The Beachbody Company(BODI) - 2025 Q2 - Quarterly Report

PART I—FINANCIAL INFORMATION Item 1. Financial Statements This section presents The Beachbody Company, Inc.'s unaudited condensed consolidated financial statements for the quarter and six months ended June 30, 2025, including balance sheets, statements of operations, comprehensive loss, stockholders' equity, and cash flows, along with detailed notes explaining significant accounting policies, revenue disaggregation, fair value measurements, inventory, debt, equity, and restructuring activities Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheets (in thousands) | Metric (in thousands) | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :-------------------- | :------------ | :---------------- | :--------- | :--------- | | Total Assets | $145,894 | $174,556 | $(28,662) | -16.4% | | Total Liabilities | $125,736 | $146,386 | $(20,650) | -14.1% | | Total Stockholders' Equity | $20,158 | $28,170 | $(8,012) | -28.4% | - Current assets decreased by $21.39 million (27.2%) from $78.685 million at December 31, 2024, to $57.295 million at June 30, 2025, primarily driven by decreases in other current assets and inventory[10] - Current liabilities decreased by $31.504 million (24.7%) from $127.638 million at December 31, 2024, to $96.134 million at June 30, 2025, largely due to a decrease in deferred revenue and the current portion of the Term Loan[10] Unaudited Condensed Consolidated Statements of Operations Unaudited Condensed Consolidated Statements of Operations – Three Months Ended June 30 (in thousands) | Metric (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Change ($) | Change (%) | | :-------------------- | :------------------------------- | :------------------------------- | :--------- | :--------- | | Total Revenue | $63,941 | $110,183 | $(46,242) | -42.0% | | Gross Profit | $46,238 | $76,376 | $(30,138) | -39.5% | | Operating Loss | $(3,964) | $(9,482) | $5,518 | -58.2% | | Net Loss | $(5,900) | $(10,865) | $4,965 | -45.7% | | Net Loss per Share | $(0.85) | $(1.59) | $0.74 | -46.5% | Unaudited Condensed Consolidated Statements of Operations – Six Months Ended June 30 (in thousands) | Metric (in thousands) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | Change ($) | Change (%) | | :-------------------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Total Revenue | $136,304 | $230,229 | $(93,925) | -40.8% | | Gross Profit | $97,787 | $157,658 | $(59,871) | -38.0% | | Operating Loss | $(7,638) | $(20,305) | $12,667 | -62.4% | | Net Loss | $(11,648) | $(25,081) | $13,433 | -53.6% | | Net Loss per Share | $(1.68) | $(3.70) | $2.02 | -54.6% | Unaudited Condensed Consolidated Statements of Comprehensive Loss Unaudited Condensed Consolidated Statements of Comprehensive Loss – Three Months Ended June 30 (in thousands) | Metric (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | | Net Loss | $(5,900) | $(10,865) | | Total Other Comprehensive Loss | $(6) | $(4) | | Total Comprehensive Loss | $(5,906) | $(10,869) | Unaudited Condensed Consolidated Statements of Comprehensive Loss – Six Months Ended June 30 (in thousands) | Metric (in thousands) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------- | :----------------------------- | :----------------------------- | | Net Loss | $(11,648) | $(25,081) | | Total Other Comprehensive Income (Loss) | $(15) | $34 | | Total Comprehensive Loss | $(11,663) | $(25,047) | Unaudited Condensed Consolidated Statements of Stockholders' Equity Unaudited Condensed Consolidated Statements of Stockholders' Equity (in thousands) | Metric (in thousands) | Balances at Dec 31, 2024 | Net Loss | Other Comprehensive Loss | Equity-based Compensation | Options Exercised, net | Tax Withholdings | ESPP Issuance | Balances at Jun 30, 2025 | | :-------------------- | :----------------------- | :------- | :----------------------- | :------------------------ | :--------------------- | :--------------- | :-------------- | :----------------------- | | Additional Paid-In Capital | $671,735 | — | — | $3,741 | $47 | $(215) | $78 | $675,386 | | Accumulated Deficit | $(643,518) | $(11,648) | — | — | — | — | — | $(655,166) | | Total Stockholders' Equity | $28,170 | $(11,648) | $(15) | $3,741 | $47 | $(215) | $78 | $20,158 | Unaudited Condensed Consolidated Statements of Cash Flows Unaudited Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity (in thousands) | 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 | - Operating cash flow decreased by $1.629 million, primarily due to increased cash used by deferred revenue and accounts payable, partially offset by a decrease in net loss and increased cash from other assets and inventory[21][198] - 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, mainly due to the absence of proceeds from the sale of the Van Nuys facility in the current period[21][199] - 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 the repayment of the Term Loan[21][200] Notes to Unaudited Condensed