false 0001802156 0001802156 2024-08-01 2024-08-01

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 1, 2024

 

 

XPONENTIAL FITNESS, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   001-40638   84-4395129
(State or other jurisdiction of
incorporation or organization)
  (Commission
File Number)
  (I.R.S. Employer
Identification No.)

 

17877 Von Karman Ave., Suite 100  
Irvine, CA   92614
(Address of principal executive offices)   (Zip Code)

Registrant’s telephone number, including area code: (949) 346-3000

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2, below):

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities

registered pursuant to Section 12(b) of the Exchange Act:

 

Title of each class

 

Trading
Symbol(s)

 

Name of each exchange
on which registered

Class A common stock, par value $0.0001 per share   XPOF   New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

 

 


Item 2.02.

Results of Operations and Financial Condition

On August 1, 2024, Xponential Fitness, Inc. issued a press release announcing its financial results for the quarter ended June 30, 2024. A copy of the press release is furnished as Exhibit 99.1 to this report.

The information in this Item 2.02 (including Exhibit 99.1) shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such a filing.

 

Item 9.01.

Financial Statements and Exhibits

(d) Exhibits

 

Exhibit
No.
   Description
99.1    Press release dated August 1, 2024
104    Cover Page Interactive Data File (the cover page XBRL tags are embedded within the inline XBRL document)


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

    XPONENTIAL FITNESS, INC.
Date: August 1, 2024     By:  

/s/ Mark King

    Name:   Mark King
    Title:   Chief Executive Officer

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Xponential Fitness, Inc. Announces Second Quarter 2024 Financial Results

 

   

Sold 87 franchise licenses and opened 108 new studios in Q2 2024

 

   

Quarterly run-rate average unit volume (AUV)3 of $638,000 in Q2 2024 grew 10% year-over-year, while total members of 801,000 were up 17%

 

   

Lowered guidance for studio openings, revenue and Adjusted EBITDA4 in light of second quarter shortfall and current business conditions

IRVINE, Calif., August 1, 2024 – Xponential Fitness, Inc. (NYSE: XPOF) (“Xponential” or the “Company”), one of the leading global franchisors of boutique health and wellness brands, today reported financial results for the second quarter ended June 30, 2024. All financial data included in this release refer to global numbers, unless otherwise noted. All KPI information is presented on an adjusted basis to include historical information of Lindora prior to its acquisition by the Company in January 2024, and to exclude historical information of all brands divested by the company prior to June 30, 2024 (Row House and Stride). 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 2024 Compared to Q2 2023

 

   

Decreased revenue 1% to $76.5 million.

 

   

Increased North America system-wide sales1 by 24% to $421.5 million.

 

   

Reported North America same store sales2 growth of 7%, compared to growth of 15%.

 

   

Reported North America quarterly run-rate average unit volume (AUV) of $638,000, compared to $581,000.

 

   

Posted net loss of $13.7 million, or a loss of $0.29 per basic share, on a share count of 31.8 million shares of Class A Common Stock, compared to 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.

 

   

Posted adjusted net income of $0.7 million, or a loss of $0.03 per basic share, compared to adjusted net income of $4.2 million, or earnings per basic share of $0.05.

 

   

Reported Adjusted EBITDA of $25.4 million, compared to $25.3 million.

“During my first six weeks, I’ve enjoyed the opportunity to meet with many of our dedicated franchisees and employees,” said Mark King, CEO of Xponential Fitness, Inc. “Every company I’ve led has had strong, growing brands, passionate stakeholders, and scalable teams with models that are poised to generate significant cash with some fine tuning. I see the exact same things at Xponential.”

 

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Results for the Second Quarter Ended June 30, 2024

For the second quarter of 2024, total revenue decreased $0.8 million, or 1%, to $76.5 million, down from $77.3 million in the prior year period. The decrease was due primarily to a $6.5 million decrease in other service revenue, largely attributable to our strategic shift away from company-owned transition studios.

