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Filed pursuant to Rule 424(b)(4)
Registration No. 333-258149

PROSPECTUS FOR

243,320,841 SHARES OF COMMON STOCK

5,333,333 WARRANTS TO PURCHASE SHARES OF COMMON STOCK

AND

15,333,333 SHARES OF COMMON STOCK UNDERLYING WARRANTS

OF

THE BEACHBODY COMPANY, INC.

This prospectus relates to the resale from time to time of (i) an aggregate of 201,788,314 shares of common stock, par value $0.0001 per share (the “common stock”), of The Beachbody Company, Inc., a Delaware corporation (“Beachbody”) by the selling shareholders named in this prospectus (each a “Selling Shareholder” and, collectively, the “Selling Shareholders”), (ii) the resale of 7,500,000 shares of common stock issued to the Sponsor (as defined below) and subsequently distributed to its members, including 3,750,000 shares of common stock that are subject to certain vesting restrictions pursuant to the Sponsor Agreement (as defined below), (iii) the resale of 22,500,000 shares of common stock issued in the PIPE Investment (as defined below) by certain of the Selling Stockholders, and (iv) the issuance by us and resale of 11,532,527 shares of common stock reserved for issuance upon the exercise of options to purchase common stock. This prospectus also relates to the issuance by us of up to 15,333,333 shares of common stock upon the exercise of outstanding warrants.

On June 25, 2021, we consummated the transactions contemplated by that certain Agreement and Plan of Merger, dated as of February 9, 2021 (the “Merger Agreement”), by and among Forest Road Acquisition Corp., a Delaware corporation (“FRX”), BB Merger Sub, LLC, a Delaware limited liability company and a direct, wholly-owned subsidiary of FRX (“BB Merger Sub”), Myx Merger Sub, LLC, a Delaware limited liability company and a direct, wholly-owned subsidiary of FRX (“Myx Merger Sub”), The Beachbody Company Group, LLC, a Delaware limited liability company (“BB”) and Myx Fitness Holdings, LLC, a Delaware limited liability company (“Myx”). As contemplated by the Merger Agreement, FRX changed its name to “The Beachbody Company, Inc.” In connection with the foregoing transactions, BB Merger Sub merged with and into BB, the separate corporate existence of BB Merger Sub ceased and BB survived as a wholly-owned subsidiary of FRX; Myx Merger Sub merged with and into Myx, the separate corporate existence of Myx Merger Sub ceased and Myx survived as a wholly-owned subsidiary of FRX; and BB merged with and into FRX, the separate corporate existence of BB ceased and FRX continued as a surviving acquiror entity (the “Business Combination”).

We are registering the resale of shares of common stock and warrants as required by (i) an amended and restated registration rights agreement, dated as of June 25, 2020 (the “Registration Rights Agreement”), entered into by and among Beachbody, Forest Road Acquisition Sponsor LLC, a Delaware limited liability company (the “Sponsor”), certain equityholders of The Beachbody Company Group, LLC, a Delaware limited liability company, set forth on the signature pages thereto, and Carl Daikeler, Mary Conlin, John Salter, Michael Heller, Ben Van de Bunt and Kevin Mayer in private placements consummated in connection with the Business Combination (such private placements, collectively, the “PIPE Investment”).

We are also registering the (i) resale of shares of common stock held by certain of our affiliates and (ii) the issuance and resale of shares of common stock reserved for issuance upon the exercise of options to purchase shares of common stock and the settlement of restricted stock units, in each case, held by certain of our current and former employees.

We will receive the proceeds from any exercise of the warrants for cash, but not from the resale of the shares of common stock or warrants by the Selling Shareholders.

We will bear all costs, expenses and fees in connection with the registration of the shares of common stock and warrants. The Selling Shareholders will bear all commissions and discounts, if any, attributable to their respective sales of the shares of common stock and warrants.

Our shares of common stock are listed on The New York Stock Exchange under the symbol “BODY.” On July 19, 2021, the closing sale price of shares of our common stock was $8.79. Our warrants are listed on The New York Stock Exchange under the symbol “BODY WS.” On July 19, 2021, the closing sale price of our warrants was $2.28.

Investing in shares of our common stock or warrants involves risks that are described in the “Risk Factors” section beginning on page 11 of this prospectus.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be issued under this prospectus or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The date of this prospectus is August 6, 2021


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TABLE OF CONTENTS

 

     Page  

EXPLANATORY NOTE

     ii  

TRADEMARKS

     ii  

SELECTED DEFINITIONS

     iii  

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

     vi  

SUMMARY

     1  

RISK FACTORS

     11  

USE OF PROCEEDS

     43  

MARKET PRICE OF OUR COMMON STOCK AND DIVIDEND INFORMATION

     44  

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

     45  

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

     53  

BUSINESS

     61  

SELECTED HISTORICAL FINANCIAL AND OPERATING DATA OF BEACHBODY

     74  

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     78  

MANAGEMENT

     104  

EXECUTIVE COMPENSATION

     111  

PRINCIPAL SECURITYHOLDERS

     119  

SELLING SHAREHOLDERS

     121  

DESCRIPTION OF OUR SECURITIES

     129  

SECURITIES ACT RESTRICTIONS ON RESALE OF OUR SECURITIES

     137  

PLAN OF DISTRIBUTION

     138  

LEGAL MATTERS

     141  

EXPERTS

     141  

WHERE YOU CAN FIND MORE INFORMATION

     142  

INDEX TO FINANCIAL STATEMENTS

     F-1  

You should rely only on the information contained in this prospectus. No one has been authorized to provide you with information that is different from that contained in this prospectus. This prospectus is dated as of the date set forth on the cover hereof. You should not assume that the information contained in this prospectus is accurate as of any date other than that date.

 

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EXPLANATORY NOTE

This prospectus is being filed pursuant to Rules 424(b)(4) and 424(b)(8) under the Securities Act of 1933, as amended (the “Securities Act”), to correct certain disclosures in the Registration Statement on Form S-1 (the “Registration Statement”) of The Beachbody Company, Inc. (the “Company”), Registration No. 333-258149, filed with the U.S. Securities and Exchange Commission (the “Commission”) on July 23, 2021, under the subsection titled “Description of Securities — Warrants” beginning on page 131 of the Registration Statement, relating to the description of the warrants issued by Forest Road Acquisition Corp., the predecessor of the Company, in connection with its initial public offering.

TRADEMARKS

This document contains references to trademarks and service marks belonging to other entities. Solely for convenience, trademarks and trade names referred to in this prospectus may appear without the ® or TM symbols, but such references are not intended to indicate, in any way, that the applicable licensor will not assert, to the fullest extent under applicable law, its rights to these trademarks and trade names. We do not intend our use or display of other companies’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of it by, any other companies.

 

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SELECTED DEFINITIONS

Unless otherwise stated in this prospectus or the context otherwise requires, references to:

 

   

“2021 Plan” are to the Beachbody Company, Inc. 2021 Incentive Award Plan;

 

   

“Business Combination” are to the transactions contemplated in the Merger Agreement;

 

   

“Bylaws” are to the Amended and Restated Bylaws of The Beachbody Company, Inc.;

 

   

“Certificate of Incorporation” are our certificate of incorporation dated June 25, 2021;

 

   

“Closing” are to the closing of the Business Combination on June 25, 2021;

 

   

“Company,” “we,” “us” and “our” are to FRX prior to the Business Combination and to Beachbody after the Business Combination and its change of name to The Beachbody Company, Inc.;

 

   

“common stock” are to shares of our common stock, par value $0.0001 per share;

 

   

“Continental” are to Continental Stock Transfer & Trust Company;

 

   

“DGCL” are to the General Corporation Law of the State of Delaware;

 

   

“ESPP” are to our 2021 Employee Stock Purchase Plan;

 

   

“Exchange Act” are to the Securities Exchange Act of 1934, as amended;

 

   

“founder shares” are to shares of Class B common stock purchased by the Sponsor;

 

   

“GAAP” are to accounting principles generally accepted in the United States of America;

 

   

“JOBS Act” are to the Jumpstart Our Business Startups Act of 2012;

 

   

“Management Awards” are to equity awards under the 2020 Plan in the form of restricted stock units expected to be granted to certain of our employees within 90 days following the Closing;

 

   

“NYSE” are to the New York Stock Exchange;

 

   

“FRX Awards” are to FRX Options, FRX Restricted Stock Awards and FRX RSUs;

 

   

“FRX common stock” are to shares of FRX common stock, par value $0.0001 per share;

 

   

“FRX Options” are to options to purchase shares of FRX common stock;

 

   

“FRX Restricted Stock Awards” are to restricted shares of FRX common stock;

 

   

“FRX RSUs” are to restricted stock units based on shares of FRX common stock;

 

   

“FRX Stockholders” are to the stockholders of FRX and holders of FRX Awards prior to the Business Combination;

 

   

“Beachbody” are to FRX after the Business Combination and its name change from Forest Road Acquisition Corp.;

 

   

“Beachbody Options” are to options to purchase shares of our common stock;

 

   

“Beachbody Restricted Stock” are to restricted shares of our common stock;

 

   

“Beachbody RSUs” are to restricted stock units based on shares of our common stock;

 

   

“ordinary shares” are to the FRX Class A ordinary shares and the FRX Class B ordinary shares, collectively;

 

   

“Person” are to any individual, firm, corporation, partnership, limited liability company, incorporated or unincorporated association, joint venture, joint stock company, governmental authority or instrumentality or other entity of any kind;

 

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“PIPE Investment” are to the purchase of shares of our common stock pursuant to the Subscription Agreements;

 

   

“PIPE Investment Amount” are to the aggregate gross purchase price received by FRX prior to or substantially concurrently with Closing for the shares in the PIPE Investment;

 

   

“PIPE Investors” are to those certain investors participating in the PIPE Investment pursuant to the Subscription Agreements;

 

   

“pro forma” are to giving pro forma effect to the Business Combination;

 

   

“Organizational Documents” are to the Certificate of Incorporation and the Bylaws;

 

   

“public shareholders” are to holders of public shares, whether acquired in FRX’s initial public offering or acquired in the secondary market;

 

   

“public shares” are to the FRX Class A ordinary shares (including those that underlie the units) that were offered and sold by FRX in its initial public offering and registered pursuant to the IPO registration statement or the shares of our common stock issued as a matter of law upon the conversion thereof at the time of the Business Combination, as context requires;

 

   

“public warrants” are to the redeemable warrants (including those that underlie the units) that were offered and sold by FRX in its initial public offering and registered pursuant to the IPO registration statement or the redeemable warrants of Beachbody issued as a matter of law upon the conversion thereof at the time of the Domestication, as context requires;

 

   

“redemption” are to each redemption of public shares for cash pursuant to the Organizational Documents;

 

   

“Registration Rights Agreement” are to the Amended and Restated Registration Rights Agreement to be entered into at Closing, entered into by and among Beachbody, Forest Road Acquisition Sponsor LLC, a Delaware limited liability company (the “Sponsor”), certain equityholders of The Beachbody Company Group, LLC, a Delaware limited liability company, set forth on the signature pages thereto, and Carl Daikeler, Mary Conlin, John Salter, Michael Heller, Ben Van de Bunt and Kevin Mayer.;

 

   

“Sarbanes Oxley Act” are to the Sarbanes-Oxley Act of 2002;

 

   

“FRX” are to Forest Road Acquisition Corp., prior to the Business Combination;

 

   

“FRX Class A ordinary shares” are to FRX’s Class A ordinary shares, par value $0.0001 per share;

 

   

“FRX Class B ordinary shares” are to FRX’s Class B ordinary shares, par value $0.0001 per share;

 

   

“FRX units” and “units” are to the units of FRX, each unit representing one FRX Class A ordinary share and one-third of one redeemable warrant to acquire one FRX Class A ordinary share, that were offered and sold by FRX in its initial public offering and registered pursuant to the IPO registration statement (less the number of units that have been separated into the underlying public shares and underlying warrants upon the request of the holder thereof);

 

   

“SEC” are to the United States Securities and Exchange Commission;

 

   

“Securities Act” are to the Securities Act of 1933, as amended;

 

   

“Sponsor” are to Forest Road Acquisition Sponsor LLC, a Delaware limited liability company;

 

   

“Sponsor Agreement” are to that certain Sponsor Agreement, dated February 9, 2021, by and among the Sponsor, FRX, each officer and director of FRX and Beachbody, as amended and modified from time to time;

 

   

“Subscription Agreements” are to the subscription agreements pursuant to which the PIPE Investment will be consummated;

 

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“trust account” are to the trust account established at the consummation of FRX’s initial public offering maintained by Continental, acting as trustee;

 

   

“Trust Agreement” are to the Investment Management Trust Agreement, dated November 24, 2020, by and between FRX and Continental Stock Transfer & Trust Company, as trustee; and

 

   

“Unvested Sponsor Shares” are to 3,750,000 shares of Class A common stock subject to certain vesting restrictions pursuant to the Sponsor Agreement; and

 

   

“warrants” are to the public warrants.

Additionally, unless the context otherwise requires, references in this prospectus to the “Company,” “we,” “us” or “our” refer to the business of FRX, which became the business of Beachbody and its subsidiaries following the Closing.

 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains statements that are forward-looking and as such are not historical facts. This includes, without limitation, statements regarding the financial position, business strategy and the plans and objectives of management for our future operations. These statements constitute projections, forecasts and forward-looking statements, and are not guarantees of performance. Such statements can be identified by the fact that they do not relate strictly to historical or current facts. When used in this prospectus, words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “strive,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking.

Forward-looking statements in this prospectus and in any document incorporated by reference in this prospectus may include, for example, statements about:

 

   

our public securities’ potential liquidity and trading;

 

   

our ability to raise financing in the future;

 

   

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

 

   

the impact of the regulatory environment and complexities with compliance related to such environment;

 

   

factors relating to our business, operations and financial performance, including:

 

   

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 operate;

 

   

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

 

   

other factors detailed under the section entitled “ Risk Factors.”

These forward-looking statements are based on information available as of the date of this prospectus and current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. You should not place undue reliance on these forward-looking statements.

 

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SUMMARY

This summary highlights selected information from this prospectus and may not contain all of the information that is important to you in making an investment decision. Before investing in our securities, you should carefully read this entire prospectus, including our financial statements and the related notes included in this prospectus and the information set forth under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” See also the section entitled “Where You Can Find Additional Information.”

Unless context otherwise requires, references in this prospectus to the “Company,” “we,” “us” or “our” refer to the business of Beachbody, which became the business of FRX following the Closing.

Our Company

We are a health and wellness platform providing fitness, nutrition and stress-reducing programs to our customers. With over 2.7 million digital subscriptions and 0.4 million nutritional subscriptions, we believe our ability to offer solutions in both the global fitness market and the global nutrition market under one platform positions us a leading holistic health and wellness platform. We have a 22-year track record of creating innovative training, nutrition and stress-reducing programs that have improved the lives of millions of customers. We make fitness entertaining, approachable, effective and convenient, while fostering social connections that encourage customers to live healthier and more fulfilling lives.

We are a results-oriented company at the intersection of wellness, technology and media. We developed one of the original fitness digital streaming platforms with an extensive library of content containing over 80 complete workout programs and over 2,300 streaming workouts. We measure the success of our library by customer engagement indicators including a metric that divides daily active users by monthly active users (“DAU/MAU”) and “streams” by our subscribers over the respective periods. While the measure of a digital stream may vary across companies, we define streams and total streams as the stream of a video for at least 25% of its length during a given period. For the three months ended March 31, 2021, our DAU/MAU was 35%. In 2020 our subscribers’ streams totaled 180 million and during the three months ended March 31, 2021 totaled 56 million. We also measure our success by month over month retention rates of our digital subscribers, which was approximately 96% as of March 31, 2021.

Driven by our commitment to help people achieve their goals and lead healthy, fulfilling lives, we have built or acquired digital platforms to engage with our customers and deliver differentiated experiences, including Beachbody on Demand and Openfit and upon shareholder approval, will acquire Myx. Our digital platforms include an extensive library with high production value and creatively diverse fitness content at a price point as low as $9.99 per month or $99.00 per year. In addition to each platform that has its own unique distribution channels, the content we produce drives a flywheel of new digital and nutritional subscriptions that helps fuel revenue growth.

Our premium nutrition products help make meal planning and healthy weight loss achievable without deprivation or starvation. Simplicity and proven strategies are at the core of what we do and many of our brands, including Shakeology, Beachbody Performance and Ladder, have been clinically designed to help our customers achieve their goals. By leveraging data about our customers, such as which content they are engaging with, we are able to make targeted recommendations that support improved results.

We have also built a social commerce platform that organically increases our customers, inspires participants to achieve their goals and generates cash flow that can be used to accelerate our digital and


 

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international businesses. This platform consists hundreds of thousands of micro influencers or Coaches, who help customers maintain their fitness program through positive reinforcement, accountability and an online/offline support community.

Our revenue is primarily generated from the sale of digital subscriptions and nutritional products that are often bundled together. We also generate revenue through connected fitness products with the acquisition of Myx. We believe that this acquisition will help increase future revenue through connected devices and additional digital subscriptions. We also intend to increase revenues through future international expansion and opportunistic acquisitions.

Our holistic health and wellness platform has generated significant revenue and subscriber growth since fully transitioning to digital. In the last three years:

 

   

Total revenue was $790.3 million in 2018, $755.8 million in 2019, $863.6 million in 2020 and $226.2 million for the three months ended March 31, 2021

 

   

Net income (loss) was $0.1 million in 2018, $32.3 million in 2019, $(21.4) million in 2020 and $(30.1) million for three months ended March 31, 2021

 

   

Adjusted EBITDA was $68.1 million in 2018, $78.4 million in 2019, $51.5 million in 2020 and $(11.7) million for three months ended March 31, 2021; with 2020 and 2021 results to date reflecting a significant increase in media spend driving subscriber and deferred revenue growth

 

   

Digital subscriptions were 1.5 million at the end of 2018, 1.7 million at the end of 2019, 2.6 million at the end of 2020 and 2.7 million as of March 31, 2021

 

   

Digital subscription month over month retention was 94.1% in 2018, 95.3% in 2019, 95.5% in 2020 and 95.8% for three months ended March 31, 2021

 

   

Nutritional subscriptions were 0.4 million at the end of 2018, 0.3 million at the end of 2019 and 0.4 million at the end of 2020 and as of March 31, 2021

See “Selected Consolidated Financial and Other Data — Non-GAAP Financial Measures” for information regarding our use of Adjusted EBITDA and a reconciliation of net income/loss to Adjusted EBITDA. For a definition of digital subscriptions, nutritional subscriptions and subscriber retention, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Business Model — Key Operational and Business Metrics.”

Our Industry and Opportunity

Overview

We are a global leader in the health, wellness and fitness industry with over 2.7 million digital subscriptions and over 0.4 million nutritional subscriptions as of March 31, 2021. Our total revenue was $790.3 million in 2018, $755.8 million in 2019 and $863.6 million in 2020 and $226.2 million for the three months ended March 31, 2021. We believe our growth has been driven by an increasing awareness on health and wellness by customers, an acceleration of consumer purchases of digital fitness products, increased demand for convenience and streaming services, and a desire to live a healthier life. In 2020, 99% of our revenue was generated in North America and we believe there is a large opportunity to expand internationally where many of these same trends exist.

Industry

We operate within the global health, wellness, and fitness industries, which are comprised of diverse products and offerings such as online/offline fitness solutions, nutritional offerings, mental health products and


 

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connected fitness devices. According to the Global Wellness Institute, the total spend on the global wellness industry in 2019 was $4.5 trillion, of which physical activity, healthy eating and nutrition represented over $1.5 trillion in spending. Additionally, according to IHRSA (International Health, Racquet & Sportsclub Association), 183 million and 62 million people had gym memberships globally and in the United States, respectively, in 2019.

Our approach to health, wellness and fitness addresses a massive and largely untapped market by bringing various aspects of well-being together in one place. We have focused our efforts on the technological disruption in the growing global health, wellness, and fitness industry since the launch of the beta version of the Beachbody on Demand digital platform in fourth quarter of 2015. A recent study from The New Consumer suggests that 66% of customers prefer home fitness solutions to gyms, and we believe that we will continue to benefit from this investment in technology and structural shift in the global wellness industry as users continue to transition to digital fitness, nutrition and mindfulness solutions.

By providing cost-effective content, which requires little to no equipment, and, with the acquisition of Myx, a lower cost connected indoor bike, we believe that we will be able to significantly expand the market for fitness engagement. And while the COVID-19 pandemic drove significant subscriber growth, 59% of Americans say they do not plan on renewing their gym membership since the pandemic has helped them find more affordable ways to exercise and live a healthier lifestyle.

Total Addressable Market

According to the Global Wellness Institute, the Total Addressable Market (TAM) is approximately $1.5 trillion and includes the physical activity and healthy eating/weight loss markets. More specifically, 3.7% of the world’s population, or 277 million people, are members of gyms, health clubs and fitness studios and/or participate in structured or independent/at-home fitness activities or classes on a regular basis. Additionally, approximately $700 billion is spent annually on healthy eating, weight loss and nutrition supplements. Given our holistic approach and wide library of health and wellness content, we believe our potential customer is any person who is interested in taking a proactive step forward in improving his or her life through fitness, nutrition, mindfulness or better recovery. With approximately 2.7 million digital subscriptions as of March 31, 2021, we believe we have penetrated approximately 1% of our total addressable global market of 277 million people globally.

Consumer Trends in Our Favor

Increasing Focus on Health and Wellness

The growing awareness of the benefits of exercise, proper nutrition, mindfulness, and recovery is driving increased participation and spend in health, wellness, and fitness. This trend has translated into consistent year-over-year growth of the fitness industry both in the United States and globally over the past two decades, even during times of economic recession. According to IHRSA, health club industry revenues in the United States grew at a 5.4% annual growth rate over the last ten years. Employers and health insurance companies are also investing in employee well-being by offering incentives for preventative health measures such as exercise. Additionally, recent studies from the NIH suggest that the combination of exercise and a proper diet are more effective than exercise alone. We believe that our holistic solution positions us well relative to companies who are focused on one aspect of health and wellness.

Democratization of Health and Wellness Through More Accessible Digital Solutions

Many consumers have found that digital health and wellness offerings are more convenient or accessible than offline solutions, which has helped accelerate consumer spending. In 2020, according to an LEK consulting study, consumer investment in digital fitness increased by 30%-35%, positioning the sector for faster growth in


 

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the future. Many of these customers plan on continuing to use these digital services, even as gyms reopen, and the online fitness market is expected to grow from $6 billion in 2019 to $59 billion by 2027. We believe this increased use of digital services will help democratize health and wellness. At an annual subscription price of $99 a year for Beachbody on Demand, we believe Beachbody is well positioned to continue to be a leading digital health and wellness platform.

Mobile and Streaming Services Provides Anytime, Anywhere Access to Fitness and Nutrition Programs

The quality, quantity and speed of streaming content has significantly changed media consumption patterns. Consumers can select from extensive catalogs of content across video programming, music, and gaming, allowing for personalized, on-demand consumption anywhere, anytime and at a great value. This trend continues to shape the health and fitness industry as app stores have made this content more accessible around the world. As a result, fitness and health related downloads reached 656 million in the second quarter of 2020, up from 446 million in the second quarter of 2019 and we believe we can continue to capitalize on this opportunity.

Demand for Convenience and On-Demand Solutions

Household trends, longer working hours and the rise of mobile technology make it challenging to balance time between family, work and personal health and wellness. According to the Pew Research Center, there has been an increase in dual income families from 49% in 1970 to 66% in 2016. We believe that busy lifestyles, less free time, more people working from home and changing household dynamics are driving demand for more convenient health, wellness, and fitness options.

Desire for Community and Shared Experiences Through Social Platforms

We believe consumers are increasingly spending on experiences and are seeking meaningful community connections, even in a digital world. Community has been a key attribute of transcendent health and wellness brands such as Peloton, Lululemon and Crossfit. Our recent introduction of BODgroups has enabled us to increase our emphasis on community and leverage the power of our Coach network to help people get results and live healthier lives through positive reinforcement, accountability, and an online/offline support network.

Our Competitive Advantages

We attribute our success to the following competitive strengths:

We Provide a Holistic Health and Wellness Solution in a Digital Ecosystem

We provide a holistic health and wellness solution powered by three distinct experiential platforms that seamlessly interact with each other. Beachbody On Demand is a leading digital subscription platform that maintains a comprehensive library of on-demand, highly produced and creatively diverse fitness content, while also providing nutritional programming aimed to make meal planning and healthy weight loss achievable. Openfit provides a comparable experience, but through a digitally streamed lens, leveraging the power of celebrity, mass social influence, story and live interactivity. Our acquisition of Myx will provide a complementary entrant into connected fitness, offering an indoor cycling experience, while encouraging broader cross training on and off the bike. Together, these platforms can create a community-driven digital ecosystem to increase and retain subscribers as well as increase engagement and will be the driving force behind our commitment to helping people achieve their goals and lead healthy, fulfilling lives.


 

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Best-in-Class Content Creation Capabilities with One of the Largest Digital Fitness Catalogs in the Industry

Our digital libraries currently have access to over 2,300 fitness videos from 84 complete workout programs. Our production of content is one of our key core competencies as we leverage our expertise to attract new mass-market audiences and we have one of the largest digital fitness catalogs in the industry, powered by our best-in-class content creation capabilities. Our content library provides significant opportunities for sustainable growth due to the evergreen nature of our programs. We have world class training and live fitness classes that are accessible anywhere and deliver compelling value to our subscribers. Our disciplined and data-driven approach allows us to create and develop content in-house, utilizing teams to assess subscriber viewership and online and offline trends. We have three in-house studios that allow us to control our production quality and undergo rigorous testing and revisions to create compelling workouts. We also gather and study data and analytics to drive post-launch optimization. Our marketing and merchandising teams work in parallel to create branding opportunities, and also assemble product bundles to drive results and increase revenue.

Large and Growing Digital Subscriber Base Being Accelerated by a Social Commerce Platform and Relationships with Social Influencers and Celebrities

We have a large and growing digital subscriber base across each platform that continues to accelerate, driven by the burgeoning relationships that we have cultivated with our Coaches, social influencers and celebrity network. Coaches help attract and retain customers, while keeping them on track with their fitness and nutrition goals. Our roster of influencers and celebrities, including LeBron James and Arnold Schwarzenegger, helps to increase the visibility of our products and services. Our digital platforms have 2.7 million digital subscriptions as of March 31, 2021, up from nearly 1.5 million in 2018, with over 180 million streamed views in 2020 and 56 million streamed views for the three months ended March 31, 2021. We had a month over month retention of 96% for the three months ended March 31, 2021, with active subscribers averaging 13.6 workouts per month.

Compelling Unit Economics and Ability to Profitably Acquire Customers

We rely on a synergistic combination of direct marketing and social commerce to drive compelling lifetime value to cost of acquisition unit economics across our platforms. Our Coaches attract, motivate and retain customers with our fitness content and nutritional supplements. We believe that as customers get results with our programs, they become evangelists for our total solution. This in turn attracts more customers who form BOD groups on our proprietary social platform and compounds demand for future content releases. We have recently implemented live content that is only available to subscribers, and also have seen reductions in our customer acquisition costs following the launch of Openfit.

Compelling Financial Profile

Our 22-year track record of profitable growth is characterized by efficient customer acquisition, high retention, recurring revenue and rapid digital subscriber growth across our platforms. Our growth is attributable to a highly analytical and agile marketing approach and a social commerce platform, all of which contribute to efficient digital subscriber acquisition. Many of our digital subscribers also signup for nutrition subscriptions, which further contributes to revenue growth. We have a track record of generating strong returns from our marketing investments and believe we can accelerate these to significantly increase our total subscriber base and drive profitable long-term revenue growth. We see a substantial opportunity to increase customers as consumer demands shift to more at-home, digital and on-demand focused health and wellness options.

Mission Focused Founders Surrounded by Ambitious Management Team

Carl Daikeler and Jon Congdon founded Beachbody in 1998 with a bold mission — to help people achieve their goals and lead healthy, fulfilling lives. While the mission has remained consistent, the management team


 

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has evolved and strengthened into an ambitious world-class group highly focused on customer engagement. From emotional storytelling and social tools, first with the introduction of customer message board forums, to social media and now our proprietary social platform, we have proven our ability to innovate amidst changing consumer preferences and technological advancements. We continue to curate entrepreneurial, analytical and experienced management to innovate in product development, stabilize logistics, create new technology, better serve the customer and deliver highly tested and potent supplements. We remain as relentlessly focused on results as we were at inception.

Growth Opportunities

We believe there are several attractive opportunities to continue to drive long-term growth:

Integration of MYX into Our Connected Fitness Ecosystem

We plan to maximize the potential of MYX by leveraging our subscriber base, social commerce platform, marketing experience and content creation capabilities. The combined ecosystem will create a holistic at-home fitness and wellness experience with a connected device that delivers premium and diverse content at a compelling price point. MYX equipment will represent the foundation of our connected fitness offering and enable us to offer a holistic on-/off-bike approach to our customers. We will continue working with our Coaches and social influencers to highlight the benefits of our products and rapidly expand sales across our existing and new customer base.

Launch New Products and Expand Content Offering

We continually innovate to deliver new workouts, wellness programs and nutritional supplements to help our customers experience results. We have a proven track record of catering to changing customer preferences over our 22-year history. We are agile and work quickly to integrate feedback from our customers to stay up to date with new fitness trends. We use this real time data to create content to engage existing and new customers and leverage analytics to optimize products and drive engagement through multiple customer touchpoints. Total workouts streamed grew from 89 million in 2018, to over 104 million in 2019, 180 million in 2020, and 56 million for the three months ended March 31, 2021, demonstrating the engagement of our subscriber base.

Investment in Data and Marketing Technologies to Drive Subscription Growth

We believe we can increase our rate of subscriber growth and retention with new content offerings and an increased investment in media. We are constantly learning from our customers, Coaches, and influencers and can leverage this data in content creation and developing products that enhance customer lifetime value. We intend to continue increasing brand awareness and productivity of our social commerce channel. Our business model, working with third parties for logistics and supply chain, allows us to efficiently allocate capital, preserving valuable resources for customer acquisition and content creation.

