As filed with the Securities and Exchange Commission on September 27, 2021.

Registration No. 333-259220

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Amendment No. 1

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

iFIT Health & Fitness Inc

(Exact name of registrant as specified in its charter)


Delaware	3600	06-1556976
(State or Other Jurisdiction of Incorporation or Organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification Number)

1500 South 1000 West

Logan, Utah 84321

(435) 786-5000

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

Everett Smith, Esq.

Senior Vice President, General Counsel, Secretary

1500 South 1000 West

Logan, Utah 84321

(435) 786-5000

(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent For Service)

Copies to:

Alexander D. Lynch, Esq.

Corey R. Chivers, Esq.

Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
(212) 310-8000 (Phone)
(212) 310-8007 (Fax)

Michael Kaplan, Esq.

Richard J. Truesdell, Jr., Esq.

Jeffrey S. Ramsay, Esq.

Davis Polk & Wardwell LLP
450 Lexington Avenue

New York, New York 10017
(212) 450-4000 (Phone)

(212) 701-5800 (Fax)

Approximate date of commencement of proposed sale to the public:

As soon as practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ☐		Accelerated filer ☐		Non-accelerated filer ☒		Smaller reporting company ☐		Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided to Section 7(a)(2)(B) of the Securities Act. ☐

CALCULATION OF REGISTRATION FEE



Title of Each Class of Securities to be Registered	Amount To Be Registered	Proposed Maximum Aggregate Offering Price Per Share	Proposed Maximum Aggregate Offering Price⁽¹⁾⁽²⁾	Amount of Registration Fee⁽²⁾
Class A Common stock, $0.001 par value per share	35,384,615⁽¹⁾	$21.00	$743,076,915	$81,070

(1)

Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(a) promulgated under the Securities Act of 1933, as amended. Includes shares of Class A common stock that may be issuable upon exercise of an option to purchase additional shares granted to the underwriters.

(2)	The Registrant previously paid $10,910 of this amount in connection with the initial filing of the Registration Statement.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

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The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. PRELIMINARY PROSPECTUS Subject to Completion, Dated September 27, 2021 iFIT CLASS A COMMON STOCK 30,769,231 SHARES This is an initial public offering of Class A common stock by iFIT Health & Fitness Inc (the “Company”). We are offering shares of our Class A common stock. We will have two classes of authorized common stock, Class A common stock and Class B common stock. The rights of holders of Class A common stock and Class B common stock are substantially identical, except with respect to voting and conversion rights. Each share of Class A common stock is entitled to one vote per share. Each share of Class B common stock is entitled to ten votes per share and is convertible into one share of Class A common stock. Outstanding shares of Class B common stock will represent approximately 85.1% of the voting power of our outstanding capital stock immediately following the completion of this offering, with our Chief Executive Officer and certain affiliated stockholders holding approximately 85.1% of the voting power of our outstanding capital stock immediately following the completion of this offering, assuming in each case no exercise of the underwriters’ option to purchase additional shares. Prior to this offering, there has been no public market for our Class A common stock. It is currently estimated that the initial public offering price per share will be between $18.00 and $21.00 We intend to apply to have our Class A common stock listed on the NASDAQ Global Select Market (“NASDAQ”) under the symbol “IFIT.” We qualified as an “emerging growth company” as defined under the federal securities laws at the time we furnished the initial draft of the registration statement of which this prospectus forms a part and, as such, are subject to reduced disclosure requirements for purposes of this offering. See “Prospectus Summary—Implications of Being an Emerging Growth Company.” After the completion of this offering, we expect to be a “controlled company” within the meaning of the corporate governance standards of NASDAQ. See “Risk Factors” beginning on page 22 to read about factors you should consider before buying shares of our Class A common stock. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. PER SHARE TOTAL Initial public offering price$ $ Underwriting discount(1) $ $ Proceeds, before expenses, to us $ $ (1) We refer you to “Underwriting,” beginning on page 201 of this prospectus, for additional information regarding total underwriter compensation. To the extent that the underwriters sell more than 30,769,231 shares of Class A common stock, the underwriters have an option to purchase up to an additional 4,615,384 shares from us at the initial public offering price less the underwriting discount. The underwriters expect to deliver the shares against payment in New York, New York on , 2021. Morgan Stanley BofA Securities Barclays Citigroup Credit Suisse Jefferies Baird

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TABLE OF CONTENTS


	Page
Prospectus Summary		1
Risk Factors		25
Cautionary Note Regarding Forward-Looking Statements		75
Use of Proceeds		76
Dividend Policy		77
Capitalization		78
Dilution		80
Unaudited Pro Forma Condensed Consolidated Financial Information		82
Selected Consolidated Financial and Other Data		92
Management’s Discussion and Analysis of Financial Condition and Results of Operations		97
Business		131
Management		157
Executive and Director Compensation		165
Principal Stockholders		175
Certain Relationships and Related Party Transactions		177
Description of Material Indebtedness		181
Description of Capital Stock		187
Shares Eligible for Future Sale		194
Material U.S. Federal Income Tax Consequences to Non-U.S. Holders of Our Class A Common Stock		196
Underwriting		201
Legal Matters		212
Experts		213
Where You Can Find More Information		214
Index to Financial Statements		F-1

Neither we nor the underwriters (or any of our or their respective affiliates) have authorized anyone to provide any information other than that contained in this prospectus or in any free writing prospectus prepared by or on behalf of us or to which we have referred you. Neither we nor the underwriters (or any of our or their respective affiliates) take any responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. We and the underwriters (or any of our or their respective affiliates) are not making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus or any free-writing prospectus is accurate only as of its date, regardless of its time of delivery or the time of any sale of shares of our Class A common stock. Our business, financial condition, results of operations and prospects may have changed since that date.

Basis of Presentation

We have a fiscal year end of May 31. Fiscal years are identified in this prospectus according to the calendar year in which they end. For example, fiscal 2020 refers to the fiscal year ended May 31, 2020. Fiscal quarters may be identified by the quarter and fiscal year in which they occur. For example, fiscal Q1 2022 refers to the first fiscal quarter ended August 31, 2021. Please see our audited consolidated financial statements and related notes thereto included elsewhere in this prospectus for the full description of the basis of presentation. References to “GAAP” are to Generally Accepted Accounting Principles issued by the Financial Accounting Standards Board (“FASB”).

Trademarks and Trade Names

We and our subsidiaries own or have the rights to various trademarks, trade names, service marks and copyrights, including the following brands: iFIT^®, NordicTrack^®, ProForm^®, Freemotion^®, Weider^®, Weslo^®, 29029^® and Sweat^®, which are our principal brands, as well as iFIT ActivePulse^™, iFIT Mind^™, LiveAdjust^TM, SmartAdjust^TM, SpaceSaver^™, FreeStride^™, Vue^™, Vault^™ and various logos used in association with these terms. Solely for convenience, the trademarks, trade names, service marks and copyrights referred to herein may be listed without the ^©, ^® and ^™ symbols, but such references are not intended to indicate, in any way, that we, or the applicable owner, will not assert, to the fullest extent under applicable law, our or their, as applicable, rights to these trademarks, trade names, service marks and copyrights. Other trademarks, trade names, service marks or copyrights appearing in this prospectus are the property of their respective owners.

Market and Industry Information

Unless otherwise indicated, market data and industry information used throughout this prospectus is based on management’s knowledge of the fitness industry and the good faith estimates of management. We also relied, to the extent available, upon management’s review of independent industry surveys and publications, other publicly available information prepared by a number of sources. Market share data, unless otherwise indicated, are provided by TraqLine and are estimated market shares for calendar 2020 based on unit share. The data we provide regarding the NordicTrack brand recognition is based on a survey we commissioned. To determine our Total Addressable Market (“TAM”) and Serviceable Addressable Market (“SAM”), we relied upon management’s review of independent industry surveys and publications as well as a report conducted by Frost & Sullivan Inc., a third-party research partner. We conducted comprehensive analysis across the supply and demand sides, including primary research with market participants and secondary research on the marketplace on the supply side, and in-depth customer surveys on the demand side. The geographic scope of our study includes North America, Latin America, Europe and Asia Pacific, and we define the segments of the fitness economy as fitness, wellness, nutrition and recovery.

All of the market data and industry information used in this prospectus, including our methodology of determining TAM and SAM, involves a number of assumptions and limitations and you are cautioned not to give undue weight to such estimates. Although we believe that these sources are reliable, neither we nor the underwriters can guarantee the accuracy or completeness of this information and neither we nor the underwriters have independently verified this information. While we believe the estimated market position, market opportunity and market size information included in this prospectus is generally reliable, such information, which is derived in part from management’s estimates and beliefs, is inherently uncertain and imprecise. Projections, assumptions and estimates of our future performance and the future performance of the fitness industry in which we operate are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in “Risk Factors,” “Cautionary Note Regarding Forward-Looking Statements” and elsewhere in this prospectus. These and other factors could cause results to differ materially from those expressed in our estimates and beliefs and in the estimates prepared by independent parties.

Certain Definitions

For definitions of our key business metrics and additional information regarding how we calculate these key business metrics, please refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Business Metrics and Non-GAAP Financial Measures.” Below are definitions of certain of these key business metrics:

“Billings” is an operating measure we use that is equal to total amounts billed for subscription and extended warranty contracts in the period.

“Touchscreen products” means interactive fitness equipment that comes installed with a high-definition touchscreen.

“Gross Merchandise Value” or “GMV” means the total dollar value of the merchandise sold to end consumers in a given period in all distribution channels.

“iFIT Subscribers,” “Sweat Subscribers,” and “Total Fitness Subscribers” are those subscribers who have full access to all paid iFIT content and/or Sweat content, as applicable, which is available on the digital app, TV app and on equipment, who are either in an active paid account or a trial and are the primary account holder. Unless otherwise specified, Total Fitness Subscribers for historical periods through and including fiscal 2021 do not include Sweat Pty Ltd (“Sweat”), which was acquired on June 30, 2021, but our figure for current Total Fitness Subscribers represents the combined figure of both iFIT Subscribers and Sweat Subscribers, each as of August 31, 2021.

“Interactive Fitness Products,” when referring to units, includes units of all products sold, including interactive fitness equipment, together with units of ancillary products including weights, apparel, nutrition products and other accessories.

“Subscription Contribution” is a non-GAAP measure that is defined as subscription revenue less cost of subscription revenue, adjusted to exclude depreciation and amortization expense from cost of subscription revenue.

“Subscription Contribution Margin” is a non-GAAP measure that is calculated by dividing Subscription Contribution by subscription revenue.

“Total Members” means all individuals who have an active iFIT account and/or Sweat subscription, which includes Total Fitness Subscribers, their respective secondary members and members who consume free content. Unless otherwise specified, Total Members for historical periods through and including fiscal 2021 do not include Sweat, which was acquired on June 30, 2021, but our figure for current Total Members represents the combined members of both iFIT and Sweat, each as of August 31, 2021.

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A LETTER FROM SCOTT WATTERSON, IFIT CO_FOUNDER, CHAIRMAN, AND CEO: My life has been guided by the benefits of balancing physical, mental, emotional, and spiritual health, so I can be at my best for my family, my community, and our company. I have seen, first-hand, how improving your physical and mental well-being can change your life for the better. This passion is both real and enduring, and it's what inspired us to found this company. We believe that the path to real self-improvement involves combining all of the building blocks of well-being: fitness, nutrition, mindfulness, active recovery, and community. We have a vision of creating a proprietary technology - a holistic platform - that connects the key aspects of health and fitness to make it simple for consumers to begin and continue their fitness journeys and enjoy lifelong well-being. The result of that vision is iFIT: a mission-driven fitness technology company that's focused on providing comprehensive solutions to our subscribers. We are passionate about helping our ever-growing community of more than six million members improve their fitness and health. That's our mission. That's why we're growing. Growth requires vision, critical optimism, and action. The iFIT company includes more than 2,700 purpose-driven team members, including our deep bench of leaders who perpetuate our mission with their actions every day. Our focus and talent keep us at the forefront of the industry, allowing us to create innovative technologies and hardware that truly improve people's well-being. With more than 400 issued and pending patents, we have a powerful foundation of innovation to build upon as we continue to serve our members in the future. We've pioneered interactive, connected fitness to guide our members on their fitness journeys and built a community. Our iFIT technology platform is distinctive because of the way we integrate our proprietary software, experiential content, and interactive hardware. Our patented integration provides what we call an "automagical" fitness experience for the consumer - one they can see, hear, and feel. For example, when our members stream the iFIT trek to the summit of Mt. Kilimanjaro on their treadmill, the speed and incline of their machines automatically adjusts in sync with the natural topography of the trail - all while their personal exercise data is streamed back to the iFIT platform thousands of times per second. We believe that one thing about consumers is certain - they need and want new and better workouts. That's why we o_er a suite of connected fitness brands and products that allows us to reach customers globally across an expansive range of distribution channels, exercise preferences, and price points. Today, we sell our connected fitness products and memberships in 120 countries and produce content in eight languages. Our iFIT platform is the technology foundation of our multi-brand, multi-product, and multi-channel strategy and provides us with the

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largest serviceable, addressable market in the industry. Regardless of consumer preferences, our unique business model creates a broad funnel to continue growing and engaging our worldwide community of members. Global interest and participation in wellness and commitment to personal health are on an unprecedented trajectory. When we founded the company in the late 1970s, the original running boom had just begun, and fitness was a new trend. Today, wellness is a growth industry approaching six trillion dollars. All generations and demographics want to participate. Expansion opportunities are real and abundant. Our opportunity to grow has never been greater. An Asian proverb I learned long ago has influenced the company and me through the years: bu jln ze tul, which means, "If you're not progressing forward, you're moving backward." iFIT's unique, seamless technology, workout series, and continual innovation embody forward movement and progress. We are humbled by the role iFIT plays in our members' lives in keeping them moving forward, empowering them to change for the better, and enjoying the benefits of better physical, mental, and emotional fitness and well-being. Because when we do that, we make a di_erence. Scott R. Watterson Co-Founder, Chairman, and CEO

PROSPECTUS SUMMARY

This summary highlights information appearing elsewhere in this prospectus. This summary is not complete and does not contain all of the information that you should consider before making a decision to participate in the offering. You should carefully read the entire prospectus, including the information presented under “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and notes related thereto included elsewhere in this prospectus, before making an investment decision. Unless the context requires otherwise, references to “our Company,” “we,” “us,” “our” and “iFIT” refer to iFIT Health & Fitness Inc and its direct and indirect subsidiaries on a consolidated basis, including Sweat from its date of acquisition.

Our Mission and Vision

Our mission is to improve your fitness and well-being.

Our vision is to create the world’s most holistic health and fitness platform.

Who We Are

We are a health and fitness subscription technology company, fueled by our passion to innovate, grow and provide meaningful solutions for our members. iFIT is an integrated health and fitness platform, designed to connect our proprietary software, experiential content and interactive hardware to deliver an unmatched connected fitness experience.

We are a growing community of over 6.4 million Total Members and more than 1.5 million Total Fitness Subscribers with members in over 120 countries. We deliver our patented interactive experiences on the industry’s broadest range of fitness modalities including treadmills, bikes, ellipticals, rowers, climbers, strength equipment, fitness mirrors, yoga equipment and accessories.

Driven by the adoption of our iFIT platform, we are the #1 provider of large fitness equipment in the United States, with approximately 40% market share based on units. In fiscal 2021, we sold approximately 10.1 million Interactive Fitness Products with a Gross Merchandise Value of $2.8 billion. Our brands, including iFIT, NordicTrack, ProForm and Freemotion, are leaders in the fitness equipment industry, and 83% of our total revenue was generated by sales of our connected fitness products and iFIT subscriptions.

Our iFIT operating system provides interactive experiences on all of our connected equipment brands, allowing members to gain access to our full library of iFIT live and on-demand content for $15/month for individuals or $39/month for families of up to five (or $396 when paid annually). We believe the combination of our proprietary software and experiential content connected with our interactive hardware creates a compelling value proposition for our rapidly growing member base and generates attractive recurring subscription revenue.

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Proprietary Software

Our innovative iFIT software is the common operating system that unites our experiential content and interactive hardware into one integrated platform. Our software is the connective tissue that provides members with a unique two-way experience with iFIT’s authentic trainers. Through iFIT’s patented software, biometric data is monitored and workout variables including speed, incline, resistance and digital weight are dynamically adjusted in real time. Our interactive software optimizes our members’ workout experience by removing the guesswork and providing personalized training. We further personalize workouts with our patent-pending SmartAdjust^{TM and ActivePulse}^TM^{technologies, which automatically adjust our equipment based on members’ real-time fitness levels and heart rates. Our distinctive leaderboard allows members to connect and interact with a global community of like-minded people.}

Experiential Content

We strive to create the most compelling interactive content in the health and fitness industry. Our highly differentiated content seamlessly integrates with our proprietary software and interactive hardware, delivering a unique media form that we call “experiential content.” Our members enjoy patented live interactive studio and outdoor workouts. Further, our members can access iconic fitness experiences with workouts filmed in more than 50 countries across seven continents. Our experiential content creates multi-sensory experiences that allow our members to see, hear and feel interactive workouts. Our content is developed and led by a team of over 180 world-class trainers in more than 60 categories including running, cycling, high-intensity interval training (HIIT), strength, boot camp and yoga, as well as new categories including mindfulness, nutrition and active recovery. Our recent acquisition of Sweat also gives our members access to additional differentiated content with over 5,000 unique workouts led by instructors who are globally recognized as top female fitness icons.

During fiscal 2021, we (including Sweat) streamed 142 million live and on-demand interactive workouts across our fitness products. We have begun offering content in eight different languages including Mandarin Chinese, Spanish and French. Our expanding mindfulness, nutrition and recovery content provides a complete experience for our members. In fiscal 2021, our iFIT members participated in 112 million workouts, reflecting growth of

229% year over year. Our community has given our experiential iFIT content more than 4.1 million member reviews with an average rating of 4.7 stars out of 5.

Interactive Fitness Hardware

We generate recurring subscription revenue on the industry’s broadest range of connected fitness hardware, including treadmills, bikes, ellipticals, rowers, climbers, strength equipment, fitness mirrors, yoga equipment and accessories. Our interactive hardware is intelligent—specifically designed and engineered to respond to our proprietary software and experiential content. This unique combination allows our members to have an immersive experience that can only be found on our hardware. For example, when our content streams the trail to the summit of Mt. Kilimanjaro, our interactive drive systems automatically adjust the speed and incline in sync with our content. Our hardware and technology are protected by over 400 issued and pending patents.

Our Brands

We market our iFIT platform with our industry-leading brands: NordicTrack, ProForm, Freemotion, Weider and Sweat. We intentionally segment our brands across a wide range of channels, products and price points to attract consumers from a variety of fitness and income levels. Our research indicates that NordicTrack enjoys market leading awareness among fitness equipment brands, with over 91% aided brand awareness in the United States. The breadth of our product portfolio and multi-brand strategy provides us with the largest addressable market in the fitness industry, and creates a broad funnel to acquire interactive fitness members at scale.

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Our Direct-to-Consumer and Multi-Channel Distribution Model

Our global distribution model is unmatched in our industry, combining both domestic and international direct-to-consumer capabilities with wholesale distribution. In fiscal 2021, we generated 44% of our interactive hardware revenue through our own direct-to-consumer channels, 54% of our interactive hardware revenue through more than 50 select retailers globally and 2% of our interactive hardware revenue through our strategic partnerships in the commercial channel. Our multi-channel distribution mitigates our dependence on any single channel and allows us to meet consumers wherever they want to shop. We also have a first-mover advantage globally, with 16% of our fiscal 2021 revenue coming from international markets.

Our Growth, Revenue and Scale

Our ability to connect with our community of health and fitness members through our cutting-edge iFIT technology and immersive experiences has fueled our growth as one of the largest connected health and fitness platforms in the world.

Our strong financial performance is underpinned by the rapid growth in our member base and consistent increase in member engagement on our platform, as seen through:

•

Total Fitness Subscribers growing from approximately 103 thousand to 1.1 million between May 31, 2017 and May 31, 2021, representing a CAGR of 81.3%; and

•

Total number of workouts on our platform growing from 12.1 million during fiscal 2019 to 34.1 million during fiscal 2020, representing 181% growth. In fiscal 2021, our members participated in 112 million workouts, reflecting growth of 229% year over year.

•

We generated total revenue of $700.0 million and $851.7 million during fiscal 2019 and fiscal 2020, respectively, representing an increase of 21.7%, and $1,745.1 million in fiscal 2021, representing an increase of 104.9%;

•

We generated net income of $56.6 million during fiscal 2019, and incurred net losses of $98.5 million and $516.7 million during fiscal 2020 and 2021, respectively; and

•

We generated Billings of $92.7 million and $183.7 million during fiscal 2019 and fiscal 2020, respectively, representing an increase of 98.2%, and $382.3 million in fiscal 2021, representing an increase of 108.1%.

The Global Wellness Economy

We operate in the global wellness industry which has demonstrated sustained, consistent growth through a range of economic cycles over many years. According to a Frost & Sullivan report, during 2021 the total global health and wellness market is projected to achieve estimated spend of $5.9 trillion.

We believe the breadth of our equipment range across modalities, brands, price points and distribution channels gives us the largest SAM among our primary competitors in the fitness industry. We believe we are the only provider delivering a seamless solution of software, content and hardware with offerings across treadmills, bikes, ellipticals, rowers, climbers, strength equipment, fitness mirrors, yoga equipment and accessories in the global market. We have a growing international presence with distribution in over 120 countries.

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Our Competitive Differentiators

Seamlessly Integrated Health and Fitness Platform

iFIT is a global health and fitness platform which seamlessly integrates our proprietary software, experiential content and interactive hardware to deliver an unmatched connected fitness experience.

We design and develop our own software, content, and hardware to ensure these elements work in harmony across our portfolio of brands and products. Our software utilizes biometric inputs (including heart rate), adaptive fitness technology, artificial intelligence (AI) and scalable cloud-based infrastructure to create an unmatched user experience that is highly engaging and valued by our members. Our content is delivered by our patented streaming technology that connects our wide range of connected devices. This comprehensive technology stack allows our devices to seamlessly connect to our network of products and members. This network effect of interactive fitness devices drives high engagement, retention, and social interaction. We believe our member-centric platform is difficult to replicate and highly scalable into adjacent categories and verticals.

Differentiated Experiential Content

We have invented experiential content, creating a new media form that is highly differentiated from passive streaming. We believe we create the best interactive content in the fitness industry, which includes live and on-demand studio classes and digital outdoor experiences. Our world-class production teams, including Emmy award-winning talent and cinematographers, film iFIT experiential content in more than 50 countries across seven continents, led by more than 180 iFIT trainers, including Olympians, top female fitness icons and other elite athletes. iFIT members can trek to Mt. Everest base camp or walk with elephants on safari in South Africa on their treadmills and ellipticals. They can join live studio cycle classes or ride the Swiss Alps on their bikes. iFIT members can row the River Thames on their rowers or join a studio boot camp class from their fitness mirrors. Our constantly growing library includes more than 17,000 interactive workouts in more than 60 categories including running, cycling, HIIT, strength, boot camp class and yoga, as well as new categories including mindfulness, nutrition and active recovery, allowing iFIT members to benefit from a complete content solution. Our proprietary LiveAdjust^TM streaming technology allows iFIT trainers to control members’ equipment variables including speed, incline, resistance and digital weight which creates an authentic interactive workout.

Innovation Pipeline That Drives Growth

We are innovators—and consider ourselves the original pioneers—of connected health and fitness technology. We have compiled a portfolio of more than 400 issued and pending patents in areas ranging from interactive streaming to adaptive fitness technology. These patents provide a competitive moat to our business. Our vertically integrated software, content and hardware teams launch new innovative products and services in multiple categories each year with industry-leading speed to market. This multidisciplinary team of over 2,500 employees includes more than 600 research and development professionals, with engineering teams across three continents, focusing on improving the user experience. Our robust innovation pipeline is unique in the fitness industry and positions us to stay at the forefront of health and fitness technology.

Advantaged Business Model

We believe our multi-brand, multi-product and multi-channel business model provides us with the largest addressable market in the fitness industry and creates a broad funnel to acquire subscribers, generating highly attractive recurring revenue. We believe our strategy is highly scalable and difficult to replicate. Our proven approach delivers a compelling financial model.

Our brands—We market our iFIT platform with our industry-leading brands: NordicTrack, ProForm, Freemotion, Weider and Sweat. We address the premium at-home market with NordicTrack, the mass market with ProForm, strength training with Weider and commercial verticals with Freemotion. With Sweat, we market our iFIT platform to the extensive global Sweat community of 450,000 paid subscribers as of May 31, 2021 and more than 50 million followers across its social media channels, the majority of which are women. We intentionally segment our brands across a wide range of channels, products and price points to attract members from a variety of fitness and income levels.

Our research indicates that NordicTrack enjoys market leading awareness among fitness equipment brands, with over 91% aided brand awareness in the United States. ProForm is the number one unit volume brand at retail. Our portfolio of valuable brands enables us to bring our iFIT platform to as many members as possible, while also providing a flexible and sustainable model for long-term growth.

Our product portfolio— The fitness products in our portfolio are connected by the iFIT operating system, enabling our members to have a unified user experience on every product they purchase from us. We deliver our interactive experiences on the fitness industry’s broadest range of fitness modalities, including treadmills, bikes, ellipticals, rowers, climbers, strength equipment, fitness mirrors, yoga equipment and accessories. During 2020, we ranked #1 in overall market share in the United States in total large exercise equipment units. The breadth of our product and technology portfolio helps insulate us from consumer trends, creating valuable opportunities for expansion and an unrivalled Serviceable Addressable Market.

Our distribution channels—We have an established presence across all major distribution channels to meet our consumers wherever they want to shop. In fiscal 2021, we generated 44% of our interactive hardware revenue through our direct-to-consumer channel via our owned websites. We generated 54% of our interactive hardware revenue through our retail partners including Amazon, Best Buy, Dick’s Sporting Goods, Costco, Canadian Tire, Rebel Sports and Decathlon. We generated 2% of our interactive hardware revenue through our key relationships in the commercial channel including Orangetheory Fitness and 24 Hour Fitness. We also have a first-mover advantage globally, with 16% of our fiscal 2021 revenue coming from international markets. We believe the breadth of our omnichannel distribution is unmatched in the fitness industry and provides multiple avenues for future growth.

Global Member Community with High Engagement

We have amassed a fast-growing, connected community of over 6.4 million Total Members and more than 1.5 million Total Fitness Subscribers in over 120 countries. Our business is characterized by high growth and strong engagement. Our growth is driven by our efficient customer acquisition and the core value proposition of our proprietary combination of software, content and hardware which have driven substantial expansion in the number of our Total Fitness Subscribers and total workouts participated in on our platform. We offset customer acquisition costs with the gross profit earned on our interactive fitness equipment, generating highly compelling unit economics. In fiscal 2020, total workouts participated in on our platform increased 181% over fiscal 2019. In fiscal 2021, our members participated in 112 million iFIT workouts, reflecting growth of 229% year over year, or 142 million workouts including Sweat.

Well-Established Global Supply Chain with Attractive Speed to Market

We have a robust and resilient supply chain with attractive speed-to-market capabilities. We manufacture both domestically and internationally in seven countries, and maintain 30+ year relationships with long-term strategic partners, with direct purchasing relationships down to the component level. Our in-house engineering expertise allows us to quickly create and adjust designs to streamline production and minimize supply bottlenecks. This network of partnerships combined with our experience, provides us with a considerable competitive advantage and allows us to flexibly respond to fluctuations in market demand. In fiscal 2021, the breadth of our scaled distribution network allowed us to ship 16,600 containers delivering approximately 10.1 million units of Interactive Fitness Products globally—more than anyone in our industry. This capability allowed us to respond quickly and grow during periods of surge demand since the onset of the outbreak of COVID-19 (the “global pandemic”).

Visionary Founder and Experienced Team

Our visionary co-founder and CEO Scott R. Watterson has combined his passions for fitness, technology, design and engineering to make interactive fitness products that positively affect people’s lives. His passion and leadership inspires our entire company, resulting in game-changing innovations. Our senior management team consists of industry veterans with an average of 23 years of experience in our company. Our entrepreneurial culture encourages our multidisciplinary team of over 2,500 employees to push for path-breaking developments across software, content and hardware. All of our efforts are guided by our core desire to provide the most immersive and interactive experiences to our members to guide them on their personal journeys for self-improvement.

Our Growth Strategies

Our goal is to grow our recurring subscriber base globally through the sale of our digital services and Interactive Fitness Products. We will continue to drive member engagement and retention by providing immersive and interactive experiences through our integrated platform.

Scale Marketing to Accelerate Growth

We market our products through a unique combination of performance, brand marketing and retail partnerships, resulting in a best-in-class customer acquisition cost and highly efficient media campaigns. Our low customer acquisition cost allows us to invest more in brand marketing to acquire additional customers. As we significantly scale our marketing efforts in the United States and internationally, we believe we can drive sustainable growth across our subscriber base and product portfolio.

Accelerate Global Growth by Leveraging Our International Presence

By leveraging our established international presence, we see substantial opportunities to accelerate sales of our iFIT interactive products and services in global markets. With minimal marketing spend in fiscal 2021, our existing international direct-to-consumer business experienced high double digit growth in the UK, France and Australia. In addition to growing our international direct-to-consumer sales, we will enhance our worldwide network of strategic retail partners including Decathlon, Rebel Sports and others. We believe we have significant runway to expand market share, and grow iFIT memberships as we meet increasing global demand through our multi-channel distribution strategy.

Continuously Improve Members’ Experience

We are constantly improving and expanding our members’ experience, which ensures high subscriber engagement, retention and satisfaction. We will continue to enhance our members’ experience by developing new content, deploying new software and continually personalizing the ways our members engage with iFIT. Whether consumers are at home, outside or in commercial facilities, iFIT will provide experiential content on our expanding platform of interactive equipment, mobile apps and digital TV apps.

Continue to Launch New and Disruptive Products

We will continue to launch new products and disrupt existing product categories by innovating software, content and hardware. We invest considerable resources in our research and development, with more than 600 professionals and engineering teams across three continents. We maintain an extensive multi-year innovation pipeline driving advancements across our entire portfolio, as well as emerging verticals, allowing us to continually launch new products embraced by the market.

Leverage Installed Consumer Base to Increase Hardware Sales and Subscription Revenues

Since fiscal 2017 through fiscal 2021, we have sold over 48.3 million units of fitness products to consumers around the world. Our large and growing installed base of members, and our relationship with them, represents distinct opportunities to accelerate additional sales of hardware and conversion to Interactive Fitness Subscriptions. As we increase marketing efforts to our existing base and drive brand awareness of the iFIT platform, we anticipate meaningful adoption of our interactive fitness subscription and additional hardware purchases. Our data shows 16% of the subscribers that have been on the iFIT platform for more than three years have purchased multiple pieces of interactive hardware from us. We intend to leverage Sweat’s globally recognized fitness icons to cross sell iFIT products and memberships to its high-quality member database and over 50 million social media followers.

Grow Commercial Sales and Expand Strategic Partnerships

By expanding our premium commercial brand of Freemotion, we see significant growth opportunities to bring more of our interactive hardware and membership offerings into all verticals in the commercial channel. We have established relationships with best-in-class commercial operators, including Planet Fitness and Orangetheory Fitness, elite training facilities for pro and collegiate teams and more. Orangetheory Fitness uses our patented technologies in their commercial fitness facilities nationwide. Through our exclusive partnership with Planet Fitness, we have made the iFIT experience available to their base of more than 15 million Planet Fitness members nationally by providing select iFIT content through the Planet Fitness app.

Expand the iFIT Platform into Adjacent Categories

We will expand our proven iFIT subscription services and hardware into categories naturally adjacent to fitness, such as mindfulness, nutrition and recovery. Recently we have brought innovation to mindfulness with iFIT

Mind^TM, creating multi-series workouts on our interactive hardware guided by experts in mental health. Our members responded quickly and positively, adding iFIT Mind^TM to their iFIT routine, further enhancing the retention of our platform and providing an excellent tool to attract new members. We recently acquired “29029,” a premier wellness tourism event and community, which will accelerate our expansion into wellness tourism and corporate wellness. As we expand into adjacent categories, which we believe are currently underserved, we believe we will enhance stickiness of current members and create more on-ramps into the iFIT ecosystem.

LOGO

The Concurrent Transactions

Concurrently with this offering, we intend to engage in the following transactions (the “Concurrent Transactions”):

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in connection with this offering, we will amend and restate our certificate of incorporation to effect a 37.8-for-one stock split of our outstanding common stock. In addition, immediately prior to the closing of this offering, we will amend and restate our certificate of incorporation to, among other things, redesignate our outstanding common stock as Class A common stock, and we will exchange Class A common held by the Scott R. Watterson holders (as defined below) for a newly designated Class B common stock. All historical financial information in this prospectus has been retroactively restated to give effect to the stock split;

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upon completion of this offering, we will repay in full the promissory note (the “2019 Note”) issued in the 2019 Financing Transaction (as defined herein) with $300 million in consideration, consisting of a combination of (a) cash to the extent available as described in “Use of Proceeds” and (b) new convertible notes (the “New Convertible Notes”) in a principal amount equal to the remaining balance due;

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upon completion of this offering, we will mandatorily repay in full our Series A preferred stock with $262.5 million in consideration, consisting of a combination of (a) 7,918,553 shares of our Class A common stock (calculated based on the midpoint of the range; the actual number of shares will be calculated as $131.25 million divided by 85% of the public offering price of the Class A common

stock), with the remaining $131.25 million to be paid with (b) cash to the extent available as described in “Use of Proceeds” and (c) New Convertible Notes in a principal amount equal to the remaining balance due;

•

upon completion of this offering, we will mandatorily repay in full our Series B preferred stock with 1,602,565 shares of our Class A common stock (calculated based on the midpoint of the range; the actual number of shares will be calculated as $25.0 million divided by 80% of the public offering price of the Class A common stock),

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upon completion of this offering, we will issue 737,180 shares of our Class A common stock as deferred consideration for the 29029 acquisition (calculated based on the midpoint of the range; the actual number of shares will be calculated as $11.5 million divided by 80% of the public offering price of the Class A common stock);

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upon completion of this offering, we will issue 2,279,203 shares of our Class A common stock as deferred consideration for the Sweat acquisition (calculated based on the midpoint of the range; the actual number of shares will be calculated as $40.0 million divided by 90% of the public offering price of the Class A common stock);

•

upon completion of this offering, we will issue in aggregate approximately 32,372,117 shares of our Class A common stock to net settle on a cashless basis all outstanding warrants (calculated based on the midpoint of the range; the actual number of shares will be calculated based on the net cashless settlement of warrants to purchase 32,633,610 shares of company stock, using the public offering price of the Class A common stock); and

•

immediately prior to the public filing of the registration statement relating to this offering, we forgave loans to management in aggregate principal amount of $53.2 million to comply with the Sarbanes-Oxley Act, and one loan to an executive officer in the amount of $9.3 million was repaid by surrendering the equivalent of 963,673 shares of our common stock. Upon completion of this offering, we will make a $35.0 million payment to our CEO, and we will grant our CEO a restricted interest in $50.0 million of New Convertible Notes, subject to certain vesting conditions described herein. For information regarding these transactions and executive compensation, see “Executive and Director Compensation—Additional Compensation in Fiscal Q1 or Q2 2022.”

The shares of Class A common stock or Class B common stock and the New Convertible Notes issued in the Concurrent Transactions are not being registered in connection with this offering.

In connection with the offering, we also intend to grant options for 6,210,729 shares of our Class A common, with an exercise price equal to the public offering price, and 332,980 restricted shares subject to vesting under a new equity incentive plan, including (i) 678,208 shares of Class A common stock issuable upon exercise of options granted to Scott R. Watterson, (ii) 1,241,957 shares of Class A common stock issuable upon exercise of options granted to David J. Watterson, and (iii) 784,161 shares of Class A common stock issuable upon exercise of options granted to Steven J. Barr, as described in “Executive and Director Compensation—Employment and Benefit Plans—2021 Equity Incentive Plan—IPO Awards.” In addition, we intend to modify and reprice certain grants made under our existing 2014 equity plan and enter into loans and other compensation arrangements with non-executive employees, which we describe in notes (O) and (Q) to our Unaudited Pro Forma Condensed Consolidated Balance Sheet. See “Unaudited Pro Forma Condensed Consolidated Financial Information.”

The total amount of cash paid and principal amount of New Convertible Notes to be issued in connection with the repayment of the 2019 Notes and the Series A preferred stock is expected to be approximately $431.3 million, although the allocation between cash paid and New Convertible Notes issued will depend on the actual net proceeds of this offering (including whether and the extent to which the underwriters exercise their option to purchase additional shares). Based on the midpoint of the range, the amount of total cash paid would be

approximately $57.3 million (or approximately $141.7 million if the underwriters exercise their option to purchase additional shares in full), and the corresponding principal amount of New Convertible Notes issued would be approximately $374.0 million (or approximately $289.6 million if the underwriters exercise their option to purchase additional shares in full). Any increase or decrease in net proceeds would increase or decrease on a dollar-for-dollar basis the aggregate amount of cash paid to repay the 2019 Notes and the Series A preferred stock, with a corresponding decrease or increase in the principal amount of New Convertible Notes. See “Use of Proceeds.”

For a description of the New Convertible Notes, see “Description of Material Indebtedness – New Convertible Notes.”

The 12,537,501 shares of our Class A common stock to be issued in connection with the repayment of our Series A and Series B preferred stock and the payment of deferred consideration for the 29029 and Sweat acquisitions and the $374.0 million of New Convertible Notes as described above are calculated based on an initial public offering price of $19.50 per share (the midpoint of the price range set forth on the cover of this prospectus). Each $1.00 increase in the public offering price per share would decrease, as applicable, by 611,588 shares, and each $1.00 decrease in the public offering price per share would increase, as applicable, by 677,699 shares, the number of shares of Class A common stock issued in connection with the repayment of our Series A and Series B preferred stock and the payment of deferred consideration for the 29029 and Sweat acquisitions. Each $1.00 decrease or increase in the public offering price per share would decrease or increase, as applicable, by $28.8 million, the amount of New Convertible Notes to be issued. Each $1.00 increase in the public offering price per share would decrease, as applicable, by 1,655,447 shares the number of shares into which such notes will be convertible and each $1.00 decrease in the public offering price per share would increase, as applicable, by 1,834,414 shares the number of shares into which such notes will be convertible.

Recent Developments

Preliminary Estimated Results for Fiscal Q1 2022 (Unaudited)

Set forth below are certain preliminary estimated unaudited financial results and other data for fiscal Q1 2022. Our unaudited interim consolidated financial statements as of August 31, 2021 and for the three months of fiscal Q1 2022 are not yet available. These ranges are based on the information available to us as of the date of this prospectus. We have provided ranges, rather than specific amounts, because these results are preliminary and subject to change as we have not yet completed our financial closing process and our auditors have not yet reviewed our results. Our actual results may vary from the preliminary estimated results presented below due to items identified as we complete our financial closing and other operational procedures, final adjustments, and due to other developments that may arise between now and the time the financial results for fiscal Q1 2022 are finalized. Such adjustments could be material.

In addition, these preliminary estimated financial results set forth below are not necessarily indicative of the results we may achieve in any future periods. This information should be read in conjunction with our consolidated financial statements and the related notes. See “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Cautionary Note Regarding Forward-Looking Statements” for additional information regarding factors that could result in differences between the preliminary estimated ranges of certain of our financial results that are presented below and the actual financial results we will report. Accordingly, we caution you about unduly relying on these preliminary estimated results.

All of the data presented below has been prepared by and is the responsibility of management. Our independent registered public accounting firm, Deloitte & Touche LLP, has not audited, reviewed, compiled or performed any procedures with respect to the estimated preliminary financial results. Accordingly, Deloitte & Touche LLP does not express an opinion or any other form of assurance with respect thereto.

The following includes our preliminary estimated results for fiscal Q1 2022:


	Three Months Ended August 31,
	2020 (actual)		2021 (estimated low)		2021 (estimated high)
	(in thousands)
Preliminary Estimated Financial Results:
Revenue:
Interactive fitness products	$	261,730	$	284,000	$	296,000
Subscription		44,592		87,000		96,000

Total revenue		306,322		371,000		392,000

Cost of revenue:
Interactive fitness products		157,381		229,000		237,000
Subscription		4,776		13,000		15,000

Total cost of revenue		162,157		242,000		252,000

Gross profit		144,165		134,000		139,000

The following operational metrics should be read in connection with “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Key Business Metrics and Non-GAAP Financial Measures.”


	Three Months Ended August 31,
	2020			2021⁽¹⁾
Other preliminary data:
Total Fitness Subscribers (at period end)		631,429			1,580,373
Total members (at period end)		3,810,760			6,489,013
Total workouts on platform		20,176,229			32,332,485
Average net monthly churn by cohort, Touchscreen $1,999+ (based on 13 month retention)		3.38	%		2.69	%

(1)	Except for average net monthly churn by cohort, fiscal Q1 2022 includes Sweat and iFIT on a combined basis.

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For fiscal Q1 2022, we expect to report total revenue in the range of $371.0 million to $392.0 million, representing growth of approximately 21.1% to 28.0% over fiscal Q1 2021. These preliminary results represent continued strong growth, particularly relative to the strong performance we posted in fiscal Q1 2021, and a decrease sequentially reflecting a more typical seasonality pattern. Revenue growth was led by an increase in subscription revenue, which grew both over the prior year and sequentially, driven by significant growth in the iFIT subscriber base as well as the acquisition of Sweat on June 30, 2021. On a combined basis, Total Fitness Subscribers increased slightly sequentially compared to fiscal 2021 year end, with an increase in iFIT subscribers offset in part by a decrease in Sweat subscribers, reflecting seasonal patterns. Our interactive fitness products revenue benefited from strong treadmill and bike sales with particular strength across our retail partners segment as consumers have returned to shopping in store, further highlighting the strength of our brands in what is typically a seasonally low quarter. We also experienced significant growth internationally compared to the prior year, with continued direct-to consumer growth in both Europe and Australia.

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For fiscal Q1 2022, we expect to report gross profit in the range of $134.0 million to $139.0 million, as compared to $144.2 million for fiscal Q1 2021. Our gross profit was heavily impacted by an industry wide increase in freight and commodity costs as well as overall channel mix, with our retail partners representing a larger portion of the business in the first quarter of 2022. These higher input costs reflect various pandemic-driven global supply chain disruptions as well as global container and chip shortages

resulting in supply backlogs. We expect these challenges to improve as conditions begin to normalize in the second half of the fiscal year, with our deep vendor relationships as well as our multiple sourcing strategy for key components across manufacturing processes serving as mitigants against supply chain bottlenecks.

