• North America Run Rate Average Unit Volumes (AUVs): $638,000, up 10% from $581,000 in the prior-year period.
• Global Open Studios: 3,102, with 108 new studios opened during Q2 and 85 closures.
• North America System-Wide Sales: $421.5 million, up 24% year-over-year.
• Same-Store Sales Increase: 7% within the existing base of open studios.
• Consolidated Revenue: $76.5 million, down 1% year-over-year.
• Franchise Revenue: $43 million, up 22% year-over-year.
• Equipment Revenue: $12.9 million, down 10% year-over-year.
• Merchandise Revenue: $5.9 million, down 30% year-over-year.
• Adjusted EBITDA: $25.4 million, flat compared to the prior-year period.
• Net Loss: $13.7 million, or $0.29 per basic share.
• Adjusted Net Income: $0.7 million, resulting in an adjusted net loss of $0.03 per basic share.
• Cash, Cash Equivalents, and Restricted Cash: $26 million as of June 30, 2024.
• Total Long-Term Debt: $330.1 million as of June 30, 2024.
• 2024 Revenue Guidance: $310 million to $320 million, down from previous guidance.
• 2024 Adjusted EBITDA Guidance: $120 million to $124 million, down from previous guidance.

• Warning! GuruFocus has detected 6 Warning Signs with XPOF.

Release Date: August 01, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Xponential Fitness Inc (NYSE:XPOF) reported a 10% increase in North America run rate average unit volumes, reaching $638,000 in the second quarter.
• The company achieved a 24% year-over-year increase in North America system-wide sales, driven by a 7% same-store sales increase and new studio openings.
• Adjusted EBITDA for the second quarter was $25.4 million, maintaining a 33% margin, indicating strong operational efficiency.
• Xponential Fitness Inc (NYSE:XPOF) has a backlog of over 1,800 licenses sold in North America and over 1,000 internationally, representing over 5 years of future studio openings.
• The company executed a new master franchise agreement for its BFT brand in Scandinavia, with plans to open 30 studios over the next 10 years.

Negative Points

• Xponential Fitness Inc (NYSE:XPOF) faced short-term disruptions due to leadership changes and regulatory uncertainties, impacting their second quarter results.
• The company reported a net loss of $13.7 million in the second quarter, compared to a net income of $27.5 million in the prior-year period.
• Merchandise revenue decreased by 30% year-over-year, attributed to a slowdown in retail purchases by members at the studio level.
• The company announced the winding down of its AKT brand, which will be completed in the third quarter, indicating challenges in brand performance.
• Total 2024 revenue guidance was adjusted down to $310 million to $320 million, from the previous $340 million to $350 million, reflecting a 1% year-over-year decrease at the midpoint.

Q & A Highlights

Q: Mark, could you share some insights from your experiences at Adidas and Taco Bell that you plan to apply at Xponential Fitness? A: At Adidas, it was a turnaround situation, unlike Xponential, which is not a turnaround. At Taco Bell, the challenge was growing same-store sales and expanding an already large store base. Here at Xponential, the brands are strong, and the growth is rapid. The focus will be on fine-tuning internal processes, managing the complexity of a multi-brand strategy, and enhancing franchisee development. (Mark King, CEO)

Q: What are your thoughts on international expansion opportunities for Xponential Fitness? A: International expansion is a significant opportunity. Brands popular in the U.S., like Club Pilates, can transfer well internationally. The key is finding great master franchise partners, as they are crucial for successful international growth. (Mark King, CEO)

Q: Can you elaborate on the disruptions and distractions mentioned, and how long they might take to resolve? A: The disruptions have pushed our expectations by about one quarter. The consumer impacts related to retail and some opening disruptions have shifted into future periods. We expect to return to our projected trajectory quickly in Q3. (John Meloun, CFO)

Q: How are you addressing the feedback from franchisees regarding communication and support? A: Franchisees have expressed a need for better communication and a voice in decision-making. We plan to address this by having more consistent communication and engaging them in our strategic directions. (Mark King, CEO)

Q: What is the outlook for same-store sales in the second half of the year? A: We expect same-store sales to normalize in the mid to high-single digits. The business is performing well, and we anticipate continued growth in membership and visits. (John Meloun, CFO)

For the complete transcript of the earnings call, please refer to the full earnings call transcript.