Xponential Fitness, Inc. (NYSE: XPOF) (“Xponential” or the
“Company”), a curator of leading boutique fitness brands, today
reported financial results for its second quarter ended June 30,
2021.
Financial Highlights: Q2 2021 Compared to Q2 2020
- Grew revenue 67% to $35.8 million.
- Increased system-wide sales1 by 179%, to $171.6 million.
- Reported system-wide same store sales2 growth of 129%.
- Posted net loss of $8.0 million, compared to a loss of $4.8
million.
- Reported Adjusted EBITDA3 of $8.3 million, compared to $(3.1)
million.
Q2 2021 Operating Highlights
- Opened 59 new studios; nearly 100% of the 1,824 North American
studios open and operational during the quarter.
- Sold 197 North American franchise licenses, compared to 46 in
Q2 2020.
- Increased total North American studio count to 1,824 at June
30, 2021, up from 1,765 total studios at March 31, 2021.
- Reported fourth consecutive quarter of sequential system-wide
sales improvement, representing consistent system recovery since
the second quarter of 2020.
- Recovery of nearly 90% run-rate AUVs4 as compared to January
31, 2020, placing the Company on track to reach pre-pandemic
run-rate AUVs by early 2022.
“I’m extremely pleased with our second quarter 2021 financial
results,” commented Anthony Geisler, Chief Executive Officer of
Xponential Fitness, Inc. “As is evident from our solid
year-over-year revenue growth and the sale of 197 North American
franchisee licenses in Q2, our business has rapidly rebounded to
pre-pandemic levels and importantly, as of today’s date, is showing
no signs of slowing down in the third quarter. When comparing the
end of the second quarter of 2021 to January 31, 2020, even without
taking into account our newest brand, Rumble, our business had
recovered to 103% of actively paying members, 98% of total visits
and a nearly 90% run-rate AUV. Thus far in Q3, this positive
trajectory has continued. In July, we recorded our highest-ever
monthly system-wide sales, and our August results to-date remain
solid. So far in August, compared to the end of Q2, we’ve seen an
increase in our total memberships and our actively paying members,
both overall and at a per studio level.”
Mr. Geisler continued, “Since Xponential Fitness’ founding in
2017, our mission has been to make boutique fitness accessible to
everyone. Today, we are the largest boutique fitness franchisor in
the United States and have over 1,850 studios operating globally
across nine leading boutique fitness brands. In July, we reached an
important milestone in our history by completing our IPO, which
positions us well to continue to successfully execute our mission
and differentiated business strategy for years to come. Looking
ahead, we are confident in our ability to continue expanding our
market share in the large and growing boutique fitness industry as
we unlock the incredible power of the Xponential platform.”
Financial Results for the Second Quarter Ended June 30,
2021
For the second quarter 2021, total revenue increased $14.3
million, or 67%, to $35.8 million, up from $21.5 million in the
prior-year period. This strong increase in revenues included a
corresponding system-wide same store sales increase of 129%
year-over-year.
Second quarter net loss was $8.0 million, compared to a loss of
$4.8 million in the prior-year period. Net loss in the second
quarter of 2021 was positively impacted by a one-time $3.7 million
forgiveness of a Payment Protection Program (“PPP”) loan.
On a per share basis for the second quarter, net loss totaled
$0.33 per diluted share on a pro forma basis based on a share count
of 21,694,000 shares. For additional information on the calculation
of share count in the second quarter and first half of 2021, please
see the non-GAAP tables at the end of this press release.
Adjusted EBITDA, which is defined as net income before interest,
taxes, depreciation and amortization, adjusted for equity-based
compensation, acquisition & transaction expenses, management
fees, litigation expenses and a change in fair value of
contingencies, increased significantly to $8.3 million, up from a
loss of $3.1 million in the prior-year period. For a reconciliation
of GAAP to non-GAAP measures, including Adjusted EBITDA, please see
the tables at the end of this press release.
Liquidity and Capital Resources
As of June 30, 2021, the Company had approximately $20.2 million
of cash and cash equivalents and $206.8 million in total debt. Net
cash provided by operating activities was $0.8 million during the
second quarter of 2021.
