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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2023
or
☐ |
TRANSITION REPORT PURSUANT TO Section 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number: 001-39735
The Beachbody Company, Inc.
(Exact name of registrant as specified in its charter)
Delaware |
85-3222090 |
|
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
|
|
|
400 Continental Blvd, Suite 400 El Segundo, California |
90245 |
(Address of principal executive offices) |
(Zip Code) |
(310) 883-9000
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
|
Title of each class
|
Trading Symbol(s)
|
Name of each exchange on which registered
|
Class A Common Stock, par value $0.0001 per share |
BODY |
The New York Stock Exchange |
Redeemable warrants, each whole warrant exercisable for one Class A common stock at an exercise price of $11.50 |
BODY WS |
The New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer ☐ |
Accelerated Filer ☒ |
Non-Accelerated Filer ☐ |
Smaller Reporting Company ☒ |
Emerging Growth Company ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
There were 176,234,868 shares of the registrant’s Class A Common Stock, par value $0.0001 per share, and 136,450,256 shares of the registrant’s Class X Common Stock, par value $0.0001 per share, outstanding as of August 2, 2023.
Table of Contents
Part I. |
3 |
|
Item 1. |
3 |
|
|
3 |
|
|
4 |
|
|
Unaudited Condensed Consolidated Statements of Comprehensive Loss |
5 |
|
Unaudited Condensed Consolidated Statements of Stockholders’ Equity |
6 |
|
7 |
|
|
Notes to Unaudited Condensed Consolidated Financial Statements |
8 |
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Operations |
24 |
Item 3. |
41 |
|
Item 4. |
41 |
|
Part II. |
41 |
|
Item 1. |
41 |
|
Item 2. |
42 |
|
Item 3. |
42 |
|
Item 4. |
42 |
|
Item 5. |
42 |
|
Item 6. |
43 |
|
45 |
||
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
The Beachbody Company, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2023 |
|
|
2022 |
|
||
|
|
(unaudited) |
|
|
|
|
||
Assets |
|
|
|
|
|
|
||
Current assets: |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
58,686 |
|
|
$ |
80,091 |
|
Inventory, net |
|
|
43,364 |
|
|
|
54,060 |
|
Prepaid expenses |
|
|
8,549 |
|
|
|
13,055 |
|
Other current assets |
|
|
48,619 |
|
|
|
39,248 |
|
Total current assets |
|
|
159,218 |
|
|
|
186,454 |
|
Property and equipment, net |
|
|
58,205 |
|
|
|
74,147 |
|
Content assets, net |
|
|
29,193 |
|
|
|
34,888 |
|
Goodwill |
|
|
125,166 |
|
|
|
125,166 |
|
Intangible assets, net |
|
|
5,648 |
|
|
|
8,204 |
|
Right-of-use assets, net |
|
|
4,033 |
|
|
|
5,030 |
|
Other assets |
|
|
9,661 |
|
|
|
9,506 |
|
Total assets |
|
$ |
391,124 |
|
|
$ |
443,395 |
|
Liabilities and Stockholders’ Equity |
|
|
|
|
|
|
||
Current liabilities: |
|
|
|
|
|
|
||
Accounts payable |
|
$ |
13,301 |
|
|
$ |
17,940 |
|
Accrued expenses |
|
|
49,116 |
|
|
|
64,430 |
|
Deferred revenue |
|
|
107,378 |
|
|
|
95,587 |
|
Current portion of lease liabilities |
|
|
2,095 |
|
|
|
2,150 |
|
Current portion of Term Loan |
|
|
16,250 |
|
|
|
1,250 |
|
Other current liabilities |
|
|
3,356 |
|
|
|
3,283 |
|
Total current liabilities |
|
|
191,496 |
|
|
|
184,640 |
|
Term Loan |
|
|
25,836 |
|
|
|
39,735 |
|
Long-term lease liabilities, net |
|
|
2,249 |
|
|
|
3,318 |
|
Deferred tax liabilities |
|
|
137 |
|
|
|
181 |
|
Other liabilities |
|
|
4,229 |
|
|
|
3,979 |
|
Total liabilities |
|
|
223,947 |
|
|
|
231,853 |
|
Commitments and contingencies (Note 8) |
|
|
|
|
|
|
||
Stockholders’ equity: |
|
|
|
|
|
|
||
Preferred stock, $0.0001 par value; 100,000,000 shares |
|
|
— |
|
|
|
— |
|
Common stock, $0.0001 par value, 1,900,000,000 shares |
|
|
|
|
|
|
||
Class A: 176,157,734 and 170,911,819 shares issued and |
|
|
18 |
|
|
|
17 |
|
Class X: 136,450,256 and 141,250,310 shares issued and outstanding at |
|
|
14 |
|
|
|
14 |
|
Class C: no shares issued and outstanding at |
|
|
— |
|
|
|
— |
|
Additional paid-in capital |
|
|
641,649 |
|
|
|
630,709 |
|
Accumulated deficit |
|
|
(474,171 |
) |
|
|
(419,235 |
) |
Accumulated other comprehensive income (loss) |
|
|
(333 |
) |
|
|
37 |
|
Total stockholders’ equity |
|
|
167,177 |
|
|
|
211,542 |
|
Total liabilities and stockholders’ equity |
|
$ |
391,124 |
|
|
$ |
443,395 |
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
The Beachbody Company, Inc.
Unaudited Condensed Consolidated Statements of Operations
(in thousands, except per share data)
|
|
Three months ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Digital |
|
$ |
65,214 |
|
|
$ |
78,015 |
|
|
$ |
129,987 |
|
|
$ |
159,760 |
|
Nutrition and other |
|
|
64,628 |
|
|
|
90,516 |
|
|
|
138,748 |
|
|
|
188,180 |
|
Connected fitness |
|
|
5,106 |
|
|
|
10,605 |
|
|
|
11,114 |
|
|
|
30,118 |
|
Total revenue |
|
|
134,948 |
|
|
|
179,136 |
|
|
|
279,849 |
|
|
|
378,058 |
|
Cost of revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Digital |
|
|
16,336 |
|
|
|
18,406 |
|
|
|
31,303 |
|
|
|
34,831 |
|
Nutrition and other |
|
|
27,202 |
|
|
|
42,002 |
|
|
|
58,241 |
|
|
|
86,776 |
|
Connected fitness |
|
|
8,666 |
|
|
|
31,459 |
|
|
|
16,221 |
|
|
|
76,165 |
|
Total cost of revenue |
|
|
52,204 |
|
|
|
91,867 |
|
|
|
105,765 |
|
|
|
197,772 |
|
Gross profit |
|
|
82,744 |
|
|
|
87,269 |
|
|
|
174,084 |
|
|
|
180,286 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Selling and marketing |
|
|
76,492 |
|
|
|
86,624 |
|
|
|
153,068 |
|
|
|
193,068 |
|
Enterprise technology and development |
|
|
18,650 |
|
|
|
24,133 |
|
|
|
37,746 |
|
|
|
57,830 |
|
General and administrative |
|
|
11,887 |
|
|
|
19,584 |
|
|
|
29,603 |
|
|
|
39,657 |
|
Restructuring |
|
|
(107 |
) |
|
|
1,332 |
|
|
|
5,280 |
|
|
|
8,555 |
|
Total operating expenses |
|
|
106,922 |
|
|
|
131,673 |
|
|
|
225,697 |
|
|
|
299,110 |
|
Operating loss |
|
|
(24,178 |
) |
|
|
(44,404 |
) |
|
|
(51,613 |
) |
|
|
(118,824 |
) |
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Change in fair value of warrant liabilities |
|
|
375 |
|
|
|
2,070 |
|
|
|
432 |
|
|
|
2,334 |
|
Interest expense |
|
|
(2,368 |
) |
|
|
(3 |
) |
|
|
(4,699 |
) |
|
|
(22 |
) |
Other income, net |
|
|
411 |
|
|
|
189 |
|
|
|
980 |
|
|
|
125 |
|
Loss before income taxes |
|
|
(25,760 |
) |
|
|
(42,148 |
) |
|
|
(54,900 |
) |
|
|
(116,387 |
) |
Income tax (provision) benefit |
|
|
12 |
|
|
|
281 |
|
|
|
(36 |
) |
|
|
987 |
|
Net loss |
|
$ |
(25,748 |
) |
|
$ |
(41,867 |
) |
|
$ |
(54,936 |
) |
|
$ |
(115,400 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss per common share, basic and diluted |
|
$ |
(0.08 |
) |
|
$ |
(0.14 |
) |
|
$ |
(0.18 |
) |
|
$ |
(0.38 |
) |
Weighted-average common shares outstanding, basic and diluted |
|
|
314,312 |
|
|
|
307,205 |
|
|
|
311,740 |
|
|
|
306,786 |
|
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, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss |
|
$ |
(25,748 |
) |
|
$ |
(41,867 |
) |
|
$ |
(54,936 |
) |
|
$ |
(115,400 |
) |
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Change in fair value of derivative financial instruments, net of tax |
|
|
(242 |
) |
|
|
35 |
|
|
|
(389 |
) |
|
|
(150 |
) |
Reclassification of (losses) gains on derivative financial instruments |
|
|
61 |
|
|
|
74 |
|
|
|
(26 |
) |
|
|
143 |
|
Foreign currency translation adjustment |
|
|
35 |
|
|
|
(51 |
) |
|
|
45 |
|
|
|
(47 |
) |
Total other comprehensive income (loss) |
|
|
(146 |
) |
|
|
58 |
|
|
|
(370 |
) |
|
|
(54 |
) |
Total comprehensive loss |
|
$ |
(25,894 |
) |
|
$ |
(41,809 |
) |
|
$ |
(55,306 |
) |
|
$ |
(115,454 |
) |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5
The Beachbody Company, Inc.
Unaudited Condensed Consolidated Statements of Stockholders’ Equity
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
||||||
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
Other |
|
|
Total |
|
||||||
|
|
Common Stock |
|
|
Paid-In |
|
|
Accumulated |
|
|
Comprehensive |
|
|
Stockholders’ |
|
|||||||||
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
Income (Loss) |
|
|
Equity |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Balances at December 31, 2021 |
|
|
309,584 |
|
|
$ |
31 |
|
|
$ |
610,418 |
|
|
$ |
(225,043 |
) |
|
$ |
(21 |
) |
|
$ |
385,385 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(73,533 |
) |
|
|
— |
|
|
|
(73,533 |
) |
Other comprehensive loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(112 |
) |
|
|
(112 |
) |
Equity-based compensation |
|
|
— |
|
|
|
— |
|
|
|
4,564 |
|
|
|
— |
|
|
|
— |
|
|
|
4,564 |
|
Options exercised, net of tax withholdings |
|
|
1,132 |
|
|
|
— |
|
|
|
1,923 |
|
|
|
— |
|
|
|
— |
|
|
|
1,923 |
|
Balances at March 31, 2022 |
|
|
310,716 |
|
|
$ |
31 |
|
|
$ |
616,905 |
|
|
$ |
(298,576 |
) |
|
$ |
(133 |
) |
|
$ |
318,227 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(41,867 |
) |
|
|
— |
|
|
|
(41,867 |
) |
Other comprehensive income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
58 |
|
|
|
58 |
|
Equity-based compensation |
|
|
210 |
|
|
|
— |
|
|
|
3,001 |
|
|
|
— |
|
|
|
— |
|
|
|
3,001 |
|
Options exercised, net of tax withholdings |
|
|
588 |
|
|
|
— |
|
|
|
737 |
|
|
|
— |
|
|
|
— |
|
|
|
737 |
|
Balances at June 30, 2022 |
|
|
311,514 |
|
|
$ |
31 |
|
|
$ |
620,643 |
|
|
$ |
(340,443 |
) |
|
$ |
(75 |
) |
|
$ |
280,156 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
||||||
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
Other |
|
|
Total |
|
||||||
|
|
Common Stock |
|
|
Paid-In |
|
|
Accumulated |
|
|
Comprehensive |
|
|
Stockholders’ |
|
|||||||||
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
Income (Loss) |
|
|
Equity |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Balances at December 31, 2022 |
|
|
312,162 |
|
|
$ |
31 |
|
|
$ |
630,709 |
|
|
$ |
(419,235 |
) |
|
$ |
37 |
|
|
$ |
211,542 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(29,188 |
) |
|
|
— |
|
|
|
(29,188 |
) |
Other comprehensive loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(224 |
) |
|
|
(224 |
) |
Equity-based compensation |
|
|
9,736 |
|
|
|
1 |
|
|
|
9,554 |
|
|
|
— |
|
|
|
— |
|
|
|
9,555 |
|
Shares withheld for tax withholdings on vesting of restricted stock |
|
|
(3,644 |
) |
|
|
— |
|
|
|
(2,128 |
) |
|
|
— |
|
|
|
— |
|
|
|
(2,128 |
) |
Balances at March 31, 2023 |
|
|
318,254 |
|
|
$ |
32 |
|
|
$ |
638,135 |
|
|
$ |
(448,423 |
) |
|
$ |
(187 |
) |
|
$ |
189,557 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(25,748 |
) |
|
|
— |
|
|
|
(25,748 |
) |
Other comprehensive loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(146 |
) |
|
|
(146 |
) |
Equity-based compensation |
|
|
1,377 |
|
|
|
1 |
|
|
|
3,160 |
|
|
|
— |
|
|
|
— |
|
|
|
3,161 |
|
Forfeiture of shares per the Forfeiture Agreement |
|
|
(8,000 |
) |
|
|
(1 |
) |
|
|
1 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Issuance of shares due to Employee Stock Purchase Plan |
|
|
982 |
|
|
|
— |
|
|
|
384 |
|
|
|
— |
|
|
|
— |
|
|
|
384 |
|
Tax withholdings on vesting of restricted stock |
|
|
(5 |
) |
|
|
— |
|
|
|
(31 |
) |
|
|
— |
|
|
|
— |
|
|
|
(31 |
) |
Balances at June 30, 2023 |
|
|
312,608 |
|
|
$ |
32 |
|
|
$ |
641,649 |
|
|
$ |
(474,171 |
) |
|
$ |
(333 |
) |
|
$ |
167,177 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
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, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
|
|
|
|
|
|
|
||
Cash flows from operating activities: |
|
|
|
|
|
|
||
Net loss |
|
$ |
(54,936 |
) |
|
$ |
(115,400 |
) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
||
Depreciation and amortization expense |
|
|
21,632 |
|
|
|
41,552 |
|
Amortization of content assets |
|
|
11,020 |
|
|
|
13,180 |
|
Provision for inventory and inventory purchase commitments |
|
|
5,072 |
|
|
|
32,019 |
|
Realized (gains) losses on hedging derivative financial instruments |
|
|
(26 |
) |
|
|
143 |
|
Change in fair value of warrant liabilities |
|
|
(432 |
) |
|
|
(2,334 |
) |
Equity-based compensation |
|
|
12,716 |
|
|
|
7,565 |
|
Deferred income taxes |
|
|
(121 |
) |
|
|
(1,143 |
) |
Amortization of debt issuance costs |
|
|
980 |
|
|
|
— |
|
Paid-in-kind interest expense |
|
|
746 |
|
|
|
— |
|
Other non-cash items |
|
|
— |
|
|
|
311 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
||
Inventory |
|
|
6,037 |
|
|
|
28,400 |
|
Content assets |
|
|
(5,325 |
) |
|
|
(11,940 |
) |
Prepaid expenses |
|
|
4,506 |
|
|
|
5,545 |
|
Other assets |
|
|
(8,912 |
) |
|
|
167 |
|
Accounts payable |
|
|
(4,179 |
) |
|
|
(22,753 |
) |
Accrued expenses |
|
|
(14,356 |
) |
|
|
(7,739 |
) |
Deferred revenue |
|
|
12,221 |
|
|
|
1,000 |
|
Other liabilities |
|
|
(1,010 |
) |
|
|
(1,829 |
) |
Net cash used in operating activities |
|
|
(14,367 |
) |
|
|
(33,256 |
) |
Cash flows from investing activities: |
|
|
|
|
|
|
||
Purchase of property and equipment |
|
|
(5,030 |
) |
|
|
(19,222 |
) |
Net cash used in investing activities |
|
|
(5,030 |
) |
|
|
(19,222 |
) |
Cash flows from financing activities: |
|
|
|
|
|
|
||
Proceeds from exercise of stock options |
|
|
— |
|
|
|
2,968 |
|
Remittance of taxes withheld from employee stock awards |
|
|
— |
|
|
|
(308 |
) |
Debt repayments |
|
|
(625 |
) |
|
|
— |
|
Proceeds from issuance of common shares in the Employee Stock Purchase Plan |
|
|
384 |
|
|
|
— |
|
Tax withholding payments for vesting of restricted stock |
|
|
(2,159 |
) |
|
|
— |
|
Net cash (used in) provided by financing activities |
|
|
(2,400 |
) |
|
|
2,660 |
|
Effect of exchange rates on cash and cash equivalents |
|
|
392 |
|
|
|
(176 |
) |
Net decrease in cash and cash equivalents |
|
|
(21,405 |
) |
|
|
(49,994 |
) |
Cash, cash equivalents and restricted cash, beginning of period |
|
|
80,091 |
|
|
|
107,054 |
|
Cash and cash equivalents, end of period |
|
$ |
58,686 |
|
|
$ |
57,060 |
|
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
||
Cash paid during the period for interest |
|
$ |
2,958 |
|
|
$ |
17 |
|
Cash (received) paid during the period for income taxes, net |
|
|
(46 |
) |
|
|
310 |
|
Supplemental disclosure of noncash investing activities: |
|
|
|
|
|
|
||
Property and equipment acquired but not yet paid for |
|
$ |
128 |
|
|
$ |
2,330 |
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
7
The Beachbody Company, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
1. Description of Business and Summary of Significant Accounting Policies
Business
The Beachbody Company, Inc. (“BODi” or the “Company”) is a leading subscription health and wellness company and the creator of some of the world’s most popular fitness programs. The Company’s fitness programs are available for streaming through subscription to Beachbody On Demand (“BOD”) and, together with the Company’s live fitness and comprehensive nutrition programs, through subscription to Beachbody On Demand Interactive (“BODi”). During the three months ended March 31, 2023, the Company launched an improved BODi experience and began migrating all BOD-only members to BODi on their renewal dates. BODi offers nutritional products such as Shakeology nutrition shakes, BEACHBAR snack bars, and Ladder premium supplements, which have been designed and clinically tested to help customers achieve their goals. BODi also offers a professional-grade stationary cycle with a 360-degree touch screen tablet and connected fitness software. The Company’s revenue has historically been generated primarily through a network of micro-influencers (“Partners”) (previously known as “Coaches”), social media marketing channels, and direct response advertising. References to “Coaches” throughout this report have been updated to “Partners.”
