Xponential Fitness, Inc. Announces Third Quarter 2023 Financial Results

  • Company raises full year 2023 guidance for revenue and tightens top end ranges for new studio openings, system-wide sales and Adjusted EBITDA4
  • Grew Q3 2023 revenue 26% and North America system-wide sales1 35%, compared to Q3 2022
  • Sold 216 franchise licenses and opened 127 new studios in Q3 2023
  • Sold 6,088 total franchise licenses and had 2,980 total studios operating as of Q3 2023

IRVINE, Calif.--(BUSINESS WIRE)-- Xponential Fitness, Inc. (NYSE: XPOF) (“Xponential” or the “Company”), the largest global franchisor of boutique fitness brands, today reported financial results for the third quarter ended September 30, 2023. All financial figures included in this release refer to global numbers, unless otherwise noted. Definitions for the non-GAAP measures and a reconciliation to the corresponding GAAP measures are included in the tables that accompany this release.

Financial Highlights: Q3 2023 Compared to Q3 2022

  • Grew revenue 26% to $80.4 million.
  • Increased North America system-wide sales1 by 35% to $356.7 million.
  • Reported North America same store sales2 growth of 15%, compared to growth of 17% in Q3 of 2022.
  • Reported North America quarterly run-rate average unit volume (AUV)3 of $564,000, compared to $489,000.
  • Posted net loss of $5.2 million, or earnings of $0.91 per basic share, on a share count of 32.3 million shares of Class A Common Stock, compared to a net loss of $13.1 million, or a loss of $1.53 per basic share, on a share count of 26.2 million shares of Class A Common Stock.
  • Posted adjusted net income of $6.0 million, or adjusted earnings of $0.09 per basic share, compared to adjusted net income of $8.0 million, or adjusted earnings of $0.10 per basic share.
  • Reported Adjusted EBITDA4 of $26.5 million, an increase of 33%, compared to $20.0 million.

“Our KPIs continue to trend well in Q4 and we are confident we will close the year out on a high note,” said Anthony Geisler, CEO of Xponential Fitness, Inc. “We have begun implementing the movement away from company-owned transition studios that we discussed during our Analyst and Investor Day in September; the impact of this right-sizing on our profitability in 2024 will be material.”

Results for the Third Quarter Ended September 30, 2023

For the third quarter of 2023, total revenue increased $16.7 million, or 26%, to $80.4 million, up from $63.8 million in the prior year period. This increase included a corresponding North America same store sales increase of 15%.

Net loss totaled $5.2 million, or earnings of $0.91 per basic share, compared to a net loss of $13.1 million, or a loss of $1.53 per basic share, in the prior year period. The lower net loss was the result of an $18.2 million decrease in non-cash contingent consideration primarily related to the Rumble acquisition, and a $0.7 million decrease in non-cash equity-based compensation expense; offset by $3.4 million of lower overall profitability, a $6.7 million increase in restructuring costs from our company-owned transition studios, and $0.9 million increase in write-down of goodwill and brand assets. Please see the table at the end of this press release for a calculation of the basic earnings per share and diluted loss per share for the quarter ended September 30, 2023.

Adjusted net income for the third quarter 2023, which excludes the $1.9 million non-cash contingent consideration gain related primarily to the Rumble acquisition, $1.8 million related to the re-measurement of the Company’s tax receivable agreement, $4.6 million related to the write down of goodwill and brand assets, and $6.7 million related to restructuring charges, was $6.0 million, or adjusted earnings of $0.09 per basic share, on a share count of 32.3 million shares of Class A Common Stock.

Adjusted EBITDA, which is defined as net income (loss) before interest, taxes, depreciation and amortization, adjusted for equity-based compensation and related employer payroll taxes, acquisition and transaction expenses, litigation expenses (outside of the ordinary course of business), financial transaction fees and related expenses, tax receivable agreement remeasurement, write down of goodwill and brand assets, and restructuring charges increased 33% to $26.5 million, up from $20.0 million in the prior year period.

