Xponential Fitness Reports 40 Percent Q1 2023 Revenue Growth

For first quarter 2023, Xponential Fitness grew its revenue to $70.7 million, a 40 percent increase over first quarter 2022, the company announced on May 4.

North America system-wide sales increased by 42 percent to $317.8 million while North America same store sales grew 20 percent, compared to growth of 47 percent in first quarter 2022.

Mature studios exhibited strong same-store sales growth with profiles similar to younger studios, Xponential CEO Anthony Geisler said in a call with analysts on May 4. North American studios over three years old comped at 21 percent same-store sales.

The company opened 115 studios in the quarter.

Revenue growth primarily came from a higher number of operating studios, new members and increased foot traffic, Xponential CFO John Meloun said in the analyst call. Memberships increased 31 percent year over year, ending the quarter at 665,000. More than 90 percent of customers are actively paying members with memberships on freeze being at their lowest level since prior to the pandemic. Studio visits in North America for the quarter increased 38 percent year over year, reaching 12.6 million.

Overall revenue also was helped by equipment revenue increase of 68 percent year over year to $13.1 million. The growth in equipment revenue was a result of continued higher volumes of global equipment installations. Merchandise revenue was $7.2 million, up 18 percent from first quarter 2022.

Xponential is looking to international expansion for future growth. For the quarter, it sold 188 licenses globally, bringing its total sold licenses to 5,638. It has more than 1,000 studios obligated to be opened under master franchise agreements internationally. Recently, the company announced a master franchise agreement in Japan to open 40 StretchLab studios during the next 10 years, and a master franchise agreement in Ireland and Switzerland for Club Pilates. Also during the quarter, the company opened its first Club Pilates in Frankfurt, Germany.

As of March 31, the company had approximately $28.1 million of cash, cash equivalents and restricted cash and $266.7 million in total long-term debt. Net cash provided by operating activities was $11.4 million for the quarter.

The company posted adjusted net income of $1.3 million, or a loss of $0.02 per basic share, compared to an adjusted net loss of $5.3 million, or a loss of $0.19 per basic share in first quarter 2022.

Adjusted EBITDA for the quarter was $22.9 million, compared to $14.5 million in first quarter 2022.

During the quarter, Xponential opened 115 new studios to bring its studio count as of March 31 to 2,750 studios across 18 countries.

North America quarterly run-rate average unit volume (AUV) grew 21 percent to $542,000, compared to $450,000 in the same period last year. This was the 11th consecutive quarter of AUV growth for the company.

“We believe that AUV growth is the most direct measure of the health of our franchise system, and I’m pleased to report the momentum in AUV growth has continued to build in the second quarter,” Xponential Fitness CEO Anthony Geisler said on a call with analysts on May 4.

Geisler called the growth in North American AUVs and same store sales during the quarter “compelling,” indicating consumers continue to prioritize spending on the company’s experiential offerings.

“The results speak to the strength of our brands, the quality of our franchisees, and the support they are receiving,” he said.

2023 Guidance

The company is seeing momentum continue through the first part of the second quarter, causing it to raise annual guidance expectations.

Xponential upped its revenue guidance for the year to a range of $290 million to $300 million, or an increase of 20 percent at the midpoint as compared to full year 2022. This compares to previous guidance of $285 million to $295 million.

It also increased its guidance on North America system-wide sales, anticipating now that it will be in the range of $1.37 billion to $1.38 billion, or an increase of 33 percent at the midpoint as compared to full year 2022. This compares to previous guidance of $1.34 billion to $1.35 billion.

Its adjusted EBITDA guidance also increased to the range of $102 million to $106 million, or an increase of 40 percent at the midpoint as compared to full year 2022, which compares to previous guidance of $101 million to $105 million.

The company also re-affirmed its guidance for net new studio openings in the range of 540 to 560, or an increase of 8 percent at the midpoint as compared to full year 2022.

In terms of capital expenditures, the company anticipates approximately $10 million to $12 million for the year or approximately 4 percent of revenue at the midpoint.

In addition, at this time, increased interest rates are not causing difficulties in franchisees getting financing, Meloun said, noting that access to capital has not slowed.

Xponential’s 10 brands are Club Pilates, CycleBar, StretchLab, Row House, AKT, YogaSix, Pure Barre, Stride, Rumble and BFT.