Good afternoon. Thank you for attending the F45 Training Holdings Inc. quarter two 2021 earnings call. All lines will be muted during the presentation portion of the call, with an opportunity for questions and answers at the end. I would now like to pass the conference over to your host, Bruce Williams, Managing Director with F45 Training Holdings. Thank you. You may proceed.
Good afternoon, everyone, and thank you for joining the call to discuss F45 Training's second 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 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 current management expectations. These may include, without limitation, predictions, expectations, targets, or estimates, including regarding our anticipated financial performance. Actual results could differ materially from those mentioned.
These forward-looking statements also involve substantial risks and uncertainties, some of which may be outside of our control, that could cause 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 quarterly report on Form 10-Q and our earnings release. You should not place undue reliance on these forward-looking statements. We 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 non-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 comparison of our core operating results and the results of peer companies. Reconciliations of these non-GAAP measures to the most comparable GAAP measures and definitions of these indicators are included in our quarterly report on Form 10-Q and in our earnings release. Now, I would like to turn the call over to Adam.
Thank you, Bruce. Thank you everyone for joining us today for our call as a public company. I want to start off by saying that we are thrilled to enter this next chapter of our journey. I'm very proud of what the F45 team has accomplished over the last few months and the strong results we delivered in the second quarter. For those of you who are not already familiar with our business, F45 is the fastest-growing fitness franchise with a mission to create a leading global fitness training and lifestyle brand. We offer functional 45-minute workouts that are high-intensity interval training based, with sessions that we believe are the world's best workout.
We deliver our workouts through our digitally connected global network of studios operating in 65 countries. We've built a differentiated technology-enabled platform that allows us to create and distribute the workouts to our franchise base every day of the week at massive scale. Our unique platform has helped drive our rapid growth. It also helps promote the success of our franchisees through standardization of our world's best workout and enables us to deliver results to our members with this incredible workout. F45 had a very strong second quarter, underscored by a record 554 new franchises sold, with 68 net new studios opening during the quarter, system-wide same-store sales growth of 126%, total revenue growth of 54% to $26.8 million, and an adjusted EBITDA growth of 7% to $10.7 million.
Despite challenges posed by the COVID-19 pandemic, we grew our footprint and experienced minimal permanent closures during 2020, which really underscores the resilience of our business model. At the end of the second quarter 2021, we had over 2,800 total franchises sold and over 1,500 total studios open in 65 different countries. As of June 30, 2021, 91% of our network had reopened. Our differentiated approach to fitness is firmly rooted in three pillars of our DNA: innovation, motivation, and most importantly, results. Starting with innovation. Innovation is at the core of everything we do. We are dedicated to driving new innovations that elevate the F45 Training experience and further our position as a global fitness training and lifestyle brand.
We are able to distinguish ourselves from competitors through such innovations, including our technology-enabled distribution platform and our proprietary fitness algorithm, which configures movements from our content library containing thousands of exercises into new workout plans, ensuring that virtually no two workouts are ever the same. Second pillar is motivation. We believe the foundation for any effective fitness program is motivation, and we motivate our members through a combination of positivity, inclusivity, and teamwork, which builds communities and encourages our members to view each studio as a sanctuary. The last key pillar is results. Supported by the sustainability of our workouts over time, we strive to help our members achieve and maintain results by focusing on creating a sustainable fitness program designed to encourage members to visit studios multiple times per week over the course of their long-term fitness journey. Let's talk about growth.
We have a significant footprint expansion opportunity both in the United States and across the rest of the world. Starting with the U.S., we continue to believe that there is a significant long-term opportunity to meaningfully expand our franchise studio footprint. As of June 30, 2021, we had 1,379 franchises sold and 556 open studios in the U.S. Based on our white space analysis, we believe there is long-term studio potential for us to open over 7,000 studios in the U.S. Outside our core markets of the U.S. and Australia, we have demonstrated the portability of our brand and franchise model in 65 countries. We have designed our studios to be easily deployed in both developed and emerging markets, and to drive continued growth in both under-penetrated existing markets and new markets. Based on our global white space analysis, we see potential for approximately 16,000 studios outside the U.S.
