F45 IPO Timing Not Right, Say Analysts

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.”

In 2019, actor Mark Wahlberg became an early investor and endorsee.

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?