Xponential Fitness, Inc. Class A ((XPOF)) has held its Q1 earnings call. Read on for the main highlights of the call.
During the latest earnings call, Xponential Fitness, Inc. Class A presented a mixed sentiment, highlighting both achievements and challenges. The company reported strong sales growth in North America and successful international expansion. However, these positive developments were tempered by a decline in revenue, increased studio closures, and significant legal costs, resulting in a neutral overall sentiment.
Strong North American Sales Growth
Xponential Fitness reported an 18% increase in North American system-wide sales, reaching $467 million. This growth was driven by a 4% increase in same-store sales and the opening of new studios. The robust sales performance in North America underscores the company’s ability to expand its footprint and attract more customers.
Expansion and New Appointments
The company announced the appointment of a new Chief Marketing Officer and Chief Human Resource Officer, signaling a strategic focus on strengthening its leadership team. Additionally, a new field operations function with 12 field managers across North America was launched to enhance operational efficiency and support franchisees.
International Expansion Success
Xponential Fitness achieved notable success in international markets, including Spain, Portugal, France, Japan, and Australia. The company plans to establish a physical presence in Asia later this year, indicating a strong commitment to global growth.
Cash Position Improvement
The company’s cash position improved significantly, with cash, cash equivalents, and restricted cash totaling $42.6 million as of March 31, 2025, up from $27.2 million the previous year. This increase reflects the company’s efforts to strengthen its financial stability.
Revenue Decline
Despite positive sales growth, Xponential Fitness experienced a 4% decline in consolidated revenue, totaling $76.9 million for the quarter. This decrease was primarily attributed to lower equipment and merchandise sales.
Increased Studio Closures
The company faced a challenging quarter with 51 global studio closures, representing an annualized closure rate of 6%. The closures were particularly elevated in the CycleBar and StretchLab brands.
License Sales Lagging
Xponential Fitness reported that one-third of global licenses were lagging over twelve months behind schedule. The company is actively addressing this issue through a targeted campaign to expedite openings.
Legal and Settlement Costs
Selling, general, and administrative expenses rose by 24% year over year, driven by a $15 million accrual for a potential settlement of a threatened franchise class action. This increase in legal costs presents a significant financial challenge for the company.
Lower Equipment and Merchandise Revenue
The company saw a decline in equipment revenue by 20% and merchandise revenue by 25% year over year. These decreases contributed to the overall revenue decline and highlight areas needing strategic improvement.
Forward-Looking Guidance
Looking ahead, Xponential Fitness projects North American system-wide sales to reach between $1.935 billion and $1.955 billion. Adjusted EBITDA is expected to grow by 5% to between $120 million and $125 million. The company anticipates opening 60 to 80 net new studios, a reduction from previous forecasts, with closures expected to be 6% to 8% of the global system. Strategic focuses include enhancing operational efficiency, strengthening franchisee support, and driving international growth in key markets such as Mexico, Portugal, Spain, and Japan.
In summary, Xponential Fitness, Inc. Class A’s earnings call presented a balanced view of its current performance and future outlook. While strong sales growth and international expansion are promising, challenges such as revenue decline, increased closures, and legal costs need to be addressed. The company’s forward-looking guidance suggests a strategic focus on operational efficiency and international growth, aiming to overcome these hurdles and achieve long-term success.
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