Basis of Presentation and Principles of Consolidation
The Company prepares its consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information as determined by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) and pursuant to the regulations of the U.S. Securities and Exchange Commission (“SEC”).
The preparation of unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that may affect the amounts reported in the unaudited condensed consolidated financial statements and accompanying notes. Significant estimates in our condensed consolidated financial statements include, but are not limited to, the useful life and recoverability of long-lived assets, the valuation of warrant liabilities, the recognition and measurement of income tax assets and liabilities, the valuation of intangible assets, impairment of goodwill, and the net realizable value of inventory. The Company bases these estimates on historical experience and on various other assumptions that it believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying amounts of assets and liabilities. Actual results could differ from those estimates.
The unaudited condensed consolidated financial statements have been prepared on the same basis as the annual audited consolidated financial statements and, in the opinion of management, include all normal recurring adjustments necessary for the fair statement of the Company’s financial position, results of operations, and cash flows. All intercompany transactions and balances with or among our consolidated subsidiaries have been eliminated. The financial data and other financial information disclosed in the notes to these unaudited condensed consolidated financial statements are also unaudited. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. Interim results are not necessarily indicative of the results that may be expected for the full fiscal year or any other period.
Summary of Changes in Significant Accounting Estimates
Goodwill and Long-Lived Assets, Net
Interim Impairment Test
Goodwill represents the excess of the fair value of the consideration transferred in a business combination over the fair value of the underlying identifiable assets and liabilities acquired. Goodwill and intangible assets deemed to have an indefinite life are not amortized, but instead are assessed for impairment annually as of October 1 and between annual tests if an event or change in circumstances occurs that would more likely than not reduce the fair value of a reporting unit ("RU") below its carrying value or indicate that it is more likely than not that the indefinite-lived asset is impaired. As of June 30, 2023 the Company has no indefinite-lived intangible assets.
Due to the sustained decline in the Company’s market capitalization and macro-economic conditions observed in the three months ended June 30, 2023, the Company performed an interim test for impairment of its goodwill as of June 30, 2023. In performing the interim impairment test for goodwill, the Company elected to bypass the optional qualitative test and proceeded to perform a quantitative test by comparing the carrying value of its RU to its estimated fair value. The Company previously tested its RU for impairment as of December 31, 2022. The results of the Company’s interim test for impairment at June 30, 2023 concluded that the fair value of its RU exceeded its carrying value, resulting in no impairment.
Long-Lived Assets
8
Management reviews long-lived assets (including property and equipment, content assets, and definite-lived intangible assets) for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Recoverability of assets is determined by comparing their carrying value to the forecasted undiscounted cash flows associated with the assets. If the evaluation of the forecasted cash flows indicates that the carrying value of the assets is not recoverable, the assets are written down to their fair value. The Company performed a test for recoverability at June 30, 2023 and concluded that the carrying value of its long-lived assets is recoverable.
Recently Adopted Accounting Pronouncements
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires an acquirer to apply ASC 606 to recognize and measure contract assets and liabilities from contracts with customers acquired in a business combination on the acquisition date rather than the general guidance in ASC 805. The Company adopted this new accounting guidance on a prospective basis on January 1, 2023, and the adoption did not have a material effect on its unaudited condensed consolidated financial statements.
In September 2022, the FASB issued ASU 2022-04, Liabilities-Supplier Finance Programs (Topic 405-50) - Disclosure of Supplier Finance Program Obligations, which requires that a buyer in a supplier finance program disclose sufficient information about the program to allow a user of financial statements to understand the program’s nature, activity during the period, changes from period to period, and potential magnitude. The Company adopted this new accounting guidance on a prospective basis on January 1, 2023, and the adoption did not have a material effect on its unaudited condensed consolidated financial statements.
2. Revenue
The Company’s revenue disaggregated by geographic region is as follows (in thousands):
|
|
Three months ended June 30, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
|
|
|
|
|
|
|
||
Geographic region: |
|
|
|
|
|
|
||
United States |
|
$ |
121,067 |
|
|
$ |
160,021 |
|
Rest of world1 |
|
|
13,881 |
|
|
|
19,115 |
|
Total revenue |
|
$ |
134,948 |
|
|
$ |
179,136 |
|
|
|
Six months ended June 30, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
|
|
|
|
|
|
|
||
Geographic region: |
|
|
|
|
|
|
||
United States |
|
$ |
251,944 |
|
|
$ |
338,628 |
|
Rest of world1 |
|
|
27,905 |
|
|
|
39,430 |
|
Total revenue |
|
$ |
279,849 |
|
|
$ |
378,058 |
|
(1) Consists of Canada, United Kingdom, and France. Other than the United States, no single country accounted for more than 10% of total revenue during the three and six months ended June 30, 2023 and 2022.
The Company determined that, in addition to the preceding table, the disaggregation of revenue by revenue type as presented in the unaudited condensed consolidated statements of operations achieves the disclosure requirement to disaggregate revenue into categories that depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors.
Deferred Revenue
Deferred revenue is recorded for nonrefundable cash payments received for the Company’s performance obligation to transfer, or stand ready to transfer, goods or services in the future. Deferred revenue consists of subscription fees billed that have not been recognized and physical products sold that have not yet been delivered. During the three and six months ended June 30, 2023, the Company recognized $24.8 million and $77.9 million, respectively, of revenue that was included in the deferred revenue balance as of December 31, 2022. During the three and six months ended June 30, 2022, the Company recognized $25.6 million and $88.1 million, respectively, of revenue that was included in the deferred revenue balance as of December 31, 2021.
9
3. Fair Value Measurements
The Company’s financial assets and liabilities subject to fair value measurements on a recurring basis and the level of inputs used for such measurements were as follows (in thousands):
|
|
June 30, 2023 |
|
|||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Assets |
|
|
|
|
|
|
|
|
|
|||
Derivative assets |
|
$ |
— |
|
|
$ |
50 |
|
|
$ |
— |
|
Total assets |
|
$ |
— |
|
|
$ |
50 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|||
Liabilities |
|
|
|
|
|
|
|
|
|
|||
Public warrants |
|
$ |
461 |
|
|
$ |
— |
|
|
$ |
— |
|
Private placement warrants |
|
|
— |
|
|
|
— |
|
|
|
53 |
|
Term Loan warrants |
|
|
— |
|
|
|
— |
|
|
|
802 |
|
Total liabilities |
|
$ |
461 |
|
|
$ |
— |
|
|
$ |
855 |
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
December 31, 2022 |
|
|||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Assets |
|
|
|
|
|
|
|
|
|
|||
Derivative assets |
|
$ |
— |
|
|
$ |
462 |
|
|
$ |
— |
|
Total assets |
|
$ |
— |
|
|
$ |
462 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|||
Liabilities |
|
|
|
|
|
|
|
|
|
|||
Public Warrants |
|
$ |
415 |
|
|
$ |
— |
|
|
$ |
— |
|
Private Placement Warrants |
|
|
— |
|
|
|
— |
|
|
|
107 |
|
Term Loan Warrants |
|
|
— |
|
|
|
— |
|
|
|
1,226 |
|
Total liabilities |
|
$ |
415 |
|
|
$ |
— |
|
|
$ |
1,333 |
|
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 and Term Loan Warrants (defined later) are classified within Level 3 of the fair value hierarchy because their fair values are based on significant inputs that are unobservable in the market.
Private Placement Warrants
The Company determined the fair value of the private placement warrants using a Black-Scholes option-pricing model and the quoted price of the Company’s Class A Common Stock. Volatility was based on the implied volatility derived primarily from the average of the actual market activity of the Company’s peer group. The expected life was based on the remaining contractual term of the private placement warrants, and the risk-free interest rate was based on the implied yield available on U.S. treasury securities with a maturity equivalent to the private placement warrants expected life. The significant unobservable input used in the fair value measurement of the private placement warrants is the implied volatility. Significant changes in the implied volatility would result in a significantly higher or lower fair value measurement, respectively.
The following table presents significant assumptions utilized in the valuation of the private placement warrants on June 30, 2023 and December 31, 2022:
|
|
|
|
|
|
|
||
|
|
June 30, 2023 |
|
|
December 31, 2022 |
|
||
|
|
|
|
|
|
|
||
Risk-free rate |
|
|
4.5 |
% |
|
|
4.2 |
% |
Dividend yield rate |
|
|
— |
|
|
|
— |
|
Volatility |
|
|
75.0 |
% |
|
|
75.0 |
% |
Contractual term (in years) |
|
|
2.99 |
|
|
|
3.49 |
|
Exercise price |
|
$ |
11.50 |
|
|
$ |
11.50 |
|
10
The following table presents changes in the fair value of the private placement warrants for the three and six months ended June 30, 2023 and 2022 (in thousands):
|
|
Three months ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Balance, beginning of period |
|
$ |
53 |
|
|
$ |
1,920 |
|
|
$ |
107 |
|
|
$ |
2,133 |
|
Change in fair value |
|
|
— |
|
|
|
(1,120 |
) |
|
|
(54 |
) |
|
|
(1,333 |
) |
Balance, end of period |
|
$ |
53 |
|
|
$ |
800 |
|
|
$ |
53 |
|
|
$ |
800 |
|
For the three and six months ended June 30, 2023 and 2022, the change in the fair value of private placement warrants resulted from the change in price of the Company’s Class A Common Stock, remaining contractual term, and risk-free rate. The changes in fair value are included in the unaudited condensed consolidated statements of operations as a component of change in fair value of warrant liabilities and in the unaudited condensed consolidated balance sheets as other liabilities.
Term Loan Warrants
The Company determined the fair value of the Term Loan Warrants (defined later) using a Black-Scholes option-pricing model and the quoted price of the Company’s Class A Common Stock. Volatility was based on the implied volatility derived primarily from the average of the actual market activity of the Company’s peer group. The expected life was based on the remaining contractual term of the Term Loan Warrants, and the risk-free interest rate was based on the implied yield available on U.S. treasury securities with a maturity equivalent to the Term Loan Warrants expected life. The significant unobservable input used in the fair value measurement of the Term Loan Warrants is the implied volatility. Significant changes in the implied volatility would result in a significantly higher or lower fair value measurement, respectively. See Note 9, Debt, and Note 16, Subsequent Events, for additional information regarding the Term Loan Warrants.
The following table presents significant assumptions utilized in the valuation of the Term Loan Warrants at June 30, 2023 and December 31, 2022:
|
|
June 30, 2023 |
|
|
December 31, 2022 |
|
||
|
|
|
|
|
|
|
||
Risk-free rate |
|
|
4.0 |
% |
|
|
4.0 |
% |
Dividend yield rate |
|
|
— |
|
|
|
— |
|
Volatility |
|
|
75.0 |
% |
|
|
75.0 |
% |
Contractual term (in years) |
|
|
6.11 |
|
|
|
6.61 |
|
Exercise price |
|
$ |
1.85 |
|
|
$ |
1.85 |
|
The following table presents changes in the fair value of the Term Loan Warrants for the three and six months ended June 30, 2023 and 2022 (in thousands):
|
|
Three months ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Balance, beginning of period |
|
$ |
1,038 |
|
|
$ |
— |
|
|
$ |
1,226 |
|
|
$ |
— |
|
Change in fair value |
|
|
(236 |
) |
|
|
— |
|
|
|
(424 |
) |
|
|
— |
|
Balance, end of period |
|
$ |
802 |
|
|
$ |
— |
|
|
$ |
802 |
|
|
$ |
— |
|
For the three and six months ended June 30, 2023, the change in the fair value of the Term Loan Warrants resulted from the change in price of the Company’s Class A Common Stock and the remaining contractual term. The changes in fair value are included in the unaudited condensed consolidated statements of operations as a component of change in fair value of warrant liabilities and in the unaudited condensed consolidated balance sheets as other liabilities.
11
4. Inventory, Net
Inventory, net consists of the following (in thousands):
|
|
June 30, 2023 |
|
|
December 31, 2022 |
|
||
|
|
|
|
|
|
|
||
Raw materials and work in process |
|
$ |
17,680 |
|
|
$ |
13,380 |
|
Finished goods |
|
|
25,684 |
|
|
|
40,680 |
|
Total inventory, net |
|
$ |
43,364 |
|
|
$ |
54,060 |
|
Adjustments to the carrying value of excess inventory and inventory on hand to net realizable value were $2.3 million and $5.1 million during the three and six months ended June 30, 2023, respectively, and $15.1 million and $32.0 million during the three and six months ended June 30, 2022, respectively. These adjustments are included in the unaudited condensed consolidated statements of operations as a component of nutrition and other cost of revenue and connected fitness cost of revenue. The Company recorded approximately zero and $1.4 million of these adjustments in nutrition and other cost of revenue for the three and six months ended June 30, 2023, respectively, and $1.9 million and $4.4 million during the three and six months ended June 30, 2022, respectively. The Company also recorded $2.3 million and $3.7 million of these adjustments in connected fitness cost of revenue for the three and six months ended June 30, 2023 respectively, and $13.2 million and $27.6 million during the three and six months ended June 30, 2022, respectively.
5. Other Current Assets
Other current assets consist of the following (in thousands):
|
|
June 30, 2023 |
|
|
December 31, 2022 |
|
||
Deferred partner costs |
|
$ |
38,332 |
|
|
$ |
31,270 |
|
Deposits |
|
|
6,204 |
|
|
|
4,527 |
|
Accounts receivable, net |
|
|
1,602 |
|
|
|
866 |
|
Other |
|
|
2,481 |
|
|
|
2,585 |
|
Total other current assets |
|
$ |
48,619 |
|
|
$ |
39,248 |
|
12
6. Property and Equipment, Net
Property and equipment, net consists of the following (in thousands):
|
|
|
|
|
|
|
||
|
|
June 30, 2023 |
|
|
December 31, 2022 |
|
||
|
|
|
|
|
|
|
||
Computer software and web development |
|
$ |
230,992 |
|
|
$ |
236,533 |
|
Computer equipment |
|
|
23,338 |
|
|
|
24,240 |
|
Buildings |
|
|
5,158 |
|
|
|
5,158 |
|
Leasehold improvements |
|
|
4,600 |
|
|
|
4,600 |
|
Furniture, fixtures and equipment |
|
|
1,207 |
|
|
|
1,222 |
|
Computer software and web development projects in-process |
|
|
738 |
|
|
|
5,147 |
|
Property and equipment, gross |
|
|
266,033 |
|
|
|
276,900 |
|
Less: Accumulated depreciation |
|
|
(207,828 |
) |
|
|
(202,753 |
) |
Total property and equipment, net |
|
$ |
58,205 |
|
|
$ |
74,147 |
|
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, |
|
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of revenue |
|
$ |
5,277 |
|
|
$ |
7,743 |
|
|
$ |
10,209 |
|
|
$ |
16,824 |
|
|
Selling and marketing |
|
|
— |
|
|
|
102 |
|
|
|
— |
|
|
|
381 |
|
|
Enterprise technology and development |
|
|
4,363 |
|
|
|
7,486 |
|
|
|
8,866 |
|
|
|
14,935 |
|
|
General and administrative |
|
|
— |
|
|
|
49 |
|
|
|
1 |
|
|
|
241 |
|
|
Total depreciation |
|
$ |
9,640 |
|
|
$ |
15,380 |
|
|
$ |
19,076 |
|
|
$ |
32,381 |
|
|
7. Accrued Expenses
Accrued expenses consist of the followings (in thousands):
|
|
June 30, 2023 |
|
|
December 31, 2022 |
|
||
Partner costs |
|
$ |
15,742 |
|
|
$ |
14,535 |
|
Inventory, shipping and fulfillment |
|
|
10,940 |
|
|
|
11,687 |
|
Employee compensation and benefits |
|
|
5,126 |
|
|
|
20,584 |
|
Sales and other taxes |
|
|
4,523 |
|
|
|
4,818 |
|
Information technology |
|
|
2,059 |
|
|
|
2,207 |
|
Advertising |
|
|
3,072 |
|
|
|
1,176 |
|
Customer service expenses |
|
|
964 |
|
|
|
956 |
|
Other accrued expenses |
|
|
6,690 |
|
|
|
8,467 |
|
Total accrued expenses |
|
$ |
49,116 |
|
|
$ |
64,430 |
|
Advertising costs, which are primarily comprised of social media, television media, and internet advertising expenses and also include print, radio, and infomercial production costs, were $8.1 million and $17.1 million for the three and six months ended June 30, 2023, respectively, and $6.9 million and $22.6 million for the three and six months ended June 30, 2022, respectively.
