- Grew Q2 2023 revenue 30% and North America system-wide sales1
37%, compared to Q2 2022
- Sold 234 franchise licenses and opened 144 new studios in Q2
2023
- Sold 5,872 total franchise licenses and had 2,892 total studios
operating as of Q2 2023
- Announced a $50 million share buyback program funded by
borrowing from existing lender MSD Partners and raised full-year
2023 guidance
Xponential Fitness, Inc. (NYSE: XPOF) (“Xponential” or the
“Company”), the largest global franchisor of boutique fitness
brands, today reported financial results for the second quarter
ended June 30, 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: Q2 2023 Compared to Q2 2022
- Grew revenue 30% to $77.3 million.
- Increased North America system-wide sales1 by 37% to $341.3
million.
- Reported North America same store sales2 growth of 15%,
compared to growth of 25% in Q2 of 2022.
- Reported North America quarterly run-rate average unit volume
(AUV)3 of $561,000, compared to $480,000.
- Posted net income of $27.5 million, or earnings per basic share
of $1.44, on a share count of 33.0 million shares of Class A Common
Stock, compared to a net income of $31.5 million, or earnings per
basic share of $3.28, on a share count of 25.4 million shares of
Class A Common Stock.
- Posted adjusted net income of $4.2 million, or adjusted
earnings per basic share of $0.05, compared to an adjusted net
income of $0.1 million, or adjusted loss of $0.07 per basic
share.
- Reported Adjusted EBITDA4 of $25.3 million, an increase of 43%,
compared to $17.6 million.
“The company continues to execute on our strategic growth
drivers. We were pleased to announce the renewal and expansion of
our partnership with lululemon in June, as well as the signing of a
master franchise agreement in France, which marks Xponential’s 19th
country outside of North America,” said Anthony Geisler, CEO of
Xponential Fitness, Inc. “Additionally, the Board has approved a
$50,000,000 stock repurchase program, and our lender, MSD Partners,
has amended our term loan Financing Agreement and is funding the
capital to complete the repurchase.”
Results for the Second Quarter Ended June 30, 2023
For the second quarter of 2023, total revenue increased $17.8
million, or 30%, to $77.3 million, up from $59.6 million in the
prior year period. This increase included a corresponding North
America same store sales increase of 15%.
Net income totaled $27.5 million, or earnings per basic share of
$1.44, compared to net income of $31.5 million, or earnings per
basic share of $3.28, in the prior year period. The slightly lower
net income was the result of $5.3 million of higher overall
profitability, offset by a $0.4 million increase in non-cash
contingent consideration primarily related to the Rumble
acquisition, a $1.6 million increase in non-cash equity-based
compensation expense, and a $7.2 million increase in write down of
brand assets associated with the acquisition of Rumble founder
studios in the period. 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 June 30, 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 $31.3 million
gain in the second quarter of 2023.
Adjusted Net Income for the second quarter 2023, which excludes
the $31.3 million non-cash contingent consideration gain related
primarily to the Rumble acquisition, $0.7 million related to the
re-measurement of the Company’s tax receivable agreement, and $7.2
million related to the write down of brand assets, was $4.2
million, or a net income of $0.05 per basic share, on a share count
of 33.0 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, tax receivable
agreement remeasurement and write down of brand assets, increased
43% to $25.3 million, up from $17.6 million in the prior year
period.
Liquidity and Capital Resources
As of June 30, 2023, the Company had approximately $40.2 million
of cash, cash equivalents and restricted cash and $265.9 million in
total long-term debt. Net cash provided by operating activities was
$30.6 million for the three months ended June 30, 2023.
2023 Outlook
Xponential is increasing full-year 2023 guidance for system-wide
sales, revenue, and Adjusted EBITDA, and re-affirming guidance for
new studio openings as follows:
- 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 $1.385 billion
to $1.395 billion, or an increase of 35% at the midpoint as
compared to full year 2022; this compares to previous guidance of
$1.370 billion to $1.380 billion;
- Revenue in the range of $295.0 million to $305.0 million, or an
increase of 22% at the midpoint as compared to full year 2022; this
compares to previous guidance of $290.0 million to $300.0 million;
and
- Adjusted EBITDA in the range of $102.5 million to $106.5
million, or an increase of 41% at the midpoint as compared to full
year 2022; this compares to previous guidance of $102.0 million to
$106.0 million.
Additional key assumptions for full year 2023 include:
- Tax rate in the mid-to-high single digits;
- Share count of 32.7 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.
Second 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 second 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, August 17, 2023, by dialing 1-844-512-2921
(United States) or 1-412-317-6671 (International) and entering the
replay pin number: 13738941.
