F45 Training Holdings, Inc. said Adam Gilchrist, president, CEO, and chairman, has stepped down, and a search for a successor is underway.

The fitness boutique also reduced its 2022 guidance and announced a reorganization that will lead to the layoff of 110 employees.

CEO Transition
After founding F45 in 2013 and leading the company for the last decade, Gilchrist stepped down but will remain on the Board as a director, and the Board of Directors will appoint a new Chairman.

Gilchrist said, “When we founded F45, we made it our principal goal to change people’s lives by creating the world’s best workout. To the staff that has worked tirelessly since our inception, you have been incredible in your efforts, and I thank you for all your support. To the investors that have joined us along our journey, I thank you for your commitment to F45. Lastly, I am forever grateful to our franchisees who deliver the world’s best workout each day to F45 members worldwide.”

“Adam has done a tremendous job leading F45, and I want to thank him for his countless contributions and innovations. We are fortunate that we will continue to benefit from his ongoing counsel and insights during this transition and well beyond as a member of our Board,” said Richard Grellman, F45 lead independent director.

While the Board is formally searching for a CEO successor, Ben Coates, an independent director with corporate, executive and financial leadership experience, will serve as interim CEO.

Coates has held management, directorship and advisory roles at various businesses. He currently serves as director of Coolgardie Investments, he founded in 2006. Before that, Coates held management, compliance, risk management, and strategy roles in the financial services industry, including National Australia Bank (NAB), Westpac Banking Corporate, Hanover Group, and ANZ Banking Group. He has been a member of F45’s Board of Directors since August 2021.

Strategic Reorganization and Cost Reduction Plan
Amid ongoing macroeconomic uncertainty, F45 initiated a comprehensive review of its strategic and financial priorities for long term growth. As a result, it realigned its corporate operations with an updated growth outlook that prioritizes profitability and cash flow; this includes reducing operational expenses and streamlining corporate functions, including reducing its global workforce by approximately 110 employees. Following these reductions, the company expects SG&A expenses to be approximately $15 million to $20 million per quarter, or 40 percent to 50 percent less than SG&A expenses during the first quarter of 2022.

“We are taking the necessary steps to right-size our business in light of shifting macroeconomic and business conditions,” said Chris Payne, CFO, F45. “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 can 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.”

Updated 2022 Outlook
Following F45’s review of its strategic and financial priorities, the company provided revised guidance for the full-year 2022.

The revised 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 other studios, would not be available despite demand from franchisees.

  • Full-year net New Franchises Sold between 350 and 450, compared to the prior guidance of 1,500;
  • Full-year net Initial Studio Openings between 350 and 450, compared to the prior guidance of 1,000;
  • Full-year revenue between $120 million and $130 million, compared to the prior guidance of $255 million to $275 million;
  • Full-year Adjusted EBITDA between $25 million and $30 million, compared to the prior guidance of $90 million to $100 million; and
  • Full-year free cash flow guidance withdrawn.

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

Photo courtesy F45