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01 Nov 2023
F45 was a 'slow motion train wreck', says new CEO, Tom Dowd, as the company reveals US$372.3 million losses and turnaround strategy
By Tom Walker
F45 was a 'slow motion train wreck', says new CEO, Tom Dowd, as the company reveals US$372.3 million losses and turnaround strategy
There were 312 new F45 studio openings in 2021 and another 351 in 2022, resulting in system-wide total studios of 2,100
Photo: F45 Training
Tom Dowd, recently appointed CEO of F45, said he remains optimistic the business can be turned around, in spite of retrospectively revealing losses of US$372.3 million for 2021 and 2022 and being entangled in a number of legal challenges.

Dowd said F45 had been a ‘slow motion train wreck’, suffering from a lack of management expertise.

“[The management team wasn’t] focused on running a good business – they didn't even review P&Ls,” he told Eric Malzone on The Future of Fitness podcast recently. “They were behaving like cowboys, running around trying to sell franchises and not focusing on how to be profitable or looking after the franchisees.

“I dealt with the [previous] F45 [management] team as an investor and it was frustrating due to their lack of ability to be decisive, which is critical to any business,” he continued.

Dowd – who is still a shareholder – believes F45 has moved to a new phase in its development: “The days of shooting from the hip are over – it’s a much more professional company, run by real adults.”

He said F45 has room for ten per cent net growth from within its existing networks, as well as the right products to expand into new territories.

Vibe, the Australian company it acquired, will be taken to the US – “We bought it and then let it sit there and don’t make it work,” says Dowd. “We ‘half-assed’ it. Now’s the time to focus on growing both Vibe and our FS8 Pilates concept."

Vibe will trade under another IP in the US – “We’re just looking for a good name,” said Dowd. “We’ll be opening a site in New York under the new brand, which is the perfect location. This will be our showcase, alongside Singapore.

“At present we have 43 FS8 locations, but in 3-5 years I think could have more Vibe and FS8 studios than F45 in total. We could have both our Pilates concepts in the same city, as they’re such different experiences,” he said.

“We're sitting on goldmine here. We just need to execute, execute execute,” he said.

Dowd expects the company to go through a period of consolidation before emerging into a growth phase, saying: “I’m OK to ‘shrink to grow’, so if we need to lose unproductive locations to add value to existing ones I’m fine with that. Moving forward we’re going to be very tactical and smart about growth. It won’t be ‘sell and forget’ like it was before.

“It’s been a real mess in many regards, but it’s a mess that’s easy to clean up,” Dowd said. “Getting everything back on track isn’t that hard when you know how to do it.

“I’m a growth CEO and I love the go, go, go, days and we're seeing traction every day now," he revealed.

Dowd said the focus now will be on supporting franchisees to be more profitable by offering them upsells such as more branded merchandise and nutrition products, as well as the opportunity to co-locate any combination of the company’s three brands alongside own-brand retail units.

The APAC business is also being rebooted – “It blew my mind that F45 was established in Australia and then moved to the US and turned its back on the original market, “ he told Malzone, ”but we’re fixing it.”

He said F45 also sees huge growth potential in the Asian and US markets.

The challenges the company is facing have been brought into sharp focus by its recent updated filings for 2021 and 2022.

F45 had previously revealed that it needed to backdate changes to its already published accounts for both years on the basis that its losses had been greater than stated.

These show net losses of US$193.5 million for the year ended 31 December 2021 and US$178.8 million for the year ended 31 December 2022 – totalling US$372.3 million.

There were 312 new F45 studio openings in 2021 and another 351 in 2022, resulting in a system-wide total of 2,100.

This is the first set of financials F45 Training has revealed since it went "dark" in August 2023, when it announced it would be delisting from the New York Stock Exchange (NYSE) and deregistering its common stock.

In a statement announcing the plans, F45 said this would be the best way forward, as it would provide cost savings and less time spent complying with the requirements of being a listed company.

"We've determined that going dark is the best path for the company due to the expected substantial cost savings and our current inability to realise the traditional benefits of public company status," F45 said at the time.

Launched in Australia in 2013, F45 was made popular by the likes of David Beckham promoting its 45-minute high-intensity workouts.

The company also attracted Hollywood actor Mark Wahlberg as a significant investor and the "face" of the company.

Some of those celebrity relationships have since gone sour, however, with both Beckham and Australian golfer, Greg Norman, suing for unpaid sponsorship fees which F45 has detailed as being around the US$20m mark. F45 has said it will challenge these cases.

Wahlberg is still heavily involved with the company, having been named chief brand officer in April this year.

The business is also embroiled in a lawsuit brought by attorneys Barrack, Rodos & Bacin who claim F45 overstated its projected performance to boost its financial status at the point of its IPO.

The securities class action lawsuit was filed on behalf of shareholders against the company and some of its executives (Goer v F45 Training Holdings Inc, Texas).

In the court statement, Barrack, Rodos & Bacin said: "F45 Training Holdings Inc, a Mark Wahlberg-backed fitness franchisor went public in July 2021, when it sold 18.75 million shares priced at US$16 per share, while touting a "Predictable, Asset-Light Model Driving Rapid Growth".

"The company reported results and issued guidance that was generally expected by the market for about a year after the IPO.

"However, on July 26, 2022, F45 issued a press release in which it drastically reduced its financial guidance; disclosed that would open about 60 per cent fewer studios than promised just two months earlier; said that a US$250 million credit line was no longer available to the company; disclosed that the company was letting go of about 110 employees; and announced that the CEO, Adam Gilchrist, had resigned.

"The disclosures in the press release sent the price of F45 shares down over 60 per cent on July 27, 2022, and it has continued since that time to trade at less than US$4.00 per share," said the statement.

F45 has said it will fight the case and filed a motion to dismiss in August.

F45's common stock now trades on the “Expert Market” tier operated by OTC Markets under the symbol “FXLV.”

Quotes on the Expert Market are restricted from public viewing.




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