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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 September 30, 2024

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

The number of outstanding shares (in thousands) of the registrant’s Class A common stock and Class B common stock as of November 1, 2024 was 32,287 and 16,016 shares, respectively.

 

 


 

Table of Contents

 

Page

PART I.

FINANCIAL INFORMATION

1

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

33

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

50

Item 4.

Controls and Procedures

50

PART II.

OTHER INFORMATION

51

Item 1.

Legal Proceedings

51

Item 1A.

Risk Factors

51

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 per share amounts)

 

 

 

September 30,

 

 

December 31,

 

 

 

2024

 

 

2023

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash, cash equivalents and restricted cash

 

$

37,774

 

 

$

37,094

 

Accounts receivable, net (Note 10)

 

 

29,552

 

 

 

32,751

 

Inventories

 

 

10,608

 

 

 

14,724

 

Prepaid expenses and other current assets

 

 

8,341

 

 

 

5,856

 

Deferred costs, current portion

 

 

9,022

 

 

 

6,620

 

Notes receivable from franchisees, net

 

 

279

 

 

 

203

 

Total current assets

 

 

95,576

 

 

 

97,248

 

Property and equipment, net

 

 

18,840

 

 

 

19,502

 

Right-of-use assets

 

 

34,160

 

 

 

71,413

 

Goodwill

 

 

163,036

 

 

 

171,601

 

Intangible assets, net

 

 

117,753

 

 

 

120,149

 

Deferred costs, net of current portion

 

 

41,616

 

 

 

46,541

 

Notes receivable from franchisees, net of current portion

 

 

103

 

 

 

802

 

Other assets

 

 

1,093

 

 

 

1,442

 

Total assets

 

$

472,177

 

 

$

528,698

 

Liabilities, redeemable convertible preferred stock and stockholders' equity (deficit)

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

21,297

 

 

$

19,119

 

Accrued expenses

 

 

21,467

 

 

 

14,088

 

Deferred revenue, current portion

 

 

28,560

 

 

 

34,674

 

Current portion of long-term debt

 

 

5,397

 

 

 

4,760

 

Other current liabilities

 

 

17,423

 

 

 

19,666

 

Total current liabilities

 

 

94,144

 

 

 

92,307

 

 

 

 

 

 

 

Deferred revenue, net of current portion

 

 

108,799

 

 

 

117,305

 

Contingent consideration from acquisitions (Note 16)

 

 

15,494

 

 

 

8,666

 

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

 

 

342,038

 

 

 

319,261

 

Lease liability

 

 

33,501

 

 

 

70,141

 

Other liabilities

 

 

1,537

 

 

 

9,152

 

Total liabilities

 

 

595,513

 

 

 

616,832

 

Commitments and contingencies (Note 16)

 

 

 

 

 

 

Redeemable convertible preferred stock, $0.0001 par value, 400 shares authorized,
     
115 shares issued and outstanding as of September 30, 2024 and December 31, 2023

 

 

116,810

 

 

 

114,660

 

Stockholders' equity (deficit):

 

 

 

 

 

 

Undesignated preferred stock, $0.0001 par value, 4,600 shares authorized, none issued and
    outstanding as of September 30, 2024 and December 31, 2023

 

 

 

 

 

 

Class A common stock, $0.0001 par value, 500,000 shares authorized, 32,191 and 30,897 shares
    issued and outstanding as of September 30, 2024 and December 31, 2023, respectively

 

 

3

 

 

 

3

 

Class B common stock, $0.0001 par value, 500,000 shares authorized, 16,091 and 16,566 shares issued,
    and
16,016 and 16,491 shares outstanding as of September 30, 2024 and December 31, 2023,
    respectively

 

 

2

 

 

 

2

 

Additional paid-in capital

 

 

516,582

 

 

 

521,998

 

Receivable from shareholder (Note 10)

 

 

(16,508

)

 

 

(15,426

)

Accumulated deficit

 

 

(654,095

)

 

 

(630,127

)

Treasury stock, at cost, 75 shares outstanding as of September 30, 2024 and December 31, 2023

 

 

(1,697

)

 

 

(1,697

)

Total stockholders' deficit attributable to Xponential Fitness, Inc.

