BODI 10-Q
Beachbody Company, Inc. (BODI)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
(Zip Code) |
(
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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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 S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer ☐ |
Accelerated Filer ☐ |
Smaller Reporting Company |
Emerging Growth Company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No
There were
Table of Contents
Part I. |
3 |
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Item 1. |
3 |
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3 |
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4 |
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Unaudited Condensed Consolidated Statements of Comprehensive Loss |
5 |
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Unaudited Condensed Consolidated Statements of Stockholders’ Equity |
6 |
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7 |
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Notes to Unaudited Condensed Consolidated Financial Statements |
8 |
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Operations |
27 |
Item 3. |
41 |
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Item 4. |
42 |
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Part II. |
42 |
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Item 1. |
42 |
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Item 2. |
43 |
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Item 3. |
43 |
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Item 4. |
43 |
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Item 5. |
43 |
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Item 6. |
44 |
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45 |
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PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
The Beachbody Company, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)
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June 30, |
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December 31, |
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2024 |
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2023 |
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(unaudited) |
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Assets |
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Current assets: |
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Cash and cash equivalents (restricted cash of $ |
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$ |
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$ |
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Restricted short-term investments |
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Inventory |
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Prepaid expenses |
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Other current assets |
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Total current assets |
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Property and equipment, net |
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Content assets, net |
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Goodwill |
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Right-of-use assets, net |
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Other assets |
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Total assets |
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$ |
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$ |
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Liabilities and Stockholders’ Equity |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued expenses |
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Deferred revenue |
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Current portion of lease liabilities |
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Current portion of Term Loan |
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Other current liabilities |
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Total current liabilities |
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Term Loan |
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Long-term lease liabilities, net |
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Deferred tax liabilities |
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Other liabilities |
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Total liabilities |
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Stockholders’ equity: |
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Preferred stock, $ |
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Common stock, $ |
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Class A: |
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Class X: |
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Class C: |
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Additional paid-in capital |
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Accumulated deficit |
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( |
) |
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( |
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Accumulated other comprehensive income (loss) |
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( |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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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)
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Three months ended June 30, |
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Six months ended June 30, |
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2024 |
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2023 |
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2024 |
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2023 |
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Revenue: |
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Digital |
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$ |
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$ |
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$ |
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$ |
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Nutrition and other |
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Connected fitness |
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Total revenue |
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Cost of revenue: |
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Digital |
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Nutrition and other |
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Connected fitness |
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Total cost of revenue |
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Gross profit |
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Operating expenses: |
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Selling and marketing |
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Enterprise technology and development |
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General and administrative |
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Restructuring |
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— |
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( |
) |
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Total operating expenses |
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Operating loss |
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( |
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( |
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( |
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( |
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Other income (expense): |
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Loss on partial debt extinguishment |
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( |
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— |
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( |
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— |
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Change in fair value of warrant liabilities |
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( |
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Interest expense |
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( |
) |
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( |
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( |
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( |
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Other income, net |
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Loss before income taxes |
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( |
) |
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( |
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( |
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( |
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Income tax (provision) benefit |
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( |
) |
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( |
) |
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( |
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Net loss |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
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Net loss per common share, basic and diluted |
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$ |
( |
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$ |
( |
) |
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$ |
( |
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$ |
( |
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Weighted-average common shares outstanding, basic and diluted |
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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)
|
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Three months ended June 30, |
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Six months ended June 30, |
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2024 |
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2023 |
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2024 |
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2023 |
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Net loss |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
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Other comprehensive income (loss): |
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Change in fair value of derivative financial instruments, net of tax |
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( |
) |
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( |
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Reclassification of gains (losses) on derivative financial instruments |
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( |
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Foreign currency translation adjustment |
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( |
) |
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( |
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Total other comprehensive income (loss) |
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( |
) |
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( |
) |
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( |
) |
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Total comprehensive loss |
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$ |
( |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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)
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Accumulated |
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Additional |
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Other |
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Total |
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Common Stock |
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Paid-In |
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Accumulated |
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Comprehensive |
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Stockholders’ |
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Shares |
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Amount |
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Capital |
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Deficit |
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Income (Loss) |
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Equity |
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Balances at December 31, 2022 |
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$ |
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$ |
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$ |
( |
) |
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$ |
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$ |
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Net loss |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
Other comprehensive loss |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Equity-based compensation |
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— |
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— |
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— |
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Tax withholdings on vesting of restricted stock |
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( |
) |
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— |
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( |
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— |
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— |
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( |
) |
Balances at March 31, 2023 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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Net loss |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Other comprehensive loss |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Equity-based compensation |
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— |
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— |
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— |
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Forfeiture of shares per the Forfeiture Agreement |
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( |
) |
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— |
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— |
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— |
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— |
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— |
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Issuance of shares due to Employee Stock Purchase Plan |
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— |
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— |
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— |
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Tax withholdings on vesting of restricted stock |
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— |
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— |
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( |
) |
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— |
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— |
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( |
) |
Balances at June 30, 2023 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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Accumulated |
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Additional |
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Other |
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Total |
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Common Stock |
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Paid-In |
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Accumulated |
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Comprehensive |
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Stockholders’ |
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Shares |
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Amount |
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Capital |
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Deficit |
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Income (Loss) |
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Equity |
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Balances at December 31, 2023 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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Net loss |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Other comprehensive income |
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— |
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— |
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— |
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— |
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Equity-based compensation |
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— |
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— |
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— |
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Tax withholdings on vesting of restricted stock |
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( |
) |
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— |
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( |
) |
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— |
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— |
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( |
) |
Pre-funded warrants exercised |
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— |
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— |
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— |
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— |
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— |
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Balances at March 31, 2024 |
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$ |
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$ |
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$ |
( |
) |
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$ |
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$ |
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Net loss |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
Other comprehensive loss |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Equity-based compensation |
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— |
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— |
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— |
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Issuance of shares due to Employee Stock Purchase Plan |
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— |
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— |
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— |
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Tax withholdings on vesting of restricted stock |
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— |
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— |
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( |
) |
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— |
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— |
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( |
) |
Balances at June 30, 2024 |
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$ |
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$ |
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$ |
( |
) |
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$ |
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$ |
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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, |
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2024 |
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2023 |
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Cash flows from operating activities: |
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Net loss |
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$ |
( |
) |
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$ |
( |
) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
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Depreciation and amortization expense |
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Amortization of content assets |
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Provision for inventory and inventory purchase commitments |
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Realized (gains) losses on hedging derivative financial instruments |
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( |
) |
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Change in fair value of warrant liabilities |
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( |
) |
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Equity-based compensation |
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Deferred income taxes |
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( |
) |
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Amortization of debt issuance costs |
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Paid-in-kind interest expense |
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Loss on partial debt extinguishment |
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— |
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Change in lease assets |
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( |
) |
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— |
|
Gain on sale of property and equipment |
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( |
) |
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— |
|
Changes in operating assets and liabilities: |
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Inventory |
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|
|
|
|
||
Content assets |
|
|
( |
) |
|
|
( |
) |
Prepaid expenses |
|
|
|
|
|
|
||
Other assets |
|
|
|
|
|
( |
) |
|
Accounts payable |
|
|
|
|
|
( |
) |
|
Accrued expenses |
|
|
( |
) |
|
|
( |
) |
Deferred revenue |
|
|
( |
) |
|
|
|
|
Other liabilities |
|
|
( |
) |
|
|
( |
) |
Net cash provided by (used in) operating activities |
|
|
|
|
|
( |
) |
|
Cash flows from investing activities: |
|
|
|
|
|
|
||
Purchase of property and equipment |
|
|
( |
) |
|
|
( |
) |
Proceeds from sale of property and equipment |
|
|
|
|
|
— |
|
|
Net cash provided by (used in) investing activities |
|
|
|
|
|
( |
) |
|
Cash flows from financing activities: |
|
|
|
|
|
|
||
Debt repayments |
|
|
( |
) |
|
|
( |
) |
Proceeds from issuance of common shares in the Employee Stock Purchase Plan |
|
|
|
|
|
|
||
Tax withholding payments for vesting of restricted stock |
|
|
( |
) |
|
|
( |
) |
Net cash used in financing activities |
|
|
( |
) |
|
|
( |
) |
Effect of exchange rates on cash, cash equivalents, and restricted cash |
|
|
( |
) |
|
|
|
|
Net decrease in cash, cash equivalents, and restricted cash |
|
|
( |
) |
|
|
( |
) |
Cash, cash equivalents and restricted cash, beginning of period |
|
|
|
|
|
|
||
Cash, cash equivalents, and restricted cash, end of period |
|
$ |
|
|
$ |
|
||
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
||
Cash paid during the period for interest |
|
$ |
|
|
$ |
|
||
Cash paid (received) during the period for income taxes, net |
|
|
|
|
|
( |
) |
|
Supplemental disclosure of noncash investing activities: |
|
|
|
|
|
|
||
Property and equipment acquired but not yet paid for |
|
$ |
|
|
$ |
|
||
Supplemental disclosure of noncash financing activities: |
|
|
|
|
|
|
||
Change in fair value of Term Loan warrants due to amended exercise price |
|
$ |
|
|
$ |
— |
|
|
Paid-in-kind fee recorded as incremental debt issuance cost |
|
|
|
|
|
— |
|
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
7
The Beachbody Company, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
1. Description of Business and Summary of Significant Accounting Policies
Business
The Beachbody Company, Inc. (“BODi” or the “Company”) is a leading fitness and nutrition company and the creator of some of the world’s most popular fitness programs. The Company’s fitness programs are available for streaming through subscription and/or digital program purchases on the BODi digital platform, accessible through a web browser, iOS devices, Android Devices and Roku. During the three months ended March 31, 2023, the Company launched an improved BODi experience and began migrating all BOD-only members to BODi on their renewal dates. BODi offers nutritional products such as Shakeology nutrition shakes, Beachbody Performance supplements and BEACHBAR snack bars, which have been designed and clinically tested to help customers achieve their goals. BODi also offers a commercial-grade stationary cycle which can include a 360-degree touch screen tablet and connected fitness software. The Company’s revenue has historically been generated primarily through a network of micro-influencers (“Partners”), social media marketing channels, and direct response advertising.
Basis of Presentation and Principles of Consolidation
The Company prepares its consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information as determined by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) and pursuant to the regulations of the U.S. Securities and Exchange Commission (“SEC”).
The preparation of unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that may affect the amounts reported in the unaudited condensed consolidated financial statements and accompanying notes. Significant estimates in our condensed consolidated financial statements include, but are not limited to, the useful life and recoverability of long-lived assets, the valuation of warrant liabilities, the recognition and measurement of income tax assets and liabilities, the valuation of intangible assets, impairment of goodwill, and the net realizable value of inventory. The Company bases these estimates on historical experience and on various other assumptions that it believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying amounts of assets and liabilities. Actual results could differ from those estimates. We periodically review estimates and assumptions and we reflect the effects of changes, if any, in the unaudited condensed consolidated financial statements in the period that they are determined.
The unaudited condensed consolidated financial statements have been prepared on the same basis as the annual audited consolidated financial statements and, in the opinion of management, include all normal recurring adjustments necessary for the fair statement of the Company’s financial position, results of operations, and cash flows. All intercompany transactions and balances with or among our consolidated subsidiaries have been eliminated in consolidation. The financial data and other financial information disclosed in the notes to these unaudited condensed consolidated financial statements are also unaudited. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. Interim results are not necessarily indicative of the results that may be expected for the full fiscal year or any other period.
