F45 Training Holdings Inc., Austin, Texas, reaffirmed on Aug. 15 that 2022 won’t be as rosy as it initially anticipated. Three weeks after announcing restructuring that included corporate layoffs of 110 people and the departure of its CEO, F45 Training released its second quarter 2022 financials and shared that it is reaffirming projections that full-year revenue will be between $120 million and $130 million, compared to the prior guidance of $255 million to $275 million. This compares to 2021 revenue of $134 million and 2020 revenue of $82.3 million.
The company also projects its full-year adjusted EBITDA will be between $25 million and $30 million, compared to the prior guidance of $90 million to $100 million. Its 2021 adjusted EBITDA was $52 million.
Still, the company’s second quarter 2022 revenue of $30 million was 12 percent higher than its second quarter 2021 revenue of $26.8 million.
However, franchise revenue decreased $1.5 million, or 7 percent, to $19.1 million from $20.6 million in the prior year period. The decrease in franchise revenue was driven by higher franchise revenues in second quarter 2021 due to a cumulative catch up of $3.5 million related to a change in estimates as disclosed previously by the company.
Despite the decline in franchise revenue, equipment and merchandise revenue increased $4.6 million, or 73 percent, to $10.9 million from $6.3 million in the prior year period. The increase in equipment and merchandise revenue was driven by the delivery of approximately 102 equipment world packs during the quarter. In February, the company announced it had increased its purchase of equipment packs to support expected significant global franchisee demand, noting it would have approximately 1,200 equipment world packs secured for delivery during 2022.
Adjusted EBITDA was $(7.3) million, compared to $10.7 million in the same period last year.
Net loss was $34.9 million compared to net loss of $30.5 million in the second quarter last year.
Gross profit decreased $1.9 million, or 9 percent, to $19.7 million from $21.6 million as compared to the prior year period. Gross profit margin of 65.5 percent represented a decrease from 80.6 percent during the prior year period.
Selling, general and administrative (SG&A) expenses were $52.8 million, compared to $18.6 million in the second quarter last year. The increase in SG&A expense was primarily due to an increase in non-recurring legal and transaction-related costs, and higher headcount and marketing expenditures, according to the company.
Same-store sales increased 6 percent globally and 20 percent in the United States. System-wide sales increased 23 percent globally to $127.1 million (a record for the company) and 44 percent in the United States to $58.1 million.
System-wide visits increased 5 percent globally to 7.3 million and 15 percent in the United States to 3.3 million.
F45 had 92 net initial studio openings in the quarter, bringing its total studio count to 1,958. However, net franchises sold totaled (173), which was impacted by terminations due to the unavailability of previously announced franchise financing facilities.
Ben Coates, interim CEO of F45, said he was pleased with the performance of the company, highlighting the same-store sales growth and the system-wide sales number.
Coates, who has been a member of the F45 board since August 2021, is stepping in as CEO while the board searches for a new CEO and chairman of the board after Adam Gilchrist, who founded F45 in 2013, stepped down in late July. He continues as a non-employee director on the board.
The company has implemented a strategic reorganization and cost reduction plan to align it more closely with macroeconomic conditions and current business trends, Coates said.
“We are confident they are the appropriate and prudent steps to prioritize profitability and cash flow generation over the near term and position F45 for strong, sustainable growth over the long term,” he said.
More 2022 Guidance
F45 anticipates new franchises sold to be between 350 and 450, initial studio openings of between 350 and 450.
The guidance assumes that the $250 million of growth capital provided by two previously announced franchise financing facilities, which F45 had arranged for franchisees to open additional studios, will not be available despite strong demand from franchisees.
The company withdrew its full-year free cash flow guidance.
F45 Training began trading on the New York Stock Exchange under the symbol FXLV on July 15, 2021. Its 52-week high has been $16.44. The day after releasing its financials, its stock opened at $1.91 per share.
The company is backed by investors such as actor Mark Wahlberg and athlete David Beckham, among others.
Update: On Aug. 17, 2022, the F45 Training board of directors approved a base salary of $1.5 million for Coates. In addition, he will be granted an option to purchase one million shares of common stock at a price equal to the closing price on August 17, 2022.