In June, the Company was notified that it received forgiveness
for a PPP loan received in April 2020 as part of the Coronavirus
Aid, Relief and Economic Security Act. Including accrued interest,
this PPP loan forgiveness resulted in a gain on debt extinguishment
of $3.7 million for the six months ended June 30, 2021.
Initial Public Offering
In July 2021, the Company sold 10.0 million shares of its common
stock in its initial public offering and received net proceeds of
$120 million. Xponential also raised $200 million through the sale
of convertible preferred stock. In addition to the payment of
transaction fees related to the IPO and the convertible preferred
stock, the proceeds from the IPO and convertible preferred were
used to pay down $116.1 million of the Company’s Term Loan, which
includes a prepayment penalty and interest aggregating $1.1
million, reducing the Company’s commitments for payment of debt
principal to $96.5 million.
In August 2021, the Company sold 904,000 shares of Class A
common stock to the underwriters of its initial public offering
pursuant to the underwriter’s option to purchase additional shares.
After underwriter discounts and commissions, net proceeds of
approximately $10.1 million were received on August 24, 2021.
Xponential intends to use $9.0 million of such net proceeds to
purchase 750,000 LLC Units from the Company’s Chief Executive
Officer and the remaining proceeds will be used for working
capital.
2021 Outlook
Based on current business conditions and future expectations as
of the date of this release, the Company is initiating its outlook
for the full fiscal year ending December 31, 2021. Please note
should further restrictions be enforced as a result of the
pandemic, such as government mandated studio closures, these
restrictions could have a material negative impact on the Company’s
business and financial performance. The Company anticipates the
following:
- Studio openings in the range of 215 to 235;
- North America system-wide sales in the range of $690 million to
$700 million, or an increase of 57% at the midpoint as compared to
full year 2020;
- Revenue in the range of $135.5 million to $137.0 million, or an
increase of 28% at the midpoint as compared to full year 2020;
and
- Adjusted EBITDA in the range of $22.0 million to $23.0 million,
or an increase of 129% at the midpoint as compared to full year
2020.
The above estimates are based on the following additional
assumptions for full year 2021:
- Tax rate of approximately 5%;
- Share count of 22.6 million for EPS calculation, which includes
the 904,000 additional shares issued in August 2021 following a
partial exercise by underwriters of their option to purchase
additional shares related to the IPO; and
- $3.25 million in quarterly dividends paid as related to the
$200 million Preferred Convertible note.
Second Quarter 2021 Conference Call
The Company will host a conference call today at 1:30 p.m.
Pacific Time / 4:30 p.m. Eastern Time to discuss its second quarter
2021 financial results. Participants may join the conference call
by dialing 1-877-407-9716 (United States) or 1-201-493-6779
(International).
A live webcast of the conference call will also be available on
the Company’s Investor Relations site at
https://investor.xponential.com/. For those unable to participate
in the conference call, a telephonic replay of the call will be
available shortly after the completion of the call, until 11:59
p.m. ET on Tuesday, September 7, 2021, by dialing 1-844-512-2921
(United States) or 1-412-317-6671 (International) and entering the
replay pin number: 13722134.
About Xponential Fitness, Inc.
Founded in 2017 and headquartered in Irvine, California,
Xponential Fitness, Inc. (NYSE: XPOF) is a curator of leading
boutique fitness brands across multiple verticals. Through its
mission to make boutique fitness accessible to everyone, the
Company has built and curated a diversified platform of nine
boutique fitness brands spanning across verticals including
Pilates, indoor cycling, barre, stretching, rowing, dancing,
boxing, running and yoga. In partnership with its franchisees,
Xponential Fitness offers energetic, accessible, and personalized
workout experiences led by highly-qualified instructors in studio
locations across 48 U.S. states and through master franchise or
international expansion agreements in 10 additional countries as of
June 30, 2021. Xponential Fitness' portfolio of brands includes
Club Pilates, the nation's largest Pilates brand; CycleBar, the
nation's largest indoor cycling brand; StretchLab, a concept
offering one-on-one and group stretching services; Row House, a
high-energy, low-impact indoor rowing workout; AKT, a dance-based
cardio workout combining toning, interval and circuit training;
YogaSix, the largest franchised yoga brand; Pure Barre, a total
body workout that uses the ballet barre to perform small isometric
movements; STRIDE, a treadmill-based cardio and strength training
concept; and Rumble, a boxing-inspired full-body workout. For more
information, please visit the Company’s website at
xponential.com.