•

On June 30, 2021, we completed the acquisition of Sweat, a leading platform for women’s health and fitness. The acquisition of Sweat expands our presence into the global digital fitness market and accelerates our delivery of best-in-class interactive fitness experiences for consumers worldwide. With this acquisition, we are now able to market our platform to the extensive global Sweat community of over 450,000 paid subscribers at May 31, 2021 and more than 50 million followers across social media channels. Sweat also gives our members access to additional differentiated content with over 5,000 unique workouts by instructors who are globally recognized as top female fitness icons.

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At August 31, 2021, we had an estimated cash balance of approximately $74.0 million, compared to $146.5 million at May 31, 2021. We had outstanding borrowings under our revolving credit facility of $210.0 million at August 31, 2021, compared to $0.3 million at May 31, 2021, and available borrowing capacity of $82.8 million. Our change in net debt reflects seasonal cash requirements as well as increased strategic investments in marketing and inventory to continue to fuel the business.

Corporate Information

Scott R. Watterson and Gary E. Stevenson founded Weslo, Inc. in 1977 and acquired ProForm Fitness Inc. in 1987. When these entities were sold to Bain Capital Inc. in 1994, they were renamed ICON Health & Fitness, Inc and changed their name to iFIT Inc. in August 2021. The parent entity of iFIT Inc., HF Holdings, Inc., was incorporated in Delaware in 1999 and changed its name to iFIT Health & Fitness Inc in May 2021. Our principal executive offices are located at 1500 South 1000 West, Logan, Utah 84321, and our telephone number is (435) 786-5000. Our corporate website address is www.ifit.com. Our website and the information contained on, or that can be accessed through, the website is not deemed to be incorporated by reference in, and is not considered part of, this prospectus. You should not rely on any such information in making your decision whether to purchase our Class A common stock.

Controlled Company

Prior to the completion of this offering, we will amend our amended and restated certificate of incorporation to redesignate our outstanding common stock as Class A common stock and issue Class B common stock in exchange for certain outstanding shares of Class A common stock. Following the offering, our Co-Founder and Chief Executive Officer, Scott R. Watterson and certain affiliated stockholders (which we refer to as the “Scott R. Watterson holders”) will hold 114,402,561 shares of our Class B common stock. The dual class structure of our common stock will have the effect of concentrating voting control with the Scott R. Watterson holders. The Scott R. Watterson holders will hold in the aggregate approximately 85.1% of the voting power of our outstanding capital stock immediately following this offering. This will limit or preclude your ability to influence corporate matters.

Summary of Risk Factors

An investment in our securities involves a high degree of risk. The occurrence of one or more of the events or circumstances described in the section titled “Risk Factors,” alone or in combination with other events or circumstances, may materially adversely affect our business, financial condition and operating results. In that event, the trading price of our securities could decline, and you could lose all or part of your investment. Such risks include, but are not limited to:

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changes in the fitness industry as well as developments in consumer demand for and preferences in fitness content or decreases in demand for our products post-pandemic;

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failure to anticipate consumer preferences in products and services;

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changes or developments in our relationships with or the businesses of third-party suppliers, manufacturers, logistics partners and retail partners, and our reliance on these parties;

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damage to our brands and reputation;

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inability to manage our growth and failure to execute our continued growth strategy;

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inability to attract and retain subscribers;

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the highly competitive nature of our industry;

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inability to achieve and maintain profitability in the future;

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the seasonality of our business, including the Sweat business, and short product life cycles;

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inability to manage increases in raw materials and component costs, long lead times, supply shortages or transportation and logistical issues;

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changes in the socioeconomic, political and environmental landscape;

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unfavorable or otherwise costly outcomes of lawsuits, claims, regulatory disputes and governmental inquiries that arise from our products and services;

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reputational harm or liabilities relating to our products or their use or misuse or defects;

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import and export controls, tariffs, import or customs duties, international taxation, economic sanctions and changes in income tax laws or enforcement;

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failure to comply with applicable anti-corruption and anti-money laundering laws;

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failure to comply with applicable privacy, security, and data laws, regulations, and standards;

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the inability to integrate the Sweat acquisition or achieve the desired benefit from the acquisition;

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the occurrence of cyberattacks, privacy or data breaches or any disruption or interference with our computing, storage, processing and similar services;

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adverse changes to or loss of our intellectual property rights, including our licenses, trademarks and trade names; and

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adverse publicity or other adverse consequences related to our dual class structure or “controlled company” status.

Implications of Being an Emerging Growth Company

When we furnished the initial draft of the registration statement of which this prospectus forms a part, we qualified as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As such we are able to take advantage of specified reduced disclosure requirements applicable to this offering. These reduced requirements include, among others:

•

exemption from the adoption of certain new or revised financial accounting standards that do not yet apply to private companies;

•

exemption from compliance with certain new requirements adopted by the Public Company Accounting Oversight Board requiring a supplement to the auditor’s report in which the auditor is required to provide additional information about the audit and the financial statements of the issuer; and

•

reduced disclosure about executive compensation arrangements.

THE OFFERING

Issuer

iFIT Health & Fitness Inc

Class A common stock offered by us

30,769,231 shares of Class A common stock (35,384,615 shares if the underwriters exercise their option to purchase additional shares in full).

Underwriters’ option to purchase additional shares of Class A common stock

The underwriters have an option to purchase an additional 4,615,384 shares of Class A common stock from us. The underwriters can exercise this option at any time within 30 days from the date of this prospectus.

Class A common stock to be outstanding after this offering (including Class A common stock issued in the Concurrent Transactions)

200,488,123 shares of Class A common stock (205,103,507 shares if the underwriters exercise their option to purchase additional shares in full).

Class B common stock to be outstanding after this offering (including Class B common stock issued in the Concurrent Transactions)

114,402,561 shares of Class B common stock, all of which will be held by the Scott R. Watterson holders.

Total Class A and Class B common stock to be outstanding after this offering (including Class A and Class B common stock issued in the Concurrent Transactions)

314,890,684 shares (319,506,068 shares if the underwriters exercise their option to purchase additional shares in full).

Voting Rights

Shares of Class A common stock are entitled to one vote per share.

Shares of Class B common stock are entitled to ten votes per share.

Holders of our Class A common stock and Class B common stock will generally vote together as a single class, unless otherwise required by law or our amended and restated certificate of incorporation. Following the completion of this offering, each share of our Class B common stock will be convertible into one share of our Class A common stock at any time and will convert automatically upon transfers (other than certain permitted transfers) and upon the earlier of (i) the date specified by a vote of the holders of not less than two-thirds of the voting power of the then outstanding shares of Class B common stock and (ii) the date on which we first become aware the shares of Class B common stock cease to represent at least 15% of all outstanding shares of our common stock. The Scott R. Watterson holders, as holders of our outstanding Class B common

stock, will hold 85.1% of the voting power of our outstanding capital stock immediately following this offering. The Scott R. Watterson holders will have the ability to control the outcome of matters submitted to our stockholders for approval, including the election of our directors and the approval of any change of control transaction. See the sections titled “Principal Stockholders” and “Description of Capital Stock” for additional information.

Directed Share Program

At our request, the underwriters and their respective affiliates (the “DSP Underwriters”) have reserved up to 5% of the shares offered by this prospectus, for sale through a directed share program at the initial public offering price to individuals, including certain of our senior management and employees, as well as friends and family members of our executive officers, founders and certain members of senior management, and persons with whom we have a business relationship, including certain partners. The reserved shares will not be subject to a lock-up, except if purchased by our directors, officers or employees. The number of shares of Class A common stock available for sale to the general public will be reduced by the number of reserved shares sold to these individuals. Any reserved shares of our Class A common stock that are not so purchased will be offered by the DSP Underwriters to the general public on the same terms as the other shares of our Class A common stock offered by this prospectus. We have agreed to indemnify the DSP Underwriters against certain liabilities and expenses, including liabilities under the Securities Act, in connection with sales of the reserved shares.

Use of proceeds

We estimate that the net proceeds from the sale of our Class A common stock in this offering, after deducting the underwriting discount and estimated offering expenses payable by us, will be approximately $557.3 million ($641.7 million if the underwriters exercise their option to purchase additional shares in full) based on an assumed initial public offering price of $19.50 per share (the midpoint of the price range set forth on the cover of this prospectus).

We intend to use the net proceeds in the following order of priority:

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approximately $465.0 million of the net proceeds will be retained by the Company and used for general corporate purposes;

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$35.0 million will be used to make a required payment to our CEO; and

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approximately $57.3 million ($141.7 million if the underwriters exercise their option to purchase additional shares in full) to make a cash payment, which together with the issuance of New Convertible Notes, will repay in full the 2019 Note.

See “Use of Proceeds.”

Dividend policy

We do not currently intend to pay cash dividends on our common stock in the foreseeable future. However, in the future, subject to a

number of factors and our future liquidity and capitalization, we may change this policy and choose to pay dividends.

Our ability to pay dividends is currently restricted by the terms of our Senior ABL Revolving Credit Facility (as defined herein), is subject to consent by the required holders of New Convertible Notes and may be further restricted by any future indebtedness we incur.

In addition, under Delaware law, our board of directors may declare dividends only to the extent of our surplus (which is defined as total assets at fair market value minus total liabilities, minus statutory capital) or, if there is no surplus, out of our net profits for the then current and/or immediately preceding fiscal year. See “Dividend Policy.”

Risk Factors

Investing in our common stock involves a high degree of risk. See the “Risk Factors” section of this prospectus for a discussion of factors you should carefully consider before investing in our common stock.

Listing

We intend to apply to have our common stock listed on NASDAQ under the symbol “IFIT.”

Except as otherwise indicated, the number of shares of our Class A common stock and Class B common stock outstanding after this offering:

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excludes 10,865,601 shares of our Class A common stock issuable upon the exercise of outstanding stock options at a weighted average exercise price of $2.21 per share and 10,662,624 shares of our Class B common stock issuable to Scott R. Watterson upon the exercise of outstanding stock options at a weighted average exercise price of $9.06 per share;

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excludes shares of Class A common stock issuable upon conversion of the New Convertible Notes to be issued as described herein, which have an initial conversion price equal to 85% of the public offering price of our Class A common stock in this offering; based on the midpoint of the price range, we would have $374.0 million of outstanding New Convertible Notes, which would be immediately convertible into 22,561,086 shares of Class A common stock, and a restricted grant to our CEO in $50.0 million principal amount of New Convertible Notes which would, upon vesting, be convertible into 3,016,592 shares of Class A common stock;

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excludes an aggregate of 45,000,000 shares of our Class A common stock that will be available for future equity awards under the iFIT 2021 Equity Incentive Plan, that we plan to adopt (the “2021 Plan”), including approximately 332,980 restricted shares and approximately 6,210,729 shares of common stock issuable upon exercise of options that we intend to grant under the 2021 Plan to certain directors, executive officers and employees at the time of this offering, with the public offering price as the exercise price, including (i) 678,208 shares of Class A common stock issuable upon exercise of options granted to Scott R. Watterson, (ii) 1,241,957 shares of Class A common stock issuable upon exercise of options granted to David J. Watterson, and (iii) 784,161 shares of Class A common stock issuable upon exercise of options granted to Steven J. Barr, as described in “Executive and Director Compensation—Employment and Benefit Plans —2021 Equity Incentive Plan—IPO Awards”; and

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gives effect to the issuance of Class A common stock and Class B common stock in the Concurrent Transactions, as described above (which shares are not being registered in connection with this offering).

Except as otherwise indicated, all information in this prospectus assumes:

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an initial public offering price of $19.50 per share (the midpoint of the price range set forth on the cover of this prospectus);

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the completion of the Concurrent Transactions; and

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no exercise of outstanding stock options after August 31, 2021.

SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL AND OTHER DATA

The following tables present certain summary historical and pro forma financial and other data for our business. We derived the summary consolidated statements of operations data for fiscal 2019, 2020 and 2021 and the summary consolidated balance sheet data as of May 31, 2020 and 2021 from our audited consolidated financial statements included elsewhere in this prospectus. The pro forma data presented below have been derived from our unaudited pro forma condensed consolidated financial statements included elsewhere in this prospectus. The pro forma data is presented for illustrative purposes only and is not necessarily indicative of the results of operations or financial position that would have occurred if the relevant transactions had been completed on the dates indicated, nor is it indicative of future operating results or financial position. Our historical results are not necessarily indicative of the results that may be expected in the future. You should read this data in conjunction with the section titled “Unaudited Pro Forma Condensed Consolidated Financial Information”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes appearing elsewhere in this prospectus.


	Year Ended May 31,
	2019			2020			2021
	(in thousands, except share and per share amounts)
Consolidated Statements of Operations Data:
Revenue:
Interactive fitness products	$	626,189		$	727,703		$	1,515,288
Subscription		73,776			123,977			229,768

Total revenue		699,965			851,680			1,745,056

Cost of revenue:
Interactive fitness products⁽¹⁾		444,908			503,353			989,873
Subscription⁽¹⁾		13,226			19,362			28,980

Total cost of revenue		458,134			522,715			1,018,853

Gross profit		241,831			328,965			726,203
Operating expenses:
Sales and marketing		193,173			278,492			619,431
Research and development⁽²⁾		20,898			23,122			36,274
General and administrative⁽¹⁾		48,892			77,105			198,132

Total operating expenses		262,963			378,719			853,837

Loss from operations		(21,132	)		(49,754	)		(127,634	)
Other expense (income):
Gain on sale of subsidiary		(111,800	)		—			—
Other expense, net⁽³⁾		13,368			46,320			387,089

Total other expense (income)		(98,432	)		46,320			387,089

Income (loss) before provision for income taxes		77,300			(96,074	)		(514,723	)
Provision for income taxes		20,733			2,469			1,983

Net income (loss)	$	56,567		$	(98,543	)	$	(516,706	)

Undistributed earnings allocated to participating securities		(7,496	)		—			—

Net income (loss) attributable to common stockholders	$	49,071		$	(98,543	)	$	(516,706	)

Net income (loss) per share
Basic	$	0.23		$	(0.46	)	$	(2.32	)

Diluted	$	0.23		$	(0.46	)	$	(2.32	)


	Year Ended May 31,
	2019		2020		2021
	(in thousands, except share and per share amounts)
Weighted-average common shares outstanding
Basic		213,654,521		213,111,562		222,511,893

Diluted		213,654,521		213,111,562		222,511,893
Pro forma per share/share data⁽⁴⁾
Pro forma net loss per share, basic and diluted (unaudited)⁽⁴⁾					$	(1.67	)
Pro forma weighted average common shares outstanding, basic and diluted (unaudited)⁽⁴⁾						295,746,503

(1)

Includes depreciation and amortization expense as follows:


	Year Ended May 31,
	2019		2020		2021
	(in thousands)
Cost of revenue
Interactive fitness products	$	1,933	$	1,466	$	1,852
Subscription		5,468		7,833		6,314

Total cost of revenue		7,401		9,299		8,166
General and administrative		9,319		8,732		8,183

Total	$	16,720	$	18,031	$	16,349

(2)

In fiscal 2019, 2020 and 2021, we invested $35.8 million, $45.1 million, and $91.7 million, respectively, in research and development and to enhance our iFIT platform, develop new products, content and features, and improve our platform infrastructure, a portion of which was capitalized.

(3)

Includes a loss in fiscal 2021 of $178.2 million related to the issuance of the Series A and B preferred stock and the 2020 Warrants. The loss is due to the excess of the fair value of the instruments issued over the proceeds received. In fiscal 2020 and 2021, we also incurred losses of $9.4 million and $142.2 million, respectively, related to the change in the fair value of our warrant liabilities and losses of $20.2 million and $39.3 million, respectively, related to the change in fair value of our embedded derivative liabilities. Total other expense (income) also includes interest expense (income) of $15.4 million, $15.5 million and $31.0 million for fiscal 2019, 2020 and 2021, respectively, and other expense (income) of $(2.0) million, $1.2 million and $(3.6) million, for fiscal 2019, 2020 and 2021, respectively.

(4)

We have presented the unaudited pro forma net loss per share, basic and diluted, which has been computed to give effect to the Concurrent Transactions and this offering as though they had occurred as of the beginning of the period on June 1, 2020. For further information on our unaudited pro forma net loss per share, refer to the “Unaudited Pro Forma Condensed Consolidated Financial Information” included elsewhere in this registration statement.

This pro forma data is presented for informational purposes only and does not purport to represent what our net loss or net loss per share actually would have been had the offering and use of proceeds therefrom occurred on June 1, 2020 or to project our net loss or net loss per share for any future period.


	Year Ended May 31,
	2019			2020			2021			2021 (Combined)⁽²⁾
	(dollars in thousands)
Certain Business Metrics and Non-GAAP Financial Measures:⁽¹⁾
Total Fitness Subscribers (at period end)⁽³⁾		262,181			530,490			1,118,519			1,569,127
Total members (at period end)⁽⁴⁾		2,474,504			3,456,816			5,670,616			6,125,067
Total workouts on platform⁽⁵⁾		12,132,471			34,098,117			112,218,822			141,920,650
Subscription gross profit	$	60,550		$	104,615		$	200,788			N/A
Subscription gross margin		82.1	%		84.4	%		87.4	%		N/A
Subscription contribution⁽⁶⁾	$	66,018		$	112,448		$	207,102			N/A
Subscription contribution margin⁽⁶⁾		89.5	%		90.7	%		90.1	%		N/A
Billings⁽⁷⁾	$	92,720		$	183,727		$	382,275			N/A

(1)

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Business Metrics and Non-GAAP Financial Measures” for more information.

(2)

Except as set forth in the combined column, which includes Sweat on a combined basis, the historical data set forth in this table do not give effect to the Sweat acquisition, which occurred subsequent to fiscal 2021 on June 30, 2021. Certain additional information regarding Sweat is provided herein.

(3)

Total Fitness Subscribers are defined as those who have full access to all paid iFIT and/or Sweat content, which is available on the digital app, TV app and on equipment, who are either in an active paid account or a trial and are the primary account holder. Our digital-only iFIT members and trial members each represent less than 5% of our iFIT Subscriber base for all periods presented.

(4)

We define Total Members as all individuals who have an active iFIT account and/or Sweat subscription, which includes Interactive Fitness Subscribers, their respective secondary members and members who consume free content.

(5)

We define a workout as a single program participated in by our members across our entire platform.

(6)

Subscription Contribution and Subscription Contribution Margin are non-GAAP financial measures. We define Subscription Contribution as subscription revenue less cost of subscription revenue, adjusted to exclude depreciation and amortization expense from cost of subscription revenue. Subscription Contribution Margin is calculated by dividing Subscription Contribution by subscription revenue. See the section titled “Selected Consolidated Financial and Other Data—Non-GAAP Financial Measures” for information regarding our use of Subscription Contribution and Subscription Contribution Margin and a reconciliation of Subscription Contribution to subscription gross profit.

(7)

We use billings as a key operating metric in evaluating the performance of our business because it enables an analysis of performance based on the timing of actual transactions with our customers and may be seen as an early indicator of trends in our operating results. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Business Metrics and Non-GAAP Financial Measures” for how we calculate billings.


	May 31, 2020			May 31, 2021			Pro Forma
	(in thousands)
Consolidated Balance Sheets Data:
Cash and cash equivalents	$	100,321		$	146,453		$	586,540
Working capital⁽¹⁾		16,197			70,944			514,002
Total assets		372,129			992,566			1,424,138
Long-term debt, net		139,842			157,133			271
Deferred revenue, current and non-current		161,739			314,246			314,246
Mandatorily redeemable preferred stock		—			234,041			—
Warrant liabilities		54,349			327,313			—
Embedded derivative liabilities		31,600			121,000			—
New convertible notes		—			—			373,950
Total stockholders’ (deficit) equity	$	(181,156	)	$	(670,159	)	$	240,769

(1)

Working capital is total current assets less total current liabilities

RISK FACTORS

Risks Related to Our Business, Our Brands, Our Products and Our Industry

If we are unable to anticipate consumer preferences and successfully develop and introduce new, innovative, and updated products and services in a timely manner or effectively manage the introduction of new or enhanced products and services, our business may be adversely affected.

Our success in maintaining and increasing our subscriber base and product sales depends on our ability to identify and originate trends as well as to anticipate and react to changing consumer demands in a timely manner. Our products and services are subject to changing consumer preferences that cannot be predicted with certainty. If we are unable to introduce new or enhanced offerings in a timely manner, or our new or enhanced offerings are not accepted by our members, our competitors may introduce similar offerings faster than us, or that are preferred by consumers, which could negatively affect our rate of growth. In addition, the success of new or enhanced offerings may depend on a number of other factors including, the success of our sales and marketing efforts, timely and successful research and development, effective forecasting and management of product demand, purchase commitments, and inventory levels, effective management of manufacturing and supply costs, and the quality of or defects in our products. The development of our products and services is complex and costly. Unanticipated problems in developing products and services could also divert substantial research and development resources, which may impair our ability to develop new products and services and enhancements of existing products and services, and could substantially increase our costs.

Our new offerings may not receive consumer acceptance as preferences could shift rapidly to different types of health and fitness offerings or away from these types of offerings altogether, and our future success depends in part on our ability to anticipate and respond to these changes. Failure to anticipate and respond in a timely manner to changing consumer preferences could lead to, among other things, lower iFIT subscription rates, lower sales, pricing pressure, lower gross margins, discounting of our existing products, and excess inventory levels. Further, if new or enhanced product and service introductions are delayed or not successful, we may not be able to achieve an acceptable return, if any, on our research and development efforts, and our business may be adversely affected.

Even if we are successful in anticipating consumer preferences, our ability to adequately react to and address them will partially depend upon our continued ability to develop and introduce innovative, high-quality offerings. Development of new or enhanced products and services may require significant time and financial investment, which could result in increased costs and a reduction in our profit margins. For example, we have historically incurred higher levels of sales and marketing expenses accompanying each product and service introduction. Further, negative reviews online or via social media or otherwise of new or enhanced products and services could have a negative impact on our business, which, particularly during the initial phase of a new or enhanced product launch, could take time or significant expense to counteract and address, or could otherwise delay or impede consumer take up of the new or enhanced products and services.

Moreover, while we have experienced a significant increase in our member base since the start of the global pandemic, it remains uncertain how the global pandemic will impact consumer demand for our products and services and consumer preferences generally and the effect on demand following the pandemic. In addition, we have experienced and may continue to experience delays in the development and introduction of new, updated or enhanced products and services due to the effects of the current global pandemic. We must successfully manage introductions of new, updated and enhanced products and services, which could adversely impact the sales of our existing products and services. For instance, consumers may decide to purchase new, updated or enhanced products and services instead of our existing products and services, which could lead to excess product inventory and discounting of our existing products and services.

In addition, we expect to change our iFIT membership subscription for our Touchscreen products from an annual subscription and billing plan to a monthly subscription and billing plan. Currently, when customers purchase

select iFIT interactive equipment, they purchase an annual subscription to iFIT. After the conclusion of the initial subscription period, customers may, at their election, enter into a monthly or annual subscription arrangement. Under our new plan, customers who purchase select iFIT interactive equipment will purchase a monthly subscription to iFIT and will renew monthly or upgrade to annual membership plans. Our transition to a new plan may not be successful. The inclusion of a monthly membership instead of an annual membership as part of a product purchase may decrease sales velocity and result in fewer subscribers once implemented. We may also experience higher churn on our members due to the monthly renewal period as compared to annual subscriptions.

Additionally, our relationships with our retail partners are important to our business. If we are unable to introduce differentiated offerings for our retail partners, our relationships with those partners may suffer, which may cause us to lose key retail partnerships, or have difficulty developing new retail partnerships.

We operate in a highly competitive market 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, in-studio fitness classes, fitness travel and events, and health and wellness apps as well as, with respect to our iFIT technology, specialized consumer electronic device companies. The market for every aspect of our business has multiple participants. 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. Further, as we expand our product offerings in the health and wellness category, we will face additional competitors within the overall health market, including from participants in the medical, nutritional health, healthcare and pharmaceutical industries. Our competitors may develop, and 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 or other proprietary 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. Some of our competitors may even aggressively discount their products and services in order to gain market share, which could result in pricing pressures, reduced profit margins, lost market share, or a failure to grow market share for us. Additionally, our retail partners may develop direct relationships with suppliers and begin to market private label fitness equipment products under their own brand names in competition with our products. 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 results of operations.

The market for subscription-based interactive health and fitness services such as those delivered through our iFIT platform is still in the early stages of growth and if it does not continue to grow, grows more slowly than we expect, or fails to grow as large as we expect, our business, financial condition, and results of operations may be adversely affected.

The market for subscription-based interactive health and fitness services is relatively new and rapidly growing, and it is uncertain whether it will sustain high levels of demand and achieve wide market acceptance. Our success depends substantially on the willingness of consumers to widely adopt our products and services. In part, adoption of our products and services will depend on an increased profile of both the market as a whole and our own platform. To be successful, we will have to educate consumers about our products and services through investment, and provide quality content that is superior to the content and experiences provided by our competitors. With respect to our iFIT platform, some individuals may be reluctant or unwilling to use connected

health and fitness devices because they have concerns regarding the risks associated with data privacy and security. If the wider public does not perceive the benefits of our connected health and fitness devices or chooses not to adopt them as a result of concerns regarding data privacy and security or for other reasons, this could limit our growth potential and adversely affect our results of operations. The development and growth of this relatively new market may also prove to be a short-term trend. Additionally, the health and fitness market at large is highly competitive, and the demand for and market acceptance of new products and services in the market is uncertain. It is difficult to predict the future growth rates, if any, and size of our market. We cannot assure you that our market will develop, that the public’s interest in connected health and fitness will continue, or that our products and services will be widely adopted. In particular, our subscribers that obtain annual memberships in bundles with equipment purchases may not renew. If our market does not develop, develops more slowly than expected, or becomes saturated with competitors with whom we cannot remain competitive, or if our products and services do not achieve market acceptance, our business, financial condition, and results of operations could be adversely affected.

We may be unable to attract and retain subscribers, which could have an adverse effect on our rate of growth, business and results of operations.

Our continued business and revenue growth is dependent on our ability to attract and retain subscribers and grow product sales, and we may not be successful in these efforts, or member retention levels may materially decline. A purchase of iFIT equipment may be bundled with a purchase of an annual iFIT subscription; however, these members may not renew their iFIT subscriptions after the first year and/or subsequent months, and a decline in the rate of renewals would have an adverse effect on our business. While our subscriptions generally provide for renewal, our customers may opt-out of automatic renewal and customers have no obligation to renew a subscription after its expiration. We expect to change our iFIT membership subscription for our Touchscreen products from an annual subscription and billing plan to a monthly subscription and billing plan. While we believe this will generate benefits for us, it could lead to fewer subscriptions, lower sales or higher churn. Further, new laws and regulations by states, the federal government, or international authorities, that are being considered or that have been recently enacted, related to automatic renewal practices, which in some cases may not allow for automatic renewal and would require customers to opt-in to each month, could impact the rate of renewal by our customers and certain of our business practices, and therefore our revenues. There are a number of factors that could lead to a decline in subscriber levels or that could prevent us from increasing our subscriber levels or product sales, including, but not limited to:

•

our inability to deliver quality products or content;

•

a potential reversal of the trend toward in-home fitness following the global pandemic;

•

harm to our brands and reputation;

•

pricing and perceived value of our offerings;

•

the success of our sales and marketing efforts;

•

concerns by consumers or members regarding privacy or data security;

•

our members engaging with competitive products and services;

•

technical or other problems preventing members from accessing our content and services in a rapid and reliable manner or otherwise affecting the member experience;

•

interruptions in our ability to sell or deliver our products or to create content and services for our members as a result of the global pandemic; and

•

deteriorating general economic conditions or a change in consumer spending preferences or buying trends including available product financing, whether as a result of the global pandemic or otherwise.

A decline in subscriber levels or product sales could have an adverse effect on our business, financial condition, and results of operations.

We rely on a limited number of suppliers, manufacturers, and logistics partners for our products. A loss of any of these partners could negatively affect our business.

We rely on a limited number of suppliers, manufacturers, and logistics partners, including in some cases only a single supplier for some of our products, components and raw materials. While we own and operate our own manufacturing facilities for certain of our products, we depend upon independent contract manufacturers to manufacture the substantial majority of products we sell. Further, we have a significant concentration with one contract manufacturer. Our reliance on a limited number of manufacturers, in particular with our main contract manufacturer, increases our risks, since we may face timing delays or difficulties transferring to or finding alternate or replacement manufacturers, and we do not currently have alternative or replacement manufacturers beyond these key parties. In the event of interruption from any of our manufacturers, we may not be able to increase capacity from other sources or develop alternate or secondary sources without incurring material additional costs and substantial delays. Additionally, if our contract manufacturers fail to make timely shipments, do not meet our quality standards, or otherwise fail to deliver us product in accordance with our plans, there could be a material adverse effect on our results of operations.

Our interactive fitness equipment is finished in multiple facilities located in seven countries, but the majority of our top suppliers are located in China. Our business could be adversely affected if one or more of our suppliers is impacted by adverse political developments, a natural or man-made disaster, including climate change, or other interruption at a particular location. In the past we have experienced some disruptions from suppliers due to natural disasters and labor disruptions. Our business is experiencing shortages of shipping containers, lack of available space on transport ships, and the disruption of global logistics and supply chains that may result in a material adverse effect on our operations including increased lead times. The costs and lead times of steel, cast iron, aluminum, and plastics have increased substantially. Consequently, we are seeing shortages and longer lead times in our acquisition of components necessary in the manufacture of our products. In addition, we have begun experiencing difficulty in ordering integrated circuits (“ICs”) for future use and that difficulty is continuing. The global shortage of ICs and increasing costs and lead times of raw materials and components is affecting a multitude of industries. While we are identifying other sources and taking other production and inventory control steps in order to mitigate the effects caused by these shortages, we cannot guarantee that we will find alternative sources to meet our short and longer-term needs and/or without experiencing increases in the prices we pay for these components. If we are not able to find these alternative sources or are not able to purchase sufficient quantities from our current and alternative suppliers, we may not be able to produce sufficient quantities of products to meet our customers’ demands.

As our ability to meet our customers’ needs depends on our ability to maintain a steady supply of products from our independent contract manufacturers, if one or more of our suppliers or vendors were to close or sever their relationship with us or significantly alter the terms of our relationship, we may not be able to obtain replacement products in a timely manner, which could have a material adverse effect on our business, financial condition, and results of operations. Additionally, if we experience significantly increased demand, or if we need to replace an existing supplier, manufacturer or logistics partner for any reason, we may be unable to supplement or replace them on terms that are acceptable to us, which may undermine our ability to deliver our products to members in a timely manner. For example, it may take a significant amount of time to identify a manufacturer that has the capability and resources to build our products to our specifications in sufficient volume. Identifying suitable suppliers, manufacturers, and logistics partners is an extensive process that requires us to become satisfied with their quality control, technical capabilities, responsiveness and service, financial stability, regulatory and legal compliance, and labor and other ethical practices. Even if we are able to find a new supplier, manufacturer or logistics partner on terms that are acceptable to us, we may be required to incur higher, or additional costs, which may be long-term, which may have an adverse effect on our subscription levels, financial condition and results of operations. In addition, in the absence of exclusivity arrangements, our suppliers, contract manufacturers, and logistics providers may have or may seek at any time to have relationships with our competitors and potential competitors, and as a result of such relationships, such suppliers, contract manufacturers, and logistics providers may choose to limit or terminate their relationship with us. Accordingly, a loss of any of our significant suppliers, manufacturers, or logistics partners could have an adverse effect on our business, financial condition and results of operations.

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

We have limited control over our suppliers, manufacturers, and logistics partners, including aspects of their specific manufacturing processes and their labor, environmental, or other practices, which subjects us to risks, such as the following:

•

inability to satisfy demand for our products;

•

reduced control over delivery timing and product reliability;

•

reduced ability to oversee or 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 partner to perform its obligations to us for technical, market, regulatory, or other reasons;

•

variance in the quality of last mile services provided by our third-party logistics partners;

•

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

•

shortages of materials or components;

•

shortages of shipping containers and the disruption of global logistics and supply chains;

•

infringement, misappropriation or other violation of our intellectual property or proprietary rights;

•

exposure to natural catastrophes, 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 raw materials/components thereof are sourced;

•

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

•

the imposition of new laws and regulations, including those relating to labor conditions, quality and safety standards, environmental, health and safety, 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 raw materials or components supplied to our manufacturers or performance by our partners.

If there are defects in the manufacture of our products by our contract manufacturers, we may face negative publicity, government investigations, and litigation and we may not be fully compensated by our contract manufacturers for any financial or other liability that we suffer as a result. Further, we also rely on our logistics partners, including last mile warehouse and delivery partners, to complete substantially all of our deliveries to customers, with the rest of the deliveries handled by our own last mile team. Our primary last mile partners rely on a network of independent contractors to perform last mile services for us in many markets. If any of these independent contractors, or the last mile partners as a whole, do not perform their obligations or meet the expectations of us or our members, our reputation, brands 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 members, which could have an adverse effect on our subscriptions, business, financial condition and results of operations.

Increases in raw materials and component costs, long lead times, supply shortages, transportation and logistical issues and supply changes could disrupt our supply chain and have an adverse effect on our business, financial condition, and results of operations.

Meeting customer demand partially depends on our ability to obtain timely and adequate delivery of raw materials and components for our products. We generally procure certain key electronic components for our products. We are therefore subject to the risk of holding these components in our inventory. Some of these components come from limited or sole sources of supply. In addition, we rely on manufacturers to assemble such components into our final end products. In addition, the lead times associated with certain raw materials and components or the manufacturing of such various components into our final end products are lengthy and preclude rapid changes in design, quantities, and delivery schedules. Our business is experiencing shortages of shipping containers, lack of available space on transport ships, and the disruption of global logistics and supply chains that may result in a material adverse effect on our operations including increased lead times. The costs and lead times of steel, cast iron, aluminum, and plastics have increased substantially. Consequently, we are seeing shortages and longer lead times in our acquisition of components necessary in the manufacture of our products. In addition, we have begun experiencing difficulty in ordering integrated circuits (“ICs”) for future use and that difficulty is continuing. The global shortage of ICs and increasing costs and lead times of raw materials and components is affecting a multitude of industries. While we are identifying other sources and taking other production and inventory control steps in order to mitigate the effects caused by these shortages, we cannot guarantee that we will find alternative sources to meet our short and longer-term needs and/or without experiencing increases in the prices we pay for these components. If we are not able to find these alternative sources or are not able to purchase sufficient quantities from our current and alternative suppliers, we may not be able to produce sufficient quantities of products to meet our customers’ demands. We may continue to and in the future experience component shortages, and the predictability of the availability of these raw materials and components is and may be limited. In the event of a component shortage, we may not be able to develop alternate sources in a timely manner. Developing alternate sources of supply for these raw materials and components may be time-consuming, difficult, and costly and we may not be able to source these raw materials and components on terms that are acceptable to us, or at all, which may undermine our ability to fill our orders in a timely manner. Any interruption or delay in the supply of any of these raw materials or components, or the inability to obtain these raw materials or components from alternate sources at acceptable prices and within a reasonable amount of time, would harm our ability to meet our scheduled product deliveries to our customers. Moreover, volatile economic conditions may make it more likely that our suppliers may be unable to timely deliver supplies, or at all, and there is no guarantee that we will be able to timely locate alternative suppliers of comparable quality at an acceptable price. Several of the raw materials or components that go into the manufacturing of our products are sourced internationally, including from China, where the United States has imposed tariffs on specified products imported therefrom following the U.S. Trade Representative Section 301 Investigation. These issues have been exacerbated by the global pandemic. These tariffs have an impact on our raw materials and component costs and have the potential to have an even greater impact depending on the outcome of the current trade negotiations, which have been protracted and recently resulted in increases in U.S. tariff rates on specified products from China. We have seen, and may continue to see, an increase in transportation and logistical issues, including strikes, congestion and new import/export restrictions implemented at ports that we rely on for our business, as well as union action, trucker and transportation strikes, and other obstacles affecting transportation infrastructure. In many cases, we have had to secure alternative transportation, such as air freight, or use alternative routes, at increased costs to run our supply chain. Increases in our raw materials or component costs, or delays or disruptions or increased costs relating to transportation and logistics, could have a material effect on our gross margins. The loss of a significant supplier, an increase in raw material or component costs, or delays or disruptions in the delivery of raw materials or components or finished goods, could adversely impact our ability to generate future revenue and have an adverse effect on our business, financial condition, and results of operations.

Our success depends on our ability to maintain our brands. If events occur that damage our brands, our business and financial results may be harmed.

Our success depends on our ability to maintain the value of the “iFIT” brand as well as other key product brands like “NordicTrack,” “ProForm,” “Freemotion,” “Weider,” “Sweat” and “29029” as well as other brands that we may acquire or develop in the future. The “iFIT” name and our product brands are integral to our business as well as to the implementation of our strategies for expanding our business. Maintaining, promoting, and positioning our brands will depend largely on the success of our marketing efforts, our ability to provide consistent, high-quality, reliable products, services, features, content, and customer support, our ability to maintain our customers’ trust, our ability to successfully differentiate our services and platform capabilities from competitive products and services, and our ability to successfully obtain, maintain, and protect our rights to use the “iFIT” name and other trademarks that are important to our business. 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, reputation or brands were to be tarnished by negative publicity, including negative online reviews or any viral negative publicity on social media or otherwise. Unfavorable publicity about us, our products or our trainers could diminish confidence in, and the use of, our products and services. Obtaining, maintaining, protecting, defending and enhancing our brands may require us to make substantial investments, and these investments may not be successful. If we fail to successfully promote our brands and protect our reputation or if we incur significant expenses in this effort, our business, financial condition and results of operations may be adversely affected and it also could have an adverse effect on subscription and retention rates and the size, engagement and loyalty of our member base.

We track certain operational and business metrics internally and our members use our products, subscriptions, and fitness accessories to track and record other certain metrics, including their workouts, and any real or perceived inaccuracies in such metrics and data may harm our reputation and negatively affect our business and ability to retain our members.

We track certain operational and business metrics, including workouts per user per month and total number of workouts on our platform, 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. Similarly, our members use our products, subscriptions, and fitness accessories, such as our heart rate monitor, to track and record certain metrics related to their workouts.

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 workouts per user per month and total number of workouts on our platform or other metrics as a result of algorithm or other technical errors, the operational and business metrics that we report may not be accurate. Furthermore, if the software used in our products or on our platform malfunctions and fails to accurately track, display, or record member 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. In addition, limitations or errors with respect to how we measure certain operational, business and user 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; if the metrics we rely on to track our performance do not provide an accurate measurement of our business; if our products and services fail to provide accurate metrics and data to our members; 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, our reputation may be harmed, we may become the subject of negative publicity, litigation, regulatory proceedings, and warranty claims, and our results of operations could be adversely affected. Further, while we disclose that our heart rate monitor is not a medical device, and that certain of our metrics, such as estimated calories burned, are only estimates, any real or

perceived inaccuracies in any metrics we provide, or the undue reliance by members on such metrics, could result in the loss of members, negative publicity or litigation.

Finally, despite our efforts and processes to prevent breaches and other security incidents, our devices, as well as our servers, computer systems, and those of third parties that we use in our operations to track such metrics are vulnerable to cybersecurity risks. Despite our efforts to create security barriers to such threats, any breach or security incident may result in negative publicity, adversely affect our brand, decrease demand for our products and services, negatively impact consumer confidence, cause us to incur significant costs and liabilities and adversely affect our business, financial condition and results of operations. See “Risks Related to Information Technology and Intellectual Property—Any cybersecurity attack, disruption or failure of our or our third-party service providers’ information technology systems, or our failure to successfully implement upgrades and new technology effectively, could adversely affect our business and operations.”

Changes in our marketing approach could increase our marketing expenses and potentially decrease subscription levels, and our marketing campaigns may not be successful.

We employ a range of marketing and other brand-building measures to reach and retain members. We use traditional television, broadcast and online advertising, as well as third-party social media platforms such as Facebook, Twitter, and Instagram, as marketing tools. As television advertising, online, and social media platforms continue to evolve or grow more competitive, we must maintain a presence on these platforms and establish a presence on any new or emerging social media, advertising and marketing platforms. We also rely on third-party marketing service providers to communicate with our customers by methods such as email, SMS text messages and mobile push notifications. Any delay or errors in the delivery of such emails or other messaging we send may occur and be beyond our control, which could damage our reputation or harm our business, financial condition and results of operations. We additionally market and run promotions with our retail partners. If we cannot employ these and new marketing tools in a cost-effective way, or if we fail to promote our products and services efficiently and effectively, our member acquisition and, therefore our financial condition, may be negatively impacted. In addition, an increase in the use of television, online, and social media for product promotion and marketing may increase the burden on us to monitor compliance of such materials and increase the risk that such materials could contain problematic product or marketing claims in violation of applicable regulations or be placed near other content that harms our brand. Online and social media advertising platforms also may restrict our use of cookies and similar technologies for advertising purpose or significantly increase the level of compliance or requirements necessary to use those platforms, which could reduce the effectiveness of our marketing efforts. Additionally, if any consumers have a negative reaction to any of our advertising, whether or not intended, this could result in negative publicity, which could harm our reputation and brand, and could result in additional expense to counteract any such negative reaction or publicity. Further, if for any reason any of our advertising campaigns prove less successful than anticipated in attracting new members or retaining existing members, we may not be able to recover our advertising spend, and our member acquisition rate may fail to meet market expectations, either of which could negatively impact our business. There can be no assurance that our advertising and other marketing efforts will result in increased sales of our products and services.

We sell our products through multiple channels and a significant reduction in orders from any major customer in our third-party channels could adversely affect our financial results.

We sell our products through multiple channels, and the loss of, or reduction in orders from, any major customer for any reason (including, for example, changes in a retailer’s strategy, claims or allegations that our products or products we market on behalf of third parties are unsafe, a decline in consumer demand, regulatory, legal or other external pressures or a change in marketing strategy) could have a material adverse effect on our business, financial condition, results of operations and cash flows, as could customer disputes regarding shipments, fees, merchandise condition or related matters. Our inability to collect accounts receivable from one of our major customers, or a significant deterioration in the financial condition of one of these customers, including a bankruptcy filing or a liquidation, could also have a material adverse effect on our financial condition, results of operations and cash flows.