 

 

(155,713

)

 

 

(125,247

)

Noncontrolling interests

 

 

(84,433

)

 

 

(77,547

)

Total stockholders' deficit

 

 

(240,146

)

 

 

(202,794

)

Total liabilities, redeemable convertible preferred stock and stockholders' deficit

 

$

472,177

 

 

$

528,698

 

 

See accompanying notes to condensed consolidated financial statements.

1


 

Xponential Fitness, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

(amounts in thousands, except per share amounts)

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Revenue, net:

 

 

 

 

 

 

 

 

 

 

 

 

Franchise revenue

 

$

44,458

 

 

$

36,425

 

 

$

129,232

 

 

$

104,524

 

Equipment revenue

 

 

14,681

 

 

 

12,564

 

 

 

41,506

 

 

 

40,086

 

Merchandise revenue

 

 

6,538

 

 

 

8,456

 

 

 

20,593

 

 

 

24,021

 

Franchise marketing fund revenue

 

 

8,565

 

 

 

6,948

 

 

 

24,777

 

 

 

19,776

 

Other service revenue

 

 

6,249

 

 

 

16,042

 

 

 

20,421

 

 

 

40,058

 

Total revenue, net

 

 

80,491

 

 

 

80,435

 

 

 

236,529

 

 

 

228,465

 

Operating costs and expenses:

 

 

 

 

 

 

 

 

 

 

Costs of product revenue

 

 

17,071

 

 

 

12,709

 

 

 

44,328

 

 

 

40,967

 

Costs of franchise and service revenue

 

 

4,867

 

 

 

3,559

 

 

 

15,822

 

 

 

11,305

 

Selling, general and administrative expenses (Note 10)

 

 

46,164

 

 

 

43,908

 

 

 

120,308

 

 

 

116,003

 

Impairment of goodwill and other assets

 

 

4,502

 

 

 

4,671

 

 

 

16,591

 

 

 

11,909

 

Depreciation and amortization

 

 

4,226

 

 

 

4,216

 

 

 

13,179

 

 

 

12,701

 

Marketing fund expense

 

 

6,423

 

 

 

5,817

 

 

 

20,785

 

 

 

16,289

 

Acquisition and transaction expenses (income)

 

 

3,664

 

 

 

(1,923

)

 

 

6,962

 

 

 

(17,433

)

Total operating costs and expenses

 

 

86,917

 

 

 

72,957

 

 

 

237,975

 

 

 

191,741

 

Operating income (loss)

 

 

(6,426

)

 

 

7,478

 

 

 

(1,446

)

 

 

36,724

 

Other expense (income):

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

(481

)

 

 

(24

)

 

 

(1,231

)

 

 

(1,189

)

Interest expense

 

 

11,843

 

 

 

10,638

 

 

 

34,644

 

 

 

27,242

 

Other expense

 

 

51

 

 

 

1,845

 

 

 

913

 

 

 

3,097

 

Total other expense

 

 

11,413

 

 

 

12,459

 

 

 

34,326

 

 

 

29,150

 

Income (loss) before income taxes

 

 

(17,839

)

 

 

(4,981

)

 

 

(35,772

)

 

 

7,574

 

Income taxes

 

 

131

 

 

 

202

 

 

 

216

 

 

 

212

 

Net income (loss)

 

 

(17,970

)

 

 

(5,183

)

 

 

(35,988

)

 

 

7,362

 

Less: net income (loss) attributable to noncontrolling interests

 

 

(5,971

)

 

 

(1,801

)

 

 

(12,020

)

 

 

2,348

 

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

 

$

(11,999

)

 

$

(3,382

)

 

$

(23,968

)

 

$

5,014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share of Class A common stock:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.29

)

 

$

0.91

 

 

$

(0.88

)

 

$

1.08

 

Diluted

 

$

(0.29

)

 

$

(0.50

)

 

$

(0.88

)

 

$

(0.17

)

Weighted average shares of Class A common stock outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

32,177

 

 

 

32,260

 

 

 

31,704

 

 

 

32,025

 

Diluted

 

 

32,177

 

 

 

40,223

 

 

 

31,704

 

 

 

39,988

 

 

See accompanying notes to condensed consolidated financial statements.

