PART I—FINANCIAL INFORMATION This section presents the Company's unaudited condensed consolidated financial statements, management's discussion, market risk, and internal controls Item 1. Financial Statements This section presents The Beachbody Company, Inc.'s unaudited condensed consolidated financial statements, including balance sheets, statements of operations, comprehensive loss, stockholders' equity, and cash flows, along with detailed notes explaining significant accounting policies, revenue recognition, fair value measurements, inventory, property and equipment, debt, equity, and other financial disclosures for the periods ended June 30, 2025 and 2024 Condensed Consolidated Balance Sheets The balance sheets provide a snapshot of the Company's financial position, detailing assets, liabilities, and equity as of June 30, 2025, and December 31, 2024 Condensed Consolidated Balance Sheets (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Total Assets | $145,894 | $174,556 | | Total Liabilities | $125,736 | $146,386 | | Total Stockholders' Equity | $20,158 | $28,170 | - Total assets decreased by $28.66 million (16.4%) from December 31, 2024, to June 30, 2025, primarily driven by decreases in current assets such as other current assets, inventory, and prepaid expenses10 - Total liabilities decreased by $20.65 million (14.1%) over the same period, mainly due to reductions in deferred revenue, accounts payable, and the current portion of the Term Loan10 - Stockholders' equity decreased by $8.01 million (28.4%) from December 31, 2024, to June 30, 2025, largely due to accumulated deficit10 Unaudited Condensed Consolidated Statements of Operations This statement outlines the Company's financial performance, including revenue, gross profit, operating loss, and net loss for the three and six months ended June 30, 2025 and 2024 Unaudited Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total Revenue | $63,941 | $110,183 | $136,304 | $230,229 | | Gross Profit | $46,238 | $76,376 | $97,787 | $157,658 | | Operating Loss | $(3,964) | $(9,482) | $(7,638) | $(20,305) | | Net Loss | $(5,900) | $(10,865) | $(11,648) | $(25,081) | | Net Loss per Common Share, Basic and Diluted | $(0.85) | $(1.59) | $(1.68) | $(3.70) | - Total revenue decreased by 42% for the three months ended June 30, 2025, and by 41% for the six months ended June 30, 2025, compared to the prior year periods, primarily due to lower digital subscriptions and nutritional product sales12 - Net loss improved for both the three-month period (from $(10.865) million to $(5.900) million) and the six-month period (from $(25.081) million to $(11.648) million) year-over-year, driven by reduced operating expenses12 Unaudited Condensed Consolidated Statements of Comprehensive Loss This statement details the Company's net loss and other comprehensive income or loss, reflecting total comprehensive loss for the periods ended June 30, 2025 and 2024 Unaudited Condensed Consolidated Statements of Comprehensive Loss (in thousands) | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net Loss | $(5,900) | $(10,865) | $(11,648) | $(25,081) | | Total Other Comprehensive Income (Loss) | $(6) | $(4) | $(15) | $34 | | Total Comprehensive Loss | $(5,906) | $(10,869) | $(11,663) | $(25,047) | - Total comprehensive loss for the three months ended June 30, 2025, was $(5.906) million, an improvement from $(10.869) million in the prior year, primarily reflecting the reduced net loss15 - For the six months ended June 30, 2025, total comprehensive loss was $(11.663) million, significantly lower than $(25.047) million in the same period last year15 Unaudited Condensed Consolidated Statements of Stockholders' Equity This statement tracks changes in the Company's stockholders' equity, including common stock, additional paid-in capital, accumulated deficit, and other comprehensive loss, for the six months ended June 30, 2025 Unaudited Condensed Consolidated Statements of Stockholders' Equity (in thousands) | Metric | Balances at Dec 31, 2024 | Balances at June 30, 2025 | | :-------------------------------- | :----------------------- | :---------------------- | | Common Stock Amount | $2 | $2 | | Additional Paid-In Capital | $671,735 | $675,386 | | Accumulated Deficit | $(643,518) | $(655,166) | | Accumulated Other Comprehensive Loss | $(49) | $(64) | | Total Stockholders' Equity | $28,170 | $20,158 | - Total stockholders' equity