BEACHBODY COMPANY, INC. Management report and analysis of the financial situation and operating results. (Form 10-Q)

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

Forward-looking statements

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

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

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

our expected growth rate and market opportunities;

our liquidity and ability to raise funds;

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

our warrants are accounted for as liabilities and changes in the value of these warrants could materially affect our financial results;

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

our ability to successfully acquire and integrate new operations;

our dependence on a few key products;

market conditions and global and economic factors beyond our control;

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

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

other risks and uncertainties discussed in this report under the heading “Risk Factors”.

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

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

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Insight

Beachbody is a leading subscription health and wellness company. We focus
primarily on digital content, supplements, connected fitness, and consumer
health and wellness. Our goal is to continue to provide holistic health and
wellness content and subscription-based solutions. We are the creator of some of
the world's most popular fitness programs, including P90X, Insanity, and 21 Day
Fix, which transformed the at-home fitness market and disrupted the global
fitness industry by making it accessible for people to get results-anytime,
anywhere. Our comprehensive nutrition-first programs, Portion Fix and 2B
Mindset, teach healthy eating habits and promote healthy, sustainable weight
loss. These fitness and nutrition programs are available through our Beachbody
On Demand and Beachbody On Demand Interactive streaming services, and in January
2022, we began the process of consolidating our Openfit streaming fitness
offerings onto a single Beachbody platform.

We offer nutritional products such as Shakeology nutrition shakes, BEACHBAR
snack bars, and Ladder premium supplements as well a professional-grade
stationary cycle with a 360-degree touch screen tablet and connected fitness
software. Leveraging our history of fitness content creation, nutrition
innovation, and our network of micro-influencers, whom we call Coaches, we plan
to continue market penetration into connected fitness to reach a wider health,
wellness and fitness audience.

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

For the three months ended June 30, 2022compared to the three months ended
June 30, 2021:

The total turnover was $179.1 milliona decrease of 20%;

Digital revenues were $78.0 milliona decrease of 17%;

Connected fitness revenue was $10.6 million;

Nutrition and other income were $90.5 milliona decrease of 30%;

The net loss was $41.9 millioncompared to the net loss of $12.4 million; and

Adjusted EBITDA was ($1.5) millioncompared to ($4.4) million.

For the six months ended June 30, 2022compared to the half-year ended June 30, 2021:

The total turnover was $378.1 million a decrease of 16%;

Digital revenues were $159.8 milliona decrease of 16%;

Connected fitness revenue was $30.1 million;

Nutrition and other income were $188.2 milliona decrease of 28%;

The net loss was $115.4 millioncompared to the net loss of $42.5 million; and

Adjusted EBITDA was ($20.6) millioncompared to ($16.1) million.

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

RECENT DEVELOPMENTS

We believe post-pandemic consumer behavior, the general slowdown of the global
economy, and rising prices for consumer products and services have adversely
impacted demand for at-home fitness solutions. These adverse conditions combined
with unprecedented supply chain surcharges and disruptions have contributed to
declines in our gross margins. Given the uncertainty for how long these
macroeconomic factors will continue, we currently anticipate the negative impact
to our gross margins to continue through the remainder of fiscal year 2022. We
plan to mitigate the challenging macroeconomic factor with strategies that we
expect will drive our future success and growth.



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Digital gross margin

We believe our "One Brand" strategy, which will consolidate our streaming
content into a single Beachbody platform and which we expect to be fully
implemented by the middle of the third quarter of 2022, will simplify our
product offerings for customers and lead to an increase in customer acquisition.
We believe that strengthening our Coach network will generate additional digital
revenue from our Coach business management online platform as well as drive
growth in digital and nutritional subscriptions. During the second quarter and
for the remainder of 2022, we began testing new incentives and training programs
for our Coach network to improve Coach recruitment and retention and their
ability to reach more customers.

Nutrition and other gross margins

Our nutritional products are often bundled with digital content offerings, and
we are in the process of developing enhancements to our upsell and cross-sell
capabilities. We are also currently reviewing our nutritional product portfolio
and may reduce our offerings to only those nutritional products that meet our
profitability requirements and/or reflect market demand. This rationalization
strategy could result in future one-time charges to write down the carrying
value of certain nutritional inventory. We also intend to test price increases
to counteract rising supply chain costs.

Connected Fitness Gross Margin

We anticipate that our connected fitness gross margin will remain negative until
we sell through our current inventory on hand. As a result of supply chain
constraints, the costs to manufacture, transport, fulfill, and ship a Beachbody
Bike have led to an unprofitable margin. As the connected fitness market is
highly competitive, we have been limited in our ability to sufficiently increase
pricing to mitigate costs. For the remainder of 2022, we will explore different
strategies such as pricing and bundling to accelerate demand for our current
inventory. Consumer response to these strategies is uncertain, and we may be
required to continue to reduce the carrying value of connected fitness inventory
through the remainder of the year. See "Risk Factors - Risks Related to Our
Business and Industry - 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" in our Annual Report on Form 10-K.

Main operational and commercial indicators

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 June 30,
                                         2022        2021

Digital subscriptions (millions)           2.28       2.72

Nutrition subscriptions (millions) 0.28 0.42



                                                Three months ended June 30,           Six months ended June 30,
                                                 2022                2021              2022                2021

Average digital retention                             95.6 %              94.9 %            95.6 %             95.4 %
Total streams (millions)                              31.0                44.5              69.2              100.4
DAU/MAU                                               30.0 %              31.9 %            31.6 %             33.5 %

Revenue (millions)                           $       179.1       $       223.1     $       378.1       $      449.3
Gross profit (millions)                      $        87.3       $       154.3     $       180.3       $      312.4
Gross margin                                            49 %                69 %              48 %               70 %

Net loss (millions)                          $       (41.9 )     $       (12.4 )   $      (115.4 )     $      (42.5 )
Adjusted EBITDA (millions)                   $        (1.5 )     $        (4.4 )   $       (20.6 )     $      (16.1 )

Please see the “Non-GAAP Information” section below for a reconciliation of net loss to Adjusted EBITDA and an explanation of why we consider Adjusted EBITDA to be a useful measure 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 BOD, BODi, and
Openfit subscriptions. Digital subscriptions include paid and free-to-pay
subscriptions, with free-to-pay subscriptions representing approximately 1% of
total digital subscriptions on average. Digital subscriptions are inclusive of
all billing plans, currently for annual, semi-annual, quarterly and monthly
billing intervals.

Nutritional subscriptions

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

Average digital retention

We use month-over-month digital subscription retention, which we define as the
average rate at which a subscription renews for a new billing cycle, to measure
customer retention.

Total Streams

We use 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 any of our digital platforms, a program must be viewed
for a minimum of 25% of the total running time.

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

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

Non-GAAP Information

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

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

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

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

                                            Three months ended June 30,            Six months ended June 30,
(in thousands)                               2022                 2021               2022               2021

Net loss                                $      (41,867 )     $      (12,440 )   $     (115,400 )     $  (42,498 )
Adjusted for:
Depreciation and amortization                   19,965               12,215             41,552           25,941
Amortization of capitalized cloud
computing implementation costs                     168                  168                336              336
Amortization of content assets                   7,016                3,302             13,180            6,119
Interest expense                                     3                  305                 22              428
Income tax benefit                                (281 )            (10,857 )             (987 )        (11,252 )
Equity-based compensation                        3,001                2,522              7,565            5,095
Inventory net realizable value
adjustment (1)                                  10,502                    -             25,436                -
Transaction costs                                    -                1,509                  2            2,142
Restructuring and platform
consolidation costs (2)                          2,086                    -              9,973                -
Change in fair value of warrant
liabilities                                     (2,070 )             (5,390 )           (2,334 )         (5,390 )
Other adjustment items (3)                           -                6,038                  -            6,038
Non-operating (4)                                    5               (1,757 )               76           (3,088 )
Adjusted EBITDA                         $       (1,472 )     $       (4,385 )   $      (20,579 )     $  (16,129 )



(1)
Represents a non-cash expense to reduce the carrying value of our connected
fitness inventory and related future commitments. This adjustment is included
because of its unusual magnitude due to disruptions in the connected fitness
market.

(2)

Includes restructuring costs and non-recurring personnel costs related to the consolidation of our digital platforms.

(3)

Incremental costs associated with COVID-19.

(4)

Includes interest income and, in the three and six months ended June 30, 2021also includes the investment gain on the Myx convertible instrument.

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Operating results

We operate and manage 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 Note 16,
Segment Information, to our unaudited condensed consolidated financial
statements included elsewhere in this Report for additional information
regarding our reportable segment. The following discussion of our results and
operations is on a consolidated basis as the Other non-reportable operating
segment is not material to the understanding of our business taken as a whole.

