F45 Training Holdings Inc. (“F45” or the “Company”) (NYSE:FXLV),
one of the fastest growing fitness franchisors in the United States
based on the number of franchises sold, today announced financial
results for the fiscal second quarter ended June 30, 2021.
“We are very pleased to report strong second quarter results,
underscored by 554 net new franchises sold and 68 net new studio
openings. These fantastic net franchise sales and openings numbers
demonstrate the strength of our brand and the continued interest
F45 has received from investors and entrepreneurs around the world.
We have never been more excited about the opportunity we have to
transform the health and wellness industry as we expand our
footprint and our franchise offerings globally,” said Adam J.
Gilchrist, President, CEO and Chairman of F45.
He continued, “Despite the ongoing uncertainty related to
COVID-19 and recent Delta variant spread, we remain highly
encouraged by the resilience of our franchise network and our
members’ enthusiasm to come back to our studios at a very healthy
pace. We delivered strong same-store sales growth of 126% during
the quarter as global systemwide sales returned to pre-pandemic
levels and our United States segment generated historic systemwide
sales of $41 million in the quarter.
“As the broader fitness industry continues to evolve, I’ve never
been more excited by F45’s unique strategic position and the
opportunity to offer to our growing network of franchisees and
members the world’s best workout,” said Mr. Gilchrist.
Q2 2021 Compared to Q2 2020 Fiscal Highlights
- Total revenue increased 54% to $26.8 million.
- Same-store sales increased 126%.
- Net new studio openings totaled 68 compared to 33.
- Net new franchises sold totaled 554 compared to 100.
- Reported income from operations of $3.1 million compared to
$5.6 million.
- Adjusted EBITDA increased 7% to $10.7 million(1).
(1) Please refer to explanation of non-GAAP financial measure
for Adjusted EBITDA.
Results for the Second Quarter Ended June 30, 2021
Total revenue increased $9.4 million, or 54%, to $26.8
million from $17.5 million as compared to the second quarter last
year.
- Franchise revenue increased $8.5 million, or 71%, to $20.6
million from $12.1 million in the prior year period. The increase
in franchise segment revenue was primarily driven by the increase
in the number of franchises sold, as well as a one-time adjustment
to revenue recognition related to a change in estimates of
approximately $3.0 million. This adjustment is due to a change in
estimates related to a subset of franchise contracts, whereby the
company recognizes revenue on this subset of agreements consistent
with revenue recognition for the remainder of the company’s
franchise agreements.
- Equipment revenue increased $0.9 million, or 16%, to $6.3
million from $5.4 million in the prior year period, driven by
increased sales and deliveries of World Packs.
Gross profit increased to $21.6 million, compared to
$13.2 million in the second quarter of last year. Gross profit
margin was 80.6% for the quarter, a 490 basis points increase from
the same period last year. The gross profit margin improvement was
primarily driven by higher mix of franchise segment revenue.
Selling, general and administrative (“SG&A”) expenses
were $18.6 million, compared to $7.6 million in the second quarter
last year. The increase in SG&A expense was primarily due to
professional services and other one-time expenses as well as
increased brand building investments.
Net loss was $30.5 million, compared to net income of
$5.9 million in the second quarter last year.
Adjusted EBITDA was $10.7 million, compared to $10.0
million in the second quarter last year.
Liquidity and Capital Resources
As of June 30, 2021, the Company has approximately $18.2 million
of cash and cash equivalents, including restricted cash, and $255
million in total debt, net of unamortized financing costs.
In July 2021, the Company closed its initial public offering
(“IPO”) and received net proceeds from the offering of
approximately $279.0 million, after deducting underwriting
discounts and commissions. The Company used the proceeds from the
offering to repay all $190.7 million of outstanding indebtedness,
$25.0 million for the acquisition of certain assets of the Flywheel
indoor cycling business, $2.4 million in cash bonuses to certain
employees, and $2.5 million for expenses incurred with the IPO. In
addition, at the time of the IPO closing, all outstanding shares of
convertible preferred stock and outstanding convertible notes were
converted into common stock.