Consolidated Financial Statements Note 1. Description of Business and Summary of Significant Accounting Policies - 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, transitioning its network business from a Multi-Level Marketing (MLM) model to a single-level affiliate model[24] - The company adopted ASU 2023-07 (Improvements to Reportable Segment Disclosures) retrospectively on January 1, 2024, with no material effect on financial statements[28] - 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, respectively[29][30] Note 2. Revenue Revenue by Geographic Region (in thousands) | Geographic Region (in thousands) | 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 months[33] - The company recognized $21.5 million and $57.8 million of revenue from deferred revenue balances as of December 31, 2024, for the three and six months ended June 30, 2025, respectively[33] Note 3. Fair Value Measurements Fair Value of Financial Instruments (in thousands) | Financial Instrument (in thousands) | 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 had a fair value of 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)[37][40] - The fair value of Term Loan Warrants decreased by $265 thousand for the three months ended June 30, 2025, and by $151 thousand for the six months ended June 30, 2025, primarily due to changes in the Class A Common Stock price, contractual term, and risk-free rate[44] - The fair value of Common Stock Warrants decreased by $1.293 million for the three months ended June 30, 2025, and by $718 thousand for the six months ended June 30, 2025, driven by similar factors[46] Note 4. Inventory Inventory Breakdown (in thousands) | Inventory (in thousands) | 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 | - Inventory decreased by $4.897 million (30.0%) from December 31, 2024, to June 30, 2025[47] - Adjustments to inventory carrying value were $0.4 million and $0.6 million for the three and six months ended June 30, 2025, respectively, primarily recorded in nutrition and other cost of revenue[47] Note 5. Other Current Assets Other Current Assets (in thousands) | Other Current Assets (in thousands) | 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 costs[48] Note 6. Property and Equipment, Net Property and Equipment, Net (in thousands) | Property and Equipment (in thousands) | 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, 2025[49] - The company recognized a $0.8 million gain on the sale of its Van Nuys production facility on February 29, 2024, recorded as a reduction in general and administrative expenses[49] Depreciation Expense (in thousands) | Depreciation Expense (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :---------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Cost of revenue | $775 | $2,225 | $2,333 | $4,283 | | Enterprise technology and development | $1,247 | $3,186 | $2,577 | $6,506 | | Total depreciation | $2,022 | $5,411 | $4,910 | $10,789 | Note 7. Accrued Expenses and Other Current Liabilities Accrued Expenses (in thousands) | Accrued Expenses (in thousands) | 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 | - 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 expenses[51] - Advertising costs were $10.5 million and $22.1 million for the three and six months ended June 30, 2025, respectively, an increase from $8.2 million and $17.3 million in the prior year periods[52] - The company financed $2.2 million in annual insurance premiums with AFCO Acceptance Corporation and $2.2 million with First Insurance Funding in October 2024, with outstanding balances of $0.4 million and $0.2 million, respectively, as of June 30, 2025[53][54] Note 8. Commitments and Contingencies Future Minimum Payments for Noncancelable Agreements (in thousands) | Future Minimum Payments (in thousands) | 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 has noncancelable inventory purchase and service agreements totaling $13.956 million through 2028, with $10.852 million due in the second half of 2025[56] - Lease obligations require payments of approximately $0.7 million during the six months ending December 31, 2025, $1.5 million for 2026, and $0.9 million thereafter through 2029[58] - The company is involved in several legal proceedings, including a class action alleging misclassification of Partners as contractors, a class action related to the 2021 merger, and arbitration demands alleging Video Privacy Protection Act violations, with the company denying the allegations and intending to vigorously defend itself[60][61][64][65] Note 9. Debt - 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, and bears interest at SOFR + 9.00% (with a potential reduction to SOFR + 7.75%), and has a SOFR floor of 3.5%[66] - The ABL Facility proceeds 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, 2025[72] - The Term Loan, initially $50.0 million, bore interest at SOFR + 7.15% plus 3.00% paid-in-kind interest, with an effective interest rate of 28.00% from January 1, 2025, to May 13, 