Xponential Fitness Increases Revenue 73 Percent in Q1 2022

Xponential Fitness brought in $50.4 million in first quarter 2022 revenue, a 73 percent increase compared to first quarter 2021 revenue of $29.1 million, the company announced May 12. It projects a 33 percent increase in revenue for the year.  

Xponential operates in 14 countries and owns 10 brands: Club Pilates, CycleBar, StretchLab, Row House, AKT, YogaSix, Pure Barre, STRIDE, Rumble and BFT.

In the first quarter, Xponential sold 260 franchise licenses and opened 99 new studios. As of the end of the quarter, the company counted 4,684 franchise licenses sold and 2,229 studios operated. About 75 percent of new openings in the first quarter were in the United States, but the company signed agreements for expansion in Mexico and the United Kingdom and has almost 1,000 studios obligated to be opened internationally.

For North America, same store sales grew 47 percent in the quarter compared to a decline of 24 percent in first quarter 2021. In addition, the company reported first quarter North America system-wide sales increased 70 percent to $224.5 million. This is the seventh consecutive quarter of North American systemwide sales increases.

One driver of North American studio growth is Xponential’s nationwide partnership with LA Fitness, in which Xponential has the exclusive right to open studios within LA Fitness locations with a minimum development commitment of 350 franchise locations over five years. The company is seeing strong interest in this opportunity from franchisees, Xponential CFO John Meloun said on a call with analysts.

In addition to the LA Fitness partnership, Xponential recently announced a collaboration with Lululemon and MIRROR. The partnership brings workouts from four of Xponential’s brands to the latest edition of the MIRROR product, which launches this fall.

“We started doing these brand partnerships when COVID happened because we had nothing else that we were really working on when the stores were closed other than trying to generate cash and use the assets that we had like access to our network, which was an asset that kind of looks intangible, but it’s an asset that we have,” Xponential CEO Anthony Geisler shared with analysts on the call.

The company has an ongoing monitored effort to do these partnerships after hiring Steve Pankowski, who had worked as director of corporate partnerships for the Los Angeles Chargers. In his role as executive vice president of strategic partnerships with Xponential, he is working on similar partnership deals for Xponential.

More First Quarter Numbers

Numbers were up in other areas of the Xponential’s reporting, too, starting with adjusted EBITDA, which was $14.5 million compared to $3.6 million in first quarter 2021.

First quarter equipment revenue came in at $7.8 million, up 91 percent from $4.1 million in the prior-year period. The increase in equipment revenue was largely driven by a higher number of equipment installed, along with a greater concentration of installs within equipment-intensive brands, according to Meloun.

“Xponential maintains a diversified supply chain, most of which is based here in the United States,” Meloun said. “We have been focused on procuring equipment to avoid any slowing or disruptions of future openings.”

Xponential secured the equipment packages required for brands with a high volume of new studio openings expected in the coming quarters, such as Club Pilates and CycleBar, Meloun said. The advanced purchases also ensure that the company protects its equipment costs against inflationary adjustments.

Merchandise revenue was $6.1 million, up 44 percent from $4.2 million in the prior-year period. The increase was primarily driven by a higher number of studio openings along with increased foot traffic across all its studios, Meloun said.

The company’s North America quarterly run-rate average unit volume (AUV) was $450,000, compared to $303,000 in the prior year period.

Performance during the first quarter strengthened month over month, Geisler said. In March, the company’s monthly run-rate North America AUVs equaled $477,000, rebounding to peak pre-COVID-19 quarterly run-rate AUVs.

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

Xponential expects that AUVs will continue to increase with the ongoing execution of its growth strategies.

“Thus far in the second quarter, this growth has continued, and even as the U.S economy experiences unprecedented inflation and macroeconomic pressures, our member counts, both overall and at the individual studio level, are increasing,” he said.

At the end of the first quarter, Xponential had approximately $15.8 million of cash and cash equivalents and $130.3 million in total long-term debt. Net cash provided by operating activities was $2.9 million for the quarter.

Geisler credited the company’s differentiated portfolio of complementary brands and modalities for its success along with its size and its shared services platform.

“With a solid start to the new year, we continue to solidify our position as the largest and most differentiated global franchisor in the boutique fitness industry,” he said. “We remain on track to meet our guidance for 2022, including expectations for adjusted EBITDA margins to be in the low 30 percent range, strengthened by the growth and maturation of our business.”

Full-Year 2022 Expectations

For the full year, Xponential projects revenue in the range of $201 million to $211 million, or an increase of 33 percent over full-year 2021, plus adjusted EBITDA between $67 million and $71 million, or an increase of 153 percent at the midpoint as compared to full year 2021.

It also projects system-wide sales in North America of $995 million to $1.005 billion, which would be an increase of 41 percent compared to 2021 and would be the highest North American systemwide sales in its history.  

Those numbers will be driven in part by the 500-520 studios Xponential projects it will open in 2022. That number is an increase of 81 percent compared to 2021 and will be the highest number of studio openings in the company’s history, Meloun said.

Geisler told analysts: “Quarter to date, we continue to see positive momentum in our system. While we are in a period of unprecedented inflation and macroeconomic pressures, our member counts are increasing, both overall and at the individual studio level as our customers continue to prioritize their health. 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.”