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As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent 11/07/23 Beachbody Co., Inc. 10-Q 9/30/23 87:13M Donnelley … Solutions/FA |
Document/Exhibit Description Pages Size
1: 10-Q Quarterly Report HTML 3.93M
2: EX-4.1 Instrument Defining the Rights of Security Holders HTML 188K
3: EX-10.2 Material Contract HTML 128K
4: EX-10.4 Material Contract HTML 41K
5: EX-31.1 Certification -- §302 - SOA'02 HTML 32K
6: EX-31.2 Certification -- §302 - SOA'02 HTML 31K
7: EX-32.1 Certification -- §906 - SOA'02 HTML 31K
13: R1 Cover Page HTML 86K
14: R2 Condensed Consolidated Balance Sheets HTML 139K
15: R3 Condensed Consolidated Balance Sheets HTML 51K
(Parenthetical)
16: R4 Unaudited Condensed Consolidated Statements of HTML 123K
Operations
17: R5 Unaudited Condensed Consolidated Statements of HTML 56K
Comprehensive Loss
18: R6 Unaudited Condensed Consolidated Statements of HTML 99K
Stockholders' Equity
19: R7 Unaudited Condensed Consolidated Statements of HTML 143K
Cash Flows
20: R8 Description Of Business And Summary Of Significant HTML 50K
Accounting Policies
21: R9 Revenue HTML 75K
22: R10 Fair Value Measurements HTML 255K
23: R11 Inventory, Net HTML 51K
24: R12 Other Current Assets HTML 46K
25: R13 Property and Equipment, Net HTML 114K
26: R14 Accrued Expenses HTML 65K
27: R15 Commitments and Contingencies HTML 51K
28: R16 Debt HTML 80K
29: R17 Stockholders' Equity HTML 162K
30: R18 Equity-Based Compensation HTML 218K
31: R19 Derivative Financial Instruments HTML 90K
32: R20 Restructuring HTML 131K
33: R21 Income Taxes HTML 35K
34: R22 Earnings (Loss) Per Share HTML 106K
35: R23 Description Of Business And Summary Of Significant HTML 53K
Accounting Policies (Polices)
36: R24 Revenue (Tables) HTML 67K
37: R25 Fair Value Measurements (Tables) HTML 250K
38: R26 Inventory, Net (Tables) HTML 43K
39: R27 Other Current Assets (Table) HTML 46K
40: R28 Property and equipment, Net (Tables) HTML 112K
41: R29 Accrued Expenses (Tables) HTML 59K
42: R30 Commitments and Contingencies (Tables) HTML 41K
43: R31 Debt (Tables) HTML 44K
44: R32 Stockholders' Equity (Tables) HTML 150K
45: R33 Equity-Based Compensation (Tables) HTML 204K
46: R34 Derivative Financial Instruments (Tables) HTML 87K
47: R35 Restructuring (Tables) HTML 122K
48: R36 Earnings (Loss) Per Share (Tables) HTML 105K
49: R37 Description Of Business And Summary Of Significant HTML 78K
Accounting Policies - Additional Information
(Details)
50: R38 Revenue - Disaggregation of Revenue (Details) HTML 38K
51: R39 Revenue - Additional Information (Details) HTML 31K
52: R40 Fair Value Measurements - Summary of Fair Value HTML 68K
Measurements, Recurring and Nonrecurring (Details)
53: R41 Fair Value Measurements - Summary of Fair Value of HTML 46K
Significant Assumptions Utilized in the Valuation
(Details)
54: R42 Fair Value Measurements - Summary of Change in the HTML 40K
Fair Value of the Warrants (Details)
55: R43 Fair Value Measurements - Additional Information HTML 50K
(Details)
56: R44 Inventory, Net - Schedule of Inventory, Current HTML 32K
(Details)
57: R45 Inventory, Net - Additional Information (Details) HTML 32K
58: R46 Other Current Assets - Summary of Other Current HTML 35K
Assets (Details)
59: R47 Property and Equipment, Net - Summary of Property HTML 47K
and Equipment, Net (Details)
60: R48 Property and Equipment, Net - Additional HTML 29K
Information (Details)
61: R49 Property and Equipment, Net - Summary of HTML 37K
Depreciation Expense Related to Property and
Equipment (Details)
62: R50 Accrued Expenses - Summary of Accrued Expenses HTML 42K
(Details)
63: R51 Accrued Expenses - Additional Information HTML 51K
(Details)
64: R52 Commitments and Contingencies - Additional HTML 46K
Information (Details)
65: R53 Commitments and Contingencies - Summary of HTML 38K
Purchase Obligation, Fiscal Year Maturity
(Details)
66: R54 Debt - Additional Information (Details) HTML 138K
67: R55 Debt - Schedule of Aggregate Amounts of Payments HTML 48K
Due and Reconciliation of Debt Balances, Net of
Debt Discount and Debt Issuance Costs (Details)
68: R56 Stockholders' Equity - Additional Information HTML 53K
(Details)
69: R57 Stockholders' Equity - Summarize Changes in HTML 54K
Accumulated Other Comprehensive Income (Loss)
(Details)
70: R58 Equity-Based Compensation - Additional Information HTML 146K
(Details)
71: R59 Equity-Based Compensation - Summary of the Option HTML 56K
Activity under the Equity Compensation Plans
(Details)
72: R60 Equity-Based Compensation - Summary of Restricted HTML 55K
Stock Unit ("RSU") Activity (Details)
73: R61 Equity-Based Compensation - Summary of Assumptions HTML 54K
Used to Determine the Fair Value of Vested Option
Grants (Details)
74: R62 Equity-Based Compensation - Summary of HTML 38K
Equity-Based Compensation Expense - Summary of
Equity-Based Compensation Expense (Details)
75: R63 Derivative Financial Instruments - Additional HTML 37K
Information (Details)
76: R64 Derivative Financial Instruments - Summary of HTML 37K
Pre-Tax Effects of the Company's Derivative
Instruments on its Unaudited Condensed
Consolidated Statements of Operations (Details)
77: R65 Restructuring - Additional Information (Details) HTML 39K
78: R66 Restructuring - Summary of Restructuring Related HTML 39K
Liability and Restructuring Costs Activity
(Details)
79: R67 Income Taxes - Additional Information (Details) HTML 31K
80: R68 Earnings (Loss) Per Share - Summary of the HTML 58K
Computation of Loss Per Share of Class A and Class
X Common Stock (Details)
81: R69 Earnings (Loss) Per Share - Additional Information HTML 29K
(Details)
82: R70 Earnings (Loss) Per Share - Summary of Common HTML 43K
Shares That Are Excluded From the Computation of
Diluted Net Loss Per Common Share (Details)
85: XML IDEA XML File -- Filing Summary XML 158K
83: XML XBRL Instance -- body-20230930_htm XML 3.31M
84: EXCEL IDEA Workbook of Financial Report Info XLSX 147K
10: EX-101.CAL XBRL Calculations -- body-20230930_cal XML 178K
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86: JSON XBRL Instance as JSON Data -- MetaLinks 552± 884K
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| 10-Q |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM i 10-Q
i ☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended i September 30, i 2023 /
or
i ☐ |
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: i 001-39735
i The Beachbody Company, Inc.
(Exact name of registrant as specified in its charter)
i Delaware |
i 85-3222090 |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
|
|
i 400 Continental Blvd, i Suite 400 i El Segundo, i California |
i 90245 |
(Address of principal executive offices) |
(Zip Code) |
( i 310) i 883-9000
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
|
Trading Symbol(s)
|
Name of each exchange on which registered
|
i Class A Common Stock, par value $0.0001 per share |
i BODY |
i The New York Stock Exchange |
i Redeemable warrants, each whole warrant exercisable for one Class A common stock at an exercise price of $11.50 |
i BODY WS |
i The New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. i Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). i Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer ☐ |
i Accelerated Filer ☒ |
Non-Accelerated Filer ☐ |
Smaller Reporting Company i ☒ |
Emerging Growth Company i ☐ |
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 i ☒
There were i 176,279,868 shares of the registrant’s Class A Common Stock, par value $0.0001 per share, and i 136,450,256 shares of the registrant’s Class X Common Stock, par value $0.0001 per share, outstanding as of November 1, 2023.
Part I. |
3 |
|
Item 1. |
3 |
|
|
3 |
|
|
4 |
|
|
Unaudited Condensed Consolidated Statements of Comprehensive Loss |
5 |
|
Unaudited Condensed Consolidated Statements of Stockholders’ Equity |
6 |
|
7 |
|
|
Notes to Unaudited Condensed Consolidated Financial Statements |
8 |
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Operations |
24 |
Item 3. |
40 |
|
Item 4. |
40 |
|
Part II. |
41 |
|
Item 1. |
41 |
|
Item 2. |
41 |
|
Item 3. |
41 |
|
Item 4. |
41 |
|
Item 5. |
41 |
|
Item 6. |
43 |
|
44 |
||
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
The Beachbody Company, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)
|
|
September 30, |
|
|
|
|||
|
|
|
|
2022 |
|
|||
|
|
(unaudited) |
|
|
|
|
||
Assets |
|
|
|
|
|
|
||
Current assets: |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
i 38,191 |
|
|
$ |
i 80,091 |
|
Restricted short-term investments |
|
|
i 4,250 |
|
|
|
— |
|
Inventory, net |
|
|
i 31,747 |
|
|
|
i 54,060 |
|
Prepaid expenses |
|
|
i 8,753 |
|
|
|
i 13,055 |
|
Other current assets |
|
|
i 47,733 |
|
|
|
i 39,248 |
|
Total current assets |
|
|
i 130,674 |
|
|
|
i 186,454 |
|
Property and equipment, net |
|
|
i 50,328 |
|
|
|
i 74,147 |
|
Content assets, net |
|
|
i 26,605 |
|
|
|
i 34,888 |
|
Goodwill |
|
|
i 125,166 |
|
|
|
i 125,166 |
|
Intangible assets, net |
|
|
i 4,370 |
|
|
|
i 8,204 |
|
Right-of-use assets, net |
|
|
i 3,541 |
|
|
|
i 5,030 |
|
Other assets |
|
|
i 6,640 |
|
|
|
i 9,506 |
|
Total assets |
|
$ |
i 347,324 |
|
|
$ |
i 443,395 |
|
Liabilities and Stockholders’ Equity |
|
|
|
|
|
|
||
Current liabilities: |
|
|
|
|
|
|
||
Accounts payable |
|
$ |
i 16,116 |
|
|
$ |
i 17,940 |
|
Accrued expenses |
|
|
i 46,190 |
|
|
|
i 64,430 |
|
Deferred revenue |
|
|
i 101,812 |
|
|
|
i 95,587 |
|
Current portion of lease liabilities |
|
|
i 2,089 |
|
|
|
i 2,150 |
|
Current portion of Term Loan |
|
|
i 1,250 |
|
|
|
i 1,250 |
|
Other current liabilities |
|
|
i 5,307 |
|
|
|
i 3,283 |
|
Total current liabilities |
|
|
i 172,764 |
|
|
|
i 184,640 |
|
Term Loan |
|
|
i 27,742 |
|
|
|
i 39,735 |
|
Long-term lease liabilities, net |
|
|
i 1,698 |
|
|
|
i 3,318 |
|
Deferred tax liabilities |
|
|
i 60 |
|
|
|
i 181 |
|
Other liabilities |
|
|
i 3,989 |
|
|
|
i 3,979 |
|
Total liabilities |
|
|
i 206,253 |
|
|
|
i 231,853 |
|
Stockholders’ equity: |
|
|
|
|
|
|
||
Preferred stock, $ i i 0.0001 / par
value; i i 100,000,000 / shares
|
|
|
— |
|
|
|
— |
|
Common stock, $ i i i i 0.0001 / / / par
value, i i 1,900,000,000 / shares |
|
|
|
|
|
|
||
Class A: i i 176,264,868 / and
i i 170,911,819 / shares issued and |
|
|
i 18 |
|
|
|
i 17 |
|
Class X: i i 136,450,256 / and
i i 141,250,310 / shares issued and
outstanding at |
|
|
i 14 |
|
|
|
i 14 |
|
Class C: i i i i no / / /
shares issued and outstanding at |
|
|
— |
|
|
|
— |
|
Additional paid-in capital |
|
|
i 648,071 |
|
|
|
i 630,709 |
|
Accumulated deficit |
|
|
( i 506,837 |
) |
|
|
( i 419,235 |
) |
Accumulated other comprehensive income (loss) |
|
|
( i 195 |
) |
|
|
i 37 |
|
Total stockholders’ equity |
|
|
i 141,071 |
|
|
|
i 211,542 |
|
Total liabilities and stockholders’ equity |
|
$ |
i 347,324 |
|
|
$ |
i 443,395 |
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
The Beachbody Company, Inc.
Unaudited Condensed Consolidated Statements of Operations
(in thousands, except per share data)
|
|
Three months ended September 30, |
|
|
Nine months ended September 30, |
|
||||||||||
|
|
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Digital |
|
$ |
i 64,339 |
|
|
$ |
i 72,228 |
|
|
$ |
i 194,326 |
|
|
$ |
i 231,988 |
|
Nutrition and other |
|
|
i 58,981 |
|
|
|
i 90,416 |
|
|
|
i 197,729 |
|
|
|
i 278,596 |
|
Connected fitness |
|
|
i 4,930 |
|
|
|
i 3,331 |
|
|
|
i 16,044 |
|
|
|
i 33,449 |
|
Total revenue |
|
|
i 128,250 |
|
|
|
i 165,975 |
|
|
|
i 408,099 |
|
|
|
i 544,033 |
|
Cost of revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Digital |
|
|
i 16,429 |
|
|
|
i 16,078 |
|
|
|
i 47,732 |
|
|
|
i 50,909 |
|
Nutrition and other |
|
|
i 26,699 |
|
|
|
i 40,486 |
|
|
|
i 84,940 |
|
|
|
i 127,262 |
|
Connected fitness |
|
|
i 10,091 |
|
|
|
i 4,745 |
|
|
|
i 26,312 |
|
|
|
i 80,910 |
|
Total cost of revenue |
|
|
i 53,219 |
|
|
|
i 61,309 |
|
|
|
i 158,984 |
|
|
|
i 259,081 |
|
Gross profit |
|
|
i 75,031 |
|
|
|
i 104,666 |
|
|
|
i 249,115 |
|
|
|
i 284,952 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Selling and marketing |
|
|
i 69,127 |
|
|
|
i 93,145 |
|
|
|
i 222,195 |
|
|
|
i 286,213 |
|
Enterprise technology and development |
|
|
i 18,879 |
|
|
|
i 25,686 |
|
|
|
i 56,625 |
|
|
|
i 83,516 |
|
General and administrative |
|
|
i 14,759 |
|
|
|
i 19,532 |
|
|
|
i 44,362 |
|
|
|
i 59,189 |
|
Restructuring |
|
|
i 1,270 |
|
|
|
i 1,492 |
|
|
|
i 6,550 |
|
|
|
i 10,047 |
|
Impairment of intangible assets |
|
|
— |
|
|
|
i 1,000 |
|
|
|
— |
|
|
|
i 1,000 |
|
Total operating expenses |
|
|
i 104,035 |
|
|
|
i 140,855 |
|
|
|
i 329,732 |
|
|
|
i 439,965 |
|
Operating loss |
|
|
( i 29,004 |
) |
|
|
( i 36,189 |
) |
|
|
( i 80,617 |
) |
|
|
( i 155,013 |
) |
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loss on partial debt extinguishment |
|
|
( i 3,168 |
) |
|
|
— |
|
|
|
( i 3,168 |
) |
|
|
— |
|
Change in fair value of warrant liabilities |
|
|
i 1,072 |
|
|
|
i 2,362 |
|
|
|
i 1,504 |
|
|
|
i 4,696 |
|
Interest expense |
|
|
( i 2,074 |
) |
|
|
( i 1,152 |
) |
|
|
( i 6,773 |
) |
|
|
( i 1,174 |
) |
Other income, net |
|
|
i 571 |
|
|
|
i 571 |
|
|
|
i 1,551 |
|
|
|
i 696 |
|
Loss before income taxes |
|
|
( i 32,603 |
) |
|
|
( i 34,408 |
) |
|
|
( i 87,503 |
) |
|
|
( i 150,795 |
) |
Income tax (provision) benefit |
|
|
( i 63 |
) |
|
|
i 549 |
|
|
|
( i 99 |
) |
|
|
i 1,536 |
|
Net loss |
|
$ |
( i 32,666 |
) |
|
$ |
( i 33,859 |
) |
|
$ |
( i 87,602 |
) |
|
$ |
( i 149,259 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss per common share, basic and diluted |
|
$ |
( i i 0.11 / |
) |
|
$ |
( i i 0.11 / |
) |
|
$ |
( i i 0.28 / |
) |
|
$ |
( i i 0.49 / |
) |
Weighted-average common shares outstanding, basic and diluted |
|
|
i i 308,931 / |
|
|
|
i i 307,949 / |
|
|
|
i i 310,794 / |
|
|
|
i i 307,178 / |
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
The Beachbody Company, Inc.
