UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2021June 30, 2023
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 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
Commission File No. 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 | ||
Class A Common Stock, par value $0.0001 per share | BODY | The New York Stock Exchange | ||
Redeemable | 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 |
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 Exchange Act):. Yes ☒☐ No ☐☒
As of May 17, 2021, thereThere were 30,000,000176,234,868 shares of the registrant’s Class A common stock,Common Stock, par value $0.0001 per share, and 7,500,000136,450,256 shares of the registrant’s Class B common stock,X Common Stock, par value $0.0001 per share, outstanding as of the registrant issued and outstanding.August 2, 2023.
FOREST ROAD ACQUISITION CORP.
Table of Contents
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2021
TABLE OF CONTENTS
i
PART I—FINANCIAL INFORMATION
Item 1.Financial StatementsStatements.
The Beachbody Company, Inc.
FOREST ROAD ACQUISITION CORP.CONDENSED BALANCE SHEETSCondensed Consolidated Balance Sheets
March 31, 2021 (Unaudited) | December 31, 2020 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash | $ | 730,435 | $ | 1,183,830 | ||||
Prepaid expenses | 254,931 | 294,383 | ||||||
Total current assets | 985,366 | 1,478,213 | ||||||
Marketable Securities Held in Trust account | 300,004,432 | 300,000,000 | ||||||
Total assets | $ | 300,989,798 | $ | 301,478,213 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Current liabilities: | ||||||||
Accounts payable and accrued expenses | $ | 2,675,348 | $ | 409,896 | ||||
Due to related party | 20,600 | — | ||||||
Franchise tax payable | — | 54,149 | ||||||
Total current liabilities | 2,695,948 | 464,045 | ||||||
Warrant Liabilities | 45,605,664 | 31,735,421 | ||||||
Deferred underwriters’ discount payable | 10,500,000 | 10,500,000 | ||||||
Total liabilities | 58,801,612 | 42,699,466 | ||||||
Commitments | ||||||||
Class A common stock subject to possible redemption, 23,718,818 and 25,377,874 shares at redemption value at March 31, 2021 and December 31, 2020, respectively | 237,188,180 | 253,778,740 | ||||||
Stockholders’ equity: | ||||||||
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued or outstanding | — | — | ||||||
Class A common stock, $0.0001 par value; 300,000,000 shares authorized; 6,281,182 shares and 4,622,126 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively (excluding 23,718,818 and 25,377,874 shares subject to possible redemption, respectively) | 628 | 462 | ||||||
Class B common stock, $0.0001 par value; 20,000,000 shares authorized; 7,500,000 shares issued and outstanding at March 31, 2021 and December 31, 2020 | 750 | 750 | ||||||
Additional paid-in capital | 29,506,028 | 12,915,634 | ||||||
Accumulated deficit | (24,507,400 | ) | (7,916,839 | ) | ||||
Total stockholders’ equity | 5,000,006 | 5,000,007 | ||||||
Total liabilities and stockholders’ equity | $ | 300,989,798 | $ | 301,478,213 |
(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.
CONDENSED STATEMENT OF OPERATIONS3
FOR THE THREE MONTHS ENDED MARCH 31, 2021The Beachbody Company, Inc.
(Unaudited)Unaudited Condensed Consolidated Statements of Operations
Operating costs | $ | 2,724,770 | ||
Loss from operations | (2,724,770 | ) | ||
Other Income (Expense) | ||||
Interest income | 20 | |||
Change in fair value of warrant liabilities | (13,870,243 | ) | ||
Interest income on marketable securities held in Trust account | 4,432 | |||
Total other income (expense) | (13,865,791 | ) | ||
Net loss | $ | (16,590,561 | ) | |
Weighted average shares outstanding - Class A common stock | 30,000,000 | |||
Basic and diluted net income per share of common stock – Class A common stock | $ | 0.00 | ||
Weighted average shares outstanding - Class B common stock | 7,500,000 | |||
Basic and diluted net income per share of common stock – Class B common stock | $ | (2.21 | ) |
(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.
CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY4
FOR THE THREE MONTHS ENDED MARCH 31, 2021The Beachbody Company, Inc.
(Unaudited)Unaudited Condensed Consolidated Statements of Comprehensive Loss
(in thousands)
Common Stock | Additional | Total | ||||||||||||||||||||||||||
Class A | Class B | Paid-In | Accumulated | Stockholders’ | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||
Balance as of December 31, 2020 | 4,622,126 | $ | 462 | 7,500,000 | $ | 750 | $ | 12,915,634 | $ | (7,916,839 | ) | $ | 5,000,007 | |||||||||||||||
Change in Class A common stock subject to possible redemption | 1,659,056 | 166 | — | — | 16,590,394 | — | 16,590,560 | |||||||||||||||||||||
Net loss | — | — | — | — | — | (16,590,561 | ) | (16,590,561 | ) | |||||||||||||||||||
Balance as of March 31, 2021 | 6,281,182 | $ | 628 | 7,500,000 | $ | 750 | $ | 29,506,028 | $ | (24,507,400 | ) | $ | 5,000,006 |
|
| 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.
CONDENSED STATEMENT OF CASH FLOWS5
FOR THE THREE MONTHS ENDED MARCH 31, 2021The Beachbody Company, Inc.