2


 

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, 2023

 

 

30,897

 

 

$

3

 

 

 

16,566

 

 

$

2

 

 

 

75

 

 

$

(1,697

)

 

$

521,998

 

 

$

(15,426

)

 

$

(630,127

)

 

$

(77,547

)

 

$

(202,794

)

Equity-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,252

 

 

 

 

 

 

 

 

 

1

 

 

 

3,253

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,867

)

 

 

(1,489

)

 

 

(4,356

)

Conversion of Class B shares to Class A shares

 

 

78

 

 

 

 

 

 

(78

)

 

 

 

 

 

 

 

 

 

 

 

(9,264

)

 

 

 

 

 

 

 

 

9,264

 

 

 

 

Issuance of Class A common stock under stock-based compensation plans

 

 

607

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loan to shareholder and accumulated interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(349

)

 

 

 

 

 

 

 

 

(349

)

Distributions paid to Pre-IPO LLC Members

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(36

)

 

 

(36

)

Preferred stock dividend

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,863

)

 

 

 

 

 

 

 

 

 

 

 

(1,863

)

Adjustment of preferred stock to redemption value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,106

)

 

 

 

 

 

 

 

 

 

 

 

(8,106

)

Balance at March 31, 2024

 

 

31,582

 

 

 

3

 

 

 

16,488

 

 

 

2

 

 

 

75

 

 

 

(1,697

)

 

 

506,017

 

 

 

(15,775

)

 

 

(632,994

)

 

 

(69,807

)

 

 

(214,251

)

Equity-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,884

 

 

 

 

 

 

 

 

 

1

 

 

 

4,885

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,102

)

 

 

(4,560

)

 

 

(13,662

)

Conversion of Class B shares to Class A shares

 

 

398

 

 

 

 

 

 

(398

)

 

 

 

 

 

 

 

 

 

 

 

(2,851

)

 

 

 

 

 

 

 

 

2,851

 

 

 

 

Issuance of Class A common stock under stock-based compensation plans

 

 

180

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

74

 

 

 

 

 

 

 

 

 

 

 

 

74

 

Loan to shareholder and accumulated interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(360

)

 

 

 

 

 

 

 

 

(360

)

Distributions paid to Pre-IPO LLC Members

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(206

)

 

 

(206

)

Preferred stock dividend

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,150

)

 

 

 

 

 

 

 

 

 

 

 

(2,150

)

Adjustment of preferred stock to redemption value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,012

 

 

 

 

 

 

 

 

 

 

 

 

2,012

 

Balance at June 30, 2024

 

 

32,160

 

 

 

3

 

 

 

16,090

 

 

 

2

 

 

 

75

 

 

 

(1,697

)

 

 

507,986

 

 

 

(16,135

)

 

 

(642,096

)

 

 

(71,721

)

 

 

(223,658

)

Equity-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,400

 

 

 

 

 

 

 

 

 

1

 

 

 

4,401

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(11,999

)

 

 

(5,971

)

 

 

(17,970

)

Vesting of Class B Shares

 

 

 

 

 

 

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of Class A common stock under stock-based compensation plans

 

 

31

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loan to shareholder and accumulated interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(373

)

 

 

 

 

 

 

 

 

(373

)

Distributions paid to Pre-IPO LLC Members

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6,742

)

 

 

(6,742

)

Preferred stock dividend

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,898

)

 

 

 

 

 

 

 

 

 

 

 

(1,898

)

Adjustment of preferred stock to redemption value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,094

 

 

 

 

 

 

 

 

 

 

 

 

6,094

 

Balance at September 30, 2024

 

 

32,191

 

 

$

3

 

 

 

16,091

 

 

$

2

 

 

 

75

 

 

$

(1,697

)

 

$

516,582

 

 

$

(16,508

)

 

$

(654,095

)

 

$

(84,433

)

 

$

(240,146

)

See accompanying notes to condensed consolidated financial statements.

3


 

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

 

 

 

 

Preferred stock dividend