Let me also take a moment to touch on a few of our growth drivers that we're really excited about. Multi-unit franchise systems is the first that I'll touch on. The majority of our franchisees today consist of owner-operators that manage single locations. Going forward, we intend to seek further opportunities to develop multi-unit franchise systems with select financial partners. As of June 30, 2021, approximately 51% of our franchises sold were owned by multi-unit franchisees, up from approximately 40% as of the end of 2019, which really highlights the strong market demand for multi-unit franchise opportunities and our ability to sell to existing franchisees. Secondly, what are our new channels? We believe there are significant opportunities to expand into new channels, and we are actively pursuing potential opportunities to partner with major universities, high schools, corporations, and military facilities.
We currently have 29 studios located in major university campuses in the U.S. In June 2021, we opened our first studio in a government military base in Miramar, California. Thirdly, we're also looking at new target demographics. We believe there is a significant opportunity to create workout programs that enable us to target a broader range of consumer demographic groups. We have also recently developed a new fitness concept in Australia called FS8, which integrates three popular methods in the health and fitness industry, the remixing of Pilates, yoga, and tone to create a new workout style. In addition, we have additional concepts in development, including Malibu Crew, a functional fitness studio clubhouse targeting men over the age of 50, as well as Avalon House, a studio sanctuary for women of a similar age. As you just heard, there's tremendous opportunities for growth across our business.
I'm thrilled by the great teams we have built at both the corporate and the franchisee level. We have an amazing management team who is focused on executing our growth strategy and continuing to drive shareholder value. Our franchise partners are well-capitalized and committed to growing the businesses, and I believe that we have developed a platform that can be one of the most powerful franchise systems in the world. I'll turn it over to Chris to go over our financial results.
Thanks, Adam. Good afternoon, everyone. I'll begin by reviewing the details of our second quarter results and then provide our outlook for the full FY 2021. In the second quarter, we sold 554 new net franchises and opened 68 new net studios. We believe these strong net sales numbers demonstrate the growing awareness of our brand and our ability to sell franchises globally. For the second quarter of 2021, total revenue increased 54%, from $7.5 million in the prior year to $26.8 million. Same-store sales increased by 126%, driven by strong membership recovery at our studios globally as pandemic restrictions have relaxed and as studios have continued to reopen from COVID-19 mandated restrictions. As of June 30, 2021, approximately 91% of our studios globally had reopened from COVID-19 mandated closures. In April and May and June 2021, we had strong year-over-year membership growth.
As of August 21st, approximately 70% of our studios globally are open, reflecting the impact of the recently imposed COVID restrictions in Australia. In the U.S., virtually all of our studios have reopened following the temporary closures due to the COVID-19 restrictions. Regionally, our revenues have increased 84% in the United States, 68% in Australia, and declined 2% in the rest of world segments. We have a high level of visibility into our revenue streams as we operate nearly 100% franchise model. We charge new franchisees a one-time establishment fee of $50,000, which is amortized over 10 years, and monthly franchise fees, which are the greater of $2,500 a month or 7% of gross revenues. Inclusive of the one-time establishment fee, franchisees are contractually required to purchase a World Pack, which consists of all of the equipment, signage, and technology they need to operate their studio.
We believe our World Packs differentiate us as a franchisor. Nearly all necessary items a franchisee needs to operate their business gets delivered in a 40-foot shipping container, and our franchisees see a tremendous amount of value in the World Pack. This one-time equipment sale of $125,000 is recognized at the time of delivery. Refresh & Upgrade equipment revenues vary year to year depending on usage and new equipment introductions, but currently do not constitute a significant part of equipment revenues. We break out our revenue into franchise and equipment revenue. Moving on to franchise revenue. Franchise revenue was $20.6 million, an increase of 71% from $12.1 million in the prior year period. The increase in franchise revenue in the quarter was driven by new franchise sales. A one-time revenue catch-up adjustment of approximately $3 million related to prior periods also favorably contributed to the franchise revenues in the quarter.
