Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis should be read in conjunction with our financial statements and related notes included elsewhere in this Annual Report on Form 10-K (this “Report”) and the section entitled “Risk Factors.” Unless otherwise indicated, the terms “Beachbody,” "BODi," “we,” “us,” “our,” or the “Company” refer to The Beachbody Company, Inc., a Delaware corporation, together with its consolidated subsidiaries.

Forward-Looking Statements

This Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”), including statements about and the financial condition, results of operations, earnings outlook and prospects of the Company. Forward-looking statements are typically identified by words such as “plan,” “believe,” “expect,” “anticipate,” “intend,” “outlook,” “estimate,” “forecast,” “project,” “continue,” “could,” “may,” “might,” “possible,” “potential,” “predict,” “should,” “would” and other similar words and expressions, but the absence of these words does not mean that a statement is not forward-looking.

The forward-looking statements are based on our current expectations as applicable and are inherently subject to uncertainties and changes in circumstances and their potential effects and speak only as of the date of such statement. There can be no assurance that future developments will be those that have been anticipated. These forward-looking statements involve a number of risks, uncertainties or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to the following:

•

our future financial performance, including our expectations regarding our revenue, cost of revenue, gross profit, operating expenses including changes in selling and marketing, general and administrative and enterprise technology and development expenses (including any components of the foregoing), Adjusted EBITDA (as defined below) and our ability to achieve and maintain future profitability;

•

our anticipated growth rate and market opportunity;

•

our liquidity and ability to raise financing;

•

our success in retaining or recruiting, or changes required in, officers, key employees or directors;

•

other than the pre-funded warrants, our warrants are accounted for as liabilities and changes in the value of such warrants could have a material effect on our financial results;

•

our ability to effectively compete in the fitness and nutrition industries;

•

our ability to successfully acquire and integrate new operations;

•

our reliance on a few key products;

•

market conditions and global and economic factors beyond our control;

•

intense competition and competitive pressures from other companies worldwide in the industries in which we will operate;

•

litigation and the ability to adequately protect our intellectual property rights; and

•

other risks and uncertainties set forth in this Report under the heading “Risk Factors.”

Should one or more of these risks or uncertainties materialize or should any of the assumptions made by management prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements.

You should not place undue reliance upon our forward-looking statements.

Except to the extent required by applicable law or regulation, we undertake no obligation to update these forward-looking statements to reflect events or circumstances after the date of this Report or to reflect the occurrence of unanticipated events.

Overview

BODi is a leading subscription health and wellness company. We focus primarily on digital content, supplements, connected fitness, and consumer health and wellness. Our goal is to continue to provide holistic health and wellness content and subscription-based solutions. We are the creator of some of the world’s most popular fitness programs, including P90X®, Insanity® and 21 Day Fix®, which transformed the at-home fitness market and disrupted the global fitness industry by making it accessible for people to get results—anytime, anywhere. Our comprehensive nutrition-first programs, Portion Fix® and 2B Mindset®, teach healthy eating habits and promote healthy, sustainable weight loss. These fitness and nutrition programs are available through our Beachbody on Demand and Beachbody on Demand Interactive streaming services.

We offer nutritional products such as Shakeology® nutrition shakes, Beachbody Performance supplements and BEACHBAR® snack bars as well as a professional-grade stationary cycle with or without a 360-degree touch screen tablet and connected fitness software.

In the health, wellness and fitness industry, we focus primarily on digital content, supplements, connected fitness, and consumer health and wellness. Our goal is to continue to provide holistic health and wellness content and subscription-based solutions. Leveraging our history of fitness content creation, nutrition innovation, and our network of micro-influencers, whom we call "Partners", we plan to continue market penetration into the health and wellness markets to reach a wider health, wellness and fitness audience.

Our revenue is generated primarily through our network of Partners, social media marketing channels, and direct response advertising. Components of revenue include recurring digital subscription revenue, revenue from the sale of nutritional and other products and connected fitness revenue. In addition to selling individual products on a one-time basis, we bundle digital and nutritional products together at discounted prices.

For the year ended December 31, 2023, as compared to the year ended December 31, 2022:

•

Total revenue was $527.1 million, a 24% decrease;

•

Digital revenue was $258.4 million, a 14% decrease;

•

Nutrition and other revenue was $249.5 million, a 29% decrease;

•

Connected fitness revenue was $19.2 million, a 50% decrease;

•

Operating expenses were $464.1 million, compared to $572.7 million;

•

Net loss was $152.6 million, compared to a net loss of $194.2 million; and

•

Adjusted EBITDA loss was $8.7 million, compared to Adjusted EBITDA loss of $23.3 million.

See “Non-GAAP Information” below for information regarding our use of Adjusted EBITDA and a reconciliation of net loss to Adjusted EBITDA.

Recent Developments

2023 Equity Offering

On December 10, 2023, the Company entered into a securities purchase agreement for the issuance and sale of 420,769 shares of Class A common stock at a purchase price of $9.75 per share and pre-funded warrants to purchase up to 122,821 shares of Class A common stock at a pre-funded purchase price of $9.7499 per share and an exercise price of $0.0001 per share with certain institutional investors in a registered direct offering. The Company received proceeds of $4.9 million, net of placement agent fees. The Company also issued 543,590 warrants (the "Common Stock Warrants") to purchase 543,590 shares of Class A common stock at an exercise price of $11.24 per share in a concurrent private placement. On January 12, 2024, the investor exercised all of the pre-funded warrants and converted them into 122,821 shares of the Company's Class A common stock. See Note 15, Stockholders' Equity, to our consolidated financial statements included elsewhere in this Report for additional information regarding the Equity Offering (defined later).

Reverse Stock Split

On November 21, 2023, we effected a 1-for-50 reverse stock split of our issued and outstanding common stock. The reverse stock split did not change the authorized number of shares or the par value of our common stock or preferred stock, but did effect a proportional adjustment to the number of shares of common stock outstanding, per share exercise price and the number of shares of common stock issuable upon the exercise of outstanding stock options, the number of shares of common stock issuable upon the vesting of restricted stock awards ("RSU's"), the number of shares of common stock under the Employee Stock Purchase Plan (the "ESPP"), the conversion rate of our outstanding warrants into common stock and the number of shares of common stock eligible for issuance under our 2021 Stock Plan (the "2021 Plan"). See Note 15, Stockholders' Equity, to our consolidated financial statements included elsewhere in this Report for additional information regarding the reverse stock split.

Goodwill and Intangible Asset Impairment

Our annual goodwill impairment test, which was performed as of December 31, 2023, determined that our goodwill was impaired and we recorded goodwill impairment of $40.0 million in the year ended December 31, 2023. See Note 1, Description of Business and Summary of Significant Accounting Policies and Note 8, Goodwill, to our consolidated financial statements included elsewhere in this Report for additional information regarding the goodwill impairment recorded in the year ended December 31, 2023. We also determined as of December 31, 2023 that our intangible assets were impaired and we recorded an intangible asset impairment of $3.1 million in the year ended December 31, 2023. See Note 1, Description of Business and Summary of Significant Accounting Policies and Note 9, Intangible Assets, net, to our consolidated financial statements included elsewhere in this Report for additional information regarding the intangible asset impairment recorded in the year ended December 31, 2023.

Impairment and Sale of Investment

In December 2023, the Company recorded a $4.0 million impairment on its $5.0 million investment in equity securities of a privately-held company based on an observable price change. The Company sold this investment on January 9, 2024 for $1.0 million and made a partial prepayment on the Term Loan of $1.0 million. The Company also entered

into the Third Amendment (defined later) which amended the minimum liquidity financial covenant. See Note 23, Subsequent Events, to our consolidated financial statements included elsewhere in this Report for additional information on the sale of this investment and the Third Amendment.

Sale/Leaseback of Property

On February 29, 2024, we sold our Van Nuys production facility which had a net carrying value of $4.8 million at December 31, 2023, for $6.2 million. Simultaneous with the sale we entered into a five year lease of the facility at an annual base rate of $0.3 million per year. The Company used the proceeds received from the sale to make a partial prepayment of $5.5 million on the Term Loan. The Company also entered into the Fourth Amendment (defined later) which amended the minimum liquidity financial covenant. See Note 23, Subsequent Events, to our consolidated financial statements included elsewhere in this Report for additional information on the sale and leaseback of this facility and the Fourth Amendment.

2024 Restructuring

In January 2024, the Company executed cost-reduction initiatives intended to streamline the business. These actions are expected to result in approximately $1.7 million in costs consisting primarily of termination benefits during the first quarter of 2024.

Key Operational and Business Metrics

We use the following key operational and business metrics to evaluate our business, measure our performance, develop financial forecasts, and make strategic decisions:

As of December 31,

(in millions)

Digital subscriptions 1.31 1.95

Nutritional subscriptions 0.16 0.22

Please see "Non-GAAP Information" below for a reconciliation of net loss to Adjusted EBITDA and an explanation for why we consider Adjusted EBITDA to be a helpful metric for investors.

Year Ended December 31,

(in millions, except for percentages)

Average digital retention 96.0 % 95.9 %

Adjusted EBITDA (1) $ (8.7 ) $ (23.3 )

(1) See “Non-GAAP Information” below for a reconciliation of net loss to Adjusted EBITDA and an explanation for why we consider Adjusted EBITDA to be a helpful metric for investors.

Digital Subscriptions

Our ability to expand the number of digital subscriptions is an indicator of our market penetration and growth. Digital subscriptions include BOD (through March 2023), BODi, and prior to July 2022, Openfit subscriptions. Digital subscriptions include paid and free-to-pay subscriptions with free-to-pay subscriptions representing approximately

1% of total digital subscriptions on average. Digital subscriptions are inclusive of all billing plans, currently for annual, quarterly and monthly billing intervals.

Nutritional Subscriptions

Nutritional subscriptions include monthly subscriptions for nutritional products such as Shakeology, Beachbody Performance, BEACHBAR, Bevvy, and Ladder Supplements. We also package and bundle the content experience of digital subscriptions with nutritional subscriptions to optimize customer results.

Average Digital Retention

We use month-over-month digital subscription retention, which is defined as the average rate at which the total subscriber file is retained for the next period, to measure customer retention. For example, a 95% average digital retention rate would correspond with retaining each month an average of 95% of digital subscribers existing at the beginning of that month. A 95% average digital retention rate would translate into a loss at the end of a quarter of approximately 15% of the subscribers existing at the beginning of the quarter. This calculation excludes new customer acquisitions or subscribers added in a specific month, so this calculation can never exceed 100%.

Total Streams

We use total streams to quantify the number of fitness, nutrition and mindset programs viewed, which is an indicator of customer engagement and retention. While the measure of a digital stream may vary across companies, to qualify as a stream on any of our digital platforms, a program must be viewed for a minimum of 25% of the total running time.

