Sweat posts $10m loss before Kayla Itsines, Tobi Pearce take back the reins

Fitness platform Sweat has posted another deep loss in its final year in US hands, before Adelaide founders Kayla Itsines and Tobi Pearce took back control.

The deteriorating finances of digital fitness platform Sweat under US ownership have been revealed, with the company slumping to another heavy loss before its acquisition by Adelaide entrepreneurs and co-founders Kayla Itsines and Tobi Pearce.

Financial accounts filed with the Australian Securities and Investments Commission by US fitness giant iFIT show subscription revenue slipped by a further 14 per cent in the 12 months to May, down to $61.4m, before reaching as high as $99.5m in 2020 during the Covid-led boom that forced people to work out at home.

iFIT booked another $3.8m writedown to the value of the Sweat business, following an $80.6m impairment in the 11 months to May 2022, which plunged the brand into an $85m loss in iFIT’s first year of ownership.

The company noted the impairment related to Sweat’s “underperformance compared to the initial expectation of the business from its acquisition in 2021”.

iFIT, and others in the global digital fitness segment, struggled to retain subscribers once lockdowns and restrictions on gym visitation eased in the aftermath of Covid-19.

Sweat reported an after tax loss of $10.7m in the 12 months to May as iFIT pulled back on spending following a “comprehensive review” of the business.

Kayla Itsines remains the face of Sweat.

Tobi Pearce is now a passive investor in Sweat. Picture: Emma Brasier

Spending on advertising and marketing – a main driver of the brand – was stripped back to $20m, down from $30.1m in the previous year.

“Throughout the fiscal year, the company conducted a comprehensive review of the budget and strategic plan,” director Mathew Zauner said in his report.

“Consequently, significant reductions in operating costs were implemented to ensure the company’s sustainability.”

Last month, it was announced Itsines and Pearce had joined forces to buy back the business they established together in 2015, following their near $200m sale to iFIT in 2021.

The financial accounts confirm iFIT will settle a further $61.2m in deferred consideration owing to Ms Itsines and Mr Pearce as part of the deal to sell the business back to its co-founders, who will pay a “nominal cash” amount to take back control.

Sweat chief executive Adam Koch said the company’s leadership team was focused on building a sustainable and profitable business.

“At Sweat, we continue to focus our attention on empowering women all over the world to improve their fitness, health and wellbeing,” he said in a statement.

“We remain committed to this as our purpose and look forward to investing in those areas that are relevant to meeting the needs of our valued Sweat community.

“Sustainability and profitability remain at the forefront of our strategic intent and I, along with the amazing Sweat team, are focused on developing a resilient business model that enables us to continue supporting women all over the world.”

Sweat employed close to 100 staff in Adelaide at its peak before the sale to iFIT, but a series of lay-offs last year were blamed on “changes in customer demand and the effects of gyms returning to pre-pandemic operating levels”.

According to the company’s accounts, the company now has 48 employees.

iFIT’s acquisition of Sweat in 2021 came with the promise of significant investment in the brand, as it looked to integrate new and improved training content into its range of equipment including treadmills, rowers, exercise bikes and steppers.

However, the Utah-based company became embroiled in a string of controversies following the acquisition, including a series of bitter legal disputes with arch rival Peloton and a failed IPO bid.

Pearce, who left his role as Sweat chief executive at the beginning of last year, said he would now act as a “passive investor” alongside Itsines, who has remained the face of the brand under iFIT ownership.

“I’ve transitioned to a point in my career where investing takes up a decent portion of my time,” he said.

“Having built the business, I’m pretty across how it trades, and so from a financial perspective it was a great opportunity.”

Pearce and Itsines shot to fame after forming the Bikini Body Guide fitness program in 2015. It evolved into Sweat, which has become one of the world’s largest digital fitness training platforms for women.

Ms Itsines and Mr Pearce split as a couple in 2020.

Ms Itsines married Jae Woodroffe earlier this month, while Pearce announced his engagement to Rachel Dillon – a three-time World Beauty Fitness and Fashion bikini champion from Townsville – in September.

Originally published as Sweat posts $10m loss before Kayla Itsines, Tobi Pearce take back the reins