FXLV - Earnings call transcript Q2 2021 | F45 Training Holdings Inc.

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Operator

Good afternoon. Thank you for attending the F45 Training Holdings, Incorporated Quarter Two 2021 Earnings Call. All lines have been muted during the presentation portion of the call. There is an opportunity for questions and answers at the end. I would now like to pass the conference over to your host, Bruce Williams, Managing Director with F45 Training Holdings. proceed. may you you, Thank

Bruce Williams

Investor Good Chief afternoon, to we joining call Chief Chris will on you this at Officer, our fXXtraining.com. Financial Today's Officer, and FXX Training Adam thank call the found discuss be which hosted and for section second of afternoon website by the be can everyone, Relations Executive quarter released and Payne. results, Gilchrist;

some contain current that others, with We review forward-looking Form regarding substantial by uncertainties, filings without on to control actual could forward-looking in limitations, cause our on risks our statements I want also may to everyone on from expressed you results predictions, this including Before performance of a may call quarterly release. financial and materially the or of differ remarks Private those Act uncertainties, filings earnings our be factors estimates, discussed may within are we actual outside involve and Litigation and started, or get that expectations. the statements management that remind anticipated statements. meaning could These are from the These in Reform our These for to including expectations, mentioned. encourage include, management's differ of of results these which materially in such discussion XX-Q SEC. report targets these those Securities among of factors, based XXXX our implied

GAAP comparability or Form and for to the and new reliance certain will measures we generate we performance useful no speak and consistency comparable as non-GAAP past call believe non-GAAP the and only measures, earnings Reconciliations of with our operating measures to and not them also in peer measures undertake place in results assist period-to-period of We our are any which these undue update to ability results financial comparison of XX-Q of that You on in these our on indicators supplemental our these This report contain most of our included statements. core evaluating forward-looking and provide should definitions are companies. facilitate earnings quarterly information. obligation release. today, revise

the Now like to Adam. turn I call to over would

Adam Gilchrist

the few you, enter you, the in for our the first second call us chapter the what to Thank delivered to our today off company. joining FXX journey. we over proud by Bruce. a thank are saying I we And everyone, results next this quarter. public that for has start earnings as want months I'm last of accomplished very of and team strong thrilled

For leading a who fastest-growing are every workout. of and brand. we've business, offer already those you global best deliver a create world's the fitness our workouts is with global high-intensity that sessions week workouts scale. base we interval training us allows XX-minute functional day our familiar are and to our a mission in workouts our of built through connected base with franchisor differentiated platform We of We to the fitness massive countries. And studios FXX that the with to at training distribute the not are that lifestyle technology-enabled operating franchise create XX digitally network believe

enables the studios during growth. drive a footprint growth with an million. opening our COVID-XX FXX challenges our permanent XX quarter we Despite posed during and million of XXXX, It of grew of $XX.X our promote to closures best to XX% by pandemic, X% the net experienced a very $XX.X studios of this adjusted growth quarter, sold new had which resilience the EBITDA to over sales and our minimal results XX underscored XXX X,XXX incredible members standardization end to has workout. X,XXX business of franchises unique total growth of we by same-store total countries. total system-wide XXXX, franchises second Our new world's in XXX%, second sold At record platform over had revenue model. with underscores helped rapid the strong really us open our success through of our and franchisees also the quarter different deliver helps workout the and

XXXX, As of June our reopened. XX, XX% network of had

differentiated the our Starting results. is rooted motivation core in do. to approach of Innovation of Our most innovation, fitness everything pillars is at innovation. importantly, three firmly with DNA; we and

the that global innovations elevate a training position We are lifestyle further brand. continue training will dedicated and experience FXX to driving as new to fitness our and

including movements such plans, from exercises workout and same. ensuring distribution distinguish algorithm, two no to content our proprietary are innovations, virtually We ourselves competitors able platform, library fitness from into new the our ever that technology-enabled are workouts containing of our configures through which thousands

fitness results. the our our over to sustainability over by course designed members Second a our as We effective each visit members combination to through last view per members encourage achieve key a maintain creating to multiple believe strive we to and encourages members communities pillar pillar any for inclusivity fitness we foundation the focusing help motivation, times studio workouts is program program studios teamwork, sanctuary. and is is Supported motivation. builds which the results their by our on motivate and fitness and journey. The positivity, week of of time, a of long-term sustainable