This adjustment is due to changes in accounting estimates on the recognition of two types of contracts, the stimulus deals that we entered into last year, and contracts in certain U.S. states where royalty billings for a particular studio do not begin until that studio is open. I want to state clearly, this is not an acceleration of revenue. Rather, we started recognizing revenue for our stimulus and deferred state contracts consistent with how we recognize revenue with our other contracts. It's also important to note that we would always have recognized this contract in franchise revenue, and our change in estimates have been guided by GAAP. In Q2 2021 and beyond, we will recognize revenue related to these stimulus contracts and the deferred state con- in each period. Geographically, we saw strong growth across regions.
Franchise revenue increased to 57% in the U.S., 112% in Australia, and 76% in rest of world. Our equipment revenue increased 16% to $6.3 million from $5.4 million. This year-over-year increase was primarily driven by World Pack equipment sales to new franchisees. Equipment sales in the quarter were modestly impacted by delivery delays at the end of the quarter. We caught up with our delivery schedules by the end of July. We've taken the necessary steps to purchase in advance so we can deliver equipment consistent with the contractually required delivery dates of our franchisees. Regionally, equipment revenues increased 227% in the U.S., declined 28% in Australia, and declined 66% in rest of world. Equipment revenue declines in Australia and rest of world were driven by the deferral of World Pack deliveries due to the pandemic during the second quarter. Moving on to gross profit.
Gross profit increased to $21.6 million compared to $13.2 million in the second quarter of last year. Gross profit margin was 80.6% in the second quarter, up 490 basis points from the same period last year, reflecting a higher mix of franchise segment revenues in the quarter. SG&A for the quarter was $18.6 million compared to $7.6 million a year ago. The increase in SG&A expense was primarily driven by professional fees and other one-time brand-building investments. We focused our marketing investments and brand-building initiatives, including partnerships with new brand ambassadors, efforts to promote our newer concept, FS8, and other market-specific promotional efforts. Moving on. Adjusted EBITDA increased 7% from $10.2 million to $10.7 million in Q2 2021. Adjusted EBITDA margin was 0.9% in the second quarter versus 57.4% in the prior year period. This decline was primarily due to the investments I mentioned above.
Net interest expense in the quarter was $8.9 million, which was compared to $0.4 million in the second quarter of last year. The increase in interest expense was due to the incremental $206 million debt outstanding in 2021. Turning to the balance sheet. As of June 30, 2021, prior to our IPO, we had cash and cash equivalents of $18 million and total debt outstanding of $255 million. On July 14, we completed our IPO, in which a total of 20.3 million shares of common stock were sold at $16 per share, or gross proceeds of $350 million. The company received $279 million in proceeds, net of underwriters' discounts and commissions.
The net proceeds were used to repay all existing debt, pay the purchase price for our acquisition of certain assets of Flywheel, the indoor cycling studio, and pay one-time cash bonuses to certain employees. Additionally, in August 2021, the underwriters in the company's IPO partially exercised an over-allotment option to purchase an additional 300,000 shares of the company's common stock from the company. The company received $4.6 million in net proceeds from the purchase of the additional shares after deducting the underwriter costs and commissions. On August 13th, we amended our secured credit agreement. Our updated credit agreement provides for a $90 million, five-year senior secured revolving facility, and under certain circumstances, we may increase the aggregate principal amount of the revolving commitments by an aggregate amount of up to $35 million.
I'm really thrilled by our current capital structure and the flexibility it gives us in the face of the lingering impacts of COVID-19 following these recent equity and debt financing activities. Just to reiterate, following the IPO, we repaid all of our outstanding debt, excluding the convertible note, which converted into equity at the IPO. We amended our credit facility to provide for a $90 million commitment, none of which we have drawn to date. We have over $60 million of cash in our account. Combined with our capital-light model and proven ability to generate significant free cash flow, we feel very comfortable with our current capital structure, and we're excited about the opportunities to invest in the business going forward. Moving on to our outlook for fiscal 2021. We expect full-year revenue to be between $132 million and $137 million.
