growth priorities. Restructuring charges in 2022 relate to the 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 $1.31.6 million and $8.65.4 million during the three and six months ended June 30, 2022,March 31, 2024 and 2023, respectively, comprised primarily of termination benefits related to headcount 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 provided service greater than 60 days from the date of notification were recognized ratably over the service period.

The following table summarizes activity in the Company’s restructuring-related liability during the three months ended June 30,March 31, 2024 and 2023, and 2022, respectively (in thousands):

 

 

Balance at

 

Restructuring

 

Payments /

 

Liability at

 

 

Balance at

 

Restructuring

 

Payments /

 

Liability at

 

 

March 31, 2023

 

 

Charges

 

 

Utilizations

 

 

June 30, 2023

 

 

December 31, 2023

 

 

Charges

 

 

Utilizations

 

 

March 31, 2024

 

Employee-related costs

 

$

1,389

 

 

$

(107

)

 

$

(1,026

)

 

$

256

 

 

$

18

 

 

$

1,644

 

 

$

(1,617

)

 

$

45

 

Total costs

 

$

1,389

 

 

$

(107

)

 

$

(1,026

)

 

$

256

 

 

$

18

 

 

$

1,644

 

 

$

(1,617

)

 

$

45

 

 

 

Balance at

 

Restructuring

 

Payments /

 

Liability at

 

 

Balance at

 

Restructuring

 

Payments /

 

Liability at

 

 

March 31, 2022

 

 

Charges

 

 

Utilizations

 

 

June 30, 2022

 

 

December 31, 2022

 

 

Charges

 

 

Utilizations

 

 

March 31, 2023

 

Employee-related costs

 

$

4,618

 

 

$

1,332

 

 

$

(4,630

)

 

$

1,320

 

 

$

469

 

 

$

5,387

 

 

$

(4,467

)

 

$

1,389

 

Total costs

 

$

4,618

 

 

$

1,332

 

 

$

(4,630

)

 

$

1,320

 

 

$

469

 

 

$

5,387

 

 

$

(4,467

)

 

$

1,389

 

 

The following table summarizes the activity in the Company’s restructuring 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 and $3.4 million 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 and $2.6 million of additional amortization as a component of digital cost of revenue during the three and six months ended June 30, 2022, respectively.

21


 

14.13. 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 $0.30.1 million and $approximately 1.0zero million for the three and six months ended June 30, 2022,March 31, 2024 and 2023, respectively. The effective tax rate was (0.00.4)% and (0.10.2)% for the three and six months ended June 30,March 31, 2024 and 2023, respectively, and the effective tax rate was 0.7% and 0.8% for the three and six months ended June 30, 2022, 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, 2023March 31, 2024 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, 2023.March 31, 2024.

 

15.14. 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,

 

 

Three months ended March 31,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

2024

 

 

2023

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(25,748

)

 

$

(41,867

)

 

$

(54,936

)

 

$

(115,400

)

 

$

(14,216

)

 

$

(29,188

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding, basic and diluted

 

 

314,311,797

 

 

 

307,204,999

 

 

 

311,740,463

 

 

 

306,786,192

 

 

 

6,760,771

 

 

 

6,182,811

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per common share, basic and diluted

 

$

(0.08

)

 

$

(0.14

)

 

$

(0.18

)

 

$

(0.38

)

 

$

(2.10

)

 

$

(4.72

)

 

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,March 31, 2024 and 2023 and 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

822


 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,

 

 

 

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

 

 

 

March 31,

 

 

 

2024

 

 

2023

 

 

 

 

 

 

 

 

Time vested options

 

 

811,949

 

 

 

962,179

 

Performance vested options

 

 

318,440

 

 

 

 

RSUs

 

 

361,599

 

 

 

309,601

 

Compensation warrants

 

 

79,612

 

 

 

79,612

 

Public and Private Placement Warrants

 

 

306,667

 

 

 

306,667

 

Term Loan Warrants

 

 

97,482

 

 

 

94,335

 

Common Stock Warrants

 

 

543,590

 

 

 

 

Forest Road Earn-out Shares

 

 

75,000

 

 

 

75,000

 

 

 

 

2,594,339

 

 

 

1,827,394

 

 

The options balance as of June 30, 2023 in the table above includes 15.9 million Performance-Vesting Options, which vest based on the attainment of applicable performance goals and continued service. See Note 11, Equity-Based Compensation, for additional information on the Performance-Vesting Options.

22


 

16.15. Subsequent Events

 

On July 24, 2023April 5, 2024 (the "Second"Fifth Amendment Effective Date"), the Company and Blue Torch entered into the SecondFifth Amendment, which amended the Company's existing Financing Agreement. The SecondFifth 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 standalone basis, and to adjust the minimum revenue levels to (a) $100.0 million, commencing with the fiscal quarter ended June 30, 2023, for each fiscal quarter ending on or prior to MarchDecember 31, 2024 and (b) $120.0110.0 million for each fiscal quarter thereafter and or prior to December 31, 2025;2025 and (2) amending the minimum liquidity financial covenant to adjust the minimum liquidity levelslevel to (a) $20.018.0 million at all times from the SecondFifth Amendment Effective Date through March 31, 2024 and (b) $25.0 million at all times thereafter through the maturity of the Term Loan; (3) modifying the maturity date of the Term Loan from August 8, 2026 to February 8, 2026; and (4) amending certain financial definitions, reporting covenants and other covenants thereunder.Loan.

 

In connection with the SecondFifth Amendment, on the SecondFifth Amendment Effective Date, the Company made a partial prepayment on the Term Loan of $15.04.0 million (which amount was classified as a current obligation at June 30, 2023)March 31, 2024) along with the related prepayment premium of 53% ($0.80.1 million) and accrued interest ($0.1 million).interest. The Company also incurred a 12% fee as paid in kind on the outstanding Term Loan balance prior to the prepayment (fee of $0.50.6 million). The amounts related to the SecondFifth Amendment will be recorded in the quarter ending SeptemberJune 30, 2023.2024. After the prepayment and the paid in kind fee on July 24, 2023,April 5, 2024, the principal amount outstanding on the Term Loan was $35.625.5 million.

 

In connection with the SecondFifth Amendment, the Company also amended and restated the Term Loan Warrants for the purchase of 4,716,75697,482 shares of the Company’s Class A Common Stock.common stock (the "Warrant Second Amendment"). The amendment of the Term Loan WarrantsWarrant Second Amendment amends the exercise price from $1.8520.50 per share to $0.419.16 per share. The amended exercise price increased the fair value of the Term Loan Warrants as of the SecondFifth Amendment Effective Date from $0.80.5 million to $1.60.6 million and will be recorded in the quarter ending SeptemberJune 30, 2023.2024.

23


 

23


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 "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, 20222023 (our "Form 10-K"). Unless otherwise indicated, the terms “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 (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including statements about 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;
other than the pre-funded warrants, 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 under the heading “Risk 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.

 

24


 

Overview

BODi is a leading subscription health and wellnessfitness company. We focus primarily on digital content, supplements, connected fitness, and consumer health and wellness.fitness. Our goal is to continue to provide holistic health and wellnessfitness content, subscription-based solutions and subscription-based solutions.digital program sales. 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 InteractiveBODi streaming services.service.

We offer nutritional products such as Shakeology nutrition shakes, Beachbody Performance supplements and BEACHBAR snack bars and Ladder premium supplements as well as a professional-gradecommercial-grade stationary cycle with or without 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 “Partners” (previously known as “Coaches”), we plan to continue market penetration into connected fitness to reach a wider health, wellness and fitness audience.

Our revenue is generated primarily through our network of Partners, social media marketing channels, and direct response advertising. Components of revenue include recurring digital subscription revenue, revenue from the sale of nutritional and other 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, 2023,March 31, 2024, as compared to the three months ended June 30, 2022:March 31, 2023:

Total revenue was $134.9$120.0 million, a 25%17% decrease;
Digital revenue was $65.2$61.5 million, a 16%5% decrease;
Nutrition and other revenue was $64.6$55.5 million, a 29%25% decrease;
Connected fitness revenue was $5.1$3.0 million, a 52%50% decrease;
Operating expenses were $92.1 million, compared to $118.8 million;
Net loss was $25.7$14.2 million, compared to a net loss of $41.9$29.2 million; and
Adjusted EBITDA was ($4.8)$4.6 million, compared to ($1.5)a loss of $0.9 million.

 

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

Total revenue was $279.8 million, a 26% decrease;
Digital revenue was $130.0 million, a 19% decrease;
Nutrition and other revenue was $138.7 million, a 26% decrease;
Connected fitness revenue was $11.1 million, a 63% decrease;
Net loss was $54.9 million, compared to net loss of $115.4 million; and
Adjusted EBITDA was $(5.7) million, compared to $(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.

 

25


 

Recent Developments

Effective as

Sale/Leaseback of June 15,Property

On February 29, 2024, we sold our Van Nuys production facility which had a net carrying value of $4.8 million at December 31, 2023, for $6.2 million. Simultaneous with the Company appointed Mark Goldston as Executive Chairman, replacing the service of Mr. Daikeler in his capacity as Chairmansale we entered into a five year lease of the Board. Mr. Daikeler will continuefacility at an annual base rate of $0.3 million per year. The Company used the proceeds received from the sale to serve as the Company’s CEO and director. In connection with the employment offer letter to Mr. Goldston, he was grantedmake a stock option under the Company’s 2023 Employment Inducement Incentive Award Plan (the “Inducement Plan”) covering an aggregatepartial prepayment of 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 vest based on continued service (the “Time-Vesting Options”) and 15,922,177 shares will vest based$5.5 million on the attainment of applicable performance goals and continued service (the “Performance-Vesting Options”).Term Loan. The Company also entered into the Fourth Amendment (as defined below) which amended the minimum liquidity financial covenant. See Note 11,6, Equity-Based Compensation, Property and Equipment, Net and Note 9, Debt, to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report for additional information on the Inducement Plansale and leaseback of this facility and the Options grantedFourth Amendment.

2024 Restructuring

In January 2024, the Company executed cost-reduction initiatives primarily related to Mr. Goldston.the Company's key initiatives. These actions resulted in approximately $1.6 million in costs consisting primarily of termination benefits during the first quarter of 2024.

Term Loan Amendment No. 5

 

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. No consideration was provided to Mr. Daikeler for the forfeiture of these shares. See Note 10, Stockholders’ Equity, for additional information on the forfeiture of these shares.

On July 24, 2023April 5, 2024 (the "Second"Fifth Amendment Effective Date"), the Company and Blue Torch entered into Amendment No. 25 to the Financing Agreement (the "Second"Fifth Amendment"), which amended, the Company's existing Financing Agreement. The Second Amendment amends, among other things, certain terms of the Financing Agreement including without limitation, to (1) amend the minimum revenue financial covenant and (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.

covenant. In connection with the SecondFifth Amendment, on the SecondFifth Amendment Effective Date, the Company made a partial prepayment on the Term Loan of $15.0$4.0 million (which amount was classified as a current obligation at June 30, 2023)March 31, 2024) along with the related prepayment premium of 5%3% ($0.80.1 million) and accrued interest ($0.1 million).interest. The Company also incurred a 1%2% fee as paid in kind on the outstanding Term Loan balance prior to the prepayment (fee of $0.5$0.6 million).

 

In connection with the SecondFifth Amendment, the Company also amended and restated the Term Loan WarrantsWarrant for the purchase of 4,716,75697,482 shares of the Company’sCompany's Class A Common Stock.common stock.

 

See Note 16, 15, Subsequent Events, to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly report for additional information on the SecondFifth Amendment and amendments to the Term Loan Warrants.Warrant.

26


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 March 31,

 

 

2023

 

 

2022

 

 

2024

 

 

2023

 

 

 

 

 

 

 

 

 

 

 

Digital subscriptions (millions)

 

 

1.53

 

 

 

2.28

 

 

 

1.22

 

 

 

1.75

 

Nutritional subscriptions (millions)

 

 

0.20

 

 

 

0.28

 

 

 

0.15

 

 

 

0.21

 

 

 

 

Three months ended June 30,

 

 

Six months ended June 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average digital retention

 

 

95.2

%

 

 

95.6

%

 

 

95.5

%

 

 

95.6

%

Total streams (millions)

 

 

25.3

 

 

 

31.0

 

 

 

55.0

 

 

 

69.2

 

DAU/MAU

 

 

31.6

%

 

 

30.0

%

 

 

32.1

%

 

 

31.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue (millions)

 

$

134.9

 

 

$

179.1

 

 

$

279.8

 

 

$

378.1

 

Gross profit (millions)

 

$

82.7

 

 

$

87.3

 

 

$

174.1

 

 

$

180.3

 

Gross margin

 

 

61

%

 

 

49

%

 

 

62

%

 

 

48

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss (millions)

 

$

(25.7

)

 

$

(41.9

)

 

$

(54.9

)

 

$

(115.4

)

Adjusted EBITDA (millions)

 

$

(4.8

)

 

$

(1.5

)

 

$

(5.7

)

 

$

(20.6

)

Please see

 

 

Three months ended March 31,

 

 

 

2024

 

 

2023

 

 

 

 

 

 

 

 

Average digital retention

 

 

95.7

%

 

 

95.9

%

Total streams (millions)

 

 

25.6

 

 

 

29.7

 

DAU/MAU

 

 

33.2

%

 

 

32.5

%

 

 

 

 

 

 

 

Revenue (millions)

 

$

120.0

 

 

$

144.9

 

Gross profit (millions)

 

$

81.3

 

 

$

91.3

 

Gross margin

 

 

67.7

%

 

 

63.0

%

 

 

 

 

 

 

 

Net loss (millions)

 

$

(14.2

)

 

$

(29.2

)

Adjusted EBITDA (millions) (1)

 

$

4.6

 

 

$

(0.9

)

26


(1) 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,(through March 2023) and prior to Q3 2022, Openfit subscriptions.BODi. Digital subscriptions include paid and free-to-pay subscriptions, with free-to-pay subscriptions representing approximatelyless than 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 is defined as the average rate at which the total subscriber file is retained for the next period, to measure customer retention. For instance,example, 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, nutrition and mindset programs viewed, which is 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)

27


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.

28


Non-GAAP Information

We use Adjusted EBITDA, which is a non-GAAP performance measure, to supplement our results presented in accordance with 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, 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 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) or are not related to our underlying business performance (for example, in the case of restructuring costs, interest income and expense).

27


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 March 31,

 

(in thousands)

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

2024

 

 

2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(25,748

)

 

$

(41,867

)

 

$

(54,936

)

 

$

(115,400

)

 

$

(14,216

)

 

$

(29,188

)

Adjusted for:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss on partial debt extinguishment (1)

 

 

1,209

 

 

 

 

Depreciation and amortization

 

 

10,919

 

 

 

19,965

 

 

 

21,632

 

 

 

41,552

 

 

 

5,378

 

 

 

10,713

 

Amortization of capitalized cloud computing implementation costs

 

 

40

 

 

 

168

 

 

 

81

 

 

 

336

 

 

 

37

 

 

 

41

 

Amortization of content assets

 

 

5,459

 

 

 

7,016

 

 

 

11,020

 

 

 

13,180

 

 

 

4,540

 

 

 

5,561

 

Interest expense

 

 

2,368

 

 

 

3

 

 

 

4,699

 

 

 

22

 

 

 

1,875

 

 

 

2,331

 

Income tax provision (benefit)

 

 

(12

)

 

 

(281

)

 

 

36

 

 

 

(987

)

Income tax provision

 

 

62

 

 

 

48

 

Equity-based compensation

 

 

3,161

 

 

 

3,001

 

 

 

12,716

 

 

 

7,565

 

 

 

4,365

 

 

 

9,555

 

Employee incentives, expected to be settled in equity (1)(2)

 

 

 

 

 

 

 

 

(5,466

)

 

 

 

 

 

 

 

 

(5,466

)

Inventory net realizable value adjustment (2)

 

 

 

 

 

10,502

 

 

 

 

 

 

25,436

 

Restructuring and platform consolidation costs (3)

 

 

(107

)

 

 

2,086

 

 

 

5,952

 

 

 

9,973

 

 

 

1,644

 

 

 

6,059

 

Change in fair value of warrant liabilities

 

 

(375

)

 

 

(2,070

)

 

 

(432

)

 

 

(2,334

)

 

 

724

 

 

 

(57

)

Gain on sale of property and equipment

 

 

(784

)

 

 

 

Non-operating (4)

 

 

(479

)

 

 

5

 

 

 

(963

)

 

 

78

 

 

 

(280

)

 

 

(484

)

Adjusted EBITDA

 

$

(4,774

)

 

$

(1,472

)

 

$

(5,661

)

 

$

(20,579

)

 

$

4,554

 

 

$

(887

)

 

(1)
Represents the loss related to the $1.0 million and $5.5 million partial debt prepayments that the Company made on January 9, 2024 and February 29, 2024, respectively.
(2)
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 was included during the three and six months ended June 30, 2022 because of its unusual magnitude due to disruptions in the connected fitness market.
(3)
Includes restructuring expense and non-recurring personnel costs associated with the Company's key initiatives during the three months ended March 31, 2024 and with executing our key growth priorities during the three and six months ended June 30, 2023 and with the consolidation of our digital platforms during the three and six months ended June 30, 2022.March 31, 2023.
(4)
Primarily includes interest income.

29


Results of Operations

The Company has one operating segment. The following discussion of our results and operations is on a consolidated basis.

 

(in thousands)

 

Three months ended June 30,

 

 

Six months ended June 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Digital

 

$

65,214

 

 

$

78,015

 

 

$

129,987

 

 

$

159,760

 

Nutrition and other

 

 

64,628

 

 

 

90,516

 

 

 

138,748

 

 

 

188,180

 

Connected fitness

 

 

5,106

 

 

 

10,605

 

 

 

11,114

 

 

 

30,118

 

Total revenue

 

 

134,948

 

 

 

179,136

 

 

 

279,849

 

 

 

378,058

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Digital

 

 

16,336

 

 

 

18,406

 

 

 

31,303

 

 

 

34,831

 

Nutrition and other

 

 

27,202

 

 

 

42,002

 

 

 

58,241

 

 

 

86,776

 

Connected fitness

 

 

8,666

 

 

 

31,459

 

 

 

16,221

 

 

 

76,165

 

Total cost of revenue

 

 

52,204

 

 

 

91,867

 

 

 

105,765

 

 

 

197,772

 

Gross profit

 

 

82,744

 

 

 

87,269

 

 

 

174,084

 

 

 

180,286

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Selling and marketing

 

 

76,492

 

 

 

86,624

 

 

 

153,068

 

 

 

193,068

 

Enterprise technology and development

 

 

18,650

 

 

 

24,133

 

 

 

37,746

 

 

 

57,830

 

General and administrative

 

 

11,887

 

 

 

19,584

 

 

 

29,603

 

 

 

39,657

 

Restructuring

 

 

(107

)

 

 

1,332

 

 

 

5,280

 

 

 

8,555

 

Total operating expenses

 

 

106,922

 

 

 

131,673

 

 

 

225,697

 

 

 

299,110

 

Operating loss

 

 

(24,178

)

 

 

(44,404

)

 

 

(51,613

)

 

 

(118,824

)

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

Change in fair value of warrant liabilities

 

 

375

 

 

 

2,070

 

 

 

432

 

 

 

2,334

 

Interest expense

 

 

(2,368

)

 

 

(3

)

 

 

(4,699

)

 

 

(22

)

Other income, net

 

 

411

 

 

 

189

 

 

 

980

 

 

 

125

 

Loss before income taxes

 

 

(25,760

)

 

 

(42,148

)

 

 

(54,900

)

 

 

(116,387

)

Income tax (provision) benefit

 

 

12

 

 

 

281

 

 

 

(36

)

 

 

987

 

Net loss

 

$

(25,748

)

 

$

(41,867

)

 

$

(54,936

)

 

$

(115,400

)

28


 

30


(in thousands)

 

Three months ended March 31,

 

 

 

2024

 

 

2023

 

 

 

 

 

 

 

 

Revenue:

 

 

 

 

 

 

Digital

 

$

61,506

 

 

$

64,773

 

Nutrition and other

 

 

55,512

 

 

 

74,120

 

Connected fitness

 

 

3,028

 

 

 

6,008

 

Total revenue

 

 

120,046

 

 

 

144,901

 

Cost of revenue:

 

 

 

 

 

 

Digital

 

 

12,862

 

 

 

14,967

 

Nutrition and other

 

 

22,284

 

 

 

31,039

 

Connected fitness

 

 

3,618

 

 

 

7,555

 

Total cost of revenue

 

 

38,764

 

 

 

53,561

 

Gross profit

 

 

81,282

 

 

 

91,340

 

Operating expenses:

 

 