Liquidity and Capital Resources

As of September 30, 2023, the Company had approximately $51.9 million of cash, cash equivalents and restricted cash and $329.7 million in total long-term debt. Net cash provided by operating activities was $38.2 million for the nine months ended September 30, 2023.

2023 Outlook

Based on the Company’s performance year to date, Xponential is increasing its full year 2023 guidance for revenue and tightening the top end ranges for new studio openings, system-wide sales and Adjusted EBITDA as follows:

  • New studio openings in the range of 550 to 560, or an increase of 9% at the midpoint as compared to full year 2022; this compares to previous guidance of 540 to 560;
  • North America system-wide sales in the range of $1.390 billion to $1.395 billion, or an increase of 35% at the midpoint as compared to full year 2022; this compares to previous guidance of $1.385 billion to $1.395 billion;
  • Revenue in the range of $305.0 million to $310.0 million, or an increase of 26% at the midpoint as compared to full year 2022; this compares to previous guidance of $295.0 million to $305.0 million; and
  • Adjusted EBITDA in the range of $104.5 million to $106.5 million, or an increase of 42% at the midpoint as compared to full year 2022; this compares to previous guidance of $102.5 million to $106.5 million.

Additional key assumptions for full year 2023 include:

  • Tax rate in the mid-to-high single digits;
  • Share count of 31.7 million shares of Class A Common Stock for the GAAP EPS and Adjusted EPS calculations. A full explanation of the Company’s share count calculation and associated EPS and Adjusted EPS calculations can be found in the tables at the end of this press release; and
  • $1.9 million in quarterly dividends paid related to the Company’s Convertible Preferred Stock.

Third Quarter 2023 Conference Call

The Company will host a conference call today at 1:30 p.m. Pacific Time / 4:30 p.m. Eastern Time to discuss its third quarter 2023 financial results. Participants may join the conference call by dialing 1-844-825-9789 (United States) or 1-412-317-5180 (International).

A live webcast of the conference call will also be available on the Company’s Investor Relations site at https://investor.xponential.com/. For those unable to participate in the conference call, a telephonic replay of the call will be available shortly after the completion of the call, until 11:59 p.m. ET on Tuesday November 21, 2023, by dialing 1-844-512-2921 (United States) or 1-412-317-6671 (International) and entering the replay pin number: 10183073.

About Xponential Fitness, Inc.

Xponential Fitness, Inc. (NYSE: XPOF) is the largest global franchisor of boutique fitness brands. Through its mission to make boutique fitness accessible to everyone, the Company operates a diversified platform of ten brands spanning across verticals including Pilates, indoor cycling, barre, stretching, rowing, dancing, boxing, running, functional training and yoga. In partnership with its franchisees and master franchisees, Xponential offers energetic, accessible, and personalized workout experiences led by highly qualified instructors in studio locations throughout the U.S. and internationally, with franchise, master franchise and international expansion agreements in 49 U.S. states and 22 additional countries. Xponential Fitness' portfolio of brands includes Club Pilates, the largest Pilates brand in the United States; CycleBar, the largest indoor cycling brand in the United States; StretchLab, a concept offering one-on-one and group stretching services; Row House, the largest franchised indoor rowing brand in the United States; AKT, a dance-based cardio workout combining toning, interval and circuit training; YogaSix, the largest franchised yoga brand in the United States; Pure Barre, a total body workout that uses the ballet barre to perform small isometric movements, and the largest Barre brand in the United States; STRIDE, a treadmill-based cardio and strength training concept; Rumble, a boxing-inspired full-body workout; and BFT, a functional training and strength-based program. For more information, please visit the Company’s website at xponential.com.