Summary of Changes in Significant Accounting Estimates
Goodwill and Long-Lived Assets, Net
Interim Impairment Test
Goodwill represents the excess of the fair value of the consideration transferred in a business combination over the fair value of the underlying identifiable assets and liabilities acquired. Goodwill and intangible assets deemed to have an indefinite life are not amortized, but instead are assessed for impairment annually as of December 31 and between annual tests if an event or change in circumstances occurs that would more likely than not reduce the fair value of a reporting unit ("RU") below its carrying value or indicate that it is more likely than not that the indefinite-lived asset is impaired. As of June 30, 2024, the Company has
Due to the sustained decline in the Company’s market capitalization and macro-economic conditions observed in the three months ended June 30, 2023, the Company performed an interim test for impairment of its goodwill as of June 30, 2023. In performing the interim impairment test for goodwill, the Company elected to bypass the optional qualitative test and proceeded to perform a quantitative test by comparing the carrying value of its RU to its estimated fair value. The Company previously tested its RU for impairment as of December 31, 2022. The results of the Company’s interim test for impairment at June 30, 2023 concluded that the fair value of its RU exceeded its carrying value, resulting in
8
Long-Lived Assets
Management reviews long-lived assets (including property and equipment, content assets, and definite-lived intangible assets) for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Recoverability of assets is determined by comparing their carrying value to the forecasted undiscounted cash flows associated with the assets. If the evaluation of the forecasted cash flows indicates that the carrying value of the assets is not recoverable, the assets are written down to their fair value. The Company performed a test for recoverability at June 30, 2023 and concluded that the carrying value of its long-lived assets was recoverable. For the six months ended June 30, 2024, there were no indicators of impairment of the Company's long-lived assets.
Reverse Stock Split
On November 21, 2023, we effected a reverse stock split of our issued and outstanding common stock. Each stockholder's percentage ownership and proportional voting power generally remained unchanged as a result of the reverse stock split. All applicable share data, per share amounts and related information in the unaudited condensed consolidated financial statements and notes thereto have been adjusted retroactively to give effect to the reverse stock split. See Note 10, Stockholders' Equity, for additional information regarding the reverse stock split.
Recently Adopted Accounting Pronouncements
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires an acquirer to apply ASC 606 to recognize and measure contract assets and liabilities from contracts with customers acquired in a business combination on the acquisition date rather than the general guidance in ASC 805. The Company
In September 2022, the FASB issued ASU 2022-04, Liabilities-Supplier Finance Programs (Topic 405-50) - Disclosure of Supplier Finance Program Obligations, which requires that a buyer in a supplier finance program disclose sufficient information about the program to allow a user of financial statements to understand the program’s nature, activity during the period, changes from period to period, and potential magnitude. The Company
Accounting Pronouncements Not Yet Adopted
In November 2023, the FASB issued ASU 2023-07, Improvements to Reportable Segment Disclosures, to improve disclosures about a public entity's reportable segments through enhanced disclosures about significant segment expenses. The guidance in this update will be effective for public companies for annual periods beginning after December 15, 2023 and interim periods for years beginning after December 15, 2024. The Company is evaluating the potential impact of adopting this guidance on its unaudited condensed consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures, to improve disclosures about a company's income taxes paid and the effective rate reconciliation table. The guidance in this update will be effective for public companies for annual periods beginning after December 15, 2024 and interim periods for years beginning after December 15, 2025. The Company is evaluating the potential impact of adopting this guidance on its unaudited condensed consolidated financial statements.
2. Revenue
The Company’s revenue disaggregated by geographic region is as follows (in thousands):
|
|
Three months ended June 30, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
|
|
|
|
|
|
|
||
Geographic region: |
|
|
|
|
|
|
||
United States |
|
$ |
|
|
$ |
|
||
Rest of world1 |
|
|
|
|
|
|
||
Total revenue |
|
$ |
|
|
$ |
|
||
9
|
|
Six months ended June 30, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
|
|
|
|
|
|
|
||
Geographic region: |
|
|
|
|
|
|
||
United States |
|
$ |
|
|
$ |
|
||
Rest of world1 |
|
|
|
|
|
|
||
Total revenue |
|
$ |
|
|
$ |
|
||
(1)
The Company determined that, in addition to the preceding table, the disaggregation of revenue by revenue type as presented in the unaudited condensed consolidated statements of operations achieves the disclosure requirement to disaggregate revenue into categories that depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors.
Deferred Revenue
Deferred revenue is recorded for nonrefundable cash payments received for the Company’s performance obligation to transfer, or stand ready to transfer, goods or services in the future. Deferred revenue consists of subscription fees billed that have not been recognized and physical products sold that have not yet been delivered. The Company expects to recognize approximately
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, 2024 |
|
|||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Assets |
|
|
|
|
|
|
|
|
|
|||
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
||
Total assets |
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|||
Liabilities |
|
|
|
|
|
|
|
|
|
|||
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Private Placement Warrants |
|
|
— |
|
|
|
— |
|
|
|
|
|
Term Loan Warrants |
|
|
— |
|
|
|
— |
|
|
|
|
|
Common Stock Warrants |
|
|
— |
|
|
|
— |
|
|
|
|
|
Total liabilities |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
December 31, 2023 |
|
|||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Assets |
|
|
|
|
|
|
|
|
|
|||
Restricted short-term investments |
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
Total assets |
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|||
Liabilities |
|
|
|
|
|
|
|
|
|
|||
Public Warrants |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
Private Placement Warrants |
|
|
— |
|
|
|
— |
|
|
|
|
|
Term Loan Warrants |
|
|
— |
|
|
|
— |
|
|
|
|
|
Common Stock Warrants |
|
|
— |
|
|
|
— |
|
|
|
|
|
Total liabilities |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
10
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. Restricted short-term investments of $
Private Placement Warrants
The Company determined the fair value of the outstanding warrants for the purchase of
The following table presents significant assumptions utilized in the valuation of the Private Placement Warrants on June 30, 2024 and December 31, 2023:
|
|
|
|
|
|
|
||
|
|
June 30, 2024 |
|
|
December 31, 2023 |
|
||
|
|
|
|
|
|
|
||
Risk-free rate |
|
|
% |
|
|
% |
||
Dividend yield rate |
|
|
|
|
|
|
||
Volatility |
|
|
% |
|
|
% |
||
Contractual term (in years) |
|
|
|
|
|
|
||
Exercise price |
|
$ |
|
|
$ |
|
||
The following table presents changes in the fair value of the Private Placement Warrants for the three and six months ended June 30, 2024 and 2023 (in thousands):
|
|
Three months ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Balance, beginning of period |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
||
Balance, end of period |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
For the three and six months ended June 30, 2024 and 2023, the change in the fair value of the Private Placement Warrants resulted from the change in price of the Company’s Class A common stock, remaining contractual term and risk-free rate. The changes in fair value are included in the unaudited condensed consolidated statements of operations as a component of change in fair value of warrant liabilities and in the unaudited condensed consolidated balance sheets as other liabilities.
Public Warrants
The Company determined the fair value of the outstanding warrants for the purchase of
11
a significantly higher or lower fair value measurement, respectively.
|
|
June 30, 2024 |
|
|
December 31, 2023 |
|
||
|
|
|
|
|
|
|
||
Risk-free rate |
|
|
% |
|
|
% |
||
Dividend yield rate |
|
|
|
|
|
|
||
Volatility |
|
|
% |
|
|
% |
||
Contractual term (in years) |
|
|
|
|
|
|
||
Exercise price |
|
$ |
|
|
$ |
|
||
The following table presents changes in the fair value of the Public Warrants for the three and six months ended June 30, 2024 and 2023 (in thousands):
|
|
Three months ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Balance, beginning of period |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
||
Balance, end of period |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
For the three and six months ended June 30, 2023, the change in the fair value of the Public Warrants resulted from the change in the price of the Public Warrants as traded on an active market. For the three and six months ended June 30, 2024 the change in the fair value of the Public Warrants resulted from the change in price of the Company’s Class A common stock, remaining contractual term, and risk-free rate. The changes in fair value are included in the unaudited condensed consolidated statements of operations as a component of change in fair value of warrant liabilities and in the unaudited condensed consolidated balance sheets as other liabilities.
Term Loan Warrants
The Company determined the fair value of the Term Loan Warrants (as defined below) using a Black-Scholes option-pricing model and the quoted price of the Company’s Class A common stock. Volatility was based on the implied volatility derived primarily from the average of the actual market activity of the Company’s peer group and the Company's historical volatility. The expected life was based on the remaining contractual term of the Term Loan Warrants, and the risk-free interest rate was based on the implied yield available on U.S. treasury securities with a maturity equivalent to the Term Loan Warrants expected life. The significant unobservable input used in the fair value measurement of the Term Loan Warrants is the implied volatility. Significant changes in the implied volatility would result in a significantly higher or lower fair value measurement, respectively. See Note 9, Debt, for additional information regarding the Term Loan Warrants.
The following table presents significant assumptions utilized in the valuation of the Term Loan Warrants at June 30, 2024 and December 31, 2023:
|
|
June 30, 2024 |
|
|
December 31, 2023 |
|
||
|
|
|
|
|
|
|
||
Risk-free rate |
|
|
% |
|
|
% |
||
Dividend yield rate |
|
|
|
|
|
|
||
Volatility |
|
|
% |
|
|
% |
||
Contractual term (in years) |
|
|
|
|
|
|
||
Exercise price |
|
$ |
|
|
$ |
|
||
The following table presents changes in the fair value of the Term Loan Warrants for the three and six months ended June 30, 2024 and 2023 (in thousands):
|
|
Three months ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Balance, beginning of period |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Amended in connection with Fifth Amendment |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Balance, end of period |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
12
For the three and six months ended June 30, 2024, the change in the balance of the Term Loan Warrants was due to the Warrant Second Amendment (as defined below) of the Term Loan Warrants, which reduced the exercise price from $
Common Stock Warrants
The Company determined the fair value of the Common Stock Warrants (as defined below), which were issued on December 13, 2023, using a Black-Scholes option-pricing model and the quoted price of the Company’s Class A common stock. Volatility was based on the implied volatility derived from the average of the actual market activity of the Company’s peer group and the Company's historical volatility. The expected life was based on the remaining contractual term of the Common Stock Warrants, and the risk-free interest rate was based on the implied yield available on U.S. treasury securities with a maturity equivalent to the Common Stock Warrants expected life. The significant unobservable input used in the fair value measurement of the Common Stock Warrants is the implied volatility. Significant changes in the implied volatility would result in a significantly higher or lower fair value measurement, respectively.
The following table presents significant assumptions utilized in the valuation of the Common Stock Warrants on June 30, 2024 and December 31, 2023:
|
|
June 30, 2024 |
|
|
December 31, 2023 |
|
||
|
|
|
|
|
|
|
||
Risk-free rate |
|
|
% |
|
|
% |
||
Dividend yield rate |
|
|
|
|
|
|
||
Volatility |
|
|
% |
|
|
% |
||
Contractual term (in years) |
|
|
|
|
|
|
||
Exercise price |
|
$ |
|
|
$ |
|
||
The following table presents changes in the fair value of the Common Stock Warrants for the three and six months ended June 30, 2024 (in thousands):
|
|
Three months ended June 30, |
|
|
Six months ended June 30, |
|
||
|
|
2024 |
|
|
2024 |
|
||
Balance, beginning of year |
|
$ |
|
|
$ |
|
||
|
|
( |
) |
|
|
|
||
Balance, end of year |
|
$ |
|
|
$ |
|
||
For the three and six months ended June 30, 2024, the change in the fair value of the Common Stock Warrants resulted from the change in price of the Company’s Class A common stock, remaining contractual term, and risk-free rate. The changes in fair value are included in the unaudited condensed consolidated statements of operations as a component of change in fair value of warrant liabilities and in the unaudited condensed consolidated balance sheets as other liabilities.
