The Beachbody Company(BODI) - 2025 Q1 - Quarterly Report

PART I—FINANCIAL INFORMATION Item 1. Financial Statements This section presents unaudited condensed consolidated financial statements and detailed notes on business, accounting, revenue, and other financial aspects Condensed Consolidated Balance Sheets Total assets, liabilities, and stockholders' equity decreased from December 31, 2024, to March 31, 2025, driven by reductions in cash, inventory, and deferred revenue | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | | :----- | :----------------------------- | :------------------------------- | :-------------------- | | Total Assets | $152,539 | $174,556 | $(22,017) | | Total Liabilities | $128,504 | $146,386 | $(17,882) | | Total Stockholders' Equity | $24,035 | $28,170 | $(4,135) | | Cash and Cash Equivalents | $18,126 | $20,187 | $(2,061) | | Inventory | $13,480 | $16,303 | $(2,823) | | Deferred Revenue | $69,819 | $77,273 | $(7,454) | | Current Portion of Term Loan | $16,425 | $9,500 | $6,925 | Unaudited Condensed Consolidated Statements of Operations Q1 2025 saw a 40% revenue decrease but a 60% reduction in net loss, improving from $(14.2) million to $(5.7) million | Metric | Three months ended March 31, 2025 (in thousands) | Three months ended March 31, 2024 (in thousands) | Change (in thousands) | % Change | | :----- | :--------------------------------------------- | :--------------------------------------------- | :-------------------- | :------- | | Total Revenue | $72,363 | $120,046 | $(47,683) | (40%) | | Cost of Revenue | $20,814 | $38,764 | $(17,950) | (46%) | | Gross Profit | $51,549 | $81,282 | $(29,733) | (37%) | | Operating Expenses | $55,223 | $92,105 | $(36,882) | (40%) | | Operating Loss | $(3,674) | $(10,823) | $7,149 | (66%) | | Net Loss | $(5,748) | $(14,216) | $8,468 | (60%) | | Net Loss per Common Share, Basic and Diluted | $(0.84) | $(2.10) | $1.26 | (60%) | Unaudited Condensed Consolidated Statements of Comprehensive Loss Total comprehensive loss for Q1 2025 was $(5.8) million, a significant improvement from $(14.2) million, reflecting reduced net loss | Metric | Three months ended March 31, 2025 (in thousands) | Three months ended March 31, 2024 (in thousands) | Change (in thousands) | | :----- | :--------------------------------------------- | :--------------------------------------------- | :-------------------- | | Net Loss | $(5,748) | $(14,216) | $8,468 | | Total Other Comprehensive Income (Loss) | $(9) | $38 | $(47) | | Total Comprehensive Loss | $(5,757) | $(14,178) | $8,421 | Unaudited Condensed Consolidated Statements of Stockholders' Equity Total stockholders' equity decreased from $28.2 million to $24.0 million, mainly due to net loss and other comprehensive loss, partially offset by equity compensation | Metric | December 31, 2024 (in thousands) | March 31, 2025 (in thousands) | Change (in thousands) | | :----- | :------------------------------- | :---------------------------- | :-------------------- | | Total Stockholders' Equity | $28,170 | $24,035 | $(4,135) | | Net Loss (Q1 2025) | $(5,748) | - | - | | Equity-based compensation (Q1 2025) | $1,726 | - | - | Unaudited Condensed Consolidated Statements of Cash Flows Net cash from operations decreased significantly, investing activities shifted to outflow, and financing cash usage decreased | Metric | Three months ended March 31, 2025 (in thousands) | Three months ended March 31, 2024 (in thousands) | Change (in thousands) | | :----- | :--------------------------------------------- | :--------------------------------------------- | :-------------------- | | Net Cash Provided by Operating Activities | $2,342 | $9,134 | $(6,792) | | Net Cash (Used in) Provided by Investing Activities | $(694) | $3,901 | $(4,595) | | Net Cash Used in Financing Activities | $(3,729) | $(7,219) | $3,490 | | Net (Decrease) Increase in Cash, Cash Equivalents, and Restricted Cash | $(2,061) | $5,520 | $(7,581) | | Cash, Cash Equivalents and Restricted Cash, End of Period | $18,126 | $38,929 | $(20,803) | Notes to Unaudited Condensed Consolidated Financial Statements These notes provide detailed explanations for the financial statements, covering business, accounting policies, revenue, fair value, and other financial items Note 1. Description of Business and Summary of Significant Accounting Policies BODi, a fitness and nutrition company, transitioned from an MLM to a single-level affiliate model, with no material effect from new accounting standards - BODi is a leading fitness and nutrition company offering streaming programs and nutritional products[24] - The Company announced a strategic initiative on September 30, 2024, to transition its network business from a Multi-Level Marketing (MLM) model to a single-level affiliate model (the "Pivot")[24] - The adoption of ASU 2023-07, "Improvements to Reportable Segment Disclosures," on January 1, 2024, did not have a material effect on the unaudited condensed consolidated