- Grew Q1 2023 revenue 40% and North America system-wide sales
42%, compared to Q1 2022
- Sold 188 franchise licenses and opened 115 new studios in Q1
2023
- Sold 5,638 total franchise licenses and had 2,756 total studios
operating as of Q1 2023
- Raises full year 2023 outlook in North America system-wide
sales, revenue and Adjusted EBITDA at +33%, +20% and +40%,
respectively, year-over-year at the midpoint of guidance
Xponential Fitness, Inc. (NYSE: XPOF) (“Xponential” or the
“Company”), the largest global franchisor of boutique fitness
brands, today reported financial results for the first quarter
ended March 31, 2023. All financial figures included in this
release refer to global numbers, unless otherwise noted.
Definitions for the non-GAAP measures and a reconciliation to the
corresponding GAAP measures are included in the tables that
accompany this release.
Financial Highlights: Q1 2023 Compared to Q1 2022
- Grew revenue 40% to $70.7 million.
- Increased North America system-wide sales1 by 42% to $317.8
million.
- Reported North America same store sales2 growth of 20%,
compared to growth of 47% in Q1 of 2022.
- Reported North America quarterly run-rate average unit volume
(AUV)3 of $542,000, compared to $450,000.
- Posted net loss of $15.0 million, or a loss of $1.38 per basic
share, on a share count of 30.8 million shares of Class A Common
Stock, compared to a net loss of $15.2 million, or a loss of $1.51
per basic share, on a share count of 22.7 million shares of Class A
Common Stock.
- Posted adjusted net income of $1.3 million, or a loss of $0.02
per basic share, compared to an adjusted net loss of $5.3 million,
or a loss of $0.19 per basic share.
- Reported Adjusted EBITDA4 of $22.9 million, compared to $14.5
million.
“The growth in our North American AUVs and same store sales
during the quarter is compelling, indicating consumers continue to
prioritize spending on our experiential offerings,” said Anthony
Geisler, CEO of Xponential Fitness, Inc. “The results speak to the
strength of our brands, the quality of our franchisees, and the
support they are receiving. We are seeing momentum continue through
the first part of the second quarter; with this growth, we are
raising our annual guidance expectations.”
Results for the First Quarter Ended March 31, 2023
For the first quarter of 2023, total revenue increased $20.3
million, or 40%, to $70.7 million, up from $50.4 million in the
prior year period. This increase included a corresponding North
America same store sales increase of 20%.
Net loss totaled $15.0 million, or a loss of $1.38 per share,
compared to a loss of $15.2 million, or a loss of $1.51 per share,
in the prior year period. The decrease in net loss was the result
of $2.8 million of lower overall profitability, a $6.2 million
increase in non-cash contingent consideration primarily related to
the Rumble acquisition, and a $9.2 million decrease in non-cash
equity-based compensation expense. Please see the table at the end
of this press release for a calculation of the basic and diluted
loss per share for the quarter ended March 31, 2023.
Consistent with previous periods, the Rumble acquisition
non-cash contingent consideration liability is marked-to-market
based on Xponential’s share price, contributing to a $15.7 million
liability increase in the first quarter of 2023.
Adjusted Net Income for the first quarter 2023, which excludes
the $15.7 million non-cash contingent consideration related
primarily to the Rumble acquisition and $0.6 million related to the
re-measurement of the Company’s tax receivable agreement, was $1.3
million, or a loss of $0.02 per basic share, on a share count of
30.8 million shares of Class A Common Stock.
Adjusted EBITDA, which is defined as net income (loss) before
interest, taxes, depreciation and amortization, adjusted for
equity-based compensation and related employer payroll taxes,
acquisition and transaction expenses, litigation expenses,
financial transaction fees and related expenses, and tax receivable
agreement remeasurement, increased to $22.9 million, up from $14.5
million in the prior year period.
Liquidity and Capital Resources
As of March 31, 2023, the Company had approximately $28.1
million of cash, cash equivalents and restricted cash and $266.7
million in total long-term debt. Net cash provided by operating
activities was $11.4 million for the three months ended March 31,
2023.