Net loss totaled $13.7 million, or a loss of $0.29 per basic share, compared to net income of $27.5 million, or earnings per basic share of $1.44, in the prior year period. The net loss was the result of $4.9 million of lower overall profitability, a $30.0 million decrease in acquisition and transaction income, which includes non-cash contingent consideration primarily related to the Rumble acquisition, a $2.3 million increase in restructuring and related charges from our company-owned transition studios, a $4.9 million increase in impairment of goodwill and other assets associated with a decrease in CycleBar’s actual and forecasted cash flows, and a $0.9 million increase in loss on brand divestiture, partially offset by a $1.9 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 loss per share for the quarter ended June 30, 2024.

Adjusted net income for the second quarter of 2024, which excludes $1.2 million in acquisition and transaction income, $0.3 million expense related to the remeasurement of the Company’s tax receivable agreement, $12.1 million related to the impairment of goodwill and other assets, $0.9 million loss on brand divestiture, and $2.3 million of restructuring and related charges, was $0.7 million, or a loss of $0.03 per basic share, on a share count of 31.8 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 (outside of the ordinary course of business), financial transaction fees and related expenses, tax receivable agreement remeasurement, impairment of goodwill and other assets, loss on brand divestiture, executive transition costs, non-recurring rebranding expenses, and restructuring and related charges, was $25.4 million for the quarter, up slightly from $25.3 million in the prior year period.

Liquidity and Capital Resources

As of June 30, 2024, the Company had approximately $26.0 million of cash, cash equivalents and restricted cash and $330.1 million in total long-term debt. Net cash provided by operating activities was $5.7 million for the six months ended June 30, 2024.

2024 Outlook

“We saw some of the same retail softness that other consumer companies experienced during the second quarter,” commented John Meloun, CFO of Xponential Fitness, Inc. “When taken together with the effects of our leadership transition and previously announced regulatory investigations, it makes sense to temper elements of our prior outlook.”

 

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Based on current business conditions, the second quarter shortfall, and the Company’s expectations as of the date of this release, Xponential is adjusting its full year 2024 guidance as follows:

 

   

Gross new studio openings in the range of 500 to 520, or a decrease of 8% at the midpoint compared to full year 2023 gross new openings; this compares to previous guidance of 540 to 560;

 

   

North America system-wide sales in the range of $1.705 billion to $1.715 billion, or an increase of 22% at the midpoint compared to full year 2023; unchanged from previous guidance;

 

   

Revenue in the range of $310.0 million to $320.0 million, or a decrease of 1% at the midpoint compared to full year 2023; this compares to previous guidance of $340.0 million to $350.0 million; and

 

   

Adjusted EBITDA in the range of $120.0 million to $124.0 million, or an increase of 16% at the midpoint compared to full year 2023; this compares to previous guidance of $136.0 million to $140.0 million.

Additional key assumptions for full year 2024 include:

 

   

Tax rate in the mid-to-high single digits;

 

   

Share count of 31.8 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, or $2.2 million if paid-in-kind.

We are not able to provide a quantitative reconciliation of the estimated full year Adjusted EBITDA for fiscal year ending December 31, 2024 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.

Second Quarter 2024 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 2024 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 15, 2024, by dialing 1-844-512-2921 (United States) or 1-412-317-6671 (International) and entering the replay pin number: 13746851.

 

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About Xponential Fitness, Inc.

Xponential Fitness, Inc. (NYSE: XPOF) is one of the leading global franchisors of boutique health and wellness brands. Through its mission to make health and wellness accessible to everyone, the Company operates a diversified platform of nine brands spanning across verticals including Pilates, indoor cycling, barre, stretching, dancing, boxing, strength training, metabolic health, and yoga. In partnership with its franchisees, Xponential offers energetic, accessible, and personalized workout experiences led by highly qualified instructors in studio locations throughout the U.S. and internationally, with franchise, master franchise and international expansion agreements in 49 U.S. states and 26 additional countries. Xponential’s 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, the largest assisted stretching brand in the United States offering one-on-one and group stretching services; AKT, a dance-based cardio workout combining toning, interval and circuit training; YogaSix, the largest 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; Rumble, a boxing-inspired full body workout; BFT, a functional training and strength-based program; and Lindora, a leading provider of medically guided wellness and metabolic health solutions. 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 and related employer payroll taxes, acquisition and transaction expenses (income), litigation expenses, financial transaction fees and related expenses, tax receivable agreement remeasurement, impairment of goodwill and other assets, loss on brand divestiture, executive transition costs, non-recurring rebranding expenses, and charges incurred in connection with our restructuring plan 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

 

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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.

