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, 2021
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:
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 El Segundo,California | 90245 | |
(Address of principal executive offices) | (Zip Code) |
(310) 883-9000
Registrant’s telephone number, including area code:
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Class A Common Stock, par value $0.0001 per share | BODY | The New York Stock Exchange | ||
Redeemable warrants, each whole warrant exercisable for one Class A common stock at an exercise price of $11.50 | BODY WS | The New York Stock |
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.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation(§ (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, acompany”company,” and “emerging growth company” in
Large Accelerated Filer ☐ | Accelerated Filer | Non-Accelerated Filer | Smaller Reporting Company ☐ | Emerging Growth Company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in
There were 170,263,772 shares of the registrant’s Class A Common Stock, par value $0.0001 per share, outstanding was 166,925,632, and the number of141,250,310 shares of the registrant’s Class X Common Stock, par value $0.0001 per share, outstanding was 141,250,310,10, 2021.
Part I. | 3 | |||||
Item 1. | 3 | |||||
3 | ||||||
4 | ||||||
5 | ||||||
6 | ||||||
7 | ||||||
8 | ||||||
Item 2. | 22 | |||||
Item 3. | 37 | |||||
Item 4. | 37 | |||||
Part II. | 38 | |||||
Item 1. | 38 | |||||
Item 2. | 38 | |||||
Item | 38 | |||||
Item | 38 | |||||
Item 5. | 38 | |||||
Item 6. | 40 | |||||
41 |
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
The Beachbody Company, Inc.
Condensed Consolidated Balance Sheets
(in thousands) | ||||||||
As of June 30, 2021 | As of December 31, 2020 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 347,229 | $ | 56,827 | ||||
Accounts receivable, net | 3,165 | 855 | ||||||
Inventory, net | 74,238 | 65,354 | ||||||
Prepaid expenses | 10,438 | 8,650 | ||||||
Other current assets | 46,286 | 37,364 | ||||||
Total current assets | 481,356 | 169,050 | ||||||
Property and equipment, net | 94,439 | 80,169 | ||||||
Content assets, net | 30,955 | 19,437 | ||||||
Intangible assets, net | 95,917 | 21,120 | ||||||
Goodwill | 176,903 | 18,981 | ||||||
Right-of-use | 29,366 | 33,272 | ||||||
Other assets | 7,026 | 14,224 | ||||||
Total assets | $ | 915,962 | $ | 356,253 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 50,648 | $ | 28,981 | ||||
Accrued expenses | 87,440 | 79,955 | ||||||
Deferred revenue | 116,590 | 97,504 | ||||||
Current portion of lease liabilities | 9,976 | 10,371 | ||||||
Other current liabilities | 2,352 | 3,106 | ||||||
Total current liabilities | 267,006 | 219,917 | ||||||
Long-term lease liabilities, net | 26,466 | 31,252 | ||||||
Deferred tax liabilities | 7,977 | 3,729 | ||||||
Warrant liabilities | 50,173 | — | ||||||
Other liabilities | 5,887 | 2,097 | ||||||
Total liabilities | 357,509 | 256,995 | ||||||
Commitments and contingencies (Note 14) | 0 | 0 | ||||||
Stockholders’ equity: | ||||||||
Preferred stock, $0.0001 par value; 100,000,000 shares authorized, 00none issued and outstanding as of June 30, 2021 and December 31, 2020 | 0— | 0— | ||||||
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); 166,925,632 and 101,762,614 Class A shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively; 141,250,310 Class X shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively and 0 Class C shares issued and outstanding at June 30, 2021 and December 31, 2020. | 31 | 24 | ||||||
Additional paid-in capital | 597,598 | 96,097 | ||||||
Accumulated other comprehensive loss | (17 | ) | (202 | ) | ||||
Retained earnings (accumulated deficit) | (39,159 | ) | 3,339 | |||||
Total stockholders’ equity | 558,453 | 99,258 | ||||||
Total liabilities and stockholders’ equity | $ | 915,962 | $ | 356,253 | ||||
(in thousands, except share and per share data)
|
| June 30, |
|
| December 31, |
| ||
|
| 2022 |
|
| 2021 |
| ||
|
| (unaudited) |
|
|
|
| ||
Assets |
|
|
|
|
|
| ||
Current assets: |
|
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 57,060 |
|
| $ | 104,054 |
|
Restricted cash |
|
| - |
|
|
| 3,000 |
|
Inventory, net |
|
| 72,271 |
|
|
| 132,730 |
|
Prepaid expenses |
|
| 10,317 |
|
|
| 15,861 |
|
Other current assets |
|
| 44,828 |
|
|
| 43,727 |
|
Total current assets |
|
| 184,476 |
|
|
| 299,372 |
|
Property and equipment, net |
|
| 92,301 |
|
|
| 113,098 |
|
Content assets, net |
|
| 38,098 |
|
|
| 39,347 |
|
Goodwill and intangible assets, net |
|
| 162,361 |
|
|
| 171,533 |
|
Other assets |
|
| 12,803 |
|
|
| 14,262 |
|
Total assets |
| $ | 490,039 |
|
| $ | 637,612 |
|
Liabilities and Stockholders’ Equity |
|
|
|
|
|
| ||
Current liabilities: |
|
|
|
|
|
| ||
Accounts payable |
| $ | 22,676 |
|
| $ | 48,379 |
|
Accrued expenses |
|
| 62,349 |
|
|
| 74,525 |
|
Deferred revenue |
|
| 107,282 |
|
|
| 107,095 |
|
Other current liabilities |
|
| 4,564 |
|
|
| 6,233 |
|
Total current liabilities |
|
| 196,871 |
|
|
| 236,232 |
|
Deferred tax liabilities |
|
| 2,031 |
|
|
| 3,165 |
|
Other liabilities |
|
| 10,981 |
|
|
| 12,830 |
|
Total liabilities |
|
| 209,883 |
|
|
| 252,227 |
|
Commitments and contingencies (Note 8) |
|
|
|
|
|
| ||
|
|
|
|
|
|
| ||
Stockholders’ equity: |
|
|
|
|
|
| ||
Preferred stock, $0.0001 par value; 100,000,000 shares |
|
| — |
|
|
| — |
|
Common stock, $0.0001 par value, 1,900,000,000 shares |
|
|
|
|
|
| ||
Class A: 170,263,772 and 168,333,463 shares issued and |
|
| 17 |
|
|
| 17 |
|
Class X: 141,250,310 shares issued and outstanding at |
|
| 14 |
|
|
| 14 |
|
Class C: 0 shares issued and outstanding at |
|
| — |
|
|
| — |
|
Additional paid-in capital |
|
| 620,643 |
|
|
| 610,418 |
|
Accumulated other comprehensive loss |
|
| (75 | ) |
|
| (21 | ) |
Accumulated deficit |
|
| (340,443 | ) |
|
| (225,043 | ) |
Total stockholders’ equity |
|
| 280,156 |
|
|
| 385,385 |
|
Total liabilities and stockholders’ equity |
| $ | 490,039 |
|
| $ | 637,612 |
|
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, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Revenue: | ||||||||||||||||
Digital | $ | 94,325 | $ | 78,357 | $ | 189,475 | $ | 140,882 | ||||||||
Nutrition and other | 128,783 | 140,127 | 259,852 | 246,938 | ||||||||||||
Total revenue | 223,108 | 218,484 | 449,327 | 387,820 | ||||||||||||
Cost of revenue: | ||||||||||||||||
Digital | 11,612 | 9,292 | 22,734 | 17,664 | ||||||||||||
Nutrition and other | 57,158 | 50,097 | 114,153 | 90,572 | ||||||||||||
Total cost of revenue | 68,770 | 59,389 | 136,887 | 108,236 | ||||||||||||
Gross profit | 154,338 | 159,095 | 312,440 | 279,584 | ||||||||||||
Operating expenses: | ||||||||||||||||
Selling and marketing | 140,194 | 134,666 | 284,890 | 228,892 | ||||||||||||
Enterprise technology and development | 26,949 | 22,373 | 54,038 | 43,706 | ||||||||||||
General and administrative | 17,231 | 14,522 | 35,177 | 29,706 | ||||||||||||
Total operating expenses | 184,374 | 171,561 | 374,105 | 302,304 | ||||||||||||
Operating loss | (30,036 | ) | (12,466 | ) | (61,665 | ) | (22,720 | ) | ||||||||
Other income (expense) | ||||||||||||||||
Change in fair value of warrant liabilities | 5,390 | 0 | 5,390 | 0 | ||||||||||||
Interest expense | (305 | ) | (248 | ) | (428 | ) | (343 | ) | ||||||||
Other income, net | 1,654 | 34 | 2,953 | 442 | ||||||||||||
Loss before income taxes | (23,297 | ) | (12,680 | ) | (53,750 | ) | (22,621 | ) | ||||||||
Income tax benefit | 10,857 | 2,677 | 11,252 | 4,290 | ||||||||||||
Net loss | $ | (12,440 | ) | $ | (10,003 | ) | $ | (42,498 | ) | $ | (18,331 | ) | ||||
Net loss per common share, basic | $ | (0.05 | ) | $ | (0.04 | ) | $ | (0.17 | ) | $ | (0.08 | ) | ||||
Net loss per common share, diluted | $ | (0.05 | ) | $ | (0.04 | ) | $ | (0.17 | ) | $ | (0.08 | ) | ||||
Weighted-average common shares outstanding, basic | 247,062 | 238,143 | 245,049 | 238,143 | ||||||||||||
Weighted-average common shares outstanding, diluted | 247,062 | 238,143 | 245,049 | 238,143 | ||||||||||||
(in thousands, except per share data)
|
| Three months ended June 30, |
|
| Six months ended June 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Digital |
| $ | 78,015 |
|
| $ | 94,325 |
|
| $ | 159,760 |
|
| $ | 189,475 |
|
Connected fitness |
|
| 10,605 |
|
|
| 10 |
|
|
| 30,118 |
|
|
| 10 |
|
Nutrition and other |
|
| 90,516 |
|
|
| 128,773 |
|
|
| 188,180 |
|
|
| 259,842 |
|
Total revenue |
|
| 179,136 |
|
|
| 223,108 |
|
|
| 378,058 |
|
|
| 449,327 |
|
Cost of revenue: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Digital |
|
| 18,406 |
|
|
| 11,612 |
|
|
| 34,831 |
|
|
| 22,734 |
|
Connected fitness |
|
| 31,459 |
|
|
| 156 |
|
|
| 76,165 |
|
|
| 156 |
|
Nutrition and other |
|
| 42,002 |
|
|
| 57,002 |
|
|
| 86,776 |
|
|
| 113,997 |
|
Total cost of revenue |
|
| 91,867 |
|
|
| 68,770 |
|
|
| 197,772 |
|
|
| 136,887 |
|
Gross profit |
|
| 87,269 |
|
|
| 154,338 |
|
|
| 180,286 |
|
|
| 312,440 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Selling and marketing |
|
| 86,624 |
|
|
| 140,194 |
|
|
| 193,068 |
|
|
| 284,890 |
|
Enterprise technology and development |
|
| 24,133 |
|
|
| 26,949 |
|
|
| 57,830 |
|
|
| 54,038 |
|
General and administrative |
|
| 19,584 |
|
|
| 17,231 |
|
|
| 39,657 |
|
|
| 35,177 |
|
Restructuring |
|
| 1,332 |
|
|
| — |
|
|
| 8,555 |
|
|
| — |
|
Total operating expenses |
|
| 131,673 |
|
|
| 184,374 |
|
|
| 299,110 |
|
|
| 374,105 |
|
Operating loss |
|
| (44,404 | ) |
|
| (30,036 | ) |
|
| (118,824 | ) |
|
| (61,665 | ) |
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Change in fair value of warrant liabilities |
|
| 2,070 |
|
|
| 5,390 |
|
|
| 2,334 |
|
|
| 5,390 |
|
Interest expense |
|
| (3 | ) |
|
| (305 | ) |
|
| (22 | ) |
|
| (428 | ) |
Other income, net |
|
| 189 |
|
|
| 1,654 |
|
|
| 125 |
|
|
| 2,953 |
|
Loss before income taxes |
|
| (42,148 | ) |
|
| (23,297 | ) |
|
| (116,387 | ) |
|
| (53,750 | ) |
Income tax benefit |
|
| 281 |
|
|
| 10,857 |
|
|
| 987 |
|
|
| 11,252 |
|
Net loss |
| $ | (41,867 | ) |
| $ | (12,440 | ) |
| $ | (115,400 | ) |
| $ | (42,498 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net loss per common share, basic and diluted |
| $ | (0.14 | ) |
| $ | (0.05 | ) |
| $ | (0.38 | ) |
| $ | (0.17 | ) |
Weighted-average common shares outstanding, basic and diluted |
|
| 307,205 |
|
|
| 247,062 |
|
|
| 306,786 |
|
|
| 245,049 |
|
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, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Net loss | $ | (12,440 | ) | $ | (10,003 | ) | $ | (42,498 | ) | $ | (18,331 | ) | ||||
Other comprehensive income (loss): | ||||||||||||||||
Change in fair value of derivative financial instruments, net of tax | (99 | ) | (217 | ) | (208 | ) | 193 | |||||||||
Reclassification of losses on derivative financial instruments included in net | 172 | (73 | ) | 339 | (47 | ) | ||||||||||
Foreign currency translation adjustment | 12 | 49 | 54 | (327 | ) | |||||||||||
Total other comprehensive income (loss) | 85 | (241 | ) | 185 | (181 | ) | ||||||||||
Total comprehensive loss | $ | (12,355 | ) | $ | (10,244 | ) | $ | (42,313 | ) | $ | (18,512 | ) | ||||
(in thousands)
|
| Three months ended June 30, |
|
| Six months ended June 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net loss |
| $ | (41,867 | ) |
| $ | (12,440 | ) |
| $ | (115,400 | ) |
| $ | (42,498 | ) |
Other comprehensive loss: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Change in fair value of derivative financial instruments, net of tax |
|
| 35 |
|
|
| (99 | ) |
|
| (150 | ) |
|
| (208 | ) |
Reclassification of losses on derivative financial instruments |
|
| 74 |
|
|
| 172 |
|
|
| 143 |
|
|
| 339 |
|
Foreign currency translation adjustment |
|
| (51 | ) |
|
| 12 |
|
|
| (47 | ) |
|
| 54 |
|
Total other comprehensive income (loss) |
|
| 58 |
|
|
| 85 |
|
|
| (54 | ) |
|
| 185 |
|
Total comprehensive loss |
| $ | (41,809 | ) |
| $ | (12,355 | ) |
| $ | (115,454 | ) |
| $ | (42,313 | ) |
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) | ||||||||||||||||||||||||||||||||
Redeemable | ||||||||||||||||||||||||||||||||
Convertible | Accumulated | Retained | ||||||||||||||||||||||||||||||
Series A | Additional | Other | Earnings | Total | ||||||||||||||||||||||||||||
Preferred | Common | Common Stock | Paid-In | Comprehensive | (Accumulated | Stockholders’ | ||||||||||||||||||||||||||
Units | Units | Shares | Amount | Capital | Income (Loss) | (Deficit) | Equity | |||||||||||||||||||||||||
Balances at December 31, 2019, as previously reported | $ | 98,245 | $ | (35,626 | ) | $ | — | $ | — | $ | — | $ | 12 | $ | 24,771 | $ | (10,843 | ) | ||||||||||||||
Retroactive application of recapitalization | (98,245 | ) | 35,626 | 238,142,972 | 24 | 62,595 | — | — | 98,245 | |||||||||||||||||||||||
Balance at December 31, 2019, after effect of reverse | — | — | 238,142,972 | 24 | 62,595 | 12 | 24,771 | 87,402 | ||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | (8,328 | ) | (8,328 | ) | ||||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | 60 | — | 60 | ||||||||||||||||||||||||
Equity-based compensation | — | — | — | — | 895 | — | — | 895 | ||||||||||||||||||||||||
Balances at March 31, 2020 | $ | — | $ | — | 238,142,972 | $ | 24 | $ | 63,490 | $ | 72 | $ | 16,443 | $ | 80,029 | |||||||||||||||||
Net loss | — | — | — | — | — | — | (10,003 | ) | (10,003 | ) | ||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | — | (241 | ) | — | (241 | ) | ||||||||||||||||||||||
Equity-based compensation | — | — | — | — | 1,013 | — | — | 1,013 | ||||||||||||||||||||||||
Balances at June 30, 2020 | $ | — | $ | — | 238,142,972 | $ | 24 | $ | 64,503 | $ | (169 | ) | $ | 6,440 | $ | 70,798 | ||||||||||||||||
Redeemable | ||||||||||||||||||||||||||||||||
Convertible | Accumulated | Retained | ||||||||||||||||||||||||||||||
Series A | Additional | Other | Earnings | Total | ||||||||||||||||||||||||||||
Preferred | Common | Common Stock | Paid-In | Comprehensive | (Accumulated | Stockholders’ | ||||||||||||||||||||||||||
Units | Units | Shares | Amount | Capital | Income (Loss) | (Deficit) | Equity | |||||||||||||||||||||||||
Balances at December 31, 2020, as previously reported | $ | 98,110 | $ | (1,989 | ) | — | $ | — | $ | — | $ | (202 | ) | $ | 3,339 | $ | 1,148 | |||||||||||||||
Retroactive application of recapitalization | (98,110 | ) | 1,989 | 243,012,924 | 24 | 96,097 | — | — | 98,110 | |||||||||||||||||||||||
Balance at December 31, 2020, after effect of reverse acquisition | — | — | 243,012,924 | 24 | 96,097 | (202 | ) | 3,339 | 99,258 | |||||||||||||||||||||||
Net loss | — | — | — | — | — | — | (30,058 | ) | (30,058 | ) | ||||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | 100 | — | 100 | ||||||||||||||||||||||||
Equity-based compensation | — | — | — | — | 2,573 | — | — | 2,573 | ||||||||||||||||||||||||
Balances at March 31, 2021 | $ | — | $ | — | 243,012,924 | $ | 24 | $ | 98,670 | $ | (102 | ) | $ | (26,719 | ) | $ | 71,873 | |||||||||||||||
Net loss | — | — | — | — | — | — | (12,440 | ) | (12,440 | ) | ||||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | 85 | — | 85 | ||||||||||||||||||||||||
Equity-based compensation | — | — | — | — | 2,522 | 0 | — | 2,522 | ||||||||||||||||||||||||
Business Combination, net of redemptions and equity issuance costs of $47.0 million | — | — | 51,616,515 | 5 | 333,850 | 0 | — | 333,855 | ||||||||||||||||||||||||
Myx acquisition | — | — | 13,546,503 | 2 | 162,556 | 0 | — | 162,558 | ||||||||||||||||||||||||
Balances at June 30, 2021 | $ | — | $ | — | 308,175,942 | $ | 31 | $ | 597,598 | $ | (17 | ) | $ | (39,159 | ) | $ | 558,453 | |||||||||||||||
(in thousands)
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| Other |
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| Earnings |
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| Total |
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| Common Stock |
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| Paid-In |
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| Comprehensive |
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| (Accumulated) |
|
| Stockholders’ |
| |||||||||
|
| Shares |
|
| Amount |
|
| Capital |
|
| Loss |
|
| (Deficit) |
|
| Equity |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Balances at December 31, 2020 |
|
| 243,013 |
|
| $ | 24 |
|
| $ | 96,097 |
|
| $ | (202 | ) |
| $ | 3,339 |
|
| $ | 99,258 |
|
Net loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (30,058 | ) |
|
| (30,058 | ) |
Other comprehensive income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 100 |
|
|
| — |
|
|
| 100 |
|
Equity-based compensation |
|
| — |
|
|
| — |
|
|
| 2,573 |
|
|
| — |
|
|
| — |
|
|
| 2,573 |
|
Balances at March 31, 2021 |
|
| 243,013 |
|
| $ | 24 |
|
| $ | 98,670 |
|
| $ | (102 | ) |
| $ | (26,719 | ) |
| $ | 71,873 |
|
Net loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (12,440 | ) |
|
| (12,440 | ) |
Other comprehensive income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 85 |
|
|
| — |
|
|
| 85 |
|
Equity-based compensation |
|
| — |
|
|
| — |
|
|
| 2,522 |
|
|
| — |
|
|
| — |
|
|
| 2,522 |
|
Business Combination, net of redemptions |
|
| 51,617 |
|
|
| 5 |
|
|
| 333,850 |
|
|
| — |
|
|
| — |
|
|
| 333,855 |
|
Common shares issued in connection with |
|
| 13,546 |
|
|
| 2 |
|
|
| 162,556 |
|
|
| — |
|
|
| — |
|
|
| 162,558 |
|
Balances at June 30, 2021 |
|
| 308,176 |
|
| $ | 31 |
|
| $ | 597,598 |
|
| $ | (17 | ) |
| $ | (39,159 | ) |
| $ | 558,453 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
| Additional |
|
| Other |
|
|
|
|
| Total |
| ||||||
|
| Common Stock |
|
| Paid-In |
|
| Comprehensive |
|
| Accumulated |