Additionally, in August 2021, the underwriters in the Company’s
IPO partially exercised an overallotment option to purchase an
additional 307,889 shares of the Company’s common stock from the
Company. The Company received $4.6 million in net proceeds from the
purchase of the additional shares after deducting underwriting
costs and commissions.
In August 2021, the Company entered into an amended and restated
credit agreement (“Credit Agreement”) which amended and restated
the Secured Credit Agreement dated September 18, 2019. The Credit
Agreement provided for a $90.0 million five-year senior secured
revolved facility (“Facility”). The Credit Agreement also provides
that, under certain circumstances, the Company may increase the
aggregate principal amount of revolving commitments by an agreement
amount of up to $35.0 million for a total aggregate commitment of
up to $125.0 million. The proceeds from the Facility will be used
for general corporate purposes.
Financial Outlook
For the year ending December 31, 2021, the Company expects the
following, assuming there is no significant worsening of the
COVID-19 pandemic that materially impacts performance, including
prolonged studio closures or other mandated operational
restrictions:
- Full-year revenue between $132 million and $137 million.
- Full-year new net franchises sold of 800 to 850.
- Full-year new net franchise openings of 220 to 260.
- Adjusted EBITDA between $50 million and $52 million.
Conference Call
A conference call to discuss the Company’s second quarter
results is scheduled for August, 26 2021, at 4:30 P.M. ET. To
participate, please dial 646-904-5544 or 844-200-6205 and use the
passcode 093239. The call is also accessible via webcast at
https://ir.f45training.com/. A recording will be available shortly
after the conclusion of the call. To access the replay, please dial
929-458-6194 and use the passcode 354115. An archive of the webcast
will be available on F45 Training Holdings’ investor relations
website.
About F45
F45 offers consumers functional 45-minute workouts that are
effective, fun and community-driven. F45 utilizes proprietary
technologies: a fitness programming algorithm and a patented
technology-enabled delivery platform that leverages a rich content
database of over 3,900 unique functional training movements to
offer new workouts each day and provide a standardized experience
across the Company’s global footprint.
Non-GAAP Financial Measures
In addition to reporting our financial results in accordance
with U.S. generally accepted accounting principles (“GAAP”), this
press release presents certain other supplemental financial
measures, including Adjusted EBITDA, which is a measurement that is
not calculated in accordance with GAAP. Management believes that
Adjusted EBITDA is useful to management as it allows investors to
evaluate the effectiveness of our business strategies, make
budgeting and capital allocation decisions, and compare our
performance against that of other peer companies using similar
measures. Adjusted EBITDA is defined as net income before interest,
taxes, depreciation and amortization and adjusted to exclude the
impact of sales tax liability, transaction expenses, certain legal
costs and settlements, COVID-19 concessions, growth and new market
development expense as well as certain other items identified as
affecting comparability, when applicable. Adjusted EBITDA
eliminates non-cash depreciation and amortization expense that
results from our capital investments and intangible assets, as well
as income taxes, which may not be comparable with other companies
based on our tax structure. Adjusted EBITDA should be considered in
addition to, and not as a substitute for, net income in accordance
with GAAP as a measure of performance. Other companies may define
Adjusted EBITDA differently and, as a result the Company’s measures
of Adjusted EBITDA, it may not be directly comparable to those of
other companies. A reconciliation of non-GAAP financial measures
used in this press release to their nearest comparable GAAP
financial measures is included at the end of this press
release.
Financial Metrics and Other Data
This press release includes several key financial metrics and
other data used by the Company management in assessing the
Company’s results of operations:
“Initial Studio Openings” means the number of studios that were
determined to be first opened during such period. We classify an
Initial Studio Opening to occur in the first month in which the
studio first generates monthly revenue of at least $4,500. Initial
Studio Openings are not adjusted downward for studios that were
temporarily closed due to the COVID-19 pandemic or otherwise.
“New Franchises Sold” means, for any specific period, the number
of franchises sold during such period using the methodology set
forth below for “Total Franchises Sold.”
“Open Studios” means the number of studios that were open for
business as of a certain date. A studio may be classified as an
Open Studio regardless of whether or not it generated minimum
monthly revenue of $4,500. During the COVID-19 pandemic, a
significant portion of our network was forced to temporarily close,
which reduced the number of Open Studios. As studios re-open in
accordance with state and local regulations, they are reflected in
the Open Studios figures.