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 48 U.S.
states and Canada, and through master franchise or international
expansion agreements in 19 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 financial 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, tax
receivable agreement remeasurement, and write down of brand assets
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 and our strategic growth drivers. 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)
June 30,
December 31,
2023
2022
Assets Current Assets: Cash, cash equivalents and restricted
cash
$
40,189
$
37,370
Accounts receivable, net
27,016
25,555
Inventories
11,945
10,864
Prepaid expenses and other current assets
11,666
6,294
Deferred costs, current portion
4,264
4,131
Notes receivable from franchisees, net
1,502
1,520
Total current assets
96,582
85,734
Property and equipment, net
21,153
18,524
Right-of-use assets
85,646
30,079
Goodwill
170,563
165,697
Intangible assets, net
125,060
137,175
Deferred costs, net of current portion
44,650
43,620
Notes receivable from franchisees, net of current portion
638
1,067
Other assets
853
795
Total assets
$
545,145
$
482,691
Liabilities, redeemable convertible preferred stock and equity
(deficit) Current Liabilities: Accounts payable
$
26,794
$
16,185
Accrued expenses
15,130
12,295
Deferred revenue, current portion
34,555
31,996
Current portion of long-term debt
4,260
3,035
Other current liabilities
19,706
9,265
Total current liabilities
100,445
72,776
Deferred revenue, net of current portion
112,816
109,465
Contingent consideration from acquisitions
12,513
28,182
Long-term debt, net of current portion, discount and issuance costs
257,490
133,039
Lease liability
77,598
30,583
Other liabilities
7,017
8,633
Total liabilities
567,879
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 June 30, 2023 and December 31, 2022,
respectively
181,738
308,075
Stockholders' equity (deficit): Undesignated preferred stock,
$0.0001 par value, 4,600 shares authorized, none issued and
outstanding as of June 30, 2023 and December 31, 2022
—
—
Class A common stock, $0.0001 par value, 500,000 shares authorized,
33,220 and 27,571 shares issued and outstanding as of June 30, 2023
and December 31, 2022, respectively
3
3
Class B common stock, $0.0001 par value, 500,000 shares authorized,
16,592 and 21,647 shares issued, and 16,517 and 21,572 shares
outstanding as of June 30, 2023 and December 31, 2022, respectively
2
2
Additional paid-in capital
485,832
505,186
Receivable from shareholder
(21,798
)
(16,369
)
Accumulated deficit
(620,828
)
(641,903
)
Treasury stock, at cost, 75 shares outstanding as of June 30, 2023
and December 31, 2022
(1,697
)
(1,697
)
Total stockholders' deficit attributable to Xponential Fitness,
Inc.
(158,486
)
(154,778
)
Noncontrolling interests
(45,986
)
(53,284
)
Total stockholders' deficit
(204,472
)
(208,062
)
Total liabilities, redeemable convertible preferred stock and
stockholders' deficit
$
545,145
$
482,691
Xponential Fitness,
Inc.
Condensed Consolidated
Statements of Operations
(Unaudited)
(in thousands, except per
share amounts)
Three Months Ended June
30,
Six Months Ended June
30,
2023
2022
2023
2022
Revenue, net: Franchise revenue
$
35,133
$
27,622
$
68,099
$
53,122
Equipment revenue
14,428
12,381
27,522
20,160
Merchandise revenue
8,401
6,753
15,565
12,836
Franchise marketing fund revenue
6,617
4,937
12,828
9,372
Other service revenue
12,761
7,867
24,016
14,432
Total revenue, net
77,340
59,560
148,030
109,922
Operating costs and expenses: Costs of product revenue
14,223
13,519
28,258
23,111
Costs of franchise and service revenue
3,714
4,544
7,746
8,778
Selling, general and administrative expenses
44,448
29,322
79,333
63,241
Depreciation and amortization
4,288
3,579
8,485
7,071
Marketing fund expense
5,466
4,081
10,472
8,436
Acquisition and transaction income
(31,252
)
(31,627
)
(15,510
)
(22,083
)
Total operating costs and expenses
40,887
23,418
118,784
88,554
Operating income
36,453
36,142
29,246
21,368
Other (income) expense: Interest income
(529
)
(418
)
(1,165
)
(807
)
Interest expense
8,627
2,866
16,604
5,727
Other expense
698
—
1,252
—
Total other expense
8,796
2,448
16,691
4,920
Income before income taxes
27,657
33,694
12,555
16,448
Income taxes
133
2,217
10
150
Net income
27,524
31,477
12,545
16,298
Less: net income attributable to noncontrolling interests
9,145
14,643
4,149
6,983
Net income attributable to Xponential Fitness, Inc.
