Earnings call transcript Q2 2023

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Operator

Greetings, and welcome to the Xponential Fitness Second Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions].

As a reminder, this conference is being recorded. pleasure your my [ph], Avery now Relations. Investor is to host, introduce Wanamaker It ahead. go Please

Unidentified Company Representative

at Financial of operator. John call you, on joining discuss Quarter Sarah of by call for and this Executive Chief Financial our our to am Investors investor. Officer; XXXX the Officer. Anthony Second recording Geisler, Fitness President; Xponential.com. Thank posted Xponential afternoon Chief conference will Good and website be thank Luna, I section joined Meloun, Results. you all A

We our results conference risks materially from certain involve management's remind to differ forward-looking call, we forward-looking statements, on that during actual and you this and and These will uncertainties including business projections. based expectations. expectations make discussions such financial that are of could statements current our outlook cause

and more uncertainties, these provided detailed our to update of refer the to assume obligations on subsequent call. description with a no risks filings information please For and today's the We SEC. recent

discussing measures will addition, non-GAAP in call. certain In this conference we be financial

use believe non-GAAP operating because reconciliation conjunction we these you A the considered be to GAAP provide we investors with by provide. they measures that should our measures performance of about that information measures earlier to We non-GAAP figures, unless the otherwise in release GAAP is remarks global to numbers prepared measures refer that comparable included reported noted. this also all that today was note earnings Please issued prior call. in today's in

Geisler, to Executive Fitness. over I of call Anthony Chief will turn now the Officer Xponential

Anthony Geisler

the business health results franchisees. to yet conference consistent of Thanks, appreciate to joining our to call. highlight Avery, you earnings second I'm our good proud strength of another and and quarter share We our afternoon, quarter the of continue everyone.

aimed additional address business. today, several on On key will the the at we providing concepts clarity call

overview longer-term metrics. Analyst We will full these X, and will discuss financial company when at also we speaking in Investor growth provide our items a the performance, about layout of business strategy on detail Day and September and more be

to X,XXX our turn now over our operate nearly sold Let's Xponential leading across results. XX brands. with franchisees globally licenses studios fitness second quarter X,XXX

franchise XX of have XX% growth of across in agreements at actively master year-over-year a quarter. the paying total North the are outside franchise, North We Total second and end of these of expansion members America to saw XXX,XXX of America. international XX% countries customers members. Over

second with million, North our second the year-over-year, XXXX. record quarter Along a North in $XX.X growth by base, of studio quarter a of sales XX% the for which American of over system-wide increase visits total increased This membership $XXX million. XX% represents reaching drove American

were growth. unit American North run in up rate QX our of volumes $XXX,XXX QX of straight XXth quarter AUV average $XXX,XXX XXXX, XX% of from

the to We the health. most systems cohort pleased quarter, in are that remained by believe three particularly continue strong America growth second growth at franchise measure with XX% sales we of of studios same-store increasing sales and the same-store XX%. with North mature performance is more years direct old AUV our our over

more that has will from detail about these shortly. we to begun we further COVID-impacted periods, in are normalize. time John metric calculations believe Now speak removed this

Turning to revenue.

prior year-over-year. net million $XX.X up of For XX% quarter, XX% of XX% Adjusted revenue increase or the $XX.X of revenue or revenue, from $XX.X an million, in QX totaled in period. XX% million totaled the EBITDA year

bringing We the X,XXX. in licenses XXX to sold second with fourth. total of increase over by first net new discuss strategic globally and the three about Beginning Let's XX% the the with XXX our to now quarter. franchise base, licenses studio ended licenses X,XXX QX open bought QX areas. in with discuss global to four turn turn to franchisees, studios XXXX, Sarah studios of opening our I'll call then we growth the sold existing

to with global open almost continue franchise also have basis, our to agreement obligations. contractually excluding pipeline obligated increasing on licenses a and an We X,XXX master sold

franchisee and of We satisfaction pleased additional as it an reinforces our with licenses success their existing their the purchases businesses. are when model always

In Xponential fact, over multiple XX% of our studios who have have owners licenses. purchased

more licenses in franchisee with Looking has our a currently detail, open. X.X studios bought bit X.X average at this

next growth driver, expansion. our to Turning international

who obligated Pilates franchisee We represents have operators we our Pilates Of gives license open over our under approach outside next with the studios The Xponential's agreement North the in recently, indicative X,XXX country partner of scale years XX rapidly of brands. France and wherein master brand, experienced XXth the studios master master in announced the to over franchise to minimum agreement just note, a agreements. franchise signing America. we a world-class France of to Club opportunity can XX of Club which is for expansion, international our

MFA a space for targeting approximately XX significant reminder, countries share provide to of very flow-through. future opportunities, receive structured Xponential We percentage high-margin brands existing XXX MFAs currently white SG&A. provide potentially with a with which corresponding As are typically our our growth. Xponential different little revenue is or XX with

during Our is third to increased flow quarter, and margins free conversion. margins to key drive second again demonstrating cash the XX.X% EBITDA operating continued expand Adjusted driver growth leverage.

holding create headwinds As when margins. transition we studios continue optimizing will to company-owned scale,

forward, going we company-owned Therefore, transition longer no studios. on take will

these transition studios brands. and studio the nontraditional operating to As studios prove corporate loss. Pilates Club currently continue Fitness We out our net nine operating StretchLab plan studios and immaterial this operating of studios order company-owned generated amount to in company-owned the call, of nine have we date LA The concept. under XX are of LA Fitness transition

studios plan these We studios company-owned forward. we to X, refranchise will take longer down to no transition any and on going

run. while will AUVs expenses shift drive in SG&A long this confident are in the benefiting also additional strategy leverage to We

X the margins John several we XX% on We of achieve and longer-term guided look York will EBITDA for speak New business our Stock growth margins by XX% discuss Investor raising adjusted September shortly, metrics layout We an year. and Analyst at of guidance performance, the on at range the to to the to metrics in Importantly, strategy Exchange. forward to in XXXX. track and XX% financial of remain providing overview on are as the Day and adjusted year-end company EBITDA

on fourth the increasing to to AUVs. Sarah our growth and call pass that, With sales same-store and our discuss final driver, I'll