International Expansion

We believe there is significant opportunity for both Openfit and Beachbody to grow internationally, particularly with the addition of the MYX bike. We currently distribute products in the United States, Canada, the United Kingdom and France with plans for expansion to Mexico in 2021 and Germany in 2022. We will continue to pursue disciplined international expansion by targeting developed countries where fitness and nutrition needs can be well-served with an in-home total solution at an affordable price.


 

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Opportunistic Mergers and Acquisitions to Expand Our Offering and Leverage Our Platform

Our platform and ecosystem are well positioned to leverage our capabilities and growing subscriber base to offer new health, wellness and fitness options. We will continue to seek out capabilities that are accretive to our existing content base and can help us attract new customers, focusing on health and wellness with new innovations. We will benefit as a public company from further platform recognition and access to capital to help facilitate these transactions.

Our Product Offerings and Economic Model

Digital Subscriptions

Our digital subscriptions include Beachbody on Demand (BOD), launched in beta version in the fourth quarter of 2015, and Openfit, launched in 2019. The subscriptions are renewed on a monthly, quarterly, and annual basis and include unlimited access to an extensive library of live and on-demand fitness and nutrition content.

Our digital platforms provide a one stop shop for all types of fitness and nutrition content, with world famous brands such as P90X, Insanity, 21 Day Fix, 80 Day Obsession, Morning Melt-Down 100 and LIIFT4. The BOD platform gives users access to comprehensive, highly produced, and creatively diverse fitness content with dynamic trainers. We had over 2.7 million digital subscribers as of March 31, 2021, who have access to over 2,300 fitness, nutrition, mindfulness and recovery videos that can be accessed anywhere. BOD content is available on the web as well as iOS, Android, Roku and AppleTV.

Leveraging the power of celebrity, mass social influence, story and live interactivity, Openfit is a digital streaming platform for people who want to make the commitment to change their fitness and nutrition habits for the long term with the gratification of aligning that commitment with celebrities and influencers they admire and love to watch. Celebrity-influence is combined with live small group training supervised by a team of certified trainers offering real time feedback, motivation and professional instruction. Complemented by the acquisition of Ladder, which originally formulated its products to the specifications of founders LeBron James and Arnold Schwarzenegger, Openfit provides an original and exciting digital fitness and wellness resource. Openfit content can be streamed via iOS, Android, FireTV, Chromecast, Roku and AppleTV.

Digital subscriptions also help generate sales of our nutritional products, which are often sold together as bundles.

Nutritional Products

Our nutritional products include Shakeology, Beachbody Performance supplements and BEACHBARs. As part of our mission to be a total health and wellness solution for our consumers, our nutritional products are formulated and manufactured to high quality standards and complement our fitness and device offerings. Our research and development team rigorously assesses and develops new nutritional products that are in line with these goals, satisfies customer demand, and increases subscriptions and lifetime revenue. Shakeology, our premium nutrition shake, is clinically shown to help reduce cravings and promote healthy weight loss and formulated to help support healthy digestion and provide healthy energy with its proprietary formula of superfoods, phytonutrients, enzymes, fiber and protein, with no artificial sweeteners, flavors, colors or preservatives.

Beachbody Performance supplements include our pre-workout Energize, post-workout Recover and overnight recovery supplement Recharge, to reduce soreness and prepare the body for the next day’s workout. These products were created to meet a different need than Shakeology, which is a once-a-day premium nutrition shake that helps supplement a healthy diet.


 

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BEACHBARs are low sugar, protein bars available in three flavors made with ingredients to help satisfy cravings without undermining our customers’ fitness and weight loss goals. We continue to research and develop additional nutritional products, and currently provide a variety of other nutritional supplements including collagen, fiber and greens “boosts.”

Connected Fitness Products

Our digital subscription offerings will be complemented by our entrance into connected fitness through the Myx acquisition. Our connected fitness products will include both Myx Fitness offerings launched in 2020: the MYX bike, a connected-stationary-bike with heart rate monitor, and MYX Plus, which includes the connected bike and heart rate monitor along with ancillary workout equipment such as a dumbbell, a kettlebell, resistance bands, a bike mat, an oversized exercise mat and a foam roller, creating an all-in-one home gym offering. The MYX bike is equipped with a unique swivel touch screen that enables users to engage with content beyond the indoor cycling experience and encourages broader cross-training, incorporating resistance training and yoga for a more holistic fitness experience and healthier results.

We believe that Myx’s focus on a holistic approach to fitness is the perfect fit for the Beachbody ecosystem, and together with Beachbody’s digital subscription offerings and nutritional products, will bring together a comprehensive in-home solution that provides personalization, live coaching, celebrity rides, nutritional supplements and healthy meal-planning.

We intend to provide Beachbody and Openfit content through the Myx Fitness touch screen. The content presented on the swivel touch screen will depend on the sales channel through which it was purchased, Beachbody or Openfit. We expect to sell the MYX/Openfit/Ladder offering to customers via our direct-to-consumer channel, retail and our current Openfit subscribers, and plan to offer the Beachbody content and supplements together with the MYX bike through BOD subscribers and Coaches.

The MYX bike is manufactured using commercial-grade equipment and includes a 21.5” 360-degree swivel screen. In the United States, the standard package sells for $1,299 and includes a Polar heart rate monitor with free delivery and set up. The MYX Plus package sells for $1,499. With approximately 27,500 bikes sold, MYX has been recognized as a leading brand in connected fitness by CNET, PC Magazine, USA Today, WIRED and Health.

Our Value Proposition

Our holistic approach to health and wellness provides the consumer with tools to succeed at a lower cost than most traditional gyms or fitness studios and nutrition/weight loss plans.

Our business model is characterized by developing compelling fitness and nutrition programs that are designed to provide the subscriber with results. This in turn attracts additional customers who see those results on social media. These consumers then become advocates for the company, which helps attract and retain new and existing consumers. This “virtuous cycle” of content, customer success, and new customer acquisition drives subscriber growth and recurring revenue opportunities.

Our monthly connected fitness subscription at an average price of $29.00 is less expensive than most monthly gym memberships, a fraction of the price of a personal training session, and less than the cost of one individual connected fitness class at a boutique studio. Boutique studio fitness classes typically cost between $25.00 and $45.00 per person per class and follow a strict schedule whereas our monthly connected fitness subscription covers the household and offers unlimited use, anytime, anywhere. Our on-demand library feature classes, spanning 5 to 60 minutes, provide our customers with flexibility and convenience.


 

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Myx offers attractive 0% APR financing programs, which allow qualified customers to pay in monthly installments of as low as $37 for 36 months for a MYX bike. These financing programs have successfully broadened the base of customers by attracting consumers from a wider spectrum of ages and income levels.

Our nutritional products come in varying sizes and prices and are often bundled with digital content offerings. One of our most popular packages is the BOD and Shakeology Challenge pack, which is priced at $160 and comes with a one-month supply of Shakeology and an annual BOD membership.

Our Economic Model

Our Beachbody offerings provide access to our marketplace of Coaches, which are people who have signed up to use Beachbody’s products and organize groups on our proprietary social platform, BODgroups. On this platform, Coaches earn a share of the revenue generated by promoting our products and helping our customers succeed. They also earn additional bonuses for expanding this social network by building teams of Coaches. This marketplace, called Team Beachbody, is made up of hundreds of thousands of Coaches who get early access to each new program and receive a 25% discount on their purchases or a 25% commission on orders they generate through their efforts.

We also sell our digital subscription products, nutritional products and connected fitness products direct to consumer through our Beachbody and Openfit platforms. On Openfit, many of our influencers receive a commission on digital subscriptions or nutritional products that they help sell, however there is no commission paid on any subscriptions that are not sold through the social channels of these influencers.

Risk Factors

Our business is subject to numerous risks and uncertainties, including those highlighted in the section entitled “Risk Factors” immediately following this prospectus summary, that represent challenges that we face in connection with the successful implementation of our strategy and the growth of our business. In particular, the following considerations, among others, may offset our competitive strengths or have a negative effect on our business strategy, which could cause a decline in the price of shares of our common stock or warrants and result in a loss of all or a portion of your investment:

 

   

If we are unable to anticipate and satisfy consumer preferences and shifting views of health, fitness and nutrition, our business may be adversely affected.

 

   

The perception of the effects of our nutritional products may change over time, which could reduce customer demand.

 

   

We rely on consumer discretionary spending, which may be adversely affected by economic downturns and other macroeconomic conditions or trends.

 

   

If we are unable to sustain pricing levels for our products and services, our business could be adversely affected.

 

   

Our success depends on our ability to maintain the value and reputation of our brands. Adverse publicity associated with our products, ingredients or network marketing program, or those of similar companies, could adversely affect our business.

 

   

Our marketing strategy relies on the use of social media platforms and any negative publicity on such social media platforms may adversely affect the public perception of our brand, and changing terms or conditions or ways in which advertisers use their platforms may adversely affect our ability to engage with customers, both of which in turn could have a material and adverse effect on our business, results of operations and financial condition. In addition, our use of social media could subject us to fines or other penalties.


 

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We may be unable to attract and retain customers, which would materially and adversely affect our business, results of operations and financial condition.

 

   

Our customers use their connected fitness products and fitness accessories to track and record their workouts. If our products fail to provide accurate metrics and data to our customers, our brand and reputation could be harmed, and we may be unable to retain our customers.

 

   

Our business relies on sales of a few key products.

 

   

We operate in highly competitive markets and we may be unable to compete successfully against existing and future competitors.

 

   

We may be unable to effectively integrate the Myx business into our operations.

 

   

The failure or inability of our contract manufacturers to comply with the specifications and requirements of our products could result in a product recall, which could adversely affect our reputation and subject us to significant liability should the consumption of any of our products cause or be claimed to cause illness or physical harm.

 

   

If any of our products are unacceptable to us or our customers, our business could be harmed.

 

   

Our products and services may be affected from time to time by design and manufacturing defects that could adversely affect our business and result in harm to our reputation.

 

   

We may incur material product liability claims, which could increase our costs and adversely affect our revenues and operating income.

 

   

Our business model relies on high quality customer service, and any negative impressions of our customer service experience may adversely affect our business and result in harm to our reputation.

 

   

The seasonal nature of our business could cause operating results to fluctuate.

Accounting Treatment

The Business Combination was accounted for as a reverse recapitalization, in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Under the guidance in ASC 805, Beachbody is expected to be treated as the “acquired” company for financial reporting purposes. Accordingly, the Business Combination is treated as the equivalent of FRX issuing stock for the net assets of Beachbody, accompanied by a recapitalization whereby no goodwill or other intangible assets are recorded. Operations prior to the Business Combination will be those of FRX.

Corporate Information

We were incorporated under the name “Forest Road Acquisition Corp.” on September 24, 2020 as a Delaware corporation for purposes of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses. On June 25, 2021, we changed our name to “The Beachbody Company, Inc.”

Our principal executive office is located at 3301 Exposition Blvd. Santa Monica, CA 90404. Our telephone number is (310) 883-9000. Our website address is www.beachbody.com. Information contained on our website is not a part of this prospectus, and the inclusion of our website address in this prospectus is an inactive textual reference only.


 

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RISK FACTORS

An investment in our securities involves a high degree of risk. You should carefully consider the risks described below before making an investment decision. Our business, prospects, financial condition, or operating results could be harmed by any of these risks, as well as other risks not currently known to us or that we currently consider immaterial. The trading price of our securities could decline due to any of these risks, and, as a result, you may lose all or part of your investment.

In the course of conducting our business operations, we are exposed to a variety of risks. These risks are generally inherent to the fitness industry or otherwise generally impact companies like us. Any of the risk factors we describe below have affected or could materially adversely affect our business, financial condition and results of operations. The market price of shares of our common stock could decline, possibly significantly or permanently, if one or more of these risks and uncertainties occurs. Certain statements in “Risk Factors” are forward-looking statements. See “Cautionary Note Regarding Forward-Looking Statements.”

Risks Related to Beachbody and Myx

The Company is a holding company with no direct operations that relies on dividends, distributions, loans and other payments, advances and transfers of funds from Beachbody and Myx to pay dividends, pay expenses and meet its other obligations. Accordingly, the Company’s stockholders and warrant holders will be subject to all of the risks of the businesses of Beachbody and Myx.

For the purposes of this section, “we,” “us” and “our” refers to Beachbody and Myx, as applicable.

Risks Related to Our Business and Industry

If we are unable to anticipate and satisfy consumer preferences and shifting views of health, fitness and nutrition, our business may be adversely affected.

The fitness industry is highly susceptible to changes in consumer preferences. Our success depends on our ability to anticipate and satisfy consumer preferences relating to health, fitness and nutrition. Our business is, and all of our workouts and products are, subject to changing consumer preferences that cannot be predicted with certainty. Consumers’ preferences for health and fitness services and products, including the technology through which they consume these services and products, could shift rapidly to offerings different from what we offer, and we may be unable to anticipate and respond to such shifts in consumer preferences. It is also possible that competitors could introduce new products, services and/or technologies that negatively impact consumer preference for our workouts and products. In addition, developments or shifts in research or public opinion on the types of workouts and products we provide could negatively impact our business. Even if we are successful in anticipating consumer preferences, our ability to adequately react to and address those preferences will in part depend upon our continued ability to develop and introduce innovative, high-quality health and fitness services. Our failure to effectively introduce new health and fitness services that are accepted by consumers could result in a decrease in revenue, which could have a material adverse effect on our financial condition and adversely impact our business.

The perception of the effects of our nutritional products may change over time, which could reduce customer demand.

A substantial portion of our revenues is derived from our Shakeology line of products. We believe that these nutritional products have, or are perceived to have, positive effects on health, and compete in a market that relies on innovation and evolving consumer preferences. However, the nutritional industry is subject to changing consumer trends, demands and preferences. Additionally, the science underlying nutritious foods and dietary

 

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supplements is constantly evolving. Therefore, products once considered healthy may over time become disfavored by consumers or no longer be perceived as healthy. Trends within the food industry change often and our failure to anticipate, identify or react to changes in these trends could, among other things, lead to reduced consumer demand and spending reductions, and could adversely impact our business, financial condition and results of operations. Additionally, ingredients used in our products may become negatively perceived by consumers, resulting in reformulation of existing products to remove such ingredients, which may negatively affect taste or other qualities. Factors that may affect consumer perception of nutritional products include dietary trends and attention to different nutritional aspects of foods, concerns regarding the health effects of specific ingredients and nutrients, trends away from specific ingredients in products and increasing awareness of the environmental and social effects of product production. For example, conflicting scientific information on what constitutes good nutrition, diet trends and other weight loss trends may also adversely affect our business from time to time. Our success depends, in part, on our ability to anticipate the tastes and dietary habits of consumers and other consumer trends and to offer nutritional products that appeal to their needs and preferences on a timely and affordable basis. Failure to do so could have a material adverse effect on our financial condition and adversely impact our business.

We rely on consumer discretionary spending, which may be adversely affected by economic downturns and other macroeconomic conditions or trends.

Our business and operating results are subject to global economic conditions and their impact on consumer discretionary spending. Some of the factors that may negatively influence consumer spending include high levels of unemployment, higher consumer debt levels, reductions in net worth, declines in asset values and related market uncertainty, home foreclosures and reductions in home values, fluctuating interest rates and credit availability, fluctuating fuel and other energy costs, fluctuating commodity prices and general uncertainty regarding the overall future of the political and economic environment. Consumer purchases of discretionary items generally decline during periods of economic uncertainty, when disposable income is reduced or when there is a reduction in consumer confidence. If consumer purchases of subscriptions and products decline, our revenue may be adversely affected.

For example, the outbreak of the novel coronavirus (“COVID-19”), a virus causing potentially deadly respiratory tract infections, has negatively affected economic conditions regionally as well as globally and has caused a reduction in consumer spending. Efforts to contain the effect of the virus have included travel restrictions and restrictions on public gatherings. Many businesses have eliminated non-essential travel and canceled in-person events to reduce instances of employees and others being exposed to large public gatherings, and governments across the globe have restricted business activities and strongly encouraged, instituted orders or otherwise restricted individuals from leaving their home. These efforts have led to an increase in at-home gyms and workouts which has in turn led to an increase in our consumers, a trend which may be negatively impacted when commercial and office gyms reopen. The ultimate severity of the coronavirus outbreak and successful distribution and vaccine inoculation results are uncertain at this time and therefore we cannot predict the full impact it may have on our end markets or operations; however, the effect on our results could be material and adverse. Any significant or prolonged decrease in consumer spending on fitness or nutritional products could adversely affect the demand for our offerings, reducing our cash flows and revenues, and thereby materially harming our business, financial condition, results of operations and prospects.

COVID-19 has had a significant impact on the fitness sector and has increased demand for home fitness solutions as gyms across the country have either been shuttered by government orders or abandoned by members uncertain of their safety in those facilities. While we cannot predict the long-term impact on consumer behavior, we believe that a significant percentage of gym goers do not plan to return to the gym even after widespread distribution of the COVID-19 vaccine. The adoption of at-home connected fitness by the broad market consumer has been accelerated by the pandemic. In addition, COVID-19 has had an adverse impact on global supply chains, resulting in an increased uncertainty in shipping lead times as well as increased import and logistics costs.

 

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However, if a significant percentage of consumers return to the gym and do not continue at-home fitness, or import and logistics costs continue to increase, our business, financial condition, results of operations and prospects may be adversely affected.

If we are unable to sustain pricing levels for our products and services, our business could be adversely affected.

If we are unable to sustain pricing levels for our products and services, including our nutritional products, digital services and connected fitness products, whether due to competitive pressure or otherwise, our revenue and gross margins could be significantly reduced. Further, our decisions around the development of new ancillary products and services are grounded in assumptions about eventual pricing levels. If there is price compression in the market after these decisions are made, it could have a negative effect on our business.

Our success depends on our ability to maintain the value and reputation of our brands.

We believe that our brands are important to attracting and retaining customers. Maintaining, protecting, and enhancing our brands depends largely on the success of our marketing efforts, ability to provide consistent, high-quality products, services, features, content, and support, and our ability to successfully secure, maintain, and defend our rights to use our trademarks, logos and other intellectual property important to our brands. We believe that the importance of our brands will increase as competition further intensifies and brand promotion activities may require substantial expenditures. Our brands could be harmed if we fail to achieve these objectives or if our public image were to be tarnished by negative publicity. Unfavorable publicity about us, including our products, services, technology, subscriber service, content, personnel, industry, distribution and/or marketing channel, and suppliers could diminish confidence in, and the use of, our products and services. Such negative publicity also could have an adverse effect on the size, engagement and loyalty of our customer base and result in decreased revenue, which could have an adverse effect on our business, financial condition, and operating results.

Adverse publicity associated with our products, ingredients or network marketing program, or those of similar companies, could adversely affect our business.

The size of our distributor base and the results of our operations may be significantly affected by the perception of our company and similar companies. This perception is dependent upon opinions concerning:

 

   

the safety and quality of our products and nutritional supplement ingredients;

 

   

the safety and quality of similar products and ingredients distributed by other companies;

 

   

our distributors;

 

   

publicity concerning network marketing; and

 

   

the direct selling business generally.

Adverse publicity concerning any actual or purported failure of our Company or our distributors to comply with applicable laws and regulations regarding product claims and advertising, good manufacturing practices, the regulation of our network marketing business, the licensing of our products for sale in our target markets, or other aspects of our business, whether or not resulting in enforcement actions or the imposition of penalties, could have an adverse effect on the goodwill of our Company and could negatively affect our ability to attract, motivate and retain distributors, which would have a material adverse effect on our ability to generate revenue. We cannot ensure that all distributors will comply with applicable legal requirements relating to the advertising, sale, labeling, licensing or distribution of our products or promotion of the income opportunity.

In addition, our distributors’ and consumers’ perception of the safety and quality of our products and ingredients as well as similar products and ingredients distributed by other companies can be significantly influenced by

 

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national media attention, publicized scientific research or findings, widespread product liability claims and other publicity concerning our products or ingredients or similar products and ingredients distributed by other companies. Adverse publicity, whether or not accurate or resulting from consumers’ use or misuse of our products, that associates consumption of our products or ingredients or any similar products or ingredients with illness or other adverse effects, questions the benefits of our or similar products or claims that any such products are ineffective, inappropriately labeled or have inaccurate instructions as to their use, could have a material adverse effect on our reputation or the market demand for our products.

Our marketing strategy relies on the use of social media platforms and any negative publicity on such social media platforms may adversely affect the public perception of our brand, and changing terms or conditions or ways in which advertisers use their platforms may adversely affect our ability to engage with customers, both of which in turn could have a material and adverse effect on our business, results of operations and financial condition. In addition, our use of social media could subject us to fines or other penalties.

We rely on social media marketing through various social media platforms, such as Instagram, YouTube and Facebook, as a means to engage with our existing customers as well as attract new customers. Existing and new customers alike interact with the brand both organically, through posts by the Beachbody community, as well as through distributors via their own social media accounts. While the use of social media platforms allows us access to a broad audience of consumers and other interested persons, our use of, and reliance on, social media as a key marketing tool exposes us to significant risk of widespread negative publicity. Social media users generally have the ability to post information to social media platforms without filters or checks on accuracy of the content posted. Information concerning the Company or its many brands may be posted on such platforms at any time. Such information may be adverse to our interests or may be inaccurate, each of which can harm our reputation and value of our brands. The harm may be immediate without affording us an opportunity for redress or correction. In addition, social media platforms provide users with access to such a broad audience that collective action against our products and offerings, such as boycotts, can be more easily organized. If such actions were organized, we could suffer reputational damage. Social media platforms may be used to attack us, our information security systems, including through use of spam, spyware, ransomware, phishing and social engineering, viruses, worms, malware, distributed denial of service attacks, password attacks, “Man in the Middle” attacks, cybersquatting, impersonation of employees or officers, abuse of comments and message boards, fake reviews, doxing and swatting. As such, the dissemination of information on social media platforms and other online platforms could materially and adversely affect our business, results of operations and financial condition, regardless of the information’s accuracy.

Our reliance on social media platforms for advertising also subjects us to the risk that any change to the platforms’ algorithms, terms and conditions and/or ways in which advertisers may advertise on their platforms may adversely affect our ability to effectively engage with customers and sell our products, which in turn could have a material and adverse effect on our business, results of operations and financial condition.

In addition, our use of social media platforms as a marketing tool could also subject us to fines or other penalties. As laws and regulations, including those from the Federal Trade Commission, State Attorneys General, and other enforcement agencies rapidly evolve to govern the use of these platforms, the failure by us, our distributors, influencers, or other third parties acting at our direction to abide by applicable laws and regulations in the use of these platforms could materially and adversely impact our business, results of operations and financial condition or subject us to fines or other penalties.

We may be unable to attract and retain customers, which would materially and adversely affect our business, results of operations and financial condition.

The success of our business depends on our ability to attract and retain customers. Our marketing efforts may not be successful in attracting customers, and membership levels may materially decline over time. Customers may cancel their membership at any time. In addition, we experience attrition, and we must continually engage

 

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existing customers and attract new customers in order to maintain membership levels. Some of the factors that could lead to a decline in membership levels include, among other factors:

 

   

changing desires and behaviors of consumers or their perception of our brand;

 

   

changes in discretionary spending trends;

 

   

market maturity or saturation;

 

   

a decline in our ability to deliver quality service at a competitive price;

 

   

a failure to introduce new features, products or services that customers find engaging;

 

   

the introduction of new products or services, or changes to existing products and services, that are not favorably received;

 

   

technical or other problems that affect the customer experience;

 

   

an increase in membership fees due to inflation;

 

   

direct and indirect competition in our industry;

 

   

a decline in the public’s interest in health and fitness; and

 

   

a general deterioration of economic conditions or a change in consumer spending preferences or buying trends.

Any decrease in our average fees or higher membership costs may materially and adversely impact our results of operations and financial condition. Additionally, further expansion into international markets may create new challenges in attracting and retaining customers that we may not successfully address, as these markets carry unique risks as discussed below. As a result of these factors, we cannot be certain that our membership levels will be adequate to maintain or permit the expansion of our operations. A decline in membership levels would have an adverse effect on our business, results of operations and financial condition.

Our customers use their connected fitness products and fitness accessories to track and record their workouts. If our products fail to provide accurate metrics and data to our customers, our brand and reputation could be harmed, and we may be unable to retain our customers.

Our customers use their connected fitness products and fitness accessories to track and record certain metrics related to their workouts. Examples of metrics tracked on our platform currently include heartrate and calories burned. These metrics assist our customers in tracking their fitness journeys and understanding the effectiveness of their workouts. We anticipate introducing new metrics and features in the future. If the software used in our connected fitness products or on our platform malfunctions and fails to accurately track, display, or record customers workouts and metrics, we could face claims alleging that our products and services do not operate as advertised. Such reports and claims could result in negative publicity, product liability claims, and, in some cases, may require us to expend time and resources to refute such claims and defend against potential litigation. If our products and services fail to provide accurate metrics and data to our customers, or if there are reports or claims of inaccurate metrics and data or claims of inaccuracy regarding the overall health benefits of our products and services in the future, we may become the subject of negative publicity, litigation, regulatory proceedings, and warranty claims, and our brand, operating results, and business could be harmed.

Our business relies on sales of a few key products.

Our digital platforms which provide recurring subscription revenue also provide a significant portion of our revenue, accounting for approximately 42% of revenue for the three months ended March 31, 2021. Our Shakeology dietary supplement product also constitutes a significant portion of our revenue, accounting for approximately 35% of revenue for the three months ended March 31, 2021. If consumer demand for these

 

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products decreases significantly or we cease offering these products without a suitable replacement, our operations could be materially adversely affected. Despite these efforts, our financial performance currently remains dependent on a few products. Any significant diminished consumer interest in these products would adversely affect our business. We could also experience adverse financial consequences if we fail to sustain market interest in the newly-added Myx business. We may not be able to develop successful new products or implement successful enhancements to existing products. Any products that we do develop or enhance may not generate sufficient revenue to justify the cost of developing and marketing these products.

We operate in highly competitive markets and we may be unable to compete successfully against existing and future competitors.

Our products and services are offered in a highly competitive market. We face significant competition in every aspect of our business, including at-home fitness equipment and content, fitness clubs, nutritional products, dietary supplements, and health and wellness apps. Moreover, we expect the competition in our market to intensify in the future as new and existing competitors introduce new or enhanced products and services that compete with ours.

Our competitors may develop, or have already developed, products, features, content, services, or technologies that are similar to ours or that achieve greater acceptance, may undertake more successful product development efforts, create more compelling employment opportunities, or marketing campaigns, or may adopt more aggressive pricing policies. Our competitors may develop or acquire, or have already developed or acquired, intellectual property rights that significantly limit or prevent our ability to compete effectively in the public marketplace. In addition, our competitors may have significantly greater resources than us, allowing them to identify and capitalize more efficiently upon opportunities in new markets and consumer preferences and trends, quickly transition and adapt their products and services, devote greater resources to marketing, advertising and research and development, or be better positioned to withstand substantial price competition. If we are not able to compete effectively against our competitors, they may acquire and engage customers or generate revenue at the expense of our efforts, which could have an adverse effect on our business, financial condition, and operating results. The business of marketing nutritional products is highly competitive and sensitive to the introduction of new products, including various prescription drugs, which may rapidly capture a significant share of the market. These market segments include numerous manufacturers, distributors, marketers, retailers and physicians that actively compete for the business of consumers both in the United States and abroad. In addition, we anticipate that we will be subject to increasing competition in the future from large electronic commerce sellers. Some of these competitors have significantly greater financial, technical, product development, marketing and sales resources, greater name recognition, larger established subscriber bases, and better-developed distribution channels than we do. Our present or future competitors may be able to develop products that are comparable or superior to those we offer, adapt more quickly than we do to new technologies, evolving industry trends and standards or subscriber requirements, or devote greater resources to the development, promotion and sale of their products than we do. Accordingly, we may not be able to compete effectively in our markets and competition may intensify.

We are also subject to competition for the recruitment of distributors from other organizations, including those that market nutritional products, dietary and nutritional supplements, and personal care products as well as other types of products. Our ability to remain competitive depends, in part, on our success in recruiting and retaining coaches through an attractive compensation plan, the maintenance of an attractive product portfolio, and other incentives. We cannot ensure that our programs for recruitment and retention efforts will be successful.

We compete with other direct selling organizations, some of which have longer operating histories and higher visibility, name recognition and financial resources. The Company competes for new coaches on the basis of the culture, premium quality products and compensation plan. We envision the entry of many more direct selling organizations into the marketplace as this channel of distribution expands. There can be no assurance that the Company will be able to successfully meet the challenges posed by increased competition.

 

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We also compete for the time, attention and commitment of its independent distributor force. Given that the pool of individuals interested in the business opportunities presented by direct selling tends to be limited in each market, the potential pool of distributors for our products is reduced to the extent other companies successfully recruit these individuals into their businesses. Although we believe that we offer an attractive business opportunity, there can be no assurance that other companies will not be able to recruit our existing distributors or deplete the pool of potential distributors in a given market.

We may be unable to effectively integrate the Myx business into our operations.

In connection with this transaction, we will acquire Myx, including the Myx brand name, its product line, and all existing equipment, inventory and facilities. The acquisition presents significant challenges for our management team. To be successful, we must effectively and efficiently integrate the Myx business into our organization, including the Myx product line, marketing and distribution system, production facilities, product development teams, and administrative and finance personnel and policies. We must also implement appropriate operational, financial and management systems and controls. We may encounter significant difficulties in this process, any one or more of which could adversely affect our business.

Additional risks relating to the acquisition include the following:

 

   

Our contract manufacturing experience is generally limited to the production of our dietary supplement products. We intend to continue Myx’s contract manufacturing operations, which are much more extensive than our own. We may be unable to operate Myx’s manufacturing operations in a cost-effective or timely manner.

Because of these and other risks, the Myx acquisition could fail to produce the revenue, earnings and business synergies that we anticipate, in which case our business would be adversely affected.

