10-Q

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-40638

Xponential Fitness, Inc.

(Exact Name of Registrant as Specified in its Charter)


Delaware	84-4395129
(State or other jurisdiction of incorporation or organization)	(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

Securities registered pursuant to Section 12(b) of the 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 (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of May 10, 2022, the registrant had 27,007,356 shares of Class A common stock outstanding and 21,807,368 shares of Class B common stock outstanding.

Table of Contents


		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations	2
	Condensed Consolidated Statements of Changes to Stockholder's/Member’s Equity (Deficit)	3
	Condensed Consolidated Statements of Cash Flows	4
	Notes to Unaudited Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	41
Item 4.	Controls and Procedures	41
PART II.	OTHER INFORMATION	42
Item 1.	Legal Proceedings	42
Item 1A.	Risk Factors	42
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	43
Item 3.	Defaults Upon Senior Securities	43
Item 4.	Mine Safety Disclosures	43
Item 5.	Other Information	43
Item 6.	Exhibits	44
Signatures		45

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Xponential Fitness, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(amounts in thousands, except share and per share amounts)


	March 31,			December 31,
	2022			2021
Assets
Current Assets:
Cash, cash equivalents and restricted cash	$	15,750		$	21,320
Accounts receivable, net (Note 10)		15,865			11,702
Inventories		9,217			6,928
Prepaid expenses and other current assets		7,389			5,271
Deferred costs, current portion		4,071			3,712
Notes receivable from franchisees, net (Note 10)		2,531			2,293
Total current assets		54,823			51,226
Property and equipment, net		13,910			12,773
Right-of-use assets		16,179			—
Goodwill		169,073			169,073
Intangible assets, net		134,532			136,863
Deferred costs, net of current portion		42,474			42,015
Notes receivable from franchisees, net of current portion (Note 10)		3,095			3,041
Other assets		558			553
Total assets	$	434,644		$	415,544
Liabilities, redeemable convertible preferred stock and deficit
Current Liabilities:
Accounts payable	$	12,359		$	14,905
Accrued expenses		15,818			21,045
Deferred revenue, current portion		25,664			22,747
Notes payable		—			983
Current portion of long-term debt		2,960			2,960
Other current liabilities		5,175			3,253
Total current liabilities		61,976			65,893
Deferred revenue, net of current portion		98,698			95,691
Contingent consideration from acquisitions (Note 16)		63,968			54,881
Long-term debt, net of current portion, discount and issuance costs		127,382			127,983
Lease liability		18,472			—
Other liabilities		1,529			4,675
Total liabilities		372,025			349,123
Commitments and contingencies (Note 16)
Redeemable convertible preferred stock, $0.0001 par value, 400,000 shares authorized, 200,000 shares issued and outstanding as of March 31, 2022 and December 31, 2021		327,821			276,890
Stockholders' equity (deficit):
Undesignated preferred stock, $0.0001 par value, 4,600,000 shares authorized, none issued and outstanding as of March 31, 2022 and December 31, 2021		—			—
Class A common stock, $0.0001 par value, 500,000,000 shares authorized, 24,249,205 and 23,898,042 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively		2			2
Class B common stock, $0.0001 par value, 500,000,000 shares authorized, 24,564,155 and 22,968,674 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively		2			2
Additional paid-in capital		465,525			—
Receivable from shareholder (Note 10)		(10,600	)		(10,600	)
Accumulated deficit		(651,352	)		(643,833	)
Total stockholders' deficit attributable to Xponential Fitness, Inc.		(196,423	)		(654,429	)
Noncontrolling interests		(68,779	)		443,960
Total stockholders' deficit		(265,202	)		(210,469	)
Total liabilities, redeemable convertible preferred stock and deficit	$	434,644		$	415,544

See accompanying notes to condensed consolidated financial statements.

Xponential Fitness, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

(amounts in thousands, except share and per share amounts)


	Three Months Ended March 31,
	2022			2021
Revenue, net:
Franchise revenue	$	25,500		$	13,755
Equipment revenue		7,779			4,066
Merchandise revenue		6,083			4,232
Franchise marketing fund revenue		4,435			2,483
Other service revenue		6,565			4,529
Total revenue, net		50,362			29,065
Operating costs and expenses:
Costs of product revenue		9,592			5,344
Costs of franchise and service revenue		4,234			2,319
Selling, general and administrative expenses (Note 10)		33,919			16,602
Depreciation and amortization		3,492			2,055
Marketing fund expense		4,355			2,616
Acquisition and transaction expenses		9,544			350
Total operating costs and expenses		65,136			29,286
Operating loss		(14,774	)		(221	)
Other (income) expense:
Interest income		(389	)		(95	)
Interest expense (Note 10)		2,861			4,423
Total other expense		2,472			4,328
Loss before income taxes		(17,246	)		(4,549	)
Income taxes		(2,067	)		201
Net loss		(15,179	)		(4,750	)
Less: Net loss attributable to noncontrolling interests		(7,660	)		—
Net loss attributable to Xponential Fitness, Inc.	$	(7,519	)	$	(4,750	)

