F45 Reports Record Fourth Quarter and Full-Year Fiscal 2021 Results

F45 Training Holdings Inc. (NYSE:FXLV) ("F45" or the "Company"), the fastest growing fitness franchisor in the world according to Entrepreneur in 2021, today announced financial results for the fourth quarter and fiscal year ended December 31, 2021.

"I am delighted with our terrific Q4 and full-year results – we completed the year with record revenues and Adjusted EBITDA, we set a record sales pace of over 1,000 franchise sales for the full year, and we opened over 300 franchises globally during the year. We demonstrated our ability to execute on our growth strategies and have shown that both we and our franchisees can achieve great successes despite lingering impacts of the COVID-19 pandemic," said Adam J. Gilchrist, President, CEO, and Chairman of F45.

He continued, "Looking towards the remainder of 2022, I am confident that we have the right strategies in place to continue to drive our success. We continue to invest in and develop our new health and wellness concepts around the world, we have developed an incredible relationship with real estate partners that will optimize our real estate strategy to drive new studio openings and reduce the time from sale to opening, we are working on innovative franchisee financing solutions to help drive our sales pace and accelerate our new studio openings, and we have ordered approximately 1,200 equipment world packs to ensure we can meet our targets in 2022. As I have said before, our goal is to be the world's fastest growing franchisor, and I believe our ability to achieve this goal has never been stronger."

Fourth Quarter Fiscal 2021 Highlights Compared to Fourth Quarter 2020

• Total revenue increased from the prior year period by 242% to $61.8 million.
• Same store sales increased 6% globally and 53% in the United States.
• System-wide sales increased 27% globally to $113.9 million, and 95% in the United States to $49.9 million.
• System-wide visits increased 7% globally to 6.7 million, and 50% in the United States to 2.6 million.
• Net Franchises Sold totaled 290 compared to 30 in the prior year period.
• Net Initial Studio Openings totaled 131 compared to 61 in the prior year period.
• Reported net income of $14.8 million.
• Adjusted EBITDA increased from the prior year period by 376% to $25.9 million.⁽¹⁾

Fiscal Year 2021 Highlights Compared to Fiscal Year 2020

• Total revenue increasedfrom the prior year period by 63% to $134.0 million.
• Same store sales increased 12% globally and 42% in the United States.
• System-wide sales increased 36% globally to $410.3 million, and 96% in the United States to $167.0 million.
• System-wide visits increased 31% globally to 26.8 million, and 103% in the United States to 10.8 million.
• Net Franchises Sold totaled 1,057, resulting in system-wide Total Franchises Sold of 3,301.
• Net Initial Studio Openings totaled 312, resulting in system-wide Total Studios of 1,749.
• Reported net loss of $182.7 million.
• Adjusted EBITDA increased from the prior year period by 104% to $52.0 million.⁽¹⁾

^{(1) Please refer to explanation of non-GAAP financial measure for Adjusted EBITDA.}

Operating Results for the Fourth Quarter Ended December 31, 2021

Total revenue increased $43.8 million, or 242%, to $61.8 million from $18.1 million as compared to the prior year period.

• Franchise revenue increased $8.7 million, or 68%, to $21.5 million from $12.8 million in the prior year period. The increase in franchise revenue was driven by the increase in establishment, monthly franchise fees and other franchise-related fees.
• Equipment and merchandise revenue increased $35.1 million, or 667%, to $40.4 million from $5.3 million in the prior year period. The increase in equipment and merchandise revenue was driven by the delivery of approximately 300 World Packs during the quarter.

Gross profit increased $35.4 million, or 376%, to $44.8 million from $9.4 million as compared to the prior year period. Gross profit margin of 72% compared to 52% in the same period last year. The increase was primarily due to a higher mix of franchise revenue as well as higher equipment margins.

Selling, general and administrative ("SG&A") expenses were $36.8 million, compared to $26.1 million in the fourth quarter last year. The increase in SG&A expense was primarily due to significant one-time expenses including legal settlements, relocation expenses, stock-based compensation, and COVID-19 concessions.

