The F45 formation has around 40 franchises in Auckland and 81 in New Zealand. Photo/NZME

Struggling fitness chain F45 posted a massive $60 million quarterly loss and canceled more than 300 franchise sales as it considers up to five possible lawsuits from disgruntled investors.

Presenting its financial results after the market close in the United States on Monday, F45 revealed that it posted a net loss of $34.9 million in the three months to June with total revenue of $30 million, of which $19.1 million was from franchise fees.

Its overall loss, which includes foreign currency translation adjustments, was just under US$38.5 million ($60.34 million).

“I am pleased with the performance of our studios, which delivered comparable store sales growth of 6% as well as record system-wide sales of US$127.1 million, representing growth of 23% year-over-year,” F45 said as an interim. general manager Ben Coates said in a statement.

Coates said there were 92 net initial studio openings in the quarter, bringing the total number to 1,958.

He told investors that a number of franchise sales were canceled after third-party funding failed.

“In the total number of franchises, sales have decreased by 175% in [US] region,” he said, as reported by the Sydney Morning Herald.

“Franchises sold in the United States will include 132 gross franchise sales, less 307 terminations during the quarter. Terminations were due to franchisees’ inability to access financing facilities, we announced that the end of [the first quarter].”

F45 said it was reaffirming its guidance for the remainder of the year, which takes into account that previously announced $250 million in growth capital from two franchise funding facilities would not be available “despite strong franchisees demand”.

The company forecasts net new franchise sales and net initial studio openings for the full year between 350 and 450, total revenue of $120 million to $130 million and profit of $25 million to $30 million. .

Mark Wahlberg was a major investor in F45.  Picture / F45
Mark Wahlberg was a major investor in F45. Picture / F45

It had previously planned to sell up to 1,500 new franchises this year.

The 2013-founded fitness franchise chain, known for its high-intensity interval training (HIIT) classes, was once an Australian success story but has plummeted dramatically since it floated on the New York Stock Exchange in July last year.

At the end of last month, its founder and CEO, Adam Gilchrist, resigned while 110 employees were made redundant – representing nearly half of its global workforce – as expansion plans were significantly reduced “due to the market conditions”.

F45’s already shaky stock price fell further on the news and is currently down almost 90% from its listing price of US$16 to US$2 at Monday’s close.

“As described in this announcement, we have implemented a strategic reorganization and cost reduction plan to more closely align the business with current macroeconomic conditions and business trends,” Coates said.

“We believe these are appropriate and prudent steps to prioritize near-term profitability and cash flow generation, and position F45 for strong and sustainable long-term growth. the recently announced strategic changes are important, we continue to be as confident as ever in the future of F45.

“We remain committed to our core mission of delivering the best workout in the world, helping change lives, and creating opportunities for people who are passionate about fitness and entrepreneurship. Consumer demand for F45 remains strong and “We continue to deliver results for our franchisees, our members, and the communities we serve. To that end, I want to express my gratitude to our employees and franchisees for their continued focus and execution.”

F45’s June quarter results came after reports that five heavyweight class action law firms in the United States were mulling potential claims and calling on investors to come forward.

The companies are investigating whether F45 misled investors, including a line of credit of around $250 million that was announced in May.

Major shareholder and actor Mark Wahlberg reportedly cashed in 1.1 million of his shares for $12.2 million in April.

During the July trade update, investors learned that the line of credit would not be available.

Gilchrist – not to be confused with the cricketer of the same name – has put his $14million Sydney home on the market after the turmoil. The freshwater mansion sold two weeks before its auction for more than $1 million compared to the guidebook.

He and Rob Deutsch founded the company in 2013 in the Sydney suburb of Paddington, but Deutsch left in February 2020 and said he was devastated to hear what had happened since then.

“Never in my wildest dreams could I have imagined this,” Deutsch wrote on Instagram after the shock announcement of the layoffs.

“When I came out and sold F45, I left behind a healthy, phenomenal company. All the way from the corporate culture to the heartbeat of the company… The workouts. F45 was special. I hope sincerely that all the 110 laid-off employees, find happiness and opportunities elsewhere.”