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As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent 8/08/22 Beachbody Co., Inc. 10-Q 6/30/22 91:16M Donnelley … Solutions/FA |
Document/Exhibit Description Pages Size
1: 10-Q Quarterly Report HTML 4.28M
2: EX-10.1 Material Contract HTML 74K
3: EX-10.2 Material Contract HTML 1.68M
4: EX-10.3 Material Contract HTML 195K
5: EX-31.1 Certification -- §302 - SOA'02 HTML 34K
6: EX-31.2 Certification -- §302 - SOA'02 HTML 33K
7: EX-32.1 Certification -- §906 - SOA'02 HTML 32K
13: R1 Cover Page HTML 87K
14: R2 Condensed Consolidated Balance Sheets HTML 130K
15: R3 Condensed Consolidated Balance Sheets HTML 50K
(Parenthetical)
16: R4 Unaudited Condensed Consolidated Statements of HTML 119K
Operations
17: R5 Unaudited Condensed Consolidated Statements of HTML 57K
Comprehensive Loss
18: R6 Unaudited Condensed Consolidated Statements of HTML 86K
Stockholders' Equity
19: R7 Unaudited Condensed Consolidated Statements of HTML 28K
Stockholders' Equity (Parenthetical)
20: R8 Unaudited Condensed Consolidated Statements of HTML 140K
Cash Flows
21: R9 Description of Business and Summary of Accounting HTML 54K
Policies
22: R10 Revenue HTML 297K
23: R11 Fair Value Measurements HTML 205K
24: R12 Inventory, Net HTML 50K
25: R13 Other Current Assets HTML 50K
26: R14 Property and Equipment, Net HTML 126K
27: R15 Accrued Expenses HTML 65K
28: R16 Commitments and Contingencies HTML 55K
29: R17 Acquisition HTML 43K
30: R18 Stockholders' Equity HTML 175K
31: R19 Equity-Based Compensation HTML 192K
32: R20 Derivative Financial Instruments HTML 102K
33: R21 Strategic Realignment HTML 97K
34: R22 Income Taxes HTML 38K
35: R23 Earnings (Loss) Per Share HTML 114K
36: R24 Segment Information HTML 209K
37: R25 Subsequent Events HTML 39K
38: R26 Description of Business and Summary of Accounting HTML 56K
Policies (Polices)
39: R27 Revenue (Tables) HTML 289K
40: R28 Fair Value Measurements (Tables) HTML 205K
41: R29 Inventory, Net (Tables) HTML 46K
42: R30 Other Current Assets (Table) HTML 50K
43: R31 Property and equipment, net (Tables) HTML 126K
44: R32 Accrued Expenses (Tables) HTML 64K
45: R33 Commitments and Contingencies (Tables) HTML 44K
46: R34 Acquisition (Tables) HTML 43K
47: R35 Stockholders' Equity (Tables) HTML 167K
48: R36 Equity-Based Compensation (Tables) HTML 191K
49: R37 Derivative Financial Instruments (Tables) HTML 99K
50: R38 Strategic Realignment (Tables) HTML 85K
51: R39 Earnings (Loss) Per Share (Tables) HTML 114K
52: R40 Segment Information (Tables) HTML 205K
53: R41 Description of Business and Summary of Accounting HTML 69K
Policies - Additional Information (Details)
54: R42 Revenue - Disaggregation of Revenue (Details) HTML 63K
55: R43 Revenue - Additional Information (Details) HTML 30K
56: R44 Fair Value Measurements - Summary of Fair Value HTML 47K
Measurements, Recurring and Nonrecurring (Details)
57: R45 Fair Value Measurements - Summary of Fair Value of HTML 38K
Significant Assumptions Utilized in the Valuation
(Details)
58: R46 Fair Value Measurements - Summary of Change in the HTML 35K
Fair Value of the Warrants (Details)
59: R47 Inventory, Net - Schedule of Inventory, Current HTML 32K
(Details)
60: R48 Inventory, Net - Additional Information (Details) HTML 28K
61: R49 Other Current Assets - Summary of Other Current HTML 36K
Assets (Details)
62: R50 Property and equipment, net - Summary of Property HTML 47K
and Equipment, Net (Details)
63: R51 Property and equipment, net - Summary of HTML 38K
Depreciation Expense Related to Property and
Equipment (Details)
64: R52 Accrued Expenses - Summary of Accrued Expenses HTML 43K
(Details)
65: R53 Commitments and Contingencies - Additional HTML 39K
Information (Details)
66: R54 Commitments and Contingencies - Summary of HTML 39K
Purchase Obligation, Fiscal Year Maturity
(Details)
67: R55 Acquisition - Additional Information (Details) HTML 31K
68: R56 Acquisition - Summary of Business Acquisition Pro HTML 31K
Forma Information (Details)
69: R57 Stockholders' Equity - Additional Information HTML 37K
(Details)
70: R58 Stockholders' Equity - Summarize Changes in HTML 55K
Accumulated Other Comprehensive Loss (Details)
71: R59 Equity-Based Compensation - Additional Information HTML 37K
(Details)
72: R60 Equity-Based Compensation - Summary of the Option HTML 65K
Activity under the Equity Compensation Plans
(Details)
73: R61 Equity-Based Compensation - Summary of RSU HTML 48K
Activity (Details)
74: R62 Equity-Based Compensation - Summary of Assumptions HTML 38K
Used to Determine the Fair Value of Option Grants
(Details)
75: R63 Equity-Based Compensation - Summary of HTML 39K
Equity-Based Compensation Expense - Summary of
Equity-Based Compensation Expense (Details)
76: R64 Derivative Financial Instruments - Additional HTML 32K
Information (Details)
77: R65 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)
78: R66 Strategic Realignment - Additional Information HTML 39K
(Details)
79: R67 Strategic Realignment - Summary of Restructuring HTML 37K
Related Liability and Restructuring Costs Activity
(Details)
80: R68 Income Taxes - Additional Information (Details) HTML 32K
81: R69 Earnings (Loss) Per Share - Summary of the HTML 59K
Computation of Loss Per Share of Class A and Class
X Common Stock (Details)
82: R70 Earnings (Loss) Per Share - Summary of Common HTML 42K
Shares That Are Excluded From the Computation of
Diluted Net Loss Per Common Share (Details)
83: R71 Segment Information - Additional Information HTML 30K
(Details)
84: R72 Segment Information - Summary Information by HTML 38K
Segment (Details)
85: R73 Segment Information - Reconciliation of HTML 52K
Consolidated Contribution to Loss before Income
Taxes (Details)
86: R74 Subsequent Events -Additional Information HTML 68K
(Details)
89: XML IDEA XML File -- Filing Summary XML 167K
87: XML XBRL Instance -- body-20220630_htm XML 3.85M
88: EXCEL IDEA Workbook of Financial Reports XLSX 134K
8: EX-101.CAL XBRL Calculations -- body-20220630_cal XML 165K
10: EX-101.DEF XBRL Definitions -- body-20220630_def XML 686K
11: EX-101.LAB XBRL Labels -- body-20220630_lab XML 1.23M
9: EX-101.PRE XBRL Presentations -- body-20220630_pre XML 914K
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90: JSON XBRL Instance as JSON Data -- MetaLinks 402± 644K
91: ZIP XBRL Zipped Folder -- 0000950170-22-015566-xbrl Zip 612K
| 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 June 30, i 2022 /
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 170,263,772 shares of the registrant’s Class A Common Stock, par value $0.0001 per share, and i 141,250,310 shares of the registrant’s Class X Common Stock, par value $0.0001 per share, outstanding as of August 04, 2022.
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 |
22 |
Item 3. |
37 |
|
Item 4. |
37 |
|
Part II. |
38 |
|
Item 1. |
38 |
|
Item 2. |
38 |
|
Item 3. |
38 |
|
Item 4. |
38 |
|
Item 5. |
38 |
|
Item 6. |
40 |
|
41 |
||
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
The Beachbody Company, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)
|
|
June 30, |
|
|
|
|||
|
|
|
|
2021 |
|
|||
|
|
(unaudited) |
|
|
|
|
||
Assets |
|
|
|
|
|
|
||
Current assets: |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
i 57,060 |
|
|
$ |
i 104,054 |
|
Restricted cash |
|
|
- |
|
|
|
i 3,000 |
|
Inventory, net |
|
|
i 72,271 |
|
|
|
i 132,730 |
|
Prepaid expenses |
|
|
i 10,317 |
|
|
|
i 15,861 |
|
Other current assets |
|
|
i 44,828 |
|
|
|
i 43,727 |
|
Total current assets |
|
|
i 184,476 |
|
|
|
i 299,372 |
|
Property and equipment, net |
|
|
i 92,301 |
|
|
|
i 113,098 |
|
Content assets, net |
|
|
i 38,098 |
|
|
|
i 39,347 |
|
Goodwill and intangible assets, net |
|
|
i 162,361 |
|
|
|
i 171,533 |
|
Other assets |
|
|
i 12,803 |
|
|
|
i 14,262 |
|
Total assets |
|
$ |
i 490,039 |
|
|
$ |
i 637,612 |
|
Liabilities and Stockholders’ Equity |
|
|
|
|
|
|
||
Current liabilities: |
|
|
|
|
|
|
||
Accounts payable |
|
$ |
i 22,676 |
|
|
$ |
i 48,379 |
|
Accrued expenses |
|
|
i 62,349 |
|
|
|
i 74,525 |
|
Deferred revenue |
|
|
i 107,282 |
|
|
|
i 107,095 |
|
Other current liabilities |
|
|
i 4,564 |
|
|
|
i 6,233 |
|
Total current liabilities |
|
|
i 196,871 |
|
|
|
i 236,232 |
|
Deferred tax liabilities |
|
|
i 2,031 |
|
|
|
i 3,165 |
|
Other liabilities |
|
|
i 10,981 |
|
|
|
i 12,830 |
|
Total liabilities |
|
|
i 209,883 |
|
|
|
i 252,227 |
|
Commitments and contingencies (Note 8) |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
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 170,263,772 / and
i i 168,333,463 / shares issued and |
|
|
i 17 |
|
|
|
i 17 |
|
Class X: i i 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 620,643 |
|
|
|
i 610,418 |
|
Accumulated other comprehensive loss |
|
|
( i 75 |
) |
|
|
( i 21 |
) |
Accumulated deficit |
|
|
( i 340,443 |
) |
|
|
( i 225,043 |
) |
Total stockholders’ equity |
|
|
i 280,156 |
|
|
|
i 385,385 |
|
Total liabilities and stockholders’ equity |
|
$ |
i 490,039 |
|
|
$ |
i 637,612 |
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
The Beachbody Company, Inc.
Unaudited Condensed Consolidated Statements of Operations
(in thousands, except per share data)
|
|
Three months ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Digital |
|
$ |
i 78,015 |
|
|
$ |
i 94,325 |
|
|
$ |
i 159,760 |
|
|
$ |
i 189,475 |
|
Connected fitness |
|
|
i 10,605 |
|
|
|
i 10 |
|
|
|
i 30,118 |
|
|
|
i 10 |
|
Nutrition and other |
|
|
i 90,516 |
|
|
|
i 128,773 |
|
|
|
i 188,180 |
|
|
|
i 259,842 |
|
Total revenue |
|
|
i 179,136 |
|
|
|
i 223,108 |
|
|
|
i 378,058 |
|
|
|
i 449,327 |
|
Cost of revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Digital |
|
|
i 18,406 |
|
|
|
i 11,612 |
|
|
|
i 34,831 |
|
|
|
i 22,734 |
|
Connected fitness |
|
|
i 31,459 |
|
|
|
i 156 |
|
|
|
i 76,165 |
|
|
|
i 156 |
|
Nutrition and other |
|
|
i 42,002 |
|
|
|
i 57,002 |
|
|
|
i 86,776 |
|
|
|
i 113,997 |
|
Total cost of revenue |
|
|
i 91,867 |
|
|
|
i 68,770 |
|
|
|
i 197,772 |
|
|
|
i 136,887 |
|
Gross profit |
|
|
i 87,269 |
|
|
|
i 154,338 |
|
|
|
i 180,286 |
|
|
|
i 312,440 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Selling and marketing |
|
|
i 86,624 |
|
|
|
i 140,194 |
|
|
|
i 193,068 |
|
|
|
i 284,890 |
|
Enterprise technology and development |
|
|
i 24,133 |
|
|
|
i 26,949 |
|
|
|
i 57,830 |
|
|
|
i 54,038 |
|
General and administrative |
|
|
i 19,584 |
|
|
|
i 17,231 |
|
|
|
i 39,657 |
|
|
|
i 35,177 |
|
Restructuring |
|
|
i 1,332 |
|
|
|
— |
|
|
|
i 8,555 |
|
|
|
— |
|
Total operating expenses |
|
|
i 131,673 |
|
|
|
i 184,374 |
|
|
|
i 299,110 |
|
|
|
i 374,105 |
|
Operating loss |
|
|
( i 44,404 |
) |
|
|
( i 30,036 |
) |
|
|
( i 118,824 |
) |
|
|
( i 61,665 |
) |
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Change in fair value of warrant liabilities |
|
|
i 2,070 |
|
|
|
i 5,390 |
|
|
|
i 2,334 |
|
|
|
i 5,390 |
|
Interest expense |
|
|
( i 3 |
) |
|
|
( i 305 |
) |
|
|
( i 22 |
) |
|
|
( i 428 |
) |
Other income, net |
|
|
i 189 |
|
|
|
i 1,654 |
|
|
|
i 125 |
|
|
|
i 2,953 |
|
Loss before income taxes |
|
|
( i 42,148 |
) |
|
|
( i 23,297 |
) |
|
|
( i 116,387 |
) |
|
|
( i 53,750 |
) |
Income tax benefit |
|
|
i 281 |
|
|
|
i 10,857 |
|
|
|
i 987 |
|
|
|
i 11,252 |
|
Net loss |
|
$ |
( i 41,867 |
) |
|
$ |
( i 12,440 |
) |
|
$ |
( i 115,400 |
) |
|
$ |
( i 42,498 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss per common share, basic and diluted |
|
$ |
( i i 0.14 / |
) |
|
$ |
( i i 0.05 / |
) |
|
$ |
( i i 0.38 / |
) |
|
$ |
( i i 0.17 / |
) |
Weighted-average common shares outstanding, basic and diluted |
|
|
i i 307,205 / |
|
|
|
i i 247,062 / |
|
|
|
i i 306,786 / |
|
|
|
i i 245,049 / |
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
The Beachbody Company, Inc.
Unaudited Condensed Consolidated Statements of Comprehensive Loss
(in thousands)
|
|
Three months ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss |
|
$ |
( i 41,867 |
) |
|
$ |
( i 12,440 |
) |
|
$ |
( i 115,400 |
) |
|
$ |
( i 42,498 |
) |
Other comprehensive loss: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Change in fair value of derivative financial instruments, net of tax |
|
|
i 35 |
|
|
|
( i 99 |
) |
|
|
( i 150 |
) |
|
|
( i 208 |
) |
Reclassification of losses on derivative financial instruments |
|
|
i 74 |
|
|
|
i 172 |
|
|
|
i 143 |
|
|
|
i 339 |
|
Foreign currency translation adjustment |
|
|
( i 51 |
) |
|
|
i 12 |
|
|
|
( i 47 |
) |
|
|
i 54 |
|
Total other comprehensive income (loss) |
|
|
i 58 |
|
|
|
i 85 |
|
|
|
( i 54 |
) |
|
|
i 185 |
|
Total comprehensive loss |
|
$ |
( i 41,809 |
) |
|
$ |
( i 12,355 |
) |
|
$ |
( i 115,454 |
) |
|
$ |
( i 42,313 |
) |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5
The Beachbody Company, Inc.