(in thousands)                          Three months ended June 30,            Six months ended June 30,
                                         2022                 2021               2022               2021

Revenue:
Digital                             $       78,015       $       94,325     $      159,760       $   189,475
Connected fitness                           10,605                   10             30,118                10
Nutrition and other                         90,516              128,773            188,180           259,842
Total revenue                              179,136              223,108            378,058           449,327
Cost of revenue:
Digital                                     18,406               11,612             34,831            22,734
Connected fitness                           31,459                  156             76,165               156
Nutrition and other                         42,002               57,002             86,776           113,997
Total cost of revenue                       91,867               68,770            197,772           136,887
Gross profit                                87,269              154,338            180,286           312,440
Operating expenses:
Selling and marketing                       86,624              140,194            193,068           284,890
Enterprise technology and
development                                 24,133               26,949             57,830            54,038
General and administrative                  19,584               17,231             39,657            35,177
Restructuring                                1,332                    -              8,555                 -
Total operating expenses                   131,673              184,374            299,110           374,105
Operating loss                             (44,404 )            (30,036 )         (118,824 )         (61,665 )
Other income (expense)
Change in fair value of warrant
liabilities                                  2,070                5,390              2,334             5,390
Interest expense                                (3 )               (305 )              (22 )            (428 )
Other income, net                              189                1,654                125             2,953
Loss before income taxes                   (42,148 )            (23,297 )  
      (116,387 )         (53,750 )
Income tax benefit                             281               10,857                987            11,252
Net loss                            $      (41,867 )     $      (12,440 )   $     (115,400 )     $   (42,498 )




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Revenue

Revenue includes digital subscriptions, nutritional supplement subscriptions,
one-time nutritional sales, connected fitness products, access to our online
Coach business management platform, preferred customer program memberships, and
other fitness-related products. Digital subscription revenue is recognized
ratably over the subscription period of up to 12 months. We often sell bundled
products that combine digital subscriptions, nutritional products, and/or other
fitness products. We consider these sales to be revenue arrangements with
multiple performance obligations and allocate the transaction price to each
performance obligation based on its relative stand-alone selling price. We defer
revenue when we receive payments in advance of delivery of products or the
performance of services.

                          Three months ended June 30,
                           2022                 2021          $ Change      % Change
                            (dollars in thousands)
Revenue
Digital               $       78,015       $       94,325     $ (16,310 )         (17 %)
Connected fitness             10,605                   10        10,595            NM
Nutrition and other           90,516              128,773       (38,257 )         (30 %)
Total revenue         $      179,136       $      223,108     $ (43,972 )         (20 %)


NM = not meaningful

The decrease in digital revenue for the three months ended June 30, 2022, as
compared to the three months ended June 30, 2021, was primarily due to a $12.6
million decrease in revenue generated from our online Coach business management
platform as a result of fewer Coaches. The decrease in Coaches was primarily
attributable to our preferred customer membership program, which launched at the
end of Q3 2021, as certain Coaches elected to become preferred customers rather
than remain in our Coach network. The change in digital revenue was also due to
a $3.9 million decrease in revenue from our digital streaming services due to
16% fewer subscriptions.

The increase in connected fitness revenue was primarily due to the acquisition
of Myx on June 25, 2021; there was minimal connected fitness revenue for the
three months ended June 30, 2021.

The decrease in nutrition and other revenue for the three months ended June 30,
2022, as compared to the three months ended June 30, 2021, was primarily due to
a $42.4 million decrease in revenue from nutritional products and a $3.1 million
decrease in associated shipping revenue as we ended Q2 2022 with 33% fewer
nutritional subscriptions compared to Q2 2021. These decreases were partially
offset by $8.5 million of revenue associated with our preferred customer
membership program, which launched at the end of Q3 2021.


                        Six months ended June 30,
                          2022               2021        $ Change      % Change
                          (dollars in thousands)
Revenue
Digital               $     159,760       $  189,475     $ (29,715 )         (16 %)
Connected fitness            30,118               10        30,108            NM
Nutrition and other         188,180          259,842       (71,662 )         (28 %)
Total revenue         $     378,058       $  449,327     $ (71,269 )         (16 %)



The decrease in digital revenue for the six months ended June 30, 2022, as
compared to the six months ended June 30, 2021, was primarily due to a $24.4
million decrease in revenue generated from our online Coach business management
platform as a result of fewer Coaches. The decrease in Coaches was primarily
attributable to our preferred customer membership program, which launched at the
end of Q3 2021, as certain Coaches elected to become preferred customers rather
than remain in our Coach network. The change in digital revenue was also due to
a $5.1 million decrease in revenue from our digital streaming services due to
16% fewer subscriptions.

The increase in connected fitness revenue was primarily due to the acquisition
of Myx on June 25, 2021; there was minimal connected fitness revenue for the six
months ended June 30, 2021.

The decrease in nutrition and other revenue for the six months ended June 30,
2022, as compared to the six months ended June 30, 2021, was primarily due to a
$76.3 million decrease in revenue from nutritional products and a $7.6 million
decrease in associated shipping revenue as we ended Q2 2022 with 33% fewer
nutritional subscriptions compared to Q2 2021. These decreases were partially
offset by $17.3 million of revenue associated with our preferred customer
membership program, which launched at the end of Q3 2021, and $2.3 million of
revenue from Coach events, which were not held in 2021 due to the COVID-19
pandemic.