|
| Stockholders’ |
| |||||||||
|
| Shares |
|
| Amount |
|
| Capital |
|
| Loss |
|
| Deficit |
|
| Equity |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Balances at December 31, 2021 |
|
| 309,584 |
|
| $ | 31 |
|
| $ | 610,418 |
|
| $ | (21 | ) |
| $ | (225,043 | ) |
| $ | 385,385 |
|
Net loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (73,533 | ) |
|
| (73,533 | ) |
Other comprehensive loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (112 | ) |
|
| — |
|
|
| (112 | ) |
Equity-based compensation |
|
| — |
|
|
| — |
|
|
| 4,564 |
|
|
| — |
|
|
| — |
|
|
| 4,564 |
|
Options exercised, net of tax withholdings |
|
| 1,132 |
|
|
| — |
|
|
| 1,923 |
|
|
| — |
|
|
| — |
|
|
| 1,923 |
|
Balances at March 31, 2022 |
|
| 310,716 |
|
| $ | 31 |
|
| $ | 616,905 |
|
| $ | (133 | ) |
| $ | (298,576 | ) |
| $ | 318,227 |
|
Net loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (41,867 | ) |
|
| (41,867 | ) |
Other comprehensive income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 58 |
|
|
| — |
|
|
| 58 |
|
Equity-based compensation |
|
| 210 |
|
|
| — |
|
|
| 3,001 |
|
|
| — |
|
|
| — |
|
|
| 3,001 |
|
Options exercised, net of tax withholdings |
|
| 588 |
|
|
| — |
|
|
| 737 |
|
|
| — |
|
|
| — |
|
|
| 737 |
|
Balances at June 30, 2022 |
|
| 311,514 |
|
| $ | 31 |
|
| $ | 620,643 |
|
| $ | (75 | ) |
| $ | (340,443 | ) |
| $ | 280,156 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, | ||||||||
2021 | 2020 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (42,498 | ) | $ | (18,331 | ) | ||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||
Depreciation and amortization expense | 25,941 | 20,678 | ||||||
Amortization of content assets | 6,119 | 3,196 | ||||||
Provision for excess and obsolete inventory | 2,791 | (76 | ) | |||||
Allowance for doubtful accounts | 0 | 32 | ||||||
Change in fair value of derivative financial instruments | 169 | 199 | ||||||
Gain on investment in convertible instrument | (3,114 | ) | 0 | |||||
Change in fair value of warrant liabilities | (5,390 | ) | 0 | |||||
Equity-based compensation | 5,095 | 1,908 | ||||||
Deferred income taxes | (11,349 | ) | (3,973 | ) | ||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (2,007 | ) | (2,184 | ) | ||||
Inventory | (194 | ) | (2,477 | ) | ||||
Content assets | (14,237 | ) | (6,399 | ) | ||||
Prepaid expenses | (1,789 | ) | 6,502 | |||||
Other assets | (5,604 | ) | (5,487 | ) | ||||
Accounts payable | 6,656 | (1,013 | ) | |||||
Accrued expenses | (461 | ) | 17,831 | |||||
Deferred revenue | 16,547 | 40,502 | ||||||
Other liabilities | (2,162 | ) | (6,862 | ) | ||||
Net cash provided by (used in) operating activities | (25,487 | ) | 44,046 | |||||
Cash flows from investing activities: | ||||||||
Purchase of property and equipment | (27,200 | ) | (18,756 | ) | ||||
Investment in convertible instrument | (5,000 | ) | 0 | |||||
Equity investment | (5,000 | ) | 0 | |||||
Cash paid for acquisition of Myx, net of cash acquired | (37,280 | ) | 0 | |||||
Net cash used in investing activities | (74,480 | ) | (18,756 | ) | ||||
Cash flows from financing activities: | ||||||||
Borrowings under Credit Facility | 42,000 | 32,000 | ||||||
Repayments under Credit Facility | (42,000 | ) | (32,000 | ) | ||||
Business Combination, net of issuance costs paid | 389,775 | 0 | ||||||
Net cash provided by financing activities | 389,775 | 0 | ||||||
Effect of exchange rates on cash | 594 | (638 | ) | |||||
Net increase in cash and cash equivalents | 290,402 | 24,652 | ||||||
Cash and cash equivalents, beginning of period | 56,827 | 41,564 | ||||||
Cash and cash equivalents, end of period | $ | 347,229 | $ | 66,216 | ||||
Supplemental disclosure of cash flow information: | ||||||||
Cash paid during the year for interest | $ | 283 | $ | 84 | ||||
Cash paid during the year for income taxes, net | $ | 198 | $ | 11 4 | ||||
Supplemental disclosure of noncash investing activities: | ||||||||
Property and equipment acquired but not yet paid for | $ | 15,322 | $ | 3,103 | ||||
Class A Common Stock issued in connection with the acquisition of Myx | $ | 162,558 | $ | 0 | ||||
Fair value of Myx instrument and promissory note held by Old Beachbody | $ | 22,618 | $ | 0 | ||||
Supplemental disclosure of noncash financing activities: | ||||||||
Business Combination transaction costs, accrued but not paid | $ | 650 | $ | — | ||||
Net assets assumed from Forest Road in the Business Combination | $ | 293 | $ | 0 |
(in thousands)
|
| Six months ended June 30, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
|
|
|
|
|
|
| ||
Cash flows from operating activities: |
|
|
|
|
|
| ||
Net loss |
| $ | (115,400 | ) |
| $ | (42,498 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
| ||
Depreciation and amortization expense |
|
| 41,552 |
|
|
| 25,941 |
|
Amortization of content assets |
|
| 13,180 |
|
|
| 6,119 |
|
Provision for inventory and net realizable value adjustment |
|
| 32,019 |
|
|
| 2,791 |
|
Realized losses on hedging derivative financial instruments |
|
| 143 |
|
|
| 339 |
|
Gain on investment in convertible instrument |
|
| — |
|
|
| (3,114 | ) |
Change in fair value of warrant liabilities |
|
| (2,334 | ) |
|
| (5,390 | ) |
Equity-based compensation |
|
| 7,565 |
|
|
| 5,095 |
|
Deferred income taxes |
|
| (1,143 | ) |
|
| (11,349 | ) |
Other non-cash items |
|
| 311 |
|
|
| — |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
| ||
Inventory |
|
| 28,400 |
|
|
| (194 | ) |
Content assets |
|
| (11,940 | ) |
|
| (14,237 | ) |
Prepaid expenses |
|
| 5,545 |
|
|
| (1,789 | ) |
Other assets |
|
| 167 |
|
|
| (5,774 | ) |
Accounts payable |
|
| (22,753 | ) |
|
| 6,656 |
|
Accrued expenses |
|
| (7,739 | ) |
|
| (461 | ) |
Deferred revenue |
|
| 1,000 |
|
|
| 16,547 |
|
Other liabilities |
|
| (1,829 | ) |
|
| (4,169 | ) |
Net cash used in operating activities |
|
| (33,256 | ) |
|
| (25,487 | ) |
Cash flows from investing activities: |
|
|
|
|
|
| ||
Purchase of property and equipment |
|
| (19,222 | ) |
|
| (27,200 | ) |
Investment in convertible instrument |
|
| — |
|
|
| (5,000 | ) |
Other investment |
|
| — |
|
|
| (5,000 | ) |
Cash paid for acquisition, net of cash acquired |
|
| — |
|
|
| (37,280 | ) |
Net cash used in investing activities |
|
| (19,222 | ) |
|
| (74,480 | ) |
Cash flows from financing activities: |
|
|
|
|
|
| ||
Proceeds from exercise of stock options |
|
| 2,968 |
|
|
| — |
|
Remittance of taxes withheld from employee stock awards |
|
| (308 | ) |
|
| — |
|
Borrowings under Credit Facility |
|
| — |
|
|
| 42,000 |
|
Repayments under Credit Facility |
|
| — |
|
|
| (42,000 | ) |
Business combination, net of issuance costs paid |
|
| — |
|
|
| 389,775 |
|
Net cash provided by financing activities |
|
| 2,660 |
|
|
| 389,775 |
|
Effect of exchange rates on cash |
|
| (176 | ) |
|
| 594 |
|
Net (decrease) increase in cash and cash equivalents |
|
| (49,994 | ) |
|
| 290,402 |
|
Cash, cash equivalents and restricted cash, beginning of period |
|
| 107,054 |
|
|
| 56,827 |
|
Cash and cash equivalents, end of period |
| $ | 57,060 |
|
| $ | 347,229 |
|
Supplemental disclosure of cash flow information: |
|
|
|
|
|
| ||
Cash paid during the year for interest |
| $ | 17 |
|
| $ | 283 |
|
Cash paid during the year for income taxes, net |
|
| 310 |
|
|
| 198 |
|
Supplemental disclosure of noncash investing activities: |
|
|
|
|
|
| ||
Property and equipment acquired but not yet paid for |
| $ | 2,330 |
|
| $ | 15,322 |
|
Class A Common Stock issued in connection with acquisition |
|
| — |
|
|
| 162,558 |
|
Fair value of Myx instrument and promissory note held by Old Beachbody |
|
| — |
|
|
| 22,618 |
|
Supplemental disclosure of noncash financing activities: |
|
|
|
|
|
| ||
Business Combination transaction costs, accrued but not paid |
|
| — |
|
|
| 650 |
|
Net assets assumed in the Business Combination |
|
| — |
|
|
| 293 |
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
7
The Beachbody Company, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
1. Description of |
Business Combination Agreement, BB Merger Sub merged with and into Old Beachbody, with Old Beachbody surviving as a wholly-owned subsidiary of Forest Road (the “Surviving Beachbody Entity”); (2) Myx Merger Sub merged with and into Myx, with Myx surviving as a wholly-owned subsidiary of Forest Road; and (3) the Surviving Beachbody Entity merged with and into Forest Road, with Forest Road surviving such merger (the “Surviving Company”, and such mergers the “Business Combination”). On the Closing Date, the Surviving Company changed its name to
The Beachbody Company, Inc. (the(“Beachbody” or the “Company”, “Beachbody”, “we” or “us”).
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”) 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 the unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affectimpact the amounts reported in the unaudited condensed consolidated financial statements and accompanying notes. Significant estimates include, but are not limited to, the useful life and recoverability of long-lived assets, the recognition and measurement of income tax assets and liabilities, the valuation of acquired intangible assets, revenue arrangements with multiple performance obligations, equity-based compensation, amortization of content assets, impairment of goodwill, and the useful lives and recoverabilitynet realizable value of long-lived assets.inventory. The Company bases these estimates on historical experience and on various other assumptions that it believes are reasonable under the circumstances, the results of which form the basis for making judgements about the carrying amounts of assets and liabilities. Actual results could differ from those estimates.
The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited annual consolidated financial statements and, in the opinion of management, include all adjustments consisting of only normal recurring adjustments necessary for the fair statement of the Company’s financial position, as of June 30, 2021, its results of operations, for the three and six months ended June 30, 2021 and 2020 and cash flows for the six months ended June 30, 2021 and 2020.flows. The financial data and other financial information disclosed in the notes to these unaudited condensed consolidated financial statements related to the three- andsix-monthperiods are also unaudited. The results of operationsThese unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes included in the Company’s Annual Report on Form 10-K for the three and six monthsyear ended June 30, 2021December 31, 2021. Interim results are not necessarily indicative of the results expected for the full fiscal year or any other period.
Summary of Changes in conjunction withSignificant Accounting Estimates
Goodwill and Intangible Assets, Net
Interim Impairment Test
Goodwill represents the consolidated financial statements and the related notes included in the Company’s annual financial statements asexcess of and for the fiscal year ended December 31, 2020.
Due to this guidance are required to be reported separatelythe sustained decline in the unaudited condensed consolidated balance sheets or the footnotes from those instruments using another measurement method.
8
Indefinite-lived Intangible Assets
During the three months ended March 31, 2022, the Company determined that one of its acquired trade names no longer has an indefinite life. The Company tested the trade name for impairment before changing the useful life and determined there was no impairment based on collection historyits assessment of fair value. The Company will prospectively amortize the trade name over its remaining estimated useful life of two years beginning January 1, 2022. The Company recorded $1.9 million, or $0.01 per share, and an analysis$3.8 million, or $0.01 per share, of the accounts receivable aging. The change in the allowanceamortization expense as a component of selling and marketing expenses for doubtful accountsthis trade name during the three and six months ended June 30, 20212022, respectively.
Long-Lived Assets
Management reviews long-lived assets (including property and 2020equipment, content assets, and definite-lived intangible assets) for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Recoverability of assets is as follows (in thousands):
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Balance, beginning of period | $ | 16 | $ | 55 | $ | 16 | $ | 69 | ||||||||
Charges | 0 | — | — | 32 | ||||||||||||
Write-offs | — | (14 | ) | — | (60 | ) | ||||||||||
Balance, end of period | $ | 16 | $ | 41 | $ | 16 | $ | 41 | ||||||||
Recently Adopted Accounting Pronouncements
In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and intangible assets acquired is assigned to goodwill.The transaction costs associated with business combinations are expensed as they are incurred.
Accounting Pronouncements Not Yet Adopted
In December 2019,October 2021, the FASB issued2019-12, Income Taxes2021-08, Business Combinations (Topic 740)805): Simplifying the Accounting for Income Taxesremoves specific exceptionsrequires 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 principlesguidance in Topic 740 in addition to simplifying other areas of Topic 740.ASC 805. The guidance in this update iswill be effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020 and is effective for all other entitiescompanies for fiscal years beginning after December 15, 2021 and2022, including interim periods within those fiscal years beginning after December 15, 2022, with early adoption permitted. The Company adoptedASU 2019-12 infirst quarterpotential impact of 2021 and the adoption had no material impact to the Company’s unaudited condensedadopting this guidance on its consolidated financial statements.
9
2. Revenue
Recapitalization | ||||
Cash- Forest Road trust and cash, net of redemptions | $ | 216,444 | ||
Cash- PIPE Financing | 225,000 | |||
Less: Non-cash net assets assumed from Forest Road | 293 | |||
Less: Fair value of Public and Private Warrants | (60,900 | ) | ||
Less: Transaction costs and advisory fees for Beachbody allocated to equity | (19,923 | ) | ||
Less: Transaction costs and advisory fees for Forest Road | (27,059 | ) | ||
Net Business Combination | 333,855 | |||
Less: Non-cash net assets assumed from Forest Road | (293 | ) | ||
Less: Transaction costs and advisory fees for Beachbody allocated to warrants | (5,337 | ) | ||
Add: Non-cash fair value of Forest Road warrants | 60,900 | |||
Add: Accrued transaction costs and advisor fees | 650 | |||
Net cash contributions from Business Combination | $ | 389,775 | ||
The Company’s revenue disaggregated by revenue type and geographic region is as follows (in thousands):
|
| Segment |
|
|
|
| ||||||
|
| Beachbody |
|
| Other |
|
| Total |
| |||
|
|
|
|
|
|
|
|
|
| |||
Three months ended June 30, 2022 |
|
|
|
|
|
|
| |||||
Revenue Type: |
|
|
|
|
|
|
|
|
| |||
Digital |
| $ | 71,355 |
|
| $ | 6,660 |
|
| $ | 78,015 |
|
Connected fitness |
|
| 9,451 |
|
|
| 1,154 |
|
|
| 10,605 |
|
Nutrition and other |
|
| 89,416 |
|
|
| 1,100 |
|
|
| 90,516 |
|
Total revenue |
| $ | 170,222 |
|
| $ | 8,914 |
|
| $ | 179,136 |
|
|
|
|
|
|
|
|
|
|
| |||
Geographic region: |
|
|
|
|
|
|
|
|
| |||
United States |
| $ | 151,107 |
|
| $ | 8,914 |
|
| $ | 160,021 |
|
Rest of world1 |
|
| 19,115 |
|
|
| — |
|
|
| 19,115 |
|
Total revenue |
| $ | 170,222 |
|
| $ | 8,914 |
|
| $ | 179,136 |
|
|
| Segment |
|
|
|
| ||||||
|
| Beachbody |
|
| Other |
|
| Total |
| |||
|
|
|
|
|
|
|
|
|
| |||
Three months ended June 30, 2021 |
|
|
|
|
|
|
| |||||
Revenue Type: |
|
|
|
|
|
|
|
|
| |||
Digital |
| $ | 90,488 |
|
| $ | 3,837 |
|
| $ | 94,325 |
|
Connected fitness |
|
| — |
|
|
| 10 |
|
|
| 10 |
|
Nutrition and other |
|
| 128,119 |
|
|
| 654 |
|
|
| 128,773 |
|
Total revenue |
| $ | 218,607 |
|
| $ | 4,501 |
|
| $ | 223,108 |
|
|
|
|
|
|
|
|
|
|
| |||
Geographic region: |
|
|
|
|
|
|
|
|
| |||
United States |
| $ | 194,028 |
|
| $ | 4,501 |
|
| $ | 198,529 |
|
Rest of world1 |
|
| 24,579 |
|
|
| — |
|
|
| 24,579 |
|
Total revenue |
| $ | 218,607 |
|
| $ | 4,501 |
|
| $ | 223,108 |
|
|
| Segment |
|
|
|
| ||||||
|
| Beachbody |
|
| Other |
|
| Total |
| |||
|
|
|
|
|
|
|
|
|
| |||
Six months ended June 30, 2022 |
|
|
|
|
|
|
| |||||
Revenue Type: |
|
|
|
|
|
|
|
|
| |||
Digital |
| $ | 145,997 |
|
| $ | 13,763 |
|
| $ | 159,760 |
|
Connected fitness |
|
| 23,940 |
|
|
| 6,178 |
|
|
| 30,118 |
|
Nutrition and other |
|
| 186,392 |
|
|
| 1,788 |
|
|
| 188,180 |
|
Total revenue |
| $ | 356,329 |
|
| $ | 21,729 |
|
| $ | 378,058 |
|
|
|
|
|
|
|
|
|
|
| |||
Geographic region: |
|
|
|
|
|
|
|
|
| |||
United States |
| $ | 316,899 |
|
| $ | 21,729 |
|
| $ | 338,628 |
|
Rest of world1 |
|
| 39,430 |
|
|
| — |
|
|
| 39,430 |
|
Total revenue |
| $ | 356,329 |
|
| $ | 21,729 |
|
| $ | 378,058 |
|
10
|
| Segment |
|
|
|
| ||||||
|
| Beachbody |
|
| Other |
|
| Total |
| |||
|
|
|
|
|
|
|
|
|
| |||
Six months ended June 30, 2021 |
|
|
|
|
|
|
| |||||
Revenue Type: |
|
|
|
|
|
|
|
|
| |||
Digital |
| $ | 181,933 |
|
| $ | 7,542 |
|
| $ | 189,475 |
|
Connected fitness |
|
| — |
|
|
| 10 |
|
|
| 10 |
|
Nutrition and other |
|
| 258,424 |
|
|
| 1,418 |
|
|
| 259,842 |
|
Total revenue |
| $ | 440,357 |
|
| $ | 8,970 |
|
| $ | 449,327 |
|
|
|
|
|
|
|
|
|
|
| |||
Geographic region: |
|
|
|
|
|
|
|
|
| |||
United States |
| $ | 392,275 |
|
| $ | 8,970 |
|
| $ | 401,245 |
|
Rest of world1 |
|
| 48,082 |
|
|
| — |
|
|
| 48,082 |
|
Total revenue |
| $ | 440,357 |
|
| $ | 8,970 |
|
| $ | 449,327 |
|
(1) Consists of Canada, United Kingdom, and France.No single country accounted for more than 10% of total revenue during the three and six months ended June 30, 2022 and 2021.