“Same store sales” means, for any reporting period, studio-level
revenue generated by a comparable base of franchise studios, which
we define as open studios that have been operating for more than 16
months.
“System-wide Sales” are defined as all payments made to our
studios and includes payment for classes, apparel and other sales
for a given period. We track System-wide Sales as an indication of
the strength of our franchisee network.
“Total franchises sold” represents, as of any specified date,
(i) the total number of signed franchise agreements in place as of
such date for which an establishment fee has been paid and (ii) the
total number of franchises committed in a multi-studio agreement in
place as of such date for which an upfront payment has been made,
in each case that have not been terminated. Each new franchise is
included in the number of total franchises sold from the date on
which such franchise first satisfies the condition in clause (i) or
(ii) above, as applicable. total franchises sold includes franchise
arrangements in all stages of development after signing a franchise
agreement, and includes franchises with open studios. Franchises
are removed from total franchises sold upon termination of the
franchise agreement.
“Total Studios” as of any specified date, means the total
cumulative Initial Studio Openings as of that date less cumulative
permanent studio closures as of that date. Total Studios are not
adjusted downward for studios that were temporarily closed due to
the COVID-19 pandemic or otherwise.
Forward-Looking Statements
F45’s financial outlook and other statements in this press
release that refer to future plans and expectations are
forward-looking statements, within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, that involve a number
of risks and uncertainties. Words such as “may,” “will,” “should,”
“expects,” “plans,” “anticipates,” “could,” “intends,” “target,”
“projects,” “contemplates,” “believes,” “estimates,” “predicts,”
“potential,” or “continue” “or negatives of these words and
variations of such words and similar expressions are intended to
identify such forward-looking statements. Statements that refer to
or are based on estimates, forecasts, projections, uncertain events
or assumptions, including statements relating to F45’s strategy,
total addressable market and market opportunity, financial outlook,
business plans, future macroeconomic conditions, future impacts of
the COVID-19 pandemic, and future products and services, also
identify forward-looking statements. All forward-looking statements
included in this press release are based on management's
expectations as of the date of this press release and, except as
required by law, F45 disclaims any obligation to update these
forward-looking statements to reflect future events or
circumstances.
Forward-looking statements are subject to certain risks,
uncertainties and assumptions relating to factors that could cause
actual results to differ materially from those anticipated in such
statements, including, without limitation, the following: our
dependence on the operational and financial results of, and our
relationships with, our franchisees and the success of their new
and existing studios; our ability to protect our brand and
reputation; our ability to identify, recruit and contract with a
sufficient number of qualified franchisees; our ability to execute
our growth strategy, including through development of new studios
by new and existing franchisees; our ability to manage our growth
and the associated strain on our resources; our ability to
successfully integrate any acquisitions, or realize their
anticipated benefits; the high level of competition in the health
and fitness industry; economic, political and other risks
associated with our international operations; changes to the
industry in which we operate; our reliance on information systems
and our and our franchisees’ ability to properly maintain the
confidentiality and integrity of our data; the occurrence of cyber
incidents or a deficiency in our cybersecurity protocols; our and
our franchisees’ ability to attract and retain members; our and our
franchisees’ ability to identify and secure suitable sites for new
franchise studios; risks related to franchisees generally; our
ability to obtain third-party licenses for the use of music to
supplement our workouts; certain health and safety risks to members
that arise while at our studios; our ability to adequately protect
our intellectual property; risks associated with the use of social
media platforms in our marketing; our ability to obtain and retain
high-profile strategic partnership arrangements; our ability to
comply with existing or future franchise laws and regulations; our
ability to anticipate and satisfy consumer preferences and shifting
views of health and fitness; our business model being susceptible
to litigation; the increased expenses associated with being a
public company; and additional factors discussed in our filings
with the Securities and Exchange Commission (the “SEC”). Further,
many of these factors are, and may continue to be, amplified by the
COVID-19 pandemic. Detailed information regarding these and other
factors that could affect F45’s business and results is included in
F45’s SEC filings, including in the section titled “Risk Factors”
in F45’s Final Prospectus dated July 14, 2021.