Net income was $14.8 million, compared to net loss of $32.8 million in the fourth quarter last year.

Adjusted EBITDA was $25.9 million, compared to $5.5 million in the prior year period. Adjusted EBITDA margin of 42% represented an increase of 1200 basis points from the same period last year.

Operating Results for the Full Year Ended December 31, 2021

Total revenue increased $51.7 million, or 63%, to $134.0 million from $82.3 million as compared to the prior year.

• Franchise revenue increased $21.2 million, or 40%, to $73.7 million from $52.6 million in the prior year period. The increase in franchise revenue was driven by the increase in establishment, monthly franchise fees and other franchise-related fees partially offset by covid-related concessions.
• Equipment and merchandise revenue increased $30.6 million, or 103%, to $60.3 million from $29.8 million in the prior year period. The increase in equipment and merchandise revenue was driven by the increase in equipment and merchandise deliveries.

Gross profit increased $47.5 million, or 90%, to $100.1 million from $52.7 million in the prior year period. Gross profit margin of 75% compared to 64% in the same period last year. The increase was primarily due to higher equipment margins and increased franchise margins due to lower contribution of marketing membership expenses because of the COVID-19 pandemic.

Selling, general and administrative ("SG&A") expenses were $182.7 million, compared to $57.8 million in the prior year period. The increase in SG&A expense was primarily due to higher brand and marketing expenses, increased personnel expenses to support our growth as well as one-time expenses primarily due to higher stock compensation expenses.

Net loss was $182.7 million, compared to a net loss of $25.3 million in the prior year period.

Adjusted EBITDA was $52.0 million, compared to $25.5 million in the prior year. Adjusted EBITDA margin of 39% represented an increase of 800 basis points from the prior year.

Balance Sheet and Liquidity Overview

As of December 31, 2021, the Company had approximately $42 million of cash and cash equivalents, and no debt outstanding. This compares to

$29 million of cash and equivalents and $242 million of total debt outstanding, in the prior year period. As of December 31, 2021, the Company had approximately $89 million of capacity under its revolving credit facility.

Financial Outlook

The Company is providing the following financial guidance for the year ending December 31, 2022, which assumes no significant worsening of the COVID-19 pandemic that materially impacts performance, such as prolonged studio closures or other mandated operational restrictions:

• Full-year net New Franchises Sold of approximately 1,000.
• Full-year net Initial Studio Openings of approximately 1,000, which is expected to be weighted towards the back half of the year.
• Full-year revenue between $255 million and $275 million.
• Full-year Adjusted EBITDA between $90 million and $100 million.

Conference Call

A conference call to discuss the Company's fourth quarter results is scheduled for March 14, 2022, at 8:30 A.M ET. To participate, please dial 844-200-6205 or +1 929-526-1599 for international callers, and use the passcode 161563. The call is also accessible via webcast at https://ir.f45training.com/. A recording will be available shortly after the conclusion of the call. To access the replay, please dial 866-813-9403 or +44 204-525-0658, for international callers, and use the passcode 583284. An archive of the webcast will be available on F45 Training Holdings' investor relations website.

About F45

F45 offers consumers functional 45-minute workouts that are effective, fun and community-driven. F45 utilizes proprietary technologies: a fitness programming algorithm and a patented technology-enabled delivery platform that leverages a rich content database of over 8,000 unique functional training movements across modalities to offer new workouts each day and provide a standardized experience across the Company's global footprint.

For more information, please visit www.f45training.com.