Full-year net franchises sold to be between 800-850. Full-year net new franchise openings to be between 220 and 260. Adjusted EBITDA to be between $50 million and $52 million. This outlook constitutes forward-looking statements and subject to risk and uncertainties discussed at the beginning of this call. Please note, the outlook does not assume a significant worsening of the COVID-19 pandemic that may seriously impact performance, including prolonged studio closures or other mandated operational restrictions. As a reminder, a reconciliation of these non-GAAP measures to the most comparable GAAP measures and definitions of these indicators are included in our quarterly report from our 10-Q and in our earnings release. I'll now turn the call back over to Adam for some closing remarks.
Thank you very much, Chris. Look, I'd like to thank everybody that's on the call for just taking the time out, and just spending some time with us, because we're obviously extremely passionate and proud of what we've achieved. More importantly, we change people's lives, and that's really part of our DNA. We're here to build out a great franchise system. As we discuss with every single franchisee that looks at buying a franchise of ours, we say, "We want to change people's lives." We do it one member at a time. It's exciting because we have a great business and our mandate at head office is about delivering the world's best workout every single day across our F45 TV platform. Again, I thank everybody for just taking some time out to listen to this call.
We look forward to continuing to grow this business and hopefully have all you folks that are on the call sharing our journey. It's been such an incredible one for the last eight years. I'll pause there and hand it back to Bruce and allow you guys to dive in with any questions that you may have.
O perator, we're ready for questions.
Absolutely. We will now begin the question and answer session. If you would like to ask a question, please press star followed by one on your touchtone keypad. If for any reason you would like to remove that question, please press star followed by two. Again, to ask a question, press star one. Those of you asking a question are asked to limit yourselves to one question and one follow-up. We will pause here briefly to allow questions to generate in queue. The first question is from Oliver Chen with Cowen. You may proceed.
Thank you. Hi, Chris and Bruce. We also see a big opportunity for U.S. unit growth, 7,000 or more. Could you let us know or inform us on how you see that opportunity and why you see that opportunity in terms of the longer-term white space? Second, a bigger picture question, as you think about other platforms and other concepts, how do you approach innovation and stay close to your core competencies? Which of these concepts might be bigger or prioritized ones for the United States as well? Thank you.
Well, that's a great question. Firstly, we sort of look at the TAM being 7,000 admittedly.
We can argue about what we've got. It's more of an art form. We looked at the Australian experience, where we have 27 million people, a GDP that's a 15th of the size of the U.S. We extrapolate that number out, and you arrive at a number that's actually closer to 9,000 studios in the U.S. We give that a haircut, and we arrive at 7,000. That's the first part of the answer, and I hope you can look at the Australian experience and think that it's very similar, with respect to culture. You can also look at the CrossFit experience, where they had somewhere in the range of 7,000 in the U.S., and we think that that's about the right number.
If you look at your second part of your question, which is innovation, we believe that that is a critical part to our success. When we talk about F45, we have three key pillars. First being innovation, second being motivation and results. With respect to innovation, we have over 6,000 different exercises that are filmed. It's crucial for us to continue to innovate and create a benchmark with respect to moving that number of exercises from 6,000 - 8,000 to 10,000. We're really excited about the fact that every day somebody turns up for an F45, and they do a workout that has never been repeated in the past. This is being done in universities, it's being done in military bases.
In Miramar, where we just launched, we have these military folks that have, hand on my heart, we went down there, they're saying it's the world's best workout. We're really excited about innovation being a critical part of our focus. Every single day we wake up, we believe that we have a mandate to deliver the world's best workout. To do that, to your question, we have to have great innovation. That's something that really keeps us up at night. We believe we're doing a great job in continuing to expand our exercise encyclopedia.
Thanks, Adam. As you think about new concepts, which ones are you most excited about for the roadmap, and how do you think about your company more broadly as a platform, as you continue to think about other opportunities as well?
