Segment and geographic area information

6 Months Ended

Jun. 30, 2023

Segment Reporting [Abstract]

Segment and geographic area information

Note 19—Segment and geographic area information

The Company’s operating segments align with how the Company manages its business and interacts with its franchisees on a geographic basis. F45 is organized by geographic regions based on the Company’s strategy to become a globally recognized brand. F45 has three reportable segments: United States, Australia and Rest of World. The Company refers to “United States” as the operations in the United States and South America. The Company refers to “Australia” as the operations in Australia, New Zealand and the immediately surrounding island nations. The Company refers to “Rest of World” as the operations in locations other than the United States and Australia.

The Company’s Chief Operating Decision Maker (“CODM”) group is comprised of two executive officers, its principal executive officer and principal financial officer. The Company identified changes to the CODM group with the appointments of Robert Madore as Interim Chief Financial Officer and Tom Dowd as Interim Chief Executive Officer on February 13, 2023 and March 29, 2023, respectively. Further, on July 13, 2023, the Board appointed Patrick Grosso as Interim Chief Financial Officer, in light of the vacancy created by Robert Madore’s resignation as Interim Chief Financial Officer on July 9, 2023. There was no change in our operating or reportable segments as a result of the change in CODM. Messrs. Madore and Dowd served as the CODM that reviewed revenue and gross profit for each of the reportable segments. Gross profit is defined as revenue less cost of revenue incurred by the segment.

The Company does not allocate assets at the reportable segment level as these are managed on an entity wide group basis.

The following is key financial information by reportable segment which is used by management in evaluating performance and allocating resources (in thousands):

	For the Three Months Ended June 30, 2023						For the Three Months Ended June 30, 2022 (As Restated)
	Revenue		Cost of revenue		Gross profit		Revenue		Cost of revenue		Gross profit
United States:
Franchise	$	8,655	$	2,198	$	6,457	$	12,145	$	1,392	$	10,753
Equipment and merchandise	1,706		1,161		545		5,292		5,772		(480)
	$	10,361	$	3,359	$	7,002	$	17,437	$	7,164	$	10,273
Australia:
Franchise	$	2,822	$	248	$	2,574	$	3,492	$	239	$	3,253
Equipment and merchandise	134		176		(42)		1,051		1,012		39
	$	2,956	$	424	$	2,532	$	4,543	$	1,251	$	3,292
Rest of World:
Franchise	$	3,007	$	58	$	2,949	$	3,472	$	112	$	3,360
Equipment and merchandise	712		981		(269)		2,249		2,308		(59)
	$	3,719	$	1,039	$	2,680	$	5,721	$	2,420	$	3,301
Consolidated:
Franchise	$	14,484	$	2,504	$	11,980	$	19,109	$	1,743	$	17,366
Equipment and merchandise	2,552		2,318		234		8,592		9,092		(500)
	$	17,036	$	4,822	$	12,214	$	27,701	$	10,835	$	16,866

	For the Six Months Ended June 30, 2023						For the Six Months Ended June 30, 2022 (As Restated)
	Revenue		Cost of revenue		Gross profit		Revenue		Cost of revenue		Gross profit
United States:
Franchise	$	17,548	$	4,291	$	13,257	$	24,546	$	2,429	$	22,117
Equipment and merchandise	3,719		3,369		350		11,156		9,580		1,576
	$	21,267	$	7,660	$	13,607	$	35,702	$	12,009	$	23,693
Australia:
Franchise	$	5,587	$	370	$	5,217	$	6,940	$	412	$	6,528
Equipment and merchandise	508		625		(117)		2,445		2,559		(114)
	$	6,095	$	995	$	5,100	$	9,385	$	2,971	$	6,414
Rest of World:
Franchise	$	5,958	$	167	$	5,791	$	7,483	$	209	$	7,274
Equipment and merchandise	1,296		1,852		(556)		4,519		4,066		453
	$	7,254	$	2,019	$	5,235	$	12,002	$	4,275	$	7,727
Consolidated:
Franchise	$	29,093	$	4,828	$	24,265	$	38,969	$	3,050	$	35,919
Equipment and merchandise	5,523		5,846		(323)		18,120		16,205		1,915
	$	34,616	$	10,674	$	23,942	$	57,089	$	19,255	$	37,834

Selling, general and administrative expenses, other expenses, and taxes are not allocated to individual segments as these are managed on an entity wide group basis. The reconciliation between reportable segment gross profit to net loss is as follows (in thousands):

	For the Three Months Ended June 30,
	2023		2022 (As Restated)
Segment gross profit	$	12,214	$	16,866
Selling, general and administrative expenses	27,739		51,926
Loss on derivative liabilities	3,361		—
Change in fair value - warrant liabilities	—		(1,265)
Interest expense, net	5,059		696
Other income, net	(430)		(1,291)
Provision for income taxes	211		23,298
Net loss	$	(23,726)	$	(56,498)

	For the Six Months Ended June 30,
	2023		2022 (As Restated)
Segment gross profit	$	23,942	$	37,834
Selling, general and administrative expenses	59,243		84,042
Loss on derivative liabilities	3,361		—
Change in fair value - warrant liabilities	—		(1,265)
Interest expense, net	8,290		822
Other income, net	(984)		(669)
Provision for income taxes	411		20,880
Net loss	$	(46,379)	$	(65,976)

As of June 30, 2023, the Company had property and equipment of $8.2 million and $1.1 million in the United States and Australia segments, respectively. As of December 31, 2022, the Company had property and equipment of $8.7 million and $1.1 million in the United States and Australia segments, respectively. No segment other than the United States and Australia segments accounted for more than 10% of total property and equipment, net as of June 30, 2023 and December 31, 2022.