F45 to cut 110 staff worldwide, lose Australian CEO and co-founder after brutal earnings update

Source: Sipa USA / The Palm Beach Post / USA TODAY

Australian-born fitness training giant F45 has announced plans to slash around 110 staff worldwide and release co-founder and CEO Adam J Gilchrist from the top job, after drastically downgrading its growth forecasts and revenue projections due to “macroeconomic uncertainty”.

In a market update, released Thursday Australian time, the company halved its full-year revenue projections from between US$255 million ($364 million) and US$275 million ($392 million) to between US$120 million ($171 million) and US$130 million ($185 million).

That shortfall was attributed to a lower-than-projected number of new franchise openings, F45 said. While the company expected to recruit as many as 1500 new franchises worldwide over the year, it now expects that number to reach anywhere between 350 and 450.

Unlike when lockdowns and public health concerns hampered gyms worldwide earlier in the pandemic, the company did not solely blame COVID-19 for its recent woes.

F45 had expected to access some US$250 million in growth capital to provide financing facilities to franchisees who wanted to open extra studios, the company said.

However, the publicly-listed company’s fluctuating share price “made it challenging for franchisees to utilise financing facilities announced earlier this year”, said CFO Chris Payne.

The result is that F45’s full-year adjusted earnings, before inflation, tax, depreciation, and amortisation, are projected to hist between US$25 million ($35 million) and US$30 million ($42 million), down from a lofty prediction of US$90 million ($128 million) and US$100 million ($142 million).

“As a result of this review, the company is realigning its corporate operations around an updated growth outlook that prioritises profitability and cash flow generation,” the company said.

Adam J Gilchrist, F45 co-founder, has also stepped down from his leadership positions, the company said.

“When we founded F45, we made it our principal goal to change people’s lives by creating the world’s best workout,” Gilchrist said, before thanking staff, investors, and franchisees for their contributions.

Ben Coates, a member of F45’s board of directors, will assume the interim CEO position as the company searches for a new full-time leader.

The company did not state how many Australian staff are expected to be impacted by the 110 layoffs. SmartCompany has contacted F45 for comment.

The market update represents the latest hurdle for a company which has experienced massive growth but no small share of challenges.

Since its inception in 2012 with a single gym in Paddington, Sydney, the company — built around high intensity interval training sessions, lasting 45 minutes each — ballooned to more than 500 franchises in Australia to around 1900 franchises in 50-odd countries in 2020.

An initial plan to IPO on the NASDAQ in 2020 was waylaid by the COVID-19 pandemic, but F45 eventually listed in July last year. Share prices faced a modest bump in its first day of trading, giving the company a market cap of US$1.46 billion ($1.95 billion).

But share prices have dropped since February this year and plummeted after the release of Thursday’s market update, drawing F45’s market cap down to US$128 million. Share prices rebounded over the day to US$1.85, giving the company a market capitalisation of $177 million.

As F45 withdrew its cashflow guidance, actor Mark Wahlberg — who reportedly banked US$200 million when his investment vehicle sold 1.6 million F45 shares during its IPO — took to Instagram to hype up the fitness juggernaut.

“About to go into F45, the best workout in the world,” Wahlberg said, outside an F45 studio in the US state of Idaho.

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