Now growth. let's talk about

have in expansion is continue the our there meaningfully footprint opportunity we long-term significant believe expand to U.S., United to both of the rest States and across with significant footprint. a Starting that opportunity franchise studio We the a world. the

Based in there and Outside our potential for analysis, long-term we XXX franchise studio model of brand XX, XX in studios As U.S. and believe the of studios Australia, countries. we markets U.S. demonstrated the franchises us in over our the space X,XXX the of to open June XXXX, is X,XXX we white had have core portability and U.S. on our sold open

on drive space analysis, continued have growth in the our to easily Based and to developed potential be We for and designed markets white studios see existing outside studios markets in and both global both our approximately we XX,XXX underpenetrated new markets. U.S. deployed emerging

drivers our is touch growth franchisees we're our locations. the of The Let to a about. consist manage a take on. majority I'll of system excited that me of on also that first today franchise that owner single few really moment Multiunit operators touch

further intend opportunities develop we financial to systems forward, Going franchise multiunit seek to with select partners.

strong As XXXX, of sold of XX, to of were their XX% our really from by for market and existing up sell approximately franchisees, the highlights ability franchises demand June of XXXX, franchisees. approximately to multiunit as multiunit franchise end XX% opportunities which the owned

are channels, we universities, opportunities partner significant our pursuing are Well, there to and and we campuses is opportunities military major to in studios facilities. our major And actively U.S. We schools, potential June corporations channels? military XXXX, located XX we government university believe Secondly, the what base currently high studio Miramar, with first new in opened into expand new the California. in have in in

looking there to also and range we a new of target consumer demographic workout opportunity broader we're Thirdly, that significant enable groups. is at demographics, us a create target believe programs to

pilates, integrates recently Australia the new fitness We and also create a workout have style. popular remixing which developed new the to in industry; health a and three tone yoga of fitness called in methods concept FSX,

men the for women including studio age. development, in targeting as concepts Malibu as a XX and clubhouse Avalon House, of Crew, of similar fitness age sanctuary additional have we well addition, over a studio functional In a

opportunities thrilled there's the both franchisee business. corporate tremendous heard, you have teams built for great by and level. growth the we As across the I'm our at just

team We have value. drive to amazing executing on strategy management an focused growth our who shareholder is continuing and

one the to to committed partners Our With the can be that our are turn results. growing believe a franchise well world. capitalized businesses. Chris developed powerful will financial and over franchise we systems that, the of I go to most over have And platform that it in I

Chris Payne

new franchises to and strong believe and year quarter, good for ability franchises Thanks, and XXXX. new provide the of reviewing Adam, by quarter afternoon, everyone. and net our these of full We studios. net second our the XXX brand In demonstrate growing the our opened second details outlook begin sell XX we numbers then sold awareness our I'll the sales globally. net results fiscal

the by reopen revenue pandemic membership at from studios as have prior and our COVID-XX of million the have $XX.X restrictions as sales globally restrictions. mandated million. studios XXXX, $XX.X Same-store from increased total strong continued to For year to relaxed recovery increased driven XXX% quarter second XX% in by

had As strong had of June from COVID-XX of and globally closures. XX, mandated we reopened May And XXXX, April in studios growth. our approximately 'XX, XX% June year-over-year and membership

the As declined increased temporary revenues open XX% segment. due the following in have our virtually XX, our Rest the approximately open, the and globally X% the imposed Regionally, Australia. the XX% of of our recently in studios COVID-XX in restrictions. of of COVID World restrictions to have impact U.S., of the United in States, closures are all August reflecting studios Australia In XX%

and XX-foot operate depending do high to of recognized significant We Pack, sale charge are shipping operate our a not the time equipment level onetime revenues. visibility a their but of amortized is nearly model. all of technology to a container or of month upgrade introductions signage of and and World streams and as franchise new onetime tremendous need and their our franchisor, of a to and a equipment a This items establishment gross into revenue of franchisees Pack. are of as establishment constitute of a fee Inclusive business monthly contractually revenues World usage equipment, they into World us years gets Refresh X% franchise required in the differentiate delivery. out revenues. over franchisees, $X,XXX Packs We we of our break value onetime We franchise have franchisees is the in believe the equipment needs $XX,XXX, nearly vary which new year-to-year a XX which a revenues. fees, studio. fee, see all equipment $XXX,XXX of the revenue amount currently which our purchase equipment greater delivered part necessary consists at XXX% We operate on franchisee