Non-GAAP Financial Measures
In addition to our results determined in accordance with GAAP,
we believe non-GAAP measures are useful in evaluating our operating
performance. We use certain non-GAAP financial information, such as
EBITDA and Adjusted EBITDA, to evaluate our ongoing operations and
for internal planning and forecasting purposes. We believe that
non-GAAP financial information, when taken collectively with
comparable GAAP financial measures, is helpful to investors because
it provides consistency and comparability with past financial
performance, and provides meaningful supplemental information
regarding our performance by excluding certain items that may not
be indicative of our business, results of operations or outlook.
However, non-GAAP financial information is presented for
supplemental informational purposes only, has limitations as an
analytical tool, and should not be considered in isolation or as a
substitute for financial information presented in accordance with
GAAP. In addition, other companies, including companies in our
industry, may calculate similarly titled non-GAAP measures
differently or may use other measures to evaluate their
performance, all of which could reduce the usefulness of our
non-GAAP financial measure as tools for comparison. We seek to
compensate such limitations by providing a detailed reconciliation
for the non-GAAP financial measures to the most directly comparable
financial measures stated in accordance with GAAP. Investors are
encouraged to review the related GAAP financial measures and the
reconciliation of the non-GAAP financial measures to their most
directly comparable GAAP financial measures and not rely on any
single financial measure to evaluate our business.
Forward-Looking Statements
This press release contains forward-looking statements that are
based on current expectations, estimates, forecasts and projections
of future performance based on management's judgment, beliefs,
current trends, and anticipated product performance. These
forward-looking statements include, without limitation, statements
relating to expansion of market share; projected financial and
performance information such as studio opening, system-wide sales;
annual revenue, Adjusted EBITDA and other statements under the
section “2021 Outlook”; and ability to execute our business
strategies. Forward-looking statements involve risks and
uncertainties that may cause actual results to differ materially
from those contained in the forward-looking statements. These
factors include, but are not limited to, the impact of COVID-19
pandemic on our business and franchisees; our relationships with
master franchisees and franchisees; difficulties and challenges in
opening studios by franchisees; the ability of franchisees to
generate sufficient revenues; risks relating to expansion into
international market; loss or reputation and brand awareness;
material weakness in our internal control over financial reporting;
and other risks as described in our SEC filings, including our
Quarterly Report on Form 10-Q for the three months ended June 30,
2021 to be filed by Xponential with the SEC and other periodic
reports filed with the SEC. Other unknown or unpredictable factors
or underlying assumptions subsequently proving to be incorrect
could cause actual results to differ materially from those in the
forward-looking statements. Although we believe that the
expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, level of activity,
performance, or achievements. You should not place undue reliance
on these forward-looking statements. All information provided in
this press release is as of today's date, unless otherwise stated,
and Xponential undertakes no duty to update such information,
except as required under applicable law.
