Beachbody Company, Inc. (BODi) — FY2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023; comparisons are to FY2022. This annual filing is not a standalone fourth-quarter report.
Business context
BODi sells digital fitness and wellness subscriptions, nutrition products, and connected fitness equipment, primarily through its Partner network and direct-to-consumer channels. At year-end, it reported 1.31 million digital subscriptions and 0.16 million nutritional subscriptions. The company continued migrating members to its consolidated BODi platform and expanded mindset content, including GrowthDay.
Financial and operating results
| Metric | FY2023 | FY2022 | Change |
|---|---|---|---|
| Revenue | $527.1 million | $692.2 million | Down 24% |
| Gross profit / margin | $323.1 million / 61.3% | $369.6 million / 53.4% | Profit down 13%; margin up |
| Operating expenses | $464.1 million | $572.7 million | Down $108.7 million |
| Operating loss | $141.0 million | $203.2 million | Loss narrowed |
| Net loss | $152.6 million | $194.2 million | Loss narrowed |
| Adjusted EBITDA loss (non-GAAP) | $8.7 million | $23.3 million | Loss narrowed |
| Cash used in operating activities | $22.5 million | $47.2 million | Use decreased |
- Revenue by category: digital $258.4 million (down 14%); nutrition and other $249.5 million (down 29%); connected fitness $19.2 million (down 50%). Digital and nutrition represented approximately 49% and 47% of revenue, respectively.
- Subscriptions declined: digital subscriptions were 1.31 million versus 1.95 million, and nutritional subscriptions were 0.16 million versus 0.22 million. Average digital retention was 96.0% versus 95.9%; streams fell to 98.2 million from 120.5 million. Average DAU/MAU was 31.3% versus 30.1%.
- Gross margin improved despite lower revenue, partly reflecting lower inventory adjustments and connected-bike costs. Connected fitness remained loss-making at gross profit of negative $10.7 million, although the loss improved from $53.3 million.
- Year-end cash and cash equivalents were $33.4 million, down from $80.1 million. Current assets were $119.3 million and current liabilities $165.2 million. The company also held $4.25 million in restricted short-term investments.
- Term Loan principal, including capitalized interest, was $35.5 million at year-end; the balance-sheet carrying amount was $29.6 million, including current and long-term portions. The loan’s effective interest rate was 19.73% and cash interest rate 12.29% for 2023; maturity was amended to February 8, 2026.
Material changes and unusual items
- Revenue fell in all three categories. Management attributed digital and nutrition declines mainly to lower demand and fewer subscriptions; bike revenue also reflected fewer deliveries and lower average selling price.
- Operating expenses fell, including selling and marketing, technology and development, and general and administrative costs, reflecting lower commissions, headcount and depreciation. However, FY2023 included $40.0 million of goodwill impairment and $3.1 million of intangible-asset impairment; goodwill ended the year at $85.2 million and intangible assets at zero.
- Other items included a $4.0 million impairment of a private-company investment and a $3.2 million loss on partial debt extinguishment. Inventory and purchase-commitment adjustments were $10.6 million, down from $39.8 million.
- The company raised $4.9 million net in a December 2023 equity offering and issued warrants. It completed a 1-for-50 reverse stock split in November 2023.
- After year-end, the company sold its investment for $1.0 million and its Van Nuys facility for $6.2 million, applying proceeds to Term Loan prepayments of $1.0 million and $5.5 million, respectively. Reported loan principal after those prepayments was $28.6 million. The lender amended minimum-liquidity covenants; minimums were set at $17 million through March 31, 2024 and $22 million thereafter through maturity.
Outlook, risks and contingencies
- The filing provides no quantified revenue, earnings or cash-flow guidance. Management said cash, cost controls and other measures were expected to support anticipated liquidity needs, while also noting that additional debt or equity financing may be explored and cannot be assured on acceptable terms.
- Management launched a Partner productivity initiative and changed Partner commissions from typically 25% to 20% effective January 3, 2024; Preferred Customer discounts were reduced from up to 25% to 20% effective December 1, 2023. January 2024 restructuring was expected to cost approximately $1.7 million.
- Key risks include declining subscriptions and demand, competition and pricing pressure, dependence on Shakeology and other core offerings, execution of cost reductions, consumer-spending and supply-chain volatility, and compliance risks involving Partners, auto-renewing subscriptions, nutrition products and customer data. The filing also highlights high debt costs, covenant restrictions and refinancing needs.
- Two material pending matters are a California class action alleging Partner misclassification and labor-code violations, and a patent-infringement suit brought by DISH entities seeking damages and injunctive relief. The company disputes the allegations; it has not recorded reserves because loss probability and amounts could not be estimated. The earlier challenge to the company’s charter share authorization was validated by the Delaware Court of Chancery in March 2023.
- Management reported that prior-year material weaknesses in internal control over financial reporting were remediated and concluded controls were effective at December 31, 2023. The independent auditor issued an unqualified opinion on the financial statements but did not attest to internal-control effectiveness.
Important facts for investors to verify
- Whether subscription counts, retention, engagement and revenue trends stabilize after the platform migration, pricing changes and Partner compensation revisions.
- Whether operating cash use and planned cost reductions are sufficient to meet debt service and minimum-liquidity covenants; confirm the effect of post-year-end prepayments and amendments.
- Whether further goodwill or other asset impairments arise if revenue, forecasts or the share price decline further.
- Developments, potential exposure and timing in the Partner classification and DISH patent litigation.
- Potential dilution and warrant impacts from the 2023 equity offering and other outstanding equity awards; the founder controls over 80% of voting power through super-voting shares.