Interactive Strength Inc. (Nasdaq: TRNR) Reports Second Quarter 2024 Results

Net Loss and Earnings per Diluted Share of $10.6 million and $17.48

Adjusted EBITDA was a $2.9 million loss, a $2.8 million improvement versus second quarter of 2023

The Company expects to generate between $2.0 million and $2.5 million in revenue in the third quarter of 2024

AUSTIN, TX / ACCESSWIRE / August 14, 2024 / Interactive Strength Inc. (Nasdaq:TRNR) ("TRNR" or the "Company"), maker of innovative specialty fitness equipment under the CLMBR and FORME brands, today announced its financial results for the second quarter of 2024.

The Company incurred a net loss of $10.6 million for the second quarter of 2024, or a loss of $17.48 per diluted share, as compared with a net loss of $13.6 million, or a loss of $40.78 per diluted share for the same period in 2023.

Adjusted EBITDA, a non-GAAP financial measure, was a $2.9 million loss for the quarter. Adjusted EBITDA for the second quarter reflects $2.9 million of non-cash stock-based compensation. For more information regarding the non-GAAP financial measures discussed in this press release, please see "Non-GAAP Financial Measures" and "Reconciliation of GAAP to Non-GAAP Financial Measures" below.

Trent Ward, Co-Founder and CEO of TRNR, said: "We have made progress towards our highest priority of achieving run-rate adjusted EBITDA profitability, with an improvement of $0.6 million as compared to the first quarter. We believe that we will be able to achieve this milestone in the near-term, though we do not expect to be able to accomplish this until 2025 due to a slower ramp in revenue for CLMBR. We had previously hoped that we might be able to achieve this as early as the fourth quarter of this year."

"The second quarter was our first full quarter with CLMBR and we were able to more fully immerse ourselves in the business," Mr. Ward continued. "As a result of thorough reliability testing, we determined that the longevity of a few CLMBR components would benefit from being upgraded and we experienced delays in shipping product, and therefore generating revenue, to customers as the improved components were designed and produced. We have been very pleased with the durability and performance of the new components and have seen great results in the lab and in the field. The specifications of commercial users are more stringent than consumers and our partnership with WOODWAY has enabled us to ensure that CLMBR exceeds those expectations."

Pilots and Flagship Orders
During the quarter, the Company announced successful pilots with two major fitness center operators, which are both expected to lead to additional orders in the future. Crunch Fitness successfully completed a multi-month group fitness pilot in its West Hollywood location and purchased 13 CLMBRs. CLMBR has earned Approved Vendor Partner status from Crunch Fitness and was invited to exhibit at the Crunch Franchise Convention in July. Crunch Fitness is considering additional locations for future CLMBR group fitness pilots in advance of potentially rolling out across the Crunch Fitness network. Crunch Fitness is expected to have 500 locations by the end of 2024 and 600 locations by the end of 2025.

Gold's Gym SoCal successfully completed a multi-location CLMBR pilot and placed an order to install two CLMBRs in each of the group's 23 locations. It is expected that these installations will occur during the third quarter. Following that success, Gold's Gym purchased six CLMBRs to install in three of the brand's 58 locations in Texas. Gold's Gym has more than 600 locations and the Company is focused on further penetrating the Gold's Gym network.

International Opportunity
The Company has announced significant initial orders with distributors in Germany, the world's largest fitness market outside the United States, and in the Gulf-region, one of the world's fastest growing economic regions. The Company has shared previously that it expects to sell to at least ten international distributors or key accounts this year, and that the international sales opportunity is expected to be similar in size to the opportunity in the United States.

The Company expects to receive the required certifications to deliver to European countries in the third quarter and believes that achieving that certification will allow distributors to fulfill the demand indications that were received at IHRSA and FIBO, the two largest fitness equipment shows in the world, earlier this year. Europe has some of the largest fitness markets in the world after the United States and it is expected that there will be strong demand for CLMBRs.

Outlook
Based on deliveries in the quarter so far and the current order book, the Company expects to generate between $2.0 million and $2.5 million in revenue during the third quarter. The major driver of the range in expected revenue is whether orders to customers in Europe are delivered in the third quarter or fourth quarter as determined by the timing of receiving the required certifications.

Given the slower ramp for CLMBR after the February acquisition of the business, the Company does not expect to achieve its previous revenue and profitability guidance until 2025 and will provide updated guidance when the timing is more certain. Consequently, the earn-out that was agreed with the sellers is unlikely to be earned and the liability has been written down.

Nasdaq Compliance
As shared on August 12^th, the Company won its appeal regarding deficiency with Listing Rule 5550(b)(1) (the "Equity Rule"), and the Nasdaq Hearings Panel has granted the Company's request for continued listing on the Nasdaq Stock Market.

The Stockholder's Equity for the period ended June 30 was reported as $0.4 million. The Company closed an equity offering of $4.0 million on July 2, which indicates that the Stockholder's Equity would have been in excess of the required $2.5 million on a pro forma basis. The Company expects to be in compliance with the Equity Rule when its third quarter earnings are reported in November, driven by expected further conversions of debt to equity. These conversions are in progress and are expected to be similar to the conversions that were agreed between the Company and its lenders in the second quarter.

TRNR Investor Contact
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TRNR Media Contact
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About Interactive Strength Inc.

Interactive Strength Inc. produces innovative specialty fitness equipment and digital fitness services under two main brands: 1) CLMBR and 2) FORME. Interactive Strength Inc. is listed on NASDAQ (symbol: TRNR).

CLMBR is a vertical climbing machine that offers an efficient and effective full-body strength and cardio workout. CLMBR's design is compact and easy to move - making it perfect for commercial or in-home use. With its low impact and ergonomic movement, CLMBR is safe for most ages and levels of ability and can be found at gyms and fitness studios, hotels, and physical therapy facilities, as well as available for consumers at home. www.clmbr.com.

FORME is a digital fitness platform that combines premium smart home gyms with live virtual personal training and coaching to deliver an immersive experience and better outcomes for both consumers and trainers. FORME delivers an immersive and dynamic at-home fitness experience through two connected hardware products: 1. The FORME Studio (fitness mirror) and 2. The FORME Studio Lift (fitness mirror and cable-based digital resistance). In addition to the company's connected fitness hardware products, FORME offers expert personal training and health coaching in different formats and price points through Video On-Demand, Custom Training, and Live 1:1 virtual personal training. www.formelife.com.

Channels for Disclosure of Information

In compliance with disclosure obligations under Regulation FD, we announce material information to the public through a variety of means, including filings with the Securities and Exchange Commission ("SEC"), press releases, company blog posts, public conference calls, and webcasts, as well as via our investor relations website. Any updates to the list of disclosure channels through which we may announce information will be posted on the investor relations page on our website. The inclusion of our website address or the address of any third-party sites in this press release are intended as inactive textual references only.

Non-GAAP Financial Measures

In addition to our results determined in accordance with accounting principles generally accepted in the United States, or GAAP, we believe the following non-GAAP financial measures are useful in evaluating our operating performance.

The Company's non-GAAP financial measure in this press release consist of Adjusted EBITDA, which we define as net (loss) income, adjusted to exclude: other expense (income), net; income tax expense (benefit); depreciation and amortization expense; stock-based compensation expense; loss on debt extinguishment; vendor settlements; transaction related expenses; and IPO readiness costs and expenses.

The Company believes the above adjusted financial measures help facilitate analysis of operating performance and the operating leverage in our business. 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 for the following reasons:

• Adjusted EBITDA is widely used by investors and securities analysts to measure a company's operating performance without regard to items such as stock-based compensation expense, depreciation and amortization expense, other expense (income), net, and provision for income taxes that can vary substantially from company to company depending upon their financing, capital structures, and the method by which assets were acquired;

• Our management uses Adjusted EBITDA in conjunction with financial measures prepared in accordance with 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; and

• Adjusted EBITDA provides consistency and comparability with our past financial performance, facilitate period-to-period comparisons of our core operating results, and may also facilitate comparisons with other peer companies, many of which use similar non-GAAP financial measures to supplement their GAAP results.

Our use of Adjusted EBITDA, or any other non-GAAP financial measures we may use in the future, is presented for supplemental informational purposes only and should not be considered as a substitute for, or in isolation from, our financial results presented in accordance with GAAP. Further, these non-GAAP financial measures have limitations as analytical tools. Some of these limitations are, or may in the future be, as follows:

• Although depreciation and amortization expense are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;

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

• Adjusted EBITDA does not reflect: (1) changes in, or cash requirements for, our working capital needs; (2) interest expense, or the cash requirements necessary to service interest or principal payments on our debt, which reduces cash available to us; or (3) tax payments that may represent a reduction in cash available to us;

• Adjusted EBITDA does not reflect impairment charges for fixed assets and capitalized content, and gains (losses) on disposals for fixed assets;

• Adjusted EBITDA does not reflect gains associated with debt extinguishments.

• Adjusted EBITDA does not reflect gains associated with vendor settlements.

• Adjusted EBITDA does not reflect IPO readiness costs and expenses that do not qualify as equity issuance costs.

• Adjusted EBITDA does not reflect transaction related expenses from CLMBR acquisition.

• Adjusted EBITDA does not reflect non cash fair value gains (losses) on convertible notes, warrants and unrealized currency gains (losses).

• Adjusted EBITDA does not reflect expenses related to the Asset Purchase Agreement and potential acquisition;

Further, the non-GAAP financial measures presented may not be comparable to similarly titled measures reported by other companies due to differences in the way that these measures are calculated. For example, the expenses and other items that we exclude in our calculation of Adjusted EBITDA may differ from the expenses and other items, if any, that other companies may exclude from Adjusted EBITDA when they report their operating results. Because companies in our industry may calculate such measures differently than we do, their usefulness as comparative measures is limited. Because of these limitations, Adjusted EBITDA should be considered along with other operating and financial performance measures presented in accordance with GAAP.

Cautionary Statement Regarding Forward-Looking Statements

This release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. In some cases, forward-looking statements can be identified by the use of forward-looking terms such as "anticipate," "estimate," "believe," "continue," "could," "intend," "may," "plan," "potential," "predict," "should," "will," "expect," "objective," "projection," "forecast," "goal," "guidance," "outlook," "effort," "target," "trajectory" or the negative of these terms or other comparable terms. However, the absence of these words does not mean that the statements are not forward-looking. Forward-looking statements include, but are not limited to, statements regarding: the expectations to receive the required certifications to deliver to European countries and that achieving that certification will allow distributors to fulfill the demand indications, statements regarding that Europe has some of the largest fitness markets in the world after the United States and the expectation that there will be strong demand for CLMBRs, the expectations to generate revenue projections during the third quarter based on expected deliveries, the Company's expectations and its belief that the Company to will potentially reach profitability in 2025, the Company's belief that the conversion of liabilities to equity will improve the financial position and belief the Company will be in compliance with the Equity Rule when its third quarter earnings are reported in November, the utility of non-GAAP financial measures; and the anticipated features and benefits of our product and service offerings. These forward-looking statements are subject to risks and uncertainties which may cause actual results to differ materially from those expressed or implied in such forward-looking statements. These risk and uncertainties include, but are not limited to, the following: our ability to achieve or maintain profitability; our future capital needs and ability to obtain additional financing to fund our operations; our ability to continue as a "going concern"; the growth rate, if any, of our business and revenue and our ability to manage any such growth; risks related to our subscription or any future revenue model; our limited operating history; our ability to compete successfully; fluctuations in our operating results and factors affecting the same; our reliance on sales of our Forme Studio equipment and CLMBR equipment; our ability to sustain competitive pricing levels; the growth rate, if any, of our target markets and our industry; the ability of our customers to obtain financing to purchase our products; our ability to forecast demand for our products and services, anticipate consumer preferences, and manage our inventory; our ability to attract and retain members, personal trainers, health coaches, and fitness instructors; our ability to expand our commercial and corporate wellness business; unforeseen costs and potential liability in connection with our products and services; our dependence on third-party systems and services; and risks related to potential acquisitions, intellectual property, litigation, dependence on key personnel, privacy, cybersecurity, and other regulatory, tax, and accounting matters, and international operations (including the impact of any geopolitical risks such as regional unrest or outbreak of hostilities or war), as well as the risks and uncertainties discussed in our most recently filed periodic reports on Form 10-Q and subsequent filings and as detailed from time to time in our SEC filings. Given these risks and uncertainties, you should not place undue reliance on these forward-looking statements. All forward-looking statements set forth in this release are qualified by these cautionary statements, and there can be no assurance that the actual results or developments anticipated by the Company will be realized or, even if substantially realized, that they will have the expected consequence to or effects on the Company or its business or operations. These forward-looking statements reflect our management's beliefs and views with respect to future events and are based on estimates and assumptions as of the date of this press release. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance, or events and circumstances reflected in the forward-looking statements will be achieved or occur. Accordingly, you should not rely upon forward-looking statements as predictions of future events. Forward-looking statements set forth in this release speak only as of the date hereof, and we do not undertake any obligation to update forward-looking statements to reflect subsequent events or circumstances, changes in expectations or the occurrence of unanticipated events, except to the extent required by law.

INTERACTIVE STRENGTH INC. AND SUBSIDIARIES
KEY PERFORMANCE AND BUSINESS METRICS
(unaudited)
(In thousands)

Adjusted EBTIDA - Please refer to the reconciliation table titled "Reconciliation of Non-GAAP Financial Measures"

With the acquisition of CLMBR, Inc., and the evolution of the FORME business, the Company is now primarily selling to commercial customers ("B2B") and therefore the previously reported Key Operational and Business Metrics associated with a direct to consumer business model ("DTC") are not indicative of the performance of the business. Therefore, the Company will no longer report the following Key Operational and Business Metrics: Households, Members, Annual Recurring Revenue, Average Annualized Recurring Revenue per Household, and Net Dollar Retention Rate.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
INTERACTIVE STRENGTH INC. AND SUBSIDIARIES
CONSOLIDATED RECONCILIATION OF ADJUSTED EBITDA TO NET LOSS
(unaudited)
(In thousands)

(1) Stock-based compensation expense.
(2) Loss on debt extinguishment related to the conversion of promissory notes and senior secured notes to convertible notes.
(3) Gain on forgiveness of debt related to the third-party Content Provider.
(4) Adjusts for IPO- readiness costs and expenses that do not qualify as equity issuance costs.
(5) Transaction costs related to acquisition of CLMBR, Inc.
(6) Please refer to the "Non-GAAP Financial Measures" section.

INTERACTIVE STRENGTH INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(In thousands, except share and per share amounts)

INTERACTIVE STRENGTH INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(In thousands, except share and per share amounts)

INTERACTIVE STRENGTH INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
(In thousands)

SOURCE: Interactive Strength Inc.