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01/11 13:21
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call reveals mixed financial performance with a notable revenue decline and significant net loss. Despite some positive metrics like franchise revenue growth and adjusted EBITDA, the high impairment costs and substantial net loss overshadow these positives. The Q&A indicates concerns about underperforming studios and unclear strategic timelines, adding to uncertainty. The market may react negatively to weak revenue guidance and operational challenges, despite some optimistic future plans. Without a market cap, the reaction is assumed to be moderate, leading to a negative sentiment.
North America system-wide sales $465 million, up 21% year over year.
North America quarterly run rate average unit volumes (AUV) $668,000, up 9% year over year.
Total members 813,000, up 15% year over year.
Revenue for the quarter $83.2 million, down 7% from $89.3 million in the prior year period.
Total revenue for 2024 $320.3 million, a 1% increase from the prior year.
Franchise revenue for the quarter $45.3 million, up 17% year over year.
Equipment revenue $12.7 million, down 22% year over year.
Merchandise revenue $6.1 million, down 34% year over year.
Franchise marketing fund revenue $9.2 million, up 23% year over year.
Other service revenue $9.9 million, down 43% from the prior year period.
Cost of product revenues $13.7 million, down 23% year over year.
Cost of franchise and service revenue $6.1 million, up 29% year over year.
Selling, general, and administrative expenses (SG&A) $46.1 million, up 8% year over year.
Impairments of goodwill and other assets $46 million, up 849% year over year.
Net loss for the fourth quarter $62.5 million, compared to a net loss of $12.3 million in the prior year period.
Adjusted net loss for the quarter $7.1 million, resulting in adjusted net loss of $0.19 per basic share.
Adjusted EBITDA for the fourth quarter $30.8 million, up 13% compared to $27.2 million in the prior year period.
Adjusted EBITDA for 2024 $116.2 million, up 16% compared to $100.3 million in the prior year period.
Cash, cash equivalents and restricted cash $32.7 million, down from $37.1 million as of December 31, 2023.
Total long-term debt $352.4 million, compared to $328.5 million as of December 31, 2023.
International Expansion: Xponential plans to expand its international footprint, particularly for Club Pilates, with on-the-ground leadership in Europe and Asia starting in the coming months.
New Management Team: Xponential has built a senior management team with leaders experienced in scaling companies profitably.
Field Operations Teams: The company is forming field operations teams to support franchise partners and enhance studio operations.
Franchise Development Strategy: Franchise sales, real estate, and construction are now unified under one leadership to improve strategic efficiency.
Studio Layout Optimization: Rethinking studio layouts to maximize productivity and customer traffic flow.
Data-Centric Approach: Xponential is focusing on becoming a data-centric company to enhance operational efficiency and member experience.
Cultural Transformation: A culture of transparency and continuous improvement is being established to address operational issues and support long-term sustainable growth.
Innovation Focus: An innovation department is being created to help franchisees exceed customer expectations.
Earnings Miss: Xponential Fitness, Inc. reported an EPS of $-0.18, missing expectations of $0.44.
Financial Restatement: The company restated 2023 financial statements due to material accounting errors related to accrued inventory, 401k compliance, purchase accounting, and vendor rebates.
Studio Openings Miss: Gross new studio openings missed by 36 studios, coming in at 464 versus the expected 500, a 7% miss.
Adjusted EBITDA Miss: Adjusted EBITDA missed by $5.8 million, coming in at $116.2 million instead of the expected $122 million.
Increased Legal Expenses: Legal fees increased to $18.1 million due to regulatory inquiries and potential franchise legal settlements.
Goodwill Impairment: Impairments of goodwill and other assets increased by 849% year over year, primarily due to a one-time impairment of $41 million.
Studio Closures: 225 global studio closures in 2024, representing approximately 7% of total open studios, higher than the previously communicated 3-5%.
Inactive Licenses: Approximately 30% of licenses contractually obligated to open are over 12 months behind schedule and currently inactive.
Debt Increase: Total long-term debt increased to $352.4 million, primarily due to drawing $25 million in additional debt for lease termination payments.
Regulatory Challenges: The company is facing regulatory inquiries which have led to increased legal expenses and potential settlements.
Strategic Pillars: The company is focused on achieving five strategic pillars, which include building a senior management team, forming field operations teams, uniting real estate, franchise sales, and construction under one leadership, rethinking studio layouts, and enhancing customer experience through technology.
International Expansion: Xponential aims to expand its international footprint, particularly for Club Pilates, with on-the-ground leadership in Europe and Asia starting in the coming months.
Innovation Focus: The company plans to build an innovation department to help franchisees exceed customer expectations and drive innovation across all aspects of the business.
Data-Centric Approach: Xponential is committed to becoming a data-centric company, focusing on harnessing data for operational efficiency and enhanced member experience.
2025 System-Wide Sales Guidance: Projected North America system-wide sales to range from $1.935 billion to $1.955 billion, representing a 13% increase at the midpoint from the prior year.
2025 Studio Openings Guidance: Expected global net new studio openings to be in the range of 200 to 220, representing a 12% decrease at the midpoint from the prior year.
2025 Revenue Guidance: Total revenue expected to be between $315 million to $325 million, representing no change year over year at the midpoint.
2025 Adjusted EBITDA Guidance: Adjusted EBITDA expected to range from $120 million to $125 million, representing a 5% year-over-year increase at the midpoint.
Capital Expenditure Guidance: Anticipated capital expenditure of approximately $10 million to $12 million for the year, focusing on data transformation and technology investments.
Quarterly Cash Dividends: $1.9 million in quarterly cash dividends related to our convertible preferred stock.
Shareholder Return Plan: None
The earnings call highlights several concerning factors: a decrease in global studio openings and revenue, declining EBITDA, and significant delinquent licenses. While there are efforts to improve pricing and marketing strategies, the lack of clear guidance and challenges like labor issues and franchisee pressures overshadow positive aspects like brand strength and efficient new unit ramp-up. Additionally, the Q&A revealed management's avoidance of addressing key issues directly. These factors suggest a likely negative stock price reaction over the next two weeks.
The earnings call highlights strong financial performance, with a significant improvement in net income and cash reserves. The company is actively addressing backlog issues and is focused on strategic expansions and partnerships, like the Fit Commerce deal, which promises future revenue. Despite some concerns about same-store sales and backlog, the overall guidance and strategic plans are optimistic, including aggressive marketing and expansion of Club Pilates. The positive sentiment from analysts in the Q&A further supports a positive outlook, likely leading to a stock price increase of 2% to 8%.
The earnings call reveals mixed financial performance with a notable revenue decline and significant net loss. Despite some positive metrics like franchise revenue growth and adjusted EBITDA, the high impairment costs and substantial net loss overshadow these positives. The Q&A indicates concerns about underperforming studios and unclear strategic timelines, adding to uncertainty. The market may react negatively to weak revenue guidance and operational challenges, despite some optimistic future plans. Without a market cap, the reaction is assumed to be moderate, leading to a negative sentiment.
The earnings call reveals several concerning factors: missed EBITDA, increased legal expenses, significant impairments, and elevated studio closures. Although there is growth in some areas like North America sales and franchise revenue, the overall financial health is questionable with a net loss and increased debt. The Q&A session highlighted management's evasiveness on key issues, further undermining confidence. Despite some positive aspects like international expansion plans, the negative elements, particularly financial risks, outweigh the positives, leading to a negative stock price prediction over the next two weeks.
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