4. Inventory
Inventory, net consists of the following (in thousands):
|
|
June 30, 2024 |
|
|
December 31, 2023 |
|
||
|
|
|
|
|
|
|
||
Raw materials and work in process |
|
$ |
|
|
$ |
|
||
Finished goods |
|
|
|
|
|
|
||
Total inventory |
|
$ |
|
|
$ |
|
||
Adjustments to the carrying value of excess inventory and inventory on hand to net realizable value were $
13
$
5. Other Current Assets
Other current assets consist of the following (in thousands):
|
|
June 30, 2024 |
|
|
December 31, 2023 |
|
||
Deferred Partner costs |
|
$ |
|
|
$ |
|
||
Deposits |
|
|
|
|
|
|
||
Accounts receivable, net |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Total other current assets |
|
$ |
|
|
$ |
|
||
6. Property and Equipment, Net
Property and equipment, net consists of the following (in thousands):
|
|
|
|
|
|
|
||
|
|
June 30, 2024 |
|
|
December 31, 2023 |
|
||
|
|
|
|
|
|
|
||
Computer software and web development |
|
$ |
|
|
$ |
|
||
Computer equipment |
|
|
|
|
|
|
||
Buildings |
|
|
|
|
|
|
||
Leasehold improvements |
|
|
|
|
|
|
||
Furniture, fixtures and equipment |
|
|
|
|
|
|
||
Computer software and web development projects in-process |
|
|
|
|
|
|
||
Property and equipment, gross |
|
|
|
|
|
|
||
Less: Accumulated depreciation |
|
|
( |
) |
|
|
( |
) |
Total property and equipment, net |
|
$ |
|
|
$ |
|
||
On February 29, 2024, the Company sold its Van Nuys production facility which had a net carrying value of $
The Company recorded depreciation expense related to property and equipment in the following expense categories of its unaudited condensed consolidated statements of operations as follows (in thousands):
|
|
Three months ended June 30, |
|
|
Six months ended June 30, |
|
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
||||
Enterprise technology and development |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total depreciation |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
||||
14
7. Accrued Expenses
Accrued expenses consist of the followings (in thousands):
|
|
June 30, 2024 |
|
|
December 31, 2023 |
|
||
Partner costs |
|
$ |
|
|
$ |
|
||
Employee compensation and benefits |
|
|
|
|
|
|
||
Inventory, shipping and fulfillment |
|
|
|
|
|
|
||
Sales and other taxes |
|
|
|
|
|
|
||
Information technology |
|
|
|
|
|
|
||
Outside professional services |
|
|
|
|
|
|
||
Advertising |
|
|
|
|
|
|
||
Other accrued expenses |
|
|
|
|
|
|
||
Total accrued expenses |
|
$ |
|
|
$ |
|
||
Advertising costs, which are primarily comprised of social media, television media, and internet advertising expenses and also include print, radio, and infomercial production costs, were $
On September 29, 2023, the Company entered into a financing agreement with IPFS Corporation of California ("IPFS") to finance certain of its annual insurance premiums. The Company financed $
On October 6, 2023, the Company entered into a financing agreement with First Insurance Funding ("FIF") to finance certain of its annual insurance premiums. The Company financed $
8. Commitments and Contingencies
Inventory Purchase and Service Agreements
The Company has noncancelable inventory purchase and service agreements with multiple service providers which expire at varying dates through 2028. During the three and six months ended June 30, 2024, there were
Future minimum payments under noncancelable service and inventory purchase agreements for the periods succeeding June 30, 2024 are as follows (in thousands):
Six months ending December 31, 2024 |
|
$ |
|
|
Year ending December 31, 2025 |
|
|
|
|
Year ending December 31, 2026 |
|
|
|
|
Year ending December 31, 2027 |
|
|
|
|
Year ending December 31, 2028 |
|
|
|
|
|
|
$ |
|
15
The preceding table excludes royalty payments to fitness trainers, talent, and others that are based on future sales as such amounts cannot be reasonably estimated. During the six months ended June 30, 2024 the Company paid $
Lease Commitments
The Company
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.
On May 22, 2023, Jessica Lyons, an individual, and a group of other plaintiffs filed a class action complaint with the Los Angeles County Superior Court alleging that the Company misclassified its Partners as contractors rather than as employees and committed other violations of the California Labor Code. The Company understands that the plaintiffs in this matter intend on filing additional claims under the Private Attorney General Act of 2004. The Company and certain executive officers are listed as defendants in the complaint. The plaintiffs are seeking monetary damages. This matter is pending as of the date of this quarterly report. We deny the allegations in the complaint, believe they are without merit, and intend to vigorously defend ourselves in this action.
On September 6, 2023 Dish Technologies LLC and SLING TV LLC (the "DISH Entities") filed a complaint with the United States District Court for the District of Delaware alleging that the Company infringed on the DISH Entities' patents and used technology belonging to the DISH Entities without their permission. The plaintiffs are seeking monetary damages and injunctive relief. In an effort to avoid any further unnecessary litigation costs, the parties entered into a Confidential Standstill and Tolling Agreement as of April 16, 2024 which included a dismissal of the case by the DISH Entities without prejudice and an agreement by the DISH Entities not to institute any litigation proceedings against the Company under the patents any earlier than December 31, 2026 in exchange for a one-time immaterial payment to the DISH Entities by the Company.
On June 14, 2024, Bryan Reilly on behalf of himself and similarly situated current and former stockholders of Forest Road Acquisition Corp., which later became the Beachbody Company, Inc. (“Forest Road”), filed a verified class action complaint (the “Reilly Action”) against the former directors and officers of Forest Road, as well as Forest Road Acquisition Sponsor LLC, Forest Road Company LLC, Zach Tarica, and Jeremy Tarica (together the “Forest Road Sponsor Defendants”) alleging claims for breach of fiduciary duty in connection with the merger among Forest Road, The Beachbody Company, Inc., and Myx in 2021 (the “Merger”). The lawsuit also brought claims against the Company, Kevin Meyer, and The Raine Group LLC (“Raine”) alleging aiding and abetting breach of fiduciary duty, and against the former Forest Road directors and officers, the Forest Road Sponsor Defendants, Raine, and Meyer for unjust enrichment. We also have certain indemnification obligations as to some or all of the former Forest Road directors and Raine as to certain claims.
The Reilly Action generally alleges that the proxy that Forest Road issued prior to the Merger contained numerous material misstatements and omissions that impaired the Forest Road stockholders’ ability to make an informed decision regarding whether to redeem their stock in connection with the Merger. The plaintiff also asserts that the Merger was a conflicted transaction because the Forest Road Sponsor Defendants and the former Forest Road directors were incentivized to close the Merger even if it was a value-decreasing transaction for Forest Road’s public stockholders. As to the Company, Meyer, and Raine, the complaint alleges that these defendants aided and abetted the Forest Road defendants’ disclosure violations. We deny the allegations in the complaint, believe they are without merit, and intend to vigorously defend ourselves in this action.
Some of our legal proceedings, such as the above referenced complaints, may be based on complex claims involving substantial uncertainties and unascertainable damages. Accordingly, it is not possible to determine the probability of loss or estimate damages for any of the above matters, and therefore the Company has not established reserves for any of these proceedings. When the Company determines that a loss is both probable and reasonably estimable, the Company records a liability, and, if the liability is material, discloses the amount of the liability reserved. Given that such proceedings are subject to uncertainty, there can be no assurance that such legal proceedings, either individually or in the aggregate, will not have a material adverse effect on our business, results of operations, financial condition or cash flows.
16
9. Debt
On August 8, 2022 (the “Effective Date”), the Company, Beachbody, LLC as borrower (a wholly owned subsidiary of the Company), and certain other subsidiaries of the Company as guarantors (the “Guarantors”), the lenders (the “Lenders”), and Blue Torch Finance, LLC, ("Blue Torch") as administrative agent and collateral agent for such lenders (the “Term Loan Agent”) entered into a financing agreement which was subsequently amended (collectively with any amendments thereto, the “Financing Agreement”). The Financing Agreement provides for senior secured term loans on the Effective Date in an aggregate principal amount of $
The Term Loan borrowings may take the form of base rate (“Reference Rate”) loans or Secured Overnight Financing Rate (“SOFR Rate”) loans. Reference Rate loans bear interest at a rate per annum equal to the sum of an applicable margin of
On July 24, 2023 (the "Second Amendment Effective Date"), the Company and Blue Torch entered into Amendment No. 2 to the Financing Agreement (the "Second Amendment"), which amended the Company's existing Financing Agreement. The Second Amendment, among other things, amended certain terms of the Financing Agreement including, but not limited to, (1) amended the minimum revenue financial covenant to test revenue levels for each fiscal quarter on a standalone basis, and to adjust the minimum revenue levels to (a) $
In connection with the Second Amendment, on the Second Amendment Effective Date, the Company made a partial prepayment on the Term Loan of $
On January 9, 2024 (the "Third Amendment Effective Date"), the Company and Blue Torch entered into Consent No. 1 and Amendment No. 3 to the Financing Agreement (the "Third Amendment"), which amended the Company's existing Financing Agreement. The Third Amendment, among other things, amended certain terms of the Financing Agreement including, but not limited to, amended the minimum liquidity financial covenant to adjust the minimum liquidity levels to (a) $
In connection with the Third Amendment, on the Third Amendment Effective Date, the Company made a partial prepayment on the Term Loan of $
17
discount and debt issuance costs as of the Third Amendment Effective Date ($
On February 29, 2024 (the "Fourth Amendment Effective Date"), the Company and Blue Torch entered into Consent No. 2 and Amendment No. 4 to the Financing Agreement (the "Fourth Amendment"), which amended the Company's existing Financing Agreement. The Fourth Amendment, among other things, amended certain terms of the Financing Agreement including, but not limited to amended the minimum liquidity financial covenant to adjust the minimum liquidity levels to (a) $
In connection with the Fourth Amendment, on the Fourth Amendment Effective Date, the Company made a partial prepayment on the Term Loan of $
On April 5, 2024 (the "Fifth Amendment Effective Date") the Company and Blue Torch entered into Amendment No. 5 to the Financing Agreement (the "Fifth Amendment") which amended the Company's existing Financing Agreement. The Fifth Amendment, among other things, amended certain terms of the Financing Agreement including, but not limited to 1) amending the minimum revenue financial covenant to adjust the minimum revenue levels to (a) $
In connection with the Fifth Amendment, on the Fifth Amendment Effective Date, the Company made a partial prepayment on the Term Loan of $
If there is an event of default, including not being in compliance with either of the financial covenants, the Term Loan will bear interest from the date of such event of default until the event of default is cured or waived in writing by the Lenders at the Post Default Rate, which is the rate of interest in effect pursuant to the Financing Agreement plus
The Financing Agreement also contains customary representations, warranties, and covenants, which include, but are not limited to, restrictions on indebtedness, liens, restricted payments, asset sales, affiliate transactions, changes in line of business, investments, negative pledges and amendments to organizational documents and material contracts. The Financing Agreement contains customary events of default, which among other things include (subject to certain exceptions and cure periods): (1) failure to pay principal, interest, or any fees or certain other amounts when due; (2) breach of any representation or warranty, covenant, or other agreement in the Financing Agreement and other related loan documents; (3) the occurrence of a bankruptcy or insolvency proceeding with respect to any Loan Party; (4) any failure by a Loan Party to make a payment with respect to indebtedness having an aggregate principal amount in excess of a specified threshold; and (5) certain other customary events of default.
In connection with the Term Loan, the Company issued to certain holders affiliated with Blue Torch warrants for the purchase of
18
Warrants amended the exercise price of the Term Loan Warrants from $
The aggregate amounts of payments due for the periods succeeding June 30, 2024 and reconciliation of the Company’s debt balances, net of debt discount and debt issuance costs, are as follows (in thousands):
Six months ending December 31, 2024 |
|
$ |
|
|
Year ending December 31, 2025 |
|
|
|
|
Year ending December 31, 2026 |
|
|
|
|
Total debt |
|
|
|
|
Less current portion |
|
|
( |
) |
Less unamortized debt discount and debt issuance costs |
|
|
( |
) |
Add capitalized paid-in-kind interest |
|
|
|
|
Total long-term debt |
|
$ |
|
Principal payments on the Term Loan are $
At June 30, 2024 and December 31, 2023, the Company had one irrevocable standby letter of credit outstanding, totaling $
10. Stockholders’ Equity
As of June 30, 2024,
Holders of each share of each class of Common Stock are entitled to dividends when, as, and if declared by the Company’s board of directors (the "Board"), subject to the rights and preferences of any holders of Preferred Stock outstanding at the time. As of June 30, 2024, the Company had not declared any dividends.
On December 10, 2023, the Company entered into a securities purchase agreement for the issuance and sale of
19
On June 15, 2023, the Company and Carl Daikeler, the Company’s co-founder and CEO entered into a forfeiture agreement (“the Forfeiture Agreement”), pursuant to which Mr. Daikeler as of June 15, 2023 forfeited
Reverse Stock Split
All applicable outstanding equity awards discussed below in Note 11, Equity-Based Compensation, have been adjusted retroactively for the reverse stock split.