financial statements[28] Note 2. Revenue Total revenue decreased 40% year-over-year, with the US as the primary region, and $36.3 million recognized from deferred revenue in Q1 2025 | Geographic Region | Three months ended March 31, 2025 (in thousands) | Three months ended March 31, 2024 (in thousands) | | :---------------- | :--------------------------------------------- | :--------------------------------------------- | | United States | $66,852 | $106,750 | | Rest of World | $5,511 | $13,296 | | Total Revenue | $72,363 | $120,046 | - The Company expects to recognize approximately 93% of its remaining performance obligations as revenue in the next 12 months[33] - During the three months ended March 31, 2025, the Company recognized $36.3 million of revenue that was included in the deferred revenue balance as of December 31, 2024[33] Note 3. Fair Value Measurements Financial assets and liabilities, including Level 3 Term Loan and Common Stock Warrants, saw fair value increases from December 2024 to March 2025 | Item | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--- | :----------------------------- | :------------------------------- | | Restricted short-term investments | $4,250 | $4,250 | | Term Loan Warrants | $504 | $390 | | Common Stock Warrants | $2,358 | $1,783 | | Total Liabilities (Warrants) | $2,862 | $2,173 | - Term Loan Warrants and Common Stock Warrants are classified within Level 3 of the fair value hierarchy because their fair values are based on significant unobservable market inputs[35] | Warrant Type | Balance, beginning of period (Q1 2025, in thousands) | Change in fair value (Q1 2025, in thousands) | Balance, end of period (Q1 2025, in thousands) | | :----------- | :------------------------------------------------- | :------------------------------------------- | :--------------------------------------------- | | Term Loan Warrants | $390 | $114 | $504 | | Common Stock Warrants | $1,783 | $575 | $2,358 | Note 4. Inventory Total inventory decreased to $13.5 million, with excess inventory adjustments significantly lower in Q1 2025 compared to Q1 2024 | Inventory Component | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :------------------ | :----------------------------- | :------------------------------- | | Raw materials and work in process | $6,421 | $7,650 | | Finished goods | $7,059 | $8,653 | | Total inventory | $13,480 | $16,303 | - Adjustments to the carrying value of excess inventory decreased from $0.6 million in Q1 2024 to $0.1 million in Q1 2025[45] Note 5. Other Current Assets Other current assets decreased to $18.6 million, primarily due to a significant reduction in deferred Partner costs | Component | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------- | :----------------------------- | :------------------------------- | | Deferred Partner costs | $14,963 | $25,578 | | Accounts receivable, net | $1,933 | $1,449 | | Total other current assets | $18,635 | $28,911 | Note 6. Property and Equipment, Net Net property and equipment decreased to $10.7 million, with a $0.8 million gain from a facility sale in Q1 2024 and reduced depreciation | Component | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------- | :----------------------------- | :------------------------------- | | Total property and equipment, net | $10,661 | $12,749 | - The Company recognized a gain on the sale of its Van Nuys production facility of $0.8 million in Q1 2024[47] | Expense Category | Three months ended March 31, 2025 (in thousands) | Three months ended March 31, 2024 (in thousands) | | :--------------- | :--------------------------------------------- | :--------------------------------------------- | | Total depreciation | $2,888 | $5,378 | Note 7. Accrued Expenses and Other Current Liabilities Accrued expenses decreased to $19.6 million due to lower inventory, shipping, and Partner costs, while advertising costs increased | Accrued Expense Category | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :----------------------- | :----------------------------- | :------------------------------- | | Employee compensation and benefits | $4,591 | $5,180 | | Inventory, shipping and fulfillment | $1,410 | $2,925 | | Partner costs | $717 | $3,272 | | Total accrued expenses | $19,573 | $24,982 | - Advertising costs were $11.5 million for the three months ended March 31, 2025, compared to $9.1 million for the same period in 2024[50] - The Company entered into financing agreements with AFCO and FIF in October 2024 to finance annual insurance premiums totaling $4.4 million, with outstanding balances of $1.0 million and $0.9 million, respectively, as of March 31, 2025[51][52] Note 8. Commitments and Contingencies The company has $10.5 million in purchase commitments and $3.4 million in lease obligations, and is involved in several legal proceedings | Commitment Type | Future Minimum Payments (in thousands) | | :-------------- | :----------------------------------- | | Noncancelable