13
8. Commitments and Contingencies
Inventory Purchase and Service Agreements
The Company has noncancelable inventory purchase and service agreements with multiple service providers which expire at varying dates through 2028. During the three and six months ended June 30, 2023, the Company recorded losses on inventory purchase commitments related to connected fitness hardware of $0.3 million and $0.4 million, respectively. During the three and six months ended June 30, 2022, the Company recorded losses on inventory purchase commitments related to connected fitness hardware of $1.8 million and $2.4 million, respectively. These losses are included in connected fitness cost of revenue in the unaudited condensed consolidated statements of operations. Service agreement obligations include amounts related to fitness and nutrition trainers, future events, information systems support, and other technology projects.
Future minimum payments under noncancelable service and inventory purchase agreements for the periods succeeding June 30, 2023 are as follows (in thousands):
Six months ending December 31, 2023 |
|
$ |
22,239 |
|
Year ending December 31, 2024 |
|
|
2,160 |
|
Year ending December 31, 2025 |
|
|
1,475 |
|
Year ending December 31, 2026 |
|
|
100 |
|
Year ending December 31, 2027 |
|
|
75 |
|
Thereafter |
|
|
75 |
|
|
|
$ |
26,124 |
|
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 leases facilities under noncancelable operating leases expiring through 2027 and certain equipment under a finance lease expiring in 2024. These lease obligations will require payments of approximately $1.2 million during the six months ending December 31, 2023, $2.1 million for the year ending December 31, 2024 and $1.5 million in total thereafter through 2027.
Contingencies
The Company is subject to litigation from time to time in the ordinary course of business. Such claims typically involve its products, intellectual property, and relationships with suppliers, customers, distributors, employees, and others. Contingent liabilities are recorded when it is both probable that a loss has occurred and the amount of the loss can be reasonable estimated. Although it is not possible to predict how litigation and other claims will be resolved, the Company does not believe that any currently identified claims or litigation matters will have a material adverse effect on its consolidated financial position or results of operations.
14
9. Debt
On August 8, 2022 (the “Effective Date”), the Company, Beachbody, LLC as borrower (a wholly owned subsidiary of the Company), and certain other subsidiaries of the Company as guarantors (the “Guarantors”), the lenders (the “Lenders”), and Blue Torch Finance, LLC, ("Blue Torch") as administrative agent and collateral agent for such lenders (the “Term Loan Agent”) entered into a financing agreement which was subsequently amended (collectively with any amendments thereto, the “Financing Agreement”). The Financing Agreement provides for senior secured term loans on the Effective Date in an aggregate principal amount of $50.0 million (the “Term Loan”) which was drawn on the Effective Date. In addition, the Financing Agreement permits the Company to borrow up to an additional $25.0 million, subject to the terms and conditions set forth in the Financing Agreement. Borrowings under the Term Loan are unconditionally guaranteed by the Guarantors, and all present and future material U.S. and Canadian subsidiaries of the Company. Such security interest consists of a first-priority perfected lien on substantially all property and assets of the Company and subsidiaries, including stock pledges on the capital stock of the Company’s material and direct subsidiaries, subject to customary carveouts. In connection with the Financing Agreement, the Company incurred $4.2 million of third-party debt issuance costs which are recorded in the unaudited condensed consolidated balance sheets as a reduction of long-term debt as of June 30, 2023 and December 31, 2022 and are being amortized over the term of the Term Loan using the effective-interest method. As of June 30, 2023, the principal balance outstanding under the Term Loan was $50.1 million. The Term Loan matures on August 8, 2026. On July 24, 2023 (the "Second Amendment Effective Date") the Company and Blue Torch entered into Amendment No. 2 to the Financing Agreement (the "Second Amendment"), which amended the Company's existing Financing Agreement. See Note 16, Subsequent Events, for additional information on the Second Amendment, including amendments to the debt covenants, maturity date of the Term Loan and the exercise price of the Term Loan Warrants.
The Term Loan borrowings may take the form of base rate (“Reference Rate”) loans or Secured Overnight Financing Rate (“SOFR Rate”) loans. Reference Rate loans bear interest at a rate per annum equal to the sum of an applicable margin of 6.15% per annum, plus the greater of (a) 2.00% per annum, (b) the Federal Funds Rate plus 0.50% per annum, (c) the SOFR Rate (based upon an interest period of 1 month) plus 1.00% per annum, and (d) the rate last quoted by The Wall Street Journal. SOFR Rate loans bear interest at a rate per annum equal to the sum of an applicable margin of 7.15% and the SOFR Rate (based upon an interest period of three months). The SOFR Rate is subject to a floor of 1.00%. In addition, the Term Loan borrowings bear additional interest at 3.00% per annum, paid in kind by capitalizing such interest and adding such capitalized interest to the outstanding principal amount of the Term Loan on each anniversary of the Effective Date. The Term Loan was a SOFR Rate loan, with a cash interest rate of 12.12% at June 30, 2023. The Company recorded $2.4 million and $4.7 million of interest related to the Term Loan during the three and six months ended June 30, 2023, respectively.
The Financing Agreement contains financial covenants that require us to maintain (a) certain minimum revenue levels, to be tested on a quarterly basis, and (b) minimum Liquidity (as defined in the Financing Agreement) of (i) $12.5 million at all times through the Second Amendment Effective Date; (ii) $20.0 million at all times thereafter through March 31, 2024; and (iii) $25.0 million at all times thereafter through the maturity of the Term Loan. If there is an event of default, including not being in compliance with either of the financial covenants, the Term Loan will bear interest from the date of such event of default until the event of default is cured or waived in writing by the Lenders at the Post Default Rate, which is the rate of interest in effect pursuant to the Financing Agreement plus 2.00%. In the event of default the Lenders could also require repayment of the outstanding balance of the Term Loan including the prepayment premium of (a) 5.0% if repaid before the 1st anniversary of the Effective Date, (b) 3.0% if repaid before the 2nd anniversary of the Effective Date, (c) 2.0% if repaid before the 3rd anniversary date of the Effective Date, and (d) 0.0% if repaid after the 3rd anniversary date of the Effective Date. The Company was in compliance with these covenants, including amendments to the minimum revenue financial covenant in the Second Amendment as of June 30, 2023. See Note 16, Subsequent Events, for additional information on the Second Amendment, including amendments to the debt covenants.
The Financing Agreement also contains customary representations, warranties, and covenants, which include, but are not limited to, restrictions on indebtedness, liens, restricted payments, asset sales, affiliate transactions, changes in line of business, investments, negative pledges and amendments to organizational documents and material contracts. The Financing Agreement contains customary events of default, which among other things include (subject to certain exceptions and cure periods): (1) failure to pay principal, interest, or any fees or certain other amounts when due; (2) breach of any representation or warranty, covenant, or other agreement in the Financing Agreement and other related loan documents; (3) the occurrence of a bankruptcy or insolvency proceeding with respect to any Loan Party; (4) any failure by a Loan Party to make a payment with respect to indebtedness having an aggregate principal amount in excess of a specified threshold; and (5) certain other customary events of default.
15
In connection with the Term Loan, the Company issued to certain holders affiliated with Blue Torch warrants for the purchase of 4,716,756 shares of the Company’s Class A Common Stock at an exercise price of $1.85 per share (the "Term Loan Warrants"). The Term Loan Warrants vest on a monthly basis over four years, with 30%, 30%, 20% and 20% vesting in the first, second, third and fourth years, respectively. The Term Loan Warrants have a seven-year term from the Effective Date. See Note 3, Fair Value Measurements, for information on the valuation of the Term Loan Warrants and Note 16, Subsequent Events, for information on amendments to the Term Loan Warrants. The Term Loan Warrants were recorded in the unaudited condensed consolidated balance sheets as warrant liabilities. The initial fair value of the Term Loan Warrants, of $5.2 million, is being amortized as a debt discount over the term of the Term Loan using the effective-interest method.
The aggregate amounts of payments due for the periods succeeding June 30, 2023 and reconciliation of the Company’s debt balances, net of debt discount and debt issuance costs, are as follows (in thousands):
Six months ending December 31, 2023 |
|
$ |
15,625 |
|
Year ending December 31, 2024 |
|
|
1,563 |
|
Year ending December 31, 2025 |
|
|
2,500 |
|
Year ending December 31, 2026 |
|
|
29,062 |
|
Total debt |
|
$ |
48,750 |
|
Less current portion |
|
|
(16,250 |
) |
Less unamortized debt discount and debt issuance costs |
|
|
(8,008 |
) |
Add capitalized paid-in-kind interest |
|
|
1,344 |
|
Total long-term debt |
|
$ |
25,836 |
|
The payments in the six months ending December 31, 2023 include a prepayment of $15.0 million which was paid on July 24, 2023 as part of the Second Amendment, see Note 16, Subsequent Events, for more information on the amendments to the Term Loan.
The Term Loan amortizes at 2.50% per year from the Effective Date to August 8, 2024, payable on a quarterly basis, and thereafter, at 5.00% per year, payable on a quarterly basis, with the remaining principal amount due on the maturity date of the Term Loan.
10. Stockholders’ Equity
As of June 30, 2023, 2,000,000,000 shares, $0.0001 par value per share are authorized, of which, 1,600,000,000 shares are designated as Class A Common Stock, 200,000,000 shares are designated as Class X Common Stock, 100,000,000 shares are designated as Class C Common Stock and 100,000,000 shares are designated as Preferred Stock.
Holders of each share of each class of Common Stock are entitled to dividends when, as, and if declared by the Company’s board of directors, subject to the rights and preferences of any holders of Preferred Stock outstanding at the time. The holder of each Class A Common Stock is entitled to one vote, the holder of each share of Class X Common Stock is entitled to ten votes and except as otherwise required by law, the holder of each share of Class C Common Stock is not entitled to any voting powers.
On June 15, 2023, the Company and Carl Daikeler, the Company’s co-founder and chief executive officer (“CEO”) entered into a forfeiture agreement (“the Forfeiture Agreement”), pursuant to which Mr. Daikeler as of June 15, 2023 forfeited 8 million shares of the Company’s common stock that he owned, comprised of 3,199,946 shares of Class A common stock and 4,800,054 shares of Class X Common stock, each with a par value of $0.0001. No consideration was provided to Mr. Daikeler for the forfeiture of these shares. The forfeiture of the shares resulted in the reduction of each of common stock and additional paid in capital by $800 in the June 30, 2023 condensed consolidated balance sheets.
16
Accumulated Other Comprehensive Income (Loss)
The following tables summarize changes in accumulated other comprehensive income (loss) by component during the three months ended June 30, 2023 and 2022 (in thousands):
|
|
Unrealized Gain (Loss) on Derivatives |
|
|
Foreign Currency Translation Adjustment |
|
|
Total |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Balances at March 31, 2022 |
|
$ |
(148 |
) |
|
$ |
15 |
|
|
$ |
(133 |
) |
Other comprehensive income (loss) before reclassifications |
|
|
13 |
|
|
|
(51 |
) |
|
|
(38 |
) |
Amounts reclassified from accumulated other comprehensive income (loss) |
|
|
74 |
|
|
|
— |
|
|
|
74 |
|
Tax effect |
|
|
22 |
|
|
|
— |
|
|
|
22 |
|
Balances at June 30, 2022 |
|
$ |
(39 |
) |
|
$ |
(36 |
) |
|
$ |
(75 |
) |
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Balances at March 31, 2023 |
|
$ |
(103 |
) |
|
$ |
(84 |
) |
|
$ |
(187 |
) |
Other comprehensive income (loss) before reclassifications |
|
|
(206 |
) |
|
|
35 |
|
|
|
(171 |
) |
Amounts reclassified from accumulated other comprehensive income (loss) |
|
|
61 |
|
|
|
— |
|
|
|
61 |
|
Tax effect |
|
|
(36 |
) |
|
|
— |
|
|
|
(36 |
) |
Balances at June 30, 2023 |
|
$ |
(284 |
) |
|
$ |
(49 |
) |
|
$ |
(333 |
) |
The following tables summarize changes in accumulated other comprehensive income (loss) by component during the six months ended June 30, 2023 and 2022 (in thousands):
|
Unrealized Gain (Loss) on Derivatives |
|
|
Foreign Currency Translation Adjustment |
|
|
Total |
|
|||
|
|
|
|
|
|
|
|
|
|||
Balances at December 31, 2021 |
$ |
(32 |
) |
|
$ |
11 |
|
|
$ |
(21 |
) |
Other comprehensive loss before reclassifications |
|
(149 |
) |
|
|
(47 |
) |
|
|
(196 |
) |
Amounts reclassified from accumulated other comprehensive income (loss) |
|
143 |
|
|
|
— |
|
|
|
143 |
|
Tax effect |
|
(1 |
) |
|
|
— |
|
|
|
(1 |
) |
Balances at June 30, 2022 |
$ |
(39 |
) |
|
$ |
(36 |
) |
|
$ |
(75 |
) |
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|||
Balances at December 31, 2022 |
$ |
131 |
|
|
$ |
(94 |
) |
|
$ |
37 |
|
Other comprehensive income (loss) before reclassifications |
|
(307 |
) |
|
|
45 |
|
|
|
(262 |
) |
Amounts reclassified from accumulated other comprehensive income (loss) |
|
(26 |
) |
|
|
— |
|
|
|
(26 |
) |
Tax effect |
|
(82 |
) |
|
|
— |
|
|
|
(82 |
) |
Balances at June 30, 2023 |
$ |
(284 |
) |
|
$ |
(49 |
) |
|
$ |
(333 |
) |
17
11. Equity-Based Compensation
Equity Compensation Plans
A summary of the option activity under the Company’s equity compensation plans is as follows:
|
Options Outstanding |
|
|||||||||||||
|
Number of Options |
|
|
Weighted-Average Exercise Price |
|
|
Weighted-Average Remaining Contractual Term |
|
|
Aggregate Intrinsic Value |
|
||||
Outstanding at December 31, 2022 |
|
48,414,625 |
|
|
$ |
2.65 |
|
|
|
6.35 |
|
|
$ |
— |
|
Granted |
|
27,346,753 |
|
|
|
0.46 |
|
|
|
|
|
|
|
||
Forfeited |
|
(5,464,000 |
) |
|
|
2.85 |
|
|
|
|
|
|
|
||
Expired |
|
(504,898 |
) |
|
|
2.66 |
|
|
|
|
|
|
|
||
Outstanding at June 30, 2023 |
|
69,792,480 |
|
|
$ |
1.78 |
|
|
|
7.06 |
|
|
$ |
— |
|
Exercisable at June 30, 2023 |
|
26,708,560 |
|
|
$ |
2.38 |
|
|
|
3.25 |
|
|
$ |
— |
|
A summary of restricted stock unit ("RSU") activity is as follows:
|
|
RSUs Outstanding |
||||||||
|
|
Number of RSUs |
|
|
Weighted-Average Fair Value |
|
|
|||
Outstanding at December 31, 2022 |
|
|
3,159,185 |
|
|
$ |
|
1.45 |
|
|
Granted |
|
|
23,121,170 |
|
|
|
|
0.58 |
|
|
Vested |
|
|
(11,113,084 |
) |
|
|
|
0.68 |
|
|
Forfeited |
|
|
(974,173 |
) |
|
|
|
0.74 |
|
|
Outstanding at June 30, 2023 |
|
|
14,193,098 |
|
|
$ |
|
0.67 |
|
|
The fair value of RSUs vested during the three and six months ended June 30, 2023 was $1.7 million and $7.6 million, respectively. No RSUs vested during the three and six months ended June 30, 2022.
On January 1, 2023, the number of shares available for issuance under the 2021 Incentive Award Plan (the “2021 Plan”) increased by 15,608,106 pursuant to the terms of the 2021 Plan. As of June 30, 2023, 13,640,317 shares of Class A Common Stock were available for issuance under the 2021 Plan.
Vested RSUs included shares of common stock that the Company withheld on behalf of certain employees to satisfy the minimum statutory tax withholding requirements, as defined by the Company. The Company withheld shares of common stock with an aggregate fair value and remitted taxes of $2.1 million during the six months ended June 30, 2023, which were classified as financing cash outflows in the unaudited condensed consolidated statements of cash flows. The Company canceled and returned these shares to the 2021 Plan, which are available under the plan terms for future issuance.
On June 14, 2023, the Board of Directors of the Company (“the Board”) adopted the Company’s 2023 Employment Inducement Incentive Award Plan (the “Inducement Plan”) for the grant of non-qualified stock options, stock appreciation rights, restricted stock, RSU's, dividend equivalents and other stock or cash-based awards to prospective employees. The Board reserved 23,883,265 shares of the Company’s common stock for issuance pursuant to the awards granted under the Inducement Plan.