decreased from $28.170 million at December 31, 2024, to $20.158 million at June 30, 2025, primarily due to the net loss incurred during the period, partially offset by equity-based compensation and ESPP share issuances18 - Accumulated deficit increased by $11.648 million during the six months ended June 30, 2025, reflecting the net loss for the period18 Unaudited Condensed Consolidated Statements of Cash Flows This statement summarizes the Company's cash inflows and outflows from operating, investing, and financing activities for the six months ended June 30, 2025 and 2024 Unaudited Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $6,580 | $8,209 | | Net cash (used in) provided by investing activities | $(2,511) | $2,655 | | Net cash provided by (used in) financing activities | $785 | $(11,504) | | Net increase (decrease) in cash, cash equivalents, and restricted cash | $5,374 | $(1,082) | | Cash, cash equivalents and restricted cash, end of period | $25,561 | $32,327 | - Net cash provided by operating activities decreased to $6.580 million for the six months ended June 30, 2025, from $8.209 million in the prior year, mainly due to changes in deferred revenue and accounts payable, partially offset by a lower net loss21198 - Investing activities shifted from a net cash inflow of $2.655 million in 2024 to a net cash outflow of $(2.511) million in 2025, primarily due to the absence of proceeds from the sale of the Van Nuys facility21199 - Financing activities significantly improved from a net cash outflow of $(11.504) million in 2024 to a net cash inflow of $0.785 million in 2025, driven by new debt borrowings from the ABL Facility and repayment of the Term Loan21200 Notes to Unaudited Condensed Consolidated Financial Statements These notes provide detailed explanations and disclosures supporting the unaudited condensed consolidated financial statements, covering accounting policies, revenue, fair value, inventory, debt, equity, and other financial information Note 1. Description of Business and Summary of Significant Accounting Policies This note describes the Company's business, its strategic 'Pivot' to an affiliate model, and summarizes significant accounting policies and recent accounting pronouncements - The Beachbody Company, Inc. (BODi) is a fitness and nutrition company offering streaming fitness programs and nutritional products, which announced a strategic 'Pivot' on September 30, 2024, to transition its network business from a Multi-Level Marketing (MLM) model to a single-level affiliate model24 - The Company adopted ASU 2023-07 (Improvements to Reportable Segment Disclosures) retrospectively on January 1, 2024, with no material effect on financial statements28 - The Company is evaluating the potential impact of ASU 2023-09 (Improvements to Income Tax Disclosures) and ASU 2024-03 (Disaggregation of Income Statement Expenses), effective for annual periods beginning after December 15, 2024, and December 15, 2026, respectively2930 Note 2. Revenue This note disaggregates revenue by geographic region and details the recognition of deferred revenue performance obligations Revenue Disaggregated by Geographic Region (in thousands) | Geographic Region | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :---------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | United States | $58,997 | $99,423 | $125,849 | $206,173 | | Rest of world | $4,944 | $10,760 | $10,455 | $24,056 | | Total Revenue | $63,941 | $110,183 | $136,304 | $230,229 | - Approximately 95% of remaining deferred revenue performance obligations are expected to be recognized in the next 12 months33 - The Company recognized $21.5 million and $57.8 million of revenue from deferred revenue balances for the three and six months ended June 30, 2025, respectively33 Note 3. Fair Value Measurements This note provides fair value measurements for financial instruments, particularly warrants, categorized by valuation input levels Fair Value Measurements (in thousands) | Item | June 30, 2025 (Level 3) | December 31, 2024 (Level 3) | | :-------------------- | :---------------------- | :------------------------ | | Term Loan Warrants | $239 | $390 | | Common Stock Warrants | $1,065 | $1,783 | | Total Liabilities | $1,304 | $2,173 | - Private Placement Warrants and Public Warrants were valued at zero at June 30, 2025, and December 31, 2024, due to their high exercise price ($575.00) compared