Beachbody Company Inc
For the period ended Sep 30, 2024. Filed Nov 12, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 12, 2024
BODI$4.25-1.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-06.
0000950170-24-091973
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-12.
0000950170-24-125662
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 134 previous paragraphs and 153 current paragraphs.
72 unchanged; 44 reworded; 36 added; 17 removed; 1 previous and 1 current paragraphs rearranged.
Tables are not compared: 21 previous and 22 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (36)
Current report
disruptions related to the Pivot (as defined below) and our ability to implement the proposed restructuring of our core business model;
Current report
On September 30, 2024, the Company announced a restructuring of its network business (the “Pivot”) which will convert the Company’s multi-level marketing model (“MLM”) to a single level affiliate model and will reduce the Company's headcount by approximately 170 employees (33% of the Company’s workforce on that date) in the fourth quarter of 2024.
Current report
Total revenue was $102.2 million, a 20% decrease;
Current report
Digital revenue was $53.7 million, a 17% decrease;
Current report
Nutrition and other revenue was $47.4 million, a 20% decrease;
Current report
Connected fitness revenue was $1.1 million, a 78% decrease;
Current report
Operating expenses was $81.8 million, compared to $104.0 million;
Current report
Net loss was $12.0 million, compared to a net loss of $32.7 million; and
Current report
For the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023:
Current report
Total revenue was $332.4 million, an 19% decrease;
Current report
Nutrition and other revenue was $153.0 million, a 23% decrease;
Current report
Connected fitness revenue was $5.4 million, a 66% decrease;
Current report
Operating expenses was $259.8 million, compared to $329.7 million;
Current report
Net loss was $37.1 million, compared to a net loss of $87.6 million; and
Current report
Pivot Restructuring
Current report
On September 30, 2024, the Company announced the Pivot which will convert the Company’s MLM model to a single level affiliate model and will reduce the Company's headcount by approximately 170 employees (33% of the Company’s workforce on that date) in the fourth quarter of 2024. The actions associated with the Pivot are expected to result in approximately $18.4 million in costs, with approximately $9.2 million recorded in the Company's unaudited condensed consolidated statement of operations in the three and nine months ending September 30, 2024 with approximately $9.2 million expected to be recorded in the three months ended December 31, 2024.
Current report
The following table details the costs incurred and benefits realized associated with the Pivot in the three and nine months ended September 30, 2024:
Current report
(1) Termination and retention benefits which are included in restructuring expense in the Company's unaudited condensed consolidated statement of operations of approximately $5.1 million were recorded in the three and nine months ended September 30, 2024. The Company expects to record an additional $1.1 million in restructuring expense in the three months ended December 31, 2024.
Current report
(2) Due to the Pivot, certain long-lived assets with a net book value of approximately $12.7 million will not be used by the Company after December 31, 2024. The Company performed an impairment review for its long-lived assets, including the long-lived assets that will not be used after December 31, 2024. The Company performed a test of recoverability and concluded that the carrying value of its long-lived assets, which are all in one asset group, were recoverable. The Company decreased the average remaining useful lives for the long-lived assets that were impacted by the Pivot from 25 months prior to the Pivot to 3 months after the Pivot. This resulted in accelerated depreciation expense of $2.9 million that was recorded in the Company's unaudited condensed consolidated statement of operations in the three and nine months ended September 30, 2024 and $8.1 million which is expected to be recorded in the three months ended December 31, 2024. See Note 6, Property and Equipment, Net, for additional information on the accelerated depreciation.
Current report
(3) Consists of (a) inventory adjustments recorded associated with the decision by management to no longer sell connected fitness inventory after December 31, 2024, which was recorded in cost of revenue-connected fitness ($1.2 million) and (b) inventory adjustments for nutrition and other inventory impacted by the Pivot which was recorded in cost of revenue-nutrition and other ($0.2 million) in the unaudited condensed consolidated statement of operations in the three and nine months ended September 30, 2024. See Note 4, Inventory, for additional information on the incremental inventory adjustments.
Current report
(4) Modification of stock awards for employees who were impacted by the Pivot which includes accelerating the vesting of any options or restricted stock units ("RSU's") that would have vested within six months of the employees termination date, and all vested options will be available for exercise for a total of six months after the employees termination date (that is, three month in addition to the standard three months per original agreement), which resulted in a decrease to equity based compensation expense of $0.3 million in the Company's unaudited condensed consolidated statement of operations for the three and nine months ended September 30, 2024. See Note 11, Equity Based Compensation, for more information on the modification of stock awards.
Current report
Term Loan Amendment
Current report
In connection with the Sixth Amendment, on the Sixth Amendment Effective Date, the Company made partial prepayments on the Term Loan of $3.2 million (which amount was classified as a current obligation at September 30, 2024) along with the related prepayment premium of 2% on $2.0 million of the partial prepayments and accrued interest. The Company also incurred a 1% fee as paid in kind on the outstanding Term Loan balance prior to the prepayment (fee of $0.3 million).