We have limited control over our suppliers, manufacturers, and logistics providers, which may subject us to significant risks, including the potential inability to produce or obtain quality products on a timely basis or in sufficient quantity in order to meet demand.

We have limited control over our suppliers, manufacturers, and logistics providers, which subjects us to risks, such as the following:

 

   

inability to satisfy demand for our products or other products or services that we currently offer or may offer in the future;

 

   

reduced control over delivery timing and product reliability;

 

   

reduced ability to monitor the manufacturing process and components used in our products;

 

   

limited ability to develop comprehensive manufacturing specifications that take into account any materials shortages or substitutions;

 

   

variance in the manufacturing capability of our third-party manufacturers;

   

price increases;

 

   

failure of a significant supplier, manufacturer, or logistics provider to perform its obligations to us for technical, market or other reasons;

 

   

difficulties in establishing additional supplier, manufacturer or logistics provider relationships if we experience difficulties with our existing suppliers, manufacturers, or logistics providers;

 

   

shortages of materials or components;

 

   

misappropriation of our intellectual property;

 

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exposure to natural catastrophes, pandemics, political unrest, terrorism, labor disputes, and economic instability resulting in the disruption of trade from foreign countries in which our products are manufactured or the components thereof are sourced;

 

   

changes in local economic conditions in the jurisdictions where our suppliers, manufacturers, and logistics providers are located;

 

   

the imposition of new laws and regulations, including those relating to labor conditions, quality and safety standards, imports, duties, tariffs, taxes, and other charges on imports, as well as trade restrictions and restrictions on currency exchange or the transfer of funds; and

 

   

insufficient warranties and indemnities on ingredients or components supplied to our manufacturers or performance by these parties.

We also rely on our logistics providers, including last mile warehouse and delivery providers, to complete deliveries to customers. If any of these independent contractors do not perform their obligations or meet the expectations of us or our customers, our reputation and business could suffer.

The occurrence of any of these risks, especially during seasons of peak demand, could cause us to experience a significant disruption in our ability to produce and deliver our products to our customers.

The failure or inability of our contract manufacturers to comply with the specifications and requirements of our products could result in a product recall, which could adversely affect our reputation and subject us to significant liability should the consumption of any of our products cause or be claimed to cause illness or physical harm.

We sell nutritional products for human consumption, which involves risks such as product contamination or spoilage, product tampering, other adulteration, mislabeling and misbranding. We also sell stationary bikes. All of our products are manufactured by independent third-party contract manufacturers. In addition, we do not own a warehouse facility, instead it is managed for us by a third party. Under certain circumstances, we may be required to, or may voluntarily, recall or withdraw products.

A widespread recall or withdrawal of any of our products may negatively and significantly impact our sales and profitability for a period of time and could result in significant losses depending on the costs of the recall, destruction of product inventory, reduction in product availability, and reaction of competitors and consumers. We may also be subject to claims or lawsuits, including class actions lawsuits (which could significantly increase any adverse settlements or rulings), resulting in liability for actual or claimed injuries, illness or death. Any of these events could adversely affect our business, financial condition and results of operations. Even if a product liability claim or lawsuit is unsuccessful or is not fully pursued, the negative publicity surrounding any assertion that our products caused illness or physical harm could adversely affect our reputation with existing and potential consumers and its corporate and brand image. Moreover, claims or liabilities of this sort might not be covered by insurance or by any rights of indemnity or contribution that we may have against others. We maintain product liability and product recall insurance in an amount that we believe to be adequate. However, we may incur claims or liabilities for which it is not insured or that exceed the amount of its insurance coverage. A product liability judgment against us or a product recall could adversely affect our business, financial condition and results of operations.

If any of our products are unacceptable to us or our customers, our business could be harmed.

We have occasionally received, and may in the future continue to receive, shipments of products that fail to comply with our technical specifications or that fail to conform to our quality control standards. We have also received, and may in the future continue to receive, products that either meet our technical specifications but that are nonetheless unacceptable to us, or products that are otherwise unacceptable to us or our customers. Under

 

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these circumstances, unless we are able to obtain replacement products in a timely manner, we risk the loss of net revenue resulting from the inability to sell those products and related increased administrative and shipping costs. Additionally, if the unacceptability of our products is not discovered until after such products are purchased by our customers or riders, they could lose confidence in the quality of our products and our results of operations could suffer and our business could be harmed.

Our products and services may be affected from time to time by design and manufacturing defects that could adversely affect our business and result in harm to our reputation.

Through Myx, we will offer complex hardware and software products and services that can be affected by design and manufacturing defects. Sophisticated operating system software and applications, such as those which will be offered by us, often have issues that can unexpectedly interfere with the intended operation of hardware or software products. Defects may also exist in components and products that we source from third parties. Any such defects could make our products and services unsafe, create a risk of environmental or property damage and personal injury, and subject us to the hazards and uncertainties of product liability claims and related litigation. In addition, from time to time we may experience outages, service slowdowns, or errors that affect our fitness and wellness programming. As a result, our services may not perform as anticipated and may not meet customer expectations. There can be no assurance that we will be able to detect and fix all issues and defects in the hardware, software, and services we offer. Failure to do so could result in widespread technical and performance issues affecting our products and services and could lead to claims against us. We maintain general liability insurance; however, design and manufacturing defects, and claims related thereto, may subject us to judgments or settlements that result in damages materially in excess of the limits of our insurance coverage. In addition, we may be exposed to recalls, product replacements or modifications, write-offs of inventory, property, plant and equipment, or intangible assets, and significant warranty and other expenses such as litigation costs and regulatory fines. If we cannot successfully defend any large claim, maintain our general liability insurance on acceptable terms, or maintain adequate coverage against potential claims, our financial results could be adversely impacted. Further, quality problems could adversely affect the experience for users of our products and services, and result in harm to our reputation, loss of competitive advantage, poor market acceptance, reduced demand for our products and services, delay in new product and service introductions, and lost revenue.

We may incur material product liability claims, which could increase our costs and adversely affect our revenues and operating income.

Additionally, our nutritional and dietary supplement products consist of herbs, vitamins and minerals and other ingredients that are classified as foods or dietary supplements and are not subject to pre-market regulatory approval in the United States. Our products could contain contaminated substances, and some of our products contain innovative ingredients that do not have long histories of human consumption. We do not always conduct or sponsor clinical studies for our products and previously unknown adverse reactions resulting from human consumption of these ingredients could occur. As a marketer of dietary and nutritional supplements and other products that are ingested by consumers, we have been, and may again be, subjected to various product liability claims, including that the products contain contaminants, the products include inadequate instructions as to their uses, or the products include inadequate warnings concerning side effects and interactions with other substances. It is possible that widespread product liability claims could increase our costs, and adversely affect our revenues and operating income. Moreover, liability claims arising from a serious adverse event may increase our costs through higher insurance premiums and deductibles and may make it more difficult to secure adequate insurance coverage in the future. In addition, our product liability insurance may fail to cover future product liability claims thereby requiring us to pay substantial monetary damages and adversely affecting our business.

Our business model relies on high quality customer service, and any negative impressions of our customer service experience may adversely affect our business and result in harm to our reputation.

We rely on high quality overall customer service across all of our products and services. Positive customer service experiences help drive a positive reputation, increased sales and minimization of litigation. For example,

 

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once our streaming services and integrated connected-bike products are purchased, our customers rely on our high-touch delivery and set up service to deliver and install their equipment in a professional and efficient manner. Our customers also rely on our support services to resolve any issues related to the use of such services and content. Providing a high-quality customer experience is vital to our success in generating word-of-mouth referrals to drive sales and for retaining existing customers. The importance of high-quality support will increase as we expand our business and introduce new products and services. If we do not help our customers quickly resolve issues and provide effective ongoing support, our reputation may suffer and our ability to retain and attract customers, or to sell additional products and services to existing customers, could be harmed.

The seasonal nature of our business could cause operating results to fluctuate.

We have experienced and continue to expect fluctuations in quarterly results of operations due to the seasonal nature of our business. The months of January to May result in the greatest retail sales due to renewed consumer focus on healthy living following New Year’s Day, as well as significant subscriber enrollment around that time. This seasonality could cause the post combination company’s share price to fluctuate as the results of an interim financial period may not be indicative of its full year results. Seasonality also impacts relative revenue and profitability of each quarter of the year, both on a quarter-to-quarter and year-over-year basis.

If we fail to obtain and retain high-profile strategic relationships, or if the reputation of any of these parties is impaired, our business may suffer.

A principal component of our marketing program has been to develop relationships with high-profile persons, such as Arnold Schwarzenegger and LeBron James, to help us extend the reach of our brand. Although we have relationships with several well-known individuals in this manner, we may not be able to attract and build relationships with new persons in the future. In addition, if the actions of these parties were to damage their or our reputation, our relationships may be less attractive to our current or prospective customers. Any of these failures by us or these parties could materially and adversely affect our business and revenues.

Our operating results could be adversely affected if we are unable to accurately forecast consumer demand for our products and services and adequately manage our inventory.

To ensure adequate inventory supply, we must forecast inventory needs and expenses and place orders sufficiently in advance with our suppliers and manufacturers, based on our estimates of future demand for particular products and services. Failure to accurately forecast our needs may result in manufacturing delays or increased costs. Our ability to accurately forecast demand could be affected by many factors, including changes in consumer demand for our products and services, changes in demand for the products and services of our competitors, unanticipated changes in general market conditions, and the weakening of economic conditions or consumer confidence in future economic conditions. This risk may be exacerbated by the fact that we may not carry a significant amount of inventory and may not be able to satisfy short-term demand increases. If we fail to accurately forecast consumer demand, we may experience excess inventory levels or a shortage of products available for sale.

Inventory levels in excess of consumer demand may result in inventory write-downs or write-offs and the sale of excess inventory at discounted prices, which would cause our gross margins to suffer and could impair the strength and premium nature of our brand. Further, lower than forecasted demand could also result in excess manufacturing capacity or reduced manufacturing efficiencies, which could result in lower margins. Conversely, if we underestimate consumer demand, our suppliers and manufacturers may not be able to deliver products to meet our requirements or we may be subject to higher costs in order to secure the necessary production capacity. An inability to meet consumer demand and delays in the delivery of our products to our customers could result in reputational harm and damaged customer relationships and have an adverse effect on our business, financial condition, and operating results.

 

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Our founder has control over all stockholder decisions because he controls a substantial majority of our voting power through our Class X Common Stock, or “super” voting stock.

Our founder, Carl Daikeler, will own or control “super” voting shares of the Company that will represent approximately 84.8% of the voting power of the Company, as of immediately after the Closing. Following the Closing, Mr. Daikeler and certain of his affiliated entities will own a majority of the Company’s outstanding Class X Common Stock, which stock carries 10 votes per share, and, therefore, will control a majority of the voting power of the Company’s outstanding common stock. The Class X Common Stock carries substantially similar rights as the Class A Common Stock, except that each share of Class X Common Stock carries 10 votes. Therefore, Mr. Daikeler alone can exercise voting control over a majority of our voting power. As a result, Mr. Daikeler has the ability to control the outcome of all matters submitted to our stockholders for approval, including the election, removal, and replacement of our directors, amendments to the Company’s organizational documents and approval of major corporate transactions. This concentrated control could give our founder the ability to delay, defer or prevent a change of control, merger, consolidation, or sale of all or substantially all of our assets that other stockholders support. Conversely, this concentrated control could allow our founder to consummate such a transaction that our other stockholders do not support. In addition, our founder may make long-term strategic investment decisions and take risks that may not be successful and may seriously harm our business.

The Class X Common Stock will automatically convert into Class A Common Stock if Mr. Daikeler no longer provides services to Beachbody as a senior executive officer or director or if the Controlling Holders have sold more than 75% of the shares of Class X Common Stock held by them at the time of the consummation of the Business Combination.

As our Chief Executive Officer, Mr. Daikeler has control over our day-to-day management and the implementation of major strategic investments of our company, subject to authorization and oversight by our board of directors. As a board member and officer, Mr. Daikeler owes a fiduciary duty to our stockholders and must act in good faith in a manner they reasonably believe to be in the best interests of our stockholders. As a stockholder, even a controlling stockholder, Mr. Daikeler is entitled to vote his shares, and shares over which he has voting control, in his own interests, which may not always be in the interests of our stockholders generally. Even if Mr. Daikeler’s employment with us is terminated, he will continue to have the ability to exercise the same significant voting power and potentially control the outcome of all matters submitted to our stockholders for approval.

The concentration of our stock ownership limits our stockholders’ ability to influence corporate matters.

Our Class X common stock has 10 votes per share, our Class A common stock has one vote per share, and our Class C common stock has no voting rights. Because our Class C common stock carries no voting rights, the issuance of the Class C common stock, including in future stock-based acquisition transactions, to fund employee equity incentive programs or otherwise could continue Mr. Daikeler’s current relative voting power and his ability to elect our directors and to determine the outcome of most matters submitted to a vote of our stockholders because, in the event of such an issuance of Class C common stock, the voting control of holders of Class X common stock would not be affected whereas the economic power of the Class X common stock would be diluted. This concentrated control limits or severely restricts other stockholders’ ability to influence corporate matters and we may take actions that some of our stockholders do not view as beneficial, which could reduce the market price of our Class A common stock and our Class C common stock.

Because the Company will be a “controlled company” within the meaning of the NYSE rules, our stockholders may not have certain corporate governance protections that are available to stockholders of companies that are not controlled companies

So long as more than 50% of the voting power for the election of directors of the Company is held by an individual, a group or another company, the Company will qualify as a “controlled company” within the meaning

 

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of the NYSE corporate governance standards. Mr. Daikeler controls over 80% of the voting power of our outstanding capital stock. As a result, the Company will be a “controlled company” within the meaning of the NYSE corporate governance standards and will not be subject to the requirements that would otherwise require us to have: (i) a majority of independent directors; (ii) a nominating committee comprised solely of independent directors; (iii) compensation of our executive officers determined by a majority of the independent directors or a compensation committee comprised solely of independent directors; and (iv) director nominees selected, or recommended for the Board’s selection, either by a majority of the independent directors or a nominating committee comprised solely of independent directors.

Mr. Daikeler may have his interest in the Company diluted due to future equity issuances or his own actions in selling shares of Class X Common Stock, in each case, which could result in a loss of the “controlled company” exemption under the NYSE listing rules. The Company would then be required to comply with those provisions of the NYSE listing requirements.

We track certain operational and business metrics with internal methods that are subject to inherent challenges in measurement, and real or perceived inaccuracies in such metrics may harm our reputation and negatively affect our business.

We track certain operational and business metrics, including total workouts and average monthly workouts per connected fitness subscription, with internal methods, which are not independently verified by any third party and, are often reliant upon an interface with mobile operating systems, networks and standards that we do not control. Our internal methods have limitations and our process for tracking these metrics may change over time, which could result in unexpected changes to our metrics, including the metrics we report. If the internal methods we use under-count or over-count metrics related to our total workouts, average monthly workouts per connected fitness subscription or other metrics as a result of algorithm or other technical errors, the operational and business metrics that we report may not be accurate. In addition, limitations or errors with respect to how we measure certain operational and business metrics may affect our understanding of certain details of our business, which could affect our longer-term strategies. If our operational and business metrics are not accurate representations of our business, market penetration, retention or engagement; if we discover material inaccuracies in our metrics; or if the metrics we rely on to track our performance do not provide an accurate measurement of our business, our reputation may be harmed, and our operating and financial results could be adversely affected.

Risks Related to Expansion

There can be no assurance that we can further penetrate existing markets or that we can successfully expand our business into new markets.

Our ability to further penetrate existing markets in which we compete or to successfully expand our business into additional countries in Western Europe, Asia, or elsewhere, to the extent we believe that we have identified attractive geographic expansion opportunities in the future, are subject to numerous factors, many of which are out of our control. These factors may include, among others, challenges around supplement formulations, localization, harmonization, market size and acceptance, costs, competitors, geopolitical stability, labor market dynamics, legal and regulatory, culture and language, infrastructure, supply chain, payment processing, customer service, payment method, taxes, foreign exchange, and repatriation.

In addition, government regulations in both our domestic and international markets can delay or prevent the introduction, or require the reformulation or withdrawal, of some of our products, which could have a material adverse effect on our business, financial condition and results of operations. Also, our ability to increase market penetration in some countries may be limited by the finite number of persons in a given country inclined to pursue a direct selling business opportunity. Moreover, our growth will depend upon improved training and other activities that enhance distributor retention in our markets. We cannot assure you that our efforts to increase our market penetration and distributor retention in existing markets will be successful.

 

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We plan to expand into international markets, which will expose us to significant risks.

We are currently expanding our operations to other countries, which requires significant resources and management attention and subjects us to regulatory, economic, and political risks in addition to those we already face in the United States. There are significant risks and costs inherent in doing business in international markets, including:

 

   

difficulty establishing and managing international operations and the increased operations, travel, infrastructure, including establishment of local delivery service and customer service operations, and legal compliance costs associated with locations in different countries or regions;

 

   

the need to vary pricing and margins to effectively compete in international markets;

 

   

the need to adapt and localize products for specific countries, including obtaining rights to third-party intellectual property and potentially unique music rights or licenses used in each country;

 

   

increased competition from local providers of similar products and services;

 

   

the ability to obtain, protect and enforce intellectual property rights abroad;

 

   

the need to offer content and customer support in various languages;

 

   

difficulties in understanding and complying with local laws, regulations, and customs in other jurisdictions;

 

   

complexity and other risks associated with current and future legal and regulatory requirements in other countries, including legal requirements related to advertising, our supplements and nutritional products, consumer protection, consumer product safety and data privacy;

 

   

varying levels of internet technology adoption and infrastructure, and increased or varying network and hosting service provider costs;

 

   

tariffs and other non-tariff barriers, such as quotas and local content rules, as well as tax consequences;

 

   

fluctuations in currency exchange rates and the requirements of currency control regulations, which might restrict or prohibit conversion of other currencies into U.S. dollars; and

 

   

political or social unrest or economic instability in a specific country or region in which we operate.

We have limited experience with international regulatory environments and market practices and may not be able to penetrate or successfully operate in the markets we choose to enter. In addition, we may incur significant expenses as a result of our international expansion, and we may not be successful. We may face limited brand recognition in parts of the world that could lead to non-acceptance or delayed acceptance of our products and services by consumers in new markets. We may also face challenges to acceptance of our fitness, supplements and nutritional products, and wellness content in new markets. Our failure to successfully manage these risks could harm our international operations and have an adverse effect on our business, financial condition, and operating results.

We may engage in merger and acquisition activities, which could require significant management attention, disrupt our business, dilute stockholder value, and adversely affect our operating results.

As part of our business strategy, we have made or may make investments in other companies, products, or technologies in the future. We may not be able to find suitable acquisition candidates and we may not be able to complete acquisitions on favorable terms, if at all, in the future. If we do complete acquisitions, we may not ultimately strengthen our competitive position or achieve our goals, and any acquisitions we complete could be viewed negatively by customers or investors. Moreover, an acquisition, investment, or business relationship may result in unforeseen operating difficulties and expenditures, including disrupting our ongoing operations, diverting management from their primary responsibilities, subjecting us to additional liabilities, increasing our

 

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expenses, and adversely impacting our business, financial condition, and operating results. Moreover, we may be exposed to unknown liabilities and the anticipated benefits of any acquisition, investment, or business relationship may not be realized, if, for example, we fail to successfully integrate such acquisitions, or the technologies associated with such acquisitions, into our company.

To pay for any such acquisitions, we would have to use cash, incur debt, or issue equity securities, each of which may affect our financial condition or the value of our capital stock and could result in dilution to our stockholders. Additionally, we may receive indications of interest from other parties interested in acquiring some or all of our business. The time required to evaluate such indications of interest could require significant attention from management, disrupt the ordinary functioning of our business, and could have an adverse effect on our business, financial condition, and operating results.

Covenants in the loan and security agreement governing our revolving credit facility may restrict our operations, and if we do not effectively manage our business to comply with these covenants, our financial condition could be adversely impacted.

We entered into a Credit Agreement with Bank of America in 2018, providing for a $35 million secured revolving line of credit. The revolving credit facility contains various restrictive covenants, including, among other things, minimum liquidity and revenue requirements, restrictions on our ability to dispose of assets, make acquisitions or investments, incur debt or liens, make certain distributions to our stockholders, or enter into certain types of related party transactions. These restrictions may restrict our current and future operations, particularly our ability to respond to certain changes in our business or industry or take future actions. Pursuant to the Credit Agreement, we granted the parties thereto a security interest in substantially all of our assets. See the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Amended and Restated Credit Agreement” for additional information.

Our ability to meet these restrictive covenants can be impacted by events beyond our control and we may be unable to do so. Our Credit Agreement provides that our breach or failure to satisfy certain covenants constitutes an event of default. Upon the occurrence of an event of default, our lenders could elect to declare all amounts outstanding under its debt agreements to be immediately due and payable. In addition, our lenders would have the right to proceed against the assets we provided as collateral. If the debt under our Credit Agreement was to be accelerated, we may not have sufficient cash on hand or be able to sell sufficient collateral to repay it, which would have an immediate adverse effect on our business and operating results.

Risks Related to Our Personnel

Increases in labor costs, including wages, could adversely affect our business, financial condition and results of operations.

The labor costs associated with our businesses are subject to many external factors, including unemployment levels, prevailing wage rates, minimum wage laws, potential collective bargaining arrangements, health insurance costs and other insurance costs and changes in employment and labor legislation or other workplace regulation. From time to time, legislative proposals are made to increase the federal minimum wage in the U.S., as well as the minimum wage in a number of individual states and municipalities, and to reform entitlement programs, such as health insurance and paid leave programs. As minimum wage rates increase or related laws and regulations change, we may need to increase not only the wage rates of our minimum wage employees, but also the wages paid to our other hourly or salaried employees. Our employees may seek to be represented by labor unions in the future or negotiate additional compensation. Any increase in the cost of our labor could have an adverse effect on our business, financial condition and results of operations or if we fail to pay such higher wages, we could suffer increased employee turnover. Increases in labor costs could force us to increase prices, which could adversely impact our visits. If competitive pressures or other factors prevent us from offsetting increased labor costs by increases in prices, our profitability may decline and could have a material adverse effect on our business, financial condition and results of operations.

 

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If we cannot maintain our culture as we grow, we could lose the innovation, teamwork, and passion that we believe contribute to our success and our business may be harmed.

We believe that a critical component of our success has been our corporate culture. We have invested substantial time and resources in building our culture, which is based on our core purpose that we are here to help people achieve their goals and lead healthy, fulfilling lives. As we continue growing after the Merger and developing the infrastructure associated with being a public company, we will need to maintain our culture among a larger number of employees, dispersed across various geographic regions. Any failure to preserve our culture could negatively affect our future success, including our ability to retain and recruit personnel and to effectively focus on and pursue our corporate objectives.

We depend on our senior management team and other key employees, and the loss of one or more key personnel or an inability to attract, hire, integrate and retain highly skilled personnel could have an adverse effect on our business, financial condition and results of operations.

Our success depends largely upon the continued services of our senior management team and other key employees. We rely on our executives in setting our strategic direction, operating our business, identifying, recruiting and training key personnel, identifying growth opportunities, and leading general and administrative functions. From time to time, there may be changes in our executive management team resulting from the hiring or departure of executives, which could disrupt our business. Imperative to our success are also our fitness trainers, instructors and influencers, whom we rely on to develop safe, effective and fun workouts for our customers and to bring new, exciting and innovative fitness content to our platform. If we are unable to attract or retain creative and experienced trainers and nutritionists, we may not be able to generate workout content or dietary supplements on a scale or of a quality sufficient to retain or grow our membership base. The loss of one or more of our executive officers or other key employees, including any of our trainers, could have a serious adverse effect on our business. The replacement of one or more of our executive officers or other key employees would involve significant time and expense and may significantly delay or prevent the achievement of our business objectives. To continue to execute our growth strategy, we also must identify, hire and retain highly skilled personnel. Failure to identify, hire and retain necessary key personnel could have a material adverse effect on our business, financial condition and results of operations.

Risks Related to Data and Information Systems

We collect, store, process, and use personal information and other customer data, which subjects us to legal obligations and laws and regulations related to data security and privacy, and any actual or perceived failure to meet those obligations could harm our business.

We collect, process, store, and use a wide variety of data from current and prospective customers, including personal information, such as home addresses, phone numbers and geolocation. Federal, state, and international laws and regulations governing data privacy, data protection, and e-commerce transactions require us to safeguard our customers’ personal information.

Many jurisdictions continue to consider the need for greater regulation or reform to existing regulatory frameworks for data privacy and data protection. In the United States, all 50 states have now passed laws to regulate the actions that a business must take in the event of a data breach, such as prompt disclosure and notification to affected users and regulatory authorities. In addition to data breach notification laws, some states have also enacted statutes and rules governing the ways in which businesses may collect, use, and retain personal information, granting data privacy rights to certain individuals, or requiring businesses to reasonably protect certain types of personal information they hold or otherwise comply with certain data security requirements for personal information. One such example is the California Consumer Privacy Act which came into effect in 2020. The U.S. federal and state governments will likely continue to consider the need for greater regulation aimed at restricting certain uses of personal data. In the European Union (EU), the General Data Protection Regulation (GDPR) came into effect in 2018 and implemented stringent operational requirements for processors and

 

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controllers of personal data, including, for example, requiring expanded disclosures about how personal data is to be used, limitations on retention of information, mandatory data breach notifications, and higher standards for data controllers to demonstrate that they have obtained either valid consent or have another legal basis to justify their data processing activities. The GDPR provides that EU member states may make their own additional laws and regulations in relation to certain data processing activities, which could further limit our ability to use and share personal data and could require localized changes to our operating model. Recent legal developments in the EU have created complexity and uncertainty regarding transfers of personal information from the EU to “third countries,” especially the United States. For example, last year the Court of Justice of the EU invalidated the EU-U.S. Privacy Shield Framework (a mechanism for the transfer of personal information to the EU to the US) and made clear that reliance on standard contractual clauses (another mechanism for the transfer of personal information outside of the EU) alone may not be sufficient in all circumstances. In addition, after the United Kingdom, or UK, left the EU, the UK enacted the UK GDPR, which together with the amended UK Data Protection Act 2018 retains the GDPR in UK national law, but also creates complexity and uncertainty regarding transfers between the UK and the EU, which could further limit our ability to use and share personal data and require localized changes to our operating model. Other jurisdictions besides the United States, EU and UK also have laws governing data privacy and security, such as Brazil’s Lei Geral de Proteção de Dados (LGPD), or are considering the adoption of new laws. Furthermore, we may be required to disclose personal data pursuant to demands from individuals, privacy advocates, regulators, government agencies, and law enforcement agencies in various jurisdictions with conflicting privacy and security laws. This disclosure or refusal to disclose personal data may result in a breach of privacy and data protection policies, notices, laws, rules, court orders, and regulations and could result in proceedings or actions against us in the same or other jurisdictions, damage to our reputation and brand, and inability to provide our products and services to consumers in some jurisdictions.

In order for us to maintain or become compliant with applicable laws as they come into effect, it may require substantial expenditures of resources to continually evaluate our policies and processes and adapt to new requirements that are or become applicable to us. Complying with any additional or new regulatory requirements on a jurisdiction-by-jurisdiction basis may impose significant burdens and costs on our operations or require us to alter our business practices. While we strive to materially comply with data protection laws and regulations applicable to us, any failure or perceived failure by us to comply with applicable data privacy laws and regulations, including in relation to the collection of necessary end-user consents and providing end-users with sufficient information with respect to our use of their personal data, may result in fines and penalties imposed by regulators. For example, under the GDPR and UK GDPR, fines of up to €20 million (£17.5 million) or up to 4% of the total worldwide annual turnover of the preceding financial year, whichever is higher, may be assessed for non-compliance. In addition, we could also face governmental enforcement actions (including enforcement orders requiring us to cease collecting or processing data in a certain way), litigation and/or adverse publicity. Proceedings against us — regulatory, civil or otherwise — could force us to spend money and devote resources in the defense or settlement of, and remediation related to, such proceedings. Additionally, our international business expansion could be adversely affected if existing or future laws and regulations are interpreted or enforced in a manner that is inconsistent with our current business practices or that requires changes to these practices. If these laws and regulations materially limit our ability to collect, transfer, and use user data, our ability to continue our current operations without modification, develop new services or features of the products and expand our user base may be impaired.

Any major disruption or failure of our information technology systems or websites, or our failure to successfully implement upgrades and new technology effectively, could adversely affect our business and operations.

Certain of our information technology systems are designed and maintained by us and are critical for the efficient functioning of our business, including the manufacture and distribution of our connected fitness products, online sales of our connected fitness products, and the ability of our customers to access content on our platform. Our rapid growth has, in certain instances, strained these systems. As we grow, we continue to implement modifications and upgrades to our systems, and these activities subject us to inherent costs and risks associated

 

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with replacing and upgrading these systems, including, but not limited to, impairment of our ability to fulfill customer orders and other disruptions in our business operations. Further, our system implementations may not result in productivity improvements at a level that outweighs the costs of implementation, or at all. If we fail to successfully implement modifications and upgrades or expand the functionality of our information technology systems, we could experience increased costs associated with diminished productivity and operating inefficiencies related to the flow of goods through our supply chain.

In addition, any unexpected technological interruptions to our systems or websites would disrupt our operations, including our ability to timely ship and track product orders, project inventory requirements, manage our supply chain, sell our connected fitness products online, provide services to our customers, and otherwise adequately serve our customers.

Nearly all of our revenue is generated over the internet via our websites, mobile applications and third-party OTT services and websites. The operation of our direct-to-consumer e-commerce business through our mobile applications and websites depends on our ability to maintain the efficient and uninterrupted operation of online order-taking and fulfillment operations. Any system interruptions or delays could prevent potential customers from purchasing our products.