other these is and with to contracts. It's revenue for contracts recognizing In change the clearly, the period. million, guided stimulus in started Rather, quarter. not revenue Moving quarter adjustment we on to increases QX in this States, I in beyond, stimulus certain and $XX.X in approximately recognition favorably the franchise U.S. contracts an franchise due estimates revenue. revenue always how XX% driven in have an to adjustment regions. in want types of of been $XX.X in particular catch-up recognized Australia where our a million to of deals to in entered year, saw that sales, studio consistent we revenue contributed in recognize of revenue strong into that not by we two billings across a will and revenues onetime This our from would our was recognize related have we the new do periods The we Franchise XX% also contracts; is state open. million of on important contract this the increase revenue contracts revenue. in accounting GAAP. prior increase World. royalty period. and estimates in stimulus to growth begin the and we until XX% each that in also franchise the deferred states to by prior state state revenue Franchise revenue 'XX contracted changes is with was related for last note studio XXX% of acceleration Geographically, deferred franchise franchise year United the $X Rest

of Our driven the equipment delays by impacted franchisees. was million by year-over-year World to delivery to at $X.X increase revenue from new were equipment This the primarily Equipment in sales Pack quarter modestly end increased million. XX% quarter. the sales $X.X

with up our caught end July. delivery by of we However, scheduled the

inventory in due of in the revenue second deliveries revenues can of equipment to taken franchisees. quarter. and United In Australia Australia were contractually required deferral World Rest the the driven Rest increased in Equipment our addition, delivery in consistent the XX% during advance pandemic to XX% we've and dates World so with the XXX% purchase deliver equipment States, necessary declined of steps World. the declined in Pack by we declines Regionally, of

in profit. last increased in reflecting the brand newer increase million quarter, to XX.X% our profit The professional the efforts. was million driven points gross compared brand was SG&A $X.X in was other revenues million for fees ago. ambassadors, Gross $XX.X quarter and onetime market-specific $XX.X building second segment our same in expense year. primarily higher of new basis a the concept, and year other mix promote on to to marketing, profit investments. the including investments second with from to promotional brand-building efforts a FSX period XXX quarter. franchise quarter initiatives, We SG&A Moving partnerships by compared $XX.X focused year, the to up and last million Gross margin

Net X% was Moving increased in QX primarily in last versus due interest on, quarter due million adjusted expense million XX.X% in the in $XXX the was year. Adjusted million $X.X XX.X% $XX.X to period. the quarter compared EBITDA which XXXX. in quarter year to mentioned interest outstanding in to above. prior 'XX. $XX.X incremental from was was was $X.X debt second This second expense EBITDA margin million in investments to the increase million, the I The decline the

to the Turning sheet. balance

shares proceeds The bonuses in to outstanding equivalents million of cash $XXX The for a net cash pay the $XXX million $XX existing and of per of XX, certain of Company we certain million. and common As purchase IPO, prior assets cycling June was acquisition indoor we our at of total to all XX, IPO, pay used onetime underwriter proceeds employees. of total debt $XX and the cash had of XX.X for received July were sold XXXX, and commissions. Flywheel, to On our million. of share stock gross our proceeds studio, which in of debt, discounts repay million $XXX net price completed

after amended exercised from the the XXXX, received net an underwriter August August Company's IPO shares the agreement. an Company shares Company. of in commissions. Company's additional million partially the The stock of the from option purchase costs we our On $X.X deducting in purchase to Additionally, common additional proceeds XX, and the in the underwriters secured credit overallotment XXX,XXX

we aggregate and current flexibility face principal credit an increase of of amount $XX financing $XX thrilled agreement lingering our the Our updated gives million capital up facility. by may us secured provides of these five-year for equity of revolving debt the circumstances, under revolving commitment a it amount senior the million. certain the aggregate the COVID-XX activities. And to following impacts and really structure, in I'm recent by