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Cost of Revenue

Digital Cost of Revenue

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

Connected Fitness Revenue Cost

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

Nutrition and other income costs

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

                           Three months ended June 30,
                            2022                 2021          $ Change      % Change
                              (dollars in thousands)
Cost of revenue
Digital                 $      18,406        $      11,612     $   6,794            59 %
Connected fitness              31,459                  156        31,303            NM
Nutrition and other            42,002               57,002       (15,000 )         (26 %)
Total cost of revenue   $      91,867        $      68,770     $  23,097            34 %

Gross profit
Digital                 $      59,609        $      82,713     $ (23,104 )         (28 %)
Connected fitness             (20,854 )               (146 )     (20,708 )          NM
Nutrition and other            48,514               71,771       (23,257 )         (32 %)
Total gross profit      $      87,269        $     154,338     $ (67,069 )         (43 %)

Gross margin
Digital                            76 %                 88 %
Connected fitness                (197 %)                NM
Nutrition and other                54 %                 56 %



The increase in digital cost of revenue for the three months ended June 30,
2022, as compared to the three months ended June 30, 2021, was driven, in part,
by a $3.7 million increase in the amortization of content assets related to BODi
which launched in the fourth quarter of 2021 and content acquired from Myx in
June 2021. The change in digital cost of revenue was also due to $2.4 million
increase in depreciation expense primarily related to a change in useful life of
certain assets in connection with our digital platform consolidation, and a $1.5
million increase in personnel-related expenses as a result of additional
headcount focused on our digital streaming services. These increases were
partially offset by a $0.8 million decrease in intangible assets amortization as
certain assets reached the end of their useful life prior to Q2 2022. The
decrease in digital gross margin for the three months ended June 30, 2022
compared to the three months ended June 30, 2021 was primarily the result of the
higher fixed expenses - content assets amortization, depreciation, and
personnel-related expenses - on lower digital revenue.

The increase in connected fitness cost of revenue was primarily due to the
acquisition of Myx on June 25, 2021; there was no connected fitness cost of
revenue for periods prior to the acquisition. The negative connected fitness
gross margin for the three months ended June 30, 2022 was primarily due to $15.0
million in adjustments for excess and obsolete inventory and to reduce the
carrying value of connected fitness inventory to its net realizable value as
well as high product, freight, fulfillment, and shipping costs due to supply
chain surcharges and constraints and lower pricing in line with a
highly-competitive connected fitness market.


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The decrease in nutrition and other cost of revenue for the three months ended
June 30, 2022, as compared to the three months ended June 30, 2021, was
primarily due to a $13.0 million decrease in product costs, freight, and
shipping expense as the result of the decrease in nutrition and other revenue
and a $2.5 million decrease in customer service as nutrition and other comprises
less of our total revenue. These were partially offset by a $1.2 million
increase in depreciation expense. Despite a favorable impact from the preferred
customer membership program, nutrition and other gross margin decreased
primarily as a result of higher fixed expenses such as depreciation and
personnel-related expenses on lower nutrition and other revenue.


                          Six months ended June 30,
                            2022               2021         $ Change      % Change
                            (dollars in thousands)
Cost of revenue
Digital                 $      34,831        $  22,734     $   12,097            53 %
Connected fitness              76,165              156         76,009            NM
Nutrition and other            86,776          113,997        (27,221 )         (24 %)
Total cost of revenue   $     197,772        $ 136,887     $   60,885            44 %

Gross profit
Digital                 $     124,929        $ 166,741     $  (41,812 )         (25 %)
Connected fitness             (46,047 )           (146 )      (45,901 )          NM
Nutrition and other           101,404          145,845        (44,441 )         (30 %)
Total gross profit      $     180,286        $ 312,440     $ (132,154 )         (42 %)

Gross margin
Digital                            78 %             88 %
Connected fitness                (153 %)            NM
Nutrition and other                54 %             56 %



The increase in digital cost of revenue for the six months ended June 30, 2022,
as compared to the six months ended June 30, 2021, was primarily driven by a
$7.1 million increase in the amortization of content assets related to BODi
which launched in the fourth quarter of 2021 and content acquired from Myx in
June 2021. The change in digital cost of revenue was also due to a $5.6 million
increase in depreciation expense primarily related to a change in useful life of
certain assets in connection with our digital platform consolidation. These
increases were partially offset by a decrease in variable costs of digital
revenue as a result of the decrease in digital revenue. The decrease in digital
gross margin for the six months ended June 30, 2022 compared to the six months
ended June 30, 2021 was primarily the result of higher fixed content assets
amortization and depreciation on lower digital revenue.