Current report
Includes accelerated depreciation expense of $2.9 million for the three and nine months ended September 30, 2024 related to certain long-lived assets that due to the Pivot will not be used by the Company after December 31, 2024.
Current report
Includes benefits due to the modification of stock awards of $0.3 million and $0.8 million for the three and nine months ended September 30, 2024, respectively, and approximately zero and $1.0 million for the three and nine months ended September 30, 2023, respectively.
Current report
Includes (a) restructuring expense and personnel costs associated with the Pivot of $5.1 million during the three and nine months ended September 30, 2024 and (b) adjustments recorded to nutrition and other inventory of $0.2 million due to the Pivot and adjustments recorded to connected fitness inventory of $1.2 million due to the decision to cease the sale of connected fitness inventory after December 31, 2024, in the three and nine months ended September 30, 2024.
Current report
The increase in enterprise technology and development expenses for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023, was primarily due to a $2.0 million increase in depreciation expense as a result of accelerated depreciation of $2.9 million recorded related to certain long-lived assets that due to the Pivot will no longer be used by the Company after December 31, 2024 partially offset by a $1.3 million decrease in personnel-related expenses due to lower headcount primarily related to the non-Pivot related restructuring activities that occurred in the past year. With the Pivot and the transition from the MLM model to an affiliate model, the Company expects a decrease in personnel-related expenses in 2025, due to the headcount reductions associated with the Pivot, and a significant decrease in depreciation expense in 2025 due to the long-lived assets impacted by Pivot which will be fully depreciated by December 31, 2024.
Current report
The decrease in general and administrative expenses for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023, was primarily due to a $1.5 million decrease in professional and accounting fees due to a management focus on decreasing spending and a decrease in equity based compensation of $1.0 million due primarily to the decrease in headcount and the modification of certain stock awards for employees who were impacted by the Pivot.
Current report
General and administrative expenses as a percentage of total revenue was unchanged from the prior year.
Current report
Income Tax Provision
Current report
Goodwill and Long-Lived Assets Impairment
Current report
Goodwill and intangible assets deemed to have an indefinite life are not amortized, but instead are assessed for impairment annually at December 31 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. 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.
Current report
We test goodwill for impairment at a level within the Company referred to as the RU. Due to the continued sustained decline in our market capitalization in the three and nine months ended September 30, 2024 and the impact of the Pivot, which was approved by the Board of Directors of the Company in late September 2024, the Company performed an interim test for impairment of its goodwill as of September 30, 2024.
Current report
In performing the interim impairment test for goodwill, the Company elected to bypass the optional qualitative assessment test and proceeded to perform a quantitative test by comparing the carrying value of its RU to its estimated fair value. The Company previously tested its RU for impairment as of December 31, 2023. Fair value is 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. The estimates used to determine fair value for the RU may change based on the results of operations, macro-economic conditions, stock price fluctuations or other factors. Changes in these estimates could materially affect our assessment of the fair value and goodwill impairment for the RU. As of September 30, 2024, management concluded that the fair value of its RU exceeded its carrying value by approximately 10%, or $5.6 million, resulting in no impairment. It is possible that our goodwill could become impaired if we determine in a subsequent period that the fair value of our RU was less than its carrying value which could result in a material charge and adversely affect our results of operations.
Current report
Due to reduced revenue and margin forecasts, we tested the related asset group for recoverability as of September 30, 2024. 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. The Company performed a test for recoverability at September 30, 2024 and concluded that the carrying value of its long-lived assets was recoverable.
Current report
Management will continue to monitor its RU and long-lived asset group 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 supply chain disruptions and demand for at-home fitness solutions; adverse macroeconomic conditions; volatility in the equity and debt markets which could result in higher weighted-average cost of capital and our subscriber growth rates. Changes in any of the assumptions used in the valuation of the RU, or changes in the business environment could materially affect the expected cash flows, and such impacts could potentially result in a material non-cash impairment charge.
Removed paragraphs (17)
Previous report
Total revenue was $110.2 million, an 18% decrease;
Previous report
Nutrition and other revenue was $50.1 million, a 22% decrease;
Previous report
Connected fitness revenue was $1.3 million, a 74% decrease;
Previous report
Operating expenses was $85.9 million, compared to $106.9 million;
Previous report
Net loss was $10.9 million, compared to net loss of $25.7 million; and
Previous report
For the six months ended June 30, 2024, as compared to the six months ended June 30, 2023:
Previous report
Total revenue was $230.2 million, an 18% decrease;
Previous report
Digital revenue was $120.3 million, a 7% decrease;
Previous report
Nutrition and other revenue was $105.6 million, a 24% decrease;
Previous report
Connected fitness revenue was $4.3 million, a 61% decrease;
Previous report
Operating expenses was $178.0 million, compared to $225.7 million;
Previous report
Net loss was $25.1 million, compared to net loss of $54.9 million; and
Previous report
In connection with the Fifth Amendment, on the Fifth Amendment Effective Date, the Company made a partial prepayment on the Term Loan of $4.0 million along with the related prepayment premium of 3% ($0.1 million) and accrued interest. The partial prepayment of $4.0 million was accounted for as a partial debt extinguishment and the Company wrote off the proportionate amount of unamortized debt discount and debt issuance costs as of the Fifth Amendment Effective Date ($0.6 million) which in addition to the prepayment premium ($0.1 million) was recorded as a loss on partial debt extinguishment of $0.7 million in the three and six months ended June 30, 2024.