Daily Active Users to Monthly Active Users (DAU/MAU)

We use the ratio of daily active users to monthly active users to measure how frequently digital subscribers are utilizing our service in a given month. We define a daily active user as a unique user streaming content on our platform in a given day. We define a monthly active user as a unique user streaming content on our platform in that same month.

Non-GAAP Information

We use Adjusted EBITDA, which is a non-GAAP performance measure, to supplement our results presented in accordance with accounting principles generally accepted in the United States of America ("GAAP"). We believe Adjusted EBITDA is useful in evaluating our operating performance, as it is similar to measures reported by our public competitors and is regularly used by security analysts, institutional investors, and other interested parties in analyzing operating performance and prospects. Adjusted EBITDA is not intended to be a substitute for any GAAP financial measure and, as calculated, may not be comparable to other similarly titled measures of performance of other companies in other industries or within the same industry.

We define and calculate Adjusted EBITDA as net income (loss) adjusted for impairment of goodwill and intangible assets, depreciation and amortization, amortization of capitalized cloud computing implementation costs, amortization of content assets, interest expense, income tax provision (benefit), equity-based compensation and other items that are not normal, recurring, operating expenses necessary to operate the Company’s business as described in the reconciliation below.

We include this non-GAAP financial measure because it is used by management to evaluate BODi’s core operating performance and trends and to make strategic decisions regarding the allocation of capital and new investments. Adjusted EBITDA excludes certain expenses that are required in accordance with GAAP because they are non-cash (for example, in the case of depreciation and amortization, impairment of goodwill and intangible assets and equity-based compensation) or are not related to our underlying business performance (for example, in the case of restructuring costs, interest income and expense).

The table below presents our Adjusted EBITDA reconciled to our net loss, the closest GAAP measure, for the periods indicated:

Year Ended December 31,

Adjusted for:

Impairment of goodwill 40,000 —

Impairment of other investment 4,000 —

Loss on partial debt extinguishment (1) 3,168 —

Amortization of capitalized cloud computing implementation costs 179 492

Income tax provision (benefit) 37 (3,053 )

Employee incentives, expected to be settled in equity (2) (5,466 ) 5,466

Inventory net realizable value adjustments (3) — 24,864

Restructuring and platform consolidation costs (4) 7,169 11,718

Change in fair value of warrant liabilities (2,679 ) (8,322 )

(1) Represents the loss related to the $15.0 million partial debt prepayment that the Company made on July 24, 2023.

(2) The non-cash charge for employee incentives which were expected to be settled in equity was recorded and included in the Adjusted EBITDA calculation during the year ended December 31, 2022. During the year ended December 31, 2023, we reclassified the non-cash charge from employee incentives expected to be settled in equity to equity-based compensation because we settled certain employee incentives with RSU awards during the period.

(3) Represents a non-cash expense to adjust the carrying value of our connected fitness inventory and related future commitments. This adjustment was included during the year ended December 31, 2022 because of its unusual magnitude due to disruptions in the connected fitness market.

(4) Includes restructuring expense and personnel costs associated with executing our key growth priorities during the year ended December 31, 2023 and with the consolidation of our digital platforms during the year ended December 31, 2022. The cost primarily relates to termination benefits related to headcount reductions.

(5) Primarily includes interest income.

Results of Operations

Prior to the third quarter of 2022, we operated and managed our business in two operating segments, Beachbody and Other, and one reportable segment, Beachbody. During the third quarter of 2022, in connection with the consolidation of our Openfit streaming fitness offering onto the Beachbody digital platform and based on the information used by management to monitor performance and make operating decisions, we changed our segment reporting as it was determined that there is one operating segment. See Note 1, Description of Business and Summary of Significant

Accounting Policies, to our consolidated financial statements included elsewhere in this Report for additional information regarding our segment reporting.

The following discussion of our results of operations is on a consolidated basis.

(in thousands) Year Ended December 31,

Revenue:

Cost of revenue:

Operating expenses:

Impairment of goodwill 40,000 —

Other income (expense)

Loss on partial debt extinguishment (3,168 ) —

Impairment of other investment (4,000 ) —

Change in fair value of warrant liabilities 2,679 8,322

Income tax (provision) benefit (37 ) 3,053

Revenue

Revenue includes digital subscriptions, nutritional supplement subscriptions, one-time nutritional sales, connected fitness products, access to our online Partner business management platform, preferred customer program memberships and other fitness-related products. We often sell bundled products that combine digital subscriptions, nutritional products, and/or other fitness products. We consider these sales to be revenue arrangements with multiple performance obligations and allocate the transaction price to each performance obligation based on its relative stand-alone selling price. We defer revenue when we receive payments in advance of delivery of products or the performance of services. Digital subscriptions revenue is recognized ratably over the subscription period of up to 38 months.

Year Ended December 31,

(dollars in thousands)

Revenue

The decrease in digital revenue for the year ended December 31, 2023, as compared to the year ended December 31, 2022, was primarily attributable to a $37.8 million decrease in revenue from our digital streaming services due to 33% fewer subscriptions as a result of lower demand and a decrease of $4.4 million in fees from Partners due to a 28% decrease in the number of Partners, partially offset by an increase in revenue per subscription due primarily to the conversion from BOD to BODi during the year. As of December 31, 2023, approximately 80% of our digital subscriptions were BODi subscriptions and the BODi subscription had an increase in price as compared to the BOD subscriptions (e.g. increase in the annual BODi subscription to $179 from $120 for the annual BOD subscription).

The decrease in nutrition and other revenue for the year ended December 31, 2023, as compared to the year ended December 31, 2022, was primarily attributable to a $85.9 million decrease in revenue from nutritional products due to 25% fewer nutritional subscriptions as a result of lower demand and a $9.5 million decrease in revenue generated from our preferred customer fees as there was a 36% decrease in preferred customers and a $4.3 million decrease in fitness accessories revenue.‌

The decrease in connected fitness revenue for the year ended December 31, 2023, as compared to the year ended December 31, 2022, was primarily due to a 34% decrease in the number of bikes delivered (from 31,471 in 2022 to 20,853 in 2023) and a 29% decrease in the average sales price for a bike.‌

Cost of Revenue

Digital Cost of Revenue

Digital cost of revenue includes costs associated with digital content creation including amortization and revision of content assets, depreciation of streaming platforms, digital streaming costs, and amortization of acquired digital platform intangible assets. It also includes customer service costs, payment processing fees, depreciation of production equipment, live trainer costs, facilities, and related personnel expenses.

Nutrition and Other Cost of Revenue

Nutrition and other cost of revenue includes product costs, shipping and handling, fulfillment and warehousing, customer service, and payment processing fees. It also includes depreciation of nutrition-related e-commerce websites and social commerce platforms, amortization of acquired formulae intangible assets, facilities, and related personnel expenses.

Connected Fitness Cost of Revenue

Connected fitness cost of revenue consists of product costs, including bike and tablet hardware costs, duties and other applicable importing costs, shipping costs, warehousing and logistics costs, costs associated with service calls and repairs of products under warranty, payment processing and financing fees, customer service expenses, and personnel-related expenses associated with supply chain and logistics.

Year Ended December 31,

(dollars in thousands)

Cost of revenue

Gross profit

Gross margin

Nutrition and other 56.2 % 53.4 %

Connected fitness (55.5 %) (139.4 %)

Total gross margin 61.3 % 53.4 %

The decrease in digital cost of revenue for the year ended December 31, 2023, as compared to the year ended December 31, 2022, was due to a $3.2 million decrease in depreciation expense as a result of the end of the useful life of certain fixed asset, a $1.5 million decrease in streaming costs due to lower platform usage and a $0.5 million decrease in the amortization of content assets as a result of lower production spend partially offset by a $1.6 million increase in program revisions and a $1.5 million increase in customer service due to an increase in the volume of contacts related to digital revenue due to the migration of customers from BOD to BODi. The decrease in digital gross margin for the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily a result of fixed expenses on lower digital revenue.

The decrease in nutrition and other cost of revenue for the year ended December 31, 2023, as compared to the year ended December 31, 2022, was primarily due to a $17.8 million decrease in product costs and a $14.1 million decrease in fulfillment and shipping expense related to the decrease in nutrition and other revenue, lower inventory adjustments of $8.2 million, a $6.0 million decrease in depreciation expense as a result of the end of the useful life of certain fixed assets and a $4.7 million decrease in customer service expense due to a decrease in the volume of contacts related to nutrition and other revenue. Nutrition and other gross margin increased for the year ended December 31, 2023 compared to the year ended December 31, 2022 primarily as a result of lower inventory adjustments.

The decrease in connected fitness cost of revenue for the year ended December 31, 2023, as compared to the year ended December 31, 2022, was driven by a $27.8 million decrease in product costs as a result of the decrease in the number of bikes delivered and inventory adjustments recorded in previous periods, lower inventory adjustments of $21.0 million, a $6.5 million decrease in freight, fulfillment, and shipping expenses as the result of a 34% decrease in the number of bikes delivered and a $3.2 million decrease in amortization expense due to intangible asset impairment recorded in the fourth quarter of 2022. The connected fitness negative gross margin improvement for the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily a result of lower product costs on bikes delivered, due to previous inventory adjustments, and lower inventory adjustments, partially offset by the impact of higher freight costs and fixed warehousing expenses on lower connected fitness revenue.

Operating Expenses

Selling and Marketing

Selling and marketing expenses primarily include the cost of Partner compensation, advertising, royalties, promotions and events, and third-party sales commissions as well as the personnel expenses for employees and consultants who support these areas. Selling and marketing expenses also include depreciation of certain software and amortization of

contract-based intangible assets. Selling and marketing expense as a percentage of total revenue may fluctuate from period to period based on total revenue, timing of new content and nutritional product launches, and the timing of our media investments to build awareness around launch activity.

Year Ended December 31,

(dollars in thousands)

As a percentage of total revenue 53.5 % 52.0 %

The decrease in selling and marketing expense for the year ended December 31, 2023, as compared to the year ended December 31, 2022, was primarily due to a $46.5 million decrease in Partner compensation as a result of lower commissionable revenue, a $14.1 million decrease in personnel-related expenses due to lower headcount primarily related to the restructuring activities that occurred in the current and prior year and a $9.9 million decrease in the amortization of intangible assets due to the impairment of certain assets in the fourth quarter of 2022.

Selling and marketing expense as a percentage of total revenue increased by 150 bps primarily due to the decrease in revenue.‌

Enterprise Technology and Development

Enterprise technology and development expenses includes maintenance and enhancements of the Company’s enterprise resource planning system, which is the core of our accounting, procurement, supply chain, and other business support systems and primarily relate to enterprise systems applications, hardware, and software that serve as the technology infrastructure for the Company and are not directly related to services provided or tangible goods sold. Enterprise technology and development also includes reporting and business analytics tools, security systems such as identity management and payment card industry compliance, office productivity software, research and development tracking tools, and other non-customer facing applications. Enterprise technology and development expenses include personnel-related expenses for employees and consultants to maintain the Company's technology systems and are involved in the research and development of new and existing nutritional products, depreciation of enterprise technology-related assets, software licenses, hosting expenses, and technology equipment leases.