Well, to be honest, I don't get more excited about training teenagers than I do someone that's my father's age, in his 70s. I think we, as the world-leading organization in fitness and wellbeing, have a responsibility to deliver the world's best workout across an age demographic from, I'm talking from five years old, I've got a three-and-a-half-year-old, all the way up to 90 or 100. We see this responsibility being critical to our growth. Obviously, there are age demographics that we believe have been neglected, and that's the truth. They've totally been neglected. As we sit here today, we have nearly 3,000 franchises sold. But I can tell you that after your family, the most important thing in your life is your health.
We believe we can be bigger than Starbucks, we can be bigger than McDonald's, and we will do that because we are delivering an incredible product to age demographic, whether they're 12 years old, 17 years old, 70 years old. At the moment, we're trialing workouts with Greg Norman. I'm really fortunate to be in Florida right now with him, chatting to him every single day about workouts that work for him, talking about workouts that work for kids. We're the only third-party gym ever to go into a high school, ever. We're doing that right now, where we're going to deliver these workouts to kids aged between 12 and 17 years old.
Look, when Stanford rang us up and said, "Hey, we want an F45 in our university." We're like, "Of course." University of Texas rang us up and said, "Hey, can you get down here?" I flew down to Austin, Texas. I love that city so much, we moved our head office there. I was like, "Of course, we can train these guys." These are schools that are the most sophisticated schools in terms of developing great systems. To answer your question, we're excited about training anybody that's wanting to be trained from the age of 4 - 90 years old. Look, I don't want to beat this to a pulpit. We're the only third-party gym ever to go onto a military base. We're the only third-party gym ever to go into a university.
Right now, we're rolling out into high schools, which is, for us, an extremely proud moment. The truth is, what are we excited about? Lots of things. What do I think is really important? I actually think it's the youth. If we can get these young guys, whether they're male, female, 12, 14, 17 years old, just getting out and having some fun with our training, that is a critical element of our success. We want to create a new benchmark of training. Functional training in our environment is what I would say to be, and I say this candidly, to be the most important aspect of our business.
Adam, thank you very much, and best regards.
Thank you.
Thank you, Mr. Chen. The next question is from Paul Golding with Macquarie. You may proceed.
Thanks so much, Adam, Chris, and the team. Congratulations on the quarter. Wanted to ask you, the performance as far as units sold in the period in Australia was impressive for such a mature market at 109. I was wondering if you could give any color on how much of that is the existing F45 concept versus new concepts like FS8. I have a follow-up.
Great question. I'll just bump that over to Chris. Sorry, Chris.
Hi, Paul. How are you? Yeah, around two-thirds of that Australian number is FS8, our Yoga, Pilates, Tone concept.
Great. Any color with respect to forward sales on units for the new concept? It seems like it's having great reception, great uptake despite the volatility and reopening with the Pandemic in that market.
Yeah. We actually haven't modeled in to the guidance that you all have been provided. We actually haven't modeled in any additional growth of FS8. Obviously that product is well out of the gates and trialing well. In terms of the numbers, that's going to be upside for us.
Great. Lastly, around the U.S. opportunity. Any color you can give on the real estate opportunity there with incumbents? We've seen so many statistics around incumbents closing permanently, sort of the opposite story of what you're seeing with your success in franchise sales. Anything you can say around whether you're hearing from franchisees that deployment, the opportunities for storefronts are good or rollout is simplified. Anything you could give around that would be great. Thanks.
Paul, I think that's a really interesting question because the speed, and the breakneck speed I should say, of our growth has to do with Amazon, to be honest with you. They have done an incredible job moving a lot of commercial and retailers into an e-commerce environment, which has created a platform where we've been able to open up multiple locations in regions that were, quite frankly, impossible to open up in. If you look at F45 today, we're the biggest operator in London. That is due to the fact that obviously a lot of these businesses are moving into e-commerce. We get excited about the fact that there's a lot of people inviting us into areas and locations where we just never had an opportunity to be able to even walk in the door.