Previous report
The decrease in enterprise technology and development expenses for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023, was primarily due to a $2.4 million decrease in depreciation expense as a result of the end of the useful life of certain fixed assets.
Previous report
The slight increase in general and administrative expenses for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023, was primarily due to the modification of certain stock awards for employees who were terminated in the prior year period which reduced general and administrative expenses by $0.4 million in the three months ended June 30, 2023.
Previous report
General and administrative expenses as a percentage of total revenue increased by 240 bps due to the increase in general and administrative expenses and the decrease in revenue.
Previous report
Income Tax (Provision) Benefit
Reworded paragraphs (44)
Previous wording
Adjusted EBITDA was $4.9 million, compared to a loss of $4.8 million.
Current wording
Adjusted EBITDA was $10.1 million, compared to a loss of $5.8 million.
Previous wording
Digital revenue was $58.8 million, a 10% decrease;
Current wording
Digital revenue was $174.0 million, a 10% decrease;
Previous wording
Adjusted EBITDA was $9.5 million, compared to a loss of $5.7 million.
Current wording
Adjusted EBITDA was $19.6 million, compared to a loss of $11.5 million.
Previous wording
On April 5, 2024 (the "Fifth Amendment Effective Date"), the Company and Blue Torch entered into Amendment No. 5 to the Financing Agreement (the "Fifth Amendment"), which amended, among other things, certain terms of the Financing Agreement including without limitation, to (1) amend the minimum revenue financial covenant and (2) amend the minimum liquidity financial covenant.
Current wording
On October 18, 2024, (the “Sixth Amendment Effective Date”), the Company and Blue Torch entered into Amendment No. 6 to the Financing Agreement (the “Sixth Amendment”), which amended the Company’s existing Financing Agreement. The Sixth Amendment amends, among other things, certain terms of the Financing Agreement including without limitation, to (1) remove the minimum revenue financial covenant, (2) amend the minimum liquidity financial covenants, (3) include a minimum consolidated EBITDA (as defined in the Financing Agreement) financial covenant, (4) increase the quarterly principal payments on the Term Loan over the remaining quarterly periods, payable in monthly installments, until the maturity of the Term Loan, and (5) amend certain financial definitions, reporting covenants and other covenants thereunder.
Previous wording
In connection with the Fifth Amendment, the Company also amended and restated the Term Loan Warrant for the purchase of 97,482 shares of the Company's Class A common stock.
Current wording
In connection with the Sixth Amendment, the Company also amended and restated the Term Loan Warrants for the purchase of 97,482 shares of the Company’s Class A common stock. The amendment of the Term Loan Warrants amends the exercise price from $9.16 per share to $6.26 per share.
Previous wording
See Note 9, Debt, for additional information on the Fifth Amendment and amendments to the Term Loan Warrants.
Current wording
See Note 15, Subsequent Events, for additional information on the Sixth Amendment and amendments to the Term Loan Warrants.
Previous wording
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.
Current wording
Nutritional subscriptions include monthly subscriptions for nutritional products such as Shakeology, Beachbody Performance and BEACHBAR. We also package and bundle the content experience of digital subscriptions with nutritional subscriptions to optimize customer results.
Previous wording
We define and calculate Adjusted EBITDA as net income (loss) adjusted for 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.
Current wording
We define and calculate Adjusted EBITDA as net income (loss) adjusted for depreciation and amortization, amortization of capitalized cloud computing implementation costs, amortization of content assets, interest expense, income tax provision, equity-based compensation, restructuring costs, and other items that are not normal, recurring, operating expenses necessary to operate the Company’s business as described in the reconciliation below.
Previous wording
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 and equity-based compensation) or are not related to our underlying business performance (for example, in the case of interest income and expense).
Current wording
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 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).
Previous wording
Represents the loss related to the $1.0 million, $5.5 million and $4.0 million partial debt prepayments that the Company made on January 9, 2024, February 29, 2024 and April 5, 2024, respectively.
Current wording
Represents the loss related to the $1.0 million, $5.5 million and $4.0 million partial debt prepayments that the Company made on January 9, 2024, February 29, 2024 and April 5, 2024, respectively, and the $15.0 million partial debt prepayment that the Company made on July 24, 2023.