Year Ended December 31,

(dollars in thousands)

As a percentage of total revenue 14.1 % 15.1 %

The decrease in enterprise technology and development expense for the year ended December 31, 2023, as compared to the year ended December 31, 2022, was primarily due to a $17.3 million decrease in personnel-related expenses due to lower headcount primarily related to the restructuring activities that occurred in the current and prior year and a $12.4 million decrease in depreciation expense as a result of the end of the useful life of certain fixed assets.‌

Enterprise technology and development expense as a percentage of total revenue decreased by 100 bps due to lower fixed expenses.

General and Administrative

General and administrative expenses include personnel-related expenses and facilities-related costs primarily for our executive, finance, accounting, legal, and human resources functions. General and administrative expense also includes fees for professional services principally comprised of legal, audit, tax, and insurance.

Year Ended December 31,

(dollars in thousands)

As a percentage of total revenue 11.0 % 11.3 %

The decrease in general and administrative expense for the year ended December 31, 2023, as compared to the year ended December 31, 2022, was primarily due to a $9.5 million decrease in personnel-related expenses as a result of lower headcount primarily related to the restructuring activities that occurred in the current and prior year, a $4.1 million decrease in insurance expense as some of our insurance is based on the level of the Company's revenues or the number of employees, which both have declined in the current period compared to the prior period and a $3.4 million decrease in professional fees due to cost reduction measures.

General and administrative expense as a percentage of total revenue decreased by 30 bps primarily due to the reduction in insurance expenses.‌

Restructuring

In 2023, restructuring charges primarily relate to activities focused on aligning our operations with our key growth priorities, including a reduction in headcount. Restructuring charges in 2022 relate to the consolidation of our streaming fitness and nutrition offerings into a single Beachbody platform. The charges incurred primarily consist of employee termination costs.

Year Ended December 31,

(dollars in thousands)

Impairment of Goodwill

Impairment of goodwill includes goodwill impairment in 2023.

Year Ended December 31,

(dollars in thousands)

The Company performed its annual goodwill impairment test as of December 31, 2023 and based on the quantitative analysis recognized goodwill impairment of $40.0 million for the year ended December 31, 2023.

Impairment of Intangible Assets

Impairment of intangible assets includes intangible asset impairment in 2023 and 2022.

Year Ended December 31,

(dollars in thousands)

During the year ended December 31, 2023, due to reduced revenue and operating income forecasts, we tested our definite-lived intangible assets for recoverability and recognized a $3.1 million impairment charge which reduced the carrying amount of our intangible assets to zero.

During the year ended December 31, 2022, due to reduced revenue and operating income forecasts, we tested our definite-lived intangible asset for recoverability, and as a result recognized a $18.9 million impairment charge to reduce to reduce the carrying amounts of our trade names, customer relationships and developed technology intangible assets to their fair values.

During the year ended December 31, 2022, we also tested our indefinite-lived intangible asset for impairment by comparing its carrying value to its estimated fair value. Based on this analysis, we recognized a $1.0 million impairment charge as the fair value of the indefinite-lived trade name was determined to be less than its carrying value primarily due to lower revenue in the current year and long-term forecast.

Other Income (Expenses)

The change in fair value of warrant liabilities consists of the fair value changes of the public, private placement, Term Loan and Common Stock warrants. Interest expense primarily consists of interest expense associated with our borrowings and amortization of debt discount and issuance costs for our Term Loan (defined below) in 2023 and 2022. Other income, net, consists of interest income earned on investments and gains (losses) on foreign currency.

Year Ended December 31,

(dollars in thousands)

Loss on partial debt extinguishment $ (3,168 ) $ — $ (3,168 ) NM

Impairment of other investment (4,000 ) — (4,000 ) NM

Change in fair value of warrant liabilities 2,679 8,322 (5,643 ) (68 %)

The loss on partial debt extinguishment for the year ended December 31, 2023 was due to the partial prepayment of $15.0 million on the Term Loan as of July 24, 2023. The Company recorded an impairment of $4.0 million on its other investment during the year ended December 31, 2023. The decrease in change in fair value of warrant liabilities during the year ended December 31, 2023, as compared to the year ended December 31, 2022, primarily resulted from a relatively lower decline in our stock price during the current period partially offset by the issuance of the Common Stock Warrants on December 13, 2023 and the change in their value to December 31, 2023. The increase in interest expense was primarily due to borrowings under the Term Loan during the year ended December 31, 2023 compared to borrowings outstanding on the Term Loan for only approximately 4.5 months during the year ended December 31, 2022. The increase in other income was primarily due to higher interest income as a result of higher interest rates on our cash balances.

Income Tax (Provision) Benefit

Income tax (provision) benefit consists of income taxes related to U.S. federal and state jurisdictions as well as those foreign jurisdictions where we have business operations.

Year Ended December 31,

(dollars in thousands)

Income tax (provision) benefit $ (37 ) $ 3,053 $ (3,090 ) NM

The income tax provision increase for the year ended December 31, 2023, as compared to the year ended December 31, 2022, was primarily driven by changes in our valuation allowance and a decrease in the net expense from discrete events.

Liquidity and Capital Resources

Historically, our primary sources of liquidity have been sales of our equity, debt financing, and cash generated from our operations. As of December 31, 2023, we had $33.4 million in cash and cash equivalents.

On August 8, 2022, the Company, Beachbody, LLC, a Delaware limited liability company and wholly-owned direct subsidiary of the Company (the “Borrower”), and certain subsidiaries of the Company (together with the Company, the “Guarantors”), entered into a financing agreement (as amended, the “Financing Agreement”) with the lenders party thereto and Blue Torch Finance, LLC, ("Blue Torch") as administrative agent and collateral agent for such lenders, providing for a senior secured term loan facility in an initial aggregate principal amount of $50.0 million (the “Term Loan”). Obligations under the Financing Agreement are guaranteed by the Guarantors, and secured by a lien on and security interest in substantially all of the assets of the Borrower and the Guarantors (together with the Borrower, the “Loan Parties”), subject to customary exceptions. On July 24, 2023 (the "Second Amendment Effective Date") the Company and Blue Torch entered into Amendment No. 2 to the Financing Agreement (the "Second Amendment"), which amended the Company's existing Financing Agreement. In connection with the Second Amendment, on the Second Amendment Effective Date, the Company made a partial prepayment on the Term Loan of $15.0 million. As of December 31, 2023, the principal balance outstanding (including capitalized paid in kind interest) under the Term Loan was $35.5 million. On January 9, 2024 and February 29, 2024, the Company made partial prepayments of $1.0 million and $5.5 million, respectively, on the Term Loan (which were classified as current obligations at December 31, 2023). During the year ended December 31, 2023, the Term Loan was a secured overnight financing rate ("SOFR") loan, with an effective interest rate of 19.73% and a cash interest rate of 12.29% for the year ended December 31, 2023.‌

The Financing Agreement contains financial covenants, customary representations, warranties, covenants and customary events of default. We were in compliance with the financial covenants as of December 31, 2023. See Note 11, Debt, and Note 23, Subsequent Events, to our consolidated financial statements included elsewhere in this Report for additional information on the Term Loan.‌

As of December 31, 2023, we have $22.8 million of lease obligations and purchase commitments associated with contracts that are enforceable and legally binding and that specify all significant terms, including fixed or minimum services to be used, fixed, minimum or variable price provisions, and the approximate timing of the actions under the contracts. See Note 12, Leases, to our consolidated financial statements included elsewhere in this Report for discussion of our leases and Note 13, Commitments and Contingencies, to our consolidated financial statements included elsewhere in this Report for discussion of our contractual commitments that are primarily due within the next year.‌

For the years ended December 31, 2023 and 2022, our net cash flows were as follows:

Year Ended December 31,

(dollars in thousands)

Net cash used in operating activities $ (22,537 ) $ (47,173 )

Net cash used in investing activities (10,826 ) (26,493 )

Net cash (used in) provided by financing activities (13,717 ) 47,561

As of December 31, 2023, we had cash and cash equivalents totaling $33.4 million.

Net cash used in operating activities was $22.5 million and $47.2 million for the year ended December 31, 2023 and 2022, respectively. The decrease in cash used in operating activities during the year ended December 31, 2023, compared to the prior year, was primarily due to a decrease in net loss of $41.6 million, an increase in asset impairment of $27.2 million, a decrease of $19.6 million of cash used related to accounts payable, an increase in cash received attributable to deferred revenue of $11.7 million partially offset by a decrease in depreciation and amortization expense of $35.3 million, a decrease in provision for inventory and inventory purchase commitments of $29.2 million and a $24.0 million decrease in change in inventory.

Net cash used in investing activities was $10.8 million and $26.5 million for the year ended December 31, 2023 and 2022, respectively. The decrease in net cash used in investing activities was due to a decrease in capital expenditures of $19.9 million due to increased focus by management on capital expenditures, in particular related to technology partially offset by $4.3 million of investment in restricted short-term investments. The current decrease of capital expenditures as compared to the prior year is expected to continue in future periods.

Net cash used in financing activities was $13.7 million for the year ended December 31, 2023 compared to net cash provided by financing activities of $47.6 million for the year ended December 31, 2022. The change in net cash from financing activities was primarily due to debt repayments on our Term Loan in the current year, including a $15.0 million partial prepayment in July 2023, and taxes associated with the vesting of RSU's partially offset by proceeds received of $4.9 million, net of placement agent fees, related to the sale of 420,769 shares of Class A common stock and pre-funded warrants to purchase up to 122,821 shares of Class A common stock on December 13, 2023. The year ended December 31, 2022 included Term Loan borrowings, net of debt issuance costs.‌ See Note 11, Debt and Note 15, Stockholders' Equity to our consolidated financial statements included elsewhere in this Report for additional information on the debt financing entered into during 2022 and the partial debt prepayment in 2023 and the Equity Offering in 2023.

Our future capital requirements may vary materially from those currently planned and will depend on many factors, including our rate of revenue growth and overall economic conditions. We continue to assess and efficiently manage our working capital, and expect to generate additional liquidity through continued cost control initiatives. We believe that existing cash and cash equivalents and cost control initiatives will provide the Company with sufficient liquidity to meet our anticipated cash needs, including debt service requirements, for the next twelve months as well as for the longer-term (i.e., beyond the next twelve months).