We think that there's probably two great reasons why we will continue to grow at this speed. Number one is Amazon, and they've been around for many years. Number two, COVID-19 has really impacted a number of our competitors. If you look at, and I don't want to talk about CrossFit, and I don't want to talk about any of our friends at Xponential. The fact is, some of them are going broke. We have a number of these opportunities opening up where they want to turn their business into an F45 and create a platform for success. We see COVID-19 right now being a continuing challenge, number 1 for our franchisees. Number two, we have a balance sheet to support a lot of those folks. We have less than 20 that will not reopen.
Really, I think that this is a great period where we can accelerate our growth because of the fact that there's a lot of real estate opportunities out there. We've exclusively partnered with CB Richard Ellis to go out and find us sites, assist us in shoehorning our franchisees into new locations. That's something that's really interesting for us, is just enabling our franchisees to come into our funnel, get introduced to CBRE, have a location they can open up. Then we have currently a nine-month period between contract signing and location opening that we want to compress. CBRE will be a big part of that solution to compress that to six and potentially four or five months.
Great. Thanks so much for that color, Adam. Chris, thanks for the FS8 info. Appreciate it.
Thank you, Mr. Golding. The next question is from Jonathan Komp with Baird. You may proceed.
Yeah. Hi. Thank you. If I could ask maybe more on the near-term environment. Can you maybe expand more of what you're seeing, maybe across markets, specifically Australia, though, in terms of the impact from some of the recent closures, maybe what you're assuming for the balance of the year and how we should think about that impacting your ability to sell more units, given the unique model where your revenue is tied more to the units sold than the actual sales volumes. Any perspective there on what you're seeing and sort of what you're embedding within Australia would be helpful.
It is a good question. I will answer first. Chris, you can dive in. Look, Australia has got a limited number of vaccines. I am not blaming any political. There is no blame here. Whether it has been mismanaged or not is irrelevant. We see the country reopening very quickly. We see, obviously, people in Australia being very similar to the U.S. 40% of Australians will die this year of heart disease. 30% of people will die of cancer. About 29.9% of people will die of other things. 0.00001% of people will die of COVID-19. The average age of death of COVID-19 is over 85 years old in Australia. We feel pretty good about the fact that Australia will come out of this. We are looking to emerging markets like the U.S. and the U.K. We believe this is a robust world whereby we will get through this.
More importantly, we believe that people will want to get back and, more importantly, want to be more fit than because of this. Because the fitter you are, the better your chances are of COVID-19. The exact, I'll press pause and let Chris dive in. We're feeling really good about it. We're really disappointed that Australia's in this situation. We're actually not disappointed, we're devastated, to be honest, because we have so many great friends that own franchises that are sitting there struggling. We see them ready and willing and able to reopen. Again, I'll pause there and let Chris just dive in and answer the second part of the question.
Thanks, Adam. John, to just hit it specifically, around approximately 60% of our Australian network is shut right now. In terms of our guidance and forward-looking projections, it contemplates Australia getting back into the studio in Q4, mid to late Q4. Look, the other thing I'd add to Adam's comment is that we have a really good case study in what happened the first time around. What we saw when these studios reopened was that the members just got straight back into the studio in Australia, and they were outperforming COVID pretty quickly. What we've actually seen when there's been a second and third wave, now that everyone in the world is now more familiar with COVID, that actual ramp, when things have closed and then reopened for the second time, that ramp to normalcy is much quicker.
Look, we're really optimistic that our Australian membership base is keen to get back into the studio as soon as these studios are allowed to open up. As I said, we've got a good case study that proves that out. In addition to that, just in terms of sales volume, franchise sales volume, the level of lead inquiry into additional FS8 units is remaining really steady, even through this period that Australia is navigating through at the moment.
Yeah, that's really helpful. Just as my follow-up, more broadly on the global guidance for franchise sold, I think it's 800-850 for the year. Can you just talk about what's needed or what's added to hit that number? As you look beyond 2021, how are you thinking about the right growth rate for franchise units sold?
Yeah, sure.
I'll let Chris dive in. Sorry.
Yeah. Let's remember that the year-to-date sales were already at close to 570 units sold. In that guidance range, the midpoint gets us to our number comfortably. That's the first point, and then I'll let Adam take the second part of the question.