Previous wording
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 three months ended March 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 restricted stock unit ("RSU") awards during the period.
Current wording
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 three months ended March 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.
Previous wording
Includes restructuring expense and personnel costs associated with the Company's key initiatives during the three and six months ended June 30, 2024 and executing our key growth priorities during the three and six months ended June 30, 2023.
Current wording
Includes restructuring expense and personnel costs associated with key initiatives of zero and $1.6 million during the three and nine months ended September 30, 2024, respectively, and restructuring expense and personnel costs of $1.3 million and $7.2 million associated with executing our key growth priorities during the three and nine months ended September 30, 2023, respectively
Previous wording
The decrease in digital revenue for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023, was primarily attributable to a $4.8 million decrease in revenue from our digital streaming services due to 25% fewer subscriptions on lower demand partially offset by the transition of all digital subscriptions to the higher priced BODi subscription over the past year, a decrease in digital program sales of $1.2 million and a decrease of $0.5 million in fees from Partners as there was a 27% decrease in the number of Partners.
Current wording
The decrease in digital revenue for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023, was primarily attributable to a $9.6 million decrease in revenue from our digital streaming services due to 20% fewer subscriptions on lower demand partially offset by the transition of all digital subscriptions to the higher priced BODi subscription over the past year, a decrease of $0.8 million in fees from Partners as there was a 27% decrease in the number of Partners and a decrease in digital program sales of $0.4 million. With the Pivot and the transition from an MLM model to an affiliate model, the Company will no longer receive fees from Partners beginning as of November 1, 2024. The Company recorded $2.7 million and $8.6 million of fees from Partners for the three and nine months ended September 30, 2024, respectively.
Previous wording
The decrease in nutrition and other revenue for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023, was primarily attributable to a $10.5 million decrease in revenue from nutritional products due to 26% fewer nutritional subscriptions on lower demand, a $2.2 million decrease in revenue generated from our preferred customer fees as there was a 31% decrease in preferred customers and a $0.9 million decrease in event ticket sales due primarily to the decrease in the number of, length of and attendance at events.
Current wording
The decrease in nutrition and other revenue for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023, was primarily attributable to a $9.4 million decrease in revenue from nutritional products due to 27% fewer nutritional subscriptions on lower demand and a $1.6 million decrease in revenue generated from our preferred customer fees as there was a 28% decrease in preferred customers. With the Pivot and the transition from an MLM model to an affiliate model, the Company will no longer receive preferred customer fees beginning as of November 1, 2024. The Company recorded $3.9 million and $12.4 million of preferred customer fees for the three and nine months ended September 30, 2024, respectively. With the Pivot, the Company will also significantly reduce the number and length of events, which will significantly reduce event ticket sales in 2025. The Company recorded zero and $2.6 million of ticket sales for the three and nine months ended September 30, 2024, respectively.
Previous wording
The decrease in connected fitness revenue for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023, was primarily due to an approximate 70% decrease in number of bikes delivered from approximately 5,500 for the three months ended June 30, 2023 to approximately 1,600 for the three months ended June 30, 2024 and an approximate 9% decrease in the average sales price for a bike.
Current wording
The decrease in connected fitness revenue for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023, was primarily due to an approximate 80% decrease in number of bikes delivered from approximately 6,500 for the three months ended September 30, 2023 to approximately 1,300 for the three months ended September 30, 2024 which was partially offset by an approximate 14% increase in the average sales price for a bike. In the three months ended September 30, 2024, management of the Company determined that it would no longer sell connected fitness inventory after December 31, 2024.
Previous wording
The decrease in digital revenue for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023, was primarily attributable to a $10.3 million decrease in revenue from our digital streaming services due to 25% fewer subscriptions on lower demand partially offset by the transition of all digital subscriptions to the higher priced BODi subscription over the past year and a decrease of $1.1 million in fees from Partners due to a 27% decrease in the number of Partners, partially offset by an increase in digital program sales of $1.3 million.
Current wording
The decrease in digital revenue for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, was primarily attributable to a $19.9 million decrease in revenue from our digital streaming services due to 20% fewer subscriptions on lower demand partially offset by the transition of all digital subscriptions to the higher priced BODi subscription over the past year and a decrease of $1.9 million in fees from Partners due to a 27% decrease in the number of Partners.
Previous wording
The decrease in nutrition and other revenue for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023, was primarily attributable to a $24.8 million decrease in revenue from nutritional products due to 26% fewer nutritional subscriptions on lower demand, a $4.7 million decrease in revenue generated from our preferred customer fees as there was a 31% decrease in preferred customers, a $2.2 million decrease in event ticket sales due primarily to the decrease in the number of, length of and attendance at events and a $1.0 million decrease in fitness accessories revenue.