Moreover, the ability of our customers to access the content on our platform could be diminished by a number of factors, including customers’ inability to access the internet, the failure of our network or software systems, security breaches, or variability in subscriber traffic for our platform. Platform failures would be most impactful if they occurred during peak platform use periods, which generally occur before and after standard work hours. During these peak periods, there are a significant number of customers concurrently accessing our platform and if we are unable to provide uninterrupted access, our customers’ perception of our platform’s reliability may be damaged, our revenue could be reduced, our reputation could be harmed, and we may be required to issue credits or refunds, or risk losing customers.

In the event we experience significant disruptions, we may be unable to repair our systems in an efficient and timely manner which could have a material adverse effect on our business, financial condition, and operating results.

If we are unable to maintain a good relationship with Apple, our business will suffer.

The Apple App Store is a key primary distribution platform for our Beachbody app. We expect to generate a significant portion of our revenue through the platform for the foreseeable future. Any deterioration in our relationship with Apple would harm our business and revenue.

We are subject to Apple’s standard terms and conditions for application developers, which govern the promotion, distribution and operation of applications on their platform.

Our business would be harmed if:

 

   

Apple discontinues or limits access to its platform by us and other app developers;

 

   

Apple removes app from their store; or

 

   

Apple modifies its terms of service or other policies, including fees charged to, or other restrictions on, us or other application developers, or change how the personal information of its users is made available to application developers on their platform or shared by users from Apple’s strong brand recognition and large user base.

If Apple loses its market position or otherwise falls out of favor with Internet users, we would need to identify additional channels for distributing our app, which would consume substantial resources and may not be

 

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effective. In addition, Apple has broad discretion to change its terms of service and other policies with respect to us and other developers, and those changes may be unfavorable to us.

If we suffer a security breach or otherwise fail to properly maintain the confidentiality and integrity of our data, including customer credit card, debit card and bank account information, our reputation and business could be materially and adversely affected.

In the ordinary course of business, we collect and transmit customer and employee data, including credit and debit card numbers, bank account information, driver’s license numbers, dates of birth and other highly sensitive personally identifiable information. We also use vendors and, as a result, we manage a number of third-party contractors who have access to our confidential information, including third party vendors of IT and data security systems and services.

We could be subject to a cyber incident or other adverse event that threatens the confidentiality, integrity or availability of information resources, including intentional attacks or unintentional events where parties gain unauthorized access to systems to disrupt operations, corrupt data or steal confidential information about customers, vendors and employees. A number of retailers and other companies have recently experienced serious cyber incidents and breaches of their information technology systems. As our reliance on technology has increased, so have the risks posed to our systems, both internal and those we have outsourced. Despite our efforts and processes to prevent breaches, our products and services, as well as our servers, computer systems, and those of third parties that we use in our operations are vulnerable to cybersecurity risks, including cyber-attacks such as viruses and worms, phishing attacks, denial-of-service attacks, physical or electronic break-ins, third-party or employee theft or misuse, and similar disruptions from unauthorized tampering with our servers and computer systems or those of third parties that we use in our operations, which could lead to interruptions, delays, loss of critical data, unauthorized access to customer data, and loss of consumer confidence. In addition, we may be the target of email scams that attempt to acquire personal information or company assets.

Some of the data we collect or process is sensitive and could be an attractive target of a criminal attack by malicious third parties with a wide range of motives and expertise, including lone wolves, organized criminal groups, “hacktivists,” disgruntled current or former employees and others. Because we accept electronic forms of payment from customers, our business requires the collection and retention of customer data, including credit and debit card numbers and other personally identifiable information in various information systems that we maintain and in those maintained by third parties with whom we contract to provide credit card processing. We also maintain important internal company data, such as personally identifiable information about our employees and information relating to our operations. The integrity and protection of customer, distributor, and employee data are critical to us.

Despite the security measures we have in place to comply with applicable laws and rules, our facilities and systems, and those of our third-party service providers (as well as their third-party service providers), may be vulnerable to security breaches, acts of cyber terrorism or sabotage, vandalism or theft, computer viruses, loss or corruption of data or programming or human errors or other similar events. Furthermore, the size and complexity of our information systems, and those of our third-party vendors (as well as their third-party service providers), make such systems potentially vulnerable to security breaches from inadvertent or intentional actions by our employees or vendors, or from attacks by malicious third parties. While we have agreements requiring our third-party service providers to use best practices for data security, we have no operational control over them. Because such attacks are increasing in sophistication and change frequently in nature, we and our third-party service providers may be unable to anticipate these attacks or implement adequate preventative measures, and any compromise of our systems, or those of our third-party vendors (as well as their third-party service providers), may not be discovered and remediated promptly. Changes in consumer behavior following a security breach or perceived security breach, act of cyber terrorism or sabotage, vandalism or theft, computer virus, loss or corruption of data or programming or human error or other similar event affecting a competitor, large retailer or financial institution may materially and adversely affect our business.

 

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If our security and information systems, or those of our vendors, are compromised or if our employees fail to comply with these laws, regulations, or contract terms, and this information is obtained by unauthorized persons or used inappropriately, it could materially and adversely affect our reputation and could disrupt our operations and result in costly litigation, judgments, or penalties arising from violations of federal and state laws and payment card industry regulations, including those promulgated by industry groups, such as the Payment Card Industry Security Standards Council, National Automated Clearing House Association, or NACHA, Canadian Payments Association and individual credit card issuers. Under laws, regulations and contractual obligations, a cyber incident could also require us to notify customers, employees or other groups of the incident or could result in adverse publicity, loss of sales and profits, or an increase in fees payable to third parties. We could also incur penalties or remediation and other costs that could materially and adversely affect the operation of our business and results of operations. We maintain insurance coverage to address cyber incidents, and have also implemented processes, procedures and controls to help mitigate these risks; however, these measures do not guarantee that our reputation and financial results will not be adversely affected by such an incident.

We rely heavily on information systems, and any material failure, interruption or weakness may prevent us from effectively operating our business and damage our reputation.

We increasingly rely on information systems, including our technology-enabled platform through which we distribute workouts to our consumer base, point-of-sale processing systems and other information systems managed by third parties, to interact with our customers, billing information and other personally identifiable information, collection of cash, legal and regulatory compliance, management of our supply chain, accounting, staffing, payment of obligations, ACH transactions, credit and debit card transactions and other processes and procedures. Our ability to efficiently and effectively manage our business depends significantly on the reliability and capacity of these systems, and any potential failure of third parties to provide quality uninterrupted service is beyond our control.

Our operations depend upon our ability, and the ability of our third-party service providers (as well as their third-party service providers), to protect our computer equipment and systems against damage from physical theft, fire, power loss, telecommunications failure or other catastrophic events, as well as from internal and external security breaches, viruses, denial-of-service attacks and other disruptions. The failure of these systems to operate effectively, stemming from maintenance problems, upgrading or transitioning to new platforms, expanding our systems as we grow, a breach in security or other unanticipated problems could result in interruptions to or delays in our business and customer service and reduce efficiency in our operations. In addition, the implementation of technology changes and upgrades to maintain current and integrate new systems may also cause service interruptions, operational delays due to the learning curve associated with using a new system, transaction processing errors and system conversion delays and may cause us to fail to comply with applicable laws. If our information systems, or those of our third-party service providers (as well as their third-party service providers), fail and our or our providers’ third-party back-up or disaster recovery plans are not adequate to address such failures, our revenues and profits could be reduced, and the reputation of our brand and our business could be materially and adversely affected.

Risks Related to Laws and Regulations

We face risks, such as unforeseen costs and potential liability in connection with content we produce, license and distribute through our content delivery platform.

As a producer and distributor of content, we face potential liability for negligence, copyright and trademark infringement, violations for rights of publicity, or other claims based on the nature and content of materials that we produce, license and distribute. We also may face potential liability for content used in promoting workouts and products, including marketing materials. We may decide to remove content from our workouts or to discontinue or alter our production of types of content if we believe such content might not be well received by our customers or could be damaging to our brand and business.

 

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To the extent we do not accurately anticipate costs or mitigate risks, including for content that we obtain but ultimately does not appear in our products, or if we become liable for content we produce, license or distribute, our business may suffer. Litigation to defend these claims could be costly and the expenses and damages arising from any liability could harm our results of operations. We may not be indemnified against claims or costs of these types and we may not have insurance coverage for these types of claims.

Our nutritional products must comply with regulations of the Food and Drug Administration, or FDA, as well as state, local and applicable international regulations. Any non-compliance with the FDA or other applicable regulations could harm our business.

Our products must comply with various FDA rules and regulations, including those regarding product manufacturing, marketing, food safety, required testing and appropriate labeling of our products. Conflicts between state and federal law regarding definitions of ingredients, as well as labeling requirements, may lead to non-compliance with state and local regulations. For example, states may maintain narrower definitions of ingredients, as well as more stringent labeling requirements, of which we are unaware. Any non-compliance at the state or local level could also adversely affect our business, financial condition and results of operations.

Because we do not manufacture our products directly, we must rely on these manufacturers to maintain compliance with regulatory requirements. Although we require our contract manufacturers to be compliant, we do not have direct control over such facilities. Failure of our contract manufacturers to comply with applicable regulations could have an adverse effect on our business.

Changes in the legal and regulatory environment could limit our business activities, increase our operating costs, reduce demand for our products or result in litigation.

Elements of our businesses, including the production, storage, distribution, sale, advertising, marketing, labeling, health and safety practices, transportation and use of many of our products, and sale of automatically renewing subscriptions, are subject to various laws and regulations administered by federal, state and local governmental agencies in the United States, as well as the laws and regulations administered by government entities and agencies outside the United States in markets in which our products or components thereof (such as packaging) may be made, manufactured or sold. These laws and regulations and interpretations thereof may change, sometimes dramatically, as a result of a variety of factors, including political, economic or social events. Such changes may include changes in:

 

   

food and drug laws (including FDA and international regulations);

 

   

laws related to product labeling;

 

   

advertising and marketing laws and practices;

 

   

laws and programs restricting the sale and advertising of products;

 

   

laws and programs aimed at reducing, restricting or eliminating ingredients present in our supplement products;

 

   

laws and programs aimed at discouraging the consumption of products or ingredients or altering the package or portion size of our products;

 

   

state consumer protection and disclosure laws;

 

   

taxation requirements, including the imposition or proposed imposition of new or increased taxes or other limitations on the sale of our products; competition laws;

 

   

anti-corruption laws, including the U.S. Foreign Corrupt Practices Act of 1977, as amended, or FCPA, and the UK Bribery Act of 2010, or Bribery Act;

 

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economic sanctions and anti-boycott laws, including laws administered by the U.S. Department of Treasury, Office of Foreign Assets Control and the European Union;

 

   

laws relating to export, re-export, transfer, and import controls, including the Export Administration Regulations, the EU Dual Use Regulation, and the customs and import laws administered by the U.S. Customs and Border Protection;

 

   

labor and employment laws;

 

   

laws related to automatically renewing subscriptions and cancellation of such subscriptions;

 

   

data collection and privacy laws; and

 

   

environmental laws.

New laws, regulations or governmental policies and their related interpretations, or changes in any of the foregoing, including taxes or other limitations on the sale of our products, ingredients contained in our products or commodities used in the production of our products, may alter the environment in which we do business and, therefore, may impact our operating results or increase its costs or liabilities. In addition, if we fail to adhere to such laws and regulations, we could be subject to regulatory investigations, civil or criminal sanctions, as well as class action litigation, which has increased in its industry in recent years.

We are affected by extensive laws, governmental regulations, administrative determinations, court decisions and similar constraints both domestically and abroad.

In both domestic and foreign markets, the formulation, manufacturing, packaging, labeling, distribution, importation, exportation, licensing, sale and storage of our products are affected by extensive laws, governmental regulations, administrative determinations, court decisions and similar constraints. Such laws, regulations and other constraints may exist at the federal, state or local levels in the United States and at all levels of government in foreign jurisdictions. There can be no assurance that we or our distributors are in compliance with all of these regulations. Our failure or our distributors’ failure to comply with these regulations or new regulations could lead to the imposition of significant penalties or claims and could have a material adverse effect on our business. In addition, the adoption of new regulations or changes in the interpretations of existing regulations may result in significant compliance costs or discontinuation of product sales and may adversely affect the marketing of our products, resulting in significant loss of sales revenues.

Regulations related to conflict minerals may cause us to incur additional expenses and could limit the supply and increase the costs of certain metals used in the manufacturing of our products.

We are subject to requirements under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, which will require us to conduct due diligence on and disclose whether or not our products contain conflict minerals. The implementation of these requirements could adversely affect the sourcing, availability, and pricing of the materials used in the manufacture of components used in our products. In addition, we will incur additional costs to comply with the disclosure requirements, including costs related to conducting diligence procedures to determine the sources of minerals that may be used or necessary to the production of our products and, if applicable, potential changes to products, processes, or sources of supply as a consequence of such due diligence activities. It is also possible that we may face reputational harm if we determine that certain of our products contain minerals not determined to be conflict free or if we are unable to alter our products, processes, or sources of supply to avoid such materials.

Our network marketing program could be found not to be in compliance with current or newly adopted laws or regulations in one or more markets, which could have a material adverse effect on our business.

Our network marketing program is subject to a number of federal and state regulations administered by the Federal Trade Commission and various state agencies in the United States as well as regulations on direct selling

 

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in foreign markets administered by foreign agencies. We are subject to the risk that, in one or more markets, our network marketing program could be found not to be in compliance with applicable law or regulations. Regulations applicable to network marketing organizations generally are directed at preventing fraudulent or deceptive schemes, often referred to as “pyramid” or “chain sales” schemes, by ensuring that product sales ultimately are made to consumers and that advancement within an organization is based on sales of the organization’s products rather than investments in the organization or other non-retail sales-related criteria. The regulatory requirements concerning network marketing programs do not include “bright line” rules and are inherently fact-based, and thus, even in jurisdictions where we believe that our network marketing program is in full compliance with applicable laws or regulations governing network marketing systems, we are subject to the risk that these laws or regulations or the enforcement or interpretation of these laws and regulations by governmental agencies or courts can change. The failure of our network marketing program to comply with current or newly adopted regulations could have a material adverse effect on our business in a particular market or in general.

We are also subject to the risk of private party challenges to the legality of our network marketing program. The network marketing programs of other companies have been successfully challenged in the past. An adverse judicial determination with respect to our network marketing program, or in proceedings not involving us directly but which challenge the legality of network marketing systems, could have a material adverse effect on our business.

Our products or services offered as part of automatically renewing subscriptions or memberships could be found not to be in compliance with laws or regulations in one or more markets, which could have a material adverse effect on our business.

Certain of our products and services include subscriptions and memberships that automatically renew unless cancelled by the subscribing consumer. There are a number of consumer-protection regulations at the state and federal level that govern how automatically renewing subscriptions are offered, including the types of notices that must be provided to consumers upon sign-up, and the manner in which consumers are able to cancel such renewals. We are subject to the risk that, in one or more markets, our automatically renewing subscription products could be found not to be in compliance with applicable law or regulations. This could result in regulatory bodies or a private party bringing an action that challenges the legality of our subscription products. These actions, including those without merit, could result in us having to expend significant litigation costs to defend against such claims, incur penalties or pay damages as a result of legal judgments against us, or require us to change elements of our automatically renewing subscription products. Each of these could have a material adverse effect on our business.

Changes in legislation or requirements related to EFT, or our failure to comply with existing or future regulations, may materially and adversely impact our business.

We derive a significant amount of revenue from auto-renewal arrangements incorporated within our programs, which require express consent from our customers to commence. Any changes in the laws, regulations or interpretations of the laws regarding auto-renewal arrangements, or increased enforcement of such laws and/or regulations, could adversely affect our ability to engage or retain customers and harm our financial condition and operating performance. Our business relies heavily on the fact that our subscriptions continue on a recurring basis after the completion of any initial term requirements, and compliance with these laws and regulations and similar requirements may be onerous and expensive. In addition, variances and inconsistencies from jurisdiction to jurisdiction may further increase the cost of compliance and doing business. States that have fitness membership statutes may be applicable to us and could provide harsh penalties for violations, including membership contracts being void or voidable. Our failure to comply fully with these rules or requirements may subject us to fines, higher transaction fees, penalties, damages and civil liability and may result in the loss of our ability to accept EFT payments, which would have a material adverse effect on our business and in turn our results of operations and financial condition. In addition, any such costs, which may arise in the future as a result

 

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of changes to the legislation and regulations or in their interpretation, could individually or in the aggregate cause us to change or limit our business practice, which may make our business model less attractive to our customers.

We are subject to a number of risks related to ACH, credit card and debit card payments we accept.

We accept payments through ACH, credit card and debit card transactions. For ACH, credit card and debit card payments, we pay interchange and other fees, which may increase over time. An increase in those fees would require us to either increase the prices we charge for our subscriptions, which could cause us to lose customers, or suffer an increase in our operating expenses, either of which could harm our operating results.

If we or any of our processing vendors have problems with our billing software, or the billing software malfunctions, it could have an adverse effect on our customer satisfaction and could cause one or more of the major credit card companies to disallow our continued use of their payment products. In addition, if our billing software fails to work properly and, as a result, we do not automatically charge our customers’ credit cards, debit cards or bank accounts on a timely basis or at all, we could lose subscription revenue, which would harm our operating results.

If we fail to adequately control fraudulent ACH, credit card and debit card transactions, we may face civil liability, diminished public perception of our security measures and significantly higher ACH, credit card and debit card related costs, each of which could adversely affect our business, financial condition and results of operations. The termination of our ability to process payments through ACH transactions or on any major credit or debit card would significantly impair our ability to operate our business.

As consumer behavior shifts to use emerging forms of payment, there may be an increased reluctance to use ACH or credit cards for membership dues and point of sale transactions which could result in decreased revenues as consumers choose to give their business to competition with more convenient forms of payment. We may need to expand our information systems to support newer and emerging forms of payment methods, which may be time-consuming and expensive and may not realize a return on our investment.

We are subject to payment processing risk.

Our customers pay for our products and services using a variety of different payment methods, including credit and debit cards and gift cards. We rely on third parties to process payments. Acceptance and processing of these payment methods are subject to certain rules and regulations and require payment of interchange and other fees. To the extent there are disruptions in our payment processing systems, increases in payment processing fees, material changes in the payment ecosystem, such as large re-issuances of payment cards, delays in receiving payments from payment processors, or changes to rules or regulations concerning payment processing, our revenue, operating expenses and results of operation could be adversely impacted. We leverage our third-party payment processors to bill customers on our behalf. If these third parties become unwilling or unable to continue processing payments on our behalf, we would have to find alternative methods of collecting payments, which could adversely impact customer acquisition and retention. In addition, from time to time, we encounter fraudulent use of payment methods, which could impact our results of operation and if not adequately controlled and managed could create negative consumer perceptions of our service.

We are subject to governmental export and import controls and economic sanctions laws that could subject us to liability and impair our ability to compete in international markets.

The United States and various foreign governments have imposed controls, export license requirements, and restrictions on the import or export of technologies. Our products may be subject to U.S. export controls, which may require submission of a product classification and annual or semi-annual reports. Compliance with applicable regulatory requirements regarding the export of our products and services may create delays in the

 

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introduction of our products and services in international markets, prevent our international customers from accessing our products and services, and, in some cases, prevent the export of our products and services to some countries altogether.

Furthermore, U.S. export control laws and economic sanctions prohibit the provision of products and services to countries, governments, and persons targeted by U.S. sanctions. Even though we take precautions to prevent our products from being provided to targets of U.S. sanctions, our products and services could be provided to those targets or provided by our customers. Any such provision could have negative consequences, including government investigations, penalties, reputational harm. Our failure to obtain required import or export approval for our products could harm our international and domestic sales and adversely affect our revenue.

We could be subject to future enforcement action with respect to compliance with governmental export and import controls and economic sanctions laws that result in penalties, costs, and restrictions on export privileges that could have an adverse effect on our business, results of operations and financial condition.

Failure to comply with anti-corruption and anti-money laundering laws, including the FCPA and similar laws associated with our activities outside of the United States, could subject us to penalties and other adverse consequences.

We operate a global business and may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities. We are subject to the Foreign Corrupt Practices Act, or the FCPA, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, the USA PATRIOT Act, the U.K. Bribery Act, and possibly other anti-bribery and anti-money laundering laws in countries in which we conduct activities. These laws that prohibit companies and their employees and third-party intermediaries from corruptly promising, authorizing, offering, or providing, directly or indirectly, improper payments or anything of value to foreign government officials, political parties, and private-sector recipients for the purpose of obtaining or retaining business, directing business to any person, or securing any advantage. In addition, U.S. public companies are required to maintain records that accurately and fairly represent their transactions and have an adequate system of internal accounting controls. In many foreign countries, including countries in which we may conduct business, it may be a local custom that businesses engage in practices that are prohibited by the FCPA or other applicable laws and regulations. We face significant risks if we or any of our directors, officers, employees, agents or other parties or representatives fail to comply with these laws and governmental authorities in the United States and elsewhere could seek to impose substantial civil and/or criminal fines and penalties which could have a material adverse effect on our business, reputation, results of operations and financial condition.

We have begun to implement an anti-corruption compliance program and policies, procedures and training designed to foster compliance with these laws; however, our employees, contractors, and agents, and companies to which we outsource some of our business operations, may take actions in violation of our policies or applicable law. Any such violation could have an adverse effect on our reputation, business, operating results and prospects.

Any violation of the FCPA, other applicable anti-corruption laws, or anti-money laundering laws could result in whistleblower complaints, adverse media coverage, investigations, loss of export privileges, severe criminal or civil sanctions and, in the case of the FCPA, suspension or debarment from U.S. government contracts, any of which could have a materially adverse effect on our reputation, business, operating results, and prospects. In addition, responding to any enforcement action may result in a significant diversion of management’s attention and resources and significant defense costs and other professional fees.

Our intellectual property rights are valuable, and any inability to protect them could reduce the value of our products, services, and brand.

Our success depends in large part on our proprietary content and technology and our trademarks, copyrights, patents, trade secrets and other intellectual property rights. We rely on, and expect to continue to rely on, a

 

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combination of trademark, trade dress, domain name, copyright, trade secret and patent laws, as well as confidentiality and license agreements with our employees, contractors, consultants, and third parties with whom we have relationships, to establish and protect our brand and other intellectual property rights. However, our efforts to obtain and protect our intellectual property rights may not be sufficient or effective, and any of our intellectual property rights may be challenged, which could result in them being narrowed in scope or declared invalid or unenforceable. There can be no assurance that our intellectual property rights will be sufficient to protect against others offering products, services, or technologies that are substantially similar to ours and that compete with our business.

Effective protection of patents, trademarks, and domain names is expensive and can be difficult to maintain, both in terms of application and registration costs as well as the costs of defending and enforcing those rights. As we have grown, we have sought to obtain and protect our intellectual property rights in an increasing number of countries, a process that can be expensive and may not always be successful. For example, the U.S. Patent and Trademark Office and various foreign governmental patent agencies require compliance with a number of procedural requirements to complete the patent application process and to maintain issued patents, and noncompliance or non-payment could result in abandonment or lapse of a patent or patent application, resulting in partial or complete loss of patent rights in a relevant jurisdiction. Further, intellectual property protection may not be available to us in every country in which our products and services are available. For example, some foreign countries have compulsory licensing laws under which a patent owner must grant licenses to third parties. In addition, many countries limit the enforceability of patents against third parties, including government agencies or government contractors. In these countries, patents may provide limited or no benefit.

In order to protect our brand and intellectual property rights, we may be required to spend significant resources to monitor and protect these rights. Enforcement actions and litigation brought to protect and enforce our intellectual property rights could be costly, time-consuming, and distracting to management and could result in the impairment or loss of portions of our intellectual property. Furthermore, our efforts to enforce our intellectual property rights may be met with defenses, counterclaims, and countersuits attacking the validity and enforceability of our intellectual property rights. Accordingly, we may not be able to prevent third parties from infringing upon or misappropriating our intellectual property. Our failure to secure, protect, and enforce our intellectual property rights could seriously damage our brand and our business.

We have been, and may in the future be, subject to claims that we infringed certain intellectual property rights of third parties, and such claims could result in costly litigation expenses or the loss of significant rights related to, among other things, our products and marketing activities, including as it relates to Myx stationary bike products.

There may be intellectual property rights held by others, including issued or pending patents, trademarks, and copyrights, and applications of the foregoing, that they allege cover significant aspects of our products, services, content, branding, or business methods. We have received in the past, and may receive in the future, communications from third parties, including practicing and non-practicing entities, claiming that we may have infringed, misused, or otherwise misappropriated their intellectual property rights. Moreover, companies in the stationary bicycle space are frequent targets of entities seeking to enforce their rights in their intellectual property, or to otherwise profit from royalties in connection with grants of licenses in their intellectual property. These intellectual property claims include enforcement of a broad variety of patents that cover various elements of stationary bicycle products.

Defending against intellectual property infringement claims may result in costly litigation expenses and diversion of technical and management personnel. It also may result in our inability to use certain technologies, content, branding, or business methods found to be in violation of another party’s rights. As a result of a dispute, we may have to develop non-infringing technology, enter into royalty or licensing agreements, revise our marketing activities, cease the sale of certain products, or take other actions to resolve the claims that would result in additional cost and expense to our business. Any of these results could materially adversely affect our ability to compete and our business, results of operations, and financial condition.

 

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Our subscriber engagement on mobile devices depends upon effective operation with mobile operating systems, networks, and standards that we do not control.

A growing portion of our customers access our platform through Openfit/Beachbody on Demand (“BOD”) and there is no guarantee that popular mobile devices will continue to support Openfit/BOD or that mobile device users will use Openfit/BOD rather than competing products. We are dependent on the interoperability of Openfit/BOD with popular mobile operating systems that we do not control, such as Android and iOS, and any changes in such systems that degrade the functionality of our digital offering or give preferential treatment to competitors could adversely affect our platform’s usage on mobile devices. Additionally, in order to deliver high-quality mobile content, it is important that our digital offering is designed effectively and works well with a range of mobile technologies, systems, networks, and standards that we do not control. We may not be successful in developing relationships with key participants in the mobile industry or in developing products that operate effectively with these technologies, systems, networks, or standards. In the event that it is more difficult for our customers to access and use our platform on their mobile devices or customers find our mobile offerings do not effectively meet their needs, our competitors develop products and services that are perceived to operate more effectively on mobile devices, or if our customers choose not to access or use our platform on their mobile devices or use mobile products that do not offer access to our platform, our subscriber growth and subscriber engagement could be adversely impacted.

In addition, a portion of our customers access our products through over-the-top (“OTT”) services such as AppleTV and Roku. These OTT services are managed by third parties that we do not control, and any changes in such systems or services that degrade the functionality of our digital offering or give preferential treatment to competitors could adversely affect our platform’s usage through these services.

Myx may be subject to warranty claims that could result in significant direct or indirect costs, or Myx could experience greater returns than expected, either of which could have an adverse effect on our business, financial condition, and operating results.

Myx generally provides a minimum 12-month limited warranty on all of its bikes. The occurrence of any material defects in our products could make it liable for damages and warranty claims in excess of its current reserves, which could result in an adverse effect on our business prospects, liquidity, financial condition, and cash flows if warranty claims were to materially exceed anticipated levels. In addition, Myx could incur significant costs to correct any defects, warranty claims, or other problems, including costs related to product recalls. Any negative publicity related to the perceived quality and safety of its products could affect our brand image, decrease consumer and subscriber confidence and demand, and adversely affect our financial condition and operating results. Also, while its warranty is limited to repairs and returns, warranty claims may result in litigation, the occurrence of which could have an adverse effect on our business, financial condition, and operating results.

Changes in U.S. tax law may have an adverse effect on our business, financial condition and results of operations and affect the U.S. federal tax considerations of the purchase, ownership and disposition of the common stock.

Potential tax reforms in the U.S. may result in significant changes in the rules governing United States federal income taxation. Such changes may have an adverse effect on our business, financial condition and results of operations. Such changes may also affect the U.S. federal tax considerations of the purchase, ownership and disposition of our common stock.

We may be subject to obligations to collect and remit sales tax and other taxes, and we may be subject to tax liability for past sales, which could adversely harm our business.

State and local jurisdictions have differing rules and regulations governing sales, use, value added and other taxes, and these rules and regulations are subject to varying interpretations that may change over time. In

 

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particular, the applicability of such taxes to our trainings in various jurisdictions is unclear. While we do not believe we are currently required to collect and remit sales or similar taxes on our trainings in any jurisdiction in which we are not collecting such tax, we could face the possibility of tax assessments and audits. A successful assertion that we should be collecting sales, use, value added or other taxes on our trainings in those jurisdictions where we do not do so or have not historically done so could result in substantial tax liabilities and related penalties for past sales, discourage customers from purchasing our services or otherwise harm our business, results of operations and financial condition.

Risks Related to Being a Public Company

Our management team has limited experience managing a public company.

Most members of our management team have limited experience managing a publicly traded company, interacting with public company investors, and complying with the increasingly complex laws pertaining to public companies. Our management team may not successfully or efficiently manage our transition to being a public company subject to significant regulatory oversight and reporting obligations under the federal securities laws and the continuous scrutiny of securities analysts and investors. These new obligations and constituents will require significant attention from our senior management and could divert their attention away from the day-to-day management of our business, which could adversely affect our business, results of operations and financial condition.

Our internal controls over financial reporting may not be effective and our independent registered public accounting firm may not be able to certify as to their effectiveness, which could have a significant and adverse effect on our business and reputation.

As a public company, we are required to comply with the SEC’s rules implementing Sections 302 and 404 of the Sarbanes-Oxley Act, which require management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of controls over financial reporting. As an “emerging growth company,” as defined in the JOBS Act, our independent registered public accounting firm is not required to formally attest to the effectiveness of our internal controls over financial reporting pursuant to Section 404 until the date we are no longer an emerging growth company. At such time, our independent registered public accounting firm may issue a report that is adverse in the event that it is not satisfied with the level at which our controls are documented, designed or operating.