Yeah. After 2021, it's a good question. We are really excited about a couple of things. Number one is, we're the first third-party gym operator ever to go onto a military base. You folks on the call may or may not know this, but there's 200,000 military folks that are retiring this year from the military, and that's a big number. In the last three years, obviously, call it 600,000. If you think about that, we believe we will be able to attract a huge number into our business to continue to drive our franchise network growth. Interestingly, you've got countries like South Korea that also have huge military personnel. We're feeling really bullish about the fact that we can get a wide variety of people from different verticals, but also semi-professional athletes.
As we sit here today, we've currently got, I think we said this on our roadshow, over 600 applicants from the military that not just inquired, but wanted to buy an F45 franchise. We need to be a little bit cautious about how much we say about this, but we think that the military will be our biggest growth funnel to drive brand new franchise sales. We're working with private equity folks that are saying that they will fund military folks and go 50/50 with them. We don't have that in writing yet. The way we look at life is we just want to create lots of entrepreneurs. We want to have an environment where we're delivering the world's best workout to thousands of people.
Interestingly, we just have under 50 SASR, which is Navy SEAL folks that own and operate F45s in Australia, that incredible franchisee operators. We just want to replicate that on a multiple of 100 and 200. Moving forward, we see the military as an incredible opportunity. That's really an interesting stat for us, is 200,000 people leaving the military this year, and we're on the first military base ever as a third-party gym in Miramar.
Yeah, great. I appreciate all the color. Thank you.
Thank you.
Look, I apologize. We can't share too much more color on 2022. I apologize, John. I do apologize. We can't go too far down the road on our numbers. I would like to have our TAM fully sold by next year. As an aggressive CEO, you've got to look at ways to do that. The military is one of those ways. I just want to say that I apologize, I can't go into 2022 numbers.
Moving forward, we only have time for participants to ask one question. Thank you. The next question is from George Kelly with Roth Capital Partners. You may proceed.
Hi, everybody. Thanks for taking my questions. Or question, I guess. I wanted to ask about marketing. You have some marketing-related franchise revenue that I believe you sort of gave franchisees a pause on in the U.S. Just curious, have you started to turn back on those revenue streams and, or what's sort of baked into your 2021 guidance related to those kind of marketing-related franchise revenue streams? Thank you.
George, it's very similar to what we advised around the IPO. That'll be coming back. That's coming back on as we speak. From middle of Q3 through Q4, that marketing revenue will be switched back on.
I guess this is just a continuation of the prior question, really. Have you started to notify franchisees of that? How has that been received?
We're working through the rollout strategy in a thoughtful way. Obviously, our franchisees have had a difficult time due to COVID-19. We've onboarded our new CMO. We're actually improving the way that we handle member acquisition marketing as well with new vendors. That messaging is underway, yes.
Okay. Got you. Thank you.
Thank you, Mr. Kelly. The next question is from John Ivankoe with JPMorgan. You may proceed.
Hi. Thank you. First, thank you for the comment on the $41 million in U.S. system sales. I think a lot of us care about system sales in Australia and rest of the world, and I was hoping that we could get those numbers either on this call or hopefully in the 10-Q.
Yeah. John, I think through June, we've got those outlined in the S-1.
Okay. All right. I'll make sure that we have those. If those are the exact numbers, I know there's. Obviously, you have to go through an audit, so I'll make sure. Yes, to your point, the U.S. was. It actually rounds up. It was fairly close. If those are the exact numbers, I'll make sure that we use those. Then secondly, and if you don't want to tell me, I certainly have them, so I'll get those. I do recommend reporting those going forward if we can. Secondly, talk about that $3 million franchise in royalty benefit. I think there's some confusion as part of the IPO process in terms of when royalties would be recognized relative to when a franchise store was opened.
Can you just elaborate in terms of what either the U.S. practice is or what the global practice is, just to give us a sense consistently how those franchise royalties are recognized relative to a store actually being open?
Yeah. ASC 606 is obviously the governing standard in this regard. Basically, you take the contract value less the World Pack, and you amortize that over the useful life of the contract. Yeah, you're right. The monthly amount that we're recognizing in the U.S. is close to that $3,000 a month per studio. That is quite right.
