Interactive Strength, Inc. (Nasdaq: TRNR) — FY2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. This is an annual report, not a standalone fourth-quarter filing; the financial comparisons below are for full-year 2023 versus full-year 2022. The filing was signed April 1, 2024.
Business context
Interactive Strength, operating as Forme, sells premium connected-fitness equipment and related memberships and coaching. Its products include the Forme Studio and Studio Lift; the company also offers on-demand content, custom training, and live one-to-one personal training. Hardware sales remained its largest revenue source. In February 2024, after year-end, the company acquired CLMBR.
Financial results and liquidity
| Metric | FY2023 | FY2022 |
|---|---|---|
| Revenue | $0.962 million | $0.681 million |
| Gross loss | $5.528 million | $8.868 million |
| Gross margin | (575%) | (1,302%) |
| Operating loss | $54.480 million | $54.345 million |
| Net loss | $51.373 million | $58.225 million |
| Adjusted EBITDA (non-GAAP) | $(16.999) million | $(38.809) million |
| Cash used in operations | $15.427 million | $35.545 million |
| Cash used in investing | $1.421 million | $7.607 million |
| Cash provided by financing | $17.105 million | $41.772 million |
Revenue increased 41%. Fitness-product revenue rose 8% to $574,000; membership revenue increased 92% to $142,000; and training revenue grew 219% to $246,000. The mix shifted: fitness products were 59% of revenue versus 78% in 2022, while training rose to 26% from 11%. Despite lower total cost of revenue and a narrower gross loss, the company continued to generate a substantial gross loss.
Operating expenses increased 8% to $48.952 million. Research and development fell 50% to $10.044 million and sales and marketing fell 74% to $1.631 million, primarily reflecting lower staffing and marketing spending. General and administrative expense rose 93% to $37.277 million, largely due to stock-based compensation. Stock-based compensation totaled $29.943 million, compared with $6.348 million in 2022. Net loss narrowed, but operating loss was broadly unchanged.
At December 31, 2023, cash and cash equivalents were zero, current assets were $5.356 million and current liabilities were $21.534 million, including $10.562 million of accounts payable. Total liabilities were $22.354 million, total assets were $16.802 million, and stockholders’ deficit was $5.552 million. Year-end debt was approximately $10 million, all classified as current. The filing reports an accumulated deficit of $166.9 million.
Material changes, outlook, and key risks
- Going concern: Management and the auditor report substantial doubt about the company’s ability to continue as a going concern. At the financial-statement issuance date, the company reported approximately zero unrestricted cash and no financing or capital source secured or deemed probable to fund operations for the next 12 months. Management said it would need near-term outside capital or lender relief; absent that, alternatives could include significant operating cuts, asset or company sale, or bankruptcy. The audited statements were prepared on a going-concern basis and do not reflect adjustments that might result.
- Debt and financing after year-end: The filing describes approximately $18 million of debt at the issuance date, plus accrued unpaid interest and penalties, with amounts due or scheduled within the following 12 months. Subsequent conversions of debt into Series A preferred stock and extensions of loan maturities are also disclosed. The company has a right, subject to conditions and an exchange cap, to sell up to $20 million of common stock under an equity line; it does not represent cash already raised.
- CLMBR and distribution: The February 2024 CLMBR acquisition had stated enterprise value of approximately $15.4 million, funded through common and preferred shares, assumed subordinated debt, and retirement of senior debt. A Woodway distribution agreement provides for an order of 2,150 CLMBR units; the filing says sales of all units could generate up to approximately $7 million in net revenue, not a guaranteed realized amount.
- Nasdaq: The company received a January 2024 notice that its bid price had been below $1 for 30 consecutive business days, with an initial compliance deadline of July 24, 2024. The filing says failure to regain compliance or obtain an extension could result in delisting. It also reports that a separate stockholders’ equity listing deficiency was subsequently resolved.
- Controls: Management concluded disclosure controls and internal control over financial reporting were ineffective at year-end due to material weaknesses involving accounting expertise and staffing, segregation of duties, accounting-system limitations, and stock-compensation controls. Remediation was underway, including plans for new accounting software in 2024; completion and effectiveness were not assured. The auditor did not attest to internal-control effectiveness.
- Unusual items: Results included a $2.595 million gain from forgiveness/settlement of obligations related to a third-party content provider and a $2.405 million gain from changes in warrant fair value. These gains helped reduce reported net loss and are not equivalent to recurring operating performance. The company also cites major staffing reductions in 2022 and early 2023.
- Contingency: A March 2024 petition seeks to enforce an approximately $2.25 million arbitration award against CLMBR. Interactive Strength disputes its liability and says it intends to defend the matter; the outcome is uncertain.
- Outlook and operating risks: No quantified revenue or earnings guidance is provided. Management’s stated priorities include growing coaching and membership uptake, expanding corporate wellness and partnerships, lowering coaching costs, and evaluating international expansion. Risks include continued losses and cash burn, dependence on equipment sales, consumer financing and discretionary spending, competition, Taiwan-centered manufacturing and supply-chain exposure, potential dilution, and the company’s ability to raise capital.
Investor verification priorities
- Verify current unrestricted cash, funding raised since the filing, debt outstanding and maturity dates, lender waivers, and the company’s ability to fund operations for the next 12 months.
- Check whether the equity line has produced cash, its remaining availability and conditions, and the dilution from preferred-stock conversions, warrants, and other securities.
- Assess the CLMBR acquisition’s integration, costs, liabilities, and actual Woodway orders, shipments, collections, and revenue.
- Track Nasdaq bid-price compliance and any subsequent listing or delisting notices.
- Review progress remediating material weaknesses and any subsequent accounting corrections or filing delays.
- Compare recurring membership and training growth with hardware sales, gross losses, and cash consumption; distinguish recurring performance from non-cash fair-value gains and debt-related gains.
- Monitor the DK City petition, its potential financial exposure, and any other material litigation or contingencies.