We do not have long-term sales agreements with, or other contractual assurances as to future sales to, any of our major retail partners. In addition, continued consolidation in the retail industry has resulted in an increasingly concentrated retail base, and as a result, we are significantly dependent upon sales to key retailers who have significant bargaining strength. To the extent such concentration continues to occur, our net sales and income from operations may be increasingly sensitive to deterioration in the financial condition of, or other adverse developments involving our relationship with, one or more of our major customers. In addition, our business may be negatively affected by changes in the policies of our retailers, such as inventory destocking, limitations on access to shelf space, price demands and other conditions.

We have grown rapidly in recent periods. If we are unable to manage our growth effectively, our brands, company and financial performance may suffer.

We recently have grown our sales rapidly. To effectively manage and capitalize on our growth, we must continue to expand our sales and marketing, continue to focus on innovative product and content development, continue to improve and update our software and technology and upgrade our management information systems and other processes. Moreover, the vertically integrated nature of our business, where we design our own products, conduct research and development, develop our own software and technology, produce original health and fitness programming and deliver and service our products, exposes us to risk and disruption at many points that are critical to successfully operating our business. If we do not adapt to meet these evolving challenges, we may experience erosion to our brands, and the quality of our products and services may suffer. Further, as we continue to grow, we may face challenges acquiring adequate and timely supplies of our products to satisfy the levels of demand, which may negatively affect our revenue, and this risk may be exacerbated by the fact that we may not carry sufficient levels of inventory, either directly or with our manufacturers or logistics partners to satisfy demand increases. The rapidly evolving nature of the market in which we sell our products and services, substantial uncertainty concerning how these markets may develop, and other factors beyond our control, reduces our ability to accurately forecast quarterly or annual revenue. Failure to manage our future growth effectively could have an adverse effect on our business, financial condition, and results of operations.

Our profitability may suffer as a result of competitive pricing, the price sensitive nature of our sales and other pressures.

The introduction of lower-priced alternative products or services by other companies can hurt our competitive position in all of our businesses. We are constantly subject to competitive pressures in which other manufacturers may pursue a strategy of aggressive pricing, particularly during periods when their local currency weakens versus the U.S. dollar. We may set product prices at a different time from when we purchase raw materials and components. After we have established prices, we may be unable to pass cost increases along to our customers, or to compete as effectively if we seek to pass such costs along, which could have a material adverse effect on us. Such pricing pressures may limit our ability to increase prices for our products in response to raw material and other cost increases and negatively affect our profit margins. Further, due to competitive pressure or otherwise, we may choose to reduce our pricing and sell certain of our products at a loss, including, for example, to increase the volume of products sold, remain competitive or for other strategic reasons. Any price compression in the market could have an adverse effect on our profit margin, financial condition and results of operations.

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

As a producer and distributor of content, we face potential liability for negligence, copyright, and trademark infringement, or other claims based on the nature and content of materials that we acquire, produce, license, and/or distribute through our iFIT platform. We also may face potential liability for content used in promoting our service, including marketing materials. We produce interactive original content. We believe that original content can help differentiate our service from other offerings, enhance our brands and otherwise attract and retain members. To the extent our original content does not meet our expectations, in particular, in terms of costs,

viewing and popularity, our business, our brands and results of operations, may be adversely impacted. This risk may be exacerbated for new content we create for our international markets. We also may decide to remove content from our platform, not to place certain content on our platform, or to discontinue or alter our production of certain types of content if we believe such content might not be well received by our members or could be damaging to our brands and business. To the extent we do not accurately anticipate costs or mitigate risks, including for content that we obtain or produce, but that ultimately does not appear on or is removed from our platform, or if we become liable for content we acquire, produce, license and/or distribute, our business may suffer. Litigation to defend these claims could be costly, could divert management’s attention, 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 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 offer a wide variety of complex hardware and software products and services that can be affected by design and manufacturing defects. Product defects can occur through either our own or third-party product development, design and manufacturing processes. Sophisticated operating system software and applications, such as those offered by us, often have issues that can unexpectedly interfere with the intended operation of hardware or software products. Although we extensively and rigorously test new and enhanced products and services before their release, there can be no assurance we will be able to detect, prevent, or fix all defects. Defects may also exist in raw materials, components and products that we source from third parties. Any such defects could make our products and services unsafe, create a risk of personal injury, property damage 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 content streaming. As a result, our services may not perform as anticipated and may not meet customer expectations. Failure to detect or prevent these issues could result in technical and performance issues affecting our products and services, a greater number of returns of products than expected from members and retailers, regulatory proceedings, product recalls, and litigation, which could harm our business, financial condition and results of operation. 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. Further, the occurrence of real or material defects or even just perceived quality problems in our current and future products could create negative publicity related to the perceived quality and safety of our products, which could affect our brands and decrease demand for our products and services, and adversely affect our business, financial condition and results of operations.

We maintain general liability and product 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 have in the past and may in the future 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 business, financial condition and results of operations could be adversely impacted.

We incur various expenses related to product defects, including product warranty costs, product recall and retrofit costs and product liability costs, which can have an adverse impact on our results of operations. In addition, the reputation of our brands may be diminished by product defects and recalls, in particular with respect to any negative publicity associated with the product defects or recalls. Our inability to cure a product defect could result in the failure of a product line or the temporary or permanent withdrawal from a product category or market.

We maintain a reserve for our product warranty costs based on certain estimates and our knowledge of current events and actions, but our actual warranty costs may exceed our reserve, resulting in a need to increase our

reserves for warranty charges. We purchase insurance coverage to reduce our exposure to significant levels of product liability claims and maintain a reserve for our self-insured losses based upon estimates of the aggregate liability using claims experience and actuarial assumptions. Incorrect estimates or any significant increase in the rate of our product defect expenses could have a material adverse effect on our results of operations. Further, our assumptions for new types of products may also be less reliable, and therefore there may be an increased risk of incorrect estimates anytime we launch a new product. Given our focus on our research and development efforts on building new software and hardware products, a launch of any new product may increase the risk that our estimates are incorrect, and increase the rate of our product defect expenses, which could have a material adverse effect on our results of operations.

Due to the global pandemic, we may experience higher product returns as consumer discretionary spending decreases. Moreover, in light of changes we have made to our delivery procedures in connection with the current global pandemic, it is possible that warranty claims may increase above historical rates, and we may be unable to satisfactorily validate and resolve warranty claims where the global pandemic prevents us from performing in-home service appointments. For example, because the global pandemic may prevent us from entering purchasers’ homes, if a customer wants to return a product, we require such customer to move their product to their door, so we can collect such product without direct physical interaction, which may negatively impact customer satisfaction. Additionally, if we are unable to resolve warranty claims through in-home service appointments, in some cases, we have sent the member a replacement product and have requested that they hold the impaired product until a later date when we can safely retrieve it.

Short product life cycles can make it difficult to maintain continued interest in our products.

Product life cycles can be short in the fitness industry and innovation is an important component of competition. While we emphasize new product innovation and product repositioning (i.e., design changes or revised marketing strategies), we may be unable to continue to develop competitive products in a timely manner or to respond adequately to market trends. In addition, we may not be able to ensure that repositioned products will gain initial market acceptance, that interest in our products will be sustained, or that significant start-up costs with respect to new products will be recouped. Moreover, although our management believes that fitness and health activities have become important for consumers, we cannot ensure that interest in any particular fitness modality will be sustained.

Although we offer a range of fitness modalities, certain modalities, including treadmills, constitute a substantial portion of our interactive equipment sales. We could be adversely affected if we were to experience a significant decline in the popularity of treadmills these modalities and were unable to replace any decline with growth in the other modalities we offer or may offer in the future.

We have been and may be subject to claims resulting from injuries experienced by our customers, which could damage our reputation and have other adverse effects on our business.

As we offer a variety of interactive fitness equipment, we face an inherent business risk of exposure to product liability claims or reputational risk in the event that our products result in injury and we are currently subject to such claims. As with any fitness equipment, there are health and safety issues, which include injuries that could result from misuse of our fitness equipment by our customers, failure of users to properly assemble equipment, the failure by users to follow safety protocols, including the use or misuse of our equipment by children, and defects in the manufacture of our equipment. While the safety of our customers is important to us, the safety protocols we have in place may not be sufficient, and, due to the interactive nature of many of our products, which allows for the automatic adjustment to the speed, resistance and incline of iFIT-enabled equipment in sync with certain of our content, or the adjustment to the speed, resistance and incline of iFIT-enabled equipment by our trainers, if one of our subscribers experiences a serious injury or harm while following a trainer recommended protocol, or as a result of engaging in content that automatically makes such adjustments, they could initiate a product liability or other claim against us. Injury may also occur if an individual uses our

equipment for purposes such as cardio or heart rate training at a level that is not appropriate for that individual in light of underlying health conditions or fitness levels. Any such claims, whether meritless or not, could harm our reputation and brand and result in losses as a result of expenses incurred in defending claims or the award of damages. And while we maintain general liability and product liability insurance, we cannot make assurances that they will be sufficient to cover all claims, that such claims will not exceed our insurance coverage limits or that such insurance will continue to be available on commercially reasonable terms, if at all.

Our results of operations could be materially harmed 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 contract manufacturers based on our estimates of future demand for particular products. Our ability to accurately forecast demand for our products and services could be affected by many factors, including an increase or decrease in customer demand for our products and services or for products and services of our competitors, product and service introductions by competitors, unanticipated changes in general market conditions, and the weakening of economic conditions or consumer confidence in future economic conditions. Due to the recent rapid growth in demand for our interactive health and fitness devices, we face challenges acquiring adequate and timely supplies of our products to satisfy the levels of demand, which we believe negatively affects our revenue. This risk may be exacerbated by the fact that we may not carry a significant amount of final end products inventory, either directly or with our contract manufacturers or logistics providers to satisfy short-term demand increases. For example, we have experienced an unexpected increase in demand for our products as a result of government shelter-in-place orders and other stay-at-home dynamics in response to the global pandemic, which has resulted in inventory shortages, delayed delivery timelines and delays in fulfilling support requests. We are in particular subject to raw material inventory risk as well; we or our contract manufacturers may not hold enough raw material inventory, or may hold too much raw material inventory, at any point in time. If we fail to accurately forecast customer demand, we may experience excess inventory levels or a shortage of products available for sale.

Inventory levels in excess of customer demand may result in inventory write-downs or write-offs and the sale of excess inventory at discounted prices, which would cause our gross margin to suffer and could impair the strength of our brand. Conversely, if we underestimate customer demand for our products and services, our contract manufacturers may not be able to deliver products to meet our requirements, and this could result in damage to our brands and customer relationships and adversely affect our revenue and results of operations.

We rely on the skills and capabilities, as well as the creativity, of our trainers to generate our experiential content. If we are unable to attract and retain high-quality trainers, we may not be able to generate interesting and attractive content for our workouts.

Production of the health and fitness content on our platform is reliant on the skills and capabilities, as well as creativity, of our trainers who, with the support of our production team, plan and lead our live and on-demand content. Our standard independent contractor agreement with our trainers is for specific projects and time periods. If we are unable to attract or retain creative and experienced trainers, we may not be able to generate content on a scale or of a quality sufficient to grow our business. Additionally, if the quality of our trainers comes into question, whether due to discrediting of their credentials, negative publicity regarding their actions or the views they express, whether or not relating to their work for us, our content and our brand could suffer. Also, our trainers have sustained injuries in the past, and if this happens in the future it may impact our ability to produce certain content, and given that some of our members prefer to stream content by certain of our trainers, the temporary or permanent loss of such preferred trainers to stream or record content due to injury could have an adverse effect on our members’ experiences, and therefore our ability to retain our members or attract new members. Our trainers are important to our success, as we rely on them to bring new, innovative health and fitness content to our iFIT platform. If we fail to produce and provide our members with interesting and attractive content led by quality trainers with whom they can relate, then our business, financial condition, and results of operations may be adversely affected.

The insolvency, credit problems, or other financial difficulties and general economic conditions confronting our retail partners, distributors and other purchasers of our products could expose us to financial risk.

Some of our retailers, distributors and other purchasers of our products have experienced financial difficulties in the past. The retail industry in general is changing. More people are shopping online and there is a general consolidation of major brands and a large number of well-known brands are stressed, including former industry giants. Commercial fitness facilities, some of which are our customers, have experienced financial difficulties, in particular recently, as a result of the global pandemic. The insolvency, credit problems, or other financial difficulties and general economic conditions confronting our retail partners, distributors or other purchasers of our products could expose us to financial risk. Financial difficulties of our retail partners, distributors or other purchasers of our products could impede their effectiveness and also expose us to risks if they are unable to pay for the products they purchase from us. The difficulties of retail partners, distributors or other purchasers of our products may also lead to price cuts of our products and adverse effects on our brands and results of operations. Retail businesses may also be adversely affected by unfavorable local, regional or national economic developments which result in reduced consumer spending. We cannot ensure that an economic downturn would not have a material adverse effect on our customers and, therefore, on the retailers with which we work, and on us. Any reduction in sales by our current retail partners, distributors or joint venture partner, loss of large resellers or distributors, or decrease in revenue from our retail partners, distributors and other purchasers of our products could adversely affect our revenue, results of operations, and financial condition.

If we fail to offer high-quality member support, our business and reputation will suffer.

Once our products are purchased, they must be assembled by the purchaser or our white glove delivery team. Our members also rely on our support services to resolve any issues related to the use of our products and content. Providing a high-quality member experience is important to our success in generating word-of-mouth referrals to drive sales and for retaining existing members and in maintaining the strength of our brand. Due to the global pandemic, our ability to provide high-quality member support has been significantly impacted. For example, due to the global pandemic, our ability to provide in-home installation and servicing of our products has been restricted, and delivery procedures for our products are still limited to curbside and threshold delivery. In addition, the closure of our offices has forced some of our member support staff to work from home, which may result in work-productivity issues or a decrease in efficiencies, particularly during times of high call volume as we have seen when delivery lead times get longer. As a result of the global pandemic or otherwise, purchasers may have unsatisfactory experiences with the delivery, installation, or servicing of our products, including due to prolonged delivery timelines and limitations on or the suspension of the in-home installation, return, and warranty servicing processes. Further, 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 members quickly resolve issues and provide effective ongoing support, our reputation may suffer and our ability to retain and attract members, or to sell additional products and services or add-on products or services to existing members, could be harmed.

We depend on key personnel, the loss of whom would harm our business.

Our future success will depend in part on the continued service of key executive officers and personnel. In particular, we are highly dependent on the contributions of members of our management team. The loss of the services of any key individual could harm our business. Our future success also depends on our ability to recruit, retain, and motivate our personnel, as well as ultimately to put in place succession plans, both to maintain our current business and to execute our strategic initiatives. Competition for employees in our industry is intense and we may not be successful in attracting and retaining such personnel. If members of our senior management team become ill, we may not be able to manage our business effectively and, as a result, our business and results of operations could be harmed.

Our business is affected by seasonality which results in fluctuations in our results of operations.

Historically, we have experienced fluctuations in aggregate sales volume during the year. Sales are typically strongest in the second and third fiscal quarters, including the holiday period and new calendar year. However,

the mix of product sales may vary considerably from time to time as a result of changes in seasonal and geographic demand for particular types of fitness equipment. Similarly, we have experienced higher churn in iFIT subscriptions during the third and fourth fiscal quarters, following the expiration of annual subscriptions purchased with fitness equipment purchases. Sweat experiences similar seasonality. As a result, we may not be able to accurately predict our quarterly sales. Accordingly, our results of operations are likely to fluctuate significantly from period to period.

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

Our quarterly results of operations and other operating metrics have fluctuated in the past and may continue to fluctuate from quarter to quarter. Additionally, our significant growth in sales recently makes it difficult to forecast our future results. As a result, you should not rely on our past quarterly results of operations 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 results of operations 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:

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the continued market acceptance of, and the growth of the interactive health and fitness market;

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our ability to maintain and attract new members;

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the impact of the reopening following the pandemic;

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our development and improvement of the quality of the iFIT experience, including, enhancing existing and creating new products, services, technology, features, and content;

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the continued development and upgrading of our proprietary technology platform;

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our ability to successfully obtain, maintain and protect our intellectual property and other proprietary rights, including third-party licenses;

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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;

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pricing pressure as a result of competition or otherwise;

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delays or disruptions in our supply, manufacturing or distribution chain;

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

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

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continued expansion into international markets or variations in our international markets;

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

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the diversification and growth of our revenue sources;

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our ability to maintain gross margins and operating margins;

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

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system failures, cybersecurity breaches or other security or privacy incidents that may result in unauthorized access to our systems or unauthorized access to or compromise, misuse or loss of personal information;

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

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

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product recalls, regulatory proceedings, or other adverse publicity about our products;

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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;

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

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

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insolvency, credit, or other difficulties faced by our distributors and retailers, affecting their ability to purchase or pay for our products;

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insolvency, credit, or other difficulties confronting our suppliers, contract manufacturers, or logistics providers leading to disruptions in our supply or distribution chain;

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levels of product returns, stock rotation, and price protection rights; and

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costs related to the acquisition of businesses, talent, technologies, or intellectual property, including potentially significant amortization costs and possible write-downs.

Any one of the factors above or the cumulative effect of some of the factors above may result in significant fluctuations in our results of operations. The variability and unpredictability of our quarterly results of operations 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 results of operations for a particular period. If we fail to meet or exceed such expectations for these or any other reasons, the market price of our Class A common stock could fall substantially, and we could face costly lawsuits, including securities class action suits.

The growth of the global health and fitness economy may not continue.

Though the total global health and wellness market is projected to achieve estimated spend of $5.9 trillion in 2021, we cannot be certain consumers’ interest in health and fitness will be sufficient to sustain continued growth in the future. If consumers’ interest in health and fitness activity declines, we cannot assure you that such a decline would not have a material adverse effect on our cash flow, financial condition, and results of operations.

Failure of our contractors or our licensees’ contractors to comply with local laws of various countries and jurisdictions and other standards could harm our business.

We work with third-party contractors to manufacture our products, and we also have license agreements that permit unaffiliated parties to manufacture or contract for the manufacture of our products using our intellectual property. From time to time, the contractors that manufacture our products and our licensees that make our products using our intellectual property may not comply or may be perceived to fail to comply with applicable environmental, health, or safety standards, labeling and content requirements relating to our products, or other applicable laws, or our licensees may fail to enforce such standards or applicable laws on their contractors. Significant or continuing noncompliance with such standards and laws by one or more contractors could cause us to fail to meet customer expectations, harm our reputation or result in a product recall or a disruption in our supply chain and, as a result, could have an adverse effect on our sales and financial condition.

We have engaged and may continue to engage in merger and acquisition activities, joint ventures and other strategic ventures and investments which could require significant management attention, disrupt our business, dilute stockholder value, and adversely affect our results of operations.

As part of our business strategy we have made and intend to make investments in other companies, products, or technologies in the future, as opportunities rise to the extent we believe they are beneficial to our business. For example, we recently acquired Sweat and 29029, and we have formed a Chinese joint venture. However we may not be able to find suitable acquisition or investment candidates and we may not be able to complete acquisitions or investments on favorable terms, if at all, in the future. If we do complete acquisitions or investments, we may not ultimately strengthen our competitive position or achieve our goals, and any acquisitions or investments we complete could be viewed negatively by members or investors. In addition, any acquisition, investment, or business relationship, including our recent acquisitions, may result in unforeseen operating difficulties and expenditures, particularly if we cannot retain the key personnel of an acquired company, including disrupting our ongoing operations, diverting management from their primary responsibilities, subjecting us to additional liabilities, increasing our expenses, and adversely impacting our business, financial condition, and results of operations. The integration of acquisitions requires time and focus from our management team and may divert attention from the day-to-day operations of our business. We may not successfully integrate the acquisitions we have made or make. Our business may be negatively impacted following an acquisition if we are unable to effectively manage our expanded operations. In addition, even if our operations are integrated successfully with acquired companies, such as Sweat, we may not realize the full benefits of the acquisition, including the synergies, operating efficiencies, or sales or growth opportunities that are anticipated.

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 or products associated with such acquisitions, into our company. Unforeseen negative impacts of any acquisition could have a negative impact on our brands, reputation, competitive position or customer relationships, or cause a diversion of management attention. 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. If we incur more debt it would result in increased fixed obligations and could also subject us to covenants or other restrictions that could impede our ability to manage our operations and impose restrictions on our capital raising activities, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. We may not successfully evaluate or utilize the acquired business or technology and accurately forecast the financial impact of an acquisition transaction, including accounting charges. 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 results of operations.

We may need additional capital to support the growth of our business and the achievement of our goals, which we may not be able to source on reasonable terms, if at all, and the terms of such additional capital may be disadvantageous to our existing stockholders.

Though we expect the proceeds from this offering, as well as our cash and cash equivalents, will be adequate to meet our anticipated funding needs for the foreseeable future, we may need additional capital to support the growth of our business, achieve our business objectives and respond to competitive challenges. Accordingly, we may need to engage in equity or debt financings to raise additional funds. If we do require additional capital, the terms of such capital may be unduly expensive or burdensome to us or disadvantageous to our existing stockholders, or that funding may not be available at all. Our inability to obtain additional funding when needed could negatively impact our business, financial condition, and results of operations. If additional funds are raised through the issuance of equity or convertible debt securities, holders of our Class A common stock could suffer significant dilution, and any new shares we issue could have rights, preferences, and privileges superior to those

of our Class A common stock. Any debt financing secured by us in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions.

We have incurred operating losses in the past, and may not achieve or maintain profitability in the future.

We incurred operating losses of $(21.1) million, $(49.8) million, and $(127.6) million for fiscal 2019, 2020 and 2021, respectively. We had a total stockholders’ deficit of $(670.2) million at May 31, 2021. We expect our operating expenses to increase in the future as we increase our sales and marketing efforts, continue to invest in research and development, expand our operating and retail infrastructure, integrate acquisitions such as Sweat and 29029, add content and software features to our iFIT platform, expand into new geographies, and continue to develop our iFIT technology. Further, as a public company, we will incur additional legal, accounting, compensation and other expenses that we did not incur as a private company. These efforts and additional expenses may be more costly than we expect, and we cannot guarantee that we will be able to increase our revenue to offset our operating expenses. Our revenue growth may slow or our revenue may decline for a number of other reasons, including reduced demand for our products and services, increased competition, a decrease in the growth or reduction in size of our overall market, the impacts to our business from the global pandemic, or if we cannot capitalize on growth opportunities. If our revenue does not grow at a greater rate than our operating expenses, we will not be able to maintain profitability.

The forecasts of market growth included in this prospectus may prove to be inaccurate, and even if the market in which we compete achieves the forecasted growth, we cannot provide assurances that our business will grow at a similar rate, if at all.

Growth forecasts 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 health and fitness market, including estimates based on our own internal survey data, may prove to be inaccurate. Even if the market experiences 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.

We are subject to payment processing risk.

Our customers purchase our products and services using a variety of payment methods, including credit and debit cards and online wallets. We depend on internal systems as well as those of third parties to process payments. Payment processing and acceptance of these payment methods are subject to certain rules and regulations, including the Payment Card Industry Data Security Standard, and necessitate payment of interchange and other fees. Any 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, failure to receive or delays in receiving payments from payment processors, and/or modifications to rules or regulations surrounding payment processing could impact our revenue, operating expenses and results of operations adversely. We utilize third-party payment processors to bill members on our behalf. If these third parties become unwilling or unable to continue processing payments for us, we would have to resort to alternative methods of collecting payments, which could preclude the ability of potential customers to make purchases and negatively and materially impact member acquisition and retention. For example, we have experienced an increase in credit card defaults associated with automatic annual subscription renewals (as subscribers declined to pay), which default rates are above the limits established by a major credit card processor. If not remedied, including as a result of our shift to monthly billing, this could lead to a refusal by that company to process payments in connection with a substantial majority of our direct to consumer online business. In addition, from time to time, we encounter fraudulent use of payment methods, which could negatively impact our results of operations and, if not adequately controlled and managed, could create negative consumer perceptions of our business.

The payment methods that we offer also subject us to potential fraud and theft by criminals, who are becoming increasingly more sophisticated, seeking to obtain unauthorized access to or exploit weaknesses that may exist in our or our third-party payment processors’ payment systems. If we fail to comply with applicable rules or requirements for the payment methods we accept, or if payment-related data is compromised due to a data breach or other security incident, we may be liable for significant costs incurred by payment card issuing banks and other third parties (including impacted individuals), subject to fines and higher transaction fees, and our ability to accept or facilitate certain types of payments may be impaired. In addition, our customers could lose confidence in certain payment types, which may result in a shift to other payment types or potential changes to our payment systems that may result in higher costs. If we fail to adequately control fraudulent credit card transactions, we may face civil liability, diminished public perception of our security measures, and significantly higher credit card-related costs, each of which could harm our business, financial condition and results of operations.

Further, and typically in connection with the goal of reducing fraud, credit card companies may not process renewal charges. Similarly, if a customer has experienced fraud in the past, and has either placed a fraud alert on their credit report, or been placed into a fraud monitoring program, charges from us, including renewal charges, may not initially be accepted. These issues have occurred in the past, and we expect they will continue to occur in the future, and any difficulty in processing such payments, may result in the loss of members, increased costs to resolve such issues, and ultimately could have an adverse effect on our financial condition and results of operations.

Our ability to use our net operating losses to offset future taxable income may be subject to certain limitations.

As of May 31, 2021, we had U.S. federal net operating loss carryforwards (“NOLs”), and state NOLs of approximately $88.3 million and $134.1 million, respectively, due to prior period losses. The federal NOLs have an indefinite carryforward period but may be utilized to offset no more than 80% of federal taxable income annually, and the state NOLs have varying expiration periods. Realization of these NOLs depends on future income, and there is a risk that our existing state NOLs could expire unused and be unavailable to offset future income tax liabilities, which could adversely affect our results of operations. In general, under Section 382 of the Internal Revenue Code of 1986, as amended, a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its NOLs to offset future taxable income. This offering, as well as future changes in our stock ownership, which may be outside of our control, could result in such an ownership change. Our NOLs may also be impaired under state laws. There is also a risk that due to regulatory changes, such as suspensions on the use of NOLs, or other unforeseen reasons, our existing NOLs could expire or otherwise be unavailable to offset future income tax liabilities. For these reasons, we may not be able to realize a tax benefit from the use of our NOLs, regardless of our profitability.

If our estimates or judgments relating to our critical accounting policies prove to be incorrect, our results of operations could be adversely affected.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as provided in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates.” The results of these estimates form the basis for making judgments about the carrying values of assets, liabilities, and stockholders’ equity/deficit, and the amount of revenue and expenses that are not readily apparent from other sources. Significant assumptions and estimates used in preparing our consolidated financial statements include, but are not limited to those related to realizability of inventory, sales returns, allowance for doubtful accounts, reserves for advertising discounts, fair value measurements including common stock, embedded derivatives and warrant liability valuations, product warranty, useful lives of property and equipment including internal use software, capitalized iFIT content, and finite-lived intangible assets, accounting for income taxes, impairment analyses of goodwill and other long-lived assets, stock-based compensation expense, standalone selling price for contracts with multiple performance

obligations and timing of revenue recognition, and commitments and contingencies. See Note 2 of the notes to our audited consolidated financial statements included elsewhere in this prospectus for additional information. Our results of operations may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our results of operations to fall below the expectations of securities analysts and investors, resulting in a decline in the price of our Class A common stock.

Our sales in China are conducted by a joint venture.

We share ownership and management responsibilities with a jointly owned company, in which we hold a non-controlling stake, for the sale of our products in China. Our joint venture partners may not have the same goals, strategies, priorities, or resources as we do within this respective territory because they are intended to be operated for the benefit of all co-owners, rather than for our exclusive benefit. If such a conflict occurred, it could negatively impact our sales or financial results in this territory. While this joint venture is in early stages, the potential for conflicts may increase as the business develops, and the joint venture or we may face or create additional risks relating to competition and the use of intellectual property, including with respect to any licenses or grants of intellectual property we may make to the joint venture.

Risks Related to Socioeconomic, Political and Environmental Factors

Our business is subject to the risk of earthquakes, fire, power outages, floods, typhoons, public health crises, including the current global pandemic, or any other pandemics in the future, and other catastrophic events, and to interruption by manmade problems such as terrorism. A disruption at our production facilities could adversely impact our results of operations, cash flows and financial condition.

Our business is vulnerable to damage or interruption from earthquakes, fires, floods, typhoons, climate change, power losses, telecommunications failures, terrorist attacks, acts of war, human errors, break-ins, public health crises, including the current global pandemic, or any other pandemics in the future, and similar events. The third-party systems, operations and manufacturers we rely on are subject to similar risks. For example, a significant natural or man-made disaster, such as an earthquake, fire, flood or typhoon, could have an adverse effect on our business, financial condition and results of operations, and our insurance coverage may be insufficient to compensate us for losses that may occur. Acts of terrorism, which may be targeted at metropolitan areas that have higher population density than rural areas, could also cause disruptions in our or our suppliers’ and manufacturers’ businesses or the economy as a whole. The loss of a substantial amount of inventory—through fire, other natural or man-made disaster, contamination, or otherwise—could result in a significant reduction in supply of the affected product or products and our inability to meet consumer demand for the affected products for a period of time. Similarly, if we experience a disruption in the supply of our raw materials or components, our business could suffer. We may not have sufficient protection or recovery plans in some circumstances, such as natural disasters affecting locations that store significant inventory of our raw materials or products, that house our servers, or from which we generate content. In particular, our live content is currently generated entirely from our Logan, Utah headquarters. As we rely heavily on our computer and communications systems, and the internet to conduct our business and provide high-quality customer service, these disruptions could negatively impact our ability to run our business and either directly or indirectly disrupt suppliers’ and manufacturers’ businesses, which could have an adverse effect on our business, financial condition, and results of operations.

The global pandemic, or any other pandemics in the future, could have an adverse effect on our business, results of operations, and financial condition.

The global pandemic has caused significant volatility in financial markets and caused a global recession. Public health problems resulting from the global pandemic and precautionary measures instituted by governments and businesses to mitigate its spread, including travel restrictions and quarantines, has and could further contribute to a general slowdown in the global economy, adversely impact our members, third-party suppliers, vendors, contract manufacturers, logistics providers and other business partners, and disrupt our operations. Changes in

our operations in response to the global pandemic or employee illnesses resulting from the pandemic have resulted in inefficiencies or delays, including in sales, delivery, and product development efforts, and additional costs related to business continuity initiatives, that cannot be fully mitigated through succession and business continuity planning, employees working remotely or teleconferencing technologies. Moreover, certain occurrences outside of our control may result in the closure of our retail partner’s stores. For example, as a result of the ongoing global pandemic, certain of our retail partners closed all or a subset of their stores, and while many have reopened, it has been under new operating limitations such as shorter operating hours, mask guidelines for employees and customers, and other constraints on their previous retail sales strategies. Certain of our retail partners have also had to temporarily close certain stores due to employee illness, and may need to do so in the future. We are unable to predict whether consumer shopping behaviors will change as our retail partners make these changes to adjust to the global pandemic.

The global pandemic and related governmental reactions have had and may continue to have some negative impacts on our business due to the occurrence of some or all of the following events or circumstances, among others:

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our and our third-party suppliers’, contract manufacturers’, logistics providers’, and other business partners’ inability to operate worksites, including manufacturing facilities, shipping and fulfillment centers, and our retail showrooms and production studios, due to employee illness or reluctance to appear at work, or “stay-at-home” regulations;

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our inability to provide our members with high-quality member support due to delivery delays, changes to the delivery experience and our inability to provide in-home servicing of our products due to safety risks and local government regulations related to the global pandemic;

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prolonged delivery timelines and the implementation of threshold delivery to the front doorway of customers’ homes, which requires our customers to self-install their machines;

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increased return rates due to a decrease in consumer discretionary spending;

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increased IT costs and systems and data security risk related to employees working remotely;

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inventory shortages caused by a combination of increased demand for our products and longer lead-times in the manufacturing of our products, due to work restrictions related to the global pandemic, import/export conditions such as port congestion, and local government orders;

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interruptions in our ability to produce new content;

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interruptions in manufacturing (including the sourcing of raw materials) and shipment of our products;

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disruptions of the operations of our third-party suppliers, which could impact our ability to purchase components at efficient prices and in sufficient amounts; and

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incurrence of significant increases to employee health care and benefits costs.

The extent of the impact of the global pandemic, or any other pandemics in the future, on our business and financial results will depend largely on future developments, including the duration of the spread of the outbreak, the impact on capital and financial markets, and the related impact on the financial circumstances of our members, all of which are highly uncertain and cannot be predicted. The situation with respect to the global pandemic is changing rapidly, and additional impacts may arise that we are not aware of currently.

An economic downturn or economic uncertainty may adversely affect consumer discretionary spending and demand for our products and services.

Our products and services may be considered discretionary items for consumers. Factors affecting the level of consumer spending for such discretionary items include general economic conditions, and other factors, such as consumer confidence in future economic conditions, fears of recession, the availability and cost of consumer

credit and financing options, levels of unemployment, and tax rates. In particular, we believe that the current global pandemic and its resulting global macroeconomic impact may adversely affect consumer discretionary spending and, though demand for our products and services has remained high due to government shelter-in-place orders and other stay at home trends, may result in decreased demand for our products in the long-term. In recent years, the United States and other significant economic markets have experienced cyclical downturns and worldwide economic conditions remain uncertain, including due to the global pandemic. As global economic conditions continue to be volatile or economic uncertainty remains, trends in consumer discretionary spending also remain unpredictable and subject to reductions. Unfavorable economic conditions may lead consumers to delay or reduce purchases of our products and services and consumer demand for our products and services may not grow as we expect. Our sensitivity to economic cycles and any related fluctuation in consumer demand for our products and services could have an adverse effect on our business, financial condition, and results of operations.

Our financial performance is subject to risks associated with changes in the value of the U.S. dollar versus local currencies.

Though in the past we have transacted principally in U.S. dollars with the majority of our members and suppliers, we have transacted in some foreign currencies, such as the Canadian Dollar, the Euro and the Renminbi, and may transact in additional foreign currencies in the future. Further, certain of our manufacturing agreements stipulate fixed costs of our products and hardware in foreign currencies but provide for payment in U.S. dollars. Any changes in the value of foreign currencies relative to the U.S. dollar can affect our revenue, expenses and results of operations. For example, in some circumstances, for competitive or other reasons, we may decide not to raise local prices to fully offset the dollar’s strengthening, or at all, which would adversely affect the U.S. dollar value of our foreign currency denominated sales and earnings. Additionally, in some circumstances, where we incur costs, for example, related to manufacturing, if the contracted costs increase due to a change in the strength of the dollar, we may experience increased costs. Further, as a result of such foreign currency exchange rate fluctuations, it could be more difficult to detect underlying trends in our business and results of operations. In addition, to the extent that fluctuations in currency exchange rates cause our results of operations to differ from our expectations or the expectations of our investors, the trading price of our Class A common stock could be lowered. We currently are party to various forward purchase contracts to hedge transactional exposures in foreign currencies and in the future, we may continue to use derivative instruments to hedge exposures to fluctuations in foreign currency exchange rates. Such hedging activities may not offset any or more than a portion of the adverse financial effects of unfavorable movements in foreign exchange rates over the time the hedges are in place and may introduce additional risks if we are unable to successfully and effectively structure hedges with such instruments.

Risks Related to Legal and Government Regulation

From time to time, we are subject to legal proceedings, regulatory disputes, and governmental inquiries that could cause us to incur significant expenses, divert our management’s attention, and materially harm our business, financial condition, and results of operations.

From time to time, we are subject to claims, lawsuits, regulatory disputes, government investigations, and other proceedings involving products liability, competition and antitrust, intellectual property, privacy, consumer protection, securities, tax, labor and employment, commercial disputes, and other matters in the ordinary course of our business. We similarly also face inquiries with respect to the conduct of our business or may be subject to disputes with our suppliers, vendors and manufacturers, which may result in the diversion of management’s attention, and potentially litigation. As we have grown, we have seen a rise in the number and significance of these disputes and inquiries. Litigation and regulatory proceedings, and particularly the intellectual property-related matters that we are currently facing or could face in the future, may be protracted and expensive, and the results are difficult to predict. Certain of these matters include speculative claims for substantial or indeterminate amounts of damages and include claims for injunctive relief. Further, consumer protection matters have been and may be brought by the Federal Trade Commission (the “FTC”) against us, and we are currently subject to an

FTC order. If the FTC determines that any of our promotional claims are false, misleading, not substantiated or not permissible, we may be subject to enforcement action and we may be required to revise our promotional claims and make other corrections or restitutions. Additionally, our litigation and compliance costs could be significant. Adverse outcomes with respect to litigation or any of these legal or regulatory proceedings may result in significant settlement costs or judgments, penalties and fines, or require us to modify our products or services, make content unavailable, or require us to stop offering certain features, all of which could negatively affect our membership and revenue growth. The results of litigation, investigations, claims, and regulatory proceedings cannot be predicted with certainty, and determining reserves for pending litigation and other legal and regulatory matters requires significant judgment. There can be no assurance that our expectations will prove correct, and even if these matters are resolved in our favor or without significant cash settlements, these matters, and the time and resources necessary to litigate or resolve them, could harm our business, financial condition, and results of operations.

We collect, store, share, disclose, transfer, use and otherwise process personal information and other member data, which subjects us to legal obligations and laws and regulations related to data security and privacy, and any actual or perceived failure by us or our third-party service providers to meet those obligations could harm our business.

We collect, store, share, disclose, transfer, use and otherwise process a wide variety of data from current and prospective members, including personal information, such as workout statistics, home addresses and geolocation. Federal, state, local and international laws, directives, rules, policies, industry standards and regulations, as well as contractual obligations, relating to privacy, data protection and e-commerce transactions require us to safeguard, and impose a variety of other obligations with respect to, our data, including members’ personal information. The regulatory framework for data privacy and security worldwide is continuously evolving and developing and, as a result, interpretation and implementation standards and enforcement practices are likely to remain uncertain for the foreseeable future. The occurrence of unanticipated events and the development of evolving technologies often rapidly drives the adoption of legislation or regulation affecting the use, collection or other processing of data. New laws, amendments to or reinterpretations of existing laws, regulations, standards and other obligations may require us to change our business operations with respect to how we use, collect, store, transfer or otherwise process certain types of personal information, implement new processes, and incur additional costs to comply with those laws and our members’ exercise of their rights thereunder.

Internationally, many jurisdictions have established their own data security and privacy legal frameworks with which we may need to comply. For example, the European Union (“EU”) has adopted the General Data Protection Regulation (“GDPR”), which went into effect in May 2018 and contains numerous requirements and changes from previously existing EU law, including more robust obligations on data processors (i.e., those who process personal information on behalf of a controller) and heavier documentation requirements for data protection compliance programs. The GDPR requires data controllers (i.e., those who determine the purpose and means of data processing) to implement more stringent operational requirements, and to impose more stringent operational requirements on processors. For example, the GDPR requires, among other things, that controllers of personal data ensure that data subjects are provided with transparent and expanded disclosure (in a concise, intelligible and easily accessible form) about how their personal information is to be used and concerning their rights with respect to their data, imposes limitations on retention of information, introduces mandatory data breach notification requirements, and sets higher standards for data controllers to demonstrate that they have obtained valid consent for certain data processing activities. The GDPR also imposes strict rules on the transfer of personal data to countries outside the European Economic Area (“EEA”), including the United States. In 2016, the EU and United States agreed to a transfer framework for data transferred from the EEA to the United States, called the Privacy Shield, but the Privacy Shield was invalidated in July 2020 by the Court of Justice of the EU (“CJEU”). The standard contractual clauses issued by the European Commission for the transfer of personal data, a potential alternative to the Privacy Shield, may be similarly invalidated by the CJEU, and it remains to be seen whether additional means for lawful data transfers will become available. Fines for noncompliance with the

GDPR are significant and can be up to the greater of €20 million or 4% of annual global turnover. The GDPR also provides that EU member states may introduce further conditions, including limitations, and make their own laws and regulations further limiting the processing of ‘special categories of personal data,’ including personal data related to health, biometric data, and genetic information, which could limit our ability to collect, use and share EU data, and could cause our compliance costs to increase, ultimately having an adverse impact on our business, and causing harm to our business and financial condition.

Further, the United Kingdom’s vote in favor of exiting the EU, often referred to as Brexit, and ongoing developments in the United Kingdom have created uncertainty with regard to data protection regulation in the United Kingdom. As of January 1, 2021, following the expiry of transitional arrangements agreed to between the United Kingdom and EU, data processing in the United Kingdom is governed by a United Kingdom version of the GDPR (combining the GDPR and the United Kingdom’s Data Protection Act 2018), exposing us to two parallel regimes, each of which authorizes similar fines and other potentially divergent enforcement actions for certain violations. With respect to transfers of personal data from the EEA, on June 28, 2021, the European Commission issued an adequacy decision in respect of the United Kingdom’s data protection framework, enabling data transfers from EU member states to the United Kingdom to continue without requiring organizations to put in place contractual or other measures in order to lawfully transfer personal data between the territories. While it is intended to last for at least four years, the European Commission may unilaterally revoke the adequacy decision at any point, and if this occurs it could lead to additional costs and increase our overall risk exposure. Other countries have also passed or are considering passing laws requiring local data residency or restricting the international transfer of data.