Accumulated Other Comprehensive Income (Loss)
The following tables summarize changes in accumulated other comprehensive income (loss) by component during the three months ended June 30, 2024 and 2023 (in thousands):
|
Total1 |
|
|
|
|
|
|
Balances at March 31, 2023 |
$ |
( |
) |
Other comprehensive loss before reclassifications |
|
( |
) |
Amounts reclassified from accumulated other comprehensive income |
|
|
|
Tax effect |
|
( |
) |
Balances at June 30, 2023 |
$ |
( |
) |
|
|
|
|
|
|
|
|
Balances at March 31, 2024 |
$ |
|
|
Other comprehensive loss before reclassifications |
|
( |
) |
Amounts reclassified from accumulated other comprehensive income (loss) |
|
— |
|
Tax effect |
|
— |
|
Balances at June 30, 2024 |
$ |
|
|
1Total denotes unrealized gain (loss) on derivatives and foreign currency translation adjustments.
20
The following tables summarize changes in accumulated other comprehensive income (loss) by component during the six months ended June 30, 2024 and 2023 (in thousands):
|
Total1 |
|
|
|
|
|
|
Balances at December 31, 2022 |
$ |
|
|
Other comprehensive loss before reclassifications |
|
( |
) |
Amounts reclassified from accumulated other comprehensive loss |
|
( |
) |
Tax effect |
|
( |
) |
Balances at June 30, 2023 |
$ |
( |
) |
|
|
|
|
|
|
|
|
Balances at December 31, 2023 |
$ |
( |
) |
Other comprehensive loss before reclassifications |
|
( |
) |
Amounts reclassified from accumulated other comprehensive income |
|
|
|
Tax effect |
|
|
|
Balances at June 30, 2024 |
$ |
|
|
1Total denotes unrealized gain (loss) on derivatives and foreign currency translation adjustments.
11. Equity-Based Compensation
Equity Compensation Plans
A summary of the option activity under the Company’s equity compensation plans is as follows:
|
Time Vested Options Outstanding |
|
|||||||||||||
|
Number of Options |
|
|
Weighted-Average Exercise Price |
|
|
Weighted-Average Remaining Contractual Term |
|
|
Aggregate Intrinsic Value |
|
||||
Outstanding at December 31, 2023 |
|
|
|
$ |
|
|
|
|
|
$ |
— |
|
|||
Forfeited |
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Expired |
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Outstanding at June 30, 2024 |
|
|
|
$ |
|
|
|
|
|
$ |
— |
|
|||
Exercisable at June 30, 2024 |
|
|
|
$ |
|
|
|
|
|
$ |
— |
|
|||
|
Performance Vested Options Outstanding |
|
|||||||||||||
|
Number of Options |
|
|
Weighted-Average Exercise Price |
|
|
Weighted-Average Remaining Contractual Term |
|
|
Aggregate Intrinsic Value |
|
||||
Outstanding at December 31, 2023 |
|
|
|
$ |
|
|
|
|
|
$ |
— |
|
|||
Outstanding at June 30, 2024 |
|
|
|
$ |
|
|
|
|
|
$ |
— |
|
|||
Exercisable at June 30, 2024 |
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
A summary of restricted stock unit ("RSU") activity is as follows:
21
|
|
RSUs Outstanding |
||||||||
|
|
Number of RSUs |
|
|
Weighted-Average Fair Value |
|
|
|||
Outstanding at December 31, 2023 |
|
|
|
|
$ |
|
|
|
||
Granted |
|
|
|
|
|
|
|
|
||
Vested |
|
|
( |
) |
|
|
|
|
|
|
Forfeited |
|
|
( |
) |
|
|
|
|
|
|
Outstanding at June 30, 2024 |
|
|
|
|
$ |
|
|
|
||
The fair value of RSUs vested during the three and six months ended June 30, 2024 was $
On January 1, 2024, the number of shares available for issuance under the 2021 Incentive Award Plan (the “2021 Plan”) increased by
Vested RSUs included shares of common stock that the Company withheld on behalf of certain employees to satisfy the minimum statutory tax withholding requirements, as defined by the Company. The Company withheld shares of common stock with an aggregate fair value and remitted taxes of $
On June 14, 2023, the Board adopted the Company’s 2023 Employment Inducement Incentive Award Plan (the “Inducement Plan”) for the grant of non-qualified stock options, stock appreciation rights, restricted stock, RSU's, dividend equivalents and other stock or cash-based awards to prospective employees. The Board reserved
Effective as of June 15, 2023, the Company appointed Mark Goldston as Executive Chairman, replacing the service of Mr. Daikeler in his capacity as Chairman of the Board. Mr. Daikeler continues to serve as the Company’s CEO and as a director. In connection with the employment offer letter to Mr. Goldston, he was granted a stock option under the Inducement Plan, covering an aggregate of
Vesting tranche Number of Performance -Vesting Options Price per share goal
Tranche 1
Tranche 2
Tranche 3
Tranche 4
The share price is measured by averaging the fair market value (as defined in the Inducement Plan) per share over any
Employee Stock Purchase Plan
22
In May 2022, the Company established an ESPP, the terms of which allow for qualified employees to participate in the purchase of designated shares of the Company’s common stock at a price equal to
On January 1, 2024 the number of shares available for issuance under the ESPP increased by
During the six months ended June 30, 2024,
Stock-based compensation expense associated with the Company’s ESPP is based on fair value estimated on the date of grant using the Black-Scholes option pricing valuation model and the following weighted-average assumptions for grants during the six months ended June 30, 2024:
|
|
Six months ended June 30, |
|
|
|
|
2024 |
|
|
Risk-free rate |
|
|
% |
|
Dividend yield rate |
|
|
|
|
Volatility |
|
|
% |
|
Expected term (in years) |
|
|
|
|
Weighted-average grant date fair value |
|
$ |
|
|
Equity-Based Compensation Expense
Equity-based compensation expense for the three and six months ended June 30, 2024 and 2023 was as follows (in thousands):
|
|
Three months ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Selling and marketing |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Enterprise technology and development |
|
|
|
|
|
|
|
|
|
|
|
|
||||
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total equity-based compensation |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
In connection with the restructuring activities that took place during the three and six months ended June 30, 2024 and 2023, the Company modified certain stock awards of terminated employees (approximately
The fair value of each award that vests solely based on time as of the date of grant is estimated using a Black-Scholes option-pricing model. The following table summarizes the weighted-average assumptions used to determine the fair value of time vested option grants for the six months ended June 30, 2023. There were
|
|
Six months ended June 30, |
|
|
|
|
2023 |
|
|
Risk-free rate |
|
|
% |
|
Dividend yield rate |
|
|
|
|
Volatility |
|
|
% |
|
Expected term (in years) |
|
|
|
|
Weighted-average grant date fair value |
|
$ |
|
|
23
The vesting periods are based on the terms of the option grant agreements, generally four to five years. The risk-free interest rates are based on the U.S. Treasury rates as of the grant dates for the expected terms of the options. The price volatilities represent calculated values based on the historical price volatilities of publicly traded companies within the Company’s industry group and the Company's historical volatility over the options’ expected terms. The expected terms of the options granted were estimated using the simplified method by taking an average of the vesting periods and the original contractual terms.
The fair value of the Performance-Vesting Options as of the date of grant is estimated using a Monte Carlo simulation. The following table summarizes the weighted average assumptions used to determine the fair value of the Performance-Vesting Options for the six months ended June 30, 2023. There were
|
|
Six months ended June 30, |
|
|
|
|
2023 |
|
|
Risk-free rate |
|
|
% |
|
Dividend yield rate |
|
|
|
|
Volatility |
|
|
% |
|
Expected term (in years) |
|
|
|
|
Weighted-average grant date fair value |
|
$ |
|
|
The vesting periods are based on the terms of the option grant agreements, generally four to five years. The risk-free interest rates are based on the U.S. Treasury rates as of the grant dates for the expected terms of the options. The price volatilities represent calculated values based on the historical price volatilities of publicly traded companies within the Company’s industry group and the Company's historical volatility over the options’ expected terms. The expected terms of the options granted were estimated using the simplified method by taking an average of the vesting periods and the original contractual terms.
12. Restructuring
In 2024, restructuring charges primarily relate to the Company's key initiatives. Restructuring charges in 2023 primarily relate to activities focused on aligning the Company's operations with its key growth priorities. The Company recognized restructuring costs of
The following table summarizes activity in the Company’s restructuring-related liability during the three months ended June 30, 2024 and 2023, respectively (in thousands):
|
|
Balance at |
|
|
Restructuring |
|
|
Payments / |
|
|
Liability at |
|
||||
|
|
March 31, 2024 |
|
|
Charges |
|
|
Utilizations |
|
|
June 30, 2024 |
|
||||
Employee-related costs |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Total costs |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
|
|
Balance at |
|
|
Restructuring |
|
|
Payments / |
|
|
Liability at |
|
||||
|
|
March 31, 2023 |
|
|
Charges |
|
|
Utilizations |
|
|
June 30, 2023 |
|
||||
Employee-related costs |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||
Total costs |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||
The following table summarizes the activity in the Company’s restructuring related liability during the six months ended June 30, 2024 and 2023, respectively (in thousands):
|
|
Balance at |
|
|
Restructuring |
|
|
Payments / |
|
|
Liability at |
|
||||
|
|
December 31, 2023 |
|
|
Charges |
|
|
Utilizations |
|
|
June 30, 2024 |
|
||||
Employee-related costs |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Total costs |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
24
|
|
Balance at |
|
|
Restructuring |
|
|
Payments / |
|
|
Liability at |
|
||||
|
|
December 31, 2022 |
|
|
Charges |
|
|
Utilizations |
|
|
June 30, 2023 |
|
||||
Employee-related costs |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Total costs |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
13. Income Taxes
The Company recorded a provision for income taxes of $
The tax provision for interim periods is determined using an estimate of the Company’s annual effective tax rate, adjusted for discrete items arising in that quarter. The Company’s effective tax rate differs from the U.S. statutory tax rate in the three and six months ended June 30, 2024 primarily due to changes in valuation allowances on deferred tax assets as it is more likely than not that some or all of the Company’s deferred tax assets will not be realized.
The Company evaluates its tax positions on a quarterly basis and revises its estimate accordingly. There were no material changes to the Company’s uncertain tax positions, interest, or penalties during the three and six months ended June 30, 2024.
14. Earnings (Loss) per Share
The computation of loss per share of Class A and Class X common stock is as follows (in thousands, except share and per share information):
|
|
Three months ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted-average common shares outstanding, basic and diluted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss per common share, basic and diluted |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
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, 2024 and 2023 as the inclusion of all potential common shares would have been antidilutive. The weighted average common shares outstanding (basic and diluted) in the above table exclude the
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:
25
|
|
June 30, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
|
|
|
|
|
|
|
||
Time vested options |
|
|
|
|
|
|
||
Performance vested options |
|
|
|
|
|
|
||
RSUs |
|
|
|
|
|
|
||
Compensation warrants |
|
|
|
|
|
|
||
Public and Private Placement Warrants |
|
|
|
|
|
|
||
Term Loan Warrants |
|
|
|
|
|
|
||
Common Stock Warrants |
|
|
|
|
|
— |
|
|
Forest Road Earn-out Shares |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
See Note 11, Equity-Based Compensation, for additional information on the Performance-Vesting Options.
26
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis should be read in conjunction with our financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q (this “Report”) as well as our financial statements and the "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our Annual Report on Form 10-K for the year ended December 31, 2023 (our "Form 10-K"). Unless otherwise indicated, the terms “BODi,” “we,” “us,” or “our” refer to The Beachbody Company, Inc., a Delaware corporation, together with its consolidated subsidiaries.
Forward-Looking Statements
This Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including statements about the financial condition, results of operations, earnings outlook and prospects of the Company. Forward-looking statements are typically identified by words such as “plan,” “believe,” “expect,” “anticipate,” “intend,” “outlook,” “estimate,” “forecast,” “project,” “continue,” “could,” “may,” “might,” “possible,” “potential,” “predict,” “should,” “would” and other similar words and expressions, but the absence of these words does not mean that a statement is not forward-looking.
The forward-looking statements are based on our current expectations as applicable and are inherently subject to uncertainties and changes in circumstances and their potential effects and speak only as of the date of such statement. There can be no assurance that future developments will be those that have been anticipated. These forward-looking statements involve a number of risks, uncertainties or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to the following:
Should one or more of these risks or uncertainties materialize or should any of the assumptions made by management prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements.
You should not place undue reliance upon our forward-looking statements.
Except to the extent required by applicable law or regulation, we undertake no obligation to update these forward-looking statements to reflect events or circumstances after the date of this Report or to reflect the occurrence of unanticipated events.