2025[74] - The company had one irrevocable standby letter of credit outstanding for $0.1 million at June 30, 2025, collateralized by $0.1 million in restricted cash[83] Note 10. Segment - The company operates as a single reporting segment, with the Chief Operating Decision Maker (CODM) assessing performance based on net loss and reviewing budget-to-actual variances quarterly[84][85][87] Selected Expenses (in thousands) | Expense (in thousands) | Three months ended June 30, 2025 | Six months ended June 30, 2025 | | :--------------------- | :------------------------------- | :----------------------------- | | Depreciation expense | $2,022 | $4,910 | | Content amortization expense | $2,289 | $5,018 | | Interest income, net | $300 | $500 | Note 11. Stockholders' Equity - 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, where Class A holders get one vote, Class X ten votes, and Class C no votes[88][89] - In December 2023, the company completed an Equity Offering, issuing 420,769 shares of Class A common stock, pre-funded warrants for 122,821 shares (exercised in January 2024), and 543,590 Common Stock Warrants[90] Accumulated Other Comprehensive Income (Loss) (in thousands) | Accumulated Other Comprehensive Income (Loss) (in thousands) | Balances at March 31, 2025 | Other comprehensive loss before reclassifications | Balances at June 30, 2025 | | :----------------------------------------------------------- | :------------------------- | :------------------------------------------------ | :------------------------ | | Total | $(58) | $(6) | $(64) | Note 12. Equity-Based Compensation Equity Options Activity | Equity Options Activity | Outstanding at Dec 31, 2024 | Exercised | Forfeited | Expired | Outstanding at Jun 30, 2025 | | :---------------------- | :-------------------------- | :-------- | :-------- | :------ | :-------------------------- | | Number of Options | 1,008,017 | (7,233) | (79,426) | (60,858) | 860,500 | | Weighted Average Exercise Price | $18.64 | $6.43 | $14.32 | $15.76 | $20.04 | RSU Activity | RSU Activity | Outstanding at Dec 31, 2024 | Granted | Vested | Forfeited | Outstanding at Jun 30, 2025 | | :------------- | :-------------------------- | :------ | :----- | :-------- | :-------------------------- | | Number of RSUs | 326,226 | 414,560 | (123,613) | (62,407) | 554,766 | | Weighted-Average Fair Value (per RSU) | $17.42 | $6.30 | $15.40 | $7.59 | $9.78 | - The fair value of RSUs vested was $0.8 million and $1.9 million for the three and six months ended June 30, 2025, respectively[95] Equity-Based Compensation Expense (in thousands) | Equity-Based Compensation Expense (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :----------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Cost of revenue | $195 | $355 | $396 | $731 | | Selling and marketing | $235 | $1,891 | $505 | $3,393 | | Enterprise technology and development | $114 | $244 | $275 | $484 | | General and administrative | $1,471 | $2,249 | $2,565 | $4,496 | | Total equity-based compensation | $2,015 | $4,739 | $3,741 | $9,104 | Note 13. Restructuring - On June 26, 2025, the company initiated a post-Pivot restructuring, reducing headcount by approximately 70 employees (22% of the workforce), which is expected to incur $2.6 million in costs, with $2.5 million recorded in Q2 2025[102] - The 2024 restructuring charges totaled $1.6 million for the six months ended June 30, 2024, primarily for termination benefits[104] Restructuring-Related Liability (in thousands) | Restructuring-Related Liability (in thousands) | Balance at Dec 31, 2024 | Restructuring Charges | Payments / Utilizations | Liability at Jun 30, 2025 | | :--------------------------------------------- | :---------------------- | :-------------------- | :---------------------- | :------------------------ | | Employee-related costs | $938 | $2,492 | $(831) | $2,599 | Note 14. Income Taxes Income Tax Provision (in thousands) | Income Tax Provision (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :---------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Income tax provision | $(101) | $(67) | $(146) | $(129) | | Effective tax rate | -1.7% | -0.6% | -1.3% | -0.5% | - The effective tax rate differs from the U.S. statutory rate primarily due to changes in valuation allowances on deferred tax assets[108] Note 15. Loss per Share Loss per Share (in thousands, except per share data) | Loss per Share (in thousands, except per share data) | 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 because the inclusion of potential common shares would have been antidilutive[111] Antidilutive Common Shares Excluded | Antidilutive Common Shares Excluded | June 30, 2025 | June 30, 2024 | | :---------------------------------- | :------------ | :------------ | | Time-vesting options | 860,500 | 809,765 | | Performance-vesting options | — | 318,440 | | RSUs | 554,766 | 450,528 | | Compensation warrants | 79,612 | 79,612 | | Public and Private Placement Warrants | 306,667 | 306,667 | | Term