(Unaudited)Unaudited Condensed Consolidated Statements of Stockholders’ Equity
Cash Flows from Operating Activities: | ||||
Net loss | $ | (16,509,561 | ) | |
Adjustments to reconcile net loss to net cash used in operating activities: | ||||
Change in fair value of warrant liabilities | 13,870,243 | |||
Interest income on trust account | (4,432 | ) | ||
Changes in current assets and current liabilities: | ||||
Prepaid assets | 39,452 | |||
Accounts payable and accrued expenses | 2,265,452 | |||
Due to related party | 20,600 | |||
Franchise tax payable | (54,149 | ) | ||
Net cash used in operating activities | (453,395 | ) | ||
Net Change in Cash | (453,395 | ) | ||
Cash - Beginning | 1,183,830 | |||
Cash - Ending | $ | 730,435 | ||
Supplemental Disclosure of Non-cash Financing Activities: | ||||
Change in value of Class A common stock subject to possible redemption | $ | (16,590,560 | ) |
(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
4
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note 1 — Organization and Business Operations
Organization and General
Forest Road Acquisition Corp. (the “Company” or “Forest Road”) was incorporated in Delaware on September 24, 2020. The Company was formed for the purpose of entering into a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”). The Company is not limited to a specific industry or sector for purposes of consummating a Business Combination; however, the Company intends to concentrate its efforts on identifying businesses in the technology, media and telecommunications industry. The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
On February 9, 2021, Forest Road entered into an Agreement and Plan of Merger (the “Merger Agreement”) with BB Merger Sub, LLC, a Delaware limited liability company and direct, wholly-owned subsidiary of Forest Road, MFH Merger Sub, LLC, a Delaware limited liability company and direct, wholly-owned subsidiary of Forest Road, The Beachbody Company, Group, LLC,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 Delaware limited liabilityleading subscription health and wellness company and Myx Fitness Holdings, LLC, a Delaware limited liability company.
On February 9, 2021, Forest Road and certain investors entered into subscription agreements (the “Subscription Agreements”) pursuant to which such investors have agreed to purchase in connection with the Closing an aggregatecreator of 22.5 million shares of Class A common stock for a purchase price of $10.00 per share, for an aggregate purchase price of $225 million (the “PIPE Investment”). The obligations of each party to consummate the PIPE Investment are conditioned upon, among other things, customary closing conditions and the consummationsome of the transactions contemplated by the Merger Agreement.
As of March 31, 2021 and December 31, 2020, the Company had not yet commenced any operations. All activity through March 31, 2021, relates to the Company’s formation and the initial public offering (“IPO”) described below. The Company will not generate any operating revenues until after the completion of its initial business combination, at the earliest. The Company will generate non-operating income in the form of interest income on cash and cash equivalents from the proceeds derived from the IPO.
world’s most popular fitness programs. The Company’s sponsor is Forest Road Acquisition Sponsor LLC, a Delaware limited liability company (the “Sponsor”). The registration statementfitness programs are available for the Company’s IPO was declared effective by the U.S. Securitiesstreaming through subscription to Beachbody On Demand (“BOD”) and, Exchange Commission (the “SEC”) on November 24, 2020 (the “Effective Date”). On November 30, 2020, the Company consummated the IPO of 30,000,000 units (the “Units” and, with respect to the shares of Class A common stock included in the Units sold, the “Public Shares”), including the issuance of 3,900,000 Units as a result of the underwriters’ partial exercise of their over-allotment option. Each Unit consists of one share of Class A common stock, $0.0001 par value, and one-third of one redeemable warrant entitling its holder to purchase one share of Class A common stock at a price of $11.50 per share. The Units were sold at an offering price of $10.00 per Unit, generating gross proceeds of $300,000,000 (Note 3).
Simultaneously with the closing of the IPO, the Company consummated the private placement (“Private Placement”) with the Sponsor of an aggregate of 5,333,333 warrants (“Private Placement Warrants”) to purchase Class A common stock, each at a price of $1.50 per Private Placement Warrant, generating total proceeds of $8,000,000 (Note 4).
Transaction costs amounted to $16,979,438, consisting of $6,000,000 of underwriting discount, $10,500,000 of deferred underwriters’ fee and $479,438 of other offering costs.
Trust Account
Following the closing of the IPO on November 30, 2020, an amount of $300,000,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in the IPO and the sale of the Private Placement Warrants was placed in a trust account (“Trust Account”) which was invested in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act, which invest only in direct U.S. government treasury obligations, until the earlier of (a) the completion of the Company’s initial Business Combination, (b) the redemption of any public shares properly submitted in connection with a stockholder vote to amend the Company’s certificate of incorporation, or (c) the redemption of the Company’s public shares if the Company is unable to complete the initial Business Combination within 24 months from the closing of the IPO, or November 30, 2022 (the “Combination Period”).
5
FOREST ROAD ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Initial Business Combination
The Company’s management has broad discretion with respect to the specific application of the net proceeds of the IPO and the sale of the Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. There is no assurance that the Company will be able to complete a Business Combination successfully. The Company must complete a Business Combination with one or more operating businesses or assets that together have an aggregate fair market value equal to at least 80% of the net assets held in the Trust Account (net of amounts disbursed to management for working capital purposes, if permitted, and excluding the amount of any deferred underwriting commissions) at the time of the Company’s signing a definitive agreement in connection with its initial Business Combination. However, the Company will only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires an interest in the target business or assets sufficient for it not to be required to register as an investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”).
The Company will provide its holders of the outstanding Public Shares (the “public stockholders”) with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a Business Combination or conduct a tender offer will be made by the Company. The public stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially anticipated to be $10.00 per Public Share, plus any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations). There will be no redemption rights upon the completion of a Business Combination with respect to the Company’s warrants.
The Company will only proceed with a Business Combination if the Company has net tangible assets of at least $5,000,001 either prior to or upon such consummation of a Business Combination and, if the Company seeks stockholder approval, a majority of the shares voted are voted in favor of the Business Combination. If a stockholder vote is not required by applicable law or stock exchange rules and the Company does not decide to hold a stockholder vote for business or other reasons, the Company will, pursuant to its Amended and Restated Certificate of Incorporation (the “Amended and Restated Certificate of Incorporation”), conduct the redemptions pursuant to the tender offer rules of the SEC and file tender offer documents with the SEC prior to completing a Business Combination.
If, however, stockholder approval of the transaction is required by applicable law or stock exchange rules, or the Company decides to obtain stockholder approval for business or other reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. If the Company seeks stockholder approval in connection with a Business Combination, the Sponsor has agreed to vote its Founder Shares (as defined in Note 5), and any Public Shares purchased during or after the IPO in favor of approving a Business Combination. Additionally, each public stockholder may elect to redeem their Public Shares irrespective of whether they vote for or against the proposed transaction or do not vote at all.
