Beachbody Company, Inc. Income Taxes Disclosure
Note 17. Income Taxes
The components of the Company’s loss before income taxes were as follows (in thousands):
|
|
Year Ended December 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
U.S. |
|
$ |
(4,686 |
) |
|
$ |
(73,752 |
) |
Foreign |
|
|
1,951 |
|
|
|
2,349 |
|
Loss before income taxes |
|
$ |
(2,735 |
) |
|
$ |
(71,403 |
) |
The components of the income tax benefit (provision), net were as follows (in thousands):
|
|
Year Ended December 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Current: |
|
|
|
|
|
|
||
Federal |
|
$ |
— |
|
|
$ |
— |
|
State and local |
|
|
(79 |
) |
|
|
(140 |
) |
Foreign |
|
|
(46 |
) |
|
|
(94 |
) |
|
|
$ |
(125 |
) |
|
$ |
(234 |
) |
Deferred: |
|
|
|
|
|
|
||
Federal |
|
$ |
— |
|
|
$ |
(6 |
) |
State and local |
|
|
— |
|
|
|
1 |
|
Foreign |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
(5 |
) |
Income tax provision, net |
|
$ |
(125 |
) |
|
$ |
(239 |
) |
The Company has continued to record a full VA against its DTAs at December 31, 2025 and 2024.
The provision for income taxes results in effective rates that differ from applicable statutory rates. A reconciliation of the provision for income taxes to the amount computed by applying the 21% statutory federal income tax rate after the adoption of ASU 2023-09 is as follows:
|
|
Year Ended December 31, |
|
|||||||||||||
|
|
2025 |
|
|
2024 |
|
||||||||||
U.S. federal statutory tax rate |
|
$ |
574 |
|
|
|
21.0 |
% |
|
$ |
14,995 |
|
|
|
21.0 |
% |
State and local income taxes, net of federal income tax effect (1) |
|
|
(79 |
) |
|
|
(2.9 |
%) |
|
|
(152 |
) |
|
|
(0.2 |
%) |
Foreign tax effects - other |
|
|
(46 |
) |
|
|
(1.7 |
%) |
|
|
(88 |
) |
|
|
(0.1 |
%) |
Nontaxable and nondeductible items |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Equity-based compensation |
|
|
(3,782 |
) |
|
|
(138.3 |
%) |
|
|
(2,719 |
) |
|
|
(3.8 |
%) |
Common stock warrant liability |
|
|
(416 |
) |
|
|
(15.2 |
%) |
|
|
240 |
|
|
|
0.3 |
% |
Return-to-provision adjustment |
|
|
(18 |
) |
|
|
(0.7 |
%) |
|
|
657 |
|
|
|
0.9 |
% |
Goodwill impairment |
|
|
— |
|
|
|
— |
|
|
|
(4,200 |
) |
|
|
(5.9 |
%) |
Other |
|
|
47 |
|
|
|
1.7 |
% |
|
|
2 |
|
|
|
— |
|
Changes in valuation allowance |
|
|
3,595 |
|
|
|
131.5 |
% |
|
|
(8,974 |
) |
|
|
(12.5 |
%) |
Total |
|
$ |
(125 |
) |
|
|
(4.6 |
%) |
|
$ |
(239 |
) |
|
|
(0.3 |
%) |
(1)The state and local jurisdictions that contribute to the majority (greater than 50%) of the tax effect in this category include Texas.