F45 Training Holdings
Inc.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(in thousands, except share
amounts and share data)
June 30, 2021
(unaudited)
December 31, 2020
(audited)
Assets
Current assets:
Cash and cash equivalents
$
16,604
$
28,967
Restricted cash
1,557
—
Accounts receivable, net
12,683
9,582
Due from related parties
1,855
2,406
Inventories
6,380
4,485
Deferred costs
1,776
1,616
Prepaid expenses
3,795
2,891
Other current assets
8,456
2,452
Total current assets
53,106
52,399
Property and equipment, net
895
884
Deferred tax assets, net
6,940
7,096
Intangible assets, net
21,852
1,758
Deferred costs, net of current
11,834
11,215
Other long-term assets
12,331
5,165
Total assets
$
106,958
$
78,517
Liabilities, convertible preferred stock
and stockholders' deficit
Current liabilities:
Accounts payable and accrued expenses
$
29,105
$
18,657
Deferred revenue
10,457
3,783
Interest payable
143
250
Current portion of long-term debt
6,977
5,847
Income taxes payable
4,315
3,499
Total current liabilities
50,997
32,036
Deferred revenue, net of current
4,720
10,312
Long-term derivative liability
85,243
36,640
Long-term debt, net of current
248,354
236,186
Other long-term liabilities
26,464
4,890
Total liabilities
415,778
320,064
Commitments and contingencies
Convertible preferred stock, $0.0001 par
value; 9,854,432 shares issued and outstanding as of June 30, 2021
and December 31, 2020
98,544
98,544
Stockholders’ deficit
Common stock, $0.00005 par value;
29,281,514 shares issued and outstanding as of June 30, 2021 and
December 31, 2020
1
1
Additional paid-in capital
11,456
11,456
Accumulated other comprehensive loss
(886
)
(982
)
Accumulated deficit
(243,215
)
(175,846
)
Less: Treasury stock
(174,720
)
(174,720
)
Total stockholders' deficit
(407,364
)
(340,091
)
Total liabilities, convertible preferred
stock and stockholders' deficit
$
106,958
$
78,517
F45 Training Holdings,
Inc.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME
(in thousands, except share
amounts and share data)
(unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2021
2020
2021
2020
Revenues:
Franchise (Related party: $50 and $137 for
the three months ended June 30, 2021 and 2020, respectively, and
$100 and $234 for the six months ended June 30, 2021 and 2020,
respectively)
$
20,581
$
12,061
$
33,737
$
25,699
Equipment and merchandise (Related party:
$0 and $112 for the three months ended June 30, 2021 and 2020,
respectively, and $0 and $112 for the six months ended June 30,
2021 and 2020, respectively)
6,251
5,397
11,286
16,601
Total revenues
26,832
17,458
45,023
42,300
Costs and operating expenses:
Cost of franchise revenue (Related party
$0 and $0 for the three months ended June 30, 2021 and 2020,
respectively, and $0 and $12 for the six months ended June 30, 2021
and 2020, respectively)
1,462
1,410
2,676
4,594
Cost of equipment and merchandise (Related
party:$1,203 and $265 for the three months ended June 30, 2021 and
2020, respectively, and $2,144 and $1,316 for the six months ended
June 30, 2021 and 2020, respectively)
3,739
2,832
6,920
9,163
Selling, general and administrative
expenses
18,562
7,633
35,390
21,624
Total costs and operating expenses
23,763
11,875
44,986
35,381
Income (losses) from operations
3,069
5,583
37
6,919
Loss on derivative liabilities
23,098
—
48,603
—
Interest expense, net
8,853
421
17,268
799
Other income, net
329
(2,258
)
620
(577
)
(Loss) income before income taxes
(29,211
)
7,420