Sarah Luna

Thank second strong quarter you, strengthened our out ecosystem fitness and performance built refining services. our partnerships, our the drove omnichannel further and continued and Anthony. offering We BXB in of in-studio XPASS XPLUS

members. actively quarter, rates During our XX% America grew America the second North grew North to membership visitation over year-over-year, base and paying XXX,XXX

their role continuing With to have base. in a playing sticky needs interests. and to Xponential access an continues members' aims that our matches product fitness experience retain our its members integral to very boutique Xponential lifestyle, to ensure be and membership individual that

our discuss help and customer offerings drive resulting engagement, higher same-store now omnichannel how sales Let's in AUVs.

our on Our way to monthly a we enhance recurring XPASS customer by single brands offering platform. membership is engagement access XX one of all frictionless having

flexibility to It there consumers with Inception provides both consumers in for fitness driving and memberships. XX,XXX snack have for modalities been bookings date, studio on over franchisees. generation new while beneficial across is made XPASS to XPASS. lead

lead This as foods. mental in the and quarter, studios. channel third-party into to studio health, XPASS give while introducing will we categories serving another exclusive as offers, benefit advertising Xponential healthy to to apparel the our drive incremental This flow further app initiative launching such customers for be an driving will means members access to

access memberships. second have from brick-and-mortar and their of at Many the to who our XPLUS subscribers their our critical at digital classes memberships, home of all our classes studios. of as own subscriptions those brands XPLUS customers supplement omni-channel in through hold is the of comfort to studio element XX our in-person approach. our a allows also including

channel We continue constantly our consumer are platform, developing excited content stickiness translate this to into increased we're new affinity. and and brand see for digital XPLUS to

Also, classes which to BFT us during our master locations. members with offer on-demand solidified we deal the licensing across an XXX quarter, for to franchisor BFT, enables XPLUS international

We licensing to to and experience introduce global to other are our excited deals similar consumers MFAs. with expect pursue omnichannel

key lead or relationship omnichannel our with creating of Xponential's and with the Cruises negative flow little means audiences, a are sometimes new like acquisition partnerships Princess generating third provide revenue partnerships These of reaching strategy. BXB costs. element

Princess end entire and ships. fleet of the across Barre, of QX, As the been of have StretchLab YogaSix Pure Cruise launched

set September, addition, sea-going In for we which our Pilates, in first in is one-of-a-kind sale will retreat to have Club Alaska.

and instructors conjunction selling other culinary itineraries Xponential. range of of take example great of options. retreats Royal another glaciers with Pure across advantage and of studio North brick-and-mortar offered Barre, with featuring Princess' stream renewal already as is and launch top-notch to the at June intend Rumble, in we workouts is of as YogaSix-classes BXB diverse a these America. AKT discounted Lululemon our classes experience across a that brands. and announced classes Club locations activity This is Alaskan helping brands we by will in well Pilates can partnership grow be Members and future entertainment amidst The mountains to Lululemon

in fitness breadth drive offerings people introducing and depth we look expanding these to the to is Xponential The retention create new to bring Fitness' brands Through higher building customers the to out enduring XXXX, of partnerships experience. enhance omnichannel cross-promotional into and efficient and franchisees our offering of to customer BXB our XPASS interest available capabilities. world-class offerings, modalities. explore second XPLUS build and Xponential to our ecosystem, tools further the forward continue we of half our will a an and additional fitness In way effective an to

all vendor have studios. we omnichannel our relationships, a our and members offerings the franchisee the of ultimately across company, leverage brands our goal to portfolio driving As to the into ability more achieve partnerships our scale,

performance grow studio-level KPIs data Importantly, quarter. validates as this each our to continue

for to time. results the you outlook. XXXX quarter turn discuss Thank to over your call second our I'll again now and John

John Meloun

Thanks, Sarah. It's everyone speak with great to today.

our unit same-store on and reporting well calculations economics. I'd provide they which our into think average I as been an will closures categorized to clarity treatment about volumes throughout level go-forward like results history. on our for brand defined have diving of as consistently discuss sales, under and quarter, provide also and Before would calculated KPI both to the of and how studio be overview historical how for

volumes. run rate at get American months average annualized respective with least Starting beginning sales an North to this quarter four of multiplied by the the activity the that average quarterly old, define for are studios at as We unit six quarterly all number.

locations of sales Fitness not a have been nontraditional always this excluded with in and in would inclusion material sales result period locations that studios said, LA as XX as difference from are With calculation. Studios in AUVs. to our zero the zero well

calculating activity XX the in our our for entire XXXX, of six studios, than run QX base $XXX,XXX have included just disclosed run including months filings. X% industry of been of North our as XXX% SEC standard studio American When we that sales same-store North older of months. would calculation studios American of practice including rate Similarly, XX% our sales, when AUV only have lower. have followed continuous AUV For rate

XXXX of of XX% QX studio XX months. older base sales same-store XX% North Our than included American our

For sales QX included XXXX, XX% same-store of studios. of these XX%

studio will go-forward to for closures sales have not treatment consecutive of deemed reporting be Turning the now closed reporting. studio for that purposes. KPI Any KPI nine does months under

a note that provided the in reconciliation this full new method applying have differences. figures to this studio XX-Q. to We minimal historical accounts results in important method of It's under new

brand of a diversification to to varying Xponential has Turning taken revenue where of portfolio its always approach a brand. is maturity depending of levels level modality on brands the the and performance data. there

be discuss upcoming our portfolio brands, will we economics the underpin on unit Day. providing We will Analyst Investor and which that more level detail our at of

our open brands out include Pilates, CycleBar Pure to that meaning brands point to and These approximately years $XXX,XXX. represent in important Barre, that well-established driving North have studios have AUVs of in our generate among and average America, existed higher is XXX brands which several more than Club time base AUVs. members, scale, America develop North studio weighted have StretchLab, YogaSix total XX% over It quarter end at a following strong and of had at for typically

the which include studio membership the America periods, AKT system shorter brand for BFT, Row than support continue at brands mature and had of and to time XX% STRIDE brands, Rumble, benefit in less growth base awareness our quarter of House, five These yet in for base. Xponential North have Our account end.