DTAs and DTLs are as follows (in thousands):
|
|
As of December 31, |
|||||||
|
|
2025 |
|
|
2024 |
|
|
||
Deferred tax assets: |
|
|
|
|
|
|
|
||
Net operating losses |
|
$ |
94,044 |
|
|
$ |
89,640 |
|
|
Equity-based compensation |
|
|
10,645 |
|
|
|
14,142 |
|
|
Tax basis step-up |
|
|
8,700 |
|
|
|
10,135 |
|
|
Inventory |
|
|
7,979 |
|
|
|
12,478 |
|
|
Capitalized research expense |
|
|
7,676 |
|
|
|
10,505 |
|
|
Intangible assets |
|
|
5,469 |
|
|
|
6,060 |
|
|
Interest expense carryover |
|
|
3,997 |
|
|
|
3,316 |
|
|
R & D credit carryover |
|
|
3,886 |
|
|
|
3,886 |
|
|
Deferred income |
|
|
1,167 |
|
|
|
61 |
|
|
Foreign tax credit carryover |
|
|
1,041 |
|
|
|
920 |
|
|
Property and equipment |
|
|
976 |
|
|
|
624 |
|
|
Capital loss carryforwards |
|
|
886 |
|
|
|
— |
|
|
Lease obligations |
|
|
473 |
|
|
|
849 |
|
|
Accrued expenses |
|
|
320 |
|
|
|
374 |
|
|
Accrued employee compensation and benefits |
|
|
298 |
|
|
|
579 |
|
|
Other |
|
|
732 |
|
|
|
1,461 |
|
|
Total deferred tax assets |
|
|
148,289 |
|
|
|
155,030 |
|
|
Deferred tax liabilities: |
|
|
|
|
|
|
|
||
Prepaid expenses |
|
|
(1,385 |
) |
|
|
(1,714 |
) |
|
Content assets |
|
|
(1,284 |
) |
|
|
(2,520 |
) |
|
Right-of-use assets |
|
|
(398 |
) |
|
|
(750 |
) |
|
Total deferred tax liabilities |
|
|
(3,067 |
) |
|
|
(4,984 |
) |
|
Net deferred tax assets before valuation allowance |
|
|
145,222 |
|
|
|
150,046 |
|
|
Valuation allowance |
|
|
(145,222 |
) |
|
|
(150,047 |
) |
|
Net deferred tax liabilities |
|
$ |
— |
|
|
$ |
(1 |
) |
|
Net deferred tax liabilities are included in other liabilities in the consolidated balance sheet.
As of December 31, 2025, the Company has accumulated U.S. federal and state net operating loss ("NOL") carryforwards of $377.4 million and $439.6 million, respectively. Of the federal NOL carryforwards, $2.3 million was generated before January 1, 2018 and subject to a 20-year carryforward period. The remaining $375.1 million can be carried forward indefinitely but is subject to an 80% taxable income limitation. The U.S. federal losses subject to carryforward limitations and state NOL carryforwards will begin to expire in 2037 and 2026, respectively. As of December 31, 2025, the Company has accumulated U.S. federal and state research tax credits of $3.5 million and $1.7 million, respectively. The U.S. federal research tax credits will begin to expire in 2039. The U.S. state research tax credits do not expire.
Uncertain Tax Positions
The following table summarizes the activity related to the Company’s gross unrecognized tax benefits (in thousands):
|
|
Year Ended December 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
|
|
|
|
|
|
|
||
Unrecognized tax benefits, beginning of year |
|
$ |
1,044 |
|
|
$ |
1,044 |
|
Additions for current year tax positions |
|
|
— |
|
|
|
— |
|
Unrecognized tax benefits (excluding interest and penalties), end of year |
|
|
1,044 |
|
|
|
1,044 |
|
Interest and penalties associated with unrecognized tax benefits |
|
|
— |
|
|
|
— |
|
Unrecognized tax benefits including interest and penalties, end of year |
|
$ |
1,044 |
|
|
$ |
1,044 |
|
The unrecognized tax benefits are recorded as a reduction in the Company’s gross DTAs. The unrecognized tax benefits would not impact the Company’s effective tax rate if recognized as the Company maintains a full valuation allowance on its net deferred tax assets.
The Company files U.S. federal, numerous state and local income, franchise, U.K., and Canada tax returns. With a few exceptions, the Company is no longer subject to U.S. federal, state, local, or Canada tax examination by taxing authorities for years prior to 2022. For the U.K., the Company is no longer subject to tax examinations by the taxing authorities for years prior to 2023.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 10, 2026 | Showing above |
| 2024 | Mar 28, 2025 | |
| 2023 | Mar 11, 2024 | |
| 2022 | Mar 16, 2023 | |
| 2021 | Mar 1, 2022 | |
| 2020 | Mar 26, 2021 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.