In the United States, numerous states have enacted or are in the process of enacting state level data privacy laws and regulations governing the collection, use, and other processing of personal information regarding residents of the respective state. For example, the California Consumer Privacy Act (“CCPA”), which went into effect on January 1, 2020, established a new privacy framework for covered businesses such as ours, and may require us to modify our data processing practices and policies and incur compliance related costs and expenses. The CCPA provides new and enhanced data privacy rights to California residents, such as affording California residents the right to access and delete their information and to opt out of certain sharing and sales of personal information. The CCPA defines the term “sale” very broadly to include any disclosure of personal information for monetary or other valuable consideration, and therefore in light of this expansive definition, we are deemed to sell certain categories of personal information within the meaning of the CCPA. The law also prohibits covered businesses from discriminating against California residents (for example, by charging more for services) for exercising any of their rights under the CCPA. The CCPA imposes severe civil penalties and statutory damages, and contains a private right of action for certain data breaches that result in the loss of personal information. This private right of action is expected to increase the likelihood of, and risks associated with, data breach litigation. However, it remains unclear how various provisions of the CCPA will be interpreted and enforced. Furthermore, in November 2020, California voters passed the California Privacy Rights Act of 2020 (“CPRA”). Effective in most material respects starting on January 1, 2023 (but with a lookback to January 1, 2022), the CPRA imposes additional obligations on companies covered by the legislation and will significantly modify the CCPA, including by expanding the CCPA to include additional data privacy compliance requirements that may impact our business. The CPRA also establishes a regulatory agency dedicated to enforcing the CCPA and the CPRA. The effects of the CPRA, the CCPA, other similar state or federal laws and other future changes in laws or regulations relating to privacy, data protection and information security, particularly any new or modified laws or regulations that require enhanced protection of certain types of data or new obligations with regard to data retention, transfer or disclosure, are significant and may require us to modify our data processing practices and policies and could greatly increase the cost of providing our offerings, require significant changes to our operations or even prevent us from providing certain offerings in certain jurisdictions in which we currently operate and in which we may operate in the future, and require us to incur significant costs in an effort to comply with such legislation and significant liability in connection with a failure to so comply.

The CCPA and the CPRA may lead other states to pass comparable legislation, with potentially greater penalties and more rigorous compliance requirements relevant to our business, and we cannot yet determine the impact

that the CCPA, CPRA or other such future laws, regulations and standards may have on our business. We expect that new industry standards, laws and regulations will continue to be proposed and implemented regarding privacy, data protection and information security in many jurisdictions. For example, many state legislatures have adopted legislation that regulates how businesses operate online, including measures relating to privacy, data security, data breaches and the protection of sensitive and personal information. The laws are not consistent, as certain state laws may be more stringent, broader in scope or offer greater individual rights with respect to sensitive and personal information than federal, international or other state laws, which may complicate compliance efforts. For instance, expanding definitions and interpretations of what constitutes “personal data” (or the equivalent) within the United States may increase our compliance costs and potential legal liability. Such changes in the laws and regulations that govern our collection, use, and disclosure of member data could impose additional requirements with respect to the retention and security of member data, limit our marketing activities, and have an adverse effect on our business, financial condition, and results of operations.

Additionally, depending on the nature of the information compromised, in the event of a data breach or other unauthorized access to our member data, we may also have obligations to notify members about the incident, which has occurred in the past and may occur in the future. We may also need to provide some form of remedy, such as a subscription to a credit monitoring service, for the individuals affected by the incident. A growing number of legislative and regulatory bodies have adopted consumer notification requirements in the event of unauthorized access to or acquisition of certain types of personal information. For example, laws in all 50 states require businesses to provide notice to customers whose personally identifiable information has been disclosed as a result of a data breach. Such breach notification laws continue to evolve and may be inconsistent from one jurisdiction to another. Complying with these obligations could cause us to incur substantial costs and could increase negative publicity surrounding any incident that compromises member data. 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 certain jurisdictions.

Failure to comply with federal, state, local and international laws regarding privacy, data protection and information security could expose us to significant penalties under such laws. Any such failure by us or our third-party processors to comply with privacy, data protection and information security laws could result in significant government-imposed fines or orders requiring that we change our practices, claims for damages or other liabilities, regulatory investigations and enforcement action, litigation and significant costs for remediation, and reputational harm, any of which could adversely affect our business. Even if we are not determined to have violated these laws, government investigations into these issues typically require the expenditure of significant resources and generate negative publicity, which may materially and adversely affect our business, financial condition and results of operations.

Import and export controls or economic sanctions imposed by governmental authorities could subject us to liability and hinder our ability to compete in international markets if we are not in full compliance with applicable laws.

The United States and various foreign governments have imposed, and may in the future impose, controls, export license requirements, duties and restrictions on the import or export of certain technologies. Our products may be subject to U.S. export controls, which may require submission of a product classification and annual or semiannual reports. The regulatory requirements surrounding the import and export of our products and services impose compliance burdens that may create delays in the introduction of our products and services in international markets, prevent our international members from accessing our products and services, and, in some cases, prevent the export of our products and services to some countries entirely. Furthermore, economic sanctions imposed by the United States may prohibit the provision of products and services to certain countries,

governments, and persons targeted by such sanctions. We also offer products, particularly online digital applications and subscriptions, that become or may become accessible in countries where certain persons or entities are subject to sanctions that restrict or prohibit transactions with these parties. Even though we take reasonable measures to prevent our products from being provided to countries that are the targets of U.S. sanctions, our products and services, including our software and platform updates, can be provided to those targets or provided by our members despite such measures. Any such provision or other prohibited transactions with sanctioned persons or entities could have negative consequences, including government investigations, penalties, reputational harm. Our failure to obtain required import or export approval for our products and services 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, financial condition, and results of operations.

Our business could be adversely affected from an accident, safety incident, or workforce disruption.

Our internal manufacturing processes and related activities, as well as our in-house warehousing, could expose us to significant personal injury claims that could subject us to substantial liability. The global pandemic increases our exposure to these risks; for example, various local government orders have been implemented in areas where we operate that require us to secure personal protective equipment, such as face masks and gloves and to implement new methods of monitoring employee health, such as temperature checks. As these government orders have come down, a global shortage of personal protective equipment has resulted, and we have experienced delays and increased costs in obtaining these materials for our teams. Our inability to timely adapt to changing norms and requirements around maintaining a safe workplace during the global pandemic could cause employee illness, accidents, or team discontent if it is perceived that we are failing to protect the health and safety of our employees. While we maintain general liability insurance in amounts and of the type generally consistent with industry practice, the amount of such coverage may not be adequate to cover fully all claims, and we may be forced to bear substantial losses from an accident or safety incident resulting from our manufacturing or warehousing activities. Additionally, if our employees decide to join or form a labor union, we may become party to a collective bargaining agreement, which could result in higher employee costs and increased risk of work stoppages. It is also possible that a union seeking to organize one subset of our employee population, could also mount a corporate campaign, resulting in negative publicity or other actions that require attention by our management team and our employees. Negative publicity, work stoppages, or strikes by unions could have an adverse effect on our business, prospects, financial condition, and results of operations.

A variety of uncontrollable events may reduce demand for our fitness event services, impair our ability to provide fitness event services or increase the cost of providing fitness event services.

Demand for our fitness event services, particularly our 29029 events, is highly dependent on the general environment for travel and tourism. The environment for travel and tourism can be significantly adversely affected in the U.S. as a result of a variety of factors beyond our control, including: adverse weather conditions arising from short-term weather patterns or long-term change, catastrophic events or natural disasters (such as excessive heat or rain, fire, floods, and earthquakes); health concerns; and terrorist attacks.

There is a risk of accidents occurring at our fitness events or competing fitness events which may reduce attendance and negatively impact our operations.

Our brand and our reputation are among our most important assets. Our ability to attract and retain customers depends, in part, upon the external perceptions of the Company, the quality and safety of our venues, services and our corporate and management integrity. An accident or an injury at any of our fitness events or at fitness events operated by competitors, particularly an accident or injury involving the safety of guests and employees, that receives media attention, could negatively impact our brand or reputation, cause loss of consumer confidence in the Company, reduce attendance at our fitness events, and negatively impact our results of operations. The considerable expansion in the use of social media over recent years has compounded the impact of negative publicity. We obtain insurance against the risk of losses relating to physical damage to property, certain injuries occurring on venue property, and liability for alleged breach of legal responsibilities. When insurance is obtained

it is subject to deductibles, exclusions, terms, conditions and limits of liability. The types and levels of coverage we obtain vary from time to time depending on our view of the likelihood of specific types and levels of loss in relation to the cost of obtaining coverage for such types and levels of loss.

Our warranty business is subject to regulatory oversight and changes in industry practice.

As part of our business, we offer extended warranty contracts on some of our fitness products through Universal Technical Services. See “Business—Our Brands and Product Offerings—Warranties”. This business is subject to regulatory oversight in certain jurisdictions where our products are offered. Future changes in such oversight may make it more costly for us to offer extended warranties. Any development that negatively impacts our ability to offer extended warranties or the margins provided by that product in the future could have a material adverse effect on our results of operations.

Failure to comply with anti-corruption and anti-money laundering laws, including the United States Foreign Corrupt Practices Act (“FCPA”) and similar laws associated with our activities outside of the United States, could adversely affect our business, subject us to penalties and have other adverse consequences.

We operate our business on a global scale and have direct or indirect interactions with government officials and employees of government agencies or state-owned or affiliated entities. We are subject to 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 local anti-bribery and anti-money laundering laws in countries where we do business. Such laws generally 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 must maintain records that accurately and fairly represent their transactions and maintain an adequate system of internal accounting controls. In many foreign countries, including countries in which we do business, it is a common local practice or custom that businesses or their agents make payments to, or otherwise participate in practices with, governmental authorities 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 partners or representatives fail to comply with these laws. Governmental authorities in the United States and elsewhere 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 support compliance with these laws, particularly as we have recently expanded our business activities internationally. However, our employees, contractors, agents, and consultants who interact with foreign government officials on our behalf, and companies to which we outsource certain of our business operations, may take actions in violation of our policies or applicable law, and our controls may not be adequate to prevent any such future or past actions by such persons. Any such violation could have an adverse effect on our reputation, business, financial condition and results of operations. 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, including our brand, our business, financial condition and results of operations. In addition, the need to respond to any enforcement action could result in a significant diversion of management’s attention and resources and significant defense costs and other professional fees.

Changes in income tax laws or enforcement could have a material adverse impact on our financial results.

The Tax Cuts and Jobs Act (the “TCJA”), enacted on December 22, 2017, significantly affected U.S. federal tax law, including by changing how the U.S. imposes tax on certain types of income of corporations and by reducing the U.S. federal corporate income tax rate to 21%. It also imposed new limitations on a number of tax benefits, including deductions for business interest, deductibility of compensation to certain executives, use of net operating losses, taxation of foreign income, and the foreign tax credit, among others. The CARES Act, enacted on March 27, 2020, in response to the global pandemic, further altered U.S. federal tax law, including in respect

of certain changes that were made by the TCJA, generally on a temporary basis. There can be no assurance that future domestic tax law changes will not increase the rate of the corporate income tax significantly, impose new limitations on deductions, credits or other tax benefits, or make other changes that may adversely affect our business, cash flows or financial performance. Further, the Internal Revenue Service (“IRS”) has yet to issue guidance on a number of important issues regarding the changes made by the TCJA and the CARES Act. In addition, other changes in international and domestic tax laws, including the reaction by states to the corporate tax changes in the TCJA or CARES Act, and changes in tax law enforcement or interpretation, could negatively impact our business operations, cash flows, and financial performance. Changes in U.S. tax law will likely have broader implications, including impacts to the economy, currency markets, inflation environment, consumer behavior, and/or competitive dynamics, which are difficult to predict, and may positively or negatively impact the Company and our results.

Various international and domestic tax risks could adversely affect our earnings and cash flows.

We generally conduct our international operations through wholly owned subsidiaries, branches, or representative offices and report our taxable income in various jurisdictions worldwide. As a result, we are subject to international and domestic tax risks. For instance, the intercompany relationships between our legal entities are subject to complex transfer pricing regulations administered by taxing authorities in various jurisdictions. Moreover, we could be subject to double taxation on income related to operations in certain countries that do not have tax treaties with the country of the trading partner. In addition, we may have a higher effective income tax rate than that of other companies in our industry if losses incurred by one operating company are not available to offset the income of an operating company located in another country. Also, distributions of earnings and other payments received from our subsidiaries may be subject to withholding taxes imposed by the countries where they are operating or are incorporated. If these foreign countries do not have income tax treaties with the United States or the countries where our subsidiaries are incorporated, we could be subject to high rates of withholding taxes on these distributions and payments. Additionally, the amount of the credit that we may claim against our U.S. federal income tax for foreign income taxes paid or accrued is subject to many limitations which may significantly restrict our ability to claim a credit for all of the foreign taxes we pay. Any changes in these laws and rules, may require us to modify our international structure in the future, which will incur costs, may increase our worldwide effective tax rate, and may adversely affect our financial position and results of operations. In addition, significant judgment is required in evaluating our tax positions and determining our provision for income taxes.

During the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain. For example, our effective tax rates could be adversely affected by earnings being lower than anticipated in countries where we have lower statutory rates and higher than anticipated in countries where we have higher statutory rates, by changes in foreign currency exchange rates, or by changes in the relevant tax, accounting, and other laws, regulations and interpretations of the law. As we operate in numerous taxing jurisdictions, the application of tax laws can be subject to diverging and sometimes conflicting interpretations by tax authorities of these jurisdictions. It is not uncommon for taxing authorities in different countries to have conflicting views with respect to, among other things, the manner in which the arm’s-length standard is applied for transfer pricing purposes, or with respect to the valuation of intellectual property.

Our operations also subject us to related risks, such as customs and import duties and tariffs. See “—We derive a portion of our revenue from international sales and are subject to the operational risks of doing business in foreign countries” below.

We or our members may be subject to sales and other taxes, and we may be subject to liabilities on past sales and transactions for taxes, surcharges, and fees.

The application of indirect taxes, such as sales and use tax, subscription sales tax, value-added tax, provincial taxes, goods and services tax, business tax, and gross receipt tax, to businesses like ours and to our members is a

complex and evolving issue. Significant judgment is required to evaluate applicable tax obligations. In many cases, the ultimate tax determination is uncertain because it is not clear how existing statutes apply to our business. One or more states, the federal government, or other countries may seek to impose additional reporting, record-keeping, or indirect tax collection obligations on businesses like ours that offer subscription services and other health and fitness offerings. New taxes could also require us to incur substantial costs to capture data and collect and remit taxes. If such obligations were imposed, the additional costs associated with tax collection, remittance, and audit requirements could have an adverse effect on our business, financial condition, and results of operations.

We derive a portion of our revenue from international sales and are subject to the operational risks of doing business in foreign countries.

International sales account, and are expected to continue to account, for a portion of our total revenues. In addition, with the recent acquisition of Sweat, we have significantly expanded our international sales and operations. Our revenue from non-U.S. ship-to addresses represented approximately 22.7%, 19.0%, and 15.7% of our total revenue for fiscal 2019, 2020 and 2021, respectively. In addition, the majority of our manufacturing is done in China and Taiwan, and as such, any negative impacts in these specific countries could adversely affect our operations in the future. Our international operations overall are, and will continue to be, subject to a variety of risks associated with conducting business internationally, many of which are beyond our control. With the acquisition of Sweat, headquartered in Australia, these risks may increase. These risks, which may adversely affect our ability to achieve and maintain profitability and our ability to sell our products internationally, include:

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changes in regulatory requirements;

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legislation and regulation, including tariffs, relating to the import or export of high technology products, compliance with export laws and controls and trade embargoes in multiple jurisdictions;

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the imposition of government controls;

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political and economic instability, including the impact of the global pandemic coronavirus, the possibility of an economic recession in certain key markets, international hostilities, acts of terrorism and governmental restrictions, inflation, trade relationships and military and political alliances;

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costs and risks of deploying systems in foreign countries;

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limited intellectual property rights and protection;

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regional limitations placed on internet or server access as well as data consumption, which would limit our services from being provided;

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the burden of complying with a wide variety of complex foreign laws and treaties, including with respect to data privacy and security such as the EU’s GDPR and Canada’s Personal Information Protection and Electronic Documents Act; and

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compliance with U.S. and local laws affecting the activities of U.S. companies abroad, including the FCPA, and local anti-bribery laws. See also “—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.”

The United States has implemented tariffs on certain imported goods. These additional tariffs could include items imported by us from China or other countries. In addition, China has imposed tariffs on a wide range of American products in retaliation for these new American tariffs. There is a concern that the imposition of additional tariffs by the United States, could result in the adoption of additional tariffs by China and other countries as well. Any resulting trade war could negatively impact the global market for health and fitness products and could have a significant adverse effect on our business. The imposition of tariffs on items imported by us from China or other countries could increase our costs and could result in lowering our gross margin on

products sold. See also “—Increases in raw materials and component costs, long lead times, supply shortages, and supply changes could disrupt our supply chain and have an adverse effect on our business, financial condition, and results of operations.”

As noted, we must also comply with the GDPR, which became effective as of May 2018. The goal of the GDPR is to increase individual rights with respect to, and protections for, personal data located in or originating from the EU. The GDPR is extraterritorial in that it applies to all business within the EU and any business located outside of the EU that processes personal data of individuals located within the EU. The GDPR regulates a broad array of data relating directly or indirectly to an individual and imposes stringent data protection requirements and grants individuals extensive rights with respect to their personal data. There are significant fines and penalties (including in connection with potential private rights of action) associated with GDPR non-compliance. See also “—We collect, store, share, disclose, transfer, use and otherwise process personal information and other member data, which subjects us to legal obligations and laws and regulations related to data security and privacy, and any actual or perceived failure by us or our third-party service providers to meet those obligations could harm our business.”

While the impact of these factors is difficult to predict, any one or more of these factors could adversely affect our operations in the future.

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 will become 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 raw 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.

We and our operations are subject to federal, state, local and foreign environmental, health and safety laws and regulations, which could subject the Company to liabilities or increase its costs.

We and our operations are subject to federal, state, local and foreign environmental, health and safety laws and regulations, including those governing climate change, air emissions, water discharges, the use, management, handling, generation, treatment, storage, disposal, and release of, and exposure to, hazardous substances and wastes, investigation and remediation of contamination, labeling and content requirements of our products and employee health and safety. Failure to comply with such laws and regulations could result in liabilities, civil or criminal fines or penalties, enforcement actions, remedial or corrective measures, or other sanctions or actions. In addition, the Company may be subject to joint and several liability for environmental investigations and remediation of contamination, including at properties that we currently or formerly owned, leased or operated, even if such contamination was not caused by us, and we may also be subject to similar liabilities and claims in connection with locations at which hazardous substances or wastes we have generated have been stored, treated, otherwise managed, or disposed. We also may face claims alleging harm to human health and safety or property or natural resource damages arising out of contamination or exposure to hazardous substances.

Compliance with current or future environmental, health and safety laws and regulations, or liabilities arising thereunder, could require us to incur additional costs or adversely affect the Company’s business, financial condition, and results of operations.

Risks Related to Information Technology and Intellectual Property

Any cybersecurity attack, disruption or failure of our or our third-party service providers’ information technology systems, or our failure to successfully implement upgrades and new technology effectively, could adversely affect our business and operations.

In providing products and services to our members, we rely on our ability to collect, manage, use, store, disclose, transfer and otherwise process a large volume of member data, including content, personal information and other sensitive information. Threats to network and data security are increasingly diverse and sophisticated. We have experienced cybersecurity incidents in the past, and we may experience such incidents in the future. Our devices, as well as our servers, computer systems, and those of third parties that we rely on in our operations have been and may in the future be vulnerable to cybersecurity risks, including viruses and worms, installation of malicious software, ransomware, spam, phishing attacks, denial-of-service attacks, software errors, source code bugs, physical or electronic break-ins, fraud, negligence, misconduct by employees, other internal sources or other third parties, including state-sponsored organizations with significant financial and technological resources, theft, misuse or improper operation, terrorism, data loss, code or configuration errors, credential stuffing, human error, social engineering attacks, unauthorized access to data, accidental technological failure, natural disasters (including fires, floods, wars, earthquakes, hurricanes, tornadoes or similar catastrophic events) and other security breaches. Further, because of the interactive nature of many of our products, some of our hardware, such as the tablets on certain of our equipment, have a camera, and any inadvertent or unauthorized use or breach of security with respect to such hardware, or any software, such as spyware, could result in a breach of privacy, and, whether or not in our control, any actual or perceived breach of privacy could harm our reputation and brand, and therefore our business, financial condition and results of operation could be adversely effected. In addition, we may be the target of email scams that attempt to acquire personal information or company assets. Any of the foregoing could lead to interruptions, delays, loss of or unauthorized access to critical data, including personal information, and loss of consumer confidence.

Although we have established security procedures to protect member data, our or our third-party service providers’ security and testing measures, controls, efforts, policies and processes may not be adequate and may not be able to prevent security breaches or the unauthorized access to personal information. Further, advances in computer capabilities, new discoveries in the field of cryptography, inadequate facility security, or other developments may result in a compromise or breach of the technology that we or our third-party service providers use to protect member data. Additionally, the increasing sophistication and resources of cyber criminals and other non-state threat actors and increased actions by nation-state actors make keeping up with new threats difficult and could result in a breach of security. We cannot guarantee that inadvertent or unauthorized use or disclosure of such data, including personal information, will not occur, or that third parties will not gain unauthorized access to such information. Any compromise of our security or breach of our members’ privacy could harm our reputation or business, financial condition and results of operations. In addition, a party who circumvents our security measures or exploits inadequacies in our security measures, could, among other effects, misappropriate member data or other proprietary or personal information, cause interruptions in our operations, or expose members to computer viruses or other disruptions. Actual or perceived vulnerabilities may lead to claims against us and we may become subject to costly litigation, member complaints, indemnity obligations, damages for contract breach or penalties for violation of applicable laws or regulations, which could result in significant fines, penalties, or damages and harm to our reputation. In addition, we have in the past and may in the future become subject to data breach notification obligations and regulatory inquires, orders or investigations with respect to cybersecurity incidents. Additionally, we cannot guarantee that our insurance coverage would be sufficient to cover all losses. Further, we could be forced to expend significant financial and operational resources in response to a security breach, including repairing system damage, increasing security protection costs by deploying additional personnel and modifying or enhancing our protection technologies, investigating and remediating any information security vulnerabilities and defending against and resolving legal and regulatory claims, all of which could divert resources and the attention of our management and key personnel away from our business operations and materially and adversely affect our business, financial condition and results of operations.

Additionally, due to the current global pandemic, there is an increased risk that we may experience cybersecurity related incidents as a result of our employees, third-party service providers and other third parties working remotely on less secure systems. Any cybersecurity attack that attempts to obtain our or our members’ data and assets, disrupt our service, or otherwise access our systems, or those of third parties we use, if successful, could be expensive to remedy, decrease demand for our products and services and negatively impact consumer confidence and adversely affect our business, financial condition and results of operations.

As cybersecurity-related threats continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any information security vulnerabilities. In addition, our remediation efforts may not be successful or may not be completed in a timely manner. Certain measures that could increase the security of our systems take significant time and resources to deploy broadly, and such measures may not be deployed in a timely manner or be effective against an attack. The inability to implement, maintain and upgrade adequate safeguards could have a material and adverse impact on our business, financial condition and results of operations. Moreover, there could be public announcements regarding any cybersecurity related incidents and any steps we take to respond to or remediate such incidents, and if securities analysts or investors perceive these announcements to be negative, it could, among other things, have a substantial adverse effect on the price of our common stock. Consumers are generally concerned with security and privacy of the internet, and any publicized security problems affecting our businesses or those of third parties with whom we are affiliated or otherwise conduct business may discourage consumers from doing business with us, which could have a material and adverse effect on our business, financial condition and results of operations.

Additionally, 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 products, online sales of our products, and the ability of our members to access content on our platform, and 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 with replacing and upgrading these systems, including, but not limited to, impairment of our ability to fulfill member 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. Additionally, if we are unable to address our members’ needs or preferences in a timely fashion or further develop and enhance our technology solutions, or if a member is not satisfied with the quality of work performed by us or with the technical support services rendered, we could incur additional costs to address the situation and our business may be impaired and members’ dissatisfaction with our technology solutions could damage our ability to maintain or expand our member base.

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 products online, provide services to our members, and otherwise adequately serve our members. The operation of our direct-to-consumer e-commerce business through our 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 members from purchasing our products. Moreover, the ability of our members to access the content on our platforms could be diminished by a number of factors, including members’ inability to access the internet, the failure of our network or software systems, security breaches, variability in member traffic for our platform and other security incidents. 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 members concurrently accessing our platform and if we are unable to provide uninterrupted access, our members’ 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 members. 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 results of operations.

Any disruption of or interference with our computing, storage, processing and similar services, including those provided by third-party service providers, could have an adverse effect on our business, financial condition, and results of operations, and our reliance on such third-party service providers subjects us to additional risks.

We rely heavily on third parties for most of our computing, storage, processing, and similar services. We have outsourced our cloud infrastructure to third-party service providers, and we currently use these providers to host and stream our services and content. We also conduct some of our own processing and similar services. We are vulnerable to service interruptions and other security incidents, including those experienced by our third-party service providers or by our own servers and infrastructure, and we have experienced and expect to experience interruptions, delays, or outages in service availability in the future due to a variety of factors, include human error, hardware or software errors, hosting disruptions, technical failures and capacity constraints. Regular interruptions in that service, could also affect the use of, and our members’ satisfaction with, our products and services and could harm our business and reputation. Frequent or persistent interruptions in our products and services could cause members to believe that our products and services are unreliable, leading them to switch to our competitors or to avoid our products and services, and could permanently harm our reputation and business. In addition, hosting costs will increase as membership engagement grows, which could harm our business if we are unable to grow our revenue faster than the cost of using these services or the services of our existing or similar third-party service providers.

The lack of renewal, or termination, of one or more of our agreements with our third-party service providers, or the renewal of an agreement on less favorable terms, also could seriously harm our business. Our third-party service providers may also take actions beyond our control that could seriously harm our business, including limiting our access to one or more services or altering how we are able to process data in a way that is unfavorable or costly to us. Although we expect that we could obtain similar services from other third parties, if our arrangements with our current third-party service providers were terminated, we could experience interruptions on our platform and in our ability to make our content available to members, as well as delays and additional expenses in arranging for alternative cloud infrastructure services. Any of these factors could further harm our reputation, reduce our revenue, subject us to member complaints, significant fines, litigation, disputes, claims, regulatory investigations or inquiries or other legal liability, result in decreased member satisfaction and increased member attrition, and cause our members to decline to renew their subscriptions, any of which could have a material adverse effect on our business, financial condition, and results of operations.

Other third-party risks may include insufficient security measures, data location uncertainty, and the possibility of data storage in inappropriate jurisdictions where laws or security measures may be inadequate, and our ability to monitor our third-party service providers’ data security practices are limited. Although we generally have agreements relating to cybersecurity and data privacy in place with our third-party service providers, they are limited in nature and we cannot guarantee that such agreements will prevent the accidental or unauthorized access to or disclosure, loss, destruction, disablement or encryption of, use or misuse of or modification of data (including personal information) or enable us to obtain adequate, or any reimbursement, from our third-party service providers in the event we should suffer any such incidents. Due to applicable laws and regulations or contractual obligations, we may be held responsible for any information security failure or cybersecurity attack attributed to our third-party service providers as they relate to the information we share with them. A vulnerability in or breach of our or our third-party service providers’ software or systems, a failure of our or our third-party service providers’ safeguards, policies or procedures could result in the compromise of the confidentiality, integrity or availability of our systems or the data housed in our third-party solutions, including personal information.

We may face claims by others that we infringe, misappropriate or otherwise violate third-party intellectual property rights, and may incur significant expenses as a result of ongoing or future intellectual property-related litigation.

Our success depends, in part, on our ability to develop and commercialize our products and services without infringing, misappropriating or otherwise violating the intellectual property rights of third parties. However, we may not be aware that our products or services are infringing, misappropriating or otherwise violating third-party intellectual property rights and third parties have in the past and may in the future bring claims alleging such infringement, misappropriation or violation. Third parties may be able to successfully challenge, oppose, invalidate, render unenforceable, dilute, misappropriate or circumvent our patents, trademarks, copyrights, and other intellectual property rights. Companies in the technology industry own large numbers of patents, copyrights, trademarks, and trade secrets and frequently enter into litigation based on allegations of infringement or other violations of intellectual property rights. As we face increasing competition and become increasingly high profile, the possibility of receiving a larger number of intellectual property claims against us grows. In addition, various “non-practicing entities,” and other intellectual property rights holders have in the past and may in the future attempt to assert intellectual property claims against us or seek to monetize the intellectual property rights they own to extract value through licensing or other settlements.

We are currently, and may in the future become, involved in litigation and other disputes relating to alleged infringement, misappropriation or other violation by us of a third party’s patents, confidential information, trade secrets and other intellectual property rights. Additionally, third parties have in the past and may in the future initiate adversarial proceedings, known as an inter partes review, in the United States Patent and Trademark Office to challenge the validity of our patent claims in the United States. We have in the past and may in the future be unsuccessful in such proceedings, resulting in a loss of some portion or all of our patent rights in the United States. Intellectual property litigation is frequently expensive to both the winning and losing parties and could consume significant amounts of management’s time and attention. We cannot predict the outcome of lawsuits and cannot ensure that the results of any such disputes will not have an adverse effect on our business, financial condition, results of operations, cash flows or prospects. Any claims or litigation, even those without merit and regardless of the outcome, could cause us to incur significant expenses and, if successfully asserted against us, could require us to pay substantial costs or damages, significant ongoing royalty payments, settlement or licensing fees, prevent us from offering our products or services or using certain essential technologies, force us to implement expensive work-arounds or re-designs, impose other unfavorable terms, distract management from our business, or satisfy indemnification obligations. For these and other reasons, intellectual property-related disputes could seriously harm our business, financial condition and results of operations.

If any of our technologies, products or services are found to infringe, misappropriate or violate a third party’s intellectual property rights, we may seek to obtain a license under such third party’s intellectual property rights in order to bring an end to certain claims or actions asserted against us to continue commercializing or using such technologies, products and services. However, we may not be able to obtain such a license on commercially reasonable terms or at all. Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors and other third parties access to the same technologies licensed to us, and it could require us to make substantial licensing and royalty payments.

In addition, we could be found liable for significant monetary damages, including treble damages and attorneys’ fees, if we are found to have willfully infringed a patent or other intellectual property right. Claims that we have misappropriated the confidential information or trade secrets of third parties, which we have been subject to in the past and may be subject to in the future, could similarly harm our business. If we are required to make substantial payments or undertake any of the other actions noted above as a result of any intellectual property infringement, misappropriation or violation claims against us, such payments, costs or actions could have a material adverse effect on our competitive position, business, financial condition and results of operations.

Our intellectual property rights are valuable, and any failure to adequately obtain, maintain, protect, defend or enforce our intellectual property rights could adversely affect our business, financial condition and results of operations.

Our success and ability to compete depends in part on our ability to obtain, maintain, protect, defend and enforce our intellectual property rights and technology. We rely on, and expect to continue to rely on, a combination of trademark, trade dress, copyright, trade secret and patent laws in the United States and internationally, as well as technological measures and contractual provisions, such as confidentiality agreements with our employees, contractors, consultants, and third parties with whom we have relationships, to establish and protect our brand, maintain our competitive position and protect our intellectual property rights from infringement, misappropriation or other violation. However, despite our efforts to protect our intellectual property rights, various factors outside our control pose a threat to our intellectual property rights.

The steps we take to protect our intellectual property rights may not be sufficient to effectively prevent third parties from infringing, misappropriating or otherwise violating our intellectual property or to prevent unauthorized disclosure or unauthorized use of our trade secrets or other confidential information. There can be no assurance that our intellectual property rights will be sufficient to protect against others offering products or services that are substantially similar to ours and competing with our business, and unauthorized parties may attempt to copy aspects of our technology and use information that we consider proprietary. For example, it is possible that third parties, including our competitors, may obtain patents relating to technologies that overlap or compete with our technology. If third parties obtain patent protection with respect to such technologies, they may assert, and have in the past asserted, that our technology infringes their patents and seek to charge us a licensing fee or otherwise preclude the use of our technology.

We seek patent, trade secret and other intellectual property protection for, for example, our trade names, products, manufacturing technologies, services and product features. The process of seeking patent protection can be long and expensive, and we cannot be certain that any currently pending or future applications will actually result in issued patents, or that, even if patents are issued, they will be of sufficient scope or strength to provide meaningful protection or any commercial advantage to us. In addition, any of our intellectual property rights may be challenged, which could result in them being narrowed in scope or declared invalid or unenforceable. Furthermore, others may develop technologies that are similar or superior to our technology or design around the patents we own. There is also a risk that we do not establish an unbroken chain of title from inventors to us. An inventorship or ownership dispute could arise that may permit one or more third parties to practice or enforce our intellectual property rights, including possible efforts to enforce rights against us. Additionally, errors in inventorship or ownership can sometimes also impact priority claims, and if we were to lose our ability to claim priority for certain patent filings, intervening art or other events may preclude us from issuing patents.

Effective protection of intellectual property rights is expensive and 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. We may fail to maintain or be unable to obtain adequate protections for certain of our intellectual property rights in certain foreign countries because effective intellectual property protection may not be available to us in every country in which our products and services are available, and our intellectual property rights may not receive the same degree of protection in foreign countries as they would in the United States because of the differences in foreign patent, trademark, copyright, and other laws concerning intellectual property and proprietary rights. Further, many countries limit the enforceability of patents against certain third parties, including government agencies or government contractors.

In addition to registered intellectual property rights, we rely on non-registered proprietary information and technology, such as trade secrets, confidential information, know-how and technical information. We attempt to protect our intellectual property, technology, and confidential information in part through confidentiality,

non-disclosure and invention assignment agreements with our employees, consultants, contractors, corporate collaborators, advisors and other third parties who develop intellectual property on our behalf or with whom we share information. However, we cannot guarantee that we have entered into such agreements with each party who has developed intellectual property on our behalf or each party that has or may have had access to our confidential information, know-how and trade secrets. These agreements may be breached, or may not effectively prevent unauthorized access to or unauthorized use, disclosure, misappropriation or reverse engineering of, our confidential information, intellectual property, or technology. Moreover, these agreements may not provide an adequate remedy for breaches or in the event of unauthorized use or disclosure of our confidential information or technology or infringement of our intellectual property. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret or know-how is difficult, expensive, and time-consuming, and the outcome is unpredictable. In addition, trade secrets and know-how can be difficult to protect and some courts inside and outside the United States are less willing or unwilling to protect trade secrets and know-how. Also, others may come to know about or determine our trade secrets through a variety of methods. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor or other third party, we would have no right to prevent them from using that technology or information to compete with us, and our competitive position would be materially and adversely harmed. The loss of trade secret protection could make it easier for third parties to compete with our products and services by copying functionality. Additionally, individuals not subject to invention assignment agreements and other third parties may make adverse ownership claims to our current and future intellectual property, and, to the extent that our employees, independent contractors or other third parties with whom we do business use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions.

We will not be able to protect our intellectual property rights if we are unable to enforce our rights or if we do not detect unauthorized use, infringement, misappropriation or other violation of our intellectual property rights. Any of our intellectual property rights may be challenged or circumvented by others or invalidated or held unenforceable through administrative processes or litigation in the United States or in foreign jurisdictions. Furthermore, legal standards relating to the validity, enforceability and scope of protection of intellectual property rights are uncertain and any changes in, or unexpected interpretations of, intellectual property laws may compromise our ability to enforce our intellectual property and other proprietary rights.

In order to protect our brands and intellectual property rights, we may be required to spend significant resources to monitor and protect these rights. 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. We have been and may continue to become involved in litigation to enforce our patents or other intellectual property rights, to protect our trade secrets and know-how, to determine the validity or scope of the proprietary rights of others or to defend against claims of invalidity. This type of litigation can be expensive regardless of whether we win or lose. Additionally, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. 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. An adverse outcome in such litigation or proceedings may expose us to a loss of our competitive position, expose us to significant liabilities or require us to seek licenses that may not be available on commercially acceptable terms, if at all. Accordingly, we may not be able to prevent third parties from infringing upon or misappropriating our intellectual property. Our failure to obtain, maintain, defend, protect and enforce our intellectual property rights could seriously damage our brands and our business and could have a materially adverse effect on our business, financial condition and results of operations.

Trademark and trade name protection is critical to our business, and any failure to adequately obtain, maintain and protect our trademark rights could adversely affect our business, financial condition and results of operations.

The market for our products depends to a large extent upon the goodwill associated with our trademarks and trade names, and we believe that the protection of our trademark rights is an important factor in product

recognition and the protection of our brand. We own or license the material trademarks and trade names used in connection with the packaging, marketing and sale of our products. Therefore, trademark and trade name protection is critical to our business. Although certain of our trademarks are registered in the United States and in certain foreign countries or an application for such registration is pending, we may not always be successful in asserting trademark or trade name protection. We may be unable to obtain trademark protection for our technologies, logos, slogans and brands, and our existing trademark registrations and applications, and any trademarks that may be used in the future, may not provide us with competitive advantages or distinguish our products and services from those of our competitors. Further, we may not timely or successfully register our trademarks. In addition, there could be potential trade name or trademark infringement claims brought by owners of other trademarks that are similar to ours and we could also incur substantial costs to enforce our trademarks and trade names to protect against potential dilution and prevent unauthorized use by third parties. If we do not adequately protect our rights in our trademarks from infringement or unauthorized use, any goodwill that we have developed in those trademarks could be lost or impaired, which could harm our brands and our business. Additionally, we may not be able to renew our material trademark licenses, and failure to renew our licenses may have a material effect on our business.

Our trademarks may be opposed, contested, circumvented or found to be unenforceable, weak or invalid, and we may not be able to prevent third parties from infringing or otherwise violating them or using similar marks in a manner that causes confusion or dilutes the value or strength of our brand. See also “—Our intellectual property rights are valuable, and any failure to adequately obtain, maintain, protect, defend or enforce our intellectual property rights could adversely affect our business, financial condition and results of operations.”

Our member growth and engagement on mobile devices depends upon effective operation with mobile operating systems, networks, technologies, products, hardware, and standards that we do not control.

A significant and growing portion of our members access our platform through our iFIT and Sweat applications on mobile devices and there is no guarantee that popular mobile devices will continue to support iFIT or that mobile device users will use iFIT rather than competing products. We are dependent on the interoperability of iFIT with popular mobile operating systems, networks, technologies, products, hardware and standards that we do not control, such as Android and iOS. Any changes, bugs or technical issues in such systems, or changes in our relationships with mobile operating system partners, device manufacturers or mobile carriers, or in their terms of service or polices that degrade the functionality of our digital offering, give preferential treatment to competitors, limit our ability to target or measure the effectiveness of applications, or impose fees or other charges related to our delivery of our applications could adversely affect our platform’s usage on mobile devices.

Further, we are subject to the standard policies and terms of service of these operating systems, as well as policies and terms of service of the various application stores that make our applications and experiences available to our developers, creators, and users. These policies and terms of service govern the availability, promotion, distribution, content, and operation generally of applications and experiences on such operating systems and stores. Each provider of these operating systems and stores has broad discretion to change and interpret its terms of service and policies with respect to our platform and those changes may be unfavorable to us and our developers’, creators’, and users’ use of our platform. If we were to violate or if an operating system provider or application store believes that we have violated its terms of service or policies, that operating system provider or application store could limit or discontinue our access to its operating system or store. In some cases, these terms and policies may not be clear or our interpretation of these terms and policies may not align with the interpretation of the operating system provider or application store, which could lead to inconsistent enforcement of these terms of service or policies against us, and could also result in the operating system provider or application store limiting or discontinuing our access to its operating system or store. Any limitation on or discontinuation of our access to any third-party platform or application store could adversely affect our business, financial condition or results of operations. We cannot assure you that the platforms through which we distribute our applications will maintain their current structures or terms of access, that such marketplaces will continue to make our mobile applications available for download, or that such marketplaces will not charge us fees to list our applications for download, or charge us fees to offer products and services through our applications.

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, products, systems, networks, hardware and standards that we do not control. We may not be successful in maintaining or developing relationships with key participants in the mobile industry or in developing products that operate effectively with these technologies, systems, networks, hardware or standards. In the event that it is more difficult for our members to access and use our platform on their mobile devices or members find our mobile offerings do not effectively meet their needs, if our competitors develop products and services that are perceived to operate more effectively on mobile devices, or if our members 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 member growth and member engagement could be adversely impacted and our business could be harmed.

We depend upon a number of third-party intellectual property licenses for our business operations, and our licensed intellectual property is an important part of our business. An adverse change to or loss of our intellectual property rights, including our licenses, may have an adverse effect on our business, financial condition, and results of operations.

We license certain of our intellectual property to a number of third parties that manufacture or market fitness equipment, and we receive licenses from third parties for certain intellectual property to develop our products. We believe that our licenses with third parties increase market recognition of our brands, enhance our ability to market our core products and generate attractive, high margin income. We anticipate that we will continue to enter into these kinds of licensing arrangements in the future. It is possible, however, that licenses we desire will not be available to us on commercially reasonable terms or at all. If we lose existing licenses to key technology, or are unable to enter into new licenses that we deem important, our business, financial condition and results of operations could be harmed.

Our relationship with our third-party licensors and our licensees may deteriorate and we cannot guarantee that our agreements with such third parties will continue to be renewed indefinitely. It also is possible that such agreements will not be renewed at all. The rates and terms available to us today under our licensing agreements may not be available to us in the future. Additionally, if we fail to comply with any of the obligations under our license agreements, we may be required to pay damages and the applicable licensor or licensee may have the right to terminate the license. Termination by our licensors or licensees would cause us to lose valuable rights, and could prevent us from selling our products and services, or inhibit our ability to commercialize future products and services. Our business would suffer if any of our current or future licenses terminate, if our licensors or licensees fail to abide by the terms of the license, if our licensors fail to enforce the licensed intellectual property rights against infringing third parties, if our licensed intellectual property rights are found to be invalid or unenforceable, or if we are unable to enter into necessary licenses on acceptable terms. In addition, our rights to certain technologies are licensed to us on a non-exclusive basis. The owners of these non-exclusively licensed technologies are therefore free to license them to third parties, including our competitors, on terms that may be superior to those offered to us, which could place us at a competitive disadvantage. Moreover, our licensors may own or control intellectual property that has not been licensed to us and, as a result, we may be subject to claims, regardless of their merit, that we are infringing, misappropriating or otherwise violating the licensors’ rights. In addition, the agreements under which we license intellectual property or technology from third parties are generally complex, and certain provisions in such agreements may be susceptible to multiple interpretations. The resolution of any contract interpretation disagreement that may arise could narrow what we believe to be the scope of our rights to the relevant intellectual property or technology, or increase what we believe to be our financial or other obligations under the relevant agreement. The lack of renewal, or termination, of one or more of our license agreements, or the renewal of a license agreement on less favorable terms, could have a material adverse effect on our business, financial condition, and results of operations.

In particular, the ability to continue to make our content accessible to our members is an important element of our business. While we own the rights to stream most of the fitness and related content produced by us or on our behalf in perpetuity, if this were to be disrupted, it would have an impact on our business and what we are able to provide to our members.