Non-GAAP Financial Measures

In addition to our results determined in accordance with GAAP, we believe non-GAAP financial measures are useful in evaluating our operating performance. We use certain non-GAAP financial information, such as EBITDA, Adjusted EBITDA, adjusted net income (loss), and adjusted net earnings (loss) per share, which exclude certain non-operating or non-recurring items, including but not limited to, equity-based compensation expenses, acquisition and transaction expenses, litigation expenses, employee retention credit, financial transaction fees and related expenses, tax receivable agreement remeasurement, write down of goodwill and brand assets that we believe are not representative of our core business or future operating performance, and charges incurred in connection with our restructuring plan, to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that non-GAAP financial information, when taken collectively with comparable GAAP financial measures, is helpful to investors because it provides consistency and comparability with past financial performance and provides meaningful supplemental information regarding our performance by excluding certain items that may not be indicative of our business, results of operations or outlook. However, non-GAAP financial information is presented for supplemental informational purposes only, has limitations as an analytical tool, and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. In addition, other companies, including companies in our industry, may calculate similarly titled non-GAAP measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison. We seek to compensate such limitations by providing a detailed reconciliation for the non-GAAP financial measures to the most directly comparable financial measures stated in accordance with GAAP. Investors are encouraged to review the related GAAP financial measures and the reconciliation of the non-GAAP financial measures to their most directly comparable GAAP financial measures and not rely on any single financial measure to evaluate our business. For a reconciliation of non-GAAP to GAAP measures discussed in this release, please see the tables at the end of this press release. In addition, we are not able to provide a quantitative reconciliation of the estimated full-year Adjusted EBITDA for fiscal year ending December 31, 2023 without unreasonable efforts to the most directly comparable GAAP financial measure due to the high variability, complexity and low visibility with respect to certain items such as taxes, TRA remeasurements, and income and expense from changes in fair value of contingent consideration from acquisitions. We expect the variability of these items to have a potentially unpredictable and potentially significant impact on future GAAP financial results, and, as such, we also believe that any reconciliations provided would imply a degree of precision that would be confusing or misleading to investors.

Forward-Looking Statements

This press release contains forward-looking statements that are based on current expectations, estimates, forecasts and projections of future performance based on management’s judgment, beliefs, current trends, and anticipated financial performance. These forward-looking statements include, without limitation, statements relating to expected growth of our business; projected number of new studio openings; profitability; the expected impact of our movement away from company-owned transition studios; anticipated industry trends; projected financial and performance information such as system-wide sales; projected annual revenue, Adjusted EBITDA and other statements under the section “2023 Outlook”; our competitive position in the boutique fitness industry; and ability to execute our business strategies and our strategic growth drivers. Forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from those contained in the forward-looking statements. These factors include, but are not limited to, our relationships with master franchisees, franchisees and international partners; difficulties and challenges in opening studios by franchisees; the ability of franchisees to generate sufficient revenues; risks relating to expansion into international markets; loss of reputation and brand awareness; general economic conditions and industry trends; and other risks as described in our SEC filings, including our Annual Report on Form 10-K for the full year ended December 31, 2022 filed by Xponential with the SEC and other periodic reports filed with the SEC. Other unknown or unpredictable factors or underlying assumptions subsequently proving to be incorrect could cause actual results to differ materially from those in the forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance, or achievements. You should not place undue reliance on these forward-looking statements. All information provided in this press release is as of today’s date, unless otherwise stated, and Xponential undertakes no duty to update such information, except as required under applicable law.

Xponential Fitness, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(in thousands, except share and per share amounts)

 
September 30, December 31,

 

2023

 

 

2022

 

Assets
Current Assets:
Cash, cash equivalents and restricted cash

$

51,880

 

$

37,370

 

Accounts receivable, net

 

27,714

 

 

25,555

 

Inventories

 

16,339

 

 

10,864

 

Prepaid expenses and other current assets

 

13,531

 

 

6,294

 

Deferred costs, current portion

 

6,507

 

 

4,131

 

Notes receivable from franchisees, net

 

1,113

 

 

1,520

 

Total current assets

 

117,084

 

 

85,734

 

Property and equipment, net

 

20,293

 

 

18,524

 

Right-of-use assets

 

77,353

 

 

30,079

 

Goodwill

 

165,661

 

 

165,697

 

Intangible assets, net

 

122,450

 

 

137,175

 

Deferred costs, net of current portion

 

45,958

 

 

43,620

 

Notes receivable from franchisees, net of current portion

 

1,181

 

 

1,067

 

Other assets

 

1,252

 

 

795

 

Total assets

$

551,232

 

$

482,691

 

Liabilities, redeemable convertible preferred stock and equity (deficit)
Current Liabilities:
Accounts payable