On December 13, 2023, the Company issued 420,769 shares of Class A common stock at a purchase price of $9.75 per share and pre-funded warrants to purchase up to 122,821 shares of Class A common stock at a pre-funded purchase price of $9.7499 per share to certain institutional investors. The Company received proceeds of $4.9 million, net of placement agent fees. The Company also issued 543,590 Common Stock Warrants to purchase 543,590 shares of Class A common stock at an exercise price of $11.24 per share. On January 12, 2024, the investor exercised all of the pre-funded warrants and converted them into 122,821 shares of Class A common stock. See Note 15, Stockholders' Equity, to our consolidated financial statements included elsewhere in this Report for additional information regarding the Equity Offering.

We may explore additional debt or equity financing to supplement our anticipated working capital balances and further strengthen our financial position, but do not at this time know which form it will take or what the terms will be. The incurrence of additional debt financing would result in debt service obligations and the instruments governing such debt could provide for operating and financial covenants that would restrict our operations. The sale of additional

equity would result in additional dilution to our shareholders. There can be no assurances that we will be able to raise additional capital in amounts or on terms acceptable to us.

Critical Accounting Policies and Estimates

Our consolidated financial statements included elsewhere in this Annual Report have been prepared in accordance with GAAP. The preparation of consolidated financial statements requires us to make estimates and assumptions about future events that affect amounts reported in our consolidated financial statements and related notes, as well as the related disclosures of contingent assets and liabilities at the date of the financial statements. We evaluate our accounting policies, estimates and judgments on an on-going basis. We base our estimates and judgments on historical experience and various other factors that we believe to be reasonable under the circumstances. Because of the uncertainty inherent in these matters, actual results may differ from these estimates under different assumptions and conditions.

We evaluate the development and selection of our critical accounting policies and estimates and believe that the following items are critical accounting estimates, as they (1) involve a higher degree of judgment or complexity and (2) are most significant to reporting our results of operations and financial position. The following critical accounting policies reflect the significant estimates and judgments used in the preparation of our consolidated financial statements. With respect to the critical accounting polices, even a relatively minor variance between actual and expected experience can potentially have a materially favorable or unfavorable impact on subsequent results of operations. In addition, there are other items within our financial statements that require estimation, but are not deemed critical as defined above. More information on the Company's significant accounting polices can be found in the footnotes to our audited consolidated financial statements included in Note 1, Description of Business and Summary of Significant Accounting Policies, in Item 8 of this Annual Report. The critical accounting policies that reflect our more difficult and subjective judgments and estimates used in the preparation of our consolidated financial statements include those noted below.

Inventory

Inventory consists of raw materials, work in process, and finished goods, is accounted for by using the first-in, first-out method, and is valued at the lower of cost or net realizable value. To estimate any necessary adjustments against the carrying value of inventory, various assumptions are made in regard to excess or slow-moving inventories including future demand for our products, anticipated margin, planned product discontinuances, and the physical condition (e.g. age and quality) of the inventory. If future demand and market conditions are less favorable than our assumptions, additional inventory adjustments may be required.

During the years ended December 31, 2023 and 2022, we recorded a $10.6 million and a $39.8 million charge, respectively, to reduce the carrying value of inventory on hand and inventory purchase commitments to net realizable value and to adjust for excess and obsolete inventory. The Company recorded $3.4 million and $11.6 million of these adjustments in nutrition and other costs of revenue for the years ended December 31, 2023 and 2022, respectively. The Company also recorded $7.2 million and $28.1 million of these adjustments in connected fitness cost of revenue for the years ended December 31, 2023 and 2022, respectively. Actual future write-offs of inventory may differ from estimates and calculations used to determine inventory adjustments due to changes in customer demand or other market conditions.

Goodwill and Intangible Assets Impairment

Goodwill and intangible assets deemed to have an indefinite life are not amortized, but instead are assessed for impairment annually and between annual tests if an event or change in circumstances occurs that would more likely than not reduce the fair value of a reporting unit ("RU") below its carrying value or indicate that it is more likely than not that an indefinite-lived intangible asset is impaired. The Company has historically performed its annual goodwill impairment assessment as of October 1. During the fourth quarter of 2023, the Company decided to change the date of its annual impairment assessment from October 1 to December 31. The change was made to more closely align the impairment assessment date with the Company's annual planning and forecasting process. The change in date of the annual impairment test is not deemed material as the new measurement date of December 31 is in relative close proximity to the previous measurement date and the change did not have any impact on goodwill or the impairment of goodwill. The change has been applied prospectively and would not have had an impact on a retrospective basis.

We test goodwill for impairment at a level within the Company referred to as the RU. We carry our definite-lived intangible assets at cost less accumulated amortization. If an event or change in circumstances occurs that indicates the carrying value may not be recoverable, we would evaluate our definite-lived intangible assets for impairment at that time.

2023 Interim Goodwill Impairment Test

Due to the sustained decline in the Company’s market capitalization and macro-economic conditions observed in the three months ended June 30, 2023, the Company performed an interim test for impairment of its goodwill as of June 30, 2023. In performing the interim impairment test as of June 30, 2023 for goodwill, we elected to bypass the qualitative assessment and proceeded to performing the quantitative test. We compared the carrying value of the RU to its estimated fair value. Fair value was estimated using a combination of a market approach and an income approach, with significant assumptions related to guideline company financial multiples used in the market approach and significant assumptions about revenue growth, long-term growth rates, and discount rates used in a discounted cash flow model in the income approach. As of June 30, 2023, the RUs fair value exceeded the carrying value by approximately 11%.‌

2023 Goodwill Impairment Test

We completed the required annual impairment test for goodwill as of October 1, 2023, prior to the change of the annual impairment test for goodwill to December 31. We performed a qualitative assessment which leveraged information from the June 30, 2023 quantitative assessment, in which we estimated the fair value of our RU and determined that the fair value of our RU was greater than its carrying value, resulting in no impairment.

Due to the change in our annual impairment assessment from October 1 to December 31, we performed our annual impairment test as of December 31, 2023.

2023 Annual Goodwill Impairment Test

We assessed our long-lived assets for impairment prior to our goodwill impairment test, see discussion below related to the long-lived asset impairment test and the recording of an intangible asset impairment.

In testing for goodwill impairment as of December 31, 2023, we elected to bypass the optional qualitative test and proceeded to perform a quantitative test by comparing the carrying value of our RU to estimated fair value. The determination of the fair value of the Company's RU was estimated using a combination of a market approach that considered benchmark company market multiples, a market approach that considered market multiples derived from the value of recent transactions and an income approach that utilized discounted cash flows for the RU. The Company applied a 50% weighting to the income approach that utilized discounted cash flows with the other two valuation methodologies having a weighting of 25% each, in determining the fair value of the RU. The significant assumptions under each of these approaches include, among others; revenue growth, long-term growth rates, and discount rates used in a discounted cash flow model in the income approach, the control premium and the terminal growth rate. The cash flows used to determine fair value are dependent on a number of significant management assumptions such as the Company's expectations of future performance and the expected future economic environment, which are partly based upon the Company's historical experience.

The Company's estimates are subject to change given the inherent uncertainty in predicting future results. Additionally, the discount rate and the terminal growth rate are based on the Company's judgment of the rates that would be utilized by a hypothetical market participant. The Company also considered its market capitalization in assessing the reasonableness of the combined fair values estimated for its RU. The results of our annual test for impairment at December 31, 2023 concluded that the fair value of our RU was less than its carrying value. As a result, we recorded an impairment charge of $40.0 million related to our goodwill, which reduced our goodwill to $85.2 million at December 31, 2023. The impairment at December 31, 2023 was primarily due to the sustained decline in the Company's stock price, which decreased approximately 45% from September 30, 2023 to December 31, 2023, and a decline in revenue of 24% for the year ended December 31, 2023 as compared to the prior year.

2023 Long-Lived Asset Impairment Test

In assessing our long-lived assets, we tested the related asset group for recoverability by comparing the carrying value of the asset group to its forecasted undiscounted cash flows. Because the carrying value of the asset group exceeded its future undiscounted cash flows, we determined that it may not be recoverable. The fair value of the assets within

the asset group was then calculated to determine whether an impairment loss should be recognized. The fair values of the customer-related, technology-based, and formulae intangible assets were estimated and calculated to be lower than the carrying value. As a result, we recorded an aggregate impairment charge of $3.1 million related to our intangible assets, which reduced our intangible asset balance to zero at December 31, 2023.

Due to reduced revenue and margin forecasts we tested the related asset group for recoverability as of June 30, 2023. In testing for recoverability, we compared the carrying value of the asset group to its forecasted undiscounted cash flows to determine whether it was recoverable. Because the carrying value of the asset group did not exceed its future undiscounted cash flows, we determined that the carrying value of the asset group was recoverable and thus no impairment was recognized.

2022 Goodwill Impairment Test

We completed the required annual impairment test for goodwill as of October 1, 2022. We performed a quantitative assessment, in which we estimated the fair value of our RU and determined that the fair value of our RU was greater than its carrying value, resulting in no impairment.

Due to the sustained decline in our market capitalization and macro-economic conditions observed in the second quarter of 2022, we performed an interim test for goodwill impairment as of June 30, 2022. We were required to assess our long-lived assets for impairment, which resulted in no impairment, prior to our goodwill impairment test. The results of our interim test for impairment at June 30, 2022 concluded that the fair value of our Beachbody RU exceeded its carrying value, resulting in no impairment.

In connection with the consolidation of the Openfit streaming fitness offering onto the Beachbody digital platform, we changed our segment reporting as we determined that there is one operating segment. As a result of this change in segment reporting during the third quarter of 2022, we completed a qualitative test for goodwill impairment by RU both prior to and subsequent to the change. Based on this qualitative assessment, we concluded that no impairment indicators existed for goodwill both prior to and subsequent to the change in segment reporting.

Due to reduced revenue and margin forecasts for certain products, we performed an interim test for impairment of our indefinite-lived intangible asset as of September 30, 2022. In testing for impairment of the indefinite-lived trade name, we compared the carrying value of the asset to its estimated fair value. The fair value of the indefinite-lived trade name was determined to be lower than its carrying value, primarily as a result of reduced revenue and margin forecasts for certain supplements. As a result, we recorded a $1.0 million non-cash impairment charge for this intangible asset.

Due to reduced revenue and operating income forecasts and sustained decline in our market capitalization during the fourth quarter of 2022, we performed an interim test for goodwill impairment as of December 31, 2022. We assessed our long-lived assets for impairment prior to our goodwill impairment test. In assessing our long-lived assets, we tested the related asset group for recoverability by comparing the carrying value of the asset group to its forecasted undiscounted cash flows. Because the carrying value of the asset group did not exceed its future undiscounted cash flows, we determined that it may not be recoverable. The fair value of the assets within the asset group was then calculated to determine whether an impairment loss should be recognized. The fair values of the customer-related, technology-based, and trade name intangible assets were estimated primarily using a relief-from-royalty approach and calculated to be lower than the carrying value. As a result, we recorded an aggregate impairment charge of $18.9 million. In testing for goodwill impairment, we elected to bypass the optional qualitative test and proceeded to perform a quantitative test by comparing the carrying value of our RU to estimated fair value. The results of our interim test for impairment at December 31, 2022 concluded that the fair value of our RU exceeded its carrying value, resulting in no impairment. Our RU’s fair value exceeded carrying value by approximately 21%.