of we have excluding our reiterate, following converted to generate in capital a repaid all structure, excited million to provide the today our at Just outstanding IPO, commitment, we we $XX the equity none the into amended which credit million for we over the of we have IPO, forward. drawn Combined ability convertible in facility note, debt, and comfortable capital-light opportunities cash free our feel our with very of the $XX proven significant cash with business accounts. we're to about our invest model going current flow, and to which and

the million or XXXX, may $XX to risks seriously Moving XXX we closures to worsening sold operational be impact and this and prolonged between other franchises between franchise fiscal of on XXX, beginning discussed $XX outlook to performance, to $XXX significant XXX, year full does pandemic between outlook COVID-XX net and revenue constitutes not be our million. to full to EBITDA to of million, statements assume including mandated year expect and be at the studio full be for new This forward-looking call. restrictions. net note, openings adjusted subject million year XXX the between outlook and Please a uncertainties that $XXX

call a reconciliation back our in As most are for now of quarterly release. measures non-GAAP in closing I'll GAAP our reminder, over report these turn to the our and measures and comparable Adam from these remarks. of a earnings indicators to the XX-Q some included definitions

Adam Gilchrist

We're But because people's DNA. franchise importantly, part Chris. single here system. time. want out it world's a as this dive and business sharing what have on that's Bruce I with best grow because folks very some extremely passionate delivering say, exciting we call you our discuss with we our business call incredible buying just achieved. questions build to we're And the just -- do And back and taking thank single journey people's office have and franchisee lives, that's time And that change for guys all to I'll we that's time looks we at out at and one FXX to change you out at platform. every we an to and proud hand much, it's that ours, you hopefully spending about you and great the last Thank our day it thank a with of listen are of some is And of time lives. have. to there continuing we eight a been that's And to any we've that member to such forward more really I'd just franchise obviously taking call. like years. we allow And the work for on everybody look, head great and for the the And to in may one pause everybody to every look a this again, mandate our out across us

Bruce Williams

Operator, we're ready for questions.

Operator

question question-and-answer now the will [Operator we being The Absolutely, Instructions] is Oliver Chen Cowen. session. with from first

may proceed. You

Oliver Chen

Thank and Bruce. you, Chris

big or inform unit why see We you of second, a see X,XXX and more. or And opportunity a how question. see picture terms to opportunity us bigger U.S. Could that for know in you growth the you space? white longer-term that opportunity also let us

how for concepts other you And of about to and think which the stay innovation competencies? or do your you might you. core United these other bigger as be and close approach States prioritized ones well? As concepts, platforms Thank

Adam Gilchrist

great a question. that's Well,

the because have at the outcome. XX of we TAM what size U.S. we of experience X,XXX -- the XXth -- at the looked more where people, we Firstly, about million But that's it's we of argue medley an and sort of GDP being look a can Australian the

has key pillars, somebody a heart, innovation, past. been first we and military with excited it's never military innovation, to And do But fit FXX turns and But answer, the like the But hand you that that fact an give respect at first a And the right look and the your X,XXX and out workout. And just U.S. about closer best of innovation, experience exercises are in it's we on haircut, we is the being at over to being which we arrive a in up motivation like to with our that a arrive being the continue second can create day, at filmed went part exercises of where that we cross the benchmark respect where with hope folks and three very this and talk that's number also -- world's that's and if can that studios experience to to question, in actually that different done to that's that about really look we're we respect that, I there. launched, in from to success. we about they have XX,XXX. the to saying part culture. We we universities, it's that range and that you being and based. like is the critical X,XXX. your Australian look Miramar, had X,XXX we believe think we at repeated So innovate number to U.S. you moving X,XXX my similar part extrapolate workout number. a when X,XXX in the is you second results. have of of But us They're at crucial the somewhere they FXX, every think And have to that for it's in X,XXX have these the in done down number

to best that keeps to to believe that, innovation. night, single And we something us believe about our a question, have in really do excited innovation continuing to to a the deliver a world's encyclopedia. exercise great we And your focus. up critical at great doing of job we our So and And part expand we have that's we being workout. we're really day have that mandate up, wake every we're

Oliver Chen

a the concepts, other as platform about company think broadly new for you as to about And as opportunities as ones map? you road about you more think And do well? most about are continue you think which how excited your