Unaudited Condensed Consolidated Statements of Stockholders’ Equity
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
Retained |
|
|
|
|
||||||
|
|
|
|
|
|
|
|
Additional |
|
|
Other |
|
|
Earnings |
|
|
Total |
|
||||||
|
|
Common Stock |
|
|
Paid-In |
|
|
Comprehensive |
|
|
(Accumulated) |
|
|
Stockholders’ |
|
|||||||||
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Loss |
|
|
(Deficit) |
|
|
Equity |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Balances at December 31, 2020 |
|
|
i 243,013 |
|
|
$ |
i 24 |
|
|
$ |
i 96,097 |
|
|
$ |
( i 202 |
) |
|
$ |
i 3,339 |
|
|
$ |
i 99,258 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( i 30,058 |
) |
|
|
( i 30,058 |
) |
Other comprehensive income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 100 |
|
|
|
— |
|
|
|
i 100 |
|
Equity-based compensation |
|
|
— |
|
|
|
— |
|
|
|
i 2,573 |
|
|
|
— |
|
|
|
— |
|
|
|
i 2,573 |
|
Balances at March 31, 2021 |
|
|
i 243,013 |
|
|
$ |
i 24 |
|
|
$ |
i 98,670 |
|
|
$ |
( i 102 |
) |
|
$ |
( i 26,719 |
) |
|
$ |
i 71,873 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( i 12,440 |
) |
|
|
( i 12,440 |
) |
Other comprehensive income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 85 |
|
|
|
— |
|
|
|
i 85 |
|
Equity-based compensation |
|
|
— |
|
|
|
— |
|
|
|
i 2,522 |
|
|
|
— |
|
|
|
— |
|
|
|
i 2,522 |
|
Business Combination, net of redemptions |
|
|
i 51,617 |
|
|
|
i 5 |
|
|
|
i 333,850 |
|
|
|
— |
|
|
|
— |
|
|
|
i 333,855 |
|
Common shares issued in connection with |
|
|
i 13,546 |
|
|
|
i 2 |
|
|
|
i 162,556 |
|
|
|
— |
|
|
|
— |
|
|
|
i 162,558 |
|
Balances at June 30, 2021 |
|
|
i 308,176 |
|
|
$ |
i 31 |
|
|
$ |
i 597,598 |
|
|
$ |
( i 17 |
) |
|
$ |
( i 39,159 |
) |
|
$ |
i 558,453 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
Additional |
|
|
Other |
|
|
|
|
|
Total |
|
||||||
|
|
Common Stock |
|
|
Paid-In |
|
|
Comprehensive |
|
|
Accumulated |
|
|
Stockholders’ |
|
|||||||||
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Loss |
|
|
Deficit |
|
|
Equity |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Balances at December 31, 2021 |
|
|
i 309,584 |
|
|
$ |
i 31 |
|
|
$ |
i 610,418 |
|
|
$ |
( i 21 |
) |
|
$ |
( i 225,043 |
) |
|
$ |
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 133 |
) |
|
$ |
( i 298,576 |
) |
|
$ |
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 75 |
) |
|
$ |
( i 340,443 |
) |
|
$ |
i 280,156 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6
The Beachbody Company, Inc.
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)
|
|
Six months ended June 30, |
|
|||||
|
|
|
|
2021 |
|
|||
|
|
|
|
|
|
|
||
Cash flows from operating activities: |
|
|
|
|
|
|
||
Net loss |
|
$ |
( i 115,400 |
) |
|
$ |
( i 42,498 |
) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
||
Depreciation and amortization expense |
|
|
i 41,552 |
|
|
|
i 25,941 |
|
Amortization of content assets |
|
|
i 13,180 |
|
|
|
i 6,119 |
|
Provision for inventory and net realizable value adjustment |
|
|
i 32,019 |
|
|
|
i 2,791 |
|
Realized losses on hedging derivative financial instruments |
|
|
i 143 |
|
|
|
i 339 |
|
Gain on investment in convertible instrument |
|
|
— |
|
|
|
( i 3,114 |
) |
Change in fair value of warrant liabilities |
|
|
( i 2,334 |
) |
|
|
( i 5,390 |
) |
Equity-based compensation |
|
|
i 7,565 |
|
|
|
i 5,095 |
|
Deferred income taxes |
|
|
( i 1,143 |
) |
|
|
( i 11,349 |
) |
Other non-cash items |
|
|
i 311 |
|
|
|
— |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
||
Inventory |
|
|
i 28,400 |
|
|
|
( i 194 |
) |
Content assets |
|
|
( i 11,940 |
) |
|
|
( i 14,237 |
) |
Prepaid expenses |
|
|
i 5,545 |
|
|
|
( i 1,789 |
) |
Other assets |
|
|
i 167 |
|
|
|
( i 5,774 |
) |
Accounts payable |
|
|
( i 22,753 |
) |
|
|
i 6,656 |
|
Accrued expenses |
|
|
( i 7,739 |
) |
|
|
( i 461 |
) |
Deferred revenue |
|
|
i 1,000 |
|
|
|
i 16,547 |
|
Other liabilities |
|
|
( i 1,829 |
) |
|
|
( i 4,169 |
) |
Net cash used in operating activities |
|
|
( i 33,256 |
) |
|
|
( i 25,487 |
) |
Cash flows from investing activities: |
|
|
|
|
|
|
||
Purchase of property and equipment |
|
|
( i 19,222 |
) |
|
|
( i 27,200 |
) |
Investment in convertible instrument |
|
|
— |
|
|
|
( i 5,000 |
) |
Other investment |
|
|
— |
|
|
|
( i 5,000 |
) |
Cash paid for acquisition, net of cash acquired |
|
|
— |
|
|
|
( i 37,280 |
) |
Net cash used in investing activities |
|
|
( i 19,222 |
) |
|
|
( i 74,480 |
) |
Cash flows from financing activities: |
|
|
|
|
|
|
||
Proceeds from exercise of stock options |
|
|
i 2,968 |
|
|
|
— |
|
Remittance of taxes withheld from employee stock awards |
|
|
( i 308 |
) |
|
|
— |
|
Borrowings under Credit Facility |
|
|
— |
|
|
|
i 42,000 |
|
Repayments under Credit Facility |
|
|
— |
|
|
|
( i 42,000 |
) |
Business combination, net of issuance costs paid |
|
|
— |
|
|
|
i 389,775 |
|
Net cash provided by financing activities |
|
|
i 2,660 |
|
|
|
i 389,775 |
|
Effect of exchange rates on cash |
|
|
( i 176 |
) |
|
|
i 594 |
|
Net (decrease) increase in cash and cash equivalents |
|
|
( i 49,994 |
) |
|
|
i 290,402 |
|
Cash, cash equivalents and restricted cash, beginning of period |
|
|
i 107,054 |
|
|
|
i 56,827 |
|
Cash and cash equivalents, end of period |
|
$ |
i 57,060 |
|
|
$ |
i 347,229 |
|
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
||
Cash paid during the year for interest |
|
$ |
i 17 |
|
|
$ |
i 283 |
|
Cash paid during the year for income taxes, net |
|
|
i 310 |
|
|
|
i 198 |
|
Supplemental disclosure of noncash investing activities: |
|
|
|
|
|
|
||
Property and equipment acquired but not yet paid for |
|
$ |
i 2,330 |
|
|
$ |
i 15,322 |
|
Class A Common Stock issued in connection with acquisition |
|
|
— |
|
|
|
i 162,558 |
|
Fair value of Myx instrument and promissory note held by Old Beachbody |
|
|
— |
|
|
|
i 22,618 |
|
Supplemental disclosure of noncash financing activities: |
|
|
|
|
|
|
||
Business Combination transaction costs, accrued but not paid |
|
|
— |
|
|
|
i 650 |
|
Net assets assumed in the Business Combination |
|
|
— |
|
|
|
i 293 |
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
7
The Beachbody Company, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
1. Description of Business and Summary of Significant Accounting Policies
Business
The Beachbody Company, Inc. (“Beachbody” or the “Company”) is a leading subscription health and wellness company and the creator of some of the world’s most popular fitness programs. The Company’s fitness programs are available for streaming through subscription to the Beachbody On Demand (“BOD”) or Openfit digital platform, and, together with the Company’s live fitness and comprehensive nutrition programs, through subscription to Beachbody On Demand Interactive (“BODi”). Beachbody offers nutritional products such as Shakeology nutrition shakes, BEACHBAR snack bars, and Ladder premium supplements, which have been designed and clinically tested to help customers achieve their goals. Beachbody also offers a professional-grade stationary cycle with a 360-degree touch screen tablet and connected fitness software. The Company’s revenue has historically been generated primarily through a network of micro-influencers (“Coaches”), social media marketing channels, and direct response advertising. During the six months ended June 30, 2022, the Company commenced a process of consolidating its Openfit streaming fitness offering onto a single Beachbody digital platform. See Note 13, Strategic Realignment, for additional information regarding our strategic realignment initiative.
Basis of Presentation and Principles of Consolidation
The Company prepares its consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) as determined by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) and pursuant to the regulations of the U.S. Securities and Exchange Commission (“SEC”).
The preparation of unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that impact the amounts reported in the unaudited condensed consolidated financial statements and accompanying notes. Significant estimates include, but are not limited to, the useful life and recoverability of long-lived assets, the recognition and measurement of income tax assets and liabilities, the valuation of intangible assets, impairment of goodwill, and the net realizable value of inventory. The Company bases these estimates on historical experience and on various other assumptions that it believes are reasonable under the circumstances, the results of which form the basis for making judgements about the carrying amounts of assets and liabilities. Actual results could differ from those estimates.
The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited annual consolidated financial statements and, in the opinion of management, include all normal recurring adjustments necessary for the fair statement of the Company’s financial position, results of operations, and cash flows. The financial data and other financial information disclosed in the notes to these unaudited condensed consolidated financial statements are also unaudited. These unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. Interim results are not necessarily indicative of the results expected for the full fiscal year or any other period.
Summary of Changes in Significant Accounting Estimates
Goodwill and Intangible 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 below its carrying value or indicate that it is more likely than not that the indefinite-lived asset is impaired.
Due to the sustained decline in the Company’s market capitalization and macro-economic conditions observed in the three months ended June 30, 2022, the Company performed an interim test for impairment of its goodwill as of June 30, 2022. In performing the interim impairment test for goodwill, the Company elected to bypass the optional qualitative test and proceeded to perform quantitative tests by comparing the carrying value of each reporting unit to its estimated fair value. The Company previously tested its reporting units for impairment as of December 31, 2021 which resulted in an impairment and write-off of all goodwill in the Company’s Other reporting unit. The results of the Company’s interim test for impairment at June 30, 2022 concluded that the fair value of its Beachbody reporting unit exceeded its carrying value, resulting in i no impairment.
8
Indefinite-lived Intangible Assets
During the three months ended March 31, 2022, the Company determined that one of its acquired trade names no longer has an indefinite life. The Company tested the trade name for impairment before changing the useful life and determined there was no impairment based on its assessment of fair value. The Company will prospectively amortize the trade name over its remaining estimated useful life of i two years beginning January 1, 2022. The Company recorded $ i 1.9 million, or $ i 0.01 per share, and $ i 3.8 million, or $ i 0.01 per share, of amortization expense as a component of selling and marketing expenses for this trade name during the three and six months ended June 30, 2022, respectively.
/
Long-Lived Assets
Management reviews long-lived assets (including property and equipment, content assets, and definite-lived intangible assets) for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Recoverability of assets is determined by comparing their carrying value to the forecasted undiscounted cash flows associated with the assets. If the evaluation of the forecasted cash flows indicates that the carrying value of the assets is not recoverable, the assets are written down to their fair value. The Company performed a test for recoverability at June 30, 2022 and concluded that the carrying value of its long-lived assets is recoverable.
Recently Adopted Accounting Pronouncements
In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40), to simplify the accounting for certain financial instruments with characteristics of liabilities and equity. The FASB reduced the number of accounting models for convertible debt and convertible preferred stock instruments and made certain disclosure amendments to improve the information provided to users. In addition, the FASB amended the derivative guidance for the “own stock” scope exception and certain aspects of the EPS guidance. The Company i adopted this new accounting guidance on a prospective basis on i January 1, 2022, and the adoption did i not have a material effect on its unaudited condensed consolidated financial statements.
Accounting Pronouncements Not Yet Adopted
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires an acquirer to apply ASC 606 to recognize and measure contract assets and liabilities from contracts with customers acquired in a business combination on the acquisition date rather than the general guidance in ASC 805. The guidance in this update will be effective for public companies for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years with early adoption permitted. The Company is evaluating the potential impact of adopting this guidance on its consolidated financial statements.