to the Company's stock price ($4.12 at June 30, 2025)3740 - The fair value of Term Loan Warrants decreased by $151 thousand for the six months ended June 30, 2025, primarily due to changes in the Company's Class A Common Stock price, contractual term, and risk-free rate44 - The fair value of Common Stock Warrants decreased by $718 thousand for the six months ended June 30, 2025, influenced by similar factors46 Note 4. Inventory This note details the composition of inventory, net, including raw materials, work in process, and finished goods, and adjustments for excess or obsolete inventory Inventory, Net (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :------------------------ | :------------ | :---------------- | | Raw materials and work in process | $5,767 | $7,650 | | Finished goods | $5,639 | $8,653 | | Total inventory | $11,406 | $16,303 | - Total inventory decreased by $4.897 million (30%) from December 31, 2024, to June 30, 202547 - Adjustments for excess inventory and net realizable value were $0.6 million for the six months ended June 30, 2025, compared to $1.0 million in the prior year47 Note 5. Other Current Assets This note itemizes other current assets, primarily focusing on deferred Partner costs, accounts receivable, and deferred Affiliate costs Other Current Assets (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Deferred Partner costs | $7,736 | $25,578 | | Accounts receivable, net | $1,851 | $1,449 | | Deferred Affiliate costs | $512 | $152 | | Other | $1,292 | $1,732 | | Total other current assets | $11,391 | $28,911 | - Total other current assets decreased by $17.52 million (60.6%) from December 31, 2024, to June 30, 2025, primarily due to a significant reduction in deferred Partner costs48 Note 6. Property and Equipment, Net This note presents the Company's property and equipment, net of accumulated depreciation, and details depreciation expense and asset disposals Property and Equipment, Net (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :---------------------------------------- | :------------ | :---------------- | | Property and equipment, gross | $138,296 | $141,897 | | Less: Accumulated depreciation | $(127,690) | $(129,148) | | Total property and equipment, net | $10,606 | $12,749 | - Net property and equipment decreased by $2.143 million (16.8%) from December 31, 2024, to June 30, 202549 - Depreciation expense for the six months ended June 30, 2025, was $4.910 million, down from $10.789 million in the prior year50 - The Company recognized a $0.8 million gain on the sale of its Van Nuys production facility on February 29, 202449 Note 7. Accrued Expenses and Other Current Liabilities This note itemizes accrued expenses, including employee compensation, taxes, professional services, advertising, and inventory-related costs Accrued Expenses (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Employee compensation and benefits | $5,868 | $5,180 | | Sales and other taxes | $2,759 | $3,125 | | Outside professional services | $2,496 | $1,997 | | Advertising | $2,010 | $2,208 | | Information technology | $1,720 | $2,211 | | Inventory, shipping and fulfillment | $1,158 | $2,925 | | Partner costs | $459 | $3,272 | | Other accrued expenses | $4,132 | $4,064 | | Total accrued expenses | $20,602 | $24,982 | - Total accrued expenses decreased by $4.38 million (17.5%) from December 31, 2024, to June 30, 2025, primarily due to reductions in Partner costs and inventory, shipping, and fulfillment expenses51 - Advertising costs for the six months ended June 30, 2025, were $22.1 million, an increase from $17.3 million in the prior year52 - The Company financed $2.2 million in annual insurance premiums with AFCO and $2.2 million with FIF, with outstanding balances of $0.4 million and $0.2 million, respectively, as of June 30, 20255354 Note 8. Commitments and Contingencies This note outlines the Company's future minimum payments under noncancelable agreements, royalty payments, lease obligations, and ongoing legal proceedings Future Minimum Payments under Noncancelable Service and Inventory Purchase Agreements (in thousands) | Period | Amount | | :-------------------------------- | :----- | | Six months ending December 31, 2025 | $10,852 | | Year ending December 31, 2026 | $2,299 | | Year ending December 31, 2027 | $730 | | Year ending December 31, 2028 | $75 | | Total | $13,956 | - The Company paid $1.4 million in royalty