6
FOREST ROAD ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Notwithstanding the above, if the Company seeks stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the Amended and Restated Certificate of Incorporation provides that a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of 15% or more of the Public Shares, without the prior consent of the Company. The Sponsor has agreed (a) to waive its redemption rights with respect to its Founder Shares and Public Shares held by it in connection with the completion of a Business Combination and (b) not to propose an amendment to the Amended and Restated Certificate of Incorporation (i) to modify the substance or timing of the Company’s obligation to allow redemption in connection with the Company’s initial Business Combination orlive fitness and comprehensive nutrition programs, through subscription to redeem 100% of its Public Shares ifBeachbody On Demand Interactive (“BODi”). During the three months ended March 31, 2023, the Company does not completelaunched 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 Business Combination or (ii)professional-grade stationary cycle with respect to any other provision relating to stockholders’ rights (including redemption rights) or pre-initial business combination activity, unless the Company provides the public stockholders with the opportunity to redeem their Public Shares in conjunction with any such amendment.
There will be no redemption rights or liquidating distributions with respect to the Company’s warrants, which will expire worthless if the Company fails to complete a Business Combination within the Combination Period. The Sponsor has agreed to waive its liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination within the Combination Period. However, if the Sponsor acquires Public Shares in or after the IPO, such Public Shares will be entitled to liquidating distributions from the Trust Account if the Company fails to complete a Business Combination within the Combination Period.
In order to protect the amounts held in the Trust Account, the Sponsor has agreed to be liable to the Company if360-degree touch screen tablet and to the extent any claims by a third party for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below the lesser of (1) $10.00 per Public Share and (2) the actual amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to claims by a third party or prospective target business who executed a waiver of any and all rights to the monies held in the Trust Account nor will it apply to any claims under the Company’s indemnity of the underwriters of the IPO against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third-party claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers (except the Company’s independent registered public accounting firm), prospective target businesses and other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
FOREST ROAD ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Liquidity
As of March 31, 2021, the Company had cash outside the Trust Account of $730,435 available for working capital needs. All remaining cash held in the Trust Account is generally unavailable for the Company’s use, prior to an initial Business Combination, and is restricted for use either in a Business Combination or to redeem common stock. As of March 31, 2021, none of the amount in the Trust Account was available to be withdrawn as described above.
Through March 31, 2021, the Company’s liquidity needs were satisfied through receipt of $25,000 from the sale of the founder shares, advances from the Sponsor in an aggregate amount of $141,881 and the remaining net proceeds from the IPO and the sale of Private Placement Warrants.
The Company anticipates that the $730,435 outside of the Trust Account as of March 31, 2021 will be sufficient to allow the Company to operate for at least the next 12 months from the issuance of the unaudited condensed financial statements, assuming that a Business Combination is not consummated during that time. Until consummation of its Business Combination, the Company will be using the funds not held in the Trust Account, and any additional Working Capital Loans (as defined in Note 5) from the initial stockholders, the Company’s officers and directors, or their respective affiliates (which is described in Note 5), for identifying and evaluating prospective acquisition candidates, performing business due diligence on prospective target businesses, traveling to and from the offices, plants or similar locations of prospective target businesses, reviewing corporate documents and material agreements of prospective target businesses, selecting the target business to acquire and structuring, negotiating and consummating the Business Combination.
The Company does not believe it will need to raise additional funds in order to meet the expenditures required for operating its business. However, if the Company’s estimates of the costs of undertaking in-depth due diligence and negotiating business combination is less than the actual amount necessary to do so, the Company may have insufficient funds available to operate its business prior to the business combination. Moreover, the Company will need to raise additional capital through loans from its Sponsor, officers, directors, or third parties. None of the Sponsor, officers or directors is under any obligation to advance funds to, or to invest in, the Company. If the Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of its business plan, and reducing overhead expenses. The Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all.
8
FOREST ROAD ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Risks and Uncertainties
On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus (the “COVID-19 outbreak”). In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally. The full impact of the COVID-19 outbreak continues to evolve. The impact of the COVID-19 outbreak on the Company’s financial position will depend on future developments, including the duration and spread of the outbreak and related advisories and restrictions. These developments and the impact of the COVID-19 outbreak on the financial markets and the overall economy are highly uncertain and cannot be predicted. If the financial markets and/or the overall economy are impacted for an extended period, the Company’s financial position may be materially adversely affected. Additionally, the Company’s ability to complete an initial Business Combination may be materially adversely affected due to significant governmental measures being implemented to contain the COVID-19 outbreak or treat its impact, including travel restrictions, the shutdown of businesses and quarantines, among others, which may limit the Company’s ability to have meetings with potential investors or affect the ability of a potential target company’s personnel, vendors and service providers to negotiate and consummate an initial Business Combination in a timely manner.connected fitness software. The Company’s abilityrevenue 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 consummate an initial business combination may also be dependent on the ability“Coaches” throughout this report have been updated to raise additional equity and debt financing, which may be impacted by the COVID-19 outbreak and the resulting market downturn.“Partners.”
Note 2 — Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The accompanying unaudited condensedCompany prepares its consolidated financial statements have been prepared in accordanceconformity with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance withas determined by the instructions to Form 10-QFinancial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) and Regulation S-X of the SEC. Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the informationU.S. Securities and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.Exchange Commission (“SEC”).
The accompanying unaudited condensed financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K, as amended, as of December 31, 2020 and for the period from September 24, 2020 (inception) through December 31, 2020 as filed with the SEC on May 3, 2021, which contains the audited financial statements and notes thereto. The interim results for the three months ended March 31, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021 or for any future interim periods.
Emerging Growth Company Status
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, (the “Securities Act”), as modified by the Jumpstart our Business Startups Act of 2012, (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
9
FOREST ROAD ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Use of Estimates
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 and disclosure of contingent assets and liabilities at the date of the unaudited condensed financial statements and the reported amounts of expenses during the reporting period.liabilities. Actual results could differ from those estimates.
CashThe unaudited condensed consolidated financial statements have been prepared on the same basis as the annual audited consolidated financial statements and, Cash Equivalents
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 Company considers all short-term investmentsfinancial 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 an original maturity of three months or less when purchased to be cash equivalents.