 

 

 

 

Selling and marketing

 

 

59,261

 

 

 

76,576

 

Enterprise technology and development

 

 

17,717

 

 

 

19,096

 

General and administrative

 

 

13,483

 

 

 

17,716

 

Restructuring

 

 

1,644

 

 

 

5,387

 

Total operating expenses

 

 

92,105

 

 

 

118,775

 

Operating loss

 

 

(10,823

)

 

 

(27,435

)

Other income (expense)

 

 

 

 

 

 

Loss on partial debt extinguishment

 

 

(1,209

)

 

 

 

Change in fair value of warrant liabilities

 

 

(724

)

 

 

57

 

Interest expense

 

 

(1,875

)

 

 

(2,331

)

Other income, net

 

 

477

 

 

 

569

 

Loss before income taxes

 

 

(14,154

)

 

 

(29,140

)

Income tax provision

 

 

(62

)

 

 

(48

)

Net loss

 

$

(14,216

)

 

$

(29,188

)

 

29


Revenue

Revenue includes digital subscriptions, digital program sales, nutritional supplement subscriptions, one-time nutritional sales, connected fitness products, access to our online Partner business management platform, preferred customer program memberships, and other fitness-related products. 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 March 31,

 

 

 

 

 

2023

 

 

2022

 

 

$ Change

 

 

% Change

 

 

2024

 

 

2023

 

 

$ Change

 

 

% Change

 

 

(dollars in thousands)

 

 

 

 

 

 

(dollars in thousands)

 

 

 

 

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Digital

 

$

65,214

 

 

$

78,015

 

 

$

(12,801

)

 

 

(16

%)

 

$

61,506

 

 

$

64,773

 

 

$

(3,267

)

 

 

(5

%)

Nutrition and other

 

 

64,628

 

 

 

90,516

 

 

 

(25,888

)

 

 

(29

%)

 

 

55,512

 

 

 

74,120

 

 

 

(18,608

)

 

 

(25

%)

Connected fitness

 

 

5,106

 

 

 

10,605

 

 

 

(5,499

)

 

 

(52

%)

 

 

3,028

 

 

 

6,008

 

 

 

(2,980

)

 

 

(50

%)

Total revenue

 

$

134,948

 

 

$

179,136

 

 

$

(44,188

)

 

 

(25

%)

 

$

120,046

 

 

$

144,901

 

 

$

(24,855

)

 

 

(17

%)

 

The decrease in digital revenue for the three months ended June 30, 2023,March 31, 2024, as compared to the three months ended June 30, 2022,March 31, 2023, was primarily dueattributable to a $5.5 million decrease in revenue from our digital streaming services due to 33%30% fewer subscriptions due toon lower demand and a decrease of $1.3$0.5 million in fees from partners due toPartners as there was a 24%27% decrease in the number of partners,Partners, partially offset by an increasedigital program sales of $2.5 million which were not sold in revenue per subscription.the prior year period.

 

The decrease in nutrition and other revenue for the three months ended June 30, 2023,March 31, 2024, as compared to the three months ended June 30, 2022,March 31, 2023, was primarily dueattributable to a $20.7$14.4 million decrease in revenue from nutritional products due to 30%28% fewer nutritional subscriptions due toon lower demand, a $2.3$2.5 million decrease in revenue generated from our preferred customer fees due toas there was a 30%34% decrease in preferred customers and a $1.3 million decrease in fitness accessories revenue, partially offset by a $1.6 million increase inevent ticket sales due primarily to Summit 2023 which occurredthe decrease in June 2023 (in the prior year the Summit occurred in July).number and length of events.

 

The decrease in connected fitness revenue for the three months ended June 30, 2023,March 31, 2024, as compared to the three months ended June 30, 2022,March 31, 2023, was primarily due to a 37% decrease in number of bikes delivered and a 19%27% 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, 2023, as compared to the six months ended June 30, 2022, was primarily due tobike and a decrease in revenuebikes delivered from our digital streaming services due to 33% fewer 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 decrease in nutrition and other revenueapproximately 4,700 for the sixthree months ended June 30,March 31, 2023 as compared to approximately 3,500 for the sixthree months ended June 30, 2022, was primarily due to a $41.1 million decrease in revenue from nutritional products due to 30% fewer nutritional subscriptions due to lower demand and a $4.1 million decrease in revenue generated from our preferred customer fees due to a 28% decrease in preferred customers and a $2.7 million decrease in fitness accessories revenue, partially offset by a $2.5 million increase in ticket sales due primarily to Summit 2023 which occurred in June 2023 (in the prior year the Summit occurred in July).March 31, 2024.

 

The decrease in connected fitness revenue for the 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 number of bikes delivered and a 7% decrease in the average sales price for a bike.

30


 

31


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 and digital streaming costs, and amortization of acquired digital platform intangible assets.costs. 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 (in the 2023 period), 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,fulfillment, warehousing and logistics costs, costs associated with service calls and repairs of products under warranty, payment processing and financing fees, customer service expenses, and personnel-related expenses associated with supply chain and logistics.

 

 

Three months ended June 30,

 

 

 

 

 

Three months ended March 31,

 

 

 

 

 

2023

 

 

2022

 

 

$ Change

 

 

% Change

 

 

2024

 

 

2023

 

 

$ Change

 

 

% Change

 

 

(dollars in thousands)

 

 

 

 

 

 

(dollars in thousands)

 

 

 

 

 

Cost of revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Digital

 

$

16,336

 

 

$

18,406

 

 

$

(2,070

)

 

 

(11

%)

 

$

12,862

 

 

$

14,967

 

 

$

(2,105

)

 

 

(14

%)

Nutrition and other

 

 

27,202

 

 

 

42,002

 

 

 

(14,800

)

 

 

(35

%)

 

 

22,284

 

 

 

31,039

 

 

 

(8,755

)

 

 

(28

%)

Connected fitness

 

 

8,666

 

 

 

31,459

 

 

 

(22,793

)

 

 

(72

%)

 

 

3,618

 

 

 

7,555

 

 

 

(3,937

)

 

 

(52

%)

Total cost of revenue

 

$

52,204

 

 

$

91,867

 

 

$

(39,663

)

 

 

(43

%)

 

$

38,764

 

 

$

53,561

 

 

$

(14,797

)

 

 

(28

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Digital

 

$

48,878

 

 

$

59,609

 

 

$

(10,731

)

 

 

(18

%)

 

$

48,644

 

 

$

49,806

 

 

$

(1,162

)

 

 

(2

%)

Nutrition and other

 

 

37,426

 

 

 

48,514

 

 

 

(11,088

)

 

 

(23

%)

 

 

33,228

 

 

 

43,081

 

 

 

(9,853

)

 

 

(23

%)

Connected fitness

 

 

(3,560

)

 

 

(20,854

)

 

 

17,294

 

 

 

83

%

 

 

(590

)

 

 

(1,547

)

 

 

957

 

 

 

62

%

Total gross profit

 

$

82,744

 

 

$

87,269

 

 

$

(4,525

)

 

 

(5

%)

 

$

81,282

 

