Xponential Fitness, Inc. Q1 FY2025 earnings call

• The business performed as expected this quarter, demonstrating solid KPIs, completing an updated financing agreement, and filing franchise disclosure documents.
• Focused on optimizing operations, with new appointments like Chief Marketing Officer Luis Ocasion and full-time Chief Human Resource Officer Fabian Lopez.
• Launched a new field operations function with 12 field managers in place across North America by quarter end to support franchisees.
• Made progress on franchise disclosure documents, with all FDDs filed except for Pure Barre and actively selling in registration states.
• Supported international master franchisees, with physical presence in London and plans for Asia, seeing success in Spain, Portugal, France, Japan, and Australia.
• Plan to share key initiatives and operational enhancements at the upcoming Analyst and Investor Day on May 29.

For the period ended March 31, 2025, North American system-wide sales were $467 million, up 18% year over year. North America quarterly run rate average unit volumes were $659,000, up 8% year over year. Total members stood at 865,000 at quarter end, up 12% year over year, and same-store sales were up 4%. Franchise revenue for the quarter was $43.9 million, up 5% year over year. Equipment revenue was $11.1 million, declining by 20% year over year. Merchandise revenue of $6.3 million was down 25% year over year. Franchise marketing fund revenue of $9.3 million was up 18% year over year. Other service revenue was $6.4 million, down 19% from the prior year period.

• Project North America system-wide sales to range from $1.935 billion to $1.955 billion, a 13% increase at midpoint from prior year.
• Expect 2025 global net new studio openings (net of closures) to be 60 to 80, a 29% decrease at midpoint from prior year.
• Anticipate 2025 total revenue to be between $315 million to $325 million, no change year over year at midpoint.
• Expect adjusted EBITDA to range from $120 million to $125 million, a 5% year-over-year increase at midpoint.

• Tariff impacts could lead to higher procurement costs, but pricing strategy is expected to mitigate margin impact.
• One-third of global licenses contractually obligated to open are lagging over twelve months behind development schedule, with potential license terminations affecting revenue.
• Elevated studio closures in prior quarters, particularly in CycleBar and StretchLab, could continue if not addressed.

Q: Randy Konik asked about the overarching theme and brand confidence for the next few months and beyond.

A: Mark King said they're in the middle of a business transformation, building foundation for long-term growth, and is bullish on Yoga Six and Pure Barre, while working to fix StretchLab. John Meloun added Club Pilates will be over half of openings and license sales.

Q: Joe Altobello inquired about closures and license sales.

A: John Meloun said closures were largely in CycleBar and StretchLab, and license sales will target about 100 a quarter going forward, with high concentration in Club Pilates.

Q: John Heinbockel asked about field ops impact and license termination process.

A: Mark King said field ops will help franchisees with new studio opening and auditing, and John Meloun explained the process of assessing delinquent franchisee licenses and taking a pause in Q1 to evaluate properly.

Q: Chris O'Cull asked about StretchLab marketing and pricing.

A: Mark King said they doubled local marketing spend in March, considering a monthly membership model and other changes to help StretchLab.

Q: Jonathan Komp asked about unit outlook change and license termination accounting.

A: John Meloun said the change was due to higher closures in Q1 and bottleneck from lack of license sales, and license termination revenue is typically a couple million dollars per quarter with net margin impact.

Q: Korinne Wolfmeyer asked about tariffs and same-store sales.

A: Mark King said tariff impact on revenue is minimal, and John Meloun said same-store sales are expected to stay in mid-single-digit range throughout the year with no material shift in consumer behavior.

Q: Richard Magnusen asked about franchise disclosure documents and pent-up demand.

A: Mark King said they made build-out costs more realistic with no negative feedback, and John Meloun said there was pent-up demand in Club Pilates with existing franchisees showing interest.

Q: J.P. Wollam asked about field ops impact and license leads.

A: Mark King said field ops will have immediate impact, and they're building their own team for license leads, with positive initial response and interest from private equity in scale brands.

Q: Logan asked about new studio openings pace and international expansion.

A: John Meloun said new studio openings will be roughly fifty-fifty quarter to quarter, and Mark King said international expansion focuses on qualified master franchisees and markets like Mexico, Portugal, Spain, France, Germany, Japan, and Australia with big upside.