The increase in connected fitness cost of revenue was primarily due to the
acquisition of Myx on June 25, 2021; there was no connected fitness cost of
revenue for periods prior to the acquisition. The negative connected fitness
gross margin for the six months ended June 30, 2022 was primarily due to $30.5
million in adjustments for excess and obsolete inventory and to reduce the
carrying value of connected fitness inventory to its net realizable value in
addition to higher product, freight, and shipping costs due to supply chain
surcharges and constraints and lower pricing in line with a highly-competitive
connected fitness market.

The decrease in nutrition and other cost of revenue for the six months ended
June 30, 2022, as compared to the six months ended June 30, 2021, was primarily
due to a $25.1 million decrease in product, freight, fulfillment, and shipping
expense as the result of the decrease in nutrition and other revenue and a $5.0
million decrease in customer service as nutrition and other comprises less of
our total revenue. These were partially offset by a $3.4 million increase in
depreciation expense. Nutrition and other gross margin decreased primarily as a
result of higher fixed depreciation and personnel-related expenses on lower
nutrition and other revenue.


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Operating Expenses

Selling and Marketing

Selling and marketing expenses primarily include the cost of Coach compensation,
advertising, royalties, promotions and events, and third-party sales commissions
as well as the personnel expenses for employees and consultants who support
these areas. Selling and marketing expense as a percentage of total revenue may
fluctuate from period to period based on total revenue, timing of new content
and nutritional product launches, and the timing of our media investments to
build awareness around launch activity.

                                       Three months ended June 30,
                                       2022                 2021            $ Change         % Change
                                         (dollars in thousands)

Selling and marketing              $      86,624       $       140,194     $   (53,570 )             (38 %)
As a percentage of total revenue            48.4 %                62.8 %




The decrease in selling and marketing expense for the three months ended June
30, 2022, as compared to the three months ended June 30, 2021, was primarily due
to a $35.8 million decrease in online and television media expense and a $19.0
million decrease in Coach compensation, which was in line with the decrease in
commissionable revenue. These decreases were partially offset by a $2.8 million
increase in amortization of intangible assets due to the acquisition of Myx in
June 2021.

Selling and marketing expense as a percentage of total revenue decreased by
1,440 basis points primarily due to the decrease in media investments compared
to the three months ended June 30, 2021. We have reduced our media spend as part
of our strategic realignment and in an effort to use our cash in the manner that
has the highest probability of return on investment.


                                      Six months ended June 30,
                                       2022                2021          $ Change         % Change
                                        (dollars in thousands)

Selling and marketing              $     193,068       $    284,890     $   (91,822 )             (32 %)
As a percentage of total revenue            51.1 %             63.4 %




The decrease in selling and marketing expense for the six months ended June 30,
2022, as compared to the six months ended June 30, 2021, was primarily due to a
$65.5 million decrease in television media and online advertising expense and a
$36.2 million decrease in Coach compensation, which was in line with the
decrease in commissionable revenue. These decreases were partially offset by a
$4.8 million increase in personnel-related expenses, a $5.7 million increase in
amortization of intangible assets due to the acquisition of Myx in June 2021,
and a $3.4 million increase in expenses from Coach events.

Selling and marketing expense as a percentage of total revenue decreased by
1,230 basis points primarily due to the decrease in media investments compared
to the six months ended June 30, 2021. We have reduced our media spend as part
of our strategic realignment and in an effort to use our cash in the manner that
has the highest probability of return on investment.

Business technology and development

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

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systems and are involved in research and development of new and existing nutritional products, amortization of company technology assets, software licenses, hosting expenses and technology equipment leases.

                                    Three months ended June 30,
                                     2022                 2021            $ Change         % Change
                                      (dollars in thousands)

Enterprise technology and
development                     $       24,133       $       26,949     $     (2,816 )             (10 %)
As a percentage of total
revenue                                   13.5 %               12.1 %



The decrease in enterprise technology and development expense for the three
months ended June 30, 2022, as compared to the three months ended June 30, 2021,
was primarily due to a $4.9 million decrease in personnel-related expenses
related to lower headcount and the completion of certain technology initiatives
by Q2 2022. This decrease was partially offset by a $2.1 million increase in
depreciation expense.

Enterprise technology and development expense as a percentage of total revenue
increased by 140 basis points due to higher fixed depreciation expense on lower
total revenue.