$

24,097

 

$

16,185

 

Accrued expenses

 

13,389

 

 

12,295

 

Deferred revenue, current portion

 

37,000

 

 

31,996

 

Current portion of long-term debt

 

5,195

 

 

3,035

 

Other current liabilities

 

21,840

 

 

9,265

 

Total current liabilities

 

101,521

 

 

72,776

 

Deferred revenue, net of current portion

 

115,229

 

 

109,465

 

Contingent consideration from acquisitions

 

10,303

 

 

28,182

 

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

 

319,053

 

 

133,039

 

Lease liability

 

74,678

 

 

30,583

 

Other liabilities

 

7,440

 

 

8,633

 

Total liabilities

 

628,224

 

 

382,678

 

Commitments and contingencies
Redeemable convertible preferred stock, $0.0001 par value, 400,000 shares authorized, 114,660 and 200,000 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively

 

130,304

 

 

308,075

 

Stockholders' equity (deficit):
Undesignated preferred stock, $0.0001 par value, 4,600,000 shares authorized, none issued and outstanding as of September 30, 2023 and December 31, 2022

 

 

 

 

Class A common stock, $0.0001 par value, 500,000,000 shares authorized, 31,477,165 and 27,571,312 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively

 

3

 

 

3

 

Class B common stock, $0.0001 par value, 500,000,000 shares authorized, 16,566,027 and 21,647,447 shares issued, and 16,491,502 and 21,572,922 shares outstanding as of September 30, 2023 and December 31, 2022, respectively

 

2

 

 

2

 

Additional paid-in capital

 

502,606

 

 

505,186

 

Receivable from shareholder

 

(15,026

)

 

(16,369

)

Accumulated deficit

 

(624,210

)

 

(641,903

)

Treasury stock, at cost, 74,525 shares outstanding as of September 30, 2023 and December 31, 2022

 

(1,697

)

 

(1,697

)

Total stockholders' deficit attributable to Xponential Fitness, Inc.

 

(138,322

)

 

(154,778

)

Noncontrolling interests

 

(68,974

)

 

(53,284

)

Total stockholders' deficit

 

(207,296

)

 

(208,062

)

Total liabilities, redeemable convertible preferred stock and stockholders' deficit

$

551,232

 

$

482,691

 

Xponential Fitness, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

(in thousands, except per share amounts)

 
Three Months Ended September 30, Nine Months Ended September 30,

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Revenue, net:
Franchise revenue

$

36,425

 

$

30,006

 

$

104,524

 

$

83,128

 

Equipment revenue

 

12,564

 

 

11,770

 

 

40,086

 

 

31,930

 

Merchandise revenue

 

8,456

 

 

6,264

 

 

24,021

 

 

19,100

 

Franchise marketing fund revenue

 

6,948

 

 

5,172

 

 

19,776

 

 

14,544

 

Other service revenue

 

16,042

 

 

10,551

 

 

40,058

 

 

24,983

 

Total revenue, net

 

80,435

 

 

63,763

 

 

228,465

 

 

173,685

 

Operating costs and expenses:
Costs of product revenue

 

12,709

 

 

11,840

 

 

40,967

 

 

34,951

 

Costs of franchise and service revenue

 

3,559

 

 

4,811

 

 

11,305

 

 

13,589

 

Selling, general and administrative expenses

 

48,579

 

 

32,841

 

 

127,912

 

 

96,082

 

Depreciation and amortization

 

4,216

 

 

4,154

 

 

12,701

 

 

11,225

 

Marketing fund expense

 

5,817

 

 

4,260

 

 

16,289

 

 

12,696

 

Acquisition and transaction expenses (income)

 

(1,923

)

 

16,290

 

 

(17,433

)

 

(5,793

)

Total operating costs and expenses

 

72,957

 

 

74,196

 

 

191,741

 

 

162,750

 

Operating income (loss)

 

7,478

 

 

(10,433

)

 

36,724

 

 

10,935

 

Other (income) expense:
Interest income

 

(24

)

 

(402

)

 

(1,189

)

 

(1,209

)