sales XX% up American make Our QX generated sales. established XXXX North same-store system-wide and brands XX% of

expenses the AUVs by studio As some and operating slight expense variations will leveraged, driven improve items. are uniform brands and noting the other franchisee corresponding labor profitability as mature, largely the

expenses, same Our areas. market these expenses brands vary have operating the across monthly roughly designated can and

exception labor to and City would to expenses Barre York rent occurs our in StretchLab The Louisville, compared example, New and brands. higher be operating Pure For in frequently Kentucky. typically costs the more

owner lower of semi AUVs. higher have has more the their would to to owner-operator otherwise an also concepts allows instances, internalize to order for StretchLab expenditures some labor labor mostly transitioned internalize reduce operator has of cost a model model, and have in overall more In owner costs that the given of some one-on-one absentee from they the AUV generates spend. franchisees but Pure Barre higher of labor.

for Now quarter. quarter. in up that were turning in million North new $XXX.X that of driven base second in sales open North new XXX sales The the to the with our America acquire growth of studios studios North by American coupled the results members, existing systemwide continue same-store opened XX% sales second the system-wide was XX% to year-over-year. American primarily

revenue of consolidated which all have a upfront that our XX% for opens. revenue five the before streams, quarter franchise during was sales the equipment for being license quarter all defined the revenues year-over-year. for include components occur revenue these materially Reoccurring up million, said, That was to XX%, grew the quarter. $XX.X On make up studio except and given revenue basis, we consistently

up year-over-year. highs. increase royalty revenue was by This revenue reached growth in primarily sales Franchise $XX.X and million, XX% system-wide all-time driven member was visits an as

addition, instructor continue to will more and training open tech saw increase studios fees that increased In domestically. as higher we we monthly revenues

continued year-over-year. installations $X.X Equipment up XX% of the equipment to Merchandise Rumble. is brands increase $XX.X of equipment global year-over-year. was revenue equipment-intensive was up mix and revenue This addition volumes higher a in XX% million, of result BFT like in revenue million, higher

Franchise to higher increased marketing operating driven traffic open of a the during sales higher XX% $X.X due to in primarily year. primarily up system-wide increase year-over-year, from a studios of revenue the The prior strong and was America. number was fund quarter compared by of million studios foot number North

higher rebates processing XPASS period. sales primarily includes BXB sales, Lastly, in generated other was year up prior was from XPLUS our XX% company-owned million, and from system-wide our partnerships. to amongst other BXB increased which studios, partnerships, system-wide in revenues increase due revenue, studio-level rebates sales from period the the our of $XX.X studio increased The service from revenue the items, transition processing and from

openings of operating Turning volume down new $X.X X% XX% to by the primarily were increase equipment brands Cost expenses. year-over-year. driven for was franchise of up revenue in studio our and a installations and of $XX.X Cost period. The product million, a of mix revenue equipment-intensive million, higher service year-over-year. were higher

administrative by and XXXX. million driven fewer in XX% The terminations year-over-year. QX $XX.X up decrease was of general license were Selling, expenses of

SG&A period. As from were in expenses a of revenue, of XX% second in revenue the percentage quarter, XX% up the year prior

regarding As earlier, we begin shift in will company-owned the studios to line drive to positive Anthony strategy leverage this a SG&A. half and on transition item spoke have in second in expect our impact

this to on the we'll We the studios and share the are executing plans already details impact at Investor positive down Analyst ramp on additional have Day. and will these

spend year million expenses million year-over-year, the marketing fund of period. by increased XXXX. afforded a $X.X million, credit Acquisition up of transaction versus of by and the prior million, were expenses franchise the were $X.X and credit Depreciation XX% revenue. was amortization quarter expense $XX.X from a Marketing of $XX.X in an second driven XX% increase fund higher

on accrue calls, mark-to-market noted earnout. the contingent and quarter acquisition each is is by I the the the earnings consideration share and related As to for we quarter Rumble price driven earn-out end, at the earnout prior

consideration prior quarter second offset compared million to brand $X.X was million associated in assets lower expense income recorded $X.X $X.X primarily founder in and higher a the a equity-based a increase net period. of of income profitability, with by company-owned in on studios write to transition Rumble slightly of the income noncash net the of overall year million $XX.X increase number $X.X of of result million a net $XX.X million We related the increase The the in in contingent down taking million noncash compensation acquisition, Rumble in period. a

second of $XX.X a excludes business. the company's tax This to on net share believe of related contingent release. income A consideration, way $X.X earnings a fair results for the increase We preferred provided million, a net of of our to our press and $X.X dividends second shares. basic common reconciliation in income liability the quarter the per attributable the agreement XX adjusted million quarter net A in more of adjusted Class value noncontrolling net Adjusted on adjusted and which continue to net brand was assets. $X.X million million after that income interest is to noncash to write-down of $X.XX for receivable gain the noncash performance of earnings income remeasurement useful share count in income is shares million measure of accounting stock

million was margin grew to in compared $XX.X XX% prior period. in XX% quarter, EBITDA Adjusted up second year the period. million $XX.X Adjusted quarter to in the year compared in prior XX% the to the second EBITDA

reaching anticipates range, and we number a reminder, outlook grow XXXX As XXXX. our the XX% margins in expect adjusted to EBITDA XX% to this XX% to

Turning balance to the sheet.

convertible up June equivalents XX, cash of compared XX, cash $XXX.X primarily were XXXX. of restricted repurchase and of as million a to shares XXXX, as in preferred debt million long-term $XX.X January. XXXX. from $XXX.X million, million XX, cash, at of $XX.XX XX,XXX per was announced the of is as debt price June of share long-term June June in increase The stock of to total due Total $XX.X XXXX, As XX,

million have These would prior convertible common shares into Class shares of repurchase stock. X.X A been to the

place term the our pursue If debt. company business which our of optimizing streams, market remains structure. will cheaper focused floating of As prove whole on our conditions in on fixed provide securitization mentioned access favorable, loan revenue to company rate calls, repeating a previous earnings capital the financing existing to intends

in our are adjusted and full-year Based we revenue guidance our system-wide for higher levels on are current sales, second of XXXX quarter, EBITDA, and to new outlook. business increasing the studio as guidance we performance openings for follows. reaffirming conditions turning Now and

to range unchanged a our increase now year. the expect billion an up highest North previous X% America and to at billion, to history of XXX represents the to new XXX. We of the company's XXXX. studio midpoint number range from global to expect $X.XX sales from the increase We the XXXX in in over $X.XXX prior range openings at from studio or the $X.XX billion systemwide billion remain openings This midpoint $X.XXX XX%

between to million million, the from at revenue from to XXXX be from $XXX XX% $XXX.X million previous EBITDA prior $XXX.X the at now increase a midpoint from Total to million, increase up adjusted $XXX now EBITDA from million, a year-over-year roughly prior the $XXX range to expected year-over-year the is expected up $XXX million translates margin Adjusted at $XXX year. the to million, midpoint range XX% year. This to XX.X% a million midpoint. into $XXX is the

million terms X% the anticipate for $XX In we of capital million or expenditures, of the revenue $XX midpoint. year to at approximately approximately