To secure the rights to use music in our content, we have licenses with third-party providers, which allows us to provide music.

The process of obtaining our music licenses with third-party providers involved negotiations. While there are other providers available to provide such content, any change in our music provider would require a substantial amount of time and resources.

Although we expend significant resources to seek to comply with the various statutory, regulatory, and judicial frameworks with respect to music licensing, we cannot guarantee that we currently hold, or will always hold, every necessary right to use all of the music that is used on our service, and we cannot assure you that we are not infringing, misappropriating or otherwise violating any third-party intellectual property rights, or that we will not do so in the future. These challenges, and others concerning the licensing of music on our platform, may subject us to significant liability for copyright infringement, breach of contract, or other claims.

In the future, we may identify additional third-party intellectual property we may need to license in order to engage in our business, including to develop or commercialize new products or services. However, such licenses may not be available on acceptable terms or at all. The licensing or acquisition of third-party intellectual property rights is a competitive area, and several companies may pursue strategies to license or acquire third-party intellectual property rights that we may consider attractive or necessary. These companies may have a competitive advantage over us due to capital resources, development or commercialization capabilities. In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. Even if such licenses are available, we may be required to pay the licensor substantial royalties based on sales of our products and services. Such royalties are a component of the cost of our products or services and may affect the margins on our products and services. If we are unable to enter into the necessary licenses on acceptable terms or at all, if any necessary licenses are subsequently terminated, if our licensors fail to abide by the terms of the licenses, or if the licensed intellectual property rights are found to be invalid or unenforceable, our business, financial condition, and results of operations could be materially and adversely affected.

Some of our products and services contain open source software, which may pose particular risks to our proprietary software, technologies, products, and services in a manner that could harm our business.

We use open source software in our products and services and anticipate using open source software in the future. Some open source software licenses require those who distribute open source software as part of their own software product to publicly disclose all or part of the source code to such software product or to make available any derivative works of the open source code on unfavorable terms or at no cost, and we may be subject to such terms. The terms of many open source licenses to which we are subject have not been interpreted by U.S. or foreign courts, and there is a risk that open source software licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to provide or distribute our products or services. Any actual or claimed requirement to disclose our proprietary source code or pay damages for breach of the applicable license could harm our business and could help third parties, including our competitors, develop products and services that are similar to or better than ours. While we monitor our use of open source software and try to ensure that none is used in a manner that would require us to disclose our proprietary source code or that would otherwise breach the terms of an open source license, such use could inadvertently occur, or could be claimed to have occurred, in part because open source license terms are often ambiguous.

From time to time, companies that incorporate open source software into their products have faced claims challenging the ownership of open source software or compliance with open source license terms. We could face claims from third parties claiming ownership of, or demanding release of, the open source software or derivative works that we developed using such software, which could include our proprietary source code, or otherwise seeking to enforce the terms of the applicable open source license. These claims could result in litigation and could require us to make our software source code freely available, purchase a costly license, or cease offering

the implicated products or services unless and until we can re-engineer them to avoid infringement. This re-engineering process could require us to expend significant additional research and development resources, and we cannot guarantee that we will be successful.

Additionally, the use of certain open source software can lead to greater risks than use of third-party commercial software, as open source licensors generally do not provide warranties or controls on the origin of software. There is typically no support available for open source software, and we cannot ensure that the authors of such open source software will implement or push updates to address security risks or will not abandon further development and maintenance. Many of the risks associated with the use of open source software, such as the lack of warranties or assurances of title or performance, cannot be eliminated, and could, if not properly addressed, negatively affect our business. We have processes to help alleviate these risks, including a review process for screening requests from our developers for the use of open source software, but we cannot be sure that all open source software is identified or submitted for approval prior to use in our products and services. Any of these risks could be difficult to eliminate or manage, and, if not addressed, could have an adverse effect on our business, financial condition, and results of operations.

We are in the process of updating our Enterprise Resource Planning (“ERP”) system. Significant additional costs, cost overruns and delays in connection with the implementation of our new ERP system may adversely affect results of operations.

We are in the process of updating our company-wide ERP system. This is a lengthy and expensive process that will result in a diversion of resources from other operations. Any disruptions, delays or deficiencies in the design and/or implementation of the new ERP system, particularly any disruptions, delays or deficiencies that impact operations, could adversely affect our ability to run and manage our business effectively. The implementation of a new ERP system has and will continue to involve substantial expenditures on system hardware and software, as well as design, development and implementation activities. There can be no assurance that other cost overruns relating to the new ERP system will not occur. Our business, financial condition and results of operations may be adversely affected if we experience operating problems, additional costs, or cost overruns during the ERP implementation process.

Risks Related to this Offering and Ownership of Our Class A Common Stock

Future offerings of debt or equity securities by us may have a material adverse effect on the market price of our Class A common stock.

In the future, we may attempt to obtain financing or to further increase our capital resources by issuing additional shares of our Class A common stock or by offering debt or other equity securities, including senior or subordinated notes, debt securities convertible into equity or shares of preferred stock.

Any future debt financing could involve restrictive covenants relating to our capital-raising activities and other financial and operational matters, which might make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. Moreover, if we issue debt securities, the debt holders would have rights to make claims on our assets senior to the rights of our holders of our Class A common stock. The issuance of additional shares of our Class A common stock or other equity securities or securities convertible into equity may dilute the economic and voting rights of our existing stockholders or reduce the market price of our Class A common stock or both. Debt securities convertible into equity could be subject to adjustments in the conversion ratio pursuant to which certain events may increase the number of equity securities issuable upon conversion. Preferred shares, if issued, could have a preference with respect to liquidating distributions or a preference with respect to dividend payments that could limit our ability to pay dividends to the holders of our Class A common stock. Our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, which may have a material adverse effect on the amount, timing, or nature of our future offerings. Thus, holders of our Class A common stock bear the risk that our future offerings may reduce the market price of our Class A common stock and dilute their stockholdings in us.

The dual class structure of our common stock will have the effect of concentrating voting control with the Scott R. Watterson holders who will hold in the aggregate 85.1% of the voting power of our capital stock following the completion of this offering, which will limit or preclude your ability to influence corporate matters, including the election of directors and the approval of any change of control transaction.

Our Class B common stock has ten votes per share, and our Class A common stock, which is the stock we are offering in this offering, has one vote per share. Following this offering, the Scott R. Watterson holders, as holders of our outstanding Class B common stock, will hold 85.1% of the voting power of our outstanding capital stock. Because of the ten-to-one voting ratio between our Class B and Class A common stock, the holders of our Class B common stock collectively will continue to control a majority of the combined voting power of our common stock and therefore be able to control all matters submitted to our stockholders for approval until the earlier of (i) the date specified by a vote of the holders of not less than two-thirds of the voting power of the then outstanding shares of Class B common stock, and (ii) the date on which we first have actual knowledge that the shares of Class B common stock cease to represent at least 15% of all outstanding shares of our common stock. This concentrated control will limit or preclude your ability to influence corporate matters for the foreseeable future, including the election of directors, amendments of our organizational documents, and any merger, consolidation, sale of all or substantially all of our assets, or other major corporate transaction requiring stockholder approval. In addition, this may prevent or discourage unsolicited acquisition proposals or offers for our capital stock that you may feel are in your best interest as one of our stockholders. Holders of Class B common stock may have interests that conflict with or are different than the interests of other stockholders.

Future transfers by holders of Class B common stock will generally result in those shares converting to Class A common stock, subject to certain exceptions. See the section titled “Description of Capital Stock—Anti-Takeover Provisions” for additional information.

The dual class structure of our common stock may adversely affect the trading market for our Class A common stock.

Certain stock index providers, such as S&P Dow Jones, exclude companies with multiple classes of shares of common stock from being added to certain stock indices, including the S&P 500. In addition, several stockholder advisory firms and large institutional investors oppose the use of multiple class structures. As a result, the dual class structure of our common stock may prevent the inclusion of our Class A common stock in such indices, may cause stockholder advisory firms to publish negative commentary about our corporate governance practices or otherwise seek to cause us to change our capital structure, and may result in large institutional investors not purchasing shares of our Class A common stock. Any exclusion from stock indices could result in a less active trading market for our Class A common stock. Any actions or publications by stockholder advisory firms or institutional investors critical of our corporate governance practices or capital structure could also adversely affect the value of our Class A common stock.

As a controlled company, we will not be subject to all of the corporate governance rules of NASDAQ.

Upon the listing of our common stock on NASDAQ in connection with this offering, we will be considered a “controlled company” under the rules of NASDAQ, as applicable. Controlled companies are exempt from NASDAQ corporate governance rules requiring that listed companies have (i) a majority of the board of directors consist of independent directors under the listing standards of NASDAQ, (ii) a nominating/corporate governance committee composed entirely of independent directors and a written nominating/corporate governance committee charter meeting NASDAQ requirements, as applicable and (iii) a compensation committee composed entirely of independent directors and a written compensation committee charter meeting the requirements of NASDAQ, as applicable. Following this offering, we intend to use some or all these exemptions. As a result, we may not have a majority of independent directors, our nomination and corporate governance committee and compensation committee may not consist entirely of independent directors and such committees may not be subject to annual performance evaluations. Accordingly, you may not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of NASDAQ. See “Management.”

We do not anticipate paying any dividends on our Class A common stock in the foreseeable future.

We do not expect to declare or pay any cash or other dividends in the foreseeable future on our Class A common stock. Our Senior ABL Revolving Credit Facility restricts our ability to pay cash dividends on our Class A common stock. The payment of dividends is also subject to consent by holders of the New Convertible Notes. We may also enter into other credit agreements or other borrowing arrangements in the future that restrict or limit our ability to pay cash dividends on our Class A common stock. As a result, you may not receive any return on an investment in our Class A common stock unless you sell our Class A common stock for a price greater than that which you paid for it. See “Dividend Policy.”

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.

The trading market for our Class A common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business. We do not currently have and may never obtain research coverage by securities and industry analysts. If no securities or industry analysts commence coverage of us, the trading price for our Class A common stock would be negatively impacted. If we obtain securities or industry analyst coverage and if one or more of these analysts ceases coverage of our Company or fails to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline. Moreover, if our results of operations do not meet the expectations of the investor community, or one or more of the analysts who cover our Company downgrade our Class A common stock, our stock price could decline. As a result, you may not be able to sell shares of our Class A common stock at prices equal to or greater than the initial public offering price.

No market currently exists for our Class A common stock, and we cannot assure you that an active market will develop for such stock.

Prior to this offering, there has been no public market for our Class A common stock. The initial public offering price for our Class A common stock has been determined through negotiations among us and the representatives of the underwriters and may not be indicative of the market price of our Class A common stock after this offering or to any other established criteria of the value of our business. If you purchase shares of our Class A common stock, you may not be able to resell those shares at or above the initial public offering price. We cannot predict the extent to which investor interest in us will lead to the development of an active trading market on NASDAQ or otherwise or how liquid that market might become. An active public market for our Class A common stock may not develop or be sustained after this offering. If an active public market does not develop or is not sustained, it may be difficult for you to sell your shares of our Class A common stock at a price that is attractive to you or at all.

The market price and trading volume of our Class A common stock may be volatile, which could result in rapid and substantial losses for our stockholders, and you may lose all or part of your investment.

Shares of our Class A common stock sold in this offering may experience significant volatility on NASDAQ. An active, liquid and orderly market for our Class A common stock may not be sustained, which could depress the trading price of our Class A common stock or cause it to be highly volatile or subject to wide fluctuations. The market price of our Class A common stock may fluctuate or may decline significantly in the future and you could lose all or part of your investment. Some of the factors that could negatively affect our share price or result in fluctuations in the price or trading volume of our Class A common stock include:

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variations in our quarterly or annual results of operations;

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changes in our earnings estimates (if provided) or differences between our actual results of operations and those expected by investors and analysts;

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the contents of published research reports about us or our industry or the failure of securities analysts to cover our Class A common stock;

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additions or departures of key management personnel;

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any increased indebtedness we may incur in the future;

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announcements by us or others and developments affecting us;

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actions by institutional stockholders;

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litigation and governmental investigations;

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legislative or regulatory changes;

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judicial pronouncements interpreting laws and regulations;

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changes in government programs;

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changes in market valuations of similar companies;

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speculation or reports by the press or investment community with respect to us or our industry in general;

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announcements by us or our competitors of significant contracts, acquisitions, dispositions, strategic relationships, joint ventures or capital commitments; and

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general market, political and economic conditions, including local conditions in the markets in which we operate.

These broad market and industry factors may decrease the market price of our Class A common stock, regardless of our actual financial performance. The stock market in general has from time to time experienced extreme price and volume fluctuations, including recently. In addition, in the past, following periods of volatility in the overall market and decreases in the market price of a company’s securities, securities class action litigation has often been instituted against these companies. This litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources, which could have a material adverse effect on our business, financial condition and results of operations.

The market price of our Class A common stock could be negatively affected by sales of substantial amounts of our Class A common stock in the public markets.

After this offering, we will have 200,488,123 shares of Class A common stock outstanding and 114,402,561 shares of Class B common stock that may be convertible into Class A common stock upon transfer (calculated assuming the offering price is $19.50 per share, the actual number of shares will vary if the offering price is changed). Of our issued and outstanding shares, all the Class A common stock sold in this offering will be freely transferable, except for any shares held by our “affiliates,” as that term is defined in Rule 144 under the Securities Act. Following closing of this offering, approximately 15.3% of our outstanding Class A common stock, or 17.3% if the underwriters exercise their option to purchase additional shares in full, will be immediately available for sale in the public market.

We and all directors and officers and holders of substantially all of our outstanding stock and stock options have agreed, subject to specified exceptions, not to directly or indirectly:

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sell, offer, contract or grant any option to sell (including any short sale), pledge, transfer, establish an open “put equivalent position” within the meaning of Rule 16a-l(h) under the Exchange Act,

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otherwise dispose of any shares of Class A common stock, options or warrants to acquire shares of Class A common stock, or securities exchangeable or exercisable for or convertible into shares of Class A common stock currently or hereafter owned either of record or beneficially, or

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publicly announce an intention to do any of the foregoing

for a period of 180 days after the date of this prospectus without the prior written consent of the representatives of the underwriters.

This restriction terminates after the close of trading of the Class A common stock on and including the 180th day after the date of this prospectus. The representatives of the underwriters may, in their sole discretion and at any time or from time to time before the termination of the 180-day period release all or any portion of the securities subject to lock-up agreements. See “Underwriting—Selling Restrictions.”

Immediately following this offering, the holders of approximately 160.7 million shares of our Class A common stock and 114.4 million shares of our Class B common stock which is convertible into shares of our Class A common stock, subject to certain lock-up restrictions and conditions, will have rights, subject to some conditions, to require us to file registration statements for the public resale of the Class A common stock issuable upon conversion of such shares or to include such shares in registration statements that we may file for us or other stockholders.

The market price of our Class A common stock may decline significantly when the restrictions on resale by our existing stockholders lapse. A decline in the price of our Class A common stock might impede our ability to raise capital through the issuance of additional Class A common stock or other equity securities.

The future issuance of additional Class A common stock in connection with outstanding securities, any equity plans, acquisitions or otherwise will dilute all other stockholdings.

After this offering, we will have an aggregate of 45,000,000 shares of Class A common stock authorized under our equity incentive plans, including appoximately 332,980 restricted shares and options issued for approximately 6,210,729 shares of Class A common stock to be granted in connection with this offering . We may issue all these shares of Class A common stock without any action or approval by our stockholders, subject to certain exceptions. The issuance of any Class A common stock in connection with any equity incentive plan, the exercise of outstanding stock options, the exercise of outstanding warrants, the conversion of the New Convertible Notes or otherwise would dilute the percentage ownership held by the investors who purchase Class A common stock in this offering.

You will incur immediate dilution as a result of this offering.

If you purchase Class A common stock in this offering, you will pay more for your shares than the amounts paid by existing stockholders for their shares. As a result, you will incur immediate dilution of $18.85 per share, representing the difference between the assumed initial public offering price of $19.50 per share (the midpoint of the estimated initial public offering price range set forth on the cover of this prospectus) and our pro forma as adjusted net tangible book value (deficit) per share after giving effect to this offering. See “Dilution.”

We will have broad discretion in the use of the net proceeds we receive in this offering and may not use them effectively.

We will have broad discretion in the application of the net proceeds we receive in this offering, including for any of the purposes described in the section titled “Use of Proceeds,” and you will not have the opportunity as part of your investment decision to assess whether the net proceeds are being used appropriately. Because of the number and variability of factors that will determine our use of the net proceeds from this offering, their ultimate use may vary substantially from their currently intended use. If we do not use the net proceeds that we receive in this offering effectively, our business, financial condition, results of operations, and prospects could be harmed, and the market price for our Class A common stock could decline. Pending their use, we may invest the net proceeds from this offering in short-term, investment-grade interest-bearing securities such as money market accounts, certificates of deposit, commercial paper, and guaranteed obligations of the U.S. government that may not generate a high yield to our stockholders. These investments may not yield a favorable return to our investors.

The requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain qualified board members and officers.

As a public company, we will incur legal, accounting and other expenses that we did not previously incur. We will become subject to the reporting requirements of the Exchange Act, and the Sarbanes-Oxley Act, the listing requirements of NASDAQ and other applicable securities rules and regulations. Compliance with these rules and

regulations will increase our legal and financial compliance costs, make some activities more difficult, time-consuming or costly and increase demand on our systems and resources. The Exchange Act requires that we file annual, quarterly and current reports with respect to our business, financial condition and results of operations. The Sarbanes-Oxley Act requires, among other things, that we establish and maintain effective internal controls and procedures for financial reporting. Furthermore, the need to establish the corporate infrastructure demanded of a public company may divert our management’s attention from implementing our growth strategy, which could prevent us from improving our business, financial condition and results of operations.

We are evaluating these rules and regulations and cannot predict or estimate the amount of additional costs we may incur or the timing of such costs. These rules and regulations are often subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. Further, if our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities may initiate legal proceedings against us and could have a material adversely effect on our business, financial condition and results of operations.

In addition, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. For example, we expect these rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may have to choose between reduced coverage or substantially higher costs to obtain coverage. These factors could make it more difficult for us to attract and retain qualified executive officers and members of our board of directors, particularly to serve on our audit committee and compensation committee.

Risks Related to Our Company and Organizational Structure

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, the rules subsequently implemented by the Securities and Exchange Commission (“SEC”), the rules and regulations of the listing standards of NASDAQ, 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 results of operations. 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, in the future, 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 controls are necessary for us to produce reliable financial reports and prevent fraud. In addition, we will be required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act. 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, financial condition and results of operations. Although we have already hired additional employees to assist us in complying with these requirements and engaged outside consultants, 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.

We have identified deficiencies in our internal control over financial reporting, including material weaknesses and if our remediation of such deficiencies is not effective, or if we fail to develop and maintain an effective system of disclosure controls and procedures and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable laws and regulations could be impaired.

In the course of preparing our financial statements for fiscal 2021, we identified material weaknesses in our internal control over financial reporting. The material weaknesses have not been remediated. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. We identified a material weakness in our control environment due to a lack of a sufficient complement of accounting and financial reporting resources commensurate with our financial reporting requirements as a public company. This material weakness contributed to the following additional material weaknesses:

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Our controls over the reviews of the accounting for certain transactions were not designed to operate at a sufficiently precise level, including those for inventory and stock compensation.

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Our controls related to our procurement process were not designed to appropriately document and review the contractual terms and related approvals for significant contracts.

These material weaknesses resulted in adjustments to our financial statements and could result in a misstatement of our accounts or disclosures that would result in a material misstatement to the annual or interim consolidated financial statement that would not be prevented or detected.

To address these material weaknesses, we have added personnel and implemented business process controls. We intend to continue to take steps to remediate the material weaknesses described above through hiring additional qualified accounting and financial reporting personnel and thoroughly evaluating the design of existing controls and implementing more robust controls and processes supporting internal controls over financial reporting. We will not be able to fully remediate these material weaknesses until these steps have been completed and have been operating effectively for a sufficient period of time. Furthermore, we cannot assure you that the measures we have taken to date, and actions we may take in the future, will be sufficient to remediate the control deficiencies that led to our material weaknesses in our internal control over financial reporting or that they will prevent or avoid potential future material weaknesses. Our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business. Further, weaknesses in our disclosure controls and procedures and internal control over financial reporting may be discovered in the future. Any failure to develop or maintain effective controls or any difficulties encountered in their implementation or improvement could harm our operating results or cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements for prior periods.

Our independent registered public accounting firm is not required to formally attest to the effectiveness of our internal control over financial reporting until after we are no longer an “emerging growth company” as defined in the JOBS Act. At such time, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our internal control over financial reporting is documented, designed, or operating. Any failure to implement and maintain effective internal control over financial reporting also could adversely affect the results of periodic management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of our internal control over financial reporting that we will eventually be required to include in our periodic reports that are filed with the SEC.

Ineffective disclosure controls and procedures and internal control over financial reporting could also cause investors to lose confidence in our reported financial and other information, which would likely have a negative effect on the trading price of our Class A common stock. In addition, if we are unable to continue to meet these requirements, we may not be able to remain listed on the Nasdaq Global Select Market.

Our current resources may not be sufficient to fulfill our public company obligations.

Following the closing of this offering, we will be subject to various regulatory requirements, including those of the SEC and NASDAQ. These requirements include record keeping, financial reporting and corporate governance rules and regulations. Historically, our management team has not had the resources typically found in a public company. Our internal infrastructure may not be adequate to support our increased reporting obligations and we may be unable to hire, train or retain necessary staff and may be reliant on engaging outside consultants or professionals to overcome our lack of experience or employees. If our internal infrastructure is inadequate, we are unable to engage outside consultants at a reasonable rate or attract talented employees to perform these functions or are otherwise unable to fulfill our public company obligations, it could have a material adverse effect on our business, financial condition and results of operations.

This prospectus takes advantage of certain reduced disclosure accommodations applicable to emerging growth companies, including those relating to accounting standards and disclosure about our executive compensation, that do not apply to other public companies.

When we furnished the initial draft of the registration statement of which this prospectus forms a part, we qualified as an “emerging growth company” as defined in the JOBS Act. As such we are able to take advantage of specified reduced disclosure requirements applicable to this offering. These reduced requirements include, among others:

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an exemption from the adoption of certain new or revised financial accounting standards that do not yet apply to private companies;

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an exemption from compliance with certain new requirements adopted by the Public Company Accounting Oversight Board requiring a supplement to the auditor’s report in which the auditor is required to provide additional information about the audit and the financial statements of the issuer; and

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reduced disclosure about executive compensation arrangements.

As a result of our decision to avail ourselves of these disclosure accommodations, the information that we provide may be different than what you may receive from other public companies in which you may hold an equity interest. Following this offering, we will no longer be able to take advantage of the accommodations available to emerging growth companies.

Provisions in our amended and restated certificate of incorporation and amended and restated bylaws and under Delaware law could make an acquisition of us, which may be beneficial to our stockholders, more difficult, limit attempts by our stockholders to replace or remove our current management, and limit the market price of our Class A common stock.

Provisions in our amended and restated certificate of incorporation and amended and restated bylaws that will be in effect upon the completion of this offering may have the effect of delaying or preventing a merger, acquisition or other change of control of our company that the stockholders may consider favorable. In addition, because our board of directors is responsible for appointing the members of our management team, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors. Among other things, our amended and restated certificate of incorporation and amended and restated bylaws include provisions that:

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provide for a classified board with staggered three-year terms;

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permit the board of directors to establish the number of directors and fill any vacancies and newly-created directorships;

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authorize the issuance of “blank check” preferred stock that our board of directors could use to implement a stockholder rights plan;

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provide that only our chief executive officer or a majority of our board of directors will be authorized to call a special meeting of stockholders;

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Our amended and restated certificate of incorporation will provide that our stockholders may take action by written consent only for so long as the outstanding shares of Class B common stock represent at least 40% of the combined voting power of our common stock after which stockholders will only be able to take action at annual or special meetings of our stockholders;

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certain litigation against us can only be brought in Delaware;

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prohibit cumulative voting;

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provide for a dual class common stock structure in which holders of our Class B common stock may have the ability to control the outcome of matters requiring stockholder approval, even if they own significantly less than a majority of the outstanding shares of our common stock, including the election of directors and significant corporate transactions, such as a merger or other sale of our company or its assets (see the section titled “Description of Capital Stock”);

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provide that the board of directors is expressly authorized to make, alter, or repeal our bylaws;

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establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at annual stockholder meetings; and

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provide that the vote of holders of a majority of the then outstanding shares of Class B common stock, voting as a separate class, will be required to amend provisions of our amended and restated certificate of incorporation and amended and restated bylaws affecting the rights of holders of Class B common stock, and that any other amendments to our amended and restated certificate of incorporation or amended and amended and restated bylaws will require the approval of the majority of the combined vote of our then-outstanding shares of Class A and Class B common stock.

In addition, our Senior ABL Revolving Credit Facility imposes, and we anticipate that documents governing our future indebtedness may impose, limitations on our ability to enter into change of control transactions. The occurrence of a change of control transaction could constitute an event of default thereunder permitting acceleration of the indebtedness, thereby impeding our ability to enter into certain transactions.

Our amended and restated certificate of incorporation will designate the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, and will designate the federal district courts of the U.S. as the sole and exclusive forum for claims arising under the Securities Act, which, in each case could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees, agents, or other stockholders.

Our amended and restated certificate of incorporation will provide that, unless we consent in writing to an alternative forum, the Court of Chancery of the State of Delaware shall, to the fullest extent permitted by law, be the sole and exclusive forum for any (a) derivative action or proceeding brought on our behalf; (b) action asserting a claim of breach of a fiduciary duty owed by or other wrongdoing by any current or former director, officer, employee, agent or stockholder to us or our stockholders; (c) action asserting a claim arising under any provision of the DGCL or our amended and restated certificate of incorporation or amended and restated bylaws (as either may be amended from time to time), or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware; or (d) action asserting a claim governed by the internal affairs doctrine. For

the avoidance of doubt, our amended and restated certificate of incorporation will also provide that the foregoing exclusive forum provision does not apply to actions brought to enforce any liability or duty created by the Securities Act or the Exchange Act, or any rules or regulations promulgated thereunder, or any other claim or cause of action for which the federal courts have exclusive jurisdiction.

Our amended and restated certificate of incorporation will also provide that, unless we consent in writing to an alternative forum, the federal district courts of the United States of America shall be the sole and exclusive forum for the resolution of any action asserting a claim arising under the Securities Act or the rules and regulations promulgated thereunder. Pursuant to the Exchange Act, claims arising thereunder must be brought in federal district courts of the United States of America.

To the fullest extent permitted by law, any person or entity purchasing or otherwise acquiring or holding any interest in any shares of our capital stock shall be deemed to have notice of and consented to the forum provision in our amended and restated certificate of incorporation. This choice of forum provision may limit a stockholder’s ability to bring a claim in a different judicial forum, including one that it may find favorable or convenient for a specified class of disputes with us or our directors, officers, other stockholders, or employees, which may discourage such lawsuits, make them more difficult or expensive to pursue, and result in outcomes that are less favorable to such stockholders than outcomes that may have been attainable in other jurisdictions. By agreeing to this provision, however, stockholders will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder. The enforceability of similar choice of forum provisions in other companies’ certificates of incorporation has been challenged in legal proceedings, and it is possible that a court could find these types of provisions to be inapplicable or unenforceable. If a court were to find the choice of forum provisions in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could have a material adverse effect on our business, financial condition and results of operations.

Our ability to issue preferred stock may deter takeover attempts.

Our Board is empowered to issue, without stockholder approval, preferred stock with dividends, liquidation, conversion, voting or other rights, which could decrease the amount of earnings and assets available for distribution to holders of our Class A common stock and adversely affect the relative voting power or other rights of the holders of our Class A common stock. In the event of issuance, the preferred stock could be used as a method of discouraging, delaying or preventing a change in control. Our certificate of incorporation authorizes the issuance of shares of “blank check” preferred stock with such designations, rights and preferences as may be determined from time to time by our board of directors. Although we have no present intention to issue any shares of our preferred stock, we may do so in the future under appropriate circumstances.

Risks Related to Our Indebtedness

Any default under our debt agreements could have significant consequences.

Our Senior ABL Credit Agreement contains covenants imposing certain restrictions on our business. These restrictions may affect our ability to operate our business and may limit our ability to take advantage of potential business opportunities as they arise. The Senior ABL Credit Agreement contains restrictive covenants including, with specified exceptions, limitations on our ability to incur debt and liens, pay dividends or make other distributions, enter into affiliate transactions, consolidate, merge or acquire or dispose of assets and make certain investments, acquisitions and loans. Our New Convertible Notes also provide consent rights to the required holders thereunder with respect to the incurrence of certain indebtedness. The Senior ABL Credit Agreement under certain circumstances also requires us to maintain a minimum consolidated fixed charge coverage ratio of 1.00 to 1.00.

Our ability to comply with these covenants under the Senior ABL Credit Agreement may be affected by events beyond our control, including prevailing economic, financial and industry conditions. The breach of any of these

covenants could result in a default, which would permit the lenders to declare all outstanding debt to be due and payable, together with accrued and unpaid interest. Our obligations under the Senior ABL Credit Agreement are secured by liens on substantially all of our assets, subject to agreed-upon exceptions. Any default by us under the Senior ABL Credit Agreement could have a material adverse effect on our business, financial condition and results of operations.

The transition away from LIBOR may adversely affect our cost to obtain financing.

On March 5, 2021, the U.K. Financial Conduct Authority announced the future cessation or loss of representativeness of the 35 London Interbank Offered Rate (“LIBOR”) benchmark settings currently published by ICE Benchmark Administration, immediately after December 31, 2021 for certain Euro settings, and immediately after June 30, 2023 for US dollar LIBOR settings. While there is no consensus on what rate or rates may become accepted alternatives to LIBOR, the Alternative Reference Rates Committee, a steering committee comprised of U.S. financial market participants, selected and the Federal Reserve Bank of New York started in May 2018 to publish the Secured Overnight Finance Rate, or SOFR, as an alternative to LIBOR. SOFR is a broad measure of the cost of borrowing cash in the overnight U.S. treasury repo market. At this time, it is impossible to predict whether SOFR or another reference rate will become an accepted alternative to LIBOR. The manner and impact of this transition may materially adversely affect the trading market for LIBOR-based securities, which may result in an increase in borrowing costs under our Senior ABL Credit Agreement. Any replacement for LIBOR may result in an effective increase in the applicable interest rate on our current or future debt obligations, including our Senior ABL Credit Agreement, impact our ability to refinance some or all of our existing indebtedness or otherwise have a material adverse impact on our business, financial condition and results of operations.

In addition, we partner with a third-party consumer finance company to offer 0% APR financing programs for certain products, for which we pay a fee to the consumer finance company. These programs allow our qualified customers to pay in monthly payments. To the extent the transition away from LIBOR increases the consumer finance company’s cost of financing or result in increased fees to us, these financing programs may become unavailable, less attractive or more costly to us.

Our level of indebtedness could have a material adverse effect on our business, financial condition and results of operations.

The total principal amount of debt outstanding under our Senior ABL Revolving Credit Facility, excluding unamortized debt issuance costs, as of May 31, 2021 was $0.3 million, with capacity to borrow up to $261.3 million. In addition, we will incur additional indebtedness in connection with the issuance of the New Convertible Notes. Our indebtedness could have significant effects on our business, such as:

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limiting our ability to borrow additional amounts to fund capital expenditures, acquisitions, debt service requirements, execution of our growth strategy and other purposes;

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limiting our ability to make investments, including acquisitions, loans and advances, and to sell, transfer or otherwise dispose of assets;

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requiring us to dedicate a substantial portion of our cash flow from operations to pay principal and interest on our borrowings, which would reduce availability of our cash flow to fund working capital, capital expenditures, acquisitions, execution of our growth strategy and other general corporate purposes;

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making us more vulnerable to adverse changes in general economic, industry and competitive conditions, in government regulation and in our business by limiting our ability to plan for and react to changing conditions;

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placing us at a competitive disadvantage compared with our competitors that have less debt; and

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exposing us to risks inherent in interest rate fluctuations because our borrowings are at variable rates of interest, which could result in higher interest expense in the event of increases in interest rates.

In addition, we may not be able to generate sufficient cash flow from our operations to repay our indebtedness when it becomes due and to meet our other cash needs. If we are not able to pay our borrowings as they become due, we will be required to pursue one or more alternative strategies, such as selling assets, refinancing or restructuring our indebtedness or selling additional debt or equity securities. We may not be able to refinance our debt or sell additional debt or equity securities or our assets on favorable terms, if at all, and if we must sell our assets, it could have a material adverse effect on our business, financial condition and results of operation.

Pursuant to our Senior ABL Credit Agreement, under certain circumstances, we are required to maintain, on a consolidated basis, a minimum ratio of consolidated EBITDA (with certain adjustments as set forth in the Senior ABL Credit Agreement) to total fixed charges (as set forth in the Senior ABL Credit Agreement), tested as of the last day of each fiscal quarter. Our ability to borrow under our Senior ABL Revolving Credit Facility depends on our compliance with this financial covenant. Events beyond our control, including changes in general economic and business conditions, may affect our ability to satisfy the financial covenant. We cannot assure you that we will satisfy the financial covenant in the future, or that our lenders will waive any failure to satisfy the financial covenant.

The failure to comply with the covenants under our Senior ABL Credit Agreement or volatility in the credit and capital markets could have a material adverse effect on our business, financial condition and results of operation.

Our ability to manage our debt is dependent on our level of positive cash flow from the sale of our products. An economic downturn may negatively impact our cash flows. Credit and capital markets can be volatile, which could make it more difficult for us to refinance our existing debt or to obtain additional debt or equity financings in the future. Such constraints could increase our costs of borrowing and could restrict our access to other potential sources of future liquidity. Future volatility or disruption in the credit and capital markets could require us to take measures to conserve cash until the markets stabilize or until alternative credit arrangements or other funding for our business needs can be arranged. Our failure to comply with the covenants under the Senior ABL Credit Agreement or to have sufficient liquidity to make interest and other payments required by our debt could result in a default of such debt and acceleration of our borrowings, which could have a material adverse effect on our business, financial condition and results of operations.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements. Forward-looking statements can be identified by words such as “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects” and similar references to future periods, or by the inclusion of forecasts or projections. Examples of forward-looking statements include, but are not limited to, statements we make regarding the outlook for our future business and financial performance, such as those contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, by their nature, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. As a result, our actual results may differ materially from those contemplated by the forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include regional, national or global political, economic, business, competitive, market and regulatory conditions and the following:

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the inability to manage or maintain our growth and failure to execute our continued growth strategy;

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changes in our market opportunity, including our TAM and SAM and forecasts of market growth;

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failure to retain and expand our Interactive Fitness Subscriber base;

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decreased perception of or inability to increase sales of our Interactive Fitness Products and services;

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the effects of the continued pandemic on our business and the global economy;

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the effects of political and policy changes that could limit our growth opportunities;

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changes in our beliefs and objectives for future operations;

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our ability to develop new and enhance existing Interactive Fitness Products and services and bring them to market in a timely manner;

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the effects of seasonality on our operating results;

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failure to maintain or enter into new partnerships with third parties;

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failure to maintain, protect, and enhance our intellectual property;

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failure to comply with applicable privacy, security, and data laws, regulations, and standards;

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cybersecurity breaches of our and our partners’ information and technology systems; and

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the effects of increased competition in our markets and our ability to compete in those markets.

See “Risk Factors” for a further description of these and other factors. For the reasons described above, we caution you against relying on any forward-looking statements, which should also be read in conjunction with the other cautionary statements that are included elsewhere in this prospectus. Any forward-looking statement made by us in this speaks only as of the date on which we make it. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.

USE OF PROCEEDS

We estimate that the net proceeds to us from our sale of 30,769,231 shares of Class A common stock in this offering will be approximately $557.3 million, after deducting underwriting discounts and commissions and estimated expenses payable by us in connection with this offering. This assumes a public offering price of $19.50 per share, which is the midpoint of the price range set forth on the cover of this prospectus. The underwriters also have an option to purchase up to 4,615,384 additional shares of Class A common stock from us.

We estimate that the net proceeds to us, if the underwriters exercise their right to purchase the maximum of additional shares of Class A common stock from us, will be approximately $641.7 million, after deducting underwriting discounts and commissions and estimated expenses payable by us in connection with this offering. This assumes a public offering price of $19.50 per share, which is the midpoint of the price range set forth on the cover of this prospectus.

We intend to use the net proceeds in the following order of priority:

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approximately $465.0 million of the net proceeds will be retained by the Company and used for general corporate purposes;

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$35.0 million will be used to make a required payment to our CEO; and

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Assuming no exercise of the underwriters’ option to purchase additional shares, a $1.00 increase (decrease) in the assumed initial public offering price of $19.50 per share (the midpoint of the price range set forth on the cover of this prospectus) would increase (decrease) the net proceeds to us from this offering by approximately $28.8 million, assuming the number of shares offered by us, as set forth on the cover of this prospectus, remains the same and after deducting underwriting discounts and commissions and estimated expenses payable by us. An increase or decrease of 1,000,000 shares in the number of shares offered by us would increase or decrease the net proceeds to us by approximately $18.3 million, assuming no change in the assumed initial public offering price of $19.50 per share and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. The information discussed above is illustrative only and will change based on the actual initial public offering price and other terms of this offering determined at pricing. The foregoing use of proceeds does not include approximately $10.6 million of expenses that have already been paid.

DIVIDEND POLICY

We do not currently intend to pay cash dividends on our common stock in the foreseeable future. However, in the future, subject to the factors described below and our future liquidity and capitalization, we may change this policy and choose to pay dividends.

Our ability to pay dividends is currently restricted by the terms of our Senior ABL Revolving Credit Facility and may be further restricted by any future indebtedness we incur.

Any future determination to pay dividends will be at the discretion of our board of directors and will take into account:

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restrictions in our debt instruments, including our Senior ABL Revolving Credit Facility;

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general economic business conditions;

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our earnings, financial condition, and results of operations;

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our capital requirements;

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our prospects;

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legal restrictions; and

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such other factors as our board of directors may deem relevant.

See “Risk Factors—Risks Related to this Offering and Ownership of Our Class A Common Stock—We do not anticipate paying any dividends on our Class A common stock in the foreseeable future,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources,” “Description of Material Indebtedness,” and “Description of Capital Stock.”

CAPITALIZATION

The following table sets forth our cash and cash equivalents and our capitalization as of May 31, 2021:

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on an actual basis; and

•

a pro forma basis to give effect to (1) the Concurrent Transactions as follows: the redesignation of our outstanding common stock as Class A common stock and the subsequent exchange of certain Class A common stock for Class B common stock; the repayment of the 2019 Note with cash and New Convertible Notes; the repayment of the Series A preferred stock with a combination of Class A common stock and New Convertible Notes; the repayment of the Series B preferred stock with Class A common stock; the payment of deferred consideration for the 29029 and Sweat acquisitions with Class A common stock; the filing and effectiveness of our amended and restated certificate of incorporation; the cashless net settlement of all outstanding warrants; and the payment of $35 million to our CEO; and (2) the issuance and sale by us of 30,769,231 shares of our Class A common stock offered in this offering at an assumed initial price of $19.50 per share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting the estimated underwriting discount and estimated offering expenses.

The pro forma information below is illustrative only, and our cash and cash equivalents, additional paid-in capital, total stockholders’ (deficit) equity, and total capitalization following the completion of this offering will be adjusted based on the actual initial public offering price and other terms of the offering determined at the pricing of this offering. This table should be read in conjunction with “Use of Proceeds,” “Selected Consolidated Financial and Other Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Description of Capital Stock,” “Unaudited Pro Forma Condensed Consolidated Financial Information” and the consolidated financial statements and notes thereto appearing elsewhere in this prospectus.


	As of May 31, 2021
	Actual			Pro Forma⁽¹⁾⁽³⁾
	(unaudited)
	(in thousands, except share and per share amounts)
Cash and cash equivalents	$	146,453		$	586,540

Debt:
Long-term debt, net⁽²⁾	$	157,133		$	271
New convertible notes		—			373,950
Mandatorily redeemable preferred stock		234,041			—
Warrant liabilities		327,313			—
Embedded derivative liabilities		121,000			—
Other non-current liabilities		25,612			14,493
Stockholders’ equity (deficit):
Common stock, $0.0001 par value per share; 1,000,000,000 authorized shares, 240,175,493 issued and outstanding, actual; no shares authorized, no shares issued and outstanding, pro forma		240			—
Class A common stock, $0.001 par value per share; no authorized shares, no issued and outstanding, actual; 3,000,000,000 shares authorized, 200,488,123 shares issued and outstanding, pro forma		—			202
Class B common stock, $0.001 par value per share; no authorized shares, no issued and outstanding, actual; 3,000,000,000 shares authorized, 114,402,561 shares issued and outstanding, pro forma		—			114
Additional paid-in capital		324,368			1,800,946
Accumulated deficit		(909,011	)		(1,460,694	)
Accumulated other comprehensive loss		(4,996	)		(4,996	)
Treasury stock		(80,760	)		(94,803	)

Total stockholders’ equity (deficit)		(670,159	)		240,769

Total capitalization	$	194,940		$	629,483

(1)

Each $1.00 increase or decrease in the public offering price per share would increase or decrease, as applicable, our net proceeds, after deducting the underwriting discount and estimated offering expenses payable by us, by $28.8 million (assuming no exercise of the underwriters’ option to purchase additional shares). Similarly, an increase or decrease of one million shares of Class A common stock sold in this offering by us would increase or decrease, as applicable, our net proceeds, after deducting the underwriting discount and estimated offering expenses payable by us, by $18.3 million, based on an assumed initial public offering price of $19.50 per share, which is the midpoint of the price range set forth on the cover of this prospectus.

(2)	For a description of debt facilities, see “Description of Material Indebtedness.” At August 31, 2021, we had borrowings under our 2021 Revolver of $210.0 million and available borrowing capacity of $82.8 million.

(3)	For further information on our pro forma capitalization, refer to the “Unaudited Pro Forma Condensed Consolidated Financial Information” included elsewhere in this registration statement.

The shares of Class A common stock or Class B common stock and the New Convertible Notes issued in the Concurrent Transactions are not being registered in connection with this offering.