Marketable Securities Heldthe audited consolidated financial statements and the related notes included in Trust Account
At March 31, 2021 andthe Company’s Annual Report on Form 10-K for the year ended December 31, 2020,2022. 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 heldand 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 Trust Account were moneyCompany’s market funds. Duringcapitalization and macro-economic conditions observed in the three months ended MarchJune 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 withdraw any interest incomebeen 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 Trust Accountaverage 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 paythe 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 tax obligations.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):
Concentration
|
| 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 Credit Risksocial 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.
Financial instruments13
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 potentiallyare 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 concentrationsborrow 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 credit risk consistthe Company. Such security interest consists of a cash accountfirst-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 financial institution, which, at times, may exceed the Federal Depository Insurance Corporation limitreduction of $250,000. At March 31, 2021long-term debt as of June 30, 2023 and December 31, 2020,2022 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 hasand 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 experienced lossesbeing 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 this accountthe Second Amendment, including amendments to the debt covenants.
The Financing Agreement also contains customary representations, warranties, and management believescovenants, 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 exposedentitled to significant risk on such accounts.any voting powers.
Common Stock SubjectOn 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 Possible Redemption
The Company accounts for its Class A common stock subject to possible redemption in accordance withwhich Mr. Daikeler as of June 15, 2023 forfeited 8 million shares of the guidance in Accounting Standard Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Class A common stock subject to mandatory redemption (if any) are classified as a liability instrument and are measured at fair value. Conditionally redeemable common stock (includingCompany’s common stock that feature redemption rights that are either within the controlhe owned, comprised of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s common stock features certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, as of March 31, 2021 and December 31, 2020, 23,718,818 and 25,377,8743,199,946 shares of Class A common stock subjectand 4,800,054 shares of Class X Common stock, each with a par value of $0.0001. No consideration was provided to possible redemption are presented at redemption value as temporary equity, outsideMr. Daikeler for the forfeiture of these shares. The forfeiture of the stockholders’ equity sectionshares resulted in the reduction of the Company’s condensed balance sheet.
10
FOREST ROAD ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Net Income (Loss) per Common Stock
Net income (loss) per shareeach of common stock is computedand additional paid in capital by dividing net$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 the weighted average number of common stock outstanding for the period. The Company has not considered the effect of warrants sold in the IPO and private placement to purchase 15,333,333 of Class A common stock in the calculation of diluted income (loss) per share, since the exercise of the warrants are contingent upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive.
The Company complies with accounting and disclosure requirements ASC Topic 260, “Earnings Per Share.” The Company’s statements of operations include a presentation of income (loss) per share for common stock subject to possible redemption in a manner similar to the two-class method of income (loss) per share. Net income per share of common stock, basic and diluted for Class A redeemable common stock is calculated by dividing the interest income earned on the Trust Account (totaling $4,432 forcomponent during the three months ended March 31, 2021)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 weighted average number of Class 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 redeemable common stock outstanding since original issuance. Net loss per share of common stock, basic and diluted for Class B non-redeemable common stock is calculated by dividing the net income, adjusted for income attributable to Class A redeemable common stock, by the weighted average number of Class B non-redeemable common stock outstanding for the period. Class B non-redeemable common stock includes the Founder Shares as these shares do not have any redemption features and do not participate in the income earned on the Trust Account. The Company did not have any dilutive securities and other contracts that could, potentially, be exercised or converted into common stock and then share in the earningssummary of the Company. As a result, diluted loss per shareoption activity under the Company’s equity compensation plans is the same as basic loss per share for the period presented.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:
Warrant liabilities
|
| 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 Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and ASC 815-15. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is reassessed at the end of each reporting period.
The Company accounts for its 15,333,333 common stock warrants issued in connection with its IPO (10,000,000) and Private Placement (5,333,333) as derivative warrant liabilities in accordance with ASC 815-40. Accordingly, the Company recognizes the warrant instruments as liabilities at fair value and adjusts the instruments to fair value at each reporting period. The liabilities are subject to remeasurement at each balance sheet date until exercised, and any change in fair value is recognized in the Company’s statement of operations. The fair value of warrants issuedRSUs 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 IPO and Private Placement has been estimated using Monte Carlo simulations at each measurement date.
11
FOREST ROAD ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Fair Valueemployment offer letter to Mr. Goldston, he was granted a stock option under the Inducement Plan, covering an aggregate of Financial Instruments
The fair value23,883,265 shares of the Company’s assets and liabilities, which qualify as financial instruments under the Financial Accounting Standards Board (“FASB”) ASC 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the balance sheet.
Income Taxes
The Company follows the asset and liability method of accounting for income taxes under ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of March 31, 2021. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.
12
FOREST ROAD ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Recent Accounting Standards
Management does not believe that any recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on the Company’s unaudited condensed financial statements.
Note 3 — Initial Public Offering
On November 30, 2020, the Company sold 30,000,000 Units at a price of $10.00 per Unit, including the issuance of 3,900,000 Units as a result of the underwriters’ partial exercise of their over-allotment option. Each Unit consists of one share of Class A common stock, par value $0.0001$0.0001 per share and one-third of one redeemable warrant (each, a “Public Warrant”(the “Option”). Each whole Public Warrant entitlesOf this amount, 7,961,088 shares subject to the holderOption 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 one shareplan (the “ESPP”), the terms of Class Awhich 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 $11.50the 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, subject to adjustment (see Note 8).share.
Note 4 — Private Placement
SimultaneouslyStock-based compensation expense associated with the closingCompany’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 IPO,date of grant is estimated using a Black-Scholes option-pricing model. The following table summarizes the Sponsor purchased an aggregateweighted-average assumptions used to determine the fair value of 5,333,333 Private Placement Warrants, at a price of $1.50 per unit, for an aggregate purchase price of $8,000,000. A portiontime 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 proceedsPerformance-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 Private Placement Warrantsdate 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 added0.0% 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 net proceeds fromCompany’s uncertain tax positions, interest, or penalties during the IPO held in the Trust Account. Each Private Placement Warrant is exercisable to purchase onethree 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 stock at $11.50share is the same as dilutive net loss per share. A portioncommon share for each of the proceedsthree and six months ended June 30, 2023 and 2022as 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 Private Placement Warrantscomputation 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 added to the proceeds from the IPO to be heldrecorded in the Trust Account. Ifquarter 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 does not complete a Business Combination withinalso amended and restated the Combination Period,Term Loan Warrants for the proceeds from the salepurchase of the Private Placement Warrants held in the Trust Account will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law), and the Private Placement Warrants will expire worthless.