Management will continue to monitor its RU for changes in the business environment that could impact its fair value. Examples of events or circumstances that could result in changes to the underlying key assumptions and judgments used in our goodwill impairment tests, and ultimately impact the estimated fair value of our RU may include the demand for at-home fitness solutions, our subscriber growth rates, adverse macroeconomic conditions, and volatility in the equity and debt markets which could result in higher weighted-average cost of capital. Changes in management's expectations of future performance could have a significant impact on the Company's RU fair value. It should be noted that revenue and expectations of revenue have a significant impact on the RU's fair value. For the year ended December 31, 2023 the Company's revenue decreased by 24% from the prior year. Continual decreases in revenue could have an impact on the future fair value of the Company's RU. The fair value of our RU has been impacted by and will

continue to be impacted by the volatility in the market price of our common stock. The Company's stock price declined by 68% in the year ended December 31, 2023. Continued decreases in the Company's stock price may result in a decrease in the fair value of the Company's RU and potential for incremental goodwill impairment. Changes in any of the assumptions used in the valuation of the RU, or changes in the business environment could materially impact the expected cash flows, and such impacts could potentially result in a material non-cash impairment charge.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Foreign Currency Risk

We are exposed to foreign currency exchange risk related to transactions in currencies other than the U.S. Dollar, which is our functional currency. Our foreign subsidiaries, sales, certain inventory purchases and operating expenses expose us to foreign currency exchange risk. For the years ended December 31, 2023 and 2022, approximately 10% of our revenue in each year was in foreign currencies. These sales were primarily denominated in Canadian dollars and British pounds.

We may use derivative instruments to manage the effects of fluctuations in foreign currency exchange rates on our net cash flows. We primarily enter into option contracts to hedge forecasted payments, typically for up to 12 months, for cost of revenue, selling and marketing expenses, general and administrative expenses and intercompany transactions not denominated in the local currencies of our foreign operations. We designate some of these instruments as cash flow hedges and record them at fair value as either assets or liabilities within the consolidated balance sheets. Some of these instruments are freestanding derivatives for which hedge accounting does not apply.

In the year ended December 31, 2023, management made a determination to cease entering into any further foreign exchange options at this time, which resulted in a decrease in the notional amount of the Company's outstanding foreign exchange options to $4.4 million at December 31, 2023. The Company's foreign exchange options that were outstanding at December 31, 2023 will all expire prior to March 31, 2024.

Changes in the fair value of cash flow hedges are recorded in accumulated other comprehensive income (loss) until the hedged forecasted transaction affects earnings. Deferred gains and losses associated with cash flow hedges of third-party payments are recognized in cost of revenue, selling and marketing or general and administrative expenses, as applicable, during the period when the hedged underlying transaction affects earnings. Changes in the fair value of certain derivatives for which hedge accounting does not apply are immediately recognized directly in earnings to cost of revenue.

A hypothetical 10% change in exchange rates, with the U.S. dollar as the functional and reporting currency, would result in an approximate $2.1 million increase or decrease in cost of revenue and operating expenses. The higher exposure to changes in foreign currency from previous periods was due to management's decision to cease entering into foreign exchange options at this time in the year ended December 31, 2023.

The aggregate notional amount of foreign exchange derivative instruments at December 31, 2023 and 2022 was $4.4 million and $17.6 million, respectively.

Interest Rate Risk

Our exposure to interest rate risk is primarily associated with our Term Loan borrowings, which were SOFR loans during the year ended December 31, 2023 and subject to variability in the SOFR rate. If the interest rate on our Term Loan were to increase or decrease by 1% for the year and our indebtedness remained constant throughout the period, our annual interest expense would not change materially. Further, our exposure to interest rate volatility is partially mitigated by interest income on our highly liquid investments. At this point, we do not believe that our liquidity has been materially affected by the debt market uncertainties noted in the last few years, and we do not believe that our liquidity will be significantly impacted in the near future.

Item 8. Financial Statements and Supplementary Data.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of The Beachbody Company, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of The Beachbody Company, Inc. and subsidiaries (the "Company") as of December 31, 2023, the related consolidated statements of operations, comprehensive loss, stockholders' equity, and cash flows, for the year ended December 31, 2023, and the related notes and the schedule listed in the Index at Item 15(a)2 (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and the results of its operations and its cash flows for the year ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Goodwill Impairment Assessment – Refer to Notes 1 and 8 to the financial statements

Critical Audit Matter Description

The Company’s recorded goodwill balance was $85.2 million as of December 31, 2023. The Company assesses goodwill for impairment annually or more frequently if an event or change in circumstances occurs that would more likely than not reduce the fair value of a reporting unit below its carrying value. The Company performed an interim quantitative test for impairment of its goodwill as of June 30, 2023. The results of the Company’s interim test for impairment at June 30, 2023 concluded that the fair value of its reporting unit exceeded its carrying value, resulting in no impairment. In performing the annual impairment test for goodwill as of October 1, 2023, the Company performed a qualitative assessment based on the interim quantitative test and determined that the fair value of its reporting unit was greater than its carrying value, resulting in no impairment. During the fourth quarter of 2023, the Company decided to change the date of its annual impairment assessment from October 1 to December 31. The change was made to more closely align the impairment assessment date with the Company’s annual planning and forecasting process. The results of the Company's annual test for impairment at

December 31, 2023 concluded that the fair value of its reporting unit was less than its carrying value. As a result, the Company recorded a goodwill impairment charge of $40.0 million for the year ended December 31, 2023.

The Company’s evaluation of goodwill for impairment involves the comparison of the carrying value of its reporting unit to its estimated fair value. The determination of the fair value of the Company’s reporting unit was based on a combination of a market approach that considered benchmark company market multiples, a market approach that considered market multiples derived from the value of recent transactions, and an income approach that utilized discounted cash flows for its reporting unit.

We identified goodwill impairment as a critical audit matter because the determination of fair value of the reporting unit involves significant assumptions made by management, including the revenue growth rates used in cash flow projections, guideline company market multiples, control premium, and weighted average cost of capital rate. This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the goodwill impairment assessment included the following, among others:

•

We evaluated the reasonableness of the revenue growth rate assumptions in management’s cash flow projections by comparing the forecasts to: (1) historical results, (2) internal communications to management and the Board of Directors, (3) current economic factors and analyst reports of the Company and companies in its peer group, and (4) forecasted information included in Company’s press releases.

•

We evaluated management’s ability to accurately forecast future revenues by comparing actual results to management’s historical forecasts.

•

We inquired of appropriate individuals, both within and outside of finance, to determine whether the judgments and assumptions used in the future revenue projections were consistent with the strategy and long-range plans of the Company.

•

With the assistance of our fair value specialists, we evaluated the reasonableness of (1) the weighted average cost of capital rate; and (2) revenue growth rates used in cash flow projections, by:

Testing the source information underlying the determination of the weighted average cost of capital rate and the mathematical accuracy of the calculation.

Developing a range of independent estimates and comparing those to the weighted average cost of capital rate selected by management.

Performing an analysis comparing applicable industry revenue growth rates used in cash flow projections to management’s revenue growth rates used in cash flow projections.

•

With the assistance of our fair value specialists, we evaluated the market approaches that (1) considered benchmark company market multiples and the control premium and (2) considered market multiples derived from the value of recent transactions by:

Evaluating the reasonableness of the selected guideline public companies and guideline transactions.

Assessing the acceptability of the selected market multiples and control premium.

/s/ Deloitte & Touche LLP

Los Angeles, California

March 11, 2024

We have served as the Company's auditor since 2023.

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of The Beachbody Company, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of The Beachbody Company, Inc. (the Company) as of December 31, 2022, the related consolidated statements of operations, comprehensive loss, stockholders’ equity and cash flows for the year ended December 31, 2022, the related notes and the financial statement schedule listed in the Index at Item 15(a)2 (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022, and the results of its operations and its cash flows for the year ended December 31, 2022, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

/s/ Ernst & Young LLP

We served as the Company’s auditor from 2011 to 2023.

Los Angeles, California

March 16, 2023, except for the effects of the reverse stock split discussed in Note 1 and Note 15, as to which the date is January 24, 2024

The Beachbody Company, Inc.

Consolidated Balance Sheets

(in thousands, except par value and share data)

As of December 31,

Assets

Current assets:

Restricted short-term investments 4,250 —

Liabilities and Stockholders’ Equity

Current liabilities:

Current portion of lease liabilities 1,835 2,150

Long-term lease liabilities, net 1,425 3,318

Deferred tax liabilities, net 10 181

Stockholders’ equity:

Class C: no shares issued and outstanding at December 31, 2023 and 2022 — —

Accumulated other comprehensive income (loss) (23 ) 37

Total liabilities and stockholders’ equity $ 276,839 $ 443,395

The accompanying notes are an integral part of these consolidated financial statements.

The Beachbody Company, Inc.

Consolidated Statements of Operations

(in thousands, except per share data)

Year Ended December 31,

Revenue:

Cost of revenue:

Operating expenses:

Impairment of goodwill 40,000 —

Other income (expense)

Loss on partial debt extinguishment (3,168 ) —

Impairment of other investment (4,000 ) —

Change in fair value of warrant liabilities 2,679 8,322

Income tax (provision) benefit (37 ) 3,053

Net loss per common share, basic and diluted $ (24.47 ) $ (31.58 )

Weighted-average common shares outstanding, basic and diluted 6,239 6,150

The accompanying notes are an integral part of these consolidated financial statements.

The Beachbody Company, Inc.

Consolidated Statements of Comprehensive Loss

(in thousands)

Year Ended December 31,

Other comprehensive (loss) income:

Change in fair value of derivative financial instruments, net of tax (360 ) 55

Foreign currency translation adjustment 78 (105 )

Total other comprehensive (loss) income (60 ) 58

The accompanying notes are an integral part of these consolidated financial statements.

The Beachbody Company, Inc.

Consolidated Statements of Stockholders’ Equity

(in thousands)

Accumulated

Additional Other Total

Class A and Class X Common Stock Paid-In Accumulated Comprehensive Stockholders’

Shares Amount Capital Deficit Income (Loss) Equity

Other comprehensive income, net of tax — — — — 58 58

Options exercised, net of tax withholdings 37 — 2,854 — — 2,854

Other comprehensive loss, net of tax — — — — (60 ) (60 )

Forfeitures of shares per the Forfeiture Agreement (160 ) — — — — —

Issuance of shares due to Employee Stock Purchase Plan 47 — 553 — — 553

Issuance of Equity Offering, net of issuance costs 421 — 1,653 — — 1,653

Tax withholdings on vesting of restricted stock (74 ) — (2,178 ) — — (2,178 )

The accompanying notes are an integral part of these consolidated financial statements.

