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 September 30, 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 November 7, 2022, the registrant had 27,566,312 shares of Class A common stock outstanding and 21,652,447 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	5
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	33
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	49
Item 4.	Controls and Procedures	49
PART II.	OTHER INFORMATION	50
Item 1.	Legal Proceedings	50
Item 1A.	Risk Factors	50
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	51
Item 3.	Defaults Upon Senior Securities	51
Item 4.	Mine Safety Disclosures	51
Item 5.	Other Information	51
Item 6.	Exhibits	52
Signatures		53

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)


	September 30,			December 31,
	2022			2021
Assets
Current Assets:
Cash, cash equivalents and restricted cash	$	30,895		$	21,320
Accounts receivable, net (Note 10)		19,377			11,702
Inventories		13,738			6,928
Prepaid expenses and other current assets		10,801			5,271
Deferred costs, current portion		3,573			3,712
Notes receivable from franchisees, net (Note 10)		1,926			2,293
Total current assets		80,310			51,226
Property and equipment, net		16,613			12,773
Right-of-use assets		22,738			—
Goodwill		165,697			169,073
Intangible assets, net		139,718			136,863
Deferred costs, net of current portion		43,402			42,015
Notes receivable from franchisees, net of current portion (Note 10)		3,107			3,041
Other assets		682			553
Total assets	$	472,267		$	415,544
Liabilities, redeemable convertible preferred stock and deficit
Current Liabilities:
Accounts payable	$	23,342		$	14,905
Accrued expenses		18,818			21,045
Deferred revenue, current portion		29,039			22,747
Notes payable		—			983
Current portion of long-term debt		3,035			2,960
Other current liabilities		6,620			3,253
Total current liabilities		80,854			65,893
Deferred revenue, net of current portion		108,191			95,691
Contingent consideration from acquisitions (Note 16)		46,655			54,881
Long-term debt, net of current portion, discount and issuance costs		131,668			127,983
Lease liability		24,472			—
Other liabilities		3,974			4,675
Total liabilities		395,814			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 September 30, 2022 and December 31, 2021		257,096			276,890
Stockholders' equity (deficit):
Undesignated preferred stock, $0.0001 par value, 4,600,000 shares authorized, none issued and outstanding as of September 30, 2022 and December 31, 2021		—			—
Class A common stock, $0.0001 par value, 500,000,000 shares authorized, 27,560,549 and 23,898,042 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively		3			2
Class B common stock, $0.0001 par value, 500,000,000 shares authorized, 21,650,669 and 22,968,674 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively		2			2
Additional paid-in capital		528,807			—
Receivable from shareholder (Note 10)		(14,219	)		(10,600	)
Accumulated deficit		(641,656	)		(643,833	)
Total stockholders' deficit attributable to Xponential Fitness, Inc.		(127,063	)		(654,429	)
Noncontrolling interests		(53,580	)		443,960
Total stockholders' deficit		(180,643	)		(210,469	)
Total liabilities, redeemable convertible preferred stock and deficit	$	472,267		$	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 September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Revenue, net:
Franchise revenue	$	30,006		$	19,985		$	83,128		$	51,504
Equipment revenue		11,770			6,750			31,930			15,571
Merchandise revenue		6,264			4,879			19,100			13,620
Franchise marketing fund revenue		5,172			3,706			14,544			9,503
Other service revenue		10,551			5,547			24,983			15,509
Total revenue, net		63,763			40,867			173,685			105,707
Operating costs and expenses:
Costs of product revenue		11,840			7,641			34,951			19,259
Costs of franchise and service revenue		4,811			3,169			13,589			8,615
Selling, general and administrative expenses (Note 10)		32,841			24,262			96,082			62,066
Depreciation and amortization		4,154			2,376			11,225			6,838
Marketing fund expense		4,260			3,828			12,696			9,304
Acquisition and transaction expenses (income)		16,290			2,880			(5,793	)		3,527
Total operating costs and expenses		74,196			44,156			162,750			109,609
Operating income (loss)		(10,433	)		(3,289	)		10,935			(3,902	)
Other (income) expense:
Interest income		(402	)		(343	)		(1,209	)		(796	)
Interest expense (Note 10)		3,333			5,855			9,060			21,869
Gain on debt extinguishment		—			—			—			(3,707	)
Total other expense		2,931			5,512			7,851			17,366
Income (loss) before income taxes		(13,364	)		(8,801	)		3,084			(21,268	)
Income taxes (benefit)		(308	)		103			(158	)		387
Net income (loss)		(13,056	)		(8,904	)		3,242			(21,655	)
Less: net income (loss) attributable to noncontrolling interests		(5,918	)		(4,848	)		1,065			(17,599	)
Net income (loss) attributable to Xponential Fitness, Inc.	$	(7,138	)	$	(4,056	)	$	2,177		$	(4,056	)

Net earnings (loss) per share of Class A common stock:
Basic	$	(1.53	)		(0.38	)	$	0.28			(0.38	)
Diluted	$	(1.53	)		(0.38	)	$	0.05			(0.38	)
Weighted average shares of Class A common stock outstanding:
Basic		26,156,418			22,146,011			24,781,778			22,146,011
Diluted		26,156,418			22,146,011			62,822,737			22,146,011

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	)
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		—