Non-GAAP Financial Measures

In addition to reporting our financial results in accordance with U.S. generally accepted accounting principles ("GAAP"), this press release presents certain other supplemental financial measures, including Adjusted EBITDA, which is a measurement that is not calculated in accordance with GAAP. Management believes that Adjusted EBITDA is useful to management as it allows investors to evaluate the effectiveness of our business strategies, make budgeting and capital allocation decisions, and compare our performance against that of other peer companies using similar measures. Adjusted EBITDA is defined as net income before interest, taxes, depreciation and amortization and adjusted to exclude the impact of sales tax liability, transaction expenses, certain legal costs and settlements, COVID-19 concessions, growth and new market development expense as well as certain other items identified as affecting comparability, when applicable. Adjusted EBITDA eliminates non-cash depreciation and amortization expense that results from our capital investments and intangible assets, as well as income taxes, which may not be comparable with other companies based on our tax structure. Adjusted EBITDA should be considered in addition to, and not as a substitute for, net income in accordance with GAAP as a measure of performance. Other companies may define Adjusted EBITDA differently and, as a result the Company's measures of Adjusted EBITDA, it may not be directly comparable to those of other companies. A reconciliation of non-GAAP financial measures used in this press release to their nearest comparable GAAP financial measures is included at the end of this press release.

Financial Metrics and Other Data

This press release includes several key financial metrics and other data used by the Company management in assessing the Company's results of operations:

"Initial Studio Openings" means the number of studios that were determined to be first opened during such period. Prior to October 1, 2021, We classify an Initial Studio Opening to occur in the first month in which the studio first generates monthly revenue of at least $4,500. Starting on October 1, 2021, we classify an Initial Studio Opening to occur in the month in which we record the initial studio opening in our internal systems. Any studios that do not have an Initial Studio Opening under the prior definition are included as of October 1, 2021. Initial Studio Openings are not adjusted downward for studios that were temporarily closed due to the COVID-19 pandemic or otherwise.

"New Franchises Sold" means, for any specific period, the number of franchises sold during such period using the methodology set forth below for "Total Franchises Sold."

"Open Studios" means the number of studios that were open for business as of a certain date. A studio may be classified as an Open Studio regardless of whether or not it generated minimum monthly revenue of $4,500. During the COVID-19 pandemic, a significant portion of our network was forced to temporarily close, which reduced the number of Open Studios. As studios re-open in accordance with state and local regulations, they are reflected in the Open Studios figures.

"Same store sales" means, for any reporting period, studio-level revenue generated by a comparable base of franchise studios, which we define as open studios that have been operating for more than 16 months.

"System-wide Sales" are defined as all payments made to our studios and includes payment for classes, apparel and other sales for a given period. We track System-wide Sales as an indication of the strength of our franchisee network.

"System-wide Visits" means the number of registered individual workouts for any specified period. A workout is registered when the consumer checks into a class.

"Total Franchises Sold" represents, as of any specified date, (i) the total number of signed franchise agreements in place as of such date for which an establishment fee has been paid and (ii) the total number of franchises committed in a multi-studio agreement in place as of such date for which an upfront payment has been made, in each case that have not been terminated. Each new franchise is included in the number of total franchises sold from the date on which such franchise first satisfies the condition in clause (i) or (ii) above, as applicable. total franchises sold includes franchise arrangements in all stages of development after signing a franchise agreement, and includes franchises with open studios. Franchises are removed from total franchises sold upon termination of the franchise agreement.

"Total Studios" as of any specified date, means the total cumulative Initial Studio Openings as of that date less cumulative permanent studio closures as of that date. Total Studios are not adjusted downward for studios that were temporarily closed due to the COVID-19 pandemic or otherwise.

Forward-Looking Statements

F45's financial outlook and other statements in this press release that refer to future plans and expectations are forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve a number of risks and uncertainties. Words such as "may," "will," "should," "expects," "plans," "anticipates," "could," "intends," "target," "projects," "contemplates," "believes," "estimates," "predicts," "potential," or "continue" "or negatives of these words and variations of such words and similar expressions are intended to identify such forward-looking statements. Statements that refer to or are based on estimates, forecasts, projections, uncertain events or assumptions, including statements relating to F45's strategy, total addressable market and market opportunity, financial outlook, business plans, the pending acquisition of Vive Active and the anticipated benefits, future macroeconomic conditions, future impacts of the COVID-19 pandemic, and future products and services, also identify forward-looking statements. All forward-looking statements included in this press release are based on management's expectations as of the date of this press release and, except as required by law, F45 disclaims any obligation to update these forward- looking statements to reflect future events or circumstances.