Xponential Fitness LLC Condensed Consolidated Balance
Sheets (Unaudited) (amounts in thousands)
June 30, December 31,
2021
2020
Assets Current Assets: Cash, cash equivalents and restricted
cash
$
20,203
$
11,299
Accounts receivable, net
7,890
5,196
Inventories
5,284
6,161
Prepaid expenses and other current assets
8,696
5,480
Deferred costs, current portion
3,392
3,281
Notes receivable from franchisees, net
1,130
1,288
Related party receivable
314
—
Total current assets
46,909
32,705
Property and equipment, net
12,587
13,694
Goodwill
147,863
139,680
Intangible assets, net
107,896
98,124
Deferred costs, net of current portion
37,021
35,445
Notes receivable from franchisees, net of current portion
2,046
2,576
Other assets
588
614
Total assets
$
354,910
$
322,838
Liabilities and Member’s Equity Current Liabilities:
Accounts payable
$
14,283
$
18,339
Accrued expenses
13,957
13,764
Deferred revenue, current portion
18,590
14,247
Notes payable
932
970
Current portion of long-term debt
2,120
5,795
Other current liabilities
1,933
1,804
Total current liabilities
51,815
54,919
Deferred revenue, net of current portion
82,137
74,361
Contingent consideration from acquisitions
9,240
8,399
Long-term debt, net of current portion, discount and issuance costs
204,733
176,002
Other liabilities
4,431
4,408
Total liabilities
352,356
318,089
Commitments and contingencies Member’s equity:
Member’s contribution
124,251
113,697
Receivable from Member
(1,454
)
(1,456
)
Accumulated deficit
(120,243
)
(107,492
)
Total member’s equity
2,554
4,749
Total liabilities and member’s equity
$
354,910
$
322,838
Xponential Fitness LLC Condensed Consolidated
Statements of Operations (Unaudited) (amounts in
thousands) Three Months Ended June 30, Six
Months Ended June 30,
2021
2020
2021
2020
Revenue, net: Franchise revenue
$
17,764
$
8,984
$
31,519
$
23,831
Equipment revenue
4,755
5,159
8,821
11,894
Merchandise revenue
4,509
3,552
8,741
8,616
Franchise marketing fund revenue
3,314
737
5,797
3,434
Other service revenue
5,433
3,030
9,962
5,474
Total revenue, net
35,775
21,462
64,840
53,249
Operating costs and expenses: Costs of product revenue
6,274
6,781
11,618
14,879
Costs of franchise and service revenue
3,127
2,048
5,446
4,130
Selling, general and administrative expenses
21,202
15,437
37,804
27,310
Depreciation and amortization
2,407
1,883
4,462
3,697
Marketing fund expense
2,860
821
5,476
3,406
Acquisition and transaction expenses (income)
297
(5,035
)
647
(5,809
)
Total operating costs and expenses
36,167
21,935
65,453
47,613
Operating income (loss)
(392
)
(473
)
(613
)
5,636
Other (income) expense: Interest income
(358
)
(87
)
(453
)
(177
)
Interest expense
11,591
4,366
16,014
12,352
Gain on debt extinguishment
(3,707
)
—
(3,707
)
—
Total other expense
7,526
4,279
11,854
12,175
Loss before income taxes
(7,918
)
(4,752
)
(12,467
)
(6,539
)
Income taxes
83
—
284
162
Net loss
$
(8,001
)
$
(4,752
)
$
(12,751
)
$
(6,701
)
Xponential Fitness LLC Condensed Consolidated
Statements of Cash Flows (Unaudited) (amounts in
thousands) Six Months Ended June 30,
2021
2020
Cash flows from operating activities: Net loss
$
(12,751
)
$
(6,701
)
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities: Depreciation and amortization
4,462
3,697
Amortization of debt issuance cost
5,350
2,501
Amortization of discount on long-term debt
271
—
Change in contingent consideration from acquisitions
340
(5,809
)
Bad debt expense
10
3,547
Equity based compensation
671
865
Non-cash interest
512
644
Gain on debt extinguishment
(3,707
)
—
Loss from disposal of assets
179
44
Impairment of long-lived assets
781
—
Changes in assets and liabilities: Accounts
receivable
(2,619
)
1,407
Inventories
876
(125
)
Prepaid expenses and other current assets
(3,217
)
(1,676
)
Deferred costs
(1,809
)
(2,006
)
Notes receivable, net
177
53
Accounts payable
(3,241
)
(3,458
)
Accrued expenses
2,059
(687
)
Related party payable
(315
)
(8
)
Other current liabilities
129
(841
)
Deferred revenue
12,302
3,190
Other assets
26
(43
)
Other liabilities
24
42