payments (exclusive of guaranteed payments) during the six months ended June 30, 202557 - Lease obligations require payments of approximately $0.7 million for the six months ending December 31, 2025, and $1.5 million for the year ending December 31, 202658 - The Company is involved in several legal proceedings, including a class action alleging misclassification of Partners as contractors and a class action related to the 2021 merger, as well as arbitration demands under the Video Privacy Protection Act606164 Note 9. Debt This note details the Company's debt arrangements, including the new ABL Facility, the repayment of the Term Loan, and associated financial covenants - On May 13, 2025, the Company entered into a new $35.0 million Asset-Based Lending (ABL) Facility, borrowing $25.0 million, which matures on May 13, 2028, with interest based on the one-month SOFR Rate plus 9.00% (subject to reduction) and a 3.5% SOFR floor66 - Proceeds from the ABL Facility were used to repay the existing Term Loan in full on May 13, 2025, resulting in a $2.2 million loss on debt extinguishment for the three and six months ended June 30, 202572 ABL Facility Payment Schedule (in thousands) | Period | Amount Due | | :-------------------------------- | :--------- | | Six months ending December 31, 2025 | $0 | | Year ending December 31, 2026 | $1,062 | | Year ending December 31, 2027 | $2,125 | | Year ending December 31, 2028 | $21,813 | | Total Debt | $25,000 | - The ABL Facility includes financial covenants such as capital expenditures less than $10 million annually, liquidity greater than $12 million, and targets for Three Month Total Billings and Quarterly Digital Subscriptions6870 Note 10. Segment This note clarifies that the Company operates as a single reporting segment, with performance assessed based on net loss - The Company operates as a single reporting segment, with the Chief Operating Decision Maker (CODM) assessing performance based on net loss and using it for annual budgeting and forecasting8485 - Depreciation expense was $4.9 million and content amortization expense was $5.0 million for the six months ended June 30, 202586 Note 11. Stockholders' Equity This note provides details on authorized and outstanding shares, equity transactions, and changes in accumulated other comprehensive income (loss) - As of June 30, 2025, the Company had 2,000,000,000 authorized shares, including Class A, Class X, Class C common stock, and preferred stock, with no dividends declared8889 - In December 2023, the Company issued 420,769 shares of Class A common stock and 543,590 Common Stock Warrants in a registered direct offering and concurrent private placement90 Changes in Accumulated Other Comprehensive Income (Loss) (in thousands) | Period | Balances at Dec 31, 2024 | Other comprehensive loss before reclassifications | Balances at June 30, 2025 | | :-------------------------------- | :----------------------- | :------------------------------------------------ | :---------------------- | | Six months ended June 30, 2025 | $(49) | $(15) | $(64) | Note 12. Equity-Based Compensation This note describes the Company's equity compensation plans, including outstanding options and RSUs, and the associated compensation expense Equity Compensation Plan Activity | Metric | Outstanding at Dec 31, 2024 | Outstanding at June 30, 2025 | | :-------------------------------- | :-------------------------- | :--------------------------- | | Time-Vesting Options | 1,008,017 | 860,500 | | RSUs | 326,226 | 554,766 | - The number of shares available for issuance under the 2021 Incentive Award Plan increased by 347,391 on January 1, 2025, totaling 1,071,664 shares available as of June 30, 202596 - Equity-based compensation expense for the six months ended June 30, 2025, was $3.741 million, a decrease from $9.104 million in the prior year101 Note 13. Restructuring This note details the Company's restructuring activities, including headcount reductions and associated employee-related costs and liabilities - On June 26, 2025, the Company initiated a post-Pivot restructuring, reducing headcount by approximately 70 employees (22% of the workforce), with expected costs of $2.6 million, of which $2.5 million was recorded in the three and six months ended June 30, 2025102 - Restructuring charges for the six months ended June 30, 2024, were $1.6 million, primarily for termination benefits104 Restructuring-Related