10-Q: Beachbody Reports Q2 2025 Results Amid Pivot

The Beachbody Company, Inc. reported a significant revenue decline in Q2 2025, driven by its strategic transition from a multi-level marketing model to a single-level affiliate model, while reducing net loss and maintaining positive Adjusted EBITDA.

Summary

• Total revenue for the three months ended June 30, 2025, was $63.9 million, a 42% decrease compared to $110.2 million in the prior year period.
• Digital revenue decreased by 32% to $39.7 million, and Nutrition and other revenue decreased by 52% to $24.2 million for the three months ended June 30, 2025.
• Connected fitness revenue was $0.1 million, a 94% decrease, primarily due to the decision to cease bike inventory sales.
• Net loss for the three months ended June 30, 2025, was $5.9 million, an improvement from a net loss of $10.9 million in the prior year period.
• Adjusted EBITDA for the three months ended June 30, 2025, was $4.6 million, a slight decrease from $4.9 million in the prior year period.
• For the six months ended June 30, 2025, total revenue was $136.3 million, a 41% decrease, with a net loss of $11.6 million (compared to $25.1 million in H1 2024) and Adjusted EBITDA of $8.3 million (compared to $9.5 million in H1 2024).
• Digital subscriptions decreased to 0.94 million as of June 30, 2025, from 1.15 million as of June 30, 2024.
• Nutritional subscriptions decreased to 0.07 million as of June 30, 2025, from 0.14 million as of June 30, 2024.
• The company executed a post-Pivot restructuring on June 26, 2025, reducing headcount by approximately 70 employees (22% of the workforce), with expected costs of approximately $2.6 million.
• The company repaid its existing Term Loan of $17.3 million on May 13, 2025, using proceeds from a new $35.0 million asset-based lending (ABL) facility, resulting in a $2.2 million loss on debt extinguishment.

Sentiment

Score: 3

Explanation: The company is undergoing a major business model transition which has led to substantial declines in revenue and subscriptions across all segments. While net loss has improved and debt has been refinanced, the core operational metrics indicate significant contraction. The future success hinges on the effectiveness of the new affiliate model and cost control, which are still in early stages. Ongoing legal proceedings add uncertainty.

Positives

• Net loss significantly reduced for both the three months ($5.9 million vs $10.9 million) and six months ($11.6 million vs $25.1 million) ended June 30, 2025, compared to the prior year periods.
• Maintained positive Adjusted EBITDA of $4.6 million for Q2 2025 and $8.3 million for H1 2025.
• Digital gross margin improved to 87.7% in Q2 2025 from 80.5% in Q2 2024, and to 86.6% in H1 2025 from 79.8% in H1 2024, primarily due to decreased expenses.
• Operating expenses significantly decreased by 41.5% to $50.2 million in Q2 2025 and by 40.8% to $105.4 million in H1 2025, driven by headcount reductions and the Pivot.
• Successful refinancing of the Term Loan with a new ABL Facility, providing approximately $5 million in additional capital and a lower effective interest rate (15.35% for ABL vs 28.00% for Term Loan).
• Average digital retention slightly increased to 96.7% in Q2 2025 from 96.5% in Q2 2024, and to 96.8% in H1 2025 from 96.1% in H1 2024.

Negatives

• Total revenue decreased significantly by 42% in Q2 2025 and 41% in H1 2025 compared to the prior year periods.
• Digital revenue declined by 32% in Q2 2025 and 31% in H1 2025, primarily due to 18% fewer subscriptions.
• Nutrition and other revenue decreased by 52% in Q2 2025 and 50% in H1 2025, driven by 49% fewer nutritional subscriptions.
• Connected fitness revenue nearly ceased, decreasing by 94% in Q2 2025 and 80% in H1 2025, due to the decision to stop bike inventory sales.
• Digital subscriptions decreased from 1.15 million to 0.94 million year-over-year.
• Nutritional subscriptions decreased from 0.14 million to 0.07 million year-over-year.
• Total streams decreased from 22.7 million to 18.0 million in Q2 2025, indicating reduced customer engagement.
• DAU/MAU ratio slightly declined from 31.9% to 31.4% in Q2 2025.
• Nutrition and other gross margin decreased to 51.4% in Q2 2025 from 60.8% in Q2 2024, and to 52.3% in H1 2025 from 60.3% in H1 2024, due to the elimination of preferred customer fees and higher promotional offerings.
• Incurred a $2.2 million loss on debt extinguishment in Q2 2025 related to the repayment of the Term Loan.