Net cash provided by (used in) operating activities
510
(5,364
)
Cash flows from investing activities: Purchases of
property and equipment
(2,023
)
(764
)
Purchase of studios
(390
)
(627
)
Proceeds from sale of assets
318
50
Purchase of intangible assets
(568
)
(554
)
Notes receivable issued
—
(326
)
Notes receivable payment received
550
—
Net cash used in investing activities
(2,113
)
(2,221
)
Cash flows from financing activities: Borrowings from
line of credit
—
10,000
Payments on line of credit
—
(8,000
)
Borrowings from long-term debt
218,360
188,665
Payments on long-term debt
(194,330
)
(147,369
)
Debt issuance costs
(904
)
(5,036
)
Payment of contingent consideration
(1,935
)
(1,375
)
Payments on loans from related party
(86
)
(110
)
Member contributions
—
17,286
Distributions to Member
(10,600
)
(73,203
)
Receipts from (advances to) Member, net
2
30,279
Net cash provided by financing activities
10,507
11,137
Increase in cash, cash equivalents and restricted cash
8,904
3,552
Cash, cash equivalents and restricted cash, beginning of period
11,299
9,339
Cash, cash equivalents and restricted cash, end of period
$
20,203
$
12,891
Reconciliations of Estimated
GAAP to Non-GAAP Measures
(In thousands, expect per share
data)
Net Loss to Adjusted
EBITDA
Three Months Ended June 30, Six Months Ended June
30,
2021
2020
2021
2020
(in thousands) Net loss
$
(8,001
)
$
(4,752
)
$
(12,751
)
$
(6,701
)
Interest expense, net
11,233
4,279
15,561
12,175
Income taxes
83
—
284
162
Depreciation and amortization
2,407
1,883
4,462
3,697
EBITDA
5,722
1,410
7,556
9,333
Equity-based compensation
449
447
671
865
Acquisition and transaction expenses (income)
297
(5,035
)
647
(5,809
)
Management fees and expenses
207
194
399
414
Integration and related expenses
—
(89
)
—
207
Litigation expenses
1,659
—
2,618
—
Adjusted EBITDA
$
8,334
$
(3,073
)
$
11,891
$
5,010
Outstanding Shares and Pro
Forma EPS Calculation
Total Share Count
Share Count
Class A Common Stock: Outstanding: Initial Public Offering
10,000
Controlling Interest Outstanding: Existing Members
11,694
Controlling Interest Outstanding: Existing Rumble Members
1,300
Unvested: All Other
777
Total Common A
23,771
Class B Common Stock: Existing LLC Members
23,543
Non-controlling Total Common B
23,543
Total Shares
47,313
Controlling Interest Shares
48
%
Note: The above pro forma basic and diluted loss
per share is computed by dividing the net loss attributable to
holders of Class A common stock by the weighted-average shares of
Class A common stock outstanding during the period. Shares of Class
B common stock do not participate in the earnings or losses of
Xponential Fitness, Inc. As a result, the shares of Class B common
stock are not considered participating securities and are not
included in the weighted average shares outstanding for purposes of
computing pro forma loss per share.
The following table sets forth a reconciliation of the numerators
and denominators used to compute pro forma basic and diluted loss
per share of Class A common stock (amounts in thousands except for
per share amounts):
Three Months Ended Six Months
Ended June 30, 2021 June 30, 2021 Numerator: Net
loss
(8,001
)
(12,751
)
Add: Pro forma net loss attributable to non-controlling interests
4,164
6,636
Less: Preferred stock dividends1
(3,250
)
(6,500
)
Pro forma net loss attributable to Xponential Fitness, Inc.
$
(7,087
)
$
(12,615
)
Denominator: Shares of Class A common stock issued in connection
with this offering
21,694
21,694
Pro forma weighted-average shares of Class A common stock
outstanding - basic
21,694
21,694
Effect of dilutive securities
-
-
Pro forma weighted-average shares of Class A common stock
outstanding - diluted
21,694
21,694
Pro forma net loss per share attributable to Class A common stock -
basic
$
(0.33
)
$
(0.58
)
Pro forma net loss per share attributable to Class A common stock -
diluted
$
(0.33
)
$
(0.58
)
1 Preferred stock dividends represent $200 million Convertible
Preferred at 6.5% assumed to be outstanding as of January 1,
2021.
