YogaWorks Reports 11 Percent Increase in Q1 2018 Revenue, Despite Net Losses

(Photo courtesy YogaWorks.) YogaWorks recently acquired Prana Power Yoga's three Boston-based studios for an undisclosed amount, growing its studio portfolio to 69 locations.

YogaWorks Inc., Los Angeles, reported $15.5 million in first quarter 2018 revenue, an 11 percent increase over the $14 million the company reported in the same period last year, according to financials released May 14.

The revenue increase was primarily due to its acquisition of 16 studios since first quarter 2017,  Vance Chang, YogaWorks CFO, said in a call with analysts.

Despite that growth, the company's net loss increased from a deficit of $2.6 million to a deficit of $4 million during the quarter. Adjusted EBITDA decreased from $841,000 to a deficit of $1.1 million.

"We started 2018 on a strong note, delivering first quarter financial results that were at the higher end of our expectations," CEO Rosanna McCollough said in a media release about the financials. "We are also excited to have made additional progress on our acquisition strategy thus far in the second quarter, as we acquired three studios in the Boston area, bringing us to 69 locations and increasing our market share in the region."

The three studios McCollough mentioned were Prana Power Yoga studios, which were acquired for an undisclosed sum.

YogaWorks increased its visits by 21 percent in the quarter, McCollough said in the analyst call. However,the number of visits on a pro forma same-store basis declined by 3.7 percent due to the shift from memberships to class packs and fewer promotions compared to last year. McCollough said she expected the mix shift to continue through 2018, but to taper off in the second half of the year.

The number of overall visitors increased by 28 percent due to the higher studio count, and the number of unique visitors increased 2.3 percent on a pro forma same-store basis, which McCollough said validated the company's widening appeal with its more flexible pricing options. YogaWorks had a $1.3 million increase in sales from multi-class packages, offset by $0.8 million of decrease in sales from monthly memberships, Chang said. 

Despite the acquisitions and the growth in revenue this quarter, the stock price for YogaWorks has decreased. 

In a May 14 Seeking Alpha article, investment analyst Maks F.S. likened YogaWorks' profitability challenges as a new public entity to those of tech companies.

"YogaWorks is not a tech company but it does have the same issue: 'the corporate yoga' model needs to reach critical mass before the profitable studios are able to subsidize the corporate expenses," he wrote. " Obviously this begs the question... 'Why do you even need to do this? Why take profitable studios and then make a losing investment out of it?' ... Other investors have likely also come to the same conclusions and is why the stock has sold off from the initial $5.50 per share to the current $2.13 or so."

In April, YogaWorks reported a 1 percent decrease in 2017 year-end revenue and a 10.2 percent increase in 2017 fourth quarter revenue.

"Looking ahead, we remain focused on continuing to leverage our robust acquisition pipeline and positioning ourselves as the acquirer of choice to capitalize on the large and fragmented yoga industry," McCollough said. "In addition, we have a number of initiatives in place to drive growth in our existing studio base including optimizing our programming across studios, sharpening our marketing efforts, adding teacher trainings and expanding the network. Taken together, we remain confident that we can deliver increased long-term value for our shareholders.”

For the second quarter of 2018, YogaWorks is targeting net revenue between $13.3 million and $13.8 million. For the full year, the company expects net revenue between $57.5 million and $59.5 million.    

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