Xponential Fitness Inc. expected big things for 2022, and, according to second quarter 2022 results released on Aug. 11, everything is trending in an upward direction – so much so that the company is increasing its fiscal outlook for 2022 despite being cautious about macroeconomic challenges.
“We experienced a strong year-over-year increase in members and grew our system-wide sales across North America for the eighth consecutive time in the second quarter,” said Anthony Geisler, CEO of Xponential Fitness Inc. “The dynamic year-over-year growth in North America run-rate AUVs (average unit volume) is a solid reminder that despite inflationary pressures to date, the workouts our franchisees provide across our diverse portfolio of 10 brands are an integral part of our members’ lives.”
For the second quarter 2022, total revenue increased $23.8 million, or 66 percent, to $59.6 million, up from $35.8 million in the prior-year period. According to the earnings call, total revenue increased largely due to increasing equipment installations and royalties generated from strong North American system-wide sales. North America system-wide sales increased 45 percent to $249.8 million compared to second quarter 2021.
It’s a trend Geisler sees continuing.
“For the remainder of the year, we expect the strong growth in the business to continue,” he said. “Accordingly, we are increasing our fiscal 2022 outlook to reflect 39 percent revenue growth and 156 percent adjusted EBITDA growth at the midpoint of our outlook ranges compared to 2021.”
Xponential Fitness sold 251 franchise licenses and opened 128 new studios in the second quarter, bringing their total franchise total to 4,935 with 2,357 total studios operating as of the end of second quarter 2022.
Xponential Fitness operates in 14 countries and owns 10 brands: Club Pilates, CycleBar, StretchLab, Row House, AKT, YogaSix, Pure Barre, STRIDE, Rumble and BFT. The company went public in July 2021 and is the largest global franchisor of boutique fitness brands.
More Q2 2022 Highlights
Net income totaled $31.5 million, or earnings of $3.28 per share, compared to a net loss of $8 million in the prior-year period. The increase was the result of $11.6 million of higher overall profitability and $31.8 million of lower non-cash contingent consideration expense primarily related to the Rumble acquisition, offset by a $4 million increase in non-cash equity-based compensation expense.
Consistent with previous periods, the Rumble acquisition non-cash contingent consideration liability is market-to-market based on Xponential’s share price, contributing to a $31.6 million decrease to contingent consideration liability in the second quarter of 2022.
Adjusted net income (loss) for the second quarter of 2022, which excludes the $31.6 million change in fair value of non-cash contingent consideration and $0.2 million expense related to the second quarter re-measurement of the company’s tax receivable agreement liability, was $0.1 million, or ($0.07) per share, which is based on 25.4 million shares of Class A common stock.
Adjusted EBITDA increased to $17.6 million, up from $8.3 million in the prior-year period.
As of the end of the second quarter, Xponential Fitness had approximately $29.3 million of cash, cash equivalents and restricted cash and $131.7 million in total long-term debt. Net cash provided by operating activities was $26.2 million for the quarter.
More on the Updated 2022 Outlook
Based on the first six months of the year, Xponential increased its 2022 outlook and reaffirmed its expectations for studio openings and system-wide sales.
The company expects its new studio openings to remain in the range of 500 to 520, or an increase of 53 percent at the midpoint as compared to full year 2021.
North America system-wide sales are expected to remain 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.
According to the earnings call, the outlook was based on assumptions that the tax rate would be in the mid-to-high single digits, a share count of approximately 25.7 million shares of Class A common stock for the GAAP EPS and adjusted EPS calculations, and $3.25 million in quarterly cash dividends paid related to the $200 million Convertible Preferred Stock.