On July 26, F45 Training announced the departure of Adam Gilchrist, the president, CEO and co-founder of F45. According to a press release, “this transition will allow his successor to establish and execute new opportunities amid changing macroeconomic and business conditions. Gilchrist will remain on the board as a director.”
“When we founded F45, we made it our principal goal to change people’s lives by creating the world’s best workout,” said Gilchrist in a statement. “To the staff that have worked tirelessly since our inception, you have been incredible in your efforts, and I thank you for all of 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 around the world.”
While the Board of Directors conducts a formal search for a permanent CEO successor, Ben Coates, an independent director, will serve as interim CEO.
Additionally, the company announced in the press release, “its realigning corporate operations around an updated growth outlook that prioritizes profitability and cash flow generation. This includes reducing operational expenses and strategically streamlining corporate functions, including reducing global workforce by approximately 110 employees. Following these reductions, the company expects selling, general and administrative expenses (SG&A) to be approximately $15 million to $20 million per quarter — approximately 40% to 50% 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, the chief financial officer of 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, Payne went on to say in the statement, “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 also released revised guidance for full-year 2022. They now expect full-year net new franchises sold to be between 350 and 450, compared to the previous guidance of 1,500; and full-year net initial studio openings between 350 and 450, compared to the prior guidance of 1,000.
After this announcement, F45’s shares fell 61.5% on Wednesday, July 27.
Read the full announcement, here.