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
United States | $ | 198,529 | $ | 200,008 | $ | 401,245 | $ | 355,032 | ||||||||
Rest of world 1 | 24,579 | 18,476 | 48,082 | 32,788 | ||||||||||||
Total revenue | $ | 223,108 | $ | 218,484 | $ | 449,327 | $ | 387,820 |
Deferred Revenue
Deferred revenue is recorded for nonrefundable cash payments received for the Company’s performance obligation to transfer, or stand ready to transfer, goods or services in the future. Deferred revenue consists of subscription fees billed that have not been recognized and physical products sold that have not yet been delivered. During the three and six months ended June 30, 20212022, the Company recognized $
3. Fair Value Measurements
The Company’s financial assets and liabilities subject to fair value measurements on a recurring basis and the level of inputs used for such measurements were as follows (in thousands):
|
| June 30, 2022 |
| |||||||||
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| |||
|
|
|
|
|
|
|
|
|
| |||
Assets |
|
|
|
|
|
|
|
|
| |||
Derivative assets |
| $ | — |
|
| $ | 337 |
|
| $ | — |
|
Total assets |
| $ | — |
|
| $ | 337 |
|
| $ | — |
|
|
|
|
|
|
|
|
|
|
| |||
Liabilities |
|
|
|
|
|
|
|
|
| |||
Public warrants |
| $ | 1,700 |
|
| $ | — |
|
| $ | — |
|
Private placement warrants |
|
| — |
|
|
| — |
|
|
| 800 |
|
Total liabilities |
| $ | 1,700 |
|
| $ | — |
|
| $ | 800 |
|
|
|
|
|
|
|
|
|
|
| |||
|
| December 31, 2021 |
| |||||||||
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| |||
|
|
|
|
|
|
|
|
|
| |||
Assets |
|
|
|
|
|
|
|
|
| |||
Derivative assets |
| $ | — |
|
| $ | 314 |
|
| $ | — |
|
Total assets |
| $ | — |
|
| $ | 314 |
|
| $ | — |
|
|
|
|
|
|
|
|
|
|
| |||
Liabilities |
|
|
|
|
|
|
|
|
| |||
Public warrants |
| $ | 2,701 |
|
| $ | — |
|
| $ | — |
|
Private placement warrants |
|
| — |
|
|
| — |
|
|
| 2,133 |
|
Total liabilities |
| $ | 2,701 |
|
| $ | — |
|
| $ | 2,133 |
|
June 30, 2021 | ||||||||||||
Level 1 | Level 2 | Level 3 | ||||||||||
Assets | ||||||||||||
Derivative assets | $ | — | $ | 22 | $ | — | ||||||
Total Assets | $ | — | $ | 22 | $ | — | ||||||
Liabilities | ||||||||||||
Public Warrants | $ | 29,800 | $ | — | $ | — | ||||||
Private Placement Warrants | — | — | 20,373 | |||||||||
Total Liabilities | $ | 29,800 | $ | 0 | $ | 20,373 | ||||||
December 31, 2020 | ||||||||||||
Level 1 | Level 2 | Level 3 | ||||||||||
Assets | ||||||||||||
Derivative assets | $ | — | $ | 164 | $ | — | ||||||
Investment in convertible instrument | — | — | 10,288 | |||||||||
Total Assets | $ | — | $ | 164 | $ | 10,288 |
11
Fair values of cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses approximate the recorded value due to the short period of time to maturity. The fair value of the Public Warrants,public warrants, which trade in active markets, is based on quoted market prices for identical instruments.prices. The fair value of derivative instruments is based on Level 2 inputs such as observable forward rates, spot rates, and foreign currency exchange rates. The Company’s Private Placementprivate placement warrants and investment in the convertible instrument are classified within Level 3 of the fair value hierarchy because their fair values are is based on significant inputs that are unobservable in the market. The fair value of goodwill and intangible assets is based on a valuation performed by a third-party using Level 3 inputs.
Private Placement Warrants and, prior to the Business Combination, the investment in convertible instrument use assumptions and estimates the Company believes would be made by a market participant in making the same valuations. The Company assesses these assumptions and estimates onan on-going basisas additional data impacting the assumptions and estimates are obtained.
The Company determined the fair value of the Private Placement Warrantsprivate placement warrants using a Black-Scholes option-pricing model and the quoted price of the Company’s common stock.Class A Common Stock. Volatility was based on the implied volatility derived primarily from the average of the actual market activity of the Company’s peer group. The expected life was based on the remaining contractual term of the Private Placement Warrants,private placement warrants, and the risk-free interest rate was based on the implied yield available on U.S. Treasury Securitiestreasury securities with a maturity equivalent to the 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 the Closing Date of the Business Combination and at June 30, 2022 and December 31, 2021:
|
|
|
|
|
|
| ||
|
| June 30, 2022 |
|
| December 31, 2021 |
| ||
|
|
|
|
|
|
| ||
Risk-free rate |
|
| 3.0 | % |
|
| 1.2 | % |
Dividend yield rate |
|
| — |
|
|
| — |
|
Volatility |
|
| 75.0 | % |
|
| 65.0 | % |
Contractual term (in years) |
|
| 3.99 |
|
|
| 4.49 |
|
Exercise price |
| $ | 11.50 |
|
| $ | 11.50 |
|
As of June 25, 2021 | As of June 30, 2021 | |||||||
Risk-free rate | 0.9 | % | 0.9 | % | ||||
Dividend yield rate | 0.0 | % | 0.0 | % | ||||
Volatility | 45.0 | % | 45.0 | % | ||||
Contractual term (in years) | 5.00 | 4.99 | ||||||
Exercise price | $ | 11.50 | $ | 11.50 |
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, 2022 and 2021:
|
| Three months ended June 30, |
|
| Six months ended June 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Balance, beginning of period |
| $ | 1,920 |
|
| $ | — |
|
| $ | 2,133 |
|
| $ | — |
|
Assumed in Business Combination |
|
| — |
|
|
| 26,400 |
|
|
| — |
|
|
| 26,400 |
|
Change in fair value |
|
| (1,120 | ) |
|
| (6,027 | ) |
|
| (1,333 | ) |
|
| (6,027 | ) |
Balance, end of period |
| $ | 800 |
|
| $ | 20,373 |
|
| $ | 800 |
|
| $ | 20,373 |
|
Three Months Ended June 30, 2021 | Six Months Ended June 30, 2021 | |||||||
Balance, beginning of period | $ | 0 | $ | 0 | ||||
Assumed in Business Combination | 26,400 | 26,400 | ||||||
Change in fair value | (6,027 | ) | (6,027 | ) | ||||
Balance, end of period | $ | 20,373 | $ | 20,373 | ||||
For the three and six months ended June 30, 2022 and 2021, the change in the fair value of Private Placement Warrantsprivate placement warrants resulted from the change in fair valueprice of the Company’s Class A Common Stock.Stock, remaining contractual term, and risk-free rate. The changes in fair value are included in the unaudited condensed consolidated statements of operations as a component of change in fair value of warrant liabilities and in the unaudited condensed consolidated balance sheets as other liabilities.
12
4. Inventory, Net
Inventory, net consists of the following (in thousands):
|
| June 30, 2022 |
|
| December 31, 2021 |
| ||
|
|
|
|
|
|
| ||
Raw materials and work in process |
| $ | 19,039 |
|
| $ | 24,436 |
|
Finished goods |
|
| 53,232 |
|
|
| 108,294 |
|
Total inventory, net |
| $ | 72,271 |
|
| $ | 132,730 |
|
Adjustments to the Business Combination and as of December 31, 2020, the convertible instrument was valued using a scenario-based analysis. Two primary scenarios were considered to arrive at the valuation conclusion for the convertible instrument. The first scenario considers the probability-weightedcarrying value of conversion at the stated discountexcess inventory and inventory on hand to the issue price in a change in control event. The second scenario considers the probability-weightednet realizable value of conversion at the stated discount to the issue price in a Qualified Financing event. As of the date of the investment in the convertible instrument, an implied yield was calculated such that the sum of the value of the straight debtwere $15.1 million and the value of the conversion feature was equal to the principal investment amount. The implied yield of the investment is carried forward with a market adjustment and used as the primary discount rate for subsequent valuation dates.
Three Months Ended June 30, 2021 | Six Months Ended June 30, 2021 | |||||||
Balance, beginning of period | $ | 16,667 | $ | 10,288 | ||||
Investment in convertible instrument | — | 5,000 | ||||||
Change in fair value | 1,735 | 3,114 | ||||||
Conversion of investment | (18,402 | ) | (18,402 | ) | ||||
Balance, end of period | $ | 0 | $ | 0 |
June 30, 2021 | December 31, 2020 | |||||||
Raw materials and work in process | $ | 26,046 | $ | 26,480 | ||||
Finished goods | 48,192 | 38,874 | ||||||
Total inventory | $ | 74,238 | $ | 65,354 |
5. Other Current Assets
Other current assets consist of the following (in thousands):
|
| June 30, 2022 |
|
| December 31, 2021 |
| ||
Deferred coach costs |
| $ | 33,633 |
|
| $ | 30,928 |
|
Deposits |
|
| 7,070 |
|
|
| 8,915 |
|
Accounts receivable, net |
|
| 1,382 |
|
|
| 1,225 |
|
Other |
|
| 2,743 |
|
|
| 2,659 |
|
Total other current assets |
| $ | 44,828 |
|
| $ | 43,727 |
|
6. Property and Equipment, Net
June 30, 2021 | December 31, 2020 | |||||||
Deferred coach costs | $ | 33,510 | $ | 29,967 | ||||
Deposits | 9,945 | 3,035 | ||||||
Other | 2,831 | 4,362 | ||||||
Total other current assets | $ | 46,286 | $ | 37,364 |
Property and equipment, net consists of the following (in thousands):
|
|
|
|
|
|
| ||
|
| June 30, 2022 |
|
| December 31, 2021 |
| ||
|
|
|
|
|
|
| ||
Computer software and web development |
| $ | 253,296 |
|
| $ | 231,943 |
|
Computer equipment |
|
| 23,449 |
|
|
| 23,691 |
|
Buildings |
|
| 5,158 |
|
|
| 5,158 |
|
Leasehold improvements |
|
| 4,600 |
|
|
| 5,157 |
|
Furniture, fixtures and equipment |
|
| 1,874 |
|
|
| 2,442 |
|
Computer software and web development projects in-process |
|
| 12,876 |
|
|
| 26,490 |
|
Property and equipment, gross |
|
| 301,253 |
|
|
| 294,881 |
|
Less: Accumulated depreciation |
|
| (208,952 | ) |
|
| (181,783 | ) |
Total property and equipment, net |
| $ | 92,301 |
|
| $ | 113,098 |
|
June 30, 2021 | December 31, 2020 | |||||||
Computer software | $ | 203,741 | $ | 194,314 | ||||
Leasehold improvements | 24,197 | 24,197 | ||||||
Computer equipment | 21,264 | 21,172 | ||||||
Computer software and web development projects in-process | 26,013 | 12,380 | ||||||
Furniture, fixtures and equipment | 6,978 | 7,016 | ||||||
Property and equipment, gross | 282,193 | 259,079 | ||||||
Less: Accumulated depreciation | (187,754 | ) | (178,910 | ) | ||||
Property and equipment, net | $ | 94,439 | $ | 80,169 | ||||
13
All of the Company’s property and equipment is located in the U.S. The Company recorded depreciation expense related to property and equipment in the following expenseexpense categories of its unaudited condensed consolidated statementsof of operations as follows (in thousands):
|
| Three months ended June 30, |
|
| Six months ended June 30, |
|
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cost of revenue |
| $ | 7,743 |
|
| $ | 4,146 |
|
| $ | 16,824 |
|
| $ | 7,884 |
|
|
Selling and marketing |
|
| 102 |
|
|
| 389 |
|
|
| 381 |
|
|
| 840 |
|
|
Enterprise technology and development |
|
| 7,486 |
|
|
| 5,340 |
|
|
| 14,935 |
|
|
| 12,651 |
|
|
General and administrative |
|
| 49 |
|
|
| 617 |
|
|
| 241 |
|
|
| 1,263 |
|
|
Total depreciation |
| $ | 15,380 |
|
| $ | 10,492 |
|
| $ | 32,381 |
|
| $ | 22,638 |
|
|
7. Accrued Expenses
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Cost of revenue | $ | 4,146 | $ | 3,037 | $ | 7,884 | $ | 6,076 | ||||||||
Selling and marketing | 389 | 552 | 840 | 1,068 | ||||||||||||
Enterprise technology and development | 5,340 | 5,277 | 12,651 | 10,214 | ||||||||||||
General and administrative | 617 | 818 | 1,263 | 1,620 | ||||||||||||
Total depreciation | $ | 10,492 | $ | 9,684 | $ | 22,638 | $ | 18,978 |
Accrued expenses consist of the following (in thousands):
June 30, 2021 | December 31, 2020 | |||||||
Released, less amortization | $ | 25,215 | $ | 17,306 | ||||
In production | 5,740 | 2,131 | ||||||
Content assets, net | $ | 30,955 | $ | 19,437 | ||||
Allocation | ||||
Goodwill | $ | 157,922 | ||
Intangible assets: | ||||
Trade name/ Trademark | 43,700 | |||
Developed technology | 14,000 | |||
Customer relationships | 20,400 | |||
78,100 | ||||
Cash acquired | 420 | |||
Inventory, net | 11,447 | |||
Other assets | 3,354 | |||
Content assets | 3,400 | |||
Deferred revenue | (2,168 | ) | ||
Other liabilities | (14,039 | ) | ||
Deferred tax liabilities | (15,560 | ) | ||
$ | 222,876 | |||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Pro forma combined: | ||||||||||||||||
Revenue | $ | 237,286 | $ | 220,791 | $ | 480,543 | $ | 390,775 | ||||||||
Net | (25,362 | ) | (14,597 | ) | (67,747 | ) | (27,073 | ) |
Purchase Price | ||||
Common units issued in connection with acquisition (1) | $ | 27,889 | ||
Allocation | ||||
Goodwill | $ | 11,606 | ||
Intangible assets: | ||||
Trade name | 7,500 | |||
Customer-related | 300 | |||
Formulae | 1,950 | |||
Talent and representation contracts | 10,300 | |||
20,050 | ||||
Cash acquired | 1,247 | |||
Other assets acquired | 1,132 | |||
Liabilities acquired | (1,834 | ) | ||
Deferred tax liabilities | (4,312 | ) | ||
$ | 27,889 | |||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||
2020 | 2020 | |||||||
Pro forma combined: | ||||||||
Revenue | $ | 219,302 | $ | 389,244 | ||||
Net loss income | (11,582 | ) | (22,000 | ) |
2021 | ||||
June 30, 2021 | December 31, 2020 | |||||||||||||||||||||||||||
Acquired Intangibles, Gross | Accumulated Amortization | Acquired Intangibles, Net | Acquired Intangibles, Gross | Accumulated Amortization | Acquired Intangibles, Net | Weighted-Average Remaining Useful Life (years) | ||||||||||||||||||||||
Contract-based | $ | 300 | $ | (200 | ) | $ | 100 | $ | 300 | $ | (150 | ) | $ | 150 | 1.0 | |||||||||||||
Customer-related | 21,100 | (606 | ) | 20,494 | 700 | (337 | ) | 363 | 2.9 | |||||||||||||||||||
Technology-based | 20,200 | (6,249 | ) | 13,951 | 6,200 | (4,650 | ) | 1,550 | 2.8 | |||||||||||||||||||
Talent and representation contracts | 10,300 | (1,931 | ) | 8,369 | 10,300 | (644 | ) | 9,656 | 3.3 | |||||||||||||||||||
Formulae | 1,950 | (147 | ) | 1,803 | 1,950 | (49 | ) | 1,901 | 9.3 | |||||||||||||||||||
Trade name | 51,200 | — | 51,200 | 7,500 | — | 7,500 | Indefinite | |||||||||||||||||||||
$ | 105,050 | $ | (9,133 | ) | $ | 95,917 | $ | 26,950 | $ | (5,830 | ) | $ | 21,120 | |||||||||||||||
|
| June 30, 2022 |
|
| December 31, 2021 |
| ||
Employee compensation and benefits |
| $ | 19,372 |
|
| $ | 8,996 |
|
Coach costs |
|
| 13,626 |
|
|
| 19,168 |
|
Inventory, shipping and fulfillment |
|
| 13,927 |
|
|
| 14,360 |
|
Sales and other taxes |
|
| 4,049 |
|
|
| 5,097 |
|
Information technology |
|
| 2,222 |
|
|
| 10,150 |
|
Advertising |
|
| 1,128 |
|
|
| 4,033 |
|
Customer service expenses |
|
| 643 |
|
|
| 1,773 |
|
Other accrued expenses |
|
| 7,382 |
|
|
| 10,948 |
|
Total accrued expenses |
| $ | 62,349 |
|
| $ | 74,525 |
|
June 30, 2021 | December 31, 2020 | |||||||
Coach costs | $ | 20,508 | $ | 19,126 | ||||
Advertising | 14,172 | 3,626 | ||||||
Employee compensation and benefits | 13,359 | 28,855 | ||||||
Information technology | 11,878 | 5,621 | ||||||
Inventory, shipping and fulfillment | 9,877 | 10,244 | ||||||
Sales and income taxes | 4,114 | 4,132 | ||||||
Other accrued expenses | 13,532 | 8,351 | ||||||
Total accrued expenses | $ | 87,440 | $ | 79,955 | ||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Finance lease costs: | ||||||||||||||||
Amortization of right-of-use | $ | 36 | $ | 36 | $ | 73 | $ | 73 | ||||||||
Interest on lease liabilities | 4 | 5 | 8 | 11 | ||||||||||||
Operating lease costs | 2,510 | 2,459 | 4,903 | 4,919 | ||||||||||||
Short-term lease costs | 21 | 75 | 22 | 132 | ||||||||||||
Variable lease costs | 165 | (65 | ) | 336 | (113 | ) | ||||||||||
Total lease costs | $ | 2,736 | $ | 2,510 | $ | 5,342 | $ | 5,022 | ||||||||
Six Months Ended June 30, | ||||||||||||||||
2021 | 2020 | |||||||||||||||
Cash paid for amounts included in the measurement of lease liabilities | ||||||||||||||||
Operating cash flows from finance leases | $ | 8 | $ | 11 | ||||||||||||
Operating cash flows from operating leases | 6,179 | 6,221 | ||||||||||||||
Financing cash flows from finance leases | 73 | 70 | ||||||||||||||
Right-of-use | — | — | ||||||||||||||
Weighted-average remaining lease term—finance leases | 2.8 | 3.8 | ||||||||||||||
Weighted-average remaining lease term—operating leases | 3.5 | 4.4 | ||||||||||||||
Weighted-average discount rate—finance leases | 4.0 | % | 4.0 | % | ||||||||||||
Weighted-average discount rate - operating leases | 5.5 | % | 5.5 | % |
Operating Leases | Finance Leases | Total | ||||||||||
Six Months Ended December 31, 2021 | $ | 4,343 | $ | 81 | $ | 4,424 | ||||||
Year ended December 31, 2022 | 11,183 | 161 | 11,344 | |||||||||
Year ended December 31, 2023 | 11,780 | 123 | 11,903 | |||||||||
Year ended December 31, 2024 | 12,616 | 3 | 12,619 | |||||||||
Year ended December 31, 2025 | — | — | — | |||||||||
Thereafter | — | — | — | |||||||||
Total | 39,922 | 368 | 40,290 | |||||||||
Less present value discount | (3,831 | ) | (17 | ) | (3,848 | ) | ||||||
Lease liabilities at June 30, 2021 | $ | 36,091 | $ | 351 | $ | 36,442 | ||||||
8. Commitments and Contingencies
Inventory Purchase and Service Agreements
The Company has noncancelable inventory purchase and service agreements with multiple service providers which expire at varying dates through 2025.2028. During the three and six months ended June 30, 2022, the Company recorded losses on inventory purchase commitments related to connected fitness hardware of $1.8 million and $2.4 million, respectively. These losses are included in accrued expenses in the unaudited condensed consolidated balance sheets and connected fitness cost of revenue in the unaudited condensed consolidated statements of operations. Service agreement obligations include amounts related to fitness and nutrition trainers, future events, information systems support, and other technology projects.