27
Overview
BODi is a leading fitness and nutrition company. We focus primarily on digital content, supplements, connected fitness, and consumer health and fitness. Our goal is to continue to provide holistic health and fitness content, subscription-based solutions and digital program sales. We are the creator of some of the world’s most popular fitness programs, including P90X, Insanity, and 21 Day Fix, which transformed the at-home fitness market and disrupted the global fitness industry by making it accessible for people to get results—anytime, anywhere. Our comprehensive nutrition-first programs, Portion Fix and 2B Mindset, teach healthy eating habits and promote healthy, sustainable weight loss. These fitness and nutrition programs are available through our BODi streaming service.
We offer nutritional products such as Shakeology nutrition shakes, Beachbody Performance supplements and BEACHBAR snack bars, as well as a commercial-grade stationary cycle with or without a 360-degree touch screen tablet and connected fitness software. Leveraging our history of fitness content creation, nutrition innovation, and our network of micro-influencers, whom we call “Partners”, we plan to continue market penetration into connected fitness to reach a wider health, wellness and fitness audience.
Our revenue is generated primarily through our network of Partners, social media marketing channels, and direct response advertising. Components of revenue include recurring digital subscription revenue, digital program sales, revenue from the sale of nutritional and other products, and connected fitness revenue. In addition to selling individual products on a one-time basis, we bundle digital and nutritional products together at discounted prices.
For the three months ended June 30, 2024, as compared to the three months ended June 30, 2023:
For the six months ended June 30, 2024, as compared to the six months ended June 30, 2023:
See “Non-GAAP Information” below for information regarding our use of Adjusted EBITDA and a reconciliation of net loss to Adjusted EBITDA.
28
Recent Developments
On April 5, 2024 (the "Fifth Amendment Effective Date"), the Company and Blue Torch entered into Amendment No. 5 to the Financing Agreement (the "Fifth Amendment"), which amended, among other things, certain terms of the Financing Agreement including without limitation, to (1) amend the minimum revenue financial covenant and (2) amend the minimum liquidity financial covenant.
In connection with the Fifth Amendment, on the Fifth Amendment Effective Date, the Company made a partial prepayment on the Term Loan of $4.0 million along with the related prepayment premium of 3% ($0.1 million) and accrued interest. The partial prepayment of $4.0 million was accounted for as a partial debt extinguishment and the Company wrote off the proportionate amount of unamortized debt discount and debt issuance costs as of the Fifth Amendment Effective Date ($0.6 million) which in addition to the prepayment premium ($0.1 million) was recorded as a loss on partial debt extinguishment of $0.7 million in the three and six months ended June 30, 2024.
In connection with the Fifth Amendment, the Company also amended and restated the Term Loan Warrant for the purchase of 97,482 shares of the Company's Class A common stock.
See Note 9, Debt, for additional information on the Fifth Amendment and amendments to the Term Loan Warrants.
29
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, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
|
|
|
|
|
|
|
||
Digital subscriptions (millions) |
|
|
1.15 |
|
|
|
1.53 |
|
Nutritional subscriptions (millions) |
|
|
0.14 |
|
|
|
0.20 |
|
|
|
Three months ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Average digital retention |
|
|
96.5 |
% |
|
|
95.2 |
% |
|
|
96.1 |
% |
|
|
95.5 |
% |
Total streams (millions) |
|
|
22.7 |
|
|
|
25.3 |
|
|
|
48.3 |
|
|
|
55.0 |
|
DAU/MAU |
|
|
31.9 |
% |
|
|
31.6 |
% |
|
|
32.6 |
% |
|
|
32.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenue (millions) |
|
$ |
110.2 |
|
|
$ |
134.9 |
|
|
$ |
230.2 |
|
|
$ |
279.8 |
|
Gross profit (millions) |
|
$ |
76.4 |
|
|
$ |
82.7 |
|
|
$ |
157.7 |
|
|
$ |
174.1 |
|
Gross margin |
|
|
69.3 |
% |
|
|
61.3 |
% |
|
|
68.5 |
% |
|
|
62.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss (millions) |
|
$ |
(10.9 |
) |
|
$ |
(25.7 |
) |
|
$ |
(25.1 |
) |
|
$ |
(54.9 |
) |
Adjusted EBITDA (millions) (1) |
|
$ |
4.9 |
|
|
$ |
(4.8 |
) |
|
$ |
9.5 |
|
|
$ |
(5.7 |
) |
(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.
Digital Subscriptions
Our ability to expand the number of digital subscriptions is an indicator of our market penetration and growth. Digital subscriptions include BOD (through March 2023) and BODi. Digital subscriptions include paid and free-to-pay subscriptions, with free-to-pay subscriptions representing less than 1% of total digital subscriptions on average. Digital subscriptions are inclusive of all billing plans, currently for annual, semi-annual, quarterly and monthly billing intervals.
Nutritional Subscriptions
Nutritional subscriptions include monthly subscriptions for nutritional products such as Shakeology, Beachbody Performance, BEACHBAR, Bevvy and Ladder Supplements. We also package and bundle the content experience of digital subscriptions with nutritional subscriptions to optimize customer results.
Average Digital Retention
We use month-over-month digital subscription retention, which is defined as the average rate at which the total subscriber file is retained for the next period, to measure customer retention. For instance, a 95% average digital retention rate would correspond with retaining each month an average of 95% of digital subscribers existing at the beginning of that month. A 95% average digital retention rate would translate into a loss at the end of the quarter of approximately 15% of the subscribers existing at the beginning of the quarter. This calculation excludes new customer acquisitions or subscribers added in a specific month, so this calculation can never exceed 100%.
Total Streams
We use total streams to quantify the number of fitness, nutrition and mindset programs viewed, which is an indicator of customer engagement and retention. While the measure of a digital stream may vary across companies, to qualify as a stream on any of our digital platforms, a program must be viewed for a minimum of 25% of the total running time.
Daily Active Users to Monthly Active Users (DAU/MAU)
30
We use the ratio of daily active users to monthly active users to measure how frequently digital subscribers are utilizing our service in a given month. We define a daily active user as a unique user streaming content on our platform in a given day. We define a monthly active user as a unique user streaming content on our platform in that same month.
Non-GAAP Information
We use Adjusted EBITDA, which is a non-GAAP performance measure, to supplement our results presented in accordance with accounting principles generally accepted in the United States of America ("GAAP"). We believe Adjusted EBITDA is useful in evaluating our operating performance, as it is similar to measures reported by our public competitors and is regularly used by security analysts, institutional investors, and other interested parties in analyzing operating performance and prospects. Adjusted EBITDA is not intended to be a substitute for any GAAP financial measure and, as calculated, may not be comparable to other similarly titled measures of performance of other companies in other industries or within the same industry.
We define and calculate Adjusted EBITDA as net income (loss) adjusted for depreciation and amortization, amortization of capitalized cloud computing implementation costs, amortization of content assets, interest expense, income tax provision (benefit), equity-based compensation, and other items that are not normal, recurring, operating expenses necessary to operate the Company’s business as described in the reconciliation below.
We include this non-GAAP financial measure because it is used by management to evaluate BODi’s core operating performance and trends and to make strategic decisions regarding the allocation of capital and new investments. Adjusted EBITDA excludes certain expenses that are required in accordance with GAAP because they are non-cash (for example, in the case of depreciation and amortization and equity-based compensation) or are not related to our underlying business performance (for example, in the case of interest income and expense).
The table below presents our Adjusted EBITDA reconciled to our net loss, the closest GAAP measure, for the periods indicated:
|
|
Three months ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
(in thousands) |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss |
|
$ |
(10,865 |
) |
|
$ |
(25,748 |
) |
|
$ |
(25,081 |
) |
|
$ |
(54,936 |
) |
Adjusted for: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loss on partial debt extinguishment (1) |
|
|
719 |
|
|
|
— |
|
|
|
1,928 |
|
|
|
— |
|
Depreciation and amortization |
|
|
5,411 |
|
|
|
10,919 |
|
|
|
10,789 |
|
|
|
21,632 |
|
Amortization of capitalized cloud computing implementation costs |
|
|
38 |
|
|
|
40 |
|
|
|
75 |
|
|
|
81 |
|
Amortization of content assets |
|
|
4,112 |
|
|
|
5,459 |
|
|
|
8,652 |
|
|
|
11,020 |
|
Interest expense |
|
|
1,652 |
|
|
|
2,368 |
|
|
|
3,527 |
|
|
|
4,699 |
|
Income tax provision (benefit) |
|
|
67 |
|
|
|
(12 |
) |
|
|
129 |
|
|
|
36 |
|
Equity-based compensation |
|
|
4,739 |
|
|
|
3,161 |
|
|
|
9,104 |
|
|
|
12,716 |
|
Employee incentives, expected to be settled in equity (2) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(5,466 |
) |
Restructuring and platform consolidation costs (3) |
|
|
— |
|
|
|
(107 |
) |
|
|
1,644 |
|
|
|
5,952 |
|
Change in fair value of warrant liabilities |
|
|
(647 |
) |
|
|
(375 |
) |
|
|
77 |
|
|
|
(432 |
) |
Gain on sale of property and equipment |
|
|
— |
|
|
|
— |
|
|
|
(784 |
) |
|
|
— |
|
Non-operating (4) |
|
|
(298 |
) |
|
|
(479 |
) |
|
|
(578 |
) |
|
|
(963 |
) |
Adjusted EBITDA |
|
$ |
4,928 |
|
|
$ |
(4,774 |
) |
|
$ |
9,482 |
|
|
$ |
(5,661 |
) |
31
Results of Operations
The Company has one operating segment. The following discussion of our results and operations is on a consolidated basis.
(in thousands) |
|
Three months ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Digital |
|
$ |
58,771 |
|
|
$ |
65,214 |
|
|
$ |
120,277 |
|
|
$ |
129,987 |
|
Nutrition and other |
|
|
50,101 |
|
|
|
64,628 |
|
|
|
105,613 |
|
|
|
138,748 |
|
Connected fitness |
|
|
1,311 |
|
|
|
5,106 |
|
|
|
4,339 |
|
|
|
11,114 |
|
Total revenue |
|
|
110,183 |
|
|
|
134,948 |
|
|
|
230,229 |
|
|
|
279,849 |
|
Cost of revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Digital |
|
|
11,476 |
|
|
|
16,336 |
|
|
|
24,338 |
|
|
|
31,303 |
|
Nutrition and other |
|
|
19,621 |
|
|
|
27,202 |
|
|
|
41,905 |
|
|
|
58,241 |
|
Connected fitness |
|
|
2,710 |
|
|
|
8,666 |
|
|
|
6,328 |
|
|
|
16,221 |
|
Total cost of revenue |
|
|
33,807 |
|
|
|
52,204 |
|
|
|
72,571 |
|
|
|
105,765 |
|
Gross profit |
|
|
76,376 |
|
|
|
82,744 |
|
|
|
157,658 |
|
|
|
174,084 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Selling and marketing |
|
|
56,308 |
|
|
|
76,492 |
|
|
|
115,569 |
|
|
|
153,068 |
|
Enterprise technology and development |
|
|
17,162 |
|
|
|
18,650 |
|
|
|
34,879 |
|
|
|
37,746 |
|
General and administrative |
|
|
12,388 |
|
|
|
11,887 |
|
|
|
25,871 |
|
|
|
29,603 |
|
Restructuring |
|
|
— |
|
|
|
(107 |
) |
|
|
1,644 |
|
|
|
5,280 |
|
Total operating expenses |
|
|
85,858 |
|
|
|
106,922 |
|
|
|
177,963 |
|
|
|
225,697 |
|
Operating loss |
|
|
(9,482 |
) |
|
|
(24,178 |
) |
|
|
(20,305 |
) |
|
|
(51,613 |
) |
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loss on partial debt extinguishment |
|
|
(719 |
) |
|
|
— |
|
|
|
(1,928 |
) |
|
|
— |
|
Change in fair value of warrant liabilities |
|
|
647 |
|
|
|
375 |
|
|
|
(77 |
) |
|
|
432 |
|
Interest expense |
|
|
(1,652 |
) |
|
|
(2,368 |
) |
|
|
(3,527 |
) |
|
|
(4,699 |
) |
Other income, net |
|
|
408 |
|
|
|
411 |
|
|
|
885 |
|
|
|
980 |
|
Loss before income taxes |
|
|
(10,798 |
) |
|
|
(25,760 |
) |
|
|
(24,952 |
) |
|
|
(54,900 |
) |
Income tax (provision) benefit |
|
|
(67 |
) |
|
|
12 |
|
|
|
(129 |
) |
|
|
(36 |
) |
Net loss |
|
$ |
(10,865 |
) |
|
$ |
(25,748 |
) |
|
$ |
(25,081 |
) |
|
$ |
(54,936 |
) |
32
Revenue
Revenue includes digital subscriptions, digital program sales, nutritional supplement subscriptions, one-time nutritional sales, connected fitness products, access to our online Partner business management platform, preferred customer program memberships, and other fitness-related products. We often sell bundled products that combine digital subscriptions, nutritional products, and/or other fitness products. We consider these sales to be revenue arrangements with multiple performance obligations and allocate the transaction price to each performance obligation based on its relative stand-alone selling price. We defer revenue when we receive payments in advance of delivery of products or the performance of services. Digital subscription revenue is recognized ratably over the subscription period of up to 38 months.