Current wording
The decrease in nutrition and other revenue for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, was primarily attributable to a $34.2 million decrease in revenue from nutritional products due to 27% fewer nutritional subscriptions on lower demand, a $6.3 million decrease in revenue generated from our preferred customer fees as there was a 28% decrease in preferred customers, a $2.2 million decrease in event ticket sales due primarily to the decrease in the number of, length of and attendance at events and a $2.0 million decrease in fitness accessories revenue.
Previous wording
The decrease in connected fitness revenue for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023, was primarily due to an approximate 50% decrease in the number of bikes delivered from approximately 10,200 for the six months ended June 30, 2023 to approximately 5,100 for the six months ended June 30, 2024 and an approximate 22% decrease in the average sales price for a bike.
Current wording
The decrease in connected fitness revenue for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, was primarily due to an approximate 62% decrease in the number of bikes delivered from approximately 16,700 for the nine months ended September 30, 2023 to approximately 6,300 for the nine months ended September 30, 2024 and an approximate 11% decrease in the average sales price for a bike.
Previous wording
The decrease in digital cost of revenue for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023, was primarily due to a $1.8 million decrease in depreciation expense as a result of the end of the useful life of certain fixed assets, a $1.3 million decrease in the amortization of content assets as the result of lower production spend and a $1.1 million decrease in digital content revisions. The increase in digital gross margin for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 was primarily as a result of the decrease in expenses as noted above.
Current wording
The decrease in digital cost of revenue for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023, was primarily due to a $1.7 million decrease in depreciation expense as a result of the end of the useful life of certain fixed assets, a $1.6 million decrease in the amortization of content assets as the result of lower production spend and a $1.4 million decrease in digital content revisions. The increase in digital gross margin for the three months ended September 30, 2024 compared to the three months ended September 30, 2023 was primarily as a result of the decrease in expenses as noted above.
Previous wording
The decrease in nutrition and other cost of revenue for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023, was primarily due to a $3.0 million decrease in product costs and a $1.6 million decrease in fulfillment and shipping expenses related to the decrease in nutrition and other revenue, a $1.2 million decrease in depreciation expense as a result of the end of the useful life of certain fixed assets and a $0.7 million decrease in customer service expense due to a decrease in the volume of contacts related to nutrition and other revenue. The increase in nutrition and other gross margin for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 was primarily as a result of the decrease in depreciation expense.
Current wording
The decrease in nutrition and other cost of revenue for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023, was primarily due to a $3.0 million decrease in product costs and a $1.8 million decrease in fulfillment, freight and shipping expenses related to the decrease in nutrition and other revenue, a $0.8 million decrease in depreciation expense as a result of the end of the useful life of certain fixed assets and a $0.4 million decrease in customer service expense due to a decrease in the volume of contacts related to nutrition and other revenue. The increase in nutrition and other gross margin for the three months ended September 30, 2024 compared to the three months ended September 30, 2023 was primarily as a result of a decrease in inventory adjustments and a decrease in depreciation expense.
Previous wording
The decrease in connected fitness cost of revenue for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023, was driven by a $2.3 million decrease in freight, fulfillment and shipping expenses and a $1.3 million decrease in product costs, as the result of an approximate 70% decrease in the number of bikes delivered, and lower inventory reserve adjustments of $2.0 million. The decrease in connected fitness gross margin for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 was primarily as a result of fixed expenses on lower connected fitness revenue and due to the decrease in the average sales price for a bike.
Current wording
The decrease in connected fitness cost of revenue for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023, was driven by a $2.7 million decrease in freight, fulfillment and shipping expenses and a $1.4 million decrease in product costs, as the result of an approximate 80% decrease in the number of bikes delivered, and lower inventory adjustments of $2.2 million. The decrease in connected fitness gross margin for the three months ended September 30, 2024 compared to the three months ended September 30, 2023 was primarily as a result of fixed expenses on lower connected fitness revenue.
Previous wording
The decrease in digital cost of revenue for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023, was due to a $3.0 million decrease in depreciation expense as a result of the end of the useful life of certain fixed assets, a $2.4 million decrease in digital content amortization as a result of lower production spend and a $1.4 million decrease in digital content revisions. The increase in digital gross margin for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 was primarily as a result of the decrease in depreciation expense and digital content amortization.
Current wording
The decrease in digital cost of revenue for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, was due to a $4.7 million decrease in depreciation expense as a result of the end of the useful life of certain fixed assets, a $4.0 million decrease in digital content amortization as a result of lower production spend and a $2.8 million decrease in digital content revisions. The increase in digital gross margin for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 was primarily as a result of the decrease in expenses as noted above.