Adam Gilchrist

more I than father's I honest, be don't someone age teenagers training to Well, XXs. my that's get do in about excited his

a have are the been -- a or deliver across and to as life that as I all have I X.X-year-old see world-leading I've our franchises years we sold. growth. in think the critical from that's Obviously, five age to demographic XX But truth. health. your neglected important fitness tell the in today, your And to talking I'm totally thing have we the organization And nearly world's this up an well-being, the They're age can XXX. responsibility there from X,XXX way old, best demographics got family, workout is sit we believe responsibility we we, your being and after here neglected. being you that most like

at is terms are the Look, excited think things, But young excited of most whether do some environment a don't think this I but about anybody gained of aspect about? great schools go old. wanting out fun benchmark our work I'm chatting a important? single to be much. going we're most in so now our training we moved guys. we to work if question, to to that we I is beat training demographic to nine years of look, want that's to candidly, schools ever. systems. age rang developing we're up from years of believe than our just business. enjoying Greg important the ever I old. These sophisticated what pulp, to years training, in out that was to university, you there. because answer your "Hey, because four the functional and high but And And of like, want ever get a where Lots up train doing I old, down can go We're critical now we third-party be say rolling said, into onto what into the we XX, we with kids. XX really us, course, gym Starbucks. head in bigger can and years can down can can the I We to University fortunate to get of him right it's with right us they're schools, And when of be now, bigger deliver into truth that FXX Florida Stanford like, our a and of of between that only do is create XX, And to workouts talking the high kids these we're years I is, extremely will XX him to office And XX this school, an third-party to training we're love whether here? incredible that XX the rang we're him, to that said, military we're day gym Texas. out Texas which third-party actually success. flew Austin, are proud an I are I getting guys, base. because they're for ever years to a our course. would "Hey, and only for what work city for moment new element about go in an be out female, And these work really university. than having their to the we age gym only want XX these We product XX we're and to be to old. the old, So Norman. McDonald's. is, -- moment, delivering are workouts age about right we we be We're old, with every male, trialing say

Operator

Macquarie. Paul is The next with from question Golding

You may proceed.

Paul Golding

Congratulations much, Adam, team. on so and Thanks Chris quarter. the the

performance is you follow-up. in a XXX. have that I FSX? you to could I the versus such was existing And the color concepts wondering, units new give much on like concept was then any a period if Australia mature impressive as the how FXX in Just far at market as wanted ask sold for of

Adam Gilchrist

over just Chris. bump that to Yes, great I'll Yes. Chris. question.

Chris Payne

Around Paul, number Australian is Yes. FSX. X/X that of

So our concept. tone yoga, pilates,

Paul Golding

the Great. the on having And new with any respect despite uptake with sales it's reopening pandemic volatility the that forward great seems It in for like color great to reception, units and market. concept?

Chris Payne

Yes, haven't additional gates we you in actually guidance of to well been trailing modeled Obviously, growth haven't in have that well. the product any is We actually that the provided. all and out modeled FSX. of

numbers, So of for going us. that's be upside -- but the to in terms

Paul Golding

in franchisees around deployment, sales. around the then you would And real lastly, Thanks. statistics fronts opportunity color permanently, around on whether say you're you're there seeing Any the you story what U.S. with so with seen give incumbents opportunity. of the Great. opposite closing can estate of We've many be simplified. incumbents? Anything Anything for rollout around your success you opportunities can from or franchise that is good hearing give the great. store are that could sort

Adam Gilchrist

impossible been were, regions a I has able to has a be really should with of speed the and our to environment, multiple growth to in. e-commerce say, Amazon, created job, an open and moving up locations a with They frankly, open you. the in quite have Interesting I honest incredible up lot of that's platform which we've because an into commercial think breakneck that speed, Paul, question retailers where done do to

biggest So if you door. we to excited that And lot the had we're the in at able be opportunity in these obviously, is of fact businesses due walk look into never there's FXX e-commerce. areas about today, a operator an London. we into lot us fact to are inviting moving the the that of that, get to just and where locations even people a But

two, many this to Number So a for competitors. we number will grow been of around we at think years, Amazon that there's impacted speed. one great probably reasons they've really has continue COVID-XX and why is but two our number

and talk so, don't to to you at Exponential, at is I talk CrossFit, fact about the look friends want And but and if any I want our don't of -- about are platform some success. create a into turn have of FXX they going them broke and business up these their an opening want for we opportunities where number and to a of