Liability Activity (in thousands) | Metric | Balance at Dec 31, 2024 | Restructuring Charges | Payments / Utilizations | Liability at June 30, 2025 | | :-------------------- | :---------------------- | :-------------------- | :---------------------- | :------------------------- | | Employee-related costs | $938 | $2,492 | $(831) | $2,599 | Note 14. Income Taxes This note presents the Company's income tax provision and explains the factors influencing the effective tax rate - The income tax provision for the three and six months ended June 30, 2025, was $0.1 million, with effective tax rates of (1.7)% and (1.3)% respectively107 - The effective tax rate differs from the U.S. statutory rate primarily due to changes in valuation allowances on deferred tax assets108 Note 15. Loss per Share This note provides the calculation of basic and diluted net loss per common share, including the weighted-average shares outstanding Net Loss per Common Share (in thousands, except per share information) | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss | $(5,900) | $(10,865) | $(11,648) | $(25,081) | | Weighted-average common shares outstanding | 6,950,761 | 6,812,750 | 6,917,062 | 6,786,761 | | Net loss per common share, basic and diluted | $(0.85) | $(1.59) | $(1.68) | $(3.70) | - Basic and diluted net loss per common share are the same for all periods presented because the inclusion of potential common shares would have been antidilutive111 - As of June 30, 2025, 2,517,617 common shares were excluded from diluted EPS computation due to their antidilutive effect, including time-vesting options, RSUs, and various warrants111 Item 2. Management's Discussion and Analysis of Financial Condition and Operations This section provides management's perspective on the Company's financial condition and results of operations, highlighting the impact of the strategic 'Pivot' from an MLM to an affiliate model, significant declines in revenue, improvements in net loss and Adjusted EBITDA due to cost reductions, and discussions on liquidity, debt refinancing, and ongoing restructuring efforts Overview This section provides an overview of BODi's business, its strategic 'Pivot' to a single-level affiliate model, and key financial highlights for the periods presented - BODi is a leading fitness and nutrition company focused on digital content, supplements, and consumer health, offering streaming services and nutritional products118119 - On September 30, 2024, the Company initiated a 'Pivot' to transition from a multi-level marketing (MLM) model to a single-level affiliate model, reducing headcount by approximately 170 employees (33% of the workforce)121 Key Financial Highlights (in millions) | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total Revenue | $63.9 (↓42%) | $110.2 | $136.3 (↓41%) | $230.2 | | Net Loss | $(5.9) (↓46%) | $(10.9) | $(11.6) (↓54%) | $(25.1) | | Adjusted EBITDA | $4.6 (↓6%) | $4.9 | $8.3 (↓12%) | $9.5 | Recent Developments This section highlights recent significant events, including the new ABL Facility, repayment of the Term Loan, and post-Pivot restructuring efforts - On May 13, 2025, the Company secured a new $35.0 million Asset-Based Lending (ABL) Facility, borrowing $25.0 million, which matures on May 13, 2028124 - Proceeds from the ABL Facility were used to fully repay the existing Term Loan ($17.3 million principal) on May 13, 2025, resulting in a $2.2 million loss on debt extinguishment125 - A post-Pivot restructuring on June 26, 2025, will reduce headcount by approximately 70 employees (22% of the workforce), incurring $2.5 million in costs during the three and six months ended June 30, 2025127 Key Operational and Business Metrics This section presents key operational metrics such as digital and nutritional subscriptions, average digital retention, total streams, DAU/MAU, gross margin, and Adjusted EBITDA Key Operational and Business Metrics | Metric | As of June 30, 2025 | As of June 30, 2024 | | :-------------------------- | :------------------ | :------------------ | | Digital subscriptions (millions) | 0.94 (↓18.3%) | 1.15 | | Nutritional subscriptions (millions) | 0.07 (↓50.0%) | 0.14 | | Average digital retention | 96.7% (↑0.2%) | 96.5% | | Total streams (millions) | 18.0 (↓20.8%) | 22.7 | | DAU/MAU | 31.4% (↓1.6%) | 31.9% | | Gross margin | 72.3% (↑3.0%) | 69.3% | | Adjusted EBITDA (millions) | $4.6 (↓6.1%) | $4.9 | - Digital