13
FOREST ROAD ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note 5 — Related Party Transactions
Founder Shares
On September 29, 2020, the Sponsor paid $25,000 to cover certain offering costs of the Company in consideration of 7,187,5004,716,756 shares of the Company’s Class B common stock (the “Founder Shares”).A Common Stock. The Founder Shares included an aggregate of up to 937,500 shares subject to forfeiture by the Sponsor to the extent that the underwriters’ over-allotment option was not exercised in full. On November 24, 2020, as part of an upsizingamendment of the IPO, the Sponsor was issued an additional 316,250 Founder Shares by the Company, resulting in a increase in the total number of shares of Class B common stock outstanding from 7,187,500 to 7,503,750 (of which 978,750 were subject to surrender for no consideration depending on the extent to which the underwriters exercised their over-allotment option). On November 30, 2020, the underwriters partially exercised their over-allotment option and forfeited the remaining over-allotment option, hence, 975,000 Founder Shares were no longer subject to forfeiture and 3,750 Founder Shares were forfeited, resulting in an aggregate of 7,500,000 Founder Shares outstanding at March 31, 2021 and December 31, 2020.
Promissory Note — Related Party
The Sponsor had agreed to loan the Company an aggregate of up to $300,000 to be used for the payment of costs related to the IPO. The promissory note was non-interest bearing, unsecured and was due on the earlier of June 30, 2021 and the closing of the IPO. The promissory note was paid in full out of the IPO proceeds on November 30, 2020, As of March 31, 2021 and December 31, 2020, there was no balance outstanding under the promissory note.
Administrative Service Fee
The Company has agreed, commencing on the effective date of the IPO through the earlier of the Company’s consummation of a Business Combination or its liquidation, to pay an affiliate of the Sponsor a monthly fee of $10,000 for office space, administrative and support services. Upon completion of the initial Business Combination or the Company’s liquidation, the Company will cease paying these monthly fees. For the three months ended March 31, 2020, the Company has paid $30,000 of administrative fees.
Related Party Loans
In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor may, but is not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company may repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans may be repaid only out of funds held outside the Trust Account. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans, but no proceeds held in the Trust Account would be used to repay the Working Capital Loans, other than the interest on such proceeds that may be released for working capital purposes. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $1,500,000 of such Working Capital Loans may be convertible into warrants of the post Business Combination entity at a price of $1.50 per warrant. The warrants would be identical to the Private Placement Warrants. As of March 31, 2021 and December 31, 2020, no Working Capital Loans were outstanding.
14
FOREST ROAD ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note 6 — Commitments & Contingencies
Registration Rights
The holders of the Founder Shares, Private PlacementTerm Loan Warrants and warrants that may be issued upon conversion of Working Capital Loans (and any shares of common stock issuable uponamends the exercise ofprice from $1.85 per share to $0.41 per share. The amended exercise price increased the Private Placement Warrants or warrants issued upon conversion of the Working Capital Loans and upon conversion of the Founder Shares) are entitled to registration rights pursuant to a registration rights agreement signed on the effective date of the IPO requiring the Company to register such securities for resale (in the case of the Founder Shares, only after conversion to shares of Class A common stock). The holders of these securities will be entitled to make up to three demands, excluding short-form registration demands, that the Company register such securities. In addition, the holders will have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of a Business Combination. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriters Agreement
On November 30, 2020, the underwriters were paid a cash underwriting fee of 2% of the gross proceeds of the IPO, totaling $6,000,000. In addition, $0.35 per unit, or approximately $10,500,000 in the aggregate, will be payable to the underwriters for deferred underwriting commissions. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.
Note 7 — Warrants
Public Warrants may only be exercised for a whole number of shares. No fractional warrants will be issued upon separation of the Units and only whole warrants will trade. The Public Warrants will become exercisable on the later of (a) 12 months from the closing of the IPO and (b) 30 days after the completion of a Business Combination. The Company will not be obligated to deliver any shares of Class A common stock pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act with respect to the Class A common stock underlying the warrants is then effective and a prospectus relating thereto is current, subject to the Company satisfying its obligations with respect to registration. No warrant will be exercisable and the Company will not be obligated to issue any shares of Class A common stock upon exercise of a warrant unless the share of Class A common stock issuable upon such warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants. The Company has agreed that as soon as practicable, but in no event later than 15 business days after the closing of a Business Combination, it will use its best efforts to file with the SEC a registration statement registering the registration, under the Securities Act, of the Class A common stock issuable upon exercise of the warrants. The Company will use its best efforts to cause the same to become effective and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration of the warrants in accordance with the provisions of the warrant agreement. If a registration statement covering the shares of Class A common stock issuable upon exercise of the warrants is not effective by the 60th business day after the closing of a Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company will have failed to maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption. Notwithstanding the above, if the Class A common stock is at the time of any exercise of a warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of public warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, the Company will not be required to file or maintain in effect a registration statement, but will use its best efforts to qualify the shares under applicable blue sky laws to the extent an exemption is not available.
15
FOREST ROAD ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Redemption of warrants for cash. Once the warrants become exercisable, the Company may call the warrants for redemption:
If and when the warrants become redeemable by the Company, it may exercise its redemption right even if the Company is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
If the Company has not completed the initial Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless.
Note 8 — Stockholder’s Equity
Preferred Stock — The Company is authorized to issue a total of 1,000,000 shares of preferred stock at par value of $0.0001 each. At March 31, 2021 and December 31, 2020, there were no shares of preferred stock issued or outstanding.
Class A Common Stock — The Company is authorized to issue a total of 300,000,000 shares of Class A common stock at par value of $0.0001 each. At March 31, 2021 and December 31, 2020, there were 6,281,182 and 4,622,126 shares issued and outstanding, respectively (excluding 23,718,818 and 25,377,874 shares, respectively on such dates, subject to possible redemption).