/
9
2. Revenue
The Company’s revenue disaggregated by revenue type and geographic region is as follows (in thousands):
|
|
Segment |
|
|
|
|
||||||
|
|
Beachbody |
|
|
Other |
|
|
Total |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Three months ended June 30, 2022 |
|
|
|
|
|
|
|
|||||
Revenue Type: |
|
|
|
|
|
|
|
|
|
|||
Digital |
|
$ |
i 71,355 |
|
|
$ |
i 6,660 |
|
|
$ |
i 78,015 |
|
Connected fitness |
|
|
i 9,451 |
|
|
|
i 1,154 |
|
|
|
i 10,605 |
|
Nutrition and other |
|
|
i 89,416 |
|
|
|
i 1,100 |
|
|
|
i 90,516 |
|
Total revenue |
|
$ |
i 170,222 |
|
|
$ |
i 8,914 |
|
|
$ |
i 179,136 |
|
|
|
|
|
|
|
|
|
|
|
|||
Geographic region: |
|
|
|
|
|
|
|
|
|
|||
United States |
|
$ |
i 151,107 |
|
|
$ |
i 8,914 |
|
|
$ |
i 160,021 |
|
Rest of world1 |
|
|
i 19,115 |
|
|
|
— |
|
|
|
i 19,115 |
|
Total revenue |
|
$ |
i 170,222 |
|
|
$ |
i 8,914 |
|
|
$ |
i 179,136 |
|
|
|
Segment |
|
|
|
|
||||||
|
|
Beachbody |
|
|
Other |
|
|
Total |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Three months ended June 30, 2021 |
|
|
|
|
|
|
|
|||||
Revenue Type: |
|
|
|
|
|
|
|
|
|
|||
Digital |
|
$ |
i 90,488 |
|
|
$ |
i 3,837 |
|
|
$ |
i 94,325 |
|
Connected fitness |
|
|
— |
|
|
|
i 10 |
|
|
|
i 10 |
|
Nutrition and other |
|
|
i 128,119 |
|
|
|
i 654 |
|
|
|
i 128,773 |
|
Total revenue |
|
$ |
i 218,607 |
|
|
$ |
i 4,501 |
|
|
$ |
i 223,108 |
|
|
|
|
|
|
|
|
|
|
|
|||
Geographic region: |
|
|
|
|
|
|
|
|
|
|||
United States |
|
$ |
i 194,028 |
|
|
$ |
i 4,501 |
|
|
$ |
i 198,529 |
|
Rest of world1 |
|
|
i 24,579 |
|
|
|
— |
|
|
|
i 24,579 |
|
Total revenue |
|
$ |
i 218,607 |
|
|
$ |
i 4,501 |
|
|
$ |
i 223,108 |
|
|
|
Segment |
|
|
|
|
||||||
|
|
Beachbody |
|
|
Other |
|
|
Total |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Six months ended June 30, 2022 |
|
|
|
|
|
|
|
|||||
Revenue Type: |
|
|
|
|
|
|
|
|
|
|||
Digital |
|
$ |
i 145,997 |
|
|
$ |
i 13,763 |
|
|
$ |
i 159,760 |
|
Connected fitness |
|
|
i 23,940 |
|
|
|
i 6,178 |
|
|
|
i 30,118 |
|
Nutrition and other |
|
|
i 186,392 |
|
|
|
i 1,788 |
|
|
|
i 188,180 |
|
Total revenue |
|
$ |
i 356,329 |
|
|
$ |
i 21,729 |
|
|
$ |
i 378,058 |
|
|
|
|
|
|
|
|
|
|
|
|||
Geographic region: |
|
|
|
|
|
|
|
|
|
|||
United States |
|
$ |
i 316,899 |
|
|
$ |
i 21,729 |
|
|
$ |
i 338,628 |
|
Rest of world1 |
|
|
i 39,430 |
|
|
|
— |
|
|
|
i 39,430 |
|
Total revenue |
|
$ |
i 356,329 |
|
|
$ |
i 21,729 |
|
|
$ |
i 378,058 |
|
10
|
|
Segment |
|
|
|
|
||||||
|
|
Beachbody |
|
|
Other |
|
|
Total |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Six months ended June 30, 2021 |
|
|
|
|
|
|
|
|||||
Revenue Type: |
|
|
|
|
|
|
|
|
|
|||
Digital |
|
$ |
i 181,933 |
|
|
$ |
i 7,542 |
|
|
$ |
i 189,475 |
|
Connected fitness |
|
|
— |
|
|
|
i 10 |
|
|
|
i 10 |
|
Nutrition and other |
|
|
i 258,424 |
|
|
|
i 1,418 |
|
|
|
i 259,842 |
|
Total revenue |
|
$ |
i 440,357 |
|
|
$ |
i 8,970 |
|
|
$ |
i 449,327 |
|
|
|
|
|
|
|
|
|
|
|
|||
Geographic region: |
|
|
|
|
|
|
|
|
|
|||
United States |
|
$ |
i 392,275 |
|
|
$ |
i 8,970 |
|
|
$ |
i 401,245 |
|
Rest of world1 |
|
|
i 48,082 |
|
|
|
— |
|
|
|
i 48,082 |
|
Total revenue |
|
$ |
i 440,357 |
|
|
$ |
i 8,970 |
|
|
$ |
i 449,327 |
|
(1) Consists of Canada, United Kingdom, and France. No single country accounted for more than 10% of total revenue during the three and six months ended June 30, 2022 and 2021.
/Deferred Revenue
Deferred revenue is recorded for nonrefundable cash payments received for the Company’s performance obligation to transfer, or stand ready to transfer, goods or services in the future. Deferred revenue consists of subscription fees billed that have not been recognized and physical products sold that have not yet been delivered. During the three and six months ended June 30, 2022, the Company recognized $ i 25.6 million and $ i 88.1 million of revenue that was included in the deferred revenue balance as of December 31, 2021. During the three and six months ended June 30, 2021, the Company recognized $ i 23.6 million and $ i 79.2 million of revenue that was included in the deferred revenue balance as of December 31, 2020.
/3. Fair Value Measurements
The Company’s financial assets and liabilities subject to fair value measurements on a recurring basis and the level of inputs used for such measurements were as follows (in thousands):
|
|
|
||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Assets |
|
|
|
|
|
|
|
|
|
|||
Derivative assets |
|
$ |
— |
|
|
$ |
i 337 |
|
|
$ |
— |
|
Total assets |
|
$ |
— |
|
|
$ |
i 337 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|||
Liabilities |
|
|
|
|
|
|
|
|
|
|||
Public warrants |
|
$ |
i 1,700 |
|
|
$ |
— |
|
|
$ |
— |
|
Private placement warrants |
|
|
— |
|
|
|
— |
|
|
|
i 800 |
|
Total liabilities |
|
$ |
i 1,700 |
|
|
$ |
— |
|
|
$ |
i 800 |
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Assets |
|
|
|
|
|
|
|
|
|
|||
Derivative assets |
|
$ |
— |
|
|
$ |
i 314 |
|
|
$ |
— |
|
Total assets |
|
$ |
— |
|
|
$ |
i 314 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|||
Liabilities |
|
|
|
|
|
|
|
|
|
|||
Public warrants |
|
$ |
i 2,701 |
|
|
$ |
— |
|
|
$ |
— |
|
Private placement warrants |
|
|
— |
|
|
|
— |
|
|
|
i 2,133 |
|
Total liabilities |
|
$ |
i 2,701 |
|
|
$ |
— |
|
|
$ |
i 2,133 |
|
11
Fair values of cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses approximate the recorded value due to the short period of time to maturity. The fair value of the public warrants, which trade in active markets, is based on quoted market prices. The fair value of derivative instruments is based on Level 2 inputs such as observable forward rates, spot rates, and foreign currency exchange rates. The Company’s private placement warrants are classified within Level 3 of the fair value hierarchy because their fair values are based on significant inputs that are unobservable in the market.
Private Placement Warrants
The Company determined the fair value of the private placement warrants using a Black-Scholes option-pricing model and the quoted price of the Company’s Class A Common Stock. Volatility was based on the implied volatility derived primarily from the average of the actual market activity of the Company’s peer group. The expected life was based on the remaining contractual term of the private placement warrants, and the risk-free interest rate was based on the implied yield available on U.S. treasury securities with a maturity equivalent to the warrants’ expected life. The significant unobservable input used in the fair value measurement of the private placement warrants is the implied volatility. Significant changes in the implied volatility would result in a significantly higher or lower fair value measurement, respectively.
The following table presents significant assumptions utilized in the valuation of the private placement warrants on June 30, 2022 and December 31, 2021:
|
|
|
|
|
|
|
||
|
|
|
|
|
||||
|
|
|
|
|
|
|
||
Risk-free rate |
|
|
i 3.0 |
% |
|
|
i 1.2 |
% |
Dividend yield rate |
|
|
— |
|
|
|
— |
|
Volatility |
|
|
i 75.0 |
% |
|
|
i 65.0 |
% |
Contractual term (in years) |
|
|
i 3.99 |
|
|
|
i 4.49 |
|
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 six months ended June 30, 2022 and 2021:
|
|
Three months ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|||||
Balance, beginning of period |
|
$ |
i 1,920 |
|
|
$ |
— |
|
|
$ |
i 2,133 |
|
|
$ |
— |
|
Assumed in Business Combination |
|
|
— |
|
|
|
i 26,400 |
|
|
|
— |
|
|
|
i 26,400 |
|
Change in fair value |
|
|
( i 1,120 |
) |
|
|
( i 6,027 |
) |
|
|
( i 1,333 |
) |
|
|
( i 6,027 |
) |
Balance, end of period |
|
$ |
i 800 |
|
|
$ |
i 20,373 |
|
|
$ |
i 800 |
|
|
$ |
i 20,373 |
|
For the three and six months ended June 30, 2022 and 2021, 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.
/
12
4. Inventory, Net
Inventory, net consists of the following (in thousands):
|
|
|
|
|
||||
|
|
|
|
|
|
|
||
Raw materials and work in process |
|
$ |
i 19,039 |
|
|
$ |
i 24,436 |
|
Finished goods |
|
|
i 53,232 |
|
|
|
i 108,294 |
|
Total inventory, net |
|
$ |
i 72,271 |
|
|
$ |
i 132,730 |
|
Adjustments to the carrying value of excess inventory and inventory on hand to net realizable value were $ i 15.1 million and $ i 32.0 million during the three and six months ended June 30, 2022, respectively, and $ i 0.8 million and $ i 2.8 million during the three and six months ended June 30, 2021, respectively. These adjustments are included in the unaudited condensed consolidated statements of operations as a component of connected fitness cost of revenue and nutrition and other cost of revenue.
/
5. Other Current Assets
Other current assets consist of the following (in thousands):
|
|
|
|
|
||||
Deferred coach costs |
|
$ |
i 33,633 |
|
|
$ |
i 30,928 |
|
Deposits |
|
|
i 7,070 |
|
|
|
i 8,915 |
|
Accounts receivable, net |
|
|
i 1,382 |
|
|
|
i 1,225 |
|
Other |
|
|
i 2,743 |
|
|
|
i 2,659 |
|
Total other current assets |
|
$ |
i 44,828 |
|
|
$ |
i 43,727 |
|
6. Property and Equipment, Net
Property and equipment, net consists of the following (in thousands):
|
|
|
|
|
|
|
||
|
|
|
|
|
||||
|
|
|
|
|
|
|
||
Computer software and web development |
|
$ |
i 253,296 |
|
|
$ |
i 231,943 |
|
Computer equipment |
|
|
i 23,449 |
|
|
|
i 23,691 |
|
Buildings |
|
|
i 5,158 |
|
|
|
i 5,158 |
|
Leasehold improvements |
|
|
i 4,600 |
|
|
|
i 5,157 |
|
Furniture, fixtures and equipment |
|
|
i 1,874 |
|
|
|
i 2,442 |
|
Computer software and web development projects in-process |
|
|
i 12,876 |
|
|
|
i 26,490 |
|
Property and equipment, gross |
|
|
i 301,253 |
|
|
|
i 294,881 |
|
Less: Accumulated depreciation |
|
|
( i 208,952 |
) |
|
|
( i 181,783 |
) |
Total property and equipment, net |
|
$ |
i 92,301 |
|
|
$ |
i 113,098 |
|
13
All of the Company’s property and equipment is located in the U.S. i The Company recorded depreciation expense related to property and equipment in the following expense categories of its unaudited condensed consolidated statements of operations as follows (in thousands):
|
|
Three months ended June 30, |
|
|
Six months ended June 30, |
|
|
||||||||||
|
|
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of revenue |
|
$ |
i 7,743 |
|
|
$ |
i 4,146 |
|
|
$ |
i 16,824 |
|
|
$ |
i 7,884 |
|
|
Selling and marketing |
|
|
i 102 |
|
|
|
i 389 |
|
|
|
i 381 |
|
|
|
i 840 |
|
|
Enterprise technology and development |
|
|
i 7,486 |
|
|
|
i 5,340 |
|
|
|
i 14,935 |
|
|
|
i 12,651 |
|
|
General and administrative |
|
|
i 49 |
|
|
|
i 617 |
|
|
|
i 241 |
|
|
|
i 1,263 |
|
|
Total depreciation |
|
$ |
i 15,380 |
|
|
$ |
i 10,492 |
|
|
$ |
i 32,381 |
|
|
$ |
i 22,638 |
|
|
7. Accrued Expenses
Accrued expenses consist of the followings (in thousands):
|
|
|
|
|
||||
Employee compensation and benefits |
|
$ |
i 19,372 |
|
|
$ |
i 8,996 |
|
Coach costs |
|
|
i 13,626 |
|
|
|
i 19,168 |
|
Inventory, shipping and fulfillment |
|
|
i 13,927 |
|
|
|
i 14,360 |
|
Sales and other taxes |
|
|
i 4,049 |
|
|
|
i 5,097 |
|
Information technology |
|
|
i 2,222 |
|
|
|
i 10,150 |
|
Advertising |
|
|
i 1,128 |
|
|
|
i 4,033 |
|
Customer service expenses |
|
|
i 643 |
|
|
|
i 1,773 |
|
Other accrued expenses |
|
|
i 7,382 |
|
|
|
i 10,948 |
|
Total accrued expenses |
|
$ |
i 62,349 |
|
|
$ |
i 74,525 |
|
8. Commitments and Contingencies
Inventory Purchase and Service Agreements
The Company has noncancelable inventory purchase and service agreements with multiple service providers which expire at varying dates through 2028. During the three and six months ended June 30, 2022, the Company recorded losses on inventory purchase commitments related to connected fitness hardware of $ i 1.8 million and $ i 2.4 million, respectively. These losses are included in accrued expenses in the unaudited condensed consolidated balance sheets and connected fitness cost of revenue in the unaudited condensed consolidated statements of operations. Service agreement obligations include amounts related to fitness and nutrition trainers, future events, information systems support, and other technology projects.
Future minimum payments under noncancelable service and inventory purchase agreements for the periods succeeding June 30, 2022 are as follows (in thousands):
Six months ending December 31, 2022 |
|
$ |
i 30,887 |
|
Year ending December 31, 2023 |
|
|
i 4,019 |
|
Year ending December 31, 2024 |
|
|
i 1,410 |
|
Year ending December 31, 2025 |
|
|
i 1,385 |
|
Year ending December 31, 2026 |
|
|
i 100 |
|
Thereafter |
|
|
i 150 |
|
|
|
$ |
i 37,951 |
|
14
/
The preceding table excludes royalty payments to fitness trainers, talent, and others that are based on future sales as such amounts cannot be reasonably estimated.
Lease Commitments
The Company i leases facilities under noncancelable operating leases expiring through 2027 and i certain equipment under a finance lease expiring in 2024. These lease obligations, of which $ i 6.1 million is included in other current liabilities and other liabilities in the unaudited condensed consolidated balance sheets, will require payments of approximately $ i 1.3 million during the six months ending December 31, 2022 and $ i 6.0 million in 2023 and thereafter.
Contingencies
The Company is subject to litigation from time to time in the ordinary course of business. Such claims typically involve its products, intellectual property, and relationships with suppliers, customers, distributors, employees, and others. Contingent liabilities are recorded when it is both probable that a loss has occurred and the amount of the loss can be reasonable estimated. Although it is not possible to predict how litigation and other claims will be resolved, the Company does not believe that any currently identified claims or litigation matters will have a material adverse effect on its consolidated financial position or results of operations.
/9. Acquisition
On June 25, 2021, the Company acquired i 100% of the equity of Myx pursuant to the Business Combination Agreement. The Company recognized the acquired assets and assumed liabilities of Myx based on estimates of their acquisition date fair values. There were i i no / adjustments to the purchase price allocations during the three and six months ended June 30, 2022.
The following unaudited pro forma financial information presents the combined results of operations of the Company and Myx as if the companies had been combined as of January 1, 2021. The unaudited pro forma financial information includes the accounting effects of the business combination, including amortization of intangible assets. The unaudited pro forma financial information is presented for information purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of the period presented, nor should it be taken as indication of the Company’s future consolidated results of operations.
(in thousands) |
|
Three Months Ended |
|
Six Months Ended |
|
|
|
||
Pro forma combined: |
|
|
|
|
Revenue |
|
$ i 237,286 |
|
$ i 480,543 |
Net loss |
|
( i 25,362) |
|
( i 67,747) |
15
10. Stockholders’ Equity
As of June 30, 2022, 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.
