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XF

Xponential Fitness, Inc. (XPOF)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 revenue was $83.2M (-7% YoY), with Adjusted EBITDA $30.8M (+13% YoY) but GAAP net loss widened to $62.5M due to $46.0M impairments and elevated legal costs; Adjusted EPS was $(0.19), GAAP EPS $(1.36) .
  • Management announced a “Big R” restatement of FY2023 financials, increasing net loss to $6.4M and reducing Adjusted EBITDA to $100.3M; corrections also made to 2022 and 2024 immaterial errors .
  • 2025 outlook guides revenue flat at $315–$325M, Adjusted EBITDA up ~5% to $120–$125M, North America system-wide sales up ~13% and net new studio openings down ~12% (200–220); tax rate mid-to-high single digits, share count ~34M, quarterly preferred dividends ~$1.9M .
  • Operational cadence: closures rose to ~7% of global studios in 2024; Q4 KPIs remained healthy (North America system-wide sales +21%, run-rate AUV $668k, members 813k), but same-store sales moderated to +5% and several brands showed negative comps; catalyst set by restatement, impairments, and focus on portfolio rationalization and “less is more” strategy .

What Went Well and What Went Wrong

What Went Well

  • Strong KPIs: North America system-wide sales reached $464.7M (+21% YoY), run-rate AUV $668k (+9%), members 813k (+15%) .
  • Adjusted EBITDA improved to $30.8M in Q4 (+13% YoY); FY24 Adjusted EBITDA up 16% to $116.2M; CEO highlighted building a “best-in-class” senior team and a shift to a data-centric, operations-driven organization .
  • Franchise momentum: 400 licenses sold, 464 gross new studios opened in 2024; Club Pilates, StretchLab, and BFT accounted for 82% of openings; international expansion strategy with boots-on-the-ground leadership in Europe/Asia planned .

Quote: “I have full confidence in the team we’ve assembled… to sustainably grow” — Mark King, CEO .

What Went Wrong

  • GAAP profitability deteriorated: Q4 net loss widened to $62.5M on $46.0M goodwill/intangible impairments (BFT, CycleBar, Rumble) and $18.1M legal fees; Q4 Adjusted net loss of $7.1M .
  • Revenue mix pressure: merchandise revenue down 34% YoY, equipment revenue down 22%, other service revenue down 43% due to strategic move away from company-owned transition studios .
  • Network health: closures rose to ~7% of global studios in 2024 (vs. prior 3–5%), with StretchLab, CycleBar, YogaSix cited; ~30% of licenses contractually obligated to open are >12 months behind schedule and currently inactive .

Financial Results

Core P&L comparison (YoY and QoQ)

MetricQ4 2023Q3 2024Q4 2024
Revenue ($USD Millions)$89.338 $80.491 $83.220
Net Income (Loss) ($USD Millions)$(12.290) $(17.970) $(62.454)
Basic EPS ($USD)$0.03 $(0.29) $(1.36)
Adjusted EPS ($USD)$(0.02) $(0.04) $(0.19)
Adjusted EBITDA ($USD Millions)$27.192 $30.979 $30.809
Adjusted EBITDA Margin (%)~30% ~38% ~37%

Trend (last two quarters + current)

MetricQ2 2024Q3 2024Q4 2024
Revenue ($USD Millions)$76.517 $80.491 $83.220
Adjusted EBITDA ($USD Millions)$25.367 $30.979 $30.809

Revenue breakdown

Revenue Component ($USD Millions)Q4 2023Q3 2024Q4 2024
Franchise revenue$38.723 $44.458 $45.292
Equipment revenue$16.368 $14.681 $12.693
Merchandise revenue$9.254 $6.538 $6.118
Franchise marketing fund revenue$7.516 $8.565 $9.209
Other service revenue$17.477 $6.249 $9.908
Total revenue$89.338 $80.491 $83.220

KPIs

KPIQ3 2024Q4 2024
North America system-wide sales ($USD Millions)$431.2 $464.7
Quarterly run-rate AUV ($USD)$631,000 $668,000
Total members (000s)827 813
Same-store sales YoY (%)+5% +5% (vs. +14% prior-year)

Notes on drivers:

  • Equipment revenue decline driven by lower installation volume; merchandise decline due to inventory discounting; other service decline reflects strategic exit from company-owned transition studios .
  • SG&A increase (+8% YoY) largely from $18.1M legal fees and accruals for potential franchise legal settlements .