a lot those being now our we franchisees. a continuing to see balance number COVID-XX challenge, we number have sheet But support folks. a right of two, one, for So

our will And find accelerate this less growth exclusively period have think not opportunities shoehorning we where out of And the Richard that period to that a get and our we lot have estate enabling to I CB that's compress real XX something that We really is go that location than currently then of can and a up. will for solution with nine-month signing six locations. in And CBRE, we've part location because interesting is and and between out funnel, be into But a franchisees come franchisees fact really, or the sites, there's that our to that that's assist months. can want we introduced compress just partnered us contract to to have great reopen. us open CBRE five there. of new Ellis a into that four potentially a big opening our to

Operator

is The question next with from Jonathan Komp Bard.

may You proceed.

Jonathan Komp

perspective you're on where year? you're units expand of recent sort actual we that your the assuming impacting about think terms markets, units seeing embedding sales the seeing of But within for of tied be is than could any maybe what what sell maybe the impact maybe more the closures, maybe ability given more model you're there helpful? in could I would what volumes? If more unique the what specifically on the to Australia, of your more near-term to balance Australia And some how and should revenue sold of you're the environment, across ask you the though, from

Adam Gilchrist

Australia. blaming other I'm We over people But being of whether XX% disease, COVID-XX. Chris, and not a number U.S., people of with but It's Australia been similar Australians see, will people is a there's any Australia I'll of in. and the heart of of you X.XXXX% political The but die got XX.X% then question. answer this of quickly. years in country reopening people would here, blame die age the of very dive obviously, vaccines, about would COVID-XX die has to cancer, XX% XX no it's death of mismanaged of of very good look, of would is not or average and limited things the can die in old see irrelevant. We history

the So this But we looking of emerging markets about the we U.S. whereby get through this. come robust like is we're And will Australia pretty good world a are we and feel that out we'll believe to fact U.K. this. the

them let importantly, will your dive But to be want exact ever want but because COVID-XX. More more that the this you that feeling we pause and in, about see we are, friends to We're the actually disappointed getting because and fit to more situation. drugging great good fries believe honest that because devastated people so be have of is we back be the this were we're really than -- I'll better really chances own get We're importantly, Australia Chris more that data, and reopen. moving ready many disappointed fitter in and that it. not are press and to are able

answer question. and in Chris and there let dive again, So just part the pause of the second I'll

Chris Payne

Thanks, sure. Adam. Yes,

mid- and time now when So is we Adam's around our John, I'd in XX% are the look, comment other COVID network to they what third It good saw outperforming and studio seen And members into when the wave quickly. studio a second And a just studios it add study only actually normalcy been in actually ramp for And got the guidance right projections. reopened second time getting there's really world in thing now that things the is that QX, Australian and happened the much COVID, reopened straight that contemplates the just what specifically, the case terms familiar shut then forward-looking ramp more to hit that everyone is the is of late Australia and when around. our pretty and in quicker. now back have was we approximately back into to QX. that Australia, what we've have with of to first actual closed that

up. base membership soon to good And said, we've into got the So is back the studios proves we're study as Australian open that I look, get that that optimistic to keen studio as as out. are allowed really a case our

is of sales really inquiry of that, Australia into volume, the addition the terms sales through FSX that is navigating this moment. steady units in to volume period In through lead just additional even remaining franchise level at

Jonathan Komp

franchise about for I on you Yes, growth that's rate XXX or really units as franchise what's you more beyond the it's guidance XXX just helpful. are embedded follow-up, that thinking look what's And XXXX, sold? how about Can year. right sold, think global for hit just as And the to needed for to my broadly talk the sort you then of number?