 

$

91,340

 

 

$

(10,058

)

 

 

(11

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross margin

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Digital

 

 

75

%

 

 

76

%

 

 

 

 

 

 

 

79.1

%

 

 

76.9

%

 

 

 

 

 

Nutrition and other

 

 

58

%

 

 

54

%

 

 

 

 

 

 

 

59.9

%

 

 

58.1

%

 

 

 

 

 

Connected fitness

 

 

(70

%)

 

 

(197

%)

 

 

 

 

 

 

 

(19.5

%)

 

 

(25.7

%)

 

 

 

 

 

Total gross margin

 

 

61

%

 

 

49

%

 

 

 

 

 

 

 

67.7

%

 

 

63.0

%

 

 

 

 

 

 

The decrease in digital cost of revenue for the three months ended June 30, 2023,March 31, 2024, as compared to the three months ended June 30, 2022,March 31, 2023, was primarily due to a $1.6$1.2 million decrease in thedepreciation and a $1.0 million decrease in digital content amortization of content assets as a result of lower production spendthe end of the useful life of certain assets and a $0.3 million decrease in digital content revisions partially offset by a $0.7 million decreaseincrease in streaming costs due to lower platform usage.customer service. The decreaseincrease in digital gross margin for the three months ended June 30, 2023March 31, 2024 compared to the three months ended June 30, 2022March 31, 2023 was primarily as a result of fixed expenses on lower digital revenue.the decrease in depreciation and amortization.

The decrease in nutrition and other cost of revenue for the three months ended June 30, 2023,March 31, 2024, as compared to the three months ended June 30, 2022,March 31, 2023, was primarily due to a $6.4$2.0 million decrease in product costs and a $4.2$1.6 million decrease in fulfillment and shipping expense related to the decrease in nutrition and other revenue, lower inventory adjustments of $1.7 million, a $1.7 million decrease in depreciation expense as a result of the end of the useful life of certain fixed assets and a $1.2$1.0 million decrease in customer service expense due to a decrease in the volume of contacts related to nutrition and other revenue. NutritionThe increase in nutrition and other gross margin increased for the three months ended June 30, 2023March 31, 2024 compared to the three months ended June 30, 2022March 31, 2023 was primarily as a result of lower shippingthe decrease in inventory adjustments, depreciation expense and lower depreciation expense.customer service.

The decrease in connected fitness cost of revenue for the three months ended June 30, 2023,March 31, 2024, as compared to the three months ended June 30, 2022,March 31, 2023, was driven by lower inventory value adjustments of $12.7 million, a $7.1$2.9 million decrease in product costs and a $1.4 million decrease in freight, fulfillment, and shipping expenses as the resultinventory adjustments of $0.4 million. The decrease in product costs was primarily due to a 24% decrease in the number of bikes sold.delivered in the current quarter as compared to the prior year quarter as well as the bikes delivered in the current quarter had a lower carrying value than the bikes delivered in the prior

31


year quarter. The connected fitness negativeimprovement in gross margin improvement for the three months ended June 30, 2023March 31, 2024 compared to the three months ended June 30, 2022

32


primarily as a result of lower inventory value adjustments, partially offset by the impact of fixed warehousing expenses on lower connected fitness revenue.

 

 

Six months ended June 30,

 

 

 

 

 

 

 

 

 

2023

 

 

2022

 

 

$ Change

 

 

% Change

 

 

 

(dollars in thousands)

 

 

 

 

 

 

 

Cost of revenue

 

 

 

 

 

 

 

 

 

 

 

 

Digital

 

$

31,303

 

 

$

34,831

 

 

$

(3,528

)

 

 

(10

%)

Nutrition and other

 

 

58,241

 

 

 

86,776

 

 

 

(28,535

)

 

 

(33

%)

Connected fitness

 

 

16,221

 

 

 

76,165

 

 

 

(59,944

)

 

 

(79

%)

Total cost of revenue

 

$

105,765

 

 

$

197,772

 

 

$

(92,007

)

 

 

(47

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

 

 

 

 

 

 

 

 

 

 

Digital

 

$

98,684

 

 

$

124,929

 

 

$

(26,245

)

 

 

(21

%)

Nutrition and other

 

 

80,507

 

 

 

101,404

 

 

 

(20,897

)

 

 

(21

%)

Connected fitness

 

 

(5,107

)

 

 

(46,047

)

 

 

40,940

 

 

 

89

%

Total gross profit

 

$

174,084

 

 

$

180,286

 

 

$

(6,202

)

 

 

(3

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross margin

 

 

 

 

 

 

 

 

 

 

 

 

Digital

 

 

76

%

 

 

78

%

 

 

 

 

 

 

Nutrition and other

 

 

58

%

 

 

54

%

 

 

 

 

 

 

Connected fitness

 

 

(46

%)

 

 

(153

%)

 

 

 

 

 

 

Total gross margin

 

 

62

%

 

 

48

%

 

 

 

 

 

 

The decrease in digital cost of revenue for the six months ended June 30,March 31, 2023 as compared to the six months ended June 30, 2022, was due to a $3.1 million 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 as a result of lower production spend and a $1.1 million decrease in streaming costs due to lower platform usage. The decrease in digital gross margin for the six months ended June 30, 2023 compared to the six months ended June 30, 2022 was primarily as a result of fixed expenses onthe lower digital revenue.

The decreasecarrying value of the bikes that were delivered in nutrition and other cost of revenue for the sixthree months ended June 30, 2023, as compared to the six months ended June 30, 2022, was primarily due to a $12.8 million decrease in product costs and a $8.0 million decrease in fulfillment and shipping expense 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 $2.8 million decrease in customer service expense due to a decrease in the volume of contacts related to nutrition and other revenue. Nutrition and other gross margin increased for the six months ended June 30, 2023 compared to the six months ended June 30, 2022 primarily as a result of lower shipping and depreciation expense.March 31, 2024.

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 warehousing expenses on lower connected fitness revenue.

33


 

Operating Expenses

Selling and Marketing

Selling and marketing expenses primarily include the cost of 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 expenses also include depreciation of certain software and amortization of contract-based intangible assets (in the 2023 period). 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 March 31,

 

 

 

 

 

2023

 

 

2022

 

 

$ Change

 

 

% Change

 

 

2024

 

 

2023

 

 

$ Change

 

 

% Change

 

 

(dollars in thousands)

 

 

 

 

 

 

(dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling and marketing

 

$

76,492

 

 

$

86,624

 

 

$

(10,132

)

 

 

(12

%)

 

$

59,261

 

 

$

76,576

 

 

$

(17,315

)

 

 

(23

%)

As a percentage of total revenue

 

 

56.7

%

 

 

48.4

%

 

 

 

 

 

 

 

 

49.4

%

 

 

52.8

%

 

 

 

 

 

 

 

The decrease in selling and marketing expense for the three months ended June 30, 2023,March 31, 2024, as compared to the three months ended June 30, 2022,March 31, 2023, was primarily due to a $12.3$11.4 million decrease in Partner compensation as a result of the decrease in the number of Partners, lower commissionable revenue and an approximate 20% decrease in the commission rate paid to Partners that started at the beginning of January 2024, a $3.8$2.7 million decrease in event expenses due primarily to a decrease in the number and length of events, a $1.5 million 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 priorpast year and a $2.5$1.1 million decrease in the amortization of intangible assets due to the impairment of certain assetsthe remaining intangible asset balance 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 2023 (in the prior year this event was held in July) and a $2.0 million increase in online and television media expense.2023.

