Nature of Business and Operations
|6 Months Ended|
Jun. 30, 2021
|Organization Consolidation And Presentation Of Financial Statements [Abstract]|
|Nature of Business and Operations||
Note 1 – Nature of Business and Operations
Xponential Fitness, Inc. (“XPO, Inc.”), was formed as a Delaware corporation on January 14, 2020. On July 23, 2021, XPO, Inc. completed an initial public offering (“IPO”) of 10,000,000 shares of Class A common stock at an initial public offering price of $12.00 per share. Pursuant to a reorganization into a holding company structure, XPO, Inc. is a holding company with its principal asset being a controlling ownership interest in Xponential Fitness LLC (the “Company”) through its ownership interest in Xponential Intermediate Holdings, LLC (“XPO Holdings”). The operations of the Company represent the predecessor to XPO, Inc. prior to the IPO.
In connection with the IPO, XPO, Inc. entered into the following series of transactions to implement an internal reorganization, (the “Reorganization Transactions.”) The pre-IPO members of XPO Holdings (the “Pre-IPO LLC Members”) who retained their equity ownership in the form of limited liability company units (the “LLC Units”), immediately following the consummation of the Reorganization Transactions are referred to as “Continuing Pre-IPO LLC Members.”
The corporate structure following the completion of the IPO, as described above, is commonly referred to as an “Up-C” structure, which is used by partnerships and limited liability companies when they undertake an initial public offering of their business. The Up-C structure will allow Continuing Pre-IPO LLC Members to continue to realize tax benefits associated with owning interests in an entity that is treated as a partnership, or “pass-through” entity, for income tax purposes following the IPO.
The Company was formed on August 11, 2017 as a Delaware limited liability company for the sole purpose of franchising fitness brands in several verticals within the boutique fitness industry. The Company is a wholly owned subsidiary of XPO Holdings (the “Member”), which was formed on February 24, 2020, and prior to the IPO, ultimately, H&W Franchise Holdings, LLC (the “Parent”). Prior to the formation of the Member, the Company was a wholly owned subsidiary of H&W Franchise Intermediate Holdings, LLC.
Currently, the Company’s portfolio of nine brands includes: “Club Pilates,” a Pilates facility franchisor; “CycleBar,” a premier indoor cycling franchise; “Stretch Lab,” a fitness concept offering one-on-one assisted stretching services; “Row House,” a rowing concept that provides an effective and efficient workout centered around the sport of rowing; “Yoga Six,” a yoga concept that concentrates on connecting to one’s body in a way that is energizing; “AKT” and “Pure Barre,” which are dance-based concepts that provide a combination of personal training and movement based techniques; “Stride,” a running concept that offers treadmill-based high-intensity interval training and strength-training; and “Rumble,” a boxing concept that offers boxing-inspired group fitness classes, which was acquired on March 24, 2021. The Company, through its brands, licenses its proprietary systems to franchisees who in turn operate studios to promote training and instruction programs to their club members within each vertical. In addition to franchised studios, the Company operated 52 and 16 company-owned studios as of June 30, 2021 and 2020, respectively.
Basis of presentation – The Company’s condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). In the opinion of management, the Company has made all adjustments necessary to present fairly the condensed consolidated statements of operations, balance sheets, changes in member’s equity, and cash flows for the periods presented. Such adjustments are of a normal, recurring nature. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company’s 2020 consolidated financial statements disclosed in the final prospectus filed with the Securities and Exchange Commission (the “SEC”) on July 26, 2021 in connection with the IPO. Interim results of operations are not necessarily indicative of results of operations to be expected for a full year.
On March 24, 2021, the Company acquired the rights to franchise the Rumble concept and has included the results of operations of Rumble in its condensed consolidated statement of operations from that date forward. See Note 3 for additional information.
Principles of consolidation – The Company’s consolidated financial statements include the accounts of its wholly owned subsidiaries Club Pilates Franchise, LLC; CycleBar Holdco, LLC; Stretch Lab Franchise, LLC; Row House Franchise, LLC; Yoga Six Franchise, LLC; AKT Franchise, LLC; PB Franchising, LLC; Stride Franchise, LLC; Rumble Franchise, LLC and Xponential Fitness Brands International, LLC. All intercompany transactions have been eliminated in consolidation.
Use of estimates – The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the consolidated financial statements. Actual results could differ from these estimates under different assumptions or conditions.
The entire disclosure for the nature of an entity's business, major products or services, principal markets including location, and the relative importance of its operations in each business and the basis for the determination, including but not limited to, assets, revenues, or earnings. For an entity that has not commenced principal operations, disclosures about the risks and uncertainties related to the activities in which the entity is currently engaged and an understanding of what those activities are being directed toward.
Reference 1: http://www.xbrl.org/2003/role/disclosureRef