Chris Payne

sure. Yes,

Adam Gilchrist

sorry. you Chris, I'll dive let in,

Chris Payne

the gets to sold. Yes, at that let's already close year-to-date remember sales units -- That number our in range, guidance the to midpoint us that were comfortably. XXX

I'll second So first And take the question. then point. part that's Adam let of the the

Adam Gilchrist

a good Yes. XXXX, question. it's After

first is couple ever We base. are third-party a things. onto military go operator about of gym the really one to Number we're a excited

the obviously, folks that's three on number. retiring are folks may call you year may military or not the XXX,XXX military. So call last but big the there's this And a notice, from XXX,XXX. years, that In it,

able think you be number a our personnel. And we got like drive you've military have growth. believe to interestingly, countries into attract to huge franchise South our if that that, about continue to So huge network we business also Korea will

equity biggest how new drive will be as military of XXX we're to on funnel a show, say be the about that that inquired but our have just to life road wide today, writing people that this, to to fact of And we also brand environment but we multiple we entrepreneurs. verticals, of athletes. operators. SAS, with got, much private But franchise different FXXs said this franchisee on an not but bit bullish to want a we've lots think And about go the And that them. an will We have growth folks look can get buy have like thousands out the work and FXX to is I where just from so want are applicants that franchise. to way Australia, sit little yet. Seal we XX-XX we And best we create and We sales. don't Navy working from semiprofessional feeling under over currently at interestingly, we variety wanted XXX we saying that we operate people. here our that a want and military they're incredible they folks And of the just the in in that is XX fund with we're really folks XXX. we need own cautious just world's We're replicate military about think which delivering

see as incredible as an is on gym the And leaving interesting really ever And year. the us Miramar. an opportunity. So moving we military this third-party forward, a we're military that's base XXX,XXX people for stuff first in military the

Jonathan Komp

great. appreciate the I Yes, color. all

Adam Gilchrist

share XXXX. I too on I don't much Look, color apologize. more

So John. I apologize,

We have do at fully our got but one can't I numbers, And road that. our ways. TAM those apologize. CEO, aggressive I an sold the the far So on like military down too do to look ways as by next go to would you've to of year. is And

into XXXX So that I I say want to numbers. go I can't just apologize,

Operator

Capital from George question next Kelly with ROTH is Partners. The Instructions] [Operator

may You proceed.

George Kelly

question, Hi, guess. everybody. Thanks taking or my I for questions

So, about I wanted to ask marketing.

on a I franchise marketing-related pause the U.S. franchisees have You believe you sort of revenue some in that gave

to started what's those marketing-related kind curious, just into And your XXXX you. so Thank or franchise guidance revenue streams? baked those have And of -- turn back streams? revenue of sort related on to you

Chris Payne

back that be marketing back And George, Yes, QX as from that's that around back of very revenue through on QX, similar will very, advised will on. be switched it's coming IPO the to we middle coming speak. what we

George Kelly

what's just of I continuation started sort of -- how is to guess notify really, risk that? the Like franchisees has this been that but prior question the And have a you of received?

Chris Payne

difficult due actually due We've in our member the with our franchisees COVID. thoughtful as new well to Obviously, way. with new handle that through on-boarded We're marketing working way a vendors. to improving we're new Yes, the rollout CMO. a we strategy time have acquisition had

underway, So messaging is that yes.

Operator

The Ivankoe JPMorgan. with next question is from John

may You proceed.

John Ivankoe

for you U.S. thank $XX First, in comment million sales. system the on the

sales care XX-Q. could a lot I call that or hoping rest we in and those us was think this of I about get system hopefully of on the numbers world, in either the and Australia

Adam Gilchrist

S-X. I John, the we've June, Yes, through those think, outlined got in

John Ivankoe

we I know okay. -- have I'll -- make right. Okay, those there's -- audit. I'll make that have you sure an sure the those exact go through obviously, all numbers. to are

then numbers, you and I So we'll secondly, have sure to up, it to rounds the close, if I'll actually -- exact if but your we certainly -- I fairly use it make U.S. that me, was make sure And don't the mean them. point, tell I'll yes, are was those want those.

I'll those. So get

forward, if Secondly, can. going recommend but I reporting do those we

or $X confusion in just be relative consistently to the you of process of give those mean I when some what like as franchise Secondly, royalty when open? talk U.S. would sense what there's recognized recognized terms that I either a benefit. are is actually royalties the about was Can to store is in being just practice elaborate of global a million franchise to think royalties open. IPO kind a franchise of relative part store terms the practice us how

Chris Payne

Yes.

World the the in XXX useful amortize life Basically governing over contract. less the regard. take ASC you you and contract standard the Pack this So obviously is value the of that

that per close we're month So you're the in studio. that right, the monthly recognizing U.S. $X,XXX amount to is

quite So that is right.