Future minimum payments under noncancelable service and inventory purchase agreements for the periods succeeding June 30, 20212022 are as follows (in thousands):
Six months ending December 31, 2022 |
| $ | 30,887 |
|
Year ending December 31, 2023 |
|
| 4,019 |
|
Year ending December 31, 2024 |
|
| 1,410 |
|
Year ending December 31, 2025 |
|
| 1,385 |
|
Year ending December 31, 2026 |
|
| 100 |
|
Thereafter |
|
| 150 |
|
|
| $ | 37,951 |
|
14
Six Months Ended December 31, 2021 | $ | 124,020 | ||
Year ended December 31, 2022 | 7,413 | |||
Year ended December 31, 2023 | 1,431 | |||
Year ended December 31, 2024 | 1,250 | |||
Year ended December 31, 2025 | 1,250 | |||
$ | 135,364 | |||
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.
Contingencies
The Company is subject to litigation from time to time in the ordinary course of business. Such claims typically involve its products, intellectual property, and relationships with suppliers, customers, distributors, employees, and others. Contingent liabilities are recorded when it is both probable that a loss has occurred and the amount of the loss can be reasonable estimated. Although it is not possible to predict how litigation and other claims will be resolved, the Company does not believe that any currently identified claims or litigation matters will have a material adverse effect on its consolidated financial position or results of operations.
9. Acquisition
On June 30,25, 2021, there were 10,000,000 Public Warrants and 5,333,333 Private Placement warrants outstanding.
The following unaudited pro forma financial information presents the issuancecombined results of operations of the PublicCompany and Private Placement WarrantsMyx as if the companies had been combined as of $5.3 million were also recorded as a componentJanuary 1, 2021. The unaudited pro forma financial information includes the accounting effects of change in fair valuethe business combination, including amortization of warrant liabilities inintangible assets. The unaudited pro forma financial information is presented for information purposes only and is not indicative of the unaudited condensed consolidated statementsresults of operations resulting in a net change in fair valuethat would have been achieved if the acquisition had taken place at the beginning of warrant liabilitiesthe period presented, nor should it be taken as indication of $5.4 million.the Company’s future consolidated results of operations.
(in thousands) |
| Three Months Ended |
| Six Months Ended |
|
| June 30, 2021 |
| June 30, 2021 |
Pro forma combined: |
|
|
|
|
Revenue |
| $237,286 |
| $480,543 |
Net loss |
| (25,362) |
| (67,747) |
15
10. Stockholders’ Equity
As of June 30, 2021, 2022, 2,000,000,000 shares, $0.0001$0.0001 par value per share are authorized, of which, 1,600,000,000 shares are designated as Class A Common Stock, 200,000,000 shares are designated as Class X Common Stock, 100,000,000 shares are designated as Class C Common Stock and 100,000,000 shares are designated as Preferred Stock.
Accumulated Other Comprehensive Income (Loss)
The following tables summarize changes in accumulated other comprehensive income (loss), net of taxloss by component during the three months ended June 30, 2022 and 2021 (in thousands):
| Unrealized Gain (Loss) on Derivatives |
|
| Foreign Currency Translation Adjustment |
|
| Total |
| |||
|
|
|
|
|
|
|
|
| |||
Balances at March 31, 2021 | $ | (188 | ) |
| $ | 86 |
|
| $ | (102 | ) |
Other comprehensive loss before reclassifications |
| (78 | ) |
|
| 12 |
|
|
| (66 | ) |
Amounts reclassified from accumulated other comprehensive income (loss) |
| 172 |
|
|
| — |
|
|
| 172 |
|
Tax effect |
| (21 | ) |
|
| — |
|
|
| (21 | ) |
Balances at June 30, 2021 | $ | (115 | ) |
| $ | 98 |
|
| $ | (17 | ) |
|
|
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
| |||
Balances at March 31, 2022 | $ | (148 | ) |
| $ | 15 |
|
| $ | (133 | ) |
Other comprehensive loss before reclassifications |
| 13 |
|
|
| (51 | ) |
|
| (38 | ) |
Amounts reclassified from accumulated other comprehensive income (loss) |
| 74 |
|
|
| — |
|
|
| 74 |
|
Tax effect |
| 22 |
|
|
| — |
|
|
| 22 |
|
Balances at June 30, 2022 | $ | (39 | ) |
| $ | (36 | ) |
| $ | (75 | ) |
The following tables summarize changes in accumulated other comprehensive loss by component during the six months ended June 30, 2022 and 2021 (in thousands):
| Unrealized Gain (Loss) on Derivatives |
|
| Foreign Currency Translation Adjustment |
|
| Total |
| |||
|
|
|
|
|
|
|
|
| |||
Balances at December 31, 2020 | $ | (246 | ) |
| $ | 44 |
|
| $ | (202 | ) |
Other comprehensive loss before reclassifications |
| (170 | ) |
|
| 54 |
|
|
| (116 | ) |
Amounts reclassified from accumulated other comprehensive income (loss) |
| 339 |
|
|
| — |
|
|
| 339 |
|
Tax effect |
| (38 | ) |
|
| — |
|
|
| (38 | ) |
Balances at June 30, 2021 | $ | (115 | ) |
| $ | 98 |
|
| $ | (17 | ) |
|
|
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
| |||
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 | ) |
16
Unrealized Gain (Loss) on Derivatives | Foreign Currency Translation Adjustment | Total | ||||||||||
Balances at December 31, 2019 | $ | (99 | ) | $ | 111 | $ | 12 | |||||
Other comprehensive income (loss) before reclassifications | 246 | (327 | ) | (81 | ) | |||||||
Amounts reclassified from accumulated other comprehensive income (loss) | (47 | ) | — | (47 | ) | |||||||
Tax effect | (53 | ) | — | (53 | ) | |||||||
Balances at June 30, 2020 | $ | 47 | $ | (216 | ) | $ | (169 | ) | ||||
Balances at December 31, 2020 | $ | (246 | ) | $ | 44 | $ | (202 | ) | ||||
Other comprehensive income (loss) before reclassifications | (170 | ) | 54 | (116 | ) | |||||||
Amounts reclassified from accumulated other comprehensive income (loss) | 339 | — | 339 | |||||||||
Tax effect | (38 | ) | — | (38 | ) | |||||||
Balances at June 30, 2021 | $ | (115 | ) | $ | 98 | $ | (17 | ) | ||||
11. Equity-Based Compensation
Equity Compensation Plans
A summary of the Company’s board of directors through the granting of one or more of the following types of awards: (a) nonqualified unit options, (b) unit awards, and (c) unit appreciation rights. The Company granted nonqualified unit options with vesting periods ranging from three to five years.
| Options Outstanding |
| |||||||||||||
| Number of Options |
|
| Weighted-Average Exercise Price |
|
| Weighted-Average Remaining Contractual Term |
|
| Aggregate Intrinsic Value |
| ||||
Outstanding at December 31, 2021 |
| 41,753,042 |
|
| $ | 3.86 |
|
|
| 5.92 |
|
| $ | 11,379 |
|
Granted |
| 15,509,878 |
|
|
| 1.21 |
|
|
|
|
|
|
| ||
Exercised |
| (1,720,163 | ) |
|
| 1.55 |
|
|
|
|
|
|
| ||
Forfeited |
| (6,075,160 | ) |
|
| 2.17 |
|
|
|
|
|
|
| ||
Expired |
| (167,868 | ) |
|
| 1.22 |
|
|
|
|
|
|
| ||
Outstanding at June 30, 2022 |
| 49,299,729 |
|
| $ | 2.98 |
|
|
| 6.06 |
|
| $ | 1,425 |
|
Exercisable at June 30, 2022 |
| 24,065,850 |
|
| $ | 2.30 |
|
|
| 2.91 |
|
| $ | — |
|
The intrinsic value of options exercised was $0.8 million for the Exchange Ratio, andsix months ended June 30, 2022.
A summary of RSU activity is as follows:
|
| RSUs Outstanding | ||||||||
|
| Number of RSUs |
|
| Weighted-Average Fair Value |
|
| |||
Outstanding at December 31, 2021 |
|
| 573,678 |
|
| $ |
| 5.97 |
|
|
Granted |
|
| 2,606,735 |
|
|
|
| 1.23 |
|
|
Vested |
|
| (210,146 | ) |
|
|
| 6.68 |
|
|
Forfeited |
|
| (251,082 | ) |
|
|
| 4.62 |
|
|
Outstanding at June 30, 2022 |
|
| 2,719,185 |
|
| $ |
| 1.49 |
|
|
On January 1, 2022, the Company’s boardnumber of directors approvedshares available for issuance under the 2021 Incentive Award Plan (the “2021 Plan”). The 2021 Plan provides for increased by 15,479,188 pursuant to the grantterms of stock options, including ISOs and nonqualified stock options (“NSOs”), SARs, restricted stock, dividend equivalents, restricted stock units (“RSUs”) and other stock or cash-based awards.
Equity-Based Compensation Expense
Options Outstanding | ||||||||||||
Number of Options | Weighted- Average Exercise Price (per option) | Weighted- Average Remaining Contractual Term (in years) | ||||||||||
Outstanding at December 31, 2020 (as previously reported) | 10,170,288 | $ | 7.04 | 5.70 | ||||||||
Conversion of awards due to recapitalization | 23,998,437 | (4.94 | ) | |||||||||
Outstanding at December 31, 2020, after effect of reverse acquisition | 34,168,725 | 2.10 | ||||||||||
Granted | 890,300 | 9.65 | ||||||||||
Exercised | — | — | ||||||||||
Forfeited | (470,505 | ) | 2.48 | |||||||||
Outstanding at June 30, 2021 | 34,588,520 | $ | 2.29 | 5.28 | ||||||||
Exercisable at June 30, 2021 | 23,444,367 | $ | 1.88 | 3.89 | ||||||||
The fair value of each award as of the date of grant is estimated using a Black-Scholes option-pricing model. The following table summarizes the weighted-average assumptions used to determine the fair value of option grants:
|
| Six months ended June 30, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Risk-free rate |
|
| 2.8 | % |
|
| 0.7 | % |
Dividend yield rate |
|
| 0 |
|
|
| 0 |
|
Volatility |
|
| 52.6 | % |
|
| 53.9 | % |
Expected term (in years) |
|
| 6.25 |
|
|
| 6.23 |
|
Weighted-average grant date fair value |
| $ | 0.64 |
|
| $ | 4.91 |
|
17
Six Months Ended June 30, | ||||||||
2021 | 2020 | |||||||
Risk-free rate | 0.7 | % | 0.5 | % | ||||
Dividend yield rate | 0.0 | % | 0.0 | % | ||||
Volatility | 53.9 | % | 55.0 | % | ||||
Expected term (in years) | 6.23 | 6.23 | ||||||
Weighted-average exercise price | $ | 9.65 | $ | 2.52 |
Number of Options | Weighted- Average Grant Date Fair Value (per option) | |||||||
Unvested at December 31, 2020 (as previously reported) | 3,701,114 | $ | 4.34 | |||||
Conversion of awards due to recapitalization | 8,733,309 | (3.05 | ) | |||||
Unvested at December 31, 2020, after effect of reverse acquisition | 12,434,423 | 1.29 | ||||||
Granted | 890,300 | 4.91 | ||||||
Vested | (1,710,066 | ) | 1.29 | |||||
Forfeited | (470,504 | ) | 1.19 | |||||
Unvested at June 30, 2021 | 11,144,153 | $ | 1.58 | |||||
Equity-based compensation expense for the three and six months ended June 30, 20212022 and 20202021 was as follows (in thousands):
|
| Three months ended June 30, |
|
| Six months ended June 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cost of revenue |
| $ | 382 |
|
| $ | 91 |
|
| $ | 717 |
|
| $ | 182 |
|
Selling and marketing |
|
| 1,018 |
|
|
| 1,616 |
|
|
| 2,657 |
|
|
| 3,333 |
|
Enterprise technology and development |
|
| (17 | ) |
|
| 357 |
|
|
| 910 |
|
|
| 663 |
|
General and administrative |
|
| 1,618 |
|
|
| 458 |
|
|
| 3,281 |
|
|
| 917 |
|
Total equity-based compensation |
| $ | 3,001 |
|
| $ | 2,522 |
|
| $ | 7,565 |
|
| $ | 5,095 |
|
Three Months Ended��June 30, | Six Months Ended June 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Cost of revenue | $ | 91 | $ | 50 | $ | 182 | $ | 106 | ||||||||
Selling and marketing | 1,616 | 265 | 3,333 | 393 | ||||||||||||
Enterprise technology and development | 357 | 306 | 663 | 594 | ||||||||||||
General and administrative | 458 | 392 | 917 | 815 | ||||||||||||
Total equity-based compensation | $ | 2,522 | $ | 1,013 | $ | 5,095 | $ | 1,908 | ||||||||
As of June 30, 2021,2022, the total unrecognized equity-based compensation expense was $31.9$52.5 million, and haswhich will be recognized over a weighted-average recognitionremaining period of 3.022.95 years.
12. Derivative Financial Instruments
As of June 30, 20212022 and December 31, 2020,2021, the notional amount of the Company’s outstanding foreign exchange options was $24.5$26.5 million and $34.0$30.4 million, respectively. There were 0outstanding0 outstanding forward contracts as of June 30, 20212022 and December 31, 2020.
June 30, | December 31, | |||||||
2021 | 2020 | |||||||
Derivatives designated as hedging instruments | $ | 18 | $ | 134 | ||||
Derivatives not designated as hedging instruments | 4 | 30 | ||||||
Total derivative assets | $ | 22 | $ | 164 | ||||
The following table shows
|
|
|
| Three months ended June 30, |
|
| Six months ended June 30, |
| ||||||||||
|
| Financial Statement Line Item |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
|
|
|
|
|
|
|
|
|
| |||||||||
Unrealized gains (losses) |
| Other comprehensive income (loss) |
| $ | 13 |
|
| $ | (78 | ) |
| $ | (149 | ) |
| $ | (170 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Losses reclassified from accumulated other |
| Cost of revenue |
| $ | (32 | ) |
| $ | (65 | ) |
| $ | (62 | ) |
| $ | (138 | ) |
comprehensive loss into net loss |
| General and administrative |
|
| (42 | ) |
|
| (107 | ) |
|
| (81 | ) |
|
| (201 | ) |
Total amounts reclassified |
|
|
| $ | (74 | ) |
| $ | (172 | ) |
| $ | (143 | ) |
| $ | (339 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Gains (losses) recognized on derivatives |
| Cost of revenue |
| $ | 6 |
|
| $ | (20 | ) |
| $ | (45 | ) |
| $ | (41 | ) |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||
Financial Statement Line Item | 2021 | 2020 | 2021 | 2020 | ||||||||||||||
Unrealized (losses) gains | Other comprehensive income (loss) | $ | (78 | ) | $ | (308 | ) | $ | (170 | ) | $ | 246 | ||||||
(Losses) gains reclassified from accumulated (loss) into net loss | Cost of revenue | (65 | ) | 22 | (138 | ) | 13 | |||||||||||
General and administrative | (107 | ) | 51 | (201 | ) | 34 | ||||||||||||
Total amounts reclassified | (172 | ) | 73 | (339 | ) | 47 | ||||||||||||
(Losses) gains recognized derivatives not designated as hedging instruments | Cost of revenue | (20 | ) | (73 | ) | (41 | ) | 31 |
13. Strategic Realignment
In January 2022, the Company commenced a strategic alignment initiative to consolidate its streaming fitness offerings into a single Beachbody Company, Inc.
The following table summarizes activity in the Company’s restructuring-related liability during the three months ended June 30, 2022 (in thousands):
|
| Balance at |
|
| Restructuring |
|
| Payments / |
|
| Liability at |
| ||||
|
| March 31, 2022 |
|
| Charges |
|
| Utilizations |
|
| June 30, 2022 |
| ||||
Employee-related costs |
| $ | 4,618 |
|
| $ | 1,332 |
|
| $ | (4,630 | ) |
| $ | 1,320 |
|
Total costs |
| $ | 4,618 |
|
| $ | 1,332 |
|
| $ | (4,630 | ) |
| $ | 1,320 |
|
18
The following table summarizes the Company’s restructuring costs activity during the six months ended June 30, 2022 (in thousands):
|
| Balance at |
|
| Restructuring |
|
| Payments / |
|
| Liability at |
| ||||
|
| December 31, 2021 |
|
| Charges |
|
| Utilizations |
|
| June 30, 2022 |
| ||||
Employee-related costs |
| $ | — |
|
| $ | 8,555 |
|
| $ | (7,235 | ) |
| $ | 1,320 |
|
Total costs |
| $ | — |
|
| $ | 8,555 |
|
| $ | (7,235 | ) |
| $ | 1,320 |
|
During the six months ended June 30, 2022, the Company determined that the useful life of certain computer software and web development assets and content assets would end upon the completion of its platform consolidation. The Company accelerated depreciation of these computer software and web development assets and recorded $1.2 million, or $0.00 per share, and $3.4 million, or $0.01 per share, of additional depreciation expense as a component of digital cost of revenue, and nutrition and other cost of revenue during three and six months ended June 30, 2022, respectively. The Company also accelerated amortization of these content assets and recorded $1.5 million, or $0.00 per share, and $2.6 million, or $0.01 per share, of additional amortization as a component of digital cost of revenue during three and six months ended June 30, 2022, respectively.
14. Income Taxes
The Company recorded a benefit for income taxes of $10.9Company recorded aeffective benefit for income taxes of $2.7milliontax rate was 0.7% and $4.3million0.8% for the three and six months ended June 30, 2020, respectively. The Company’s effective benefit tax rate was 46.6%2022, respectively, and 20.9%46.6% and 20.9% for the three and six months ended June 30, 2021, respectively.
The Company’s effective benefit tax rate was 21.1% and 19.0% for the three and six months ended June 30, 2020, respectively.
The Company evaluates its tax positions on a quarterly basis and revises its estimate accordingly. There arewere no material changes to the Company’s uncertain tax positions, interest, or penalties during the three and six months ended June 30, 2021.
15. Earnings (Loss) per common share is calculated by dividing net loss allocable to common shareholders by the weighed-average number of common shares outstanding during the period. Diluted net loss per common share adjusts net loss and net loss per common share for the effect of all potentially dilutive shares of the Company’s common stock. Basic and diluted earnings per share are the same for each class of common stock because they are entitled to the same liquidation and dividend rights.
The computation of earnings (loss)loss per share of Class A and Class X Common Stock is as follows (in thousands, except share and per share information):
|
| Three months ended June 30, |
|
| Six months ended June 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net loss |
| $ | (41,867 | ) |
| $ | (12,440 | ) |
| $ | (115,400 | ) |
| $ | (42,498 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Weighted-average common shares outstanding, basic and diluted |
|
| 307,204,999 |
|
|
| 247,062,134 |
|
|
| 306,786,192 |
|
|
| 245,048,715 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net loss per common share, basic and diluted |
| $ | (0.14 | ) |
| $ | (0.05 | ) |
| $ | (0.38 | ) |
| $ | (0.17 | ) |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Numerator: | ||||||||||||||||
Net loss available to common shareholders-basic and diluted | $ | (12,440 | ) | $ | (10,003 | ) | $ | (42,498 | ) | $ | (18,331 | ) | ||||
Denominator: | ||||||||||||||||
Weighted-average common shares outstanding- basic and diluted | 247,062,134 | 238,142,972 | 245,048,715 | 238,142,972 | ||||||||||||
Net loss per common shareholder, basic | $ | (0.05 | ) | $ | (0.04 | ) | $ | (0.17 | ) | $ | (0.08 | ) | ||||
Net loss per common shareholder, diluted | $ | (0.05 | ) | $ | (0.04 | ) | $ | (0.17 | ) | $ | (0.08 | ) |
Basic net loss per common share is the same as dilutive net loss per common share for each of the three and six months ended June 30, 2022 and each of the three and six months ended June 30, 2021 and 2020 as the inclusion of all potential common shares would have been antidilutive.