18
Effective as of June 15, 2023, the Company appointed Mark Goldston as Executive Chairman, replacing the service of Mr. Daikeler in his capacity as Chairman of the Board. Mr. Daikeler continues to serve as the Company’s CEO and as a director. In connection with the employment offer letter to Mr. Goldston, he was granted a stock option under the Inducement Plan, covering an aggregate of 23,883,265 shares of the Company’s Class A common stock, par value $0.0001 per share (the “Option”). Of this amount, 7,961,088 shares subject to the Option will vest based on continued service (the “Time-Vesting Options”) and 15,922,177 shares will vest based on the attainment of applicable performance goals and continued service (the “Performance-Vesting Options”). The Time-Vesting Options will vest and become exercisable with respect to 25% of the Time-Vesting Options subject to the Option on each of the first four anniversaries of June 15, 2023. The Performance-Vesting Options will vest and become exercisable based on both (1) the achievement of pre-determined price per share goals and (2) Mr. Goldston’s service through the applicable vesting date. Any earned Performance-Vesting Options will vest and become exercisable as of the later of (1) June 15, 2024, and (2) the date on which the applicable price per share goal is achieved. The weighted average exercise price of the Performance-Vesting Options was $0.44 per option and none of the Performance-Vesting Options were exercisable as of June 30, 2023.
Vesting tranche Number of Performance -Vesting Options Price per share goal
Tranche 1 3,980,544 $1.00
Tranche 2 3,980,544 $1.50
Tranche 3 3,980,544 $2.00
Tranche 4 3,980,545 $2.50
The share price is measured by averaging the fair market value (as defined in the Inducement Plan) per share over any 30 consecutive trading-day period.
Employee Stock Purchase Plan
In May 2022, the Company established an employee stock purchase plan (the “ESPP”), the terms of which allow for qualified employees to participate in the purchase of designated shares of the Company’s common stock at a price equal to 85% of the lower of the closing price at the beginning or ending of each six-month purchase period.
During the six months ended June 30, 2023, 981,853 shares of the Company’s common stock were issued pursuant to the ESPP at an average price of $0.46 per share.
Stock-based compensation expense associated with the Company’s ESPP is based on fair value estimated on the date of grant using the Black-Scholes option pricing valuation model and the following weighted-average assumptions for grants during the six months ended June 30, 2023:
|
|
Six months ended June 30, |
|
|
|
|
2023 |
|
|
Risk-free rate |
|
|
4.6 |
% |
Dividend yield rate |
|
|
— |
|
Volatility |
|
|
55.3 |
% |
Expected term (in years) |
|
|
0.50 |
|
Weighted-average grant date fair value |
|
$ |
0.14 |
|
Equity-Based Compensation Expense
The fair value of each award that vests solely based on time as of the date of grant is estimated using a Black-Scholes option-pricing model. The following table summarizes the weighted-average assumptions used to determine the fair value of time vested option grants:
|
|
Six months ended June 30, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Risk-free rate |
|
|
3.8 |
% |
|
|
2.8 |
% |
Dividend yield rate |
|
|
— |
|
|
|
— |
|
Volatility |
|
|
54.8 |
% |
|
|
52.6 |
% |
Expected term (in years) |
|
|
5.92 |
|
|
|
6.25 |
|
Weighted-average grant date fair value |
|
$ |
0.27 |
|
|
$ |
0.64 |
|
19
The fair value of the Performance-Vesting Options as of the date of grant is estimated using a Monte Carlo simulation. The following table summarizes the weighted average assumptions used to determine the fair value of the Performance-Vesting Options:
|
|
Six months ended June 30, |
|
|
|
|
2023 |
|
|
Risk-free rate |
|
|
3.7 |
% |
Dividend yield rate |
|
|
— |
|
Volatility |
|
|
53.7 |
% |
Expected term (in years) |
|
|
10.00 |
|
Weighted-average grant date fair value |
|
$ |
0.26 |
|
Equity-based compensation expense for the three and six months ended June 30, 2023 and 2022 was as follows (in thousands):
|
|
Three months ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of revenue |
|
$ |
327 |
|
|
$ |
382 |
|
|
$ |
1,756 |
|
|
$ |
717 |
|
Selling and marketing |
|
|
1,771 |
|
|
|
1,018 |
|
|
|
5,157 |
|
|
|
2,657 |
|
Enterprise technology and development |
|
|
140 |
|
|
|
(17 |
) |
|
|
703 |
|
|
|
910 |
|
General and administrative |
|
|
923 |
|
|
|
1,618 |
|
|
|
5,100 |
|
|
|
3,281 |
|
Total equity-based compensation |
|
$ |
3,161 |
|
|
$ |
3,001 |
|
|
$ |
12,716 |
|
|
$ |
7,565 |
|
In connection with the restructuring activity that took place during the three and six months ended June 30, 2023, the Company modified certain stock awards of terminated employees (approximately 100 employees). The modifications included accelerating the vesting of any options that would have vested within three months of the employees termination date, and all vested options will be available for exercise for a total of six months after the employees’ termination date (that is, three months in addition to the standard three months per original agreement). As a result of these modifications, the Company recognized a $0.4 million and $1.0 million reduction to equity-based compensation expense within general and administrative expense in the unaudited condensed consolidated statements of operations for the three and six months ended June 30, 2023, respectively.
As of June 30, 2023, the total unrecognized equity-based compensation expense was $40.7 million, which will be recognized over a weighted-average remaining period of 2.85 years.
12. Derivative Financial Instruments
As of June 30, 2023 and December 31, 2022, the notional amount of the Company’s outstanding foreign exchange options was $15.4 million and $17.6 million, respectively. There were no outstanding forward contracts as of June 30, 2023 and December 31, 2022.
The following table shows the pre-tax effects of the Company’s derivative instruments on its unaudited condensed consolidated statements of operations (in thousands):
|
|
|
|
Three months ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
Financial Statement Line Item |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
|
|
|
|
|
|
|
|
|
|
|||||||||
Unrealized gains (losses) |
|
Other comprehensive income (loss) |
|
$ |
(206 |
) |
|
$ |
13 |
|
|
$ |
(307 |
) |
|
$ |
(149 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gains (losses) reclassified from accumulated other |
|
Cost of revenue |
|
$ |
(25 |
) |
|
$ |
(32 |
) |
|
$ |
11 |
|
|
$ |
(62 |
) |
comprehensive income (loss) into net loss |
|
General and administrative |
|
|
(36 |
) |
|
|
(42 |
) |
|
|
15 |
|
|
|
(81 |
) |
Total amounts reclassified |
|
|
|
$ |
(61 |
) |
|
$ |
(74 |
) |
|
$ |
26 |
|
|
$ |
(143 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gains (losses) recognized on derivatives |
|
Cost of revenue |
|
$ |
(54 |
) |
|
$ |
6 |
|
|
$ |
(95 |
) |
|
$ |
(45 |
) |
20
13. Restructuring
In 2023, restructuring charges primarily relate to activities focused on aligning the Company's operations with its key growth priorities. Restructuring charges in 2022 relate to the consolidation of our streaming fitness and nutrition offerings into a single Beachbody platform. The Company recognized restructuring costs of $(0.1) million and $5.3 million during the three and six months ended June 30, 2023, respectively, comprised primarily of termination benefits related to headcount reductions, of which $0.3 million is included in accrued expenses in the unaudited condensed consolidated balance sheets at June 30, 2023. The Company recognized restructuring costs of $1.3 million and $8.6 million during the three and six months ended June 30, 2022, respectively, comprised primarily of termination benefits related to headcount reductions. In accordance with GAAP, employee termination benefits were recognized at the date employees were notified and post-employment benefits were accrued as the obligation was probable and estimable. Benefits for employees who provided service greater than 60 days from the date of notification were recognized ratably over the service period.
The following table summarizes activity in the Company’s restructuring-related liability during the three months ended June 30, 2023 and 2022, respectively (in thousands):
|
|
Balance at |
|
|
Restructuring |
|
|
Payments / |
|
|
Liability at |
|
||||
|
|
March 31, 2023 |
|
|
Charges |
|
|
Utilizations |
|
|
June 30, 2023 |
|
||||
Employee-related costs |
|
$ |
1,389 |
|
|
$ |
(107 |
) |
|
$ |
(1,026 |
) |
|
$ |
256 |
|
Total costs |
|
$ |
1,389 |
|
|
$ |
(107 |
) |
|
$ |
(1,026 |
) |
|
$ |
256 |
|
|
|
Balance at |
|
|
Restructuring |
|
|
Payments / |
|
|
Liability at |
|
||||
|
|
March 31, 2022 |
|
|
Charges |
|
|
Utilizations |
|
|
June 30, 2022 |
|
||||
Employee-related costs |
|
$ |
4,618 |
|
|
$ |
1,332 |
|
|
$ |
(4,630 |
) |
|
$ |
1,320 |
|
Total costs |
|
$ |
4,618 |
|
|
$ |
1,332 |
|
|
$ |
(4,630 |
) |
|
$ |
1,320 |
|
The following table summarizes the activity in the Company’s restructuring related liability during the six months ended June 30, 2023 and 2022, respectively (in thousands):
|
|
Balance at |
|
|
Restructuring |
|
|
Payments / |
|
|
Liability at |
|
||||
|
|
December 31, 2022 |
|
|
Charges |
|
|
Utilizations |
|
|
June 30, 2023 |
|
||||
Employee-related costs |
|
$ |
469 |
|
|
$ |
5,280 |
|
|
$ |
(5,493 |
) |
|
$ |
256 |
|
Total costs |
|
$ |
469 |
|
|
$ |
5,280 |
|
|
$ |
(5,493 |
) |
|
$ |
256 |
|
|
|
Balance at |
|
|
Restructuring |
|
|
Payments / |
|
|
Liability at |
|
||||
|
|
December 31, 2021 |
|
|
Charges |
|
|
Utilizations |
|
|
June 30, 2022 |
|
||||
Employee-related costs |
|
$ |
— |
|
|
$ |
8,555 |
|
|
$ |
(7,235 |
) |
|
$ |
1,320 |
|
Total costs |
|
$ |
— |
|
|
$ |
8,555 |
|
|
$ |
(7,235 |
) |
|
$ |
1,320 |
|
During the six months ended June 30, 2022, the Company determined that the useful life of certain computer software and web development assets and content assets would end upon the completion of its platform consolidation. The Company accelerated depreciation of these computer software and web development assets and recorded $1.2 million and $3.4 million of additional depreciation expense as a component of digital cost of revenue and nutrition and other cost of revenue during the three and six months ended June 30, 2022, respectively. The Company also accelerated amortization of these content assets and recorded $1.5 million and $2.6 million of additional amortization as a component of digital cost of revenue during the three and six months ended June 30, 2022, respectively.
21
14. Income Taxes
The Company recorded a benefit and provision for income taxes of approximately zero for the three and six months ended June 30, 2023, and a benefit for income taxes of $0.3 million and $1.0 million for the three and six months ended June 30, 2022, respectively. The effective tax rate was 0.0% and 0.1% for the three and six months ended June 30, 2023, respectively, and the effective tax rate was 0.7% and 0.8% for the three and six months ended June 30, 2022, respectively.
The tax provision for interim periods is determined using an estimate of the Company’s annual effective tax rate, adjusted for discrete items arising in that quarter. The Company’s effective tax rate differs from the U.S. statutory tax rate in the three and six months ended June 30, 2023 primarily due to changes in valuation allowances on deferred tax assets as it is more likely than not that some or all of the Company’s deferred tax assets will not be realized.
The Company evaluates its tax positions on a quarterly basis and revises its estimate accordingly. There were no material changes to the Company’s uncertain tax positions, interest, or penalties during the three and six months ended June 30, 2023.
15. Earnings (Loss) per Share
The computation of loss per share of Class A and Class X Common Stock is as follows (in thousands, except share and per share information):
|
|
Three months ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss |
|
$ |
(25,748 |
) |
|
$ |
(41,867 |
) |
|
$ |
(54,936 |
) |
|
$ |
(115,400 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted-average common shares outstanding, basic and diluted |
|
|
314,311,797 |
|
|
|
307,204,999 |
|
|
|
311,740,463 |
|
|
|
306,786,192 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss per common share, basic and diluted |
|
$ |
(0.08 |
) |
|
$ |
(0.14 |
) |
|
$ |
(0.18 |
) |
|
$ |
(0.38 |
) |
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, 2023 and 2022 as the inclusion of all potential common shares would have been antidilutive. The weighted average common shares outstanding (basic and diluted) in the above table exclude the 8 million shares that were forfeited by Mr. Daikeler for the period of time after they were forfeited (June 15, 2023).
The following table presents the common shares that are excluded from the computation of diluted net loss per common share as of the periods presented because including them would have been antidilutive:
|
|
June 30, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
|
|
|
|
|
|
|
||
Options |
|
|
69,792,480 |
|
|
|
49,299,729 |
|
RSUs |
|
|
14,193,098 |
|
|
|
2,719,185 |
|
Compensation warrants |
|
|
3,980,656 |
|
|
|
3,980,656 |
|
Public and private placement warrants |
|
|
15,333,333 |
|
|
|
15,333,333 |
|
Term Loan warrants |
|
|
4,716,756 |
|
|
|
— |
|
Earn-out shares |
|
|
3,750,000 |
|
|
|
3,750,000 |
|
|
|
|
111,766,323 |
|
|
|
75,082,903 |
|
The options balance as of June 30, 2023 in the table above includes 15.9 million Performance-Vesting Options, which vest based on the attainment of applicable performance goals and continued service. See Note 11, Equity-Based Compensation, for additional information on the Performance-Vesting Options.
22
16. Subsequent Events
On July 24, 2023 (the "Second Amendment Effective Date"), the Company and Blue Torch entered into the Second Amendment, which amended the Company's existing Financing Agreement. The Second Amendment, among other things, amended certain terms of the Financing Agreement including , but not limited to, (1) amending the minimum revenue financial covenant to test revenue levels for each fiscal quarter on a standalone basis, and to adjust the minimum revenue levels to (a) $100.0 million, commencing with the fiscal quarter ended June 30, 2023, for each fiscal quarter ending on or prior to March 31, 2024 and (b) $120.0 million for each fiscal quarter thereafter and or prior to December 31, 2025; (2) amending the minimum liquidity financial covenant to adjust the minimum liquidity levels to (a) $20.0 million at all times from the Second Amendment Effective Date through March 31, 2024 and (b) $25.0 million at all times thereafter through the maturity of the Term Loan; (3) modifying the maturity date of the Term Loan from August 8, 2026 to February 8, 2026; and (4) amending certain financial definitions, reporting covenants and other covenants thereunder.
In connection with the Second Amendment, on the Second Amendment Effective Date, the Company made a partial prepayment on the Term Loan of $15.0 million (which amount was classified as a current obligation at June 30, 2023) along with the related prepayment premium of 5% ($0.8 million) and accrued interest ($0.1 million). The Company also incurred a 1% fee as paid in kind on the outstanding Term Loan balance prior to the prepayment (fee of $0.5 million). The amounts related to the Second Amendment will be recorded in the quarter ending September 30, 2023. After the prepayment and the paid in kind fee on July 24, 2023, the principal amount outstanding on the Term Loan was $35.6 million.
In connection with the Second Amendment, the Company also amended and restated the Term Loan Warrants for the purchase of 4,716,756 shares of the Company’s Class A Common Stock. The amendment of the Term Loan Warrants amends the exercise price from $1.85 per share to $0.41 per share. The amended exercise price increased the fair value of the Term Loan Warrants as of the Second Amendment Effective Date from $0.8 million to $1.6 million and will be recorded in the quarter ending September 30, 2023.
23
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis should be read in conjunction with our financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q (this “Report”) as well as our financial statements and the "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our Annual Report on Form 10-K for the year ended December 31, 2022 (our "Form 10-K"). Unless otherwise indicated, the terms “BODi,” “we,” “us,” or “our” refer to The Beachbody Company, Inc., a Delaware corporation, together with its consolidated subsidiaries.
Forward-Looking Statements
This Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including statements about the financial condition, results of operations, earnings outlook and prospects of the Company. Forward-looking statements are typically identified by words such as “plan,” “believe,” “expect,” “anticipate,” “intend,” “outlook,” “estimate,” “forecast,” “project,” “continue,” “could,” “may,” “might,” “possible,” “potential,” “predict,” “should,” “would” and other similar words and expressions, but the absence of these words does not mean that a statement is not forward-looking.
The forward-looking statements are based on our current expectations as applicable and are inherently subject to uncertainties and changes in circumstances and their potential effects and speak only as of the date of such statement. There can be no assurance that future developments will be those that have been anticipated. These forward-looking statements involve a number of risks, uncertainties or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to the following:
Should one or more of these risks or uncertainties materialize or should any of the assumptions made by management prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements.
You should not place undue reliance upon our forward-looking statements.
Except to the extent required by applicable law or regulation, we undertake no obligation to update these forward-looking statements to reflect events or circumstances after the date of this Report or to reflect the occurrence of unanticipated events.