subscriptions decreased by 18.3% to 0.94 million, and nutritional subscriptions decreased by 50% to 0.07 million as of June 30, 2025, compared to the prior year130 - Total streams declined by 20.8% to 18.0 million for the three months ended June 30, 2025, indicating reduced customer engagement131 Non-GAAP Information This section defines and reconciles Adjusted EBITDA, a non-GAAP measure used by management to evaluate core operating performance - Adjusted EBITDA is a non-GAAP measure used by management to evaluate core operating performance, excluding non-cash expenses (depreciation, amortization, equity-based compensation) and non-recurring items (restructuring costs, interest income/expense)138139 Adjusted EBITDA Reconciliation (in thousands) | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss | $(5,900) | $(10,865) | $(11,648) | $(25,081) | | Adjustments (total) | $10,532 | $15,793 | $19,993 | $34,563 | | Adjusted EBITDA | $4,632 | $4,928 | $8,345 | $9,482 | Results of Operations This section provides a detailed analysis of the Company's revenue, cost of revenue, operating expenses, and other income/expense for the periods presented Revenue This section analyzes revenue performance by segment, detailing declines in digital, nutrition, and connected fitness revenues due to reduced subscriptions and strategic changes Revenue by Segment (in thousands) | Segment | Three months ended June 30, 2025 | % Change | Six months ended June 30, 2025 | % Change | | :---------------- | :------------------------------- | :------- | :----------------------------- | :------- | | Digital | $39,693 | (32%) | $82,604 | (31%) | | Nutrition and other | $24,172 | (52%) | $52,825 | (50%) | | Connected fitness | $76 | (94%) | $875 | (80%) | | Total revenue | $63,941 | (42%) | $136,304 | (41%) | - Digital revenue decreased by $19.078 million (32%) for the three months and $37.673 million (31%) for the six months ended June 30, 2025, primarily due to 18% fewer subscriptions and the impact of the Pivot on Partner fees145148 - Nutrition and other revenue declined by $25.929 million (52%) for the three months and $52.788 million (50%) for the six months, mainly due to 49-50% fewer nutritional subscriptions and the elimination of preferred customer fees post-Pivot146149 - Connected fitness revenue dropped significantly by 94% and 80% for the three and six months, respectively, due to management's decision to cease bike inventory sales in Q1 2025147150 Cost of Revenue This section details the cost of revenue by segment and explains changes in gross margins, driven by lower content amortization, reduced personnel expenses, and product costs Cost of Revenue and Gross Profit by Segment (in thousands) | Segment | Three months ended June 30, 2025 | % Change (Cost) | Gross Margin 2025 | Gross Margin 2024 | | :---------------- | :------------------------------- | :-------------- | :---------------- | :---------------- | | Digital Cost | $4,893 | (57%) | 87.7% | 80.5% | | Nutrition Cost | $11,740 | (40%) | 51.4% | 60.8% | | Connected Fitness Cost | $1,070 | (61%) | NM | (106.7%) | | Total Cost | $17,703 | (48%) | 72.3% | 69.3% | - Digital cost of revenue decreased by 57% for the three months and 54% for the six months, driven by lower content amortization, reduced personnel expenses, and decreased depreciation156160 - Nutrition and other cost of revenue decreased by 40% for both periods, primarily due to lower product costs and reduced fulfillment/shipping expenses from decreased sales volume157161 - Connected fitness cost of revenue decreased by 61% and 65% for the three and six months, respectively, due to the cessation of bike inventory sales159162 - Digital gross margin increased to 87.7% (from 80.5%) for the three months and 86.6% (from 79.8%) for the six months, while Nutrition and other gross margin decreased to 51.4% (from 60.8%) and 52.3% (from 60.3%) respectively, due to the elimination of preferred customer fees and higher promotional offerings155158160161 Operating Expenses This section analyzes changes in selling and marketing, enterprise technology and development, general and administrative, and restructuring expenses Operating Expenses (in thousands) | Expense Category | Three months ended June 30, 2025 | % Change | Six months ended June 30, 2025 | % Change | | :-------------------------------- | :------------------------------- | :------- | :----------------------------- | :------- | | Selling