|
|
Three months ended June 30, |
|
|
|
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
$ Change |
|
|
% Change |
|
||||
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|||||||
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Digital |
|
$ |
58,771 |
|
|
$ |
65,214 |
|
|
$ |
(6,443 |
) |
|
|
(10 |
%) |
Nutrition and other |
|
|
50,101 |
|
|
|
64,628 |
|
|
|
(14,527 |
) |
|
|
(22 |
%) |
Connected fitness |
|
|
1,311 |
|
|
|
5,106 |
|
|
|
(3,795 |
) |
|
|
(74 |
%) |
Total revenue |
|
$ |
110,183 |
|
|
$ |
134,948 |
|
|
$ |
(24,765 |
) |
|
|
(18 |
%) |
The decrease in digital revenue for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023, was primarily attributable to a $4.8 million decrease in revenue from our digital streaming services due to 25% fewer subscriptions on lower demand partially offset by the transition of all digital subscriptions to the higher priced BODi subscription over the past year, a decrease in digital program sales of $1.2 million and a decrease of $0.5 million in fees from Partners as there was a 27% decrease in the number of Partners.
The decrease in nutrition and other revenue for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023, was primarily attributable to a $10.5 million decrease in revenue from nutritional products due to 26% fewer nutritional subscriptions on lower demand, a $2.2 million decrease in revenue generated from our preferred customer fees as there was a 31% decrease in preferred customers and a $0.9 million decrease in event ticket sales due primarily to the decrease in the number of, length of and attendance at events.
The decrease in connected fitness revenue for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023, was primarily due to an approximate 70% decrease in number of bikes delivered from approximately 5,500 for the three months ended June 30, 2023 to approximately 1,600 for the three months ended June 30, 2024 and an approximate 9% decrease in the average sales price for a bike.
|
|
Six months ended June 30, |
|
|
|
|
|
|
|
|||||||
|
|
2024 |
|
|
2023 |
|
|
$ Change |
|
|
% Change |
|
||||
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|||||||
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Digital |
|
$ |
120,277 |
|
|
$ |
129,987 |
|
|
$ |
(9,710 |
) |
|
|
(8 |
%) |
Nutrition and other |
|
|
105,613 |
|
|
|
138,748 |
|
|
|
(33,135 |
) |
|
|
(24 |
%) |
Connected fitness |
|
|
4,339 |
|
|
|
11,114 |
|
|
|
(6,775 |
) |
|
|
(61 |
%) |
Total revenue |
|
$ |
230,229 |
|
|
$ |
279,849 |
|
|
$ |
(49,620 |
) |
|
|
(18 |
%) |
The decrease in digital revenue for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023, was primarily attributable to a $10.3 million decrease in revenue from our digital streaming services due to 25% fewer subscriptions on lower demand partially offset by the transition of all digital subscriptions to the higher priced BODi subscription over the past year and a decrease of $1.1 million in fees from Partners due to a 27% decrease in the number of Partners, partially offset by an increase in digital program sales of $1.3 million.
The decrease in nutrition and other revenue for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023, was primarily attributable to a $24.8 million decrease in revenue from nutritional products due to 26% fewer nutritional subscriptions on lower demand, a $4.7 million decrease in revenue generated from our preferred customer fees as there was a 31% decrease in preferred customers, a $2.2 million decrease in event ticket sales due primarily to the decrease in the number of, length of and attendance at events and a $1.0 million decrease in fitness accessories revenue.
33
The decrease in connected fitness revenue for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023, was primarily due to an approximate 50% decrease in the number of bikes delivered from approximately 10,200 for the six months ended June 30, 2023 to approximately 5,100 for the six months ended June 30, 2024 and an approximate 22% decrease in the average sales price for a bike.
Cost of Revenue
Digital Cost of Revenue
Digital cost of revenue includes costs associated with digital content creation including amortization and revision of content assets, depreciation of streaming platforms and digital streaming costs. It also includes customer service costs, payment processing fees, depreciation of production equipment, live trainer costs, facilities, and related personnel expenses.
Nutrition and Other Cost of Revenue
Nutrition and other cost of revenue includes product costs, shipping and handling, fulfillment and warehousing, customer service, and payment processing fees. It also includes depreciation of nutrition-related e-commerce websites and social commerce platforms, amortization of acquired formulae intangible assets (in the 2023 period), facilities, and related personnel expenses.
Connected Fitness Cost of Revenue
Connected fitness cost of revenue consists of product costs, including bike and tablet hardware costs, duties and other applicable importing costs, shipping, fulfillment, warehousing and logistics costs, costs associated with service calls and repairs of products under warranty, payment processing and financing fees, customer service expenses, and personnel-related expenses associated with supply chain and logistics.
|
|
Three months ended June 30, |
|
|
|
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
$ Change |
|
|
% Change |
|
||||
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|||||||
Cost of revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Digital |
|
$ |
11,476 |
|
|
$ |
16,336 |
|
|
$ |
(4,860 |
) |
|
|
(30 |
%) |
Nutrition and other |
|
|
19,621 |
|
|
|
27,202 |
|
|
|
(7,581 |
) |
|
|
(28 |
%) |
Connected fitness |
|
|
2,710 |
|
|
|
8,666 |
|
|
|
(5,956 |
) |
|
|
(69 |
%) |
Total cost of revenue |
|
$ |
33,807 |
|
|
$ |
52,204 |
|
|
$ |
(18,397 |
) |
|
|
(35 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross profit |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Digital |
|
$ |
47,295 |
|
|
$ |
48,878 |
|
|
$ |
(1,583 |
) |
|
|
(3 |
%) |
Nutrition and other |
|
|
30,480 |
|
|
|
37,426 |
|
|
|
(6,946 |
) |
|
|
(19 |
%) |
Connected fitness |
|
|
(1,399 |
) |
|
|
(3,560 |
) |
|
|
2,161 |
|
|
|
61 |
% |
Total gross profit |
|
$ |
76,376 |
|
|
$ |
82,744 |
|
|
$ |
(6,368 |
) |
|
|
(8 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross margin |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Digital |
|
|
80.5 |
% |
|
|
75.0 |
% |
|
|
|
|
|
|
||
Nutrition and other |
|
|
60.8 |
% |
|
|
57.9 |
% |
|
|
|
|
|
|
||
Connected fitness |
|
|
(106.7 |
%) |
|
|
(69.7 |
%) |
|
|
|
|
|
|
||
Total gross margin |
|
|
69.3 |
% |
|
|
61.3 |
% |
|
|
|
|
|
|
||
The decrease in digital cost of revenue for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023, was primarily due to a $1.8 million decrease in depreciation expense as a result of the end of the useful life of certain fixed assets, a $1.3 million decrease in the amortization of content assets as the result of lower production spend and a $1.1 million decrease in digital content revisions. The increase in digital gross margin for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 was primarily as a result of the decrease in expenses as noted above.
The decrease in nutrition and other cost of revenue for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023, was primarily due to a $3.0 million decrease in product costs and a $1.6 million decrease in fulfillment and shipping expenses related to the decrease in nutrition and other revenue, a $1.2 million decrease in depreciation expense as a result of the end of the useful life of certain fixed assets and a $0.7 million decrease in customer service expense due to a decrease in the volume of contacts
34
related to nutrition and other revenue. The increase in nutrition and other gross margin for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 was primarily as a result of the decrease in depreciation expense.
The decrease in connected fitness cost of revenue for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023, was driven by a $2.3 million decrease in freight, fulfillment and shipping expenses and a $1.3 million decrease in product costs, as the result of an approximate 70% decrease in the number of bikes delivered, and lower inventory reserve adjustments of $2.0 million. The decrease in connected fitness gross margin for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 was primarily as a result of fixed expenses on lower connected fitness revenue and due to the decrease in the average sales price for a bike.
|
|
Six months ended June 30, |
|
|
|
|
|
|
|
|||||||
|
|
2024 |
|
|
2023 |
|
|
$ Change |
|
|
% Change |
|
||||
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|||||||
Cost of revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Digital |
|
$ |
24,338 |
|
|
$ |
31,303 |
|
|
$ |
(6,965 |
) |
|
|
(22 |
%) |
Nutrition and other |
|
|
41,905 |
|
|
|
58,241 |
|
|
|
(16,336 |
) |
|
|
(28 |
%) |
Connected fitness |
|
|
6,328 |
|
|
|
16,221 |
|
|
|
(9,893 |
) |
|
|
(61 |
%) |
Total cost of revenue |
|
$ |
72,571 |
|
|
$ |
105,765 |
|
|
$ |
(33,194 |
) |
|
|
(31 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross profit |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Digital |
|
$ |
95,939 |
|
|
$ |
98,684 |
|
|
$ |
(2,745 |
) |
|
|
(3 |
%) |
Nutrition and other |
|
|
63,708 |
|
|
|
80,507 |
|
|
|
(16,799 |
) |
|
|
(21 |
%) |
Connected fitness |
|
|
(1,989 |
) |
|
|
(5,107 |
) |
|
|
3,118 |
|
|
|
61 |
% |
Total gross profit |
|
$ |
157,658 |
|
|
$ |
174,084 |
|
|
$ |
(16,426 |
) |
|
|
(9 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross margin |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Digital |
|
|
79.8 |
% |
|
|
75.9 |
% |
|
|
|
|
|
|
||
Nutrition and other |
|
|
60.3 |
% |
|
|
58.0 |
% |
|
|
|
|
|
|
||
Connected fitness |
|
|
(45.8 |
%) |
|
|
(46.0 |
%) |
|
|
|
|
|
|
||
Total gross margin |
|
|
68.5 |
% |
|
|
62.2 |
% |
|
|
|
|
|
|
||
The decrease in digital cost of revenue for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023, was due to a $3.0 million decrease in depreciation expense as a result of the end of the useful life of certain fixed assets, a $2.4 million decrease in digital content amortization as a result of lower production spend and a $1.4 million decrease in digital content revisions. The increase in digital gross margin for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 was primarily as a result of the decrease in depreciation expense and digital content amortization.
The decrease in nutrition and other cost of revenue for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023, was primarily due to a $5.0 million decrease in product costs and a $3.1 million decrease in fulfillment and shipping expenses related to the decrease in nutrition and other revenue, a $2.9 million decrease in depreciation expense as a result of the end of the useful life of certain fixed assets, a $1.7 million decrease in customer service expense due to a decrease in the volume of contacts related to nutrition and other revenue and lower inventory adjustments of $1.6 million. Nutrition and other gross margin increased for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 primarily as a result of the decrease in depreciation expense.
The decrease in connected fitness cost of revenue for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023, was driven by a $4.2 million decrease in product costs and a $2.3 million decrease in freight, fulfillment, and shipping expenses, as the result of an approximate 50% decrease in the number of bikes delivered, and lower inventory adjustments of $2.5 million. The connected fitness negative gross margin for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 was flat.