2023 Outlook
Based on the Company’s performance in the first quarter and the
beginning of the second quarter, Xponential is increasing its
full-year 2023 guidance for system-wide sales, revenue and Adjusted
EBITDA, and re-affirming guidance for net new studio openings as
follows:
- Net new studio openings in the range of 540 to 560, or an
increase of 8% at the midpoint as compared to full year 2022;
- North America system-wide sales in the range of $1.37 billion
to $1.38 billion, or an increase of 33% at the midpoint as compared
to full year 2022; this compares to previous guidance of $1.34
billion to $1.35 billion;
- Revenue in the range of $290.0 million to $300.0 million, or an
increase of 20% at the midpoint as compared to full year 2022; this
compares to previous guidance of $285.0 million to $295.0 million;
and
- Adjusted EBITDA in the range of $102.0 million to $106.0
million, or an increase of 40% at the midpoint as compared to full
year 2022; this compares to previous guidance of $101.0 million to
$105.0 million.
Additional key assumptions for full year 2023 include:
- Tax rate in the mid-to-high single digits;
- Share count of 32.6 million shares of Class A Common Stock for
the GAAP EPS and Adjusted EPS calculations. A full explanation of
the Company’s share count calculation and associated EPS and
Adjusted EPS calculations can be found in the tables at the end of
this press release; and
- $1.9 million in quarterly dividends paid related to the
Company’s Convertible Preferred Stock.
First Quarter 2023 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 first quarter
2023 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 Thursday, May 18, 2023, by dialing 1-844-512-2921
(United States) or 1-412-317-6671 (International) and entering the
replay pin number: 13737385.
About Xponential Fitness, Inc.
Xponential Fitness, Inc. (NYSE: XPOF) is the largest global
franchisor of boutique fitness brands. Through its mission to make
boutique fitness accessible to everyone, the Company operates a
diversified platform of ten brands spanning across verticals
including Pilates, indoor cycling, barre, stretching, rowing,
dancing, boxing, running, functional training 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 49 U.S.
states and Canada, and through master franchise or international
expansion agreements in 16 additional countries. Xponential
Fitness' portfolio of brands includes Club Pilates, the largest
Pilates brand in the United States; CycleBar, the largest indoor
cycling brand in the United States; StretchLab, a concept offering
one-on-one and group stretching services; Row House, the largest
franchised indoor rowing brand in the United States; AKT, a
dance-based cardio workout combining toning, interval and circuit
training; YogaSix, the largest franchised yoga brand in the United
States; Pure Barre, a total body workout that uses the ballet barre
to perform small isometric movements, and the largest Barre brand
in the United States; STRIDE, a treadmill-based cardio and strength
training concept; Rumble, a boxing-inspired full-body workout; and
BFT, a functional training and strength-based program. 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, Adjusted EBITDA, adjusted net income (loss), and adjusted
net earnings (loss) per share, which exclude certain non-operating
or non-recurring items, including but not limited to, equity-based
compensation expenses, acquisition and transaction expenses,
litigation expenses, employee retention credit, financial
transaction fees and related expenses, and tax receivable agreement
remeasurement, that we believe are not representative of our core
business or future operating performance, 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 measures 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. For a
reconciliation of non-GAAP to GAAP measures discussed in this
release, please see the tables at the end of this press release. In
addition, we are not able to provide a quantitative reconciliation
of the estimated full-year Adjusted EBITDA for fiscal year ending
December 31, 2023 without unreasonable efforts to the most directly
comparable GAAP financial measure due to the high variability,
complexity and low visibility with respect to certain items such as
taxes, TRA remeasurements, and income and expense from changes in
fair value of contingent consideration from acquisitions. We expect
the variability of these items to have a potentially unpredictable
and potentially significant impact on future GAAP financial
results, and, as such, we also believe that any reconciliations
provided would imply a degree of precision that would be confusing
or misleading to investors.