Each $1.00 increase in the public offering price per share would decrease, as applicable, by 611,588 shares, and each $1.00 decrease in the public offering price per share would increase, as applicable, by 677,699 shares, the number of shares of Class A common stock issued in connection with the repayment of our Series A and Series B preferred stock, and the payment of deferred consideration for the 29029 and Sweat acquisitions.

The number of shares of our Class A common stock and Class B common stock to be outstanding after this offering is based upon our shares of stock outstanding as of May 31, 2021, after giving effect to the Concurrent Transactions, and does not include:

•

9,741,051 shares of our Class A common stock issuable upon the exercise of options to purchase shares of our Class A common stock outstanding as of May 31, 2021, with a weighted-average exercise price of $1.41 per share or 1,124,550 options granted between June 1, 2021 and August 31, 2021 with a weighted-average price of $9.06 per share;

•

10,662,624 shares of our Class B common stock issuable upon the exercise of options to purchase shares of our Class B common stock outstanding as of May 31, 2021 with an exercise price of $9.06 per share;

•

22,561,086 shares of our Class A common stock issuable upon the conversion of our New Convertible Notes, which will have an initial conversion price equal to 85% of the public offering price of the Class A common stock in this offering; based on the midpoint of the price range, we would have $374.0 million of outstanding New Convertible Notes, which would be convertible into 22,561,086 shares of Class A common stock; and

•

45,000,000 shares of our Class A common stock that will be available for future equity awards under the 2021 Plan, including approximately 332,980 restricted shares and approximately 6,210,729 shares of common stock issuable upon exercise of options that we intend to grant under the 2021 Plan to certain directors, executive officers and employees at the time of this offering, with the public offering price as the exercise price, including (i) 678,208 shares of Class A common stock issuable upon exercise of options granted to Scott R. Watterson, (ii) 1,241,957 shares of Class A common stock issuable upon exercise of options granted to David J. Watterson, and (iii) 784,161 shares of Class A common stock issuable upon exercise of options granted to Steven J. Barr, as described in “Executive and Director Compensation—Employment and Benefit Plans—2021 Equity Incentive Plan—IPO Awards.”

See the section titled “Executive and Director Compensation—Employment Benefit Plans” for additional information.

DILUTION

If you invest in our Class A common stock, your interest will be diluted to the extent of the difference between the initial public offering price per share of our Class A common stock and the net tangible book value per share of our Class A common stock upon the consummation of this offering. Dilution results from the fact that the per share offering price of our Class A common stock is in excess of the book value per share attributable to new investors.

Our net tangible book value as of May 31, 2021 was $(782.2) million, or $(3.26) per share of common stock. Net tangible book value represents the amount of total tangible assets less total liabilities. Pro forma net tangible book value per share represents pro forma net tangible book value divided by the number of shares of common stock outstanding as of May 31, 2021 after giving effect to (1) the redesignation of our outstanding common stock as Class A common stock and the subsequent exchange of certain Class A common stock for Class B common stock, (2) repayment of the 2019 Note and our outstanding Series A and Series B preferred stock with a combination of 9,521,118 shares of our Class A common stock, $57.3 million in cash and the issuance of $374.0 million principal amount of New Convertible Notes, (3) payment of deferred consideration for the 29029 and Sweat acquisitions with 3,016,383 shares of our Class A common stock, (4) payment of $35 million bonus to our chief executive officer in connection with this offering, (5) loans in the aggregate amount of $19.9 million made to certain non-executive employees in connection with the offering, and (6) the filing and effectiveness of our amended and restated certificate of incorporation. After giving effect to the above, our pro forma net tangible book value as of May 31, 2021 would have been $(352.0) million, or $(1.24) per share.

After giving effect to the sale of 30,769,231 shares of Class A common stock in this offering at the assumed initial public offering price of $19.50 per share (the midpoint of the price range set forth on the cover of this prospectus) after deducting the underwriting discount and estimated offering expenses payable by us, and the application of the net proceeds from this offering, as described in the “Use of Proceeds” section, our pro forma as adjusted net tangible book value as of May 31, 2021 would have been $203.3 million, or $0.65 per share. This represents an immediate increase in pro forma as adjusted net tangible book value of $1.89 per share to our existing investors and an immediate dilution in pro forma as adjusted net tangible book value of $18.85 per share to new investors.

The following table illustrates this dilution on a per share of Class A common stock basis:


Assumed initial public offering price per share				$	19.50
Historical net tangible book value (deficit) per share as of May 31, 2021	$	(3.26	)
Pro forma increase in net tangible book value per share as of May 31, 2021 attributable to the pro forma transactions described above		2.02

Pro forma net tangible book value per share as of May 31, 2021		(1.24	)
Increase in pro forma net tangible book value per share attributable to new investors participating in this offering		1.89

Pro forma as adjusted net tangible book value per share after this offering					0.65

Dilution in net tangible book value per share to new investors in this offering				$	18.85

A $1.00 increase (decrease) in the assumed initial public offering price of $19.50 per share would increase (decrease) our pro forma net tangible book value by $28.8 million, the pro forma net tangible book value per share after this offering by $0.09 and the dilution per share to new investors by $0.91 assuming the number of shares offered by us, as set forth on the cover of this prospectus, remains the same, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

The following table illustrates, on a pro forma basis as of May 31, 2021, our existing stockholders after giving effect to the Concurrent Transactions and the sale by us of shares of our Class A common stock in this offering at the midpoint of the range, the difference between the existing stockholders and the investors purchasing shares of

our Class A common stock in this offering with respect to the number of shares of our common stock purchased from us, the total consideration paid to us or to be paid, and the average price per share paid or to be paid, before deducting the estimated underwriting discounts and commissions:


	Shares Purchased					Total Consideration					Average Price Per Share
	Number		Percent			Amount		Percent			Average Price Per Share
Existing stockholders		284,121,453		90.2	%	$	138,833,622		18.8	%	$	0.49
Investors purchasing shares of our Class A common stock in this offering		30,769,231		9.8			600,000,000		81.2			19.50

Total		314,890,684		100.0	%		$738,833,622		100.0	%	$	2.35

If the underwriters were to fully exercise their option to purchase 4,615,384 additional shares of our Class A common stock, the percentage of shares of our Class A common stock held by existing investors would be 88.9%, and the percentage of shares of our Class A common stock held by new investors would be 11.1%.

Assuming the exercise of all outstanding options as of May 31, 2021 and the issuance of 22,561,086 shares of Class A common stock to settle $374.0 million of New Convertible Notes and the issuance of 3,016,592 shares of Class A common stock to settle the vesting of the restricted interest of $50.0 million of New Convertible Notes held by our chief executive officer expected to be issued in the offering, the information set forth in the foregoing table would be as follows:


	Shares Purchased					Total Consideration						Average Price Per Share
	Number		Percent			Amount			Percent			Average Price Per Share
Existing stockholders		330,102,815		91.5	%	$	618,883,409	⁽¹⁾		50.8	%	$	1.87
Investors purchasing shares of our Class A common stock in this offering		30,769,231		8.5			600,000,000			49.2			19.50

Total		360,872,046		100.0	%	$	1,218,883,409			100.0	%	$	3.38

(1)	Excluding the $50.0 million of New Convertible Note issuable to our chief executive officer as no cash consideration will be received.

The above discussion and tables are based on the number of shares outstanding at May 31, 2021. In addition, we may choose to raise additional capital due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent that additional capital is raised through the sale of equity or convertible debt securities, the issuance of such securities could result in further dilution to our stockholders.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

The following unaudited pro forma condensed consolidated financial information have been derived by the application of pro forma adjustments to our historical audited financial statements included elsewhere in this registration statement, after giving effect to the transactions as further described herein.

The unaudited pro forma condensed consolidated balance sheet as of May 31, 2021 (the “Unaudited Pro Forma Condensed Consolidated Balance Sheet”) and the unaudited pro forma condensed consolidated statement of operations for the year ended May 31, 2021 (the “Unaudited Pro Forma Condensed Consolidated Statement of Operations”) present our financial position and results of operations after giving effect to the following pro forma transactions (“Transaction Accounting Adjustments”):

•

The Concurrent Transactions as defined elsewhere in this registration statement; and

•

The sale and issuance of 30,769,231 shares of our Class A common stock to the purchasers in this offering in exchange for net proceeds approximating $546.7 million, at an assumed initial offering price of $19.50 per share (the midpoint of the price range listed on the cover page of this prospectus), after deducting $53.3 million of underwriting discounts and commissions and estimated offering expenses. Except as otherwise indicated, the unaudited pro forma condensed consolidated financial information presented assumes no exercise by the underwriters of their option to purchase additional shares of Class A common stock.

The Transaction Accounting Adjustments and such other adjustments as described in the accompanying notes are reflected in the Unaudited Pro Forma Condensed Consolidated Balance Sheet as if these Transaction Accounting Adjustments occurred on May 31, 2021. The Unaudited Pro Forma Condensed Consolidated Statement of Operations for the year ended May 31, 2021 gives effect to the Transaction Accounting Adjustments as if they had occurred on June 1, 2020.

The unaudited pro forma condensed consolidated financial information was prepared in accordance with Article 11 of Regulation S-X using the assumptions set forth in the notes to the unaudited pro forma condensed consolidated financial information. The unaudited pro forma condensed consolidated financial information has been adjusted to include estimated accounting adjustments, which reflect the application of the accounting required by generally accepted accounting principles in the United States (“US GAAP”), linking the effects of the Transaction Accounting Adjustments listed above to the Company’s historical consolidated financial statements.

The pro forma adjustments are based upon currently available information and includes certain estimates and assumptions that the Company’s management believes are reasonable and are subject to change as additional information becomes available. We describe in greater detail the assumptions underlying the pro forma adjustments in the accompanying notes, which should be read in conjunction with this unaudited pro forma condensed consolidated financial information. The actual effect on our consolidated financial statements in the period(s) in which the Concurrent Transactions occur will depend upon a number of factors and additional information that will be available only upon or after the closing of this offering. Accordingly, the actual adjustments that will appear in our financial statements will differ from these pro forma adjustments, and those differences may be material. The unaudited pro forma condensed consolidated financial information does not give effect to the potential impact of current financial conditions, or any anticipated revenue enhancements, cost savings or operating synergies that may result from the Transaction Accounting Adjustments.

We are in the process of assessing the accounting related to the New Convertible Notes issued in exchange for the 2019 Notes and the Series A preferred stock and the restricted interest in the New Convertible Notes held by our chief executive officer, including the accounting on the settlement of the existing securities and the compensation elements of the restricted interest arrangement. For purposes of this Registration Statement, we have included preliminary adjustments within the unaudited pro forma condensed consolidated financial

information to reflect these Concurrent Transactions. Additionally, valuations that have been performed are preliminary and based on estimates subject to change. The final determination of the accounting and fair value and allocation to the various components of these arrangements will be determined upon the successful completion of our initial public offering. Accordingly, the pro forma adjustments are preliminary and subject to further revision as additional information becomes available and given the complexity of the transaction. Refer to the footnotes to this unaudited pro forma condensed consolidated financial information for further details as to the accounting and valuation presented herein. The accounting and valuation related to the above will be finalized and reported when the Company files its report on Form 10-Q for the quarter ended November 30, 2021.

The unaudited pro forma condensed consolidated financial information is presented for information purposes only and are not necessarily indicative of iFIT’s financial position or results of operations that would have occurred had the events been consummated as of the dates set forth above. In addition, the unaudited pro forma condensed consolidated financial information is not necessarily indicative of iFIT’s future financial condition or operating results.

As a public company, we will be implementing additional procedures and processes for the purpose of addressing the standards and requirements applicable to public companies. We expect to incur additional annual expenses related to these steps and, among other things, additional directors’ and officers’ liability insurance, director fees, reporting requirements of the SEC, transfer agent fees, hiring additional accounting, legal and administrative personnel, increased auditing and legal fees and similar expenses. We have not included any pro forma adjustments relating to these expenses.

The unaudited pro forma condensed consolidated financial information should be read together with “The Concurrent Transactions”, “Capitalization”, “Summary Historical Consolidated Financial and Other Data”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, and the historical audited consolidated annual financial statements of the Company and the related notes thereto included elsewhere in this Registration Statement.

Unaudited Pro Forma Condensed Consolidated Balance Sheet

As of May 31, 2021


(Amounts in thousands, except par value and share amounts)	iFIT Health & Fitness Inc Historical		Transaction Accounting Adjustments			Pro Forma iFIT Health & Fitness Inc
ASSETS
Current assets:
Cash and cash equivalents	$	146,453	$	562,500	(A)	$	586,540
				(35,000	)(B)
				(57,300	)(E)
				(10,215	)(F)
				(19,898	)(P)
Accounts receivable, net		167,297		—			167,297
Inventories		403,437		—			403,437
Prepaid expenses		8,881		—			8,881
Other current assets		50,885		—			50,885

Total current assets		776,953		440,087			1,217,040
Property and equipment, net		79,002		—			79,002
Goodwill		29,639		—			29,639
Intangible assets, net		5,336		—			5,336
Other non-current assets		101,636		(8,515	)(F)		93,121

Total assets	$	992,566	$	431,572		$	1,424,138

LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY
Current liabilities:
Accounts payable		425,967		(2,971	)(F)		422,996
Accrued expenses and other current liabilities		56,144		—			56,144
Current portion of deferred revenue		223,898		—			223,898

Total current liabilities		706,009		(2,971	)		703,038
Long-term debt, net		157,133		4,766	(D)		271
				(161,628	)(E)
Convertible notes		—		242,700	(E)		373,950
				131,250	(G)
Mandatorily redeemable preferred stock		234,041		5,105	(D)		—
				(213,904	)(G)
				(25,242	)(H)
Deferred income tax liabilities		1,269		—			1,269
Deferred revenue		90,348		—			90,348
Warrant liabilities		327,313		303,943	(C)		—
				(631,256	)(I)
Embedded derivative liabilities		121,000		3,100	(C)		—
				(72,800	)(E)
				(46,700	)(G)
				(4,600	)(H)
Other non-current liabilities		25,612		(11,119	)(J)		14,493

Total liabilities	$	1,662,725	$	(479,356	)	$	1,183,369

Stockholders’ (deficit) equity:
Common stock, $0.001 par value		240		(240	)(N)		—
Class A common stock, $0.001 par value		—		31	(A)		202
				8	(G)
				2	(H)
				32	(I)
				1	(J)
				2	(K)
				126	(N)
Class B common stock, $0.001 par value		—		114	(N)		114
Additional paid-in capital		324,368		562,469	(A)		1,800,946
				(15,760	)(F)
				154,404	(G)


(Amounts in thousands, except par value and share amounts)	iFIT Health & Fitness Inc Historical			Transaction Accounting Adjustments			Pro Forma iFIT Health & Fitness Inc
					31,249	(H)
					631,224	(I)
					14,374	(J)
					(2	)(K)
					(31,930	)(L)
					5,048	(M)
					313	(O)
					92,860	(P)
					32,329	(Q)
Accumulated deficit		(909,011	)		(35,000	)(B)		(1,460,694	)
					(307,043	)(C)
					(9,872	)(D)
					(65,572	)(E)
					(25,058	)(G)
					(1,408	)(H)
					(3,256	)(J)
					(34,861	)(L)
					(5,048	)(M)
					(313	)(O)
					(31,923	)(P)
					(32,329	)(Q)
Accumulated other comprehensive loss		(4,996	)		—			(4,996	)
Treasury stock, at cost		(80,760	)		66,790	(L)		(94,803	)
					(80,833	)(P)

Total stockholders’ (deficit) equity		(670,159	)		910,928			240,769

Total liabilities and stockholders’ (deficit) equity	$	992,566		$	431,572		$	1,424,138

Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet

(A)

Reflects the net effect on cash of the receipt of offering proceeds of $600.0 million, based on the assumed sale of 30,769,231 shares of Class A common stock with a par value of $0.001 at an initial public offering (“IPO”) price of $19.50 per share, the midpoint of the estimated range set forth on the cover page of this prospectus, after deducting an estimated $37.5 million of underwriting discounts and commissions.

(B)	Reflects the cash payment and related compensation expense for the $35.0 million bonus to the chief executive officer which is contingent on the IPO.

(C)	Reflects the fair value adjustment of $303.9 million to the warrants and $3.1 million to the embedded derivative liabilities immediately before the IPO.

(D)	Reflects the accretion of the debt discount and issuance costs of $4.8 million on the 2019 Note and $5.1 million on the Series A and Series B preferred stock up through the IPO date.

(E)

Upon the initial public offering and in conjunction with the issuance of the New Convertible Notes, the Company will settle in full the outstanding 2019 Note. The 2019 Note must be paid at a price equal to $300.0 million, which is equal to the principal amount to be prepaid plus the Make-whole provision which will be paid in a combination of cash and New Convertible Notes, depending on the net proceeds of this offering. The pro forma adjustments reflect the cash payment of $57.3 million, the issuance of New Convertible Notes of $242.7 million, the removal of $161.6 million for the 2019 Notes, the write-off of the embedded derivative liability of $72.8 million and a loss on extinguishment of $65.6 million. The amount of extinguishment loss will be finalized upon the Company completing the valuation procedures related to the issuance of the New Convertible Notes.

(F)

Reflects (i) the reduction of cash of $10.2 million for the payment of offering expenses, (ii) reclassification of $8.5 million from other non-current assets for previously capitalized deferred offering costs, (iii) reduction of $3.0 million from accounts payable for the payment of accrued offering costs and (iv) $15.8 million to additional paid-in capital for costs directly related to the transaction.

(G)

Upon the initial public offering, the Company must pay in full all outstanding shares of Series A preferred stock. The Series A preferred stock must be paid at a price equal to $262.5 million, which is equal to 125% of the liquidation value of such Series A preferred stock. Of this amount, $131.3 million will be paid in a combination of cash and New Convertible Notes, depending on the net proceeds of this offering, and the remaining $131.3 million will be paid with shares of Class A common stock (based on the midpoint of the price range set forth on the cover of this prospectus), which number of shares is equal to $131.3 million, divided by 85% of the public offering price of the Class A common stock. The adjustments reflect the issuance of New Convertible Notes of $131.3 million, the issuance of 7,918,553 shares of Class A common stock with a fair value of $154.4 million, the settlement of $213.9 million of Series A preferred stock, the write-off of the embedded derivative liability of $46.7 million and loss on extinguishment of $25.1 million.

(H)

Upon the initial public offering, the Company must pay in full all outstanding shares of Series B preferred stock at a price per share of $1.0 million for a total of $25.0 million. The Company will pay in full the Series B preferred stock with shares of Class A common stock (based on the midpoint of the price range set forth on the cover of this prospectus), which number of shares is equal to $25.0 million divided by 80% of the public offering price of the Class A common stock. The adjustments reflect the issuance of 1,602,565 shares of Class A common stock with a fair value of $31.3 million, the settlement of $25.2 million of Series B preferred stock, the write-off of the embedded derivative liability of $4.6 million and loss on extinguishment of $1.4 million.

(I)	Represents the cashless net exercise of the 2019 Warrant and 2020 Warrants upon the initial public offering resulting in issuance of 32,372,117 Class A common shares.

(J)

Reflects the settlement of deferred consideration of $11.5 million for the 29029 acquisition with 737,180 shares of Class A common stock (based on the midpoint of the price range set forth on the cover of this prospectus), which number of shares is equal to $11.5 million divided by 80% of the public offering price of the Class A common stock. The pro forma adjustments reflect the settlement of the sellers’ financing liability and contingent consideration of $11.1 million, the issuance of $14.4 million in Class A common shares, and the net impact to accumulated deficit, which includes $0.3 million in interest expense, a loss on settlement of $2.5 million in other expense, and the mark to market adjustment for the contingent consideration of $0.5 million.

(K)

Reflects the issuance of 2,279,203 shares of Class A common stock for the Sweat acquisition (based on the midpoint of the price range set forth on the cover of this prospectus), which number of shares is equal to $40.0 million divided by 90% of the public offering price of the Class A common stock. As Sweat was acquired in July 2021, there was no liability recorded for the deferred purchase consideration as of May 31, 2021 and therefore we have not reflected a pro forma adjustment to the balance sheet for the issuance of the shares other than to record the par value of the Class A common stock issued. Additionally, we have not reflected the acquisition of Sweat and related purchase accounting adjustments in these unaudited condensed consolidated pro forma financial statements as the acquisition of Sweat was not significant under Rule 3-05 and Article 11 of Regulation S-X.

(L)

Represents the forgiveness of the non-recourse loans issued to members of management in the aggregate amount of $53.2 million and the repayment of an executive loan with a principal amount of $9.3 million originally secured by 963,673 shares of the Company’s common stock to comply with the Sarbanes-Oxley Act. The non-recourse loans that were forgiven were secured by a total of 15,504,955 shares of the Company’s common stock as well as 550,670 stock options of the Company. Upon forgiveness of the loans, the collateral shares and options pledged were released and such shares will be considered outstanding for accounting purposes resulting in compensation expense of $34.9 million and release of Treasury stock of $66.8 million. The $9.3 million loan was repaid by the surrender of the 963,673 shares of common stock pledged to secure such loan which has no net effect on shares outstanding because such shares for accounting purposes were not previously treated as outstanding. The transaction is effectively a cancellation of the options that were previously granted when the loan was made on May 17, 2021. Since the number of collateralized shares is the same number of shares to settle the loan, there is no further accounting impact. However, these shares are no longer considered outstanding for legal purposes.

(M)	Reflects the impact of stock options that will vest as a result of the performance-based vesting conditions being satisfied in connection with this offering, resulting in $5.0 million in compensation expense.

(N)	Reflects the redesignation of our common stock to Class A common stock and the exchange of Class A common stock held by the Scott R. Watterson holders for newly designated Class B common stock in connection with this offering.

(O)

Reflects the impact of 5,313,507 new stock options that will be issued in conjunction with this offering, with an estimated aggregate grant date fair value of $48.4 million, of which $0.3 million of stock-based compensation expense will be recognized immediately as 38,140 of the options vest upon grant. These new stock options are in addition to the new stock options of 897,222 and new restricted shares of 332,980 further described in note Q (iii) below.

(P)

Reflects the impact of non-recourse loans made to non-executive employees of the Company in connection with this offering in the amounts of $11.0 million and $8.9 million. In exchange for the loans, the non-executive employees pledged 2,702,738 and 1,442,561 shares of the Company’s common stock, respectively, and 2,327,913 and 1,345,491 of unvested stock options, respectively. The pledge of the aggregate 4,145,299 shares of the Company’s common stock was accounted for as a repurchase of stock with a fair value of $80.8 million which is reflected within treasury stock and the issuance of 4,145,299 vested options. The pledge of the aggregate 3,673,404 unvested stock options was accounted for as a cancellation of the existing stock options and the issuance of an equal number of unvested stock options to the loan recipients. The Company will recognize an aggregate amount of compensation expense of $31.9 million upon issuance of these loans which is reflected within accumulated deficit.

(Q)

Reflects the impact of (i) the modification to the exercise price of 1,867,887 stock options, (ii) the modification to extend the vesting dates of 3,131,919 stock options, and (iii) the issuance of 897,222 new options and 332,980 restricted shares to the same option holders regarding the forgoing items (i) and (ii). The modification to reprice the options in (i) and to extend the vesting dates of options in (ii) are accounted for as the cancellation of the historical award and the grant of a new replacement award with the modified terms in accordance with ASC 718, Compensation-Stock Compensation, as the vesting of the historical awards were subject to a performance condition which was not probable at the time of modification. The modification of the exercise price of 1,867,887 stock options in (i) above will result in the recognition of $32.3 million of stock-based compensation expense, all of which will be recognized immediately as the options vest upon an initial public offering and is reflected within accumulated deficit and additional paid-in capital. The modifications in (ii) and issuances of additional options and restricted shares in (iii) do not result in the immediate recognition of any expense, but will result in the recognition of stock-based compensation expense prospectively over the vesting term of the awards.

Unaudited Pro Forma Condensed Consolidated Statement of Operations

For the Year Ended May 31, 2021


(Amounts in thousands, except share and per share amounts)	iFIT Health & Fitness Inc Historical			Transaction Accounting Adjustments			Pro Forma iFIT Health & Fitness Inc
Revenue
Interactive fitness products	$	1,515,288		$	—		$	1,515,288
Subscription		229,768			—			229,768

Total revenue		1,745,056			—			1,745,056

Cost of revenue
Interactive fitness products		989,873			—			989,873
Subscription		28,980			—			28,980

Total cost of revenue		1,018,853			—			1,018,853

Gross profit		726,203			—			726,203
Operating expenses:
Sales and marketing		619,431			—			619,431
Research and development		36,274			—			36,274
General and administrative		198,132			34,861	(F)		443,361
					5,048	(G)
					35,000	(H)
					475	(I)
					11,751	(K)
					13,001	(L)
					56,281	(M)
					88,812	(N)

Total operating expenses		853,837			245,229			1,099,066

Loss from operations		(127,634	)		(245,229	)		(372,863	)
Other expense (income):
Interest expense		31,016			(29,239	)(A)		29,288
					318	(I)
					27,193	(K)
Change in fair value of warrant		142,150			(142,150	)(C)		—
Change in fair value of embedded derivative liabilities		39,300			(39,300	)(D)		—
Loss on issuance of mandatorily redeemable preferred stock and warrants		178,200			(178,200	)(B)		—
Other expense (income), net		(3,577	)		2,463	(I)		(1,114	)
Loss on extinguishment of long-term debt and mandatorily redeemable preferred stock		—			92,037	(E)		92,037

Total other expense (income)		387,089			(266,878	)		120,211

Income (loss) before provision for income taxes		(514,723	)		21,649			(493,074	)
Provision (benefit) for income taxes		1,983			—	(J)		1,983

Net income (loss)	$	(516,706	)	$	21,649		$	(495,057	)

Net income (loss) per share attributable to common shareholders
Basic	$	(2.32	)		0.30	(O)		(1.67	)

Diluted	$	(2.32	)	$	0.30	(O)	$	(1.67	)

Shares used to compute net income (loss) per share attributable to common stockholders
Basic		222,511,893			73,234,611	(O)		295,746,504

Diluted		222,511,893			73,234,611	(O)		295,746,504

Notes to Unaudited Pro Forma Condensed Consolidated Statement of Operations

(A)

Reflects the elimination of $17.2 million, $11.7 million, and $0.4 million in interest expense, including PIK interest, for the 2019 Note, amortization of debt issuance costs, the amortization of the debt discounts and amortization of premiums recorded during fiscal 2021 related to the 2019 Notes, Series A preferred stock, and Series B preferred stock, respectively. Offsetting the elimination, is the incremental interest expense of $27.2 million expected to be incurred on the New Convertible Notes issued in connection with this offering. Such New Convertible Notes in the face amount of $374.0 million will incur 7% interest annually per the New Convertible Notes agreement and if paid in common shares, it will be paid in common shares at 85% of the 10-day VWAP at the interest payment date. However, the Company may pay interest due on the New Convertible Notes in cash, PIK (compounding quarterly) or shares of common stock at the holders’ discretion. For purposes of the pro forma adjustment, we have assumed the interest will be paid in common shares. As discussed further in the notes to the Unaudited Condensed Consolidated Pro Forma Balance Sheet, the 2019 Notes, Series A preferred stock and Series B preferred stock and related embedded derivative liabilities are being settled in connection with this offering and the New Convertible Notes are being issued.

(B)	Reflects the elimination of the $173.4 million and $4.8 million losses recorded on the issuance of the Series A and B preferred stock, respectively, assuming settlement of these securities in connection with this offering.

(C)

Represents the elimination of the historical change in fair value of the 2019 Warrant and 2020 Warrants, as the warrants are being exercised in connection with this offering. For purposes of calculating the shares included in the pro forma basic net loss per share denominator, the shares are included on a weighted average basis for the period of time the warrants were outstanding during fiscal 2021. The number of shares in pro forma net loss per share include 27,891,575 shares related to the 2019 and 2020 Warrants.

(D)

Reflects the elimination of $35.6 million and $3.7 million in losses recorded during fiscal 2021 related to the change in the fair value of outstanding embedded derivative liabilities on the 2019 Notes and Series A preferred stock, respectively. As discussed further in the notes to the Unaudited Condensed Consolidated Pro Forma Balance Sheet, the 2019 Notes and Series A preferred stock and related embedded derivative liabilities are being settled in connection with this offering.

(E)	Reflects the loss on extinguishment expected to be recorded of $65.6 million, $25.1 million, and $1.4 million on the 2019 Notes, Series A preferred stock and Series B preferred stock, respectively, which are all expected to be settled in connection with this offering.

(F)

Represents $34.9 million of stock-based compensation expense related to the forgiveness of $53.2 million of loans historically issued to members of management. For the purpose of calculating the pro forma net loss per share denominator, the 15,504,955 shares which collateralized the loans are included in the denominator of the calculation of the weighted average of shares outstanding from the later of June 1, 2020 or the loan issuance date.

(G)	Represents $5.0 million of stock-based compensation expense related to the vesting of 1,469,475 stock options with a performance vesting condition which is satisfied immediately upon the consummation of our initial public offering.

(H)	Represents $35.0 million of compensation expense related to the payment of a $35.0 million cash bonus to our chief executive officer in conjunction with the consummation of our initial public offering.

(I)

Reflects the issuance of 737,180 shares of Class A common stock in settlement of the deferred purchase consideration related to the acquisition of 29029 in fiscal 2021. As a result of the settlement, we estimate we will record a loss of $2.5 million related to the excess of the fair value of the shares issued over the carrying value of the obligation. The number of shares included in pro forma net loss per share is weighted to reflect the period of time during fiscal 2021 such shares would have been outstanding should they have been issued upon acquisition of 29029. Refer to footnote (J) in the Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet for more information.

(J)	The Company is in a full valuation position in the jurisdiction of the United States and therefore no income tax impact related to the Transaction Accounting Adjustments is reflected.

(K)

Reflects the grant of the restricted interest in the New Convertible Notes, in an aggregate principal amount of $50.0 million to our chief executive officer in connection with the offering to compensate his services provided to us. As such, the restricted interest is accounted for as a stock compensation arrangement. The restricted interest is restricted as (a) our chief executive officer may not sell, pledge, transfer or dispose of the restricted interest, and (b) our chief executive officer’s right to retain the restricted interest is subject to forfeiture upon our termination of the chief executive officer’s employment for cause at the earlier of six years or the occurrence of a certain event. The principal amount of the restricted interest is considered a combination award under ASC 718 which is comprised of: (i) a fixed repurchase price (i.e., the amount due at maturity of the New Convertible Notes underlying the restricted interest) of the award of $50.0 million with a fair value of $23.7 million on grant date, (ii) a call option with an exercise price equal to the fixed amount for which our chief executive officer can require us to repurchase his shares (i.e., share options of 61,501 shares with an exercise price of $16.27) with an aggregate fair value of $29.7 million on grant date. The interest payments of 7% annually to be paid in common shares at 85% of the 10-day VWAP at the interest payment date is considered a separate component with a fair value of $17.1 million on grant date. The fair value of the three components will be recognized over the period of applicability of the forfeiture restrictions. The adjustment reflects compensation expense of $11.8 million expected to be recognized in fiscal 2021 as if the restricted interest was granted on June 1, 2020.

(L)

Reflects the issuance of 5,313,507 stock options to members of management and our employees in conjunction with this offering with an aggregate grant date fair value of $48.4 million. As a result of this issuance, we estimate we will record share-based compensation expense of $13.0 million during the first year subsequent to the initial public offering.

(M)

Reflects compensation expense of $56.3 million related to the issuance of loans to non-executive employees by the Company collateralized with 4,145,299 shares and 3,673,404 options of which $31.9 million will be recognized immediately and $24.4 million will be recognized during the first year following the issuance of these loans.

(N)

Reflects the stock-based compensation expense associated with the modification of certain stock options and grants of restricted shares in connection with the offering. See note (Q) to the Unaudited Condensed Consolidated Pro Forma Balance Sheet. We expect to recognize $32.3 million of expense related to 1,867,887 stock options that will vest immediately upon the consummation of an initial public offering. Additionally, we expect to recognize $56.5 million of stock compensation expense in the first year following the initial public offering related to 4,029,140 stock options and 332,980 restricted shares that will continue to vest.

(O)

Unaudited pro forma net loss per share, basic and diluted, has been computed to give effect to the Transaction Accounting Adjustments as if they had occurred as of the beginning of the period on June 1, 2020. The calculation of pro forma weighted average shares outstanding, basic and diluted, assumes that the shares issuable relating to the Transaction Accounting Adjustments have been outstanding as of the later of June 1, 2020 or the date the related transaction was entered into. Basic and diluted pro forma net loss per share and weighted average shares outstanding for the year ended May 31, 2021 are calculated as follows:


(Amounts in thousands, except share and per share amounts)	Year Ended May 31, 2021
Numerator:
Pro forma net loss	$	(495,057	)
Denominator:
Weighted average shares of common stock outstanding (basic and diluted)		222,511,893
Pro forma adjustment to reflect the redemption of the 2019 Note and Series A and B preferred stock (1)		5,612,904
Pro forma adjustment to reflect shares issued for the forgiveness of loans (2)		13,044,768
Pro forma adjustment to reflect the exercise of the 2019 and 2020 Warrants (3)		27,891,575
Pro forma adjustment to reflect the shares issued for the acquisition deferred and contingent consideration (4)		61,432
Pro forma adjustment to reflect the shares issued at IPO (5)		30,769,231
Pro forma adjustment to reflect the shares repurchased for the loans to non-executive employees (6)		(4,145,299	)

Weighted-average shares used in computing pro forma net loss per share, basic and diluted		295,746,504

Pro forma net loss per share, basic and diluted	$	(1.67	)

(1)

Reflects (i) partial repayment of the Series A preferred stock with 7,918,553 shares of Class A common stock (calculated based on the midpoint of the range; the actual number of shares will be calculated as $131.3 million divided by 85% of the public offering price of the Class A common stock) and (ii) 1,602,565 shares that will be issued to repay the Series B preferred stock (calculated based on the midpoint of the range; the actual number of shares will be calculated as $25.0 million divided by 80% of the public offering price of the Class A common stock). The number of shares included in pro forma net loss per share is weighted to reflect the period of time during fiscal 2021 such shares would have been outstanding if issued at the time of the Series A and Series B preferred stock issuances.

(2)

Reflects shares of Class A common stock deemed to be issued for accounting purposes upon forgiveness of management loans and the release of these shares as collateral. One executive loan in the principal amount of $9.3 million was repaid by the surrender of the 963,673 shares of common stock pledged to secure such loan, which has no net effect on shares outstanding because such shares for accounting purposes were not previously treated as outstanding.

(3)

Represents the cashless net exercise of the 2019 and 2020 Warrants upon consummation of the initial public offering which resulted in the issuance of 32,372,117 shares of Class A common stock. The number of shares included in pro forma net loss per share is weighted to reflect the period of time the warrants were outstanding during fiscal 2021 for which the shares would have been issued.

(4)

Reflects the 737,180 shares of Class A common stock that will be issued to former owners of 29029 (calculated based on the midpoint of the range; the actual number of shares will be calculated as $11.5 million divided by 80% of the public offering price of the Class A common stock). The number of shares included in pro forma net loss per share is weighted to reflect the period of time during fiscal 2021 such shares would have been outstanding if issued at the time of the acquisition.

(5)	Represents the sale and issuance of 30,769,231 shares of Class A common stock in connection with our initial public offering.

(6)	Reflects the 4,145,299 shares pledged by non-executive employees of the Company in exchange for loans in the aggregate amount of $19.9 million. The pledge of the Company’s common shares was accounted for as a repurchase and as such, was reflected in treasury stock.

SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

The following tables present selected historical financial and other data for our business. We derived the selected consolidated statements of operations data for fiscal 2019, 2020 and 2021 and the selected consolidated balance sheet data as of May 31, 2020 and 2021 from our audited consolidated financial statements included elsewhere in this prospectus. Our historical results are not necessarily indicative of the results that may be expected in the future. You should read this data in conjunction with the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes appearing elsewhere in this prospectus.


	Year Ended May 31,
	2019			2020			2021
	(in thousands, except share and per share amounts)
Consolidated Statements of Operations Data:
Revenue:
Interactive fitness products	$	626,189		$	727,703		$	1,515,288
Subscription⁽¹⁾		73,776			123,977			229,768

Total revenue		699,965			851,680			1,745,056

Cost of revenue:
Interactive fitness products⁽²⁾		444,908			503,353			989,873
Subscription⁽²⁾		13,226			19,362			28,980

Total cost of revenue		458,134			522,715			1,018,853

Gross profit		241,831			328,965			726,203
Operating expenses:
Sales and marketing		193,173			278,492			619,431
Research and development⁽³⁾		20,898			23,122			36,274
General and administrative⁽²⁾		48,892			77,105			198,132

Total operating expenses		262,963			378,719			853,837

Loss from operations		(21,132	)		(49,754	)		(127,634	)
Other expense (income):
Gain on sale of subsidiary		(111,800	)		—			—
Other expense, net⁽⁴⁾		13,368			46,320			387,089

Total other expense (income)		(98,432	)		46,320			387,089

Income (loss) before provision for income taxes		77,300			(96,074	)		(514,723	)
Provision for income taxes		20,733			2,469			1,983

Net income (loss)	$	56,567		$	(98,543	)	$	(516,706	)

Undistributed earnings allocated to participating securities		(7,496	)		—			—

Net income (loss) attributable to common stockholders	$	49,071		$	(98,543	)	$	(516,706	)

Net income (loss) per share
Basic	$	0.23		$	(0.46	)	$	(2.32	)

Diluted	$	0.23		$	(0.46	)	$	(2.32	)

Weighted-average common shares outstanding
Basic		213,654,521			213,111,562			222,511,893

Diluted		213,654,521			213,111,562			222,511,893

(1)

We use Billings as a key operating metric in evaluating the performance of our business because it enables an analysis of performance based on the timing of actual transactions with our customers and may be seen as an early indicator of trends in our operating results. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Business Metrics and Non-GAAP Financial Measures” for how we calculate Billings.


	Year Ended May 31,
	2019		2020		2021
	(in thousands)
Billings	$	92,720	$	183,727	$	382,275

(2)	Includes depreciation and amortization expense as follows:


	Year Ended May 31,
	2019		2020		2021
	(in thousands)
Cost of revenue
Interactive fitness products	$	1,933	$	1,466	$	1,852
Subscription		5,468		7,833		6,314

Total cost of revenue		7,401		9,299		8,166
General and administrative		9,319		8,732		8,183

Total	$	16,720	$	18,031	$	16,349

(3)	In fiscal 2019, 2020 and 2021, we invested $35.8 million, $45.1 million, and $91.7 million, respectively, in research and development and to enhance our iFIT platform, develop new products, content and features, and improve our platform infrastructure, a portion of which was capitalized.

(4)


	May 31, 2020			May 31, 2021
	(in thousands)
Consolidated Balance Sheets Data:
Cash and cash equivalents	$	100,321		$	146,453
Working capital⁽¹⁾		16,197			70,944
Total assets		372,129			992,566
Long-term debt, net		139,842			157,133
Deferred revenue, current and non-current		161,739			314,246
Mandatorily redeemable preferred stock		—			234,041
Warrant liabilities		54,349			327,313
Embedded derivative liabilities		31,600			121,000
Total stockholders’ deficit	$	(181,156	)	$	(670,159	)

(1)	Working capital is total current assets less total current liabilities

Non-GAAP Financial Measures

To supplement our consolidated financial statements presented in accordance with U.S. GAAP, we monitor and consider Adjusted EBITDA and Adjusted EBITDA Margin, and Subscription Contribution and Subscription Contribution Margin, which are non-GAAP financial measures. These non-GAAP financial measures are not based on any standardized methodology prescribed by U.S. GAAP and are not necessarily comparable to similarly-titled measures presented by other companies.

Adjusted EBITDA and Adjusted EBITDA Margin

We define Adjusted EBITDA as net income (loss) adjusted to exclude the impact of stock-based compensation expense, the revaluation of our warrant and embedded derivative liabilities, depreciation and amortization, interest expense, gain on sale of subsidiary, other expense (income) and provision for income taxes. Adjusted EBITDA Margin is calculated by dividing Adjusted EBITDA by total revenue.

We use Adjusted EBITDA and Adjusted EBITDA Margin to evaluate our operating performance and trends and make planning decisions. We believe that Adjusted EBITDA and Adjusted EBITDA Margin helps identify underlying trends in our business that could otherwise be masked by the effect of the expenses and other items that we exclude in Adjusted EBITDA and Adjusted EBITDA Margin. In particular, the exclusion of certain expenses in calculating Adjusted EBITDA and Adjusted EBITDA Margin can provide a useful measure for period-to-period comparisons of our business and we use this measure to evaluate our operating performance and trends and make planning decisions. Accordingly, we believe that Adjusted EBITDA and Adjusted EBITDA Margin provide useful information to investors and others in understanding and evaluating our operating results, enhancing the overall understanding of our past performance and future prospects, and allowing for greater transparency with respect to key financial metrics used by our management in its financial and operational decision-making.

Adjusted EBITDA and Adjusted EBITDA Margin are not prepared in accordance with U.S. GAAP, and should not be considered in isolation of, or as an alternative to, measures prepared in accordance with U.S. GAAP. There are a number of limitations related to the use of these non-GAAP financial measures rather than net income (loss), which is the nearest U.S. GAAP equivalent of Adjusted EBITDA and Adjusted EBITDA Margin. Some of these limitations are:

•

Adjusted EBITDA and Adjusted EBITDA Margin exclude stock-based compensation expense, which has recently been, and will continue to be for the foreseeable future, a significant expense for our business and an important part of our compensation strategy;

•

Adjusted EBITDA and Adjusted EBITDA Margin exclude depreciation and amortization expense and, although these are non-cash expenses, the assets being depreciated and amortized may have to be replaced in the future and Adjusted EBITDA and Adjusted EBITDA Margin do not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;

•

Adjusted EBITDA and Adjusted EBITDA Margin do not reflect interest expense, or the cash requirements necessary to service interest or principal payments on our debt, which reduces cash available to us;

•

Adjusted EBITDA and Adjusted EBITDA Margin do not reflect other expense (income), consisting of gains on sales of securities, the gain on extinguishment of mandatorily redeemable preferred stock, and other non-recurring items, that arise outside of the ordinary course of our business;

•

Adjusted EBITDA and Adjusted EBITDA Margin do not reflect provision for income taxes;

•

Adjusted EBITDA and Adjusted EBITDA Margin do not reflect the gain on sale of subsidiary, the loss on the issuance of the Series A and B preferred stock and the 2020 Warrants, and the gain or loss related to the revaluation of our warrant liabilities and embedded derivative liabilities, which are non-recurring and did not arise in the ordinary course of our business. In connection with the initial public

offering, the 2019 Note and the Series A preferred stock are required to be settled including the respective embedded derivative liabilities. The classification of the 2019 Warrant and 2020 Warrants will be reassessed and will no longer be required to be remeasured at fair value as the warrants will be net share settled in connection with the offering.