Net loss per share of Class A common stock:
Basic	$	(1.51	)	N/A
Diluted	$	(1.51	)	N/A
Weighted average shares of Class A common stock outstanding:
Basic		22,736,946		N/A
Diluted		22,736,946		N/A

See accompanying notes to condensed consolidated financial statements.

Xponential Fitness, Inc.

Condensed Consolidated Statements of Changes to Stockholders'/Member’s Equity (Deficit)

(Unaudited)

(amounts in thousands, except share amounts)


	Class A Common Stock				Class B Common Stock
	Shares		Amount		Shares			Amount		Additional Paid-In Capital			Member’s Contribution		Receivable from Shareholder			Accumulated Deficit			Noncontrolling interests			Total Equity (Deficit)
Balance at December 31, 2021		23,898,042	$	2		22,968,674		$	2	$	—		$	—	$	(10,600	)	$	(643,833	)	$	443,960		$	(210,469	)
Equity-based compensation		—		—		—			—		2,423			—		—			—			12,204			14,627
Net loss		—		—		—			—		—			—		—			(7,519	)		(7,660	)		(15,179	)
Conversion of Class B shares to Class A shares		351,163		—		(351,163	)		—		517,283			—		—			—			(517,283	)		—
Payment of preferred stock dividend		—		—		—			—		(3,250	)		—		—			—			—			(3,250	)
Adjustment of preferred stock to redemption value		—		—		—			—		(50,931	)		—		—			—			—			(50,931	)
Vesting of Class B Shares		—		—		1,946,644			—		—			—		—			—			—			—
Balance at March 31, 2022		24,249,205	$	2	$	24,564,155		$	2	$	465,525		$	—	$	(10,600	)	$	(651,352	)	$	(68,779	)	$	(265,202	)


	Class A Common Stock				Class B Common Stock
	Shares		Amount		Shares		Amount		Additional Paid-In Capital		Member’s Contribution			Receivable from Member			Accumulated Deficit			Noncontrolling interests		Total Equity
Balance at December 31, 2020		—	$	—		—	$	—	$	—	$	113,697		$	(1,456	)	$	(107,492	)	$	—	$	4,749
Equity-based compensation		—		—		—		—		—		222			—			—			—		222
Net loss		—		—		—		—		—		—			—			(4,750	)		—		(4,750	)
Parent contribution of Rumble assets		—		—		—		—		—		20,483			—			—			—		20,483
Distributions to Member		—		—		—		—		—		(10,600	)		—			—			—		(10,600	)
Payment received from Member, net		—		—		—		—		—		—			2			—			—		2
Balance at March 31, 2021		—	$	—		—	$	—	$	—	$	123,802		$	(1,454	)	$	(112,242	)	$	—	$	10,106

See accompanying notes to condensed consolidated financial statements.

Xponential Fitness, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(amounts in thousands)


	Three Months Ended March 31,
	2022			2021
Cash flows from operating activities:
Net loss	$	(15,179	)	$	(4,750	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		3,492			2,055
Amortization of debt issuance cost		33			311
Amortization of discount on long-term debt		151			—
Change in contingent consideration from acquisitions		9,546			120
Bad debt expense (recovery)		(617	)		(105	)
Equity-based compensation		15,248			222
Non-cash interest		(208	)		226
Gain on disposal of assets		(43	)		—
Changes in assets and liabilities:
Accounts receivable		(3,300	)		(1,173	)
Inventories		(2,289	)		430
Prepaid expenses and other current assets		(2,117	)		(985	)
Operating lease right-of-use assets and operating lease liabilities		(20	)		—
Deferred costs		(818	)		(533	)
Notes receivable, net		5			168
Accounts payable		(2,758	)		(1,797	)
Accrued expenses		(3,650	)		491
Notes payable		(983	)		—
Other current liabilities		20			65
Deferred revenue		5,924			5,033
Other assets		(10	)		(1	)
Other liabilities		461			23
Net cash provided by (used in) operating activities		2,888			(200	)
Cash flows from investing activities:
Purchases of property and equipment		(1,798	)		(1,125	)
Purchase of studios		—			(245	)
Proceeds from sale of assets		65			—
Purchase of intangible assets		(316	)		(288	)
Notes receivable issued		(585	)		—
Notes receivable payment received