F45 Training Holdings Inc. reported adjusted EBITDA surged 235 percent in the first quarter ended March 31 as sales climbed 175 percent. System-wide visits increased 6 percent globally to 7.2 million and 37 percent in the U.S.
“We delivered total revenue of over $50 million and Adjusted EBITDA of nearly $18 million for the first quarter, which was above expectations. In addition, we sold 706 new full fee-paying franchises during the quarter which will provide a bridge to 1,500 new franchises sold for the full year, up from 1,000. In addition, we are reaffirming full-year guidance for 1,000 openings, which will be weighted to Q3 and Q4, as well as guidance for total revenue and Adjusted EBITDA. Finally, we are introducing guidance for free cash flow, which we expect to be between $50 million and $60 million for the fiscal year 2022,” said Adam Gilchrist, F45’s president, CEO and chairman.
Gilchrist continued, “Earlier this year we embarked on a formal process to establish new dedicated third-party franchise financing facilities. I am pleased to share that we have successfully established two new off-balance sheet facilities, which will provide franchisees with $250 million in committed capital from third-party lenders. These financings will provide the pathway to lend to approximately 1,000 of our 2,200 sold but not yet open backlogs and will help to secure our target of 1,000 new studio Openings this year.”
F45 currently has approximately 1,155 franchisees that have a contractual obligation to pay for and receive equipment packs by the end of 2022, as well as nearly 900 contracted franchises that are in the advance process of securing financing and/or finalizing a lease so they can start the opening process. The company has also started a process to raise additional off-balance sheet franchise financing capital in Australia to fund expansion worldwide for 2023.
“F45 is asset light, balance sheet strong, cash generating, and delivers the world’s best workout. We continue to demonstrate an ability to successfully navigate challenges that are outside our sphere of influence such as global pandemics, supply chain delays in 2020 and franchise financing. With the launch of David Beckham, we continue to see incredible amounts of demand from prospective franchisees globally and thank our HQ team, Mark Wahlberg and our existing franchisees for being the true champions of this business, and we look forward to continuing to transform our member’s lives,” said Gilchrist.
First Quarter Fiscal 2022 Highlights Compared To First Quarter Fiscal 2021
- Total revenue increased from the prior year period by 175 percent to $50.0 million;
- Same-store sales increased 6 percent globally and 40 percent in the United States;
- System-wide sales increased 25 percent globally to $117.4 million and 73 percent in the United States to $52.7 million;
- System-wide visits increased 6 percent globally to 7.2 million and 37 percent in the United States to 3.1 million;
- Net franchises sold totaled 706;
- Net initial studio openings totaled 117;
- Reported net income of $2.5 million; aned
- Adjusted EBITDA increased from the prior year period by 235 percent to $17.7 million.
Operating Results For First Quarter Ended March 31, 2022
- Total revenue increased $31.8 million, or 175 percent, to $50.0 million from $18.2 million as compared to the prior year period;
- Franchise revenue increased $6.7 million, or 51 percent, to $19.9 million from $13.2 million in the prior year period. The increase in franchise revenue was driven by the increase in the establishment, monthly franchise fees and other franchise-related fees;
- Equipment and merchandise revenue increased $25.1 million, or 499 percent, to $30.1 million from $5.0 million in the prior year period. The increase in equipment and merchandise revenue was driven by the delivery of approximately 240 World Packs during the quarter;
- Gross profit increased $24.0 million, or 174 percent, to $37.8 million from $13.8 million as compared to the prior year period. A gross profit margin of 76 percent was in line with the same period last year;
- Selling, general and administrative (SG&A) expenses were $32.1 million, compared to $16.8 million, in the first quarter of last year. The increase in SG&A expenses was primarily due to significant one-time expenses including legal settlements, relocation expenses, stock-based compensation, and COVID-19 concessions;
- Net income was $2.5 million, compared to a net loss of $36.8 million in the first quarter of last year; and
- Adjusted EBITDA was $17.7 million, compared to $5.3 million in the prior year period. Adjusted EBITDA margin of 35 percent represented an increase of 640 basis points from the same period last year.
The company is providing the following financial guidance for the year ending December 31, 2022, which assumes no significant worsening of the COVID-19 pandemic that materially impacts performance, such as prolonged studio closures or other mandated operational restrictions:
- Full-year net New Franchises Sold of approximately 1,500, compared to the prior guidance of 1,000;
- Full-year net Initial Studio Openings of approximately 1,000, which is expected to be weighted towards the back half of the year;
- Full-year revenue between $255 million and $275 million;
- Full-year Adjusted EBITDA between $90 million and $100 million; and
- Full-year free cash flow of between $50 million and $60 million.
Photo courtesy F45/David Beckham