                                   Six months ended June 30,
                                   2022                2021            $ Change          % Change
                                    (dollars in thousands)

Enterprise technology and
development                    $      57,830       $      54,038     $      3,792                   7 %
As a percentage of total
revenue                                 15.3 %              12.0 %



The increase in enterprise technology and development expense for the six months
ended June 30, 2022, as compared to the six months ended June 30, 2021, was
primarily due to a $2.3 million increase in depreciation expense and a $1.9
million increase in personnel-related expenses related to certain technology
initiatives.

Technology and business development expenses as a percentage of total revenue increased 330 basis points due to higher fixed amortization and personnel costs on lower total revenue.

General and administrative

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

                                       Three months ended June 30,
                                        2022                 2021            $ Change          % Change
                                         (dollars in thousands)

General and administrative         $       19,584       $       17,231     $      2,353                 14 %
As a percentage of total revenue             10.9 %                7.7 %



The increase in general and administrative expense for the three months ended
June 30, 2022, as compared to the three months ended June 30, 2021, was
primarily due to a $3.2 million increase in personnel-related expenses ($2.0
million in incentive compensation and $1.2 million in equity-based compensation)
and a $2.6 million increase in insurance expense and accounting fees as a result
of operating as a public company. These increases were partially offset by a
$1.8 million decrease in rent expense due to our Santa Monica lease

                                       32
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assignment, $1.5 million lower transaction costs as there was no acquisition activity in Q2 2022, and a $0.5 million lower recruitment expenses due to lower headcount in the second quarter of 2022.

General and administrative expenses as a percentage of total revenue increased by 320 basis points due to higher fixed costs on lower total revenue.

                                       Six months ended June 30,
                                       2022                2021            $ Change           % Change
                                        (dollars in thousands)

General and administrative         $      39,657       $      35,177     $       4,480                 13 %
As a percentage of total revenue            10.5 %               7.8 %



The increase in general and administrative expense for the six months ended June
30, 2022, as compared to the six months ended June 30, 2021, was primarily due
to a $5.1 million increase in personnel-related expenses ($2.7 million in
incentive compensation and $2.4 million in equity-based compensation) and a $6.2
million increase in insurance expense and accounting, legal, and other
professional service fees as a result of operating as a public company. These
increases were partially offset by a $3.3 million decrease in rent expense due
to our Santa Monica lease assignment, $2.1 million decrease in transaction costs
as there was no acquisition activity in 2022, and a $1.0 million decrease in
recruiting expenses due to fewer headcount additions in 2022.

General and administrative expenses as a percentage of total revenue increased by 270 basis points due to higher fixed costs on lower total revenue.

Restructuring

Restructuring charges relate to our 2022 strategic alignment initiative to consolidate our streaming fitness and nutrition offerings into one
beach body Platform. Expenses incurred relate mainly to termination costs.

                  Three months ended June 30,
                       2022                2021       $ Change      % Change
                     (dollars in thousands)

Restructuring   $            1,332         $   -     $    1,332           NM



                   Six months ended June 30,
                      2022                2021       $ Change      % Change
                    (dollars in thousands)

Restructuring   $           8,555         $   -     $    8,555           NM


Other Income (Expense)

The change in fair value of warrant liabilities consists of the fair value
changes of the public and private placement warrants. Interest expense primarily
consists of interest expense associated with our borrowings and amortization of
debt issuance costs for our Credit Facility in 2021. Other income, net, consists
of interest income earned on investments and gains (losses) on foreign currency.

                                   Three months ended June 30,
                                    2022                2021            $ Change         % Change
                                     (dollars in thousands)

Change in fair value of
warrant liabilities             $       2,070       $       5,390     $     (3,320 )             (62 %)
Interest expense                           (3 )              (305 )            302               (99 %)
Other income, net                         189               1,654           (1,465 )             (89 %)



The change in fair value of warrant liabilities during the three months ended
June 30, 2022 primarily resulted from a decline in our stock price during the
quarter. The decrease in interest expense was due to no borrowings outstanding
during the three months ended June 30,

                                       33
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2022 compared to $22.0 million during the three months ended June 30, 2021. The
decrease in other income was primarily due to the gain on the investment in the
convertible instrument from Myx prior to June 25, 2021; there was no similar
investment in 2022.


                                  Six months ended June 30,
                                   2022               2021            $ Change         % Change
                                    (dollars in thousands)

Change in fair value of
warrant liabilities            $      2,334       $       5,390     $     (3,056 )             (57 %)
Interest expense                        (22 )              (428 )            406               (95 %)
Other income, net                       125               2,953           (2,828 )             (96 %)



The change in fair value of warrant liabilities during the six months ended June
30, 2022 primarily resulted from a decline in our stock price during 2022. The
decrease in interest expense was due to no borrowings outstanding during the six
months ended June 30, 2022 compared to $42.0 million during the six months ended
June 30, 2021. The decrease in other income was primarily due to the gain on the
investment in the convertible instrument from Myx prior to June 25, 2021; there
was no similar investment in 2022.

