F45 Says Losses Likely Higher Than Previously Reported
The beleaguered F45 has determined that it made “material errors” in financial statements it submitted for 2021 and 2022
The Mark Wahlberg-backed F45 Training continues to be plagued with financial troubles, recently disclosing that its previous financials contained errors and warning that its net losses are likely higher than initially reported. The news comes on the heels of interim CFO, Robert Madore, resigning from the fitness franchise.
The announcement, released in a Form 8-K, was issued on July 7. Shares of F45 have plunged to $0.54, down from $16 in July 2021 when the fitness chain went public with a $1.4 billion valuation.
F45 says its Audit Committee of the Board of Directors concluded that the company’s previously issued consolidated financial statements and related disclosures for the year ending December 31, 2021, as well as its financials for the first three quarters of the year ending December 21, 2022, should “no longer be relied upon due to misstatements contained in such financial statements.”
The functional fitness chain says the financial statements will be restated and that the committee’s conclusion was based on F45’s determination that “material errors” were made, resulting from “incorrect conclusions” regarding the “identification and recognition of performance obligations for customer contracts and the assessment of criteria of a contract under ASC 606.”
F45 expects that its net loss for the financial periods in question will “increase materially” as a result of the changes.
The fitness company also says its Audit Committee, board of directors and management have started implementing measures to “enhance processes and controls” and that they “continue to evaluate appropriate remediation actions.”
Management will also continue to assess the effect of any restatements on F45’s internal controls over financial reporting and its disclosure controls and procedures. F45 says it expects to report “one or more material weaknesses” following the completion of its analysis.
Can F45 Right the Ship?
While the functional fitness brand has plans to double in size over the next two years, it also received a non-compliance notice in May from The New York Stock Exchange for failing to meet its listing standards, among other financial issues F45 has recently dealt with.
The functional fitness company also delayed its financial filings for the fiscal period ending March 31, 2023, citing the need for additional time.
F45’s former interim CEO Ben Coates and co-founder Adam Gilchrist resigned earlier this spring from the company’s board.
F45 has been forging partnerships as it looks to rebuild, recently teaming up with Spartan Race to create custom workouts, retail agency BDA for branded merchandise, and Uberall, a Berlin-based marketing platform, to ramp up its digital marketing presence.
Still, according to one Seeking Alpha analyst, bankruptcy might be in the cards for the fitness franchisor.
“With the business apparently still bleeding cash and the company at the mercy of secured lenders, it is hard to get excited about F45 Training Holdings’ prospects,” wrote Henrik Alex in a recent memo. “At least, in my opinion, chapter 11 remains the most likely scenario at this point. Given the company’s substantial indebtedness, a recovery for existing shareholders in bankruptcy doesn’t seem likely.”