19
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.antidilutive:
|
| June 30, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
|
|
|
|
|
|
| ||
Options |
|
| 49,299,729 |
|
|
| 34,588,520 |
|
RSUs |
|
| 2,719,185 |
|
|
| — |
|
Compensation warrants |
|
| 3,980,656 |
|
|
| 3,980,656 |
|
Public and private placement warrants |
|
| 15,333,333 |
|
|
| 15,333,333 |
|
Earn-out shares |
|
| 3,750,000 |
|
|
| 3,750,000 |
|
|
|
| 75,082,903 |
|
|
| 57,652,509 |
|
June 30, | ||||||||
2021 | 2020 | |||||||
Options | 34,588,520 | 33,389,285 | ||||||
Compensati o n Warrants | 3,980,656 | — | ||||||
Public and Private Placement Warrants | 15,333,333 | — | ||||||
Forest Road Earn-out Shares | 3,750,000 | — | ||||||
57,652,509 | 33,389,285 | |||||||
16.
The Company applies ASC 280,ourthe Company’s digital platforms. The Company has 2 operating segments, Beachbody and Other, and 1 reportable segment, Beachbody. The Beachbody segment primarily derives revenue from Beachbody on DemandBOD and BODi digital subscriptions, nutritional products, connected fitness equipment (bikes and accessories), and other fitness relatedfitness-related products. Other derives revenue primarily from Openfit digital subscriptions, and nutritional products, and Myx connected fitness equipment (bikes and accessories) and monthly subscription revenue for workout content.equipment. The Company uses contribution as a measure of profit or loss, defined as revenue less directly attributable cost of revenue and certain selling and marketing expenses including media, Coach and social influencer compensation, royalties, and third-party sales commissions. Contribution does not include allocated costs as described below as the CODM does not include these costs in assessing performance. There are no inter-segment transactions. The Company manages its assets on a consolidated basis, and, as such, does not report asset information by segment.
Summary information by reportable segment is as follows (in thousands):
|
| Segment |
| |||||||||
|
| Beachbody |
|
| Other |
|
| Consolidated |
| |||
|
|
|
|
|
|
|
|
|
| |||
Three months ended June 30, 2022 |
|
|
|
|
|
|
| |||||
Revenue |
| $ | 170,222 |
|
| $ | 8,914 |
|
| $ | 179,136 |
|
Contribution |
|
| 37,607 |
|
|
| (451 | ) |
|
| 37,156 |
|
|
|
|
|
|
|
|
|
|
| |||
Three months ended June 30, 2021 |
|
|
|
|
|
|
| |||||
Revenue |
| $ | 218,607 |
|
| $ | 4,501 |
|
| $ | 223,108 |
|
Contribution |
|
| 49,545 |
|
|
| (6,411 | ) |
|
| 43,134 |
|
|
|
|
|
|
|
|
|
|
| |||
Six months ended June 30, 2022 |
|
|
|
|
|
|
| |||||
Revenue |
| $ | 356,329 |
|
| $ | 21,729 |
|
| $ | 378,058 |
|
Contribution |
|
| 65,698 |
|
|
| (1,827 | ) |
|
| 63,871 |
|
|
|
|
|
|
|
|
|
|
| |||
Six months ended June 30, 2021 |
|
|
|
|
|
|
| |||||
Revenue |
| $ | 440,357 |
|
| $ | 8,970 |
|
| $ | 449,327 |
|
Contribution |
|
| 96,020 |
|
|
| (11,547 | ) |
|
| 84,473 |
|
20
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Beachbody: | ||||||||||||||||
Revenue | $ | 218,607 | $ | 216,370 | $ | 440,357 | $ | 384,733 | ||||||||
Contribution | 49,545 | 53,623 | 96,020 | 104,317 | ||||||||||||
Other: | ||||||||||||||||
Revenue | 4,501 | 2,114 | 8,970 | 3,087 | ||||||||||||
Contribution | (6,411 | ) | (8,520 | ) | (11,547 | ) | (12,642 | ) | ||||||||
Consolidated: | ||||||||||||||||
Revenue | $ | 223,108 | $ | 218,484 | $ | 449,327 | $ | 387,820 | ||||||||
Contribution | 43,134 | 45,103 | 84,473 | 91,675 |
Reconciliation of consolidated contribution to loss before income taxes (in thousands):
|
| Three months ended June 30, |
|
| Six months ended June 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Consolidated contribution |
| $ | 37,156 |
|
| $ | 43,134 |
|
| $ | 63,871 |
|
| $ | 84,473 |
|
Amounts not directly related to segments: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cost of revenue (1) |
|
| 14,749 |
|
|
| 8,118 |
|
|
| 28,572 |
|
|
| 15,960 |
|
Selling and marketing (2) |
|
| 21,762 |
|
|
| 20,872 |
|
|
| 48,081 |
|
|
| 40,963 |
|
Enterprise technology and development |
|
| 24,133 |
|
|
| 26,949 |
|
|
| 57,830 |
|
|
| 54,038 |
|
General and administrative |
|
| 19,584 |
|
|
| 17,231 |
|
|
| 39,657 |
|
|
| 35,177 |
|
Restructuring |
|
| 1,332 |
|
|
| — |
|
|
| 8,555 |
|
|
| — |
|
Change in fair value of warrant liabilities |
|
| (2,070 | ) |
|
| (5,390 | ) |
|
| (2,334 | ) |
|
| (5,390 | ) |
Interest expense |
|
| 3 |
|
|
| 305 |
|
|
| 22 |
|
|
| 428 |
|
Other expense (income), net |
|
| (189 | ) |
|
| (1,654 | ) |
|
| (125 | ) |
|
| (2,953 | ) |
Loss before income taxes |
| $ | (42,148 | ) |
| $ | (23,297 | ) |
| $ | (116,387 | ) |
| $ | (53,750 | ) |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Consolidated contribution | $ | 43,134 | $ | 45,103 | $ | 84,473 | $ | 91,675 | ||||||||
Amounts not directly related to segments: | ||||||||||||||||
Cost of revenue (1) | 8,118 | 6,712 | 15,960 | 13,447 | ||||||||||||
Selling and marketing (2) | 20,872 | 13,962 | 40,963 | 27,536 | ||||||||||||
Enterprise technology and development | 26,949 | 22,373 | 54,038 | 43,706 | ||||||||||||
General and administrative | 17,231 | 14,522 | 35,177 | 29,706 | ||||||||||||
Change in fair value of warrant liabilities | (5,390 | ) | — | (5,390 | ) | — | ||||||||||
Interest expense | 305 | 248 | 428 | 343 | ||||||||||||
Other income, net | (1,654 | ) | (34 | ) | (2,953 | ) | (442 | ) | ||||||||
Loss before income taxes | $ | (23,297 | ) | $ | (12,680 | ) | $ | (53,750 | ) | $ | (22,621 | ) | ||||
17. Subsequent Events
On August 8, 2022 (the “Closing”), the Company entered into an agreement with a third-party lender for a $50.0 million senior secured term loan (the “Term Loan”) with a four-year maturity. The Term Loan includes an incremental facility of up to an additional $25.0 million subject to certain terms and conditions. The Term Loan was funded at Closing and bears interest at the Company’s option of either (i) the Secured Overnight Financing Rate based upon an interest period of three months plus 7.15%, or (ii) a reference rate as defined in the agreement, plus 6.15%. In addition, borrowings will bear interest at 3.00%, which will be paid in kind by capitalizing such interest and adding it to the outstanding principal, annually. The Company has evaluated subsequent events through August 12, 2021,paid an upfront fee of $1.5 million at Closing and is required to pay an annual fee of $0.25 million. The Term Loan requires annual amortization of 2.50% in the first two years and 5.00% in the final two years, paid quarterly, and certain mandatory repayments as defined in the agreement. The Term Loan provides customary restrictions, including prepayment premiums, and requires compliance with certain financial and other covenants. The Company expects to use the proceeds for general corporate purposes and to pay transaction fees and expenses related to the Term Loan.
In connection with the Term Loan, the Company issued warrants for the purchase of 4,716,756 million shares of the Company’s Class A Common Stock at an exercise price of $1.85 per share. The warrants vest on a monthly basis over four years, with 30%, 30%, 20% and 20% vesting in the first, second, third and fourth years, respectively. The warrants have a seven-year term from the date which the unaudited condensed consolidated financial statements were issued.
21
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(this (this “Report”) and the section entitled “Risk Factors.” Unless otherwise indicated, the terms “Beachbody,” “we,” “us,” or “our” refer to The Beachbody Company, Inc., a Delaware corporation, together with its consolidated subsidiaries.
Forward-Looking Statements
This Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended or the (“Securities Act,Act”), and Section 21E of the Securities Exchange Act of 1934, as amended or the (“Exchange Act)Act”), including statements about and the financial condition, results of operations, earnings outlook and prospects of the Company. Forward-looking statements are typically identified by words such as “plan,” “believe,” “expect,” “anticipate,” “intend,” “outlook,” “estimate,” “forecast,” “project,” “continue,” “could,” “may,” “might,” “possible,” “potential,” “predict,” “should,” “would” and other similar words and expressions, but the absence of these words does not mean that a statement is not forward-looking.
The forward-looking statements are based on our current expectations as applicable and are inherently subject to uncertainties and changes in circumstances and their potential effects and speak only as of the date of such statement. There can be no assurance that future developments will be those that have been anticipated. These forward-looking statements involve a number of risks, uncertainties or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to the following:
Should one or more of these risks or uncertainties materialize or should any of the assumptions made by management prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements.
Except to the extent required by applicable law or regulation, we undertake no obligation to update these forward-looking statements to reflect events or circumstances after the date of this Report or to reflect the occurrence of unanticipated events.
22
Overview of
Beachbody is a leading subscription health and wellness company. We focus primarily on digital content, supplements, connected fitness, and consumer health and wellness. Our Business
We offer nutritionalsnutritional products such as Shakeology®BEACHBAR® snack bars.
Historically, our revenue has primarily been generated primarily through aour network of micro-influencers, social media marketing channels, and direct response advertising. Components of revenue include recurring digital subscription revenue, connected fitness revenue, and revenue from the sale of nutritional and other products. In addition to selling individual products onalso bundle fitnessdigital and nutritionnutritional products together at discounted prices.
For the three months ended June 30, 2021,2022, as compared to the three months ended June 30, 2020:
For the six months ended June 30, 2021,2022, as compared to the six months ended June 30, 2020:
See the sectiontitled “—Non-GAAP“Non-GAAP Information”income (loss)loss to Adjusted EBITDA.
Recent Developments
We believe post-pandemic consumer behavior, the general slowdown of COVID-19
23
Digital Gross Margin
We believe our “One Brand” strategy, which will consolidate our streaming content into a single Beachbody platform and as consumers were reluctantwhich we expect to return to gyms asCOVID-19 pandemiccontinued. We also experienced modestly slowermiddle of the third quarter of 2022, will simplify our product fulfillment toofferings for customers and supply chain delays.lead to an increase in customer acquisition. We believe that strengthening our Coach network will generate additional digital revenue from our Coach business management online platform as well as drive growth in digital and nutritional subscriptions. During the second quarter and for the remainder of 2021,2022, we began testing new incentives and training programs for our Coach network to improve Coach recruitment and retention and their ability to reach more customers.
Nutrition and Other Gross Margin
Our nutritional products are often bundled with digital content offerings, and we are in the pandemic has resultedprocess of developing enhancements to our upsell and cross-sell capabilities. We are also currently reviewing our nutritional product portfolio and may reduce our offerings to only those nutritional products that meet our profitability requirements and/or reflect market demand. This rationalization strategy could result in higher shipping, freight, and fulfillment costs andfuture one-time charges to write down the cancellationcarrying value of certain Coach events.
Connected Fitness Gross Margin
We anticipate that our connected fitness gross margin will remain negative until we sell through our current inventory on hand. As a result of COVID-19 on
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, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
|
|
|
|
|
|
| ||
Digital subscriptions (millions) |
|
| 2.28 |
|
|
| 2.72 |
|
Nutritional subscriptions (millions) |
|
| 0.28 |
|
|
| 0.42 |
|
|
| Three months ended June 30, |
|
| Six months ended June 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Average digital retention |
|
| 95.6 | % |
|
| 94.9 | % |
|
| 95.6 | % |
|
| 95.4 | % |
Total streams (millions) |
|
| 31.0 |
|
|
| 44.5 |
|
|
| 69.2 |
|
|
| 100.4 |
|
DAU/MAU |
|
| 30.0 | % |
|
| 31.9 | % |
|
| 31.6 | % |
|
| 33.5 | % |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Revenue (millions) |
| $ | 179.1 |
|
| $ | 223.1 |
|
| $ | 378.1 |
|
| $ | 449.3 |
|
Gross profit (millions) |
| $ | 87.3 |
|
| $ | 154.3 |
|
| $ | 180.3 |
|
| $ | 312.4 |
|
Gross margin |
|
| 49 | % |
|
| 69 | % |
|
| 48 | % |
|
| 70 | % |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net loss (millions) |
| $ | (41.9 | ) |
| $ | (12.4 | ) |
| $ | (115.4 | ) |
| $ | (42.5 | ) |
Adjusted EBITDA (millions) |
| $ | (1.5 | ) |
| $ | (4.4 | ) |
| $ | (20.6 | ) |
| $ | (16.1 | ) |
Please see “Non-GAAP Information” below for a reconciliation of net loss to Adjusted EBITDA and an explanation for why we consider Adjusted EBITDA to be a helpful metric for investors.
24
Digital Subscriptions
Our ability to expand the number of digital solutions,subscriptions is an indicator of our market penetration and growth. Digital subscriptions include BOD, BODi, and Openfit subscriptions. Digital subscriptions include paid and free-to-pay subscriptions, with free-to-pay subscriptions representing approximately 1% of total digital subscriptions on average. Digital subscriptions are inclusive of all billing plans, currently for annual, semi-annual, quarterly and monthly billing intervals.
Nutritional Subscriptions
Nutritional subscriptions include monthly subscriptions for nutritional products such as Shakeology, Beachbody Performance, BEACHBAR, Bevvy and Ladder Supplements. We also package and bundle the content experience of digital subscriptions with nutritional subscriptions to optimize customer results.
Average Digital Retention
We use month-over-month digital subscription retention, which we believedefine as the structural shift towards wellnessaverage rate at which a subscription renews for a new billing cycle, to measure customer retention.
Total Streams
We use total streams to quantify the number of fitness or nutrition programs viewed per subscription, which is a leading indicator of customer engagement and fitness solutions likeretention. While the measure of a digital stream may vary across companies, to qualify as a stream on any of our digital platforms, a program must be viewed for a minimum of 25% of the total running time.
Daily Active Users to Monthly Active Users (DAU/MAU)
We use the ratio of daily active users to monthly active users to measure how frequently digital subscribers are utilizing our service in a given month. We define a daily active user as a unique user streaming content on our platform existed before the impactof COVID-19, andwe anticipate that this structural change to the fitness industry will continueafter COVID-19.
Non-GAAP Information
We use Adjusted EBITDA, which is that we use to supplement our results presented in accordance with GAAP. We believe Adjusted EBITDA is useful in evaluating our operating performance, as it is similar to measures reported by our public competitors and is regularly used by security analysts, institutional investors, and other interested parties in analyzing operating performance and prospects. Adjusted EBITDA is not intended to be a substitute for any GAAP financial measure and, as calculated, may not be comparable to other similarly titled measures of performance of other companies in other industries or within the same industry.
We define and calculate Adjusted EBITDA as net income (loss) adjusted for depreciation and amortization, amortization of capitalized cloud computing implementation costs, amortization of content assets, interest expense, income taxes,tax provision (benefit), equity-based compensation, inventory net realizable value adjustment, and other items that are not normal, recurring, operating expenses necessary to operate the Company’s business as described in the reconciliation below.
We includecompensation)compensation, and net realizable value adjustment) or are not related to our underlying business performance (for example, in the case of interest income and expense).