•

the expenses and other items that we exclude in our calculation of Adjusted EBITDA and Adjusted EBITDA Margin may differ from the expenses and other items, if any, that other companies may exclude from Adjusted EBITDA and Adjusted EBITDA Margin when they report their operating results.

Because of these limitations, Adjusted EBITDA and Adjusted EBITDA Margin should be considered along with other operating and financial performance measures presented in accordance with U.S. GAAP.

The following table presents a reconciliation of net income (loss), the most directly comparable GAAP measure, to Adjusted EBITDA and Adjusted EBITDA Margin:


	Year Ended May 31,
	2019			2020			2021
	(in thousands)
Net income (loss)	$	56,567		$	(98,543	)	$	(516,706	)
Adjusted to exclude the following:
Stock-based compensation expense⁽¹⁾		—			18,484			96,714
Increase in fair value of warrant liabilities⁽²⁾		—			9,396			142,150
Increase in embedded derivative liabilities⁽²⁾		—			20,200			39,300
Loss on issuance of mandatorily redeemable preferred stock and warrants		—			—			178,200
Depreciation and amortization⁽³⁾		16,720			18,031			16,349
Interest expense⁽⁴⁾		15,368			15,496			31,016
Other expense (income), net⁽⁵⁾		(2,000	)		1,228			(3,577	)
Provision for income taxes		20,733			2,469			1,983
Gain on sale of subsidiary		(111,800	)		—			—

Adjusted EBITDA	$	(4,412	)	$	(13,239	)	$	(14,571	)

Net income (loss) margin		8.1	%		(11.6	)%		(29.6	)%

Adjusted EBITDA Margin		(0.6	)%		(1.6	)%		(0.8	)%

(1)	Includes expense related to the vesting of awards of $17.3 million and $51.5 million, respectively, and expense related to loans issued to members of management of $1.2 million and $45.2 million, respectively, in fiscal 2020 and fiscal 2021.

(2)

An initial public offering constitutes a mandatory prepayment event under the terms of the 2019 Note and the Series A and B preferred stock. Upon the occurrence of the mandatory prepayment event, the Company will redeem the 2019 Note and the Series A and B preferred stock, including the embedded derivative instruments. Additionally, the 2019 Warrant and 2020 Warrants will be net share settled in connection with the offering. Please see the section “Liquidity and Capital Resources” for further detail on the 2019 Note and the Series A and B preferred stock.

(3)

Includes amortization of internal use software and iFIT software of $9.5 million, $12.0 million, and $9.7 million for fiscal 2019, 2020 and 2021, respectively; and depreciation and amortization of property plant and equipment of $5.5 million, $4.9 million, and $5.8 million for fiscal 2019, 2020 and 2021, respectively.

(4)	Includes amortization of debt discount and issuance costs, including the write-off of deferred financing fees, totaling $5.6 million, $2.7 million, and $7.0 million for fiscal 2019, 2020 and 2021, respectively.

(5)	Includes the gain on extinguishment of mandatorily redeemable preferred stock of $2.2 million in fiscal 2020.

Subscription Contribution and Subscription Contribution Margin

We define Subscription Contribution as subscription revenue less cost of subscription revenue, adjusted to exclude depreciation and amortization expense from cost of subscription revenue. Subscription Contribution Margin is calculated by dividing Subscription Contribution by subscription revenue.

We use Subscription Contribution and Subscription Contribution Margin to measure our ability to scale and leverage the costs of our subscriptions. We believe that these non-GAAP financial measures are useful to investors for period-to-period comparisons of our business and in understanding and evaluating our operating results because our management uses Subscription Contribution and Subscription Contribution Margin in conjunction with financial measures prepared in accordance with U.S. GAAP for planning purposes, including the preparation of our annual operating budget, as a measure of our core operating results and the effectiveness of our business strategy, and in evaluating our financial performance.

Subscription Contribution and Subscription Contribution Margin are not prepared in accordance with U.S. GAAP, and should not be considered in isolation of, or as an alternative to, measures prepared in accordance with U.S. GAAP. Our use of Subscription Contribution and Subscription Contribution Margin have limitations as analytical tools. You should not consider these in isolation or as substitutes for analysis of our financial results as reported under U.S. GAAP. Although depreciation and amortization expense are non-cash charges, the assets being depreciated and amortized will have to be replaced in the future, and Subscription Contribution and Subscription Contribution Margin do not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements.

Because of these limitations, Subscription Contribution and Subscription Contribution Margin should be considered along with other operating and financial performance measures presented in accordance with U.S. GAAP.

The following table presents a reconciliation of Subscription Contribution to subscription gross profit, the most directly comparable financial measure prepared in accordance with U.S. GAAP, for each of the periods indicated:


	Year Ended May 31,
	2019			2020			2021
Subscription revenue	$	73,776		$	123,977		$	229,768
Less:
Cost of subscription revenue		13,226			19,362			28,980

Subscription gross profit	$	60,550		$	104,615		$	200,788

Subscription gross margin		82.1	%		84.4	%		87.4	%

Add back:
Depreciation and amortization	$	5,468		$	7,833		$	6,314

Subscription contribution	$	66,018		$	112,448		$	207,102

Subscription contribution margin		89.5	%		90.7	%		90.1	%

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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the section titled “Selected Consolidated Financial and Other Data” and our consolidated financial statements and related notes included elsewhere in this prospectus. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from such forward-looking statements. Factors that could cause or contribute to those differences include, but are not limited to, those identified below and those discussed above in the section titled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” included elsewhere in this prospectus. Unless the context otherwise requires, references to “fiscal 2019,” “fiscal 2020” and “fiscal 2021” in this section are intended to mean our fiscal years ended May 31, 2019, 2020 and 2021, respectively.

Overview

iFIT is an integrated health and fitness platform, designed to connect our proprietary software, experiential content and interactive hardware to deliver an unmatched connected fitness experience. We believe the combination of our proprietary software and experiential content connected with our interactive hardware creates a compelling value proposition for our rapidly growing member base and generates attractive recurring subscription revenue. Through our platform, we connect with our growing community of over 6.4 million Total Members and more than 1.5 million Total Fitness Subscribers in over 120 countries.

How We Generate Revenue

Our financial profile is characterized by strong growth, customer retention, recurring subscription revenue and highly efficient customer acquisition.

Interactive Fitness Hardware

We market our interactive hardware under the fitness industry-leading brands NordicTrack, ProForm, Freemotion and Weider. A majority of our large fitness equipment ranges in price from $400 to $13,000 across the primary categories of treadmills, bikes, ellipticals, rowers, climbers, strength equipment, fitness mirrors and yoga equipment. We intentionally segment our brands across a wide range of channels, products and price points to attract consumers from a variety of fitness and income levels and have versions of each major modality in each brand. Our hardware is intelligent—specifically designed and engineered to respond to our proprietary software and experiential content.

We believe that the breadth of our product portfolio and multi-brand strategy provides us with the largest addressable market in our industry and creates a broad funnel to acquire interactive fitness members at scale.

iFIT Member Base

We offer an iFIT membership for $15/month for individuals or $39/month for families of up to five (or $396 when paid annually). The iFIT platform drives interactive experiences on all of our brands, with members gaining access to our full library of live and on-demand content through the membership plan. When a customer purchases select iFIT interactive equipment, they also purchase an annual subscription to iFIT. After the conclusion of the initial subscription period, customers may enter into a monthly or annual subscription arrangement. We expect to change our iFIT membership subscription for our Touchscreen products from an annual subscription and billing plan to a monthly subscription and billing plan.

In addition, we have members that use iFIT on other fitness equipment or without having connected equipment, but utilize the content to achieve their health and fitness goals through our iFIT app on a mobile device or smart

TV. We believe the combination of our proprietary software and experiential content connected with our interactive hardware creates a compelling value proposition for our rapidly growing member base and generates attractive recurring subscription revenue.

Through Sweat, we now offer subscriptions to the Sweat app for $19.99/month or $119.94 when paid annually. The Sweat app offers over 5,000 unique workouts across 26 exercise programs ranging from high-intensity interval training and strength to yoga, barre and Pilates.

Factors Affecting Our Performance

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

Growth in Sales of Interactive Fitness Hardware

We are focused on attracting consumers with function, features, design and modalities that serve as the basis for the engagement of our iFIT members. We have experienced rapid growth of hardware and subscriptions in recent periods and our financial results will continue to be affected by the level of sales of our Interactive Fitness Products. We believe our growth has been driven by an attractive value proposition to our members, our spend on sales and marketing to create awareness of our products and accelerated lifestyle trends in the health and fitness industry toward connected fitness. In addition, unit sales of interactive fitness equipment exceeded our expectations due in part to the global pandemic and an accelerated adoption of connected at-home fitness, particularly in the months of April and May in our fourth quarter of fiscal 2020 and during fiscal 2021. We believe our growth rates will continue to be driven by our ability to create brand and product awareness through additional marketing spend, as well as the continuing lifestyle trend toward connected at-home fitness. If we cannot attract new purchasers of our Interactive Fitness Products as quickly as we expect, our operating results may be adversely affected.

Attracting and Retaining Total Fitness Subscribers

A significant portion of our revenue comes from subscriptions to the iFIT platform. We have amassed over 1.1 million Total Fitness Subscribers as of the end of fiscal 2021, and in fiscal 2021 generated subscription revenue from iFIT subscriptions and extended warranty contracts of $229.8 million, representing an 85% increase from fiscal 2020. We anticipate that over time, the percentage of our revenue represented by subscription income will increase as we enhance our offerings. In addition, our member experience must be compelling enough to attract and retain Total Fitness Subscribers on an ongoing basis. As a result, we expect to continue to invest significantly in our software, experiential content and the related infrastructure. We cannot be sure that we will be successful in attracting and retaining Total Fitness Subscribers or that retention levels will not materially decline due to any number of factors, including our ability to engage our members, implement new software features and launch new content.

Driving Repeat and Adjacent Purchases from Our Customers

We anticipate that an increasing portion of our revenue may come from repeat purchases from existing customers as they build out health and fitness portfolios. Our platform creates an incentive for existing customers to purchase items that can leverage the platform content, and our brands drive loyalty in our customers. As of the end of fiscal 2021, 17% of our Total Fitness Subscribers that joined the iFIT platform had more than one unit of our interactive fitness equipment. As we further expand the offerings of our platform, we will continue to actively market to our Total Fitness Subscribers additional Interactive Fitness Products and adjacent categories of products.

Investing in Technology and Innovation

Technology development has been the hallmark of our success. During fiscal 2021, we invested $91.7 million in research and development and to enhance our iFIT platform, develop new products, content and features, and improve our platform infrastructure, a portion of which was capitalized. Our investment in new initiatives and technologies is critical to our ongoing success, and we intend to continue to invest meaningfully in the future to fuel our growth.

Impact of Global Pandemic

The global pandemic has significantly impacted the global economy. Governments have introduced measures in an effort to control the spread of the virus, including lockdowns, closures, quarantines and travel bans. Demand for at-home health and fitness solutions has increased as a result of gyms and fitness studio closures. While the adoption of at-home connected fitness has been accelerated by the pandemic, it is possible that increased demand levels could decline and churn rates could increase as economies eventually normalize due to vaccine distribution and consumers spending less time at home.

Seasonality

Historically, our revenue has been higher in the second and third fiscal quarters of our year, due in large part to seasonal holiday demand, New Year’s goals and cold weather. As such, we also expect our revenues to generally decline in the fourth fiscal quarter. In fiscal 2020, due to the atypical environment driven from the global pandemic, we did not experience our typical seasonality, although we have experienced seasonality in fiscal 2021, with higher revenue in the second and third fiscal quarters, and expect seasonality to return in future years. Similarly, we have experienced higher churn in iFIT subscriptions during the third and fourth fiscal quarters, following the expiration of annual subscriptions purchased together with fitness equipment. Sweat is also impacted by similar seasonality.

Impact of the Sweat Acquisition

On June 30, 2021, a subsidiary of the Company completed the acquisition of Sweat Group Pty Ltd, an Australian company and one of the world’s largest digital fitness training platforms for women. Pursuant to the terms of the share sale agreement, the Company indirectly acquired all of the issued share capital in Sweat, for aggregate consideration of (a) $37.5 million in cash; (b) $40 million in Class A common stock to be issued following the initial public offering at a 10% discount to the price per share in such offering; and (c) up to $70 million of deferred consideration, with an upward adjustment of approximately $4 million for debt, working capital (including cash) and transaction expenses. The deferred consideration consists of (i) up to $30 million based on revenues of Sweat’s business during the three years following the acquisition of Sweat and (ii) royalty payments up to $40 million, based on sales of the Company’s interactive fitness equipment generated by the Sweat team during the five years following the acquisition of Sweat. We are currently assessing the accounting treatment of the Sweat acquisition. Included in that assessment is an analysis of the purchase consideration and whether any components of such should be accounted for as compensation for continuing employment rather than as consideration transferred. All payments to the sellers will be paid in Australian dollars at an agreed exchange rate of AU$1.2985 per US$1.00. Under applicable SEC rules, the Sweat acquisition does not meet the significance thresholds for separate financial statement or pro forma reporting purposes.

Because the acquisition occurred subsequent to fiscal 2021, the Sweat results are not included in our historical results, but will be included as of and from the date of acquisition during Q1 fiscal 2022. Through Sweat, we now offer subscriptions to the Sweat app, which we expect to positively impact subscription revenue in future periods. The Sweat acquisition also gives us direct access to Sweat’s community of 450,000 paid subscribers at May 31, 2021 and more than 50 million followers, primarily women, across its social channels, which will expand our ability to market both our iFIT subscriptions and our interactive hardware to the extensive global Sweat community.

Key Business Metrics and Non-GAAP Financial Measures

In addition to the measures presented in our consolidated financial statements, we use the following key operational metrics and non-GAAP financial measures to evaluate our business, measure our performance, develop financial forecasts, and make strategic and budgeting decisions.


	Year Ended May 31,
	(dollars in thousands)
	2019			2020			2021			2021 (Combined) ⁽¹⁾
Total Fitness Subscribers (at period end)		262,181			530,490			1,118,519			1,569,127
Total members (at period end)		2,474,504			3,456,816			5,670,616			6,121,224
Total workouts on platform		12,132,471			34,098,117			112,194,032			141,895,860
Average monthly workouts⁽²⁾		5.5			7.7			13.1			N/A
Billings	$	92,720		$	183,727		$	382,275			N/A
Net income (loss)	$	56,567		$	(98,543	)	$	(516,706	)		N/A
Net income (loss) margin		8.1	%		(11.6	)%		(29.6	)%		N/A
Adjusted EBITDA	$	(4,412	)	$	(13,239	)	$	(14,571	)		N/A
Adjusted EBITDA Margin		(0.6	)%		(1.6	)%		(0.8	)%		N/A
Subscription gross profit	$	60,550		$	104,615		$	200,788			N/A
Subscription gross margin		82.1	%		84.4	%		87.4	%		N/A
Subscription contribution	$	66,018		$	112,448		$	207,102			N/A
Subscription contribution margin		89.5	%		90.7	%		90.1	%		N/A

(1)	Except as set forth in the combined column, which includes Sweat on a combined basis, the historical data set forth in this table do not give effect to the Sweat acquisition, which occurred subsequent to fiscal 2021 on June 30, 2021. Certain additional information regarding Sweat is provided below.

(2)	Average monthly workouts attributable to Touchscreen products priced $1,999 and above.

Total Fitness Subscribers. Our number of Total Fitness Subscribers indicates our market penetration and growth of our subscription business. Our number of Total Fitness Subscribers grew 102% from fiscal 2019 to 2020 and grew 111% from fiscal 2020 to fiscal 2021. Total Fitness Subscribers are defined as those who have full access to all paid content, which is available on the digital app, TV app and on equipment who are either in an active paid account or a trial and are the primary account holder. Our digital-only iFIT members and trial members each represent less than 5% of our Total Fitness Subscriber base for all periods presented.

Except as set forth in our combined figure, our Total Fitness Subscribers for historical periods do not include Sweat app subscribers, which amounted to 450,000 at May 31, 2021. Our combined Total Fitness Subscribers were 1.6 million at May 31, 2021.

Total Fitness Subscribers

(As of fiscal quarter end, in thousands)

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Total Members. Our total member count is a key indicator of the size of our global community. Our Total Member count increased at a 51% CAGR from fiscal 2019 to fiscal 2021. We define Total Members as all individuals who have an active iFIT account and/or Sweat subscription, which includes Total Fitness Subscribers, their respective secondary members and members who consume free content.

Except as set forth in the combined figure, our Total Members for historical periods do not include Sweat app subscribers, which amounted to 450,000 at May 31, 2021. Our combined Total Members were 6.1 million at May 31, 2021.

Total Workouts on Platform. This metric allows us to measure our member engagement, which indicates overall satisfaction with our iFIT platform, and provides insight into which content is the most popular among our Total Members. The breadth of our iFIT platform enables us to collect usage data as it pertains to modalities, length of workouts, and other information that can inform our decision-making on future content and products. For fiscal 2019 and fiscal 2020, the total number of workouts participated in on our platform was 12.1 million and 34.1 million, respectively, representing 181% growth. In fiscal 2021, our members participated in more than 112 million workouts, reflecting growth of 229% year over year. We define a workout as a single program participated in by any of our members across our entire platform.

Total Workouts on Platform

(Per fiscal quarter, in millions)

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Average Monthly Workouts. We view this metric as a way to measure the engagement of our Total Fitness Subscribers. Over time, our members become more engaged with our platform, as seen through the average number of workouts per Touchscreen product member at the $1,999+ price point, which was 5.5, 7.7 and 13.1 for fiscal 2019, fiscal 2020 and fiscal 2021, respectively. For the same time periods, the average monthly workouts for all Touchscreen product members was 5.0, 6.8 and 10.0. We calculate this metric by summing the total number of workouts in the 12 months preceding each respective period end by all Touchscreen product members (or Touchscreen product members at the $1,999+ price point), divided by the average number of subscribers owning the relevant equipment over same period, divided by 12 months. As we continue to add engaging live and recorded content to our library, we expect this number to continue to increase over time.

Average Monthly Churn. We measure churn on our subscribers who own our interactive fitness equipment with a high-definition touchscreen. Touchscreen product subscribers represent a subset of our total subscriber base, who we believe purchase equipment with the intent of consuming content, giving us a strong indication of member retention and the strength of our content offerings.

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We now sell Touchscreen products across every major modality and with price points starting at $499. The number of Touchscreen product subscribers as of the end of fiscal 2021 represented 71% of our Total Fitness Subscriber base, up from 26% in fiscal 2018. We plan to continue to invest in shifting our product mix toward Touchscreen products.

As of the end of fiscal 2021, Touchscreen products priced $1,999 and above represented approximately 45% of our Touchscreen product subscribers. The chart below highlights monthly churn for subscribers who purchased Touchscreen product units priced $1,999 and above, based on monthly cohorts 13 months prior to each respective period.

Average Net Monthly Churn by Cohort, Touchscreen $1,999+

(Based on 13-month Retention)

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Average Net Monthly Churn is calculated based on the 13-month retention rate of our subscribers who use our Touchscreen products priced $1,999 and above. For fiscal Q4 2021, we calculate this figure based on the number of subscribers that renewed their subscription from the monthly cohorts that joined the platform in the 13 months prior (February 2020, March 2020 and April 2020) and include the subscribers from prior cohorts that reactivated their subscriptions during the period. This reflects a 76% annual retention rate, and converts to a 2.3% monthly churn rate. This figure is 2.9% when calculated for Touchscreen product subscribers at all price points of $499 and higher, who joined the platform in the same months.

Given that currently our Touchscreen products are typically sold together with an annual iFIT subscription, we focus on our customers’ propensity to renew their subscriptions after their initial year on the platform.

Our iFIT platform enables us to access subscribers who do not have Touchscreen equipment. These additive subscribers have a lower likelihood of renewing their subscriptions than Touchscreen product subscribers. We may experience an increase in average monthly churn, which we would expect to be temporary, in connection with our plan to change our iFIT membership subscription for our Touchscreen products from an annual subscription and billing plan to a monthly subscription and billing plan.

Billings. We define billings as the total amounts billed for subscription and extended warranty contracts in the period. Billings consists of iFIT subscription contracts with existing customers (including renewals), iFIT subscription contracts with new customers and contracts for extended warranty. Customers can either purchase an iFIT subscription in connection with the purchase of certain iFIT Interactive Fitness Products or purchase a subscription independently of purchasing iFIT products. Customers may enter into monthly or annual iFIT subscriptions which are billed at the beginning of the contract period and can be renewed at any time during the contract period. Customers typically purchase extended warranty at the time of the iFIT Interactive Fitness Product purchase, or during the limited warranty period (that comes with the product), which are billed to the customer at that time and can range over terms of 1 to 5 years.

We monitor Billings as a key operating metric in evaluating the performance of our business as it drives deferred revenue which is an important indicator of the health of our subscription business and represents a significant

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percentage of future subscription revenue. It also provides management with a view on the cash flows associated with our subscription business, thereby enabling management to assess continued investment in the business. We believe it is a useful disclosure for our investors as unlike other companies that may be viewed as our peers, our subscription model is largely driven by longer term subscriptions rather than a month-to-month subscription and providing this information allows investors to evaluate the total dollar amount of subscription purchases made by our customers and assess the overall performance of our subscription business.

In connection with our plan to change our iFIT membership subscription for our Touchscreen products from an annual subscription and billing plan to a monthly subscription and billing plan, we expect our Billings to decrease as the mix between annual and monthly renewals shifts to monthly renewals.

Unit Economics. When evaluating unit economics for our iFIT subscription offering, we focus on our Touchscreen product line. Our Touchscreen product subscriber lifetime value (“LTV”) is calculated as:

•

Our monthly iFIT subscription fee of approximately $32, blended to account for our subscription plan options, monthly and annual - as well as our member plan options, individual and family; multiplied by

•

Subscription Gross Margin; multiplied by

•

Touchscreen product subscribers added in the period; multiplied by

•

Months of subscriber lifetime, calculated as one divided by Average Monthly Churn.

Our Touchscreen product subscriber LTV was $553 million for fiscal 2021, or $909 per Touchscreen product subscriber added during the period. For the category of Touchscreen products priced $1,999 and above, LTV was $1,214 per subscriber added during the same period.

We evaluate customer acquisition cost on a net basis, offsetting marketing investments associated with customer acquisition with gross profit, excluding depreciation and amortization expense, earned on the sale of our iFIT-enabled equipment, which demonstrates an instant payback of our marketing investment. For fiscal 2021, our net customer acquisition cost was negative $43 per Touchscreen product subscriber added. The gross profit, which excludes depreciation and amortization expense, we generate from our Touchscreen products, which was $301.5 million in fiscal 2021, offsets the marketing spend associated with subscriber acquisition. We believe our unit economics profile will continue to improve as we generate operating leverage and experience heightened brand awareness.

Adjusted EBITDA and Adjusted EBITDA Margin. Adjusted EBITDA is a non-GAAP financial measure that represents our performance adjusted for depreciation and amortization, net interest expense, provision for income taxes among other adjustments outlined in the reconciliation referenced below. We calculated Adjusted EBITDA Margin by dividing Adjusted EBITDA by revenue. We use Adjusted EBITDA and Adjusted EBITDA Margin in conjunction with GAAP measures as part of our overall assessment of our performance to evaluate the effectiveness of our business strategies and to communicate with our board of directors concerning our financial performance. See the section titled “Selected Consolidated Financial and Other Data—Non-GAAP Financial Measures” for information regarding our use of Adjusted EBITDA and Adjusted EBITDA Margin and a reconciliation of Adjusted EBITDA to net income (loss).

Subscription Contribution and Subscription Contribution Margin. Subscription Contribution and Subscription Contribution Margin are non-GAAP financial measures. We define Subscription Contribution as subscription revenue less cost of subscription revenue, adjusted to exclude depreciation and amortization expense from cost of subscription revenue. Subscription Contribution Margin is calculated by dividing Subscription Contribution by subscription revenue. We use Subscription Contribution and Subscription Contribution Margin to measure our ability to scale and leverage the costs of our subscriptions. The continued growth of our subscription base will allow us to improve our Subscription Contribution Margin. While there are variable costs associated with our subscriptions, a significant portion of our content creation costs are fixed given that we operate with a limited

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number of production studios and personnel. The fixed nature of those expenses should scale over time as we grow our subscription base. See the section titled “Selected Consolidated Financial and Other Data—Non-GAAP Financial Measures” for information regarding our use of Subscription Contribution and Subscription Contribution Margin and a reconciliation of Subscription Contribution to subscription gross profit.

Percentage of Multi-Equipment Users by Cohort. We view the Percentage of Multi-Equipment Users as a strong indicator of the breadth of our platform and a validation of our vision to serve our members holistically. We calculate this metric at a given date by dividing the number of Total Fitness Subscribers with two or more iFIT-enabled units (excluding our digital app) attached to a single user account as of such date, by the total number of Total Fitness Subscribers who joined the platform with at least one iFIT-enabled unit during a specified period (which we refer to as a “cohort”).

As of the end of fiscal 2021, 17% of our Total Fitness Subscribers that joined the iFIT platform had more than one unit of our interactive fitness equipment. For cohorts of fiscal 2018, 2019 and 2020 this figure is 20%, 18%, and 14% respectively. Our data supports that the longer members are on our platform, the more likely they are to purchase multiple iFIT-enabled units. We define “units” as items that have iFIT functionality, such as bikes, treadmills, ellipticals, climbers and rowers. This metric is an indicator of our ability to drive retention in our member base and increase the touchpoints we have with consumers. We believe we have a competitive advantage as compared to others in our market due to the breadth of high-quality, iFIT-enabled equipment we offer.

Gross Merchandise Value. We define Gross Merchandise Value as the total dollar value of the merchandise sold to end consumers in a given period in all distribution channels. Gross Merchandise Value is calculated by multiplying the number of units sold of a specific stock-keeping unit (“SKU”) in the period by the estimated retail selling price of that SKU in all distribution channels, prior to the deduction of any discounts, fees or expenses. We monitor Gross Merchandise Value as a key operating metric because it provides insights into the overall growth of our business and strength of our brands with end consumers, while normalizing for different billing conventions across our transactions with our customers through our direct and wholesale channels. We believe Gross Merchandise Value is useful to investors as it gives investors a clearer indication of the volume of our business transacted in a period by calculating retail value, regardless of the distribution channel and allows us and investors to make like-for-like sales comparisons to certain competitors who utilize predominantly direct distribution channels.

Components of our Operating Results

We operate and manage our business in two operating and reportable segments: Interactive Fitness Products and Subscription. We identify our reportable segments based on the information used by management to monitor performance and make operating decisions. See Note 22 to our consolidated financial statements included elsewhere in this prospectus for additional information regarding our reportable segments.

Revenue

Interactive Fitness Products. We generate most of our revenue from the sale of our interactive fitness equipment, as well as ancillary products including weights, apparel, nutrition products and other accessories. Interactive fitness products revenue is recognized when control transfers to the customer, which can be either at the time of shipping or the time of delivery, depending upon the terms of our contract with the customer, and is recorded net of returns, discounts and customer sales incentives.

Subscription. Subscription revenue consists of revenue generated from month-to-month and annual iFIT subscriptions. When a customer purchases select iFIT Interactive Fitness Products, they also purchase an annual subscription to iFIT. After the initial one-year period, subscriptions are offered on a month-to-month or annual basis. We also occasionally offer discounts on the purchase of additional years of iFIT with the upfront purchase of an interactive fitness product. We also generate a portion of our subscription revenue from our extended warranties. Revenues associated with our subscription products are deferred at the time of sale and recognized

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ratably over the subscription period, net of customer sales incentives. Commencing in Q1 fiscal 2022, subscription revenue will include revenue generated from subscriptions to the Sweat app. Additionally, in Q2 fiscal 2022, we expect to change our iFIT membership subscription for our Touchscreen products from an annual subscription and billing plan to a monthly subscription and billing plan.

Cost of revenue

Interactive Fitness Products. Interactive fitness products cost of revenue consists of inventory and manufacturing costs, tooling costs, duties and import costs, realized cash flow hedge gains and losses, depreciation and amortization, inbound freight, packaging, warranty replacement and servicing costs associated with the manufacturer’s warranty, and certain allocated costs related to management, facilities, and personnel-related expenses. Personnel-related expenses include salaries, bonuses and benefits. In the near term, we expect interactive fitness products cost of revenue to increase in total and as a percentage of revenue due to higher costs related to freight and materials. Additionally, our interactive fitness products cost of revenue and margins will fluctuate based on the channel through which we sell.

Subscription. Subscription cost of revenue includes costs associated with the creation of iFIT content, including associated personnel related expenses, filming and production costs, other iFIT content specific costs, hosting fees, music royalties, amortization of iFIT capitalized software development costs, and warranty replacement and servicing costs associated with extended warranty contracts. We expect subscription cost of revenue to increase both in total and as a percentage of revenue as we continue to invest in video and live fitness content, increases in variable costs such as hosting fees and music royalties, and increasing costs related to updates to and development of our iFIT platform. Commencing in Q1 fiscal 2022, subscription cost of revenue will include the costs associated with the Sweat app.

Operating Expenses

Operating expenses consist of sales and marketing, research and development, and general and administrative expenses.

Sales and Marketing. Sales and marketing expenses represent the largest component of our operating expenses and consist primarily of advertising and marketing expenses and personnel-related expenses, as well as sales incentives, distribution and freight-out, payment processing fees, sponsorship costs, consulting and contractor expenses and travel expenses. We expect our sales and marketing expenses to increase significantly as we continue to actively advertise and market our products and services. Sales and marketing expenses as a percentage of total revenue may fluctuate from period to period based on total revenue and the timing of our investments in our sales and marketing functions as these investments may vary in scope and scale over future periods.

Shipping and handling fees billed to customers are recorded gross and included in Interactive Fitness Products revenue with the associated costs reported in sales and marketing. Shipping and handling fees recorded in sales and marketing were $54.1 million, $66.5 million and $117.9 million for fiscal 2019, 2020 and 2021, respectively.

Research and Development. Research and development expenses consist primarily of personnel-related expenses, facilities-related expenses, and consulting and contractor expenses. Substantially all of our research and development expenses are related to developing new products and services and improving our existing products and services. We capitalize certain qualified costs incurred in connection with the development of internal-use and iFIT software. We expect our research and development expenses to increase in absolute dollars and vary from period to period as a percentage of total revenue as we continue to make significant investments in developing new products and services and enhancing existing iFIT products and services.

General and Administrative. General and administrative expenses consist of personnel-related expenses, professional service costs, capitalized internal use software amortization expense, and other administrative expenses. Personnel-related expenses include salaries, bonuses, benefits, and stock-based compensation for our administrative, finance, legal, and human resources personnel.

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Following the completion of this offering, we expect to incur additional general and administrative expenses as a result of operating as a public company, including expenses related to compliance and reporting obligations of public companies and increased costs for insurance, investor relations expenses, professional services and stock-based compensation. As a result, we expect our general and administrative expenses to increase in absolute dollars and vary from period to period as a percentage of revenue.

In addition, we expect increased compensation expense in future periods to reflect the forgiveness of $53.2 million aggregate principal amount of executive loans (including a $44 million loan to our CEO) to comply with the Sarbanes-Oxley Act a $35 million payment to our CEO and a restricted grant to our CEO of $50.0 million of New Convertible Notes. We expect to incur share-based compensation expense of approximately $163.1 million in the first year subsequent to the initial public offering related to options and restricted shares, including modifications of existing awards and issuance of loans to non-executive employees, granted to members of management and employees in conjunction with this offering. See “Executive and Director Compensation—Additional Compensation in Fiscal Q1 or Q2 2022” and notes (O) and (Q) to our Unaudited Pro Forma Condensed Consolidated Balance Sheet. See “Unaudited Pro Forma Condensed Consolidated Financial Information.”

Other Expense (Income)

Other expense (income), net consists of interest expense, including amortization of debt issuance cost and amortization of debt discount, changes in the fair value of warrant liabilities and embedded derivative liabilities, gains and losses on mandatorily redeemable preferred stock and warrants, gain on the sale of a subsidiary, equity-method investment income, gains and losses on investment securities and other miscellaneous income and expense items.

Provision for Income Taxes

Provision for income taxes consists primarily of income taxes related to federal, foreign and state jurisdictions in which we conduct business. The foreign jurisdictions have statutory tax rates different from those in the United States. Accordingly, our effective tax rates will vary depending on the relative proportion of foreign to U.S. income, the utilization of foreign tax credits, and changes in tax laws. We maintain a full valuation allowance on our federal and state deferred tax assets as we have concluded that it is more likely than not that our U.S. deferred assets will not be utilized.

Results of Operations

The following tables set forth the components of our consolidated results of operations for each of the periods presented and as a percentage of our revenue for those periods. The period-to-period comparison of operating results is not necessarily indicative of results for future periods.


	Year Ended May 31,
	2019		2020		2021
	(in thousands)
Consolidated Statements of Operations Data:
Revenue:
Interactive fitness products	$	626,189	$	727,703	$	1,515,288
Subscription⁽¹⁾		73,776		123,977		229,768

Total revenue		699,965		851,680		1,745,056

Cost of revenue:
Interactive fitness products⁽²⁾		444,908		503,353		989,873
Subscription⁽²⁾		13,226		19,362		28,980

Total cost of revenue		458,134		522,715		1,018,853

Gross profit		241,831		328,965		726,203

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	Year Ended May 31,
	2019			2020			2021
	(in thousands)
Operating expenses:
Sales and marketing		193,173			278,492			619,431
Research and development⁽³⁾		20,898			23,122			36,274
General and administrative⁽²⁾		48,892			77,105			198,132

Total operating expenses		262,963			378,719			853,837

Loss from operations		(21,132	)		(49,754	)		(127,634	)
Other expense (income):
Gain on sale of subsidiary		(111,800	)		—			—
Other expense, net⁽⁴⁾		13,368			46,320			387,089

Total other expense (income)		(98,432	)		46,320			387,089

Income (loss) before provision for income taxes		77,300			(96,074	)		(514,723	)
Provision for income taxes		20,733			2,469			1,983

Net income (loss)	$	56,567		$	(98,543	)	$	(516,706	)

(1)

We use Billings as a key operating metric in evaluating the performance of our business because it enables an analysis of performance based on the timing of actual transactions with our customers and may be seen as an early indicator of trends in our operating results. See “Management’s Discussion and Analysis—Key Business Metrics and Non-GAAP Financial Measures” for how we calculate Billings.


	Year Ended May 31,
	2019		2020		2021
	(in thousands)
Billings	$	92,720	$	183,727	$	382,275

(2)	Includes depreciation and amortization expense as follows:


	Year Ended May 31,
	2019		2020		2021
	(in thousands)
Cost of revenue
Interactive fitness products	$	1,933	$	1,466	$	1,852
Subscription		5,468		7,833		6,314

Total cost of revenue		7,401		9,299		8,166
General and administrative		9,319		8,732		8,183

Total	$	16,720	$	18,031	$	16,349

(3)

In fiscal 2019, 2020 and 2021, we invested $35.8 million, $45.1 million and $91.7 million, respectively, which represents 5.1%, 5.3% and 5.3% of our total revenues, respectively, in research and development and to enhance our iFIT platform, develop new products, content and features, and improve our platform infrastructure, a portion of which was capitalized.

(4)

Includes a loss in fiscal 2021 of $178.2 million related to the issuance of the Series A and B preferred stock and the 2020 Warrants. The loss is due to the excess of the fair value of the instruments issued over the proceeds received. In fiscal 2020 and 2021, we also incurred losses of $9.4 million and $142.2 million, respectively, related to the change in fair value of our warrant liabilities and $20.2 million and $39.3 million, respectively, related to the change in fair value of our embedded derivative liabilities. Total other expense (income) also includes interest expense (income) of $15.4 million, $15.5 million and $31.0 million for fiscal 2019, 2020 and 2021, respectively, and other expense (income) of $(2.0) million, $1.2 million, and $(3.6) million, for fiscal 2019, 2020 and 2021, respectively.

107

The following table sets forth our consolidated statements of operations data as a percentage of total revenue:


	Year Ended May 31,
	2019			2020			2021
	(as a percentage of total revenue)
Consolidated Statements of Operations Data:
Revenue:
Interactive fitness products		89.5	%		85.4	%		86.8	%
Subscription		10.5			14.6			13.2

Total revenue		100.0			100.0			100.0

Cost of revenue:
Interactive fitness products		63.6			59.1			56.7
Subscription		1.9			2.3			1.7

Total cost of revenue		65.5			61.4			58.4

Gross profit		34.5			38.6			41.6
Operating expenses:
Sales and marketing		27.6			32.7			35.5
Research and development		3.0			2.7			2.1
General and administrative		7.0			9.1			11.4

Total operating expenses		37.6			44.5			48.9

Loss from operations		(3.0	)		(5.8	)		(7.3	)
Other expense (income):
Gain on sale of subsidiary		(16.0	)		—			—
Other expense, net		1.9			5.4			22.2

Total other expense (income)		(14.1	)		5.4			22.2

Income (loss) before provision for income taxes		11.0			(11.3	)		(29.5	)
Provision for income taxes		3.0			0.3			0.1

Net income (loss)		8.1	%		(11.6	)%		(29.6	)%

Comparison of Fiscal 2020 and 2021

Revenue


	Year Ended May 31,				Change
(dollars in thousands)	2020		2021		$		%
Revenue:
Interactive fitness products	$	727,703	$	1,515,288	$	787,585		108.2	%
Subscription		123,977		229,768		105,791		85.3

Total revenue	$	851,680	$	1,745,056	$	893,376		104.9	%

The $787.6 million increase in fiscal 2021 Interactive Fitness Products revenue was primarily attributable to an increase in the number of Touchscreen product units sold. The Company’s investments in advertising and brand awareness in fiscal 2021, as well as a general shift in consumer behavior to health and fitness and increased demand driven by stay-at-home orders issued by governments in response to the global pandemic, contributed to the increase in the number of interactive fitness units sold. While we have experienced strong demand for our interactive fitness units during fiscal 2021, our growth across quarterly periods also reflects our typical seasonality patterns, with higher revenue during the second and third quarters. Our prospective growth rates may also be impacted by the re-openings of fitness center facilities, vaccine distribution and consumers spending less time at home.

108

The $105.8 million increase in fiscal 2021 subscription revenue was primarily attributable to an increase in demand for our Interactive Fitness Products with an iFIT bundled offering upon purchase of the product. In addition, $2.0 million of the $105.8 million increase was attributable to revenue related to extended warranties within subscription revenue, which increased from $20.2 million in fiscal 2020 to $22.2 million in fiscal 2021.

Cost of revenue


	Year Ended May 31,						Change
(dollars in thousands)	2020			2021			$		%
Cost of revenue:
Interactive fitness products	$	503,353		$	989,873		$	486,520		96.7	%
Subscription		19,362			28,980			9,618		49.7

Total cost of revenue	$	522,715		$	1,018,853		$	496,138		94.9	%
Gross profit:
Interactive fitness products	$	224,350		$	525,415		$	301,065		134.2	%
Subscription		104,615			200,788			96,173		91.9

Total gross profit	$	328,965		$	726,203		$	397,238		120.8	%

Gross margin:
Interactive fitness products		30.8	%		34.7	%
Subscription		84.4			87.4

Total gross margin		38.6	%		41.6	%

The $486.5 million increase in Interactive Fitness Products cost of revenue was primarily attributable to the increase in the number of Touchscreen product units sold. The increase in Interactive Fitness Products gross margin from 30.8% in fiscal 2020 to 34.7% in fiscal 2021 was primarily attributable to direct-to-consumer sales increasing (as a percentage of total Interactive Fitness Products sales), which is our higher margin channel.

The $9.6 million increase in subscription cost of revenue during fiscal 2021 was primarily attributable to the increase in the number of Total Fitness Subscribers and increases in iFIT software content costs. The increase in subscription gross margin from 84.4% in fiscal 2020 to 87.4% in fiscal 2021 was primarily attributable to greater growth in our subscribers than in our fixed cost base. Subscription cost of revenue is expected to continue to increase as we continue to invest in video and live fitness content for our Total Fitness Subscribers and updates to and development of our iFIT platform.

Operating Expenses

Sales and Marketing


	Year Ended May 31,						Change
(dollars in thousands)	2020			2021			$		%
Sales and marketing	$	278,492		$	619,431		$	340,939		122.4	%
As a percentage of total revenue		32.7	%		35.5	%

The $340.9 million increase in sales and marketing expense during fiscal 2021 was primarily due to a $254.9 million increase in expenses associated with advertising costs and other marketing programs, an increase of $51.4 million in shipping and handling fees and an increase of $23.8 million in labor costs. As a percentage of revenues, sales and marketing increased 2.8%, which was mainly due to increased advertising and marketing spend in fiscal 2021.

109

Research and Development


	Year Ended May 31,						Change
(dollars in thousands)	2020			2021			$		%
Research and development	$	23,122		$	36,274		$	13,152		56.9	%
As a percentage of total revenue		2.7	%		2.1	%

The $13.2 million increase in research and development expense during fiscal 2021 was primarily attributable to a $14.2 million increase in personnel-related expenses related to an increase in headcount to support product and software development for the iFIT platform. As a percentage of revenue, research and development expense was 0.6% lower year over year. In addition to our research and development expense, in fiscal 2020 and fiscal 2021, we invested $22.0 million and $55.4 million, respectively, to enhance our iFIT platform, develop new products, content and features and improve our platform infrastructure, which was capitalized in each of those years.

General and Administrative


	Year Ended May 31,						Change
(dollars in thousands)	2020			2021			$		%
General and administrative	$	77,105		$	198,132		$	121,027		157.0	%
As a percentage of total revenue		9.1	%		11.4	%

The $121.1 million increase in general and administrative expense during fiscal 2021 was primarily due to a $78.3 million increase in stock-based compensation expense, a $14.0 million increase in consulting and advisory fees, and a $19.4 million increase in personnel costs. As a percentage of revenue, general and administrative expense increased 2.3% which was mainly due to the increase in stock-based compensation expense in fiscal 2021.