Previous wording
The decrease in nutrition and other cost of revenue for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023, was primarily due to a $5.0 million decrease in product costs and a $3.1 million decrease in fulfillment and shipping expenses related to the decrease in nutrition and other revenue, a $2.9 million decrease in depreciation expense as a result of the end of the useful life of certain fixed assets, a $1.7 million decrease in customer service expense due to a decrease in the volume of contacts related to nutrition and other revenue and lower inventory adjustments of $1.6 million. Nutrition and other gross margin increased for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 primarily as a result of the decrease in depreciation expense.
Current wording
The decrease in nutrition and other cost of revenue for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, was primarily due to a $7.9 million decrease in product costs and a $5.8 million decrease in fulfillment, freight and shipping expenses related to the decrease in nutrition and other revenue, a $3.7 million decrease in depreciation expense as a result of the end of the useful life of certain fixed assets, a $2.1 million decrease in customer service expense due to a decrease in the volume of contacts related to nutrition and other revenue and lower inventory adjustments of $2.0 million. Nutrition and other gross margin increased for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 primarily as a result of the decrease in depreciation expense and a decrease in inventory adjustments.
Previous wording
The decrease in connected fitness cost of revenue for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023, was driven by a $4.2 million decrease in product costs and a $2.3 million decrease in freight, fulfillment, and shipping expenses, as the result of an approximate 50% decrease in the number of bikes delivered, and lower inventory adjustments of $2.5 million. The connected fitness negative gross margin for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 was flat.
Current wording
The decrease in connected fitness cost of revenue for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, was driven by a $5.6 million decrease in product costs and a $5.1 million decrease in freight, fulfillment, and shipping expenses, as the result of an approximate 62% decrease in the number of bikes delivered and lower inventory adjustments of $4.6 million. The decrease in connected fitness gross margin for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 was due primarily to fixed expenses on lower connected fitness revenue.
Previous wording
The decrease in selling and marketing expense for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023, was primarily due to a $22.8 million decrease in Partner compensation as a result of the decrease in the number of Partners, lower commissionable revenue and a decrease in the commission rate paid to Partners that started at the beginning of January 2024, an $8.3 million decrease in event expenses due primarily to a decrease in the number of, length of and attendance at events, a $2.7 million decrease in personnel-related expenses due to lower headcount primarily related to the restructuring activities that occurred in the past year and a $2.3 million decrease in the amortization of intangible assets due to the impairment of the remaining intangible asset balance in the fourth quarter of 2023.
Current wording
The decrease in selling and marketing expense for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023, was primarily due to a $12.2 million decrease in Partner compensation as a result of the decrease in the number of Partners, lower commissionable revenue and a decrease in the commission rate paid to Partners that started at the beginning of January 2024, a $3.2 million decrease in media expenses due to management's focus on reducing expense, a $3.1 million decrease in personnel-related expenses due to lower headcount primarily related to the non-Pivot related restructuring activities that occurred in the past year and the modification of certain stock awards for employees who were impacted by the Pivot, a $2.1 million decrease in event expenses due primarily to no events in the three months ended September 30, 2024, and a $1.1 million decrease in the amortization of intangible assets due to the impairment of the remaining intangible asset balance in the fourth quarter of 2023. With the Pivot and the transition from the MLM model to an affiliate model, the Company will significantly reduce the number and length of events for Partners and these event expenses are expected to be reduced significantly in 2025. The Company recorded approximately zero and $5.5 million of event expenses for the three and nine months ended September 30, 2024, respectively. The Company also expects a decrease in personnel-related expenses due to the headcount reductions associated with the Pivot.
Previous wording
Selling and marketing expense as a percentage of total revenue decreased by 560 basis points ("bps") primarily due to the decrease in Partner compensation and event expenses.
Current wording
Selling and marketing expense as a percentage of total revenue decreased by 930 basis points ("bps") primarily due to the decrease in Partner compensation, media expenses and event expenses.
Previous wording
The decrease in selling and marketing expense for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023, was primarily due to an $11.5 million decrease in Partner compensation as a result of the decrease in the number of Partners, lower commissionable revenue and a decrease in the commission rate paid to Partners that started at the beginning of January 2024, a $5.6 million decrease in event expenses due primarily to a decrease in the number of, length of and attendance at events, a $1.2 million decrease in personnel-related expenses due to lower headcount primarily related to the restructuring activities that occurred in the past year and a $1.1 million decrease in the amortization of intangible assets due to the impairment of the remaining intangible asset balance in the fourth quarter of 2023.
Current wording
The decrease in selling and marketing expense for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, was primarily due to a $35.1 million decrease in Partner compensation as a result of the decrease in the number of Partners, lower commissionable revenue and a decrease in the commission rate paid to Partners that started at the beginning of January 2024, a $10.4 million decrease in event expenses due primarily to a decrease in the number of, length of and attendance at events, a $5.8 million decrease in personnel-related expenses due to lower headcount primarily related to the non-Pivot related restructuring activities that occurred in the past year and due to the modification of certain stock awards for employees who were impacted by the Pivot, a $3.4 million decrease in the amortization of intangible assets due to the impairment of the remaining intangible asset balance in the fourth quarter of 2023 and a $2.4 million decrease in media expenses due to management's focus on reducing expense.
