Xponential Fitness, Inc. Q4 FY2024 earnings call

• Formed field operations teams to support studios across North America.
• Unified franchise sales, real estate, and construction under one leadership vertical (franchise development) with a new Chief Development Officer.
• Rethought studio layouts to maximize productivity and market customization.
• COO overseeing learning and education to create a thoughtful member journey.
• CTO focusing on enhancing enterprise apps, data analytics, and cyber resiliency.
• International expansion plans, starting with Club Pilates in Europe and Asia, with on-the-ground leadership in London and Asia later in the year.
• Focus on innovation, data utilization, and addressing legacy operational issues through transparency and structural improvements.
• Restated 2023 financial statements and corrected immaterial errors in 2022 and 2024 financials related to accrued inventory, 401 compliance, purchase accounting, and vendor rebates.

North America system-wide sales for the period ended December 31, 2024, were $465 million, up 21% year over year. North America quarterly run rate average unit volumes were $668,000, up 9% year over year. Total members stood at 813,000 at quarter end, up 15% year over year. Franchise revenue for the quarter was $45.3 million, up 17% year over year. Equipment revenue was $12.7 million, declining by 22% year over year. Merchandise revenue was $6.1 million, down 34% year over year. Franchise marketing fund revenue was $9.2 million, up 23% year over year. Other service revenue was $9.9 million, down 43% from the prior year period. The scaled brands (Club Pilates, CycleBar, PureBar, StretchLab, Yoga Six) contributed significantly, with Club Pilates contributing 56% of total system-wide sales for the year.

• North America system-wide sales projected to range $1.935 billion to $1.955 billion, a 13% increase at midpoint.
• Global net new studio openings expected to be 200 to 220, a 12% decrease at midpoint.
• Total 2025 revenue expected to be between $315 million to $325 million, no change year over year at midpoint.
• Adjusted EBITDA expected to range from $120 million to $125 million, a 5% year over year increase at midpoint.

• Legacy operational issues due to rapid scaling and lack of organizational maturity, which could impact financial results.
• Delays in franchise disclosure documents affecting license sales.
• Elevated studio closures in 2024 (7% of global open studios), particularly for StretchLab, CycleBar, and YogaWorks.
• Potential materiality of uncovered operational issues that may need addressing, though management hopes they won't be significant.

Q: Chris O'Cull asks about comp performance embedded in 2025 system sales guidance and the franchise recruiting process update.

A: John Meloun notes mid-single digit comp expectations, and Mark King discusses hiring a new Chief Development Officer, unifying franchise sales/real estate/construction, and setting higher standards for franchisees.

Q: John Heinbockel asks about assessment of StretchLab and four-wall economics of underperforming brands.

A: Mark King details efforts to improve StretchLab, including qualifying flexologists, local marketing, and group stretch experiments; mentions evaluating all brands for profitability at the franchisee level.

Q: Randy Konik asks about thoughts on closures and criteria for assessing brands.

A: Mark King talks about taking a conservative approach to underperforming studios, focusing on franchisee profitability; John Meloun discusses lease settlement progress related to real estate.

Q: Jonathan Komp asks about strategic initiative roadmaps and legacy issues.

A: Mark King outlines timelines for field ops teams, LMS system, and data initiatives; discusses ongoing evaluation of legacy operational issues.

Q: Joe Altobello asks about studio openings and member health.

A: John Meloun explains 2025 gross opening expectations tied to franchise disclosure documents, and notes no weakening in member trends or visitations.

Q: Richard Magnusen asks about field operations and Lindora Clinic.

A: Mark King says field operations are cost-neutral currently; John Meloun provides AUV for Lindora and notes no impact from weight loss drug supply changes.

Q: Owen Ricard asks about data-driven company pillar.

A: John Meloun explains data warehouse initiative for real-time insights and improved reporting across the company.

Q: Sarah Luna asks about brand and membership investments.

A: Mark King discusses marketing fund allocation, focusing on consumer-driven strategies for member retention.