John Ivankoe

actually I for to it's can many a least XX there for deals mean you how be store months, that or for eight at what X months assume actually In opening that in is before up words, S-X operation? open a know months not before going recognize store be store can loyalty whether mean years. other saw to a that that you're is that recognize that's some years. you of I And kind Okay. recognized the from eight opened. I can the royalties were in I is I point have

Chris Payne

Yes.

the consideration in So form hands upon with of franchisee changes executing agreement fee. the establishment the the material franchise

part useful life of over into the that amount that's recognition month per the and agreement. obviously forms the So there's of factored -- the revenue

therefore consideration start that that material the agreement. recognize XX-year point, to at there's franchise the upon So execution next in monthly And period. amount over we

they're built accordance whether a franchisee required Just of their is franchise be of not, a the defined though, franchise in and agreements, to open technically, will pay franchise terms it's our with billing reminder, agreement. or the starts, a regardless

John Ivankoe

the your expectations? certainly lower I probably I at expectations guess, -- down was Yes, mean and understood. is thought. 'XX the of of I of units the think final, range terms the net important lowering open tweaked that you of end fiscal previous terms is relative then There elaborate in question. XXX we on think of to fiscal openings And visibility to it 'XX and of course, in for says I that, of XXX the of -- of which relative Can what range expectations in kind that kind the

Chris Payne

no, chat consistent can call. our But our it's we in outlook. maybe John, that with about Yes.

no, we number maybe with down. But have revised not we that can you. that So certainly, address

We franchisees on-boarding have of their exceptional relation visibility health to obligations. our as well relates our purchase We've pack contractual brought service enough to the as it to inventory pipeline. forward

happy line with trued with we've where remainder the of all and So openings our that supply we'll to the you're you delivering off-line we've year guided, be address if chain, are in so of seeing up equipment that throughout and differently. something previously

John Ivankoe

were to we at XXX. range the XXX Well, is XXX, Yes. and

certainly the at And and they clarification. you for have being all. no problem depends it yes, thank one I that, all understood corrected defines guess I how obviously, So but

Operator

for additional There you. team no remarks. hand waiting this I time. at back Thank will management over questions additional are now the it to

Adam Gilchrist

conservative been Thanks. just XX we've Look, sit I And we've had we very quarter. as an business impacted unprofitable since over been to have one. We've months. by fiscally a the here today, say, I -- day last never COVID-XX

because to debt. our So during we're this about process able of that's really at IPO important breakneck relieve think and to all been speed, growing really we've to be excited

a in this space. have I we strongest that the would So sheet argue is balance

single best we sustainable out, see would be the echo I'll deliver up talk we're and it out you earlier, like what talk when have franchisees. that about I in every about about said have. the world's you because excited what the we need to we best wake And and going our to space, and And work we point, Thirdly, workouts day, is you world's this and of communities, to to say members. that's let's we I right, get waking many to folks to up our out FXX, We create create the these believe our is saying, last want across but enough. this talk do the we actually workout. to And bed, it's so the X about communities continue it thing think crucial that that get conversation a.m., these don't whole important most And we are in really say I'll globe. work people

X.XX about our largest countries growing conversation great where business India, geographies. about Singapore respect emerging conversation. up fitness, a that excited the our peers. times everything, fitness And in get are week, We're love glue absolutely they growing and we us they religions, countries our really with in per whole with growing and members the to are business Our our we transcend that's footprint we're in the we turn workout. in this because massive got respect there, important for languages, talk And to business, when franchise about we've

deliver So work out. continue we the world's best mandate to that think our is

the to thank to to anything exciting being folks there a I respect business. add period are we franchises. Chris continue I'll like dive is and to comments. But that let that an think pause want And time. my a we with say, lightweight challenged. and beginning because owning said our at We your of call, to business really this of in grow are you for the We lot

opportunity. an that's us, for However,

in conversation. pause time thank our next and again, So you to look our forward quarterly for your press

Chris Payne

in first-ever call to Thanks, speaking not-too-distant our as all future. everyone. to great again and been earnings as Yes. the public and a thanks, It's look you company Adam, forward

Operator

of you day. conference enjoy That Thank for your the participation, call. and rest your the concludes

F45 Training (FXLV) 27 Aug 212021 Q2 Earnings call transcript