Tax benefit

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

                          Three months ended June 30,
                        2022                   2021            $ Change      % Change
                            (dollars in thousands)

Income tax benefit   $       281         $          10,857     $ (10,576 )         (97 %)



The income tax benefit decrease for the three months ended June 30, 2022, as
compared to the three months ended June 30, 2021, was primarily driven by a
reduction in our valuation allowance in Q2 2021. We recorded significant
deferred tax liabilities in connection with the acquisition of Myx, which was a
discrete Q2 2021 event, for which we will not incur future taxable income. This
partially reduced our need for a valuation allowance, resulting in income tax
benefit recorded during the three months ended June 30, 2021; there was no
similar benefit recorded during the three months ended June 30, 2022.

                        Six months ended June 30,
                       2022               2021           $ Change      % Change
                         (dollars in thousands)

Income tax benefit   $     987       $        11,252     $ (10,265 )         (91 %)



The income tax benefit decrease for the six months ended June 30, 2022, as
compared to the six months ended June 30, 2021, was primarily driven by a
reduction in our valuation allowance in Q2 2021. We recorded significant
deferred tax liabilities in connection with the acquisition of Myx, which was a
discrete Q2 2021 event, for which we will not incur future taxable income. This
partially reduced our need for a valuation allowance, resulting in income tax
benefit recorded during the six months ended June 30, 2021; there was no similar
benefit recorded during the six months ended June 30, 2022.


                                       34
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Cash and capital resources

                                              Six months ended June 30,
                                                2022               2021
                                                (dollars in thousands)

Net cash used in operating activities ($33,256) ($25,487)
Net cash used in investing activities

             (19,222 )        (74,480 )
Net cash provided by financing activities           2,660          389,775



From June 30, 2022we had cash and cash equivalents totaling $57.1 million.

Net cash used in operating activities was $33.3 million for the six months ended
June 30, 2022 compared to net cash used in operating activities of $25.5 million
for the six months ended June 30, 2021. The increase in cash used in operating
activities during the six months ended June 30, 2022, compared to the prior year
quarter, was primarily due to the following:

an increase in net loss;

payments for 2021 debts, including connected fitness inventory, freight and duties, and media;

a decrease in subscription revenue received from customers prior to delivery of the service or product; partially offset by

an increase in cash from inventory sold.

We expect to reduce our cash used in operating activities over the next year,
primarily through reduced inventory purchases and investment in media. As of
June 30, 2022, our purchases of bike inventory were substantially completed as
our inventory level is sufficient to meet expected connected fitness demand over
the next year. Also, during the six months ended June 30, 2022, we returned to a
performance marketing model which drives in-quarter or next-quarter payback and
which reduced media spend by approximately $50.2 million compared to the prior
year period.

Net cash used in investing activities was $19.2 million and $74.5 million for
the six months ended June 30, 2022 and 2021, respectively. The decrease in net
cash used in investing activities was primarily due to a $8.0 million decrease
in capital expenditures and $47.3 million for certain investing activities which
occurred during the six months ended June 30, 2021, but not during the six
months ended June 30, 2022. These investing activities include cash paid for the
Myx acquisition, investment in the convertible instrument in Myx, and another
investment. We expect lower capital expenditures in 2022 compared to prior year
due to the completion of significant projects at the end of 2021.

Net cash provided by financing activities was $2.7 million and $389.8 million
for the six months ended June 30, 2022 and 2021, respectively. The decrease in
net cash provided by financing activities was primarily due to the completion of
the Business Combination during the six months ended June 30, 2021; we had no
similar financing during the six months ended June 30, 2022.

We have $45.3 million of lease obligations and purchase commitments associated
with contracts that are enforceable and legally binding and that specify all
significant terms, including fixed or minimum services to be used, fixed,
minimum or variable price provisions, and the approximate timing of the actions
under the contracts. See Note 8, Commitments and Contingencies, for discussion
of our contractual commitments that are primarily due in the next year. Our
future capital requirements may vary materially from those currently planned and
will depend on many factors, including our rate of revenue growth and overall
economic conditions. We continue to assess and efficiently manage our working
capital, and expect to generate additional liquidity through continued cost
control initiatives. We believe that existing cash and cash equivalents and cost
control initiatives will provide the Company with sufficient liquidity to meet
our anticipated cash needs for the next twelve months.

