The Beachbody pany(US:BODY)2025-03-28 20:05PART I Business The company provides digital fitness and nutrition products, recently pivoting from an MLM to an affiliate model and discontinuing connected fitness equipment Key Subscriber Metrics (as of December 31, 2024) | Metric | Count (millions) | | :--- | :--- | | Digital Subscriptions | 1.1 | | Nutritional Subscriptions | 0.1 | Customer Engagement and Retention (2024 vs. 2023) | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Total Streams (millions) | 87.4 | 98.2 | | DAU/MAU | 31.7% | - | | Month-over-month Retention | 96.8% | - | - The company executed a strategic "Pivot" from an MLM to an affiliate model, reducing its workforce by approximately 33%28 - Following the Pivot, the company ceased receiving Partner and preferred customer fees, which amounted to $9.9 million and $14.3 million respectively in 20242846 - Management decided to discontinue the sale of connected fitness equipment beginning in early 20252936 - As of December 31, 2024, the company employed approximately 355 full-time individuals in a remote-first workplace76 Risk Factors The company faces risks from its strategic pivot, competition, debt covenants, and concentrated voting control Risks Related to Our Business and Industry Key risks include the strategic pivot's execution, reliance on key products, and intense industry competition - The strategic "Pivot" from an MLM to an affiliate model may not be successful, could be disruptive, and cause revenue to decline9096 - The business relies heavily on its digital platform (54% of revenue) and nutrition products (45% of revenue), with Shakeology alone constituting 18% of revenue105 - Co-founder and CEO, Carl Daikeler, controls over 80% of the company's voting power through Class X "super" voting stock127 - The company qualifies as a "controlled company" under NYSE rules, exempting it from certain corporate governance requirements131 Risks Related to our Indebtedness Restrictive covenants in the senior secured term loan limit operations and a failure to comply could lead to default - The senior secured term loan facility (Term Loan) contains restrictive covenants limiting operations, including incurring debt and paying dividends134137 - The Financing Agreement requires maintaining minimum consolidated EBITDA and liquidity levels, with non-compliance potentially leading to default135136 - The Term Loan matures on February 8, 2026, and while discussions for refinancing are underway, there is no assurance a new facility will be finalized142143 Risks Related to Data and Information Systems The business is subject to complex data privacy laws and depends on third-party platforms like the Apple App Store - The company is subject to numerous data privacy laws like GDPR and CCPA/CPRA, where non-compliance can lead to significant fines158160162 - A security breach of customer data could lead to regulatory investigations, legal exposure, and significant remediation costs171174 - The business depends on the Apple App Store as a primary distribution platform, and unfavorable changes to its terms could harm the business168169 Unresolved Staff Comments The company reports no unresolved staff comments from the Securities and Exchange Commission - None252 Cybersecurity The company's cybersecurity program is based on the NIST CSF framework and overseen by the Board's Audit Committee - The company's cybersecurity program is designed and assessed based on the National Institute of Standards and Technology Cybersecurity Framework (NIST CSF)254 - The Board's Audit Committee has oversight of cybersecurity risk and receives quarterly reports from management258259 - The company has not identified any material risks from known cybersecurity threats to its operations, strategy, or financial condition257 Properties The company downsized its headquarters lease and sold its production facility, entering into a leaseback agreement - The corporate headquarters lease in El Segundo, CA was renewed, and the leased space was reduced from ~42,000 sq ft to ~9,400 sq ft265 - On February 29, 2024, the company sold its Van Nuys production facility and entered into a five-year leaseback for the property266 Legal Proceedings The company is involved in several legal proceedings, including class actions and arbitration demands, but has not established reserves - A class action complaint was filed alleging the company misclassified its Partners as contractors rather than employees268 - A patent infringement complaint filed by DISH Technologies was dismissed after a confidential settlement for an immaterial payment269 - The company faces 10 arbitration demands, with a potential for approximately 6,239 total, alleging violations of the Video Privacy Protection Act274 - For all pending matters, the company has not established reserves as it cannot reasonably estimate damages275 Mine Safety Disclosures This item is not applicable to the company's business - Not applicable277 PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's Class A stock trades on the NYSE, it has never paid dividends, and made no stock repurchases in Q4 2024 - Class A common stock trades on the NYSE, with the ticker changed from "BODY" to "BODI" on March 4, 2024278 - The company has never declared or paid cash dividends and does not expect to in the foreseeable future281 - There were no repurchases of common stock during the fourth quarter of 2024283 Selected Financial Data This item is reserved and contains no information - Reserved283 Management's Discussion and Analysis of Financial Condition and Results of Operations Revenue fell 21% in 2024, but a major restructuring improved profitability, though debt maturity raises going concern doubts Results of Operations Total revenue fell 21% in 2024, but lower operating expenses significantly narrowed the company's operating and net losses Revenue by Segment (2024 vs. 2023) | Revenue Segment | 2024 (in thousands) | 2023 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | Digital | $224,335 | $258,370 | (13%) | | Nutrition and other | $187,835 | $249,510 | (25%) | | Connected fitness | $6,626 | $19,229 | (66%) | | Total revenue | $418,796 | $527,109 | (21%) | Key Profitability Metrics (2024 vs. 2023) | Metric | 2024 (in thousands) | 2023 (in thousands) | $ Change | | :--- | :--- | :--- | :--- | | Gross Profit | $287,344 | $323,087 | ($35,743) | | Operating Loss | ($66,208) | ($140,988) | $74,780 | | Net Loss | ($71,642) | ($152,641) | $80,999 | - Selling and marketing expenses decreased by 29% ($82.0 million), primarily due to a $49.4 million reduction in Partner compensation347 - Enterprise technology and development expenses increased by 3% due to $11.1 million in accelerated depreciation related to the Pivot351 - A goodwill impairment charge of $20.0 million was recorded in 2024, compared to a $40.0 million charge in 2023359 Liquidity and Capital Resources The 2026 Term Loan maturity and potential covenant violations raise substantial doubt about the company's ability to continue as a going concern - The company's Term Loan matures in February 2026 and it may violate financial covenants in the second half of 2025368369 - These conditions raise substantial doubt about the Company's ability to continue as a going concern369 - Management is pursuing a new ABL facility to refinance the debt and has identified controllable actions to mitigate risk and provide liquidity370371 Cash Flow Summary (2024 vs. 2023) | Cash Flow Activity | 2024 (in thousands) | 2023 (in thousands) | | :--- | :--- | :--- | | Net cash from operating activities | $2,562 | ($22,537) | | Net cash from investing activities | $1,058 | ($10,826) | | Net cash used in financing activities | ($15,868) | ($13,717) | Critical Accounting Estimates Key estimates involve inventory valuation, which led to a write-down, and goodwill impairment testing, resulting in a $20 million charge - Inventory valuation requires estimates of future demand, leading to $4.2 million in adjustments in 2024, including a $1.2 million write-down for discontinued fitness equipment387388389 - Goodwill is tested for impairment annually using significant assumptions about revenue growth, discount rates, and market multiples390395 - The 2024 goodwill impairment test resulted in a $20.0 million impairment charge, driven by a sustained decline in stock price and revenue396 Quantitative and Qualitative Disclosures About Market Risk The company is exposed to foreign currency and interest rate risks but has ceased hedging and expects minimal impact from rate changes - The company is exposed to foreign currency risk as approximately 10% of its revenue was in foreign currencies in 2024 and 2023399 - In 2023, management decided to stop entering into new foreign exchange option contracts to hedge currency risk401404 - Interest rate risk is primarily from the variable SOFR-based Term Loan; a hypothetical 10% change in exchange rates would impact expenses by approximately $2.1 million403405 Financial Statements and Supplementary Data This section contains audited financial statements, with the auditor identifying the Goodwill Impairment Assessment as a critical audit matter - The independent auditor identified the Goodwill Impairment Assessment as a critical audit matter due to significant management judgments415417 Consolidated Balance Sheet Summary (as of Dec 31) | (in thousands) | 2024 | 2023 | | :--- | :--- | :--- | | Total Current Assets | $78,685 | $119,273 | | Total Assets | $174,556 | $276,839 | | Total Current Liabilities | $127,638 | $165,203 | | Total Liabilities | $146,386 | $194,079 | | Total Stockholders' Equity | $28,170 | $82,760 | Consolidated Statement of Operations Summary (Year Ended Dec 31) | (in thousands) | 2024 | 2023 | | :--- | :--- | :--- | | Total Revenue | $418,796 | $527,109 | | Gross Profit | $287,344 | $323,087 | | Operating Loss | ($66,208) | ($140,988) | | Net Loss | ($71,642) | ($152,641) | | Net Loss Per Share | ($10.51) | ($24.47) | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None671 Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2024 - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2024672 - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2024675 - No attestation report from the registered public accounting firm is included because the company qualifies as a "non-accelerated filer"676 Other Information The company reports no other information for this item - None681 Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable to the company - Not applicable682 PART III Directors, Executive Officers, and Corporate Governance Required information is incorporated by reference from the company's 2025 proxy statement - Information is incorporated by reference from the Proxy Statement for the 2025 Annual Meeting of Shareholders684 Executive Compensation Required information is incorporated by reference from the company's 2025 proxy statement - Information is incorporated by reference from the Proxy Statement for the 2025 Annual Meeting of Shareholders685 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Required information is incorporated by reference from the company's 2025 proxy statement - Information is incorporated by reference from the Proxy Statement for the 2025 Annual Meeting of Shareholders686687689 Certain Relationships and Related Transactions, and Director Independence Required information is incorporated by reference from the company's 2025 proxy statement - Information is incorporated by reference from the Proxy Statement for the 2025 Annual Meeting of Shareholders690 Principal Accounting Fees and Services Required information is incorporated by reference from the company's 2025 proxy statement - Information is incorporated by reference from the Proxy Statement for the 2025 Annual Meeting of Shareholders691 PART IV Exhibits, Financial Statement Schedules This section lists all financial statements, schedules, and exhibits filed as part of the Annual Report - This section lists the financial statements, financial statement schedules, and all exhibits filed with the Form 10-K693 Form 10-K Summary The company reports no summary for this item - None702