Unaudited Condensed Consolidated Statements of Comprehensive Loss
(in thousands)
|
|
Three months ended September 30, |
|
|
Nine months ended September 30, |
|
||||||||||
|
|
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss |
|
$ |
( i 32,666 |
) |
|
$ |
( i 33,859 |
) |
|
$ |
( i 87,602 |
) |
|
$ |
( i 149,259 |
) |
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Change in fair value of derivative financial instruments, net of tax |
|
|
i 31 |
|
|
|
i 555 |
|
|
|
( i 358 |
) |
|
|
i 405 |
|
Reclassification of (losses) gains on derivative financial instruments |
|
|
i 157 |
|
|
|
( i 2 |
) |
|
|
i 131 |
|
|
|
i 141 |
|
Foreign currency translation adjustment |
|
|
( i 50 |
) |
|
|
( i 129 |
) |
|
|
( i 5 |
) |
|
|
( i 176 |
) |
Total other comprehensive income (loss) |
|
|
i 138 |
|
|
|
i 424 |
|
|
|
( i 232 |
) |
|
|
i 370 |
|
Total comprehensive loss |
|
$ |
( i 32,528 |
) |
|
$ |
( i 33,435 |
) |
|
$ |
( i 87,834 |
) |
|
$ |
( i 148,889 |
) |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5
The Beachbody Company, Inc.
Unaudited Condensed Consolidated Statements of Stockholders’ Equity
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
||||||
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
Other |
|
|
Total |
|
||||||
|
|
Common Stock |
|
|
Paid-In |
|
|
Accumulated |
|
|
Comprehensive |
|
|
Stockholders’ |
|
|||||||||
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
Income (Loss) |
|
|
Equity |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Balances at December 31, 2021 |
|
|
i 309,584 |
|
|
$ |
i 31 |
|
|
$ |
i 610,418 |
|
|
$ |
( i 225,043 |
) |
|
$ |
( i 21 |
) |
|
$ |
i 385,385 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( i 73,533 |
) |
|
|
— |
|
|
|
( i 73,533 |
) |
Other comprehensive loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( i 112 |
) |
|
|
( i 112 |
) |
Equity-based compensation |
|
|
— |
|
|
|
— |
|
|
|
i 4,564 |
|
|
|
— |
|
|
|
— |
|
|
|
i 4,564 |
|
Options exercised, net of tax withholdings |
|
|
i 1,132 |
|
|
|
— |
|
|
|
i 1,923 |
|
|
|
— |
|
|
|
— |
|
|
|
i 1,923 |
|
Balances at March 31, 2022 |
|
|
i 310,716 |
|
|
$ |
i 31 |
|
|
$ |
i 616,905 |
|
|
$ |
( i 298,576 |
) |
|
$ |
( i 133 |
) |
|
$ |
i 318,227 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( i 41,867 |
) |
|
|
— |
|
|
|
( i 41,867 |
) |
Other comprehensive income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 58 |
|
|
|
i 58 |
|
Equity-based compensation |
|
|
i 210 |
|
|
|
— |
|
|
|
i 3,001 |
|
|
|
— |
|
|
|
— |
|
|
|
i 3,001 |
|
Options exercised, net of tax withholdings |
|
|
i 588 |
|
|
|
— |
|
|
|
i 737 |
|
|
|
— |
|
|
|
— |
|
|
|
i 737 |
|
Balances at June 30, 2022 |
|
|
i 311,514 |
|
|
$ |
i 31 |
|
|
$ |
i 620,643 |
|
|
$ |
( i 340,443 |
) |
|
$ |
( i 75 |
) |
|
$ |
i 280,156 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( i 33,859 |
) |
|
|
— |
|
|
|
( i 33,859 |
) |
Other comprehensive income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 424 |
|
|
|
i 424 |
|
Equity-based compensation |
|
|
i 647 |
|
|
|
— |
|
|
|
i 5,601 |
|
|
|
— |
|
|
|
— |
|
|
|
i 5,601 |
|
Options exercised, net of tax withholdings |
|
|
i 159 |
|
|
|
— |
|
|
|
i 194 |
|
|
|
— |
|
|
|
— |
|
|
|
i 194 |
|
Tax withholdings on vesting of restricted stock |
|
|
( i 158 |
) |
|
|
— |
|
|
|
( i 183 |
) |
|
|
— |
|
|
|
— |
|
|
|
( i 183 |
) |
Balances at September 30, 2022 |
|
|
i 312,162 |
|
|
$ |
i 31 |
|
|
$ |
i 626,255 |
|
|
$ |
( i 374,302 |
) |
|
$ |
i 349 |
|
|
$ |
i 252,333 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
||||||
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
Other |
|
|
Total |
|
||||||
|
|
Common Stock |
|
|
Paid-In |
|
|
Accumulated |
|
|
Comprehensive |
|
|
Stockholders’ |
|
|||||||||
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
Income (Loss) |
|
|
Equity |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Balances at December 31, 2022 |
|
|
i 312,162 |
|
|
$ |
i 31 |
|
|
$ |
i 630,709 |
|
|
$ |
( i 419,235 |
) |
|
$ |
i 37 |
|
|
$ |
i 211,542 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( i 29,188 |
) |
|
|
— |
|
|
|
( i 29,188 |
) |
Other comprehensive loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( i 224 |
) |
|
|
( i 224 |
) |
Equity-based compensation |
|
|
i 9,736 |
|
|
|
i 1 |
|
|
|
i 9,554 |
|
|
|
— |
|
|
|
— |
|
|
|
i 9,555 |
|
Tax withholdings on vesting of restricted stock |
|
|
( i 3,644 |
) |
|
|
— |
|
|
|
( i 2,128 |
) |
|
|
— |
|
|
|
— |
|
|
|
( i 2,128 |
) |
Balances at March 31, 2023 |
|
|
i 318,254 |
|
|
$ |
i 32 |
|
|
$ |
i 638,135 |
|
|
$ |
( i 448,423 |
) |
|
$ |
( i 187 |
) |
|
$ |
i 189,557 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( i 25,748 |
) |
|
|
— |
|
|
|
( i 25,748 |
) |
Other comprehensive loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( i 146 |
) |
|
|
( i 146 |
) |
Equity-based compensation |
|
|
i 1,377 |
|
|
|
i 1 |
|
|
|
i 3,160 |
|
|
|
— |
|
|
|
— |
|
|
|
i 3,161 |
|
Forfeiture of shares per the Forfeiture Agreement |
|
|
( i 8,000 |
) |
|
|
( i 1 |
) |
|
|
i 1 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Issuance of shares due to Employee Stock Purchase Plan |
|
|
i 982 |
|
|
|
— |
|
|
|
i 384 |
|
|
|
— |
|
|
|
— |
|
|
|
i 384 |
|
Tax withholdings on vesting of restricted stock |
|
|
( i 5 |
) |
|
|
— |
|
|
|
( i 31 |
) |
|
|
— |
|
|
|
— |
|
|
|
( i 31 |
) |
Balances at June 30, 2023 |
|
|
i 312,608 |
|
|
$ |
i 32 |
|
|
$ |
i 641,649 |
|
|
$ |
( i 474,171 |
) |
|
$ |
( i 333 |
) |
|
$ |
i 167,177 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( i 32,666 |
) |
|
|
— |
|
|
|
( i 32,666 |
) |
Other comprehensive income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 138 |
|
|
|
i 138 |
|
Equity-based compensation |
|
|
i 140 |
|
|
|
— |
|
|
|
i 6,436 |
|
|
|
— |
|
|
|
— |
|
|
|
i 6,436 |
|
Tax withholdings on vesting of restricted stock |
|
|
( i 33 |
) |
|
|
— |
|
|
|
( i 14 |
) |
|
|
— |
|
|
|
— |
|
|
|
( i 14 |
) |
Balances at September 30, 2023 |
|
|
i 312,715 |
|
|
$ |
i 32 |
|
|
$ |
i 648,071 |
|
|
$ |
( i 506,837 |
) |
|
$ |
( i 195 |
) |
|
$ |
i 141,071 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
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)
|
|
Nine months ended September 30, |
|
|||||
|
|
|
|
2022 |
|
|||
|
|
|
|
|
|
|
||
Cash flows from operating activities: |
|
|
|
|
|
|
||
Net loss |
|
$ |
( i 87,602 |
) |
|
$ |
( i 149,259 |
) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
||
Impairment of intangible assets |
|
|
— |
|
|
|
i 1,000 |
|
Depreciation and amortization expense |
|
|
i 31,395 |
|
|
|
i 58,858 |
|
Amortization of content assets |
|
|
i 16,487 |
|
|
|
i 18,673 |
|
Provision for inventory and inventory purchase commitments |
|
|
i 9,370 |
|
|
|
i 35,195 |
|
Realized (gains) losses on hedging derivative financial instruments |
|
|
i 131 |
|
|
|
i 141 |
|
Change in fair value of warrant liabilities |
|
|
( i 1,504 |
) |
|
|
( i 4,696 |
) |
Equity-based compensation |
|
|
i 19,152 |
|
|
|
i 13,166 |
|
Deferred income taxes |
|
|
( i 166 |
) |
|
|
( i 1,754 |
) |
Amortization of debt issuance costs |
|
|
i 1,288 |
|
|
|
i 262 |
|
Paid-in-kind interest expense |
|
|
i 1,042 |
|
|
|
i 221 |
|
Non-cash component of loss on partial debt extinguishment |
|
|
i 2,418 |
|
|
|
— |
|
Other non-cash items |
|
|
— |
|
|
|
i 311 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
||
Inventory |
|
|
i 11,884 |
|
|
|
i 31,676 |
|
Content assets |
|
|
( i 8,201 |
) |
|
|
( i 16,111 |
) |
Prepaid expenses |
|
|
i 4,302 |
|
|
|
i 8,681 |
|
Other assets |
|
|
( i 4,531 |
) |
|
|
i 4,496 |
|
Accounts payable |
|
|
( i 1,471 |
) |
|
|
( i 30,379 |
) |
Accrued expenses |
|
|
( i 15,809 |
) |
|
|
( i 209 |
) |
Deferred revenue |
|
|
i 6,995 |
|
|
|
( i 3,690 |
) |
Other liabilities |
|
|
i 237 |
|
|
|
( i 3,525 |
) |
Net cash used in operating activities |
|
|
( i 14,583 |
) |
|
|
( i 36,943 |
) |
Cash flows from investing activities: |
|
|
|
|
|
|
||
Purchase of property and equipment |
|
|
( i 5,499 |
) |
|
|
( i 23,236 |
) |
Investment in restricted short-term investments |
|
|
( i 4,250 |
) |
|
|
— |
|
Net cash used in investing activities |
|
|
( i 9,749 |
) |
|
|
( i 23,236 |
) |
Cash flows from financing activities: |
|
|
|
|
|
|
||
Proceeds from exercise of stock options |
|
|
— |
|
|
|
i 3,162 |
|
Remittance of taxes withheld from employee stock awards |
|
|
— |
|
|
|
( i 308 |
) |
Debt borrowings |
|
|
— |
|
|
|
i 50,000 |
|
Debt repayments |
|
|
( i 15,938 |
) |
|
|
( i 313 |
) |
Proceeds from issuance of common shares in the Employee Stock Purchase Plan |
|
|
i 384 |
|
|
|
— |
|
Tax withholding payments for vesting of restricted stock |
|
|
( i 2,173 |
) |
|
|
( i 183 |
) |
Payment of debt issuance costs |
|
|
— |
|
|
|
( i 4,075 |
) |
Net cash (used in) provided by financing activities |
|
|
( i 17,727 |
) |
|
|
i 48,283 |
|
Effect of exchange rates on cash and cash equivalents |
|
|
i 159 |
|
|
|
( i 1,095 |
) |
Net decrease in cash and cash equivalents |
|
|
( i 41,900 |
) |
|
|
( i 12,991 |
) |
Cash, cash equivalents and restricted cash, beginning of period |
|
|
i 80,091 |
|
|
|
i 107,054 |
|
Cash and cash equivalents, end of period |
|
$ |
i 38,191 |
|
|
$ |
i 94,063 |
|
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
||
Cash paid during the period for interest |
|
$ |
i 4,177 |
|
|
$ |
i 738 |
|
Cash (received) paid during the period for income taxes, net |
|
|
( i 10 |
) |
|
|
i 365 |
|
Supplemental disclosure of noncash investing activities: |
|
|
|
|
|
|
||
Property and equipment acquired but not yet paid for |
|
$ |
i 267 |
|
|
$ |
i 789 |
|
Supplemental disclosure of noncash financing activities: |
|
|
|
|
|
|
||
Warrants issued in relation to Term Loan |
|
$ |
— |
|
|
$ |
i 5,236 |
|
Change in fair value of Term Loan warrants due to amended exercise price |
|
|
i 802 |
|
|
|
— |
|
Debt issuance costs, accrued but not paid |
|
|
— |
|
|
|
i 136 |
|
Paid-in-kind fee recorded as incremental debt issuance cost |
|
|
i 488 |
|
|
|
— |
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
7
The Beachbody Company, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
1. Description of Business and Summary of Significant Accounting Policies
Business
The Beachbody Company, Inc. (“BODi” or the “Company”) is a leading subscription health and wellness company and the creator of some of the world’s most popular fitness programs. The Company’s fitness programs are available for streaming through subscription to Beachbody On Demand (“BOD”) and, together with the Company’s live fitness and comprehensive nutrition programs, through subscription to Beachbody On Demand Interactive (“BODi”). During the three months ended March 31, 2023, the Company launched an improved BODi experience and began migrating all BOD-only members to BODi on their renewal dates. BODi offers nutritional products such as Shakeology nutrition shakes, BEACHBAR snack bars, and Ladder premium supplements, which have been designed and clinically tested to help customers achieve their goals. BODi also offers a professional-grade stationary cycle with a 360-degree touch screen tablet and connected fitness software. The Company’s revenue has historically been generated primarily through a network of micro-influencers (“Partners”) (previously known as “Coaches”), social media marketing channels, and direct response advertising. References to “Coaches” throughout this report have been updated to “Partners.”
Basis of Presentation and Principles of Consolidation
The Company prepares its consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information as determined by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) and pursuant to the regulations of the U.S. Securities and Exchange Commission (“SEC”).
The preparation of unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that may affect the amounts reported in the unaudited condensed consolidated financial statements and accompanying notes. Significant estimates in our condensed consolidated financial statements include, but are not limited to, the useful life and recoverability of long-lived assets, the valuation of warrant liabilities, the recognition and measurement of income tax assets and liabilities, the valuation of intangible assets, impairment of goodwill, and the net realizable value of inventory. The Company bases these estimates on historical experience and on various other assumptions that it believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying amounts of assets and liabilities. Actual results could differ from those estimates.
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. The financial data and other financial information disclosed in the notes to these unaudited condensed consolidated financial statements are also unaudited. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. 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 October 1 and between annual tests if an event or change in circumstances occurs that would more likely than not reduce the fair value of a reporting unit ("RU") below its carrying value or indicate that it is more likely than not that the indefinite-lived asset is impaired. As of September 30, 2023 the Company has i no indefinite-lived intangible assets.
Due to the sustained decline in the Company’s market capitalization and macro-economic conditions observed in the three months ended June 30, 2023, the Company performed an interim test for impairment of its goodwill as of June 30, 2023. In performing the interim impairment test for goodwill, the Company elected to bypass the optional qualitative test and proceeded to perform a quantitative test by comparing the carrying value of its RU to its estimated fair value. The Company previously tested its RU for impairment as of December 31, 2022. The results of the Company’s interim test for impairment at June 30, 2023 concluded that the fair value of its RU exceeded its carrying value, resulting in i no impairment.
Indefinite-lived Intangible Assets
8
During the three months ended March 31, 2022, the Company determined that one of its acquired trade names no longer has an indefinite life. The Company tested the trade name for impairment before changing the useful life and determined there was no impairment based on its assessment of fair value. The Company is prospectively amortizing the trade name over its remaining estimated useful life of i two years beginning January 1, 2022. The Company recorded $ i 0.1 million and $ i 0.2 million of amortization expense for this trade name as a component of selling and marketing expenses during the three and nine months ended September 30, 2023, respectively. The Company recorded $ i 1.8 million and $ i 5.6 million of amortization expense for this trade name as a component of selling and marketing expenses during the three and nine months ended September 30, 2022, respectively.