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 new studio openings; profitability; the expected impact of our movement away from company-owned transition studios; anticipated industry trends; projected financial and performance information such as system-wide sales; and other statements under the section “2024 Outlook”; our competitive position in the boutique fitness and broader health and wellness 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, 2023, 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.

 

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Contact:

Addo Investor Relations

investor@xponential.com

(310) 829-5400

 

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Xponential Fitness, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(in thousands, except per share amounts)

 

     June 30,     December 31,  
     2024     2023  
Assets     

Current assets:

    

Cash, cash equivalents and restricted cash

   $ 26,017     $ 37,094  

Accounts receivable, net

     29,771       32,751  

Inventories

     13,273       14,724  

Prepaid expenses and other current assets

     8,242       5,856  

Deferred costs, current portion

     8,066       6,620  

Notes receivable from franchisees, net

     352       203  
  

 

 

   

 

 

 

Total current assets

     85,721       97,248  

Property and equipment, net

     18,553       19,502  

Right-of-use assets

     43,387       71,413  

Goodwill

     163,036       171,601  

Intangible assets, net

     120,232       120,149  

Deferred costs, net of current portion

     43,043       46,541  

Notes receivable from franchisees, net of current portion

     108       802  

Other assets

     1,159       1,442  
  

 

 

   

 

 

 

Total assets

   $ 475,239     $ 528,698  
  

 

 

   

 

 

 
Liabilities, redeemable convertible preferred stock and stockholders’ equity (deficit)     

Current liabilities:

    

Accounts payable

   $ 22,694     $ 19,119  

Accrued expenses

     14,411       14,088  

Deferred revenue, current portion

     29,343       34,674  

Current portion of long-term debt

     5,147       4,760  

Other current liabilities

     20,235       19,666  
  

 

 

   

 

 

 

Total current liabilities

     91,830       92,307  
    

Deferred revenue, net of current portion

     111,232       117,305  

Contingent consideration from acquisitions

     11,600       8,666  

Long-term debt, net of current portion, discount and issuance costs

     318,454       319,261  

Lease liability

     38,047       70,141  

Other liabilities

     4,831       9,152  
  

 

 

   

 

 

 

Total liabilities

     575,994       616,832  

Commitments and contingencies

    

Redeemable convertible preferred stock, $0.0001 par value, 400 shares authorized, 115 shares issued and outstanding as of June 30, 2024 and December 31, 2023

     122,903       114,660  

Stockholders’ equity (deficit):

    

Undesignated preferred stock, $0.0001 par value, 4,600 shares authorized, none issued and outstanding as of June 30, 2024 and December 31, 2023

     —        —   

Class A common stock, $0.0001 par value, 500,000 shares authorized, 32,160 and 30,897 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively

     3       3  

Class B common stock, $0.0001 par value, 500,000 shares authorized, 16,090 and 16,566 shares issued, and 16,015 and 16,491 shares outstanding as of June 30, 2024 and December 31, 2023, respectively

     2       2  

Additional paid-in capital

     507,986       521,998  

Receivable from shareholder

     (16,135     (15,426

Accumulated deficit

     (642,096     (630,127

Treasury stock, at cost, 75 shares outstanding as of June 30, 2024 and December 31, 2023

     (1,697     (1,697
  

 

 

   

 

 

 

Total stockholders’ deficit attributable to Xponential Fitness, Inc.

     (151,937     (125,247

Noncontrolling interests

     (71,721     (77,547
  

 

 

   

 

 

 

Total stockholders’ deficit

     (223,658     (202,794
  

 

 

   

 

 

 

Total liabilities, redeemable convertible preferred stock and stockholders’ deficit

   $ 475,239     $ 528,698  
  

 

 

   

 

 

 

 

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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,  
     2024     2023     2024     2023  

Revenue, net:

        

Franchise revenue

   $ 43,020     $ 35,133     $ 84,774     $ 68,099  

Equipment revenue

     12,925       14,428       26,825       27,522  

Merchandise revenue

     5,882       8,401       14,055       15,565  

Franchise marketing fund revenue

     8,380       6,617       16,212       12,828  

Other service revenue

     6,310       12,761       14,172       24,016  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue, net