service and inventory purchase agreements (total) | $10,493 (through 2028) | | Lease obligations (total) | $3,400 (through 2029) | - The Company is defending a class action complaint alleging misclassification of its Partners as employees, with 12 arbitration actions already settled for nominal fees[57] - A patent infringement lawsuit by DISH Entities was dismissed without prejudice following a Confidential Standstill and Tolling Agreement, which included an immaterial one-time payment by the Company[58] - The Company is involved in a class action lawsuit (Reilly Action) related to the 2021 merger, though aiding and abetting claims against the Company were dismissed without prejudice on December 5, 2024[59][61] - Milberg Coleman Bryson Phillips Grossman filed 10 arbitration demands alleging that the Company violated the Video Privacy Protection Act on behalf of approximately 6,239 BODi subscribers[63] Note 9. Debt The Term Loan had an $18.4 million balance with a 27.81% effective interest rate, and was fully repaid post-quarter with a new ABL Facility - The Term Loan facility, initiated on August 8, 2022, had an initial aggregate principal amount of $50.0 million[65] - The Term Loan bore an effective interest rate of 27.81% and a cash interest rate of 11.64% for the three months ended March 31, 2025[66] - Partial prepayments on the Term Loan in Q1 2024 totaled $6.5 million, leading to a loss on partial debt extinguishment of $1.2 million[67][68][70] - As of March 31, 2025, the principal balance outstanding under the Term Loan was $18.4 million (including capitalized paid-in-kind interest)[175] - The Term Loan Warrants' exercise price was amended multiple times, most recently to $6.26 per share on October 18, 2024[75][77][78] - Subsequent to March 31, 2025, on May 13, 2025, the Term Loan was fully repaid using proceeds from a new $35.0 million Asset-Based Lending (ABL) Facility[74][80] Note 10. Segment The company operates as a single reporting segment, with performance assessed by the CODM based on net loss and budget variances - The Company defines its business as a single reporting segment[82] - The Chief Operating Decision Maker (CODM) assesses segment performance using net loss and reviews budget-to-actual variances quarterly[83] Note 11. Stockholders' Equity Class A and Class X shares are outstanding, no dividends declared, and accumulated other comprehensive loss increased to $(58) thousand - As of March 31, 2025, the Company had 4,259,361 Class A shares and 2,729,003 Class X shares issued and outstanding[10] - No dividends were declared as of March 31, 2025[88] - An Equity Offering in December 2023 included the issuance of 543,590 Common Stock Warrants at an exercise price of $11.24 per share, and all pre-funded warrants were exercised by January 12, 2024[89] | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :----- | :----------------------------- | :------------------------------- | | Accumulated other comprehensive loss | $(58) | $(49) | Note 12. Equity-Based Compensation Equity-based compensation expense decreased significantly to $1.7 million, partly due to a $0.9 million reduction from modified stock awards | Metric | March 31, 2025 | December 31, 2024 | | :----- | :------------- | :---------------- | | Time-Vesting Options Outstanding | 912,758 | 1,008,017 | | RSUs Outstanding | 603,155 | 326,226 | | Expense Category | Three months ended March 31, 2025 (in thousands) | Three months ended March 31, 2024 (in thousands) | | :--------------- | :--------------------------------------------- | :--------------------------------------------- | | Total equity-based compensation | $1,726 | $4,365 | - Modifications to stock awards of terminated employees resulted in a $0.9 million reduction to equity-based compensation expense in Q1 2025, compared to $0.5 million in Q1 2024[96] Note 13. Restructuring No restructuring charges were recognized in Q1 2025, a decrease from $1.6 million in Q1 2024, with the liability reduced to $0.01 million - The Company recognized $1.6 million in restructuring costs during the three months ended March 31, 2024, primarily for employee termination benefits. No restructuring costs were incurred in Q1 2025[97][98] | Metric | December 31, 2024 (in thousands) | March 31, 2025 (in thousands) | | :----- | :------------------------------- | :---------------------------- | | Employee-related costs liability | $938 | $10 | Note 14. Income Taxes The income tax provision decreased to $0.045 million, with an effective tax rate of (0.8)%, primarily due to valuation allowance changes | Metric | Three months ended March 31, 2025 (in thousands) | Three months ended March 31, 2024 (in thousands) | | :----- | :--------------------------------------------- | :--------------------------------------------- | | Income tax provision | $45 | $62 | | Effective tax rate | (0.8)% | (0.4)% | - The effective tax rate differs from the U.S. statutory tax rate primarily due to changes in