Due to reduced revenue and margin forecasts for certain products, the Company performed an interim test for impairment of indefinite-lived intangible assets as of September 30, 2022. The fair value of the indefinite-lived trade name was calculated using a relief-from-royalty approach and was determined to be lower than its carrying value, primarily due to the reduced revenue and margin forecasts for certain supplements. The Company recorded a $ i i 1.0 / million non-cash impairment charge for these intangible assets during the three and nine months ended September 30, 2022.
/Long-Lived Assets
Management reviews long-lived assets (including property and equipment, content assets, and definite-lived intangible assets) for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Recoverability of assets is determined by 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 is recoverable.
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 i adopted this new accounting guidance on a prospective basis on i January 1, 2023, and the adoption did i not have a material effect on its unaudited condensed consolidated financial statements.
In September 2022, the FASB issued ASU 2022-04, Liabilities-Supplier Finance Programs (Topic 405-50) - Disclosure of Supplier Finance Program Obligations, which requires that a buyer in a supplier finance program disclose sufficient information about the program to allow a user of financial statements to understand the program’s nature, activity during the period, changes from period to period, and potential magnitude. The Company i adopted this new accounting guidance on a prospective basis on i January 1, 2023, and the adoption did i not have a material effect 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 September 30, |
|
|||||
|
|
|
|
2022 |
|
|||
|
|
|
|
|
|
|
||
Geographic region: |
|
|
|
|
|
|
||
United States |
|
$ |
i 114,735 |
|
|
$ |
i 149,132 |
|
Rest of world1 |
|
|
i 13,514 |
|
|
|
i 16,843 |
|
Total revenue |
|
$ |
i 128,250 |
|
|
$ |
i 165,975 |
|
|
|
Nine months ended September 30, |
|
|||||
|
|
|
|
2022 |
|
|||
|
|
|
|
|
|
|
||
Geographic region: |
|
|
|
|
|
|
||
United States |
|
$ |
i 366,680 |
|
|
$ |
i 487,760 |
|
Rest of world1 |
|
|
i 41,419 |
|
|
|
i 56,273 |
|
Total revenue |
|
$ |
i 408,099 |
|
|
$ |
i 544,033 |
|
(1) Consists of Canada, United Kingdom, and France. Other than the United States, no single country accounted for more than 10% of total revenue during the three and nine months ended September 30, 2023 and 2022.
/9
The Company determined that, in addition to the preceding table, the disaggregation of revenue by revenue type as presented in the unaudited condensed consolidated statements of operations achieves the disclosure requirement to disaggregate revenue into categories that depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors.
Deferred Revenue
Deferred revenue is recorded for nonrefundable cash payments received for the Company’s performance obligation to transfer, or stand ready to transfer, goods or services in the future. Deferred revenue consists of subscription fees billed that have not been recognized and physical products sold that have not yet been delivered. During the three and nine months ended September 30, 2023, the Company recognized $ i 13.0 million and $ i 90.9 million, respectively, of revenue that was included in the deferred revenue balance as of December 31, 2022. During the three and nine months ended September 30, 2022, the Company recognized $ i 14.1 million and $ i 102.2 million, respectively, of revenue that was included in the deferred revenue balance as of December 31, 2021.
/
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):
|
|
|
||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Assets |
|
|
|
|
|
|
|
|
|
|||
Derivative assets |
|
$ |
— |
|
|
$ |
i 39 |
|
|
$ |
— |
|
Restricted short-term investments |
|
|
— |
|
|
|
i 4,250 |
|
|
|
— |
|
Total assets |
|
$ |
— |
|
|
$ |
i 4,289 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|||
Liabilities |
|
|
|
|
|
|
|
|
|
|||
Public warrants |
|
$ |
i 190 |
|
|
$ |
— |
|
|
$ |
— |
|
Private placement warrants |
|
|
— |
|
|
|
— |
|
|
|
i 6 |
|
Term Loan warrants |
|
|
— |
|
|
|
— |
|
|
|
i 849 |
|
Total liabilities |
|
$ |
i 190 |
|
|
$ |
— |
|
|
$ |
i 855 |
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Assets |
|
|
|
|
|
|
|
|
|
|||
Derivative assets |
|
$ |
— |
|
|
$ |
i 462 |
|
|
$ |
— |
|
Total assets |
|
$ |
— |
|
|
$ |
i 462 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|||
Liabilities |
|
|
|
|
|
|
|
|
|
|||
Public Warrants |
|
$ |
i 415 |
|
|
$ |
— |
|
|
$ |
— |
|
Private Placement Warrants |
|
|
— |
|
|
|
— |
|
|
|
i 107 |
|
Term Loan Warrants |
|
|
— |
|
|
|
— |
|
|
|
i 1,226 |
|
Total liabilities |
|
$ |
i 415 |
|
|
$ |
— |
|
|
$ |
i 1,333 |
|
Fair values of cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses approximate the recorded value due to the short period of time to maturity. Restricted short-term investments of $ i 4.3 million at September 30, 2023 consist of a one-year certificate of deposit (“CD”) that matures on i July 26, 2024 with an interest rate of i 4.8%. The fair value of the public warrants, which trade in active markets, is based on quoted market prices. The fair value of derivative instruments is based on Level 2 inputs such as observable forward rates, spot rates, and foreign currency exchange rates. The Company’s private placement and Term Loan Warrants (defined later) are classified within Level 3 of the fair value hierarchy because their fair values are based on significant inputs that are unobservable in the market.
Private Placement Warrants
10
The Company determined the fair value of the private placement warrants using a Black-Scholes option-pricing model and the quoted price of the Company’s Class A Common Stock. Volatility was based on the implied volatility derived primarily from the average of the actual market activity of the Company’s peer group. The expected life was based on the remaining contractual term of the private placement warrants, and the risk-free interest rate was based on the implied yield available on U.S. treasury securities with a maturity equivalent to the private placement warrants expected life. The significant unobservable input used in the fair value measurement of the private placement warrants is the implied volatility. Significant changes in the implied volatility would result in a significantly higher or lower fair value measurement, respectively.
The following table presents significant assumptions utilized in the valuation of the private placement warrants on September 30, 2023 and December 31, 2022:
|
|
|
|
|
|
|
||
|
|
|
|
|
||||
|
|
|
|
|
|
|
||
Risk-free rate |
|
|
i 4.9 |
% |
|
|
i 4.2 |
% |
Dividend yield rate |
|
|
i — |
|
|
|
i — |
|
Volatility |
|
|
i 75.0 |
% |
|
|
i 75.0 |
% |
Contractual term (in years) |
|
|
i 2.74 |
|
|
|
i 3.49 |
|
Exercise price |
|
$ |
i 11.50 |
|
|
$ |
i 11.50 |
|
The following table presents changes in the fair value of the private placement warrants for the three and nine months ended September 30, 2023 and 2022 (in thousands):
|
|
Three months ended September 30, |
|
|
Nine months ended September 30, |
|
||||||||||
|
|
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
|||||
Balance, beginning of period |
|
$ |
i 53 |
|
|
$ |
i 800 |
|
|
$ |
i 107 |
|
|
$ |
i 2,133 |
|
Change in fair value |
|
|
( i 47 |
) |
|
|
( i 160 |
) |
|
|
( i 101 |
) |
|
|
( i 1,493 |
) |
Balance, end of period |
|
$ |
i 6 |
|
|
$ |
i 640 |
|
|
$ |
i 6 |
|
|
$ |
i 640 |
|
For the three and nine months ended September 30, 2023 and 2022, the change in the fair value of private placement warrants resulted from the change in price of the Company’s Class A Common Stock, remaining contractual term and risk-free rate. The changes in fair value are included in the unaudited condensed consolidated statements of operations as a component of change in fair value of warrant liabilities and in the unaudited condensed consolidated balance sheets as other liabilities.
Term Loan Warrants
The Company determined the fair value of the Term Loan Warrants (defined later) using a Black-Scholes option-pricing model and the quoted price of the Company’s Class A Common Stock. Volatility was based on the implied volatility derived primarily from the average of the actual market activity of the Company’s peer group. The expected life was based on the remaining contractual term of the Term Loan Warrants, and the risk-free interest rate was based on the implied yield available on U.S. treasury securities with a maturity equivalent to the Term Loan Warrants expected life. The significant unobservable input used in the fair value measurement of the Term Loan Warrants is the implied volatility. Significant changes in the implied volatility would result in a significantly higher or lower fair value measurement, respectively. See Note 9, Debt, for additional information regarding the Term Loan Warrants.
The following table presents significant assumptions utilized in the valuation of the Term Loan Warrants at September 30, 2023 and December 31, 2022:
|
|
|
|
|
||||
|
|
|
|
|
|
|
||
Risk-free rate |
|
|
i 4.6 |
% |
|
|
i 4.0 |
% |
Dividend yield rate |
|
|
i — |
|
|
|
i — |
|
Volatility |
|
|
i 75.0 |
% |
|
|
i 75.0 |
% |
Contractual term (in years) |
|
|
i 5.86 |
|
|
|
i 6.61 |
|
Exercise price |
|
$ |
i 0.41 |
|
|
$ |
i 1.85 |
|
The following table presents changes in the fair value of the Term Loan Warrants for the three and nine months ended September 30, 2023 and 2022 (in thousands):
11
|
|
Three months ended September 30, |
|
|
Nine months ended September 30, |
|
||||||||||
|
|
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
|||||
Balance, beginning of period |
|
$ |
i 802 |
|
|
$ |
— |
|
|
$ |
i 1,226 |
|
|
$ |
— |
|
Issued in connection with Term Loan |
|
|
— |
|
|
|
i 5,236 |
|
|
|
— |
|
|
|
i 5,236 |
|
Amended in connection with Second Amendment |
|
|
i 802 |
|
|
|
— |
|
|
|
i 802 |
|
|
|
— |
|
Change in fair value |
|
|
( i 755 |
) |
|
|
( i 2,123 |
) |
|
|
( i 1,179 |
) |
|
|
( i 2,123 |
) |
Balance, end of period |
|
$ |
i 849 |
|
|
$ |
i 3,113 |
|
|
$ |
i 849 |
|
|
$ |
i 3,113 |
|
For the three and nine months ended September 30, 2023, the change in the balance of the Term Loan Warrants was due to the amendment of the Term Loan Warrants, which reduced the exercise price from $ i 1.85 per share to $ i 0.41 per share which resulted in an increase in the fair value of the Term Loan Warrants of $ i 0.8 million as of the Second Amendment Effective Date (defined later) and the change in the fair value of the Term Loan Warrants resulting from the change in price of the Company’s Class A Common Stock, the remaining contractual term and the risk-free rate. The changes in fair value are included in the unaudited condensed consolidated statements of operations as a component of change in fair value of warrant liabilities and in the unaudited condensed consolidated balance sheets as other liabilities.
/4. Inventory, Net
Inventory, net consists of the following (in thousands):
|
|
|
|
|
||||
|
|
|
|
|
|
|
||
Raw materials and work in process |
|
$ |
i 13,529 |
|
|
$ |
i 13,380 |
|
Finished goods |
|
|
i 18,218 |
|
|
|
i 40,680 |
|
Total inventory, net |
|
$ |
i 31,747 |
|
|
$ |
i 54,060 |
|
Adjustments to the carrying value of excess inventory and inventory on hand to net realizable value were $ i 4.3 million and $ i 9.4 million during the three and nine months ended September 30, 2023, respectively, and $ i 0.3 million and $ i 32.3 million during the three and nine months ended September 30, 2022, respectively. These adjustments are included in the unaudited condensed consolidated statements of operations as a component of nutrition and other cost of revenue and connected fitness cost of revenue. The Company recorded $ i 0.9 million and $ i 2.3 million of these adjustments in nutrition and other cost of revenue for the three and nine months ended September 30, 2023, respectively, and $ i 2.6 million and $ i 7.0 million during the three and nine months ended September 30, 2022, respectively. The Company also recorded $ i 3.4 million and $ i 7.1 million of these adjustments in connected fitness cost of revenue for the three and nine months ended September 30, 2023 respectively, and $( i 2.3) million and $ i 25.3 million during the three and nine months ended September 30, 2022, respectively.
/
5. Other Current Assets
Other current assets consist of the following (in thousands):
|
|
|
|
|
||||
Deferred partner costs |
|
$ |
i 37,073 |
|
|
$ |
i 31,270 |
|
Deposits |
|
|
i 7,381 |
|
|
|
i 4,527 |
|
Accounts receivable, net |
|
|
i 1,484 |
|
|
|
i 866 |
|
Other |
|
|
i 1,795 |
|
|
|
i 2,585 |
|
Total other current assets |
|
$ |
i 47,733 |
|
|
$ |
i 39,248 |
|
12
6. Property and Equipment, Net
Property and equipment, net consists of the following (in thousands):
|
|
|
|
|
|
|
||
|
|
|
|
|
||||
|
|
|
|
|
|
|
||
Computer software and web development |
|
$ |
i 230,758 |
|
|
$ |
i 236,533 |
|
Computer equipment |
|
|
i 23,539 |
|
|
|
i 24,240 |
|
Buildings |
|
|
i 5,158 |
|
|
|
i 5,158 |
|
Leasehold improvements |
|
|
i 4,600 |
|
|
|
i 4,600 |
|
Furniture, fixtures and equipment |
|
|
i 1,207 |
|
|
|
i 1,222 |
|
Computer software and web development projects in-process |
|
|
i 1,045 |
|
|
|
i 5,147 |
|
Property and equipment, gross |
|
|
i 266,307 |
|
|
|
i 276,900 |
|
Less: Accumulated depreciation |
|
|
( i 215,979 |
) |
|
|
( i 202,753 |
) |
Total property and equipment, net |
|
$ |
i 50,328 |
|
|
$ |
i 74,147 |
|
During the three and nine months ended September 30, 2022, primarily due to the consolidation of the Company's digital platforms and office lease assignment, the Company disposed of certain property and equipment no longer in use. The Company recognized a net loss of $ i 0.3 million and $ i 0.7 million during the three and nine months ended September 30, 2022, respectively. There were i i no / similar dispositions in the three and nine months ended September 30, 2023.
The Company recorded depreciation expense related to property and equipment in the following expense categories of its unaudited condensed consolidated statements of operations as follows (in thousands):
|
|
Three months ended September 30, |
|
|
Nine months ended September 30, |
|
|
||||||||||
|
|
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of revenue |
|
$ |
i 4,582 |
|
|
$ |
i 5,068 |
|
|
$ |
i 14,791 |
|
|
$ |
i 21,892 |
|
|
Selling and marketing |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 381 |
|
|
Enterprise technology and development |
|
|
i 3,902 |
|
|
|
i 7,676 |
|
|
|
i 12,768 |
|
|
|
i 22,611 |
|
|
General and administrative |
|
|
i 1 |
|
|
|
i 1 |
|
|
|
i 2 |
|
|
|
i 242 |
|
|
Total depreciation |
|
$ |
i 8,485 |
|
|
$ |
i 12,745 |
|
|
$ |
i 27,561 |
|
|
$ |
i 45,126 |
|
|
7. Accrued Expenses
Accrued expenses consist of the followings (in thousands):
|
|
|
|
|
||||
Partner costs |
|
$ |
i 14,086 |
|
|
$ |
i 14,535 |
|
Inventory, shipping and fulfillment |
|
|
i 7,258 |
|
|
|
i 11,687 |
|
Employee compensation and benefits |
|
|
i 8,561 |
|
|
|
i 20,584 |
|
Sales and other taxes |
|
|
i 3,992 |
|
|
|
i 4,818 |
|
Information technology |
|
|
i 2,025 |
|
|
|
i 2,207 |
|
Advertising |
|
|
i 1,715 |
|
|
|
i 1,176 |
|
Customer service expenses |
|
|
i 658 |
|
|
|
i 956 |
|
Other accrued expenses |
|
|
i 7,895 |
|
|
|
i 8,467 |
|
Total accrued expenses |
|
$ |
i 46,190 |
|
|
$ |
i 64,430 |
|
/
Advertising costs, which are primarily comprised of social media, television media, and internet advertising expenses and also include print, radio, and infomercial production costs, were $ i 8.9 million and $ i 26.0 million for the three and nine months ended September 30, 2023, respectively, and $ i 7.2 million and $ i 29.8 million for the three and nine months ended September 30, 2022, respectively.
13
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 $ i 2.6 million, which will be paid over a i ten month period with the first payment due on i November 1, 2023. The financing has an interest rate of i 8.83% and IPFS has a security interest in the underlying policies that have been financed. The $ i 2.6 million outstanding as of September 30, 2023 is recorded in other current liabilities and prepaid expenses in the condensed consolidated balance sheet.