     76,517       77,340       156,038       148,030  

Operating costs and expenses:

        

Costs of product revenue

     12,866       14,223       27,257       28,258  

Costs of franchise and service revenue

     5,834       3,714       10,955       7,746  

Selling, general and administrative expenses

     36,989       37,210       74,144       72,095  

Impairment of goodwill and other assets

     12,089       7,238       12,089       7,238  

Depreciation and amortization

     4,517       4,288       8,953       8,485  

Marketing fund expense

     7,847       5,466       14,362       10,472  

Acquisition and transaction expenses (income)

     (1,217     (31,252     3,298       (15,510
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating costs and expenses

     78,925       40,887       151,058       118,784  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

     (2,408     36,453       4,980       29,246  

Other expense (income):

        

Interest income

     (387     (529     (750     (1,165

Interest expense

     11,256       8,627       22,801       16,604  

Other expense

     253       698       862       1,252  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other expense

     11,122       8,796       22,913       16,691  
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

     (13,530     27,657       (17,933     12,555  

Income taxes

     132       133       85       10  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

     (13,662     27,524       (18,018     12,545  

Less: net income (loss) attributable to noncontrolling interests

     (4,560     9,145       (6,049     4,149  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to Xponential Fitness, Inc.

   $ (9,102   $ 18,379     $ (11,969   $ 8,396  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per share of Class A common stock:

        

Basic

   $ (0.29   $ 1.44     $ (0.59   $ 0.16  

Diluted

   $ (0.29   $ 0.09     $ (0.59   $ 0.08  

Weighted average shares of Class A common stock outstanding:

        

Basic

     31,806       33,045       31,465       31,906  

Diluted

     31,806       41,593       31,465       50,059  

 

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Xponential Fitness, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)

 

     Six Months Ended June 30,  
     2024     2023  

Cash flows from operating activities:

    

Net income (loss)

   $ (18,018   $ 12,545  

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

    

Depreciation and amortization

     8,953       8,485  

Amortization and write off of debt issuance costs

     124       296  

Amortization and write off of discount on long-term debt

     2,201       1,218  

Change in contingent consideration from acquisitions

     2,770       (15,510

Non-cash lease expense

     3,937       3,347  

Bad debt expense

     1,467       897  

Equity-based compensation

     8,138       12,111  

Non-cash interest

     (649     (856

Loss (gain) on disposal of assets

     (6,660     133  

Impairment of goodwill and other assets

     12,089       7,238  

Changes in assets and liabilities, net of effect of acquisition:

    

Accounts receivable

     1,715       (2,022

Inventories

     1,451       (983

Prepaid expenses and other current assets

     (2,386     (5,280

Operating lease liabilities

     (2,699     (2,636

Deferred costs

     2,051       (1,192

Notes receivable, net

     2       2  

Accounts payable

     3,419       9,302  

Accrued expenses

     35       1,174  

Other current liabilities

     3,197       663  

Deferred revenue

     (11,404     1,945  

Other assets

     282       (59

Other liabilities

     (4,319     (253
  

 

 

   

 

 

 

Net cash provided by operating activities

     5,696       30,565  

Cash flows from investing activities:

    

Purchases of property and equipment

     (2,984     (4,360

Proceeds from sale of assets

     346       —   

Purchase of studios

     —        (164

Purchase of intangible assets

     (1,016     (1,431

Notes receivable issued

     —        (31

Notes receivable payments received

     393       373  

Acquisition of business

     (8,500     —   
  

 

 

   

 

 

 

Net cash used in investing activities

     (11,761     (5,613

Cash flows from financing activities:

    

Borrowings from long-term debt

     38,701       126,100  

Payments on long-term debt

     (41,178     (1,824

Debt issuance costs

     (269     (115

Payment of preferred stock dividend

     (1,968     (2,612

Payments for taxes related to net share settlement of restricted share units

     —        (8,111

Proceeds from issuance of common stock in connection with stock-based compensation plans

     74       —   

Payment for tax receivable agreement

     (136     (1,163

Payments for redemption of preferred stock

     —        (130,766

Payments for distributions to Pre-IPO LLC Members

     (236     (532

Payment received from shareholder

     —        1,290  

Loan to shareholder

     —        (4,400
  

 

 

   

 

 

 

Net cash used in financing activities

     (5,012     (22,133
  

 

 

   

 

 

 

Increase (decrease) in cash, cash equivalents and restricted cash

     (11,077     2,819  

Cash, cash equivalents and restricted cash, beginning of period

     37,094       37,370  
  

 

 

   

 

 

 

Cash, cash equivalents and restricted cash, end of period

   $ 26,017     $ 40,189  
  

 

 

   

 

 

 

 

9


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Xponential Fitness, Inc.