XPASS on to support be expenditures technology new the our Going investments forward, other on offerings. features XPLUS capital focused and will primarily BFT maintenance digital and integration,

EPS press as and capitalization calculation release count our earnings share our be corporate EPS high related mid-to $X.X Investor in associated For FAQ be our single-digits, our pro adjusted of of found quarterly purposes our be million in as the and stock. well back share tables on convertible website. to can earnings of to calculation our explanation to structure for the count XX.X the at tax be to full-year, preferred and calculations paid and expected is forma full rate A share million dividends per

Directors to to million August Board a Finally, repurchase. new on the for I authorized up communicate want before that has our X of questions, $XX share call over turning

repurchase. and based Xx Capital our already loan the adjusting debt-to-adjusted XXXX this to midpoint agreement company capital funding have for complete MSD EBITDA debt, term full-year net incremental in forma, Our term the Pro for loan will lender, the our of million than is $XX amended the guided has financing range. less the on

and today your support for time Xponential. your for of you Thank

call now the questions. open for Operator? will We

Operator

go conducting Thank of you, question-and-answer is Randy a now Jefferies. ahead. Please be question first gentlemen, we session. Konik Instructions] Our sir. Ladies will and from [Operator

Randal Konik

for guys, presentation, for very lots a data us Hey on. to thorough in of dig thanks good

one was, AUV during visitation thing me about you strong. growth talked the strength very guess really quarter. it's that I the on then, So in struck side A, And B,

bounce quarter-over-quarter maybe you So you in how some -- it mix much growth, us perspective higher could with AUV if with give like some out Can the about that pricing, strength shift AUV think concepts. is give you year-over-year. quarter visitation some maybe us -- the

that overall get to your number? want driving Just perspective on what's

Anthony Geisler

Yes, I'll that. take

QX ways. it's with getting up sales One, So that different growth, the two, from again, new sales not system-wide QX, of opening you're from saw growth two XX% obviously system-wide prior consistent volume, as price. quarters, you studios. But it's to

very XX%, the X% reaffirming simply similar, XX% is it's did calculation, QX volume. is that So that

think months, And typically vacations. in you in more families you visitation, see summer when take about visitation the

QX, visitation was still sales but benefit and to growing roughly you systemwide of the So members. have flat

the of of QX So you'll vacation. to see out while take part that as in month, kind of a kids early are of more is travel school, summer parents well. July more tend

and July. is relatively from it like you you you and kids the of their So they and in have August look it when at months seasonality, workout June usually than school, parents summer greater at to But come look patterns QX, historical visitation is when back regimens. to is but time to flat flat. back But return still September, more visitation see kind when

Randal Konik

Thank different country in How you. on additional then kind the regions been you're XX let's you're of openings, far? very three over And Understood. That the what's would next us years? the from new say, I be to And been give how then MFAs differences five going? of countries or pace on helpful. What thinking about now, that's countries? country, France developed to so up maybe maybe guess, flavor your the seeing some

Sarah Luna

develop MFAs out take go potential. identified, in of countries lot we've that that I We that there's a can pursue. XXX got we XX there total mentioned that so and XX of Yes, development out times and one. terms can We've brands,

of got France. which we've as early franchise the recent abroad, Ireland decided that studios to partners Switzerland, those going studios. open MFAs, Those to and the in domestic our leases is are exciting out looking as And for of have of developing see. and out really existing terms they're well In stages

So domestically. in they we performance very feel perform, confident our but they're how franchise given performers the partners, soon should we that know strong of

Anthony Geisler

that to future like the the follow question domestic, to what now, in into to looking -- to closer total we've Randy, follow regards openings opening We've XX:XX. and your XX:XX, like with the been suit. up, international, And is compared mix around but going does look around it's been right to internationally XX% domestic, XX% selling

So year, units could coming will years. of assuming long-term assume XXX over probably metrics, of the north a you XX% internationally about come those

Randal Konik

it. Again, thanks Appreciate for Super guys. the all helpful. data

Operator

question you. Thank ahead. Altobello The Please go James. Raymond next Joe of from is

Joseph Altobello

guys. Good Thanks afternoon.

little that dig percentage on are a basis? are economics. year First open deeper to or of into I want studio profitable your four-wall question, more than studios than a a What a longer year

Anthony Geisler

Yes.

is the you'll economics, typically months, in the talk level, ramp to $XXX,XXX-ish, information provided and above studio that XX first before. which studios So about breakeven see about we when we've

comp the then that, mid- year, X% to, reflects majority in -- comp average I then first after in on largely X% that, high they first and studios our And that after the year. typically that around So that at we model like per studios studios said, to they typically get The $XXX,XXX get saw their year. arrive in single-digits pre-COVID. to of the

Joseph Altobello

a question. And then maybe Helpful. Okay. second

are down thinking frame at you zero time about? that you What get transition to some point. expect do mentioned You to studios

Anthony Geisler

the Yes. Well, of they we in are Joe, the half down and about in or as the actual QX. unit were studios what said, QX from count studios recently

remaining in lose the the doesn't money. portfolio material balance any So

indication unit the SG&A concerned what itself. actual NOLs the with the of never of headwind concerned always We're number. looked So unit we've number health, as the not an the count at It's that and we're are with. franchisee what studios is to