On August 8, 2022 (the "Closing"), we entered into an agreement with a
third-party lender for a $50.0 million senior secured term loan (the "Term
Loan") with a four-year maturity. The Term Loan includes an incremental facility
of up to an additional $25.0 million subject to certain terms and conditions.
The Term Loan was funded at Closing and bears interest at our option of either
(i) the Secured Overnight Financing Rate based upon an interest period of three
months plus 7.15%, or (ii) a reference rate as defined in the agreement, plus
6.15%. In addition, borrowings will bear interest at 3.00%, which will be paid
in kind by capitalizing such interest and adding it to the outstanding
principal, annually. We paid an upfront fee of $1.5 million at Closing and are
required to pay an annual fee of $0.25 million. The Term Loan requires annual
amortization of 2.50% in the first two years and 5.00% in the final two years,
paid quarterly, and certain mandatory repayments as defined in the agreement.
The Term Loan provides customary restrictions, including prepayment premiums,
and requires compliance with certain financial and other covenants.


                                       35
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In connection with the Term Loan, we issued warrants for the purchase of
4,716,756 million shares of the Company's Class A Common Stock at an exercise
price of $1.85 per share. The warrants vest on a monthly basis over four years,
with 30%, 30%, 20% and 20% vesting in the first, second, third and fourth years,
respectively. The warrants have a seven-year term from the date of Closing.

We expect to use the proceeds for general corporate purposes and to pay
transaction fees and expenses related to the Term Loan. We may explore
additional equity or debt financing to supplement our anticipated working
capital balances and further strengthen our financial position, but do not at
this time know which form it will take or what the terms will be. The incurrence
of debt financing would result in debt service obligations and the instruments
governing such debt could provide for operating and financing covenants that
would restrict our operations. The sale of additional equity would result in
additional dilution to our shareholders. There can be no assurances that we will
be able to raise additional capital in amounts or on terms acceptable to us.

Significant Accounting Policies and Estimates

Good will and impairment of intangible assets

Goodwill and intangible assets deemed to have an indefinite life are not
amortized, but instead are assessed for impairment annually at October 1 and
between annual tests if an event or change in circumstances occurs that would
more likely than not reduce the fair value of a reporting unit below its
carrying value or indicate that it is more likely than not that an
indefinite-lived intangible asset is impaired. We carry our definite-lived
intangible assets at cost less accumulated amortization. If an event or change
in circumstances occurs that indicates the carrying value may not be
recoverable, we would evaluate our definite-lived intangible assets for
impairment at that time. Due to the sustained decline in our market
capitalization and macroeconomic factors observed during the three months ended
June 30, 2022, we performed an interim test for impairment of our Beachbody
reporting unit goodwill and tested our definite-lived intangible assets for
recoverability as of June 30, 2022. In performing the interim impairment test
for goodwill we elected to bypass the qualitative assessment and proceed to
performing the quantitative test.

In testing for impairment of our definite-lived intangible assets, we compared
the carrying value of each asset group to its forecasted undiscounted cash flows
to determine whether it was recoverable. The carrying values of each of our
asset groups exceed their future undiscounted cash flows and are therefore
recoverable.

We test goodwill for impairment at a level within the Company referred to as the
reporting unit. We have determined that our reporting units are our operating
segments, Beachbody and Other, because none of the components of either
operating segment constitutes a business for which discrete financial
information is available or has operating results which are regularly reviewed
by segment management. There is no goodwill held by the Other reporting unit.

In testing for goodwill impairment, we compared the carrying value of the
Beachbody reporting unit to its estimated fair value. Fair value was estimated
using a combination of a market approach and an income approach, with
significant assumptions related to guideline company financial multiples used in
the market approach and significant assumptions about revenue growth, long-term
growth rates, and discount rates used in a discounted cash flow model in the
income approach. As of June 30, 2022, the Beachbody reporting unit's fair value
exceeded the carrying value by approximately 60%. We will continue to monitor
changes that would impact the significant assumptions used in the valuation.

Management will continue to monitor its reporting units for changes in the
business environment that could impact their fair value. Examples of events or
circumstances that could result in changes to the underlying key assumptions and
judgments used in our goodwill impairment tests, and ultimately impact the
estimated fair value of our reporting unit may include the duration of the
COVID-19 global pandemic, its impact on the global economy, supply chain
disruptions and demand for at-home fitness solutions; adverse macroeconomic
conditions; volatility in the equity and debt markets which could result in
higher weighted-average cost of capital and our subscriber growth rates. Changes
in any of the assumptions used in the valuation of the reporting unit, or
changes in the business environment could materially affect the expected cash
flows, and such impacts could potentially result in a material non-cash
impairment charge.

Recent accounting pronouncements

See Note 1, Description of Business and Summary of Significant Accounting Policies, in the notes to our unaudited condensed consolidated financial statements included elsewhere in this report for recently adopted accounting pronouncements and recently issued accounting pronouncements not yet issued. adopted.



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