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 financial performance. These
forward-looking statements include, without limitation, statements
relating to expected growth of our business; projected number of
net new studio openings; anticipated industry trends; projected
financial and performance information such as system-wide sales;
projected annual revenue, Adjusted EBITDA and other statements
under the section “2023 Outlook”; our competitive position in the
boutique fitness industry; 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, our relationships with
master franchisees, franchisees and international partners;
difficulties and challenges in opening studios by franchisees; the
ability of franchisees to generate sufficient revenues; risks
relating to expansion into international markets; loss of
reputation and brand awareness; general economic conditions and
industry trends; and other risks as described in our SEC filings,
including our Annual Report on Form 10-K for the full year ended
December 31, 2022 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,
Inc.
Condensed Consolidated Balance
Sheets
(Unaudited)
(in thousands, except per
share amounts)
March 31,
December 31,
2023
2022
Assets Current Assets: Cash, cash equivalents and restricted
cash
$
28,135
$
37,370
Accounts receivable, net
22,408
25,555
Inventories
12,962
10,864
Prepaid expenses and other current assets
9,918
6,294
Deferred costs, current portion
4,083
4,131
Notes receivable from franchisees, net
1,501
1,520
Total current assets
79,007
85,734
Property and equipment, net
19,171
18,524
Right-of-use assets
40,487
30,079
Goodwill
165,697
165,697
Intangible assets, net
134,691
137,175
Deferred costs, net of current portion
43,530
43,620
Notes receivable from franchisees, net of current portion
851
1,067
Other assets
862
795
Total assets
$
484,296
$
482,691
Liabilities, redeemable convertible preferred stock and equity
(deficit) Current Liabilities: Accounts payable
$
18,741
$
16,185
Accrued expenses
14,328
12,295
Deferred revenue, current portion
31,276
31,996
Current portion of long-term debt
4,260
3,035
Other current liabilities
8,553
9,265
Total current liabilities
77,158
72,776
Deferred revenue, net of current portion
110,809
109,465
Contingent consideration from acquisitions
43,665
28,182
Long-term debt, net of current portion, discount and issuance costs
257,626
133,039
Lease liability
39,888
30,583
Other liabilities
6,611
8,633
Total liabilities
535,757
382,678
Commitments and contingencies Redeemable convertible preferred
stock, $0.0001 par value, 400 shares authorized, 115 and 200 shares
issued and outstanding as of March 31, 2023 and December 31, 2022,
respectively
227,290
308,075
Stockholders' equity (deficit): Undesignated preferred stock,
$0.0001 par value, 4,600 shares authorized, none issued and
outstanding as of March 31, 2023 and December 31, 2022
—
—
Class A common stock, $0.0001 par value, 500,000 shares authorized,
32,899 and 27,571 shares issued and outstanding as of March 31,
2023 and December 31, 2022, respectively
3
3
Class B common stock, $0.0001 par value, 500,000 shares authorized,
16,731 and 21,647 shares issued, and 16,656 and 21,572 shares
outstanding as of March 31, 2023 and December 31, 2022,
respectively
2
2
Additional paid-in capital
438,038
505,186
Receivable from shareholder
(19,956
)
(16,369
)
Accumulated deficit
(639,207
)
(641,903
)
Treasury stock, at cost, 75 shares outstanding as of March 31, 2023
and December 31, 2022
(1,697
)
(1,697
)
Total stockholders' deficit attributable to Xponential Fitness,
Inc.
(222,817
)
(154,778
)
Noncontrolling interests
(55,934
)
(53,284
)
Total stockholders' deficit
(278,751
)
(208,062
)
Total liabilities, redeemable convertible preferred stock and
stockholders' deficit
$
484,296
$
482,691
Xponential Fitness,
Inc.
Condensed Consolidated
Statements of Operations
(Unaudited)
(in thousands, except per
share amounts)
Three Months Ended March
31,
2023
2022
Revenue, net: Franchise revenue
$
32,966
$
25,500
Equipment revenue
13,094
7,779
Merchandise revenue
7,164
6,083
Franchise marketing fund revenue
6,211
4,435
Other service revenue
11,255
6,565
Total revenue, net
70,690
50,362
Operating costs and expenses: Costs of product revenue
14,035
9,592
Costs of franchise and service revenue
4,032
4,234
Selling, general and administrative expenses
34,885
33,919
Depreciation and amortization
4,197
3,492
Marketing fund expense
5,006
4,355
Acquisition and transaction expenses
15,742
9,544
Total operating costs and expenses
77,897
65,136
Operating loss
(7,207
)
(14,774
)
Other (income) expense: Interest income
(636
)
(389
)
Interest expense
7,977
2,861
Other expense
554
—
Total other expense
7,895
2,472
Loss before income taxes
(15,102
)
(17,246
)
Income tax benefit
(123
)
(2,067
)
Net loss
(14,979
)
(15,179
)
Less: net loss attributable to noncontrolling interests
(4,996
)
(7,660
)
Net loss attributable to Xponential Fitness, Inc.