Interest expense

 

10,638

 

 

3,333

 

 

27,242

 

 

9,060

 

Other expense

 

1,845

 

 

 

 

3,097

 

 

 

Total other expense

 

12,459

 

 

2,931

 

 

29,150

 

 

7,851

 

Income (loss) before income taxes

 

(4,981

)

 

(13,364

)

 

7,574

 

 

3,084

 

Income taxes (benefit)

 

202

 

 

(308

)

 

212

 

 

(158

)

Net income (loss)

 

(5,183

)

 

(13,056

)

 

7,362

 

 

3,242

 

Less: net income (loss) attributable to noncontrolling interests

 

(1,801

)

 

(5,918

)

 

2,348

 

 

1,065

 

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

$

(3,382

)

$

(7,138

)

$

5,014

 

$

2,177

 

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

$

0.91

 

$

(1.53

)

$

1.08

 

$

0.28

 

Diluted

$

(0.50

)

$

(1.53

)

$

(0.17

)

$

0.05

 

Weighted average shares of Class A common stock outstanding:
Basic

 

32,260

 

 

26,156

 

 

32,025

 

 

24,782

 

Diluted

 

40,223

 

 

26,156

 

 

39,988

 

 

62,823

 

Xponential Fitness, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)(in thousands)

 
Nine Months Ended September 30,

 

2023

 

 

2022

 

Cash flows from operating activities:
Net income

$

7,362

 

$

3,242

 

Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization

 

12,701

 

 

11,225

 

Amortization and write off of debt issuance cost

 

416

 

 

94

 

Amortization of discount on long-term debt

 

2,032

 

 

454

 

Change in contingent consideration from acquisitions

 

(17,528

)

 

(5,791

)

Amortization of right-of-use assets

 

9,729

 

 

1,450

 

Bad debt expense (recovery)

 

850

 

 

(526

)

Equity-based compensation

 

15,647

 

 

23,920

 

Non-cash interest

 

(857

)

 

(679

)

Write down of goodwill and brand assets

 

11,817

 

 

3,656

 

Gain on disposal of assets

 

(770

)

 

(90

)

Changes in assets and liabilities, net of effect of acquisitions:
Accounts receivable

 

(2,535

)

 

(6,592

)

Inventories

 

(5,376

)

 

(6,810

)

Prepaid expenses and other current assets

 

(7,237

)

 

(5,529

)

Operating lease liabilities

 

(4,027

)

 

(1,398

)

Deferred costs

 

(4,743

)

 

(1,248

)

Notes receivable, net

 

1

 

 

25

 

Accounts payable

 

7,302

 

 

7,497

 

Accrued expenses

 

1,656

 

 

(1,555

)

Other current liabilities

 

4,953

 

 

599

 

Deferred revenue

 

7,536

 

 

13,993

 

Other assets

 

(458

)

 

(129

)

Other liabilities

 

(277

)

 

1,663

 

Net cash provided by operating activities

 

38,194

 

 

37,471

 

Cash flows from investing activities:
Purchases of property and equipment

 

(6,156

)

 

(5,660

)

Proceeds from sale of assets

 

60

 

 

65

 

Purchase of studios

 

(164

)

 

 

Purchase of intangible assets

 

(2,420

)

 

(6,840

)

Notes receivable issued

 

(581

)

 

(1,782

)

Notes receivable payments received

 

666

 

 

2,643

 

Net cash used in investing activities

 

(8,595

)

 

(11,574

)

Cash flows from financing activities:
Borrowings from long-term debt

 

189,150

 

 

5,480

 

Payments on long-term debt

 

(3,014

)

 

(2,220

)

Debt issuance costs

 

(411

)

 

(49

)

Payment of preferred stock dividend and deemed cash dividend

 

(5,677

)

 

(13,000

)

Payment of contingent consideration

 

(1,412

)

 

(1,336

)

Payments for taxes related to net share settlement of restricted share units

 

(8,111

)

 

(1,897

)

Payment for tax receivable agreement

 

(1,163

)

 

 

Payments for redemption of preferred stock

 

(130,766

)

 

 