valuation allowances on deferred tax assets[100] Note 15. Loss per Share Basic and diluted net loss per common share improved to $(0.84), with antidilutive potential common shares excluded from calculations | Metric | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :----- | :-------------------------------- | :-------------------------------- | | Net loss per common share, basic and diluted | $(0.84) | $(2.10) | | Weighted-average common shares outstanding, basic and diluted | 6,882,988 | 6,760,771 | - Approximately 2.6 million common shares were excluded from the computation of diluted net loss per common share for both periods as their inclusion would have been antidilutive[103] Note 16. Subsequent Events Post-quarter, the company secured a new $35.0 million ABL Facility and fully repaid the Term Loan, with specific financial covenants - On May 13, 2025, the Company entered into a new $35.0 million ABL Facility, which includes a $10 million uncommitted accordion, maturing on May 13, 2028[104] - The ABL Facility bears interest based on the one-month SOFR rate plus 9.00% (initially 13.33% as of May 13, 2025), with a potential reduction to SOFR plus 7.75% after one year if the Company's fixed charge coverage ratio exceeds 1.10x[104] - Proceeds from the ABL Facility were used to fully repay the existing Term Loan on May 13, 2025, including $17.3 million principal, $0.5 million paid-in-kind interest, $0.3 million prepayment premium, and $0.2 million accrued interest[107] - The ABL Facility includes financial covenants requiring the Company to maintain certain billing levels, subscription counts, liquidity levels (greater than $12 million), and limit capital expenditures (less than $10 million annually)[109] Item 2. Management's Discussion and Analysis of Financial Condition and Operations Management discusses financial condition and operations, highlighting the 'Pivot' from MLM to affiliate model, impacting revenue and expenses - The discussion should be read in conjunction with the financial statements and notes included in this Quarterly Report on Form 10-Q and the Annual Report on Form 10-K for the year ended December 31, 2023[110] - The Company is transitioning its network business from a Multi-Level Marketing (MLM) model to a single-level affiliate model (the "Pivot"), which involved a 33% headcount reduction (approximately 170 employees) in the fourth quarter of 2024[119] | Metric | Three months ended March 31, 2025 (in millions) | Three months ended March 31, 2024 (in millions) | % Change | | :----- | :-------------------------------------------- | :-------------------------------------------- | :------- | | Total Revenue | $72.4 | $120.0 | (40%) | | Net Loss | $(5.7) | $(14.2) | (60%) | | Adjusted EBITDA | $3.7 | $4.6 | (20%) | Overview BODi, a fitness and nutrition company, focuses on digital content and supplements, recently shifting from an MLM to a single-level affiliate model - BODi is a leading fitness and nutrition company focusing primarily on digital content, supplements, connected fitness, and consumer health and fitness[116] - Revenue is generated primarily through direct response advertising, affiliates, social media marketing channels, and e-commerce marketplaces like Amazon[118] - On September 30, 2024, the Company announced a restructuring of its network business (the "Pivot") from a multi-level marketing (MLM) model to a single-level affiliate model, reducing headcount by approximately 170 employees[119] Recent Developments The company secured a new $35.0 million ABL Facility on May 13, 2025, repaying the Term Loan and establishing new financial covenants - On May 13, 2025, the Company entered into a $35.0 million asset-based lending facility (the "ABL Facility"), which includes a $10 million uncommitted accordion, maturing on May 13, 2028[122] - The Company used the proceeds from the ABL Facility to repay in full its existing Term Loan on May 13, 2025 (outstanding principal balance of $17.3 million)[123] - The ABL Facility has financial covenants that require the Company to maintain certain billing levels, subscription counts, and liquidity levels[122] Key Operational and Business Metrics Digital and nutritional subscriptions decreased significantly year-over-year, while average digital retention improved, and total streams declined | Metric | As of March 31, 2025 | As of March 31, 2024 | % Change | | :----- | :------------------- | :------------------- | :------- | | Digital subscriptions (millions) | 1.02 | 1.22 | (16%) | | Nutritional subscriptions (millions) | 0.08 | 0.15 | (47%) | | Metric | Three months ended March 31, 2025 | Three months ended March 31, 2024 | Change | | :----- | :-------------------------------- | :-------------------------------- | :----- | | Average digital retention | 97.0% | 95.7% | +1.3 pp | | Total streams (millions) | 20.7 | 25.6 | (19%) | | DAU/MAU | 32.5% | 33.2% | (0.7 pp) | - Digital subscriptions include paid and free-to-pay subscriptions, with