Loan Warrants | 97,482 | 97,482 | | Common Stock Warrants | 543,590 | 543,590 | | Forest Road Earn-out Shares | 75,000 | 75,000 | | Total | 2,517,617 | 2,681,084 | 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 'Pivot' to an affiliate model, recent debt restructuring, and a detailed analysis of revenue, costs, and operating expenses, also discussing key operational metrics, non-GAAP financial measures like Adjusted EBITDA, liquidity, and capital resources Overview - BODi is a fitness and nutrition company focused on digital content, supplements, and consumer health, known for programs like P90X® and Shakeology®[118][119] - 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 Metrics – Three Months Ended June 30 (in millions) | Metric (in millions) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Change (%) | | :------------------- | :------------------------------- | :------------------------------- | :--------- | | Total Revenue | $63.9 | $110.2 | -42% | | Digital Revenue | $39.7 | $58.8 | -32% | | Nutrition and other Revenue | $24.2 | $50.1 | -52% | | Connected Fitness Revenue | $0.1 | $1.3 | -94% | | Operating Expenses | $50.2 | $85.9 | -41.5% | | Net Loss | $(5.9) | $(10.9) | -45.9% | | Adjusted EBITDA | $4.6 | $4.9 | -6.1% | Key Financial Metrics – Six Months Ended June 30 (in millions) | Metric (in millions) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | Change (%) | | :------------------- | :----------------------------- | :----------------------------- | :--------- | | Total Revenue | $136.3 | $230.2 | -41% | | Digital Revenue | $82.6 | $120.3 | -31% | | Nutrition and other Revenue | $52.8 | $105.6 | -50% | | Connected Fitness Revenue | $0.9 | $4.3 | -80% | | Operating Expenses | $105.4 | $178.0 | -40.8% | | Net Loss | $(11.6) | $(25.1) | -53.8% | | Adjusted EBITDA | $8.3 | $9.5 | -12.6% | Recent Developments - 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, 2028, and bears interest at SOFR + 9.00%[124] - Proceeds from the ABL Facility were used to fully repay the existing Term Loan ($17.3 million outstanding principal) on May 13, 2025, resulting in a $2.2 million loss on debt extinguishment[125] - 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 Q2 2025[127] Key Operational and Business Metrics Subscriptions (in millions) | Metric (in millions) | As of June 30, 2025 | As of June 30, 2024 | Change (%) | | :------------------- | :------------------ | :------------------ | :--------- | | Digital subscriptions | 0.94 | 1.15 | -18.3% | | Nutritional subscriptions | 0.07 | 0.14 | -50.0% | Operational Metrics | 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 | | :------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Average digital retention | 96.7% | 96.5% | 96.8% | 96.1% | | Total streams (millions) | 18.0 | 22.7 | 38.8 | 48.3 | | DAU/MAU | 31.4% | 31.9% | 32.0% | 32.6% | - Digital subscriptions decreased by 18% and nutritional subscriptions by 50% year-over-year, indicating lower demand[130][145][146][148][149] - Average digital retention slightly increased to 96.7% (Q2 2025) and 96.8% (YTD Q2 2025) compared to prior year periods, while total streams and DAU/MAU decreased, suggesting reduced customer engagement despite improved retention rates[131] Non-GAAP Information - 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)[137][138][139] Net Loss and Adjusted EBITDA (in thousands) | Metric (in thousands) | 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) | | Adjusted EBITDA | $4,632 | $4,928 | $8,345 | $9,482 | - Adjusted EBITDA decreased by 6.1% for the three months and 12.6% for the six months ended June 30, 2025, compared to the prior year, despite a reduction in net loss, indicating ongoing operational challenges[140] Results of Operations Revenue Revenue by Category – Three Months Ended June 30 (in thousands) | Revenue Category (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | $ Change | % Change | | :------------------------------ | :------------------------------- | :------------------------------- | :------- | :------- | | Digital | $39,693 | $58,771 | $(19,078) | -32% | | Nutrition and other | $24,172 | $50,101 | $(25,929) | -52% | | Connected fitness | $76 | $1,311 | $(1,235) | -94% | | Total revenue | $63,941 | $110,183 | $(46,242) | -42% | Revenue by Category – Six Months Ended June 30 (in thousands) | Revenue Category (in thousands) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | $ Change | % Change | | :------------------------------ | :----------------------------- | :----------------------------- | :------- | :------- | | Digital | $82,604 | $120,277 | $(37,673) | -31% | | Nutrition and other | $52,825 | $105,613 | $(52,788) | -50% | | Connected fitness | $875 | $4,339 | $(3,464) | -80% | | Total revenue | $136,304 | $230,229 | $(93,925) | -41% | - Digital revenue decreased due to 18% fewer subscriptions and a $2.9 million decrease in Partner fees (due to the Pivot) for the three months ended June 30, 2025[145] - Nutrition and other