/
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 nine months ended September 30, 2023 there were i i no / losses on inventory purchase commitments. During the three and nine months ended September 30, 2022, the Company recorded losses on inventory purchase commitments related to connected fitness hardware of approximately i zero and $ i 2.3 million, respectively. These losses are included in connected fitness cost of revenue in the unaudited condensed consolidated statements of operations. Service agreement obligations include amounts related to fitness and nutrition trainers, future events, information systems support, and other technology projects.
Future minimum payments under noncancelable service and inventory purchase agreements for the periods succeeding September 30, 2023 are as follows (in thousands):
Three months ending December 31, 2023 |
|
$ |
i 12,216 |
|
Year ending December 31, 2024 |
|
|
i 3,567 |
|
Year ending December 31, 2025 |
|
|
i 1,475 |
|
Year ending December 31, 2026 |
|
|
i 100 |
|
Year ending December 31, 2027 |
|
|
i 75 |
|
Thereafter |
|
|
i 75 |
|
|
|
$ |
i 17,508 |
|
/
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 nine months ended September 30, 2023 the Company paid $ i 3.5 million of royalty payments exclusive of guaranteed payments.
Lease Commitments
The Company i leases facilities under noncancelable operating leases expiring through 2027 and i certain equipment under a finance lease expiring in 2024. These lease obligations will require payments of approximately $ i 0.6 million during the three months ending December 31, 2023, $ i 2.1 million for the year ending December 31, 2024 and $ i i i i 1.5 / / / million in total thereafter through 2027.
Contingencies
The Company is subject to litigation from time to time in the ordinary course of business. Such claims typically involve its products, intellectual property, and relationships with suppliers, customers, distributors, employees, and others. Contingent liabilities are recorded when it is both probable that a loss has occurred and the amount of the loss can be reasonable estimated. Although it is not possible to predict how litigation and other claims will be resolved, the Company does not believe that any currently identified claims or litigation matters will have a material adverse effect on its consolidated financial position or results of operations.
/
14
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 $ i 50.0 million (the “Term Loan”) which was drawn on the Effective Date. In addition, the Financing Agreement permits the Company to borrow up to an additional $ i 25.0 million, subject to the terms and conditions set forth in the Financing Agreement. Borrowings under the Term Loan are unconditionally guaranteed by the Guarantors, and all present and future material U.S. and Canadian subsidiaries of the Company. Such security interest consists of a first-priority perfected lien on substantially all property and assets of the Company and subsidiaries, including stock pledges on the capital stock of the Company’s material and direct subsidiaries, subject to customary carveouts. In connection with the Financing Agreement, the Company incurred $ i 4.2 million of third-party debt issuance costs which are recorded in the unaudited condensed consolidated balance sheets as a reduction of long-term debt as of September 30, 2023 and December 31, 2022 and are being amortized over the term of the Term Loan using the effective-interest method.
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 i 6.15% per annum, plus the greater of (a) i 2.00% per annum, (b) the Federal Funds Rate plus i 0.50% per annum, (c) the SOFR Rate (based upon an interest period of 1 month) plus i 1.00% per annum, and (d) the rate last quoted by The Wall Street Journal. SOFR Rate loans bear interest at a rate per annum equal to the sum of an applicable margin of i 7.15% and the SOFR Rate (based upon an interest period of three months). The SOFR Rate is subject to a floor of i 1.00%. In addition, the Term Loan borrowings bear additional interest at i 3.00% per annum, paid in kind by capitalizing such interest and adding such capitalized interest to the outstanding principal amount of the Term Loan on each anniversary of the Effective Date. The Term Loan was a SOFR Rate loan, with a cash interest rate of i 12.21% for the nine months ended September 30, 2023. The Company recorded $ i 2.1 million and $ i 6.8 million of interest related to the Term Loan during the three and nine months ended September 30, 2023, respectively.
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) $ i 100.0 million, commencing with the fiscal quarter ended June 30, 2023, for each fiscal quarter ending on or prior to March 31, 2024 and (b) $ i 120.0 million for each fiscal quarter thereafter and or prior to December 31, 2025; (2) amended the minimum liquidity financial covenant to adjust the minimum liquidity levels to (a) $ i 20.0 million at all times from the Second Amendment Effective Date through March 31, 2024 and (b) $ i 25.0 million at all times thereafter through the maturity of the Term Loan; (3) modified the maturity date of the Term Loan from i August 8, 2026 to i February 8, 2026; and (4) amended certain financial definitions, reporting covenants and other covenants thereunder. The Company was in compliance with these covenants as of September 30, 2023.
In connection with the Second Amendment, on the Second Amendment Effective Date, the Company made a partial prepayment on the Term Loan of $ i 15.0 million along with the related prepayment premium of i 5% ($ i 0.8 million) and accrued interest ($ i 0.1 million). The Company also incurred a i 1% fee as paid in kind on the outstanding Term Loan balance prior to the prepayment (fee of $ i 0.5 million) which is recorded as incremental third party debt issuance costs and is being amortized over the amended term of the Term Loan using the effective-interest method. The partial prepayment of $ i 15.0 million was accounted for as a partial debt extinguishment and the Company wrote off the proportionate amount of unamortized debt discount and debt issuance costs as of the Second Amendment Effective Date ($ i 2.4 million) which in addition to the prepayment premium ($ i 0.8 million) was recorded as a loss on partial debt extinguishment of $ i i 3.2 / million in the three and nine months ended September 30, 2023. As of September 30, 2023, the principal balance outstanding (including capitalized paid in kind interest) under the Term Loan was $ i 35.6 million.
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 i 2.00%. In the event of default, or voluntary prepayment of a portion of the Term Loan by the Company, the Lenders could also require repayment of the outstanding balance of the Term Loan including the prepayment premium of (a) i 5.0% if repaid before the 1st anniversary of the Effective Date, (b) i 3.0% if repaid before the 2nd anniversary of the Effective Date, (c) i 2.0% if repaid before the 3rd anniversary date of the Effective Date, and (d) i 0.0% if repaid after the 3rd anniversary date of the Effective Date.
15
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 i 4,716,756 shares of the Company’s Class A Common Stock at an exercise price of $ i 1.85 per share (the "Term Loan Warrants"). The Term Loan Warrants vest on a monthly basis over four years, with i 30%, i 30%, i 20% and i 20% vesting in the first, second, third and fourth years, respectively. The Term Loan Warrants have a i seven-year term from the Effective Date. See Note 3, Fair Value Measurements, for information on the valuation of the Term Loan Warrants. The Term Loan Warrants were recorded in the unaudited condensed consolidated balance sheets as warrant liabilities. The initial fair value of the Term Loan Warrants, of $ i 5.2 million, is being amortized as a debt discount over the term of the Term Loan using the effective-interest method. In connection with the Second Amendment, the Company also amended and restated the Term Loan Warrants. The amendment of the Term Loan Warrants amended the exercise price from $ i 1.85 per share to $ i 0.41 per share. The amended exercise price increased the fair value of the Term Loan Warrants as of the Second Amendment Effective Date by $ i 0.8 million and was recorded as of the Second Amendment Effective Date as an incremental debt discount, and in addition to the remaining debt discount is being amortized over the amended term of the Term Loan using the effective-interest method.
The aggregate amounts of payments due for the periods succeeding September 30, 2023 and reconciliation of the Company’s debt balances, net of debt discount and debt issuance costs, are as follows (in thousands):
Three months ending December 31, 2023 |
|
$ |
i 313 |
|
Year ending December 31, 2024 |
|
|
i 1,563 |
|
Year ending December 31, 2025 |
|
|
i 2,500 |
|
Year ending December 31, 2026 |
|
|
i 31,033 |
|
Total debt |
|
$ |
i 35,409 |
|
Less current portion |
|
|
( i 1,250 |
) |
Less unamortized debt discount and debt issuance costs |
|
|
( i 6,572 |
) |
Add capitalized paid-in-kind interest |
|
|
i 155 |
|
Total long-term debt |
|
$ |
i 27,742 |
|
Principal payments on the Term Loan are $ i 1.3 million per year from the Effective Date to September 30, 2024, payable on a i quarterly basis, and thereafter, are $ i 2.5 million per year, payable on a i quarterly basis, with the remaining principal amount due on the maturity date of the Term Loan.
/
10. Stockholders’ Equity
As of September 30, 2023, i 2,000,000,000 shares, $ i 0.0001 par value per share are authorized, of which, i 1,600,000,000 shares are designated as Class A Common Stock, i 200,000,000 shares are designated as Class X Common Stock, i 100,000,000 shares are designated as Class C Common Stock and i 100,000,000 shares are designated as Preferred Stock.
Holders of each share of each class of Common Stock are entitled to dividends when, as, and if declared by the Company’s board of directors, subject to the rights and preferences of any holders of Preferred Stock outstanding at the time. i The holder of each Class A Common Stock is entitled to i one vote, the holder of each share of Class X Common Stock is entitled to i ten votes and except as otherwise required by law, the holder of each share of Class C Common Stock is not entitled to any voting powers. /
On June 15, 2023, the Company and Carl Daikeler, the Company’s co-founder and chief executive officer (“CEO”) entered into a forfeiture agreement (“the Forfeiture Agreement”), pursuant to which Mr. Daikeler as of June 15, 2023 forfeited i 8 million shares of the Company’s common stock that he owned, comprised of i 3,199,946 shares of Class A common stock and i 4,800,054 shares of Class X Common stock, each with a par value of $ i i 0.0001 / . i No consideration was provided to Mr. Daikeler for the forfeiture of these shares. The forfeiture of the shares resulted in the reduction of each of common stock and additional paid in capital by $ i 800 in the September 30, 2023 condensed consolidated balance sheets.
16
Accumulated Other Comprehensive Income (Loss)
The following tables summarize changes in accumulated other comprehensive income (loss) by component during the three months ended September 30, 2023 and 2022 (in thousands):
|
|
Unrealized Gain (Loss) on Derivatives |
|
|
Foreign Currency Translation Adjustment |
|
|
Total |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Balances at June 30, 2022 |
|
$ |
( i 39 |
) |
|
$ |
( i 36 |
) |
|
$ |
( i 75 |
) |
Other comprehensive income (loss) before reclassifications |
|
|
i 444 |
|
|
|
( i 129 |
) |
|
|
i 315 |
|
Amounts reclassified from accumulated other comprehensive income (loss) |
|
|
( i 2 |
) |
|
|
— |
|
|
|
( i 2 |
) |
Tax effect |
|
|
i 111 |
|
|
|
— |
|
|
|
i 111 |
|
Balances at September 30, 2022 |
|
$ |
i 514 |
|
|
$ |
( i 165 |
) |
|
$ |
i 349 |
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Balances at June 30, 2023 |
|
$ |
( i 284 |
) |
|
$ |
( i 49 |
) |
|
$ |
( i 333 |
) |
Other comprehensive income (loss) before reclassifications |
|
|
( i 7 |
) |
|
|
( i 50 |
) |
|
|
( i 57 |
) |
Amounts reclassified from accumulated other comprehensive income (loss) |
|
|
i 157 |
|
|
|
— |
|
|
|
i 157 |
|
Tax effect |
|
|
i 38 |
|
|
|
— |
|
|
|
i 38 |
|
Balances at September 30, 2023 |
|
$ |
( i 96 |
) |
|
$ |
( i 99 |
) |
|
$ |
( i 195 |
) |
The following tables summarize changes in accumulated other comprehensive income (loss) by component during the nine months ended September 30, 2023 and 2022 (in thousands):
|
Unrealized Gain (Loss) on Derivatives |
|
|
Foreign Currency Translation Adjustment |
|
|
Total |
|
|||
|
|
|
|
|
|
|
|
|
|||
Balances at December 31, 2021 |
$ |
( i 32 |
) |
|
$ |
i 11 |
|
|
$ |
( i 21 |
) |
Other comprehensive loss before reclassifications |
|
i 295 |
|
|
|
( i 176 |
) |
|
|
i 119 |
|
Amounts reclassified from accumulated other comprehensive income (loss) |
|
i 141 |
|
|
|
— |
|
|
|
i 141 |
|
Tax effect |
|
i 110 |
|
|
|
— |
|
|
|
i 110 |
|
Balances at September 30, 2022 |
$ |
i 514 |
|
|
$ |
( i 165 |
) |
|
$ |
i 349 |
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|||
Balances at December 31, 2022 |
$ |
i 131 |
|
|
$ |
( i 94 |
) |
|
$ |
i 37 |
|
Other comprehensive income (loss) before reclassifications |
|
( i 314 |
) |
|
|
( i 5 |
) |
|
|
( i 319 |
) |
Amounts reclassified from accumulated other comprehensive income (loss) |
|
i 131 |
|
|
|
— |
|
|
|
i 131 |
|
Tax effect |
|
( i 44 |
) |
|
|
— |
|
|
|
( i 44 |
) |
Balances at September 30, 2023 |
$ |
( i 96 |
) |
|
$ |
( i 99 |
) |
|
$ |
( i 195 |
) |
17
11. Equity-Based Compensation
Equity Compensation Plans
A summary of the option activity under the Company’s equity compensation plans is as follows:
|
Options Outstanding |
|
|||||||||||||
|
Number of Options |
|
|
Weighted-Average Exercise Price |
|
|
Weighted-Average Remaining Contractual Term |
|
|
Aggregate Intrinsic Value |
|
||||
Outstanding at December 31, 2022 |
|
i 48,414,625 |
|
|
$ |
i 2.65 |
|
|
|
i 6.35 |
|
|
$ |
— |
|
Granted |
|
i 27,346,753 |
|
|
|
i 0.46 |
|
|
|
|
|
|
|
||
Forfeited |
|
( i 9,199,664 |
) |
|
|
i 2.53 |
|
|
|
|
|
|
|
||
Expired |
|
( i 4,179,401 |
) |
|
|
i 2.60 |
|
|
|
|
|
|
|
||
Outstanding at September 30, 2023 |
|
i 62,382,313 |
|
|
$ |
i 0.71 |
|
|
|
i 7.45 |
|
|
$ |
— |
|
Exercisable at September 30, 2023 |
|
i 21,225,179 |
|
|
$ |
i 1.04 |
|
|
|
i 4.01 |
|
|
$ |
— |
|
A summary of restricted stock unit ("RSU") activity is as follows:
|
|
RSUs Outstanding |
||||||||
|
|
Number of RSUs |
|
|
Weighted-Average Fair Value |
|
|
|||
Outstanding at December 31, 2022 |
|
|
i 3,159,185 |
|
|
$ |
|
i 1.45 |
|
|
Granted |
|
|
i 23,121,170 |
|
|
|
|
i 0.58 |
|
|
Vested |
|
|
( i 11,253,084 |
) |
|
|
|
i 0.68 |
|
|
Forfeited |
|
|
( i 974,173 |
) |
|
|
|
i 0.74 |
|
|
Outstanding at September 30, 2023 |
|
|
i 14,053,098 |
|
|
$ |
|
i 0.66 |
|
|
The fair value of RSUs vested during the three and nine months ended September 30, 2023 was $ i 0.1 million and $ i 7.7 million, respectively. $ i 0.7 million and $ i 2.2 million was the fair value of RSUs vested during the three and nine months ended September 30, 2022, respectively.
On January 1, 2023, the number of shares available for issuance under the 2021 Incentive Award Plan (the “2021 Plan”) increased by i 15,608,106 pursuant to the terms of the 2021 Plan. As of September 30, 2023, i 14,805,017 shares of Class A Common Stock were available for issuance under the 2021 Plan.
Vested RSUs included shares of common stock that the Company withheld on behalf of certain employees to satisfy the minimum statutory tax withholding requirements, as defined by the Company. The Company withheld shares of common stock with an aggregate fair value and remitted taxes of $ i 2.2 million during the nine months ended September 30, 2023, which were classified as financing cash outflows in the unaudited condensed consolidated statements of cash flows. The Company canceled and returned these shares to the 2021 Plan, which are available under the plan terms for future issuance.
On June 14, 2023, the Board of Directors of the Company (“the Board”) adopted the Company’s 2023 Employment Inducement Incentive Award Plan (the “Inducement Plan”) for the grant of non-qualified stock options, stock appreciation rights, restricted stock, RSU's, dividend equivalents and other stock or cash-based awards to prospective employees. The Board reserved i 23,883,265 shares of the Company’s common stock for issuance pursuant to the awards granted under the Inducement Plan.