24
Overview
BODi is a leading subscription health and wellness company. We focus primarily on digital content, supplements, connected fitness, and consumer health and wellness. Our goal is to continue to provide holistic health and wellness content and subscription-based solutions. We are the creator of some of the world’s most popular fitness programs, including P90X, Insanity, and 21 Day Fix, which transformed the at-home fitness market and disrupted the global fitness industry by making it accessible for people to get results—anytime, anywhere. Our comprehensive nutrition-first programs, Portion Fix and 2B Mindset, teach healthy eating habits and promote healthy, sustainable weight loss. These fitness and nutrition programs are available through our Beachbody On Demand and Beachbody On Demand Interactive streaming services.
We offer nutritional products such as Shakeology nutrition shakes, BEACHBAR snack bars, and Ladder premium supplements as well as a professional-grade stationary cycle with a 360-degree touch screen tablet and connected fitness software. Leveraging our history of fitness content creation, nutrition innovation, and our network of micro-influencers, whom we call “Partners” (previously known as “Coaches”), we plan to continue market penetration into connected fitness to reach a wider health, wellness and fitness audience.
Our revenue is generated primarily through our network of Partners, social media marketing channels, and direct response advertising. Components of revenue include recurring digital subscription revenue, revenue from the sale of nutritional and other products, and connected fitness revenue. In addition to selling individual products on a one-time basis, we bundle digital and nutritional products together at discounted prices.
Our key growth priorities for 2023 include: revamping our Beachbody on Demand (“BODi”) digital platform, growing Shakeology in the Healthy Dessert market, and improving the affordability of our connected fitness bike. In March 2023, we relaunched the BODi digital platform with a new form of fitness programming called BODi Blocks, the addition of positive mindset content, and digital recipes to extend Shakeology into a Healthy Dessert. We also began migrating all BOD-only members to BODi on their renewal dates. During the first quarter of 2023, to align our operations with our key growth priorities, we executed certain restructuring activities, including a reduction in headcount. These actions resulted in aggregate charges of $5.3 million, consisting primarily of termination benefits during the six months ended June 30, 2023.
For the three months ended June 30, 2023, as compared to the three months ended June 30, 2022:
For the six months ended June 30, 2023, as compared to the six months ended June 30, 2022:
See “Non-GAAP Information” below for information regarding our use of Adjusted EBITDA and a reconciliation of net loss to Adjusted EBITDA.
25
Recent Developments
Effective as of June 15, 2023, the Company appointed Mark Goldston as Executive Chairman, replacing the service of Mr. Daikeler in his capacity as Chairman of the Board. Mr. Daikeler will continue to serve as the Company’s CEO and director. In connection with the employment offer letter to Mr. Goldston, he was granted a stock option under the Company’s 2023 Employment Inducement Incentive Award Plan (the “Inducement Plan”) covering an aggregate of 23,883,265 shares of the Company’s Class A common stock (the “Option”). Of this amount, 7,961,088 shares subject to the Option will vest based on continued service (the “Time-Vesting Options”) and 15,922,177 shares will vest based on the attainment of applicable performance goals and continued service (the “Performance-Vesting Options”). See Note 11, Equity-Based Compensation, for additional information on the Inducement Plan and the Options granted to Mr. Goldston.
On June 15, 2023, the Company and Carl Daikeler the Company’s co-founder and chief executive officer (“CEO”) entered into a forfeiture agreement (“the Forfeiture Agreement”), pursuant to which Mr. Daikeler as of June 15, 2023 forfeited 8 million shares of the Company’s common stock that he owned, comprised of 3,199,946 shares of Class A common stock and 4,800,054 shares of Class X Common stock. No consideration was provided to Mr. Daikeler for the forfeiture of these shares. See Note 10, Stockholders’ Equity, for additional information on the forfeiture of these shares.
On July 24, 2023 (the "Second Amendment Effective Date"), the Company and Blue Torch entered into Amendment No. 2 to the Financing Agreement (the "Second Amendment"), which amended the Company's existing Financing Agreement. The Second Amendment amends, among other things, certain terms of the Financing Agreement including without limitation, to (1) amend the minimum revenue financial covenant, (2) amend the minimum liquidity financial covenant, (3) modify the maturity date of the Term Loan, and (4) amend certain financial definitions, reporting covenants and other covenants thereunder.
In connection with the Second Amendment, on the Second Amendment Effective Date, the Company made a partial prepayment on the Term Loan of $15.0 million (which amount was classified as a current obligation at June 30, 2023) along with the related prepayment premium of 5% ($0.8 million) and accrued interest ($0.1 million). The Company also incurred a 1% fee as paid in kind on the outstanding Term Loan balance prior to the prepayment (fee of $0.5 million).
In connection with the Second Amendment, the Company also amended and restated the Term Loan Warrants for the purchase of 4,716,756 shares of the Company’s Class A Common Stock.
See Note 16, Subsequent Events, for additional information on the Second Amendment and amendments to the Term Loan Warrants.
26
Key Operational and Business Metrics
We use the following key operational and business metrics to evaluate our business, measure our performance, develop financial forecasts, and make strategic decisions.
|
|
As of June 30, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
|
|
|
|
|
|
|
||
Digital subscriptions (millions) |
|
|
1.53 |
|
|
|
2.28 |
|
Nutritional subscriptions (millions) |
|
|
0.20 |
|
|
|
0.28 |
|
|
|
Three months ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Average digital retention |
|
|
95.2 |
% |
|
|
95.6 |
% |
|
|
95.5 |
% |
|
|
95.6 |
% |
Total streams (millions) |
|
|
25.3 |
|
|
|
31.0 |
|
|
|
55.0 |
|
|
|
69.2 |
|
DAU/MAU |
|
|
31.6 |
% |
|
|
30.0 |
% |
|
|
32.1 |
% |
|
|
31.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenue (millions) |
|
$ |
134.9 |
|
|
$ |
179.1 |
|
|
$ |
279.8 |
|
|
$ |
378.1 |
|
Gross profit (millions) |
|
$ |
82.7 |
|
|
$ |
87.3 |
|
|
$ |
174.1 |
|
|
$ |
180.3 |
|
Gross margin |
|
|
61 |
% |
|
|
49 |
% |
|
|
62 |
% |
|
|
48 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss (millions) |
|
$ |
(25.7 |
) |
|
$ |
(41.9 |
) |
|
$ |
(54.9 |
) |
|
$ |
(115.4 |
) |
Adjusted EBITDA (millions) |
|
$ |
(4.8 |
) |
|
$ |
(1.5 |
) |
|
$ |
(5.7 |
) |
|
$ |
(20.6 |
) |
Please see “Non-GAAP Information” below for a reconciliation of net loss to Adjusted EBITDA and an explanation for why we consider Adjusted EBITDA to be a helpful metric for investors.
Digital Subscriptions
Our ability to expand the number of digital subscriptions is an indicator of our market penetration and growth. Digital subscriptions include BOD, BODi, and prior to Q3 2022, Openfit subscriptions. Digital subscriptions include paid and free-to-pay subscriptions, with free-to-pay subscriptions representing approximately 1% of total digital subscriptions on average. Digital subscriptions are inclusive of all billing plans, currently for annual, semi-annual, quarterly and monthly billing intervals.
Nutritional Subscriptions
Nutritional subscriptions include monthly subscriptions for nutritional products such as Shakeology, Beachbody Performance, BEACHBAR, Bevvy and Ladder Supplements. We also package and bundle the content experience of digital subscriptions with nutritional subscriptions to optimize customer results.
Average Digital Retention
We use month-over-month digital subscription retention, which is defined as the average rate at which the total subscriber file is retained for the next period, to measure customer retention. For instance, a 95% average digital retention rate would correspond with retaining each month an average of 95% of digital subscribers existing at the beginning of that month. A 95% average digital retention rate would translate into a loss at the end of the quarter of approximately 15% of the subscribers existing at the beginning of the quarter. This calculation excludes new customer acquisitions or subscribers added in a specific month, so this calculation can never exceed 100%.
Total Streams
We use total streams to quantify the number of fitness, nutrition and mindset programs viewed, which is an indicator of customer engagement and retention. While the measure of a digital stream may vary across companies, to qualify as a stream on any of our digital platforms, a program must be viewed for a minimum of 25% of the total running time.
Daily Active Users to Monthly Active Users (DAU/MAU)
27
We use the ratio of daily active users to monthly active users to measure how frequently digital subscribers are utilizing our service in a given month. We define a daily active user as a unique user streaming content on our platform in a given day. We define a monthly active user as a unique user streaming content on our platform in that same month.
28
Non-GAAP Information
We use Adjusted EBITDA, which is a non-GAAP performance measure, to supplement our results presented in accordance with accounting principles generally accepted in the United States of America ("GAAP"). We believe Adjusted EBITDA is useful in evaluating our operating performance, as it is similar to measures reported by our public competitors and is regularly used by security analysts, institutional investors, and other interested parties in analyzing operating performance and prospects. Adjusted EBITDA is not intended to be a substitute for any GAAP financial measure and, as calculated, may not be comparable to other similarly titled measures of performance of other companies in other industries or within the same industry.
We define and calculate Adjusted EBITDA as net income (loss) adjusted for depreciation and amortization, amortization of capitalized cloud computing implementation costs, amortization of content assets, interest expense, income tax provision (benefit), equity-based compensation, and other items that are not normal, recurring, operating expenses necessary to operate the Company’s business as described in the reconciliation below.
We include this non-GAAP financial measure because it is used by management to evaluate BODi’s core operating performance and trends and to make strategic decisions regarding the allocation of capital and new investments. Adjusted EBITDA excludes certain expenses that are required in accordance with GAAP because they are non-cash (for example, in the case of depreciation and amortization and equity-based compensation) or are not related to our underlying business performance (for example, in the case of interest income and expense).
The table below presents our Adjusted EBITDA reconciled to our net loss, the closest GAAP measure, for the periods indicated:
|
|
Three months ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
(in thousands) |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss |
|
$ |
(25,748 |
) |
|
$ |
(41,867 |
) |
|
$ |
(54,936 |
) |
|
$ |
(115,400 |
) |
Adjusted for: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Depreciation and amortization |
|
|
10,919 |
|
|
|
19,965 |
|
|
|
21,632 |
|
|
|
41,552 |
|
Amortization of capitalized cloud computing implementation costs |
|
|
40 |
|
|
|
168 |
|
|
|
81 |
|
|
|
336 |
|
Amortization of content assets |
|
|
5,459 |
|
|
|
7,016 |
|
|
|
11,020 |
|
|
|
13,180 |
|
Interest expense |
|
|
2,368 |
|
|
|
3 |
|
|
|
4,699 |
|
|
|
22 |
|
Income tax provision (benefit) |
|
|
(12 |
) |
|
|
(281 |
) |
|
|
36 |
|
|
|
(987 |
) |
Equity-based compensation |
|
|
3,161 |
|
|
|
3,001 |
|
|
|
12,716 |
|
|
|
7,565 |
|
Employee incentives, expected to be settled in equity (1) |
|
|
— |
|
|
|
— |
|
|
|
(5,466 |
) |
|
|
— |
|
Inventory net realizable value adjustment (2) |
|
|
— |
|
|
|
10,502 |
|
|
|
— |
|
|
|
25,436 |
|
Restructuring and platform consolidation costs (3) |
|
|
(107 |
) |
|
|
2,086 |
|
|
|
5,952 |
|
|
|
9,973 |
|
Change in fair value of warrant liabilities |
|
|
(375 |
) |
|
|
(2,070 |
) |
|
|
(432 |
) |
|
|
(2,334 |
) |
Non-operating (4) |
|
|
(479 |
) |
|
|
5 |
|
|
|
(963 |
) |
|
|
78 |
|
Adjusted EBITDA |
|
$ |
(4,774 |
) |
|
$ |
(1,472 |
) |
|
$ |
(5,661 |
) |
|
$ |
(20,579 |
) |
29
Results of Operations
The Company has one operating segment. The following discussion of our results and operations is on a consolidated basis.
(in thousands) |
|
Three months ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Digital |
|
$ |
65,214 |
|
|
$ |
78,015 |
|
|
$ |
129,987 |
|
|
$ |
159,760 |
|
Nutrition and other |
|
|
64,628 |
|
|
|
90,516 |
|
|
|
138,748 |
|
|
|
188,180 |
|
Connected fitness |
|
|
5,106 |
|
|
|
10,605 |
|
|
|
11,114 |
|
|
|
30,118 |
|
Total revenue |
|
|
134,948 |
|
|
|
179,136 |
|
|
|
279,849 |
|
|
|
378,058 |
|
Cost of revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Digital |
|
|
16,336 |
|
|
|
18,406 |
|
|
|
31,303 |
|
|
|
34,831 |
|
Nutrition and other |
|
|
27,202 |
|
|
|
42,002 |
|
|
|
58,241 |
|
|
|
86,776 |
|
Connected fitness |
|
|
8,666 |
|
|
|
31,459 |
|
|
|
16,221 |
|
|
|
76,165 |
|
Total cost of revenue |
|
|
52,204 |
|
|
|
91,867 |
|
|
|
105,765 |
|
|
|
197,772 |
|
Gross profit |
|
|
82,744 |
|
|
|
87,269 |
|
|
|
174,084 |
|
|
|
180,286 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Selling and marketing |
|
|
76,492 |
|
|
|
86,624 |
|
|
|
153,068 |
|
|
|
193,068 |
|
Enterprise technology and development |
|
|
18,650 |
|
|
|
24,133 |
|
|
|
37,746 |
|
|
|
57,830 |
|
General and administrative |
|
|
11,887 |
|
|
|
19,584 |
|
|
|
29,603 |
|
|
|
39,657 |
|
Restructuring |
|
|
(107 |
) |
|
|
1,332 |
|
|
|
5,280 |
|
|
|
8,555 |
|
Total operating expenses |
|
|
106,922 |
|
|
|
131,673 |
|
|
|
225,697 |
|
|
|
299,110 |
|
Operating loss |
|
|
(24,178 |
) |
|
|
(44,404 |
) |
|
|
(51,613 |
) |
|
|
(118,824 |
) |
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Change in fair value of warrant liabilities |
|
|
375 |
|
|
|
2,070 |
|
|
|
432 |
|
|
|
2,334 |
|
Interest expense |
|
|
(2,368 |
) |
|
|
(3 |
) |
|
|
(4,699 |
) |
|
|
(22 |
) |
Other income, net |
|
|
411 |
|
|
|
189 |
|
|
|
980 |
|
|
|
125 |
|
Loss before income taxes |
|
|
(25,760 |
) |
|
|
(42,148 |
) |
|
|
(54,900 |
) |
|
|
(116,387 |
) |
Income tax (provision) benefit |
|
|
12 |
|
|
|
281 |
|
|
|
(36 |
) |
|
|
987 |
|
Net loss |
|
$ |
(25,748 |
) |
|
$ |
(41,867 |
) |
|
$ |
(54,936 |
) |
|
$ |
(115,400 |
) |
30
Revenue
Revenue includes digital subscriptions, nutritional supplement subscriptions, one-time nutritional sales, connected fitness products, access to our online Partner business management platform, preferred customer program memberships, and other fitness-related products. We often sell bundled products that combine digital subscriptions, nutritional products, and/or other fitness products. We consider these sales to be revenue arrangements with multiple performance obligations and allocate the transaction price to each performance obligation based on its relative stand-alone selling price. We defer revenue when we receive payments in advance of delivery of products or the performance of services. Digital subscription revenue is recognized ratably over the subscription period of up to 38 months.
|
|
Three months ended June 30, |
|
|
|
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
||||
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|||||||
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Digital |
|
$ |
65,214 |
|
|
$ |
78,015 |
|
|
$ |
(12,801 |
) |
|
|
(16 |
%) |
Nutrition and other |
|
|
64,628 |
|
|
|
90,516 |
|
|
|
(25,888 |
) |
|
|
(29 |
%) |
Connected fitness |
|
|
5,106 |
|
|
|
10,605 |
|
|
|
(5,499 |
) |
|
|
(52 |
%) |
Total revenue |
|
$ |
134,948 |
|
|
$ |
179,136 |
|
|
$ |
(44,188 |
) |
|
|
(25 |
%) |
The decrease in digital revenue for the three months ended June 30, 2023, as compared to the three months ended June 30, 2022, was primarily due to a decrease in revenue from our digital streaming services due to 33% fewer subscriptions due to lower demand and a decrease of $1.3 million in fees from partners due to a 24% decrease in the number of partners, partially offset by an increase in revenue per subscription.
The decrease in nutrition and other revenue for the three months ended June 30, 2023, as compared to the three months ended June 30, 2022, was primarily due to a $20.7 million decrease in revenue from nutritional products due to 30% fewer nutritional subscriptions due to lower demand, a $2.3 million decrease in revenue generated from our preferred customer fees due to a 30% decrease in preferred customers and a $1.3 million decrease in fitness accessories revenue, partially offset by a $1.6 million increase in ticket sales due primarily to Summit 2023 which occurred in June 2023 (in the prior year the Summit occurred in July).