Class B Common Stock — The Company is authorized to issue a total of 20,000,000 shares of Class B common stock at par value of $0.0001 each. At March 31, 2021 and December 31, 2020, there were 7,500,000 shares of Class B common stock issued or outstanding.
Holders of Class A common stock and Class B common stock will vote together as a single class on all matters submitted to a vote of stockholders except as required by law. The shares of Class B common stock will automatically convert into shares of Class A common stock at the time of a Business Combination on a one-for-one basis, subject to adjustment. In the case that additional shares of Class A common stock or equity-linked securities are issued or deemed issued in connection with a Business Combination, the number of shares of Class A common stock issuable upon conversion of all Founder Shares will equal, in the aggregate, on an as-converted basis, 20% of the total number of shares of Class A common stock outstanding after such conversion (after giving effect to any redemptions of shares of Class A common stock by public stockholders), including the total number of shares of Class A common stock issued, or deemed issued or issuable upon conversion or exercise of any equity-linked securities or rights issued or deemed issued, by the Company in connection with or in relation to the consummation of a Business Combination, excluding any shares of Class A common stock or equity-linked securities or rights exercisable for or convertible into shares of Class A common stock issued, or to be issued, to any seller in a Business Combination and any Private Placement Warrants issued to the Sponsor, officers or directors upon conversion of Working Capital Loans, provided that such conversion of Founder Shares will never occur on a less than one-for-one basis.
FOREST ROAD ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note 9 — Fair Value Measurements
Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
At March 31, 2021, there were 10,000,000 Public Warrants and 5,333,333 Private Placement Warrants outstanding.
The following table presents information about the Company’s assets that are measured at fair value on a recurring basis at March 31, 2021 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
March 31, | Quoted Prices In Active Markets | Significant Other Observable Inputs | Significant Other Unobservable Inputs | |||||||||||||
2021 | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
Description | ||||||||||||||||
Warrant Liability – Public Warrants | $ | 26,900,000 | $ | 26,900,000 | $ | - | $ | - | ||||||||
Warrant Liability – Private Warrants | $ | 18,705,664 | $ | - | $ | - | $ | 18,705,664 | ||||||||
$ | 45,605,664 | $ | 26,900,000 | $ | - | $ | 18,705,664 |
17
FOREST ROAD ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The Company utilizes a Monte Carlo simulation model to value the warrants at each reporting period, with changes in fair value recognized in the statement of operations. The estimated fair value of the warrant liability is determined using Level 3 inputs. Inherent in a binomial options pricing model are assumptions related to expected share-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its shares of common stock based on historical volatility that matches the expected remaining lifeTerm Loan Warrants as of the warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similarSecond Amendment Effective Date from $0.8 million to the expected remaining life of the warrants. The expected life of the warrants is assumed to$1.6 million and will be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates to remain at zero. As of March 31, 2021, the public warrants were valued using the actual closing trading price on March 31, 2021.
The aforementioned warrant liabilities are not subject to qualified hedge accounting.
Transfers to/from Levels 1, 2 and 3 are recognized at the end of the reporting period. There were no transfers between levels for the three months ended March 31, 2021, other than the transfer of the Public Warrants from Level 3 to Level 1.
The following table provides quantitative information regarding Level 3 fair value measurements:
As of March 31, 2020 | As of December 31, 2020 | |||||||
Stock price | $ | 10.12 | $ | 10.50 | ||||
Strike price | $ | 11.50 | $ | 11.50 | ||||
Term (in years) | 5.0 | 5.0 | ||||||
Volatility | 43.3 | % | 31.3 | % | ||||
Risk-free rate | 0.92 | % | 0.44 | % | ||||
Dividend yield | 0.0 | % | 0.0 | % |
Note 10 — Subsequent Events
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the unaudited condensed financial statements were issued. Based upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosurerecorded in the financial statements.quarter ending September 30, 2023.
23
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsOperations.
References to the “Company,” “us,” “our” or “we” refer Forest Road Acquisition Corp. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited financial statements and related notes included herein.
Cautionary Note Regarding Forward-Looking Statements
All statements other than statements of historical fact includedelsewhere in this report including, without limitation,Quarterly Report on Form 10-Q (this “Report”) as well as our financial statements under “Management’sand the "Management's Discussion and Analysis of Financial Condition and Results of Operations” regardingOperations" included in our Annual Report on Form 10-K for the Company’syear 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 position, business strategycondition, results of operations, earnings outlook and prospects of the plans and objectives of management for future operations,Company. Forward-looking statements are forward-looking statements. When used in this report,typically identified by words such as “anticipate,“plan,” “believe,” “expect,” “anticipate,” “intend,” “outlook,” “estimate,” “expect,“forecast,” “intend”“project,” “continue,” “could,” “may,” “might,” “possible,” “potential,” “predict,” “should,” “would” and other similar words and expressions, as they relate to us orbut the Company’s management, identify forward-looking statements. Suchabsence 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 beliefsdate of management,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 and information currently availablemanagement 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 Company’s management. Actual results could differ materially from those contemplatedextent required by applicable law or regulation, we undertake no obligation to update these forward-looking statements to reflect events or circumstances after the forward- looking statementsdate 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 resultprofessional-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 factors detailedrestructuring 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 filingsuse 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 SEC. All subsequent written or oral forward-looking statements attributableemployment offer letter to us or persons actingMr. 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 behalf are qualifiedco-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 their entirety by this paragraph.kind on the outstanding Term Loan balance prior to the prepayment (fee of $0.5 million).
TheIn 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 discussionkey operational and analysisbusiness 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 financial conditionmarket 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 of operations should be readpresented in conjunctionaccordance with the financial statements and the notes thereto contained elsewhere in this report. Certain information containedaccounting principles generally accepted in the discussionUnited 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 analysis set forth below includes forward-looking statementsis 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 involve risks and uncertainties.
Results of Operations and Known Trends or Future Events
We have neither engaged in any operations nor generated any revenues to date. Our only activities since inception have been organizational activities, thoseare not normal, recurring, operating expenses necessary to prepare for our initial public offering and identifying a target company for our initialoperate the Company’s business combination. We do not expect to generate any operating revenues until after completion of our initial business combination. We generate non-operating incomeas described in the formreconciliation 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 on cash and cash equivalents heldexpense).
