Xponential Fitness, Inc. Q2 FY2025 earnings call

• Leadership Transition: Mike Nuzzo appointed as CEO, with Mark King expressing confidence in his ability to lead Xponential. - Business Progress: North American system-wide sales up 12%, same-store sales up 1%. Divested CycleBar and Rumble to focus on core brands like Club Pilates, Pure Barre, YogaSix, and StretchLab. - Retail Agreement: Outsourced wholesale retail business to Fit Commerce, reallocating resources to higher-margin areas, reducing SG&A and freeing up working capital. - Brand Updates: Club Pilates focused on strengthening brand, enhancing monetization, and launching a major marketing campaign; Pure Barre planning 25th anniversary marketing; YogaSix innovating with new classes; StretchLab exploring cross-studio memberships and equipment. - Field Operations: Expanding field operations team, reengaging or terminating lagging licenses, and changing the franchise sales process. - International Efforts: Club Pilates crossed 150 international studios, BFT crossed 50 studios in New Zealand, and hiring a Managing Director for Europe and planning an Asia leader.

North American system-wide sales for the period ended June 30, 2025, were $474 million, up 12% year-over-year. North American quarterly run rate average unit volumes were $659,000, up 3% year-over-year. Total members stood at 863,000, up 8% year-over-year, and same-store sales were up 1%. Revenue for the quarter was $76.2 million, down 1% from the prior year period. Franchise revenue was $45.4 million, up 5% year-over-year. Equipment revenue was $9.5 million, down 26% year-over-year. Merchandise revenue was $5.6 million, down 8% year-over-year. Franchise marketing fund revenue was $9.5 million, up 13% year-over-year. Other service revenue was $6.3 million, down 3% year-over-year. Cost of product revenue was $10.5 million, down 25% year-over-year. Cost of franchise and service revenue was $4 million, down 32% year-over-year. Selling, general and administrative expenses were $24.1 million, 35% lower year-over-year. Depreciation and amortization expense was $3 million, down 34% year-over-year. Marketing fund expenses were $8.9 million, up 13% year-over-year. Net income was $1.3 million, and adjusted net income was $14.5 million. Revenue contribution: Recurring revenue made up 82% of the quarter's revenue.

Updated guidance is conservative due to brand divestitures, FDD renewal, macro environment, and new CEO. North America system-wide sales guided to $1.78 billion to $1.8 billion (down from prior). Global net new studio openings expected 170-190 (down from prior). Revenue expected $300 million to $310 million (down from prior). Adjusted EBITDA expected $106 million to $111 million (down from prior). SG&A, capital expenditure, tax rate, and share count also outlined with respective ranges.

Risks include FDD renewal process and timing, macro environment impact on sales, organizational realignment with new CEO, and performance of non-core brands such as potential challenges with certain underperforming or non-core brands.

Q: On same-store sales trend and Club Pilates pricing, A: John Meloun discussed that same-store sales shifted due to certain brands and that Club Pilates is focusing on pricing strategies like membership structures and dynamic pricing.

Q: On backlog of licenses behind schedule, A: John Meloun mentioned that CycleBar and Rumble contributed significantly to the backlog, with the remaining backlog in other brands like StretchLab, YogaSix, and Club Pilates.

Q: On FDD renewal and license sales, A: John Meloun expected to sell licenses in the second half and get back on trend fairly quickly.

Q: On portfolio outlook for noncore brands, A: John Meloun discussed continuing focus on BFT internationally and evaluating Lindora's performance for ROI.

Q: On Fit Commerce partnership and SEC investigation, A: John Kawaja discussed the Fit Commerce partnership's impact in 2026 and that the SEC resolution aids in the debt refinance process.