The Beachbody Company, Inc.

Consolidated Statements of Cash Flows

(in thousands)

Year Ended December 31,

Cash flows from operating activities:

Adjustments to reconcile net loss to net cash used in operating activities:

Impairment of goodwill 40,000 —

Impairment of other investments 4,000 —

Depreciation and amortization expense 39,573 74,848

Provision for inventory and inventory purchase commitments 10,561 39,757

Realized losses on hedging derivative financial instruments 222 108

Change in fair value of warrant liabilities (2,679 ) (8,322 )

Deferred income taxes (191 ) (2,961 )

Amortization of debt issuance costs 1,899 733

Paid-in-kind interest expense 1,310 598

Loss on partial debt extinguishment 3,168 —

Change in lease assets 1,967 —

Other non-cash items — 1,219

Changes in operating assets and liabilities:

Net cash used in operating activities (22,537 ) (47,173 )

Cash flows from investing activities:

Purchase of property and equipment (6,576 ) (26,493 )

Investment in restricted short-term investments (4,250 ) —

Net cash used in investing activities (10,826 ) (26,493 )

Cash flows from financing activities:

Proceeds from exercise of stock options — 3,162

Remittance of taxes withheld from employee stock awards — (308 )

Tax withholdings payments for vesting of restricted stock (2,178 ) (183 )

Payment of debt issuance costs — (4,485 )

Proceeds from issuance of Equity Offering, net of issuance costs 4,908 —

Net cash (used in) provided by financing activities (13,717 ) 47,561

Effect of exchange rates on cash 398 (858 )

Net decrease in cash, cash equivalents and restricted cash (46,682 ) (26,963 )

Cash, cash equivalents and restricted cash, beginning of year 80,091 107,054

Cash, cash equivalents and restricted cash, end of year $ 33,409 $ 80,091

Supplemental disclosure of cash flow information:

Cash paid during the year for interest $ 5,389 $ 2,082

Cash paid during the year for income taxes, net 11 389

Supplemental disclosure of noncash investing activities:

Property and equipment acquired but not yet paid for $ 817 $ 2,025

Supplemental disclosure of noncash financing activities:

Warrants issued in relation to Term Loan $ — $ 5,236

Change in fair value of Term Loan warrants due to amended exercise price 802 —

Paid-in-kind fee recorded as incremental debt issuance cost 488 —

The accompanying notes are an integral part of these consolidated financial statements.

The Beachbody Company, Inc.

Notes to Consolidated Financial Statements

Note 1. Description of Business and Summary of Significant Accounting Policies

Organization

The Beachbody Company, Inc. (“BODi” or the “Company”) is a leading subscription health and wellness company and the creator of some of the world’s most popular fitness programs. The Company’s fitness programs are available for streaming through subscription to Beachbody On Demand (“BOD”) and, together with the Company’s live fitness and comprehensive nutrition programs, through subscription to Beachbody On Demand Interactive (“BODi”). During the three months ended March 31, 2023, the Company launched an improved BODi experience and began migrating all BOD-only members to BODi on their renewal dates. BODi offers nutritional products such as Shakeology nutrition shakes, Beachbody Performance supplements and BEACHBAR snack bars, which have been designed and clinically tested to help customers achieve their goals. BODi also offers a commercial-grade stationary cycle which can include a 360-degree touch screen tablet and connected fitness software. The Company’s revenue has historically been generated primarily through a network of micro-influencers (“Partners”), social media marketing channels, and direct response advertising.

Basis of Presentation and Principles of Consolidation

The Company prepares its consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) as determined by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) and pursuant to the regulations of the U.S. Securities and Exchange Commission ("SEC").

The consolidated financial statements include the accounts of the Company and its controlled subsidiaries. All intercompany transactions and balances with or among our consolidated subsidiaries have been eliminated in consolidation.

Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that may impact the amounts reported in the consolidated financial statements and accompanying notes. Significant estimates in our consolidated financial statements include, but are not limited to, the useful life and recoverability of long-lived assets, the valuation of warrant liabilities, the recognition and measurement of income tax assets and liabilities, the valuation of intangible assets, impairment of goodwill and intangible assets, and the net realizable value of inventory. The Company bases these estimates on historical experience and on various other assumptions that it believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying amounts of assets and liabilities. Our actual results could differ from our estimates. We periodically review estimates and assumptions and we reflect the effects of changes, if any, in the consolidated financial statements in the period that they are determined.

Segments

The Company has one operating and reporting segment. In reaching this conclusion, management considered the definition of the Chief Operating Decision Maker (“CODM”); how the business is defined by the CODM; the nature of the information provided to the CODM and how that information is used to make operating decisions; and how resources and performance are accessed. The Company's CODM is the chief executive officer ("CEO"). The results of the operations are provided to and analyzed by the CODM at the Company level and accordingly, key resource decisions and assessment of performance are performed at the Company level based on the Company’s consolidated net revenues and operating income.

Prior to the third quarter of 2022, the Company concluded it had two operating segments, Beachbody and Other, and one reportable segment, Beachbody. During the third quarter of 2022, in connection with the consolidation of its Openfit streaming fitness offering onto a single Beachbody digital platform, the Company determined that it had one operating and reportable segment and changed its segment reporting accordingly.

Summary of Significant Accounting Policies

Reverse Stock Split

On November 21, 2023, we effected a 1-for-50 reverse stock split of our issued and outstanding common stock. Each stockholder's percentage ownership and proportional voting power generally remained unchanged as a result of the reverse stock split. All applicable share data, per share amounts and related information in the consolidated financial statements and notes thereto have been adjusted retroactively to give effect to the 1-for-50 reverse stock split. See Note 15 Stockholders' Equity for additional information regarding the reverse stock split.

Recurring Fair Value Measurements

For assets and liabilities that are measured using quoted prices (unadjusted) in active markets for identical assets or liabilities, the total fair value is the published market price per unit multiplied by the number of units held without consideration of transaction costs (Level 1). Assets and liabilities that are measured using significant other observable inputs are valued by reference to similar assets or liabilities, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data (Level 2). For all remaining assets and liabilities for which there are no significant observable inputs, fair value is derived using an assessment of various discount rates, default risk, credit quality, and the overall capital market liquidity (Level 3). These valuations require significant judgment.

Non-Recurring Fair Value Measurements

Certain assets are measured at fair value on a non-recurring basis. These assets are not measured at fair value on an ongoing basis but are subject to fair value adjustments only in certain circumstances. These assets can include long-lived assets that have been reduced to fair value when they are held for sale, equity securities without readily determinable fair value that are written down to fair value when they are impaired and long-lived assets (including intangible assets and goodwill) that are written down to fair value when they are impaired. Assets that are written down to fair value when impaired are not subsequently adjusted to fair value unless further impairment occurs.

Cash and Cash Equivalents

The Company considers all cash and short-term investments purchased with maturities of three months or less when acquired to be cash equivalents. Cash and cash equivalents include:

•

cash held in checking and money market funds;

•

amounts in transit from payment processors for customer credit and debit card transactions; and

•

highly liquid investments with original maturities of three months or less at the time of purchase.

Cash and cash equivalents are carried at cost, which approximates market value. The Company maintains its cash at financial institutions, and the balances, at times, may exceed Federal Deposit Insurance Corporation insurance limits. The Company has not experienced any losses in such accounts. The Company mitigates its risk by placing funds in high-credit quality financial institutions and utilizing nightly sweeps into U.S. Treasury funds for certain cash accounts. We regularly monitor the financial stability of the financial institutions and believe that we are not exposed to any significant credit risk in cash and cash equivalents. Restricted cash primarily consists of cash held related to an irrevocable letter of credit, see Note 11, Debt, for additional information on the letter of credit.

Inventory

Inventory consists of raw materials, work in process, and finished goods. Inventory is accounted for using the first-in, first-out method and is valued at the lower of cost or net realizable value. The Company records adjustments to the carrying value of inventory based on assumptions regarding future demand for the Company’s products, anticipated margin, planned product discontinuances, and the physical condition (e.g. age and quality) of the inventory.

Accounts Receivable, Net (included in Other Current Assets)

The Company's accounts receivable primarily represents amounts due from third party sales. The allowance for credit losses is based on several factors, including the length of time accounts receivable are past due, the Company's

previous loss history, the specific customer's ability to pay its obligations and any other forward looking data regarding customers' ability to pay which may be available.

Content Assets, Net

The Company capitalizes costs associated with the development and production of programs on its streaming platforms. The Company capitalizes production costs as customer usage and retention data supports that future revenue will be earned. These costs are classified as non-current assets in the consolidated balance sheets.

Content assets are predominantly monetized as a film group and are amortized over the estimated useful life based on projected usage, which has been derived from historical viewing patterns, resulting in an accelerated amortization pattern. Amortization begins when the program is first available for streaming by customers and is recorded in the consolidated statements of operations as a component of digital cost of revenue. When an event or change in circumstances indicates a change in projected usage, content assets are reviewed for potential impairment in aggregate at a group level. To date, the Company has not identified any such event or changes in circumstances.

Property and Equipment, Net

Property and equipment, which includes computer software and web development costs, are recorded at cost less accumulated depreciation. Depreciation is recorded on a straight-line basis over the estimated useful lives of the assets, which primarily range from two to seven years and up to 39 years for buildings. Leasehold improvements are depreciated over the shorter of the life of the assets or the remaining life of the related lease. Costs of maintenance, repairs, and minor replacements are expensed when incurred, while expenditures for major renewals and betterments that extend the useful life of an asset or provide additional utility are capitalized.

Software and web development projects in-process consist primarily of costs associated with internally developed software that has not yet been placed into service. The Company capitalizes eligible costs to acquire, develop, or modify internal-use software that are incurred subsequent to the preliminary project stage. Depreciation of these assets begins upon the initial usage of the software.

When property is sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is included in net income (loss).

Business Combinations

The Company accounts for business combinations under the acquisition method of accounting. The cost of an acquired company is assigned to the tangible and identifiable assets purchased and the liabilities assumed on the basis of their fair values at the date of acquisition. Any excess of the purchase price over the fair value of tangible and intangible assets acquired is assigned to goodwill. The transaction costs associated with business combinations are expensed as they are incurred.