$
(9,983
)
$
(7,519
)
Net loss per share of Class A common stock: Basic
$
(1.38
)
$
(1.51
)
Diluted
$
(1.38
)
$
(1.51
)
Weighted average shares of Class A common stock outstanding: Basic
30,754
22,737
Diluted
30,754
22,737
Xponential Fitness,
Inc.
Condensed Consolidated
Statements of Cash Flows
(Unaudited) (in
thousands)
Three Months Ended March
31,
2023
2022
Cash flows from operating activities: Net loss
$
(14,979
)
$
(15,179
)
Adjustments to reconcile net loss to net cash provided by operating
activities: Depreciation and amortization
4,197
3,492
Amortization and write off of debt issuance cost
283
33
Amortization of discount on long-term debt
609
151
Change in contingent consideration from acquisitions
15,742
9,546
Amortization of right-of-use assets
1,212
469
Bad debt recovery
(21
)
(617
)
Equity-based compensation
6,056
15,248
Non-cash interest
(478
)
(208
)
Gain on disposal of assets
—
(43
)
Changes in assets and liabilities: Accounts receivable
3,230
(3,300
)
Inventories
(2,098
)
(2,289
)
Prepaid expenses and other current assets
(3,083
)
(2,117
)
Operating lease liabilities
(1,228
)
(489
)
Deferred costs
138
(818
)
Notes receivable, net
2
5
Accounts payable
2,794
(2,758
)
Accrued expenses
433
(4,633
)
Other current liabilities
(1,800
)
20
Deferred revenue
624
5,924
Other assets
(68
)
(10
)
Other liabilities
(214
)
461
Net cash provided by operating activities
11,351
2,888
Cash flows from investing activities: Purchases of property and
equipment
(2,127
)
(1,798
)
Proceeds from sale of assets
—
65
Purchase of intangible assets
(470
)
(316
)
Notes receivable issued
—
(585
)
Notes receivable payments received
212
426
Net cash used in investing activities
(2,385
)
(2,208
)
Cash flows from financing activities: Borrowings from long-term
debt
126,100
—
Payments on long-term debt
(1,065
)
(740
)
Debt issuance costs
(115
)
(46
)
Payment of preferred stock dividend and deemed dividend
(1,320
)
(4,875
)
Payment of contingent consideration
—
(589
)
Payments for taxes related to net share settlement of restricted
share units
(7,935
)
—
Payments for redemption of preferred stock
(130,766
)
—
Loan to shareholder
(3,100
)
—
Net cash used in financing activities
(18,201
)
(6,250
)
Decrease in cash, cash equivalents and restricted cash
(9,235
)
(5,570
)
Cash, cash equivalents and restricted cash, beginning of period
37,370
21,320
Cash, cash equivalents and restricted cash, end of period
$
28,135
$
15,750
Xponential Fitness,
Inc.
Net Loss to GAAP EPS Per
Share
(in thousands, except per
share amounts)
Three Months Ended March
31,
2023
2022
Numerator: Net loss
$
(14,979
)
$
(15,179
)
Less: net loss attributable to noncontrolling interests
24,588
35,003
Less: dividends on preferred shares
(2,069
)
(3,250
)
Less: deemed dividend
(62,660
)
(50,931
)
Add: deemed contribution from redemption of convertible preferred
stock
12,679
-
Net loss attributable to XPO Inc. - basic and diluted
$
(42,441
)
$
(34,357
)
Denominator: Weighted average shares of Class A common stock
outstanding - basic and diluted
30,754
22,737
Net loss per share attributable to Class A common stock -
basic
$
(1.38
)
$
(1.51
)
Net loss per share attributable to Class A common stock - diluted
$
(1.38
)
$
(1.51
)
Anti-dilutive shares excluded from diluted loss per share of Class
A common stock: Rumble Class A common stock
-
1,300
Restricted stock units
1,781
2,360
Convertible preferred stock
7,963
13,889
Conversion of Class B common stock to Class A common stock
16,656
24,564
Treasury share options
75
-
Rumble contingent shares
2,024
2,024
Profits interests, time vesting
4
48
Xponential Fitness,
Inc.
