F45 Training Holdings Inc.

Good afternoon and thank you for attending today's F45 Training Holdings Inc. Q1 2022 Earnings Conference Call. My name is Selena and I will be your moderator. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star 1 on your telephone keypad. I would now like to pass the conference over to our host, Adam Gilchrist with F45 Training. Please go ahead.

Good afternoon, everyone, and thank you for joining the call to discuss F45 training's first quarter results, which we released this afternoon and can be found on the investor relations section of our website at F45training.com. Today's call will be hosted by Chief Executive Officer Adam Gilchrist and Chief Financial Officer Chris Payne. Before we get started, I want to remind everyone that the management's remarks on this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on the current management's expectations. These may include, without limitations, predictions, expectations, targets, or estimates, including regarding our anticipated financial performance and the actual results could differ materially from those mentioned. Those forward-looking statements also involve substantial risks and uncertainties, some of which may be outside of our control that can cause the actual results to differ materially from those expressed in or implied by such statements. These factors and uncertainties, among others, are discussed in our filings with the SEC. We encourage you to review these filings for a discussion of these factors, including our earnings release and our filed quarterly report on Form 10-Q for the quarter ended March 31st, 2021. You should not place undue reliance on these forward-looking statements, which speak only as of today, and we undertake no obligation to update or revise them for any new information. This call will also contain certain nine GAAP financial measures, which we believe are useful supplemental measures that assist in evaluating our ability to generate earnings, provide consistency and comparability with our past performance, and facilitate period-to-period comparisons of our core operating results and the results of peer companies. Reconciliations of these nine gap measures to the most comparable gap measures and definitions of these indicators are included in our earnings release. Now, I would like to turn the call over to Adam.