Effective as of June 15, 2023, the Company appointed Mark Goldston as Executive Chairman, replacing the service of Mr. Daikeler in his capacity as Chairman of the Board. Mr. Daikeler continues to serve as the Company’s CEO and as a director. In connection with the employment offer letter to Mr. Goldston, he was granted a stock option under the Inducement Plan, covering an aggregate of
18
i 23,883,265 shares of the Company’s Class A common stock, par value $ i 0.0001 per share (the “Option”). Of this amount, i 7,961,088 shares subject to the Option will vest based on continued service (the “Time-Vesting Options”) and i 15,922,177 shares will vest based on the attainment of applicable performance goals and continued service (the “Performance-Vesting Options”). The Time-Vesting Options will vest and become exercisable with respect to i 25% of the Time-Vesting Options subject to the Option on each of the first four anniversaries of June 15, 2023. The Performance-Vesting Options will vest and become exercisable based on both (1) the achievement of pre-determined price per share goals and (2) Mr. Goldston’s service through the applicable vesting date. Any earned Performance-Vesting Options will vest and become exercisable as of the later of (1) June 15, 2024, and (2) the date on which the applicable price per share goal is achieved. The weighted average exercise price of the Performance-Vesting Options was $ i 0.44 per option and i none of the Performance-Vesting Options were exercisable as of September 30, 2023.
Vesting tranche Number of Performance -Vesting Options Price per share goal
Tranche 1 i 3,980,544 $ i 1.00
Tranche 2 i 3,980,544 $ i 1.50
Tranche 3 i 3,980,544 $ i 2.00
Tranche 4 i 3,980,545 $ i 2.50
The share price is measured by averaging the fair market value (as defined in the Inducement Plan) per share over any i 30 consecutive trading-day period.
Employee Stock Purchase Plan
In May 2022, the Company established an employee stock purchase plan (the “ESPP”), the terms of which allow for qualified employees to participate in the purchase of designated shares of the Company’s common stock at a price equal to i 85% of the lower of the closing price at the beginning or ending of each six-month purchase period.
During the nine months ended September 30, 2023, i 981,853 shares of the Company’s common stock were issued pursuant to the ESPP at an average price of $ i 0.46 per share.
Stock-based compensation expense associated with the Company’s ESPP is based on fair value estimated on the date of grant using the Black-Scholes option pricing valuation model and the following weighted-average assumptions for grants during the nine months ended September 30, 2023:
|
|
Nine months ended September 30, |
|
|
|
|
|
||
Risk-free rate |
|
|
i 4.6 |
% |
Dividend yield rate |
|
|
i — |
|
Volatility |
|
|
i 55.3 |
% |
Expected term (in years) |
|
|
i 0.50 |
|
Weighted-average grant date fair value |
|
$ |
i 0.14 |
|
Equity-Based Compensation Expense
The fair value of each award that vests solely based on time as of the date of grant is estimated using a Black-Scholes option-pricing model. The following table summarizes the weighted-average assumptions used to determine the fair value of time vested option grants:
|
|
Nine months ended September 30, |
|
|||||
|
|
|
|
2022 |
|
|||
Risk-free rate |
|
|
i 3.8 |
% |
|
|
i 2.9 |
% |
Dividend yield rate |
|
|
i — |
|
|
|
i — |
|
Volatility |
|
|
i 54.8 |
% |
|
|
i 52.5 |
% |
Expected term (in years) |
|
|
i 5.92 |
|
|
|
i 6.08 |
|
Weighted-average grant date fair value |
|
$ |
i 0.27 |
|
|
$ |
i 0.63 |
|
19
/
The fair value of the Performance-Vesting Options as of the date of grant is estimated using a Monte Carlo simulation. The following table summarizes the weighted average assumptions used to determine the fair value of the Performance-Vesting Options:
|
|
Nine months ended September 30, |
|
|
|
|
|
||
Risk-free rate |
|
|
i 3.7 |
% |
Dividend yield rate |
|
|
i — |
|
Volatility |
|
|
i 53.7 |
% |
Expected term (in years) |
|
|
i 10.00 |
|
Weighted-average grant date fair value |
|
$ |
i 0.26 |
|
Equity-based compensation expense for the three and nine months ended September 30, 2023 and 2022 was as follows (in thousands):
|
|
Three months ended September 30, |
|
|
Nine months ended September 30, |
|
||||||||||
|
|
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of revenue |
|
$ |
i 795 |
|
|
$ |
i 413 |
|
|
$ |
i 2,551 |
|
|
$ |
i 1,130 |
|
Selling and marketing |
|
|
i 2,689 |
|
|
|
i 2,578 |
|
|
|
i 7,846 |
|
|
|
i 5,235 |
|
Enterprise technology and development |
|
|
i 394 |
|
|
|
i 364 |
|
|
|
i 1,097 |
|
|
|
i 1,274 |
|
General and administrative |
|
|
i 2,558 |
|
|
|
i 2,246 |
|
|
|
i 7,658 |
|
|
|
i 5,527 |
|
Total equity-based compensation |
|
$ |
i 6,436 |
|
|
$ |
i 5,601 |
|
|
$ |
i 19,152 |
|
|
$ |
i 13,166 |
|
In connection with the restructuring activities that took place during the three and nine months ended September 30, 2023, the Company modified certain stock awards of terminated employees (approximately i 25 employees in the three month period ended September 30, 2023 and approximately i 100 employees in the three months ended March 31, 2023). The modifications included accelerating the vesting of any options that would have vested within three months of the employees termination date, and all vested options will be available for exercise for a total of six months after the employees’ termination date (that is, three months in addition to the standard three months per original agreement). As a result of these modifications, the Company recognized approximately i zero and $ i 1.0 million reduction to equity-based compensation expense within general and administrative expense in the unaudited condensed consolidated statements of operations for the three and nine months ended September 30, 2023, respectively.
Repricing of Stock Options
The Company determined that a significant portion of the outstanding stock options had an exercise price per share that was significantly higher than the current fair market value of the Company’s common stock (the “Underwater Options”). In order to help retain and motivate holders of Underwater Options, and align their interests with those of stockholders, on September 14, 2023, the Compensation Committee of the Board of Directors resolved that it was in the best interests of the Company and its stockholders to amend certain of the Underwater Options (the “Amended Underwater Options”) for current employees and consultants of the Company that were either (1) not maturing in fiscal 2023 or (2) that had not been issued at an exercise price of less than $ i 1 in the prior twelve months, to reduce the exercise price of each Amended Underwater Option to the closing per share price of the Company’s common stock on September 14, 2023 (the “Repricing”). The Company had i 26.6 million Amended Underwater Options which had their exercise price amended to $ i 0.347 per option.
Excluded from the Repricing were, among others, Underwater Options held by members of the Board of Directors, the Company's CEO and Executive Chairman; any Underwater Options with an exercise price less than $ i 1.00; and options granted to consultants who are no longer providing services to the Company. Except for the modification of the exercise price, all other terms and conditions of the Amended Underwater Options remain in effect.
The Company determined that the Repricing represented a modification of share-based awards under ASC 718. Accordingly, the Company recognized incremental stock-based compensation of $ i i 1.6 / million which was recorded in the three and nine months ended September 30, 2023, related to i i 12.8 / million vested Amended Underwater Options. At September 30, 2023, $ i 1.5 million incremental unrecognized compensation expense related to i 13.8 million unvested Amended Underwater Options will be recognized as expense over the requisite service period in which the options vest, or i 1.6 years.
As of September 30, 2023, the total unrecognized equity-based compensation expense was $ i 37.4 million, which will be recognized over a weighted-average remaining period of i 2.66 years.
/20
12. Derivative Financial Instruments
As of September 30, 2023 and December 31, 2022, the notional amount of the Company’s outstanding foreign exchange options was $ i 10.0 million and $ i 17.6 million, respectively. There were i i no / outstanding forward contracts as of September 30, 2023 and December 31, 2022.
The following table shows the pre-tax effects of the Company’s derivative instruments on its unaudited condensed consolidated statements of operations (in thousands):
|
|
|
|
Three months ended September 30, |
|
|
Nine months ended September 30, |
|
||||||||||
|
|
Financial Statement Line Item |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
|
|
|
|
|
|
|
|
|
|
|||||||||
Unrealized gains (losses) |
|
Other comprehensive income (loss) |
|
$ |
( i 7 |
) |
|
$ |
i 444 |
|
|
$ |
( i 314 |
) |
|
$ |
i 295 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gains (losses) reclassified from accumulated other |
|
Cost of revenue |
|
$ |
( i 67 |
) |
|
$ |
i 3 |
|
|
$ |
( i 56 |
) |
|
$ |
( i 59 |
) |
comprehensive income (loss) into net loss |
|
General and administrative |
|
|
( i 90 |
) |
|
|
( i 1 |
) |
|
|
( i 75 |
) |
|
|
( i 82 |
) |
Total amounts reclassified |
|
|
|
$ |
( i 157 |
) |
|
$ |
i 2 |
|
|
$ |
( i 131 |
) |
|
$ |
( i 141 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gains (losses) recognized on derivatives |
|
Cost of revenue |
|
$ |
( i 3 |
) |
|
$ |
i 159 |
|
|
$ |
( i 98 |
) |
|
$ |
i 114 |
|
13. Restructuring
In 2023, restructuring charges primarily relate to activities focused on aligning the Company's operations with its key growth priorities. Restructuring charges in 2022 relate to the consolidation of our streaming fitness and nutrition offerings into a single Beachbody platform. The Company recognized restructuring costs of $ i 1.3 million and $ i 6.6 million during the three and nine months ended September 30, 2023, respectively, comprised primarily of termination benefits related to headcount reductions, of which $ i 1.3 million is included in accrued expenses in the unaudited condensed consolidated balance sheets at September 30, 2023 which are expected to be completed by December 31, 2023. The Company recognized restructuring costs of $ i 1.5 million and $ i 10.0 million during the three and nine months ended September 30, 2022, respectively, comprised primarily of termination benefits related to headcount reductions. In accordance with GAAP, employee termination benefits were recognized at the date employees were notified and post-employment benefits were accrued as the obligation was probable and estimable. Benefits for employees who provided service greater than 60 days from the date of notification were recognized ratably over the service period.
The following table summarizes activity in the Company’s restructuring-related liability during the three months ended September 30, 2023 and 2022, respectively (in thousands):
|
|
Balance at |
|
|
Restructuring |
|
|
Payments / |
|
|
Liability at |
|
||||
|
|
|
|
Charges |
|
|
Utilizations |
|
|
|
||||||
Employee-related costs |
|
$ |
i 256 |
|
|
$ |
i 1,270 |
|
|
$ |
( i 215 |
) |
|
$ |
i 1,311 |
|
Total costs |
|
$ |
i 256 |
|
|
$ |
i 1,270 |
|
|
$ |
( i 215 |
) |
|
$ |
i 1,311 |
|
|
|
Balance at |
|
|
Restructuring |
|
|
Payments / |
|
|
Liability at |
|
||||
|
|
|
|
Charges |
|
|
Utilizations |
|
|
|
||||||
Employee-related costs |
|
$ |
i 1,320 |
|
|
$ |
i 1,492 |
|
|
$ |
( i 879 |
) |
|
$ |
i 1,933 |
|
Total costs |
|
$ |
i 1,320 |
|
|
$ |
i 1,492 |
|
|
$ |
( i 879 |
) |
|
$ |
i 1,933 |
|
The following table summarizes the activity in the Company’s restructuring related liability during the nine months ended September 30, 2023 and 2022, respectively (in thousands):
21
|
|
Balance at |
|
|
Restructuring |
|
|
Payments / |
|
|
Liability at |
|
||||
|
|
|
|
Charges |
|
|
Utilizations |
|
|
|
||||||
Employee-related costs |
|
$ |
i 469 |
|
|
$ |
i 6,550 |
|
|
$ |
( i 5,708 |
) |
|
$ |
i 1,311 |
|
Total costs |
|
$ |
i 469 |
|
|
$ |
i 6,550 |
|
|
$ |
( i 5,708 |
) |
|
$ |
i 1,311 |
|
|
|
Balance at |
|
|
Restructuring |
|
|
Payments / |
|
|
Liability at |
|
||||
|
|
|
|
Charges |
|
|
Utilizations |
|
|
|
||||||
Employee-related costs |
|
$ |
— |
|
|
$ |
i 10,047 |
|
|
$ |
( i 8,114 |
) |
|
$ |
i 1,933 |
|
Total costs |
|
$ |
— |
|
|
$ |
i 10,047 |
|
|
$ |
( i 8,114 |
) |
|
$ |
i 1,933 |
|
During the nine months ended September 30, 2022, the Company determined that the useful life of certain computer software and web development assets and content assets would end upon the completion of its platform consolidation. The Company accelerated depreciation of these computer software and web development assets and recorded i no accelerated depreciation and $ i 3.4 million of additional depreciation expense as a component of digital cost of revenue and nutrition and other cost of revenue during the three and nine months ended September 30, 2022, respectively. The Company also accelerated amortization of these content assets and recorded $ i 0.1 million and $ i 2.7 million of additional amortization as a component of digital cost of revenue during the three and nine months ended September 30, 2022, respectively.
/
14. Income Taxes
The Company recorded a provision for income taxes of $ i i 0.1 / million for the three and nine months ended September 30, 2023, and a benefit for income taxes of $ i 0.5 million and $ i 1.5 million for the three and nine months ended September 30, 2022, respectively. The effective tax rate was ( i 0.2)% and ( i 0.1)% for the three and nine months ended September 30, 2023, respectively, and the effective tax rate was i 1.6% and i 1.0% for the three and nine months ended September 30, 2022, respectively.
The tax provision for interim periods is determined using an estimate of the Company’s annual effective tax rate, adjusted for discrete items arising in that quarter. The Company’s effective tax rate differs from the U.S. statutory tax rate in the three and nine months ended September 30, 2023 primarily due to changes in valuation allowances on deferred tax assets as it is more likely than not that some or all of the Company’s deferred tax assets will not be realized.
The Company evaluates its tax positions on a quarterly basis and revises its estimate accordingly. There were no material changes to the Company’s uncertain tax positions, interest, or penalties during the three and nine months ended September 30, 2023.
/
15. Earnings (Loss) per Share
The computation of loss per share of Class A and Class X Common Stock is as follows (in thousands, except share and per share information):
|
|
Three months ended September 30, |
|
|
Nine months ended September 30, |
|
||||||||||
|
|
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
|||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss |
|
$ |
( i 32,666 |
) |
|
$ |
( i 33,859 |
) |
|
$ |
( i 87,602 |
) |
|
$ |
( i 149,259 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted-average common shares outstanding, basic and diluted |
|
|
i i 308,931,120 / |
|
|
|
i i 307,949,355 / |
|
|
|
i i 310,793,724 / |
|
|
|
i i 307,178,173 / |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss per common share, basic and diluted |
|
$ |
( i i 0.11 / |
) |
|
$ |
( i i 0.11 / |
) |
|
$ |
( i i 0.28 / |
) |
|
$ |
( i i 0.49 / |
) |
/
Basic net loss per common share is the same as dilutive net loss per common share for each of the three and nine months ended September 30, 2023 and 2022 as the inclusion of all potential common shares would have been antidilutive. The weighted average
22
common shares outstanding (basic and diluted) in the above table exclude the i 8 million shares that were forfeited by Mr. Daikeler for the period of time after they were forfeited (June 15, 2023).
The following table presents the common shares that are excluded from the computation of diluted net loss per common share as of the periods presented because including them would have been antidilutive:
|
|
|
||||||
|
|
|
|
2022 |
|
|||
|
|
|
|
|
|
|
||
Options |
|
|
i 62,382,313 |
|
|
|
i 50,918,670 |
|
RSUs |
|
|
i 14,053,098 |
|
|
|
i 3,159,185 |
|
Compensation warrants |
|
|
i 3,980,656 |
|
|
|
i 3,980,656 |
|
Public and private placement warrants |
|
|
i 15,333,333 |
|
|
|
i 15,333,333 |
|
Term Loan warrants |
|
|
i 4,716,756 |
|
|
|
i 4,716,756 |
|
Earn-out shares |
|
|
i 3,750,000 |
|
|
|
i 3,750,000 |
|
|
|
|
i 104,216,156 |
|
|
|
i 81,858,600 |
|
See Note 11, Equity-Based Compensation, for additional information on the Performance-Vesting Options.
/23
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis should be read in conjunction with our financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q (this “Report”) as well as our financial statements and the "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our Annual Report on Form 10-K for the year ended December 31, 2022 (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.
24
Overview
BODi is a leading subscription health and wellness company. We focus primarily on digital content, supplements, connected fitness, and consumer health and wellness. Our goal is to continue to provide holistic health and wellness content and subscription-based solutions. We are the creator of some of the world’s most popular fitness programs, including P90X, Insanity, and 21 Day Fix, which transformed the at-home fitness market and disrupted the global fitness industry by making it accessible for people to get results—anytime, anywhere. Our comprehensive nutrition-first programs, Portion Fix and 2B Mindset, teach healthy eating habits and promote healthy, sustainable weight loss. These fitness and nutrition programs are available through our Beachbody On Demand and Beachbody On Demand Interactive streaming services.