(66,454
)
6,697
Provision for income taxes
1,313
1,552
915
1,562
Net (loss) income
$
(30,524
)
$
5,868
$
(67,369
)
$
5,135
Other comprehensive income (loss)
Unrealized gain (loss) on interest rate
swap, net of tax
132
123
203
(727
)
Foreign currency translation adjustment,
net of tax
(74
)
(1,845
)
(106
)
(564
)
Comprehensive (loss) income
$
(30,466
)
$
4,146
$
(67,272
)
$
3,844
Per share data:
Net (loss) income per share
Basic and diluted
(1.04
)
0.08
(2.30
)
0.07
Weighted average shares outstanding
Basic and diluted
29,281,514
58,000,000
29,281,514
58,000,000
F45 Training Holdings
Inc.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Six Months Ended June
30,
2021 (unaudited)
2020 (audited)
Cash flows from operating
activities
Net (loss) income
$
(67,369
)
$
5,135
Adjustments to reconcile net (loss) income
to net cash used in operating activities:
Depreciation
130
216
Amortization of intangible assets
1,247
261
Amortization of deferred costs
725
685
Provision for inventories
149
—
Accretion of debt discount
2,983
—
Loss on derivative liabilities
48,603
—
Paid in kind interest accrual
12,851
—
Bad debt expense
3,514
1,917
Gain and loss on disposal of property and
equipment
6
—
Deferred income taxes
—
13
Unrealized foreign currency transaction
gains (losses)
185
(556
)
Changes in operating assets and
liabilities:
Due from related parties
549
163
Accounts receivable, net
(6,715
)
(2,576
)
Inventories
(2,125
)
(3,001
)
Prepaid expenses
(934
)
172
Other current assets
(3,722
)
(1,989
)
Deferred costs
(1,280
)
(2,590
)
Other long-term assets
(7,233
)
(2,499
)
Accounts payable
5,351
(1,410
)
Deferred revenue
3,912
(6,354
)
Interest payable
(107
)
171
Income tax payable
702
1,633
Other long-term liabilities
1,000
68
Net cash used in operating
activities
(7,579
)
(10,541
)
Cash flows from investing
activities
Purchases of property and equipment
(345
)
(302
)
Disposal of property and equipment
19
2
Purchases of intangible assets
(576
)
(577
)
Net cash used in investing
activities
(902
)
(877
)
Cash flows from financing
activities
Borrowings under revolving facility
—
8,145
Repayments under term facility
—
(1,500
)
Repayment of 1st Lien Loan
(2,625
)
—
Proceeds from Paycheck Protection Program
loan
—
2,065
Deferred offering costs
—
(440
)
Net cash (used in) provided by
financing activities
(2,625
)
8,270
Effect of exchange rate changes on
cash, cash equivalents, and restricted cash
300
(291
)
Net decrease in cash, cash equivalents,
and restricted cash
(10,806
)
(3,439
)
Cash, cash equivalents, and restricted
cash at beginning of period
28,967
8,267
Cash, cash equivalents, and restricted
cash at end of period
$
18,161
$
4,828
Supplemental disclosures of cash flow
information
Income taxes paid
$
—
$
632
Interest paid
1,109
600
Supplemental disclosure of noncash
financing and investing activities:
Liability assumed on intellectual property
license agreement with FW SPV II LLC
20,790
—
Intangible assets included in accounts
payable and accrued expenses
—
46
Deferred offering costs included in
accounts payable and accrued expenses
2,248
1,531
REGIONAL SEGMENT
INFORMATION
(in thousands)
(unaudited)
For the Three Months Ended
June 30, 2021
For the Three Months Ended
June 30, 2020
Revenue
Cost of revenue
Gross profit
Revenue
Cost of revenue
Gross profit
United States:
Franchise
$
11,741
$
1,308
$
10,433
$
7,461
$
1,158
$
6,303
Equipment and merchandise
4,523
2,437
2,086
1,383
678
705
$
16,264
$
3,745
$
12,519
$
