EXEC: Xponential Fitness Sees Fitness Boutique Business Undergo Strong Rebound

Xponential Fitness said first-quarter North American systemwide sales grew for the seventh consecutive quarter, up 70 percent year over-year. The owner of fitness boutiques is on track to open over 500 new studios this year.

Xponential Fitness boutiques include Club Pilates, CycleBar, StretchLab, Row House, AKT, YogaSix, Pure Barre, Stride, Rumble, and BFT.

“On the heels of a very strong fourth quarter, Xponential Fitness entered 2022 with great momentum,” said Anthony Geisler, CEO, on a call with analysts.

First-quarter actively paying members and visitation rates in North America increased by approximately 60 percent and 45 percent, respectively, year-over-year. Sequentially, both figures improved 17 percent compared to the fourth quarter of 2021.

“Importantly, performance during the first quarter continued to strengthen month-over-month,” Geisler said. “We reached a significant milestone in March with monthly run rate North American AUV (average unit volume) of $477,000, rebounding to the peak pre-COVID quarterly run rate AUV. We expect that AUVs will continue to increase with the ongoing execution of our growth strategies.”

Quarter to date, positive momentum has continued across boutique franchises.

“While we are in a period of inflation and macroeconomic pressures, our member counts are increasing overall and at the individual studio level as our customers continue to prioritize their health,” Geisler said. “Further, we believe our model is more insulated from macroeconomic pressures as our customers who, in general, are on reoccurring membership packages do not view fitness as discretionary spend. And our membership fees tend to be a relatively small piece of their overall budgets.”

For the first quarter, total revenue, including royalties from franchisees, jumped 73 percent to $50.4 million, including a corresponding North America same-store sales increase of 47 percent.

The net loss totaled $15.2 million, or $1.51, compared to a loss of $4.8 million in the prior-year period. The increase was the result of $14.0 million of higher overall profitability, offset by a $9.4 million increase in non-cash contingent consideration primarily related to the Rumble acquisition and a $15.0 million increase in a non-cash equity-based compensation expense.

Xponential Fitness went public in July 2021.

The adjusted net loss, which excludes the contingent consideration related primarily to the Rumble acquisition, was $5.3 million, or 19 cents.

Adjusted EBITDA increased four times to $14.5 million, up from $3.6 million in the prior-year period. Compared to the fourth quarter, adjusted EBITDA in the first quarter improved by $5.9 million, an increase of 68 percent, with adjusted EBITDA margins nearly doubling quarter over quarter.

To drive growth, Geisler said a primary focus would be increasing its franchise studio base across all brands in North America and expanding internationally.

Said Geisler, “We ended the quarter with 2,229 global studios, the largest studio count in our company’s history. Having opened 99 net new studios in the first quarter as expected, we remain on track to open over 500 new studios this year.”

A key driver of North American studio growth is its nationwide partnership with LA Fitness, giving exclusive right to open Xponential Fitness brands studios within LA Fitness locations with a minimum development commitment of 350 franchise locations over five years.

Internationally, the company now has almost 1,000 studios obligated to be opened, including recently entering agreements for Mexico and the UK

On the M&A front, the integration of BFT (Body Fit Training) remains on track, with over 170 franchise studios currently open and an additional 180 studios sold and contractually obligated to open globally. Said Geisler, “In terms of future M&A, we will continue to opportunistically evaluate potential brands and new modalities, taking a disciplined approach to capital allocation.”

Drivers of same-store sales and average unit volume (AUV) are expected to include the XPass all-access subscription program that enables entry to its ten boutique fitness studios and its XPlus on-demand online offering.

Subsequent to the quarter’s end, Xponential Fitness announced an expansion of its digital offering in collaboration with Lululemon and its home gym technology, Mirror. Beginning this fall, four of Xponential Fitness’ brands, Pure Barre, Rumble, YogaSix, and AKT, will create original fitness content for the Mirror.

“We are thrilled to introduce exponential offerings to the Mirror community and believe this partnership will help us increase brand awareness and reduce overall customer acquisition costs given that Lululemon, Mirror and Xponential all target a similar customer demographic.” said Sarah Luna, president, on the call.

Xponential Fitness reiterated its guidance for 2022 that calls for:

  • New studio openings in the range of 500-to-520, or an increase of 81 percent at the midpoint as compared to full-year 2021;
  • North America systemwide sales in the range of $995.0 million to $1.005 billion, or an increase of 41 percent at the midpoint as compared to full-year 2021;
  • Revenue in the range of $201.0 million to $211.0 million, or an increase of 33 percent at the midpoint as compared to full-year 2021; and
  • Adjusted EBITDA in the range of $67.0 million to $71.0 million, or an increase of 153 percent at the midpoint as compared to full-year 2021.

Geisler concluded, “In summary, we are very pleased with our solid start to 2022. Xponential is well-positioned for continued growth as we open new studios, drive same-store sales and expand our operating margins. These factors, combined with the ongoing execution of our four strategic growth initiatives, continue to solidify our position as the largest and most differentiated global franchisor in the boutique fitness industry.”

Photo courtesy Xponential Fitness

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