Reconciliations of GAAP to
Non-GAAP Measures
(in thousands, except per
share amounts)
Three Months Ended March
31,
2023
2022
Net loss
$
(14,979
)
$
(15,179
)
Interest expense, net
7,341
2,472
Income tax benefit
(123
)
(2,067
)
Depreciation and amortization
4,197
3,492
EBITDA
(3,564
)
(11,282
)
Equity-based compensation
6,056
15,248
Employer payroll taxes related to equity-based compensation
474
—
Acquisition and transaction expenses
15,742
9,544
Litigation expenses
2,045
2,740
Employee retention credit
—
(2,597
)
Financial transaction fees and related expenses
1,565
487
TRA remeasurement
554
313
Adjusted EBITDA
$
22,872
$
14,453
Three Months Ended March
31,
2023
2022
Net loss
$
(14,979
)
$
(15,179
)
Change in fair value of contingent consideration
15,742
9,546
TRA remeasurement
554
313
Adjusted net income (loss)
$
1,317
$
(5,320
)
Adjusted net income (loss) attributable to noncontrolling
interest
496
(2,685
)
Adjusted net income (loss) attributable to Xponential
Fitness, Inc.
821
(2,635
)
Dividends on preferred shares
(1,290
)
(1,610
)
Numerator - basic and diluted
$
(469
)
$
(4,245
)
Adjusted net loss per share - basic and diluted
$
(0.02
)
$
(0.19
)
Weighted average shares of Class A common stock outstanding - basic
and diluted
30,754
22,737
Shares excluded from diluted earnings per share of Class A
common stock Rumble Class A common stock
—
1,300
Restricted stock units
1,781
2,360
Convertible preferred stock
7,963
13,889
Conversion of Class B common stock to Class A common stock
16,656
24,564
Treasury share options
75
—
Rumble contingent shares
2,024
2,024
Profits interests, time vesting
4
48
Note: The above adjusted net income (loss) per share is
computed by dividing the adjusted net income (loss) attributable to
holders of Class A common stock by the weighted average shares of
Class A common stock outstanding during the period. Total share
count does not include potential future shares vested upon
achieving certain earn-out thresholds. Net income, however,
continues to take into account the non-cash contingent liability
primarily due to Rumble.
Footnotes
1System-wide sales represent gross sales by all North America
studios. System-wide sales include 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
fund revenue, respectively. We believe that this operating measure
aids in understanding how we derive our royalty revenue and
marketing fund revenue and is important in evaluating our
performance. System-wide sales growth is driven by net new studio
openings and increases in same store sales. Management reviews
system-wide sales weekly, 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 net new studio openings.
Management reviews same store sales to assess the health of the
franchised studios.
3AUV 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 consists of average
quarterly sales for all studios that are at least 6 months old at
the beginning of the respective quarter, multiplied by four.
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 net new studio
openings. Management reviews AUV to assess studio economics.
4We 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 and related employer payroll
taxes, acquisition and transaction expenses (including change in
contingent consideration), litigation expenses (consisting of legal
and related fees for specific proceedings that arise outside of the
ordinary course of our business), employee retention credit (a tax
credit for retaining employees throughout the COVID-19 pandemic),
fees for financial transactions, such as secondary public offering
expenses for which we do not receive proceeds (including bonuses
paid to executives related to completion of such transactions) and
expense related to the remeasurement of our TRA obligation 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, 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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230502006293/en/
Kimberly Esterkin Addo Investor Relations
investor@xponential.com (310) 829-5400
Xponential Fitness (NYSE:XPOF)
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