and marketing | $25,528 | (55%) | $56,498 | (51%) | | Enterprise technology and development | $10,611 | (38%) | $23,207 | (33%) | | General and administrative | $11,571 | (7%) | $23,228 | (10%) | | Restructuring | $2,492 | NM | $2,492 | 52% | | Total operating expenses | $50,202 | (42%) | $105,425 | (41%) | - Selling and marketing expenses decreased by 55% for the three months and 51% for the six months, primarily due to a significant reduction in Partner compensation post-Pivot and lower personnel/event expenses, despite increased media spend164166 - Enterprise technology and development expenses decreased by 38% and 33% for the three and six months, respectively, mainly due to reduced personnel-related expenses and depreciation from fully depreciated assets post-Pivot170172 - General and administrative expenses decreased by 7% and 10% for the three and six months, respectively, driven by lower headcount and a gain on the sale of the Van Nuys facility in the prior year, partially offset by increased professional fees176178 - Restructuring charges were $2.492 million for both the three and six months ended June 30, 2025, related to post-Pivot headcount reductions181 Other Income (Expense) This section details non-operating items such as loss on debt extinguishment, changes in fair value of warrant liabilities, and interest expense Other Income (Expense) (in thousands) | Category | Three months ended June 30, 2025 | % Change | Six months ended June 30, 2025 | % Change | | :-------------------------------- | :------------------------------- | :------- | :----------------------------- | :------- | | Loss on debt extinguishment | $(2,166) | NM | $(2,166) | 12% | | Change in fair value of warrant liabilities | $1,558 | NM | $869 | NM | | Interest expense | $(1,268) | (23%) | $(2,833) | (20%) | | Other income, net | $41 | (90%) | $266 | (70%) | - The loss on debt extinguishment for the three and six months ended June 30, 2025, was $2.166 million, due to the full repayment of the Term Loan184185 - The change in fair value of warrant liabilities resulted in a gain of $1.558 million for the three months and $0.869 million for the six months ended June 30, 2025, primarily due to a decline in the Company's stock price184185 - Interest expense decreased by 23% and 20% for the three and six months, respectively, due to a lower average principal debt balance and a reduced effective interest rate on the new ABL Facility compared to the Term Loan184185 Income Tax Provision This section explains the Company's income tax provision and the factors influencing its effective tax rate Income Tax Provision (in thousands) | Period | Three months ended June 30, 2025 | % Change | Six months ended June 30, 2025 | % Change | | :-------------------- | :------------------------------- | :------- | :----------------------------- | :------- | | Income tax provision | $(101) | 51% | $(146) | 13% | - The income tax provision increased for both periods, primarily due to changes in valuation allowances and an increase in net expense from discrete events187188 Liquidity and Capital Resources This section discusses the Company's cash position, the impact of the new ABL Facility, compliance with financial covenants, and management's outlook on future liquidity - As of June 30, 2025, the Company had $25.6 million in cash and cash equivalents197 - The new ABL Facility provided approximately $5 million in additional capital after repaying the Term Loan191 - The Company was in compliance with all financial covenants under the ABL Facility as of June 30, 2025, but notes that unexpected weakness in demand could impact compliance with minimum billings and digital subscriptions covenants194 - Management believes existing cash, cash equivalents, and cost control initiatives will provide sufficient liquidity for the next twelve months and longer-term, but may explore additional debt or equity financing203204 Critical Accounting Policies and Estimates This section confirms no material changes to critical accounting estimates since the prior annual report - There have been no material changes to the Company's critical accounting estimates since the 2024 Annual Report on Form 10-K206 Recent Accounting Pronouncements This section refers to Note 1 for details on recently adopted and not yet adopted accounting pronouncements - Refer to Note 1 for details on recently adopted