And the four-wall stores kind of that so don't that our of we XX-plus for us. money stores stores lose are a the brick-and-mortar lot have now,

and right what us that offload focused are lot but that's portfolio and SG&A be amount a and the in the there's left we're least making headwind, will in not away, are so to is pressure that we losers NOLs. sure those giving that winners balance And that doing and right, on, of of the

words, don't with the So left the want been strategy the winners from be in sell that's to the to other all losers we and beginning.

by of want I the had year kind the to end QX or of if guess year. out targeting to of so we deals are next good company. a the throw accretive do we're But And to there, that

of for we've bought these what actually than they're Some stores, worth. lot less a

so making the company. the sure for we deals out best do possible be And we'll going that

of little which Club not But necessarily to the And here operating, out doing given that and Fitness's to Fitness's be California. then LA see them very are leakage, a the just there's which We them, franchisees LA is not concept a do longer of proving locally we're operating Southern with that concept want have we're operating bit to works. one franchisees Pilates lot them want to but a that trying because those as we offload that well StretchLab. real in of nine quickly. and eight are continue We'll operate probably several we're

Joseph Altobello

guys. thanks Okay,

Operator

Thank Perry from The Please question Alex Bank of next you. is go of ahead. America.

Alexander Perry

on my here. taking of profitability questions or about say of to for versus better a cash-on-cash to I sort the House Is clubs like more returns pre-COVID? concepts talk sort thanks concept just guess Hi, some Can by questions. first of sort franchisee follow-up earlier and you fair Club the and with the maybe like Row nascent the some Pilates have cash-on-cash it concepts. the returns of have that most tenure of like

economics sort by can Thanks. concept any would of give the us really Just be on color more you helpful.

John Meloun

Yes, Alex.

Day. But to We that and dive to this think was forum cash-on-cash on five-minute to just of we've it's of the kind Investor in at -- levels about the try a talked too in double-click session. not will certain that. we it, AUVs. right So much data whether debated about And XX% Q&A into do or returns

scale a an continue that talked for brands climbing. than and perspective, roughly of we AUV. a we call, weighted lot our The average AUV brands produce to $XXX,XXX north of on seeing more the from as on are We sure keep

higher largely So cash-on-cash which than much model, are we've their returns spoke ad about. design the

scale, You we'll call the, AUVs one. it, have are in $XXX,XXX-plus brands Those BFT, year at coming Rumble. out not in opening already at

of cash in actually in the semi-absentee operate House, can an relation model. do So studios they get go STRIDE, to talked more the you model different have brands into like a similar AUVs, see in to we I They're those at generate AKT. to the if better margins model, expect Row We call to returns how there. lower owner-operator unscaled and versus could

So lot on in definitely, more so they're and clarity brand could provide performing. more a Day business detail get we'll we see you about guys how it the that Investor more think how you level, to the and a at

So into that, delve I tuned excited we're in but to stay kind say, that on about month. would of a

Alexander Perry

the follow-up based been just I then leases already a year? of is guess, And Perfect. How two-parter. have is question, signed. this growth that in outlook sort unit that much there on my visibility for Is

degree John. of then a And confidence you, more there? maybe have one you So high for

Thanks. what can that us the write-down little you give million color a of be is, just of more would that add-back really $X.X helpful. Just brand assets,

John Meloun

agreement the start those I'll original when QX, QX. would a We studios, In they That that with did point. at studios. Yes. be founder were certain million. our the assume purchased of as in those part Rumble happened exiting we $X.X business,

markets, have we lot a those. the in ones of the major So

get be we So over will refranchised time. those looking to

what the In one the -- the agreements reflects. million that to franchise was what $X.X essence, the intangibles when of that assigned bought was the were we outstanding. that's because brand, So was

onto hold own the outstanding. perspective. Therefore, sheet not no your was first the an we balance would the Now question? studios, from you franchise what agreements apologies, are accounting And them that longer

Alexander Perry

this into growth visibility the the Just outlook for year?

John Meloun

were kind signing into knew QX consistently going many into Yes, from fact and we've consistently many greatest signings you're We strong. so talked indicator QX, We the how been signed how signed the I really always this about have have many agreements and studios to mean going is that lease of year. of the beginning open. lease early of so how in this year. coming -- we

our good forward-looking the perspective, the visibility month usually six to and strong. for about is openings So view. have We a nine so very

you not we can pretty idea we good much year in a happen So have QX to in almost but already. of only what's QX QX, going tell and next

year, said beginning openings, in EBITDA unchanged. we moved and it's We've to regards sales. of revenue guidance at around guidance the around the the been So city and adjusted systemwide

We've we I raised but QX, we pretty strong. it's to structured and in pretty the mean, those as and the that we've have haven't continued in and studios moved out, because that is six the acquire open. visibility QX there to franchise building they're they is a a somebody when lease, months studio signs up sense go agreement, eight getting a where perform they

of looking of quarters things you're So kind ahead a always couple time. of at

the going that when So once two sign know studio about we to lease, quarters is already open. we in

from So it's pretty that static perspective.

So a the short strong answer really put question, to this that I studio year. your guidance there out feel for really and about openings we new good

Alexander Perry

going forward. Perfect. That's helpful. Best luck really of

John Meloun

you. Thank

Operator

Harbour of ahead. Brian next The is question from Morgan Please you. Stanley. Thank go

Brian Harbour

afternoon. SG&A strategy? the Good could Yes, of running John, comment then you just kind given transition the expense of studio and year-to-date impact any you're where on thanks.