Note: Potentially dilutive securities that are
antidilutive have been excluded from the calculation of diluted net
loss per share as outlined above. Potential common shares that have
been excluded from net loss per share because the effect of
including them would be antidilutive include the Convertible
Preferred, potential common shares issued as contingent
consideration under the Rumble acquisition agreement and potential
common shares to be issued under our 2021 Plan and ESPP. Please
note that beginning in the third quarter 2021, the total share
count for EPS calculation purposes will be increased to 22.6
million shares to reflect the additional 904,000 shares issued in
August 2021 following a partial exercise by underwriters of their
option to purchase additional shares related to the IPO.
Footnotes
1 System-wide sales represent gross sales by all studios.
System-wide sales includes sales by franchisees that are not
revenue realized by us in accordance with GAAP. While we do not
record sales by franchisees as revenue, and such sales are not
included in our consolidated financial statements, this operating
metric relates to our revenue because we receive approximately 7%
and 2% of the sales by franchisees as royalty revenue and marketing
fee revenue, respectively. We believe that this operating measure
aids in understanding how we derive our royalty revenue and
marketing fee revenue and is important in evaluating our
performance. System-wide sales growth is driven by new studio
openings and increases in same store sales. Management reviews
system-wide sales monthly, which enables us to assess changes in
our franchise revenue, overall studio performance, the health of
our brands and the strength of our market position relative to
competitors.
2 Same store sales refer to period-over-period sales comparisons
for the base of studios. We define the same store sales base to
include studios in North America that have been open for at least
13 calendar months as of the measurement date. Any transfer of
ownership of a studio does not affect this metric. We measure same
store sales based solely upon monthly sales as reported by
franchisees. This measure highlights the performance of existing
studios, while excluding the impact of new studio openings.
Management reviews same store sales to assess the health of the
franchised studios.
3 We define adjusted EBITDA as EBITDA (net income/loss before
interest, taxes, depreciation and amortization), adjusted for the
impact of certain non-cash and other items that we do not consider
in our evaluation of ongoing operating performance. These items
include equity-based compensation, acquisition and transaction
expenses (income) (including change in contingent consideration),
management fees and expenses (that will be discontinued after July
2021), integration and related expenses and litigation expenses
(consisting of legal and related fees for specific proceedings that
arise outside of the ordinary course of our business) that we do
not believe reflect our underlying business performance and affect
comparability. EBITDA and adjusted EBITDA are also frequently used
by analysts, investors and other interested parties to evaluate
companies in our industry. We believe that adjusted EBITDA is an
appropriate measure of operating performance because it eliminates
the impact of expenses that we do not believe reflect our
underlying business performance. We believe that adjusted EBITDA,
viewed in addition to, and not in lieu of, our reported GAAP
results, provides useful information to investors regarding our
performance and overall results of operations because it eliminates
the impact of other items that we believe reduce the comparability
of our underlying core business performance from period to period
and is therefore useful to our investors in comparing the core
performance of our business from period to period.
4 AUV is calculated by dividing sales during the applicable
period for all studios being measured by the number of studios
being measured. Quarterly run-rate AUV is calculated as the
quarterly AUV multiplied by four, for studios that are at least 6
months old at the beginning of the respective quarter. Monthly
run-rate AUV is calculated as the monthly AUV multiplied by twelve,
for studios that are at least 6 months old at the beginning of the
respective month. AUV growth is primarily driven by changes in same
store sales and is also influenced by new studio openings.
Management reviews AUV to assess studio economics.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210824005811/en/
Xponential Fitness, Inc.: Kate Doyle-Kwon Vice President of
Communications & Franchise Marketing (949) 346-3000
Investor Relations: Kimberly Esterkin Addo Investor Relations
investor@xponential.com (310) 829-5400
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