We offer nutritional products such as Shakeology nutrition shakes, BEACHBAR snack bars, and Ladder premium supplements as well as a professional-grade stationary cycle with a 360-degree touch screen tablet and connected fitness software. Leveraging our history of fitness content creation, nutrition innovation, and our network of micro-influencers, whom we call “Partners” (previously known as “Coaches”), we plan to continue market penetration into connected fitness to reach a wider health, wellness and fitness audience.
Our revenue is generated primarily through our network of Partners, social media marketing channels, and direct response advertising. Components of revenue include recurring digital subscription revenue, revenue from the sale of nutritional and other products, and connected fitness revenue. In addition to selling individual products on a one-time basis, we bundle digital and nutritional products together at discounted prices.
Our key growth priorities for 2023 include: revamping our Beachbody on Demand (“BODi”) digital platform, growing Shakeology in the Healthy Dessert market, and improving the affordability of our connected fitness bike. In March 2023, we relaunched the BODi digital platform with a new form of fitness programming called BODi Blocks, the addition of positive mindset content, and digital recipes to extend Shakeology into a Healthy Dessert. We also began migrating all BOD-only members to BODi on their renewal dates. During the first and third quarters of 2023, to align our operations with our key growth priorities, we executed certain restructuring activities, including a reduction in headcount. These actions resulted in aggregate charges of $6.6 million, consisting primarily of termination benefits during the nine months ended September 30, 2023.
For the three months ended September 30, 2023, as compared to the three months ended September 30, 2022:
For the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022:
See “Non-GAAP Information” below for information regarding our use of Adjusted EBITDA and a reconciliation of net loss to Adjusted EBITDA.
25
Recent Developments
Effective as 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 will continue to serve as the Company’s CEO and director. In connection with the employment offer letter to Mr. Goldston, he was granted a stock option under the Company’s 2023 Employment Inducement Incentive Award Plan (the “Inducement Plan”) covering an aggregate of 23,883,265 shares of the Company’s Class A common stock (the “Option”). Of this amount, 7,961,088 shares subject to the Option will vest based on continued service (the “Time-Vesting Options”) and 15,922,177 shares will vest based on the attainment of applicable performance goals and continued service (the “Performance-Vesting Options”). See Note 11, Equity-Based Compensation, for additional information on the Inducement Plan and the Options granted to Mr. Goldston.
On June 15, 2023, the Company and Carl Daikeler the Company’s co-founder and chief executive officer (“CEO”) entered into a forfeiture agreement (“the Forfeiture Agreement”), pursuant to which Mr. Daikeler as of June 15, 2023 forfeited 8 million shares of the Company’s common stock that he owned, comprised of 3,199,946 shares of Class A common stock and 4,800,054 shares of Class X Common stock. No consideration was provided to Mr. Daikeler for the forfeiture of these shares. See Note 10, Stockholders’ Equity, for additional information on the forfeiture of these shares.
On July 24, 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 amended, among other things, certain terms of the Financing Agreement including without limitation, to (1) amend the minimum revenue financial covenant, (2) amend the minimum liquidity financial covenant, (3) modify the maturity date of the Term Loan, and (4) amend certain financial definitions, reporting covenants and other covenants thereunder.
In connection with the Second Amendment, on the Second Amendment Effective Date, the Company made a partial prepayment on the Term Loan of $15.0 million along with the related prepayment premium of 5% ($0.8 million) and accrued interest ($0.1 million). The partial prepayment of $15.0 million was accounted for as a partial debt extinguishment and the Company wrote off the proportionate amount of unamortized debt discount and debt issuance costs as of the Second Amendment Effective Date ($2.4 million) which in addition to the prepayment premium ($0.8 million) was recorded as a loss on partial debt extinguishment of $3.2 million in the three and nine months ended September 30, 2023.
In connection with the Second Amendment, the Company also amended and restated the Term Loan Warrants for the purchase of 4,716,756 shares of the Company’s Class A Common Stock.
See Note 9, Debt, for additional information on the Second Amendment and amendments to the Term Loan Warrants.
26
Key Operational and Business Metrics
We use the following key operational and business metrics to evaluate our business, measure our performance, develop financial forecasts, and make strategic decisions.
|
|
As of September 30, |
|
|||||
|
|
|
|
2022 |
|
|||
|
|
|
|
|
|
|
||
Digital subscriptions (millions) |
|
|
1.38 |
|
|
|
2.10 |
|
Nutritional subscriptions (millions) |
|
|
0.18 |
|
|
|
0.24 |
|
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.
|
|
Three months ended September 30, |
|
|
Nine months ended September 30, |
|
||||||||||
|
|
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Average digital retention |
|
|
96.2 |
% |
|
|
95.7 |
% |
|
|
95.7 |
% |
|
|
95.6 |
% |
Total streams (millions) |
|
|
22.9 |
|
|
|
27.5 |
|
|
|
77.9 |
|
|
|
96.7 |
|
DAU/MAU |
|
|
30.8 |
% |
|
|
29.5 |
% |
|
|
31.6 |
% |
|
|
30.4 |
% |
Bikes delivered (thousands) |
|
|
6,524 |
|
|
|
2,305 |
|
|
|
16,723 |
|
|
|
27,749 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenue (millions) |
|
$ |
128.3 |
|
|
$ |
166.0 |
|
|
$ |
408.1 |
|
|
$ |
544.0 |
|
Gross profit (millions) |
|
$ |
75.0 |
|
|
$ |
104.7 |
|
|
$ |
249.1 |
|
|
$ |
285.0 |
|
Gross margin |
|
|
58.5 |
% |
|
|
63.1 |
% |
|
|
61.0 |
% |
|
|
52.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss (millions) |
|
$ |
(32.7 |
) |
|
$ |
(33.9 |
) |
|
$ |
(87.6 |
) |
|
$ |
(149.3 |
) |
Adjusted EBITDA (millions) |
|
$ |
(5.8 |
) |
|
$ |
(6.2 |
) |
|
$ |
(11.5 |
) |
|
$ |
(26.8 |
) |
Digital Subscriptions
Our ability to expand the number of digital subscriptions is an indicator of our market penetration and growth. Digital subscriptions include BOD, BODi, and prior to Q3 2022, Openfit subscriptions. Digital subscriptions include paid and free-to-pay subscriptions, with free-to-pay subscriptions representing approximately 1% of total digital subscriptions on average. Digital subscriptions are inclusive of all billing plans, currently for annual, semi-annual, quarterly and monthly billing intervals.
Nutritional Subscriptions
Nutritional subscriptions include monthly subscriptions for nutritional products such as Shakeology, Beachbody Performance, BEACHBAR, Bevvy and Ladder Supplements. We also package and bundle the content experience of digital subscriptions with nutritional subscriptions to optimize customer results.
Average Digital Retention
We use month-over-month digital subscription retention, which 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)
27
We use the ratio of daily active users to monthly active users to measure how frequently digital subscribers are utilizing our service in a given month. We define a daily active user as a unique user streaming content on our platform in a given day. We define a monthly active user as a unique user streaming content on our platform in that same month.
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 September 30, |
|
|
Nine months ended September 30, |
|
||||||||||
(in thousands) |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss |
|
$ |
(32,666 |
) |
|
$ |
(33,859 |
) |
|
$ |
(87,602 |
) |
|
$ |
(149,259 |
) |
Adjusted for: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Impairment of intangible assets |
|
|
— |
|
|
|
1,000 |
|
|
|
— |
|
|
|
1,000 |
|
Loss on partial debt extinguishment (1) |
|
|
3,168 |
|
|
|
— |
|
|
|
3,168 |
|
|
|
— |
|
Depreciation and amortization |
|
|
9,763 |
|
|
|
17,306 |
|
|
|
31,395 |
|
|
|
58,858 |
|
Amortization of capitalized cloud computing implementation costs |
|
|
41 |
|
|
|
126 |
|
|
|
122 |
|
|
|
462 |
|
Amortization of content assets |
|
|
5,467 |
|
|
|
5,493 |
|
|
|
16,487 |
|
|
|
18,673 |
|
Interest expense |
|
|
2,074 |
|
|
|
1,152 |
|
|
|
6,773 |
|
|
|
1,174 |
|
Income tax provision (benefit) |
|
|
63 |
|
|
|
(549 |
) |
|
|
99 |
|
|
|
(1,536 |
) |
Equity-based compensation |
|
|
6,436 |
|
|
|
5,601 |
|
|
|
19,152 |
|
|
|
13,166 |
|
Employee incentives, expected to be settled in equity (2) |
|
|
— |
|
|
|
— |
|
|
|
(5,466 |
) |
|
|
— |
|
Inventory net realizable value adjustment (3) |
|
|
— |
|
|
|
(1,867 |
) |
|
|
— |
|
|
|
23,569 |
|
Restructuring and platform consolidation costs (4) |
|
|
1,270 |
|
|
|
1,745 |
|
|
|
7,222 |
|
|
|
11,718 |
|
Change in fair value of warrant liabilities |
|
|
(1,072 |
) |
|
|
(2,362 |
) |
|
|
(1,504 |
) |
|
|
(4,696 |
) |
Non-operating (5) |
|
|
(377 |
) |
|
|
(15 |
) |
|
|
(1,340 |
) |
|
|
63 |
|
Adjusted EBITDA |
|
$ |
(5,833 |
) |
|
$ |
(6,229 |
) |
|
$ |
(11,494 |
) |
|
$ |
(26,808 |
) |
28
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 September 30, |
|
|
Nine months ended September 30, |
|
||||||||||
|
|
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Digital |
|
$ |
64,339 |
|
|
$ |
72,228 |
|
|
$ |
194,326 |
|
|
$ |
231,988 |
|
Nutrition and other |
|
|
58,981 |
|
|
|
90,416 |
|
|
|
197,729 |
|
|
|
278,596 |
|
Connected fitness |
|
|
4,930 |
|
|
|
3,331 |
|
|
|
16,044 |
|
|
|
33,449 |
|
Total revenue |
|
|
128,250 |
|
|
|
165,975 |
|
|
|
408,099 |
|
|
|
544,033 |
|
Cost of revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Digital |
|
|
16,429 |
|
|
|
16,078 |
|
|
|
47,732 |
|
|
|
50,909 |
|
Nutrition and other |
|
|
26,699 |
|
|
|
40,486 |
|
|
|
84,940 |
|
|
|
127,262 |
|
Connected fitness |
|
|
10,091 |
|
|
|
4,745 |
|
|
|
26,312 |
|
|
|
80,910 |
|
Total cost of revenue |
|
|
53,219 |
|
|
|
61,309 |
|
|
|
158,984 |
|
|
|
259,081 |
|
Gross profit |
|
|
75,031 |
|
|
|
104,666 |
|
|
|
249,115 |
|
|
|
284,952 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Selling and marketing |
|
|
69,127 |
|
|
|
93,145 |
|
|
|
222,195 |
|
|
|
286,213 |
|
Enterprise technology and development |
|
|
18,879 |
|
|
|
25,686 |
|
|
|
56,625 |
|
|
|
83,516 |
|
General and administrative |
|
|
14,759 |
|
|
|
19,532 |
|
|
|
44,362 |
|
|
|
59,189 |
|
Restructuring |
|
|
1,270 |
|
|
|
1,492 |
|
|
|
6,550 |
|
|
|
10,047 |
|
Impairment of intangible assets |
|
|
— |
|
|
|
1,000 |
|
|
|
— |
|
|
|
1,000 |
|
Total operating expenses |
|
|
104,035 |
|
|
|
140,855 |
|
|
|
329,732 |
|
|
|
439,965 |
|
Operating loss |
|
|
(29,004 |
) |
|
|
(36,189 |
) |
|
|
(80,617 |
) |
|
|
(155,013 |
) |
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loss on partial debt extinguishment |
|
|
(3,168 |
) |
|
|
— |
|
|
|
(3,168 |
) |
|
|
— |
|
Change in fair value of warrant liabilities |
|
|
1,072 |
|
|
|
2,362 |
|
|
|
1,504 |
|
|
|
4,696 |
|
Interest expense |
|
|
(2,074 |
) |
|
|
(1,152 |
) |
|
|
(6,773 |
) |
|
|
(1,174 |
) |
Other income, net |
|
|
571 |
|
|
|
571 |
|
|
|
1,551 |
|
|
|
696 |
|
Loss before income taxes |
|
|
(32,603 |
) |
|
|
(34,408 |
) |
|
|
(87,503 |
) |
|
|
(150,795 |
) |
Income tax (provision) benefit |
|
|
(63 |
) |
|
|
549 |
|
|
|
(99 |
) |
|
|
1,536 |
|
Net loss |
|
$ |
(32,666 |
) |
|
$ |
(33,859 |
) |
|
$ |
(87,602 |
) |
|
$ |
(149,259 |
) |
29
Revenue
Revenue includes digital subscriptions, 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 September 30, |
|
|
|
|
||||||||||
|
|
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
|||||
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|||||||
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Digital |
|
$ |
64,339 |
|
|
$ |
72,228 |
|
|
$ |
(7,889 |
) |
|
|
(11 |
%) |
Nutrition and other |
|
|
58,981 |
|
|
|
90,416 |
|
|
|
(31,435 |
) |
|
|
(35 |
%) |
Connected fitness |
|
|
4,930 |
|
|
|
3,331 |
|
|
|
1,599 |
|
|
|
48 |
% |
Total revenue |
|
$ |
128,250 |
|
|
$ |
165,975 |
|
|
$ |
(37,725 |
) |
|
|
(23 |
%) |
The decrease in digital revenue for the three months ended September 30, 2023, as compared to the three months ended September 30, 2022, was primarily attributable to a $7.0 million decrease in revenue from our digital streaming services due to 34% fewer subscriptions on lower demand and a decrease of $0.9 million in fees from partners as there was a 18% decrease in the number of partners, partially offset by an increase in revenue per subscription.
The decrease in nutrition and other revenue for the three months ended September 30, 2023, as compared to the three months ended September 30, 2022, was primarily attributable to a $25.8 million decrease in revenue from nutritional products due to 27% fewer nutritional subscriptions on lower demand, a $2.7 million decrease in revenue generated from our preferred customer fees as there was a 34% decrease in preferred customers and a $1.9 million decrease in ticket sales due primarily to Summit 2023 which occurred in June 2023 (in the prior year the Summit occurred in July).
The increase in connected fitness revenue for the three months ended September 30, 2023, as compared to the three months ended September 30, 2022, was primarily due to a 183% increase in number of bikes delivered partially offset by a 42% decrease in the average sales price for a bike.
|
|
Nine months ended September 30, |
|
|
|
|
|
|
|
|||||||
|
|
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
|||||
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|||||||
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Digital |
|
$ |
194,326 |
|
|
$ |
231,988 |
|
|
$ |
(37,662 |
) |
|
|
(16 |
%) |
Nutrition and other |
|
|
197,729 |
|
|
|
278,596 |
|
|
|
(80,867 |
) |
|
|
(29 |
%) |
Connected fitness |
|
|
16,044 |
|
|
|
33,449 |
|
|
|
(17,405 |
) |
|
|
(52 |
%) |
Total revenue |
|
$ |
408,099 |
|
|
$ |
544,033 |
|
|
$ |
(135,934 |
) |
|
|
(25 |
%) |
The decrease in digital revenue for the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022, was primarily attributable to a $33.5 million decrease in revenue from our digital streaming services due to 34% fewer subscriptions on lower demand and a decrease of $3.8 million in fees from partners due to a 24% decrease in the number of partners, partially offset by an increase in revenue per subscription.
The decrease in nutrition and other revenue for the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022, was primarily attributable to a $66.9 million decrease in revenue from nutritional products due to 27% fewer nutritional subscriptions on lower demand and a $6.8 million decrease in revenue generated from our preferred customer fees as there was a 30% decrease in preferred customers and a $3.4 million decrease in fitness accessories revenue.
The decrease in connected fitness revenue for the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022, was primarily due to a 40% decrease in the number of bikes delivered and a 20% decrease in the average sales price for a bike.
30
Cost of Revenue
Digital Cost of Revenue
Digital cost of revenue includes costs associated with digital content creation including amortization and revision of content assets, depreciation of streaming platforms, digital streaming costs, and amortization of acquired digital platform intangible assets. It also includes customer service costs, payment processing fees, depreciation of production equipment, live trainer costs, facilities, and related personnel expenses.
Nutrition and Other Cost of Revenue
Nutrition and other cost of revenue includes product costs, shipping and handling, fulfillment and warehousing, customer service, and payment processing fees. It also includes depreciation of nutrition-related e-commerce websites and social commerce platforms, amortization of acquired formulae intangible assets, facilities, and related personnel expenses.