Risks

• Uncertainty regarding future financial performance, including revenue, cost of revenue, gross profit, operating expenses, Adjusted EBITDA, and ability to achieve and maintain future profitability.
• Disruptions related to the 'Pivot' business model transition and the ability to successfully implement the proposed restructuring.
• Ability to comply with financial covenants in the new ABL Facility, specifically the Three Month Total Billings Target, Quarterly Digital Subscriptions Target, Capital Expenditures limit ($10 million annually), and minimum Liquidity ($12 million at all times, $13.2 million during a Cure Period).
• Risk of not retaining or recruiting key officers, employees, or directors.
• Changes in the fair value of warrants, which are accounted for as liabilities, could materially affect financial results.
• Intense competition and competitive pressures from other companies in the fitness and nutrition industries.
• Litigation risks, including class action lawsuits related to Partner classification, a 2021 merger, and alleged Video Privacy Protection Act violations.
• Market conditions and global and economic factors beyond the company's control.
• Impact of tariffs and global trade disruptions on the company, its suppliers, and customers.
• Unexpected weakness in product demand may interfere with compliance with financial covenants, potentially leading to debt acceleration.
• Inability to amend the ABL Facility or raise sufficient capital to repay obligations if debt maturity is accelerated.
• Exposure to foreign currency exchange risk, with approximately 8% of H1 2025 revenue in foreign currencies.

Future Outlook

The company expects a significant decrease in Partner compensation in 2025, with no new Partner compensation after November 1, 2024, only amortization of deferred compensation. Event expenses are also expected to be significantly reduced in 2025. Personnel-related expenses and depreciation expense are anticipated to decrease in 2025 due to headcount reductions and the full depreciation of certain long-lived assets impacted by the Pivot. Management believes existing cash and cash equivalents, combined with cost control initiatives, will provide sufficient liquidity for both the next twelve months and the longer term. The company may explore additional debt or equity financing to supplement working capital and strengthen its financial position, though the form and terms are currently unknown.

Management Comments

• "We focus primarily on digital content, supplements, and consumer health and fitness."
• "Our goal is to continue to provide holistic health and fitness content, subscription-based solutions and digital program sales."
• "The prior year periods do not reflect the impact of the Pivot that the Company announced on September 30, 2024, and was executed in the fourth quarter of 2024, so results are not directly comparable with the prior periods."
• "With the Pivot and the transition from the MLM model to an affiliate model the Company expects a significant decrease in Partner compensation in 2025 and does not expect to record any Partner compensation in 2025 other than the amortization of deferred Partner compensation."
• "The Company will significantly reduce the number and length of events for Partners and these event expenses are expected to be reduced significantly in 2025."
• "Management's decision to cease the sale of bike inventory in the first quarter of 2025."
• "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, including debt service requirements, for the next twelve months as well as for the longer-term (i.e., beyond the next twelve months)."

Industry Context

The company is undergoing a significant business model transformation, shifting from a multi-level marketing (MLM) structure to a single-level affiliate model. This strategic 'Pivot' is likely a response to evolving market dynamics within the fitness and nutrition industry, aiming to streamline operations and potentially reduce costs associated with the MLM model. The substantial declines in revenue and subscriptions across all segments suggest a challenging market environment or the inherent difficulties of such a large-scale transition. The decision to cease connected fitness bike sales indicates a strategic shift away from hardware, focusing more on digital content and nutritional products, aligning with broader trends towards digital-first health and wellness solutions.

