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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 June 30, 2022

OR

 

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.

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

 

 

 

 

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.

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 August 8, 2022, the registrant had 27,185,829 shares of Class A common stock outstanding and 21,713,155 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 Condensed Consolidated Financial Statements

6

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

29

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

44

Item 4.

Controls and Procedures

44

PART II.

OTHER INFORMATION

45

Item 1.

Legal Proceedings

45

Item 1A.

Risk Factors

45

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

46

Item 3.

Defaults Upon Senior Securities

46

Item 4.

Mine Safety Disclosures

46

Item 5.

Other Information

46

Item 6.

Exhibits

47

Signatures

48

 

 

 

 


 

 

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)

 

 

 

June 30,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Assets

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

Cash, cash equivalents and restricted cash

 

$

29,267

 

 

$

21,320

 

Accounts receivable, net (Note 10)

 

 

19,684

 

 

 

11,702

 

Inventories

 

 

14,287

 

 

 

6,928

 

Prepaid expenses and other current assets

 

 

5,907

 

 

 

5,271

 

Deferred costs, current portion

 

 

3,763

 

 

 

3,712

 

Notes receivable from franchisees, net (Note 10)

 

 

3,381

 

 

 

2,293

 

Total current assets

 

 

76,289

 

 

 

51,226

 

Property and equipment, net

 

 

15,254

 

 

 

12,773

 

Right-of-use assets

 

 

13,361

 

 

 

 

Goodwill

 

 

169,073

 

 

 

169,073

 

Intangible assets, net

 

 

142,670

 

 

 

136,863

 

Deferred costs, net of current portion

 

 

43,080

 

 

 

42,015

 

Notes receivable from franchisees, net of current portion (Note 10)

 

 

2,877

 

 

 

3,041

 

Other assets

 

 

632

 

 

 

553

 

Total assets

 

$

463,236

 

 

$

415,544

 

Liabilities, redeemable convertible preferred stock and deficit

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

Accounts payable

 

$

31,012

 

 

$

14,905

 

Accrued expenses

 

 

16,719

 

 

 

21,045

 

Deferred revenue, current portion

 

 

29,926

 

 

 

22,747

 

Notes payable

 

 

 

 

 

983

 

Current portion of long-term debt

 

 

2,960

 

 

 

2,960

 

Other current liabilities

 

 

5,317

 

 

 

3,253

 

Total current liabilities

 

 

85,934

 

 

 

65,893

 

Deferred revenue, net of current portion

 

 

105,963

 

 

 

95,691

 

Contingent consideration from acquisitions (Note 16)

 

 

31,650

 

 

 

54,881

 

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

 

 

126,823

 

 

 

127,983

 

Lease liability

 

 

15,837

 

 

 

 

Other liabilities

 

 

2,376

 

 

 

4,675

 

Total liabilities

 

 

368,583

 

 

 

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 June 30, 2022 and December 31, 2021

 

 

200,000

 

 

 

276,890

 

Stockholders' equity (deficit):

 

 

 

 

 

 

Undesignated preferred stock, $0.0001 par value, 4,600,000 shares authorized, none issued
   and outstanding as of June 30, 2022 and December 31, 2021

 

 

 

 

 

 

Class A common stock, $0.0001 par value, 500,000,000 shares authorized, 27,185,829 and
    
23,898,042 shares issued and outstanding as of June 30, 2022 and December 31, 2021,
    respectively

 

 

2

 

 

 

2

 

Class B common stock, $0.0001 par value, 500,000,000 shares authorized, 21,686,633 and
    
22,968,674 shares issued and outstanding as of June 30, 2022 and December 31, 2021,
    respectively

 

 

2

 

 

 

2

 

Additional paid-in capital

 

 

586,570

 

 

 

 

Receivable from shareholder (Note 10)

 

 

(10,600

)

 

 

(10,600

)

Accumulated deficit

 

 

(634,518

)

 

 

(643,833

)

Total stockholders' deficit attributable to Xponential Fitness, Inc.

 

 

(58,544

)

 

 

(654,429

)

Noncontrolling interests

 

 

(46,803

)

 

 

443,960

 

Total stockholders' deficit

 

 

(105,347

)

 

 

(210,469

)

Total liabilities, redeemable convertible preferred stock and deficit

 

$

463,236

 

 

$

415,544

 

 

See accompanying notes to condensed consolidated financial statements.