The decrease in connected fitness revenue for the three months ended June 30, 2023, as compared to the three months ended June 30, 2022, was primarily due to a 37% decrease in number of bikes delivered and a 19% decrease in the average sales price for a bike.
|
|
Six months ended June 30, |
|
|
|
|
|
|
|
|||||||
|
|
2023 |
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
||||
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|||||||
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Digital |
|
$ |
129,987 |
|
|
$ |
159,760 |
|
|
$ |
(29,773 |
) |
|
|
(19 |
%) |
Nutrition and other |
|
|
138,748 |
|
|
|
188,180 |
|
|
|
(49,432 |
) |
|
|
(26 |
%) |
Connected fitness |
|
|
11,114 |
|
|
|
30,118 |
|
|
|
(19,004 |
) |
|
|
(63 |
%) |
Total revenue |
|
$ |
279,849 |
|
|
$ |
378,058 |
|
|
$ |
(98,209 |
) |
|
|
(26 |
%) |
The decrease in digital revenue for the six months ended June 30, 2023, as compared to the six months ended June 30, 2022, was primarily due to a decrease in revenue from our digital streaming services due to 33% fewer subscriptions due to lower demand and a decrease of $2.9 million in fees from partners due to a 27% decrease in the number of partners, partially offset by an increase in revenue per subscription.
The decrease in nutrition and other revenue for the six months ended June 30, 2023, as compared to the six months ended June 30, 2022, was primarily due to a $41.1 million decrease in revenue from nutritional products due to 30% fewer nutritional subscriptions due to lower demand and a $4.1 million decrease in revenue generated from our preferred customer fees due to a 28% decrease in preferred customers and a $2.7 million decrease in fitness accessories revenue, partially offset by a $2.5 million increase in ticket sales due primarily to Summit 2023 which occurred in June 2023 (in the prior year the Summit occurred in July).
The decrease in connected fitness revenue for the six months ended June 30, 2023, as compared to the six months ended June 30, 2022, was primarily due to a 60% decrease in the number of bikes delivered and a 7% decrease in the average sales price for a bike.
31
Cost of Revenue
Digital Cost of Revenue
Digital cost of revenue includes costs associated with digital content creation including amortization and revision of content assets, depreciation of streaming platforms, digital streaming costs, and amortization of acquired digital platform intangible assets. It also includes customer service costs, payment processing fees, depreciation of production equipment, live trainer costs, facilities, and related personnel expenses.
Nutrition and Other Cost of Revenue
Nutrition and other cost of revenue includes product costs, shipping and handling, fulfillment and warehousing, customer service, and payment processing fees. It also includes depreciation of nutrition-related e-commerce websites and social commerce platforms, amortization of acquired formulae intangible assets, facilities, and related personnel expenses.
Connected Fitness Cost of Revenue
Connected fitness cost of revenue consists of product costs, including bike and tablet hardware costs, duties and other applicable importing costs, shipping and handling costs, warehousing and logistics costs, costs associated with service calls and repairs of products under warranty, payment processing and financing fees, customer service expenses, and personnel-related expenses associated with supply chain and logistics.
|
|
Three months ended June 30, |
|
|
|
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
||||
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|||||||
Cost of revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Digital |
|
$ |
16,336 |
|
|
$ |
18,406 |
|
|
$ |
(2,070 |
) |
|
|
(11 |
%) |
Nutrition and other |
|
|
27,202 |
|
|
|
42,002 |
|
|
|
(14,800 |
) |
|
|
(35 |
%) |
Connected fitness |
|
|
8,666 |
|
|
|
31,459 |
|
|
|
(22,793 |
) |
|
|
(72 |
%) |
Total cost of revenue |
|
$ |
52,204 |
|
|
$ |
91,867 |
|
|
$ |
(39,663 |
) |
|
|
(43 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross profit |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Digital |
|
$ |
48,878 |
|
|
$ |
59,609 |
|
|
$ |
(10,731 |
) |
|
|
(18 |
%) |
Nutrition and other |
|
|
37,426 |
|
|
|
48,514 |
|
|
|
(11,088 |
) |
|
|
(23 |
%) |
Connected fitness |
|
|
(3,560 |
) |
|
|
(20,854 |
) |
|
|
17,294 |
|
|
|
83 |
% |
Total gross profit |
|
$ |
82,744 |
|
|
$ |
87,269 |
|
|
$ |
(4,525 |
) |
|
|
(5 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross margin |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Digital |
|
|
75 |
% |
|
|
76 |
% |
|
|
|
|
|
|
||
Nutrition and other |
|
|
58 |
% |
|
|
54 |
% |
|
|
|
|
|
|
||
Connected fitness |
|
|
(70 |
%) |
|
|
(197 |
%) |
|
|
|
|
|
|
||
Total gross margin |
|
|
61 |
% |
|
|
49 |
% |
|
|
|
|
|
|
||
The decrease in digital cost of revenue for the three months ended June 30, 2023, as compared to the three months ended June 30, 2022, was due to a $1.6 million decrease in the amortization of content assets as a result of lower production spend and a $0.7 million decrease in streaming costs due to lower platform usage. The decrease in digital gross margin for the three months ended June 30, 2023 compared to the three months ended June 30, 2022 was primarily as a result of fixed expenses on lower digital revenue.
The decrease in nutrition and other cost of revenue for the three months ended June 30, 2023, as compared to the three months ended June 30, 2022, was primarily due to a $6.4 million decrease in product costs and a $4.2 million decrease in fulfillment and shipping expense related to the decrease in nutrition and other revenue, a $1.7 million decrease in depreciation expense as a result of the end of the useful life of certain fixed assets, and a $1.2 million decrease in customer service expense due to a decrease in the volume of contacts related to nutrition and other revenue. Nutrition and other gross margin increased for the three months ended June 30, 2023 compared to the three months ended June 30, 2022 primarily as a result of lower shipping and lower depreciation expense.
The decrease in connected fitness cost of revenue for the three months ended June 30, 2023, as compared to the three months ended June 30, 2022, was driven by lower inventory value adjustments of $12.7 million, a $7.1 million decrease in product costs and a $1.4 million decrease in freight, fulfillment, and shipping expenses as the result of a decrease in the number of bikes sold. The connected fitness negative gross margin improvement for the three months ended June 30, 2023 compared to the three months ended June 30, 2022 primarily as a result of lower inventory value adjustments, partially offset by the impact of fixed warehousing expenses on lower connected fitness revenue.
32
|
|
Six months ended June 30, |
|
|
|
|
|
|
|
|||||||
|
|
2023 |
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
||||
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|||||||
Cost of revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Digital |
|
$ |
31,303 |
|
|
$ |
34,831 |
|
|
$ |
(3,528 |
) |
|
|
(10 |
%) |
Nutrition and other |
|
|
58,241 |
|
|
|
86,776 |
|
|
|
(28,535 |
) |
|
|
(33 |
%) |
Connected fitness |
|
|
16,221 |
|
|
|
76,165 |
|
|
|
(59,944 |
) |
|
|
(79 |
%) |
Total cost of revenue |
|
$ |
105,765 |
|
|
$ |
197,772 |
|
|
$ |
(92,007 |
) |
|
|
(47 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross profit |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Digital |
|
$ |
98,684 |
|
|
$ |
124,929 |
|
|
$ |
(26,245 |
) |
|
|
(21 |
%) |
Nutrition and other |
|
|
80,507 |
|
|
|
101,404 |
|
|
|
(20,897 |
) |
|
|
(21 |
%) |
Connected fitness |
|
|
(5,107 |
) |
|
|
(46,047 |
) |
|
|
40,940 |
|
|
|
89 |
% |
Total gross profit |
|
$ |
174,084 |
|
|
$ |
180,286 |
|
|
$ |
(6,202 |
) |
|
|
(3 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross margin |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Digital |
|
|
76 |
% |
|
|
78 |
% |
|
|
|
|
|
|
||
Nutrition and other |
|
|
58 |
% |
|
|
54 |
% |
|
|
|
|
|
|
||
Connected fitness |
|
|
(46 |
%) |
|
|
(153 |
%) |
|
|
|
|
|
|
||
Total gross margin |
|
|
62 |
% |
|
|
48 |
% |
|
|
|
|
|
|
||
The decrease in digital cost of revenue for the six months ended June 30, 2023, as compared to the six months ended June 30, 2022, was due to a $3.1 million decrease in depreciation expense as a result of the end of the useful life of certain fixed assets, a $2.2 million decrease in the amortization of content assets as a result of lower production spend and a $1.1 million decrease in streaming costs due to lower platform usage. The decrease in digital gross margin for the six months ended June 30, 2023 compared to the six months ended June 30, 2022 was primarily as a result of fixed expenses on lower digital revenue.
The decrease in nutrition and other cost of revenue for the six months ended June 30, 2023, as compared to the six months ended June 30, 2022, was primarily due to a $12.8 million decrease in product costs and a $8.0 million decrease in fulfillment and shipping expense related to the decrease in nutrition and other revenue, a $3.5 million decrease in depreciation expense as a result of the end of the useful life of certain fixed assets, and a $2.8 million decrease in customer service expense due to a decrease in the volume of contacts related to nutrition and other revenue. Nutrition and other gross margin increased for the six months ended June 30, 2023 compared to the six months ended June 30, 2022 primarily as a result of lower shipping and depreciation expense.
The decrease in connected fitness cost of revenue for the six months ended June 30, 2023, as compared to the six months ended June 30, 2022, was driven by lower inventory value adjustments of $26.9 million and a $21.5 million decrease in product costs and a $7.8 million decrease in freight, fulfillment, and shipping expenses as the result of a decrease in the number of bikes sold. The connected fitness negative gross margin improvement for the six months ended June 30, 2023 compared to the six months ended June 30, 2022 was primarily as a result of lower inventory value adjustments, partially offset by the impact of fixed warehousing expenses on lower connected fitness revenue.
33
Operating Expenses
Selling and Marketing
Selling and marketing expenses primarily include the cost of Partner compensation, advertising, royalties, promotions and events, and third-party sales commissions as well as the personnel expenses for employees and consultants who support these areas. Selling and marketing 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, |
|
|
|
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
||||
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Selling and marketing |
|
$ |
76,492 |
|
|
$ |
86,624 |
|
|
$ |
(10,132 |
) |
|
|
(12 |
%) |
As a percentage of total revenue |
|
|
56.7 |
% |
|
|
48.4 |
% |
|
|
|
|
|
|
||
The decrease in selling and marketing expense for the three months ended June 30, 2023, as compared to the three months ended June 30, 2022, was primarily due to a $12.3 million decrease in Partner compensation as a result of lower commissionable revenue, a $3.8 million decrease in personnel-related expenses due to lower headcount primarily related to the restructuring activities that occurred in the first quarter of 2023 and in the prior year, and a $2.5 million decrease in the amortization of intangible assets due to the impairment of certain assets in the fourth quarter of 2022 partially offset by a $7.1 million increase in event expenses due primarily to Summit 2023 which occurred in June 2023 (in the prior year this event was held in July) and a $2.0 million increase in online and television media expense.
Selling and marketing expense as a percentage of total revenue increased by 830 basis points ("bps") primarily due to the timing of Summit 2023 and a decrease in revenue.
|
|
Six months ended June 30, |
|
|
|
|
|
|
|
|||||||
|
|
2023 |
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
||||
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Selling and marketing |
|
$ |
153,068 |
|
|
$ |
193,068 |
|
|
$ |
(40,000 |
) |
|
|
(21 |
%) |
As a percentage of total revenue |
|
|
54.7 |
% |
|
|
51.1 |
% |
|
|
|
|
|
|
||
The decrease in selling and marketing expense for the six months ended June 30, 2023, as compared to the six months ended June 30, 2022, was primarily due to a $26.2 million decrease in Partner compensation as a result of lower commissionable revenue, a $9.9 million decrease in personnel-related expenses due to lower headcount primarily related to the restructuring activities that occurred in the first quarter of 2023 and in the prior year, a $5.0 million decrease in the amortization of intangible assets due to the impairment of certain assets in the fourth quarter of 2022 and a $4.0 million decrease in online and television media expense, partially offset by a $7.8 million increase in event expenses due primarily to Summit 2023 which occurred in June 2023 (in the prior year this event was held in July).
Selling and marketing expense as a percentage of total revenue increased by 360 bps primarily due to the timing of Summit 2023 and a decrease in revenue.
34
Enterprise Technology and Development
Enterprise technology and development expenses primarily relate to enterprise systems applications, hardware, and software that serve as the technology infrastructure for the Company and are not directly related to services provided or tangible goods sold. This includes maintenance and enhancements of the Company’s enterprise resource planning system, which is the core of our accounting, procurement, supply chain and other business support systems. Enterprise technology and development also includes reporting and business analytics tools, security systems such as identity management and payment card industry compliance, office productivity software, research and development tracking tools, and other non-customer facing applications. Enterprise technology and development expenses include personnel-related expenses for employees and consultants who create improvements to and maintain technology systems and are involved in the research and development of new and existing nutritional products, depreciation of enterprise technology-related assets, software licenses, hosting expenses, and technology equipment leases.
|
|
Three months ended June 30, |
|
|
|
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
||||
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Enterprise technology and development |
|
$ |
18,650 |
|
|
$ |
24,133 |
|
|
$ |
(5,483 |
) |
|
|
(23 |
%) |
As a percentage of total revenue |
|
|
13.8 |
% |
|
|
13.5 |
% |
|
|
|
|
|
|
||
The decrease in enterprise technology and development expense for the three months ended June 30, 2023, as compared to the three months ended June 30, 2022, was primarily due to a $3.1 million decrease in depreciation expense as a result of the end of the useful life of certain fixed assets and a $2.4 million decrease in personnel-related expenses due to lower headcount primarily related to the restructuring activities that occurred in the first quarter of 2023 and in the prior year.
Enterprise technology and development expense as a percentage of total revenue increased by 30 bps due to the decrease in revenue.
|
|
Six months ended June 30, |
|
|
|
|
|
|
|
|||||||
|
|
2023 |
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
||||
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Enterprise technology and development |
|
$ |
37,746 |
|
|
$ |
57,830 |
|
|
$ |
(20,084 |
) |
|
|
(35 |
%) |
As a percentage of total revenue |
|
|
13.5 |
% |
|
|
15.3 |
% |
|
|
|
|
|
|
||
The decrease in enterprise technology and development expense for the six months ended June 30, 2023, as compared to the six months ended June 30, 2022, was primarily due to a $14.1 million decrease in personnel-related expenses due to lower headcount primarily related to the restructuring activities that occurred in the first quarter of 2023 and in the prior year and a $6.1 million decrease in depreciation expense as a result of the end of the useful life of certain fixed assets.
Enterprise technology and development expense as a percentage of total revenue decreased by 180 bps due to lower fixed expenses.
35
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, |
|
|
|
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
||||
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
General and administrative |
|
$ |
11,887 |
|
|
$ |
19,584 |
|
|
$ |
(7,697 |
) |
|
|
(39 |
%) |
As a percentage of total revenue |
|
|
8.8 |
% |
|
|
10.9 |
% |
|
|
|
|
|
|
||
The decrease in general and administrative expense for the three months ended June 30, 2023, as compared to the three months ended June 30, 2022, was primarily due to a $5.0 million decrease in personnel-related expenses as a result of lower headcount, primarily related to the restructuring activities that occurred in the first quarter of 2023 and in the prior year, and a $1.2 million decrease in insurance expense as some of our insurance is based on the level of the Company's revenues or the number of employees, which both have declined in the current period compared to the prior period.
General and administrative expense as a percentage of total revenue decreased by 210 bps due to lower fixed expenses.
|
|
Six months ended June 30, |
|
|
|
|
|
|
|
|||||||
|
|
2023 |
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
||||
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
General and administrative |
|
$ |
29,603 |
|
|
$ |
39,657 |
|
|
$ |
(10,054 |
) |
|
|
(25 |
%) |
As a percentage of total revenue |
|
|
10.6 |
% |
|
|
10.5 |
% |
|
|
|
|
|
|
||
The decrease in general and administrative expense for the six months ended June 30, 2023, as compared to the six months ended June 30, 2022, was primarily due to a $7.2 million decrease in personnel-related expenses as a result of lower headcount primarily related to the restructuring activities that occurred in the first quarter of 2023 and in the prior year, and a $1.7 million decrease in insurance expense as some of our insurance is based on the level of the Company's revenues or the number of employees, which both have declined in the current period compared to the prior period.
General and administrative expense as a percentage of total revenue was relatively flat with the prior period.