Net Income (Loss) to GAAP EPS Per Share

(in thousands, except per share amounts)

 

     Three months ended June 30,     Six months ended June 30,  
     2024     2023     2024     2023  

Numerator:

        

Net income (loss)

   $ (13,662   $ 27,524     $ (18,018   $ 12,545  

Less: net (income) loss attributable to noncontrolling interests

     4,607       (23,740     9,546       849  

Less: dividends on preferred shares

     (2,150     (1,857     (4,013     (3,926

Less: deemed contribution (dividend)

     2,012       45,551       (6,094     (17,109

Add: deemed contribution from redemption of convertible preferred stock

     —        —        —        12,679  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to XPO Inc. - basic

     (9,193     47,478       (18,579     5,038  

Add: net income (loss) attributable to non-controlling interests

     —        —        —        (849

Add: dividends on preferred shares

     —        1,857       —        —   

Less: deemed (contribution) dividend

     —        (45,551     —        —   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to XPO Inc. - diluted

   $ (9,193   $ 3,784     $ (18,579   $ 4,189  
  

 

 

   

 

 

   

 

 

   

 

 

 

Denominator:

        

Weighted average shares of Class A common stock outstanding - basic

     31,806       33,045       31,465       31,906  

Effect of dilutive securities:

        

Restricted stock units

     —        585       —        590  

Convertible preferred stock

     —        7,963       —        —   

Conversion of Class B common stock to Class A common stock

     —        —        —        17,563  
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares of Class A common stock outstanding - diluted

     31,806       41,593       31,465       50,059  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings (loss) per share attributable to Class A common stock - basic

   $ (0.29   $ 1.44     $ (0.59   $ 0.16  

Net earnings (loss) per share attributable to Class A common stock - diluted

   $ (0.29   $ 0.09     $ (0.59   $ 0.08  

Anti-dilutive shares excluded from diluted loss per share of Class A common stock:

        

Restricted stock units

     2,263       —        2,263       —   

Conversion of Class B common stock to Class A common stock

     16,016       16,574       16,016       —   

Convertible preferred stock

     8,112       —        8,112       7,963  

Treasury share options

     75       —        75       —   

Rumble contingent shares

     2,024       2,024       2,024       2,024  

Profits interests, time vesting

     1       2       1       2  

 

10


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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,  
     2024     2023     2024     2023  
     (in thousands)  

Net income (loss)

   $ (13,662   $ 27,524     $ (18,018   $ 12,545  

Interest expense, net

     10,869       8,098       22,051       15,439  

Income taxes

     132       133       85       10  

Depreciation and amortization

     4,517       4,288       8,953       8,485  
  

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

     1,856       40,043       13,071       36,479  

Equity-based compensation

     4,196       6,055       8,138       12,111  

Employer payroll taxes related to equity-based compensation

     109       91       422       565  

Acquisition and transaction expenses (income)

     (1,217     (31,252     3,298       (15,510

Litigation expenses

     3,388       2,299       4,086       4,344  

Financial transaction fees and related expenses

     425       79       620       1,644  

TRA remeasurement

     253       698       862       1,252  

Impairment of goodwill and other assets

     12,089       7,238       12,089       7,238  

Loss on brand divestiture

     922       —        1,201       —   

Executive transition costs

     690       —        690       —   

Non-recurring rebranding expenses

     331       —        331       —   

Restructuring and related charges

     2,325       —        10,389       —   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 25,367     $ 25,251     $ 55,197     $ 48,123  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

     Three Months Ended June 30,     Six Months Ended June 30,  
     2024     2023     2024     2023  

Net income (loss)

   $ (13,662   $ 27,524     $ (18,018   $ 12,545  

Acquisition and transaction expenses (income)

     (1,217     (31,252     3,298       (15,510

TRA remeasurement

     253       698       862       1,252  

Impairment of goodwill and other assets

     12,089       7,238       12,089       7,238  

Loss on brand divestiture

     922       —        1,201       —   

Restructuring and related charges

     2,325       —        10,389       —   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted net income

   $ 710     $ 4,208     $ 9,821     $ 5,525  
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted net income attributable to noncontrolling interest

     240       1,406       3,393       1,902  

Adjusted net income attributable to Xponential Fitness, Inc.