Previous wording
Selling and marketing expense as a percentage of total revenue decreased by 450 bps primarily due to the decrease in Partner compensation and event expenses.
Current wording
Selling and marketing expense as a percentage of total revenue decreased by 590 bps primarily due to the decrease in Partner compensation and event expenses.
Previous wording
Enterprise technology and development expense as a percentage of total revenue increased by 180 bps due to the decrease in revenue at a faster pace than the reduction in enterprise technology and development expenses.
Current wording
Enterprise technology and development expense as a percentage of total revenue increased by 430 bps due to the accelerated depreciation on the long-lived assets impacted by the Pivot, as well as a decrease in revenue at a faster pace than the reduction in enterprise technology and development expenses.
Previous wording
The decrease in enterprise technology and development expenses for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023, was primarily due to a $1.2 million decrease in depreciation expense as a result of the end of the useful life of certain fixed assets.
Current wording
The decrease in enterprise technology and development expenses for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, was primarily due to a $1.6 million decrease in personnel-related expenses due to lower headcount primarily related to the non-Pivot related restructuring activities that occurred in the past year and a $0.4 million decrease in depreciation expense as a result of the end of the useful life of certain fixed assets, which was partially offset by accelerated depreciation of $2.9 million recorded related to certain long-lived assets that due to the Pivot will no longer be used by the Company after December 31, 2024.
Previous wording
Enterprise technology and development expense as a percentage of total revenue increased by 160 bps due to the decrease in revenue at a faster pace than the reduction in enterprise technology and development expenses.
Current wording
Enterprise technology and development expense as a percentage of total revenue increased by 240 bps due to the accelerated depreciation on the long-lived assets impacted by the Pivot, as well as a decrease in revenue at a faster pace than the reduction in enterprise technology and development expenses.
Previous wording
The decrease in general and administrative expenses for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023, was primarily due to a $2.3 million decrease in professional and accounting fees due to a management focus on decreasing spending, a $1.4 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 $0.8 million gain on the sale of the Van Nuys facility which was recorded as a reduction of general and administrative expenses in the three months ended March 31, 2024.
Current wording
The decrease in general and administrative expenses for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, was primarily due to a $3.8 million decrease in professional and accounting fees due to a management focus on decreasing spending, a $1.7 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, a decrease in equity based compensation of $1.6 million due primarily to the decrease in headcount and the modification of certain stock awards for employees who were impacted by the Pivot, and a $0.8 million gain on the sale of the Van Nuys facility which was recorded as a reduction of general and administrative expenses in the three months ended March 31, 2024.
Previous wording
General and administrative expense as a percentage of total revenue increased by 60 bps due to the decrease in revenue at a faster pace than the reduction in general and administrative expenses.
Current wording
General and administrative expense as a percentage of total revenue increased by 40 bps due to the decrease in revenue at a faster pace than the reduction in general and administrative expenses.
Previous wording
In 2024, restructuring charges primarily relate to the Company's key initiatives. Restructuring charges in 2023 relate to activities focused on aligning our operations with our key growth priorities, including a reduction in headcount. The charges incurred primarily consist of employee termination costs.
Current wording
In 2024, restructuring charges primarily relate to the Pivot which was announced by the Company on September 30, 2024 (see Note 12, Restructuring, for more information on the Pivot) and key initiatives. Restructuring charges in 2023 relate to activities focused on aligning our operations with our key growth priorities, including a reduction in headcount. The charges incurred primarily consist of employee termination costs.
Previous wording
The loss on partial debt extinguishment for the three months ended June 30, 2024 was due to the partial prepayment of $4.0 million on the Term Loan as of April 5, 2024. The change in fair value of warrant liabilities during the three months ended June 30, 2024, as compared to the three months ended June 30, 2023, primarily resulted from the decline in our stock price during the current quarter and an increase in the number of outstanding warrants due to the Common Stock Warrants that were issued in December 2023. The decrease in interest expense was primarily due to principal prepayments of $25.5 million on the outstanding Term Loan balance from June 30, 2023 to June 30, 2024.
Current wording
The loss on partial debt extinguishment for the three months ended September 30, 2023 was due to the partial prepayment of $15.0 million on the Term Loan as of July 24, 2023. The change in fair value of warrant liabilities during the three months ended September 30, 2024, as compared to the three months ended September 30, 2023, primarily resulted from the decline in our stock price during the current quarter and an increase in the number of outstanding warrants due to the Common Stock Warrants that were issued in December 2023. The decrease in interest expense was primarily due to principal prepayments of $25.5 million on the outstanding Term Loan balance from July 1, 2023 to September 30, 2024. The increase in other income was primarily due to a $1.2 million gain on the sale of a legal claim for a litigation settlement in the current quarter.