Okay. How many months can that be recognized before a store is actually open? In other words, I know you have some deals, at least from what I saw in the S-1, that were up to eight years. I assume that you're not going to recognize royalties for a store that's opening in eight years. Is there a point, whether it's 6 months or 12 months, that you can recognize royalty before the store is actually open for operation?
Yeah. Upon executing the franchise agreement with the franchisee, material consideration changes hands in the form of the establishment fee. That forms part of, obviously, the amount that's stacked into the revenue recognition per month over the useful life of the agreement. There's material consideration upon execution of the franchise agreement. At that point, we therefore start to recognize that monthly amount over the next 10-year period.
Okay.
Just a reminder, though, our franchise agreements, technically, the billing starts. It's defined. Regardless of whether a franchise is open or not, a franchisee will be billed, and they're required to pay in accordance with the terms of their franchise agreement.
Yes, of course, understood.
Yeah.
The final, which is, I think, probably the important question. There was I think, a tweak down in terms of the net openings expectations for fiscal 2021. The range of 220-260 is at the lower end of certainly the range that we thought. Can you elaborate on that, I guess, relative lowering of expectations and what that says in terms of your visibility of units open in fiscal 2022 relative to previous expectations?
Yeah. John, maybe we can chat about that in our call. No, it's consistent with our outlook, so maybe we can address that with you. No, certainly, we have not revised that number down. We have exceptional visibility as to the health of our onboarding pipeline. We've brought forward enough inventory to service our franchisees' contractual relations as it relates to their World Pack purchase obligations. We've trued up our supply chain, and we'll be delivering all of that equipment throughout the remainder of the year. Openings are in line with where we've previously guided. Happy to address that with you offline if you're seeing something differently.
Well, we were at 260, the range is 220-260. I guess it all depends how one defines that. Certainly understood, thank you for the clarification. Obviously, I have no problem being corrected at all. Thank you so much, guys.
Thanks, John.
Thank you. There are no additional questions waiting at this time. I will now pass it back over to the management team for additional remarks.
Oh, thanks. Look, Adam here. I have to say, as we sit here today, we've been impacted by COVID-19 over the past eight months. We've been a very fiscally conservative business since day one. We've never had an unprofitable quarter. That's really important to think about because we've been growing at breakneck speed. We were really excited during this IPO process to be able to relieve all of our debt. We have a balance sheet that I would argue is the strongest in this space. Thirdly, I would say that when you talk about workouts and you talk about what is going to be sustainable in this space, you need to have the world's best workout. That's what we have. Every single day, like I said earlier, and I'll echo the point, we wake up and we deliver the world's best workout to our franchisees.
We're excited about it because we see so many folks waking up saying, "Right, let's get out of bed, 5:00 A.M., get to F45, do our workout." We think that it's crucial to create these communities, but we want to continue to create these communities across the globe. The last thing I'll say is, we actually really believe that the most important people in this whole conversation are our members. We don't talk about it enough. Our members turn up 2.65 x per week, and they absolutely love our workout. That's really important for us because they are the glue in this whole conversation. When we talk about growing our business, we transcend everything, religions, languages, geographies. We're in great countries that are emerging countries with respect to fitness.
We get excited about the conversation about growing our business in India, where we're the largest growing fitness franchise business there. We've got a massive footprint in Singapore with respect to our peers. We think that our mandate is continue to deliver the world's best workout. We are a lightweight business with respect to owning franchises. We want to continue to grow our business. Like I said at the beginning of the call, we thank you for your time. I'll pause there and let Chris dive in and add anything to my comments. We think that this is an exciting period because a lot of folks are really being challenged. However, for us, that's an opportunity. Again, thank you for your time, and I'll press pause and look forward to our next quarterly conversation.
Yeah, thanks, Adam. Yeah, thanks everyone. It's been great. It's our first-ever earnings call as a public company, and I look forward to speaking to you all again in the not too distant future.
That concludes the conference call. Thank you for your participation, and enjoy the rest of your day.