and not yet adopted accounting pronouncements207 Item 3. Quantitative and Qualitative Disclosures About Market Risk This section discusses the Company's exposure to foreign currency exchange risk, noting that approximately 8% of revenue for the six months ended June 30, 2025, was in foreign currencies, and its strategy to reduce this exposure - Approximately 8% of the Company's revenue for the six months ended June 30, 2025, was denominated in foreign currencies, primarily Canadian dollars and British pounds208 - Management decided to cease entering into foreign exchange options, and all outstanding options expired prior to March 31, 2024, resulting in zero notional amount of foreign exchange derivative instruments at June 30, 2025210213 - As part of the Pivot, the Company is exiting the sale of nutritional and other physical products in the United Kingdom and France210 - A hypothetical 10% change in exchange rates would result in an approximate $1.5 million increase or decrease in cost of revenue and operating expenses212 Item 4. Controls and Procedures Management, including the CEO and Interim CFO, concluded that the Company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control over financial reporting during the most recent fiscal quarter - The Chief Executive Officer and Interim Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of June 30, 2025214 - No material changes in internal control over financial reporting occurred during the most recent fiscal quarter216 PART II—OTHER INFORMATION This section provides updates on legal proceedings, risk factors, equity security sales, defaults, mine safety, other information, and exhibits Item 1. Legal Proceedings This section updates on ongoing legal proceedings, including a class action lawsuit alleging misclassification of Partners as employees, a class action related to the 2021 merger, and arbitration demands concerning the Video Privacy Protection Act - A class action complaint filed on May 22, 2023, alleges misclassification of Partners as contractors and other California Labor Code violations; 13 arbitrations have been settled for nominal fees219 - A class action complaint filed on June 14, 2024, alleges breach of fiduciary duty related to the 2021 merger; aiding and abetting claims against the Company were dismissed without prejudice on December 5, 2024220221 - On October 14, 2024, 10 arbitration demands were filed alleging violations of the Video Privacy Protection Act, with intentions to file similar demands for approximately 6,239 additional subscribers223 Item 1A. Risk Factors There have been no material developments regarding the risk factors previously reported in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2024 - No material developments have occurred with respect to the risk factors previously disclosed in the Annual Report on Form 10-K for the fiscal year ended December 31, 2024224 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The Company reported no unregistered sales of equity securities or use of proceeds during the period - There were no unregistered sales of equity securities or use of proceeds to report226 Item 3. Defaults Upon Senior Securities The Company reported no defaults upon senior securities during the period - There were no defaults upon senior securities to report227 Item 4. Mine Safety Disclosures This item is not applicable to the Company - This item is not applicable228 Item 5. Other Information No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the three months ended June 30, 2025 - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2025229 Item 6. Exhibits This section lists all exhibits filed as part of the Form 10-Q, including organizational documents, warrant forms, credit agreements, and certifications - The exhibits include the Second Amended and Restated Certificate of Incorporation, Bylaws, Form of Third Amended and Restated Warrant to Purchase Stock, and the Credit Agreement dated May 13, 2025231 - Certifications from the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a) are filed herewith231 SIGNATURES This section contains the official signatures of the Chief Executive Officer and Interim Chief Financial Officer, certifying the report - The report was signed on August 6, 2025, by Carl Daikeler, Chief Executive Officer, and Brad Ramberg, Interim Chief Financial Officer237
The Beachbody pany(BODY) - 2025 Q2 - Quarterly Report