Accumulated Other Comprehensive Loss
The following tables summarize changes in accumulated other comprehensive loss by component during the three months ended June 30, 2022 and 2021 (in thousands):
|
Unrealized Gain (Loss) on Derivatives |
|
|
Foreign Currency Translation Adjustment |
|
|
Total |
|
|||
|
|
|
|
|
|
|
|
|
|||
Balances at March 31, 2021 |
$ |
( i 188 |
) |
|
$ |
i 86 |
|
|
$ |
( i 102 |
) |
Other comprehensive loss before reclassifications |
|
( i 78 |
) |
|
|
i 12 |
|
|
|
( i 66 |
) |
Amounts reclassified from accumulated other comprehensive income (loss) |
|
i 172 |
|
|
|
— |
|
|
|
i 172 |
|
Tax effect |
|
( i 21 |
) |
|
|
— |
|
|
|
( i 21 |
) |
Balances at June 30, 2021 |
$ |
( i 115 |
) |
|
$ |
i 98 |
|
|
$ |
( i 17 |
) |
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|||
Balances at March 31, 2022 |
$ |
( i 148 |
) |
|
$ |
i 15 |
|
|
$ |
( i 133 |
) |
Other comprehensive loss before reclassifications |
|
i 13 |
|
|
|
( i 51 |
) |
|
|
( i 38 |
) |
Amounts reclassified from accumulated other comprehensive income (loss) |
|
i 74 |
|
|
|
— |
|
|
|
i 74 |
|
Tax effect |
|
i 22 |
|
|
|
— |
|
|
|
i 22 |
|
Balances at June 30, 2022 |
$ |
( i 39 |
) |
|
$ |
( i 36 |
) |
|
$ |
( i 75 |
) |
The following tables summarize changes in accumulated other comprehensive loss by component during the six months ended June 30, 2022 and 2021 (in thousands):
|
Unrealized Gain (Loss) on Derivatives |
|
|
Foreign Currency Translation Adjustment |
|
|
Total |
|
|||
|
|
|
|
|
|
|
|
|
|||
Balances at December 31, 2020 |
$ |
( i 246 |
) |
|
$ |
i 44 |
|
|
$ |
( i 202 |
) |
Other comprehensive loss before reclassifications |
|
( i 170 |
) |
|
|
i 54 |
|
|
|
( i 116 |
) |
Amounts reclassified from accumulated other comprehensive income (loss) |
|
i 339 |
|
|
|
— |
|
|
|
i 339 |
|
Tax effect |
|
( i 38 |
) |
|
|
— |
|
|
|
( i 38 |
) |
Balances at June 30, 2021 |
$ |
( i 115 |
) |
|
$ |
i 98 |
|
|
$ |
( i 17 |
) |
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|||
Balances at December 31, 2021 |
$ |
( i 32 |
) |
|
$ |
i 11 |
|
|
$ |
( i 21 |
) |
Other comprehensive loss before reclassifications |
|
( i 149 |
) |
|
|
( i 47 |
) |
|
|
( i 196 |
) |
Amounts reclassified from accumulated other comprehensive income (loss) |
|
i 143 |
|
|
|
— |
|
|
|
i 143 |
|
Tax effect |
|
( i 1 |
) |
|
|
— |
|
|
|
( i 1 |
) |
Balances at June 30, 2022 |
$ |
( i 39 |
) |
|
$ |
( i 36 |
) |
|
$ |
( i 75 |
) |
16
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, 2021 |
|
i 41,753,042 |
|
|
$ |
i 3.86 |
|
|
|
i 5.92 |
|
|
$ |
i 11,379 |
|
Granted |
|
i 15,509,878 |
|
|
|
i 1.21 |
|
|
|
|
|
|
|
||
Exercised |
|
( i 1,720,163 |
) |
|
|
i 1.55 |
|
|
|
|
|
|
|
||
Forfeited |
|
( i 6,075,160 |
) |
|
|
i 2.17 |
|
|
|
|
|
|
|
||
Expired |
|
( i 167,868 |
) |
|
|
i 1.22 |
|
|
|
|
|
|
|
||
Outstanding at June 30, 2022 |
|
i 49,299,729 |
|
|
$ |
i 2.98 |
|
|
|
i 6.06 |
|
|
$ |
i 1,425 |
|
Exercisable at June 30, 2022 |
|
i 24,065,850 |
|
|
$ |
i 2.30 |
|
|
|
i 2.91 |
|
|
$ |
— |
|
The intrinsic value of options exercised was $ i 0.8 million for the six months ended June 30, 2022.
A summary of RSU activity is as follows:
|
|
RSUs Outstanding |
||||||||
|
|
Number of RSUs |
|
|
Weighted-Average Fair Value |
|
|
|||
Outstanding at December 31, 2021 |
|
|
i 573,678 |
|
|
$ |
|
i 5.97 |
|
|
Granted |
|
|
i 2,606,735 |
|
|
|
|
i 1.23 |
|
|
Vested |
|
|
( i 210,146 |
) |
|
|
|
i 6.68 |
|
|
Forfeited |
|
|
( i 251,082 |
) |
|
|
|
i 4.62 |
|
|
Outstanding at June 30, 2022 |
|
|
i 2,719,185 |
|
|
$ |
|
i 1.49 |
|
|
On January 1, 2022, the number of shares available for issuance under the 2021 Incentive Award Plan (the “2021 Plan”) increased by i 15,479,188 pursuant to the terms of the 2021 Plan. As of June 30, 2022, i 20,319,069 shares of Class A Common Stock were available for issuance under the 2021 Plan.
Equity-Based Compensation Expense
The fair value of each award as of the date of grant is estimated using a Black-Scholes option-pricing model. The following table summarizes the weighted-average assumptions used to determine the fair value of option grants:
|
|
Six months ended June 30, |
|
|||||
|
|
|
|
2021 |
|
|||
Risk-free rate |
|
|
i 2.8 |
% |
|
|
i 0.7 |
% |
Dividend yield rate |
|
|
i — |
|
|
|
i — |
|
Volatility |
|
|
i 52.6 |
% |
|
|
i 53.9 |
% |
Expected term (in years) |
|
|
i 6.25 |
|
|
|
i 6.23 |
|
Weighted-average grant date fair value |
|
$ |
i 0.64 |
|
|
$ |
i 4.91 |
|
17
Equity-based compensation expense for the three and six months ended June 30, 2022 and 2021 was as follows (in thousands):
|
|
Three months ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of revenue |
|
$ |
i 382 |
|
|
$ |
i 91 |
|
|
$ |
i 717 |
|
|
$ |
i 182 |
|
Selling and marketing |
|
|
i 1,018 |
|
|
|
i 1,616 |
|
|
|
i 2,657 |
|
|
|
i 3,333 |
|
Enterprise technology and development |
|
|
( i 17 |
) |
|
|
i 357 |
|
|
|
i 910 |
|
|
|
i 663 |
|
General and administrative |
|
|
i 1,618 |
|
|
|
i 458 |
|
|
|
i 3,281 |
|
|
|
i 917 |
|
Total equity-based compensation |
|
$ |
i 3,001 |
|
|
$ |
i 2,522 |
|
|
$ |
i 7,565 |
|
|
$ |
i 5,095 |
|
As of June 30, 2022, the total unrecognized equity-based compensation expense was $ i 52.5 million, which will be recognized over a weighted-average remaining period of i 2.95 years.
/12. Derivative Financial Instruments
As of June 30, 2022 and December 31, 2021, the notional amount of the Company’s outstanding foreign exchange options was $ i 26.5 million and $ i 30.4 million, respectively. There were i i no / outstanding forward contracts as of June 30, 2022 and December 31, 2021.
The following table shows the pre-tax effects of the Company’s derivative instruments on its unaudited condensed consolidated statements of operations (in thousands):
|
|
|
|
Three months ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
Financial Statement Line Item |
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
|
|
|
|
|
|
|
|
|
|
|||||||||
Unrealized gains (losses) |
|
Other comprehensive income (loss) |
|
$ |
i 13 |
|
|
$ |
( i 78 |
) |
|
$ |
( i 149 |
) |
|
$ |
( i 170 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Losses reclassified from accumulated other |
|
Cost of revenue |
|
$ |
( i 32 |
) |
|
$ |
( i 65 |
) |
|
$ |
( i 62 |
) |
|
$ |
( i 138 |
) |
comprehensive loss into net loss |
|
General and administrative |
|
|
( i 42 |
) |
|
|
( i 107 |
) |
|
|
( i 81 |
) |
|
|
( i 201 |
) |
Total amounts reclassified |
|
|
|
$ |
( i 74 |
) |
|
$ |
( i 172 |
) |
|
$ |
( i 143 |
) |
|
$ |
( i 339 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gains (losses) recognized on derivatives |
|
Cost of revenue |
|
$ |
i 6 |
|
|
$ |
( i 20 |
) |
|
$ |
( i 45 |
) |
|
$ |
( i 41 |
) |
13. Strategic Realignment
In January 2022, the Company commenced a strategic alignment initiative to consolidate its streaming fitness offerings into a single Beachbody platform. The Company recognized restructuring costs of $ i 1.3 million and $ i 8.5 million during the three and six months ended June 30, 2022, 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. In accordance with GAAP, employee termination benefits were recognized at the date employees were notified and post-employment benefits were accrued as the obligation was probable and estimable. Benefits for employees who provide future service greater than 60 days from the date of notification will be recognized ratably over the future service period.
The following table summarizes activity in the Company’s restructuring-related liability during the three months ended June 30, 2022 (in thousands):
|
|
Balance at |
|
|
Restructuring |
|
|
Payments / |
|
|
Liability at |
|
||||
|
|
|
|
Charges |
|
|
Utilizations |
|
|
|
||||||
Employee-related costs |
|
$ |
i 4,618 |
|
|
$ |
i 1,332 |
|
|
$ |
( i 4,630 |
) |
|
$ |
i 1,320 |
|
Total costs |
|
$ |
i 4,618 |
|
|
$ |
i 1,332 |
|
|
$ |
( i 4,630 |
) |
|
$ |
i 1,320 |
|
18
The following table summarizes the Company’s restructuring costs activity during the six months ended June 30, 2022 (in thousands):
|
|
Balance at |
|
|
Restructuring |
|
|
Payments / |
|
|
Liability at |
|
||||
|
|
|
|
Charges |
|
|
Utilizations |
|
|
|
||||||
Employee-related costs |
|
$ |
— |
|
|
$ |
i 8,555 |
|
|
$ |
( i 7,235 |
) |
|
$ |
i 1,320 |
|
Total costs |
|
$ |
— |
|
|
$ |
i 8,555 |
|
|
$ |
( i 7,235 |
) |
|
$ |
i 1,320 |
|
During the six months ended June 30, 2022, the Company determined that the useful life of certain computer software and web development assets and content assets would end upon the completion of its platform consolidation. The Company accelerated depreciation of these computer software and web development assets and recorded $ i 1.2 million, or $ i 0.00 per share, and $ i 3.4 million, or $ i 0.01 per share, of additional depreciation expense as a component of digital cost of revenue, and nutrition and other cost of revenue during three and six months ended June 30, 2022, respectively. The Company also accelerated amortization of these content assets and recorded $ i 1.5 million, or $ i 0.00 per share, and $ i 2.6 million, or $ i 0.01 per share, of additional amortization as a component of digital cost of revenue during three and six months ended June 30, 2022, respectively.
/14. Income Taxes
The Company recorded a benefit for income taxes of $ i 0.3 million and $ i 1.0 million for the three and six months ended June 30, 2022, respectively, and a benefit for income taxes of $ i 10.9 million and $ i 11.3 million for the three and six months ended June 30, 2021, respectively. The effective benefit tax rate was i 0.7% and i 0.8% for the three and six months ended June 30, 2022, respectively, and i 46.6% and i 20.9% for the three and six months ended June 30, 2021, respectively.
The tax provision for interim periods is determined using an estimate of the Company’s annual effective tax rate, adjusted for discrete items arising in that quarter. The Company’s effective tax rate differs from the U.S. statutory tax rate in the three and six months ended June 30, 2022 primarily due to changes in valuation allowances on deferred tax assets as it is more likely than not that some or all of the Company’s deferred tax assets will not be realized.
The Company evaluates its tax positions on a quarterly basis and revises its estimate accordingly. There were no material changes to the Company’s uncertain tax positions, interest, or penalties during the three and six months ended June 30, 2022.
/15. Earnings (Loss) per Share
The computation of loss per share of Class A and Class X Common Stock is as follows (in thousands, except share and per share information):
|
|
Three months ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss |
|
$ |
( i 41,867 |
) |
|
$ |
( i 12,440 |
) |
|
$ |
( i 115,400 |
) |
|
$ |
( i 42,498 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted-average common shares outstanding, basic and diluted |
|
|
i i 307,204,999 / |
|
|
|
i i 247,062,134 / |
|
|
|
i i 306,786,192 / |
|
|
|
i i 245,048,715 / |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss per common share, basic and diluted |
|
$ |
( i i 0.14 / |
) |
|
$ |
( i i 0.05 / |
) |
|
$ |
( i i 0.38 / |
) |
|
$ |
( i i 0.17 / |
) |
Basic net loss per common share is the same as dilutive net loss per common share for each of the three and six months ended June 30, 2022 and each of the three and six months ended June 30, 2021 as the inclusion of all potential common shares would have been antidilutive.
19
The following table presents the common shares that are excluded from the computation of diluted net loss per common share as of the periods presented because including them would have been antidilutive:
|
|
|
||||||
|
|
|
|
2021 |
|
|||
|
|
|
|
|
|
|
||
Options |
|
|
i 49,299,729 |
|
|
|
i 34,588,520 |
|
RSUs |
|
|
i 2,719,185 |
|
|
|
— |
|
Compensation warrants |
|
|
i 3,980,656 |
|
|
|
i 3,980,656 |
|
Public and private placement warrants |
|
|
i 15,333,333 |
|
|
|
i 15,333,333 |
|
Earn-out shares |
|
|
i 3,750,000 |
|
|
|
i 3,750,000 |
|
|
|
|
i 75,082,903 |
|
|
|
i 57,652,509 |
|
16. Segment Information
The Company applies ASC 280, Segment Reporting, in determining reportable segments for financial statement disclosure. Segment information is presented based on the financial information the Company uses to manage the business which is organized around the Company’s digital platforms. The Company has i two operating segments, Beachbody and Other, and i one reportable segment, Beachbody. The Beachbody segment primarily derives revenue from BOD and BODi digital subscriptions, nutritional products, connected fitness equipment (bikes and accessories), and other fitness-related products. Other derives revenue primarily from Openfit digital subscriptions, nutritional products, and connected fitness equipment. The Company uses contribution as a measure of profit or loss, defined as revenue less directly attributable cost of revenue and certain selling and marketing expenses including media, Coach and social influencer compensation, royalties, and third-party sales commissions. Contribution does not include allocated costs as described below as the CODM does not include these costs in assessing performance. There are no inter-segment transactions. The Company manages its assets on a consolidated basis, and, as such, does not report asset information by segment.
