F45 Training announces layoffs for almost half its corporate staff after revealing projected revenue fall

Australian-founded F45 Training has revealed a significant fall in its projected full financial year revenues, reducing income projections for the year to US$120 to US$130 million, compared to prior guidance of US$255 to $275 million.

With a full-year adjusted EBITDA now anticipated to be between US$25 and $30 million, compared to the prior guidance of US$90 to $100 million, the now Austin, Texas, USA-based company to restructure, laying off 110 employees, about 45% of its corporate staff while transition to a new, yet-to-be-named Chief Executive.

Revealed yesterday, the company’s revised guidance assumes that US$250 million of growth capital provided by two previously announced franchise financing facilities, which F45 had arranged so that franchisees could open additional studios, will now not be available despite strong demand from franchisees.

In addition, F45 also now anticipates full-year net new franchises sold of between 350 and 450 locations, compared to the prior guidance of 1,500, and its full-year net initial studio openings now projected to be between 350 and 450, compared to the prior guidance of 1,000.

In response, cost-cutting moves being undertaken by the company include reducing its operational expenses and streamlining corporate functions, which will involve laying off 110 employees. The layoffs are expected to be completed in the third quarter, costing the company up to US$12 million in severance and related costs.

F45 also advised that co-founder Adam Gilchrist, who has been serving as President, Chief Executive and Chairman of the board of directors, stepped down from those roles on 24th July.

Gilchrist will remain on the Board as a Director and the Board of Directors will appoint a new Chairman, along with looking for a new Chief Executive.

During the search term, Ben Coates will serve as interim Chief Executive.

Coates is an independent director with corporate executive and financial leadership experience, having held management, directorship, and advisory roles at a range of businesses. He currently serves as director of Coolgardie Investments, a private investment vehicle that he founded in 2006.

As part of his separation agreement, Gilchrist is eligible for one-time cash payments understood to exceed US$5 million and payment of up to $1.2 million by the company for the 12-month lease on his home in the US stated of Florida.

He will also get reimbursement for COBRA premiums for himself and covered dependents for up to 18 months, and he will receive relocation expenses up to $20,000 and reimbursement of separation agreement legal fees.

Explaining the announcement, Payne commented “we are taking the necessary steps to right-size our business in light of shifting macroeconomic and business conditions.

“While we expect growth to continue, market dynamics are having a greater than expected impact on the ability of franchisees to obtain capital to develop new F45 locations.

“In addition, recent share price performance has made it challenging for franchisees to utilize financing facilities announced earlier this year.

“While reducing corporate headcount was an incredibly difficult decision, acting proactively to realign our resources is an important step to enable the company to remain on track for long-term, sustainable success.

“Additionally, we believe that once these cost reductions are fully realized, the company will be able to generate positive free cash flow on a normalized basis. Despite the headwinds, F45's business fundamentals remain strong, and we are as excited as ever to continue bringing the world’s best workout to a growing base of members every day.”

F45’s filing with the New York Stock Exchange (NYSE), on which it began trading under the symbol FXLV in July 2021, advised that it had entered into an agreement with F45 Training Chief Financial Officer Chris Payne to give him US$2.4 million in a cash retention bonus along with accelerated vesting of his outstanding and unvested equity awards if he stays with the company until October this year.

F45 is expected to report results and host its second quarter earnings conference in mid-August.

Images: Working out at F45 (top) and outgoing Chief Executive Adam Gilchrist [on right] with Hollywood star Mark Wahlberg at the company's New York Stock Exchange listing in 2021 (below). Credit: F45.