Payments for distributions to Pre-IPO LLC Members

 

(7,485

)

 

 

Repurchase of Class A common stock

 

(50,378

)

 

 

Payment received from shareholder

 

8,062

 

 

 

Loan to shareholder

 

(4,400

)

 

(3,300

)

Proceeds from disgorgement of stockholders short-swing profits

 

516

 

 

 

Net cash used in financing activities

 

(15,089

)

 

(16,322

)

Increase in cash, cash equivalents and restricted cash

 

14,510

 

 

9,575

 

Cash, cash equivalents and restricted cash, beginning of period

 

37,370

 

 

21,320

 

Cash, cash equivalents and restricted cash, end of period

$

51,880

 

$

30,895

 

Xponential Fitness, Inc.

Net Loss to GAAP EPS Per Share

(in thousands, except per share amounts)

 
Three Months Ended September 30, Nine Months Ended September 30,

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Numerator:
Net income (loss)

$

(5,183

)

$

(13,056

)

$

7,362

 

$

3,242

 

Less: net (income) loss attributable to noncontrolling interests

 

(14,976

)

 

33,271

 

 

(14,127

)

 

(6,295

)

Less: dividends on preferred shares

 

(1,863

)

 

(3,250

)

 

(5,789

)

 

(9,750

)

Add: deemed contribution (dividend)

 

51,435

 

 

(57,096

)

 

34,326

 

 

19,794

 

Add: deemed contribution from redemption of convertible preferred stock

 

 

 

 

 

12,679

 

 

 

Net income (loss) attributable to XPO Inc. - basic

 

29,413

 

 

(40,131

)

 

34,451

 

 

6,991

 

Add: net income (loss) attributable to non-controlling interests

 

 

 

 

 

 

 

6,295

 

Add: dividends on preferred shares

 

1,863

 

 

 

 

5,789

 

 

9,750

 

Less: deemed (contribution) dividend

 

(51,435

)

 

 

 

(34,326

)

 

(19,794

)

Less: Deemed contribution from redemption of convertible preferred stock

 

 

 

 

 

(12,679

)

 

-

 

Net income (loss) attributable to XPO Inc. - diluted

$

(20,159

)

$

(40,131

)

$

(6,765

)

$

3,242

 

Denominator:
Weighted average shares of Class A common stock outstanding - basic

 

32,260

 

 

26,156

 

 

32,025

 

 

24,782

 

Effect of dilutive securities:
Rumble Class A common stock

 

 

 

 

 

 

 

1,300

 

Restricted stock units

 

 

 

 

 

 

 

539

 

Convertible preferred stock

 

7,963

 

 

 

 

7,963

 

 

13,889

 

Conversion of Class B common stock to Class A common stock

 

 

 

 

 

 

 

22,313

 

Weighted average shares of Class A common stock outstanding - diluted

 

40,223

 

 

26,156

 

 

39,988

 

 

62,823

 

 
Net earnings (loss) per share attributable to Class A common stock - basic

$

0.91

 

$

(1.53

)

$

1.08

 

$

0.28

 

Net earnings (loss) per share attributable to Class A common stock - diluted

$

(0.50

)

$

(1.53

)

$

(0.17

)

$

0.05

 

 
Anti-dilutive shares excluded from diluted earnings (loss) per share of Class A common stock:
Rumble Class A common stock

 

 

 

1,300

 

 

 

 

 

Restricted stock units

 

1,342

 

 

2,121

 

 

1,342

 

 

 

Conversion of Class B common stock to Class A common stock

 

16,492

 

 

21,651

 

 

16,492

 

 

 

Convertible preferred stock

 

 

 

13,889

 

 

 

 

 

Accelerated Purchase Program - final settlement

 

589

 

 

 

 

589

 

 

 

Rumble contingent shares

 

2,024

 

 

2,024

 

 

2,024

 

 

2,024

 

Profits interests, time vesting

 

1

 

 

15

 

 

1

 

 

15

 

Xponential Fitness, Inc.

