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01/11 13:20
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
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%.
North American system-wide sales $474 million, up 12% year-over-year. Growth driven primarily by a 1% same-store sales increase within the existing base of open studios, coupled with growth from net new studio openings. Approximately 80% of system-wide sales growth was driven by a higher number of actively paying members and approximately 20% by higher pricing and/or mix shifts.
North American quarterly run rate average unit volumes (AUVs) $659,000, up 3% year-over-year from $638,000. The increase was largely driven by a higher number of actively paying members and higher pricing for new members.
Total members 863,000 at quarter-end, up 8% year-over-year. Growth attributed to increased demand and expansion of studio openings.
Same-store sales Up 1% year-over-year. Growth moderated compared to the first quarter, attributed to strategic actions aimed at improving performance in future periods.
Revenue $76.2 million, down 1% year-over-year from $76.9 million. Decline attributed to lower equipment and merchandise sales volumes.
Franchise revenue $45.4 million, up 5% year-over-year. Growth driven by an increase in royalty revenue supported by an 8% increase in actively paying memberships and an 11% increase in total visits, offset by lower revenues from license terminations.
Equipment revenue $9.5 million, down 26% year-over-year. Decline due to a 39% year-over-year lower volume of global installations.
Merchandise revenue $5.6 million, down 8% year-over-year. Decrease due to lower sales volumes.
Adjusted EBITDA $28.1 million, up 14% year-over-year from $24.7 million. Growth primarily driven by an increase in high-margin royalties in franchise revenues. Adjusted EBITDA margin was 36.9%, up from 32.1% in the prior year period.
Net income $1.3 million, compared to a net loss of $14.3 million in the prior year period. Improvement attributed to higher adjusted EBITDA and lower operating expenses.
Cash, cash equivalents, and restricted cash $38.7 million as of June 30, 2025, up from $26 million as of June 30, 2024. Increase attributed to net cash provided by operating activities and reduced operating expenses.
New retail partnership agreement: Xponential Fitness entered into a new retail partnership agreement with Fit Commerce to outsource its retail operations, which were historically low-margin and resource-intensive. This transition is expected to reduce SG&A expenses and introduce annual minimum guaranteed commissions totaling over $50 million over a 5-year contract period.
Club Pilates innovations: Club Pilates is focusing on monetization strategies, including enhanced pricing, new membership types, and a national brand marketing campaign to drive revenue growth.
Pure Barre marketing: Pure Barre is planning major marketing campaigns for its 25th anniversary to accelerate growth.
YogaSix new class: YogaSix launched a new signature class, 'mobility,' blending yoga and functional movement to attract a broader audience.
StretchLab enhancements: StretchLab is testing new equipment and cross-studio memberships to increase engagement and utilization.
International expansion: Club Pilates reached 150 international studios, and BFT opened its 50th studio in New Zealand. Xponential is also hiring regional directors for Europe and Asia to support global growth.
Divestiture of CycleBar and Rumble: Xponential divested CycleBar and Rumble brands to focus on higher ROI brands like Club Pilates, Pure Barre, YogaSix, and StretchLab. This is expected to improve portfolio health and operational efficiency.
Field operations team expansion: The company expanded its field operations team to support franchisees and improve studio openings.
License management: Xponential is terminating underperforming licenses and implementing a new sales process to ensure timely studio openings.
Leadership transition: Mike Nuzzo was appointed as the new CEO, bringing 25 years of experience in consumer and retail businesses. His focus will be on innovation, franchisee support, and strategic growth.
Retail strategy shift: The partnership with Fit Commerce marks a strategic shift to focus on higher-margin areas and reduce sensitivity to market cycles.
Retail Operations: The wholesale retail business has been a low-margin segment with significant risks and management attention requirements. Outsourcing to Fit Commerce is expected to reduce SG&A expenses and improve margins, but the transition carries execution risks and dependency on Fit Commerce meeting capital requirements by October.
Brand Divestitures: The divestiture of CycleBar and Rumble aims to focus resources on higher ROI brands. However, this transition involves a period of operational adjustment and potential short-term disruptions.
Franchisee Development Backlog: Approximately 40% of global licenses are over 12 months behind their development schedule. Terminations of these licenses are expected to increase in the second half of the year, which could impact development pipeline health and revenue.
StretchLab Challenges: The brand faces challenges in achieving higher AUV levels. Planned changes, such as cross-studio memberships and new equipment, are being tested but may not yield immediate results.
Macroeconomic Environment: The company has adopted a more conservative revenue outlook due to an unpredictable macroeconomic environment, which could impact consumer spending and franchisee performance.
FDD Renewal Process: Franchise sales in the U.S. are paused due to the FDD renewal process, potentially delaying revenue from new franchise openings.
Studio Closures: The annualized closure rate is 6.9%, with higher closures expected in the second half of the year, particularly from underperforming brands like CycleBar and Rumble.
International Expansion: While international growth is progressing, it requires additional support and resources, such as hiring regional directors, which could strain operational focus and financials.
Dynamic Pricing Risks: Plans to implement dynamic pricing strategies, including new price tiers and cancellation policies, could face resistance from members and impact customer satisfaction.
Leadership Transition: The appointment of a new CEO introduces potential risks related to organizational realignment and strategic execution during the transition period.
North America system-wide sales: Projected to range from $1.78 billion to $1.8 billion for 2025, representing a 13% increase at the midpoint from the prior year when removing Rumble and CycleBar from the comparison.
Global net new studio openings: Expected to range from 170 to 190 for 2025, representing a 37% decrease at the midpoint from the prior year, excluding Rumble and CycleBar.
Studio closures: Expected to be approximately 5% of the global system in 2025, excluding Rumble and CycleBar.
Total 2025 revenue: Projected to be between $300 million to $310 million, representing a 5% year-over-year decrease at the midpoint of the guided range.
Adjusted EBITDA for 2025: Expected to range from $106 million to $111 million, representing a 7% year-over-year decrease at the midpoint of the guided range.
Capital expenditure for 2025: Anticipated to be approximately $10 million to $12 million, or approximately 4% of revenue at the midpoint.
SG&A expenses for 2025: Expected to range from $130 million to $140 million, with further exclusions for one-time charges and stock-based costs.
Unlevered free cash flow conversion: Anticipated to be approximately 90% of adjusted EBITDA for 2025.
Levered adjusted EBITDA cash flow conversion: Expected to be 28% for 2025.
Preferred Stock Dividends: $3.8 million in payments on preferred stock dividends for the quarter.
Quarterly Cash Dividends: $1.9 million in quarterly cash dividends related to convertible preferred stock.
Annual Cash Dividends: Approximately $8 million in cash dividends related to convertible preferred stock for the year.
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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