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, 2023


☐	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 April 28, 2023, the registrant had 32,938,771 shares of Class A common stock outstanding and 16,618,110 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 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	27
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39
Item 4.	Controls and Procedures	39
PART II.	OTHER INFORMATION	40
Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	41
Item 3.	Defaults Upon Senior Securities	41
Item 4.	Mine Safety Disclosures	41
Item 5.	Other Information	41
Item 6.	Exhibits	42
Signatures		43

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Xponential Fitness, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(amounts in thousands, except per share amounts)


	March 31,			December 31,
	2023			2022
Assets
Current Assets:
Cash, cash equivalents and restricted cash	$	28,135		$	37,370
Accounts receivable, net (Note 10)		22,408			25,555
Inventories		12,962			10,864
Prepaid expenses and other current assets		9,918			6,294
Deferred costs, current portion		4,083			4,131
Notes receivable from franchisees, net		1,501			1,520
Total current assets		79,007			85,734
Property and equipment, net		19,171			18,524
Right-of-use assets		40,487			30,079
Goodwill		165,697			165,697
Intangible assets, net		134,691			137,175
Deferred costs, net of current portion		43,530			43,620
Notes receivable from franchisees, net of current portion		851			1,067
Other assets		862			795
Total assets	$	484,296		$	482,691
Liabilities, redeemable convertible preferred stock and equity (deficit)
Current Liabilities:
Accounts payable	$	18,741		$	16,185
Accrued expenses		14,328			12,295
Deferred revenue, current portion		31,276			31,996
Current portion of long-term debt		4,260			3,035
Other current liabilities		8,553			9,265
Total current liabilities		77,158			72,776
Deferred revenue, net of current portion		110,809			109,465
Contingent consideration from acquisitions (Note 16)		43,665			28,182
Long-term debt, net of current portion, discount and issuance costs		257,626			133,039
Lease liability		39,888			30,583
Other liabilities		6,611			8,633
Total liabilities		535,757			382,678
Commitments and contingencies (Note 16)
Redeemable convertible preferred stock, $0.0001 par value, 400 shares authorized, 115 and 200 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively		227,290			308,075
Stockholders' equity (deficit):
Undesignated preferred stock, $0.0001 par value, 4,600 shares authorized, none issued and outstanding as of March 31, 2023 and December 31, 2022		—			—
Class A common stock, $0.0001 par value, 500,000 shares authorized, 32,899 and 27,571 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively		3			3
Class B common stock, $0.0001 par value, 500,000 shares authorized, 16,731 and 21,647 shares issued, and 16,656 and 21,572 shares outstanding as of March 31, 2023 and December 31, 2022, respectively		2			2
Additional paid-in capital		438,038			505,186
Receivable from shareholder (Note 10)		(19,956	)		(16,369	)
Accumulated deficit		(639,207	)		(641,903	)
Treasury stock, at cost, 75 shares outstanding as of March 31, 2023 and December 31, 2022		(1,697	)		(1,697	)
Total stockholders' deficit attributable to Xponential Fitness, Inc.		(222,817	)		(154,778	)
Noncontrolling interests		(55,934	)		(53,284	)
Total stockholders' deficit		(278,751	)		(208,062	)
Total liabilities, redeemable convertible preferred stock and stockholders' deficit	$	484,296		$	482,691

See accompanying notes to condensed consolidated financial statements.

Xponential Fitness, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

(amounts in thousands, except per share amounts)