revenue declined significantly due to 49% fewer nutritional subscriptions, a $4.1 million decrease in preferred customer fees (due to the Pivot), and reduced shipping revenue, partially offset by increased Amazon sales[146] - Connected fitness revenue decreased by 94% (three months) and 80% (six months) as management ceased bike inventory sales in Q1 2025[147][150] Cost of Revenue Cost of Revenue by Category – Three Months Ended June 30 (in thousands) | Cost of Revenue (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | $ Change | % Change | | :----------------------------- | :------------------------------- | :------------------------------- | :------- | :------- | | Digital | $4,893 | $11,476 | $(6,583) | -57% | | Nutrition and other | $11,740 | $19,621 | $(7,881) | -40% | | Connected fitness | $1,070 | $2,710 | $(1,640) | -61% | | Total cost of revenue | $17,703 | $33,807 | $(16,104) | -48% | Gross Margin by Category | Gross Margin | Three months ended June 30, 2025 | Three months ended June 30, 2024 | | :----------------------------- | :------------------------------- | :------------------------------- | | Digital | 87.7% | 80.5% | | Nutrition and other | 51.4% | 60.8% | | Connected fitness | NM | (106.7%) | | Total gross margin | 72.3% | 69.3% | - Digital cost of revenue decreased by 57% (three months) and 54% (six months) due to lower content amortization, reduced personnel expenses from restructuring, and decreased depreciation, leading to an increase in digital gross margin[156][160] - Nutrition and other cost of revenue decreased by 40% (three and six months) due to lower product costs and reduced fulfillment/shipping expenses; however, gross margin decreased due to the elimination of preferred customer fees and higher promotional offerings[157][158][161] - Connected fitness cost of revenue decreased by 61% (three months) and 65% (six months) due to the cessation of bike inventory sales, resulting in lower freight, shipping, and product costs[159][162] Operating Expenses Selling and Marketing Selling and Marketing Expenses – Three Months Ended June 30 (in thousands) | Selling and Marketing (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | $ Change | % Change | | :----------------------------------- | :------------------------------- | :------------------------------- | :------- | :------- | | Selling and marketing | $25,528 | $56,308 | $(30,780) | -55% | | As a percentage of total revenue | 39.9% | 51.1% | | -11.2% | Selling and Marketing Expenses – Six Months Ended June 30 (in thousands) | Selling and Marketing (in thousands) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | $ Change | % Change | | :----------------------------------- | :----------------------------- | :----------------------------- | :------- | :------- | | Selling and marketing | $56,498 | $115,569 | $(59,071) | -51% | | As a percentage of total revenue | 41.4% | 50.2% | | -8.8% | - Selling and marketing expenses decreased significantly (55% for three months, 51% for six months) primarily due to a $24.4 million (three months) and $46.3 million (six months) decrease in Partner compensation following the Pivot, and reduced personnel and event expenses[164][166] - The decrease was partially offset by increased media expense ($3.4 million for three months, $7.2 million for six months) and affiliated compensation ($0.7 million for three months, $1.6 million for six months) related to the Pivot transition[164][166] - Selling and marketing expense as a percentage of total revenue decreased by 1,120 basis points (three months) and 880 basis points (six months) due to the significant reduction in Partner compensation[165][167] Enterprise Technology and Development Enterprise Technology and Development Expenses – Three Months Ended June 30 (in thousands) | Enterprise Technology and Development (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | $ Change | % Change | | :--------------------------------------------------- | :------------------------------- | :------------------------------- | :------- | :------- | | Expense | $10,611 | $17,162 | $(6,551) | -38% | | As a percentage of total revenue | 16.6% | 15.6% | | 1.0% | Enterprise Technology and Development Expenses – Six Months Ended June 30 (in thousands) | Enterprise Technology and Development (in thousands) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | $ Change | % Change | | :--------------------------------------------------- | :----------------------------- | :----------------------------- | :------- | :------- | | Expense | $23,207 | $34,879 | $(11,672) | -33% | | As a percentage of total revenue | 17.0% | 15.1% | | 1.9% | - Expenses decreased by 38% (three months) and 33% (six months) due to lower personnel-related expenses from restructuring and a decrease in depreciation expense as certain long-lived assets were fully depreciated by December 31, 2024, following the Pivot[170][172] - As a percentage of total revenue, these expenses increased by 100 basis points (three months) and 190 basis points (six months) because revenue decreased at a faster pace than the expense reductions[171][173] General and Administrative General and Administrative Expenses – Three Months Ended June 30 (in thousands) | General and Administrative (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | $ Change | % Change | | :---------------------------------------- | :------------------------------- | :------------------------------- | :------- | :------- | | Expense | $11,571 | $12,388 | $(817) | -7% | | As a percentage of total revenue | 18.1% | 11.2% | | 6.9% | General and Administrative Expenses – Six Months Ended June 30 (in thousands) | General and Administrative (in thousands) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | $ Change | % Change | | :---------------------------------------- | :----------------------------- | :----------------------------- | :------- | :------- | | Expense | $23,228 | $25,871 | $(2,643) | -10% | | As a percentage of total revenue | 17.0% | 11.2% | | 5.8% | - Expenses decreased by 7% (three months) and 10% (six months) primarily due to lower personnel-related expenses from restructuring activities and a $0.8 million gain on the sale of the Van Nuys facility in 2024[176][178] - As a percentage of total revenue, these expenses increased by 690 basis points (three months) and 580 basis points (six months) due to revenue declining faster than expense reductions[177][179] Restructuring Restructuring Charges – Three Months Ended June 30 (in thousands) | Restructuring Charges (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | $ Change | % Change | | :----------------------------------- | :------------------------------- | :------------------------------- | :------- | :------- | | Restructuring | $2,492 | $0 | $2,492 | NM | Restructuring Charges – Six Months Ended June 30 (in thousands) | Restructuring Charges (in thousands) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | $ Change | % Change | | :----------------------------------- | :----------------------------- | :----------------------------- | :------- | :------- | | Restructuring | $2,492 | $1,644 | $848 | 52% | - Restructuring charges in 2025 primarily relate to additional post-Pivot headcount reductions, totaling $2.492 million for both the three and six months ended June 30, 2025[180][181] - In 2024, restructuring charges were $1.644 million for the six months ended June 30, primarily for employee termination costs related to key initiatives[180][181] Other Income (Expense) Other Income (Expense) – Three Months Ended June 30 (in thousands) | Other Income (Expense) (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | $ Change | % Change | | :------------------------------------ | :------------------------------- | :------------------------------- | :------- | :------- | | Loss on debt extinguishment | $(2,166) | $(719) | $(1,447) | NM | | Change in fair value of warrant liabilities | $1,558 | $647 | $911 | NM | | Interest expense | $(1,268) | $(1,652) | $384 | -23% | | Other income, net | $41 | $408 | $(367) | -90% | Other Income (Expense) – Six Months Ended June 30 (in thousands) | Other Income (Expense) (in thousands) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | $ Change | % Change | | :------------------------------------ | :----------------------------- | :----------------------------- | :------- | :------- | | Loss on debt extinguishment | $(2,166) | $(1,928) | $(238) | 12% | | Change in fair value of warrant liabilities | $869 | $(77) | $946 | NM | | Interest expense | $(2,833) | $(3,527) | $694 | -20% | | Other income, net | $266 | $885 | $(619) | -70% | - Loss on debt extinguishment increased due to the full repayment of the Term Loan in May 2025, compared to partial prepayments in 2024[184][185] - The change in fair value of warrant liabilities shifted from a loss to a gain, primarily driven by a 45% decline in the company's stock price in Q2 2025, compared to a 12% decrease in Q2 2024[184][185] - Interest expense decreased by 23% (three months) and 20% (six months) due to a lower average principal debt balance and a reduced effective interest rate on the new ABL Facility (15.4%) compared to the Term Loan (28.0%)[184][185] Income Tax Provision Income Tax Provision – Three Months Ended June 30 (in thousands) | Income Tax Provision (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | $ Change | % Change | | :---------------------------------- | :------------------------------- | :------------------------------- | :------- | :------- | | Income tax provision | $(101) | $(67) | $(34) | 51% | Income Tax Provision – Six Months Ended June 30 (in thousands) | Income Tax Provision (in thousands) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | $ Change | % Change | | :---------------------------------- | :----------------------------- | :----------------------------- | :------- | :------- | | Income tax provision | $(146) | $(129) | $(17) | 13% | - The income tax provision increased by 51% (three months) and 13% (six months) primarily due to changes in the valuation allowance and an increase in net expense from discrete events[187][188] Liquidity and Capital Resources - The company secured a new $35.0 million ABL Facility on May 13, 2025, borrowing $25.0 million, and used the proceeds to fully repay its existing Term Loan, providing approximately $5 million in additional capital[189][190][191] - The ABL Facility includes financial covenants such as minimum billings targets, minimum digital subscriptions targets, capital expenditure limits, and a minimum liquidity requirement of $12 million[193][195] - As of June 30, 2025, the company had $25.6 million in cash and cash equivalents and was in compliance with its financial covenants[194][197] - 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 financing[203][204] Critical Accounting Policies and Estimates - There have been no material changes to the company's critical accounting estimates discussed in the 2024 Annual Report on Form 10-K[206] Recent Accounting Pronouncements - Refer to Note 1, 'Description of Business and Summary of Significant Accounting Policies,' for information on recently adopted accounting pronouncements[207] 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 the company has ceased entering into foreign exchange options and is exiting the sale of physical products in the UK and France - Approximately 8% of the company's revenue for the six months ended June 30, 2025, was in foreign currencies, primarily Canadian dollars and British pounds[208] - The company has ceased entering into foreign exchange options and is exiting the sale of nutritional and other physical products in the United Kingdom and France as part of the Pivot[210] - A hypothetical 10% change in exchange rates would result in an approximate $1.5 million increase or decrease in cost of revenue and operating expenses[212] - The aggregate notional amount of foreign exchange derivative instruments was zero at June 30, 2025, and December 31, 2024[213] 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, 2025[214] - There have been no material changes in internal control over financial reporting during the most recent fiscal quarter[216] - Management acknowledges that any control system has inherent limitations and cannot provide absolute assurance of achieving its objectives[217] PART II—OTHER INFORMATION 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 Video Privacy Protection Act violations, with the company denying the allegations and vigorously defending these matters - A class action complaint filed May 22, 2023, alleges misclassification of Partners as contractors rather than employees and other California Labor Code violations; the company is defending against this, with 13 arbitrations settled for nominal fees[219] - A class action filed June 14, 2024 (Reilly Action) alleges breach of fiduciary duty related to the 2021 merger; aiding and abetting claims against the company were dismissed without prejudice on December 5, 2024, but indemnification obligations remain[220][221] - On October 14, 2024, 10 arbitration demands were filed, alleging Video Privacy Protection Act violations, with intentions to file similar demands for approximately 6,239 additional subscribers; the company denies these allegations[223] Item 1A. Risk Factors This section states that 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 - There have been no material developments with respect to the risk factors previously reported in the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2024[224] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section indicates that there were no unregistered sales of equity securities or use of proceeds to report for the period - There were no unregistered sales of equity securities or use of proceeds to report[226] Item 3. Defaults Upon Senior Securities This section states that there were no defaults upon senior securities during the reporting period - There were no defaults upon senior securities[227] Item 4. Mine Safety Disclosures This section indicates that mine safety disclosures are not applicable to the company - Mine safety disclosures are not applicable to the company[228] Item 5. Other Information This section reports that 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, 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, 2025[229] 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 and Bylaws, Form of Third Amended and Restated Warrant to Purchase Stock, and the Credit Agreement dated May 13, 2025[231] - Certifications from the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a) are filed herewith[231] Signatures This section contains the official signatures of the registrant's Chief Executive Officer and Interim Chief Financial Officer, certifying the report's submission - The report is signed by Carl Daikeler, Chief Executive Officer, and Brad Ramberg, Interim Chief Financial Officer, on August 6, 2025[237]