Selling and marketing expense as a percentage of total revenue increaseddecreased by 830340 basis points ("bps") primarily due to the timing of Summit 2023 and a decrease in revenue.

 

 

Six months ended June 30,

 

 

 

 

 

 

 

 

 

2023

 

 

2022

 

 

$ Change

 

 

% Change

 

 

 

(dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling and marketing

 

$

153,068

 

 

$

193,068

 

 

$

(40,000

)

 

 

(21

%)

As a percentage of total revenue

 

 

54.7

%

 

 

51.1

%

 

 

 

 

 

 

The decrease in selling and marketing expense for the six months ended June 30, 2023, as compared to the six months ended June 30, 2022, was primarily due to a $26.2 million decrease in Partner compensation as a result of lower commissionable revenue, a $9.9 million decrease in personnel-related expenses due to lower headcount primarily related to the restructuring activities that occurred in the first quarter of 2023commissions and in the prior year, a $5.0 million decrease in the amortization of intangible assets due to the impairment of certain assets in the fourth quarter of 2022 and a $4.0 million decrease in online and television media expense, partially offset by a $7.8 million increase in event expenses due primarily to Summit 2023 which occurred in June 2023 (in the prior year this event was held in July).expense.

Selling and marketing expense as a percentage of total revenue increased by 360 bps primarily due to the timing of Summit 2023 and a decrease in revenue.

34


Enterprise Technology and Development

Enterprise technology and development expenses 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 and primarily relate 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 the Company's 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 March 31,

 

 

 

 

 

2023

 

 

2022

 

 

$ Change

 

 

% Change

 

 

2024

 

 

2023

 

 

$ Change

 

 

% Change

 

 

(dollars in thousands)

 

 

 

 

 

 

(dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Enterprise technology and development

 

$

18,650

 

 

$

24,133

 

 

$

(5,483

)

 

 

(23

%)

 

$

17,717

 

 

$

19,096

 

 

$

(1,379

)

 

 

(7

%)

As a percentage of total revenue

 

 

13.8

%

 

 

13.5

%

 

 

 

 

 

 

 

 

14.8

%

 

 

13.2

%

 

 

 

 

 

 

 

The decrease in enterprise technology and development expense for the three months ended June 30, 2023,March 31, 2024, as compared to the three months ended June 30, 2022,March 31, 2023, was primarily due to a $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 due to lower headcount primarily related to the restructuring activities that occurred in the first quarter of 2023 and in the prior year.

Enterprise technology and development expense as a percentage of total revenue increased by 30 bps due to the decrease in revenue.

 

 

Six months ended June 30,

 

 

 

 

 

 

 

 

 

2023

 

 

2022

 

 

$ Change

 

 

% Change

 

 

 

(dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Enterprise technology and development

 

$

37,746

 

 

$

57,830

 

 

$

(20,084

)

 

 

(35

%)

As a percentage of total revenue

 

 

13.5

%

 

 

15.3

%

 

 

 

 

 

 

The decrease in enterprise technology and development expense for the six months ended June 30, 2023, as compared to the six months ended June 30, 2022, was primarily due to a $14.1 million 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$1.2 million decrease in depreciation expense as a result of the end of the useful life of certain fixed assets.

 

Enterprise technology and development expense as a percentage of total revenue decreasedincreased by 180160 bps due to lower fixed expenses.the decrease in revenue.

 

35

32


 

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 March 31,

 

 

 

 

 

2023

 

 

2022

 

 

$ Change

 

 

% Change

 

 

2024

 

 

2023

 

 

$ Change

 

 

% Change

 

 

(dollars in thousands)

 

 

 

 

 

 

(dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative

 

$

11,887

 

 

$

19,584

 

 

$

(7,697

)

 

 

(39

%)

 

$

13,483

 

 

$

17,716

 

 

$

(4,233

)

 

 

(24

%)

As a percentage of total revenue

 

 

8.8

%

 

 

10.9

%

 

 

 

 

 

 

 

 

11.2

%

 

 

12.2

%

 

 

 

 

 

 

 

The decrease in general and administrative expense for the three months ended June 30, 2023,March 31, 2024, as compared to the three months ended June 30, 2022,March 31, 2023, was primarily due to a $5.0$2.3 million decrease in personnel-related expenses asprofessional and accounting fees due to management focus on decreasing spending, a result of lower headcount, primarily related to the restructuring activities that occurred in the first quarter of 2023 and in the prior year, and a $1.2$1.0 million decrease in insurance expense 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 the prior period.period, and a $0.8 million gain on the sale of the Van Nuys facility which was recorded as a reduction of general and administrative expense in the three months ended March 31, 2024.

 

General and administrative expense as a percentage of total revenue decreased by 210100 bps due to lower fixed expenses.

 

 

Six months ended June 30,

 

 

 

 

 

 

 

 

 

2023

 

 

2022

 

 

$ Change

 

 

% Change

 

 

 

(dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative

 

$

29,603

 

 

$

39,657

 

 

$

(10,054

)

 

 

(25

%)

As a percentage of total revenue

 

 

10.6

%

 

 

10.5

%

 

 

 

 

 

 

Thethe decrease in general and administrative expense for the six months ended June 30, 2023, as compared to the six months ended June 30, 2022, was primarily due to a $7.2 million decrease in personnel-related expenses as a result of lower headcount primarily related to the restructuring activities that occurred in the first quarter of 2023 and in the prior year, and a $1.7 million decrease in insurance expense 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 the prior period.

General and administrative expense as a percentage of total revenue was relatively flat with the prior period.noted above.

Restructuring

In 2023,2024, restructuring charges primarily relate to the Company's key initiatives. Restructuring charges in 2023 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 the consolidation of our streaming fitness and nutrition offerings into a single Beachbody platform. The charges incurred primarily consist of employee termination costs.

 

 

 

Three months ended June 30,

 

 

 

 

 

2023

 

 

2022

 

 

$ Change

 

 

% Change

 

 

(dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restructuring

 

$

(107

)

 

$

1,332

 

��

$

(1,439

)

 

NM

 

 

Three months ended March 31,

 

 

 

 

 

 

2024

 

 

2023

 

 

$ Change

 

 

% Change

 

 

 

(dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restructuring

 

$

1,644

 

 

$

5,387

 

 

$

(3,743

)

 

 

(70

%)

 

 

 

Six months ended June 30,

 

 

 

 

 

 

 

 

 

2023

 

 

2022

 

 

$ Change

 

 

% Change

 

 

 

(dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restructuring

 

$

5,280

 

 

$

8,555

 

 

$

(3,275

)

 

 

(38

%)

33


 

36


Other Income (Expense)

The change in fair value of warrant liabilities consists of the fair value changes of the public, private placement, and Term Loan and Common Stock 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(as defined below) in 20222023 and Credit Facility in 2021.2022. Other income, net, consists of interest income earned on investments and gains (losses) on foreign currency.