Restructuring
In 2023, restructuring charges primarily relate to activities focused on aligning our operations with our key growth priorities, including a reduction in headcount. Restructuring charges in 2022 relate to the consolidation of our streaming fitness and nutrition offerings into a single Beachbody platform. The charges incurred primarily consist of employee termination costs.
|
|
Three months ended June 30, |
|
|
|
|||||||||
|
|
2023 |
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|||
|
|
(dollars in thousands) |
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||
Restructuring |
|
$ |
(107 |
) |
|
$ |
1,332 |
|
|
$ |
(1,439 |
) |
|
NM |
|
|
Six months ended June 30, |
|
|
|
|
|
|
|
|||||||
|
|
2023 |
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
||||
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Restructuring |
|
$ |
5,280 |
|
|
$ |
8,555 |
|
|
$ |
(3,275 |
) |
|
|
(38 |
%) |
36
Other Income (Expense)
The change in fair value of warrant liabilities consists of the fair value changes of the public, private placement, and Term Loan warrants. Interest expense primarily consists of interest expense associated with our borrowings and amortization of debt discount and issuance costs for our Term Loan (defined below) in 2022 and Credit Facility in 2021. Other income, net, consists of interest income earned on investments and gains (losses) on foreign currency.
|
|
Three months ended June 30, |
|
|
|
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
||||
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Change in fair value of warrant liabilities |
|
$ |
375 |
|
|
$ |
2,070 |
|
|
$ |
(1,695 |
) |
|
|
(82 |
%) |
Interest expense |
|
|
(2,368 |
) |
|
|
(3 |
) |
|
|
(2,365 |
) |
|
NM |
|
|
Other income (expense), net |
|
|
411 |
|
|
|
189 |
|
|
|
222 |
|
|
NM |
|
|
The decrease in change in fair value of warrant liabilities during the three months ended June 30, 2023, as compared to the three months ended June 30, 2022, primarily resulted from a relatively lower decline in our stock price during the current quarter. The increase in interest expense was due to borrowings under the Term Loan during the three months ended June 30, 2023 compared to no borrowings outstanding during the three months ended June 30, 2022. The increase in other income was primarily due to higher interest income as a result of higher interest rates on our cash balances.
|
|
Six months ended June 30, |
|
|
|
|
|
|
|
|||||||
|
|
2023 |
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
||||
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Change in fair value of warrant liabilities |
|
$ |
432 |
|
|
$ |
2,334 |
|
|
$ |
(1,902 |
) |
|
|
(81 |
%) |
Interest expense |
|
|
(4,699 |
) |
|
|
(22 |
) |
|
|
(4,677 |
) |
|
NM |
|
|
Other income, net |
|
|
980 |
|
|
|
125 |
|
|
|
855 |
|
|
NM |
|
|
The decrease in change in fair value of warrant liabilities during the six months ended June 30, 2023, as compared to the six months ended June 30, 2022, primarily resulted from a relatively lower decline in our stock price during the current period. The increase in interest expense was due to borrowings under the Term Loan during the six months ended June 30, 2023 compared to no borrowings outstanding during the six months ended June 30, 2022. The increase in other income was primarily due to higher interest income as a result of higher interest rates on our cash balances.
37
Income Tax (Provision) Benefit
Income tax (provision) benefit consists of income taxes related to U.S. federal and state jurisdictions as well as those foreign jurisdictions where we have business operations.
|
|
Three months ended June 30, |
|
|
|
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
||||
|
|
(dollars in thousands) |
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income tax benefit |
|
$ |
12 |
|
|
$ |
281 |
|
|
$ |
(269 |
) |
|
|
(96 |
%) |
The income tax benefit decrease for the three months ended June 30, 2023, as compared to the three months ended June 30, 2022, was primarily driven by changes in our projected net deferred taxes after valuation allowance and a decrease in the net expense from discrete events.
|
|
Six months ended June 30, |
|
|
|
|
|
|
||||||
|
|
2023 |
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|||
|
|
(dollars in thousands) |
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||
Income tax (provision) benefit |
|
$ |
(36 |
) |
|
$ |
987 |
|
|
$ |
(1,023 |
) |
|
NM |
The income tax provision increase for the six months ended June 30, 2023, as compared to the six months ended June 30, 2022, was primarily driven by changes in our projected net deferred taxes after valuation allowance and a decrease in the net expense from discrete events.
38
Liquidity and Capital Resources
|
|
Six months ended June 30, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
|
|
(in thousands) |
|
|||||
|
|
|
|
|
|
|
||
Net cash used in operating activities |
|
$ |
(14,367 |
) |
|
$ |
(33,256 |
) |
Net cash used in investing activities |
|
|
(5,030 |
) |
|
|
(19,222 |
) |
Net cash (used in) provided by financing activities |
|
|
(2,400 |
) |
|
|
2,660 |
|
As of June 30, 2023, we had cash and cash equivalents totaling $58.7 million.
Net cash used in operating activities was $14.4 million and $33.3 million for the six months ended June 30, 2023 and 2022, respectively. The decrease in cash used in operating activities during the six months ended June 30, 2023, compared to the prior year period, was primarily due to a decrease in net loss of $60.5 million and an increase in cash received attributable to deferred revenue of $11.2 million partially offset by a decrease in provision for inventory and inventory purchase commitments of $26.9 million and a decrease in depreciation and amortization expense of $22.1 million.
Net cash used in investing activities was $5.0 million and $19.2 million for the six months ended June 30, 2023 and 2022, respectively. The decrease in net cash used in investing activities was due to a decrease in capital expenditures due to increased focus by management on capital expenditures, in particular related to technology. The current decrease of capital expenditures as compared to the prior period is expected to continue in future periods.
Net cash used in financing activities was $2.4 million for the six months ended June 30, 2023 compared to net cash provided by financing activities of $2.7 million for the six months ended June 30, 2022. The change in net cash from financing activities was primarily due to taxes associated with the vesting of restricted stock during the six months ended June 30, 2023 and debt repayments on our Term Loan compared to proceeds from stock option exercises during the six months ended June 30, 2022.
On August 8, 2022, the Company, Beachbody, LLC, a Delaware limited liability company and wholly-owned direct subsidiary of the Company (the “Borrower”), and certain subsidiaries of the Company (together with the Company, the “Guarantors”), entered into a financing agreement (as amended, the “Financing Agreement”) with the lenders party thereto and Blue Torch Finance, LLC, ("Blue Torch") as administrative agent and collateral agent for such lenders, providing for a senior secured term loan facility in an initial aggregate principal amount of $50.0 million (the “Term Loan”). Obligations under the Financing Agreement are guaranteed by the Guarantors, and secured by a lien on and security interest in substantially all of the assets of the Borrower and the Guarantors (together with the Borrower, the “Loan Parties”), subject to customary exceptions. As of June 30, 2023, the principal balance outstanding under the Term Loan was $50.1 million. On July 24, 2023 the Company and Blue Torch entered into the Second Amendment. In connection with the Second Amendment, on the Second Amendment Effective Date, the Company made a partial prepayment on the Term Loan of $15.0 million (which was classified as a current obligation at June 30, 2023). During the three and six months ended June 30, 2023, the Term Loan was a secured overnight financing rate ("SOFR") loan, with an effective interest rate of 18.69% and a cash interest rate of 12.12%.
The Financing Agreement contains financial covenants, customary representations, warranties, covenants and customary events of default. We were in compliance with the financial covenants, including amendments to the minimum revenue financial covenant in the Second Amendment, as of June 30, 2023. See Note 9, Debt, for additional information on the Term Loan. See Note 16, Subsequent Events, for additional information on the amendments to the Term Loan including amendments to the financial covenants and the maturity date of the Term Loan.
As of June 30, 2023, we have $30.9 million of lease obligations and purchase commitments associated with contracts that are enforceable and legally binding and that specify all significant terms, including fixed or minimum services to be used, fixed, minimum or variable price provisions, and the approximate timing of the actions under the contracts. See Note 8, Commitments and Contingencies, for discussion of our contractual commitments that are primarily due within the next year.
39
Our future capital requirements may vary materially from those currently planned and will depend on many factors, including our rate of revenue growth and overall economic conditions. We continue to assess and efficiently manage our working capital, and expect to generate additional liquidity through continued cost control initiatives. We believe that existing cash and cash equivalents and cost control initiatives will provide the Company with sufficient liquidity to meet our anticipated cash needs, including debt service requirements, for the next twelve months as well as for the longer-term (i.e., beyond the next twelve months).
We may explore additional equity financing to supplement our anticipated working capital balances and further strengthen our financial position, but do not at this time know which form it will take or what the terms will be. The sale of additional equity would result in additional dilution to our shareholders. There can be no assurances that we will be able to raise additional capital in amounts or on terms acceptable to us.
Critical Accounting Policies and Estimates
There have been no material changes to the Company's critical accounting policies and estimates discussed in the 2022 Annual Report on Form 10-K in Item 7 under the heading Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates other than noted below.
Goodwill and Long-Lived Assets Impairment
Goodwill and intangible assets deemed to have an indefinite life are not amortized, but instead are assessed for impairment annually at October 1 and between annual tests if an event or change in circumstances occurs that would more likely than not reduce the fair value of a reporting unit ("RU") below its carrying value or indicate that it is more likely than not that an indefinite-lived intangible asset is impaired. We carry our definite-lived intangible assets at cost less accumulated amortization. If an event or change in circumstances occurs that indicates the carrying value may not be recoverable, we would evaluate our definite-lived intangible assets for impairment at that time.
We test goodwill for impairment at a level within the Company referred to as the RU. Due to the continued sustained decline in our market capitalization and macroeconomic factors observed during the three months ended June 30, 2023, we performed an interim test for impairment of our goodwill.
In performing the interim impairment test for goodwill, we elected to bypass the qualitative assessment and proceeded to performing the quantitative test. We compared the carrying value of the RU to its estimated fair value. Fair value is estimated using a combination of a market approach and an income approach, with significant assumptions related to guideline company financial multiples used in the market approach and significant assumptions about revenue growth, long-term growth rates, and discount rates used in a discounted cash flow model in the income approach. As of June 30, 2023, the RUs fair value exceeded the carrying value by approximately 11%.
Due to reduced revenue and margin forecasts we tested the related asset group for recoverability as of June 30, 2023. In testing for recoverability, we compared the carrying value of the asset group to its forecasted undiscounted cash flows to determine whether it was recoverable. Because the carrying value of the asset group did not exceed its future undiscounted cash flows, we then calculated the fair value of the assets within the asset group. The fair value of the formulae intangible assets, which is the long-lived asset within the asset group, was calculated to be greater than its carrying value. As a result, no impairment was recognized.
Management will continue to monitor its RU for changes in the business environment that could impact its fair value. Examples of events or circumstances that could result in changes to the underlying key assumptions and judgments used in our goodwill impairment tests, and ultimately impact the estimated fair value of our RU may include supply chain disruptions and demand for at-home fitness solutions; adverse macroeconomic conditions; volatility in the equity and debt markets which could result in higher weighted-average cost of capital and our subscriber growth rates. Changes in any of the assumptions used in the valuation of the RU, or changes in the business environment could materially affect the expected cash flows, and such impacts could potentially result in a material non-cash impairment charge.
Recent Accounting Pronouncements
See Note 1, Description of Business and Summary of Significant Accounting Policies, of the notes to our unaudited condensed consolidated financial statements included elsewhere in this Report for recently adopted accounting pronouncements.
40
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Foreign Currency Risk
We are exposed to foreign currency exchange risk related to transactions in currencies other than the U.S. Dollar, which is our functional currency. Our foreign subsidiaries, sales, certain inventory purchases and operating expenses expose us to foreign currency exchange risk. For the six months ended June 30, 2023 and 2022, approximately 10% of our revenue was in foreign currencies. These sales were primarily denominated in Canadian dollars and British pounds.
We use derivative instruments to manage the effects of fluctuations in foreign currency exchange rates on our net cash flows. We primarily enter into option contracts to hedge forecasted payments, typically for up to 12 months, for cost of revenue, selling and marketing expenses, general and administrative expenses and intercompany transactions not denominated in the local currencies of our foreign operations. We designate some of these instruments as cash flow hedges and record them at fair value as either assets or liabilities within the consolidated balance sheets. Some of these instruments are freestanding derivatives for which hedge accounting does not apply.
Changes in the fair value of cash flow hedges are recorded in accumulated other comprehensive income (loss) until the hedged forecasted transaction affects earnings. Deferred gains and losses associated with cash flow hedges of third-party payments are recognized in cost of revenue, selling and marketing or general and administrative expenses, as applicable, during the period when the hedged underlying transaction affects earnings. Changes in the fair value of certain derivatives for which hedge accounting does not apply are immediately recognized directly in earnings to cost of revenue.
A hypothetical 10% change in exchange rates, with the U.S. dollar as the functional and reporting currency, would 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, 2023 and year ended December 31, 2022 was $15.4 million and $17.6 million, respectively.
Item 4. Controls and Procedures.
Management’s Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of June 30, 2023. Based upon that evaluation, as a result of the material weaknesses identified in our 2022 Form 10-K, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this Report.
Changes in Internal Control Over Financial Reporting
We continue to be in the process of implementing changes, as more fully described in our 2022 Form 10-K, to our internal control over financial reporting to remediate the material weaknesses as described in our 2022 Form 10-K.
There 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 judgments and assumptions and cannot provide absolute assurance that its objectives will be met.
PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
We are and, from time to time, we may become, involved in legal proceedings or be subject to claims arising in the ordinary course of our business. There have been no material changes from the information previously reported under Part I, Item 3 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
41
Item 1A. Risk Factors.
There have been no material developments with respect to the information previously reported under Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022. These risk factors describe some of the assumptions, risks, uncertainties and other factors that could adversely affect our business or that could otherwise result in changes that differ materially from our expectations. We may disclose changes to such risk factors or disclose additional risk factors from time to time in our future filings with the SEC.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Unregistered 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.
None.
42
Item 6. Exhibits.
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Exhibit
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Incorporated by Reference
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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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||
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3.1 |
Amended and Restated Certificate of Incorporation of The Beachbody Company, Inc. |
8-K |
3.1 |
7/1/2021 |
001-39735 |
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3.2 |
8-K |
3.2 |
7/1/2021 |
001-39735 |
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4.1 |
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* |
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10.1 |
10-Q |
10.2 |
8/8/2022 |
001-39735 |
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10.2+ |
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* |
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10.3+ |
8-K |
10.1 |
7/26/2023 |
001-39735 |
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10.4^ |
The Beachbody Company, Inc. Deferred Compensation Plan for Directors |
10-K |
10.10 |
3/16/2023 |
001-39735 |
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10.5^ |
8-K |
10.1 |
6/15/2023
|
001-39735 |
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10.6^ |
The Beachbody Company, Inc. 2023 Employment Inducement Incentive Award Plan. |
8-K |
10.2 |
6/15/2023 |
001-39735 |
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10.7^ |
8-K |
10.3 |
6/15/2023 |
001-39735 |
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10.8^ |
8-K |
10.4 |
6/15/2023 |
001-39735 |
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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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43
* Filed herewith
** Furnished herewith.
+ Schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company will furnish copies of any such schedules and exhibits to the SEC upon request.
^ Indicates management contract or compensatory plan.
44
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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The Beachbody Company, Inc. |
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Date: August 8, 2023 |
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By: |
/s/ Carl Daikeler |
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Carl Daikeler |
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Chief Executive Officer |
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(Principal Executive Officer) |
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Date: August 8, 2023 |
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By: |
/s/ Marc Suidan |
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Marc Suidan |
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Chief Financial Officer |
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(Principal Financial Officer) |
45
Exhibit 4.1
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT AS SET FORTH IN SECTIONS 5.4 AND 5.5 BELOW, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND LAWS OR, IN THE OPINION OF LEGAL COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER, SUCH OFFER, SALE, PLEDGE OR OTHER TRANSFER IS EXEMPT FROM SUCH REGISTRATION.
AMENDED AND RESTATED WARRANT TO PURCHASE STOCK
Company: The Beachbody Company, Inc., a Delaware corporation
Number of Shares: [ ], subject to adjustment as provided herein
Class: Class A Common Stock, $0.0001 par value per share
Warrant Price: $0.41 per Share, subject to adjustment as provided herein
Original Issue Date: August 8, 2022
Amended and Restated Date: July 24, 2023
Expiration Date: August 8, 2029 See also Section 5.1(c).
THIS AMENDED AND RESTATED WARRANT TO PURCHASE STOCK (“WARRANT”) CERTIFIES THAT, for good and valuable consideration, [ ] (together with any successor or permitted assignee or transferee of this Warrant or of any shares issued upon exercise hereof, “Holder”) is entitled to purchase up to the number set forth above, of fully paid and non-assessable shares (subject to adjustment as provided herein, the “Shares”) of Class A Common Stock (“Class A Common Stock”) of The Beachbody Company, Inc., a Delaware corporation (the “Company”) at a purchase price per share of $0.41 (“Warrant Price”), all as set forth above and as adjusted pursuant to Section 2 of this Warrant, subject to the provisions and upon the terms and conditions set forth in this Warrant. This Warrant amends and restates in its entirety that certain Warrant to Purchase Stock, dated as of the Original Issue Date (the “Original Warrant”) and is effective as of the Original Issue Date. Upon the effectiveness of this Warrant, the Original Warrant shall be of no further force or effect.
X = Y(A-B)/A
where:
X = the number of Vested Shares to be issued to the Holder;
Y = the number of Vested Shares with respect to which this Warrant is being exercised (inclusive of the Vested Shares surrendered to the Company in payment of the aggregate Warrant Price);
A = the Fair Market Value (as determined pursuant to Section 1.3 below) of one Share; and
B = the Warrant Price.
2
3
X=A-B×CA
where:
X = the number of shares of Class A Common Stock issuable upon exercise pursuant to this Section 1.6(b).
A = the amount of Sale Consideration payable per share of Class A Common Stock of the Acquisition, (i) with such amount expressed in U.S. dollars and, if applicable, rounded to the nearest whole cent, and (ii) with any non-cash portion of such Sale Consideration valued at the value attributed thereto in the Acquisition.
B = the lesser of (i) the Warrant Price and (ii) the Black-Scholes Adjusted Warrant Price.
C = the number of shares of Class A Common Stock as to which this Warrant is exercisable after giving effect to Section 5.1(a)(2) (prior to payment of the Warrant Price).
In connection with such Cashless Exercise, Holder shall be deemed to have restated each of the representations and warranties in Section 4 of the Warrant as of the date thereof and the Company shall promptly notify the Holder of the number of Shares (or such other securities) issued upon exercise. In the event of a Cash/Public Acquisition where the fair market value of one Share as determined in accordance with the Section 1.3 above would be less than the Warrant Price in effect immediately prior to such Cash/Public Acquisition, then this Warrant will expire immediately prior to the consummation of such Cash/Public Acquisition.