John Meloun

question. Great Yes.

the QX SG&A to do So on number had that That than transition studios was QX. it in in higher we of was with books. the has

Looking costs forward strategy labor we cost we in we've operating made and QX, rent SG&A. of start as lowering have into the this shift in QX as because our and SG&A don't

to SG&A start over down expect time. You'll coming

you'll So half, in the that second apparent see quickly. pretty

was down XX%. can we to think close below percent as it range you in kind SG&A about XX% to the QX. it think -- we see a way revenue will that would the hit total of these So high were ramp studios expect I as is of I

ramp how studios. these a of is kind we of function down it quickly So

about goal refranchise year, As XX% kind loose into will see it'd -- but range of to the have is we goal kind Anthony done talked mentioned, out. all that the get the of of by back it the as these end great we low them be you studios

Brian Harbour

suitable role will you the that? closures how makes forward franchisee Do how can't find just might with be franchisee a And going more see -- the of sense are if you you change going brokering it impact are that in in of to there to that Yes, of kind deals? we buyer? think you a Like might occasional take sense. Okay. kind active just that,

John Meloun

Yes.

the to were in be reasonable if traffic, studios center the reason, that we the or interest the get best said location. inquiry time, we for have doesn't triaging, of or earnings turned where a we grocery If around, a would that. anchor and the the foot better the really -- refranchised moved the sense sense can will in As the to if studios just franchisee we whatever that feel that are there they we situations a of a that it either in differently no amount be script, lot I in in resources of longer kind studio guess, large relocate of invest studio to will time just make do

I on we're it's you closures the in the not basis. best to But franchisees in studio in anymore, look tools sure forward. relocations, But with studios for go case-by-case start work what's look assisting they're obviously, path. a center going studio following perspective, kind operating their of seeing resources ahead we sales make and at short to to a address situations side, it's with model, where think getting assess them on But studios down a ramp going to will if we'll issue company our just be of viable option a more from yes, on focus a term, the as will and then and the the

Brian Harbour

Okay, thank you.

Operator

of you. Baird. Komp go ahead. Please next is question Thank The Jonathan from

Jonathan Komp

second Yes, sales first seeing. trajectory. at trend XX%, you strong different XX%, hi, And just Good same-store could but about thank ways you afternoon quarter, you're you. that were want interpret obviously, and trend ask quarter I everyone. numbers, the to the at

give you're should terms going seeing expect insight the color So that the can you we trend more half? of any sales? back into in any then And same-store what for

John Meloun

Yes.

do maturities, in you more to quarters. see same-store I I they as to grow. calls first elevated they I that sales open into pretty believe still same-store second going from obviously, XX%, we time. over So quarter. a do expect do sales continue on as benefiting of kind to mentioned growth -- to see into previous getting I you're studios, system-wide the studios on XX% mentioned, see, grow continue perspective obviously, the in quarter, sales strong normalize XXXX, coming you're as over

high of will how look the still same-store single the digits Mid- year. or second in XX%, expectation my sales, I be the is XX% expect studios do you in to But long-term to perform. XXXX this kind half of mid-teens, range in on guidance

As quarter-on-quarter, strong I it typically QX quarter is you mentioned, see strong when a look and you at growth.

going So workouts typically back QX mentioned, somewhat Friday as their from I school, we and parents in going kids I elevated back our to -- that going benefit vacation. sales also have stay QX the expect in strong Black And then do back QX, quarter. people, to to to seasonality as promotions, see you from holiday and we start always

XX%-ish expect for range I full-year. So the

studios measure, long-term, get level how I to see high to looking monitor, assess, and beyond as a you'll well. roll of kind of mid- QX, then start you continue think QX XXXX, idea. XXXX. are up, into around But see kind as as as you that single-digits we'll And better opening we

Jonathan Komp

And Board's to color. with Got and do incremental taking the I ask buyback program the follow-up to on initiate want it. to so about That's decision helpful then debt. to

to using I the past convertible or the cash back Just further structure. simplifying debt. generated the preferred there the process and some different know of the the any -- thoughts internally bought weighing shares to you or options relative in capital

So and the on process Board the just it the on may thoughts that did. have any how path thought settled additional

John Meloun

more $XX mean, capital with securitization. a I the put cash. announced Obviously, of $XX repurchase. Yes. million was finished million The we in structure kind quarter always to goal a with efficient the we long-term in place

to the it's all So shares B -- talked Class A, all preferred It's fungible, those. about and preferred. Class wanting repurchase it's we had me, whether to always

ultimate possible, out as an I guess, is The few from goal have antidilutive shares to there as perspective.

to the was is looked for us, us. the way at debt available it So we

because shareholders the it undervalued offered to We who MSD, from do as have also "Listen, willing they see be give these they shares", to also see their guys a you the stock this perspective, but capital partner, being to the levels. we'll great at as say,

share in get So easier, and We cash. loved done have but the the take under ahead refinance short-term. it we makes yes, the preferred on we'll What it go repurchase that out were anyway. the a just for was all that the given of the securitized easy debt shares us would price, access to going model, ideally and to the timing to

a Yes. mention it's low. it that. and And just me, lower being just over to issue advantage timing So at pretty our We're to to able is of now taking a not price of Xx. do leverage

the $XX borrowing still roughly million, just at even Xx So levered. we're under

makes it easy it for to So us it. do

Jonathan Komp

color. Thanks Got I it, the appreciate again.

Operator

Capital. The question from Street Ryan next you. is go Meyers Thank of ahead. Lake Please

Ryan Meyers

taking Hey my questions. guys. Thanks for

me. for one First

Just if if studios? seen open to potential franchisees more wondering the you up you've of changes can willingness on comment in any

Anthony Geisler

Yes.

in I of related we we number look of opened came licenses came studios that XX% QX, the mean the some I that on the from QX, franchisees. existing So franchisees. of number of from you data When them sold to have licenses about them sold. a at in third existing

the they of have, those of that license. and franchisee we quarter continuing third franchisees And them installed new you're sold most in franchisees open licenses. of around to see buy They're But existing were from existing licenses. them opening to this came existing So three continuing the opened base buying studios again, that like and and the sales quarter half I franchisees. we license said, -- a

to continuing they're more. to buy So come back

Ryan Meyers

of to any helpful perform relative there? Just a multiunit differences then Is follow-up you can question. to as how franchisees That's kind my it. talk last maybe color. about Got single there franchisees? And

Anthony Geisler

scale, like versus from the just of marketing that locations those that you what benefit is perspective specifically. -- they a get there's them Typically, right? see of franchisees one three to to they all multiple market Yes. economies ability to the get as own across So

benefits could to more across actually General Manager that there's manage perspective, you from the operating a even three. So franchisee

So sharing you get an coverage case called the labor instructor resources, of in out. of benefit

one second open if the because one operating than one from one, learnings third third you will better of that typically the of the open So one our and benefits the to and you multiple. Not there's of first the actually one. a to kind you get lot benefit better to the for experience mention second

performed and second opening they their franchisees these one, they've lessons actually actually the have see gate of typically one. the learned that better out you So because they first open all

Ryan Meyers

Got for it, my Thanks questions. makes taking that sense.