free-to-pay subscriptions representing less than 1% of total digital subscriptions on average[126] Non-GAAP Information Adjusted EBITDA, a non-GAAP measure, decreased to $3.7 million in Q1 2025, used to evaluate core operating performance and trends - Adjusted EBITDA is a non-GAAP performance measure used to supplement GAAP results, similar to measures reported by public competitors[132] - Adjusted EBITDA excludes non-cash expenses (depreciation and amortization, equity-based compensation) and items not related to underlying business performance (restructuring costs, interest income and expense)[134] | Metric | Three months ended March 31, 2025 (in thousands) | Three months ended March 31, 2024 (in thousands) | Change (in thousands) | | :----- | :--------------------------------------------- | :--------------------------------------------- | :-------------------- | | Net Loss | $(5,748) | $(14,216) | $8,468 | | Adjusted EBITDA | $3,713 | $4,554 | $(841) | Results of Operations This section details the company's consolidated financial results for Q1 2025 versus Q1 2024, covering revenue, costs, and expenses - The Company has one operating segment, and the discussion of results and operations is on a consolidated basis[138] | Metric | Three months ended March 31, 2025 (in thousands) | Three months ended March 31, 2024 (in thousands) | $ Change | % Change | | :----- | :--------------------------------------------- | :--------------------------------------------- | :------- | :------- | | Total Revenue | $72,363 | $120,046 | $(47,683) | (40%) | | Total Cost of Revenue | $20,814 | $38,764 | $(17,950) | (46%) | | Gross Profit | $51,549 | $81,282 | $(29,733) | (37%) | | Total Operating Expenses | $55,223 | $92,105 | $(36,882) | (40%) | | Operating Loss | $(3,674) | $(10,823) | $7,149 | (66%) | | Net Loss | $(5,748) | $(14,216) | $8,468 | (60%) | Revenue Total revenue decreased 40% due to fewer digital and nutritional subscriptions and cessation of connected fitness inventory sales | Revenue Type | Three months ended March 31, 2025 (in thousands) | Three months ended March 31, 2024 (in thousands) | $ Change | % Change | | :----------- | :--------------------------------------------- | :--------------------------------------------- | :------- | :------- | | Digital | $42,911 | $61,506 | $(18,595) | (30%) | | Nutrition and other | $28,653 | $55,512 | $(26,859) | (48%) | | Connected fitness | $799 | $3,028 | $(2,229) | (74%) | | Total revenue | $72,363 | $120,046 | $(47,683) | (40%) | - The decrease in digital revenue was primarily attributable to a $13.8 million decrease from digital streaming services due to 17% fewer subscriptions and a $3.1 million decrease in fees from Partners due to the Pivot[142] - The decrease in nutrition and other revenue was primarily due to an $18.1 million decrease from nutritional products (48% fewer subscriptions) and a $4.4 million decrease in preferred customer fees due to the Pivot[143] - The decrease in connected fitness revenue was primarily due to management's decision to no longer sell connected fitness inventory beginning in early 2025, resulting in an approximate 57% decrease in bikes delivered[144] Cost of Revenue Total cost of revenue decreased 46%, improving digital gross margin but declining nutrition and connected fitness gross margins | Cost of Revenue Type | Three months ended March 31, 2025 (in thousands) | Three months ended March 31, 2024 (in thousands) | $ Change | % Change | | :------------------- | :--------------------------------------------- | :--------------------------------------------- | :------- | :------- | | Digital | $6,211 | $12,862 | $(6,651) | (52%) | | Nutrition and other | $13,451 | $22,284 | $(8,833) | (40%) | | Connected fitness | $1,152 | $3,618 | $(2,466) | (68%) | | Total cost of revenue | $20,814 | $38,764 | $(17,950) | (46%) | | Gross Margin Type | Three months ended March 31, 2025 | Three months ended March 31, 2024 | Change (bps) | | :---------------- | :-------------------------------- | :-------------------------------- | :----------- | | Digital | 85.5% | 79.1% | +640 | | Nutrition and other | 53.1% | 59.9% | (680) | | Connected fitness | (44.2%) | (19.5%) | (2470) | | Total gross margin | 71.2% | 67.7% | +350 | - Digital cost of revenue decreased primarily due to lower personnel-related expenses ($1.8 million), digital content amortization ($1.8 million), customer service expenses ($1.0 million), and digital content revisions ($0.8 million)[148] - The decrease in nutrition and other gross margin was primarily a result of a 'buy one get one free' program in the current quarter and the elimination of preferred customer fees[149] Operating Expenses Total operating expenses decreased 40%, driven by reductions in selling and marketing, technology, and general and administrative expenses | Operating Expense Category | Three months ended March 31, 2025 (in thousands) | Three months ended March 31, 2024 (in thousands) | $ Change | % Change | | :------------------------- | :--------------------------------------------- | :--------------------------------------------- | :------- | :------- | | Selling and marketing | $30,970 | $59,261 | $(28,291) | (48%) | | Enterprise technology and development | $12,596 | $17,717 | $(5,121) | (29%) | | General and administrative | $11,657 | $13,483 | $(1,826) | (14%) | | Restructuring | $0 | $1,644 | $(1,644) | (100%) | | Total operating expenses | $55,223 | $92,105 | $(36,882) | (40%) | Selling and Marketing Selling and marketing expenses decreased 48% due to lower Partner compensation and personnel costs, partially offset by increased media and affiliate expenses | Metric | Three months ended March 31, 2025 (in thousands) | Three months ended March 31, 2024 (in thousands) | $ Change | % Change | | :----- | :--------------------------------------------- | :--------------------------------------------- | :------- | :------- | | Selling and marketing expense | $30,970 | $59,261 | $(28,291) | (48%) | | As a percentage of total revenue | 42.8% | 49.4% | (6.6 pp) | - The decrease was primarily due to a $21.9 million decrease in Partner compensation due to the Pivot and a $7.1 million decrease in personnel-related expenses[153] - This decrease was partially offset by a $3.8 million increase in media expenses and a $0.9 million increase in affiliate compensation[153] Enterprise Technology and Development Enterprise technology and development expenses decreased 29% due to reduced personnel and depreciation, but increased as a percentage of revenue | Metric | Three months ended March 31, 2025 (in thousands) | Three months ended March 31, 2024 (in thousands) | $ Change | % Change | | :----- | :--------------------------------------------- | :--------------------------------------------- | :------- | :------- | | Enterprise technology and development | $12,596 | $17,717 | $(5,121) | (29%) | | As a percentage of total revenue | 17.4% | 14.8% | +2.6 pp | - The decrease was primarily due to a $3.1 million reduction in personnel-related expenses and a $2.0 million decrease in depreciation expense[156] General and Administrative General and administrative expenses decreased 14% due to lower personnel costs, partially offset by the absence of a prior-year facility sale gain | Metric | Three months ended March 31, 2025 (in thousands) | Three months ended March 31, 2024 (in thousands) | $ Change | % Change | | :----- | :--------------------------------------------- | :--------------------------------------------- | :------- | :------- | | General and administrative | $11,657 | $13,483 | $(1,826) | (14%) | | As a percentage of total revenue | 16.1% | 11.2% | +4.9 pp | - The decrease was primarily due to a $2.7 million reduction in personnel-related expenses, partially offset by a $0.8 million gain on the sale of the Van Nuys facility in the prior year period[159] Restructuring No restructuring charges were incurred in Q1 2025, a 100% decrease from $1.6 million in Q1 2024, which were employee termination costs | Metric | Three months ended March 31, 2025 (in thousands) | Three months ended March 31, 2024 (in thousands) | $ Change | % Change | | :----- | :--------------------------------------------- | :--------------------------------------------- | :------- | :------- | | Restructuring | $0 | $1,644 | $(1,644) | (100%) | - Restructuring charges in 2024 primarily related to the Company's key initiatives, consisting of employee termination costs[161] Other Income (Expense) No debt extinguishment loss in Q1 2025, interest expense decreased 17% due to prepayments, and other income, net, decreased 53% | Metric | Three months ended March 31, 2025 (in thousands) | Three months ended March 31, 2024 (in thousands) | $ Change | % Change | | :----- | :--------------------------------------------- | :--------------------------------------------- | :------- | :------- | | Loss on partial debt extinguishment | $0 | $(1,209) | $1,209 | (100%) | | Change in fair value of warrant liabilities | $(689) | $(724) | $35 | (5%) | | Interest expense | $(1,565) | $(1,875) | $310 | (17%) | | Other income, net | $225 | $477 | $(252) | (53%) | - The decrease in interest expense was primarily due to principal prepayments of $13.7 million on the outstanding Term Loan balance from January 1, 2024, to March 31, 2025[165] Income Tax Provision The income tax provision decreased 27% to $0.045 million, primarily due to changes in valuation allowances and discrete events | Metric | Three months ended March 31, 2025 (in thousands) | Three months ended March 31, 2024 (in thousands) | | :----- | :--------------------------------------------- | :--------------------------------------------- | | Income tax provision | $(45) | $(62) | - The income tax provision decrease was primarily driven by changes in valuation allowances and a decrease in the net expense from discrete events[167] Liquidity and Capital Resources The company's liquidity was