I am pleased to report that our business is firing on all cylinders. Our key performance metrics are trending at or above pre-pandemic levels, and we are encouraged by the unprecedented demand from our franchise partners and members around the world. Overall, our momentum remains strong across our performance metrics. During the first quarter, we sold a record 706 net new franchises, which brought the total number of sold but not yet opened studios to over 2,200. This is an incredible accomplishment, particularly given the fact that all 706 of these new franchises are full fee-paying contracts. During the quarter, global same-store sales increased 6%, and U.S. same-store sales increased approximately 40%. Global system-wide sales increased 25%, and U.S. system-wide sales increased 73%. System-wide visits increased almost 7% globally and 37% in the United States. We continue to lead the industry with average weekly visits per member and expect them to increase to over three times per week which is a testament to our members' unwavering loyalty and dedication to F45. We have also seen improvements in AUVs, particularly in the US, where AUVs are at or above pre-COVID-19 levels. During the quarter, we delivered approximately 240 equipment well-packs that were received on time. This achievement is a result of the proactive measures we have taken over the last two quarters to mitigate macro supply chain challenges. We remain confident in our ability to meet expected demand for the balance of the year. During Q1, we opened 117 new studios, which was in line with our expectations, bringing the total number of open studios to 1,866 globally. As we have noted on our year-end earnings call, we expect studio openings this year to be back half-weighted due to industry-wide factors, including franchise financing, which I'll actually address shortly, as well as permitting and construction delays, which is a broader issue in the commercial construction industry. Strong growth continues with the rollout of their 45 studios and colleges, with many new clients coming on board during the period. Some including University of North Carolina, University of West Virginia, Virginia Tech, Texas Tech. S45 and our workout continues to dominate this vertical, and this is underscored by the fact that we are the only boutique company that operates third-party workouts on college campuses. With over 450 college proposals currently being negotiated, we are very optimistic to see this market segment continue to grow. Our military rollout has now seen over 2,500 servicemen and women apply to own and operate an F45 franchise. This vertical has two enormous opportunities. Number one, it'll drive revenue from operating F45 studios on military bases. And number two, generate franchise inquiry demand to continue to fuel our F45 rollout. With many new verticals maturing into this franchise network, we remain confident in the TAM that we have previously presented. For 2022, we are not changing our openings guidance and we believe in our ability to deliver the 1000 openings this year as we have both the equipment packs now available and the contracted franchises moving through the opening process to achieve this target. On the supply side, as previously discussed, we have already secured 1200 equipment wall packs for delivery this year. And on the demand side, we have approximately 1000 100 franchisees that have a contractual obligation to pay for and receive equipment packs by the end of 22, as well as nearly 900 contracted franchises that are in advanced process of securing financing and or finalizing a lease so they can commence their opening process. Now, I would like to provide an update on our strategic growth initiatives, starting with franchise financing. First, we announced the $150 million facility with affiliates of Fortress Investment Group, which has the potential to expand to 300 million. This facility will principally be used to help our existing franchise and secure growth capital to fund new studio development on a more timely basis and on more attractive terms than is otherwise available. Second, we announced the $100 million facility to support our after program, which stands for Armed Forces to Entrepreneurship. After is an exciting new chapter in the relationship we have established with the US military and the veteran community in the United States. And through this innovative program, we will have the opportunity to empower many of the 200,000 service members who leave the US military each year to pursue an exciting entrepreneurial opportunity that may otherwise not be possible due to financial constraints. We are grateful for their service and we look forward to the opportunity to serve them as new S45 business partners. Even before marketing the new financing, we have already received over 2,500 inquiries from interested prospects who want to become S45 franchise owners. By establishing new bespoke financing solutions tailored to the specific needs of our franchisees, we have taken proactive measures to assist our franchisees in executing on their growth ambitions. In particular, we are securing the pathway to 1,000 new openings this year, and we are creating a playbook for establishing financing solutions to support our expansion in 2023. To that end, we have launched a new process to establish a third financing vehicle to fund growth outside the U.S. I'm excited to share developments on this front in the coming months as that process unfolds. Because these facilities will be funded by third parties and be treated as off balance sheet from F45's perspective, we are able to maintain the compelling economics of our typical franchise agreement and our asset life economic model. Next, I will provide an update on real estate and new studio construction. First, let me provide an overview of the permitting and construction delays that I previously mentioned. As most of you probably know, permitting and build-outs are simply taking longer today than they did prior to the pandemic, which is an industry-wide challenge in commercial construction. Nevertheless, our tech-driven real estate approval process provides visibility throughout the entire franchise opening process. We approve the property LOI and then sign off on city approvals and on the contractors. so that for each individual franchisee, we know exactly where they are in the process. And by knowing this, we maintain strong visibility into our new studio opening pipeline, which reinforces our guidance on full year openings of 1,000. I would also like to highlight that our F45 real estate team is well experienced, and our partnership with CBRE is providing tools to expedite the site selection and construction process. This is an area of the business we have invested in through partnerships, systems, and key personnel, and we believe it is an area which can bring tremendous value for our franchise partners. Next, I want to provide some color on a very important new strategic initiative, the S45 Shared Services Platform. Earlier this year, we established a new group within S45 that will be responsible for providing services for a fee to franchisees across four main areas. membership sales, studio bookkeeping, marketing, and real estate. With real estate, it includes site selection, lease negotiation, permitting, and construction. By offering a solution for franchisees to outsource these functions to F45, we will provide them with the opportunity to focus their efforts exclusively on operating their studios and delivering a world-class experience to their members. I'm excited about the potential for this new initiative because it will help our franchisees operate their businesses more efficiently and profitably, which in turn will allow them to continue to scale their respective footprints. In addition, I expect for this new division to become a meaningful profit center for S45 over time as it achieves the benefits of economy of scale. Lastly, on the marketing side, we continue to grow brand awareness and drive engagement with our membership. Just last week, we debuted our newest exclusive workout with one of our key global ambassadors, David Beckham. As expected, the launch of this new workout called DB45 was a huge success. Fitness programming has always been a key differentiator for our business, and by leveraging our industry-leading team of global ambassadors to further elevate our fitness offering, we are truly delivering on a mission to offer our franchisees and members the world's best workout. In conclusion, we are very excited about the opportunities in front of us. Our business is extremely well positioned with a new studio pipeline that has never been stronger and strategic initiatives in place to streamline the path to opening new studios. We are in front of the supply chain issues that are impacting many and we have a clear visibility to deliver 1,200 equipment well packed, and 1,000 openings this year. With that, I'll turn the call over to Chris.