Operator

very you go Thank much. The question Please is ahead. Heinbockel Guggenheim. John from of next

Julio Marquez

Heinbockel. Hey this guys, for John on Julio is Marquez

about signs there? you touch -- at improve product weekly the pull improved how follow-up, think could on Any changing But Any can any costs on thoughts of behavior could we Thank if revenue. mentioned of guys would you. to that KPIs? then member be and you And levers scale? franchise equipment, the profitability you that If in product great.

Anthony Geisler

of meet made Yes. the of sufficient In coming regards and that we we back were the equipment supply spent to retail available equipment COVID, studios kind our chain demand -- equipment as there we're time issues sure of manufacturers margins, opening. out the did some that to number had with packages we of

negotiating, we commitments to lieu price manage volume we firm So of did on in did more price -- them on kind of increases, what we is passing increases.

order XX% prices our could as at vendor. roughly, we both again, When stabilizing use directly mix purchases return, we that In nonbranded relationship. vendors. facilitating across you look of rebates equipment, for of the branded franchisees and retail, like The a margin. get with vendors volume an associated job good a branded from and done we've the example, So Allo

if warehouse Tustin, because and unbranded we certain well actually them. entire they inventory our here costs to went pre-negotiated lower at have we have to they an the than that a We directly have in California, cost as could vendors where with both franchisees buy branded ability

follow could make provide. retail and for somewhere and the sell around price closer to we inventory our retail recommend Typically, they XX% the we us at franchisees they purchased return, in margin. a to wholesale recommendations they then margins XX% if And turn

believe really retail margins, manage unchanged. equipment, intended chain, supply are -- all to is combined doing from -- negotiations vendor lot cost the we XX%. the it is shipping getting and the I everything And of from that's from staff our cost warehouse will the So a margins and freight suppliers. the of largely to make really intended remain of our inbound which that the to packing the

So into largely margins remain the will future. unchanged

Julio Marquez

just Awesome. KPIs. changes the you're on seeing? very Thanks. Any that quickly weekly And

Anthony Geisler

Weekly that up KPIs, now. yes, following on

say, summer would the mentioned, flat I visitation I to months. due seasonally is, As

We haven't increases seen any cancellations. in like

You do month on freezes town. typically memberships more July of because people are see in the of your out

membership, paying So on rather they while they're their charged monthly getting it could than avoid vacation.

August July you at year. of look than less You were typically ramps July of when are versus see XXXX prior back up. our and September, Year-on-year, that XXXX, actually they freezers

still does just behavior. our seasonal. but that nothing July, it a It's of show year engaged than in staying in change more month or indicates more are last the member same members somewhat it of So so they but more is any of impact, seasonal were sort shift

and to back better return sales to show of So momentum August how September, into the continue indication have studios. be to really strong sales, back QX. come classes, people system-wide same-store able a we'll and But have

Julio Marquez

Awesome, thank you.

Operator

you. is Warren of go next ahead. Evercore. The Cheng Please Thank question from

Warren Cheng

cost kind good evening, rebuild. cost John Hey, inflation are of franchisees seeing wondering to was and their what in I Anthony.

increases build cost of they studio in you your Obviously, compared pretty significant your So your as curious new stores year? opening, franchisees one the But seeing some what rebuild. publicly of about level reiterated competitors talked traded guys. I'm are just to

Anthony Geisler

our real of if can is, it when us, or think dollars thing. kind XX,XXX bigger we're lifetime, to you than XX,XXX square percentage, not And it's for of same all feet, the a it's going In the that. be box, reason or X,XXX Yes. it's see But massive. not is or XX,XXX in

lot build that. of they showers a there's and lot -- so And things bathrooms of like a and

much So box. a bigger it's

that a planning plumbing, and there's which walls, a more stuff. lot lot lot there's So a more here's a electricity, lot all engineering more means more and

given And so it's build-outs scale that size same, the are. are really be just but -- the the they cheap, will and percentages the the

building or a three the a If really really two you builds, even box inside you most walls box. you're think walls, have complex

left. back of you're in straight that the middle comes a or to cases, So goes the just building out across wall you're wall the and some building a

this dry -- something Pilates, There's thing lot pieces electric kind a walls, The of a a really the StretchLab, is just there's our a so then year. StretchLab, walls. Barre, that And not in YogaSix. But lot of on an done computer. electric. is of instance, to of lot for of that a those There's like openings work there's Club lot plugs the the little is are And get stands our Pure iPad in there. has which of program only two not front that only maps

bathroom of the men's lot a electric the women's wiring, not on have depending and of a size you So a box. or bathroom single

to So has impact. not a dollar lot it of so work less do,

Warren Cheng

How sense, was if just there's follow-up You've sources a sort these earlier finding makes generation question visitation, the Anthony. visitation. My Randy's are new for of That higher developed of new your thanks members, curious studios? most numbers? members question driving on lot driving ones recently. the I'm fruitful of on are just that

Sarah Luna

BXB question. improving are initiatives constantly all and digital and that really great partnerships. our marketing but partners, our course, we've with SEO We're CAC digital efforts, got initiatives with coupled overall marketing looking the BXB grassroots leveraging Yes, of are blended that of that coupled sure making at

So of starting is tick all to that really studios. and leads push now into the

of into again. so are bring they're them kind channels net those then and leads and into well as through come XPASS leads back our that life to to course, excited also those that our to XPLUS new studios Of bringing recycling back

Warren Cheng

Good luck. you. Thank

Operator

next Securities. from Thank of question The Riley go is Jeff B. Van Please ahead. you. Sinderen

Jeff Van Sinderen

Hi, everyone.

QX clarify company-owned from count regarding QX. to the studio to decline Just

studios those of were All sold, correct?

Anthony Geisler

QX studios and we earlier in was end release QX. roughly studios It the the to amount sold. same QX, the around that in The to ones had we XX was we've that QX of at earnings flat from talked in -- already the

-- we've been half already new those sold of about operator. a have already So off to

have. that kind on and unload strategy that of on the we're So refranchise of way we executing to already the studios

John Meloun

more existing no were But sold weren't detailed, to to be they they closed, franchisees.