Previous wording
The loss on partial debt extinguishment for the six months ended June 30, 2024 was due to the partial prepayments of $10.5 million on the Term Loan that occurred in the six months ended June 30, 2024. The change in fair value of warrant liabilities during the six months ended June 30, 2024, as compared to the six months ended June 30, 2023, primarily resulted from a slight increase in our stock price during the current period as compared to a decrease in our stock price in the prior year period. The decrease in interest expense was primarily due to principal prepayments of $25.5 million on the outstanding Term Loan balance from June 30, 2023 to June 30, 2024. The decrease in other income was primarily due to lower interest income as a result of lower average cash balances for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023.
Current wording
The change in the loss on partial debt extinguishment for the nine months ended September 30, 2024 was due to partial prepayments of $10.5 million on the Term Loan that occurred in the nine months ended September 30, 2024 as compared to partial prepayments of $15.0 million in the nine months ended September 30, 2023. The change in fair value of warrant liabilities during the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, primarily resulted from a lower decrease in our stock price during the current period as compared to the decrease in our stock price in the prior year period. The decrease in interest expense was primarily due to principal prepayments of $25.5 million on the outstanding Term Loan balance from July 1, 2023 to September 30, 2024. The increase in other income was primarily due to a $1.2 million gain on the sale of a legal claim for a litigation settlement in the quarter ended September 30, 2024.
Previous wording
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.
Current wording
Income tax provision consists of income taxes related to U.S. federal and state jurisdictions as well as those foreign jurisdictions where we have business operations.
Previous wording
The income tax provision increase for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023, was primarily driven by changes in our valuation allowance and an increase in the net expense from discrete events.
Current wording
The income tax provision increase for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, was primarily driven by changes in our valuation allowance and an increase in the net expense from discrete events.
Previous wording
Net cash provided by (used in) operating activities was $8.2 million and $(14.4) million for the six months ended June 30, 2024 and 2023, respectively. The increase in net cash provided by operating activities during the six months ended June 30, 2024, compared to the prior year period, was primarily due to a decrease in net loss of $29.9 million, an increase in cash provided by other assets of $18.1 million and a decrease in cash used for accrued expenses of $8.8 million partially offset by a decrease in cash provided by deferred revenue of $13.0 million, a decrease in depreciation and amortization expense of $10.8 million and a decrease in provision for inventory and inventory purchase commitments of $4.1 million.
Current wording
Net cash provided by (used in) operating activities was $9.3 million and $(14.6) million for the nine months ended September 30, 2024 and 2023, respectively. The increase in net cash provided by operating activities during the nine months ended September 30, 2024, compared to the prior year period, was primarily due to a decrease in net loss of $50.5 million, an increase in cash provided by other assets of $15.7 million and a decrease in cash used for accrued expenses of $12.0 million partially offset by a decrease in cash provided by deferred revenue of $13.3 million, a decrease in depreciation and amortization expense of $12.6 million, a decrease in cash provided by inventory of $7.7 million, a decrease in provision for inventory and inventory purchase commitments of $6.6 million, a decrease in cash provided by equity based compensation of $6.5 million and in increase in cash used in other liabilities of $4.2 million.
Previous wording
Net cash provided by (used in) investing activities was $2.7 million and $(5.0) million for the six months ended June 30, 2024 and 2023, respectively. The increase in net cash provided by investing activities was due to proceeds received from the sale of the Van Nuys facility of $5.6 million and a decrease in capital expenditures of $2.1 million due to increased focus by management on capital expenditures, in particular related to technology.
Current wording
Net cash provided by (used in) investing activities was $1.6 million and $(9.7) million for the nine months ended September 30, 2024 and 2023, respectively. The increase in net cash provided by investing activities was due to proceeds received from the sale of the Van Nuys facility of $5.6 million and a decrease in capital expenditures of $1.5 million due to increased focus by management on capital expenditures, in particular related to technology.
Showing the first 40 of 44 pairs. Open the source sections for the rest.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
The Financing Agreement contains financial covenants, customary representations, warranties, covenants and customary events of default. In particular, the Financing Agreement contains a minimum liquidity financial covenant of $18.0 million as of September 30, 2024, which was amended in the Sixth Amendment to (a) $9.5 million from the Sixth Amendment Effective Date through December
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
Agreement, would constitute a condition of default and would allow Blue Torch to accelerate the maturity of all indebtedness under the Financing Agreement. If such acceleration were to occur, we would likely have to seek an amendment and/or waiver of the impacted financial covenant or repay the debt with proceeds from the issuance of new debt or equity, or asset sales, if necessary. We may be unable to amend the Financing Agreement or raise sufficient capital to repay such obligations in the event the maturity is accelerated. See Note 9, Debt, for additional information on the Term Loan.