	Three Months Ended March 31,
	2023			2022
Revenue, net:
Franchise revenue	$	32,966		$	25,500
Equipment revenue		13,094			7,779
Merchandise revenue		7,164			6,083
Franchise marketing fund revenue		6,211			4,435
Other service revenue		11,255			6,565
Total revenue, net		70,690			50,362
Operating costs and expenses:
Costs of product revenue		14,035			9,592
Costs of franchise and service revenue		4,032			4,234
Selling, general and administrative expenses (Note 10)		34,885			33,919
Depreciation and amortization		4,197			3,492
Marketing fund expense		5,006			4,355
Acquisition and transaction expenses		15,742			9,544
Total operating costs and expenses		77,897			65,136
Operating loss		(7,207	)		(14,774	)
Other (income) expense:
Interest income		(636	)		(389	)
Interest expense		7,977			2,861
Other expense		554			—
Total other expense		7,895			2,472
Loss before income taxes		(15,102	)		(17,246	)
Income tax benefit		(123	)		(2,067	)
Net loss		(14,979	)		(15,179	)
Less: net loss attributable to noncontrolling interests		(4,996	)		(7,660	)
Net loss attributable to Xponential Fitness, Inc.	$	(9,983	)	$	(7,519	)

Net loss per share of Class A common stock:
Basic	$	(1.38	)	$	(1.51	)
Diluted	$	(1.38	)	$	(1.51	)
Weighted average shares of Class A common stock outstanding:
Basic		30,754			22,737
Diluted		30,754			22,737

See accompanying notes to condensed consolidated financial statements.

Xponential Fitness, Inc.

Condensed Consolidated Statements of Changes to Stockholders' Equity (Deficit)

(Unaudited)

(amounts in thousands)


	Class A Common Stock				Class B Common Stock					Treasury Stock
	Shares		Amount		Shares			Amount		Shares		Amount			Additional Paid-In Capital			Receivable from Shareholder			Accumulated Deficit			Noncontrolling interests			Total Equity (Deficit)
Balance at December 31, 2022		27,571	$	3		21,647		$	2		75	$	(1,697	)	$	505,186		$	(16,369	)	$	(641,903	)	$	(53,284	)	$	(208,062	)
Equity-based compensation		—		—		—			—		—		—			5,598			—			—			14			5,612
Net loss		—		—		—			—		—		—			—			—			(9,983	)		(4,996	)		(14,979	)
Conversion of Class B shares to Class A shares		4,926		—		(4,926	)		—		—		—			(2,332	)		—			—			2,332			—
Payment of preferred stock dividend		—		—		—			—		—		—			(2,069	)		—			—			—			(2,069	)
Adjustment of preferred stock to redemption value		—		—		—			—		—		—			(62,660	)		—			—			—			(62,660	)
Vesting of Class B Shares		—		—		10			—		—		—			—			—			—			—			—
Vesting of restricted share units, net of shares withheld for taxes		402		—		—			—		—		—			(7,935	)		—			—			—			(7,935	)
Deemed contribution from redemption of preferred stock		—		—		—			—		—		—			—			—			12,679			—			12,679
Liability-classified restricted stock units vested		—		—		—			—		—		—			2,250			—			—			—			2,250
Loan to shareholder and accumulated interest		—		—		—			—		—		—			—			(3,587	)		—			—			(3,587	)
Balance at March 31, 2023		32,899	$	3		16,731		$	2		75	$	(1,697	)	$	438,038		$	(19,956	)	$	(639,207	)	$	(55,934	)	$	(278,751	)

See accompanying notes to condensed consolidated financial statements.

Xponential Fitness, Inc.

Condensed Consolidated Statements of Changes to Stockholders' Equity (Deficit)

(Unaudited)

(amounts in thousands)


	Class A Common Stock				Class B Common Stock
	Shares		Amount		Shares			Amount		Additional Paid-In Capital			Receivable from Shareholder			Accumulated Deficit			Noncontrolling interests			Total Equity (Deficit)
Balance at December 31, 2021		23,898	$	2		22,969		$	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		—		(351	)		—		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		—		—		1,947			—		—			—			—			—			—
Balance at March 31, 2022		24,249	$	2		24,565		$	2	$	465,525		$	(10,600	)	$	(651,352	)	$	(68,779	)	$	(265,202	)

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,
	2023			2022
Cash flows from operating activities:
Net loss	$	(14,979	)	$	(15,179	)
Adjustments to reconcile net loss to net cash provided by operating activities: