F45 Training Misses Earnings, Pauses Expansion

F45 Training

F45 Training reported Q2’22 earnings on August 15. The global HIIT studio franchisor reset expectations as liquidity problems abruptly ended its hyper-expansion strategy.

By the numbers: 

  • Q2 revenue increased 12% to $30M, with systemwide sales at $127.1M, a record high.
  • Q2 net loss was $34.9M, compared to a $30.5M loss in Q2’21 and $5.9M gain in Q2’20.
  • During the quarter, it sold 173 franchise licenses and opened 92 studios.

Between the lines: This news follows the departure of CEO Adam Gilchrist, slashed FY22 outlook, and layoffs affecting 45% of its global corporate workforce.

In trouble but not sunk, interim CEO Ben Coates is adamant that the concept’s high-margin franchise operation can still be profitable.

“Consumer demand for F45 remains strong, and we continue to deliver results to our franchisees, our members, and the communities we serve.

But, with operational challenges ahead, expect F45 to lose its title of “world’s fastest-growing fitness franchise.”

Credit freeze. F45 had previously secured $250M in credit financing, earmarked to support the development of new franchises in the US. The company now says that funding won’t be available.

Another credit facility, $150M from Fortress Credit Corp. this May, was supposed to bolster a loan program for military veteran franchisees in the US. That agreement has now been voided.

Core work. Coates believes F45 will once again attain positive free cash flow starting in Q4’22. But, to get there, they’re making some sacrifices to focus on their core brand.

Until they can prove profitability, F45 will shelve non-core channels and nascent concepts like FS8, Malibu Crew, and its concepts designed for golf clubs and hospitality.

Looking ahead: F45 is popular in boutique fitness, and its US foot traffic alone grew 15% to reach 3.3M. But, achieving  23K worldwide studios—a long-term goal detailed just one year ago—feels out of reach for now.

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