Legal Proceedings

• Jessica Lyons class action complaint (filed May 22, 2023): Alleges misclassification of Partners as contractors and violations of the California Labor Code. The company and certain executive officers are defendants. 28 arbitration actions have been filed, with 13 settled for nominal fees. The company denies allegations and intends to vigorously defend.
• Bryan Reilly class action complaint (filed June 14, 2024): Alleges breach of fiduciary duty by former directors and officers of Forest Road Acquisition Corp. (now The Beachbody Company, Inc.) in connection with the 2021 merger, citing material misstatements and omissions in the proxy. Claims against the company for aiding and abetting were dismissed without prejudice on December 5, 2024, but the company retains indemnification obligations for certain remaining defendants. A motion to dismiss is pending, with oral argument held on July 1, 2025.
• Milberg Coleman Bryson Phillips Grossman arbitration demands (filed October 14, 2024): 10 arbitration demands filed, representing approximately 6,239 additional subscribers, alleging violations of the Video Privacy Protection Act. Plaintiffs are seeking monetary damages, injunctive, and equitable relief. The company denies allegations and intends to vigorously defend.

Stakeholder Impact

• Shareholders face significant revenue and subscription declines, ongoing net losses, potential future dilution from a capital raise, and risks from ongoing litigation.
• Employees are impacted by headcount reductions, with approximately 70 employees (22% of the workforce) affected by the June 26, 2025 restructuring, following a previous reduction of 170 employees in Q4 2024.
• Customers may experience changes in product access or support due to the transition from an MLM to an affiliate model, and the decline in subscriptions indicates customer churn or reduced new customer acquisition. The cessation of bike sales directly impacts connected fitness customers.
• Partners (micro-influencers) are directly affected by the 'Pivot' business model change, which eliminated Partner compensation on new sales after November 1, 2024, fundamentally altering their compensation structure and relationship with the company.
• Creditors, particularly those under the new ABL facility, are subject to financial covenants that, if breached, could lead to the acceleration of debt maturity.

Next Steps

• Incur remaining costs related to the June 26, 2025 restructuring, primarily in the third quarter of 2025, with charges expected to be substantially completed by September 30, 2025.
• A decision on the motion to dismiss in the Bryan Reilly class action lawsuit is forthcoming after oral argument on July 1, 2025.
• The first principal payment on the new ABL Facility is due on July 1, 2026.
• Evaluate the potential impact of adopting new accounting guidance: ASU 2023-09 (Improvements to Income Tax Disclosures) effective for interim periods beginning after December 15, 2025, and ASU 2024-03 (Disaggregation of Income Statement Expenses) effective for interim periods within fiscal years beginning after December 15, 2027.
• May explore additional debt or equity financing to supplement working capital and strengthen financial position.

Key Dates

Recommendation

The company is in a challenging transition phase with significant revenue and subscriber declines, reflecting the impact of its 'Pivot' from an MLM to an affiliate model. While management has taken steps to reduce costs and refinance debt, the core business metrics are deteriorating. The improved net loss is largely due to cost cutting rather than revenue growth. The ongoing legal proceedings add uncertainty. An investor should 'Hold' to observe if the new affiliate model can stabilize revenue and subscriber trends, and if cost efficiencies can lead to sustained profitability, before considering further investment. The current environment presents too many headwinds for a 'Buy' recommendation, but the strategic shift and cost controls prevent a 'Sell' at this stage.

Keywords

Fitness, Nutrition, Digital Subscriptions, Supplements, Health, Wellness, Streaming, Exercise, Workout, BODi, SEC Filing, 10-Q, Quarterly Report, Financial Results, Debt Refinancing, Restructuring, Affiliate Marketing, Multi-Level Marketing, Class Action, Litigation, Adjusted EBITDA