Other Expense (Income)


	Year Ended May 31,					Change
(dollars in thousands)	2020		2021			$			%
Interest expense	$	15,496	$	31,016		$	15,520			100.2	%
Change in fair value of warrant liabilities		9,396		142,150			132,754			1,412.9
Change in fair value of embedded derivative liabilities		20,200		39,300			19,100			94.6
Loss on issuance of mandatorily redeemable preferred stock and warrants		—		178,200			178,200			—
Other expense (income), net		1,228		(3,577	)		(4,805	)		(391.3	)

Total other expense, net	$	46,320	$	387,089		$	340,769			735.7	%

The $340.8 million increase in total other expense, net in fiscal 2021 was primarily due to the $132.8 million and $19.1 million increase in losses due to the change in fair value of the warrant and embedded derivative liabilities, respectively, the $178.2 million loss on the issuance of the Series A and B preferred stock and 2020 Warrants and the $15.5 million increase in interest expense due to the interest incurred on the 2019 Note and the Series A preferred stock during fiscal 2021.

An initial public offering constitutes a mandatory prepayment event under the terms of the Series A and B preferred stock and the 2019 Note, at which time the Company will redeem the Series A preferred stock and the 2019 Note, including the underlying embedded derivative instruments. As such, after an initial public offering, we would not expect to recognize fair value changes in the embedded derivative liabilities. Additionally, the classification of the 2019 Warrant and 2020 Warrants will be reassessed and will no longer be required to be remeasured at fair value as the warrants will be net share settled in connection with the offering.

110

Provision for Income Taxes


	Year Ended May 31,						Change
(dollars in thousands)	2020			2021			$			%
Provision for income taxes	$	2,469		$	1,983		$	(486	)		(19.7	)%
As a percentage of total revenue		0.3	%		0.1	%

Our effective tax rate was (2.5)% and (0.5)% for fiscal 2020 and fiscal 2021, respectively.

Comparison of Fiscal 2019 and 2020

Revenue


	Year Ended May 31,				Change
	2019		2020		$		%
	(dollars in thousands)
Revenue:
Interactive fitness products	$	626,189	$	727,703	$	101,514		16.2	%
Subscription		73,776		123,977		50,201		68.0

Total revenue	$	699,965	$	851,680	$	151,715		21.7	%

The $101.5 million increase in fiscal 2020 Interactive Fitness Products revenue was primarily attributable to an increase in the number of Touchscreen product units sold. The Company’s investments in advertising and brand awareness in fiscal 2020, as well as a general shift in consumer behavior to health and fitness, contributed to the increase in the number of interactive fitness units sold.

The $50.2 million increase in fiscal 2020 subscription revenue was primarily attributable to the growth in our Total Fitness Subscribers, which increased from 262,181 as of May 31, 2019 to 530,490 as of May 31, 2020. Total Fitness Subscribers grew as consumers shifted to at-home workouts due to changes in consumer fitness trends. Included in the $50.2 million increase was a decrease of $1.3 million attributable to revenue related to extended warranties within subscription revenue, which decreased from $21.5 million in fiscal 2019 to $20.2 million in fiscal 2020.

111

Cost of revenue


	Year Ended May 31,						Change
	2019			2020			$		%
	(dollars in thousands)
Cost of revenue
Interactive fitness products	$	444,908		$	503,353		$	58,445		13.1	%
Subscription		13,226			19,362			6,136		46.4

Total cost of revenue	$	458,134		$	522,715		$	64,581		14.1	%

Gross profit
Interactive fitness products	$	181,281		$	224,350		$	43,069		23.8	%
Subscription		60,550			104,615			44,065		72.8

Total gross profit	$	241,831		$	328,965		$	87,134		36.0	%

Gross margin
Interactive fitness products		28.9	%		30.8	%
Subscription		82.1			84.4

Total gross margin		34.5	%		38.6	%

The $58.4 million increase in Interactive Fitness Products cost of revenue was primarily attributable to the increase in the number of Touchscreen product units sold. The increase in Interactive Fitness Products gross margin from 28.9% in fiscal 2019 to 30.8% in fiscal 2020 was primarily attributable to direct-to-consumer sales increasing (as a percentage of total Interactive Fitness Products sales) which is our higher margin channel.

The $6.1 million increase in subscription cost of revenue during fiscal 2020 was primarily attributable to the increase in the number of Total Fitness Subscribers and increases in amortization of capitalized iFIT software and content costs. The increase in subscription gross margin from 82.1% for fiscal 2019 to 84.4% for fiscal 2020 was primarily attributable to greater growth in our subscribers than in our fixed cost base. Subscription cost of revenue is expected to continue to increase as we continue to invest in video and live fitness content for our Total Fitness Subscribers and updates to and development of our iFIT platform.

Operating Expenses

Sales and Marketing


	Year Ended May 31,						Change
(dollars in thousands)	2019			2020			$		%
Sales and marketing	$	193,173		$	278,492		$	85,319		44.2	%
As a percentage of total revenue		27.6	%		32.7	%

The $85.3 million increase in sales and marketing expense during fiscal 2020 was primarily due to a $62.1 million increase in expenses associated with advertising costs and other marketing programs, an increase of $12.4 million in shipping and handling fees, and a $9.3 million increase in bad debt expense mainly due to the bankruptcy of a major retail partner. As a percentage of revenues, sales and marketing increased 5.1% which was mainly due to the increased advertising and marketing spend in fiscal 2020.

Research and Development


	Year Ended May 31,						Change
(dollars in thousands)	2019			2020			$		%
Research and development	$	20,898		$	23,122		$	2,224		10.6	%
As a percentage of total revenue		3.0	%		2.7	%

112

The $2.2 million increase in research and development expense during fiscal 2020 was primarily due to a $1.4 million increase in personnel-related expenses. As a percentage of revenue, research and development expense was slightly lower year over year. In addition to our research and development expense, in fiscal 2019 and fiscal 2020, we invested $14.9 million and $22.0 million, respectively, to enhance our iFIT platform, develop new products, content and features and improve our platform infrastructure which was capitalized in each of those years.

General and Administrative


	Year Ended May 31,						Change
(dollars in thousands)	2019			2020			$		%
General and administrative	$	48,892		$	77,105		$	28,213		57.7	%
As a percentage of total revenue		7.0	%		9.1	%

The $28.2 million increase in general and administrative expense during fiscal 2020 was primarily due to a $18.5 million increase in stock-based compensation and to a lesser extent increases in personnel costs and product liability insurance costs. As a percentage of revenue, general and administrative expense increased 2.1% which was mainly due to the increase in stock-based compensation expense in fiscal 2020.

Other Expense (Income)


	Year Ended May 31,					Change
(dollars in thousands)	2019			2020		$		%
Interest expense	$	15,368		$	15,496	$	128		0.8	%
Change in fair value of warrant liabilities		—			9,396		9,396		—
Change in fair value of embedded derivative liabilities		—			20,200		20,200		—
Gain on the sale of a subsidiary		(111,800	)		—		111,800		(100.0	)
Other expense (income), net		(2,000	)		1,228		3,228		(161.4	)

Total other expense (income), net	$	(98,432	)	$	46,320	$	144,752		(147.1	)%

The $144.8 million increase in total other expense (income), net in fiscal 2020 was primarily due to the $9.4 million and $20.2 million in losses on the changes in fair value of the warrant liability and embedded derivative liability, respectively, recognized in fiscal 2020 and the $111.8 million gain on the sale of subsidiary, which was completed during fiscal 2019.

After the initial public offering, we do not expect to recognize fair value changes in the embedded derivative liabilities. An initial public offering constitutes a mandatory prepayment event under the terms of the 2019 Note, at which time the Company will redeem the 2019 Note, including the underlying derivative instrument. Additionally, the classification of the 2019 Warrant will be reassessed and it will no longer be required to be remeasured at fair value as the 2019 Warrant will be net share settled in connection with the offering.

Provision for Income Taxes


	Year Ended May 31,						Change
(dollars in thousands)	2019			2020			$			%
Provision for income taxes	$	20,733		$	2,469		$	(18,264	)		(88.1	)%
As a percentage of total revenue		3.0	%		0.3	%

Our effective tax rate was 26.8% and (2.5)% for fiscal 2019 and 2020, respectively. The decrease was mainly due to the gain from the sale of our subsidiary that occurred during fiscal 2019.

113

Quarterly Results of Operations Data

The following table sets forth our unaudited quarterly consolidated statements of operations data for each of the eight quarters in the period ended May 31, 2021, as well as the percentage that each line item represents of our total revenue for each quarter presented. In the opinion of management, the consolidated statements of operations data set forth below has been prepared on a basis consistent with our audited consolidated financial statements included elsewhere in this prospectus and contain all adjustments, consisting only of normal and recurring adjustments, necessary for a fair statement of the results of operations for these periods. Our historical results are not necessarily indicative of the results that may be expected in the future, and results for any quarter are not necessarily indicative of results to be expected for a full year or any other period. The following quarterly results of operations data should be read in conjunction with our financial statements and the related notes included elsewhere in this prospectus.


	Three Months Ended
	August 31, 2019			November 30, 2019			February 29, 2020			May 31, 2020			August 31, 2020			November 30, 2020			February 28, 2021			May 31, 2021
	(in thousands)
Revenue:
Interactive fitness products	$	120,380		$	156,055		$	221,556		$	229,712		$	261,730		$	372,469		$	503,775		$	377,314
Subscription		23,927			26,375			26,164			47,511			44,593			53,152			64,688			67,335

Total revenue		144,307			182,430			247,720			277,223			306,323			425,621			568,463			444,649

Cost of revenue:
Interactive fitness products		91,578			116,550			146,148			149,077			157,381			241,918			321,965			268,609
Subscription		3,905			4,548			5,311			5,598			4,776			5,726			8,583			9,895

Total cost of revenue		95,483			121,098			151,459			154,675			162,157			247,644			330,548			278,504

Gross profit		48,824			61,332			96,261			122,548			144,166			177,977			237,915			166,145
Operating expenses:
Sales and marketing		37,887			54,235			102,129			84,241			98,856			117,038			221,571			181,966
Research and development		4,986			5,541			6,013			6,582			6,198			7,935			10,934			11,207
General and administrative		14,437			17,238			14,421			31,009			15,084			63,210			20,632			99,206

Total operating expenses		57,310			77,014			122,563			121,832			120,138			188,183			253,137			292,379

Income (loss) from operations		(8,486	)		(15,682	)		(26,302	)		716			24,028			(10,206	)		(15,222	)		(126,234	)
Other expense (income):
Total other expense (income), net		2,338			2,682			9,745			31,555			68,912			278,518			37,268			2,391

Loss before provision for income taxes		(10,824	)		(18,364	)		(36,047	)		(30,839	)		(44,884	)		(288,724	)		(52,490	)		(128,625	)
Provision (benefit) for income taxes		(115	)		236			41			2,307			(101	)		(2	)		346			1,740

Net loss	$	(10,709	)	$	(18,600	)	$	(36,088	)	$	(33,146	)	$	(44,783	)	$	(288,722	)	$	(52,836	)	$	(130,365	)

114

The following table sets forth our results of operations for each of the eight quarters in the period ended May 31, 2021 as a percentage of our total revenue for those periods:


	Three Months Ended
	August 31, 2019			November 30, 2019			February 29, 2020			May 31, 2020			August 31, 2020			November 30, 2020			February 28, 2021			May 31, 2021
	(as a percentage of total revenue)
Revenue:
Interactive fitness products		83.4	%		85.5	%		89.4	%		82.9	%		85.4	%		87.5	%		88.6	%		84.9	%
Subscription		16.6			14.5			10.6			17.1			14.6			12.5			11.4			15.1

Total revenue		100.0			100.0			100.0			100.0			100.0			100.0			100.0			100.0

Cost of revenue:
Interactive fitness equipment		63.5			63.9			59.0			53.8			51.4			56.8			56.6			60.4
Subscription		2.7			2.5			2.1			2.0			1.6			1.3			1.5			2.2

Total cost of revenue		66.2			66.4			61.1			55.8			52.9			58.2			58.1			62.6

Gross profit		33.8			33.6			38.9			44.2			47.1			41.8			41.9			37.4
Operating expenses:
Selling and marketing		26.3			29.7			41.2			30.4			32.3			27.5			39.0			40.9
Research and development		3.5			3.0			2.4			2.4			2.0			1.9			1.9			2.5
General and administrative		10.0			9.4			5.8			11.2			4.9			14.9			3.6			22.3

Total operating expenses		39.7			42.2			49.5			43.9			39.2			44.2			44.5			65.8

Loss from operations		(5.9	)		(8.6	)		(10.6	)		0.3			7.8			(2.4	)		(2.7	)		(28.4	)

Other expense (income):
Total other expense (income), net		1.6			1.5			3.9			11.4			22.5			65.4			6.6			0.5
Income (loss) before income taxes		(7.5	)		(10.1	)		(14.6	)		(11.1	)		(14.7	)		(67.8	)		(9.2	)		(28.9	)
Provision (benefit) for income taxes		(0.1	)		0.1			0.0			0.8			(0.0	)		(0.0	)		0.1			0.4

Net loss		(7.4	)%		(10.2	)%		(14.6	)%		(12.0	)%		(14.6	)%		(67.8	)%		(9.3	)%		(29.3	)%

Quarterly Trends

Revenue

Our quarterly revenue increased in each of the periods presented when compared to the results of the same quarter in the prior year primarily due to an increase in demand for our Interactive fitness products. However, due to seasonality of our business, we expect our Interactive fitness products revenues to generally decline in the fourth fiscal quarter, relative to the prior quarter, as seasonal demand has historically been strongest during our second and third fiscal quarters. In the fourth fiscal quarter of 2020, we did not experience the typical seasonality as we were partially impacted from the global pandemic.

Our Subscription revenue increased primarily due to the increase in Total Fitness Subscribers and to a lesser extent by the increase in revenue from extended warranties.

115

Cost of Revenue

Interactive Fitness Products cost of revenue has fluctuated in line with Interactive Fitness Products revenue for all periods presented primarily due to costs associated with sales of Interactive Fitness Products.

Subscription cost of revenue has constantly increased in each of the quarters presented with the exception of the first fiscal quarter of 2021 as a result of increased spending in developing iFIT content and features, as well as continued investments in the iFIT platform infrastructure.

Operating Expenses

Sales and marketing expense increased in the second and third quarter of each fiscal year due to an increase in advertising and other marketing programs for the holiday season. During the fourth quarters of fiscal 2020 and 2021, we continued to incur significant marketing expenses to drive brand awareness and to sustain revenue growth. Additionally, sales and marketing expenses have generally increased due to costs related to an increase in salaries and contract labor to support our growth.

Research and development expense has increased primarily due to personnel-related expenses as we have continued to increase our headcount to support product and platform innovation.

General and administrative expense generally increased primarily due to increases in personnel-related expenses and consulting fees. We saw significant increases in general and administrative expense in the fourth quarter of fiscal 2020 and the second and fourth quarters of fiscal 2021 related to stock-based compensation expense associated with loans to management and issuances of equity awards.

Other Expense (Income)

Total other expenses (income) increased and fluctuated starting in fiscal Q3 2020 and throughout fiscal 2021 primarily due to changes in the fair values of the warrants and embedded derivative liabilities associated with our 2019 Note and our Series A and B preferred stock. In fiscal Q2 2021, we recognized a loss of $173.4 million related to the issuance of our Series A preferred stock and 2020 Warrants which significantly increased total other expenses (income) for the period.

Liquidity and Capital Resources

Our operations have been financed primarily through cash flow from operating activities, borrowings under our credit facilities and issuances of the 2019 Notes and the Series A and B preferred stock. As of May 31, 2021, we had cash and cash equivalents of $146.5 million.

We believe our existing cash and cash equivalents and cash flow from operations, along with available borrowings, taking into account the outflows related to the acquisition of Sweat, will be sufficient to meet our working capital and capital expenditure needs for at least the next 12 months. Our future capital requirements may vary materially from those currently planned and will depend on many factors, including our rate of revenue growth, the timing and extent of spending on research and development efforts and other business initiatives, the expansion of sales and marketing activities, the timing of new product introductions, market acceptance of our products and overall economic conditions. We anticipate significant ongoing discretionary strategic investments in marketing and inventory to continue to fuel the business. To the extent that current and anticipated future sources of liquidity are insufficient to fund our future business activities and requirements, we may be required to seek additional equity or debt financing. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, or if we cannot expand our operations or otherwise capitalize on our business opportunities because we lack sufficient capital, our business, results of operations and financial condition would be adversely affected.

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Debt and Preferred Equity

2016 Credit Agreement

On August 3, 2016, our wholly owned subsidiary iFIT Inc. entered into a credit agreement with JP Morgan Chase Bank, N.A. an administrative agent, and a syndicate of financial institutions and institutional lenders (the “2016 Credit Agreement”), which provided for a $175.0 million term loan and a $125.0 million revolving line of credit (the “2016 Revolver”). The term loan and the 2016 Revolver mature on August 3, 2021.

On June 26, 2018, iFIT Inc. fully repaid the outstanding principal amount and accrued but unpaid interest of the term loan for $119.2 million and wrote-off unamortized debt issuance costs of $4.6 million related to the term loan.

As of May 31, 2019, the 2016 Revolver had outstanding borrowings of $102.5 million and an available borrowing capacity of $22.5 million.

2020 Credit Agreement

On April 27, 2020, iFIT Inc. entered into a credit agreement with JP Morgan Chase Bank, N.A. an administrative agent, and a syndicate of the existing lenders of the 2016 Credit Agreement (the “2020 Credit Agreement”), which provided for a $175.0 million revolving line of credit (the “2020 Revolver”) and a letter of credit. The 2020 Revolver matures on April 24, 2024.

As a condition to closing, the 2020 Credit Agreement required the termination of any security interests and guarantees under the 2016 Credit Agreement and thus iFIT Inc. repaid all outstanding borrowings under 2016 Revolver. Management determined the loan restructuring would not constitute a troubled debt restructuring. In addition, as the borrowing capacity for each of the continuing lenders increased under the 2020 Revolver compared to that under the 2016 Revolver, the loan restructuring for these lenders are deemed a debt modification. In connection with the execution of the 2020 Credit Agreement, certain lenders of the 2016 Revolver Loan exited the syndicate under the 2020 Credit Agreement. iFIT Inc. wrote off $1.3 million of unamortized deferred costs attributable to the exit lenders’ 2016 Revolver. iFIT Inc. capitalized $2.1 million new fees paid to the continuing lenders and third-party lenders as deferred financing fees which will be amortized along with the unamortized deferred costs attributable to these continuing lenders over the term of the 2020 Credit Agreement to interest expense on a straight-line basis.

The 2020 Credit Agreement permits the interest rate to be selected at our option at Adjusted LIBOR, Alternative Base (“CDOR”), plus their respective applicable margin. Adjusted LIBOR is the rate for deposits in U.S. Dollars with a maturity of one month. The Alternate Base Rate is the highest of (i) the administrative agent’s “Prime Rate”, (ii) the Federal Funds Effective Rate calculated by Federal Reserve Bank of New York plus 0.5%, and (iii) Adjusted LIBOR plus 1.0%. Canadian Prime Rate is the higher of (i) the PRIMCAN Index rate and (ii) the average rate for 30 day Canadian Dollar-denominated bankers’ acceptances. CDOR Rate is the rate offered on Canadian deposits for the relevant interest period plus 0.1% per annum. Each of the interest rates is subject to a floor. Additionally, the margin is determined based on total leverage ratio. Total leverage ratio is defined as our total indebtedness over consolidated EBITDA as defined under the 2020 Credit Agreement. As of May 31, 2020, the interest rate was 5.5% for borrowings on the 2020 Credit Agreement.

Under the 2020 Credit Agreement, the lenders have a perfected first priority lien on substantially all our tangible and intangible assets. The 2020 Credit Agreement contained financial covenants, including a minimum fixed charge coverage ratio when a triggering event occurs and limitations on additional indebtedness and dividends. As of May 31, 2020, iFIT Inc. was in compliance with all of the debt covenants.

As of May 31, 2020, the 2020 Revolver had no outstanding borrowings and an available borrowing capacity of $80.9 million.

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2021 Credit Agreement

On May 12, 2021, iFIT Inc. entered into a credit agreement with Bank of America, N.A. the administrative agent, and a syndicate of the existing lenders of the 2020 Credit Agreement (the “2021 Credit Agreement”), which provides for a $325.0 million revolving line of credit (the “2021 Revolver”) and a $9.4 million letter of credit. The 2021 Revolver matures on May 12, 2026.

As a condition to closing, the 2021 Credit Agreement required the termination of any security interests and guarantees and the repayment of all outstanding borrowings under the 2020 Credit Agreement.

The 2021 Credit Agreement permits the interest rate to be selected at Icon’s option at the LIBO Rate, Alternate Base Rate, Canadian Prime Rate, or Canadian Dollar Offered Rate (CDOR), plus their respective applicable margin. The LIBO Rate is the published LIBO Rate, as adjusted to reflect applicable statutory reserves prescribed by governmental authorities. The Alternate Base Rate is the higher of (i) the Federal Funds Rate plus 0.50%, (ii) the Published LIBO Rate plus 1.00% and (iii) the Prime Rate. The Canadian Prime Rate is the higher of (i) the variable interest rate of Bank of America, N.A. and (ii) the 1-month CDOR plus 1.00% per annum. The CDOR Rate is the rate of interest per annum equal to the arithmetic average of the rates applicable to Canadian Dollar bankers’ acceptance rate. As of May 31, 2021, the interest rate was 3.4% for borrowings under the 2021 Credit Agreement.

Under the 2021 Credit Agreement, the lenders have a perfected first priority lien on substantially all our tangible and liquid assets. The 2021 Credit Agreement contained financial covenants, including a minimum fixed charge coverage ratio when a triggering event occurs and limitations on additional indebtedness and dividends. As of May 31, 2021, the Company was in compliance with all of its debt covenants.

As of May 31, 2021, the 2021 Revolver had $0.3 million of outstanding borrowings and an available borrowing capacity of $261.3 million. The company used the outstanding borrowings for general business purposes.

2019 Note and 2019 Warrant

Pursuant to a securities purchase agreement, on November 29, 2019, we issued a note for an aggregate principal amount of $200.0 million and a warrant to purchase up to 25,853,840 shares of our common stock (the “2019 Warrant”) to Icon Preferred Holdings, L.P (“Pamplona”). The 2019 Note matures on November 29, 2029. In addition, we reimbursed Pamplona $1.5 million of transaction expenses which were accounted for as a discount on the 2019 Note.

Interest on the 2019 Note accrues at a rate of (i) 7.0% per annum prior to and on November 29, 2026, and (ii) thereafter, 10.0% per annum, payable quarterly in cash in arrears on March 31, June 30, September 30 and December 31 of each year commencing on December 31, 2019. At our election, any interest accrued can be paid in kind. If paid-in-kind (“PIK”) interest is elected, such accrued interest should be added to the unpaid principal amount of the 2019 Note outstanding at such time. The discretionary PIK interest should be recorded at the then fair value of the incremental 2019 Note issued when a PIK interest election is made at the applicable contractual interest payment dates. We elected the PIK interest on each of the interest payment dates since issuing the 2019 Notes and recorded the PIK interest at the fair value of the incremental 2019 Note issued on these dates. As described below, an effective interest rate of the 2019 Note was established at the issuance date and thus any resulting difference between the fair value and such assumed cash flows of the PIK interest is recognized through a corresponding adjustment to the amount of interest cost recognized.

We have the option to prepay, at a premium, all or a portion of the outstanding principal amount of the 2019 Note. Any prepayment must include the portion of the original principal amount being prepaid, plus all PIK interest previously added in respect of such portion of the original principal amount. Additionally, if such principal amount of the 2019 Note to be prepaid plus all cash interest paid in respect of the portion to be prepaid

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is less than 150% of the original principal amount to be prepaid (such difference, the “Make-whole”), then such prepayment shall also include an amount equal to the Make-whole. In connection with the closing of the offering, we expect to repay the 2019 Note with a combination of cash and New Convertible Notes as described herein.

Upon the occurrence of (a) our liquidation or the liquidation of our material subsidiaries, (b) an event of default, (c) a change in control, and (d) our initial public offering, we must redeem the 2019 Note at an amount equal to the principal amount to be prepaid plus the Make-whole if applicable. Such redemption features are determined to be accounted for as embedded derivatives pursuant to ASC 815, Derivatives and Hedging. The embedded derivatives were recognized at a fair value of $11.4 million at inception and are subsequently remeasured at fair value with changes in fair value recorded in the consolidated statements of operations and comprehensive income (loss). The recognition of the embedded derivatives at inception created a discount on the 2019 Note. The fair value of the embedded derivative is $31.6 million and $67.2 million as of May 31, 2020 and May 31, 2021, respectively. The $20.2 million and $35.6 million changes in fair value during fiscal 2020 and 2021, respectively, were recorded in change in fair value of embedded derivative liabilities in the consolidated statements of operations and comprehensive income (loss).

The initial recognition of the 2019 Warrant also created a discount on the 2019 Note. The debt discount of $57.9 million (i.e., the sum of $1.5 million transaction costs reimbursed to the lender, the $11.4 million fair value of the embedded derivatives at inception, and the $45.0 million fair value of the 2019 Warrant at inception) and issuance costs of $7.3 million allocated to the 2019 Note are amortized to interest expense using the effective interest method over the term of the 2019 Note. Additionally, the redemption feature of the 2019 Warrant will not survive the initial public offering of the Company. The effective interest rate of the 2019 Note was established at the issuance date incorporating assumed cash flows from the PIK interest.

As of May 31, 2020 and May 31, 2021, the effective interest rate on the 2019 Note was 11.9%.

The Company issued the 2019 Warrant to purchase up to 25,853,840 shares of the Company’s common stock at an exercise price of $0.001 per share. In the event the 2019 Warrant is exercised on or prior to November 29, 2024, the warrant holder shall be entitled to receive 19,676,110 shares of the Company’s common stock. Otherwise, the underlying shares of the warrant shall increase on November 30, 2024 and each six month thereafter at an amount equal to (i) 1,544,432 multiplied by (ii) the outstanding principal amount of the 2019 Note divided by $200.0 million, until the underlying shares of the warrant equal to 25,853,840. If the Company makes or declares a dividend or any other distribution to its common stockholders, the holder shall receive such dividend or distribution that it would have been entitled to had the warrant been exercised in full into shares on the date of such event. If, at any time prior to an initial public offering, the Company makes a dilutive issuance of common stock or options to certain members of management or holders of the Company’s common equity, Pamplona and L Catterton will receive grants of additional warrant shares to keep their percentage of ownership in the Company consistent with the ownership percentage prior to the dilutive issuance.

The 2019 Warrant grants the holder the right to require the Company to purchase the warrant and the shares issued pursuant to the exercise of the warrant for cash at fair market value from November 29, 2026 to January 28, 2027. Upon a liquidity event, including an initial public offering, the repurchase right will expire. The warrant represents an obligation that is indexed to an obligation to repurchase the shares of the Company’s common stock, and the Company is required to transfer cash. As such, the 2019 Warrant is classified as a liability. The warrant was recorded at fair value at inception and is subsequently remeasured at fair value, with changes in fair value recorded in earnings. The initial fair value of the warrant is estimated to be $45.0 million, which created a discount on the 2019 Note. The discount is amortized using the effective interest method as discussed above. The fair value of the warrant was $54.3 million and $183.8 million as of May 31, 2020 and May 31, 2021, respectively. The $9.4 million and $129.5 million change in fair value of the warrant liability during fiscal 2020 and 2021, respectively, was recorded in changes in fair value of warrant liabilities in the consolidated statements of operations and comprehensive income (loss).

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Upon completion of this offering, we will issue in aggregate approximately 19,861,454 shares of our Class A common stock to net settle on a cashless basis the 2019 Warrant (calculated based on the midpoint of the range; the actual number of shares will be calculated based on the net cashless settlement of warrants to purchase 20,022,245 shares, after giving effect to certain anti-dilution adjustments, using the public offering price of the Class A common stock).

Series A Preferred Stock and 2020 Warrants

On October 2, 2020, pursuant to its amended articles of incorporation, we authorized and issued 210 shares of preferred stock (the “Series A”) pursuant to a securities purchase agreement and warrants to purchase up to 18,899,244 shares of our common stock (the “2020 Warrants”) to LC9 Connected Holdings, LP, (together with its managing entities, “L Catterton”), a new investor in the Company, and Pamplona for gross proceeds of $210.0 million (the “2020 Transactions”). We paid Pamplona a $4.8 million advisory fee and reimbursed L Catterton and Pamplona $1.3 million and $0.2 million, respectively, of related transaction expenses, which were included in the loss on issuance (see below). As such, we received $203.8 million net proceeds from the 2020 Transactions.

In addition, we incurred $6.0 million in other transaction and legal fees, of which $3.9 million and $2.1 million were allocated to the Series A preferred stock and 2020 Warrants, respectively, based on their relative fair values. The amount allocated to the Series A preferred stock is presented as a direct deduction from its carrying value in the consolidated balance sheets. The amount allocated to the 2020 Warrants was expensed immediately as such warrants are liability-classified and recognized at fair value.

Prior to and in preference to any declaration or payment of any dividend on our common shares, on a pari passu basis, the holders of the Series A preferred stock are entitled to receive cumulative dividends per share at the rate per annum equal to (i) 7% from October 2, 2020 until November 29, 2026 and (ii) 10% thereafter.

Upon any liquidation, dissolution or winding up of the Company, each holder of the Series A preferred stock shall be entitled to be paid, before any distribution or payment is made upon any of our common stock, for each outstanding share of Series A preferred stock, an amount in cash equal to a mandatory payment price which is the greater of (i) $1.0 million plus all accrued but unpaid dividends and (ii) $1.5 million. As of May 31, 2021, the aggregate liquidation preference of the Series A preferred stock was $315.0 million.

The shares of the Series A preferred stock are not convertible into shares of our common stock and they do not have any voting rights.

On November 29, 2030, we are required to redeem the Series A preferred stock at the mandatory payment price, and thus, the Series A preferred stock is accounted for as a mandatorily redeemable financial instrument liability in the consolidated balance sheets. The Series A preferred stock was recorded at fair value at inception and subsequently measured at the present value of the redemption amount to be paid at the mandatory redemption date of November 29, 2030, accruing interest using the rate implicit at inception. The fair value of the Series A preferred stock at inception, including the value of the embedded redemption features, was determined to be $246.4 million.

Upon the occurrence of (a) any liquidation of the Company or its material subsidiaries, (b) an initial public offering of the Company, (c) a change in control, or (d) an event of default, we are required to redeem the Series A preferred stock at the mandatory payment price. However, in the event of the consummation of our initial public offering on or prior to September 30, 2021, we shall redeem the Series A preferred stock at a price equal to $1.25 million per share (the “Minimum IPO Return”) and the Minimum IPO Return shall increase gradually on October 1, 2021 and on each six months thereafter; provided further that in no event shall the Minimum IPO Return exceed $1.5 million per share. Upon our initial public offering, the Minimum IPO Return is to be paid as follows per share: (i) an amount equal to (A) at our option, $0.6 million to $1.0 million paid in cash (provided that, from and after January 1, 2022, we no longer have such option, and such amount shall be equal to $0.6 million) plus (B) at L Catterton’s option, up to 50% of any increase in the Minimum IPO Return

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above $1.25 million shall be paid in cash; and (ii) the remainder of the Minimum IPO Return shall be paid in a number of our common shares at an amount equal to (x) the amount of such remainder of the Minimum IPO Return, divided by (y) 85% of the price per share of our common stock sold in the initial public offering. In connection with this offering, we expect to repay the Series A preferred stock with New Convertible Notes as described herein. Such a redemption feature is accounted for as an embedded derivative pursuant to ASC 815, Derivatives and Hedging. The embedded derivative was separately recognized as a liability at an estimated fair value of $44.9 million at inception and is subsequently remeasured to fair value with changes in fair value recorded in the consolidated statements of operations and comprehensive income (loss). The recognition of the embedded derivative at inception created a discount on the Series A preferred stock. The fair value of the embedded derivative is $48.6 million as of May 31, 2021.

As a consequence, the Series A preferred stock was recorded at its fair value of $246.4 million net of the bifurcated embedded derivative of $44.9 million and allocated issuance costs of $3.9 million, for a net carrying amount at issuance of $197.6 million. The 2020 Warrants were recorded at their fair value of $130.8 million. The aggregate fair value of the Series A preferred stock and 2020 Warrants was $377.2 million as of the issuance date, which is greater than the $203.8 million net cash proceeds. There were no other rights or privileges identified that require separate accounting as an asset. As a result, the Company recognized a loss for the excess of the aggregate fair value of the Series A preferred stock and the 2020 Warrants over the net cash proceeds, amounting to $173.4 million. One of the driving factors for the Company to enter into the 2020 Transactions was due to the extensive experience the investor has in the consumer health segment and depth of initial public offering experience and relationships. The Company believed that a relationship with L Catterton would greatly enhance the Company’s prospects for an effective exit, potentially via an initial public offering.

On or after October 2, 2023, we have the option to prepay all or any portion of the outstanding shares of Series A preferred stock at a price per share equal to the greater of (i) $1.0 million plus all accrued but unpaid dividends, and (ii) $1.5 million; provided, that we shall not consummate an initial public offering within nine months of any such optional payment.

The difference between the fair value and the initial carrying amount of the Series A preferred stock of $197.6 million, inclusive of the discount of $44.9 million and the issuance costs of $3.9 million allocated to the Series A preferred stock, is amortized through the mandatory redemption date and is recognized as interest expense in the consolidated statements of operations and comprehensive income (loss) using the effective interest method over the term of the Series A preferred stock. As of May 31, 2021, the effective interest rate on Series A preferred stock was 8.73%. For fiscal 2021, the interest expense is $11.7 million, which includes the accruing dividend and amortization of discount and debt issuance costs. As of May 31, 2021, the carrying amount of the Series A preferred stock is $209.3 million.

On October 2, 2020, as part of the 2020 Transaction, the Company issued to L Catterton and Pamplona the 2020 Warrant to purchase up to 17,639,219 and 1,260,026 shares, respectively, of the Company’s common stock at an exercise price of $0.001 per share. The 2020 Warrants are exercised at the holders’ discretion subject to the following vesting conditions. For the 2020 Warrant held by L Catterton, if the warrant is exercised on or prior to November 29, 2024, the number of the underlying shares shall be equal to 11,501,709 shares; otherwise, the underlying shares of the warrant shall increase on November 30, 2024 and each six-months thereafter at an amount equal to (i) 1,534,378 shares plus (ii) 0.49% of any common stock of the Company issued after October 2, 2020, until the underlying shares of the warrant is equal to 5.88% of the sum of (i) 293,410,933 shares plus (ii) certain common stock of the Company issued after October 2, 2020. For the 2020 Warrant held by Pamplona, if the warrant is exercised prior to November 29, 2024, the number of the underlying shares shall be equal to 821,546 shares; otherwise, the underlying shares of the warrant shall increase on November 30, 2024 and each six-months thereafter at an amount equal to (i) 109,620 shares plus (ii) 0.035% of any common stock of the Company issued after October 2, 2020, until the underlying shares of the warrant is equal to 0.42% of the sum of (i) 293,409,005 shares plus (ii) certain common stock of the Company issued after October 2, 2020.

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If the Company makes or declares a dividend or any other distribution to its common shareholders, holders of the 2020 Warrants shall receive such dividend or distribution that they would have been entitled to had the 2020 Warrants been exercised in full into shares on the date of such event. Management determined that the 2020 Warrants, which expire on November 29, 2034, are freestanding financial instruments and participating securities for EPS purposes. The 2020 Transaction agreement also contains anti-dilution provisions with regards to the 2020 Warrants. If, at any time prior to an initial public offering, the Company makes a dilutive issuance of common stock or options to certain members of management or holders of the Company’s common equity, Pamplona and L Catterton will receive grants of additional warrant shares to keep their percentage of ownership in the Company consistent with the ownership percentage prior to the dilutive issuance. These provisions include the Pamplona warrant shares included in the 2019 Warrant in addition to the warrant shares included in the 2020 Warrant.

The holders have the right to require the Company to purchase the 2020 Warrants (or the shares issued pursuant to the exercise of the 2020 Warrants) at their fair value for cash during the period from November 29, 2026 to January 28, 2027. As such, the 2020 Warrants are classified as liabilities in the consolidated balance sheet as of May 31, 2021. The 2020 Warrants were recorded at fair value at inception and are subsequently remeasured at fair value, with changes in fair value recorded in earnings. The initial fair value of the 2020 Warrants was estimated to be $130.8 million and the fair value of the 2020 Warrants was $143.5 million as of May 31, 2021. The $12.7 million change in fair value of the warrant liability during fiscal 2021 was recorded in changes in fair value of warrant liabilities in the consolidated statements of operations and comprehensive income (loss). In connection with this offering, the Company expects that this repurchase right under the 2020 Warrants will be extinguished.

Upon completion of this offering, we will issue in aggregate approximately 12,510,663 shares of our Class A common stock to net settle on a cashless basis the 2020 Warrants (calculated based on the midpoint of the range; the actual number of shares will be calculated based on the net cashless settlement of warrants to purchase 12,611,366 shares, after giving effect to certain anti-dilution adjustments, using the public offering price of the Class A common stock).

Series B Preferred Stock

On March 17, 2021, pursuant to a securities purchase agreement, we issued 25 shares of Series B preferred stock (the “Series B”) to Planet Fitness Holdings, LLC. (“Planet Fitness”) for an aggregate purchase price of $25.0 million.

Dividends shall accrue on the shares of Series B preferred stock at the rate per annum equal to 7.0% on the sum of (i) the liquidation value of each outstanding share of Series B preferred stock, plus (ii) all previously compounded accrued dividends, accruing from the date of issuance. Series B accrued dividends shall accrue daily, whether or not declared, and shall be cumulative, compounding each quarter.

Upon any liquidation, dissolution or winding up of the Company, each holder of Series B preferred stock shall be entitled to be paid, after the distribution or payment is made upon any Series A preferred stock and before any distribution or payment is made upon any common stock of the Company, an amount in cash per share of Series B preferred stock equal to the mandatory payment price, which is the sum of (i) $1 million plus (ii) all accrued but unpaid dividends. As of May 31, 2021, the aggregate liquidation preference of the Series B preferred stock was $25.4 million.

Following the distribution to the Series A and B preferred stock, all of the remaining proceeds available for distribution to stockholders of the Company shall be distributed among the holders of common stock on a pro rata basis.

The shares of Series B preferred stock are not convertible into shares of the Company’s common stock and they do not have any voting rights.

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On March 17, 2026, the Company must redeem the Series B preferred stock in cash at the mandatory payment price, and thus, the Series B preferred stock is accounted for as a mandatorily redeemable financial instrument liability in the consolidated balance sheets. The Series B preferred stock was recorded at fair value at inception and subsequently measured at the present value of the redemption amount to be paid at the mandatory redemption date of March 17, 2026, accruing interest using the rate implicit at inception. The fair value of the Series B preferred stock at inception, including the value of the embedded redemption feature, was determined to be $29.8 million.

Upon the occurrence of (a) any liquidation of the Company or its material subsidiaries, (b) an initial public offering of the Company, (c) a change in control, or (d) the sale of all or substantially all of the assets of the Company and its subsidiaries, the Company must redeem the Series B preferred stock at the mandatory payment price. However, in the event of the consummation of the Company’s initial public offering on or prior to January 1, 2022, the Company shall redeem all outstanding shares of Series B preferred stock at a price per share equal to $1.0 million. Upon the consummation of an IPO on or after January 1, 2022, the Company shall redeem all outstanding shares of Series B preferred stock at the Series B preferred stock mandatory payment price per share. The Company shall pay any amounts to be paid in a number of shares issued in such an IPO equal to (x) the dollar value of such applicable payment amount, divided by (y) the public offering price per share of these shares multiplied by 80%. Such a redemption feature is accounted for as an embedded derivative pursuant to ASC 815, Derivatives and Hedging. The embedded derivative was separately recognized as a liability at a fair value of $5.2 million at inception and is subsequently remeasured at fair value with changes in fair value recorded in the consolidated statements of operations and comprehensive income (loss). The recognition of the embedded derivative at inception created a discount on the Series B preferred stock. The fair value of the embedded derivative is $5.2 million as of May 31, 2021.

The Series B preferred stock was recorded at its fair value of $29.8 million, net of the bifurcated derivative liability of $5.2 million and issuance costs of $0.2 million, for a net carrying amount at issuance of $24.4 million. The fair value of the series B preferred stock was greater than the cash proceeds. To date there has been immaterial revenue from Planet Fitness and there were no other rights or privileges identified that require separate accounting as an asset. As a result, the Company recognized a loss for the excess of the fair value of the Series B preferred stock of $29.8 million over the cash proceeds of $25.0 million, amounting to $4.8 million, which is included in loss on issuance of mandatorily redeemable preferred stock in the consolidated statements of operations and comprehensive income (loss). The Company issued the Series B preferred stock with the goal of expanding its collaborative arrangement with Planet Fitness, an established and recognizable brand within the fitness community with whom the Company has worked with in the past, as well as providing the Company with added liquidity in anticipation of growth prior to a potential initial public offering.

On or after March 17, 2024, the Company has the option to prepay all or any portion of the outstanding shares of Series B preferred stock at a price per share equal to the mandatory payment price.

The difference between the fair value and the initial carrying amount of the Series B preferred stock of $24.4 million, inclusive of the discount of $5.2 million and the issuance costs of $0.2 million of the Series B preferred stock, is amortized through the mandatory redemption date and is recognized as interest expense in the consolidated statements of operations and comprehensive income (loss) using the effective interest method over the term of the Series B preferred stock. As of May 31, 2021, the effective interest rate on Series B preferred stock was 7.45%. For fiscal 2021, the interest expense was $0.4 million, which includes the accruing dividend and amortization of discount and debt issuance costs. As of May 31, 2021, the carrying amount of the Series B preferred stock is $24.8 million.

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Cash Flows


	Year Ended May 31,
	2019		2020			2021
	(in thousands)
Cash and cash equivalents, beginning of period	$	18,948	$	23,771		$	100,321
Cash and cash equivalents, end of period		23,771		100,321			146,453
Net cash provided by (used in)
Operating activities		16,032		27,887			(13,883	)
Investing activities		113,178		(26,419	)		(82,181	)

iFit Health & Fitness Inc S-1/A