Reconciliations of GAAP to Non-GAAP Measures

(in thousands, except per share amounts)

 
Three Months Ended September 30, Nine Months Ended September 30,

 

2023

 

 

2022

 

 

2023

 

 

2022

 

(in thousands)
Net income (loss)

$

(5,183

)

$

(13,056

)

$

7,362

 

$

3,242

 

Interest expense, net

 

10,614

 

 

2,931

 

 

26,053

 

 

7,851

 

Income taxes

 

202

 

 

(308

)

 

212

 

 

(158

)

Depreciation and amortization

 

4,216

 

 

4,154

 

 

12,701

 

 

11,225

 

EBITDA

 

9,849

 

 

(6,279

)

 

46,328

 

 

22,160

 

Equity-based compensation

 

3,536

 

 

4,243

 

 

15,647

 

 

23,920

 

Employer payroll taxes related to equity-based compensation

 

94

 

 

 

 

659

 

 

 

Acquisition and transaction expenses (income)

 

(1,923

)

 

16,290

 

 

(17,433

)

 

(5,793

)

Litigation expenses

 

1,511

 

 

1,015

 

 

5,855

 

 

8,374

 

Employee retention credit

 

 

 

 

 

 

 

(2,597

)

Financial transaction fees and related expenses

 

327

 

 

 

 

1,971

 

 

737

 

TRA remeasurement

 

1,845

 

 

1,078

 

 

3,097

 

 

1,635

 

Write down of goodwill and brand assets

 

4,579

 

 

3,656

 

 

11,817

 

 

3,656

 

Restructuring and related charges

 

6,703

 

 

 

 

6,703

 

 

 

Adjusted EBITDA

$

26,521

 

$

20,003

 

$

74,644

 

$

52,092

 

Three Months Ended September 30, Nine Months Ended September 30,

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net income (loss)

$

(5,183

)

$

(13,056

)

$

7,362

 

$

3,242

 

Change in fair value of contingent consideration

 

(1,923

)

 

16,290

 

 

(17,433

)

 

(5,791

)

TRA remeasurement

 

1,845

 

 

1,078

 

 

3,097

 

 

1,635

 

Write down of goodwill and brand assets

 

4,579

 

 

3,656

 

 

11,817

 

 

3,656

 

Restructuring and related charges

 

6,703

 

 

 

 

6,703

 

 

 

Adjusted net income

$

6,021

 

$

7,968

 

$

11,546

 

$

2,742

 

 
Adjusted net income (loss) attributable to noncontrolling interest

 

2,038

 

 

3,612

 

3,940

 

 

1,299

 
Adjusted net income attributable to Xponential Fitness, Inc.

 

3,983

 

 

4,356

 

 

7,606

 

 

1,443

 

Dividends on preferred shares

 

(1,233

)

 

(1,777

)

 

(3,759

)

 

(5,131

)

Earnings (loss) per share - basic numerator

 

2,750

 

 

2,579

 

 

3,847

 

 

(3,688

)

Add: adjusted net income attributable to noncontrolling interest

 

2,038

 

 

3,612

 

 

3,940

 

 

 

Add: dividends on preferred shares

 

1,233

 

 

1,777

 

 

3,759

 

 

 

Earnings (loss) per share - diluted numerator

$

6,021

 

$

7,968

 

$

11,546

 

$

(3,688

)

 
Adjusted net earnings (loss) per share - basic

$

0.09

 

$

0.10

 

$

0.12

 

$

(0.15

)

Adjusted net earnings (loss) per share - diluted

$

0.11

 

$

0.13

 

$

0.20

 

$

(0.15

)

 
Weighted average shares of Class A common stock outstanding - basic

 

32,260

 

 

26,156

 

 

32,025

 

 

24,782

 

Effect of dilutive securities:
Rumble Class A common stock

 

 

 

1,300

 

 

 

 

 

Restricted stock units

 

85

 

 

43

 

 

421

 

 

 

Convertible preferred stock

 

7,963

 

 

13,889

 

 

7,963

 

 

 

Conversion of Class B common stock to Class A common stock

 

16,503

 

 

21,685

 

 

17,206

 

 

 

Weighted average shares of Class A common stock outstanding - diluted

 

56,811

 

 

63,073

 

 