Goodwill and Indefinite-Lived Intangible Assets

Goodwill represents the excess of the fair value of the consideration transferred in a business combination over the fair value of the underlying identifiable assets and liabilities acquired. Goodwill and intangible assets deemed to have an indefinite life are not amortized. Instead, goodwill and indefinite-lived intangible assets are assessed for impairment annually or more frequently if an event or change in circumstances occurs that, with respect to goodwill, would more likely than not reduce the fair value of a reporting unit ("RU") below its carrying value or, for indefinite-lived intangible assets, indicate that it is more likely than not that the asset is impaired. The Company has historically performed its annual goodwill impairment assessment as of October 1. During the fourth quarter of 2023, the Company decided to change the date of its annual impairment assessment from October 1 to December 31. The Company completed the required annual impairment test for goodwill as of October 1, 2023, prior to the change of the annual impairment test for goodwill to December 31. The change was made to more closely align the impairment assessment date with the Company's annual planning and forecasting process. The change in date of the annual impairment test is not deemed material as the new measurement date of December 31 is in relative close proximity to the previous measurement date and the change did not have any impact on goodwill or the impairment of goodwill. The change has been applied prospectively and would not have had an impact on a retrospective basis.

As of December 31, 2023 and 2022, the Company had no indefinite-lived intangible assets.

Long-Lived Assets

Management reviews long-lived assets (including property and equipment, content assets, and definite-lived intangible assets) for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Recoverability of assets is determined by first grouping the long-lived assets at the lowest level for which there are identifiable cash flows, and then comparing the carrying value of each asset group to its forecasted undiscounted cash flows. If the forecasted undiscounted cash flows indicates that the carrying value of the assets is not recoverable, an impairment test of the asset group is performed. Impairment is recognized if the carrying amount of the asset group exceeds its fair value.

As of December 31, 2023 and 2022, the Company’s long-lived assets were located in the U.S.

Leases

The Company accounts for its leases of administrative offices and production studios under ASC 842, Leases; the Company does not have any leases where it acts as a lessor as of December 31, 2023. Under this guidance, arrangements meeting the definition of a lease are classified as operating or finance leases based on the principle of whether or not the lease is effectively a financed purchase of the leased asset by the lessee and are recorded on the consolidated balance sheets as both a right-of-use ("ROU") asset and lease liability, calculated by discounting fixed lease payments over the lease term at the discount rate implicit in the lease or the Company’s incremental borrowing rate. Lease liabilities are increased by interest and reduced by payments each period, and the ROU asset is amortized over the lease term. For operating leases, interest on the lease liability and the amortization of the ROU asset results in straight-lined rent expense over the lease term. For finance leases, interest on the lease liability and the amortization of the ROU asset results in front-loaded expense over the lease term. Variable lease expenses are recorded when incurred.

In calculating the ROU asset and lease liability, the Company elected the practical expedient to combine lease and non-lease components. Rental income on subleases is recognized on a straight-line basis over the estimated lease term. The Company excludes short-term leases having initial terms of 12 months or less as an accounting policy election and instead recognizes rent expense on a straight-line basis over the lease term for such leases.

Warrant Liabilities

The Company has issued warrants on several occasions including during its initial public offering process, the execution of its Term Loan (defined later) and in the Equity Offering (defined later), which have not met the criteria to be classified in stockholders equity.

Public and Private Placement Warrants

The Company has outstanding warrants for the purchase of 200,000 shares of the Company's Class A common stock at an exercise price of $575.00 per share (the “Public Warrants”) and outstanding warrants for the purchase of 106,667 shares of the Company's Class A common stock at an exercise price of $575.00 per share (the “Private Placement Warrants”). All of the Public and Private Placement Warrants remained outstanding as of December 31, 2023 and 2022. The Public Warrants were publicly traded on the New York Stock Exchange (the "NYSE") but were delisted by the NYSE on November 24, 2023 due to their abnormally low price levels. If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a cashless basis, as described in the warrant agreement. In no event will the Company be required to net cash settle any warrant. The Private Placement Warrants are transferable, assignable or salable in certain limited exceptions. The Private Placement Warrants are exercisable for cash or on a cashless basis, at the holder’s option, and are non-redeemable so long as they are held by the initial purchasers or their permitted transferees. If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will cease to be Private Placement Warrants and will become Public Warrants, and will be redeemable by the Company and exercisable by such holders on the same basis as the other Public Warrants.

Term Loan Warrants

In connection with the Term Loan (defined later), the Company issued warrants for the purchase of 94,335 shares of the Company’s Class A common stock at an exercise price of $92.50 per share to certain holders affiliated with Blue Torch Finance, LLC (the “Term Loan Warrants”). In connection with the Second Amendment (defined later), the Company also amended and restated the Term Loan Warrants. The amendment of the Term Loan Warrants amended

the exercise price from $92.50 per share to $20.50 per share. The Term Loan warrants vest on a monthly basis over four years and have a seven-year term. In connection with the Equity Offering (defined later), the Term Loan Warrants conversion ratio was amended resulting in an increase in the number of shares purchased upon the exercise of the Term Loan Warrants to 97,482 shares of the Company's Class A common stock.

Common Stock Warrants

In connection with the Equity Offering (defined later), the Company issued warrants (the "Common Stock Warrants") to certain institutional investors to purchase 543,590 shares of Class A common stock at an exercise price of $11.24 per share. The Common Stock Warrants may be exercised at any time beginning June 13, 2024 and will expire on June 13, 2029. See Note 15, Stockholders' Equity, for additional information on the Equity Offering and the Common Stock Warrants.

The Company evaluated the Public, Private Placement, Term Loan and Common Stock Warrants (collectively, the "Warrants") under ASC 815, Derivatives and Hedging—Contracts in Entity’s Own Equity, and concluded they do not meet the criteria to be classified in stockholders’ equity. Since the Warrants meet the definition of a derivative under ASC 815, the Company recorded these warrants as other liabilities in the consolidated balance sheets at fair value, with subsequent changes in their respective fair values recognized in the change in fair value of warrant liabilities within the consolidated statements of operations at each reporting date. The Public Warrants were publicly traded until November 24, 2023, when they were delisted by the NYSE due to the NYSE's determination that the Public Warrants were no longer suitable for listing, and thus had an observable market price to estimate fair value until the date that they were delisted. The Private Placement, Term Loan and Common Stock Warrants, as well as the Public Warrants after the date they were delisted, are valued using a Black-Scholes option-pricing model as described in Note 3, Fair Value Measurements to the consolidated financial statements.

The change in the fair values of the Warrants for the years ended December 31, 2023 and 2022, resulted in a $2.7 million and $8.3 million non-cash change in fair value gain in the consolidated statements of operations for the years ended December 31, 2023 and 2022, respectively.

Other Investment

As of December 31, 2023 and 2022, the Company has an investment in equity securities of a privately-held company of $1.0 million and $5.0 million, with no readily determinable fair value. This equity investment is reported within other assets in the consolidated balance sheets. The Company uses the measurement alternative for this investment, and its carrying value is reported at cost, adjusted for impairments or any observable price changes in ordinary transactions with identical or similar instruments. As of December 31, 2023 the Company recorded a $4.0 million impairment on this investment based on an observable price change. As of December 31, 2022, noadjustments to the carrying value of this investment were made.

On January 9, 2024 the Company sold this investment for $1.0 million. See Note 23, Subsequent Events to the consolidated financial statements for additional information on the sale of this investment.

Revenue Recognition

The Company’s primary sources of revenue are from sales of digital subscriptions, nutritional products, and connected fitness equipment. The Company determines revenue recognition through the five-step model which requires us to:

(i) identify our contracts with a customer;

(ii) identify our performance obligations in the contract;

(iii) determine the transaction price in the contract;

(iv) allocate the transaction price to our performance obligation in the contract; and

(v) recognize revenue when each performance obligation under the contract is satisfied.

The Company records revenue when it fulfills its performance obligation to transfer control of the goods or services to its customer and defers revenue when it receives payments in advance of fulfilling its performance obligations. Revenue that is deferred is included in deferred revenue (for the remaining deferral period that is less than one year) and in other liabilities (for the remaining deferral period that is more than one year) in the consolidated balance sheets. Control of shipped items is generally transferred when the product is delivered to the customer. Control of services,

which are primarily digital subscriptions, transfers over time, and as such, revenue is recognized ratably over the subscription period (up to 38 months). Shipping and handling charges billed to customers are included in revenue. The Company markets and sells its products primarily in the United States, Canada, the United Kingdom, and France.

The amount of revenue recognized is the consideration that the Company expects it will be entitled to receive in exchange for transferring goods or services to its customers. Revenue is recorded net of expected returns, discounts, and credit card chargebacks, which are estimated using the Company’s historical experience. If actual costs differ from previous estimates, the amount of the liability and corresponding revenue are adjusted in the period in which such costs occur. The Company sells a variety of bundled products that combine digital subscriptions, nutritional products, and/or other fitness products. The Company considers these sales to be revenue arrangements with multiple performance obligations. For customer contracts that include multiple performance obligations, the Company accounts for individual performance obligations if they are distinct. The transaction price is then allocated to each performance obligation based on its stand-alone selling price. The Company generally determines the standalone selling price based on the prices charged to customers. Revenue is presented net of sales taxes and value added taxes ("VAT") and GST/HST (Goods and Services Tax/Harmonized Sales Tax) which are collected from customers and remitted to applicable government agencies. The Company records fees paid to its third party financing partners as a reduction of revenue.

A description of our principal revenue generating activities is as follows:

Digital Subscriptions – Our digital subscription services provide access to BODi, which provides a vast library of workout content. Digital subscriptions represent a single, stand-ready obligation and are paid for either at the time of or in advance of service delivery. Revenue from these arrangements is recognized over the subscription period.

Nutritional Products – We offer a comprehensive line of nutritional products including nutritional supplement subscriptions and one-time nutritional sales. We often sell bundled products that combine digital subscriptions, nutritional products and/or fitness products. Revenue is recognized when control of the goods is transferred to the customer, which typically occurs upon delivery. See below for discussion of bundled products.

Connected Fitness – We offer a connected fitness system that includes in-home fitness equipment and associated digital content subscriptions. Some of our in-home fitness contracts have multiple performance obligations, which include both hardware and a subscription service commitment. Revenue is recognized when control of the equipment is transferred to the customer, usually upon delivery. See below for discussion of bundled products.

In cases where a customer contract contains multiple performance obligations, which the Company refers to as bundled products, we account for each obligation individually if they are distinct. We allocate the transaction price, net of discounts, to each performance obligation based on its standalone selling price. Revenue from such arrangements is recognized when control of the product is transferred to the customer, usually upon delivery. For digital subscription service commitments, revenue is recognized over the subscription period.

The Company operates primarily as the principal in its relationships where third parties sell or distribute the Company’s goods or services, payments made to the third parties are recorded in selling and marketing expenses within the consolidated statements of operations. The Company in certain instances serves as the agent in relationships with third parties, the activity in these relationships are immaterial.

Cost of Revenue

Digital Cost of Revenue

Digital cost of revenue includes costs associated with digital content creation including amortization and revisions of content assets, depreciation of streaming platforms, digital streaming costs, and amortization of acquired digital platform intangible assets. It also includes customer service costs, payment processing fees, depreciation of production equipment, live trainer costs, facilities, and related personnel expenses.