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 | ) |
We have neither engaged in any operations nor generated any revenues to date. Our only activities since inception have been organizational activities, those necessary to prepare for our initial public offering and identifying a target company for our initial business combination. We do not expect to generate any operating revenues until after completion of our initial business combination. We generate non-operating income inAdjusted EBITDA calculation during the form of interest income on cash and cash equivalents held in the trust account. We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as expenses as we conduct due diligence on prospective business combination candidates.
Foryear ended December 31, 2022. During the three months ended March 31, 2021,2023, we hadreclassified the non-cash charge from employee incentives expected to be settled in equity to equity-based compensation because we settled certain employee incentives with restricted stock unit ("RSU") awards during the period.
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 incurred $2,724,770often 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 operating costs, consistingdelivery of public company operating expenses and costs relatedproducts or the performance of services. Digital subscription revenue is recognized ratably over the subscription period of up to preparing38 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 initial business combination. We had interest income of $20 of interest on the bank account and investment income of $4,432 from marketable securities held in trust account. For the three months ended March 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 2021,
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
32
primarily as a result of lower inventory value adjustments, partially offset by the impact of fixed warehousing expenses on lower connected fitness revenue.
|
| 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.
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| Six months ended June 30, |
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Selling and marketing |
| $ | 153,068 |
|
| $ | 193,068 |
|
| $ | (40,000 | ) |
|
| (21 | %) |
As a percentage of total revenue |
|
| 54.7 | % |
|
| 51.1 | % |
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|
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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.
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| Three months ended June 30, |
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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.
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| Six months ended June 30, |
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Enterprise technology and development |
| $ | 37,746 |
|
| $ | 57,830 |
|
| $ | (20,084 | ) |
|
| (35 | %) |
As a percentage of total revenue |
|
| 13.5 | % |
|
| 15.3 | % |
|
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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.
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| Three months ended June 30, |
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General and administrative |
| $ | 11,887 |
|
| $ | 19,584 |
|
| $ | (7,697 | ) |
|
| (39 | %) |
As a percentage of total revenue |
|
| 8.8 | % |
|
| 10.9 | % |
|
|
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|
|
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.
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| Six months ended June 30, |
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General and administrative |
| $ | 29,603 |
|
| $ | 39,657 |
|
| $ | (10,054 | ) |
|
| (25 | %) |
As a percentage of total revenue |
|
| 10.6 | % |
|
| 10.5 | % |
|
|
|
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|
|
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.
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| Three months ended June 30, |
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Restructuring |
| $ | (107 | ) |
| $ | 1,332 |
|
| $ | (1,439 | ) |
| NM |
|
| Six months ended June 30, |
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Restructuring |
| $ | 5,280 |
|
| $ | 8,555 |
|
| $ | (3,275 | ) |
|
| (38 | %) |
36
Other Income (Expense)
The change in fair value of warrantswarrant 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.
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| Three months ended June 30, |
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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.
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| Six months ended June 30, |
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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.
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| Three months ended June 30, |
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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, |
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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) |
| |||||
|
|
|
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| ||
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 millionfor 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 approximately $13,870,243.
Liquiditythe Company (the “Borrower”), and Capital Resources
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 March 31, 2021,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 had cash outsidehave $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 trust accountapproximate timing of $730,435 availablethe 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, needs. All remainingand expect to generate additional liquidity through continued cost control initiatives. We believe that existing cash held inand cash equivalents and cost control initiatives will provide the trust account are generally unavailableCompany with sufficient liquidity to meet our anticipated cash needs, including debt service requirements, for the Company’s use, priornext twelve months as well as for the longer-term (i.e., beyond the next twelve months).
We may explore additional equity financing to an initial business combination,supplement our anticipated working capital balances and is restricted for use either in a business combinationfurther strengthen our financial position, but do not at this time know which form it will take or to redeem common stock.
Through March 31, 2021,what the Company’s liquidity needs were satisfied through receipt of $25,000 from theterms will be. The sale of the founder shares, advances from the sponsoradditional equity would result in an aggregate amount of $141,881 and the remaining net proceeds from the initial public offering and the sale of private placement warrants.
The Company anticipatesadditional dilution to our shareholders. There can be no assurances that the $730,735 of cash held outside of the trust account as of March 31, 2021,we will be sufficient to allow the Company to operate for at least the next 12 months, assuming that a business combination is not consummated during that time. Until consummation of our business combination, the Company will be using the funds not held in the trust account, and any additional Working Capital Loans (as defined in Note 5 to our financial statements) from the initial stockholders, the Company’s officers and directors, or their respective affiliates (which is described in Note 5 to our financial statements), for identifying and evaluating prospective acquisition candidates, performing business due diligence on prospective target businesses, traveling to and from the offices, plants or similar locations of prospective target businesses, reviewing corporate documents and material agreements of prospective target businesses, selecting the target business to acquire and structuring, negotiating and consummating the business combination.
The Company does not believe it will need to raise additional funds in order to meet the expenditures required for operating its business. However, if the Company’s estimates of the costs of undertaking in-depth due diligence and negotiating business combination is less than the actual amount necessary to do so, the Company may have insufficient funds available to operate its business prior to the business combination. Moreover, the Company will needable to raise additional capital through loans fromin 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 sponsor, officers, directors,carrying value or third parties. Noneindicate 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 sponsor, officers or directors are under any obligationRU to advance fundsits estimated fair value. Fair value is estimated using a combination of a market approach and an income approach, with significant assumptions related to or to investguideline company financial multiples used in the Company. If the Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of its business plan,market approach and reducing overhead expenses. The Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all.
Derivative Warrant Liabilities
We do not use derivative instruments to hedge exposures tosignificant assumptions about revenue growth, long-term growth rates, and discount rates used in a discounted cash flow market, or foreign currency risks. We evaluate allmodel in the income approach. As of our financial instruments, including issued stock purchase warrants,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 if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and ASC 815-15. The classificationwhether it was recoverable. Because the carrying value of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is reassessed at the end of each reporting period.