25
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, |
| ||||||||||
(in thousands) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net loss |
| $ | (41,867 | ) |
| $ | (12,440 | ) |
| $ | (115,400 | ) |
| $ | (42,498 | ) |
Adjusted for: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Depreciation and amortization |
|
| 19,965 |
|
|
| 12,215 |
|
|
| 41,552 |
|
|
| 25,941 |
|
Amortization of capitalized cloud computing implementation costs |
|
| 168 |
|
|
| 168 |
|
|
| 336 |
|
|
| 336 |
|
Amortization of content assets |
|
| 7,016 |
|
|
| 3,302 |
|
|
| 13,180 |
|
|
| 6,119 |
|
Interest expense |
|
| 3 |
|
|
| 305 |
|
|
| 22 |
|
|
| 428 |
|
Income tax benefit |
|
| (281 | ) |
|
| (10,857 | ) |
|
| (987 | ) |
|
| (11,252 | ) |
Equity-based compensation |
|
| 3,001 |
|
|
| 2,522 |
|
|
| 7,565 |
|
|
| 5,095 |
|
Inventory net realizable value adjustment (1) |
|
| 10,502 |
|
|
| — |
|
|
| 25,436 |
|
|
| — |
|
Transaction costs |
|
| — |
|
|
| 1,509 |
|
|
| 2 |
|
|
| 2,142 |
|
Restructuring and platform consolidation costs (2) |
|
| 2,086 |
|
|
| — |
|
|
| 9,973 |
|
|
| — |
|
Change in fair value of warrant liabilities |
|
| (2,070 | ) |
|
| (5,390 | ) |
|
| (2,334 | ) |
|
| (5,390 | ) |
Other adjustment items (3) |
|
| — |
|
|
| 6,038 |
|
|
| — |
|
|
| 6,038 |
|
Non-operating (4) |
|
| 5 |
|
|
| (1,757 | ) |
|
| 76 |
|
|
| (3,088 | ) |
Adjusted EBITDA |
| $ | (1,472 | ) |
| $ | (4,385 | ) |
| $ | (20,579 | ) |
| $ | (16,129 | ) |
(in thousands) | Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Net loss | $ | (12,440 | ) | $ | (10,003 | ) | $ | (42,498 | ) | $ | (18,331 | ) | ||||
Adjusted for | ||||||||||||||||
Depreciation and amortization | 12,215 | 10,534 | 25,941 | 20,678 | ||||||||||||
Amortization of capitalized cloud computing implementation costs | 168 | — | 336 | — | ||||||||||||
Amortization of content assets | 3,302 | 1,715 | 6,119 | 3,196 | ||||||||||||
Interest expense | 305 | 248 | 428 | 343 | ||||||||||||
Income tax benefit | (10,857 | ) | (2,677 | ) | (11,252 | ) | (4,290 | ) | ||||||||
Equity-based compensation | 2,522 | 1,013 | 5,095 | 1,908 | ||||||||||||
Transaction costs | 1,509 | — | 2,142 | — | ||||||||||||
Other adjustment items (1) | 6,038 | — | 6,038 | — | ||||||||||||
Non-operating costs (2) | (7,147 | ) | 60 | (8,478 | ) | 54 | ||||||||||
Adjusted EBITDA | $ | (4,385 | ) | $ | 890 | $ | (16,129 | ) | $ | 3,558 | ||||||
As of June 30, | ||||||||
2021 | 2020 | |||||||
Digital Subscriptions (millions) | 2.7 | 2.4 | ||||||
Nutritional Subscriptions (millions) | 0.4 | 0.5 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Average Digital Retention | 94.9 | % | 96.3 | % | 95.4 | % | 95.6 | % | ||||||||
Total Streams (millions) | 44.5 | 55.5 | 100.4 | 88.7 | ||||||||||||
DAU/MAU | 31.9 | % | 33.2 | % | 33.5 | % | 31.6 | % | ||||||||
Revenue (millions) | $ | 223.1 | $ | 218.5 | $ | 449.3 | $ | 387.8 | ||||||||
Gross profit (millions) | $ | 154.3 | $ | 159.1 | $ | 312.4 | $ | 279.6 | ||||||||
Gross margin | 69 | % | 73 | % | 70 | % | 72 | % | ||||||||
Net loss (millions) | $ | (12.4 | ) | $ | (10.0 | ) | $ | (42.5 | ) | $ | (18.3 | ) | ||||
Adjusted EBITDA (millions) (1) | $ | (4.4 | ) | $ | 0.9 | $ | (16.1 | ) | $ | 3.6 |
26
Results of Operations
We operate and manage our business in two operating segments, Beachbody and Other. For financial reporting purposes, we have one reportable segment, Beachbody. We identified the reportable segment based on the information used by management to monitor performance and make operating decisions. See Notes 1 and 22 of the notesNote 16, Segment Information, to our unaudited condensed consolidated financial statements included elsewhere in this Report for additional information regarding our reportable segment. The following discussion of our results and operations is on a consolidated basis as the Other
(in thousands) |
| Three months ended June 30, |
|
| Six months ended June 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Digital |
| $ | 78,015 |
|
| $ | 94,325 |
|
| $ | 159,760 |
|
| $ | 189,475 |
|
Connected fitness |
|
| 10,605 |
|
|
| 10 |
|
|
| 30,118 |
|
|
| 10 |
|
Nutrition and other |
|
| 90,516 |
|
|
| 128,773 |
|
|
| 188,180 |
|
|
| 259,842 |
|
Total revenue |
|
| 179,136 |
|
|
| 223,108 |
|
|
| 378,058 |
|
|
| 449,327 |
|
Cost of revenue: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Digital |
|
| 18,406 |
|
|
| 11,612 |
|
|
| 34,831 |
|
|
| 22,734 |
|
Connected fitness |
|
| 31,459 |
|
|
| 156 |
|
|
| 76,165 |
|
|
| 156 |
|
Nutrition and other |
|
| 42,002 |
|
|
| 57,002 |
|
|
| 86,776 |
|
|
| 113,997 |
|
Total cost of revenue |
|
| 91,867 |
|
|
| 68,770 |
|
|
| 197,772 |
|
|
| 136,887 |
|
Gross profit |
|
| 87,269 |
|
|
| 154,338 |
|
|
| 180,286 |
|
|
| 312,440 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Selling and marketing |
|
| 86,624 |
|
|
| 140,194 |
|
|
| 193,068 |
|
|
| 284,890 |
|
Enterprise technology and development |
|
| 24,133 |
|
|
| 26,949 |
|
|
| 57,830 |
|
|
| 54,038 |
|
General and administrative |
|
| 19,584 |
|
|
| 17,231 |
|
|
| 39,657 |
|
|
| 35,177 |
|
Restructuring |
|
| 1,332 |
|
|
| — |
|
|
| 8,555 |
|
|
| — |
|
Total operating expenses |
|
| 131,673 |
|
|
| 184,374 |
|
|
| 299,110 |
|
|
| 374,105 |
|
Operating loss |
|
| (44,404 | ) |
|
| (30,036 | ) |
|
| (118,824 | ) |
|
| (61,665 | ) |
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Change in fair value of warrant liabilities |
|
| 2,070 |
|
|
| 5,390 |
|
|
| 2,334 |
|
|
| 5,390 |
|
Interest expense |
|
| (3 | ) |
|
| (305 | ) |
|
| (22 | ) |
|
| (428 | ) |
Other income, net |
|
| 189 |
|
|
| 1,654 |
|
|
| 125 |
|
|
| 2,953 |
|
Loss before income taxes |
|
| (42,148 | ) |
|
| (23,297 | ) |
|
| (116,387 | ) |
|
| (53,750 | ) |
Income tax benefit |
|
| 281 |
|
|
| 10,857 |
|
|
| 987 |
|
|
| 11,252 |
|
Net loss |
| $ | (41,867 | ) |
| $ | (12,440 | ) |
| $ | (115,400 | ) |
| $ | (42,498 | ) |
27
(in thousands) | Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Revenue: | ||||||||||||||||
Digital | $ | 94,325 | $ | 78,357 | $ | 189,475 | $ | 140,882 | ||||||||
Nutrition and other | 128,783 | 140,127 | 259,852 | 246,938 | ||||||||||||
Total revenue | 223,108 | 218,484 | 449,327 | 387,820 | ||||||||||||
Cost of revenue: | ||||||||||||||||
Digital | 11,612 | 9,292 | 22,734 | 17,664 | ||||||||||||
Nutrition and other | 57,158 | 50,097 | 114,153 | 90,572 | ||||||||||||
Total cost of revenue | 68,770 | 59,389 | 136,887 | 108,236 | ||||||||||||
Gross profit | 154,338 | 159,095 | 312,440 | 279,584 | ||||||||||||
Operating expenses: | ||||||||||||||||
Selling and marketing | 140,194 | 134,666 | 284,890 | 228,892 | ||||||||||||
Enterprise technology and development | 26,949 | 22,373 | 54,038 | 43,706 | ||||||||||||
General and administrative | 17,231 | 14,522 | 35,177 | 29,706 | ||||||||||||
Total operating expenses | 184,374 | 171,561 | 374,105 | 302,304 | ||||||||||||
Operating loss | (30,036 | ) | (12,466 | ) | (61,665 | ) | (22,720 | ) | ||||||||
Change in fair value of warrant liabilities | 5,390 | — | 5,390 | — | ||||||||||||
Interest expense | (305 | ) | (248 | ) | (428 | ) | (343 | ) | ||||||||
Other income, net | 1,654 | 34 | 2,953 | 442 | ||||||||||||
Loss before income taxes | (23,297 | ) | (12,680 | ) | (53,750 | ) | (22,621 | ) | ||||||||
Income tax benefit (provision) | 10,857 | 2,677 | 11,252 | 4,290 | ||||||||||||
Net loss | $ | (12,440 | ) | $ | (10,003 | ) | $ | (42,498 | ) | $ | (18,331 | ) | ||||
Revenue
Revenue includes digital subscriptions, nutritional supplementSubscriptionDigital subscription revenue is recognized ratably over the subscription period (upof up to 12 months).months. We often sell bundled products that combine digital subscriptions, nutritional products, and/or other fitness and nutritional programs.products. We consider these sales to be revenue arrangements with multiple performance obligations and allocate the transaction price to each performance obligation based on its relative stand-alone selling price. We defer revenue when we receive payments in advance of delivery of products or the performance of services.
Three Months Ended June 30, | ||||||||||||||||
2021 | 2020 | $ Change | % Change | |||||||||||||
(dollars in thousands) | ||||||||||||||||
Revenue | ||||||||||||||||
Digital | $ | 94,325 | $ | 78,357 | $ | 15,968 | 20 | % | ||||||||
Nutrition and other | 128,783 | 140,127 | (11,344 | ) | (8 | %) | ||||||||||
Total revenue | $ | 223,108 | $ | 218,484 | $ | 4,624 | 2 | % | ||||||||
|
| Three months ended June 30, |
|
|
|
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| $ Change |
|
| % Change |
| ||||
|
| (dollars in thousands) |
|
|
|
|
|
|
| |||||||
Revenue |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Digital |
| $ | 78,015 |
|
| $ | 94,325 |
|
| $ | (16,310 | ) |
|
| (17 | %) |
Connected fitness |
|
| 10,605 |
|
|
| 10 |
|
|
| 10,595 |
|
| NM |
| |
Nutrition and other |
|
| 90,516 |
|
|
| 128,773 |
|
|
| (38,257 | ) |
|
| (30 | %) |
Total revenue |
| $ | 179,136 |
|
| $ | 223,108 |
|
| $ | (43,972 | ) |
|
| (20 | %) |
NM = not meaningful
The increasedecrease in digital revenue for the three months ended June 30, 2021,2022, as compared to the three months ended June 30, 2020,2021, was primarily due to a $12.6 million decrease in revenue generated from our online Coach business management platform as a result of fewer Coaches. The decrease in Coaches was primarily attributable to our preferred customer membership program, which launched at the end of Q3 2021, as certain Coaches elected to become preferred customers rather than remain in our Coach network. The change in digital revenue was also due to a $3.9 million decrease in revenue from our digital streaming services due to 16% fewer subscriptions.
The increase in connected fitness revenue was primarily due to the growth in digital subscriptions asacquisition of Myx on June 25, 2021; there was minimal connected fitness revenue for the three months ended June 30, 2021.
The decrease in nutrition and other revenue for the three months ended June 30, 2021,2022, as compared to the three months ended June 30, 2020,2021, was primarily due to an $11.2a $42.4 million decrease in revenue from nutritional products and a $3.1 million decrease in associated shipping revenue as we ended Q2 2022 with 33% fewer nutritional subscriptions compared to andone-timepurchasesQ2 2021. These decreases were partially offset by $8.5 million of Shakeology.
Six Months Ended June 30, | ||||||||||||||||
2021 | 2020 | $ Change | % Change | |||||||||||||
(dollars in thousands) | ||||||||||||||||
Revenue | ||||||||||||||||
Digital | $ | 189,475 | $ | 140,882 | $ | 48,593 | 34 | % | ||||||||
Nutrition and other | 259,852 | 246,938 | 12,914 | 5 | % | |||||||||||
Total revenue | $ | 449,327 | $ | 387,820 | $ | 61,507 | 16 | % | ||||||||
|
| Six months ended June 30, |
|
|
|
|
|
|
| |||||||
|
| 2022 |
|
| 2021 |
|
| $ Change |
|
| % Change |
| ||||
|
| (dollars in thousands) |
|
|
|
|
|
|
| |||||||
Revenue |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Digital |
| $ | 159,760 |
|
| $ | 189,475 |
|
| $ | (29,715 | ) |
|
| (16 | %) |
Connected fitness |
|
| 30,118 |
|
|
| 10 |
|
|
| 30,108 |
|
| NM |
| |
Nutrition and other |
|
| 188,180 |
|
|
| 259,842 |
|
|
| (71,662 | ) |
|
| (28 | %) |
Total revenue |
| $ | 378,058 |
|
| $ | 449,327 |
|
| $ | (71,269 | ) |
|
| (16 | %) |
The increasedecrease in digital revenue for the six months ended June 30, 2021,2022, as compared to the six months ended June 30, 2020,2021, was primarily due to a $24.4 million decrease in revenue generated from our online Coach business management platform as a result of fewer Coaches. The decrease in Coaches was primarily attributable to year-over-year growthour preferred customer membership program, which launched at the end of Q3 2021, as certain Coaches elected to become preferred customers rather than remain in our Coach network. The change in digital revenue was also due to a $5.1 million decrease in revenue from our digital streaming services due to 16% fewer subscriptions.
The increasedecrease in nutrition and other revenue for the six months ended June 30, 2021,2022, as compared to the six months ended June 30, 2020,2021, was primarily due to a $9.4$76.3 million increasedecrease in revenue from subscriptions to, andone-timepurchases of, Beachbody Performance supplements and Shakeologynutritional products and a $1.7$7.6 million increasedecrease in associated shipping revenue as we ended Q2 2022 with 33% fewer nutritional subscriptions compared to Q2 2021. These decreases were partially offset by $17.3 million of revenue associated with our preferred customer membership program, which launched at the end of Q3 2021, and $2.3 million of revenue from accessories and other fitness products.
28
Cost of Revenue
Digital Cost of Revenue
Digital cost of revenue includes costs associated with digital content creation including amortization and revisionsrevision of content assets, depreciation of streaming platforms, ande-commercewebsites, digital streaming costs, and amortization of acquired digital platform intangible assets. It also includes customer service costs, credit cardpayment processing fees, depreciation of production equipment, live trainer costs, facilities, and related personnel expenses.
Connected Fitness Cost of Revenue
Connected fitness cost of revenue consists of product costs, including bike and tablet hardware costs, duties and other applicable importing costs, shipping and handling costs, warehousing and logistics costs, costs associated with service calls and repairs of products under warranty, payment processing and financing fees, customer service expenses, and personnel-related expenses associated with supply chain and logistics.
Nutrition and Other Cost of Revenue
Nutrition and other cost of revenue includes product costs, shipping and handling, fulfillment and warehousing, customer service, and credit cardpayment processing fees. It also includes depreciation of nutrition-related
Three Months Ended June 30, | ||||||||||||||||
2021 | 2020 | $ Change | % Change | |||||||||||||
(dollars in thousands) | ||||||||||||||||
Cost of revenue | ||||||||||||||||
Digital | $ | 11,612 | $ | 9,292 | $ | 2,320 | 25 | % | ||||||||
Nutrition and other | 57,158 | 50,097 | 7,061 | 14 | % | |||||||||||
Total cost of revenue | $ | 68,770 | $ | 59,389 | $ | 9,381 | 16 | % | ||||||||
Gross profit | ||||||||||||||||
Digital | $ | 82,713 | $ | 69,065 | $ | 13,648 | 20 | % | ||||||||
Nutrition and other | 71,625 | 90,030 | (18,405 | ) | (20 | %) | ||||||||||
Total gross profit | $ | 154,338 | $ | 159,095 | $ | (4,757 | ) | (3 | %) | |||||||
Gross margin | ||||||||||||||||
Digital | 88 | % | 88 | % | ||||||||||||
Nutrition and other | 56 | % | 64 | % |
|
| Three months ended June 30, |
|
|
|
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| $ Change |
|
| % Change |
| ||||
|
| (dollars in thousands) |
|
|
|
|
|
|
| |||||||
Cost of revenue |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Digital |
| $ | 18,406 |
|
| $ | 11,612 |
|
| $ | 6,794 |
|
|
| 59 | % |
Connected fitness |
|
| 31,459 |
|
|
| 156 |
|
|
| 31,303 |
|
| NM |
| |
Nutrition and other |
|
| 42,002 |
|
|
| 57,002 |
|
|
| (15,000 | ) |
|
| (26 | %) |
Total cost of revenue |
| $ | 91,867 |
|
| $ | 68,770 |
|
| $ | 23,097 |
|
|
| 34 | % |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Gross profit |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Digital |
| $ | 59,609 |
|
| $ | 82,713 |
|
| $ | (23,104 | ) |
|
| (28 | %) |
Connected fitness |
|
| (20,854 | ) |
|
| (146 | ) |
|
| (20,708 | ) |
| NM |
| |
Nutrition and other |
|
| 48,514 |
|
|
| 71,771 |
|
|
| (23,257 | ) |
|
| (32 | %) |
Total gross profit |
| $ | 87,269 |
|
| $ | 154,338 |
|
| $ | (67,069 | ) |
|
| (43 | %) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Gross margin |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Digital |
|
| 76 | % |
|
| 88 | % |
|
|
|
|
|
| ||
Connected fitness |
|
| (197 | %) |
| NM |
|
|
|
|
|
|
| |||
Nutrition and other |
|
| 54 | % |
|
| 56 | % |
|
|
|
|
|
|
The increase in digital cost of revenue for the three months ended June 30, 2021,2022, as compared to the three months ended June 30, 2020,2021, was primarily driven, in part, by a $1.6$3.7 million increase in the amortization of content assets amortizationrelated to BODi which launched in the fourth quarter of 2021 and content acquired from Myx in June 2021. The change in digital cost of revenue was also due to $2.4 million increase in depreciation expense primarily related to a content asset library (newchange in useful life of certain assets in connection with our digital platform consolidation, and existing content) with higher costs being amortized duringa $1.5 million increase in personnel-related expenses as a result of additional headcount focused on our digital streaming services. These increases were partially offset by a $0.8 million decrease in intangible assets amortization as certain assets reached the end of their useful life prior to Q2 2022. The decrease in digital gross margin for the three months ended June 30, 20212022 compared to the three months ended June 30, 2020. Additional customer service2021 was primarily the result of $0.3 million, credit card processingthe higher fixed expenses of $0.2 million,- content assets amortization, depreciation, and Openfit live training costs of $0.1 million were variable costs associated with thepersonnel-related expenses - on lower digital revenue.
The increase in revenue.connected fitness cost of revenue was primarily due to the acquisition of Myx on June 25, 2021; there was no connected fitness cost of revenue for periods prior to the acquisition. The digitalnegative connected fitness gross margin was flat fromfor the three months ended June 30, 20202022 was primarily due to $15.0 million in adjustments for excess and obsolete inventory and to reduce the three months ended June 30, 2021.
29
The increasedecrease in nutrition and other cost of revenue for the three months ended June 30, 2021,2022, as compared to the three months ended June 30, 2020,2021, was primarily due to a $3.8$13.0 million decrease in product costs, freight, and shipping expense as the result of the decrease in nutrition and other revenue and a $2.5 million decrease in customer service as nutrition and other comprises less of our total revenue. These were partially offset by a $1.2 million increase in product costs, primarily increased freight expense of $1.9 million and reserve for excess and obsolete inventory of $1.3 million. Other increases include shipping costs by $1.7 million, depreciation by $1.0 million, and fulfillment by $0.6 million. Nutritionexpense. Despite a favorable impact from the preferred customer membership program, nutrition and other gross margin decreased primarily as a result of higher freightfixed expenses such as depreciation and shipping rates due to COVID-19 during the three months ended June 30, 2021, a higher reserve for excesspersonnel-related expenses on lower nutrition and obsolete inventory, and higher depreciation expense for which there is no commensurateother revenue.
Six Months Ended June 30, | ||||||||||||||||
2021 | 2020 | $ Change | % Change | |||||||||||||
(dollars in thousands) | ||||||||||||||||
Cost of revenue | ||||||||||||||||
Digital | $ | 22,734 | $ | 17,664 | $ | 5,070 | 29 | % | ||||||||
Nutrition and other | 114,153 | 90,572 | 23,581 | 26 | % | |||||||||||
Total cost of revenue | $ | 136,887 | $ | 108,236 | $ | 28,651 | 26 | % | ||||||||
Gross profit | ||||||||||||||||
Digital | $ | 166,741 | $ | 123,218 | $ | 43,523 | 35 | % | ||||||||
Nutrition and other | 145,699 | 156,366 | (10,667 | ) | (7 | %) | ||||||||||
Total gross profit | $ | 312,440 | $ | 279,584 | $ | 32,856 | 12 | % | ||||||||
Gross margin | ||||||||||||||||
Digital | 88 | % | 87 | % | ||||||||||||
Nutrition and other | 56 | % | 63 | % |
|
| Six months ended June 30, |
|
|
|
|
|
|
| |||||||
|
| 2022 |
|
| 2021 |
|
| $ Change |
|
| % Change |
| ||||
|
| (dollars in thousands) |
|
|
|
|
|
|
| |||||||
Cost of revenue |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Digital |
| $ | 34,831 |
|
| $ | 22,734 |
|
| $ | 12,097 |
|
|
| 53 | % |
Connected fitness |
|
| 76,165 |
|
|
| 156 |
|
|
| 76,009 |
|
| NM |
| |
Nutrition and other |
|
| 86,776 |
|
|
| 113,997 |
|
|
| (27,221 | ) |
|
| (24 | %) |
Total cost of revenue |
| $ | 197,772 |
|
| $ | 136,887 |
|
| $ | 60,885 |
|
|
| 44 | % |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Gross profit |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Digital |
| $ | 124,929 |
|
| $ | 166,741 |
|
| $ | (41,812 | ) |
|
| (25 | %) |
Connected fitness |
|
| (46,047 | ) |
|
| (146 | ) |
|
| (45,901 | ) |
| NM |
| |
Nutrition and other |
|
| 101,404 |
|
|
| 145,845 |
|
|
| (44,441 | ) |
|
| (30 | %) |
Total gross profit |
| $ | 180,286 |
|
| $ | 312,440 |
|
| $ | (132,154 | ) |
|
| (42 | %) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Gross margin |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Digital |
|
| 78 | % |
|
| 88 | % |
|
|
|
|
|
| ||
Connected fitness |
|
| (153 | %) |
| NM |
|
|
|
|
|
|
| |||
Nutrition and other |
|
| 54 | % |
|
| 56 | % |
|
|
|
|
|
|
The increase in digital cost of revenue for the six months ended June 30, 2021,2022, as compared to the six months ended June 30, 2020, was primarily driven by a $2.9 million increase in content assets amortization due to a content asset library (new and existing content) with higher costs being amortized during the six months ended June 30, 2021 compared to the six months ended June 30, 2020. Additional credit card processing expenses of $0.8 million, customer service of $0.5 million, and Openfit live training costs of $0.2 million were attributable to the increase in revenue. The increase in digital gross margin from the six months ended June 30, 2020 to the six months ended June 30, 2021, was primarily driven by a $7.1 million increase in the amortization of content assets related to BODi which launched in the fourth quarter of 2021 and content acquired from Myx in June 2021. The change in digital cost of revenue was also due to a $5.6 million increase in depreciation expense primarily related to a change in useful life of certain assets in connection with our digital platform consolidation. These increases were partially offset by a decrease in variable costs of digital revenue as a result of the decrease in digital revenue. The decrease in digital gross margin for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 was primarily the result of higher fixed content assets amortization and depreciation on lower digital revenue.