impacted by the new ABL Facility and Term Loan repayment, with sufficient cash and cost controls for future needs - As of March 31, 2025, the Company had cash and cash equivalents totaling $18.1 million[171] - The Company believes that existing cash and cash equivalents and cost control initiatives will provide sufficient liquidity to meet anticipated cash needs for the next twelve months as well as for the longer-term[178] - The Company may explore additional debt or equity financing to supplement working capital and strengthen its financial position, but there are no assurances regarding the availability or terms of such capital[179] ABL Facility and Repayment of Term Loan The company secured a $35.0 million ABL Facility and repaid the Term Loan, providing $5 million in additional capital post-quarter - On May 13, 2025, the Company entered into a $35.0 million ABL Facility and borrowed $25.0 million on the Asset-Based Lending Facility Effective Date[168] - The Company used the proceeds from the ABL Facility to repay in full its existing Term Loan on May 13, 2025 (outstanding principal balance of $17.3 million), along with paid-in-kind interest, prepayment premium, and accrued interest[169] - After repaying the existing Term Loan, the ABL Facility provided the Company with approximately $5 million in additional capital on its balance sheet[169] Cash Provided By (Used In) Operating, Investing and Financing Activities Operating cash decreased due to deferred revenue and accrued expenses, investing shifted to outflow, and financing cash usage decreased | Cash Flow Activity | Three months ended March 31, 2025 (in thousands) | Three months ended March 31, 2024 (in thousands) | Change (in thousands) | | :----------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------- | | Net cash provided by operating activities | $2,342 | $9,134 | $(6,792) | | Net cash (used in) provided by investing activities | $(694) | $3,901 | $(4,595) | | Net cash used in financing activities | $(3,729) | $(7,219) | $3,490 | - The decrease in net cash provided by operating activities was primarily due to a $12.3 million decrease in cash provided by deferred revenue and a $4.2 million increase in cash used in accrued expenses[172] - The decrease in net cash provided by investing activities was due to proceeds from the sale of the Van Nuys facility of $5.6 million in Q1 2024, partially offset by a $1.0 million decrease in capital expenditures[173] Term Loan The Term Loan had an $18.4 million balance with a 27.81% effective interest rate, and the company was compliant with covenants before its repayment - As of March 31, 2025, the principal balance outstanding (including capitalized paid in kind interest) under the Term Loan was $18.4 million[175] - During the three months ended March 31, 2025, the Term Loan had an effective interest rate of 27.81% and a cash interest rate of 11.64%[175] - The Company was in compliance with the financial covenants (minimum liquidity of $13.0 million and minimum consolidated EBITDA targets) as of March 31, 2025[176] Contractual Commitments The company had $13.9 million in lease obligations and purchase commitments as of March 31, 2025, primarily due within the next year - As of March 31, 2025, the Company had $13.9 million of lease obligations and purchase commitments associated with contracts that are enforceable and legally binding[177] Future Capital Requirements Existing cash and cost controls are expected to provide sufficient liquidity for short and long-term needs, with potential for additional financing - The Company believes that existing cash and cash equivalents and cost control initiatives will provide sufficient liquidity to meet anticipated cash needs for the next twelve months as well as for the longer-term[178] - The Company may explore additional debt or equity financing to supplement anticipated working capital balances and further strengthen its financial position, but there can be no assurances that it will be able to raise additional capital in amounts or on terms acceptable[179] Critical Accounting Estimates No material changes occurred in the company's critical accounting estimates since the 2024 Annual Report on Form 10-K - There have been no material changes to the Company's critical accounting estimates discussed in the 2024 Annual Report on Form 10-K[180] Recent Accounting Pronouncements Information on recently adopted accounting pronouncements is detailed in Note 1 of the financial statements - Information on recently adopted accounting pronouncements is detailed in Note 1, Description of Business and Summary of Significant Accounting Policies[181] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company faces foreign currency risk, with 8% of Q1 2025 revenue in foreign currencies, and is exiting nutritional product sales in the UK and France - Approximately 8% of the Company's revenue for the three months ended March 31, 2025, was in foreign currencies (primarily