35
Operating Expenses
Selling and Marketing
Selling and marketing expenses primarily include the cost of Partner compensation, advertising, royalties, promotions and events, and third-party sales commissions as well as the personnel expenses for employees and consultants who support these areas. Selling and marketing expense as a percentage of total revenue may fluctuate from period to period based on total revenue, timing of new content and nutritional product launches, and the timing of our media investments to build awareness around launch activity.
|
|
Three months ended June 30, |
|
|
|
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
$ Change |
|
|
% Change |
|
||||
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Selling and marketing |
|
$ |
56,308 |
|
|
$ |
76,492 |
|
|
$ |
(20,184 |
) |
|
|
(26 |
%) |
As a percentage of total revenue |
|
|
51.1 |
% |
|
|
56.7 |
% |
|
|
|
|
|
|
||
The decrease in selling and marketing expense for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023, was primarily due to an $11.5 million decrease in Partner compensation as a result of the decrease in the number of Partners, lower commissionable revenue and a decrease in the commission rate paid to Partners that started at the beginning of January 2024, a $5.6 million decrease in event expenses due primarily to a decrease in the number of, length of and attendance at events, a $1.2 million decrease in personnel-related expenses due to lower headcount primarily related to the restructuring activities that occurred in the past year and a $1.1 million decrease in the amortization of intangible assets due to the impairment of the remaining intangible asset balance in the fourth quarter of 2023.
Selling and marketing expense as a percentage of total revenue decreased by 560 basis points ("bps") primarily due to the decrease in Partner compensation and event expenses.
|
|
Six months ended June 30, |
|
|
|
|
|
|
|
|||||||
|
|
2024 |
|
|
2023 |
|
|
$ Change |
|
|
% Change |
|
||||
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Selling and marketing |
|
$ |
115,569 |
|
|
$ |
153,068 |
|
|
$ |
(37,499 |
) |
|
|
(25 |
%) |
As a percentage of total revenue |
|
|
50.2 |
% |
|
|
54.7 |
% |
|
|
|
|
|
|
||
The decrease in selling and marketing expense for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023, was primarily due to a $22.8 million decrease in Partner compensation as a result of the decrease in the number of Partners, lower commissionable revenue and a decrease in the commission rate paid to Partners that started at the beginning of January 2024, an $8.3 million decrease in event expenses due primarily to a decrease in the number of, length of and attendance at events, a $2.7 million decrease in personnel-related expenses due to lower headcount primarily related to the restructuring activities that occurred in the past year and a $2.3 million decrease in the amortization of intangible assets due to the impairment of the remaining intangible asset balance in the fourth quarter of 2023.
Selling and marketing expense as a percentage of total revenue decreased by 450 bps primarily due to the decrease in Partner compensation and event expenses.
36
Enterprise Technology and Development
Enterprise technology and development expenses includes maintenance and enhancements of the Company’s enterprise resource planning system, which is the core of our accounting, procurement, supply chain and other business support systems and primarily relate to enterprise systems applications, hardware, and software that serve as the technology infrastructure for the Company and are not directly related to services provided or tangible goods sold. Enterprise technology and development expenses also includes reporting and business analytics tools, security systems such as identity management and payment card industry compliance, office productivity software, research and development tracking tools, and other non-customer facing applications. Enterprise technology and development expenses include personnel-related expenses for employees and consultants to maintain technology systems and are involved in the research and development of new and existing nutritional products, depreciation of enterprise technology-related assets, software licenses, hosting expenses, and technology equipment leases.
|
|
Three months ended June 30, |
|
|
|
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
$ Change |
|
|
% Change |
|
||||
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Enterprise technology and development |
|
$ |
17,162 |
|
|
$ |
18,650 |
|
|
$ |
(1,488 |
) |
|
|
(8 |
%) |
As a percentage of total revenue |
|
|
15.6 |
% |
|
|
13.8 |
% |
|
|
|
|
|
|
||
The decrease in enterprise technology and development expenses for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023, was primarily due to a $1.2 million decrease in depreciation expense as a result of the end of the useful life of certain fixed assets.
Enterprise technology and development expense as a percentage of total revenue increased by 180 bps due to the decrease in revenue at a faster pace than the reduction in enterprise technology and development expenses.
|
|
Six months ended June 30, |
|
|
|
|
|
|
|
|||||||
|
|
2024 |
|
|
2023 |
|
|
$ Change |
|
|
% Change |
|
||||
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Enterprise technology and development |
|
$ |
34,879 |
|
|
$ |
37,746 |
|
|
$ |
(2,867 |
) |
|
|
(8 |
%) |
As a percentage of total revenue |
|
|
15.1 |
% |
|
|
13.5 |
% |
|
|
|
|
|
|
||
The decrease in enterprise technology and development expenses for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023, was primarily due to a $2.4 million decrease in depreciation expense as a result of the end of the useful life of certain fixed assets.
Enterprise technology and development expense as a percentage of total revenue increased by 160 bps due to the decrease in revenue at a faster pace than the reduction in enterprise technology and development expenses.
37
General and Administrative
General and administrative expenses includes personnel-related expenses and facilities-related costs primarily for our executive, finance, accounting, legal and human resources functions. General and administrative expenses also includes fees for professional services principally comprised of legal, audit, tax, and insurance.
|
|
Three months ended June 30, |
|
|
|
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
$ Change |
|
|
% Change |
|
||||
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
General and administrative |
|
$ |
12,388 |
|
|
$ |
11,887 |
|
|
$ |
501 |
|
|
|
4 |
% |
As a percentage of total revenue |
|
|
11.2 |
% |
|
|
8.8 |
% |
|
|
|
|
|
|
||
The slight increase in general and administrative expenses for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023, was primarily due to the modification of certain stock awards for employees who were terminated in the prior year period which reduced general and administrative expenses by $0.4 million in the three months ended June 30, 2023.
General and administrative expenses as a percentage of total revenue increased by 240 bps due to the increase in general and administrative expenses and the decrease in revenue.
|
|
Six months ended June 30, |
|
|
|
|
|
|
|
|||||||
|
|
2024 |
|
|
2023 |
|
|
$ Change |
|
|
% Change |
|
||||
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
General and administrative |
|
$ |
25,871 |
|
|
$ |
29,603 |
|
|
$ |
(3,732 |
) |
|
|
(13 |
%) |
As a percentage of total revenue |
|
|
11.2 |
% |
|
|
10.6 |
% |
|
|
|
|
|
|
||
The decrease in general and administrative expenses for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023, was primarily due to a $2.3 million decrease in professional and accounting fees due to a management focus on decreasing spending, a $1.4 million decrease in insurance expense as some of our insurance is based on the level of the Company's revenues or the number of employees, which both have declined in the current period compared to the prior period and a $0.8 million gain on the sale of the Van Nuys facility which was recorded as a reduction of general and administrative expenses in the three months ended March 31, 2024.
General and administrative expense as a percentage of total revenue increased by 60 bps due to the decrease in revenue at a faster pace than the reduction in general and administrative expenses.
Restructuring
In 2024, restructuring charges primarily relate to the Company's key initiatives. Restructuring charges in 2023 relate to activities focused on aligning our operations with our key growth priorities, including a reduction in headcount. The charges incurred primarily consist of employee termination costs.
|
|
Three months ended June 30, |
|
|
|
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
$ Change |
|
|
% Change |
|
||||
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Restructuring |
|
$ |
— |
|
|
$ |
(107 |
) |
|
$ |
107 |
|
|
|
(100 |
%) |
|
|
Six months ended June 30, |
|
|
|
|
|
|
|
|||||||
|
|
2024 |
|
|
2023 |
|
|
$ Change |
|
|
% Change |
|
||||
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Restructuring |
|
$ |
1,644 |
|
|
$ |
5,280 |
|
|
$ |
(3,636 |
) |
|
|
(69 |
%) |
38
Other Income (Expense)
The change in fair value of warrant liabilities consists of the fair value changes of the public, private placement, Term Loan And Common Stock warrants. Interest expense primarily consists of interest expense associated with our borrowings and amortization of debt discount and issuance costs for our Term Loan (as defined below). Other income, net, consists of interest income earned on investments and gains (losses) on foreign currency.
|
|
Three months ended June 30, |
|
|
|
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
$ Change |
|
|
% Change |
|
||||
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loss on partial debt extinguishment |
|
$ |
(719 |
) |
|
$ |
— |
|
|
$ |
(719 |
) |
|
NM |
|
|
Change in fair value of warrant liabilities |
|
|
647 |
|
|
|
375 |
|
|
|
272 |
|
|
NM |
|
|
Interest expense |
|
|
(1,652 |
) |
|
|
(2,368 |
) |
|
|
716 |
|
|
|
(30 |
%) |
Other income, net |
|
|
408 |
|
|
|
411 |
|
|
|
(3 |
) |
|
|
(1 |
%) |
The loss on partial debt extinguishment for the three months ended June 30, 2024 was due to the partial prepayment of $4.0 million on the Term Loan as of April 5, 2024. The change in fair value of warrant liabilities during the three months ended June 30, 2024, as compared to the three months ended June 30, 2023, primarily resulted from the decline in our stock price during the current quarter and an increase in the number of outstanding warrants due to the Common Stock Warrants that were issued in December 2023. The decrease in interest expense was primarily due to principal prepayments of $25.5 million on the outstanding Term Loan balance from June 30, 2023 to June 30, 2024.
|
|
Six months ended June 30, |
|
|
|
|
|
|
|
|||||||
|
|
2024 |
|
|
2023 |
|
|
$ Change |
|
|
% Change |
|
||||
|
|
(dollars in thousands) |
|
|
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|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loss on partial debt extinguishment |
|
$ |
(1,928 |
) |
|
$ |
— |
|
|
$ |
(1,928 |
) |
|
NM |
|
|
Change in fair value of warrant liabilities |
|
|
(77 |
) |
|
|
432 |
|
|
|
(509 |
) |
|
NM |
|
|
Interest expense |
|
|
(3,527 |
) |
|
|
(4,699 |
) |
|
|
1,172 |
|
|
|
(25 |
%) |
Other income, net |
|
|
885 |
|
|
|
980 |
|
|
|
(95 |
) |
|
|
(10 |
%) |
The loss on partial debt extinguishment for the six months ended June 30, 2024 was due to the partial prepayments of $10.5 million on the Term Loan that occurred in the six months ended June 30, 2024. The change in fair value of warrant liabilities during the six months ended June 30, 2024, as compared to the six months ended June 30, 2023, primarily resulted from a slight increase in our stock price during the current period as compared to a decrease in our stock price in the prior year period. The decrease in interest expense was primarily due to principal prepayments of $25.5 million on the outstanding Term Loan balance from June 30, 2023 to June 30, 2024. The decrease in other income was primarily due to lower interest income as a result of lower average cash balances for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023.
Income Tax (Provision) Benefit
Income tax (provision) benefit consists of income taxes related to U.S. federal and state jurisdictions as well as those foreign jurisdictions where we have business operations.
|
|
Three months ended June 30, |
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|
|||||||||
|
|
2024 |
|
|
2023 |
|
|
$ Change |
|
|
% Change |
|||
|
|
(dollars in thousands) |
|
|
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|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||
Income tax (provision) benefit |
|
$ |
(67 |
) |
|
$ |
12 |
|
|
$ |
(79 |
) |
|
NM |
The income tax provision increase for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023, was primarily driven by changes in our valuation allowance and an increase in the net expense from discrete events.
39
|
|
Six months ended June 30, |
|
|
|
|
|
|
||||||
|
|
2024 |
|
|
2023 |
|
|
$ Change |
|
|
% Change |
|||
|
|
(dollars in thousands) |
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||
Income tax provision |
|
$ |
(129 |
) |
|
$ |
(36 |
) |
|
$ |
(93 |
) |
|
NM |
The income tax provision increase for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023, was primarily driven by changes in our valuation allowance and an increase in the net expense from discrete events.
Liquidity and Capital Resources
|
|
Six months ended June 30, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
|
|
(in thousands) |
|
|||||
|
|
|
|
|
|
|
||
Net cash provided by (used in) operating activities |
|
$ |
8,209 |
|
|
$ |
(14,367 |
) |
Net cash provided by (used in) investing activities |
|
|
2,655 |
|
|
|
(5,030 |
) |
Net cash used in financing activities |
|
|
(11,504 |
) |
|
|
(2,400 |
) |
As of June 30, 2024, we had cash and cash equivalents totaling $32.3 million.