To comply with the requirements of being a public company, we may need to undertake various actions, such as implementing additional internal controls and procedures and hiring additional accounting or internal audit staff. Testing and maintaining internal controls can divert our management’s attention from other matters that are important to the operation of our business. If we identify material weaknesses in our internal controls over financial reporting or are unable to comply with the requirements of Section 404 or assert that our internal controls over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal controls over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be negatively affected, and we could become subject to investigations by the SEC or other regulatory authorities, which could require additional financial and management resources.

If securities or industry analysts do not publish research or reports about our business, if they adversely change their recommendations regarding our shares or if our results of operations do not meet their expectations, our share price and trading volume could decline.

The trading market for our shares is influenced by the research and reports that industry or securities analysts publish about us or our business. We do not have any control over these analysts. Securities and industry analysts do not currently, and may never, publish research on us. If no securities or industry analysts commence coverage

 

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of us, the trading price of our shares would likely be negatively impacted. In the event securities or industry analysts initiated coverage, and one or more of these analysts cease coverage of us or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our share price or trading volume to decline. Moreover, if one or more of the analysts who cover us downgrade our stock, or if our results of operations do not meet their expectations, our share price could decline.

As a public company, we are subject to additional laws, regulations and stock exchange listing standards, which will impose additional costs on us and may strain our resources and divert our management’s attention.

As a company with publicly-traded securities, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the listing requirements of the NYSE and other applicable securities laws and regulations. These rules and regulations require that we adopt additional controls and procedures and disclosure, corporate governance and other practices thereby significantly increasing our legal, financial and other compliance costs. These new obligations also make other aspects of our business more difficult, time-consuming or costly and increase demand on our personnel, systems and other resources. For example, to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting, we need to commit significant resources, hire additional staff and provide additional management oversight. Furthermore, as a result of disclosure of information in this prospectus and in our Exchange Act and other filings required of a public company, our business and financial condition become more visible, which we believe may give some of our competitors who may not be similarly required to disclose this type of information a competitive advantage. In addition to these added costs and burdens, if we are unable to satisfy our obligations as a public company, we could be subject to delisting of our common stock, fines, sanctions, other regulatory actions and civil litigation, any of which could negatively affect the price of our common stock.

Our Proposed Charter provides that the Court of Chancery of the State of Delaware will be the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

Our Proposed Charter provides that, unless we consent in writing to the selection of an alternative forum, the sole and exclusive forum, to the fullest extent permitted by law, for (1) any derivative action or proceeding brought on our behalf, (2) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, employees or agents or our stockholders, (3) any action asserting a claim against us or any director or officer arising pursuant to any provision of the DGCL, (4) any action to interpret, apply, enforce or determine the validity of our Proposed Charter or Bylaws, or (5) any other action asserting a claim that is governed by the internal affairs doctrine shall be the Court of Chancery of the State of Delaware or federal court located within the State of Delaware if the Court of Chancery does not have jurisdiction, in all cases subject to the court’s having jurisdiction over indispensable parties named as defendants. A complaint asserting a cause of action under the Securities Act of 1933, as amended, may be brought in state or federal court. With respect to the Securities Exchange Act of 1934, as amended, only claims brought derivatively under the Securities Exchange Act of 1934, as amended, would be subject to the forum selection clause described above. The enforceability of similar choice of forum provisions in other companies’ certificates of incorporation and bylaws has been challenged in legal proceedings, and it is possible that, in connection with any action, a court could find the choice of forum provisions contained in our Proposed Charter and Bylaws to be inapplicable or unenforceable in such action. Although we believe these provisions benefit us by providing increased consistency in the application of Delaware law for the specified types of actions and proceedings, the provisions may have the effect of discouraging lawsuits against us or our directors and officers. Alternatively, if a court were to find the choice of forum provision contained in our Proposed Charter and Bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, financial condition and operating results. Any person or entity purchasing or otherwise acquiring any interest in our shares of capital stock shall be deemed to have notice of and consented to this exclusive forum

 

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provision but will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder.

Our quarterly operating results and other operating metrics may fluctuate from quarter to quarter, which makes these metrics difficult to predict.

Our quarterly operating results and other operating metrics have fluctuated in the past and may continue to fluctuate from quarter to quarter. As a result, you should not rely on our past quarterly operating results as indicators of future performance. You should take into account the risks and uncertainties frequently encountered by companies in rapidly evolving markets. Our financial condition and operating results in any given quarter can be influenced by numerous factors, many of which we are unable to predict or are outside of our control, including:

 

   

the continued market acceptance of, and the growth of the connected fitness and wellness market;

 

   

our ability to maintain and attract new customers;

 

   

our development and improvement of the quality of the subscriber experience, including, enhancing existing and creating new content, services, nutritional supplements, technology, and features;

 

   

the continued development and upgrading of our technology platform;

 

   

the timing and success of new product, service, feature, and content introductions by us or our competitors or any other change in the competitive landscape of our market;

 

   

pricing pressure as a result of competition or otherwise;

 

   

delays or disruptions in our supply chain;

 

   

errors in our forecasting of the demand for our products and services, which could lead to lower revenue or increased costs, or both;

 

   

increases in marketing, sales, and other operating expenses that we may incur to grow and expand our operations and to remain competitive;

 

   

the continued maintenance and expansion of last mile delivery and maintenance services for our fitness products;

 

   

successful expansion into international markets;

 

   

seasonal fluctuations in subscriptions and usage of fitness products by our customers, each of which may change as our products and services evolve or as our business grows;

 

   

the diversification and growth of our revenue sources;

 

   

our ability to maintain gross margins and operating margins;

 

   

constraints on the availability of consumer financing or increased down payment requirements to finance purchases of our integrated fitness products;

 

   

system failures or breaches of security or privacy;

 

   

adverse litigation judgments, settlements, or other litigation-related costs, including content costs for past use;

 

   

changes in the legislative or regulatory environment, including with respect to privacy, consumer product safety, and advertising, or enforcement by government regulators, including fines, orders, or consent decrees;

 

   

fluctuations in currency exchange rates and changes in the proportion of our revenue and expenses denominated in foreign currencies;

 

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changes in our effective tax rate;

 

   

changes in accounting standards, policies, guidance, interpretations, or principles; and

 

   

changes in business or macroeconomic conditions, including lower consumer confidence, recessionary conditions, increased unemployment rates, or stagnant or declining wages.

Any one of the factors above or the cumulative effect of some of the factors above may result in significant fluctuations in our operating results.

The variability and unpredictability of our quarterly operating results or other operating metrics could result in our failure to meet our expectations or those of analysts that cover us or investors with respect to revenue or other operating results for a particular period. If we fail to meet or exceed such expectations, the market price of our common stock could fall substantially, and we could face costly lawsuits, including securities class action suits.

The requirements of being a public company, including maintaining adequate internal control over our financial and management systems, may strain our resources, divert management’s attention, and affect our ability to attract and retain executive management and qualified board members.

As a public company we will incur significant legal, accounting, and other expenses that we did not incur as a private company. We will be subject to reporting requirements of the Exchange Act, the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, the rules subsequently implemented by the SEC, the rules and regulations of the listing standards of the NYSE, and other applicable securities rules and regulations. Compliance with these rules and regulations will likely strain our financial and management systems, internal controls, and employees.

The Exchange Act requires, among other things, that we file annual, quarterly, and current reports with respect to our business and operating results. Moreover, the Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures, and internal control, over financial reporting. In order to maintain and, if required, improve our disclosure controls and procedures, and internal control over, financial reporting to meet this standard, significant resources and management oversight may be required. If we have material weaknesses or deficiencies in our internal control over financial reporting, we may not detect errors on a timely basis and our consolidated financial statements may be materially misstated. Effective internal control is necessary for us to produce reliable financial reports and is important to prevent fraud.

In addition, we will be required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act when we cease to be an emerging growth company. We expect to incur significant expenses and devote substantial management effort toward ensuring compliance with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act. As a result of the complexity involved in complying with the rules and regulations applicable to public companies, our management’s attention may be diverted from other business concerns, which could harm our business, operating results, and financial condition. Although we have already engaged additional resources to assist us in complying with these requirements, our finance team is small and we may need to hire more employees in the future, or engage outside consultants, which will increase our operating expenses.

We also expect that being a public company and complying with applicable rules and regulations will make it more expensive for us to obtain director and officer liability insurance, and we may be required to incur substantially higher costs to obtain and maintain the same or similar coverage. These factors could also make it more difficult for us to attract and retain qualified members of our board of directors and qualified executive officers.

Our ability to raise capital in the future may be limited.

Our business and operations may consume resources faster than we anticipate. In the future, we may need to raise additional funds through the issuance of new equity securities, debt or a combination of both. However, the lapse

 

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or waiver of any lock up restrictions or any sale or perception of a possible sale by our stockholders, and any related decline in the market price of our common stock, could impair our ability to raise capital. Separately, additional financing may not be available on favorable terms, or at all. If adequate funds are not available on acceptable terms, we may be unable to fund our capital requirements. If we issue new debt securities, the debt holders would have rights senior to common stockholders to make claims on our assets, and the terms of any debt could restrict our operations, including our ability to pay dividends on our common stock. If we issue additional equity securities, existing stockholders will experience dilution, and the new equity securities could have rights senior to those of our common stock. Because our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. Thus, our stockholders bear the risk of our future securities offerings reducing the market price of our common stock and diluting their interest.

The forecasts of market growth and other projections included in this prospectus may prove to be inaccurate, and even if the markets in which we compete achieve the forecasted growth, we cannot assure you that our business will grow at a similar rate, if at all.

Growth forecasts and projections are subject to significant uncertainty and are based on assumptions and estimates that may not prove to be accurate. The forecasts in this prospectus relating to the expected growth in the fitness market, including estimates based on our own internal survey data, as well as any corresponding projections related to our potential performance, may prove to be inaccurate. Even if the markets experience the forecasted growth described in this prospectus, we may not grow our business at a similar rate, or at all. Our growth is subject to many factors, including our success in implementing our business strategy, which is subject to many risks and uncertainties. Accordingly, the forecasts of market growth included in this prospectus should not be taken as indicative of our future growth.

The Merger involves the integration of businesses that currently operate as independent businesses. Each of the companies will be required to devote attention and resources to integrating their business practices and operations following the Closing. The companies may encounter potential difficulties in the integration process including the following:

 

   

the inability to successfully integrate the businesses, including operations, technologies, products and services, in a manner that permits Beachbody, Myx or the Company to achieve the cost savings and operating synergies anticipated to result from the Merger, which could result in the anticipated benefits of the Merger not being realized partly or wholly in the time frame currently anticipated or at all;

 

   

the necessity of coordinating geographically separated organizations, systems and facilities;

 

   

potential unknown liabilities and unforeseen expenses, delays or regulatory conditions associated with the Merger;

 

   

the integration of personnel with diverse business backgrounds and business cultures, while maintaining focus on providing consistent, high-quality products and services;

 

   

the consolidation and rationalization of information technology platforms and administrative infrastructures as well as accounting systems and related financial reporting activities; and

 

   

the challenge of preserving important relationships of both Beachbody and Myx and resolving potential conflicts that may arise.

Furthermore, it is possible that the integration process could result in the loss of talented employees or skilled workers of Beachbody and Myx. The loss of talented employees and skilled workers could adversely affect Beachbody’s, Myx’s or the Company’s ability to successfully conduct their respective businesses because of such employees’ experience and knowledge of the respective business. In addition, Beachbody, Myx, or the Company could be adversely affected by the diversion of our attention and any delays or difficulties encountered

 

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in connection with the integration of Beachbody and Myx. The process of integrating operations could cause an interruption of, or loss of momentum in, the activities of the businesses. If Beachbody, Myx or the Company experience difficulties with the integration process, the anticipated benefits of the Merger may not be realized fully or at all, or may take longer to realize than expected. These integration matters could have an adverse effect on the business, results of operations, financial condition or prospects of Beachbody, Myx, or the Company during this transition period and for an undetermined period after completion of the Merger.

 

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USE OF PROCEEDS

All of the shares of common stock and warrants offered by the Selling Shareholders will be sold by them for their respective accounts. We will not receive any of the proceeds from these sales.

The Selling Shareholders will pay any underwriting fees, discounts, selling commissions, stock transfer taxes and certain legal expenses incurred by such Selling Shareholders in disposing of their shares of common stock and warrants, and we will bear all other costs, fees and expenses incurred in effecting the registration of such securities covered by this prospectus, including, without limitation, all registration and filing fees, NYSE listing fees and fees and expenses of our counsel and our independent registered public accountants.

We will receive any proceeds from the exercise of the warrants for cash, but not from the sale of the shares of common stock issuable upon such exercise.

 

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MARKET PRICE OF OUR COMMON STOCK AND DIVIDEND INFORMATION

Market Price of Our Common Stock

Our common stock and warrants are listed on NYSE under the symbol “BODY” and “BODY WS,” respectively.

On July 19, 2021, the closing price of our Class A common stock was $8.79 per share and the closing price of our warrants was $2.28 per warrant. As of June 25, 2021, following the closing of the Business Combination, there were 163,175,632 shares of our Class A common stock outstanding, held of record by 122 holders, 141,250,310 shares of our Class X common stock outstanding, held of record by 3 holders, and 3 holders of record of our warrants.

Dividend Policy

We have not paid any cash dividends on our common stock to date and prior to the Business Combination, FRX had not paid any dividends on its ordinary shares. The payment of cash dividends in the future will be dependent upon our revenues and earnings, if any, capital requirements and general financial condition. The payment of any cash dividends will be within the discretion of our board of directors. Our ability to declare dividends may be limited by the terms of financing or other agreements entered into by us or our subsidiaries from time to time.

 

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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

Unless the context otherwise requires, the “Company” refers to The Beachbody Company, Inc. (“Beachbody”) (f/k/a Forest Road Acquisition Corp.) and its subsidiaries after the closing of the business combination (the “Closing”), and Forest Road Acquisition Corp. (“Forest Road”) prior to the Closing.

The following unaudited pro forma condensed combined financial information presents the combination of the financial information of The Beachbody Company Group, LLC (“Old Beachbody”), Forest Road and Myx adjusted to give effect to the Business Combination and related transactions. The following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X, as amended by the final rule, Release 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses.”

The unaudited pro forma condensed combined balance sheet as of March 31, 2021 combines the historical balance sheets of Old Beachbody, Forest Road and Myx on a pro forma basis as if the Business Combination and related transactions, summarized below, had been consummated on March 31, 2021. The unaudited pro forma condensed combined statements of operations for the three months ended March 31, 2021 and year ended December 31, 2020 combine the historical statements of operations of Old Beachbody, Forest Road and Myx for such periods on a pro forma basis as if the Business Combination and related transactions, summarized below, had been consummated on January 1, 2020, the beginning of the earliest period presented. The Business Combination and related transactions contemplated in the Merger Agreement are as follows:

 

   

the merger of BB Merger Sub, LLC, a wholly owned subsidiary of Forest Road, with and into Old Beachbody;

 

   

the merger of MFH Merger Sub, LLC, a wholly owned subsidiary of Forest Road, with and into Myx; and

 

   

the issuance and sale of 22,500,000 shares of Class A Common Stock at a purchase price of $10.00 per share for an aggregate purchase price of $225,000,000 in the PIPE Placement pursuant to the Subscription Agreements.

The pro forma condensed combined financial information may not be useful in predicting the future financial condition and results of operations of the post-combination company. The actual financial position and results of operations may differ significantly from the pro forma amounts reflected herein due to a variety of factors.

Upon the closing of the Business Combination, public stockholders were offered the opportunity to redeem shares of Forest Road Class A common stock then held by them for cash equal to their pro rata share of the aggregate amount on deposit (as of two business days prior to the Closing) in the trust account. The unaudited condensed combined pro forma financial statements reflect actual redemptions of 8,383,485 shares of Class A common stock at $10.00 per share (based on the marketable securities held in the trust account of approximately $300.0 million).

Old Beachbody was determined to be the accounting acquirer in the Business Combination based on the following predominate factors:

 

   

Old Beachbody’s existing stockholders has the greatest voting interest in the combined entity with over 95% of the voting interest;

 

   

Old Beachbody has the ability to nominate a majority of the members of the Board of Directors of the combined entity;

 

   

Old Beachbody’s senior management is the senior management of the combined entity; and

 

   

Old Beachbody is the larger entity based on historical operating activity and has the larger employee base.

 

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The Beachbody Merger was accounted for as a reverse recapitalization in accordance with GAAP, whereby Forest Road was treated as the acquired company and Old Beachbody was treated as the acquirer. Accordingly, for accounting purposes, the Beachbody Merger was treated as the equivalent of Old Beachbody issuing stock for the net assets of Forest Road, accompanied by a recapitalization. The net assets of Forest Road are stated at historical cost, with no goodwill or other intangible assets recorded. Subsequently, results of operations presented for the period prior to the Beachbody Merger are those of Old Beachbody.

The Myx Merger was treated as a business combination in accordance with GAAP and was accounted for using the acquisition method of accounting. Old Beachbody recorded the estimated fair value of the assets acquired and liabilities assumed from Myx. Any excess amounts after allocating the estimated consideration to identifiable tangible and intangible assets acquired and liabilities assumed was recorded as goodwill.

Assumptions and estimates underlying the unaudited pro forma adjustments included in the unaudited pro forma condensed combined financial statements are described in the accompanying notes. The unaudited pro forma condensed combined financial statements have been presented for illustrative purposes only and are not necessarily indicative of the operating results and financial position that would have been achieved had the Business Combination and related transactions occurred on the dates indicated. Further, the unaudited pro forma condensed combined financial statements do not purport to project the future operating results or financial position of the Company following the completion of the Business Combination and related transactions. The unaudited pro forma adjustments represent management’s estimates based on information available as of the date of these unaudited pro forma condensed combined financial statements and are subject to change as additional information becomes available and analyses are performed.

 

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UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

AS OF MARCH 31, 2021

(in thousands)

 

    As of March 31, 2021                             As of
March 31, 2021
 
    Old
Beachbody
(Historical)
    Forest
Road
(Historical)
    Myx
(Historical)
    Transaction
Accounting
Adjustments
(Note 3—RR)
          Transaction
Accounting
Adjustments
(Note 3—PPA)
          Pro Forma
Combined
 

Assets

               

Cash and cash equivalents

  $ 47,649     $ 730     $ 2,990     $ 300,004       (a   $ (37,700     (b   $ 403,756  
          (10,500     (b     (3,216     (g  
          (37,363     (c      
          225,000       (d      
          (83,838     (i      

Accounts receivable, net

    3,338       —         —                 3,338  

Inventory, net

    65,653       —         13,502               79,155  

Prepaid expenses and other current assets

    60,184       256       3,127       (6,293     (c         57,274  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total current assets

    176,824       986       19,619       387,010         (40,916       543,523  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Property and equipment, net

    81,905       —         71               81,976  

Content assets, net

    24,046       —         —                 24,046  

Intangible assets, net

    19,540       —         —             79,800       (c     99,340  

Goodwill

    18,981       —         —             155,132       (b     174,113  

Marketable securities held in Trust Account

    —         300,004       —         (300,004     (a         —    

Right-of-use asset, net

    31,380       —         —                 31,380  

Other assets

    18,634       —         34           1,735       (a     2,001  
              (18,402     (b  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total assets

  $ 371,310     $ 300,990     $ 19,724     $ 87,006       $ 177,349       $ 956,379  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Liabilities

               

Bank line of credit

  $ —       $ —       $ 6,015     $ —         $ (6,015     (e   $ —    

Accounts payable and accrued expenses

    122,868       2,674       18,160       (5,791     (c   $ (633     (g     131,910  
            $ (5,368     (e  

Due to related party

    —         21       6,672           (6,672     (e     21  

Deferred revenue

    106,897       —         3,243               110,140  

Current portion of lease liabilities

    9,929       —         —                 9,929  

Other current liabilities

    3,024       —         —                 3,024  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total current liabilities

    242,718       2,695       34,090       (5,791       (18,688       255,024  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Long-term debt

    20,000                   20,000  

Long-term lease liabilities, net

    29,128       —         —                 29,128  

Deferred taxliabilities

    3,216       —         —             19,950       (d     11,766  
              (11,400     (h  

Warrant liabilities

    —         45,606       —                 45,606  

Deferred underwriters’ discount payable

    —         10,500       —         (10,500     (b         —    

Convertible instrument

    —         —         16,667           (16,667     (b     —    

Other liabilities

    4,375       —         11               4,386  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total liabilities

    299,437       58,801       50,768       (16,291       (26,805       365,910  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

 

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Table of Contents
    As of March 31, 2021                             As of
March 31, 2021
 
    Old
Beachbody
(Historical)
    Forest
Road
(Historical)
    Myx
(Historical)
    Transaction
Accounting
Adjustments
(Note 3—RR)
          Transaction
Accounting
Adjustments
(Note 3—PPA)
          Pro Forma
Combined
 

Commitments and contingencies

               

Redeemable convertible Series A preferred units

  $ 98,110     $ —       $ —       $ (98,110     (f       $ —    

Class A common stock subject to possible redemption

    —         237,188       —         (237,188     (e         —    

Stockholders’ equity/ Members’ equity (deficit)

               

Common units

    584       —         —         (584     (f         —    

Member’s deficit

    —         —         (31,044         31,044       (f     —    

Preferred stock

    —         —         —                 —    

Class A common stock

    —         1       —         2       (d     1       (b     16  
          2       (e      
          10       (f      
          1       (g      
          (1     (i      

Class B common stock

    —         1       —         (1     (g         —    

Class X common stock

          14       (f         14  

Additional paid-in capital

    —         29,506       —         (30,764     (c     162,557       (b     613,809  
          224,998       (d      
          237,186       (e      
          98,670       (f      
          (24,507     (h      
          (83,837     (i      

Accumulated other comprehensive loss

    (102     —         —                 (102

Retained earnings (accumulated deficit)

    (26,719     (24,507     —         24,507       (h     (2,583     (g     (23,268
          (7,101     (c     1,735       (a  
              11,400       (h  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total stockholders’ equity/ members’ equity (deficit)

    (26,237     5,001       (31,044     438,595         204,154         590,469  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total liabilities and stockholders’ equity/ members’ equity (deficit)

  $ 371,310     $ 300,990     $ 19,724     $ 87,006       $ 177,349       $ 956,379  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

 

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Table of Contents

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2021

(in thousands, except share and per share data)

 

                        For the Three
Months Ended

March 31, 2021
 
    For the Three Months Ended
March 31, 2021
               
    Old Beachbody
(Historical)
    Forest
Road
(Historical)
    Myx
(Historical)
    Transaction
Accounting
Adjustments
(Note 3—RR)
        Transaction
Accounting
Adjustments
(Note 3—PPA)
        Pro Forma
Combined
 

Revenue:

               

Digital

  $ 95,150     $ —       $ —           $ —         $ 95,150  

Nutrition and other

    131,069       —         —             —           131,069  

Connected fitness

    —         —         17,038           —           17,038  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total revenue

    226,219       —         17,038       —           —           243,257  

Cost of revenue:

               

Digital

    11,122       —         —             —           11,122  

Nutrition and other

    56,995       —         —             —           56,995  

Connected fitness

    —         —         17,456           —           17,456  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total cost of revenue

    68,117       —         17,456       —           —           85,573  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Gross profit (loss)

    158,102       —         (418     —           —           157,684  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Operating expenses:

               

Selling and marketing

    144,696       —         4,789           —           149,485  

Enterprise technology and development

    27,089       —         813           —           27,902  

General and administrative

    17,946       2,725       3,029       199     (aa)     2,755     (aa)     23,768  
          (2,253   (bb)     (633   (bb)  

Restructuring

    —         —         —             —           —    
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total operating expenses

    189,731       2,725       8,631       (2,054       2,122         201,155  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Operating loss

    (31,629     (2,725     (9,049     2,054         (2,122       (43,471

Other income (expenses)

               

Other income (expense), net

    1,299       —         (91             1,208  

Offering cost associated with warrants recorded as liabilities

    —         —         —                 —    

Change in fair value of warrant liabilities

    —         (13,870     —                 (13,870

Interest income on marketable securities held in Trust account

      4       —                 4  

Loss from change in fair value of convertible instrument

    —         —         (1,379         1,379     (ee)     —    

Interest expense

    (123     —         (113         113     (ff)     (123
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

   

 

 

 

 

 

Total other income (expenses)

    1,176       (13,866     (1,583     —             1,492         (12,781
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

   

 

 

 

 

 

 

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Table of Contents
                        For the Three
Months Ended

March 31, 2021
 
    For the Three Months Ended
March 31, 2021
               
    Old Beachbody
(Historical)
    Forest
Road
(Historical)
    Myx
(Historical)
    Transaction
Accounting
Adjustments
(Note 3—RR)
        Transaction
Accounting
Adjustments
(Note 3—PPA)
        Pro Forma
Combined
 

Loss before income taxes

  $ (30,453   $ (16,591   $ (10,632   $ 2,054       $ (630     $ (56,252

Income tax provisions (benefit)

    (395     —         —         514     (dd)     (158   (gg)     (39
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Net loss

  $ (30,058   $ (16,591   $ (10,632   $ 1,540       $ (472     $ (56,213
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Net loss per share, basic and diluted

  $ (0.48               $ (0.18

Weighted average shares outstanding, basic and diluted

    62,263,439                   304,425,942  

 

50


Table of Contents

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2020

(in thousands, except share and per share data)

 

    For the
year ended
December 31,
2020
    For
the period
September 24,
2020
(inception)
through
December 31,
2020
    For the
year ended
December 31,
2020
                            For the year
ended
December 31,
2020
 
    Old Beachbody
(Historical)
    Forest Road
(Historical)
    Myx
(Historical)
    Transaction
Accounting
Adjustments
(Note 3—RR)
          Transaction
Accounting
Adjustments
(Note 3—PPA)
          Pro Forma
Combined
 

Revenue:

               

Digital

  $ 334,804     $ —       $ —           $ —         $ 334,804  

Nutrition and other

    528,778       —         —             —           528,778  

Connected fitness

    —         —         29,671           —           29,671  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total revenue

    863,582       —         29,671       —           —           893,253  

Cost of revenue:

               

Digital

    38,285       —         —             —           38,285  

Nutrition and other

    211,422       —         —             —           211,422  

Connected fitness

    —         —         34,050           —           34,050  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total cost of revenue

    249,707       —         34,050       —           —           283,757  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Gross profit (loss)

    613,875       —         (4,379     —           —           609,496  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Operating expenses:

               

Selling and marketing

    464,000       —         9,243           —           473,243  

Enterprise technology and development

    93,036       —         1,950           —           94,986  

General and administrative

    64,818       531       6,540       797       (aa     11,020       (aa     89,122  
          2,200       (cc     3,216       (cc  

Restructuring

    (1,677     —         —             —           (1,677
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total operating expenses

    620,177       531       17,733       2,997         14,236         655,674  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Operating loss

    (6,302     (531     (22,112     (2,997       (14,236       (46,178

Other income (expenses)

               

Other income (expense), net

    666       —         (156         1,735       (dd     2,245  

Offering cost associated with warrants recorded as liabilities

    —         (981       (4,901     (cc         (5,882

Change in fair value of warrant liabilities

    —         (3,608               (3,608

 

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Table of Contents
    For the
year ended
December 31,
2020
    For
the period
September 24,
2020
(inception)
through
December 31,
2020
    For the
year ended
December 31,
2020
                            For the year
ended
December 31,
2020
 
    Old Beachbody
(Historical)
    Forest Road
(Historical)
    Myx
(Historical)
    Transaction
Accounting
Adjustments
(Note 3—RR)
          Transaction
Accounting
Adjustments
(Note 3—PPA)
          Pro Forma
Combined
 

Loss on sale of private placement warrants

      (2,796               (2,796

Loss from change in fair value of convertible instrument

    —         —         (288         288       (ee     —    

Interest expense

    (527     —         (201         201       (ff     (527
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total other income (expenses)

    139       (7,385     (645     (4,901       2,224         (10,568
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Loss before income taxes

    (6,163     (7,916     (22,757     (7,898       (12,012       (56,746

Income tax provisions (benefit)

    15,269       —         —         (1,975     (dd     (11,400     (gg     1,894  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Net loss

  $ (21,432   $ (7,916   $ (22,757   $ (5,923     $ (612     $ (58,640
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Net loss per share, basic and diluted

  $ (0.35               $ (0.19

Weighted average shares outstanding, basic and diluted

    61,229,753                   304,425,942  

 

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Table of Contents

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

 

1.

Basis of Presentation

The Beachbody Merger was accounted for as a reverse recapitalization in accordance with GAAP, whereby Forest Road was treated as the acquired company and Old Beachbody was treated as the acquirer. Accordingly, for accounting purposes, the Beachbody Merger was treated as the equivalent of Old Beachbody issuing stock for the net assets of Forest Road, accompanied by a recapitalization. The net assets of Forest Road were stated at historical cost, with no goodwill or other intangible assets recorded.

The Myx Merger was treated as a business combination in accordance with GAAP and was accounted for using the acquisition method of accounting. Old Beachbody recorded the estimated fair value of assets acquired and liabilities assumed from Myx. Any excess amounts after allocating the estimated consideration to identifiable tangible and intangible assets acquired and liabilities assumed were recorded as goodwill.

The unaudited pro forma condensed combined balance sheet as of March 31, 2021 gives pro forma effect to the Business Combination and related transactions as if they had been consummated on March 31, 2021. The unaudited pro forma condensed combined statements of operations for the three months ended March 31, 2021 and year ended December 31, 2020 give pro forma effect to the Business Combination and related transactions as if it had been consummated on January 1, 2020.

The unaudited pro forma condensed combined balance sheet as of March 31, 2021 has been prepared using, and should be read in conjunction with, the following:

 

   

Old Beachbody’s unaudited consolidated balance sheet as of March 31, 2021 and the related notes included in Amendment No. 5 to the Registration Statement on Form S-4 (File No. 333-253136);

 

   

Forest Road’s unaudited balance sheet as of March 31, 2021 and the related notes included in Amendment No. 5 to the Registration Statement on Form S-4 (File No. 333-253136); and

 

   

Myx’s unaudited balance sheet as of March 31, 2021 and the related notes included in Amendment No. 5 to the Registration Statement on Form S-4 (File No. 333-253136).