Forward-looking statements are subject to certain risks, uncertainties and assumptions relating to factors that could cause actual results to differ materially from those anticipated in such statements, including, without limitation, the following: our dependence on the operational and financial results of, and our relationships with, our franchisees and the success of their new and existing studios; our ability to protect our brand and reputation; our ability to identify, recruit and contract with a sufficient number of qualified franchisees; our ability to execute our growth strategy, including through development of new studios by new and existing franchisees; our ability to manage our growth and the associated strain on our resources; our ability to successfully integrate any acquisitions, or realize their anticipated benefits; the high level of competition in the health and fitness industry; economic, political and other risks associated with our international operations; changes to the industry in which we operate; our reliance on information systems and our and our franchisees' ability to properly maintain the confidentiality and integrity of our data; the occurrence of cyber incidents or a deficiency in our cybersecurity protocols; our and our franchisees' ability to attract and retain members; our and our franchisees' ability to identify and secure suitable sites for new franchise studios; risks related to franchisees generally; our ability to obtain third-party licenses for the use of music to supplement our workouts; certain health and safety risks to members that arise while at our studios; our ability to adequately protect our intellectual property; risks associated with the use of social media platforms in our marketing; our ability to obtain and retain high-profile strategic partnership arrangements; our ability to comply with existing or future franchise laws and regulations; our ability to anticipate and satisfy consumer preferences and shifting views of health and fitness; our business model being susceptible to litigation; the increased expenses associated with being a public company; the occurrence of any event, change, or other circumstances that could give rise to the termination of the agreement to acquire Vive Active; the inability to timely complete or complete the Vive Active acquisition because of the failure to satisfy conditions to closing set forth in the acquisition agreement; the risk that the Vive Active transaction disrupts our current plans and operations and/or Vive Active as a result of the announcement, pendency or consummation of the transaction; the ability to successfully integrate the operations and employees of Vive Active into our operations; the ability to recognize the anticipated benefits of the Vive Active acquisition; and additional factors discussed in our filings with the Securities and Exchange Commission (the "SEC"). Further, many of these factors are, and may continue to be, amplified by the COVID-19 pandemic. Detailed information regarding these and other factors that could affect F45's business and results is included in F45's SEC filings, including in the section titled "Risk Factors" in F45's Final Prospectus dated July 14, 2021.

(a) New Franchises Sold are shown net of franchises that were signed but subsequently terminated prior to the initial studio opening.

(a) Initial Studio Openings are shown net of studios that have permanently closed which had a recorded initial studio opening.

^(a) Represents the impact of one-time sales tax liability arising from a change in timing of enforceability of certain contractual terms in arrangements with franchisees.

^(b) Represents transaction costs incurred as a part of a reorganization, certain acquisition-related costs, and the issuance of preferred and common shares, including legal, tax, accounting and other professional services.

^(c) Represents loss on derivative liabilities associated with a convertible note.

^(d) Represents certain one-time legal costs, primarily related to litigation activities and legal settlements.

^(e) Represents stock-based compensation of our employees, non-employees and directors.

^(f) Represents one-time recruitment expense of executive leadership and essential public-company roles.

^(g) Represents concessions made to studios impacted by COVID, including one time COVID-19 related write-offs.

^(h) Represents costs incurred as a part of the relocation of our corporate headquarters.

⁽ⁱ⁾ Represents one-time non-recurring costs incurred with launch of new brands.

^(j) Represents one-time charitable donation made in the amount of total PPP loan forgiveness pursuant to the use of proceeds discussed in our IPO prospectus.

^(k) Represents inventory written off.

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