Summary information by segment is as follows (in thousands):
|
|
Segment |
|
|||||||||
|
|
Beachbody |
|
|
Other |
|
|
Consolidated |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Three months ended June 30, 2022 |
|
|
|
|
|
|
|
|||||
Revenue |
|
$ |
i 170,222 |
|
|
$ |
i 8,914 |
|
|
$ |
i 179,136 |
|
Contribution |
|
|
i 37,607 |
|
|
|
( i 451 |
) |
|
|
i 37,156 |
|
|
|
|
|
|
|
|
|
|
|
|||
Three months ended June 30, 2021 |
|
|
|
|
|
|
|
|||||
Revenue |
|
$ |
i 218,607 |
|
|
$ |
i 4,501 |
|
|
$ |
i 223,108 |
|
Contribution |
|
|
i 49,545 |
|
|
|
( i 6,411 |
) |
|
|
i 43,134 |
|
|
|
|
|
|
|
|
|
|
|
|||
Six months ended June 30, 2022 |
|
|
|
|
|
|
|
|||||
Revenue |
|
$ |
i 356,329 |
|
|
$ |
i 21,729 |
|
|
$ |
i 378,058 |
|
Contribution |
|
|
i 65,698 |
|
|
|
( i 1,827 |
) |
|
|
i 63,871 |
|
|
|
|
|
|
|
|
|
|
|
|||
Six months ended June 30, 2021 |
|
|
|
|
|
|
|
|||||
Revenue |
|
$ |
i 440,357 |
|
|
$ |
i 8,970 |
|
|
$ |
i 449,327 |
|
Contribution |
|
|
i 96,020 |
|
|
|
( i 11,547 |
) |
|
|
i 84,473 |
|
20
Reconciliation of consolidated contribution to loss before income taxes (in thousands):
|
|
Three months ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Consolidated contribution |
|
$ |
i 37,156 |
|
|
$ |
i 43,134 |
|
|
$ |
i 63,871 |
|
|
$ |
i 84,473 |
|
Amounts not directly related to segments: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of revenue (1) |
|
|
i 14,749 |
|
|
|
i 8,118 |
|
|
|
i 28,572 |
|
|
|
i 15,960 |
|
Selling and marketing (2) |
|
|
i 21,762 |
|
|
|
i 20,872 |
|
|
|
i 48,081 |
|
|
|
i 40,963 |
|
Enterprise technology and development |
|
|
i 24,133 |
|
|
|
i 26,949 |
|
|
|
i 57,830 |
|
|
|
i 54,038 |
|
General and administrative |
|
|
i 19,584 |
|
|
|
i 17,231 |
|
|
|
i 39,657 |
|
|
|
i 35,177 |
|
Restructuring |
|
|
i 1,332 |
|
|
|
— |
|
|
|
i 8,555 |
|
|
|
— |
|
Change in fair value of warrant liabilities |
|
|
( i 2,070 |
) |
|
|
( i 5,390 |
) |
|
|
( i 2,334 |
) |
|
|
( i 5,390 |
) |
Interest expense |
|
|
i 3 |
|
|
|
i 305 |
|
|
|
i 22 |
|
|
|
i 428 |
|
Other expense (income), net |
|
|
( i 189 |
) |
|
|
( i 1,654 |
) |
|
|
( i 125 |
) |
|
|
( i 2,953 |
) |
Loss before income taxes |
|
$ |
( i 42,148 |
) |
|
$ |
( i 23,297 |
) |
|
$ |
( i 116,387 |
) |
|
$ |
( i 53,750 |
) |
17. Subsequent Events
On August 8, 2022 (the “Closing”), the Company entered into an agreement with a third-party lender for a $ i 50.0 million senior secured term loan (the “Term Loan”) with a i four-year maturity. The Term Loan includes an incremental facility of up to an additional $ i 25.0 million subject to certain terms and conditions. The Term Loan was funded at Closing and bears interest at the Company’s option of either (i) the Secured Overnight Financing Rate based upon an interest period of three months plus i 7.15%, or (ii) a reference rate as defined in the agreement, plus i 6.15%. In addition, borrowings will bear interest at i 3.00%, which will be paid in kind by capitalizing such interest and adding it to the outstanding principal, annually. The Company paid an upfront fee of $ i 1.5 million at Closing and is required to pay an annual fee of $ i 0.25 million. The Term Loan requires annual amortization of i 2.50% in the first two years and i 5.00% in the final two years, paid quarterly, and certain mandatory repayments as defined in the agreement. The Term Loan provides customary restrictions, including prepayment premiums, and requires compliance with certain financial and other covenants. The Company expects to use the proceeds for general corporate purposes and to pay transaction fees and expenses related to the Term Loan.
In connection with the Term Loan, the Company issued warrants for the purchase of i 4,716,756 million shares of the Company’s Class A Common Stock at an exercise price of $ i 1.85 per share. The 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 warrants have a i seven-year term from the date of Closing.
/
21
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis should be read in conjunction with our financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q (this “Report”) and the section entitled “Risk Factors.” Unless otherwise indicated, the terms “Beachbody,” “we,” “us,” or “our” refer to The Beachbody Company, Inc., a Delaware corporation, together with its consolidated subsidiaries.
Forward-Looking Statements
This Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”), including statements about and the financial condition, results of operations, earnings outlook and prospects of the Company. Forward-looking statements are typically identified by words such as “plan,” “believe,” “expect,” “anticipate,” “intend,” “outlook,” “estimate,” “forecast,” “project,” “continue,” “could,” “may,” “might,” “possible,” “potential,” “predict,” “should,” “would” and other similar words and expressions, but the absence of these words does not mean that a statement is not forward-looking.
The forward-looking statements are based on our current expectations as applicable and are inherently subject to uncertainties and changes in circumstances and their potential effects and speak only as of the date of such statement. There can be no assurance that future developments will be those that have been anticipated. These forward-looking statements involve a number of risks, uncertainties or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to the following:
Should one or more of these risks or uncertainties materialize or should any of the assumptions made by management prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements.
Except to the extent required by applicable law or regulation, we undertake no obligation to update these forward-looking statements to reflect events or circumstances after the date of this Report or to reflect the occurrence of unanticipated events.
22
Overview
Beachbody is a leading subscription health and wellness company. We focus primarily on digital content, supplements, connected fitness, and consumer health and wellness. Our goal is to continue to provide holistic health and wellness content and subscription-based solutions. We are the creator of some of the world’s most popular fitness programs, including P90X, Insanity, and 21 Day Fix, which transformed the at-home fitness market and disrupted the global fitness industry by making it accessible for people to get results—anytime, anywhere. Our comprehensive nutrition-first programs, Portion Fix and 2B Mindset, teach healthy eating habits and promote healthy, sustainable weight loss. These fitness and nutrition programs are available through our Beachbody On Demand and Beachbody On Demand Interactive streaming services, and in January 2022, we began the process of consolidating our Openfit streaming fitness offerings onto a single Beachbody platform.
We offer nutritional products such as Shakeology nutrition shakes, BEACHBAR snack bars, and Ladder premium supplements as well a professional-grade stationary cycle with a 360-degree touch screen tablet and connected fitness software. Leveraging our history of fitness content creation, nutrition innovation, and our network of micro-influencers, whom we call Coaches, we plan to continue market penetration into connected fitness to reach a wider health, wellness and fitness audience.
Historically, our revenue has been generated primarily through our network of micro-influencers, social media marketing channels, and direct response advertising. Components of revenue include recurring digital subscription revenue, connected fitness revenue, and revenue from the sale of nutritional and other products. In addition to selling individual products on a one-time basis, we bundle digital and nutritional products together at discounted prices.
For the three months ended June 30, 2022, as compared to the three months ended June 30, 2021:
For the six months ended June 30, 2022, as compared to the six months ended June 30, 2021:
See “Non-GAAP Information” below for information regarding our use of Adjusted EBITDA and a reconciliation of net loss to Adjusted EBITDA.
Recent Developments
We believe post-pandemic consumer behavior, the general slowdown of the global economy, and rising prices for consumer products and services have adversely impacted demand for at-home fitness solutions. These adverse conditions combined with unprecedented supply chain surcharges and disruptions have contributed to declines in our gross margins. Given the uncertainty for how long these macroeconomic factors will continue, we currently anticipate the negative impact to our gross margins to continue through the remainder of fiscal year 2022. We plan to mitigate the challenging macroeconomic factor with strategies that we expect will drive our future success and growth.
23
Digital Gross Margin
We believe our “One Brand” strategy, which will consolidate our streaming content into a single Beachbody platform and which we expect to be fully implemented by the middle of the third quarter of 2022, will simplify our product offerings for customers and lead to an increase in customer acquisition. We believe that strengthening our Coach network will generate additional digital revenue from our Coach business management online platform as well as drive growth in digital and nutritional subscriptions. During the second quarter and for the remainder of 2022, we began testing new incentives and training programs for our Coach network to improve Coach recruitment and retention and their ability to reach more customers.
Nutrition and Other Gross Margin
Our nutritional products are often bundled with digital content offerings, and we are in the process of developing enhancements to our upsell and cross-sell capabilities. We are also currently reviewing our nutritional product portfolio and may reduce our offerings to only those nutritional products that meet our profitability requirements and/or reflect market demand. This rationalization strategy could result in future one-time charges to write down the carrying value of certain nutritional inventory. We also intend to test price increases to counteract rising supply chain costs.
Connected Fitness Gross Margin
We anticipate that our connected fitness gross margin will remain negative until we sell through our current inventory on hand. As a result of supply chain constraints, the costs to manufacture, transport, fulfill, and ship a Beachbody Bike have led to an unprofitable margin. As the connected fitness market is highly competitive, we have been limited in our ability to sufficiently increase pricing to mitigate costs. For the remainder of 2022, we will explore different strategies such as pricing and bundling to accelerate demand for our current inventory. Consumer response to these strategies is uncertain, and we may be required to continue to reduce the carrying value of connected fitness inventory through the remainder of the year. See “Risk Factors - Risks Related to Our Business and Industry - Our operating results could be adversely affected if we are unable to accurately forecast consumer demand for our products and services and adequately manage our inventory” in our Annual Report on Form 10-K.
Key Operational and Business Metrics
We use the following key operational and business metrics to evaluate our business, measure our performance, develop financial forecasts, and make strategic decisions.
|
|
As of June 30, |
|
|||||
|
|
|
|
2021 |
|
|||
|
|
|
|
|
|
|
||
Digital subscriptions (millions) |
|
|
2.28 |
|
|
|
2.72 |
|
Nutritional subscriptions (millions) |
|
|
0.28 |
|
|
|
0.42 |
|
|
|
Three months ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Average digital retention |
|
|
95.6 |
% |
|
|
94.9 |
% |
|
|
95.6 |
% |
|
|
95.4 |
% |
Total streams (millions) |
|
|
31.0 |
|
|
|
44.5 |
|
|
|
69.2 |
|
|
|
100.4 |
|
DAU/MAU |
|
|
30.0 |
% |
|
|
31.9 |
% |
|
|
31.6 |
% |
|
|
33.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenue (millions) |
|
$ |
179.1 |
|
|
$ |
223.1 |
|
|
$ |
378.1 |
|
|
$ |
449.3 |
|
Gross profit (millions) |
|
$ |
87.3 |
|
|
$ |
154.3 |
|
|
$ |
180.3 |
|
|
$ |
312.4 |
|
Gross margin |
|
|
49 |
% |
|
|
69 |
% |
|
|
48 |
% |
|
|
70 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss (millions) |
|
$ |
(41.9 |
) |
|
$ |
(12.4 |
) |
|
$ |
(115.4 |
) |
|
$ |
(42.5 |
) |
Adjusted EBITDA (millions) |
|
$ |
(1.5 |
) |
|
$ |
(4.4 |
) |
|
$ |
(20.6 |
) |
|
$ |
(16.1 |
) |
Please see “Non-GAAP Information” below for a reconciliation of net loss to Adjusted EBITDA and an explanation for why we consider Adjusted EBITDA to be a helpful metric for investors.
24
Digital Subscriptions
Our ability to expand the number of digital subscriptions is an indicator of our market penetration and growth. Digital subscriptions include BOD, BODi, and Openfit subscriptions. Digital subscriptions include paid and free-to-pay subscriptions, with free-to-pay subscriptions representing approximately 1% of total digital subscriptions on average. Digital subscriptions are inclusive of all billing plans, currently for annual, semi-annual, quarterly and monthly billing intervals.
Nutritional Subscriptions
Nutritional subscriptions include monthly subscriptions for nutritional products such as Shakeology, Beachbody Performance, BEACHBAR, Bevvy and Ladder Supplements. We also package and bundle the content experience of digital subscriptions with nutritional subscriptions to optimize customer results.
Average Digital Retention
We use month-over-month digital subscription retention, which we define as the average rate at which a subscription renews for a new billing cycle, to measure customer retention.
Total Streams
We use total streams to quantify the number of fitness or nutrition programs viewed per subscription, which is a leading indicator of customer engagement and retention. While the measure of a digital stream may vary across companies, to qualify as a stream on any of our digital platforms, a program must be viewed for a minimum of 25% of the total running time.
Daily Active Users to Monthly Active Users (DAU/MAU)
We use the ratio of daily active users to monthly active users to measure how frequently digital subscribers are utilizing our service in a given month. We define a daily active user as a unique user streaming content on our platform in a given day. We define a monthly active user as a unique user streaming content on our platform in that same month.
Non-GAAP Information
We use Adjusted EBITDA, which is a non-GAAP performance measure, to supplement our results presented in accordance with GAAP. We believe Adjusted EBITDA is useful in evaluating our operating performance, as it is similar to measures reported by our public competitors and is regularly used by security analysts, institutional investors, and other interested parties in analyzing operating performance and prospects. Adjusted EBITDA is not intended to be a substitute for any GAAP financial measure and, as calculated, may not be comparable to other similarly titled measures of performance of other companies in other industries or within the same industry.
We define and calculate Adjusted EBITDA as net income (loss) adjusted for depreciation and amortization, amortization of capitalized cloud computing implementation costs, amortization of content assets, interest expense, income tax provision (benefit), equity-based compensation, inventory net realizable value adjustment, and other items that are not normal, recurring, operating expenses necessary to operate the Company’s business as described in the reconciliation below.
We include this non-GAAP financial measure because it is used by management to evaluate Beachbody’s 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, equity-based compensation, and net realizable value adjustment) or are not related to our underlying business performance (for example, in the case of interest income and expense).