The unaudited pro forma condensed combined statement of operations for the three months ended March 31, 2021 has been prepared using, and should be read in conjunction with, the following:

 

   

Old Beachbody’s unaudited condensed consolidated statement of operations for the three months ended March 31, 2021 and the related notes included in Amendment No. 5 to the Registration Statement on Form S-4 (File No. 333-253136);

 

   

Forest Road’s unaudited statement of operations for the three months ended March 31, 2021 and the related notes included in Amendment No. 5 to the Registration Statement on Form S-4 (File No. 333-253136); and

 

   

Myx’s unaudited statement of operations for the three months ended March 31, 2021 and the related notes included in Amendment No. 5 to the Registration Statement on Form S-4 (File No. 333-253136).

The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2020 has been prepared using, and should be read in conjunction with, the following:

 

   

Old Beachbody’s audited consolidated statement of operations for the year ended December 31, 2020 and the related notes included in Amendment No. 5 to the Registration Statement on Form S-4 (File No. 333-253136);

 

   

Forest Road’s audited statement of operations for the period September 24, 2020 (inception) through December 31, 2020 and the related notes included in Amendment No. 5 to the Registration Statement on Form S-4 (File No. 333-253136); and

 

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Table of Contents
   

Myx’s audited statement of operations for the year ended December 31, 2020 and the related notes included in Amendment No. 5 to the Registration Statement on Form S-4 (File No. 333-253136).

Management has made significant estimates and assumptions in its determination of the pro forma adjustments. As the unaudited pro forma condensed combined financial information has been prepared based on these preliminary estimates, the final amounts recorded may differ materially from the information presented.

The unaudited pro forma condensed combined financial information does not give effect to any anticipated synergies, operating efficiencies, tax savings or cost savings that may be associated with the Business Combination. In addition, for businesses acquired by Old Beachbody during the year ended December 31, 2020, the unaudited pro forma condensed combined financial information includes results from such businesses after the acquisitions. Acquisitions during the year ended December 31, 2020 did not meet the significance test thresholds that would have required pro forma presentation, as described in Article 11 of Regulation S-X as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses.”

The pro forma adjustments reflecting the completion of the Business Combination and related transactions are based on currently available information and assumptions and methodologies that management believes are reasonable under the circumstances. The unaudited condensed pro forma adjustments, which are described in the accompanying notes, may be revised as additional information becomes available and is evaluated. Therefore, it is likely that the actual adjustments will differ from the pro forma adjustments and it is possible the difference may be material. Management believes that its assumptions and methodologies provide a reasonable basis for presenting all of the significant effects of the Business Combination and related transactions based on information available to management at the current time and that the pro forma adjustments give appropriate effect to those assumptions and are properly applied in the unaudited pro forma condensed combined financial information.

The unaudited pro forma condensed combined financial information is not necessarily indicative of what the actual results of operations and financial position would have been had the Business Combination and related transactions taken place on the dates indicated, nor are they indicative of the future consolidated results of operations or financial position of the post-combination company. They should be read in conjunction with the historical financial statements and notes thereto of Old Beachbody, Forest Road and Myx.

 

2.

Accounting Policies and Reclassifications

As part of the preparation of these unaudited pro forma condensed combined financial statements, certain reclassifications were made to align Old Beachbody’s, Myx’s and Forest Road’s financial statement presentation. Following the completion of the Business Combination, management will perform a comprehensive review of Old Beachbody’s, Myx’s and Forest Road’s accounting policies. As a result of the review, management may identify differences between the accounting policies of the three entities which, when conformed, could have a material impact on the financial statements of the post-combination company. Based on its initial analysis, management did not identify any differences that would have a material impact on the unaudited pro forma condensed combined financial information.

 

3.

Adjustments to Unaudited Pro Forma Condensed Combined Financial Information

The unaudited pro forma condensed combined financial information has been prepared to illustrate the effect of the Business Combination and related transactions and has been prepared for informational purposes only.

The following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X as amended by the final rule, Release No. 33-10786 “Amendments

 

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Table of Contents

to Financial Disclosures about Acquired and Disposed Businesses.” Release No. 33-10786 replaces the existing pro forma adjustment criteria with simplified requirements to depict the accounting for the transaction (“Transaction Accounting Adjustments”) and the option to present the reasonably estimable synergies and other transaction effects that have occurred or are reasonably expected to occur (“Management’s Adjustments”). The Company has elected not to present Management’s Adjustments and has only presented Transaction Accounting Adjustments in the following unaudited pro forma condensed combined financial information.

The pro forma combined provision for income taxes does not necessarily reflect the amounts that would have resulted had the post-combination company filed consolidated income tax returns during the periods presented.

The pro forma basic and diluted earnings per share amounts presented in the unaudited pro forma condensed combined consolidated statement of operations are based upon the number of the Company’s shares outstanding, assuming the Business Combination and related transactions occurred on January 1, 2020.

Transaction Accounting Adjustments to Unaudited Pro Forma Condensed Combined Balance Sheet

The pro forma adjustments included in the unaudited pro forma condensed combined balance sheet as of March 31, 2021, are as follows:

Reverse Recapitalization Adjustments (Rr)

 

  (a)

Reflects the reclassification of marketable securities held in the trust account that became available following the Business Combination.

 

  (b)

Reflects the settlement of $10.5 million in deferred underwriters’ discount.

 

  (c)

Represents estimated transaction costs incurred related to the Beachbody Merger of approximately $40.1 million, for legal, financial advisory and other professional fees. Of these costs:

 

   

$2.8 million was deferred in prepaid expenses and other current assets and paid by Old Beachbody as of March 31, 2021;

 

   

$3.5 million was deferred in prepaid expenses and other current assets and accrued in accounts payable and accrued expenses by Old Beachbody as of March 31, 2021;

 

   

$2.3 million was accrued by Forest Road in accounts payable and accrued expenses and recognized in expense as of March 31, 2021;

 

   

$37.4 million was reflected as a reduction of cash, which represents the total estimated transaction costs less the amounts previously paid by Old Beachbody;

 

   

$7.1 million were not capitalized as part of the Beachbody Merger and reflected as a decrease in retained earnings. The costs, which include amounts allocated to the public and private placement warrant liabilities assumed as part of the Beachbody Merger, are expensed through retained earnings and included in the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2020 as discussed in Note (RR-cc) below; and

 

   

$30.8 million were capitalized and offset against the proceeds from the Beachbody Merger and the PIPE Placement and reflected as a decrease in additional paid-in capital. This amount represents the total estimated transaction costs less: 1) $2.3 million recognized in expense by Forest Road and reclassified to additional paid-in capital (refer to Note RR—h below); and 2) $7.1 million that were not capitalized as part of the Business Combination and reflected as a decrease in retained earnings.

 

  (d)

Reflects proceeds of $225,000,000 from the issuance and sale of 22,500,000 shares of Class A Common Stock at $10.00 per share in the PIPE Placement pursuant to the Subscription Agreements.

 

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  (e)

Reflects the reclassification of $237.2 million of Class A Common Stock subject to possible redemption to permanent equity.

 

  (f)

Reflects the recapitalization of Old Beachbody equity comprised of 10,068,841 Old Beachbody Series A Preferred Units and 62,263,439 Old Beachbody Common Units into 101,762,614 shares of Class A Common Stock and 141,250,310 shares of Class X Common Stock.

 

  (g)

Reflects the conversion of Class B Common Stock held by the Sponsor into Class A Common Stock.

 

  (h)

Reflects the elimination of Forest Road’s historical accumulated deficit.

 

  (i)

Represents redemptions of 8,383,485 shares of Class A Common Stock for $83.8 million allocated to Class A common stock and additional paid-in capital using par value of $0.0001 per share and at a redemption price of $10.00 per share.

Purchase Price Allocation Adjustments (Ppa)

 

  (a)

Reflects the pro forma adjustment to Old Beachbody’s investment in the instrument between Old Beachbody and Myx to fair value at Closing. The fair value was determined using 1,533,483 shares issued to Old Beachbody equity holders upon conversion of the instrument and a $12.00 share price (as of June 25, 2021). The adjustment was recorded as an increase to Old Beachbody’s investment in the instrument (recorded in Other assets) and a corresponding increase in retained earnings on the unaudited pro forma condensed combined balance sheet. The fair value adjustment recorded through retained earnings is included in the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2020 as discussed in Note (PPA-dd) below.

 

  (b)

The estimated consideration is as follows:

 

Estimated Consideration:

  

Cash consideration(1)

   $ 37,700  

Share consideration(3).

     162,558  

Fair value of Myxinstrument held by Old Beachbody(2)(3)

     18,402  
  

 

 

 

Total estimated consideration

   $ 218,660  
  

 

 

 

 

  (1)

Cash consideration includes the payoff of certain of Myx’s existing debt obligations and accounts payable and accrued expenses, the Myx Preferred Amount, and cash payments paid as consideration for certain Myx Common Units.

  (2)

Fair value of Myx instrument held by Old Beachbody was determined using 1,533,483 shares of Class A common stock issued to Old Beachbody equity holders upon conversion of an instrument between Old Beachbody and Myx, pursuant to which Old Beachbody funded Myx an aggregate $15.0 million subject to certain terms and conditions, including (but not limited to) the right to convert certain of Old Beachbody’s rights under such instrument into equity interests of Myx.

  (3)

Share consideration was determined using a $12.00 share price (as of June 25, 2021).

Under the acquisition method of accounting, the identifiable tangible and intangible assets acquired and liabilities assumed of Myx are recorded at the estimated acquisition date fair values. The pro forma adjustments are preliminary and based on estimates of the fair value and useful lives of the assets acquired and liabilities assumed and have been prepared to illustrate the estimated effect of the Myx Merger. For all assets acquired and liabilities assumed other than identified intangible assets and goodwill, the carrying value was assumed to equal fair value.

The final determination of the estimated fair value of the identifiable tangible and intangible assets acquired and liabilities assumed will be determined when management has completed the detailed valuations and necessary calculations. The final determination could differ materially from the preliminary amounts used in the

 

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pro forma adjustments and may include (1) changes in the fair values and useful lives of intangible assets, (2) changes in the fair value of other assets and liabilities, (3) the related tax impact of any changes made and (4) the related impact to goodwill of any change made. Any potential adjustments made could be material in relation to the preliminary values presented.

Accordingly, the pro forma purchase price allocation is subject to further adjustment as additional information becomes available and as additional analyses and final valuations are completed. There can be no assurances that these additional analyses and final valuations will not result in significant changes to the estimates of fair value set forth below.

The following table sets forth a preliminary allocation of the estimated consideration for the Myx Merger to the identifiable tangible and intangible assets acquired and liabilities assumed based on Myx’s March 31, 2021 balance sheet, with the excess recorded as goodwill:

 

Estimated Goodwill:

  

Cash and cash equivalents

   $ 2,990  

Inventory, net

     13,502  

Prepaid expenses and other current assets

     3,127  

Property and equipment, net

     71  

Intangible assets, net

     79,800  

Other assets

     34  
  

 

 

 

Total assets

     99,524  

Accounts payable and accrued expenses(1)

     12,792  

Deferred revenue

     3,243  

Deferred tax liability

     19,950  

Other liabilities

     11  
  

 

 

 

Total liabilities

     35,996  
  

 

 

 

Net assets acquired(a)

     63,528  
  

 

 

 

Estimated consideration(b)

     218,660  
  

 

 

 

Estimated goodwill(b)—(a)

   $ 155,132  
  

 

 

 

 

  (1)

Represents the carrying value of accounts payable and accrued expenses as of March 31, 2021 less amounts repaid with the proceeds from the cash consideration in the Myx Merger.

In accordance with Accounting Standards Codification (“ASC”) Topic 350, Goodwill and Other Intangible Assets, goodwill will not be amortized, but instead will be tested for impairment at least annually or more frequently if certain indicators are present. In the event management determines that the value of goodwill has become impaired, an accounting charge for the amount of impairment during the quarter in which the determination is made may be recognized. Goodwill recognized is not expected to be deductible for tax purposes.

 

  (c)

The table below indicates the estimated fair value of each of the identifiable intangible assets:

 

     Preliminary
Estimated
Fair Value
     Weighted
Average
Useful Life
(Years)
 

Trade name / Trademark

   $ 41,300        Indefinite  

Developed technology

     13,600        5  

Customer relationships

     21,500        3  

Content library

     3,400        3  
  

 

 

    
   $ 79,800     
  

 

 

    

 

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The fair values of the trade name and trademark intangible assets were determined using an “income approach”, specifically, the relief-from royalty approach, which is a commonly accepted valuation approach. This approach is based on the assumption that in lieu of ownership, a firm would be willing to pay a royalty in order to exploit the related benefits of this asset. Therefore, a portion of Myx’s earnings, equal to the after-tax royalty that would have been paid for the use of the asset, can be attributed to the firm’s ownership. The fair value of the developed technology intangible asset was also determined by the relief-from-royalty approach. The fair values of the customer relationship intangible assets were determined by using an “income approach,” specifically a multi-period excess earnings approach, which is a commonly accepted valuation approach. Under this approach, the net earnings attributable to the asset or liability being measured are isolated using the discounted projected net cash flows. These projected cash flows are isolated from the projected cash flows of the combined asset group over the remaining economic life of the intangible asset or liability being measured. Both the amount and the duration of the cash flows are considered from a market participant perspective. Where appropriate, the net cash flows were adjusted to reflect the potential attrition of existing customers in the future, as existing customers are a “wasting” asset and are expected to decline over time. The fair value of the content library intangible assets were determined using a “cost approach”, which is a commonly accepted valuation approach. This approach uses the concept of replacement cost as an indicator of fair value; specifically, that a prudent investor would pay no more for an asset than the amount to recreate the asset.

 

  (d)

Represents the deferred tax impact associated with the incremental differences in book and tax basis created from the preliminary purchase price allocation resulting from the step up in fair value of intangible assets. Deferred tax amounts determined based on an estimated combined blended statutory tax rate of 25.0%, based on jurisdictions where income has historically been generated. This estimate of deferred income tax liabilities is preliminary and is subject to change based upon a final determination of the fair value of assets acquired and liabilities assumed by jurisdiction.

 

  (e)

Reflects the repayment of Myx’s bank line of credit, due to related party and certain accounts payable and accrued expenses with the proceeds from the cash consideration in the Myx Merger.

 

  (f)

Represents the elimination of Myx’s historical Member’s deficit.

 

  (g)

Represents estimated transaction costs of $3.2 million associated with the Myx Merger, which are expensed as incurred in accordance with GAAP. Of this amount, $0.6 million was accrued and recognized as an expense by Old Beachbody as of March 31, 2021. The cost expensed through retained earnings is included in the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2020 as discussed in Note (PPA-cc) below.

 

  (h)

Represents the reversal of a portion of Old Beachbody’s deferred tax asset valuation allowance as result of the deferred tax liabilities recognized in the Myx Merger. The change in the deferred tax asset valuation allowance recognized through retained earnings is included in the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2020 as discussed in Note (PPA—gg) below.

Transaction Accounting Adjustments to Unaudited Pro Forma Condensed Combined Statements of Operations

The pro forma adjustments included in the unaudited pro forma condensed combined statements of operations for the three months ended March 31, 2021 and year ended December 31, 2020 are as follows:

Reverse Recapitalization Adjustments (Rr)

 

  (aa)

Reflects the amortization of estimated share-based expense associated with stock options granted as part of the Beachbody Merger.

 

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  (bb)

Represents adjustment to eliminate transaction costs expensed by Forest Road during the three months ended March 31, 2021. These costs will be considered equity issuance costs of the post-combination company, and are either capitalized as a reduction of additional paid-in capital or recognized in expense at the Closing. Transaction costs recognized in expense at Closing are reflected as if incurred on January 1, 2020, the date the Business Combination occurred for the purposes of the unaudited pro forma condensed combined statements of operations, and accordingly, have been eliminated from the unaudited pro forma condensed combined statement of operations for the three months ended March 31, 2021.

 

  (cc)

Reflects estimated transaction costs related to the Beachbody Merger, which are not capitalized as part of the Beachbody Merger. These costs are reflected as if incurred on January 1, 2020, the date the Business Combination occurred for the purposes of the unaudited pro forma condensed combined statements of operations. Additionally, the adjustment reflects amounts allocated to the public and private placement warrant liabilities that were assumed as part of the Beachbody Merger. This is a non-recurring item.

 

  (dd)

Reflects the adjustment to income tax expense as a result of the tax impact on the pro forma adjustments at the estimated combined statutory tax rate of 25.0%.

Purchase Price Allocation (PPA)

 

  (aa)

Reflects the amortization expense recorded associated with the intangible assets recognized in the Myx Merger.

 

  (bb)

Represents adjustment to eliminate transaction costs related to the Myx Merger that was recorded by Old Beachbody during the three months ended March 31, 2021. Transaction costs related to the Myx Merger are reflected in Note (PPA—cc) as if incurred on January 1, 2020, the date the Business Combination occurred for the purposes of the unaudited pro forma condensed combined statements of operations.

 

  (cc)

Reflects estimated transaction costs related to the Myx Merger, which are expensed as incurred in accordance with GAAP. These costs, which include approximately $0.6 million previously recognized by Old Beachbody during the three months ended March 31, 2021, are reflected as if incurred on January 1, 2020, the date the Business Combination occurred for the purposes of the unaudited pro forma condensed combined statements of operations. This is a non-recurring item.

 

  (dd)

Reflects the fair value adjustment on the investment held by Old Beachbody in the instrument between Old Beachbody and Myx based on the 1,533,483 shares of Class A common stock issued to Old Beachbody equity holders upon conversion of an instrument into equity interests of Myx in the Myx Merger and a $12.00 share price (as of June 25, 2021). The fair value adjustment is reflected as if incurred on January 1, 2020, the date the Business Combination occurred for the purposes of the unaudited pro forma condensed combined statement of operations. This is a non-recurring item.

 

  (ee)

Reflects the elimination of the loss from change in fair value of convertible instrument, which is assumed to be converted to equity interests in Myx as part of the Myx Merger.

 

  (ff)

Reflects the elimination of interest expense associated with Myx’s bank line of credit and due to related party, which were repaid as part of the Myx Merger.

 

  (gg)

Reflects the adjustment to income tax expense as a result of the tax impact on the pro forma adjustments at the estimated combined statutory tax rate of 25.0% and the non-recurring income tax benefit associated with the partial reversal of the deferred tax asset valuation allowance as a result of the deferred tax liabilities recognized in the Myx Merger.

 

4.

Loss Per Share

Represents the net loss per share calculated using the historical weighted average shares outstanding, and the issuance of additional shares in connection with the Business Combination and related transactions, assuming

 

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the shares were outstanding since January 1, 2020. As the Business Combination is being reflected as if it had occurred at the beginning of the periods presented, the calculation of weighted average shares outstanding for basic and diluted net loss per share assumes that the shares issuable relating to the Business Combination and related transactions have been outstanding for the entire periods presented. Basic and diluted earnings per share are the same for each class of common stock because they are entitled to the same liquidation and dividend rights.

 

     Three Months
Ended
March 31,

2021
    Year Ended
December 31,
2020
 

Pro forma net loss (in thousands)

   $ (56,213   $ (58,606

Pro forma weighted average shares outstanding, basic and diluted

     304,425,942       304,425,942  

Pro forma net loss per share, basic and diluted

   $ (0.18   $ (0.19

Pro forma weighted average shares calculation, basis and diluted

    

Forest Road public stockholders(2)

     21,616,515       21,616,515  

Holders of Forest Road sponsor shares(2)

     3,750,000       3,750,000  

PIPE Investors

     22,500,000       22,500,000  

Legacy Beachbody equity holders(1)(2)

     243,012,924       243,012,924  

Myx equity holders

     13,546,503       13,546,503  
  

 

 

   

 

 

 
     304,425,942       304,425,942  
  

 

 

   

 

 

 

 

(1)

Old Beachbody equity holders includes 1,533,483 shares of Class A Common Stock issued to Old Beachbody equity holders upon conversion of an instrument between Old Beachbody and Myx pursuant to which Old Beachbody funded Myx an aggregate $15.0 million subject to certain terms and conditions, including (but not limited to) the right to convert certain of Old Beachbody’s rights under such instrument into equity interests of Myx.

(2)

The pro forma basic and diluted shares exclude the following because including them would be antidilutive:

 

   

34,588,520 unexercised Old Beachbody stock options

 

   

3,980,392 unexercised Old Beachbody warrants

 

   

15,333,333 unexercised New Beachbody warrants

 

(3)

The pro forma basic and diluted shares of the holders of Forest Road Sponsor shares exclude 3,750,000 shares of Class A Common Stock subject to certain vesting restrictions pursuant to the Sponsor Agreement. These shares are considered contingently issuable shares for which the milestones have not yet been achieved.

 

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BUSINESS

Who We Are

We are a health and wellness platform providing fitness, nutrition and stress-reducing programs to our customers. With over 2.7 million digital subscriptions and 0.4 million nutritional subscriptions, we believe our ability to offer solutions in both the global fitness market and the global nutrition market under one platform positions us a leading holistic health and wellness platform. We have a 22-year track record of creating innovative training, nutrition and stress-reducing programs that have improved the lives of millions of customers. We make fitness entertaining, approachable, effective and convenient, while fostering social connections that encourage customers to live healthier and more fulfilling lives.

We are a results-oriented company at the intersection of wellness, technology and media. We developed one of the original fitness digital streaming platforms with an extensive library of content containing over 80 complete workout programs and over 2,300 streaming workouts. We measure the success of our library by customer engagement indicators including a metric that divides daily active users by monthly active users (“DAU/MAU”) and “streams” by our subscribers over the respective periods. While the measure of a digital stream may vary across companies, we define streams and total streams as the stream of a video for at least 25% of its length during a given period. For the three months ended March 31, 2021, our DAU/MAU was 35%. In 2020 our subscribers’ streams totaled 180 million and during the three months ended March 31, 2021 totaled 56 million. We also measure our success by month over month retention rates of our digital subscribers, which was approximately 96% as of March 31, 2021.

Driven by our commitment to help people achieve their goals and lead healthy, fulfilling lives, we have built or acquired digital platforms to engage with our customers and deliver differentiated experiences, including Beachbody on Demand and Openfit and upon shareholder approval, will acquire Myx. Our digital platforms include an extensive library with high production value and creatively diverse fitness content at a price point as low as $9.99 per month or $99.00 per year. In addition to each platform that has its own unique distribution channels, the content we produce drives a flywheel of new digital and nutritional subscriptions that helps fuel revenue growth.

Our premium nutrition products help make meal planning and healthy weight loss achievable without deprivation or starvation. Simplicity and proven strategies are at the core of what we do and many of our brands, including Shakeology, Beachbody Performance and Ladder, have been clinically designed to help our customers achieve their goals. By leveraging data about our customers, such as which content they are engaging with, we are able to make targeted recommendations that support improved results.

We have also built a social commerce platform that organically increases our customers, inspires participants to achieve their goals and generates cash flow that can be used to accelerate our digital and international businesses. This platform consists hundreds of thousands of micro influencers or Coaches, who help customers maintain their fitness program through positive reinforcement, accountability and an online/offline support community.

Our revenue is primarily generated from the sale of digital subscriptions and nutritional products that are often bundled together. We also generate revenue through connected fitness products with the acquisition of Myx. We believe that this acquisition will help increase future revenue through connected devices and additional digital subscriptions. We also intend to increase revenues through future international expansion and opportunistic acquisitions.

 

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LOGO

Our holistic health and wellness platform has generated significant revenue and subscriber growth since fully transitioning to digital. In the last three years:

 

   

Total revenue was $790.3 million in 2018, $755.8 million in 2019, $863.6 million in 2020 and $226.2 million for the three months ended March 31, 2021

 

   

Net income (loss) was $0.1 million in 2018, $32.3 million in 2019, $(21.4) million in 2020 and $(30.1) million for three months ended March 31, 2021

 

   

Adjusted EBITDA was $68.1 million in 2018, $78.4 million in 2019, $51.5 million in 2020 and $(11.7) million for three months ended March 31, 2021; with 2020 and 2021 results to date reflecting a significant increase in media spend driving subscriber and deferred revenue growth

 

   

Digital subscriptions were 1.5 million at the end of 2018, 1.7 million at the end of 2019, 2.6 million at the end of 2020 and 2.7 million as of March 31, 2021

 

   

Digital subscription month over month retention was 94.1% in 2018, 95.3% in 2019, 95.5% in 2020 and 95.8% for three months ended March 31, 2021

 

   

Nutritional subscriptions were 0.4 million at the end of 2018, 0.3 million at the end of 2019 and 0.4 million at the end of 2020 and as of March 31, 2021

See “Selected Consolidated Financial and Other Data — Non-GAAP Financial Measures” for information regarding our use of Adjusted EBITDA and a reconciliation of net income/loss to Adjusted EBITDA. For a definition of digital subscriptions, nutritional subscriptions and subscriber retention, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Business Model — Key Operational and Business Metrics.”

 

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Our Industry and Opportunity

Overview

We are a global leader in the health, wellness and fitness industry with over 2.7 million digital subscriptions and over 0.4 million nutritional subscriptions as of March 31, 2021. Our total revenue was $790.3 million in 2018, $755.8 million in 2019 and $863.6 million in 2020 and $226.2 million for the three months ended March 31, 2021. We believe our growth has been driven by an increasing awareness on health and wellness by customers, an acceleration of consumer purchases of digital fitness products, increased demand for convenience and streaming services, and a desire to live a healthier life. In 2020, 99% of our revenue was generated in North America and we believe there is a large opportunity to expand internationally where many of these same trends exist.

Industry

We operate within the global health, wellness, and fitness industries, which are comprised of diverse products and offerings such as online/offline fitness solutions, nutritional offerings, mental health products and connected fitness devices. According to the Global Wellness Institute, the total spend on the global wellness industry in 2019 was $4.5 trillion, of which physical activity, healthy eating and nutrition represented over $1.5 trillion in spending. Additionally, according to IHRSA (International Health, Racquet & Sportsclub Association), 183 million and 62 million people had gym memberships globally and in the United States, respectively, in 2019.

Our approach to health, wellness and fitness addresses a massive and largely untapped market by bringing various aspects of well-being together in one place. We have focused our efforts on the technological disruption in the growing global health, wellness, and fitness industry since the launch of the beta version of the Beachbody on Demand digital platform in fourth quarter of 2015. A recent study from The New Consumer suggests that 66% of customers prefer home fitness solutions to gyms, and we believe that we will continue to benefit from this investment in technology and structural shift in the global wellness industry as users continue to transition to digital fitness, nutrition and mindfulness solutions.

By providing cost-effective content, which requires little to no equipment, and, with the acquisition of Myx, a lower cost connected indoor bike, we believe that we will be able to significantly expand the market for fitness engagement. And while the COVID-19 pandemic drove significant subscriber growth, 59% of Americans say they do not plan on renewing their gym membership since the pandemic has helped them find more affordable ways to exercise and live a healthier lifestyle.

Total Addressable Market

According to the Global Wellness Institute, the Total Addressable Market (TAM) is approximately $1.5 trillion and includes the physical activity and healthy eating/weight loss markets. More specifically, 3.7% of the world’s population, or 277 million people, are members of gyms, health clubs and fitness studios and/or participate in structured or independent/at-home fitness activities or classes on a regular basis. Additionally, approximately $700 billion is spent annually on healthy eating, weight loss and nutrition supplements. Given our holistic approach and wide library of health and wellness content, we believe our potential customer is any person who is interested in taking a proactive step forward in improving his or her life through fitness, nutrition, mindfulness or better recovery. With approximately 2.7 million digital subscriptions as of March 31, 2021, we believe we have penetrated approximately 1% of our total addressable global market of 277 million people globally.

Consumer Trends in Our Favor

Increasing Focus on Health and Wellness

The growing awareness of the benefits of exercise, proper nutrition, mindfulness, and recovery is driving increased participation and spend in health, wellness, and fitness. This trend has translated into consistent year-over-year growth of the fitness industry both in the United States and globally over the past two decades, even

 

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during times of economic recession. According to IHRSA, health club industry revenues in the United States grew at a 5.4% annual growth rate over the last ten years. Employers and health insurance companies are also investing in employee well-being by offering incentives for preventative health measures such as exercise. Additionally, recent studies from the NIH suggest that the combination of exercise and a proper diet are more effective than exercise alone. We believe that our holistic solution positions us well relative to companies who are focused on one aspect of health and wellness.

Democratization of Health and Wellness Through More Accessible Digital Solutions

Many consumers have found that digital health and wellness offerings are more convenient or accessible than offline solutions, which has helped accelerate consumer spending. In 2020, according to an LEK consulting study, consumer investment in digital fitness increased by 30%-35%, positioning the sector for faster growth in the future. Many of these customers plan on continuing to use these digital services, even as gyms reopen, and the online fitness market is expected to grow from $6 billion in 2019 to $59 billion by 2027. We believe this increased use of digital services will help democratize health and wellness. At an annual subscription price of $99 a year for Beachbody on Demand, we believe Beachbody is well positioned to continue to be a leading digital health and wellness platform.

Mobile and Streaming Services Provides Anytime, Anywhere Access to Fitness and Nutrition Programs

The quality, quantity and speed of streaming content has significantly changed media consumption patterns. Consumers can select from extensive catalogs of content across video programming, music, and gaming, allowing for personalized, on-demand consumption anywhere, anytime and at a great value. This trend continues to shape the health and fitness industry as app stores have made this content more accessible around the world. As a result, fitness and health related downloads reached 656 million in the second quarter of 2020, up from 446 million in the second quarter of 2019 and we believe we can continue to capitalize on this opportunity.

Demand for Convenience and On-Demand Solutions

Household trends, longer working hours and the rise of mobile technology make it challenging to balance time between family, work and personal health and wellness. According to the Pew Research Center, there has been an increase in dual income families from 49% in 1970 to 66% in 2016. We believe that busy lifestyles, less free time, more people working from home and changing household dynamics are driving demand for more convenient health, wellness, and fitness options.

