Shares of F45 Training (NYSE:FXLV) stock are plunging lower by over 70% today following a reduction of guidance and a management switch-up. Notably, acclaimed actor Mark Wahlberg backs the company. In 2019, the actor invested $110 million into F45 through investment firm MWIG. Wahlberg explained:
“I’m a fitness fanatic […] I fell in love with F45 after I walked into a gym and saw people from all walks of life, all levels of fitness, working out together.”
However, today the company’s guidance reduction is putting a damper on its potential. F45 announced operational expense reductions and the termination of 110 employees. On the bright side, the company does expect that to reduce selling, general, and administrative (SG&A) expenses by between $15 million and $20 million per quarter.
On top of that news, though, founder and CEO Adam Gilchrist is stepping down. Gilchrist will remain on the company’s board. Meanwhile, Wahlberg — who serves as a director — has sold shares of FXLV stock on 28 separate occasions this year. These sales occurred through a 10b5-1 plan, a prearranged opportunity for insiders to buy or sell stock.
Let’s get into the details.
Wahlberg Sells Off FXLV Stock Before Guidance Reduction
Wahlberg’s sales foreshadowed the company’s drastic update. The fitness provider disclosed revenue guidance for the full year of between $120 million and $130 million. Previously, full-year guidance had been for between $255 million and $275 million in revenue. At the midpoint, that represents a reduction of about 53%.
In addition, F45 reduced net new franchise expectations from 1,500 to between 350 and 450. Net initial studio openings also fell from 1,000 to between 350 and 45.
The reduction of new facility openings will affect earnings before interest, taxes, deductions, and amortizations (EBITDA) as well. F45 now expects full year EBITDA of between $25 million and $30 million. That’s down from previous expectations of between $90 million and $100 million. Lastly, the company withdrew its prior free cash flow guidance of between $50 million and $60 million.
F45 attributed the poor guidance to franchise funding shortfalls. The company explained:
“The revised guidance assumes that the $250 million of growth capital provided by two previously announced franchise financing facilities, which F45 had arranged for franchisees to open additional studios, will not be available despite strong demand from franchisees.“
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On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.