Canadian dollars and British pounds), down from 11% in Q1 2024[182] - Management made a determination in 2023 to cease entering into any further foreign exchange options, resulting in a zero notional amount of outstanding foreign exchange derivative instruments at March 31, 2025[184][187] - As part of the Pivot, the Company has decided to exit the sale of nutritional and other physical products in the United Kingdom and France[184] - A hypothetical 10% change in exchange rates would result in an approximate $1.7 million increase or decrease in cost of revenue and operating expenses[186] Item 4. Controls and Procedures Management concluded disclosure controls were effective as of March 31, 2025, with no material changes in internal control over financial reporting - Management concluded that the Company's disclosure controls and procedures were effective as of March 31, 2025[188] - There have been no changes in internal control over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting[189] - 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[190] PART II—OTHER INFORMATION Item 1. Legal Proceedings The company is involved in several legal proceedings, including class actions and arbitration demands, and intends to vigorously defend itself - The Company is involved in a class action complaint alleging misclassification of its Partners as contractors rather than employees, with 12 arbitration actions already settled for nominal fees[192] - A patent infringement complaint by Dish Technologies LLC and SLING TV LLC was dismissed without prejudice following a Confidential Standstill and Tolling Agreement, which included an immaterial one-time payment by the Company[193] - Claims against the Company and Raine in the Reilly Action (class action related to the 2021 merger) for aiding and abetting breach of fiduciary duty were dismissed without prejudice on December 5, 2024[195] - Milberg Coleman Bryson Phillips Grossman filed 10 arbitration demands alleging that the Company violated the Video Privacy Protection Act on behalf of approximately 6,239 BODi subscribers[197] Item 1A. Risk Factors No material developments regarding risk factors were reported since the 2024 Annual Report on Form 10-K - No material developments regarding risk factors were reported since the 2024 Annual Report on Form 10-K[198] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities or use of proceeds were reported during the period - No unregistered sales of equity securities and use of proceeds were reported[199] Item 3. Defaults Upon Senior Securities No defaults upon senior securities were reported during the period - No defaults upon senior securities were reported[200] Item 4. Mine Safety Disclosures Mine Safety Disclosures are not applicable to the company's operations - Mine Safety Disclosures are not applicable to the Company[201] Item 5. Other Information This section provides additional information on the new ABL Facility and the subsequent repayment of the Blue Torch Term Loan - No director or officer of the Company adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement" during the three months ended March 31, 2025[202] Asset Based Lending Facility The company entered a $35.0 million ABL Facility on May 13, 2025, secured by assets, with specific interest rates and financial covenants - On May 13, 2025, the Company entered into a $35.0 million ABL Facility, which includes a $10 million uncommitted accordion, that matures on May 13, 2028[203] - The ABL Facility bears interest based on the one-month SOFR rate plus 9.00% (initially 13.33%) and is secured by a first lien on substantially all of the Company's assets[203] - Financial covenants under the ABL Facility require the Company to maintain certain billing levels, subscription counts, liquidity greater than $12 million, and annual capital expenditures less than $10 million[205][206] Blue Torch Term Loan Repayment The Term Loan was fully repaid on May 13, 2025, using ABL Facility proceeds, including principal, interest, and prepayment premium - The Company used the proceeds from the ABL Facility to repay in full its existing Term Loan on May 13, 2025[207] - The repayment included an outstanding principal balance of $17.3 million, $0.5 million of outstanding paid-in-kind interest, a $0.3 million prepayment premium, and $0.2 million of outstanding accrued interest[207] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including corporate documents, warrant forms, a letter agreement, and certifications - The exhibits include corporate governance documents (Certificate of Incorporation, Bylaws), warrant forms, a letter agreement, the Credit Agreement for the new ABL Facility, and certifications from the CEO and CFO[211] Signatures The report was signed by the CEO and Interim CFO on May 15, 2025, certifying its submission - The report was signed by Carl Daikeler, Chief Executive Officer, and Brad Ramberg, Interim Chief Financial Officer, on May 15, 2025[215]