$
18,379
$
16,834
$
8,396
$
9,315
Net income per share of Class A common stock: Basic
$
1.44
$
3.28
$
0.16
$
1.86
Diluted
$
0.09
$
0.50
$
0.08
$
0.26
Weighted average shares of Class A common stock outstanding: Basic
33,045
25,414
31,906
24,083
Diluted
41,593
63,183
50,059
62,696
Xponential Fitness,
Inc.
Condensed Consolidated
Statements of Cash Flows
(Unaudited)(in
thousands)
Six Months Ended June
30,
2023
2022
Cash flows from operating activities: Net income
$
12,545
$
16,298
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization
8,485
7,071
Amortization and write off of debt issuance cost
296
64
Amortization of discount on long-term debt
1,218
303
Change in contingent consideration from acquisitions
(15,510
)
(22,081
)
Amortization of right-of-use assets
3,347
886
Bad debt expense (recovery)
897
(773
)
Equity-based compensation
12,111
19,677
Non-cash interest
(856
)
(448
)
Write down of brand assets
7,238
—
Loss (gain) on disposal of assets
133
(68
)
Changes in assets and liabilities, net of effect of acquisitions:
Accounts receivable
(2,022
)
(6,964
)
Inventories
(983
)
(7,359
)
Prepaid expenses and other current assets
(5,280
)
(635
)
Operating lease liabilities
(2,636
)
(910
)
Deferred costs
(1,192
)
(1,116
)
Notes receivable, net
2
13
Accounts payable
9,302
10,819
Accrued expenses
1,174
(2,216
)
Other current liabilities
663
380
Deferred revenue
1,945
12,652
Other assets
(59
)
(85
)
Other liabilities
(253
)
686
Net cash provided by operating activities
30,565
26,194
Cash flows from investing activities: Purchases of property and
equipment
(4,360
)
(4,394
)
Proceeds from sale of assets
—
65
Purchase of studios
(164
)
—
Purchase of intangible assets
(1,431
)
(912
)
Notes receivable issued
(31
)
(1,365
)
Notes receivable payments received
373
971
Net cash used in investing activities
(5,613
)
(5,635
)
Cash flows from financing activities: Borrowings from long-term
debt
126,100
—
Payments on long-term debt
(1,824
)
(1,480
)
Debt issuance costs
(115
)
(46
)
Payment of preferred stock dividend and deemed cash dividend
(2,612
)
(9,750
)
Payment of contingent consideration
—
(1,336
)
Payments for taxes related to net share settlement of restricted
share units
(8,111
)
—
Payment for tax receivable agreement
(1,163
)
—
Distributions to Member
—
—
Payments for redemption of preferred stock
(130,766
)
—
Payments for distributions to Pre-IPO LLC Members
(532
)
—
Payment received from shareholder
1,290
—
Loan to shareholder
(4,400
)
—
Net cash used in financing activities
(22,133
)
(12,612
)
Increase in cash, cash equivalents and restricted cash
2,819
7,947
Cash, cash equivalents and restricted cash, beginning of period
37,370
21,320
Cash, cash equivalents and restricted cash, end of period
$
40,189
$
29,267
Xponential Fitness,
Inc.
Net Loss to GAAP EPS Per
Share
(in thousands, except per
share amounts)
Three Months Ended June
30,
Six Months Ended June
30,
2023
2022
2023
2022
Numerator: Net income
$
27,524
$
31,477
$
12,545
$
16,298
Less: net (income) loss attributable to noncontrolling interests
(23,740
)
(72,592
)
849
(41,998
)
Less: dividends on preferred shares
(1,857
)
(3,250
)
(3,926
)
(6,500
)
Add: deemed contribution (dividend)
45,551
127,821
(17,109
)
76,890
Add: deemed contribution from redemption of convertible preferred
stock
—
—
12,679
—
Net income attributable to XPO Inc. - basic
47,478
83,456
5,038
44,690
Add: net income (loss) attributable to non-controlling interests
—
72,592
(849
)
41,998
Add: dividends on preferred shares
1,857
3,250
—
6,500
Less: deemed (contribution) dividend
(45,551
)
(127,821
)
—
(76,890
)
Net income attributable to XPO Inc. - diluted
$
3,784
$
31,477
$
4,189
$
16,298
Denominator: Weighted average shares of Class A common stock
outstanding - basic
33,045
25,414
31,906
24,083
Effect of dilutive securities: Rumble Class A common stock
—
1,300
—
1,300
Restricted stock units
585
474
590
791
Convertible preferred stock
7,963
13,889
—
13,889
Conversion of Class B common stock to Class A common stock
—
22,106
17,563
22,633
Weighted average shares of Class A common stock outstanding -
diluted
41,593
63,183
50,059
62,696
Net earnings per share attributable to Class A common stock
- basic
$
1.44
$
3.28
$
0.16
$
1.86
Net earnings per share attributable to Class A common stock -
diluted
$
0.09
$
0.50
$
0.08
$
0.26
Anti-dilutive shares excluded from diluted earnings per
share of Class A common stock: Conversion of Class B common stock
to Class A common stock
16,574
—
—
—
Convertible preferred stock
—
—
7,963
—
Rumble contingent shares
2,024
2,024
2,024
2,024
Profits interests, time vesting
2
43
2
43
Xponential Fitness,
Inc.