8,844
$
1,836
$
7,008
Australia:
Franchise
$
4,420
$
94
$
4,326
$
2,089
$
173
$
1,916
Equipment and merchandise
689
514
175
960
902
58
$
5,109
$
608
$
4,501
$
3,049
$
1,075
$
1,974
Rest of World:
Franchise
$
4,420
$
60
$
4,360
$
2,511
$
80
$
2,431
Equipment and merchandise
1,039
788
251
3,054
1,252
1,802
$
5,459
$
848
$
4,611
$
5,565
$
1,332
$
4,233
Consolidated:
Franchise
$
20,581
$
1,462
$
19,119
$
12,061
$
1,411
$
10,650
Equipment and merchandise
6,251
3,739
2,512
5,397
2,832
2,565
$
26,832
$
5,201
$
21,631
$
17,458
$
4,243
$
13,215
For the Six Months Ended June
30, 2021
For the Six Months Ended June
30, 2020
Revenue
Cost of revenue
Gross profit
Revenue
Cost of revenue
Gross profit
United States:
Franchise
$
18,756
$
2,330
$
16,426
$
15,709
$
4,089
$
11,620
Equipment and merchandise
7,004
3,915
3,089
7,462
3,704
3,758
$
25,760
$
6,245
$
19,515
$
23,171
$
7,793
$
15,378
Australia:
Franchise
$
7,709
$
272
$
7,437
$
4,840
$
332
$
4,508
Equipment and merchandise
1,528
1,321
207
2,478
2,184
294
$
9,237
$
1,593
$
7,644
$
7,318
$
2,516
$
4,802
Rest of World:
Franchise
$
7,272
$
74
$
7,198
$
5,150
$
174
$
4,976
Equipment and merchandise
2,754
1,684
1,070
6,661
3,275
3,386
$
10,026
$
1,758
$
8,268
$
11,811
$
3,449
$
8,362
Consolidated:
Franchise
$
33,737
$
2,676
$
31,061
$
25,699
$
4,595
$
21,104
Equipment and merchandise
11,286
6,920
4,366
16,601
9,163
7,438
$
45,023
$
9,596
$
35,427
$
42,300
$
13,758
$
28,542
TOTAL FRANCHISES SOLD
(unaudited)
Three Months Ended June 30,
2021
Three Months Ended June 30,
2020
Year Ended December 31,
2020
U.S.
Australia
ROW
Total
U.S.
Australia
ROW
Total
U.S.
Australia
ROW
Total
Total Franchises Sold, beginning of
period
941
676
630
2,247
826
653
480
1,959
814
643
435
1,892
New Franchises Sold, net(a)
438
109
7
554
20
14
66
100
117
36
199
352
Total Franchises Sold, end of period
1,379
785
637
2,801
846
667
546
2,059
931
679
634
2,244
TOTAL NUMBER OF
STUDIOS
(unaudited)
Three Months Ended June 30,
2021
Three Months Ended June 30,
2020
Year Ended December 31,
2020
U.S.
Australia
ROW
Total
U.S.
Australia
ROW
Total
U.S.
Australia
ROW
Total
Total Studios, beginning of period
518
617
352
1,487
376
593
273
1,242
320
581
239
1,140
Initial Studio Openings, net
38
11
19
68
20
2
11
33
166
35
96
297
Total Studios, end of period
556
628
371
1,555
396
595
284
1,275
486
616
335
1,437
GAAP to Non-GAAP
Reconciliation
(in thousands, except share
amounts and share data)
(unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2021
2020
2021
2020
(dollars in thousands, except per
share amounts)
Net (loss) income
(30,524
)
5,868
(67,369
)
5,135
Net interest expense
8,853
421
17,268
799
Provision for income taxes
1,313
1,552
915
1,562
Depreciation and amortization
1,173
249
1,377
477
Amortization of deferred costs
277
359
725
685
EBITDA
(18,908
)
8,449
(47,084
)
8,658
Sales tax reserve
147
12
247
515
Transaction fees
1,749
1,214
3,331
2,656
Loss (gain) on derivative liability
23,098
—
48,603
—
Certain legal costs and settlements
886
351
3,423
781
Forgiveness of loans to directors
—
—
—
—
Recruitment
53
—
53
—
Inventory write-off
—
—
—
—
COVID concessions
1,851
—
4,333
—
Relocation
183
—
252
30
Development costs
1,617
—
2,788
—
Adjusted EBITDA
10,677
10,026
15,947
12,640
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210826005731/en/
Investor and Media Relations: Bruce Williams, Managing
Director ICR, Inc. F45IR@icrinc.com 332-242-4303
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