Jeff Van Sinderen

Okay.

the but something to say the ask want just save anyway increasing brands are Day, know as I all favorably? AUV? that you And guess Okay. comping insight with I any we not share stand want positive of this clarify your then regarding just maybe And Analyst any add around of till brands retention, that metrics brands. up to want individual were your that. is to Can you I favorably or maybe around you. Thank could then individual member

John Meloun

Yes.

So when like a let bought a actually BFT $X original as And a negative handful one AUV. but is and plus there's me of we which million you at comp, because explain that's in it look of had really only in like does studios. Santa the Monica, something, brand when QX, the studios brand,

start -- just studios that comp in or and naturally of brands are that opening pulling out. will average more you in are So kind the more younger

me, had So nine when of of unscaled look that say, would has, you an the excuse negative, out nine X%. all of a And one you positive I minus of with mix, same-store take it the at and eight that it's in that quarter brands the the -- -- doesn't out remaining was sales a a like it studios was with open. brand brand lot if have

just really noise. it's So

Jeff Van Sinderen

Okay.

forth. So one it to so should start we would think that positive comp scales, and as that

John Meloun

Yes.

of kind are XX% just generated continued you at get concentration a more sales I data and system-wide of I nominal our of that that scaled they would say, the it you see the to of was, in studios As five of reinforcing guess, -- points, can it we've -- say are X% quarter that out more, number plus open but they're of brands. generate brands, XX% more and was and flat on a of that studios,

Jeff Van Sinderen

Okay. Well, that's helpful.

to healthy me. pretty for taking Sounds the Thanks questions.

John Meloun

much. you Thank very

Operator

next The ROTH ahead. Partners. is George go you. of Kelly from Thank Please question Capital

George Kelly

Thanks questions. my everyone. for taking Hello

studios talked first lot you prepared remarks, one you, for your about John, owner-operated. So of your a being in

So your concentrated which are what them or I much was just of tell, another curious there? ballpark base, too if if operated you estimate of that's brands way total most are -- asked a have that of studio sort way, percent to

Anthony Geisler

Pure Barre give you at comment, more To the brand pre-acquisition. directed that's a Yes. really

in of multiple not by studio. Barre, when most to we three, of get franchisee Pure more we for sales our franchisees mentioned, we the it's and economies acquired Xpo's, the -- one the to bought-one I of of originally -- studios, because scale the right, -- of as more like existed a franchisee As -- locations. benefit one recommend operating do three three most the franchisees brand, it's they that one

model. which model would that here back it The operator owner they of model kind but at appears is then, did -- I wasn't they be the they

that So say it's the largely Pure that. Barre you count, fits could

Barre franchisees you opened our that when Xpo post look for Now acquisition, average acquisition overall Pure is largely perspective. have post up from AUVs reflects much at that the higher. the It Xpo the

just something generate it is a more studio a personal I a than to running units try three whether franchisee not say, in they that generates profits. as to it would sales So their mini business a two enterprise of difference more a build, or versus kind more to of is run and lot

So model, strategy. different benefit different

and and a lower the ability we model studio. one just a in their is proved of But about thing the flexibility that and if does COVID during one promote perspective day-to-day does operations model to within more we the studio, do franchisees franchisee costs. largely, have really involved to out operations the more encourage be than an from this OpEx operate the model to our interesting where they that's work have Now and kind semi-absentee want

George Kelly

And XX,XXX I through is Excellent. you for there's second XPass. you Okay. then bookings think been cumulative on XPASS, that said question

had. like the I accelerate you. that where boosting at Thank beyond maybe And behind else enough that that's point are comfortable if getting what is business? where you're I or you've curious spending right. looking As your you something is part all we XXXX, seen plan the it? So two feel heard marketing to to And --

Sarah Luna

did You that correctly. hear

had and got the some coming dive to there So about actually Analyst Day and have talk XX,XXX into September. we've in up bookings We've new XPASS. initiatives date, at we'll to with more

George Kelly

Thanks. understood. Okay,

Operator

you. Thank

of Sandler. Our is ahead. next Korinne from Piper go question Wolfmeyer Please

Korinne Wolfmeyer

the taking team. quarter. question. Hey, Congrats for Thanks on good afternoon the

generating, negative of just But CAC one just little that talk as getting I quantify this of me. can question wanted and a CAC, is a well. the quickly, on So BXB kind about like just are there level maybe of you way your the see an from Investor bit and for like BXB to are to is as Day longer-term about partnerships more is and thinking you baked touch over has partnerships. into nicely, that. negative Obviously, that I of CAC you opportunity these other And get time? and some big that think been Thanks. growing that longer-term category how then you're the that of how really trajectory about you the can

Sarah Luna

Yes, partnerships to of which the in. bringing each of it's type brings really already into will ClassPass, was leads and system new coming other the that our that on off. did they depend flow like of see the flow are going are kicking and that perspective, and have lead We've in we got then year-over-year. BXBs it into a To lead in partnerships some put There CAC decline CPL.

BXB specifically launched business ago. about strategic and or seeing direction, moving our given in just things standpoint, partnership we're So year from so really right the our that an annual division a

So benefit of done, see launching, deals and the across are they're we're system. to now the that those starting

Korinne Wolfmeyer

Thank you.

Operator

you the Anthony of comments. I much. end and have over the to gentlemen, question-and-answer session. Thank we Ladies would back very And for the reached to closing like turn floor Geisler

Anthony Geisler

for earnings call your and support. joining today's again Thanks for

available growth webcast company's website. and for live in to As a drill opportunities. business attend those to down X our see Stock the strategic we at give York on event, At at to will many be look hosting Investor on We Wednesday, we further Analyst you New there of initiatives and an be on Day our investment alluded community long-term the the the unable to and September video and an earlier, we'll person, Investor Exchange. in-depth Relations plan hope

we the closing, Xponential bullish to remain partners to our customers and of the is and very on Fitness franchisees, support journey. In direction you. of step forward Thank look heading continuing every

Operator

your your have and may Ladies disconnect gentlemen, lines Thank of now for you time. participation. and we end you this at conference, reached this the

Xponential Fitness (XPOF) 3 Aug 232023 Q2 Earnings call transcript