 

 

Three months ended June 30,

 

 

 

 

 

Three months ended March 31,

 

 

 

 

 

2023

 

 

2022

 

 

$ Change

 

 

% Change

 

 

2024

 

 

2023

 

 

$ Change

 

 

% Change

 

 

(dollars in thousands)

 

 

 

 

 

 

(dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss on partial debt extinguishment

 

$

(1,209

)

 

$

 

 

$

(1,209

)

 

NM

 

Change in fair value of warrant liabilities

 

$

375

 

 

$

2,070

 

 

$

(1,695

)

 

 

(82

%)

 

 

(724

)

 

 

57

 

 

 

(781

)

 

NM

 

Interest expense

 

 

(2,368

)

 

 

(3

)

 

 

(2,365

)

 

NM

 

 

 

(1,875

)

 

 

(2,331

)

 

 

456

 

 

 

(20

%)

Other income (expense), net

 

 

411

 

 

 

189

 

 

 

222

 

 

NM

 

Other income, net

 

 

477

 

 

 

569

 

 

 

(92

)

 

 

(16

%)

 

The decrease inloss on partial debt extinguishment for the three months ended March 31, 2024 was due to the partial prepayments of $1.0 million and $5.5 million on the Term Loan as of January 9, 2024 and February 29, 2024, respectively. The change in fair value of warrant liabilities during the three months ended June 30, 2023,March 31, 2024, as compared to the three months ended June 30, 2022,March 31, 2023, primarily resulted from a relatively lower declinean increase in our stock price during the current quarter as compared to a decrease in our stock price in the prior year quarter. The increasedecrease 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. The increase in other income was primarily due to higher interest income as a resultprincipal prepayments of higher interest rates$21.5 million on 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

 

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 the current period. The increase in interest expense was due to borrowings under theoutstanding Term Loan during the six months ended June 30,balance from March 31, 2023 compared to no borrowings outstanding during the six months ended June 30, 2022. The increase in other income was primarily due to higher interest income as a result of higher interest rates on our cash balances.March 31, 2024.

37


Income Tax (Provision) BenefitProvision

Income tax (provision) benefitprovision 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,

 

 

 

 

 

 

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, 2023, as compared to the three months ended June 30, 2022, was primarily driven by changes in our projected net deferred taxes after valuation allowance and a decrease in the net expense from discrete events.

 

 

Six months ended June 30,

 

 

 

 

 

 

 

 

2023

 

 

2022

 

 

$ Change

 

 

% Change

 

 

(dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax (provision) benefit

 

$

(36

)

 

$

987

 

 

$

(1,023

)

 

NM

 

 

Three months ended March 31,

 

 

 

 

 

 

2024

 

 

2023

 

 

$ Change

 

 

% Change

 

 

 

(dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax provision

 

$

(62

)

 

$

(48

)

 

$

(14

)

 

 

29

%

 

The income tax provision increase for the sixthree months ended June 30, 2023,March 31, 2024, as compared to the sixthree months ended June 30, 2022,March 31, 2023, was primarily driven by changes in our projected net deferred taxes after valuation allowance and a decrease in the net expense from discrete events.

 

38

34


 

Liquidity and Capital Resources

 

 

 

Six months ended June 30,

 

 

 

2023

 

 

2022

 

 

 

(in thousands)

 

 

 

 

 

 

 

 

Net cash used in operating activities

 

$

(14,367

)

 

$

(33,256

)

Net cash used in investing activities

 

 

(5,030

)

 

 

(19,222

)

Net cash (used in) provided by financing activities

 

 

(2,400

)

 

 

2,660

 

 

 

Three months ended March 31,

 

 

 

2024

 

 

2023

 

 

 

(in thousands)

 

 

 

 

 

 

 

 

Net cash provided by (used in) operating activities

 

$

9,134

 

 

$

(7,869

)

Net cash provided by (used in) investing activities

 

 

3,901

 

 

 

(3,417

)

Net cash used in financing activities

 

 

(7,219

)

 

 

(2,441

)

 

As of June 30, 2023,March 31, 2024, we had cash and cash equivalents totaling $58.7$38.9 million.

Net cash used inprovided by (used in) operating activities was $14.4$9.1 million and $33.3$(7.9) million for the sixthree months ended June 30,March 31, 2024 and 2023, and 2022, respectively. The decreaseincrease in cash used inprovided by operating activities during the sixthree months ended June 30, 2023,March 31, 2024, compared to the prior year period, was primarily due to a decrease in net loss of $60.5$15.0 million, and an increase in cash received attributabledue to deferred revenuechange in other assets of $11.2$9.0 million and a decrease in cash used in accrued expenses of $7.4 million partially offset by a decrease in depreciation and amortization expense of $5.3 million, a decrease in equity based compensation of $5.2 million and a decrease in provision for inventory and inventory purchase commitments of $26.9$2.1 million.

Net cash provided by (used in) investing activities was $3.9 million and $(3.4) million for the three months ended March 31, 2024 and 2023, respectively. The increase in net cash provided by investing activities was due to proceeds received from the sale of the Van Nuys facility of $5.6 million and a decrease in depreciation and amortization expensecapital expenditures of $22.1 million.

Net cash used in investing activities was $5.0$1.7 million and $19.2 million for the six months ended June 30, 2023 and 2022, respectively. The decrease in net cash used in investing activities was due to a decrease in capital expenditures due to increasedcontinued 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 $7.2 million and $2.4 million for the sixthree months ended June 30,March 31, 2024 and 2023, compared to net cash provided by financing activities of $2.7 millionfor the six months ended June 30, 2022.respectively. The change in net cash fromused in financing activities was primarily due to taxes associated with the vesting of restricted stock during the six months ended June 30, 2023 and debt repayments on our Term Loan compared to proceeds from stock option exercises duringin the sixthree months ended June 30, 2022.March 31, 2024.

 

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. On January 9, 2024 and February 29, 2024, the Company made partial prepayments of $1.0 million and $5.5 million, respectively, on the Term Loan in connection with the Third and Fourth Amendments. As of March 31, 2024, the principal balance outstanding (including capitalized paid in kind interest) under the Term Loan was $28.9 million. On April 5, 2024, the Company and Blue Torch entered into the Fifth Amendment. In connection with the Fifth Amendment, on the Fifth Amendment Effective Date, the Company made a partial prepayment on the Term Loan of $4.0 million (which was classified as a current obligation at June 30, 2023)March 31, 2024). During the three and six months ended June 30, 2023,March 31, 2024, the Term Loan was a secured overnight financing rate ("SOFR") loan, with an effective interest rate of 18.69%21.83% and a cash interest rate of 12.12%.12.65% for the three months ended March 31, 2024.

