F45, which is a workout center that can fit into any strip mall space and offers an optimal workout in 45 minutes, might be a great concept. However, as the industry still reels from the pandemic, is it now a good time for an IPO?
For about $16, you will soon be able to buy a piece of F45, the Mark Wahlberg-endorsed chain of fitness studios for time-pressed people. The Austin, Texas-based company filed a revised S-1 form with the Securities and Exchange Commission last week, hoping for a valuation of $1.5 billion. In its IPO, F45 wants to raise $325 million by selling 20.3 million shares at $15 to $17 a piece.
F45’s growth, done exclusively through franchising, is impressive: 1,500 fitness studios already open in 63 countries (a vast majority in the U.S. and its native Australia) and 2,800 franchisees already signed up, all within a seven-year company history.
However, some analysts have been cool to the IPO because of F45’s history of net losses. This may be one reason F45 is making initial shares available through the amateur trading app Robinhood, a sign that it hopes to expand past the scope of traditional brokers.
Founded in Australia in 2013, F45 offers a changing array of 45-minute classes that combine HIIT, functional training and circuit training, with a proprietary algorithm supplying the class structure. It claims to present routine that can give you everything you really need in one workout of less than an hour. F45 also dubs itself a “functional fitness community,” adding a CrossFit-like element of comradery. And during the height of the COVID-19 pandemic, it adapted to home workouts.
Its franchising model has allowed its brand to expand on franchisees’ dime. The model, the company claims in its SEC filing, works because a F45 studio can be installed in any small strip-mall space.
“The optimized box layout of our studios, which requires as little as approximately 1,600 square feet of training area contributes to the relatively low initial investment and operating costs of our franchisees,” it claims, “and allows our studios to be located in a wide array of attractive prospective retail locations.”
So what’s not to love about an F45 IPO?
It has not earned money, for a start. Deep in F45’s SEC filing are its net losses for 2020 ($25.3 million) and 2019 ($12.6 million). The company also lost $36.1 million in the first three months of 2021 alone.
“You can say that this company is still young and growing fast, so volatile revenue can be expected,” writes Mike Stenger of Money Matters. “But you would at least hope to see revenue increasing over time with the increase in studios around the world.”
F45 “is generating contracting revenue, increasing losses and has unrealistic IPO valuation expectations,” concluded Donovan Jones, author of the IPO Edge news site. “so I’ll pass on the IPO.”
F45’s middling performance of 2020 and 2021 can no doubt be attributed in part to the effects of the COVID-19 pandemic, which shuttered fitness spaces and left them in financial and operation chaos (the severity of which differed by area). No doubt many the financial development of many fitness start-ups have been stuttered by the pandemic. But investors will have to ask themselves: Do they now have enough confidence that these companies can succeed in a new environment to buy?
Nick Keppler is a freelance journalist, writer and editor. He enjoys writing the difficult stories, the ones that make him pore over studies, talk about subjects that make people uncomfortable, and explain concepts that have taken years to develop. Nick has written extensively about psychology, healthcare, and public policy for national publications and for those locally- based in Pittsburgh. In addition to Athletech News, Nick has written for The Washington Post, The Daily Beast, Vice, Slate, Reuters, CityLab, Men’s Health, The Gizmodo Media Group, The Financial Times, Mental Floss, The Village Voice and AlterNet. His journalistic heroes include Jon Ronson, Jon Krakauer and Norah Vincent.