57,615

 

 

24,782

 

 
Anti-dilutive shares excluded from diluted earnings per share of Class A common stock:
Rumble Class A common stock

 

 

 

 

 

 

 

1,300

 

Restricted stock units

 

 

 

 

 

 

 

2,121

 

Convertible preferred stock

 

 

 

 

 

 

 

13,889

 

Conversion of Class B common stock to Class A common stock

 

 

 

 

 

 

 

21,651

 

Rumble contingent shares

 

2,024

 

 

2,024

 

 

2,024

 

 

2,024

 

Profits interests, time vesting

 

1

 

 

15

 

 

1

 

 

15

 

Note: The above adjusted net income (loss) per share is computed by dividing the adjusted net income (loss) attributable to holders of Class A common stock by the weighted average shares of Class A common stock outstanding during the period. Total share count does not include potential future shares vested upon achieving certain earn-out thresholds. Net income, however, continues to take into account the non-cash contingent liability primarily due to Rumble.

Footnotes

1System-wide sales represent gross sales by all North America studios. System-wide sales include sales by franchisees that are not revenue realized by us in accordance with GAAP. While we do not record sales by franchisees as revenue, and such sales are not included in our consolidated financial statements, this operating metric relates to our revenue because we receive approximately 7% and 2% of the sales by franchisees as royalty revenue and marketing fund revenue, respectively. We believe that this operating measure aids in understanding how we derive our royalty revenue and marketing fund revenue and is important in evaluating our performance. System-wide sales growth is driven by new studio openings and increases in same store sales. Management reviews system-wide sales weekly, which enables us to assess changes in our franchise revenue, overall studio performance, the health of our brands and the strength of our market position relative to competitors.

2 Same store sales refer to period-over-period sales comparisons for the base of studios. In accordance with industry standard, we define the same store sales base to include studios in North America that are in traditional locations and that have generated positive sales for at least 13 consecutive calendar months as of the measurement date. Any transfer of ownership of an existing studio does not affect this metric. We measure same store sales based solely upon monthly sales as reported by franchisees. This measure highlights the performance of existing studios, while excluding the impact of new studio openings. Management reviews same store sales to assess the health of the franchised studios.

3AUV is calculated by dividing sales during the applicable period for all studios being measured by the number of studios being measured. Quarterly run-rate AUV consists of average quarterly sales activity for all North America traditional studio locations that are at least 6 months old at the beginning of the respective quarter, and that have non-zero sales in the period, multiplied by four. Monthly run-rate AUV is calculated as the monthly AUV multiplied by twelve, for studios that are at least 6 months old at the beginning of the respective month, operate in traditional locations and have nonzero sales. AUV growth is primarily driven by changes in same store sales and is also influenced by new studio openings. Management reviews AUV to assess studio economics.

4We define Adjusted EBITDA as EBITDA (net income/loss before interest, taxes, depreciation and amortization), adjusted for the impact of certain non-cash and other items that we do not consider in our evaluation of ongoing operating performance. These items include equity-based compensation and related employer payroll taxes, acquisition and transaction expenses (including change in contingent consideration), litigation expenses (consisting of legal and related fees for specific proceedings that arise outside of the ordinary course of our business), employee retention credit (a tax credit for retaining employees throughout the COVID-19 pandemic), fees for financial transactions, such as secondary public offering expenses for which we do not receive proceeds (including bonuses paid to executives related to completion of such transactions), expense related to the remeasurement of our TRA obligation, write down of goodwill and brand assets, and restructuring and related charges that we do not believe reflect our underlying business performance and affect comparability. EBITDA and Adjusted EBITDA are also frequently used by analysts, investors and other interested parties to evaluate companies in our industry. We believe that Adjusted EBITDA, viewed in addition to, and not in lieu of, our reported GAAP results, provides useful information to investors regarding our performance and overall results of operations because it eliminates the impact of other items that we believe reduce the comparability of our underlying core business performance from period to period and is therefore useful to our investors in comparing the core performance of our business from period to period.

Addo Investor Relations
investor@xponential.com
(310) 829-5400

Source: Xponential Fitness, Inc.