 

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.March 31, 2024. See Note 9, Debt, and Note 15, Subsequent Events, 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,March 31, 2024, we have $30.9$25.9 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 within the next year.

 

 

3935


 

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 as well as for the longer-term (i.e., beyond the next twelve months).

 

We may explore additional debt or equity 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 additional debt financing would result in debt service obligations and the instruments governing such debt could provide for operating and financial 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 20222023 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-Critical Accounting Policies and Estimatesother than noted below..

 

Goodwill and 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, 2023, we performed an interim test for impairment of our goodwill.

In performing the interim impairment test for goodwill, we elected to bypass the qualitative assessment and proceeded to performing the quantitative test. We compared the carrying value of the RU to its estimated fair value. Fair value is estimated using a combination of a market approach and an income approach, with significant assumptions related to guideline company financial multiples used in the market approach and significant assumptions about revenue growth, long-term growth rates, and discount rates used in a discounted cash flow model in the income approach. As of June 30, 2023, the RUs fair value exceeded the carrying value by approximately 11%.

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 RU for changes in the business environment that could impact 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 RU may include 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 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.

40


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 the sixthree months ended June 30,March 31, 2024 and 2023, approximately 11% and 2022, approximately 10%, respectively, of our revenue was in foreign currencies. These sales were primarily denominated in Canadian dollars and British pounds.

We may 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.

In the year ended December 31, 2023, management made a determination to cease entering into any further foreign exchange options at this time, which resulted in a decrease in the notional amount of the Company's outstanding foreign exchange options to zero at March 31, 2024 as all of the foreign exchange options expired prior to March 31, 2024.

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 materialan approximate $2.5 million increase or decrease in cost of revenue and operating expensesexpenses. The higher exposure to changes in foreign currency from previous periods was due to the derivative instruments we usemanagement's decision to hedge anycease entering into foreign currency exposure.exchange options at this time.

The aggregate notional amount of foreign exchange derivative instruments at June 30, 2023March 31, 2024 and year ended December 31, 20222023 was $15.4 millionzero and $17.6$4.4 million, respectively.

36


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, 2023.March 31, 2024. 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 hashave been no changechanges in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Effectiveness of Controls and Procedures

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

PART II—OTHER INFORMATION

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. ThereOther than as set forth below, 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, 2022.2023.

41


On May 22, 2023, Jessica Lyons, an individual, and a group of other plaintiffs filed a class action complaint with the Los Angeles County Superior Court alleging that the Company misclassified its Partners as contractors rather than as employees and committed other violations of the California Labor Code. The Company understands that the plaintiffs in this matter intend on filing additional claims under the Private Attorney General Act of 2004. The Company and certain executive officers are listed as defendants in the complaint. The plaintiffs are seeking monetary damages. This matter is pending as of the date of this quarterly report.

On September 6, 2023 Dish Technologies LLC and SLING TV LLC (the "DISH Entities") filed a complaint with the United States District Court for the District of Delaware alleging that the Company infringed on the DISH Entities' patents and used technology belonging to the DISH Entities without their permission. The plaintiffs are seeking monetary damages and injunctive relief. In an effort to avoid any further unnecessary litigation costs, the parties entered into a Confidential Standstill and Tolling Agreement as of April 16, 2024 which included a dismissal of the case by the DISH Entities without prejudice and an agreement by the DISH Entities not to institute any litigation proceedings against the Company under the patents any earlier than December 31, 2026 in exchange for a one-time immaterial payment to the DISH Entities by the Company.

 

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, 2022.2023. 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 SalesProceeds, and Issuer Purchases of Equity Securities and Use of Proceeds.Securities.

 

None.

Issuer Repurchase of Equity Securities.

None.

Item 3. Defaults Upon Senior Securities.

37


None.

Item 4. Mine Safety Disclosure.

None.Not applicable.

Item 5. Other Information.

None.

During the three months ended March 31, 2024, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” each as defined in Item 408(a) of Regulation S-k.

4238


Item 6. Exhibits.

 

Exhibit

Incorporated by Reference

Filed or

Furnished herewith

 

 

Form

Exhibit

Filing Date

File No.

 

3.1

Amended and Restated Certificate of Incorporation of The Beachbody Company, Inc.

 

 

 

 

8-K

 

 

 

 

3.1

 

 

 

 

7/1/2021

 

 

 

 

001-39735

 

3.2

Amended and Restated Bylaws of The Beachbody Company, Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed July 1, 2021).

 

 

 

 

 

8-K

 

 

 

 

 

3.2

 

 

 

 

 

7/1/2021

 

 

 

 

 

001-39735

 

4.1

Amended and Restated Form of Warrant.

 

 

 

 

*

10.1

Financing Agreement, dated August 8, 2022, by and among Beachbody, LLC, a Delaware limited liability company, The Beachbody Company, Inc., a Delaware corporation (the “Parent”), each subsidiary of the Parent from time to time party thereto, the lenders from time to time party hereto (each a “Lender” and collectively, the “Lenders”), and Blue Torch Finance, LLC, as collateral agent and as administrative agent for the Lenders.

10-Q

10.2

8/8/2022

001-39735

 

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)

 

 

 

 

 

43


Exhibit

Incorporated by Reference

Filed or

Furnished herewith

 

 

Form

Exhibit

Filing Date

File No.

 

3.1

Second Amended and Restated Certificate of Incorporation of The Beachbody Company, Inc.

10-K

3.1

3/11/2024

001-39735

 

3.2

Certificate of Amendment to Second Amended & Restated Certificate of Incorporation of The Beachbody Company, Inc.

8-K

3.1

11/27/2023

001-39735

 

3.3

Amended and Restated Bylaws of The Beachbody Company, Inc.

8-K

3.2

7/1/2021

001-39735

 

4.1

Form of Second Amended and Restated Warrant.

8-K

10.2

4/8/2024

001-39735

 

10.1

Consent No. 1 and Amendment No. 3 to Financing Agreement, dated as of January 9, 2024 by and among the Borrower, the lenders party thereto and Blue Torch, as collateral agent and as administrative agent

8-K

10.1

1/12/2024

001-39735

 

10.2

Consent No. 2 and Amendment No. 4 to Financing Agreement, dated as of February 29, 2024 by and among the Borrower, the lenders party thereto and Blue Torch, as collateral agent and as administrative agent.

8-K

10.1

3/5/2024

001-39735

 

10.3

Amendment No. 5 to Financing Agreement, dated as of April 5, 2024 by and among the Borrower, the lenders party thereto and Blue Torch, as collateral agent and as administrative agent.

8-K

10.1

4/8/2024

001-39735

 

10.4^

Letter Agreement by and between Beachbody, LLC and Michael Neimand, dated April 10, 2024

8-K

10.1

4/16/2024

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–the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document

*

101.SCH

Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents

*

104

Cover page 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.

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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, 2023May 6, 2024

By:

/s/ Carl Daikeler

Carl Daikeler

Chief Executive Officer

(Principal Executive Officer)

Date: August 8, 2023May 6, 2024

By:

/s/ Marc Suidan

Marc Suidan

Chief Financial Officer

(Principal Financial Officer)

 

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