The increase in connected fitness cost of revenue was primarily due to the leverageacquisition of fixedMyx on June 25, 2021; there was no connected fitness cost of revenue for periods prior to the acquisition. The negative connected fitness gross margin for the six months ended June 30, 2022 was primarily due to $30.5 million in adjustments for excess and obsolete inventory and to reduce the carrying value of connected fitness inventory to its net realizable value in addition to higher product, freight, and shipping costs such as depreciation, amortizationdue to supply chain surcharges and personnel-related expenses as revenue increased.
The increasedecrease in nutrition and other cost of revenue for the six months ended June 30, 2021,2022, as compared to the six months ended June 30, 2020,2021, was primarily due to a $13.4$25.1 million decrease in product, freight, fulfillment, and shipping expense as the result of the decrease in nutrition and other revenue and a $5.0 million decrease in customer service as nutrition and other comprises less of our total revenue. These were partially offset by a $3.4 million increase in product costs, $5.3 million increase in shipping costs, $1.4 million increase in fulfillment, and $1.4 million increase in customer service expenses partially attributable to the increase in sales volume.depreciation expense. Nutrition and other gross margin decreased primarily as a result of higher freightfixed depreciation and shipping rates during the six months ended June 30, 2021, a higher reserve for excesspersonnel-related expenses on lower nutrition and obsolete inventory, and increases in personnel-related costs and depreciation expense for which there is no commensurateother revenue.
30
Operating Expenses
Selling and Marketing
Selling and marketing expenses primarily include the cost of micro-influencerCoach compensation, advertising, royalties, content revisions, promotions and events, and third-party sales commissions as well as the related personnel expenses for employees and consultants.
Three Months Ended June 30, | ||||||||||||||||
2021 | 2020 | $ Change | % Change | |||||||||||||
(dollars in thousands) | ||||||||||||||||
Selling and marketing | $ | 140,194 | $ | 134,666 | $ | 5,528 | 4 | % | ||||||||
As a percentage of total revenue | 62.8 | % | 61.6 | % |
|
| Three months ended June 30, |
|
|
|
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| $ Change |
|
| % Change |
| ||||
|
| (dollars in thousands) |
|
|
|
|
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Selling and marketing |
| $ | 86,624 |
|
| $ | 140,194 |
|
| $ | (53,570 | ) |
|
| (38 | %) |
As a percentage of total revenue |
|
| 48.4 | % |
|
| 62.8 | % |
|
|
|
|
|
|
The increasedecrease in selling and marketing expense for the three months ended June 30, 2021,2022, as compared to the three months ended June 30, 2020,2021, was primarily due to a $4.5$35.8 million decrease in online and television media expense and a $19.0 million decrease in Coach compensation, which was in line with the decrease in commissionable revenue. These decreases were partially offset by a $2.8 million increase relatedin amortization of intangible assets due to headcount additions and investmentsthe acquisition of Myx in systems focused on driving customer acquisition.
Selling and marketing expense increased, as a percentage of total revenue decreased by 1,440 basis points primarily due to these customer acquisition costs increasing at a faster rate asthe decrease in media investments compared to the growththree months ended June 30, 2021. We have reduced our media spend as part of our strategic realignment and in revenue.
Six Months Ended June 30, | ||||||||||||||||
2021 | 2020 | $ Change | % Change | |||||||||||||
(dollars in thousands) | ||||||||||||||||
Selling and marketing | $ | 284,890 | $ | 228,892 | $ | 55,998 | 24 | % | ||||||||
As a percentage of total revenue | 63.4 | % | 59.0 | % |
|
| Six months ended June 30, |
|
|
|
|
|
|
| |||||||
|
| 2022 |
|
| 2021 |
|
| $ Change |
|
| % Change |
| ||||
|
| (dollars in thousands) |
|
|
|
|
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Selling and marketing |
| $ | 193,068 |
|
| $ | 284,890 |
|
| $ | (91,822 | ) |
|
| (32 | %) |
As a percentage of total revenue |
|
| 51.1 | % |
|
| 63.4 | % |
|
|
|
|
|
|
The increasedecrease in selling and marketing expense for the six months ended June 30, 2021,2022, as compared to the six months ended June 30, 2020,2021, was primarily due to a $22.0$65.5 million decrease in television media and online advertising expense and a $36.2 million decrease in Coach compensation, which was in line with the decrease in commissionable revenue. These decreases were partially offset by a $4.8 million increase in media costspersonnel-related expenses, a $5.7 million increase in amortization of intangible assets due to build awarenessthe acquisition of Myx in June 2021, and conversion on our digital platforms. Additionally, increasesa $3.4 million increase in micro-influencer compensation and royalties of $17.7 million, expenses for personnel and systems that support customer acquisition activities of $8.5 million, andfrom Coach events expense of $3.4 million.
Selling and marketing expense increased, as a percentage of total revenue decreased by 1,230 basis points primarily due to increasedthe decrease in media costsinvestments compared to build awarenessthe six months ended June 30, 2021. We have reduced our media spend as part of our strategic realignment and drive subscriptions associated with future revenues.
Enterprise technologyTechnology and development
Enterprise technology and development expenses relate primarily to enterprise systems applications, hardware, and software that serve as the technology infrastructure for the Company and are not directly related to services provided or tangible goods sold. This includes maintenance and enhancements of the Company’s enterprise resource planning (ERP) system, which is the core of our accounting, procurement, supply chain and other business support systems. Enterprise technology and development also includes reporting and business analytics tools, security systems such as identity management and payment card industry compliance, office productivity software, research and development tracking tools, and other non—customernon-customer facing applications. Enterprise technology and development expenses include personnel-related expenses for employees and consultants who create improvements to and maintain technology
31
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, | ||||||||||||||||
2021 | 2020 | $ Change | % Change | |||||||||||||
(dollars in thousands) | ||||||||||||||||
Enterprise technology and development | $ | 26,949 | $ | 22,373 | $ | 4,576 | 20 | % | ||||||||
As a percentage of total revenue | 12.1 | % | 10.2 | % |
|
| Three months ended June 30, |
|
|
|
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| $ Change |
|
| % Change |
| ||||
|
| (dollars in thousands) |
|
|
|
|
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Enterprise technology and development |
| $ | 24,133 |
|
| $ | 26,949 |
|
| $ | (2,816 | ) |
|
| (10 | %) |
As a percentage of total revenue |
|
| 13.5 | % |
|
| 12.1 | % |
|
|
|
|
|
|
The increasedecrease in enterprise technology and development expense for the three months ended June 30, 2021,2022, as compared to the three months ended June 30, 2020,2021, was primarily due to a $4.4$4.9 million decrease in personnel-related expenses related to lower headcount and the completion of certain technology initiatives by Q2 2022. This decrease was partially offset by a $2.1 million increase in personnel and enterprise systems-related expenses. depreciation expense.
Enterprise technology and development expense as a percentage of total revenue increased by 190140 basis points due to the increases ofhigher fixed costs at a faster rate as compared to the growth indepreciation expense on lower total revenue.
Six Months Ended June 30, | ||||||||||||||||
2021 | 2020 | $ Change | % Change | |||||||||||||
(dollars in thousands) | ||||||||||||||||
Enterprise technology and development | $ | 54,038 | $ | 43,706 | $ | 10,332 | 24 | % | ||||||||
As a percentage of total revenue | 12.0 | % | 11.3 | % |
|
| Six months ended June 30, |
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| |||||||
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| 2021 |
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| $ Change |
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Enterprise technology and development |
| $ | 57,830 |
|
| $ | 54,038 |
|
| $ | 3,792 |
|
|
| 7 | % |
As a percentage of total revenue |
|
| 15.3 | % |
|
| 12.0 | % |
|
|
|
|
|
|
The increase in enterprise technology and development expense for the six months ended June 30, 2021,2022, as compared to the six months ended June 30, 2020,2021, was primarily due to a $7.7$2.3 million increase in depreciation expense and a $1.9 million increase in personnel-related expenses and a $2.4 million increase in depreciation expense. related to certain technology initiatives.
Enterprise technology and development expense as a percentage of total revenue increased by 70330 basis points due to the increases ofhigher fixed depreciation and personnel-related costs at a faster rate as compared to the growth inon lower total revenue.
General and Administrative
General and administrative expense includes personnel-related expenses and facilities-related costs primarily for our executive, finance, accounting, legal and human resources functions. General and administrative expense also includes fees for professional services principally comprised of legal, audit, tax, and insurance.
Three Months Ended June 30, | ||||||||||||||||
2021 | 2020 | $ Change | % Change | |||||||||||||
(dollars in thousands) | ||||||||||||||||
General and administrative | $ | 17,231 | $ | 14,522 | $ | 2,709 | 19 | % | ||||||||
As a percentage of total revenue | 7.7 | % | 6.6 | % |
|
| Three months ended June 30, |
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| 2022 |
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| 2021 |
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| $ Change |
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| % Change |
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| (dollars in thousands) |
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General and administrative |
| $ | 19,584 |
|
| $ | 17,231 |
|
| $ | 2,353 |
|
|
| 14 | % |
As a percentage of total revenue |
|
| 10.9 | % |
|
| 7.7 | % |
|
|
|
|
|
|
The increase in general and administrative expense for the three months ended June 30, 2021,2022, as compared to the three months ended June 30, 2020,2021, was primarily due to ana $3.2 million increase in acquisition costs related to the Business Combination and increases in personnel-related expenses ($2.0 million in incentive compensation and other general corporate expenses. $1.2 million in equity-based compensation) and a $2.6 million increase in insurance expense and accounting fees as a result of operating as a public company. These increases were partially offset by a $1.8 million decrease in rent expense due to our Santa Monica lease
32
assignment, $1.5 million decrease in transaction costs as there was no acquisition activity in Q2 2022, and a $0.5 million decrease in recruiting expense due to fewer headcount additions in Q2 2022.
General and administrative expense as a percentage of total revenue increased by 130320 basis points due to acquisitionhigher fixed costs related to the Business Combination.
Six Months Ended June 30, | ||||||||||||||||
2021 | 2020 | $ Change | % Change | |||||||||||||
(dollars in thousands) | ||||||||||||||||
General and administrative | $ | 35,177 | $ | 29,706 | $ | 5,471 | 18 | % | ||||||||
As a percentage of total revenue | 7.8 | % | 7.7 | % |
|
| Six months ended June 30, |
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|
|
|
| |||||||
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| 2022 |
|
| 2021 |
|
| $ Change |
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| % Change |
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| (dollars in thousands) |
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General and administrative |
| $ | 39,657 |
|
| $ | 35,177 |
|
| $ | 4,480 |
|
|
| 13 | % |
As a percentage of total revenue |
|
| 10.5 | % |
|
| 7.8 | % |
|
|
|
|
|
|
The increase in general and administrative expense for the six months ended June 30, 2021,2022, as compared to the six months ended June 30, 2020,2021, was primarily due to ana $5.1 million increase in acquisition costs related to the Business Combination and increases in personnel-related expenses ($2.7 million in incentive compensation and $2.4 million in equity-based compensation) and a $6.2 million increase in insurance expense and accounting, legal, and other general corporate expenses. professional service fees as a result of operating as a public company. These increases were partially offset by a $3.3 million decrease in rent expense due to our Santa Monica lease assignment, $2.1 million decrease in transaction costs as there was no acquisition activity in 2022, and a $1.0 million decrease in recruiting expenses due to fewer headcount additions in 2022.
General and administrative expense as a percentage of total revenue was relatively flat primarilyincreased by 270 basis points due to acquisitionhigher fixed costs leveraged by higheron lower total revenue.
Restructuring
Restructuring charges relate to our 2022 strategic alignment initiative to consolidate our streaming fitness and nutrition offerings into a single Beachbody platform. The charges incurred primarily relate to employee termination costs.
|
| Three months ended June 30, |
|
|
| |||||||||
|
| 2022 |
|
| 2021 |
|
| $ Change |
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| % Change | |||
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| (dollars in thousands) |
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|
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| ||||||
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| |||
Restructuring |
| $ | 1,332 |
|
| $ | — |
|
| $ | 1,332 |
|
| NM |
|
| Six months ended June 30, |
|
|
|
|
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| ||||||
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| 2022 |
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| 2021 |
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| $ Change |
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| % Change | |||
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| (dollars in thousands) |
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| ||||||
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|
| |||
Restructuring |
| $ | 8,555 |
|
| $ | — |
|
| $ | 8,555 |
|
| NM |
Other Income (Expenses)
The change in fair value of warrant liabilities consists of the fair value changes of the Public Warrantspublic and Private Warrants and the transaction costs and advisory fees for the Business Combination allocated to theprivate placement warrants. Interest expense primarily consists of interest expense associated with our borrowings and amortization of debt issuance costs for our Credit Facility.Facility in 2021. Other income, net, consists of interest income earned on investments and gains (losses) on foreign currency.
Three Months Ended June 30, | ||||||||||||||||
2021 | 2020 | $ Change | % Change | |||||||||||||
(dollars in thousands) | ||||||||||||||||
Change in fair value of warrant liabilities | $ | 5,390 | $ | — | $ | 5,390 | n/m | |||||||||
Interest expense | (305 | ) | (248 | ) | (57 | ) | -23 | % | ||||||||
Other income, net | 1,654 | 34 | 1,620 | 4765 | % |
|
| Three months ended June 30, |
|
|
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| 2022 |
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| 2021 |
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| $ Change |
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| % Change |
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| ||||
Change in fair value of warrant liabilities |
| $ | 2,070 |
|
| $ | 5,390 |
|
| $ | (3,320 | ) |
|
| (62 | %) |
Interest expense |
|
| (3 | ) |
|
| (305 | ) |
|
| 302 |
|
|
| (99 | %) |
Other income, net |
|
| 189 |
|
|
| 1,654 |
|
|
| (1,465 | ) |
|
| (89 | %) |
The change in fair value of warrant liabilities of $5.4during the three months ended June 30, 2022 primarily resulted from a decline in our stock price during the quarter. The decrease in interest expense was due to no borrowings outstanding during the three months ended June 30,
33
2022 compared to $22.0 million during the three months ended June 30, 2021 results from the changes in fair value of the warrants following consummation of the Business Combination on June 25, 2021, partially offset by the transaction costs and advisory fees for the Business Combination allocated to the warrants.2021. The increase in interest expense for the three months ended June 30, 2021, as compared to the three months ended June 30, 2020, was primarily due to higher outstanding borrowings and for a longer period in 2021 compared to 2020. The increasedecrease in other income net was primarily due to the gain on the investment in the convertible instrument from Myx prior to June 25, 2021; there was no similar investment during the three months ended June 30, 2020.
Six Months Ended June 30, | ||||||||||||||||
2021 | 2020 | $ Change | % Change | |||||||||||||
(dollars in thousands) | ||||||||||||||||
Change in fair value of warrant liabilities | $ | 5,390 | $ | — | $ | 5,390 | n/m | |||||||||
Interest expense | (428 | ) | (343 | ) | (85 | ) | -25 | % | ||||||||
Other income, net | 2,953 | 442 | 2,511 | 568 | % |
|
| Six months ended June 30, |
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| |||||||
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| 2021 |
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| $ Change |
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| ||||
Change in fair value of warrant liabilities |
| $ | 2,334 |
|
| $ | 5,390 |
|
| $ | (3,056 | ) |
|
| (57 | %) |
Interest expense |
|
| (22 | ) |
|
| (428 | ) |
|
| 406 |
|
|
| (95 | %) |
Other income, net |
|
| 125 |
|
|
| 2,953 |
|
|
| (2,828 | ) |
|
| (96 | %) |
The gain on the change in fair value of warrant liabilities of $5.4during the six months ended June 30, 2022 primarily resulted from a decline in our stock price during 2022. The decrease in interest expense was due to no borrowings outstanding during the six months ended June 30, 2022 compared to $42.0 million during the six months ended June 30, 2021 results from the changes in fair value of the warrants following consummation of the Business Combination on June 25, 2021, partially offset by the transaction costs and advisory fees for the Business Combination allocated to the warrants.2021. The increase in interest expense for the six months ended June 30, 2021, as compared to the six months ended June 30, 2020, was primarily due to higher outstanding borrowings and for a longer period in 2021 compared to 2020. The increasedecrease in other income net was primarily due to the gain on the investment in the convertible instrument from Myx prior to June 25, 2021; there was no similar investment during the six months ended June 30, 2020.
Income tax benefit
Income tax benefit consists of income taxes related to USU.S. federal and state jurisdictions as well as those foreign jurisdictions where we have business operations.
Three Months Ended June 30, | ||||||||||||||||
2021 | 2020 | $ Change | % Change | |||||||||||||
(dollars in thousands) | ||||||||||||||||
Income tax benefit | $ | 10,857 | $ | 2,677 | $ | 8,180 | 306 | % |
|
| Three months ended June 30, |
|
|
|
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| $ Change |
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| % Change |
| ||||
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| ||||
Income tax benefit |
| $ | 281 |
|
| $ | 10,857 |
|
| $ | (10,576 | ) |
|
| (97 | %) |
The income tax benefit indecrease for the three months ended June 30, 2022, as compared to the three months ended June 30, 2021, reflects the expected tax benefit, net ofwas primarily driven by a reduction in our valuation allowance on the loss before income taxes for the three months ended June 30, 2021, as compared to the income tax benefit in the three months ended June 30, 2020 which reflects the expected tax benefit on the loss before income taxes for the three months ended June 30, 2020.Q2 2021. We recorded significant deferred tax liabilities in connection with the acquisition of Myx, which was a discrete second quarterQ2 2021 event, for which we will not incur future taxable income. This partially reduced our need for a valuation allowance, resulting in income tax benefit recorded during the three months ended June 30, 2021. No valuation allowance2021; there was no similar benefit recorded during the three months ended June 30, 2020.
Six Months Ended June 30, | ||||||||||||||||
2021 | 2020 | $ Change | % Change | |||||||||||||
(dollars in thousands) | ||||||||||||||||
Income tax benefit | $ | 11,252 | $ | 4,290 | $ | 6,962 | 162 | % |
|
| Six months ended June 30, |
|
|
|
|
|
|
| |||||||
|
| 2022 |
|
| 2021 |
|
| $ Change |
|
| % Change |
| ||||
|
| (dollars in thousands) |
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| |||||||
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| ||||
Income tax benefit |
| $ | 987 |
|
| $ | 11,252 |
|
| $ | (10,265 | ) |
|
| (91 | %) |
The income tax benefit indecrease for the six months ended June 30, 2022, as compared to the six months ended June 30, 2021, reflects the expected tax benefit, net ofwas primarily driven by a reduction in our valuation allowance on the loss before income taxes for the six months ended June 30, 2021, as compared to the income tax benefit in the six months ended June 30, 2020 which reflects the expected tax benefit on the loss before income taxes for the six months ended June 30, 2020.Q2 2021. We recorded significant deferred tax liabilities in connection with the acquisition of Myx, which was a discrete second quarterQ2 2021 event, for which we will not incur future taxable income. This partially reduced our need for a valuation allowance, resulting in income tax benefit recorded during the six months ended June 30, 2021. No valuation allowance2021; there was no similar benefit recorded during the six months ended June 30, 2020.
34
Liquidity and Capital Resources
|
| Six months ended June 30, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
|
| (dollars in thousands) |
| |||||
|
|
|
|
|
|
| ||
Net cash used in operating activities |
| $ | (33,256 | ) |
| $ | (25,487 | ) |
Net cash used in investing activities |
|
| (19,222 | ) |
|
| (74,480 | ) |
Net cash provided by financing activities |
|
| 2,660 |
|
|
| 389,775 |
|
As of June 30, 2021,2022, we had cash and cash equivalents of $347.2totaling $57.1 million.
Net cash used in operating activities was $33.3 million and $32.0 million of borrowing capacity available under our Credit Facility (defined below).
Six Months Ended June 30, | ||||||||
2021 | 2020 | |||||||
(dollars in thousands) | ||||||||
Net cash provided by (used in) operating activities | $ | (25,487 | ) | $ | 44,046 | |||
Net cash used in investing activities | (74,480 | ) | (18,756 | ) | ||||
Net cash provided by financing activities | 389,775 | — |
We expect to reduce our cash used in operating activities over the next year, primarily through reduced inventory purchases and investment in media. As of June 30, 2022, our purchases of bike inventory were substantially completed as our inventory level is sufficient to meet expected connected fitness demand over the next year. Also, during the six months ended June 30, 2022, we returned to a performance marketing model which drives in-quarter or next-quarter payback and which reduced media spend by approximately $50.2 million compared to the prior year period.
