Xponential Fitness Celebrates 56 Percent Q3 2022 Revenue Increase, Raises Full-Year 2022 Guidance

Xponential Fitness reported third quarter 2022 revenue of $63.8 million and raised its guidance for full-year 2022 revenue and adjusted EBITDA.

Third quarter revenue was up 56 percent, and North American system-wide sales of $264.8 million was an increase of 37 percent compared to third quarter 2021, the company reported on Nov. 10.

Xponential owns 10 brands: Club Pilates, CycleBar, StretchLab, Row House, AKT, YogaSix, Pure Barre, STRIDE, Rumble and BFT.

Xponential is focused on four areas of growth: increasing its franchise studio base, expanding internationally, expanding margins and driving free cash flow conversion, and increasing its same-store sales and average unit volume, Xponential CEO Anthony Geisler said in a call with analysts on Nov. 10.

Due to the focus on these four areas and its performance year-to-date, Xponential is increasing its full-year 2022 guidance for revenue. It now anticipates revenue of  $235 million to $240 million, or an increase of 53 percent at the midpoint as compared to full-year 2021. This compares to previous guidance of $211 million to $221 million.

It is also increasing its guidance on full-year adjusted EBITDA, now anticipating $70 million to $74 million or an increase of 164 percent at the midpoint compared to full-year 2021 compared to previous guidance of $68 million to $72 million.

It reaffirmed its guidance for studio openings in the range of 500 to 520 or an increase of 53 percent at the midpoint compared to full-year 2021. It also reaffirmed its North America system-wide sales projections, which are in the range of $995 million to $1.005 billion, or an increase of 41 percent at the midpoint as compared to full-year 2021.

More Third Quarter 2022 Results

In addition to third quarter revenue of $63.8 million and North American system-wide sales of $264.8 million, Xponential’s third quarter adjusted EBITDA was $20 million or 31 percent of revenue compared to $6.8 million or 17 percent of revenue in the third quarter 2021, an increase of 193 percent.

North America same store sales grew 17 percent. The company’s North America quarterly run-rate average unit volume (AUV) was $489,000, compared to $417,000 in the same period last year.

Xponential posted 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, compared to a net loss of $8.9 million, or a loss of $0.38 per basic share, on a share count of 22.1 million shares of Class A Common Stock.

It posted adjusted net income of $8 million, or $0.10 per basic share, compared to an adjusted net loss of $5.8 million, or a loss of $0.31 per basic share.

The company sold 258 franchise licenses and opened 128 new studios in the quarter, bringing total franchise licenses to 5,193 and total studios operating to 2,485 as of the end of the quarter.

“As is evident from our third-quarter results, while we continue to operate in a time of inflationary and overall macroeconomic pressures, our business has remained resilient,” Geisler said.

He attributed the resilience to the company’s members, franchisees and business model.

Xponentials’ average member has a typical household income of approximately $130,000, and the majority subscribe to reoccurring membership packages with fees that represent a small piece of Xponential’s overall budget, Geisler said. Membership is growing, numbering 577,000 in North America at the end of the quarter, which was an increase of 33 percent from the prior year period. Churn remains low, although he did not share the churn rate.

Geisler touted the strength of the brand’s franchisees. The company selects just two percent of interested entities to become franchisees, focusing on corporate veterans looking for an entrepreneurial opportunity.

“These individuals have the tenacity, courage and capital to successfully run their businesses,” he said.

Xponential franchisees have borrowed more than $200 million from the Small Business Administration without any nonrepayment.

“To ensure a studio’s success, once we bring an individual into our franchisee system, Xponential offers ongoing monitoring of the business and key operational assistance that leverages our extensive data analytics capability,” Geisler said. “Should there be any indication in the data that studio operations are awry, we are able to respond quickly and make the necessary shifts to maintain that studio’s performance.”

Xponential also benefits from a “highly predictable” reoccurring revenue stream and limited ongoing capital requirement because of its business model, Geisler said.

In the third quarter, 71 percent of the company’s revenue was reoccurring, largely driven by royalties, and the company’s studios are capital-light with access to enough labor and equipment to help expand margins, he said.