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 June 30, 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 July 31, 2023, the registrant had 33,455,003 shares of Class A common stock outstanding and 16,510,913 shares of Class B common stock outstanding.

Table of Contents


		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements	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	28
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	45
Item 3.	Defaults Upon Senior Securities	45
Item 4.	Mine Safety Disclosures	45
Item 5.	Other Information	45
Item 6.	Exhibits	46
Signatures		47

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Xponential Fitness, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(amounts in thousands, except per share amounts)


	June 30,			December 31,
	2023			2022
Assets
Current Assets:
Cash, cash equivalents and restricted cash	$	40,189		$	37,370
Accounts receivable, net (Note 10)		27,016			25,555
Inventories		11,945			10,864
Prepaid expenses and other current assets		11,666			6,294
Deferred costs, current portion		4,264			4,131
Notes receivable from franchisees, net		1,502			1,520
Total current assets		96,582			85,734
Property and equipment, net		21,153			18,524
Right-of-use assets		85,646			30,079
Goodwill		170,563			165,697
Intangible assets, net		125,060			137,175
Deferred costs, net of current portion		44,650			43,620
Notes receivable from franchisees, net of current portion		638			1,067
Other assets		853			795
Total assets	$	545,145		$	482,691
Liabilities, redeemable convertible preferred stock and equity (deficit)
Current Liabilities:
Accounts payable	$	26,794		$	16,185
Accrued expenses		15,130			12,295
Deferred revenue, current portion		34,555			31,996
Current portion of long-term debt		4,260			3,035
Other current liabilities		19,706			9,265
Total current liabilities		100,445			72,776
Deferred revenue, net of current portion		112,816			109,465
Contingent consideration from acquisitions (Note 16)		12,513			28,182
Long-term debt, net of current portion, discount and issuance costs		257,490			133,039
Lease liability		77,598			30,583
Other liabilities		7,017			8,633
Total liabilities		567,879			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 June 30, 2023 and December 31, 2022, respectively		181,738			308,075
Stockholders' equity (deficit):
Undesignated preferred stock, $0.0001 par value, 4,600 shares authorized, none issued and outstanding as of June 30, 2023 and December 31, 2022		—			—
Class A common stock, $0.0001 par value, 500,000 shares authorized, 33,220 and 27,571 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively		3			3
Class B common stock, $0.0001 par value, 500,000 shares authorized, 16,592 and 21,647 shares issued, and 16,517 and 21,572 shares outstanding as of June 30, 2023 and December 31, 2022, respectively		2			2
Additional paid-in capital		485,832			505,186
Receivable from shareholder (Note 10)		(21,798	)		(16,369	)
Accumulated deficit		(620,828	)		(641,903	)
Treasury stock, at cost, 75 shares outstanding as of June 30, 2023 and December 31, 2022		(1,697	)		(1,697	)
Total stockholders' deficit attributable to Xponential Fitness, Inc.		(158,486	)		(154,778	)
Noncontrolling interests		(45,986	)		(53,284	)
Total stockholders' deficit		(204,472	)		(208,062	)
Total liabilities, redeemable convertible preferred stock and stockholders' deficit	$	545,145		$	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 June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Revenue, net:
Franchise revenue	$	35,133		$	27,622		$	68,099		$	53,122
Equipment revenue		14,428			12,381			27,522			20,160
Merchandise revenue		8,401			6,753			15,565			12,836
Franchise marketing fund revenue		6,617			4,937			12,828			9,372
Other service revenue		12,761			7,867			24,016			14,432
Total revenue, net		77,340			59,560			148,030			109,922
Operating costs and expenses:
Costs of product revenue		14,223			13,519			28,258			23,111
Costs of franchise and service revenue		3,714			4,544			7,746			8,778
Selling, general and administrative expenses (Note 10)		44,448			29,322			79,333			63,241
Depreciation and amortization		4,288			3,579			8,485			7,071
Marketing fund expense		5,466			4,081			10,472			8,436
Acquisition and transaction income		(31,252	)		(31,627	)		(15,510	)		(22,083	)
Total operating costs and expenses		40,887			23,418			118,784			88,554
Operating income		36,453			36,142			29,246			21,368
Other (income) expense:
Interest income		(529	)		(418	)		(1,165	)		(807	)
Interest expense		8,627			2,866			16,604			5,727
Other expense		698			—			1,252			—
Total other expense		8,796			2,448			16,691			4,920
Income before income taxes		27,657			33,694			12,555			16,448
Income taxes		133			2,217			10			150
Net income		27,524			31,477			12,545			16,298
Less: net income attributable to noncontrolling interests		9,145			14,643			4,149			6,983
Net income attributable to Xponential Fitness, Inc.	$	18,379		$	16,834		$	8,396		$	9,315

Net income per share of Class A common stock:
Basic	$	1.44		$	3.28		$	0.16		$	1.86
Diluted	$	0.09		$	0.50		$	0.08		$	0.26
Weighted average shares of Class A common stock outstanding:
Basic		33,045			25,414			31,906			24,083
Diluted		41,593			63,183			50,059			62,696

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	)
Equity-based compensation		—		—		—			—		—		—			5,608			—			—			3