25
The table below presents our Adjusted EBITDA reconciled to our net loss, the closest GAAP measure, for the periods indicated:
|
|
Three months ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
(in thousands) |
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss |
|
$ |
(41,867 |
) |
|
$ |
(12,440 |
) |
|
$ |
(115,400 |
) |
|
$ |
(42,498 |
) |
Adjusted for: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Depreciation and amortization |
|
|
19,965 |
|
|
|
12,215 |
|
|
|
41,552 |
|
|
|
25,941 |
|
Amortization of capitalized cloud computing implementation costs |
|
|
168 |
|
|
|
168 |
|
|
|
336 |
|
|
|
336 |
|
Amortization of content assets |
|
|
7,016 |
|
|
|
3,302 |
|
|
|
13,180 |
|
|
|
6,119 |
|
Interest expense |
|
|
3 |
|
|
|
305 |
|
|
|
22 |
|
|
|
428 |
|
Income tax benefit |
|
|
(281 |
) |
|
|
(10,857 |
) |
|
|
(987 |
) |
|
|
(11,252 |
) |
Equity-based compensation |
|
|
3,001 |
|
|
|
2,522 |
|
|
|
7,565 |
|
|
|
5,095 |
|
Inventory net realizable value adjustment (1) |
|
|
10,502 |
|
|
|
— |
|
|
|
25,436 |
|
|
|
— |
|
Transaction costs |
|
|
— |
|
|
|
1,509 |
|
|
|
2 |
|
|
|
2,142 |
|
Restructuring and platform consolidation costs (2) |
|
|
2,086 |
|
|
|
— |
|
|
|
9,973 |
|
|
|
— |
|
Change in fair value of warrant liabilities |
|
|
(2,070 |
) |
|
|
(5,390 |
) |
|
|
(2,334 |
) |
|
|
(5,390 |
) |
Other adjustment items (3) |
|
|
— |
|
|
|
6,038 |
|
|
|
— |
|
|
|
6,038 |
|
Non-operating (4) |
|
|
5 |
|
|
|
(1,757 |
) |
|
|
76 |
|
|
|
(3,088 |
) |
Adjusted EBITDA |
|
$ |
(1,472 |
) |
|
$ |
(4,385 |
) |
|
$ |
(20,579 |
) |
|
$ |
(16,129 |
) |
26
Results of Operations
We operate and manage our business in two operating segments, Beachbody and Other. For financial reporting purposes, we have one reportable segment, Beachbody. We identified the reportable segment based on the information used by management to monitor performance and make operating decisions. See Note 16, Segment Information, to our unaudited condensed consolidated financial statements included elsewhere in this Report for additional information regarding our reportable segment. The following discussion of our results and operations is on a consolidated basis as the Other non-reportable operating segment is not material to the understanding of our business taken as a whole.
(in thousands) |
|
Three months ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Digital |
|
$ |
78,015 |
|
|
$ |
94,325 |
|
|
$ |
159,760 |
|
|
$ |
189,475 |
|
Connected fitness |
|
|
10,605 |
|
|
|
10 |
|
|
|
30,118 |
|
|
|
10 |
|
Nutrition and other |
|
|
90,516 |
|
|
|
128,773 |
|
|
|
188,180 |
|
|
|
259,842 |
|
Total revenue |
|
|
179,136 |
|
|
|
223,108 |
|
|
|
378,058 |
|
|
|
449,327 |
|
Cost of revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Digital |
|
|
18,406 |
|
|
|
11,612 |
|
|
|
34,831 |
|
|
|
22,734 |
|
Connected fitness |
|
|
31,459 |
|
|
|
156 |
|
|
|
76,165 |
|
|
|
156 |
|
Nutrition and other |
|
|
42,002 |
|
|
|
57,002 |
|
|
|
86,776 |
|
|
|
113,997 |
|
Total cost of revenue |
|
|
91,867 |
|
|
|
68,770 |
|
|
|
197,772 |
|
|
|
136,887 |
|
Gross profit |
|
|
87,269 |
|
|
|
154,338 |
|
|
|
180,286 |
|
|
|
312,440 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Selling and marketing |
|
|
86,624 |
|
|
|
140,194 |
|
|
|
193,068 |
|
|
|
284,890 |
|
Enterprise technology and development |
|
|
24,133 |
|
|
|
26,949 |
|
|
|
57,830 |
|
|
|
54,038 |
|
General and administrative |
|
|
19,584 |
|
|
|
17,231 |
|
|
|
39,657 |
|
|
|
35,177 |
|
Restructuring |
|
|
1,332 |
|
|
|
— |
|
|
|
8,555 |
|
|
|
— |
|
Total operating expenses |
|
|
131,673 |
|
|
|
184,374 |
|
|
|
299,110 |
|
|
|
374,105 |
|
Operating loss |
|
|
(44,404 |
) |
|
|
(30,036 |
) |
|
|
(118,824 |
) |
|
|
(61,665 |
) |
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Change in fair value of warrant liabilities |
|
|
2,070 |
|
|
|
5,390 |
|
|
|
2,334 |
|
|
|
5,390 |
|
Interest expense |
|
|
(3 |
) |
|
|
(305 |
) |
|
|
(22 |
) |
|
|
(428 |
) |
Other income, net |
|
|
189 |
|
|
|
1,654 |
|
|
|
125 |
|
|
|
2,953 |
|
Loss before income taxes |
|
|
(42,148 |
) |
|
|
(23,297 |
) |
|
|
(116,387 |
) |
|
|
(53,750 |
) |
Income tax benefit |
|
|
281 |
|
|
|
10,857 |
|
|
|
987 |
|
|
|
11,252 |
|
Net loss |
|
$ |
(41,867 |
) |
|
$ |
(12,440 |
) |
|
$ |
(115,400 |
) |
|
$ |
(42,498 |
) |
27
Revenue
Revenue includes digital subscriptions, nutritional supplement subscriptions, one-time nutritional sales, connected fitness products, access to our online Coach business management platform, preferred customer program memberships, and other fitness-related products. Digital subscription revenue is recognized ratably over the subscription period of up to 12 months. We often sell bundled products that combine digital subscriptions, nutritional products, and/or other fitness products. We consider these sales to be revenue arrangements with multiple performance obligations and allocate the transaction price to each performance obligation based on its relative stand-alone selling price. We defer revenue when we receive payments in advance of delivery of products or the performance of services.
|
|
Three months ended June 30, |
|
|
|
|
||||||||||
|
|
|
|
2021 |
|
|
$ Change |
|
|
% Change |
|
|||||
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|||||||
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Digital |
|
$ |
78,015 |
|
|
$ |
94,325 |
|
|
$ |
(16,310 |
) |
|
|
(17 |
%) |
Connected fitness |
|
|
10,605 |
|
|
|
10 |
|
|
|
10,595 |
|
|
NM |
|
|
Nutrition and other |
|
|
90,516 |
|
|
|
128,773 |
|
|
|
(38,257 |
) |
|
|
(30 |
%) |
Total revenue |
|
$ |
179,136 |
|
|
$ |
223,108 |
|
|
$ |
(43,972 |
) |
|
|
(20 |
%) |
NM = not meaningful
The decrease in digital revenue for the three months ended June 30, 2022, as compared to the three months ended June 30, 2021, was primarily due to a $12.6 million decrease in revenue generated from our online Coach business management platform as a result of fewer Coaches. The decrease in Coaches was primarily attributable to our preferred customer membership program, which launched at the end of Q3 2021, as certain Coaches elected to become preferred customers rather than remain in our Coach network. The change in digital revenue was also due to a $3.9 million decrease in revenue from our digital streaming services due to 16% fewer subscriptions.
The increase in connected fitness revenue was primarily due to the acquisition of Myx on June 25, 2021; there was minimal connected fitness revenue for the three months ended June 30, 2021.
The decrease in nutrition and other revenue for the three months ended June 30, 2022, as compared to the three months ended June 30, 2021, was primarily due to a $42.4 million decrease in revenue from nutritional products and a $3.1 million decrease in associated shipping revenue as we ended Q2 2022 with 33% fewer nutritional subscriptions compared to Q2 2021. These decreases were partially offset by $8.5 million of revenue associated with our preferred customer membership program, which launched at the end of Q3 2021.
|
|
Six months ended June 30, |
|
|
|
|
|
|
|
|||||||
|
|
|
|
2021 |
|
|
$ Change |
|
|
% Change |
|
|||||
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|||||||
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Digital |
|
$ |
159,760 |
|
|
$ |
189,475 |
|
|
$ |
(29,715 |
) |
|
|
(16 |
%) |
Connected fitness |
|
|
30,118 |
|
|
|
10 |
|
|
|
30,108 |
|
|
NM |
|
|
Nutrition and other |
|
|
188,180 |
|
|
|
259,842 |
|
|
|
(71,662 |
) |
|
|
(28 |
%) |
Total revenue |
|
$ |
378,058 |
|
|
$ |
449,327 |
|
|
$ |
(71,269 |
) |
|
|
(16 |
%) |
The decrease in digital revenue for the six months ended June 30, 2022, as compared to the six months ended June 30, 2021, was primarily due to a $24.4 million decrease in revenue generated from our online Coach business management platform as a result of fewer Coaches. The decrease in Coaches was primarily attributable to our preferred customer membership program, which launched at the end of Q3 2021, as certain Coaches elected to become preferred customers rather than remain in our Coach network. The change in digital revenue was also due to a $5.1 million decrease in revenue from our digital streaming services due to 16% fewer subscriptions.
The increase in connected fitness revenue was primarily due to the acquisition of Myx on June 25, 2021; there was minimal connected fitness revenue for the six months ended June 30, 2021.
The decrease in nutrition and other revenue for the six months ended June 30, 2022, as compared to the six months ended June 30, 2021, was primarily due to a $76.3 million decrease in revenue from nutritional products and a $7.6 million decrease in associated shipping revenue as we ended Q2 2022 with 33% fewer nutritional subscriptions compared to Q2 2021. These decreases were partially offset by $17.3 million of revenue associated with our preferred customer membership program, which launched at the end of Q3 2021, and $2.3 million of revenue from Coach events, which were not held in 2021 due to the COVID-19 pandemic.
28
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.
Connected Fitness Cost of Revenue
Connected fitness cost of revenue consists of product costs, including bike and tablet hardware costs, duties and other applicable importing costs, shipping and handling costs, warehousing and logistics costs, costs associated with service calls and repairs of products under warranty, payment processing and financing fees, customer service expenses, and personnel-related expenses associated with supply chain and logistics.
Nutrition and Other Cost of Revenue
Nutrition and other cost of revenue includes product costs, shipping and handling, fulfillment and warehousing, customer service, and 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.
|
|
Three months ended June 30, |
|
|
|
|
||||||||||
|
|
|
|
2021 |
|
|
$ Change |
|
|
% Change |
|
|||||
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|||||||
Cost of revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Digital |
|
$ |
18,406 |
|
|
$ |
11,612 |
|
|
$ |
6,794 |
|
|
|
59 |
% |
Connected fitness |
|
|
31,459 |
|
|
|
156 |
|
|
|
31,303 |
|
|
NM |
|
|
Nutrition and other |
|
|
42,002 |
|
|
|
57,002 |
|
|
|
(15,000 |
) |
|
|
(26 |
%) |
Total cost of revenue |
|
$ |
91,867 |
|
|
$ |
68,770 |
|
|
$ |
23,097 |
|
|
|
34 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross profit |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Digital |
|
$ |
59,609 |
|
|
$ |
82,713 |
|
|
$ |
(23,104 |
) |
|
|
(28 |
%) |
Connected fitness |
|
|
(20,854 |
) |
|
|
(146 |
) |
|
|
(20,708 |
) |
|
NM |
|
|
Nutrition and other |
|
|
48,514 |
|
|
|
71,771 |
|
|
|
(23,257 |
) |
|
|
(32 |
%) |
Total gross profit |
|
$ |
87,269 |
|
|
$ |
154,338 |
|
|
$ |
(67,069 |
) |
|
|
(43 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross margin |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Digital |
|
|
76 |
% |
|
|
88 |
% |
|
|
|
|
|
|
||
Connected fitness |
|
|
(197 |
%) |
|
NM |
|
|
|
|
|
|
|
|||
Nutrition and other |
|
|
54 |
% |
|
|
56 |
% |
|
|
|
|
|
|
||
The increase in digital cost of revenue for the three months ended June 30, 2022, as compared to the three months ended June 30, 2021, was driven, in part, by a $3.7 million increase in the amortization of content assets related to BODi which launched in the fourth quarter of 2021 and content acquired from Myx in June 2021. The change in digital cost of revenue was also due to $2.4 million increase in depreciation expense primarily related to a change in useful life of certain assets in connection with our digital platform consolidation, and a $1.5 million increase in personnel-related expenses as a result of additional headcount focused on our digital streaming services. These increases were partially offset by a $0.8 million decrease in intangible assets amortization as certain assets reached the end of their useful life prior to Q2 2022. The decrease in digital gross margin for the three months ended June 30, 2022 compared to the three months ended June 30, 2021 was primarily the result of the higher fixed expenses - content assets amortization, depreciation, and personnel-related expenses - on lower digital revenue.
The increase in connected fitness cost of revenue was primarily due to the acquisition of Myx on June 25, 2021; there was no connected fitness cost of revenue for periods prior to the acquisition. The negative connected fitness gross margin for the three months ended June 30, 2022 was primarily due to $15.0 million in adjustments for excess and obsolete inventory and to reduce the carrying value of connected fitness inventory to its net realizable value as well as high product, freight, fulfillment, and shipping costs due to supply chain surcharges and constraints and lower pricing in line with a highly-competitive connected fitness market.
29
The decrease in nutrition and other cost of revenue for the three months ended June 30, 2022, as compared to the three months ended June 30, 2021, was primarily due to a $13.0 million decrease in product costs, freight, and shipping expense as the result of the decrease in nutrition and other revenue and a $2.5 million decrease in customer service as nutrition and other comprises less of our total revenue. These were partially offset by a $1.2 million increase in depreciation expense. Despite a favorable impact from the preferred customer membership program, nutrition and other gross margin decreased primarily as a result of higher fixed expenses such as depreciation and personnel-related expenses on lower nutrition and other revenue.
|
|
Six months ended June 30, |
|
|
|
|
|
|
|
|||||||
|
|
|
|
2021 |
|
|
$ Change |
|
|
% Change |
|
|||||
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|||||||
Cost of revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Digital |
|
$ |
34,831 |
|
|
$ |
22,734 |
|
|
$ |
12,097 |
|
|
|
53 |
% |
Connected fitness |
|
|
76,165 |
|
|
|
156 |
|
|
|
76,009 |
|
|
NM |
|
|
Nutrition and other |
|
|
86,776 |
|
|
|
113,997 |
|
|
|
(27,221 |
) |
|
|
(24 |
%) |
Total cost of revenue |
|
$ |
197,772 |
|
|
$ |
136,887 |
|
|
$ |
60,885 |
|
|
|
44 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross profit |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Digital |
|
$ |
124,929 |
|
|
$ |
166,741 |
|
|
$ |
(41,812 |
) |
|
|
(25 |
%) |
Connected fitness |
|
|
(46,047 |
) |
|
|
(146 |
) |
|
|
(45,901 |
) |
|
NM |
|
|
Nutrition and other |
|
|
101,404 |
|
|
|
145,845 |
|
|
|
(44,441 |
) |
|
|
(30 |
%) |
Total gross profit |
|
$ |
180,286 |
|
|
$ |
312,440 |
|
|
$ |
(132,154 |
) |
|
|
(42 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross margin |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Digital |
|
|
78 |
% |
|
|
88 |
% |
|
|
|
|
|
|
||
Connected fitness |
|
|
(153 |
%) |
|
NM |
|
|
|
|
|
|
|
|||
Nutrition and other |
|
|
54 |
% |
|
|
56 |
% |
|
|
|
|
|
|
||
The increase in digital cost of revenue for the six months ended June 30, 2022, as compared to the six months ended June 30, 2021, was primarily driven by a $7.1 million increase in the amortization of content assets related to BODi which launched in the fourth quarter of 2021 and content acquired from Myx in June 2021. The change in digital cost of revenue was also due to a $5.6 million increase in depreciation expense primarily related to a change in useful life of certain assets in connection with our digital platform consolidation. These increases were partially offset by a decrease in variable costs of digital revenue as a result of the decrease in digital revenue. The decrease in digital gross margin for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 was primarily the result of higher fixed content assets amortization and depreciation on lower digital revenue.
The increase in connected fitness cost of revenue was primarily due to the acquisition of Myx on June 25, 2021; there was no connected fitness cost of revenue for periods prior to the acquisition. The negative connected fitness gross margin for the six months ended June 30, 2022 was primarily due to $30.5 million in adjustments for excess and obsolete inventory and to reduce the carrying value of connected fitness inventory to its net realizable value in addition to higher product, freight, and shipping costs due to supply chain surcharges and constraints and lower pricing in line with a highly-competitive connected fitness market.
The decrease in nutrition and other cost of revenue for the six months ended June 30, 2022, as compared to the six months ended June 30, 2021, was primarily due to a $25.1 million decrease in product, freight, fulfillment, and shipping expense as the result of the decrease in nutrition and other revenue and a $5.0 million decrease in customer service as nutrition and other comprises less of our total revenue. These were partially offset by a $3.4 million increase in depreciation expense. Nutrition and other gross margin decreased primarily as a result of higher fixed depreciation and personnel-related expenses on lower nutrition and other revenue.
30
Operating Expenses
Selling and Marketing
Selling and marketing expenses primarily include the cost of Coach compensation, advertising, royalties, promotions and events, and third-party sales commissions as well as the personnel expenses for employees and consultants who support these areas. Selling and marketing expense as a percentage of total revenue may fluctuate from period to period based on total revenue, timing of new content and nutritional product launches, and the timing of our media investments to build awareness around launch activity.
|
|
Three months ended June 30, |
|
|
|
|
||||||||||
|
|
|
|
2021 |
|
|
$ Change |
|
|
% Change |
|
|||||
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Selling and marketing |
|
$ |
86,624 |
|
|
$ |
140,194 |
|
|
$ |
(53,570 |
) |
|
|
(38 |
%) |
As a percentage of total revenue |
|
|
48.4 |
% |
|
|
62.8 |
% |
|
|
|
|
|
|
||
The decrease in selling and marketing expense for the three months ended June 30, 2022, as compared to the three months ended June 30, 2021, was primarily due to a $35.8 million decrease in online and television media expense and a $19.0 million decrease in Coach compensation, which was in line with the decrease in commissionable revenue. These decreases were partially offset by a $2.8 million increase in amortization of intangible assets due to the acquisition of Myx in June 2021.
Selling and marketing expense as a percentage of total revenue decreased by 1,440 basis points primarily due to the decrease in media investments compared to the three months ended June 30, 2021. We have reduced our media spend as part of our strategic realignment and in an effort to use our cash in the manner that has the highest probability of return on investment.
|
|
Six months ended June 30, |
|
|
|
|
|
|
|
|||||||
|
|
|
|
2021 |
|
|
$ Change |
|
|
% Change |
|
|||||
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Selling and marketing |
|
$ |
193,068 |
|
|
$ |
284,890 |
|
|
$ |
(91,822 |
) |
|
|
(32 |
%) |
As a percentage of total revenue |
|
|
51.1 |
% |
|
|
63.4 |
% |
|
|
|
|
|
|
||
The decrease in selling and marketing expense for the six months ended June 30, 2022, as compared to the six months ended June 30, 2021, was primarily due to a $65.5 million decrease in television media and online advertising expense and a $36.2 million decrease in Coach compensation, which was in line with the decrease in commissionable revenue. These decreases were partially offset by a $4.8 million increase in personnel-related expenses, a $5.7 million increase in amortization of intangible assets due to the acquisition of Myx in June 2021, and a $3.4 million increase in expenses from Coach events.
Selling and marketing expense as a percentage of total revenue decreased by 1,230 basis points primarily due to the decrease in media investments compared to the six months ended June 30, 2021. We have reduced our media spend as part of our strategic realignment and in an effort to use our cash in the manner that has the highest probability of return on investment.
Enterprise Technology and Development
Enterprise technology and development expenses relate primarily to enterprise systems applications, hardware, and software that serve as the technology infrastructure for the Company and are not directly related to services provided or tangible goods sold. This includes maintenance and enhancements of the Company’s enterprise resource planning 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
31
systems and are involved in the research and development of new and existing nutritional products, depreciation of enterprise technology-related assets, software licenses, hosting expenses, and technology equipment leases.
|
|
Three months ended June 30, |
|
|
|
|
||||||||||
|
|
|
|
2021 |
|
|
$ Change |
|
|
% Change |
|
|||||
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Enterprise technology and development |
|
$ |
24,133 |
|
|
$ |
26,949 |
|
|
$ |
(2,816 |
) |
|
|
(10 |
%) |
As a percentage of total revenue |
|
|
13.5 |
% |
|
|
12.1 |
% |
|
|
|
|
|
|
||
The decrease in enterprise technology and development expense for the three months ended June 30, 2022, as compared to the three months ended June 30, 2021, was primarily due to a $4.9 million decrease in personnel-related expenses related to lower headcount and the completion of certain technology initiatives by Q2 2022. This decrease was partially offset by a $2.1 million increase in depreciation expense.
Enterprise technology and development expense as a percentage of total revenue increased by 140 basis points due to higher fixed depreciation expense on lower total revenue.
|
|
Six months ended June 30, |
|
|
|
|
|
|
|
|||||||
|
|
|
|
2021 |
|
|
$ Change |
|
|
% Change |
|
|||||
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Enterprise technology and development |
|
$ |
57,830 |
|
|
$ |
54,038 |
|
|
$ |
3,792 |
|
|
|
7 |
% |
As a percentage of total revenue |
|
|
15.3 |
% |
|
|
12.0 |
% |
|
|
|
|
|
|
||
The increase in enterprise technology and development expense for the six months ended June 30, 2022, as compared to the six months ended June 30, 2021, was primarily due to a $2.3 million increase in depreciation expense and a $1.9 million increase in personnel-related expenses related to certain technology initiatives.
Enterprise technology and development expense as a percentage of total revenue increased by 330 basis points due to higher fixed depreciation and personnel-related costs on lower total revenue.
General and Administrative
General and administrative expense includes personnel-related expenses and facilities-related costs primarily for our executive, finance, accounting, legal and human resources functions. General and administrative expense also includes fees for professional services principally comprised of legal, audit, tax, and insurance.
|
|
Three months ended June 30, |
|
|
|
|
||||||||||
|
|
|
|
2021 |
|
|
$ Change |
|
|
% Change |
|
|||||
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
General and administrative |
|
$ |
19,584 |
|
|
$ |
17,231 |
|
|
$ |
2,353 |
|
|
|
14 |
% |
As a percentage of total revenue |
|
|
10.9 |
% |
|
|
7.7 |
% |
|
|
|
|
|
|
||
The increase in general and administrative expense for the three months ended June 30, 2022, as compared to the three months ended June 30, 2021, was primarily due to a $3.2 million increase in personnel-related expenses ($2.0 million in incentive compensation and $1.2 million in equity-based compensation) and a $2.6 million increase in insurance expense and accounting fees as a result of operating as a public company. These increases were partially offset by a $1.8 million decrease in rent expense due to our Santa Monica lease
32
assignment, $1.5 million decrease in transaction costs as there was no acquisition activity in Q2 2022, and a $0.5 million decrease in recruiting expense due to fewer headcount additions in Q2 2022.
General and administrative expense as a percentage of total revenue increased by 320 basis points due to higher fixed costs on lower total revenue.
|
|
Six months ended June 30, |
|
|
|
|
|
|
|
|||||||
|
|
|
|
2021 |
|
|
$ Change |
|
|
% Change |
|
|||||
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
General and administrative |
|
$ |
39,657 |
|
|
$ |
35,177 |
|
|
$ |
4,480 |
|
|
|
13 |
% |
As a percentage of total revenue |
|
|
10.5 |
% |
|
|
7.8 |
% |
|
|
|
|
|
|
||
The increase in general and administrative expense for the six months ended June 30, 2022, as compared to the six months ended June 30, 2021, was primarily due to a $5.1 million increase in personnel-related expenses ($2.7 million in incentive compensation and $2.4 million in equity-based compensation) and a $6.2 million increase in insurance expense and accounting, legal, and other professional service fees as a result of operating as a public company. These increases were partially offset by a $3.3 million decrease in rent expense due to our Santa Monica lease assignment, $2.1 million decrease in transaction costs as there was no acquisition activity in 2022, and a $1.0 million decrease in recruiting expenses due to fewer headcount additions in 2022.
General and administrative expense as a percentage of total revenue increased by 270 basis points due to higher fixed costs on lower total revenue.
Restructuring
Restructuring charges relate to our 2022 strategic alignment initiative to consolidate our streaming fitness and nutrition offerings into a single Beachbody platform. The charges incurred primarily relate to employee termination costs.
|
|
Three months ended June 30, |
|
|
|
|||||||||
|
|
|
|
2021 |
|
|
$ Change |
|
|
% Change |
||||
|
|
(dollars in thousands) |
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||
Restructuring |
|
$ |
1,332 |
|
|
$ |
— |
|
|
$ |
1,332 |
|
|
NM |
|
|
Six months ended June 30, |
|
|
|
|
|
|
||||||
|
|
|
|
2021 |
|
|
$ Change |
|
|
% Change |
||||
|
|
(dollars in thousands) |
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||
Restructuring |
|
$ |
8,555 |
|
|
$ |
— |
|
|
$ |
8,555 |
|
|
NM |
Other Income (Expense)
The change in fair value of warrant liabilities consists of the fair value changes of the public and private placement warrants. Interest expense primarily consists of interest expense associated with our borrowings and amortization of debt issuance costs for our Credit Facility in 2021. Other income, net, consists of interest income earned on investments and gains (losses) on foreign currency.
|
|
Three months ended June 30, |
|
|
|
|
||||||||||
|
|
|
|
2021 |
|
|
$ Change |
|
|
% Change |
|
|||||
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Change in fair value of warrant liabilities |
|
$ |
2,070 |
|
|
$ |
5,390 |
|
|
$ |
(3,320 |
) |
|
|
(62 |
%) |
Interest expense |
|
|
(3 |
) |
|
|
(305 |
) |
|
|
302 |
|
|
|
(99 |
%) |
Other income, net |
|
|
189 |
|
|
|
1,654 |
|
|
|
(1,465 |
) |
|
|
(89 |
%) |
The change in fair value of warrant liabilities during the three months ended June 30, 2022 primarily resulted from a decline in our stock price during the quarter. The decrease in interest expense was due to no borrowings outstanding during the three months ended June 30,
33
2022 compared to $22.0 million during the three months ended June 30, 2021. The decrease in other income was primarily due to the gain on the investment in the convertible instrument from Myx prior to June 25, 2021; there was no similar investment in 2022.
|
|
Six months ended June 30, |
|
|
|
|
|
|
|
|||||||
|
|
|
|
2021 |
|
|
$ Change |
|
|
% Change |
|
|||||
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Change in fair value of warrant liabilities |
|
$ |
2,334 |
|
|
$ |
5,390 |
|
|
$ |
(3,056 |
) |
|
|
(57 |
%) |
Interest expense |
|
|
(22 |
) |
|
|
(428 |
) |
|
|
406 |
|
|
|
(95 |
%) |
Other income, net |
|
|
125 |
|
|
|
2,953 |
|
|
|
(2,828 |
) |
|
|
(96 |
%) |
The change in fair value of warrant liabilities during the six months ended June 30, 2022 primarily resulted from a decline in our stock price during 2022. The decrease in interest expense was due to no borrowings outstanding during the six months ended June 30, 2022 compared to $42.0 million during the six months ended June 30, 2021. The decrease in other income was primarily due to the gain on the investment in the convertible instrument from Myx prior to June 25, 2021; there was no similar investment in 2022.
Income Tax Benefit
Income tax benefit consists of income taxes related to U.S. federal and state jurisdictions as well as those foreign jurisdictions where we have business operations.
|
|
Three months ended June 30, |
|
|
|
|
||||||||||
|
|
|
|
2021 |
|
|
$ Change |
|
|
% Change |
|
|||||
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income tax benefit |
|
$ |
281 |
|
|
$ |
10,857 |
|
|
$ |
(10,576 |
) |
|
|
(97 |
%) |
The income tax benefit decrease for the three months ended June 30, 2022, as compared to the three months ended June 30, 2021, was primarily driven by a reduction in our valuation allowance in Q2 2021. We recorded significant deferred tax liabilities in connection with the acquisition of Myx, which was a discrete Q2 2021 event, for which we will not incur future taxable income. This partially reduced our need for a valuation allowance, resulting in income tax benefit recorded during the three months ended June 30, 2021; there was no similar benefit recorded during the three months ended June 30, 2022.
|
|
Six months ended June 30, |
|
|
|
|
|
|
|
|||||||
|
|
|
|
2021 |
|
|
$ Change |
|
|
% Change |
|
|||||
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income tax benefit |
|
$ |
987 |
|
|
$ |
11,252 |
|
|
$ |
(10,265 |
) |
|
|
(91 |
%) |
The income tax benefit decrease for the six months ended June 30, 2022, as compared to the six months ended June 30, 2021, was primarily driven by a reduction in our valuation allowance in Q2 2021. We recorded significant deferred tax liabilities in connection with the acquisition of Myx, which was a discrete Q2 2021 event, for which we will not incur future taxable income. This partially reduced our need for a valuation allowance, resulting in income tax benefit recorded during the six months ended June 30, 2021; there was no similar benefit recorded during the six months ended June 30, 2022.
34
Liquidity and Capital Resources
|
|
Six months ended June 30, |
|
|||||
|
|
|
|
2021 |
|
|||
|
|
(dollars in thousands) |
|
|||||
|
|
|
|
|
|
|
||
Net cash used in operating activities |
|
$ |
(33,256 |
) |
|
$ |
(25,487 |
) |
Net cash used in investing activities |
|
|
(19,222 |
) |
|
|
(74,480 |
) |
Net cash provided by financing activities |
|
|
2,660 |
|
|
|
389,775 |
|
As of June 30, 2022, we had cash and cash equivalents totaling $57.1 million.
Net cash used in operating activities was $33.3 million for the six months ended June 30, 2022 compared to net cash used in operating activities of $25.5 million for the six months ended June 30, 2021. The increase in cash used in operating activities during the six months ended June 30, 2022, compared to the prior year quarter, was primarily due to the following:
We expect to reduce our cash used in operating activities over the next year, primarily through reduced inventory purchases and investment in media. As of June 30, 2022, our purchases of bike inventory were substantially completed as our inventory level is sufficient to meet expected connected fitness demand over the next year. Also, during the six months ended June 30, 2022, we returned to a performance marketing model which drives in-quarter or next-quarter payback and which reduced media spend by approximately $50.2 million compared to the prior year period.
Net cash used in investing activities was $19.2 million and $74.5 million for the six months ended June 30, 2022 and 2021, respectively. The decrease in net cash used in investing activities was primarily due to a $8.0 million decrease in capital expenditures and $47.3 million for certain investing activities which occurred during the six months ended June 30, 2021, but not during the six months ended June 30, 2022. These investing activities include cash paid for the Myx acquisition, investment in the convertible instrument in Myx, and another investment. We expect lower capital expenditures in 2022 compared to prior year due to the completion of significant projects at the end of 2021.
Net cash provided by financing activities was $2.7 million and $389.8 million for the six months ended June 30, 2022 and 2021, respectively. The decrease in net cash provided by financing activities was primarily due to the completion of the Business Combination during the six months ended June 30, 2021; we had no similar financing during the six months ended June 30, 2022.
We have $45.3 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 in the next year. Our future capital requirements may vary materially from those currently planned and will depend on many factors, including our rate of revenue growth and overall economic conditions. We continue to assess and efficiently manage our working capital, and expect to generate additional liquidity through continued cost control initiatives. We believe that existing cash and cash equivalents and cost control initiatives will provide the Company with sufficient liquidity to meet our anticipated cash needs for the next twelve months.
On August 8, 2022 (the “Closing”), we entered into an agreement with a third-party lender for a $50.0 million senior secured term loan (the “Term Loan”) with a four-year maturity. The Term Loan includes an incremental facility of up to an additional $25.0 million subject to certain terms and conditions. The Term Loan was funded at Closing and bears interest at our option of either (i) the Secured Overnight Financing Rate based upon an interest period of three months plus 7.15%, or (ii) a reference rate as defined in the agreement, plus 6.15%. In addition, borrowings will bear interest at 3.00%, which will be paid in kind by capitalizing such interest and adding it to the outstanding principal, annually. We paid an upfront fee of $1.5 million at Closing and are required to pay an annual fee of $0.25 million. The Term Loan requires annual amortization of 2.50% in the first two years and 5.00% in the final two years, paid quarterly, and certain mandatory repayments as defined in the agreement. The Term Loan provides customary restrictions, including prepayment premiums, and requires compliance with certain financial and other covenants.
35
In connection with the Term Loan, we issued warrants for the purchase of 4,716,756 million shares of the Company’s Class A Common Stock at an exercise price of $1.85 per share. The warrants vest on a monthly basis over four years, with 30%, 30%, 20% and 20% vesting in the first, second, third and fourth years, respectively. The warrants have a seven-year term from the date of Closing.
We expect to use the proceeds for general corporate purposes and to pay transaction fees and expenses related to the Term Loan. We may explore additional equity or debt financing to supplement our anticipated working capital balances and further strengthen our financial position, but do not at this time know which form it will take or what the terms will be. The incurrence of debt financing would result in debt service obligations and the instruments governing such debt could provide for operating and financing covenants that would restrict our operations. The sale of additional equity would result in additional dilution to our shareholders. There can be no assurances that we will be able to raise additional capital in amounts or on terms acceptable to us.
Critical Accounting Policies and Estimates
Goodwill and Intangible 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 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. Due to the sustained decline in our market capitalization and macroeconomic factors observed during the three months ended June 30, 2022, we performed an interim test for impairment of our Beachbody reporting unit goodwill and tested our definite-lived intangible assets for recoverability as of June 30, 2022. In performing the interim impairment test for goodwill we elected to bypass the qualitative assessment and proceed to performing the quantitative test.
In testing for impairment of our definite-lived intangible assets, we compared the carrying value of each asset group to its forecasted undiscounted cash flows to determine whether it was recoverable. The carrying values of each of our asset groups exceed their future undiscounted cash flows and are therefore recoverable.
We test goodwill for impairment at a level within the Company referred to as the reporting unit. We have determined that our reporting units are our operating segments, Beachbody and Other, because none of the components of either operating segment constitutes a business for which discrete financial information is available or has operating results which are regularly reviewed by segment management. There is no goodwill held by the Other reporting unit.
In testing for goodwill impairment, we compared the carrying value of the Beachbody reporting unit to its estimated fair value. Fair value was estimated using a combination of a market approach and an income approach, with significant assumptions related to guideline company financial multiples used in the market approach and significant assumptions about revenue growth, long-term growth rates, and discount rates used in a discounted cash flow model in the income approach. As of June 30, 2022, the Beachbody reporting unit’s fair value exceeded the carrying value by approximately 60%. We will continue to monitor changes that would impact the significant assumptions used in the valuation.
Management will continue to monitor its reporting units for changes in the business environment that could impact their fair value. Examples of events or circumstances that could result in changes to the underlying key assumptions and judgments used in our goodwill impairment tests, and ultimately impact the estimated fair value of our reporting unit may include the duration of the COVID-19 global pandemic, its impact on the global economy, supply chain disruptions and demand for at-home fitness solutions; adverse macroeconomic conditions; volatility in the equity and debt markets which could result in higher weighted-average cost of capital and our subscriber growth rates. Changes in any of the assumptions used in the valuation of the reporting unit, or changes in the business environment could materially affect the expected cash flows, and such impacts could potentially result in a material non-cash impairment charge.
Recent Accounting Pronouncements
See Note 1, Description of Business and Summary of Significant Accounting Policies, of the notes to our unaudited condensed consolidated financial statements included elsewhere in this Report for recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Foreign Currency Risk
We are exposed to foreign currency exchange risk related to transactions in currencies other than the U.S. Dollar, which is our functional currency. Our foreign subsidiaries, sales, certain inventory purchases and operating expenses expose us to foreign currency exchange risk. For three months ended June 30, 2022 and 2021, approximately 11% of our revenue was in foreign currencies. These sales were primarily denominated in Canadian dollars and British pounds.
We use derivative instruments to manage the effects of fluctuations in foreign currency exchange rates on our net cash flows. We primarily enter into option contracts to hedge forecasted payments, typically for up to 12 months, for cost of revenue, selling and marketing expenses, general and administrative expenses and intercompany transactions not denominated in the local currencies of our foreign operations. We designate some of these instruments as cash flow hedges and record them at fair value as either assets or liabilities within the consolidated balance sheets. Some of these instruments are freestanding derivatives for which hedge accounting does not apply.
Changes in the fair value of cash flow hedges are recorded in accumulated other comprehensive income (loss) until the hedged forecasted transaction affects earnings. Deferred gains and losses associated with cash flow hedges of third-party payments are recognized in cost of revenue, selling and marketing or general and administrative expenses, as applicable, during the period when the hedged underlying transaction affects earnings. Changes in the fair value of certain derivatives for which hedge accounting does not apply are immediately recognized directly in earnings to cost of revenue.
A hypothetical 10% change in exchange rates, with the U.S. dollar as the functional and reporting currency, would not result in a material increase or decrease in cost of revenue and operating expenses due to the derivative instruments we use to hedge any foreign currency exposure.
The aggregate notional amount of foreign exchange derivative instruments at June 30, 2022 and December 31, 2021 was $26.5 million and $30.4 million, respectively.
Item 4. Controls and Procedures.
Management’s Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of June 30, 2022. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Report.
Changes in Internal Control Over Financial Reporting
There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Limitations on Effectiveness of Controls and Procedures
Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives, as specified above. Our management recognizes that any control system, no matter how well designed and operated, is based upon certain judgements and assumptions and cannot provide absolute assurance that its objectives will be met.
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PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
We are and, from time to time, we may become, involved in legal proceedings or be subject to claims arising in the ordinary course of our business. There have been no material changes from the information previously reported under Part I, Item 3 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
Item 1A. Risk Factors.
There have been no material developments with respect to the information previously reported under Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Issuer Repurchase of Equity Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosure.
None.
Item 5. Other Information.
Financing Agreement
On August 8, 2022 (the “Effective Date”),The Beachbody Company, Inc., a Delaware corporation (the “Parent” or the “Company”), Beachbody, LLC, a Delaware limited liability company and wholly-owned direct subsidiary of the Company (the “Borrower”), and certain subsidiaries of the Company (together with the Company and the Borrower, each, a “Loan Party”, and collectively, the “Loan Parties”), entered into a senior secured term loan facility (the “Credit Facility”).
The loan documents for the Credit Facility (the “Loan Documents”) include a Financing Agreement (the “Financing Agreement”) entered into by the Company, the other Loan Parties, the lenders party thereto, and Blue Torch Finance, LLC, as administrative agent and collateral agent (the “Term Loan Agent”) for such lenders.
The Financing Agreement provides for senior secured term loans on the Effective Date in an aggregate principal amount of $50.0 million (the “Term Loan”) which was drawn on the Effective Date. The proceeds of the Credit Facility will be used for general business purposes and to pay transaction fees and expenses related to the Credit Facility. In addition, the Credit Facility contains an incremental facility feature which permits the Borrower to borrow up to an additional $25.0 million, subject to the terms and conditions set forth in the Financing Agreement. The Credit Facility matures on August 8, 2026.
The Borrower’s obligations under the Financing Agreement are guaranteed by the other Loan Parties, including the Company. Pursuant to the Financing Agreement and the other Loan documents, the Company and the other Loan Parties granted a lien to the Term Loan Agent in substantially all of the assets now owned or hereafter acquired by any Loan Party, including, without limitation: accounts, cash and cash equivalents, chattel paper, deposit accounts, documents, equipment, fixtures, general intangibles, instruments, intellectual property and intellectual property licenses, inventory, investment property, letter of credit rights, supporting obligations, insurance policies, goods, books and records, commercial tort claims, and the proceeds and products of each of the foregoing, in each case, subject to certain customary exceptions.
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The Term Loan borrowings under the Credit Facility may take the form of base rate (“Reference Rate”) loans or Secured Overnight Financing Rate (“SOFR”) loans. Reference Rate loans will bear interest at a rate per annum equal to the sum of an applicable margin of 6.15% per annum, plus the greatest of (a) 2.00% per annum, (b) the Federal Funds Rate plus 0.50% per annum, (c) the “SOFR Rate” (based upon an interest period of 1 month) plus 1.00% per annum, and (d) the rate last quoted by The Wall Street Journal. SOFR loans will bear interest at a rate per annum equal to the sum of an applicable margin of 7.15% and the “SOFR Rate” (based upon an interest period of 3 months). The “SOFR Rate” is subject to a floor of 1.00%. In addition, the Term Loan borrowings under the Credit Facility will bear interest at a rate per annum equal to 3.00%, which interest will be paid in kind by capitalizing such interest and adding such capitalized interest to the then outstanding principal amount of the loans annually on each anniversary of the Effective Date.
The Financing Agreement contains certain customary covenants, including requirements to prepay the loans in an amount equal to (i) 100% of the net cash proceeds from certain asset dispositions, extraordinary receipts and debt issuances, subject to certain reinvestment rights and other exceptions and (ii) 50% of excess cash flow of the Company and its subsidiaries, subject to certain exceptions. The Credit Facility will amortize at 2.50% per year from the Effective Date to the date that is the second anniversary of the Effective Date, payable on a quarterly basis, and thereafter, at 5.00% per year, payable on a quarterly basis.
Amounts outstanding under the Term Loan Credit Agreement may become due and payable upon the occurrence of specified events of default, which among other things include (subject to certain exceptions and cure periods): failure to pay principal, interest, or any fees or certain other amounts when due; breach of any representation or warranty, covenant, or other agreement in the Financing Agreement and other related loan documents; the occurrence of a bankruptcy or insolvency proceeding with respect to any Loan Party; any failure by a Loan Party to make a payment with respect to indebtedness having an aggregate principal amount in excess of a specified threshold; and certain other customary events of default.
The Financing Agreement contains financial covenants whereby the Loan Parties are required to (a) maintain certain minimum revenue levels, to be tested on a quarterly basis, beginning on the fiscal quarter ending September 30, 2022, and (b) maintain minimum Liquidity (as defined in the Financing Agreement) of (i) $10.0 million at all times from the Effective Date through December 31, 2022, (ii) $12.5 million at all times thereafter through June 30, 2023, and (iii) $15.0 million at all times thereafter through the maturity of the Credit Facility. The Financing Agreement also contains customary representations, warranties, and covenants, which include, but are not limited to, restrictions on indebtedness, liens, fundamental changes, restricted payments, asset sales, affiliate transactions, line of business, investments, negative pledges and amendments to organizational documents and material contracts.
Any amounts voluntarily or mandatorily prepaid under the Credit Facility are subject to a prepayment penalty, subject to certain exceptions, equal to (i) 5.00% of the principal amount prepaid if the prepayment occurs on or prior to the first anniversary of the Effective Date, (ii) 3.00% of the principal amount prepaid if the prepayment occurs after the first anniversary and on or prior to the second anniversary of the Effective Date, (iii) 2.00% of the principal amount prepaid if the prepayment occurs after the second anniversary and on or prior to the third anniversary of the Effective Date, and (iv) 0.00% thereafter.
The foregoing summary does not purport to be complete and is qualified in its entirety by reference to the Financing Agreement which is attached hereto as Exhibit 10.2 and is incorporated by reference herein.
Warrant
Pursuant to the Financing Agreement, on August 8, 2022, the Company issued to certain holders affiliated with Blue Torch Finance, LLC warrants (each, a “Warrant” and, collectively, the “Warrants”) to purchase, in the aggregate, 4,716,756 shares of Class A common stock of the Company, $0.0001 par value per share (the “Common Stock”) at an exercise price of $1.85 per share. The shares of Common Stock underlying the Warrants shall vest in accordance with the schedule set forth in the Warrants (the “Vested Shares”). The Warrants are exercisable for all or part of the unexercised Vested Shares from time to time on or after the Effective Date.
The foregoing summary of the Warrant is qualified in its entirety by reference to the full text of the form of Warrant, a copy of which is attached hereto as Exhibit 10.3 and incorporated herein by reference.
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Item 6. Exhibits.
Exhibit
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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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2.1 |
8-K/A |
2.1 |
2/16/2021 |
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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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10.1 |
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*
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10.2 |
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* |
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10.3 |
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* |
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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.
^ 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: August 8, 2022 |
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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: August 8, 2022 |
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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 | ||
|---|---|---|---|---|
 | ||||
| 12/31/26 | ||||
| 8/8/26 | ||||
| 12/31/25 | ||||
| 12/31/24 | ||||
| 12/31/23 | ||||
| 6/30/23 | ||||
| 12/31/22 | ||||
| 12/15/22 | ||||
| 9/30/22 | ||||
| Filed on: | 8/8/22 | 8-K | ||
| 8/4/22 | ||||
| For Period end: | 6/30/22 | |||
| 3/31/22 | 10-Q, DEF 14A, DEFA14A | |||
| 1/1/22 | ||||
| 12/31/21 | 10-K | |||
| 6/30/21 | 10-Q, 3, 4 | |||
| 6/25/21 | 3, 4, 425, 8-K | |||
| 3/31/21 | 10-Q, S-4/A | |||
| 1/1/21 | ||||
| 12/31/20 | 10-K, 10-K/A | |||
| List all Filings | ||||
As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent 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 11/07/23 Beachbody Co., Inc. 10-Q 9/30/23 87:13M Donnelley … Solutions/FA 8/08/23 Beachbody Co., Inc. 10-Q 6/30/23 86:14M Donnelley … Solutions/FA 5/08/23 Beachbody Co., Inc. 10-Q 3/31/23 81:10M Donnelley … Solutions/FA 3/16/23 Beachbody Co., Inc. 10-K 12/31/22 134:22M Donnelley … Solutions/FA 11/09/22 Beachbody Co., Inc. 10-Q 9/30/22 86:13M Donnelley … Solutions/FA |
As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent 7/01/21 Beachbody Co., Inc. 8-K:1,2,3,5 6/25/21 10:2.4M Donnelley … Solutions/FA 2/16/21 Beachbody Co., Inc. 8-K/A:1,3,8 2/09/21 6:924K Donnelley … Solutions/FA |