4
5
6
7
8
9
10
The Holder represents and warrants to the Company as follows:
11
12
THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT AS SET FORTH IN THAT CERTAIN AMENDED AND RESTATED WARRANT TO PURCHASE STOCK ISSUED BY THE ISSUER TO [ ] DATED JULY 24, 2023, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND LAWS OR, IN THE OPINION OF LEGAL COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER, SUCH OFFER, SALE, PLEDGE OR OTHER TRANSFER IS EXEMPT FROM SUCH REGISTRATION.
13
14
15
[ ]
150 East 58th Street, 18th Floor
New York, NY 10155
Attention: Sibyl Kavak
Email: skavak@bluetorchcapital.com
with a copy to:
Milbank LLP
2029 Century Park East, Suite 3300
Los Angeles, CA 90067
Attention: Jason Anderson; Al Pisa
Email: jtanderson@milbank.com; apisa@milbank.com
Notice to the Company shall be addressed as follows until Holder receives notice of a change in address:
The Beachbody Company, Inc.
400 Continental Boulevard, Suite 400
El Segundo, CA 90245
Attention: Marc Suidan, Chief Financial Officer
Email: msuidan@beachbody.com
with a copy to:
Latham & Watkins LLP
10250 Constellation Blvd., Suite 1100
Los Angeles, CA 90067
Attention: Steven B. Stokdyk
Email: steven.stokdyk@lw.com
16
[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY]
IN WITNESS WHEREOF, the parties have caused this Amended and Restated Warrant to Purchase Stock to be executed by their duly authorized representatives effective as of the Amended and Restated Date written above.
THE BEACHBODY COMPANY, INC.
17
By:
Name:
Title:
Agreed and Accepted:
[●]
By:
Name:
Title:
APPENDIX 1
NOTICE OF EXERCISE
[ ] Check in the amount of $___________ payable to order of the Company enclosed herewith
[ ] Wire transfer of immediately available funds to the Company’s account
[ ] Cashless exercise pursuant to Section 1.2 of the Warrant
[ ] Other [Describe] __________________________________________
Holder’s Name
(Address)
18
HOLDER:
[_________________________]
By:
Name:
Title:
Date:
19
Exhibit 10.2
Exhibit 10.2
AMENDMENT NO. 1 TO FINANCING AGREEMENT
This AMENDMENT NO. 1 TO FINANCING AGREEMENT (this “Agreement”) dated as of October 4, 2022 (the “First Amendment Effective Date”), is made by and among BEACHBODY, LLC, a Delaware limited liability company (the “Borrower”), THE BEACHBODY COMPANY, INC., a Delaware corporation (the “Parent”), each subsidiary of the Parent listed as a “Guarantor” on the signature pages hereto (together with the Parent, each a “Guarantor” and collectively, the “Guarantors”), the lenders party hereto (each a “Lender” and collectively, the “Lenders”), BLUE TORCH FINANCE, LLC, a Delaware limited liability company (“Blue Torch”), as collateral agent for the Lenders (in such capacity, together with its permitted successors and assigns in such capacity, the “Collateral Agent”) and Blue Torch, as administrative agent for the Lenders (in such capacity, together with its permitted successors and assigns in such capacity, the “Administrative Agent” and together with the Collateral Agent, each an “Agent” and collectively, the “Agents”).
WHEREAS, the Borrower, the Parent, the other Guarantors and the Lenders party thereto from time to time, the Administrative Agent and the Collateral Agent are party to that certain Financing Agreement, dated as of August 8, 2022 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Financing Agreement”).
NOW THEREFORE, in consideration of the premises and covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:
Section 1. Definitions. Except as otherwise defined in this Agreement, terms defined in the Financing Agreement, after giving effect to this Agreement, are used herein as defined therein. This Agreement shall constitute a Loan Document for all purposes of the Financing Agreement and the other Loan Documents.
Section 2. Amendments. Subject to the satisfaction of the conditions precedent specified in Section 4 below, effective as of the First Amendment Effective Date:
(a) The definition of “Excluded Account” set forth in Section 1.01 of the Financing Agreement is hereby amended and restated in its entirety as follows:
““Excluded Account” means (A) any deposit account or any other accounts which (i) are used for the sole purpose of making payroll, payroll and withholding Tax payments related thereto (the employee portion thereof) and other employee wage and benefit payments and accrued and unpaid employee compensation (including salaries, wages, bonuses, benefits and expense reimbursements), (ii) are used for the sole purpose of paying Taxes, including payroll, withholding and sales or similar Taxes and Tax Distributions, (iii) are zero balance deposit accounts, (iv) constitute custodian, trust, fiduciary or other escrow accounts or collateral accounts established for the benefit of third parties in the ordinary course of business in connection with transactions permitted hereunder, or (v) are accounts that contain amounts which do not exceed a balance of $10,000 per such account or $50,000 for all such accounts in the aggregate or (B) (i) that certain deposit account identified as number 55519203 established and maintained at Bank of America, N.A. for Team Beachbody Canada, LP and (ii) that certain deposit account identified as number 56969209 established and maintained at Bank of America, N.A. for Myx Fitness, LLC, solely for so long as the average balance on deposit therein over any four-week period shall not exceed the Dollar equivalent of $4,000,000 in the aggregate, which average balance shall be measured on and as of the date of delivery of each weekly Liquidity report delivered (or required to be delivered) pursuant to Section 7.01(a)(v)
(beginning with the first such report immediately following the First Amendment Effective Date) on a trailing four week basis (by calculating the average of the balance on deposit in such accounts on the date of such weekly Liquidity report and on the date of each of the three most recent weekly Liquidity reports delivered (or required to be delivered) pursuant to Section 7.01(a)(v) prior to such date), in each case, as evidenced by such report.”
(b) The definition of “Qualified Cash” set forth in Section 1.01 of the Financing Agreement is hereby amended and restated in its entirety as follows:
““Qualified Cash” means, as of any date of determination, the aggregate amount of unrestricted cash on-hand of the Loan Parties maintained in deposit accounts in the name of a Loan Party in the United States or Canada as of such date, which deposit accounts are subject to Control Agreements; provided, that prior to the date that is 60 days after the Effective Date (or such later date as agreed to by the Collateral Agent in its sole discretion) so long as the Loan Parties are using commercially reasonable efforts to put in place such Control Agreements, such unrestricted cash shall not be subject to the requirement to be subject to a Control Agreement prior to such date.”
(c) Section 1.01 of the Financing Agreement is hereby amended by adding the following definitions in proper alphabetical order:
““First Amendment” means that certain Amendment No. 1, dated as of October 4, 2022, by and among the Borrower, the Parent, each other Loan Party party thereto, the Administrative Agent and the Lenders party thereto.”
““First Amendment Effective Date” means the First Amendment Effective Date, as such term is defined in the First Amendment.”
(d) Section 8.01(b) of the Financing Agreement is hereby amended by deleting the text “45 days” in each instance it appears therein and replacing it with the text “60 days”.
Section 3. Representations and Warranties. Each Loan Party represents and warrants to each Agent and the Lenders that, as of the date of this Agreement, after giving effect to the terms of this Agreement:
(a) the representations and warranties contained in Article VI of the Financing Agreement and in each other Loan Document, certificate or other writing delivered to any Secured Party pursuant thereto on or prior to the First Amendment Effective Date are true and correct in all material respects (except for representations and warranties that are already qualified by materiality, which representations and warranties are true and correct in all respects) on and as of the First Amendment Effective Date as though made on and as of such date, except to the extent that any such representation or warranty expressly relates solely to an earlier date (in which case such representation or warranty is true and correct in all material respects (except for representations and warranties that are already qualified by materiality, which representations and warranties are true and correct in all respects) on and as of such earlier date); and
(b) no Default or Event of Default has occurred and is continuing on the First Amendment Effective Date or would result from this Agreement becoming effective in accordance with its terms.
Section 4. Conditions Precedent. The amendments set forth in Section 2 hereof shall become effective upon satisfaction of the following conditions:
2
IF "" = "1" "Error! Unknown document property name." ""
IF "Error! No document variable supplied." = "1" "Error! Unknown document property name." ""
(a) Execution. The Agents (or their counsel) shall have received from the Borrower, the Parent and each Lender party to the Financing Agreement constituting Required Lenders either (i) a counterpart of this Agreement signed on behalf of such party or (ii) written evidence satisfactory to the Agents (which may include telecopy or electronic transmission (e.g., “pdf”) of a signed signature page of this Agreement) that such party has signed a counterpart of this Agreement; and
(b) First Amendment Effective Date Certificate. The Parent and the Borrower shall have delivered to the Administrative Agent a certificate signed by an Authorized Officer of the Borrower certifying as to the matters specified in Sections 3(a) and (b).
Section 5. No Novation or Mutual Departure. The Borrower expressly acknowledges and agrees that there has not been, and this Agreement does not constitute or establish, a novation with respect to the Financing Agreement or any other Loan Document, or a mutual departure from the strict terms, provisions, and conditions thereof, other than as specified herein. Except as otherwise expressed herein, the execution, delivery and effectiveness of this Agreement shall not operate as a waiver of any right, power or remedy of Administrative Agent, the Collateral Agent and the Lenders under the Financing Agreement or any of the other Loan Documents, nor constitute a waiver of any provision of the Financing Agreement or any of the other Loan Documents. Except as set forth herein, the Financing Agreement and all other Loan Documents shall remain unchanged and in full force and effect and each of the Parent and the Borrower hereby ratifies and confirms its obligations thereunder as of the date hereof. This Agreement shall not constitute a course of dealing between the Loan Parties, on the one hand, and the Administrative Agent, the Collateral Agent and the Lenders, on the other hand, at variance with the Financing Agreement or any other Loan Document such as to require further notice by the Administrative Agent, the Collateral Agent and the Lenders to any Loan Party to require strict compliance with the terms of the Financing Agreement and the other Loan Documents in the future, except as expressly set forth herein.
Section 6. Confirmation. Each Loan Party (a) confirms its obligations under the Loan Documents as of the date hereof, (b) confirms that its obligations under the Financing Agreement as modified and expanded hereby are entitled to the benefits of the pledges set forth in the Loan Documents, (c) confirms that its obligations under the Financing Agreement as modified and expanded hereby constitute Obligations and (d) agrees that the Financing Agreement as modified hereby is the Financing Agreement under and for all purposes of the Loan Documents. Each party, by its execution of this Agreement, hereby confirms that the Obligations shall remain in full force and effect as of the date hereof, and such Obligations shall continue to be entitled to the benefits of the grant set forth in the Collateral Documents. Each Guarantor (a) confirms its guarantee obligations under the Financing Agreement as of the date hereof, (b) confirms that its obligations under the Financing Agreement as modified and expanded hereby are entitled to the benefits of the guarantee set forth in the Guaranty, and (c) confirms that its obligations under the Financing Agreement as modified and expanded hereby constitute “Obligations”. Each Loan Party, by its execution of this Agreement, hereby confirms that the Guaranteed Obligations shall remain in full force and effect as of the date hereof.
Section 7. Miscellaneous.
(a) This Agreement shall be limited as written and nothing herein shall be deemed to constitute an amendment or waiver of any other term, provision or condition of any of the Loan Documents in any other instance than as expressly set forth herein or prejudice any right or remedy that any Lender or any Agent may now have or may in the future have under any of the Loan Documents. Except as herein provided, the Financing Agreement shall remain unchanged and in full force and effect. This Agreement, the Financing Agreement, the Security Agreement and the other Loan Documents constitute the entire agreement among the parties with respect to the subject matter hereof and thereof and supersede all other prior agreements and understandings, both written and verbal, among the parties or any of them with respect to the subject matter hereof.
3
IF "" = "1" "Error! Unknown document property name." ""
IF "Error! No document variable supplied." = "1" "Error! Unknown document property name." ""
This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same amendatory instrument and any of the parties hereto may execute this Agreement by signing any such counterpart. Delivery of a counterpart by electronic transmission shall be effective as delivery of a manually executed counterpart hereof. The provisions of Section 12.08 of the Financing Agreement are hereby incorporated herein, mutatis mutandis.
(b) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN THE STATE OF NEW YORK.
(c) Each of the undersigned Lenders, by its execution hereof, authorizes and directs the Administrative Agent and the Collateral Agent to execute and deliver this Agreement upon the satisfaction of the conditions precedent described above (which shall be conclusively evidenced by such Lender’s execution hereof).
[Signature pages follow]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the day and year first above written.
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BORROWER: |
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BEACHBODY, LLC
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By: |
/s/ Carl Daikeler |
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Name: Carl Daikeler |
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Title: Chief Executive Officer |
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PARENT: |
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THE BEACHBODY COMPANY, INC.
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By: |
/s/ Carl Daikeler |
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Name: Carl Daikeler |
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Title: Chief Executive Officer |
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GUARANTORS: |
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MYX FITNESS, LLC OPENFIT, LLC LADDER, LLC TEAM BEACHBODY CANADA, LLC.
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By: |
/s/ Carl Daikeler |
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Name: Carl Daikeler |
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Title: Chief Executive Officer |
4
IF "" = "1" "Error! Unknown document property name." ""
IF "Error! No document variable supplied." = "1" "Error! Unknown document property name." ""
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TEAM BEACHBODY CANADA LTD. |
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By: |
/s/ Carl Daikeler |
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Name: Carl Daikeler |
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Title: Chief Executive Officer |
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OPENFIT CANADA, INC. |
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By: |
/s/ Carl Daikeler |
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Name: Carl Daikeler |
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Title: Chief Executive Officer |
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TEAM BEACHBODY CANADA LIMITED PARTNERSHIP |
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by its general partner, TEAM BEACHBODY CANADA LTD. |
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By: |
/s/ Carl Daikeler |
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Name: Carl Daikeler |
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Title: Chief Executive Officer |
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5
IF "" = "1" "Error! Unknown document property name." ""
IF "Error! No document variable supplied." = "1" "Error! Unknown document property name." ""
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COLLATERAL AGENT AND ADMINISTRATIVE AGENT: |
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BLUE TORCH FINANCE, LLC
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By: |
/s/ Kevin Genda |
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Name: Kevin Genda |
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Title: CEO |
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LENDERS: |
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BTC HOLDINGS FUND II LLC
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By: |
Blue Torch Credit Opportunities Fund II LP, its sole member |
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By: |
Blue Torch Credit Opportunities GP II LLC, its general partner |
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By: |
KPG BTC Management LLC, its sole member
/s/ Kevin Genda |
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Name: Kevin Genda |
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Title: CEO |
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BTC HOLDINGS SBAF FUND LLC |
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By: |
Blue Torch Credit Opportunities SBAF Fund LP, its sole member |
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By: |
Blue Torch Credit Opportunities SBAF GP LLC, its general partner |
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By: |
KPG BTC Management LLC, its sole member
/s/ Kevin Genda |
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Name: Kevin Genda |
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Title: CEO |
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BTC HOLDINGS KRS FUND LLC |
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By: |
Blue Torch Credit Opportunities KRS Fund LP, its sole member |
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By: |
Blue Torch Credit Opportunities KRS GP LLC, its general partner |
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By: |
KPG BTC Management LLC, its sole member
/s/ Kevin Genda |
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Name: Kevin Genda |
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Title: CEO |
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6
IF "" = "1" "Error! Unknown document property name." ""
IF "Error! No document variable supplied." = "1" "Error! Unknown document property name." ""
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BLUE TORCH CREDIT OPPORTUNITIES FUND II LP |
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By: |
Blue Torch Credit Opportunities GP II LLC, its general partner |
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By: |
KPG BTC Management LLC, its sole member
/s/ Kevin Genda |
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Name: Kevin Genda |
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Title: CEO |
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BLUE TORCH CREDIT OPPORTUNITIES FUND III LP |
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By: |
Blue Torch Credit Opportunities GP III LLC, its general partner |
|
By: |
KPG BTC Management LLC, its sole member
/s/ Kevin Genda |
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Name: Kevin Genda |
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Title: CEO |
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7
IF "" = "1" "Error! Unknown document property name." ""
IF "Error! No document variable supplied." = "1" "Error! Unknown document property name." ""
Exhibit 31.1
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Carl Daikeler, certify that:
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Date: August 8, 2023 |
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By: |
/s/ Carl Daikeler |
|
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Carl Daikeler |
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Chief Executive Officer (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Marc Suidan, certify that:
|
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Date: August 8, 2023 |
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By: |
/s/ Marc Suidan |
|
|
|
Marc Suidan |
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Chief Financial Officer (Principal Financial Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of The Beachbody Company, Inc. (the “Company”) on Form 10-Q for the period ending June 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
|
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|
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Date: August 8, 2023 |
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By: |
/s/ Carl Daikeler |
|
|
|
Carl Daikeler |
|
|
|
Chief Executive Officer (Principal Executive Officer) |
In connection with the Quarterly Report of The Beachbody Company, Inc. (the “Company”) on Form 10-Q for the period ending June 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
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|
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Date: August 8, 2023 |
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By: |
/s/ Marc Suidan |
|
|
|
Marc Suidan |
|
|
|
Chief Financial Officer (Principal Financial Officer) |