We issued an aggregate of 15,333,333 warrants in connection with our initial public offering and private placement, which are recognized as derivative liabilities in accordance with ASC 815-40. Accordingly,asset group did not exceed its future undiscounted cash flows, we recognizethen calculated the warrants as liabilities at fair value and adjustof the instruments to fair value at each reporting period. The liabilities are subject to remeasurement at each balance sheet date until exercised, and any change in fair value is recognized inassets within the Company’s statement of operations.asset group. The fair value of warrants issuedthe 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 connection withthe 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 initial public offeringgoodwill impairment tests, and private placement has beenultimately impact the estimated using Monte Carlo simulations at each measurement date.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 RiskRisk.
Foreign Currency Risk
Not requiredWe 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 smallerup 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 companies.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 ProceduresProcedures.
Management’s Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of our management, including our principal executive officerChief Executive Officer and principal financial and accounting officer,Chief Financial Officer, we conducted an evaluation ofevaluated the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended March 31, 2021, as such term is(as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act.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 principal executive officer2022 Form 10-K, our Chief Executive Officer and principal financial and accounting officerChief Financial Officer concluded that solely due to the Company’s restatement of its financial statements to reclassify the Company’s warrants as described in the Form 10-K/A filed May 3, 2021, a material weakness existed and our disclosure controls and procedures were not effective as of March 31, 2021.
To remediate the material weakness pertaining to the presentationend of the Company’s warrants as equity instead of liability, as disclosed in the Company’s Annual Report on Form 10-K, as amended on May 5, 2021, for the period ended December 31, 2021, the Company has reviewed its internal controls and enhanced the supervisory review of accounting procedures incovered by this financial reporting area.Report.
Changes in Internal Control overOver 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.
During the most recently completed fiscal quarter ended March 31, 2021, there wasThere 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 - II—OTHER INFORMATION
None.
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.
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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 previously discloseddescribe 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 Amendment No. 1 to the annual report on Form 10-K/A filedfuture filings with the SEC on May 3, 2021 and in our Form S-4, initially filed on February 16, 2021, as amended.SEC.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Unregistered Sales of Equity Securities and Use of ProceedsProceeds.
On November 30, 2020, we consummated our initial public offeringNone.
Issuer Repurchase of 30,000,000 units, which included 3,900,000 units issued pursuant to the partial exercise by the underwriters of their over-allotment option. Each unit consists of one share of Class A common stock, par value $0.0001 per share, and one-third of one redeemable warrant, with each whole warrant entitling the holder thereof to purchase one share of Class A common stock for $11.50 per share. The units were sold at a price of $10.00 per unit, generating gross proceeds to us of $300,000,000.Equity Securities.
None.
Simultaneously with the closing of our initial public offering, we completed the private sale of an aggregate of 5,333,333 private placement warrants to Forest Road Acquisition Sponsor LLC, our sponsor, at a purchase price of $1.50 per private placement warrant, generating gross proceeds to us of $8,000,000. This issuance of private placement warrants was be made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.
A total of $300,000,000, comprised of $292,000,000 of the proceeds from our initial public offering (which amount includes $10,500,000 of the underwriters’ deferred discount) and $8,000,000 of the proceeds of the sale of the private placement warrants, was placed in a U.S.-based trust account maintained by Continental Stock Transfer & Trust Company, acting as trustee. The proceeds held in the trust account are invested only in U.S. government treasury obligations with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act which invest only in direct U.S. government treasury obligations.
There has been no material change in the planned use of the proceeds from the Initial Public Offering and Private Placement as is described in the Company’s final prospectus related to the Initial Public Offering.
Item 3. Defaults Upon Senior Securities.
None.
None.
Item 4. Mine Safety Disclosures.Disclosure.
None.
Not Applicable.
None.
None.
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Item 6. ExhibitsExhibits.
Exhibit | Incorporated by Reference | Filed or Furnished herewith | ||||
|
| Form | Exhibit | Filing Date | File No. |
|
3.1 | Amended and Restated Certificate of Incorporation of The Beachbody Company, Inc. |
8-K |
3.1 |
7/1/2021 |
001-39735 |
|
3.2 |
8-K |
3.2 |
7/1/2021 |
001-39735 |
| |
4.1 |
|
|
|
| * | |
10.1 | 10-Q | 10.2 | 8/8/2022 | 001-39735 |
| |
10.2+ |
|
|
|
| * | |
10.3+ |
8-K |
10.1 |
7/26/2023 |
001-39735 |
| |
10.4^ | The Beachbody Company, Inc. Deferred Compensation Plan for Directors |
10-K |
10.10 |
3/16/2023 |
001-39735 |
|
10.5^ |
8-K |
10.1 |
6/15/2023
|
001-39735 |
| |
10.6^ | The Beachbody Company, Inc. 2023 Employment Inducement Incentive Award Plan. |
8-K |
10.2 |
6/15/2023 |
001-39735 |
|
10.7^ |
8-K |
10.3 |
6/15/2023 |
001-39735 |
| |
10.8^ |
8-K |
10.4 |
6/15/2023 |
001-39735 |
| |
31.1 | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a) | * | ||||
31.2 | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a) | * | ||||
32.1 | ** | |||||
101.INS | Inline XBRL Instance Document | * | ||||
101.SCH | Inline XBRL Taxonomy Extension Schema Document | * | ||||
101.CAL | Inline XBRL Taxonomy Calculation Linkbase Document | * | ||||
101.DEF | Inline XBRL Taxonomy Definition Linkbase Document | * | ||||
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | * | ||||
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | * | ||||
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
|
|
|
|
|
43
* Filed herewith
** Furnished herewith.
+ Schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The followingCompany will furnish copies of any such schedules and exhibits are filed as part of,to the SEC upon request.
^ Indicates management contract or incorporated by reference into, this Quarterly Report on Form 10-Q.compensatory plan.
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In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
The Beachbody Company, Inc. | |||
Date: August 8, 2023 | By: | /s/ Carl Daikeler | |
Carl Daikeler | |||
Chief Executive Officer | |||
(Principal Executive Officer) | |||
Date: | By: | /s/ | |
Marc Suidan | |||
Chief Financial Officer | |||
(Principal Financial |
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