Connected Fitness Cost of Revenue
Connected fitness cost of revenue consists of product costs, including bike and tablet hardware costs, duties and other applicable importing costs, shipping and handling costs, warehousing and logistics costs, costs associated with service calls and repairs of products under warranty, payment processing and financing fees, customer service expenses, and personnel-related expenses associated with supply chain and logistics.
|
|
Three months ended September 30, |
|
|
|
|
||||||||||
|
|
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
|||||
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|||||||
Cost of revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Digital |
|
$ |
16,429 |
|
|
$ |
16,078 |
|
|
$ |
351 |
|
|
|
2 |
% |
Nutrition and other |
|
|
26,699 |
|
|
|
40,486 |
|
|
|
(13,787 |
) |
|
|
(34 |
%) |
Connected fitness |
|
|
10,091 |
|
|
|
4,745 |
|
|
|
5,346 |
|
|
NM |
|
|
Total cost of revenue |
|
$ |
53,219 |
|
|
$ |
61,309 |
|
|
$ |
(8,090 |
) |
|
|
(13 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross profit |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Digital |
|
$ |
47,910 |
|
|
$ |
56,150 |
|
|
$ |
(8,240 |
) |
|
|
(15 |
%) |
Nutrition and other |
|
|
32,282 |
|
|
|
49,930 |
|
|
|
(17,648 |
) |
|
|
(35 |
%) |
Connected fitness |
|
|
(5,161 |
) |
|
|
(1,414 |
) |
|
|
(3,747 |
) |
|
NM |
|
|
Total gross profit |
|
$ |
75,031 |
|
|
$ |
104,666 |
|
|
$ |
(29,635 |
) |
|
|
(28 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross margin |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Digital |
|
|
74.5 |
% |
|
|
77.7 |
% |
|
|
|
|
|
|
||
Nutrition and other |
|
|
54.7 |
% |
|
|
55.2 |
% |
|
|
|
|
|
|
||
Connected fitness |
|
|
(104.7 |
%) |
|
|
(42.4 |
%) |
|
|
|
|
|
|
||
Total gross margin |
|
|
58.5 |
% |
|
|
63.1 |
% |
|
|
|
|
|
|
||
The increase in digital cost of revenue for the three months ended September 30, 2023, as compared to the three months ended September 30, 2022, was primarily due to a $0.6 million increase in program revisions partially offset by a $0.4 million decrease in streaming costs due to lower platform usage. The decrease in digital gross margin for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 was primarily as a result of fixed expenses on lower digital revenue.
The decrease in nutrition and other cost of revenue for the three months ended September 30, 2023, as compared to the three months ended September 30, 2022, was primarily due to $4.3 million decrease in fulfillment and shipping expense and a $4.1 million decrease in product costs related to the decrease in nutrition and other revenue, lower inventory reserve adjustments of $1.8 million, a $0.9 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 related to nutrition and other revenue. Nutrition and other gross margin were down slightly for the three months ended September 30, 2023 compared to the three months ended September 30, 2022.
The increase in connected fitness cost of revenue for the three months ended September 30, 2023, as compared to the three months ended September 30, 2022, was driven by higher inventory reserve adjustments of $5.7 million and a $2.3 million increase in freight and shipping expenses as the result of a 183% increase in the number of bikes sold, partially offset by a $1.2 million decrease in product costs as a result of inventory reserves recorded. The connected fitness decrease in gross margin for the three months ended September 30,
31
2023 compared to the three months ended September 30, 2022 was primarily as a result of higher inventory reserves recorded and lower average sales price for a bike.
|
|
Nine months ended September 30, |
|
|
|
|
|
|
|
|||||||
|
|
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
|||||
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|||||||
Cost of revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Digital |
|
$ |
47,732 |
|
|
$ |
50,909 |
|
|
$ |
(3,177 |
) |
|
|
(6 |
%) |
Nutrition and other |
|
|
84,940 |
|
|
|
127,262 |
|
|
|
(42,322 |
) |
|
|
(33 |
%) |
Connected fitness |
|
|
26,312 |
|
|
|
80,910 |
|
|
|
(54,598 |
) |
|
|
(68 |
%) |
Total cost of revenue |
|
$ |
158,984 |
|
|
$ |
259,081 |
|
|
$ |
(100,097 |
) |
|
|
(39 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross profit |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Digital |
|
$ |
146,594 |
|
|
$ |
181,079 |
|
|
$ |
(34,485 |
) |
|
|
(19 |
%) |
Nutrition and other |
|
|
112,789 |
|
|
|
151,334 |
|
|
|
(38,545 |
) |
|
|
(26 |
%) |
Connected fitness |
|
|
(10,268 |
) |
|
|
(47,461 |
) |
|
|
37,193 |
|
|
|
78 |
% |
Total gross profit |
|
$ |
249,115 |
|
|
$ |
284,952 |
|
|
$ |
(35,837 |
) |
|
|
(13 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross margin |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Digital |
|
|
75.4 |
% |
|
|
78.1 |
% |
|
|
|
|
|
|
||
Nutrition and other |
|
|
57.0 |
% |
|
|
54.3 |
% |
|
|
|
|
|
|
||
Connected fitness |
|
|
(64.0 |
%) |
|
|
(141.9 |
%) |
|
|
|
|
|
|
||
Total gross margin |
|
|
61.0 |
% |
|
|
52.4 |
% |
|
|
|
|
|
|
||
The decrease in digital cost of revenue for the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022, was due to a $2.7 million decrease in depreciation expense as a result of the end of the useful life of certain fixed asset and a $2.2 million decrease in the amortization of content assets as a result of lower production spend. The decrease in digital gross margin for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 was primarily as a result of fixed expenses on lower digital revenue.
The decrease in nutrition and other cost of revenue for the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022, was primarily due to a $14.1 million decrease in product costs and a $12.3 million decrease in fulfillment and shipping expense related to the decrease in nutrition and other revenue, lower inventory reserve adjustments of $4.6 million, a $4.4 million decrease in depreciation expense as a result of the end of the useful life of certain fixed assets and a $3.5 million decrease in customer service expense due to a decrease in the volume of contacts related to nutrition and other revenue. Nutrition and other gross margin increased for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 primarily as a result of lower product costs and shipping.
The decrease in connected fitness cost of revenue for the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022, was driven by a $22.7 million decrease in product costs, lower inventory reserve adjustments of $21.3 million and a $5.5 million decrease in freight, fulfillment, and shipping expenses as the result of a 40% decrease in the number of bikes sold. The connected fitness negative gross margin improvement for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 was primarily as a result of lower inventory reserve adjustments and lower average sales price for a bike, partially offset by the impact of fixed warehousing expenses on lower connected fitness revenue.
32
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 September 30, |
|
|
|
|
||||||||||
|
|
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
|||||
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Selling and marketing |
|
$ |
69,127 |
|
|
$ |
93,145 |
|
|
$ |
(24,018 |
) |
|
|
(26 |
%) |
As a percentage of total revenue |
|
|
53.9 |
% |
|
|
56.1 |
% |
|
|
|
|
|
|
||
The decrease in selling and marketing expense for the three months ended September 30, 2023, as compared to the three months ended September 30, 2022, was primarily due to a $11.5 million decrease in Partner compensation as a result of lower commissionable revenue, a $7.8 million decrease in event expenses due primarily to Summit 2023 which occurred in June 2023 (in the prior year this event was held in July), a $2.7 million decrease in personnel-related expenses due to lower headcount primarily related to the restructuring activities that occurred in the first quarter of 2023 and in the prior year and a $2.5 million decrease in the amortization of intangible assets due to the impairment of certain assets in the fourth quarter of 2022 partially offset by a $2.9 million increase in online and television media expense.
Selling and marketing expense as a percentage of total revenue decreased by 220 basis points ("bps") primarily due to the timing of Summit 2023, partially offset by the decrease in revenue.
|
|
Nine months ended September 30, |
|
|
|
|
|
|
|
|||||||
|
|
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
|||||
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Selling and marketing |
|
$ |
222,195 |
|
|
$ |
286,213 |
|
|
$ |
(64,018 |
) |
|
|
(22 |
%) |
As a percentage of total revenue |
|
|
54.4 |
% |
|
|
52.6 |
% |
|
|
|
|
|
|
||
The decrease in selling and marketing expense for the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022, was primarily due to a $37.7 million decrease in Partner compensation as a result of lower commissionable revenue, a $12.6 million decrease in personnel-related expenses due to lower headcount primarily related to the restructuring activities that occurred in the first quarter of 2023 and in the prior year and a $7.5 million decrease in the amortization of intangible assets due to the impairment of certain assets in the fourth quarter of 2022.
Selling and marketing expense as a percentage of total revenue increased by 180 bps primarily due to the decrease in revenue.
33
Enterprise Technology and Development
Enterprise technology and development expenses primarily relate to enterprise systems applications, hardware, and software that serve as the technology infrastructure for the Company and are not directly related to services provided or tangible goods sold. This includes maintenance and enhancements of the Company’s enterprise resource planning system, which is the core of our accounting, procurement, supply chain and other business support systems. Enterprise technology and development also includes reporting and business analytics tools, security systems such as identity management and payment card industry compliance, office productivity software, research and development tracking tools, and other non-customer facing applications. Enterprise technology and development expenses include personnel-related expenses for employees and consultants who create improvements to and maintain technology systems and are involved in the research and development of new and existing nutritional products, depreciation of enterprise technology-related assets, software licenses, hosting expenses, and technology equipment leases.
|
|
Three months ended September 30, |
|
|
|
|
||||||||||
|
|
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
|||||
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Enterprise technology and development |
|
$ |
18,879 |
|
|
$ |
25,686 |
|
|
$ |
(6,807 |
) |
|
|
(27 |
%) |
As a percentage of total revenue |
|
|
14.7 |
% |
|
|
15.5 |
% |
|
|
|
|
|
|
||
The decrease in enterprise technology and development expense for the three months ended September 30, 2023, as compared to the three months ended September 30, 2022, was primarily due to a $3.8 million decrease in depreciation expense as a result of the end of the useful life of certain fixed assets and a $2.9 million decrease in personnel-related expenses due to lower headcount primarily related to the restructuring activities that occurred in the first quarter of 2023 and in the prior year.
Enterprise technology and development expense as a percentage of total revenue decreased by 80 bps due to lower fixed expenses.
|
|
Nine months ended September 30, |
|
|
|
|
|
|
|
|||||||
|
|
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
|||||
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Enterprise technology and development |
|
$ |
56,625 |
|
|
$ |
83,516 |
|
|
$ |
(26,891 |
) |
|
|
(32 |
%) |
As a percentage of total revenue |
|
|
13.9 |
% |
|
|
15.4 |
% |
|
|
|
|
|
|
||
The decrease in enterprise technology and development expense for the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022, was primarily due to a $17.0 million decrease in personnel-related expenses due to lower headcount primarily related to the restructuring activities that occurred in the first quarter of 2023 and in the prior year and a $9.8 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 decreased by 150 bps due to lower fixed expenses.
34
General and Administrative
General and administrative expense includes personnel-related expenses and facilities-related costs primarily for our executive, finance, accounting, legal and human resources functions. General and administrative expense also includes fees for professional services principally comprised of legal, audit, tax, and insurance.
|
|
Three months ended September 30, |
|
|
|
|
||||||||||
|
|
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
|||||
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
General and administrative |
|
$ |
14,759 |
|
|
$ |
19,532 |
|
|
$ |
(4,773 |
) |
|
|
(24 |
%) |
As a percentage of total revenue |
|
|
11.5 |
% |
|
|
11.8 |
% |
|
|
|
|
|
|
||
The decrease in general and administrative expense for the three months ended September 30, 2023, as compared to the three months ended September 30, 2022, was primarily due to a $2.1 million decrease in personnel-related expenses as a result of lower headcount, primarily related to the restructuring activities that occurred in the first quarter of 2023 and in the prior year and a $1.4 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.
General and administrative expense as a percentage of total revenue decreased by 30 bps due to lower fixed expenses.
|
|
Nine months ended September 30, |
|
|
|
|
|
|
|
|||||||
|
|
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
|||||
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
General and administrative |
|
$ |
44,362 |
|
|
$ |
59,189 |
|
|
$ |
(14,827 |
) |
|
|
(25 |
%) |
As a percentage of total revenue |
|
|
10.9 |
% |
|
|
10.9 |
% |
|
|
|
|
|
|
||
The decrease in general and administrative expense for the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022, was primarily due to a $8.8 million decrease in personnel-related expenses as a result of lower headcount primarily related to the restructuring activities that occurred in the first quarter of 2023 and in the prior year, and a $3.1 million decrease in insurance expense as some of our insurance is based on the level of the Company's revenues or the number of employees, which both have declined in the current period compared to the prior period.
General and administrative expense as a percentage of total revenue was flat.
Restructuring
In 2023, restructuring charges primarily relate to activities focused on aligning our operations with our key growth priorities, including a reduction in headcount. Restructuring charges in 2022 relate to the consolidation of our streaming fitness and nutrition offerings into a single Beachbody platform. The charges incurred primarily consist of employee termination costs.
|
|
Three months ended September 30, |
|
|
|
|
||||||||||
|
|
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
|||||
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Restructuring |
|
$ |
1,270 |
|
|
$ |
1,492 |
|
|
$ |
(222 |
) |
|
|
(15 |
%) |
|
|
Nine months ended September 30, |
|
|
|
|
|
|
|
|||||||
|
|
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
|||||
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Restructuring |
|
$ |
6,550 |
|
|
$ |
10,047 |
|
|
$ |
(3,497 |
) |
|
|
(35 |
%) |
35
Impairment of Intangible Assets
In testing for impairment of our indefinite-lived intangible asset, we compared the carrying value of the trade name to its estimated fair value. Fair value was estimated using an income approach, specifically the relief-from-royalty approach, and included significant assumptions related to the royalty rate and revenue growth. Based on this analysis, we recognized an impairment charge as the fair value of the indefinite-lived trade name was determined to be less than its carrying value primarily due to lower revenue in the current year and long-term forecast.
|
|
Three months ended September 30, |
|
|
|
|
||||||||||
|
|
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
|||||
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Impairment of intangible assets |
|
$ |
— |
|
|
$ |
1,000 |
|
|
$ |
(1,000 |
) |
|
|
(100 |
%) |
|
|
Nine months ended September 30, |
|
|
|
|
|
|
|
|||||||
|
|
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
|||||
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Impairment of intangible assets |
|
$ |
— |
|
|
$ |
1,000 |
|
|
$ |
(1,000 |
) |
|
|
(100 |
%) |
Other Income (Expense)
The change in fair value of warrant liabilities consists of the fair value changes of the public, private placement, and Term Loan warrants. Interest expense primarily consists of interest expense associated with our borrowings and amortization of debt discount and issuance costs for our Term Loan (defined below) in 2022 and Credit Facility in 2021. Other income, net, consists of interest income earned on investments and gains (losses) on foreign currency.
|
|
Three months ended September 30, |
|
|
|
|
||||||||||
|
|
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
|||||
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loss on partial debt extinguishment |
|
$ |
(3,168 |
) |
|
$ |
— |
|
|
$ |
(3,168 |
) |
|
NM |
|
|
Change in fair value of warrant liabilities |
|
|
1,072 |
|
|
|
2,362 |
|
|
|
(1,290 |
) |
|
|
(55 |
%) |
Interest expense |
|
|
(2,074 |
) |
|
|
(1,152 |
) |
|
|
(922 |
) |
|
|
80 |
% |
Other income, net |
|
|
571 |
|
|
|
571 |
|
|
|
— |
|
|
|
— |
% |
The loss on partial debt extinguishment for the three months ended September 30, 2023 was due to the partial prepayment of $15.0 million on the Term Loan as of July 24, 2023. The decrease in change in fair value of warrant liabilities during the three months ended September 30, 2023, as compared to the three months ended September 30, 2022, primarily resulted from a relatively lower decline in our stock price during the current quarter. The increase in interest expense was primarily due to borrowings under the Term Loan during the three months ended September 30, 2023 compared to borrowings outstanding for approximately half of the three months ended September 30, 2022.
|
|
Nine months ended September 30, |
|
|
|
|
|
|
|
|||||||
|
|
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
|||||
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loss on partial debt extinguishment |
|
$ |
(3,168 |
) |
|
$ |
— |
|
|
$ |
(3,168 |
) |
|
NM |
|
|
Change in fair value of warrant liabilities |
|
|
1,504 |
|
|
|
4,696 |
|
|
|
(3,192 |
) |
|
|
(68 |
%) |
Interest expense |
|
|
(6,773 |
) |
|
|
(1,174 |
) |
|
|
(5,599 |
) |
|
NM |
|
|
Other income, net |
|
|
1,551 |
|
|
|
696 |
|
|
|
855 |
|
|
NM |
|
|
The loss on partial debt extinguishment for the nine months ended September 30, 2023 was due to the partial prepayment of $15.0 million on the Term Loan as of July 24, 2023. The decrease in change in fair value of warrant liabilities during the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022, primarily resulted from a relatively lower decline in our stock price during the current period. The increase in interest expense was primarily due to borrowings under the Term Loan during the nine months ended September 30, 2023 compared to borrowings outstanding for only approximately 1.5 months during the nine
36
months ended September 30, 2022. The increase in other income was primarily due to higher interest income as a result of higher interest rates on our cash balances.