Net cash provided by (used in) operating activities was $8.2 million and $(14.4) million for the six months ended June 30, 2024 and 2023, respectively. The increase in net cash provided by operating activities during the six months ended June 30, 2024, compared to the prior year period, was primarily due to a decrease in net loss of $29.9 million, an increase in cash provided by other assets of $18.1 million and a decrease in cash used for accrued expenses of $8.8 million partially offset by a decrease in cash provided by deferred revenue of $13.0 million, a decrease in depreciation and amortization expense of $10.8 million and a decrease in provision for inventory and inventory purchase commitments of $4.1 million.
Net cash provided by (used in) investing activities was $2.7 million and $(5.0) million for the six months ended June 30, 2024 and 2023, respectively. The increase in net cash provided by investing activities was due to proceeds received from the sale of the Van Nuys facility of $5.6 million and a decrease in capital expenditures of $2.1 million due to increased focus by management on capital expenditures, in particular related to technology.
Net cash used in financing activities was $11.5 million and $2.4 million for the six months ended June 30, 2024 and 2023, respectively. The increase in net cash used in financing activities was primarily due to debt repayments on our Term Loan in the six months ended June 30, 2024.
On August 8, 2022, the Company, Beachbody, LLC, a Delaware limited liability company and wholly-owned direct subsidiary of the Company (the “Borrower”), and certain subsidiaries of the Company (together with the Company, the “Guarantors”), entered into a financing agreement (as amended, the “Financing Agreement”) with the lenders party thereto and Blue Torch Finance, LLC, ("Blue Torch") as administrative agent and collateral agent for such lenders, providing for a senior secured term loan facility in an initial aggregate principal amount of $50.0 million (the “Term Loan”). Obligations under the Financing Agreement are guaranteed by the Guarantors, and secured by a lien on and security interest in substantially all of the assets of the Borrower and the Guarantors (together with the Borrower, the “Loan Parties”), subject to customary exceptions. On July 24, 2023 the Company and Blue Torch entered into the Second Amendment. In connection with the Second Amendment, on the Second Amendment Effective Date, the Company made a partial prepayment on the Term Loan of $15.0 million. On January 9, 2024, February 29, 2024 and April 5, 2024, the Company made partial prepayments of $1.0 million, $5.5 million and $4.0 million, respectively, on the Term Loan in connection with the Third, Fourth and Fifth Amendments. As of June 30, 2024, the principal balance outstanding (including capitalized paid in kind interest) under the Term Loan was $25.4 million. During the six months ended June 30, 2024, the Term Loan was a secured overnight financing rate ("SOFR") loan, with an effective interest rate of 22.71% and a cash interest rate of 12.75% for the six months ended June 30, 2024.
The Financing Agreement contains financial covenants, customary representations, warranties, covenants and customary events of default. In particular, the Financing Agreement contains a minimum revenue financial covenant of $100.0 million, for each fiscal quarter ending on or prior to December 31, 2024, and $110.0 million for each fiscal quarter thereafter to December 31, 2025. We were in compliance with the financial covenants as of June 30, 2024 and we expect to remain in compliance with the financial covenants based on our current expectation of future results of operations. Unexpected weakness in the demand for our products may interfere with our ability to remain in compliance with the covenants, in particular the quarterly minimum revenue financial covenant for which the cushion in passing is expected to narrow in upcoming quarters. Failure to comply with the financial and other covenants under the Financing
40
Agreement, would constitute a condition of default and would allow Blue Torch to accelerate the maturity of all indebtedness under the Financing Agreement. If such acceleration were to occur, we would likely have to seek an amendment and/or waiver of the impacted financial covenant or repay the debt with proceeds from the issuance of new debt or equity, or asset sales, if necessary. We may be unable to amend the Financing Agreement or raise sufficient capital to repay such obligations in the event the maturity is accelerated. See Note 9, Debt, for additional information on the Term Loan.
As of June 30, 2024, we have $26.2 million of lease obligations and purchase commitments associated with contracts that are enforceable and legally binding and that specify all significant terms, including fixed or minimum services to be used, fixed, minimum or variable price provisions, and the approximate timing of the actions under the contracts. See Note 8, Commitments and Contingencies, for discussion of our contractual commitments that are primarily due within the next year.
Our future capital requirements may vary materially from those currently planned and will depend on many factors, including our rate of revenue growth and overall economic conditions. We continue to assess and efficiently manage our working capital, and expect to generate additional liquidity through continued cost control initiatives. We believe that existing cash and cash equivalents and cost control initiatives will provide the Company with sufficient liquidity to meet our anticipated cash needs, including debt service requirements, for the next twelve months as well as for the longer-term (i.e., beyond the next twelve months).
We may explore additional debt or equity financing to supplement our anticipated working capital balances and further strengthen our financial position, but do not at this time know which form it will take or what the terms will be. The incurrence of additional debt financing would result in debt service obligations and the instruments governing such debt could provide for operating and financial covenants that would restrict our operations. The sale of additional equity would result in additional dilution to our shareholders. There can be no assurances that we will be able to raise additional capital in amounts or on terms acceptable to us.
Critical Accounting Policies and Estimates
There have been no material changes to the Company's critical accounting policies and estimates discussed in the 2023 Annual Report on Form 10-K in Item 7 under the heading Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates other than noted below.
Recent Accounting Pronouncements
See Note 1, Description of Business and Summary of Significant Accounting Policies, of the notes to our unaudited condensed consolidated financial statements included elsewhere in this Report for recently adopted accounting pronouncements.
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 six months ended June 30, 2024 and 2023, approximately 10% of our revenue was in foreign currencies. These sales were primarily denominated in Canadian dollars and British pounds.
We may use derivative instruments to manage the effects of fluctuations in foreign currency exchange rates on our net cash flows. We primarily enter into option contracts to hedge forecasted payments, typically for up to 12 months, for cost of revenue, selling and marketing expenses, general and administrative expenses and intercompany transactions not denominated in the local currencies of our foreign operations. We designate some of these instruments as cash flow hedges and record them at fair value as either assets or liabilities within the consolidated balance sheets. Some of these instruments are freestanding derivatives for which hedge accounting does not apply.
In the year ended December 31, 2023, management made a determination to cease entering into any further foreign exchange options at this time, which resulted in a decrease in the notional amount of the Company's outstanding foreign exchange options to zero at June 30, 2024 as all of the foreign exchange options expired prior to March 31, 2024.
Changes in the fair value of cash flow hedges are recorded in accumulated other comprehensive income (loss) until the hedged forecasted transaction affects earnings. Deferred gains and losses associated with cash flow hedges of third-party payments are recognized in cost of revenue, selling and marketing or general and administrative expenses, as applicable, during the period when the hedged underlying
41
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 result in an approximate $2.2 million increase or decrease in cost of revenue and operating expenses. The higher exposure to changes in foreign currency from previous periods was due to management's decision to cease entering into foreign exchange options at this time.
The aggregate notional amount of foreign exchange derivative instruments at June 30, 2024 and year ended December 31, 2023 was zero and $4.4 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 Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of June 30, 2024. 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 have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Limitations on Effectiveness of Controls and Procedures
Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives, as specified above. Our management recognizes that any control system, no matter how well designed and operated, is based upon certain judgments and assumptions and cannot provide absolute assurance that its objectives will be met.
PART II—OTHER INFORMATION
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. Other than as set forth below, there have been no material changes from the information previously reported under Part I, Item 3 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.
On May 22, 2023, Jessica Lyons, an individual, and a group of other plaintiffs filed a class action complaint with the Los Angeles County Superior Court alleging that the Company misclassified its Partners as contractors rather than as employees and committed other violations of the California Labor Code. The Company understands that the plaintiffs in this matter intend on filing additional claims under the Private Attorney General Act of 2004. The Company and certain executive officers are listed as defendants in the complaint. The plaintiffs are seeking monetary damages. This matter is pending as of the date of this quarterly report. We deny the allegations in the complaint, believe they are without merit, and intend to vigorously defend ourselves in this action.
On September 6, 2023 Dish Technologies LLC and SLING TV LLC (the "DISH Entities") filed a complaint with the United States District Court for the District of Delaware alleging that the Company infringed on the DISH Entities' patents and used technology belonging to the DISH Entities without their permission. The plaintiffs are seeking monetary damages and injunctive relief. In an effort to avoid any further unnecessary litigation costs, the parties entered into a Confidential Standstill and Tolling Agreement as of April 16, 2024 which included a dismissal of the case by the DISH Entities without prejudice and an agreement by the DISH Entities not to institute any litigation proceedings against the Company under the patents any earlier than December 31, 2026 in exchange for a one-time immaterial payment to the DISH Entities by the Company.
On June 14, 2024, Bryan Reilly on behalf of himself and similarly situated current and former stockholders of Forest Road Acquisition Corp., which later became the Beachbody Company, Inc. (“Forest Road”), filed a verified class action complaint (the “Reilly Action”) against the former directors and officers of Forest Road, as well as Forest Road Acquisition Sponsor LLC, Forest Road Company LLC, Zach Tarica, and Jeremy Tarica (together the “Forest Road Sponsor Defendants”) alleging claims for breach of fiduciary duty in connection with the merger among Forest Road, The Beachbody Company, Inc., and Myx in 2021 (the “Merger”). The lawsuit also brought claims against the Company, Kevin Meyer, and The Raine Group LLC (“Raine”) alleging aiding and abetting breach of fiduciary
42
duty, and against the former Forest Road directors and officers, the Forest Road Sponsor Defendants, Raine, and Meyer for unjust enrichment. We also have certain indemnification obligations as to some or all of the former Forest Road directors and Raine as to certain claims.
The Reilly Action generally alleges that the proxy that Forest Road issued prior to the Merger contained numerous material misstatements and omissions that impaired the Forest Road stockholders’ ability to make an informed decision regarding whether to redeem their stock in connection with the Merger. The plaintiff also asserts that the Merger was a conflicted transaction because the Forest Road Sponsor Defendants and the former Forest Road directors were incentivized to close the Merger even if it was a value-decreasing transaction for Forest Road’s public stockholders. As to the Company, Meyer, and Raine, the complaint alleges that these defendants aided and abetted the Forest Road defendants’ disclosure violations. We deny the allegations in the complaint, believe they are without merit, and intend to vigorously defend ourselves in this action.
Item 1A. Risk Factors.
There have been no material developments with respect to the information previously reported under Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023. These risk factors describe some of the assumptions, risks, uncertainties and other factors that could adversely affect our business or that could otherwise result in changes that differ materially from our expectations. We may disclose changes to such risk factors or disclose additional risk factors from time to time in our future filings with the SEC.
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosure.
Not applicable.
Item 5. Other Information.
During the three months ended June 30, 2024,
43
Item 6. Exhibits.
Exhibit
|
|
Incorporated by Reference
|
Filed or Furnished herewith
|
|||
|
Form
|
Exhibit
|
Filing Date
|
File No.
|
||
|
|
|
|
|
|
|
3.1 |
Second Amended and Restated Certificate of Incorporation of The Beachbody Company, Inc. |
10-K |
3.1 |
3/11/2024 |
001-39735 |
|
3.2 |
8-K |
3.1 |
11/27/2023 |
001-39735 |
|
|
3.3 |
Amended and Restated Bylaws of The Beachbody Company, Inc. . |
8-K |
3.2 |
7/1/2021 |
001-39735 |
|
4.1 |
8-K |
10.2 |
4/8/2024 |
001-39735 |
|
|
31.1 |
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a) |
|
|
|
|
* |
|
|
|
|
|
|
|
31.2 |
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a) |
|
|
|
|
* |
|
|
|
|
|
|
|
32.1 |
|
|
|
|
** |
|
|
|
|
|
|
|
|
101.INS |
Inline XBRL Instance Document–the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document |
|
|
|
|
* |
101.SCH |
Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents |
|
|
|
|
* |
104 |
Cover page formatted as Inline XBRL and contained in Exhibit 101 |
|
|
|
|
|
* Filed herewith
** Furnished herewith.
+ Schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company will furnish copies of any such schedules and exhibits to the SEC upon request.
^ Indicates management contract or compensatory plan.
44
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 6, 2024 |
|
By: |
/s/ Carl Daikeler |
|
|
|
Carl Daikeler |
|
|
|
Chief Executive Officer |
|
|
|
(Principal Executive Officer) |
|
|
|
|
Date: August 6, 2024 |
|
By: |
/s/ Marc Suidan |
|
|
|
Marc Suidan |
|
|
|
Chief Financial Officer |
|
|
|
(Principal Financial Officer) |
45