1


 

Xponential Fitness, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

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

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenue, net:

 

 

 

 

 

 

 

 

 

 

 

 

Franchise revenue

 

$

27,622

 

 

$

17,764

 

 

$

53,122

 

 

$

31,519

 

Equipment revenue

 

 

12,381

 

 

 

4,755

 

 

 

20,160

 

 

 

8,821

 

Merchandise revenue

 

 

6,753

 

 

 

4,509

 

 

 

12,836

 

 

 

8,741

 

Franchise marketing fund revenue

 

 

4,937

 

 

 

3,314

 

 

 

9,372

 

 

 

5,797

 

Other service revenue

 

 

7,867

 

 

 

5,433

 

 

 

14,432

 

 

 

9,962

 

Total revenue, net

 

 

59,560

 

 

 

35,775

 

 

 

109,922

 

 

 

64,840

 

Operating costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Costs of product revenue

 

 

13,519

 

 

 

6,274

 

 

 

23,111

 

 

 

11,618

 

Costs of franchise and service revenue

 

 

4,544

 

 

 

3,127

 

 

 

8,778

 

 

 

5,446

 

Selling, general and administrative expenses (Note 10)

 

 

29,322

 

 

 

21,202

 

 

 

63,241

 

 

 

37,804

 

Depreciation and amortization

 

 

3,579

 

 

 

2,407

 

 

 

7,071

 

 

 

4,462

 

Marketing fund expense

 

 

4,081

 

 

 

2,860

 

 

 

8,436

 

 

 

5,476

 

Acquisition and transaction expenses (income)

 

 

(31,627

)

 

 

297

 

 

 

(22,083

)

 

 

647

 

Total operating costs and expenses

 

 

23,418

 

 

 

36,167

 

 

 

88,554

 

 

 

65,453

 

Operating income (loss)

 

 

36,142

 

 

 

(392

)

 

 

21,368

 

 

 

(613

)

Other (income) expense:

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

(418

)

 

 

(358

)

 

 

(807

)

 

 

(453

)

Interest expense (Note 10)

 

 

2,866

 

 

 

11,591

 

 

 

5,727

 

 

 

16,014

 

Gain on debt extinguishment

 

 

 

 

 

(3,707

)

 

 

 

 

 

(3,707

)

Total other expense

 

 

2,448

 

 

 

7,526

 

 

 

4,920

 

 

 

11,854

 

Income (loss) before income taxes

 

 

33,694

 

 

 

(7,918

)

 

 

16,448

 

 

 

(12,467

)

Income taxes

 

 

2,217

 

 

 

83

 

 

 

150

 

 

 

284

 

Net income (loss)

 

 

31,477

 

 

 

(8,001

)

 

 

16,298

 

 

 

(12,751

)

Less: net income attributable to noncontrolling interests

 

 

14,643

 

 

 

 

 

 

6,983

 

 

 

 

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

 

$

16,834

 

 

$

(8,001

)

 

$

9,315

 

 

$

(12,751

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings per share of Class A common stock:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

3.28

 

 

N/A

 

 

$

1.86

 

 

N/A

 

Diluted

 

$

0.50

 

 

N/A

 

 

$

0.26

 

 

N/A

 

Weighted average shares of Class A common stock outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

25,414,394

 

 

N/A

 

 

 

24,083,066

 

 

N/A

 

Diluted

 

 

63,183,268

 

 

N/A

 

 

 

62,696,023

 

 

N/A

 

 

See accompanying notes to condensed consolidated financial statements.

2


 

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

)

Equity based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,861

 

 

 

 

 

 

 

 

 

 

 

 

(54

)

 

 

3,807

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

16,834

 

 

 

14,643

 

 

 

31,477

 

Conversion of Class B shares to Class A shares

 

 

2,883,053

 

 

 

 

 

 

(2,883,053

)

 

 

 

 

 

(7,387

)

 

 

 

 

 

 

 

 

 

 

 

7,387

 

 

 

 

Payment of preferred stock dividend

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,250

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,250

)

Adjustment of preferred stock to redemption value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

127,821

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

127,821

 

Vesting of Class B Shares

 

 

 

 

 

 

 

 

5,531

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Vesting of restricted stock units

 

 

53,571

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at June 30, 2022