Desire for Community and Shared Experiences Through Social Platforms

We believe consumers are increasingly spending on experiences and are seeking meaningful community connections, even in a digital world. Community has been a key attribute of transcendent health and wellness brands such as Peloton, Lululemon and Crossfit. Our recent introduction of BODgroups has enabled us to increase our emphasis on community and leverage the power of our Coach network to help people get results and live healthier lives through positive reinforcement, accountability, and an online/offline support network.

Our Competitive Advantages

We attribute our success to the following competitive strengths:

We Provide a Holistic Health and Wellness Solution in a Digital Ecosystem

We provide a holistic health and wellness solution powered by three distinct experiential platforms that seamlessly interact with each other. Beachbody On Demand is a leading digital subscription platform that maintains a comprehensive library of on-demand, highly produced and creatively diverse fitness content, while also providing nutritional programming aimed to make meal planning and healthy weight loss achievable.

 

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Openfit provides a comparable experience, but through a digitally streamed lens, leveraging the power of celebrity, mass social influence, story and live interactivity. Our acquisition of Myx will provide a complementary entrant into connected fitness, offering an indoor cycling experience, while encouraging broader cross training on and off the bike. Together, these platforms can create a community-driven digital ecosystem to increase and retain subscribers as well as increase engagement and will be the driving force behind our commitment to helping people achieve their goals and lead healthy, fulfilling lives.

Best-in-Class Content Creation Capabilities with One of the Largest Digital Fitness Catalogs in the Industry

Our digital libraries currently have access to over 2,300 fitness videos from 84 complete workout programs. Our production of content is one of our key core competencies as we leverage our expertise to attract new mass-market audiences and we have one of the largest digital fitness catalogs in the industry, powered by our best-in-class content creation capabilities. Our content library provides significant opportunities for sustainable growth due to the evergreen nature of our programs. We have world class training and live fitness classes that are accessible anywhere and deliver compelling value to our subscribers. Our disciplined and data-driven approach allows us to create and develop content in-house, utilizing teams to assess subscriber viewership and online and offline trends. We have three in-house studios that allow us to control our production quality and undergo rigorous testing and revisions to create compelling workouts. We also gather and study data and analytics to drive post-launch optimization. Our marketing and merchandising teams work in parallel to create branding opportunities, and also assemble product bundles to drive results and increase revenue.

Large and Growing Digital Subscriber Base Being Accelerated by a Social Commerce Platform and Relationships with Social Influencers and Celebrities

We have a large and growing digital subscriber base across each platform that continues to accelerate, driven by the burgeoning relationships that we have cultivated with our Coaches, social influencers and celebrity network. Coaches help attract and retain customers, while keeping them on track with their fitness and nutrition goals. Our roster of influencers and celebrities, including LeBron James and Arnold Schwarzenegger, helps to increase the visibility of our products and services. Our digital platforms have 2.7 million digital subscriptions as of March 31, 2021, up from nearly 1.5 million in 2018, with over 180 million streamed views in 2020 and 56 million streamed views for the three months ended March 31, 2021. We had a month over month retention of 96% for the three months ended March 31, 2021, with active subscribers averaging 13.6 workouts per month.

Compelling Unit Economics and Ability to Profitably Acquire Customers

We rely on a synergistic combination of direct marketing and social commerce to drive compelling lifetime value to cost of acquisition unit economics across our platforms. Our Coaches attract, motivate and retain customers with our fitness content and nutritional supplements. We believe that as customers get results with our programs, they become evangelists for our total solution. This in turn attracts more customers who form BOD groups on our proprietary social platform and compounds demand for future content releases. We have recently implemented live content that is only available to subscribers, and also have seen reductions in our customer acquisition costs following the launch of Openfit.

Compelling Financial Profile

Our 22-year track record of profitable growth is characterized by efficient customer acquisition, high retention, recurring revenue and rapid digital subscriber growth across our platforms. Our growth is attributable to a highly analytical and agile marketing approach and a social commerce platform, all of which contribute to efficient digital subscriber acquisition. Many of our digital subscribers also signup for nutrition subscriptions, which further contributes to revenue growth. We have a track record of generating strong returns from our marketing investments and believe we can accelerate these to significantly increase our total subscriber base and drive profitable long-term revenue growth. We see a substantial opportunity to increase customers as consumer demands shift to more at-home, digital and on-demand focused health and wellness options.

 

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Mission Focused Founders Surrounded by Ambitious Management Team

Carl Daikeler and Jon Congdon founded Beachbody in 1998 with a bold mission — to help people achieve their goals and lead healthy, fulfilling lives. While the mission has remained consistent, the management team has evolved and strengthened into an ambitious world-class group highly focused on customer engagement. From emotional storytelling and social tools, first with the introduction of customer message board forums, to social media and now our proprietary social platform, we have proven our ability to innovate amidst changing consumer preferences and technological advancements. We continue to curate entrepreneurial, analytical and experienced management to innovate in product development, stabilize logistics, create new technology, better serve the customer and deliver highly tested and potent supplements. We remain as relentlessly focused on results as we were at inception.

Growth Opportunities

We believe there are several attractive opportunities to continue to drive long-term growth:

Integration of MYX into Our Connected Fitness Ecosystem

We plan to maximize the potential of MYX by leveraging our subscriber base, social commerce platform, marketing experience and content creation capabilities. The combined ecosystem will create a holistic at-home fitness and wellness experience with a connected device that delivers premium and diverse content at a compelling price point. MYX equipment will represent the foundation of our connected fitness offering and enable us to offer a holistic on-/off-bike approach to our customers. We will continue working with our Coaches and social influencers to highlight the benefits of our products and rapidly expand sales across our existing and new customer base.

Launch New Products and Expand Content Offering

We continually innovate to deliver new workouts, wellness programs and nutritional supplements to help our customers experience results. We have a proven track record of catering to changing customer preferences over our 22-year history. We are agile and work quickly to integrate feedback from our customers to stay up to date with new fitness trends. We use this real time data to create content to engage existing and new customers and leverage analytics to optimize products and drive engagement through multiple customer touchpoints. Total workouts streamed grew from 89 million in 2018, to over 104 million in 2019, 180 million in 2020, and 56 million for the three months ended March 31, 2021, demonstrating the engagement of our subscriber base.

Investment in Data and Marketing Technologies to Drive Subscription Growth

We believe we can increase our rate of subscriber growth and retention with new content offerings and an increased investment in media. We are constantly learning from our customers, Coaches, and influencers and can leverage this data in content creation and developing products that enhance customer lifetime value. We intend to continue increasing brand awareness and productivity of our social commerce channel. Our business model, working with third parties for logistics and supply chain, allows us to efficiently allocate capital, preserving valuable resources for customer acquisition and content creation.

International Expansion

We believe there is significant opportunity for both Openfit and Beachbody to grow internationally, particularly with the addition of the MYX bike. We currently distribute products in the United States, Canada, the United Kingdom and France with plans for expansion to Mexico in 2021 and Germany in 2022. We will continue to pursue disciplined international expansion by targeting developed countries where fitness and nutrition needs can be well-served with an in-home total solution at an affordable price.

 

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Opportunistic Mergers and Acquisitions to Expand Our Offering and Leverage Our Platform

Our platform and ecosystem are well positioned to leverage our capabilities and growing subscriber base to offer new health, wellness and fitness options. We will continue to seek out capabilities that are accretive to our existing content base and can help us attract new customers, focusing on health and wellness with new innovations. We will benefit as a public company from further platform recognition and access to capital to help facilitate these transactions.

Our Product Offerings and Economic Model

Digital Subscriptions

Our digital subscriptions include Beachbody on Demand (BOD), launched in beta version in the fourth quarter of 2015, and Openfit, launched in 2019. The subscriptions are renewed on a monthly, quarterly, and annual basis and include unlimited access to an extensive library of live and on-demand fitness and nutrition content.

Our digital platforms provide a one stop shop for all types of fitness and nutrition content, with world famous brands such as P90X, Insanity, 21 Day Fix, 80 Day Obsession, Morning Melt-Down 100 and LIIFT4. The BOD platform gives users access to comprehensive, highly produced, and creatively diverse fitness content with dynamic trainers. We had over 2.7 million digital subscribers as of March 31, 2021, who have access to over 2,300 fitness, nutrition, mindfulness and recovery videos that can be accessed anywhere. BOD content is available on the web as well as iOS, Android, Roku and AppleTV.

Leveraging the power of celebrity, mass social influence, story and live interactivity, Openfit is a digital streaming platform for people who want to make the commitment to change their fitness and nutrition habits for the long term with the gratification of aligning that commitment with celebrities and influencers they admire and love to watch. Celebrity-influence is combined with live small group training supervised by a team of certified trainers offering real time feedback, motivation and professional instruction. Complemented by the acquisition of Ladder, which originally formulated its products to the specifications of founders LeBron James and Arnold Schwarzenegger, Openfit provides an original and exciting digital fitness and wellness resource. Openfit content can be streamed via iOS, Android, FireTV, Chromecast, Roku and AppleTV.

Digital subscriptions also help generate sales of our nutritional products, which are often sold together as bundles.

Nutritional Products

Our nutritional products include Shakeology, Beachbody Performance supplements and BEACHBARs. As part of our mission to be a total health and wellness solution for our consumers, our nutritional products are formulated and manufactured to high quality standards and complement our fitness and device offerings. Our research and development team rigorously assesses and develops new nutritional products that are in line with these goals, satisfies customer demand, and increases subscriptions and lifetime revenue. Shakeology, our premium nutrition shake, is clinically shown to help reduce cravings and promote healthy weight loss and formulated to help support healthy digestion and provide healthy energy with its proprietary formula of superfoods, phytonutrients, enzymes, fiber and protein, with no artificial sweeteners, flavors, colors or preservatives.

Beachbody Performance supplements include our pre-workout Energize, post-workout Recover and overnight recovery supplement Recharge, to reduce soreness and prepare the body for the next day’s workout. These products were created to meet a different need than Shakeology, which is a once-a-day premium nutrition shake that helps supplement a healthy diet.

 

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BEACHBARs are low sugar, protein bars available in three flavors made with ingredients to help satisfy cravings without undermining our customers’ fitness and weight loss goals. We continue to research and develop additional nutritional products, and currently provide a variety of other nutritional supplements including collagen, fiber and greens “boosts.”

Connected Fitness Products

Our digital subscription offerings will be complemented by our entrance into connected fitness through the Myx acquisition. Our connected fitness products will include both Myx Fitness offerings launched in 2020: the MYX bike, a connected-stationary-bike with heart rate monitor, and MYX Plus, which includes the connected bike and heart rate monitor along with ancillary workout equipment such as a dumbbell, a kettlebell, resistance bands, a bike mat, an oversized exercise mat and a foam roller, creating an all-in-one home gym offering. The MYX bike is equipped with a unique swivel touch screen that enables users to engage with content beyond the indoor cycling experience and encourages broader cross-training, incorporating resistance training and yoga for a more holistic fitness experience and healthier results.

We believe that Myx’s focus on a holistic approach to fitness is the perfect fit for the Beachbody ecosystem, and together with Beachbody’s digital subscription offerings and nutritional products, will bring together a comprehensive in-home solution that provides personalization, live coaching, celebrity rides, nutritional supplements and healthy meal-planning.

We intend to provide Beachbody and Openfit content through the Myx Fitness touch screen. The content presented on the swivel touch screen will depend on the sales channel through which it was purchased, Beachbody or Openfit. We expect to sell the MYX/Openfit/Ladder offering to customers via our direct-to-consumer channel, retail and our current Openfit subscribers, and plan to offer the Beachbody content and supplements together with the MYX bike through BOD subscribers and Coaches.

The MYX bike is manufactured using commercial-grade equipment and includes a 21.5” 360-degree swivel screen. In the United States, the standard package sells for $1,299 and includes a Polar heart rate monitor with free delivery and set up. The MYX Plus package sells for $1,499. With approximately 27,500 bikes sold, MYX has been recognized as a leading brand in connected fitness by CNET, PC Magazine, USA Today, WIRED and Health.

Our Value Proposition

Our holistic approach to health and wellness provides the consumer with tools to succeed at a lower cost than most traditional gyms or fitness studios and nutrition/weight loss plans.

Our business model is characterized by developing compelling fitness and nutrition programs that are designed to provide the subscriber with results. This in turn attracts additional customers who see those results on social media. These consumers then become advocates for the company, which helps attract and retain new and existing consumers. This “virtuous cycle” of content, customer success, and new customer acquisition drives subscriber growth and recurring revenue opportunities.

Our monthly connected fitness subscription at an average price of $29.00 is less expensive than most monthly gym memberships, a fraction of the price of a personal training session, and less than the cost of one individual connected fitness class at a boutique studio. Boutique studio fitness classes typically cost between $25.00 and $45.00 per person per class and follow a strict schedule whereas our monthly connected fitness subscription covers the household and offers unlimited use, anytime, anywhere. Our on-demand library feature classes, spanning 5 to 60 minutes, provide our customers with flexibility and convenience.

 

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Myx offers attractive 0% APR financing programs, which allow qualified customers to pay in monthly installments of as low as $37 for 36 months for a MYX bike. These financing programs have successfully broadened the base of customers by attracting consumers from a wider spectrum of ages and income levels.

Our nutritional products come in varying sizes and prices and are often bundled with digital content offerings. One of our most popular packages is the BOD and Shakeology Challenge pack, which is priced at $160 and comes with a one-month supply of Shakeology and an annual BOD membership.

Our Economic Model

Our Beachbody offerings provide access to our marketplace of Coaches, which are people who have signed up to use Beachbody’s products and organize groups on our proprietary social platform, BODgroups. On this platform, Coaches earn a share of the revenue generated by promoting our products and helping our customers succeed. They also earn additional bonuses for expanding this social network by building teams of Coaches. This marketplace, called Team Beachbody, is made up of hundreds of thousands of Coaches who get early access to each new program and receive a 25% discount on their purchases or a 25% commission on orders they generate through their efforts.

We also sell our digital subscription products, nutritional products and connected fitness products direct to consumer through our Beachbody and Openfit platforms. On Openfit, many of our influencers receive a commission on digital subscriptions or nutritional products that they help sell, however there is no commission paid on any subscriptions that are not sold through the social channels of these influencers.

Competition

We operate in the competitive and highly fragmented health and wellness market in which, given the holistic nature of our business, we face significant competition from multiple industry segments. Within fitness, we face significant competition from providers of at-home fitness solutions, connected fitness equipment and content, on-demand fitness offerings and health and wellness apps. We also face competition from weight management, dietary and nutritional supplement providers, and are sensitive to the introduction of new products or weight management plans, including various prescription drugs.

We are also subject to significant competition in attracting Coaches from other social commerce platforms, including those that market fitness solutions, weight management products and dietary and nutritional supplements. Our ability to remain competitive depends on our success in delivering results for our customers, maintaining our community, retaining Coaches through attractive compensation plans, and continuing to offer a vast content library as well as an attractive product portfolio.

Our competitors may develop, or have already developed, products, features, content, services, or technologies that are similar to ours or that achieve greater acceptance, may undertake more successful product development efforts, create more compelling marketing campaigns, or may adopt more aggressive pricing policies. Our competitors may develop or acquire, or have already developed or acquired, intellectual property rights that significantly limit or prevent our ability to compete effectively in the public marketplace. In addition, our competitors may have significantly greater resources than us, allowing them to identify and capitalize more efficiently upon opportunities in new markets and consumer preferences and trends, quickly transition and adapt their products and services, devote greater resources to marketing and advertising, or be better positioned to withstand substantial price competition. If we are not able to compete effectively against our competitors, they may acquire and engage customers or generate revenue at the expense of our efforts, which could have an adverse effect on our business, financial condition, and operating results.

 

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Manufacturing

We rely on contract manufacturers to manufacture our nutritional products and Myx relies on contract manufacturers to manufacture its bikes and related equipment. The Myx contract manufacturers can schedule and purchase supplies independently or from our suppliers, according to contractual parameters. Nutritional ingredients are sourced according to our specifications from our approved suppliers. Outsourcing allows us to operate an asset-light business model and focus our efforts on innovation, sales and marketing. Our contract manufacturers are regularly audited by third parties and in the case of nutritionals they are audited by our Quality Assurance department, and comply with our rigorous Quality Assurance Protocols (QAPs) and specifications as well as follow industry good manufacturing practices (GMPs) and food safety guidelines. We believe our contract manufacturers have the capacity to meet our current and near-term supply needs. We monitor capacity and performance of our manufacturing partners and will qualify alternate suppliers as needed. We receive finished products from our contract manufacturers, which includes all packaging and ingredients used, as well as an agreed-upon charge for each item produced.

To mitigate against the risks related to a single source of supply, we qualify alternative suppliers and manufacturers when possible, and develop contingency plans for responding to disruptions, including maintaining adequate inventory of products.

Storage and Distribution

We outsource the storage and distribution of finished goods to third party logistics companies, with facilities geographically dispersed to help optimize shipping times to our customer base. In North America, our Beachbody products are currently distributed from Groveport, Ohio and shipped to US-based customers principally through FedEx, Smartpost or UPS and to our Canadian customers through a third-party specialty shipper. In Europe, our Beachbody products are distributed from Daventry, UK to customers via a European transport provider. We primarily distribute our products directly to consumers from our distribution centers, typically via Fedex. Usual delivery time is approximately five to seven days.

Myx outsources the storage and distribution of products through a third-party logistics provider, via separate distributions centers in California, New Jersey and Illinois, covering the entire United States.

Utilizing multiple partners from multiple locations enhances our geographic reach and allows us to further scale our distribution system and maintain flexibility, while reducing order fulfillment time and shipping costs, and expand our geographical reach. With our commitment to our customers-first approach, we will continue to invest to strengthen our operations’ coverage in locations we identify as strategic and cost-effective delivery markets throughout the United States, Canada and in new international regions.

Culture and People

Mission and Values

Like our brand, product and content offerings, our culture is dynamic, unique, and framed by our expansive vision and passion for community and collaboration. For our people, the purpose and function of our culture is clear, and operates as a shared language of values and as a way of getting things done that permeates through the many areas in which we operate as a company. Our culture is shaped by our Core Purpose: to help people achieve their goals and lead healthy, fulfilling lives. Our Core Purpose informs what we do, the products we develop, the people we hire and the business decisions we make, which helps us collaborate and interact with candor, passion and heart.

In furthering our Core Purpose, we employ the following business tenants, among others, in the way we operate:

 

   

Customers First: We have a customer-centered mindset that prioritizes a positive product and brand experience. We are proud to be innovators of a global, product-oriented, fitness-centered community.

 

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Constantly Moving Forward: We value innovation, continuous improvement, and challenging the status quo, all of which are keys to success in a competitive environment. We move quickly, take smart risks and learn from failures. We never let the fear of imperfection stop us from achieving great things.

 

   

Team Members: We hire individuals who are great at what they do and encourage all our team members to think openly and creatively to solve tough, exciting problems. We empower our team members to think and act like owners.

 

   

Diversity of Perspective: We know the importance and value of a team. We know our collective differences make us stronger and uphold the obligation to dissent and listen. We value inclusivity and we are proud that everyone can work to help solve difficult problems and have an impact.

Our Culture

To foster these values, we have committed to promote a culture that is informally professional. We are relaxed, comfortable and diverse, an inclusive group comprised of bright and talented people who are highly skilled and collaborative.

We offer generous benefits and compensation packages, such as parental leave, health and wellness offerings, product discounts, life insurance, and learning and development opportunities.

We are committed to equal pay, respecting all people and all beliefs, and creating a positive social impact.

Employees

We are extremely proud of our team which embodies a diverse mix of backgrounds, industries, and levels of experience. As of May 3, 2021 we employed 908 individuals across our Santa Monica, California headquarters, as well as our El Segundo, California, New York City, New York, Provo, Utah and Harpenden, United Kingdom locations.

Facilities

Our corporate headquarters are located in Santa Monica, California, where we occupy facilities totaling approximately 133,000 rentable square feet under a lease that expires in 2025. We use these facilities primarily for technology, product design, research and development, sales and marketing, supply chain and logistics, finance, legal, human resources, and information technology. We also have office space in El Segundo, California, Provo, Utah and Harpenden, United Kingdom, where we occupy approximately 53,000 aggregate rentable square feet under various leases that expire over the next 4 years.

In addition to our corporate headquarters and regional locations, we currently operate a production facility of approximately 19,400 square feet in Van Nuys, California where we produce our content. We intend to procure additional space as we add employees and expand geographically. We believe that our facilities are adequate to meet our needs for the immediate future and that suitable additional space will be available to accommodate any expansion of our operations as needed.

Intellectual Property

We believe our success, competitive advantages, and growth prospects depend in part upon our ability to develop and protect our technology and intellectual property rights. We rely upon a combination of patents, trademarks, trade secrets, copyrights, confidentiality agreements, contractual commitments and other legal rights to establish and protect our brands and intellectual property rights throughout the world. For example, we register and monitor third party trademarks worldwide and we have developed a robust enforcement program to protect our brands/trademarks, domains, copyrights to protect our intellectual property rights on various platforms including

 

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the web, borders/customs, and social channels to protect our brands, videos, DVDs and DVD kits, clothing, which have been and continue to be counterfeited. We have over 2,600 registered trademarks, 167 registered copyrights and eight patents (including five patents pending).

To minimize intellectual property infringement and counterfeiting, our team monitors domains, websites, eCommerce sites, social channels, distributors and other third parties through a third party platform that monitors eBay, Mercado Libre, YouTube, Vimeo, Instagram, Gumtree, Kijiji, Mercari and other platforms and sites in the

U.S. and worldwide to identify third parties who purport to sell our products including DVDs and videos. Additionally, we enter into agreements with our commercial partners, supply-chain vendors, employees and consultants to control access to, and clarify ownership of, our intellectual property and proprietary information.

Government Regulation

We are subject to many varying laws and regulations in the United States, Canada, the United Kingdom, the European Union and throughout the world, including those related to data privacy, data protection, data breach notification, content regulation, foods and dietary supplements, imports and exports, intellectual property, consumer protection, e-commerce, multi-level marketing, advertising, messaging, rights of publicity, health and safety, employment and labor, product liability, accessibility, competition, and taxation. These laws often require companies to implement specific information security controls to protect certain types of information, such as personal data, “special categories of personal data” or health data. While we strive to comply and remain compliant with each of these laws and regulations, they are constantly evolving and may be interpreted, applied, created, or amended in a manner that could require a change to our current compliance footprint, or harm our current or future business and operations. In addition, it is possible that certain governments may seek to block or limit our products and services or otherwise impose other restrictions that may affect the accessibility or usability of any or all of our products and services for an extended period of time or indefinitely.

With respect to data privacy and protection laws and regulations, in the European Union, the General Data Protection Regulation, or the GDPR, became effective in 2018. The GDPR is intended to create a single legal framework for privacy rights that applies across all EU member states, including France, which is currently the only country in the EU in which we operate. The GDPR created more stringent operational requirements for controllers and processors of personal data, including, for example, requiring enhanced disclosures to data subjects about how personal data is processed (including information about the profiling of individuals and automated individual decision-making), limiting retention periods of personal data, requiring mandatory data breach notification, and requiring additional policies and procedures to comply with the accountability principle under the GDPR. Similarly, other jurisdictions are instituting privacy and data security laws, rules, and regulations, which could increase our risk and compliance costs. As a result of Brexit, for example, we will need to continue compliance with the UK Data Protection Act of 2018 for privacy rights across the United Kingdom, the legal requirements of which largely follow the GDPR.

We are also subject to laws, rules, and regulations regarding cross-border transfers of personal data, including laws relating to the transfer of personal data outside the European Economic Area, or EEA, and the United Kingdom. We rely on transfer mechanisms permitted under these laws, including the standard contract clauses and intracompany data transfer agreements, which mechanisms have been subject to regulatory and judicial scrutiny. If these existing mechanisms for transferring personal data from the EEA, the United Kingdom, or other jurisdictions are unavailable, we may be unable to transfer personal data of employees or customers in those regions to the United States.

In addition to European data privacy rules, we are subject to privacy laws in the U.S. and Canada, the most comprehensive and strictest of which is the California Consumer Privacy Act, or CCPA. The CCPA requires us to provide clear notice to consumers about what data is collected about them, honor requests to opt-out of the sale of their personal data, and comply with certain requests related to their personal data, such as the right to access or delete their personal data. We will also be subject to the new California Privacy Rights Act (or, CPRA) which will take effect on January 1, 2023. The CPRA expands California’s consumer privacy law and builds upon the CCPA.

 

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Additionally, along with our contract manufacturers, distributors and ingredients and packaging suppliers, we are subject to laws and regulations related to our food and nutritional products. In the United States, the federal agencies governing the manufacture, distribution and advertising of our products include, among others, the Federal Trade Commission, the Food and Drug Administration, the United States Department of Agriculture, or USDA, the U.S. Environmental Protection Agency and similar state and local agencies. Under various statutes, these agencies, among other things, prescribe the requirements and establish the standards for labeling, manufacturing, quality, and safety and regulate marketing and advertising to consumers. Certain of these agencies, in certain circumstances, must not only enforce regulations that apply to our food and nutritional products, but also review the manufacturing processes and facilities used to produce these products to ensure compliance with applicable regulations in the United States.

We are also subject to laws and regulations regarding automatically renewing subscriber products and services as well as the status and determination of independent contractor status for our distributors, affiliates and influencers. Any changes in the laws, regulations or interpretations of these laws, or increased enforcement of such laws and/or regulations, could adversely affect our ability to retain customers, promote sales, and harm our financial condition and operating performance.

Legal Proceedings

From time to time, we may become involved in actions, claims, suits and other legal proceedings arising in the ordinary course of our business, including assertions by third parties relating to personal injuries sustained using our products and services, intellectual property infringement, breaches of contract or warranties or employment-related matters. We are not currently a party to any actions, claims, suits or other legal proceedings the outcome of which, if determined adversely to us, would individually or in the aggregate have a material adverse effect on our business, financial condition and results of operations.

 

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF BEACHBODY

The following table shows selected historical financial information of Beachbody for the periods and as of the dates indicated.

The selected historical financial information of Beachbody as of December 31, 2020 and 2019, and for the years ended December 31, 2020, 2019 and 2018 was derived from the audited historical consolidated financial statements of Beachbody included elsewhere in this prospectus. The selected historical financial information of Beachbody for the three months ended March 31, 2021 and 2020 and the condensed consolidated balance sheet as of March 31, 2021 are derived from Beachbody’s unaudited interim condensed consolidated financial statements included elsewhere in this prospectus. In Beachbody management’s opinion, the unaudited interim condensed consolidated financial statements include all adjustments necessary to fairly state Beachbody’s financial position as of March 31, 2021 and the results of operations for the three months ended March 31, 2021 and 2020. As explained elsewhere in this prospectus, the financial information contained in this section relates to Beachbody, prior to and without giving pro forma effect to the impact of the Business Combination and, as a result, the results reflected in this section may not be indicative of the results of Beachbody going forward. See the section entitled “Unaudited Pro Forma Condensed Combined Financial Information” included elsewhere in this prospectus

 

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The following selected historical financial information should be read together with the consolidated financial statements and accompanying notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Beachbody” appearing elsewhere in this prospectus. The selected historical financial information in this section is not intended to replace Beachbody’s consolidated financial statements and the related notes. Beachbody’s historical results are not necessarily indicative of Beachbody’s future results.

 

     Three Months Ended March 31,     Year Ended December 31,  
Statement of Operations Data    2021     2020     2020     2019     2018  
     (amounts in thousands, except units and per unit amounts)  

Revenue:

          

Digital

   $ 95,150     $ 62,525     $ 334,804     $ 250,764     $ 210,726  

Nutrition and other

     131,069       106,811       528,778       505,015       579,563  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue

     226,219       169,336       863,582       755,779       790,289  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cost of revenue:

          

Digital

     11,122       8,372       38,285       33,595       27,308  

Nutrition and other

     56,995       40,475       211,422       176,724       201,607  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total cost of revenue

     68,117       48,847       249,707       210,319       228,915  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     158,102       120,489       613,875       545,460       561,374  

Operating expenses:

          

Selling and marketing

     144,696       94,226       464,000       384,376       401,141  

Enterprise technology and development

     27,089       21,333       93,036       84,132       91,189  

General and administrative

     17,946       15,184       64,818       56,899       63,096  

Restructuring

     —         —         (1,677     1,171       6,555  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     189,731       130,743       620,177       526,578       561,981  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

     (31,629     (10,254     (6,302     18,882       (607

Interest expense

     (123     (95     (527     (790     (268

Other income, net

     1,299       408       666       813       991  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

     (30,454     (9,941     (6,163     18,905       116  

Income tax benefit (provision)

     395       1,613       (15,269     13,390       —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (30,059   $ (8,328   $ (21,432   $ 32,295     $ 116  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Distribution and cumulative preferred return to Redeemable convertible preferred unit members

     —         —         —         (349     (21,752
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income available to common unit members (loss)

   $ (30,059   $ (8,328   $ (21,432   $ 31,946     $ (21,636
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per common unit, basic

   $ (0.48   $ (0.14   $ (0.35   $ 0.53     $ (0.36

Net income (loss) per common unit, diluted

   $ (0.48   $ (0.14   $ (0.35   $ 0.45     $ (0.36

Weighted-average common units outstanding, basic

     62,263,439       60,813,902       61,229,753       60,252,139       59,798,835  

Weighted average common units outstanding, diluted

     62,263,439       60,813,902       61,229,753       72,108,820       59,798,835  

 

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     As of March 31,      As of December 31,  
     2021      2020      2019  

Balance Sheet Data

        

Total assets

   $ 371,310      $ 356,253      $ 291,111  

Total liabilities

     299,437        256,995        203,709  

Total mezzanine equity

     98,110        98,110        98,245  

Total members’ equity

     (26,237      1,148        (10,843

Key Performance Indicators

Beachbody reports the following financial and operational key performance indicators, which are used by management to assess its performance:

Adjusted EBITDA. Beachbody defines and calculates Adjusted EBITDA as net income (loss) before the impact of interest income or expense, income tax (benefit) expense and depreciation and amortization, as further adjusted for the following items: equity-based compensation, transaction-related costs, restructuring and related costs and certain other non-core items. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Beachbody—Non-GAAP Information” for important information about the limitations of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income (loss), the most directly comparable financial measure calculated in accordance with U.S. GAAP.