     470       2,802       6,428       3,623  

Dividends on preferred shares

     (1,423     (1,237     (2,641     (2,527
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings (loss) per share - basic numerator

   $ (953   $ 1,565     $ 3,787     $ 1,096  
  

 

 

   

 

 

   

 

 

   

 

 

 

Add: Adjusted net income (loss) attributable to noncontrolling interest

     —        1,406       3,393       1,902  

Add: Dividends on preferred shares

     —        1,237       2,641       2,527  
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings (loss) per share - diluted numerator

   $ (953   $ 4,208     $ 9,821     $ 5,525  
  

 

 

   

 

 

   

 

 

   

 

 

 
        

Adjusted net earnings (loss) per share - basic

   $ (0.03   $ 0.05     $ 0.12     $ 0.03  

Weighted average shares of Class A common stock outstanding - basic

     31,806       33,045       31,465       31,906  
        

Adjusted net earnings (loss) per share - diluted

   $ (0.03   $ 0.07     $ 0.18     $ 0.10  

Effect of dilutive securities:

        

Restricted stock units

     —        585       —        590  

Convertible preferred stock

     —        7,963       8,112       7,963  

Conversion of Class B common stock to Class A common stock

     —        16,574       16,356       17,563  
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares of Class A common stock outstanding - diluted

     31,806       58,167       55,933       58,022  
        

Shares excluded from dilutive earnings per share of Class A common stock

        

Restricted stock units

     2,263       —        2,263       —   

Convertible preferred stock

     8,112       —        —        —   

Conversion of Class B common stock to Class A common stock

     16,016       —        —        —   

Treasury share options

     75       —        75       —   

Rumble contingent shares

     2,024       2,024       2,024       2,024  

Profits interests, time vesting

     1       2       1       2  

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 attributable to Rumble.

 

11


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Footnotes

1. System-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 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 studio 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 new studio openings. Management reviews same store sales to assess the health of the franchised studios.

3. 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 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 non-zero sales. 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.

4. 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 and related employer payroll taxes, acquisition and transaction expenses (income) (including change in contingent consideration and transaction bonuses), litigation expenses (consisting of legal and related fees for specific proceedings that arise outside of the ordinary course of our business), 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 other contemplated corporate transactions, expense related to the remeasurement of our TRA obligation, expense related to loss on impairment or write down of goodwill and other assets, loss on brand divestiture, executive transition costs (consisting of costs associated with the transition of our former CEO, such as professional services, legal fees, executive recruiting costs and other related costs), non-recurring rebranding expenses, and restructuring and related charges incurred in connection with our restructuring plan 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.

 

12

v3.24.2.u1
Document and Entity Information
Aug. 01, 2024
Cover [Abstract]  
Amendment Flag false
Entity Central Index Key 0001802156
Document Type 8-K
Document Period End Date Aug. 01, 2024
Entity Registrant Name XPONENTIAL FITNESS, INC.
Entity Incorporation State Country Code DE
Entity File Number 001-40638
Entity Tax Identification Number 84-4395129
Entity Address, Address Line One 17877 Von Karman Ave.
Entity Address, Address Line Two Suite 100
Entity Address, City or Town Irvine
Entity Address, State or Province CA
Entity Address, Postal Zip Code 92614
City Area Code (949)
Local Phone Number 346-3000
Written Communications false
Soliciting Material false
Pre Commencement Tender Offer false
Pre Commencement Issuer Tender Offer false
Security 12b Title Class A common stock, par value $0.0001 per share
Trading Symbol XPOF
Security Exchange Name NYSE
Entity Emerging Growth Company true
Entity Ex Transition Period false

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