Nutrition and Other Cost of Revenue

Nutrition and other cost of revenue includes product costs, shipping and handling, fulfillment and warehousing, customer service, and payment processing fees. It also includes depreciation of nutrition-related e-commerce websites and social commerce platforms, amortization of formulae intangible assets, facilities, and related personnel expenses.

Connected Fitness Cost of Revenue

Connected fitness cost of revenue consists of product costs, including bike and tablet hardware costs, duties and other applicable importing costs, shipping costs, warehousing and logistics costs, costs associated with service calls and repairs of the products under warranty, payment processing and financing fees, customer service expenses, and personnel-related expenses associated with supply chain and logistics.

The Company utilizes the practical expedient under ASC 606-10-25-18B to account for shipping and handling costs incurred to deliver products to customers as fulfillment activities, rather than a promised service (a revenue element). Shipping and handling costs are included in Nutrition and other cost of revenue and Connected fitness cost of revenue in the consolidated statements of operations in the period during which the products ship. The costs associated with shipping connected fitness and nutrition and other products to customers were $22.5 million and $35.4 millionfor the years ended December 31, 2023 and 2022, respectively.

Selling and Marketing

Selling and marketing expenses primarily include the costs of Partner compensation, advertising, royalties, promotions and events, and third-party sales commissions as well as the personnel expenses for employees and consultants who support these areas. Selling and marketing expenses also include depreciation of certain software and amortization of contract-based intangible assets.

The Company pays Partner and third-party sales commissions when commissionable sales are made. The third-party sales commissions are not material. In cases where the underlying revenue is deferred, the Company also defers the commissions and expenses these costs in the same period in which the underlying revenue is recognized. Deferred Partner commissions are included in other current assets and other assets in the consolidated balance sheets and were $37.1 million and $32.8 million as of December 31, 2023 and 2022, respectively.

Partners are also eligible for various bonuses, recognition, and complimentary participation in events, including those based on sales volume. The Company expenses these costs in the period in which they are earned. These expenses as well as Partner commissions earned but not paid are included in accrued expenses in the consolidated balance sheets.

Advertising costs are primarily comprised of social media, television media, and internet advertising expenses and also include print, radio, and infomercial production costs. Generally, the costs to produce television and web advertising are expensed as incurred, while television media costs are expensed at the time the media airs. Total advertising expense, including the costs to produce infomercials, was $31.5 million and $36.9 millionfor the years ended December 31, 2023 and 2022, respectively.

Enterprise Technology and Development

Enterprise technology and development expenses primarily include personnel-related expenses for employees and professional fees paid to consultants to maintain the Company’s enterprise systems applications, hardware, and software. Expenses also include payroll and related costs for employees involved in the research and development of new and existing products and services, enterprise technology hosting expenses, depreciation of enterprise technology-related assets, and equipment leases.

Research and development costs, which are expensed as incurred, were $2.7 million and $4.4 million for the years ended December 31, 2023 and 2022 respectively.

Equity-Based Compensation

The Company measures and recognizes compensation expense for all equity-based awards based on their estimated grant date fair values. The Company recognizes the expense on a straight-line basis over the requisite service period, and forfeitures are accounted for as they occur. Equity-based compensation expense is included in cost of revenue,

selling and marketing, enterprise technology and development, and general and administrative expense within the consolidated statements of operations.

Derivative Financial Instruments

The Company may use derivative instruments to manage the effects of fluctuations in foreign currency exchange rates on the Company’s net cash flows. The Company primarily enters into option contracts to hedge forecasted payments, typically for up to 12 months, for cost of revenue, selling and marketing expenses, general and administrative expenses, and intercompany transactions not denominated in the local currencies of the Company’s foreign operations. The Company designates certain of these instruments as cash flow hedges and records them at fair value as either assets or liabilities within the consolidated balance sheets. Certain of these instruments are freestanding derivatives for which hedge accounting does not apply.

Changes in the fair value of cash flow hedges are recorded in accumulated other comprehensive income (loss) until the hedged forecasted transaction affects earnings. Deferred gains and losses associated with cash flow hedges of third-party payments are recognized in cost of revenue, selling and marketing, or general and administrative expenses, as applicable, during the period when the hedged underlying transaction affects earnings. Changes in the fair value of certain derivatives for which hedge accounting does not apply are immediately recognized directly in earnings to cost of revenue.

The Company classifies cash flows related to derivative financial instruments as operating activities in the consolidated statements of cash flows.

Income Taxes

The Company is subject to income taxes in the United States, Canada, and the United Kingdom. The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets ("DTAs") and liabilities ("DTLs") for the expected future tax consequences of events to be included in the financial statements. Under this method, DTAs and DTLs are determined on the basis of the differences between the financial statement and tax basis of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on DTAs and DTLs is recognized in income in the period that includes the enactment date.

In evaluating the Company’s ability to recover DTAs, all available positive and negative evidence is analyzed, including historical and current operating results, ongoing tax planning, and forecasts of future taxable income on a jurisdiction-by-jurisdiction basis. Based on the level of losses, the Company has established a valuation allowance ("VA") to reduce its net DTAs to the amount that is more likely than not to be realized. To the extent we establish a VA or increase or decrease this allowance in a given period, we would include the related tax expense or tax benefit within the tax provision in the consolidated statement of operations in that period. In the future, if we determine that we would be able to realize our DTAs in excess of their net recorded amount, we would make an adjustment to the DTA VA and record an income tax benefit within the tax provision in the consolidated statement of operations in that period.

The Company records uncertain tax positions on the basis of a two-step process in which (1) the Company determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is more than 50% likely to be realized upon ultimate settlement with the related tax authority.

The Company recognizes interest and penalties related to unrecognized tax benefits in interest expense and other income, net, respectively, in the consolidated statements of operations. Accrued interest and penalties are included in accrued expenses and other liabilities in the consolidated balance sheets.

Foreign Currency

The reporting currency for the consolidated financial statements of the Company is the U.S. dollar. The functional currency of the Company’s foreign subsidiaries is the local currency of the subsidiaries. The assets and liabilities of these subsidiaries are translated into U.S. dollars at exchange rates in effect at the end of each reporting period. Revenues and expenses for these subsidiaries are translated at average exchange rates in effect during the applicable period. Translation adjustments are included in accumulated other comprehensive income (loss) as a component of

stockholders’ equity. Gains and losses related to the recurring measurement and settlement of foreign currency transactions are included as a component of other income, net in the consolidated statements of operations and were a loss of $0.2 million and a gain of $0.6 millionduring the years ended December 31, 2023 and 2022, respectively.

Earnings (loss) per share

Basic net loss per common share is calculated by dividing net loss allocable to common shareholders by the weighed-average number of common shares outstanding during the period. The weighted average number of common shares outstanding for basic and diluted earnings per share includes the weighted average affect of the pre-funded warrants issued in connection with the Equity Offering (defined later) that closed on December 13, 2023, the exercise of which requires nominal consideration for the delivery of the common shares. See note 15, Stockholders' Equity, for information on the pre-funded warrants. Diluted net loss per common share adjusts net loss and net loss per common share for the effect of all potentially dilutive shares of the Company’s common stock. Basic and diluted loss per common share are the same for each class of common stock because they are entitled to the same liquidation and dividend rights.

Recently Adopted Accounting Pronouncement

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires an acquirer to apply ASC 606 to recognize and measure contract assets and liabilities from contracts with customers acquired in a business combination on the acquisition date rather than the general guidance in ASC 805. The Company adopted this new accounting guidance on a prospective basis on January 1, 2023, and the adoption did not have a material effect on its consolidated financial statements.

In September 2022, the FASB issued ASU 2022-04, Liabilities-Supplier Finance Programs (Topic 405-50) - Disclosure of Supplier Finance Program Obligations, which requires that a buyer in a supplier finance program disclose sufficient information about the program to allow a user of financial statements to understand the program’s nature, activity during the period, changes from period to period, and potential magnitude. The Company adopted this new accounting guidance on a prospective basis on January 1, 2023, and the adoption did not have a material effect on its consolidated financial statements.

Accounting Pronouncements Not Yet Adopted

In November 2023, the FASB issued ASU 2023-07, Improvements to Reportable Segment Disclosures, to improve disclosures about a public entity's reportable segments through enhanced disclosures about significant segment expenses. The guidance in this update will be effective for public companies for annual periods beginning after December 15, 2023 and interim periods for years beginning after December 15, 2024. The Company is evaluating the potential impact of adopting this guidance on its consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures, to improve disclosures about a companies income taxes paid and the effective rate reconciliation table. The guidance in this update will be effective for public companies for annual periods beginning after December 15, 2024 and interim periods for years beginning after December 15, 2025. The Company is evaluating the potential impact of adopting this guidance on its consolidated financial statements.

Note 2. Revenue

The Company’s revenue disaggregated by geographic region is as follows (in thousands):

Year Ended December 31,

Geographic region:

1Consists of Canada, United Kingdom and France. Other than the United Sates, no single country accounted for more than 10% of the Company’s total revenue.

The Company determined that, in addition to the preceding table, the disaggregation of revenue by revenue type as presented in the consolidated statements of operations achieves the disclosure requirement to disaggregate revenue into categories that depict how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors.

Deferred Revenue

Deferred revenue is recorded for nonrefundable cash payments received for the Company’s performance obligation to transfer, or stand ready to transfer, goods or services in the future. Deferred revenue consists of subscription fees billed that have not been recognized and physical products sold that have not yet been delivered. The Company expects to recognize approximately 95% of the remaining performance obligations as revenue in the next 12 months, and the remainder thereafter. During the year ended December 31, 2023, the Company recognized $95.6 million of revenue that was included in the deferred revenue balance as of December 31, 2022. During the year ended December 31, 2022, the Company recognized $106.5 million of revenue that was included in the deferred revenue balance as of December 31, 2021. The balance in deferred revenue as of December 31, 2021 was $107.1 million.

Note 3. Fair Value Measurements

The Company’s financial assets and liabilities subject to fair value measurements on a recurring basis and the level of inputs used for such measurements were as follows (in thousands):

Level 1 Level 2 Level 3

Assets

Derivative assets $ — $ — $ —

Restricted short-term investments — 4,250 —

Total assets $ — $ 4,250 $ —

Liabilities

Public Warrants $ — $ — $ 17

Private Placement Warrants — — 9

Term Loan Warrants — — 392

Common Stock Warrants — — 2,707

Total liabilities $ — $ — $ 3,125

Level 1 Level 2 Level 3

Assets

Derivative assets $ — $ 462 $ —

BODI US Equity

BODI · 10-K · period ended 2023-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Item 8. Financial Statements and Supplementary Data.

BODI US Equity☆

BODI · 10-K · period ended 2023-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Item 8. Financial Statements and Supplementary Data.

BODI US Equity