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 September 30, |
|
|
|
|||||||||
|
|
|
|
2022 |
|
|
$ Change |
|
|
% Change |
||||
|
|
(dollars in thousands) |
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||
Income tax (provision) benefit |
|
$ |
(63 |
) |
|
$ |
549 |
|
|
$ |
(612 |
) |
|
NM |
The income tax provision increase for the three months ended September 30, 2023, as compared to the three months ended September 30, 2022, was primarily driven by changes in our valuation allowance and a decrease in the net expense from discrete events.
|
|
Nine months ended September 30, |
|
|
|
|
|
|
||||||
|
|
|
|
2022 |
|
|
$ Change |
|
|
% Change |
||||
|
|
(dollars in thousands) |
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||
Income tax (provision) benefit |
|
$ |
(99 |
) |
|
$ |
1,536 |
|
|
$ |
(1,635 |
) |
|
NM |
The income tax provision increase for the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022, was primarily driven by changes in our valuation allowance and a decrease in the net expense from discrete events.
37
Liquidity and Capital Resources
|
|
Nine months ended September 30, |
|
|||||
|
|
|
|
2022 |
|
|||
|
|
(in thousands) |
|
|||||
|
|
|
|
|
|
|
||
Net cash used in operating activities |
|
$ |
(14,583 |
) |
|
$ |
(36,943 |
) |
Net cash used in investing activities |
|
|
(9,749 |
) |
|
|
(23,236 |
) |
Net cash (used in) provided by financing activities |
|
|
(17,727 |
) |
|
|
48,283 |
|
As of September 30, 2023, we had cash and cash equivalents totaling $38.2 million.
Net cash used in operating activities was $14.6 million and $36.9 million for the nine months ended September 30, 2023 and 2022, respectively. The decrease in cash used in operating activities during the nine months ended September 30, 2023, compared to the prior year period, was primarily due to a decrease in net loss of $61.7 million and an increase in cash received attributable to deferred revenue of $10.7 million partially offset by a decrease in depreciation and amortization expense of $27.5 million and a decrease in provision for inventory and inventory purchase commitments of $25.8 million.
Net cash used in investing activities was $9.7 million and $23.2 million for the nine months ended September 30, 2023 and 2022, respectively. The decrease in net cash used in investing activities was due to a decrease in capital expenditures of $17.7 million due to increased focus by management on capital expenditures, in particular related to technology partially offset by $4.3 million of investment in restricted short-term investments. The current decrease of capital expenditures as compared to the prior period is expected to continue in future periods.
Net cash used in financing activities was $17.7 million for the nine months ended September 30, 2023 compared to net cash provided by financing activities of $48.3 million for the nine months ended September 30, 2022. The change in net cash from financing activities was primarily due to debt repayments on our Term Loan and taxes associated with the vesting of restricted stock during the nine months ended September 30, 2023 compared to proceeds from stock option exercises during the nine months ended September 30, 2022.
On August 8, 2022, the Company, Beachbody, LLC, a Delaware limited liability company and wholly-owned direct subsidiary of the Company (the “Borrower”), and certain subsidiaries of the Company (together with the Company, the “Guarantors”), entered into a financing agreement (as amended, the “Financing Agreement”) with the lenders party thereto and Blue Torch Finance, LLC, ("Blue Torch") as administrative agent and collateral agent for such lenders, providing for a senior secured term loan facility in an initial aggregate principal amount of $50.0 million (the “Term Loan”). Obligations under the Financing Agreement are guaranteed by the Guarantors, and secured by a lien on and security interest in substantially all of the assets of the Borrower and the Guarantors (together with the Borrower, the “Loan Parties”), subject to customary exceptions. 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. As of September 30, 2023, the principal balance outstanding (including capitalized paid in kind interest) under the Term Loan was $35.6 million. During the three and nine months ended September 30, 2023, the Term Loan was a secured overnight financing rate ("SOFR") loan, with an effective interest rate of 19.21% and a cash interest rate of 12.21% for the nine months ended September 30, 2023.
The Financing Agreement contains financial covenants, customary representations, warranties, covenants and customary events of default. We were in compliance with the financial covenants as of September 30, 2023. See Note 9, Debt, for additional information on the Term Loan.
As of September 30, 2023, we have $21.7 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.
38
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 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 sale of additional equity would result in additional dilution to our shareholders. There can be no assurances that we will be able to raise additional capital in amounts or on terms acceptable to us.
Critical Accounting Policies and Estimates
There have been no material changes to the Company's critical accounting policies and estimates discussed in the 2022 Annual Report on Form 10-K in Item 7 under the heading Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates other than noted below.
Goodwill and Long-Lived Assets Impairment
Goodwill and intangible assets deemed to have an indefinite life are not amortized, but instead are assessed for impairment annually at October 1 and between annual tests if an event or change in circumstances occurs that would more likely than not reduce the fair value of a reporting unit ("RU") below its carrying value or indicate that it is more likely than not that an indefinite-lived intangible asset is impaired. We carry our definite-lived intangible assets at cost less accumulated amortization. If an event or change in circumstances occurs that indicates the carrying value may not be recoverable, we would evaluate our definite-lived intangible assets for impairment at that time.
We test goodwill for impairment at a level within the Company referred to as the RU. Due to the continued sustained decline in our market capitalization and macroeconomic factors observed during the three months ended June 30, 2023, we performed an interim test for impairment of our goodwill.
In performing the interim impairment test for goodwill, we elected to bypass the qualitative assessment and proceeded to performing the quantitative test. We compared the carrying value of the RU to its estimated fair value. Fair value is estimated using a combination of a market approach and an income approach, with significant assumptions related to guideline company financial multiples used in the market approach and significant assumptions about revenue growth, long-term growth rates, and discount rates used in a discounted cash flow model in the income approach. As of June 30, 2023, the RUs fair value exceeded the carrying value by approximately 11%.
Due to reduced revenue and margin forecasts we tested the related asset group for recoverability as of June 30, 2023. In testing for recoverability, we compared the carrying value of the asset group to its forecasted undiscounted cash flows to determine whether it was recoverable. Because the carrying value of the asset group did not exceed its future undiscounted cash flows, we then calculated the fair value of the assets within the asset group. The fair value of the formulae intangible assets, which is the long-lived asset within the asset group, was calculated to be greater than its carrying value. As a result, no impairment was recognized.
Due to reduced revenue and margin forecasts for certain supplements, we performed an interim test for impairment of certain indefinite-lived intangible assets as of September 30, 2022. The fair value of the indefinite-lived trade name was calculated using a relief-from-royalty approach and was determined to be lower than its carrying value, primarily due to the reduced revenue and margin forecasts for certain supplements. We recorded a $1.0 million non-cash impairment charge for these intangible assets during the three and nine months ended September 30, 2022. As of September 30, 2023, the Company has no indefinite-lived intangible assets.
Management will continue to monitor its RU for changes in the business environment that could impact its fair value. Examples of events or circumstances that could result in changes to the underlying key assumptions and judgments used in our goodwill impairment tests, and ultimately impact the estimated fair value of our RU may include supply chain disruptions and demand for at-home fitness solutions; adverse macroeconomic conditions; volatility in the equity and debt markets which could result in higher weighted-average cost of capital and our subscriber growth rates. Changes in any of the assumptions used in the valuation of the RU, or changes in the business environment could materially affect the expected cash flows, and such impacts could potentially result in a material non-cash impairment charge.
Recent Accounting Pronouncements
39
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 nine months ended September 30, 2023 and 2022, approximately 10% of our revenue was in foreign currencies. These sales were primarily denominated in Canadian dollars and British pounds.
We use derivative instruments to manage the effects of fluctuations in foreign currency exchange rates on our net cash flows. We primarily enter into option contracts to hedge forecasted payments, typically for up to 12 months, for cost of revenue, selling and marketing expenses, general and administrative expenses and intercompany transactions not denominated in the local currencies of our foreign operations. We designate some of these instruments as cash flow hedges and record them at fair value as either assets or liabilities within the consolidated balance sheets. Some of these instruments are freestanding derivatives for which hedge accounting does not apply.
Changes in the fair value of cash flow hedges are recorded in accumulated other comprehensive income (loss) until the hedged forecasted transaction affects earnings. Deferred gains and losses associated with cash flow hedges of third-party payments are recognized in cost of revenue, selling and marketing or general and administrative expenses, as applicable, during the period when the hedged underlying transaction affects earnings. Changes in the fair value of certain derivatives for which hedge accounting does not apply are immediately recognized directly in earnings to cost of revenue.
A hypothetical 10% change in exchange rates, with the U.S. dollar as the functional and reporting currency, would result in an approximate $1.5 million increase or decrease in cost of revenue and operating expenses due to the derivative instruments we use to hedge any foreign currency exposure.
The aggregate notional amount of foreign exchange derivative instruments at September 30, 2023 and year ended December 31, 2022 was $10.0 million and $17.6 million, respectively.
Item 4. Controls and Procedures.
Management’s Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of September 30, 2023. Based upon that evaluation, as a result of the material weaknesses identified in our 2022 Form 10-K, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this Report.
As previously disclosed in our 2022 Form 10-K for the year ended December 31, 2022 management concluded that our internal control over financial reporting were not effective as of December 31, 2022. Management is in the process of enhancing, and will continue to enhance, the risk assessment process and design and implementation of internal control over financial reporting. The remediation measures to correct the previously identified material weaknesses include enhancing the design and implementation of existing controls and creating new controls as needed to address identified risks and provide additional training to personnel including the appropriate level of documentation to be maintained to support internal control over financial reporting.
As we continue to evaluate and work to improve our internal control over financial reporting, management may determine to take additional measures to strengthen controls or to modify the remediation plan described above. When fully implemented and operational, we believe the controls we have designed, or plan to design, will remediate the control deficiencies that have led to the material weaknesses that we have identified. The previously identified material weaknesses will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.
Changes in Internal Control Over Financial Reporting
Other than with respect to the remediation efforts described above in connection with the previously identified material weaknesses in our 2022 Form 10-K, there have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and
40
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, 2022.
In May 2023, a class of similarly situated individuals filed a class action complaint against the Company and certain of our executives in the Superior Court of California for the County of Los Angeles. The complaint alleged misclassification of the Company’s Partners as independent contractors, rather than as employees, under the California Labor Code and sought, among other things, recovery of unpaid wages, penalties and injunctive relief. The court’s first availability for an arbitration hearing on the matter has been delayed until April 2024. We continue to deny liability with respect to the claims set forth in the complaint, and intend to defend vigorously against any such claims. As of September 30, 2023, we cannot reasonably estimate a loss or a range of losses, for this matter.
In September 2023, DISH Technologies L.L.C. and Sling TV L.L.C. (collectively, "DISH") filed a complaint against Beachbody, LLC, a wholly owned subsidiary of the Company, in the United States District Court for the District of Delaware. The complaint alleged infringement of various patents related to the distribution and playback of the Company's fitness content via the internet. We continue to deny liability with respect to the claims set forth by DISH in the complaint, and intend to defend vigorously against any such claims. As of September 30, 2023, we cannot reasonably estimate a loss or a range of losses, for this matter.
Item 1A. Risk Factors.
Other than with respect to the material weaknesses described elsewhere in this Quarterly Report on Form 10-Q, there have been no material developments with respect to the information previously reported under Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022. 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.
None.
Item 5. Other Information.
Clawback Policy
On September 14, 2023, the Compensation Committee of the Board of Directors of the Company adopted the Policy for Recovery of Erroneously Awarded Compensation (the “Clawback Policy”). The Clawback Policy, which became effective as of October 2, 2023, is administered by the Compensation Committee.
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The Clawback Policy provides, among other things, that in the event that the Company is required to prepare an accounting restatement to correct the Company’s material noncompliance with any financial reporting requirement under securities laws, including restatements that correct an error in previously issued financial statements (a) that is material to the previously issued financial statements or (b) that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period (collectively, a “Restatement”), the Company shall recover erroneously awarded incentive-based compensation from its current or former officers in accordance with the Clawback Policy, unless the Compensation Committee determines that recovery would be impracticable. The recovery of such compensation applies regardless of (i) whether the applicable officer engaged in misconduct or otherwise caused or contributed to the requirement for a Restatement, and (ii) whether or when the Company files restated financial statements.
The foregoing description of the terms of the Clawback Policy does not purport to be complete and is qualified in its entirety by reference to the full text of the Clawback Policy, which is filed as Exhibit 10.4 to this Quarterly Report on Form 10-Q.
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Item 6. Exhibits.
Exhibit
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Filed or Furnished herewith
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Form
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Exhibit
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Filing Date
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File No.
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3.1 |
Amended and Restated Certificate of Incorporation of The Beachbody Company, Inc. |
8-K |
3.1 |
7/1/2021 |
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3.2 |
8-K |
3.2 |
7/1/2021 |
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4.1 |
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* |
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10.1 |
10-Q |
10.2 |
8/8/2022 |
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10.2+ |
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* |
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10.3+ |
8-K |
10.1 |
7/26/2023 |
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10.4^ |
The Beachbody Company, Inc. Compensation Clawback Policy, effective as of October 2, 2023. |
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* |
31.1 |
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a) |
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* |
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31.2 |
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a) |
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* |
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32.1 |
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** |
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101.INS |
Inline XBRL Instance Document |
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* |
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101.SCH |
Inline XBRL Taxonomy Extension Schema Document |
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* |
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101.CAL |
Inline XBRL Taxonomy Calculation Linkbase Document |
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* |
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101.DEF |
Inline XBRL Taxonomy Definition Linkbase Document |
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* |
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101.LAB |
Inline XBRL Taxonomy Extension Label Linkbase Document |
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* |
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101.PRE |
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
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* |
104 |
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
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** Furnished herewith.
+ Schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company will furnish copies of any such schedules and exhibits to the SEC upon request.
^ Indicates management contract or compensatory plan.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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The Beachbody Company, Inc. |
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Date: November 7, 2023 |
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By: |
/s/ Carl Daikeler |
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Chief Executive Officer |
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(Principal Executive Officer) |
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Date: November 7, 2023 |
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By: |
/s/ Marc Suidan |
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Chief Financial Officer |
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(Principal Financial Officer) |
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| This ‘10-Q’ Filing | Date | Other Filings | ||
|---|---|---|---|---|
 | ||||
| 12/31/27 | ||||
| 12/31/26 | ||||
| 8/8/26 | ||||
| 2/8/26 | ||||
| 12/31/25 | ||||
| 12/31/24 | ||||
| 9/30/24 | ||||
| 7/26/24 | ||||
| 6/15/24 | ||||
| 3/31/24 | ||||
| 12/31/23 | ||||
| Filed on: | 11/7/23 | 8-K | ||
| 11/1/23 | ||||
| 10/2/23 | 4, S-3 | |||
| For Period end: | 9/30/23 | |||
| 9/29/23 | 4, PRE 14A | |||
| 9/14/23 | 4 | |||
| 7/24/23 | 8-K | |||
| 6/30/23 | 10-Q | |||
| 6/15/23 | 3, 4, 8-K, S-8 | |||
| 6/14/23 | 8-K | |||
| 3/31/23 | 10-Q | |||
| 1/1/23 | ||||
| 12/31/22 | 10-K, 10-K/A, ARS | |||
| 9/30/22 | 10-Q | |||
| 8/8/22 | 10-Q, 8-K | |||
| 6/30/22 | 10-Q | |||
| 3/31/22 | 10-Q, DEF 14A, DEFA14A | |||
| 1/1/22 | ||||
| 12/31/21 | 10-K | |||
| List all Filings | ||||
As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent 4/30/24 Beachbody Co., Inc. S-1/A 123:12M Donnelley … Solutions/FA 4/30/24 Beachbody Co., Inc. POS AM 123:13M Donnelley … Solutions/FA 3/11/24 Beachbody Co., Inc. 10-K 12/31/23 129:17M Donnelley … Solutions/FA 1/24/24 Beachbody Co., Inc. S-1 134:16M Donnelley … Solutions/FA 12/13/23 Beachbody Co., Inc. 424B5 1:524K Donnelley … Solutions/FA |
As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent 7/26/23 Beachbody Co., Inc. 8-K:1,2,9 7/24/23 13:1.3M Donnelley … Solutions/FA 8/08/22 Beachbody Co., Inc. 10-Q 6/30/22 91:16M Donnelley … Solutions/FA 7/01/21 Beachbody Co., Inc. 8-K:1,2,3,5 6/25/21 10:2.4M Donnelley … Solutions/FA |