Net cash used in investing activities was $19.2 million and the net change in operating assets and liabilities of $3.3 million, partially offsetby non-cash adjustmentsof$20.3 million. Non-cash adjustmentsprimarily consisted of depreciation and amortization of $25.9 million, deferred income taxes of ($11.3) million, amortization of content assets of $6.1 million, change in fair value of warrant liabilities of ($5.4) million and equity-based compensation of $5.1 million. The change in net operating assets and liabilities was primarily due to a $14.2 million increase in content assets, $2.0 million increase in accounts receivables, $1.8 million increase in prepaid expenses, and $2.2 million decrease in other liabilities; partially offset by a $16.5 million increase in deferred revenue as a result of the increase in digital subscriptions.
Net cash provided by financing activities was $2.7 millionand $389.8 millionfor the six months ended June 30, 2022 and 2021, respectively. The decrease in net cash provided by financing activities was primarily due to the completion of $74.5 million was related to $37.3 cash consideration for the acquisition of Myx, net of cash acquired, capital expenditures of $27.2 million, the investment in a convertible instrument of $5.0 million, and an equity investment of $5.0 million.
We have $45.3 million in net proceeds received from the Business Combination.
Total | Less than 1 Year | 1-3 Years | 3-5 Years | More than 5 Years | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Operating lease obligations | $ | 39,922 | $ | 4,343 | $ | 22,963 | $ | 12,616 | $ | — | ||||||||||
Finance lease obligations | 368 | 81 | 284 | 3 | — | |||||||||||||||
Noncancelable service and inventory purchase obligations | 135,364 | 124,020 | 8,844 | 2,500 | — | |||||||||||||||
Total | $ | 175,654 | $ | 128,444 | $ | 32,091 | $ | 15,119 | $ | — | ||||||||||
On August 8, 2022 (the “Closing”), we entered into an agreement with a third-party lender for a $50.0 million senior secured term loan (the “Term Loan”) with a four-year maturity. The Term Loan includes an incremental facility of up to an additional $25.0 million subject to certain terms and conditions. The Term Loan was funded at Closing and bears interest at our option of either (i) the Secured Overnight Financing Rate based upon an interest period of three months plus 7.15%, or (ii) a reference rate as defined in the agreement, plus 6.15%. In addition, borrowings will bear interest at 3.00%, which will be paid in kind by capitalizing such interest and adding it to the outstanding principal, annually. We paid an upfront fee of $1.5 million at Closing and are required to pay an annual fee of $0.25 million. The Term Loan requires annual amortization of 2.50% in the first two years and 5.00% in the final two years, paid quarterly, and certain mandatory repayments as defined in the agreement. The Term Loan provides customary restrictions, including prepayment premiums, and requires compliance with certain financial and other covenants.
35
In connection with the Term Loan, we issued warrants for the purchase of 4,716,756 million shares of the Company’s Class A Common Stock at an exercise price of $1.85 per share. The warrants vest on a monthly basis over four years, with 30%, 30%, 20% and 20% vesting in the first, second, third and fourth years, respectively. The warrants have a seven-year term from the date of Closing.
We expect to use the proceeds for general corporate purposes and to pay transaction fees and expenses related to the Term Loan. We may explore additional equity or debt financing to supplement our anticipated working capital balances and further strengthen our financial position, but do not haveany off-balance sheetarrangements asat this time know which form it will take or what the terms will be. The incurrence of June 30, 2021.
Critical Accounting Policies and Estimates
Goodwill and Intangible Assets
Goodwill and intangible assets deemed to have an indefinite life are not amortized, but instead are assessed for impairment annually in the fourth quarter as ofat October 1. Additionally,1 and between annual tests if an event or change in circumstances occurs that would more likely than not reduce the fair value of thea reporting unit below its carrying value we would evaluate goodwill and other intangibles at that time.
In testing for impairment of our definite-lived intangible assets, we compared the carrying value of each asset group to its forecasted undiscounted cash flows to determine whether it was recoverable. The carrying values of each of our asset groups exceed their future undiscounted cash flows and are therefore recoverable.
We test goodwill for impairment at a level within the Company referred to as the reporting unit. We have determined that our reporting units are our operating segments, Beachbody and Other, because none of the components of either operating segment constitutes a business for which discrete financial information is available or has operating results which are regularly reviewed by segment management. There is no goodwill held by the Other reporting unit.
In testing for goodwill impairment, we compared the carrying value of the Beachbody reporting unit is less thanto its estimated fair value. Fair value was estimated using a combination of a market approach and an income approach, with significant assumptions related to guideline company financial multiples used in the market approach and significant assumptions about revenue growth, long-term growth rates, and discount rates used in a discounted cash flow model in the income approach. As of June 30, 2022, the Beachbody reporting unit’s fair value exceeded the carrying amount. If, after assessingvalue by approximately 60%. We will continue to monitor changes that would impact the totalitysignificant assumptions used in the valuation.
Management will continue to monitor its reporting units for changes in the business environment that could impact their fair value. Examples of events or circumstances that could result in changes to the underlying key assumptions and circumstances, we conclude that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performingthe two-step impairmenttest is not required. If we conclude otherwise, we are required to performthe two-step impairmenttest. Thejudgments used in our goodwill impairment test is performed at the reporting unit level by comparingtests, and ultimately impact the estimated fair value of aour reporting unit withmay include the duration of the COVID-19 global pandemic, its respective carrying value. Ifimpact on the estimated fair value exceedsglobal economy, supply chain disruptions and demand for at-home fitness solutions; adverse macroeconomic conditions; volatility in the carrying value, goodwill atequity and debt markets which could result in higher weighted-average cost of capital and our subscriber growth rates. Changes in any of the assumptions used in the valuation of the reporting unit, level is not impaired. If the estimated fair value is less than the carrying value, an impairment charge will be recorded to reduce the reporting unit to fair value.
Recent Accounting Pronouncements
See Note 1, Organization,Description of Business and Summary of Significant Accounting Policies, of the notes to our unaudited condensed consolidated financial statements included elsewhere in this Report for recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted.
36
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 three and six months ended June 30, 2022 and 2021, approximately 11% of our revenue was in foreign currencies. For the three and six months ended June 30, 2020 approximately 8% of our revenue was in foreign currencies These sales were primarily denominated in Canadian dollars and British pounds.
We use derivative instruments to manage the effects of fluctuations in foreign currency exchange rates on our net cash flows. We primarily enter into option and forward contracts to hedge forecasted payments, typically for up to 12 months, for cost of revenue, selling and marketing expenses, general and administrative expenses and intercompany transactions not denominated in the local currencies of our foreign operations. We designate some of these instruments as cash flow hedges and recordsrecord them at fair value as either assets or liabilities within the consolidated balance sheets. Some of these instruments are freestanding derivatives for which hedge accounting does not apply.
Changes in the fair value of cash flow hedges are recorded in accumulated other comprehensive income (loss) until the hedged forecasted transaction affects earnings. Deferred gains and losses associated with cash flow hedges of third-party payments are recognized in cost of revenue, selling and marketing or general and administrative expenses, as applicable, during the period when the hedged underlying transaction affects earnings. Changes in the fair value of certain derivatives for which hedge accounting does not apply are immediately recognized directly in earnings to cost of revenue.
A hypothetical 10% change in exchange rates, with the U.S. dollar as the functional and reporting currency, would not result in a material increase or decrease in cost of revenue and operating expenses.
The aggregate notional amount of foreign exchange derivative instruments at June 30, 20212022 and December 31, 20202021 was $24.5$26.5 million $34.0and $30.4 million, respectively.
Item 4. Controls and Procedures.
Management’s Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules2021.2022. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.
Changes in Internal Control Over Financial Reporting
There has been no change in our internal control over financial reporting (as defined in Rules
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 judgmentsjudgements and assumptions and cannot provide absolute assurance that its objectives will be met.
37
PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
We are and, from time to time, we may become, involved in legal proceedings or be subject to claims arising in the ordinary course of our business. There arehave been no material updates tochanges from the information previously reported under Part I, Item 3 of our Annual Report on Form S-4 declared effective on May 27,10-K for the fiscal year ended December 31, 2021.
Item 1A. Risk Factors.
There have been no material developments with respect to the information previously reported under Part I, Item 1A of our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all of the other information in this QuarterlyAnnual Report on Form10-Q,including the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our unaudited condensed consolidated financial statements and the accompanying notes and the information contained in our other public filings before deciding whether to invest in shares of our common stock. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of or that we deem immaterial may also become important factors that adversely affect our business. If any of the following risks occur, our business, financial condition, operating results, and future prospects could be materially and adversely affected. In that event, the market price of our common stock could decline, and you could lose part or all of your investment.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Unregistered Sales of unregistered equity securities during the six months ended June 30, 2021.
None.
Issuer Repurchase of Equity Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosure.
None.
Item 5. Other Information.
Financing Agreement
On August 8, 2022 (the “Effective Date”),The following table sets forth our financial resultsBeachbody Company, Inc., a Delaware corporation (the “Parent” or the “Company”), Beachbody, LLC, a Delaware limited liability company and wholly-owned direct subsidiary of the Company (the “Borrower”), and certain subsidiaries of the Company (together with the Company and the Borrower, each, a “Loan Party”, and collectively, the “Loan Parties”), entered into a senior secured term loan facility (the “Credit Facility”).
The loan documents for the quarters indicated:
(in thousands) | Three Months Ended | |||||||||||||||||||||||
March 31, | June 30, | September 30, | December 31, | March 31, | June 30, | |||||||||||||||||||
2020 | 2020 | 2020 | 2020 | �� | 2021 | 2021 | ||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
Revenue: | ||||||||||||||||||||||||
Digital | $ | 62,525 | $ | 78,357 | $ | 99,082 | $ | 94,841 | $ | 95,150 | $ | 94,325 | ||||||||||||
Nutrition and other | 106,811 | 140,127 | 152,397 | 129,442 | 131,069 | 128,783 | ||||||||||||||||||
Total revenue (1) | 169,336 | 218,484 | 251,479 | 224,283 | 226,219 | 223,108 | ||||||||||||||||||
Cost of revenue: | ||||||||||||||||||||||||
Digital | 8,372 | 9,292 | 9,843 | 10,778 | 11,122 | 11,612 | ||||||||||||||||||
Nutrition and other | 40,475 | 50,097 | 61,082 | 59,768 | 56,995 | 57,158 | ||||||||||||||||||
Total cost of revenue | 48,847 | 59,389 | 70,925 | 70,546 | 68,117 | 68,770 | ||||||||||||||||||
Gross profit | 120,489 | 159,095 | 180,554 | 153,737 | 158,102 | 154,338 | ||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||
Selling and marketing | 94,226 | 134,666 | 123,980 | 111,128 | 144,696 | 140,194 | ||||||||||||||||||
Enterprise technology and development | 21,333 | 22,373 | 23,852 | 25,478 | 27,089 | 26,949 | ||||||||||||||||||
General and administrative | 15,184 | 14,522 | 16,523 | 18,589 | 17,946 | 17,231 | ||||||||||||||||||
Restructuring gain | — | — | (1,677 | ) | — | — | — | |||||||||||||||||
Total operating expenses | 130,743 | 171,561 | 162,678 | 155,195 | 189,731 | 184,374 | ||||||||||||||||||
Operating income (loss) | (10,254 | ) | (12,466 | ) | 17,876 | (1,458 | ) | (31,629 | ) | (30,036 | ) | |||||||||||||
Change in fair value of warrant liabilities | — | — | — | — | — | 5,390 | ||||||||||||||||||
Interest expense | (95 | ) | (248 | ) | (90 | ) | (95 | ) | (123 | ) | (305 | ) | ||||||||||||
Other income, net | 408 | 34 | 114 | 111 | 1,299 | 1,654 | ||||||||||||||||||
Income (loss) before income taxes | (9,941 | ) | (12,680 | ) | 17,900 | (1,442 | ) | (30,453 | ) | (23,297 | ) | |||||||||||||
Income tax benefit (provision) | 1,613 | 2,677 | (4,129 | ) | (15,430 | ) | 395 | 10,857 | ||||||||||||||||
Net income (loss) | $ | (8,328 | ) | $ | (10,003 | ) | $ | 13,771 | $ | (16,872 | ) | $ | (30,058 | ) | $ | (12,440 | ) | |||||||
Adjusted for: | ||||||||||||||||||||||||
Depreciation and amortization | 10,144 | 10,534 | 11,203 | 12,376 | 13,726 | 12,215 | ||||||||||||||||||
Amortization of capitalized cloud computing implementation costs | — | — | — | 186 | 168 | 168 | ||||||||||||||||||
Amortization of content assets | 1,481 | 1,715 | 1,907 | 2,382 | 2,817 | 3,302 | ||||||||||||||||||
Interest expense | 95 | 248 | 89 | 95 | 123 | 305 | ||||||||||||||||||
Income tax provision (benefit) | (1,613 | ) | (2,677 | ) | 4,129 | 15,430 | (395 | ) | (10,857 | ) | ||||||||||||||
Equity-based compensation | 895 | 1,013 | 1,261 | 2,229 | 2,573 | 2,522 | ||||||||||||||||||
Transaction costs | — | — | 612 | 855 | 633 | 1,509 | ||||||||||||||||||
Restructuring gain | — | — | (1,677 | ) | — | — | — | |||||||||||||||||
Other adjustment items | — | — | — | — | — | 6,038 | ||||||||||||||||||
Non-operating costs | (6 | ) | 60 | 77 | (151 | ) | (1,331 | ) | (7,147 | ) | ||||||||||||||
Adjusted EBITDA | $ | 2,668 | $ | 890 | $ | 31,372 | $ | 16,530 | $ | (11,744 | ) | $ | (4,385 | ) | ||||||||||
Myx revenue (1) | 647 | 2,307 | 9,124 | 17,592 | 17,038 | 14,265 | ||||||||||||||||||
Pro forma consolidated revenue (2) | 169,983 | 220,791 | 260,603 | 241,875 | 243,257 | 237,286 |
The Borrower’s obligations under the Financing Agreement are guaranteed by the other Loan Parties, including the Company. Pursuant to the Financing Agreement and the other Loan documents, the Company and the other Loan Parties granted a lien to the Term Loan Agent in substantially all of the assets now owned or hereafter acquired by any Loan Party, including, without limitation: accounts, cash and cash equivalents, chattel paper, deposit accounts, documents, equipment, fixtures, general intangibles, instruments, intellectual property and intellectual property licenses, inventory, investment property, letter of credit rights, supporting obligations, insurance policies, goods, books and records, commercial tort claims, and the proceeds and products of each of the foregoing, in each case, subject to certain customary exceptions.
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The Term Loan borrowings under the Credit Facility may take the form of base rate (“Reference Rate”) loans or Secured Overnight Financing Rate (“SOFR”) loans. Reference Rate loans will bear interest at a rate per annum equal to the sum of an applicable margin of 6.15% per annum, plus the greatest of (a) 2.00% per annum, (b) the Federal Funds Rate plus 0.50% per annum, (c) the “SOFR Rate” (based upon an interest period of 1 month) plus 1.00% per annum, and (d) the rate last quoted by The Wall Street Journal. SOFR loans will bear interest at a rate per annum equal to the sum of an applicable margin of 7.15% and the “SOFR Rate” (based upon an interest period of 3 months). The “SOFR Rate” is subject to a floor of 1.00%. In addition, the Term Loan borrowings under the Credit Facility will bear interest at a rate per annum equal to 3.00%, which interest will be paid in kind by capitalizing such interest and adding such capitalized interest to the then outstanding principal amount of the loans annually on each anniversary of the Effective Date.
The Financing Agreement contains certain customary covenants, including requirements to prepay the loans in an amount equal to (i) 100% of the net cash proceeds from certain asset dispositions, extraordinary receipts and debt issuances, subject to certain reinvestment rights and other exceptions and (ii) 50% of excess cash flow of the Company and its subsidiaries, subject to certain exceptions. The Credit Facility will amortize at 2.50% per year from the Effective Date to the date that is the second anniversary of the Effective Date, payable on a quarterly basis, and thereafter, at 5.00% per year, payable on a quarterly basis.
Amounts outstanding under the Term Loan Credit Agreement may become due and payable upon the occurrence of specified events of default, which among other things include (subject to certain exceptions and cure periods): failure to pay principal, interest, or any fees or certain other amounts when due; breach of any representation or warranty, covenant, or other agreement in the Financing Agreement and other related loan documents; the occurrence of a bankruptcy or insolvency proceeding with respect to any Loan Party; any failure by a Loan Party to make a payment with respect to indebtedness having an aggregate principal amount in excess of a specified threshold; and certain other customary events of default.
The Financing Agreement contains financial covenants whereby the Loan Parties are required to (a) maintain certain minimum revenue levels, to be tested on a quarterly basis, beginning on the fiscal quarter ending September 30, 2022, and (b) maintain minimum Liquidity (as defined in the Financing Agreement) of (i) $10.0 million at all times from the Effective Date through December 31, 2022, (ii) $12.5 million at all times thereafter through June 30, 2023, and (iii) $15.0 million at all times thereafter through the maturity of the Credit Facility. The Financing Agreement also contains customary representations, warranties, and covenants, which include, but are not limited to, restrictions on indebtedness, liens, fundamental changes, restricted payments, asset sales, affiliate transactions, line of business, investments, negative pledges and amendments to organizational documents and material contracts.
Any amounts voluntarily or mandatorily prepaid under the Credit Facility are subject to a prepayment penalty, subject to certain exceptions, equal to (i) 5.00% of the principal amount prepaid if the prepayment occurs on or prior to the first anniversary of the Effective Date, (ii) 3.00% of the principal amount prepaid if the prepayment occurs after the first anniversary and on or prior to the second anniversary of the Effective Date, (iii) 2.00% of the principal amount prepaid if the prepayment occurs after the second anniversary and on or prior to the third anniversary of the Effective Date, and (iv) 0.00% thereafter.
The foregoing summary does not purport to be complete and is qualified in its entirety by reference to the Financing Agreement which is attached hereto as Exhibit 10.2 and is incorporated by reference herein.
Warrant
Pursuant to the Financing Agreement, on August 8, 2022, the Company issued to certain holders affiliated with Blue Torch Finance, LLC warrants (each, a “Warrant” and, collectively, the “Warrants”) to purchase, in the aggregate, 4,716,756 shares of Class A common stock of the Company, $0.0001 par value per share (the “Common Stock”) at an exercise price of $1.85 per share. The shares of Common Stock underlying the Warrants shall vest in accordance with the schedule set forth in the Warrants (the “Vested Shares”). The Warrants are exercisable for all or part of the unexercised Vested Shares from time to time on or after the Effective Date.
The foregoing summary of the Warrant is qualified in its entirety by reference to the full text of the form of Warrant, a copy of which is attached hereto as Exhibit 10.3 and incorporated herein by reference.
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Item 6. Exhibits.
Exhibit
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| Incorporated by Reference
| Filed or Furnished herewith
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2.1 |
8-K/A |
2.1 |
2/16/2021 |
001-39735 |
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3.1 | Amended and Restated Certificate of Incorporation of The Beachbody Company, Inc. |
8-K |
3.1 |
7/1/2021 |
001-39735 |
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3.2 |
8-K |
3.2 |
7/1/2021 |
001-39735 |
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10.1 |
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10.2 |
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10.3 |
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31.1 | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a) |
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31.2 | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a) |
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32.1 |
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101.INS | Inline XBRL Instance Document |
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101.SCH | Inline XBRL Taxonomy Extension Schema Document |
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101.CAL | Inline XBRL Taxonomy Calculation Linkbase Document |
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101.DEF | Inline XBRL Taxonomy Definition Linkbase Document |
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101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document |
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101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
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104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
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* Filed herewith
** Furnished herewith.
^ 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 | By: | /s/ Carl Daikeler | ||||
Carl Daikeler | ||||||
Chief Executive Officer | ||||||
(Principal Executive Officer) | ||||||
Date: August | By: | /s/ | ||||
Marc Suidan | ||||||
Chief Financial Officer | ||||||
(Principal Financial Officer) |
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