YogaWorks Inc., Culver City, California, reported a $4.4 million net loss in second-quarter earnings—its first report since going public in August.
Total revenue for the quarter was $12.5 million, a 6.3 percent decrease year-over-year. This decrease was attributed to re-classification of the quarter's sales from net revenue to deferred revenue, according to the company's report. Deferred revenue grew due to a "sales mix shift from monthly memberships toward class packages," which company leaders said, over time, will broaden YogaWorks' customer base.
“Our second quarter results were in line with our expectations, and we remain pleased with the progress in our business," YogaWorks President and CEO Rosanna McCollough said in the report. "Following our IPO, we have the capital in place and are well positioned, as the acquirer of choice within the large and highly fragmented yoga industry, to execute our growth plan of acquiring premier studios. In August, we completed the acquisition of two studios: our first in Virginia, in the city of Arlington, and one in the Dupont Circle neighborhood of Washington, D.C., extending our footprint in the D.C. area while leveraging our regional infrastructure.”
For the rest of 2017 and 2018, the company plans to drive growth through acquisitions, having already signed letters of intent to add 15 studios, McCollough said.
"In addition, we remain focused on driving solid performance across our studio base through national and local marketing, localized programming, best-in-class teacher trainings and workshops as well as our online offering," McCollough said in the report. "We look forward to growing our business while helping people reach their personal goals of physical and mental well-being.”
Operating expenses for the quarter increased 5.6 percent to $16.7 million. Adjusted EBITDA was also a loss of $551,000, compared to a loss of $46,000 during the same period last year.
Looking forward, the company expects third-quarter net revenue between $12.7 million and $13.2 million. For the fiscal year of 2017, the company is targeting a range of $53.2 million to $54.2 million. This is based on YogaWorks' plan to acquire 10 to 13 studios in the second half of the year.
In a Sept. 22 Seeking Alpha article, the leader of Maks Financial Services, an independent financial advisory practice. was critical of YogaWorks' conference call to discuss the quarter's business.
"Both the company and the analysts were all too happy to discuss deferred revenue and future M&A activity; not one person bothered to stop and discuss growing losses," he wrote in the article. "Here is one question I would have asked, 'When should investors realistically expect the company to break even?' ... While the executives and the board may have good intentions, I don't believe it is serious about profitability."
As of June 30, YogaWorks operated 50 studios across six American markets. On Aug. 10, it became the first yoga studio chain to become publicly traded on the NASDAQ Global Market.