Reconciliations of GAAP to
Non-GAAP Measures
(in thousands, except per
share amounts)
Three Months Ended June
30,
Six Months Ended June
30,
2023
2022
2023
2022
Net income
$
27,524
$
31,477
$
12,545
$
16,298
Interest expense, net
8,098
2,448
15,439
4,920
Income taxes
133
2,217
10
150
Depreciation and amortization
4,288
3,579
8,485
7,071
EBITDA
40,043
39,721
36,479
28,439
Equity-based compensation
6,055
4,429
12,111
19,677
Employer payroll taxes related to equity-based compensation
91
—
565
—
Acquisition and transaction income
(31,252
)
(31,627
)
(15,510
)
(22,083
)
Litigation expenses
2,299
4,619
4,344
7,359
Employee retention credit
—
—
—
(2,597
)
Financial transaction fees and related expenses
79
250
1,644
737
TRA remeasurement
698
244
1,252
557
Write down of brand assets
7,238
—
7,238
—
Adjusted EBITDA
$
25,251
$
17,636
$
48,123
$
32,089
Three Months Ended June
30,
Six Months Ended June
30,
2023
2022
2023
2022
Net income
$
27,524
$
31,477
$
12,545
$
16,298
Change in fair value of contingent consideration
(31,252
)
(31,627
)
(15,510
)
(22,081
)
TRA remeasurement
698
244
1,252
557
Write down of brand assets
7,238
—
7,238
—
Adjusted net income (loss)
$
4,208
$
94
$
5,525
$
(5,226
)
Adjusted net income (loss) attributable to noncontrolling
interest
1,406
44
1,902
(2,532
)
Adjusted net income (loss) attributable to Xponential
Fitness, Inc.
2,802
50
3,623
(2,694
)
Dividends on preferred shares
(1,237
)
(1,738
)
(2,527
)
(3,351
)
Earnings (loss) per share - basic numerator
1,565
(1,688
)
1,096
(6,045
)
Add: adjusted net income attributable to noncontrolling interest
1,406
—
1,902
—
Add: dividends on preferred shares
1,237
—
2,527
—
Earnings (loss) per share - diluted numerator
$
4,208
$
(1,688
)
$
5,525
$
(6,045
)
Adjusted net earnings (loss) per share - basic
$
0.05
$
(0.07
)
$
0.03
$
(0.25
)
Adjusted net earnings (loss) per share - diluted
$
0.07
$
(0.07
)
$
0.10
$
(0.25
)
Weighted average shares of Class A common stock outstanding
- basic
33,045
25,414
31,906
24,083
Effect of dilutive securities: Restricted stock units
585
—
590
—
Convertible preferred stock
7,963
—
7,963
—
Conversion of Class B common stock to Class A common stock
16,574
—
17,563
—
Weighted average shares of Class A common stock outstanding -
diluted
58,167
25,414
58,022
24,083
Anti-dilutive shares excluded from diluted earnings per
share of Class A common stock: Rumble Class A common stock
—
1,300
—
1,300
Restricted stock units
—
2,550
—
2,550
Convertible preferred stock
—
13,889
—
13,889
Conversion of Class B common stock to Class A common stock
—
21,687
—
21,687
Rumble contingent shares
2,024
2,024
2,024
2,024
Profits interests, time vesting
2
43
2
43
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. In accordance with industry standard, we
define the same store sales base to include studios in North
America that are in traditional locations and that have generated
positive sales for at least 13 consecutive calendar months as of
the measurement date. Any transfer of ownership of an existing
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 activity for all North America traditional studio
locations that are at least 6 months old at the beginning of the
respective quarter, and that have non-zero sales in the period,
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, operate in
traditional locations and have nonzero sales. 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),
expense related to the remeasurement of our TRA obligation, and
write down of brand assets 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/20230802684455/en/
Addo Investor Relations investor@xponential.com (310)
829-5400
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