Digital Subscriptions. Digital subscriptions include Beachbody On Demand, Nutrition+, and Openfit subscriptions. Digital subscriptions include paid and free-to-pay subscriptions. Free to pay subscriptions, on average, represent less than 3% of total digital subscriptions. Digital subscriptions are inclusive of all billing plans, currently for annual, semi-annual, quarterly and monthly billing intervals.

Nutritional Subscriptions. Beachbody packages and synthesizes the content experience of digital subscriptions with nutritional subscriptions that work together. Beachbody Nutritional Subscriptions are monthly subscriptions to nutritional products such as, Shakeology, Beachbody Performance, BEACHBAR, Bevvy and Collagen.

Average Digital Retention. Beachbody uses month over month digital subscription retention to measure the retention of its digital subscriptions. Beachbody defines digital subscription retention as the average rate in which a subscription renews for a new billing cycle.

Daily Active Users to Monthly Active Users (DAU/MAU). Beachbody uses the ratio of daily active users to monthly active users to understand how frequently digital customers are utilizing its service in a given month. Beachbody defines a daily active user as a unique user streaming content on its platform in a given day. Beachbody defines monthly active user in this ratio as a unique user streaming content on its platform in that same month.

Average Monthly Streams per Average Active User. Beachbody uses average monthly streams per average active user to measure engagement, which is the leading indicator of retention for its digital subscribers. While the measure of a digital stream may vary across companies, Beachbody defines streams and total streams as the stream of a video for at least 25% of its length during a given period. Beachbody defines active user as a unique user streaming a program in a given period. Beachbody defines average monthly streams per active user as the total streams in the month divided by the average active users in the month.

The following table presents Beachbody’s key performance indicators for the periods indicated:

 

     As of March 31,      As of December 31,  
     2020      2019      2020      2019      2018  

Digital Subscriptions (millions)

     2.7        1.9        2.6        1.7        1.5  

Nutritional Subscriptions (millions)

     0.4        0.4        0.4        0.3        0.4  

 

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     Three Months
Ended March 31,
    For The Year Ended December 31,  
         2020             2019             2020             2019             2018      

Average Digital Retention

     95.8     94.8     95.5     95.3     94.1

Total Streams (millions)

     56       33       180       104       89  

DAU/MAU

     35.1     30.0     31.6     29.2     28.5

Adjusted EBITDA (millions)(1)

   $ (11.7   $ 2.7     $ 51.5     $ 78.4     $ 68.1  

 

(1)

Adjusted EBITDA is a non-GAAP financial measure. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Beachbody—Non-GAAP Information” for the definition of and additional information about Adjusted EBITDA and reconciliation to net income (loss), the most directly comparable U.S. GAAP financial measure.

For important information about how Beachbody uses Digital Subscriptions, Nutritional Subscriptions, Average Digital Retention, Average Monthly Streams per Average Active User and Total Streams, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Beachbody.”

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF BEACHBODY

The following discussion and analysis of the financial condition and results of operations of Beachbody should be read together with our unaudited condensed interim consolidated financial statements as of March 31, 2021 and for the three months ended March 31, 2021 and 2020, and our audited consolidated financial statements as of December 31, 2020 and 2019 and for the years ended December 31, 2020, 2019 and 2018, in each case together with related notes thereto, included elsewhere in this prospectus. The discussion and analysis should also be read together with the section entitled “Business of Beachbody” and our pro forma financial information as of and for the three months ended March 31, 2021. See “Unaudited Pro Forma Condensed Combined Financial Information.” The following discussion contains forward-looking statements. Our actual results may differ significantly from those projected in the forward-looking statements. Factors that might cause future results to differ materially from those projected in the forward-looking statements include, but are not limited to, those discussed in the sections entitled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements.” For the purposes of this section, “we,” “us,” “our,” “the Company” and “Beachbody” refers to The Beachbody Company, Inc, a Delaware Corporation.

Overview of Our Business and History

Beachbody was founded in 1998 by Carl Daikeler and Jon Congdon with the mission of helping people achieve their goals and lead healthy, fulfilling lives. Headquartered in Santa Monica, CA, our comprehensive approach combines world-class fitness, nutrition and support to help people completely transform their lives— physically, mentally and financially.

We are the creator of some of the world’s most popular fitness programs, including P90X®, Insanity® and 21 Day Fix®, which transformed the in-home fitness market and disrupted the global fitness industry by making it accessible for people to get results—anytime, anywhere. We have also developed comprehensive nutrition-first programs, the Ultimate Portion Fix® and 2B Mindset®, which teach healthy eating habits and promote healthy, sustainable weight loss. All fitness and nutrition programs are available through our Beachbody On Demand ® streaming service. In addition, we offer nutritionals such as Shakeology® nutrition shakes and BEACHBAR® snack bars.

In 2019, we acquired Gixo and launched the Openfit platform, an all-in-one digital platform for fitness, nutrition and wellness. The Openfit platform provides certified trainer-led live group fitness experiences, a library of on-demand fitness programs, personalized nutritional plans, and virtual access to NASM (National Academy of Sports Medicine) certified trainers.

In 2020, we further expanded the Openfit platform with the acquisition of Ladder, the sports nutrition company founded by LeBron James and Arnold Schwarzenegger. With our shared commitment for a holistic approach to health and wellness, the Ladder brand and its performance supplements are now integrated into the Openfit platform and its supplement offerings.

Our goal is to continue to provide leading holistic health and wellness platforms. Leveraging our history of fitness content creation and our network of micro-influencers, whom we call Coaches, we have been successful in identifying market trends and expanding our market share. With our 2021 expansion into connected fitness, through the integration of Myx’s professional grade bike, tablet, connected fitness software, weights, and accessories, we plan to leverage our distribution, marketing and content creation capabilities to reach a wider health, wellness and fitness audience.

The health, wellness and fitness industry is undergoing a fundamental transition and we believe we are well positioned to capture additional market share as we operate at the center of three mega-trends: (1) digital content, (2) connected fitness and (3) consumer health & wellness.

 

   

Digital content: Digital is now a way of life. Our daily lives revolve around screens and content, and we are democratizing fitness content for everyone.

 

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Connected fitness: Now that more consumers are spending more time at-home, they want fitness solutions that are accessible and fit into their busy schedules. With the planned acquisition of Myx, we are capitalizing on the connected fitness trends.

 

   

Consumer health & wellness: More people than ever are focused on their health & wellness, and we believe this trend will continue well into the future. With a branded line of premium nutrition products, we believe Beachbody and Ladder’s premium supplements are differentiated in the marketplace and have an opportunity to increase market share.

 

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Key milestones in our growth history include:

 

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Historically, our revenue has primarily been generated through a network of micro-influencers, social media marketing channels and direct response advertising. Components of revenue include recurring digital subscription revenue and revenue from the sale of nutritional and other products. In addition to selling individual products on a one-time basis, we also bundle products together at discounted prices, which offers customers the greatest opportunity to achieve their health and wellness goals for the total solution – “fitness and nutrition”. It is this bundled approach to marketing, and the successful launch of our Beachbody On Demand platform in 2015 that allowed us to have insight into customer usage patterns, improve customer retention and drive lifetime revenue.

For the three months ended March 31, 2021, as compared to the three months ended March 31, 2020:

 

   

Total revenue was $226.2 million, a 34% increase;

 

   

Digital subscriptions were 2.7 million at period end, a 41% increase;

 

   

Digital revenue was $95.2 million, a 52% increase;

 

   

Nutrition and other revenue was $131.1 million, a 23% increase;

 

   

Net loss was $30.1 million, compared to a net loss of $8.3 million; and

 

   

Adjusted EBITDA was $(11.7) million, compared to $2.7 million.

For the year ended December 31, 2020, as compared to the year ended December 31, 2019:

 

   

Total revenue was $863.6 million, a 14% increase;

 

   

Digital subscriptions were 2.6 million at period end, a 53% increase;

 

   

Digital revenue was $334.8 million, a 34% increase;

 

   

Nutrition and other revenue was $528.8 million, a 5% increase;

 

   

Net loss was $21.4 million, compared to net income of $32.3 million; and

 

   

Adjusted EBITDA was $51.5 million, compared to $78.4 million.

For the year ended December 31, 2019, as compared to the year ended December 31, 2018:

 

   

Total revenue was $755.8 million, a 4% decrease;

 

   

Digital subscriptions were 1.7 million at period end, a 13% increase;

 

   

Digital revenue was $250.8 million, a 19% increase;

 

   

Nutrition and other revenue was $505.0 million, a 13% decrease;

 

   

Net income was $32.3 million, compared to $0.1 million; and

 

   

Adjusted EBITDA was $78.4 million, compared to $68.1 million.

For a definition of digital subscriptions see the section titled “—Key Operational and Business Metrics.”

See the section titled “—Non-GAAP Information” for information regarding our use of Adjusted EBITDA and a reconciliation of net income (loss) to Adjusted EBITDA.

Impact of COVID-19

The novel coronavirus is having a significant impact on most businesses, including Beachbody and Myx. During the year ended December 31, 2020, we saw strong demand for our digital subscriptions as the government ordered closures and restrictions on gyms and as consumers were reluctant to return to gyms as the COVID-19 pandemic continued. We also experienced modestly slower product fulfillment to customers.

 

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The ultimate impact of COVID-19 on our financial and operating results is unknown and will depend on the length of time that these disruptions exist and whether the demand for many of our digital subscriptions continue. COVID-19 has had a significant impact and may continue to have a significant impact, the full extent of which is unknown, but which could be material. Although COVID-19 increased consumer demand for our digital solutions, we believe the structural shift towards wellness and fitness solutions like our platform existed before the impact of COVID-19, and we anticipate that this structural change to the fitness industry will continue after COVID-19.

Beachbody and Myx have business continuity programs in place to ensure that employees are safe and that the businesses continue to function while employees are working remotely. The businesses have been closely monitoring the impact of working from home and the potential strain on internet connectivity but have not seen any adverse impact on the ability of the businesses to function and we have not seen any network connectivity issues that would have an adverse impact on our customers’ ability to access our product offerings.

Our Business Model

Our business model is based on our investments in customer acquisition to accelerate digital subscriber growth along with the bundling of nutritional products that increase customer revenue and drive incremental nutrition subscriptions. We believe this flywheel creates multiple layers of community that drives loyalty, retention and lifetime revenue.

Grow Our Digital Subscriber Base

We launched the beta version of our first digital platform, Beachbody On Demand, in the fourth quarter of 2015, and our second platform, Openfit, in 2019. As of March 31, 2021, we had approximately 2.7 million digital subscriptions, with over 180 million streamed views in 2020 and approximately 56 million streamed view during the three months ended March 31, 2021. We believe our historical success in growing our digital subscription base is due to our network of micro-influencers, or Coaches, who drive sales across their social networks, macro-influencers who drive sales to a broad customer base, our social media community groups that create a peer-to-peer marketplace, data-driven marketing, education-based multi-channel sales efforts and word-of-mouth referrals. In order to continue to grow our digital subscription base, we plan to continue to increase consumer awareness through brand and product marketing, the introduction of new fitness and nutrition content, and geographical expansion.

The acquisition of Myx will enable us to create an exciting connected fitness experience for a broader audience at a compelling price and affordable monthly subscription.

In addition to our digital subscriptions, we often bundle products and nutritional offerings specifically designed to complement fitness programs. We believe that the growth of our digital subscription base creates marketing opportunities to cross sell nutritional products and subscriptions. We package and synthesize the content experience with nutritional subscriptions that work together. This relationship of content expanding the lifestyle change to nutrition is at the core of the Beachbody lifetime value model.

Increase Engagement to Drive High Retention

We provide a holistic approach for customers to achieve their personal fitness and nutrition goals. We continuously improve our platforms to increase usage. We analyze millions of streams per month to help us develop new platform features, as well as create new on-trend fitness and nutrition content. Through the network of micro-influencers, we have developed fitness and nutrition communities that help customers achieve a level of accountability and motivation that optimizes results. Our retention has also increased as subscribers have elected to purchase annual plans instead of monthly or quarterly plans, and we continue to innovate our content and nutritional supplement line.

 

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Engagement is the leading indicator of retention for our digital subscribers and is measured as a percentage of Daily Active Users to Monthly Active Users, known as DAU/MAU. We have consistently seen an increase in our DAU/MAU engagement per digital subscription. Total streams by our digital subscribers have grown significantly. We evaluate engagement on a daily basis given the seasonality in our digital subscribers’ streaming patterns. While the measure of a digital stream may vary across companies, we define streams and total streams as the stream of a video for at least 25% of its length during a given period.

For definitions of digital subscriptions, DAU/MAU, digital retention, and total streams, see the section titled “—Key Operational and Business Metrics.”

 

LOGO

Improve Profitability through Scaling Content Platform

The continued growth of our digital subscriptions will allow us to develop new fitness, nutrition and connected fitness products, which are expected to increase customer lifetime revenue. Additionally, we expect to leverage a significant portion of our content creation costs given the longevity of franchise titles (such as P90X, P90X2, P90X3, P90, P90X One on One), and we will continue to create new and original content given the proprietary knowledge, infrastructure, and talent we have to support our growth.

Our digital subscription gross margin was 88% for the three months ended March 31, 2021, 89% for the year ended December 31, 2020, and 87% in 2019 and 2018. The increase in gross margin from 2019 to the year ended December 31, 2020 was primarily driven by a change in the useful life of content assets from two years to three years based on our assessment of the longevity of the historical viewing and utilization patterns.

Maintain Compelling Unit Economics

Our financial model benefits from high digital subscription retention and high digital subscription and nutrition product margin. We offset sales and marketing investments with the gross margin earned, allowing for a defined payback. Thereafter, we seek to earn recurring, high-margin subscription revenue.

 

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As we expand into connected fitness digital subscribers with the acquisition of Myx, develop new interactive platform features, increase our community of subscribers and transition more subscribers to annual plans, we believe we can maintain a high retention rate. In addition, with the growth of our connected fitness base over time, we expect to leverage Beachbody’s existing content creation capabilities to scale our fixed content production costs.

The Business Combination

Under the terms of the Merger Agreement, at the Closing, upon the terms and subject to the conditions of the Merger Agreement, in accordance with the DGCL and the DLLCA, (x) Beachbody Merger Sub was merged with and into Beachbody, following which the separate existence of Beachbody Merger Sub ceased and Beachbody continued as the surviving entity (the “Surviving Beachbody Entity”) and as a wholly- owned subsidiary of Forest Road, and all the property, rights, privileges, agreements, powers and franchises, debts, liabilities, duties and obligations of Beachbody Merger Sub and Beachbody became the property, rights, privileges, agreements, powers and franchises, debts, liabilities, duties and obligations of the Surviving Beachbody Entity (the “Beachbody Merger”); (y) Myx Merger Sub was merged with and into Myx, following which the separate existence of Myx Merger Sub ceased and Myx continued as the surviving entity (the “Surviving Myx Entity”) and as a wholly-owned subsidiary of Forest Road, and all the property, rights, privileges, agreements, powers and franchises, debts, liabilities, duties and obligations of Myx Merger Sub and Myx became the property, rights, privileges, agreements, powers and franchises, debts, liabilities, duties and obligations of the Surviving Myx Entity (the “Myx Merger”); and (z) immediately following the consummation of the Beachbody Merger, the Surviving Beachbody Entity was merged with and into Forest Road, following which the separate existence of the Surviving Beachbody Entity ceased and Forest Road continues as the surviving entity, and all the property, rights, privileges, agreements, powers and franchises, debts, liabilities, duties and obligations of the Surviving Beachbody Entity and Forest Road became the property, rights, privileges, agreements, powers and franchises, debts, liabilities, duties and obligations of the Company (the “Forest Road Merger”, and together with the Beachbody Merger and the Myx Merger, the “Mergers”); (ii) as a result of the Mergers, among other things, all outstanding equity interests of Beachbody and Myx were cancelled in exchange for the right to receive, in the aggregate, a number of shares of common stock (or, in the case of outstanding Beachbody options, options to purchase shares of common stock) in the Company that is approximately equal to the quotient obtained by dividing (x) $2,900,000,000 by (y) $10.00, provided, however, that (1) certain Beachbody equityholders received common stock in the Company with similar rights as those being issued to all other recipients of merger consideration, except that such common stock will carry 10 votes per share; (2) certain Myx equityholders were entitled to receive, in lieu of their pro rata portion (based on their percentage ownership interests in Myx) of such shares, an amount in cash equal to the value of such shares, up to an aggregate amount of cash among all such equityholders not to exceed the result of $37.7 million minus certain payments to be made by Forest Road; and (3) the foregoing consideration is subject to adjustment (x) in the case of the Beachbody equity interests, based on the transaction expenses of Beachbody and Forest Road, and (y) in the case of each of the Beachbody equity interests and the Myx equity interests, based on the Closing Date and the related number of Myx units issuable to Beachbody, LLC, a Delaware limited liability company (“BB”) and wholly-owned subsidiary of Beachbody, upon conversion of instruments between Myx and BB, dated December 7, 2020 and March 4, 2021, pursuant to which BB funded Myx an aggregate of $15 million subject to certain terms and conditions, including (but not limited to) the right to convert, upon certain conditions, certain of BB’s rights under such instrument into equity interests of Myx; and (iii) upon the effective time of the Forest Road Merger (the “Effective Time”), the Company was renamed “The Beachbody Company, Inc.”, as described more fully in the section entitled “The Business Combination Proposal.” We refer to these transactions as the “Business Combination.”

We are the accounting acquirer of Myx and have preliminarily allocated the estimated purchase price of approximately $187.3 million (based on Forest Road’s share price as of May 24, 2021 of $9.92) to Myx’s assets and liabilities in the pro forma balance sheet included elsewhere in this prospectus. This would result in, among other adjustments, pro forma increases of approximately $62.6 million in intangible assets and $142.0 million in goodwill, compared to Beachbody’s balance sheet as of March 31, 2021. The fair value measurement period for the

 

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Myx Acquisition will remain open upon the consummation of the Business Combination while we await further information and analyses to determine the acquisition date fair values of certain acquired assets and assumed liabilities. Additionally, we expect to incur one-time integration costs. We also plan to integrate Myx’s platform, services, assets and know-how with our operations over time, which we expect to result in substantial synergies and provide us with important competitive advantages. Expected synergies include expansion of Myx’s connected fitness content library, integration of corporate management and shared service functions and processes. Consequently, the future results we report for the combined business may not be comparable to Beachbody’s or Myx’s historical financial statements or the pro forma financial information included elsewhere in this prospectus.

The Beachbody Company Group, LLC shall be deemed the predecessor of the combined business, and the Company, as the parent company of the combined business, continues as the SEC registrant, meaning that Beachbody’s financial statements for previous periods will be disclosed in the registrant’s future periodic reports filed with the SEC. The Beachbody Merger is accounted for as a reverse recapitalization, with no goodwill or other intangible assets recorded, in accordance with U.S. GAAP. Myx will be treated as an acquired company for financial statement reporting purposes. The Business Combination is expected to have several significant impacts on our future reported financial position and results, as a consequence of reverse capitalization treatment (with respect to Forest Road) and acquisition accounting (with respect to Myx). These include an estimated increase in cash (as compared to our balance sheet at March 31, 2021) of between approximately $255.3 million, assuming maximum shareholder redemptions, and $430.3 million, assuming no shareholder redemptions. These pro forma cash amounts are net of (x) approximately $37.7 million in cash consideration payable to Myx members (including estimated purchase price adjustments pursuant to the Merger Agreement and certain seller transaction costs to be paid by the Company), and (y) total non-recurring transaction costs estimated at approximately $63.5 million (including acquisition-related advisory fees in connection with the Business Combination and deferred underwriting commissions in connection with Forest Road’s initial public offering, but excluding certain seller costs to be paid by the Company). A portion of the transaction costs will be treated as a reduction of equity (i.e., the deferred underwriting commissions and costs pertaining to the reverse recapitalization) and a portion will be expensed in the period in which the Business Combination closes (i.e., merger-related costs). The pro forma cash amounts include cash from (i) Forest Road’s trust account, the amount of which will depend on the level of shareholder redemptions, and (iii) the proceeds from the PIPE of approximately $225,000,000. See “Unaudited Pro Forma Condensed Combined Financial Information.”

Beachbody shall become the successor to an SEC-registered and NYSE-listed company, which will require us to hire additional staff and implement procedures and processes to address public company regulatory requirements and customary practices. We expect to incur additional annual expenses for, among other things, directors’ and officers’ liability insurance, director fees and additional internal and external accounting, legal and administrative resources and fees. Beachbody estimates that these incremental costs will range between approximately $10 million and $15 million per year.

Non-GAAP Information

This prospectus includes Adjusted EBITDA, which is a non-GAAP performance measure that we use to supplement our results presented in accordance with U.S. 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 U.S. 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 depreciation and amortization, amortization of content assets, interest expense, income taxes, 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.

 

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We include this non-GAAP financial measure because it is used by management to evaluate Beachbody’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 U.S. GAAP because they are non-cash (for example, in the case of depreciation and amortization, equity-based compensation) or are not related to our underlying business performance (for example, in the case of interest income and expense).

The table below presents our Adjusted EBITDA reconciled to our net income (loss), the closest U.S. GAAP measure, for the periods indicated:

 

(in thousands)    Three Months Ended
March 31,
    Year Ended December 31,  
     2021     2020     2020     2019     2018  

Net income (loss)

   $ (30,058   $ (8,328   $ (21,432   $ 32,295     $ 116  

Adjusted for:

          

Depreciation and amortization

     13,726       10,144       44,257       44,659       52,487  

Amortization of capitalized cloud computing implementation costs

     168       —         186       —         —    

Amortization of content development assets

     2,817       1,481       7,485       8,495       6,199  

Interest expense

     123       95       527       790       268  

Income tax provision (benefit)

     (395     (1,613     15,269       (13,390     —    

Equity- based compensation

     2,573       895       5,398       3,580       3,649  

Transaction costs

     633       —         1,467       852       21  

Restructuring (gain) loss

     —         —         (1,677     1,171       6,555  

One-time customer returns adjustment

     —         —         —         705       —    

Non-operating costs (1)

     (1,331     (6     (20     (761     (1,161
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ (11,744   $ 2,668     $ 51,460     $ 78,396     $ 68,134  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
(1)

Non-operating primarily includes interest income and gain on investment in the Myx convertible instrument.

Factors Affecting Our Results

Our financial condition and results of operations have been, and will continue to be, affected by a number of factors, including the following:

Ability to Attract New Digital Subscriptions and Scale Our Platforms

Our long-term growth will depend in part on our continued ability to attract new digital subscriptions through the Beachbody On Demand and Openfit platforms as well as through Myx’s connected fitness offerings. If we cannot attract new digital subscriptions as quickly as we expect, our operating results may be adversely affected. The inability to grow our digital subscriptions would reduce efficiency in customer acquisition costs and slow growth.

Ability to Engage and Retain Our Existing Subscriptions

Our long-term growth will partially depend on our continued ability to retain existing subscriptions, both digital and for our nutritional products. Engagement is the leading indicator of retention for our digital subscribers, and we must continue to provide an experience that our subscribers enjoy. Product quality is key for retention of our nutritional customers. We cannot be sure that we will be successful in retaining subscriptions, or that retention levels will not materially decline due to any number of factors, such as harm to our brand, or our inability to anticipate and meet consumer preferences and successfully implement new platform features and content to meet those demands.

 

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Ability to Invest

We will continue to make investments across our business to drive growth, and therefore we expect expenses to increase. We will continue to invest significant resources in selling and marketing to drive subscriber growth and demand for our products. We will also continue to invest to enhance our platforms, develop new nutritional products and platform features, and update and expand our content offering. As cost of revenue, operating expenses, and capital expenditures increase as we invest in our business for long-term growth, we are likely to experience losses, delaying our ability to achieve profitability and adversely affecting cash flows.

Ability to Grow in New Geographies

Entering new geographic markets requires us to invest in selling and marketing, technology, and personnel, including by establishing additional offices, and potentially smaller local production studios. Our international growth will depend on our ability to sell digital subscriptions and associated nutritional products in international markets. Our international expansion has resulted in, and will continue to result in, increased costs and is subject to a variety of risks, including local competition, content localization, multilingual customer support, potentially complex delivery logistics, and compliance with foreign laws and regulations.

Seasonality

Historically, our revenue generally correlates with the popularity and timing of our fitness program launches. For example, in 2018, our revenue was highest in the second quarter, while in 2019, our revenue was highest in the first quarter, and in 2020, our revenue was highest in the third quarter. Each of these quarters featured a program launch. We have historically incurred higher selling and marketing expenses during these periods, which may continue.

Key Operational and Business Metrics

In addition to the measures presented in our consolidated financial statements, 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 March 31,     As of December 31,  
     2021     2020     2020     2019     2018  

Digital Subscriptions (millions)

     2.7       1.9       2.6       1.7       1.5  

Nutritional Subscriptions (millions)

     0.4       0.4       0.4       0.3       0.4  
     Three Months Ended
March 31,
    Year Ended December 31,  
     2021     2020     2020     2019     2018  

Average Digital Retention

     95.8     94.8     95.5     95.3     94.1

Total Streams (millions)

     56.0       33.2       179.6       104.0       89.0  

DAU/MAU

     35.1     30.0     31.6     29.2     28.5

Revenue (millions)

   $ 226.2     $ 169.3     $ 863.6     $ 755.8     $ 790.3  

Gross profit (millions)

   $ 158.1     $ 120.5     $ 613.9     $ 545.5     $ 561.4  

Gross margin

     70     71     71     72     71

Net income (loss) (millions)

   $ (30.1   $ (8.3   $ (21.4   $ 32.3     $ 0.1  

Adjusted EBITDA (millions) (1)

   $ (11.7   $ 2.7     $ 51.5     $ 78.4     $ 68.1  

 

(1)

Please see the section titled “—Non-GAAP Information” for a reconciliation of net income (loss) to Adjusted EBITDA and an explanation for why we consider Adjusted EBITDA to be a helpful metric for investors.

 

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Digital Subscriptions

Our ability to expand the number of digital subscriptions is an indicator of our market penetration and growth. Digital subscriptions include Beachbody On Demand, Nutrition+, and Openfit subscriptions. Digital subscriptions include paid and free-to-pay subscriptions. Free-to-pay subscriptions, on average, represent less than 3% of total digital subscriptions. Digital subscriptions are inclusive of all billing plans, currently for annual, semi-annual, quarterly and monthly billing intervals.

Nutritional Subscriptions

We package and synthesize the content experience of digital subscriptions with nutritional subscriptions that work together.

Nutritional Subscriptions are monthly subscriptions to nutritional products such as, Shakeology, Beachbody Performance, BEACHBAR, Bevvy and Collagen.

Average Digital Retention

We use month over month digital subscription retention to measure the retention of our digital subscriptions. We define digital subscription retention as the average rate in which a subscription renews for a new billing cycle.

Total Streams

We measure streams and total streams to quantify the number of fitness or nutrition programs viewed per subscription which is a leading indicator of customer engagement and retention. While the measure of a digital stream may vary across companies, to qualify as a stream on either our Beachbody on Demand or Openfit 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.

Components of our Operating Results and Results of Operations

We have historically operated and managed our business in two operating segments, Beachbody and Other. For financial reporting purposes, we have one reportable segment, Beachbody. We identified the reportable segment based on the information used by management to monitor performance and make operating decisions. See Notes 1 and 22 of the notes to our consolidated financial statements included elsewhere in this prospectus for additional information regarding our reportable segment. We will describe our results and operations on a consolidated basis as the Other, non-reportable operating segment is not material to the understanding of our business taken as a whole. With the planned acquisition of Myx, we expect decisions regarding the allocation of resources and the

 

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assessment of operating performance may be based on realigned reportable segments. The following discussion of results of operations are based on our reportable segment for the periods presented.

 

(in thousands)    Three Months Ended
March 31,
    Year Ended December 31,  
     2021     2020     2020     2019     2018  

Revenue:

          

Digital

   $ 95,150     $ 62,525     $ 334,804     $ 250,764     $ 210,726  

Nutrition and other

     131,069       106,811       528,778       505,015       579,563  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue

     226,219       169,336       863,582       755,779       790,289  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cost of revenue:

          

Digital

     11,122       8,372       38,285       33,595       27,308  

Nutrition and other

     56,995       40,475       211,422       176,724       201,607  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total cost of revenue

     68,117       48,847       249,707       210,319       228,915  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     158,102       120,489       613,875       545,460       561,374  

Operating expenses:

          

Selling and marketing

     144,696       94,226       464,000       384,376       401,141  

Enterprise technology and development

     27,089       21,333       93,036       84,132       91,189  

General and administrative

     17,946       15,184       64,818       56,899       63,096  

Restructuring

     —         —         (1,677     1,171       6,555  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     189,731       130,743       620,177       526,578       561,981  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

     (31,629     (10,254     (6,302     18,882       (607

Interest expense

     (123     (95     (527     (790     (268

Other income, net

     1,299       408       666       813       991  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

     (30,453     (9,941     (6,163     18,905       116  

Income tax benefit (provision)

     395       1,613       (15,269     13,390       —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (30,058   $ (8,328   $ (21,432   $ 32,295     $ 116  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Revenue

Revenue includes digital subscriptions, nutritional supplement subscriptions, one-time nutritional sales, and other fitness-related products. Subscription revenue is recognized ratably over the subscription period (up to 12 months). We often sell bundled products that combine Beachbody On Demand, Shakeology and/or other fitness and nutritional programs. 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.

 

     Three Months Ended
March 31,
     2020 to 2021  
     2021      2020      $ Change      %
Change
 
     (dollars in thousands)                

Revenue

           

Digital

   $ 95,150      $ 62,525      $ 32,625        52

Nutrition and other

     131,069        106,811        24,258        23