Guidance Changes

2024 guidance progression (as communicated)

MetricPeriodPrevious Guidance (Q2 2024 PR)Current Guidance (Q3 2024 PR)Change
Gross new studio openingsFY 2024500–520 490–510 Lowered
RevenueFY 2024$310–$320M $310–$320M Maintained
Adjusted EBITDAFY 2024$120–$124M $120–$124M Maintained
North America system-wide salesFY 2024$1.705–$1.715B $1.705–$1.715B Maintained

Outcome vs guidance:

  • FY24 Adjusted EBITDA came in at $116.2M (vs. $120–$124M guided); gross openings 464 (vs. ~500 midpoint guided); misses attributed to equipment/merchandise margins, inventory write-offs, bad debt/loan liabilities, severance .

2025 outlook (introduced in Q4)

MetricPeriodCurrent GuidanceReference/Context
Net new studio openingsFY 2025200–220 (~12% decrease YoY midpoint) Closures expected at 5–7% of global system
North America system-wide salesFY 2025$1.935–$1.955B (~13% increase midpoint) Mid-single-digit comps assumed
RevenueFY 2025$315–$325M (flat YoY midpoint) Mix shifts (recurring ~78% in Q4)
Adjusted EBITDAFY 2025$120–$125M (~5% increase midpoint) ~38% margin implied
Tax rateFY 2025Mid-to-high single digits
Share count (EPS calc)FY 2025~34.0M Class A
Preferred dividendsFY 2025~$1.9M per quarter ($2.2M PIK)

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3 2024)Current Period (Q4 2024)Trend
Data/technologyInitiation of data warehouse; spreadsheet-driven processes acknowledged “Data lakehouse” nearing live dashboards; field ops to access near real-time KPIs; CTO leading ERP/POS/platform enhancements Execution momentum improving
Franchise development/processQ2: lowered studio opening guidance amid leadership transition/regulatory investigations FDD pause impacted license sales; unified franchise sales + real estate + construction under CDO; higher standards for franchisee selection Stricter gating; rebuilding pipeline
Merchandise/equipment economicsQ2/Q3: retail softness; equipment revenue variability Equipment margins pressured by higher freight; aggressive inventory reduction (Merch inv. ~50% lower YoY) Margin headwinds easing via inventory actions
Legal/regulatoryQ2: investigations noted; tempered outlook $18.1M Q4 legal fees; expect partial insurance offsets in 2025 Elevated near term; potential partial relief
Portfolio health/closuresPrior cadence 3–5% closure rate communicated 2024 closures ~7% of global studios; focus on underperformers (“less is more”) Cleansing phase intensifying
Brand performanceQ2: KPIs growing; Club Pilates strong Scaled brands = 95% system-wide sales; StretchLab comps -5%; CycleBar comps -3% Mix concentrated; selective remediation

Management Commentary

  • Strategic foundation-building year: “2025 largely is going to be a year of foundation building, allowing for growth to reaccelerate in the out years” — Mark King .
  • Portfolio rationalization: “Less is more… capital allocation to fewer brands… starts with franchisee profitability (20–25% studio-level EBITDA margin)” — Mark King .
  • International focus: boots on ground in London, later Asia; build around strong brands (Club Pilates, BFT) .
  • Network discipline: assessing bottom ~10% of portfolio; AUV breakeven ~$360k annual run-rate; closures expected 5–7% in 2025 .
  • Restatement transparency: material FY2023 restatement and immaterial corrections to 2022/2024; management emphasizes transparency and process maturity .

Q&A Highlights

  • Franchise recruiting and pipeline: Higher franchisee standards (capitalization, operator capability); unified development org; plan to resume license sales post-FDD filings .
  • StretchLab remediation: labor qualification costs, local marketing shift, corporate programs, potential group stretch, enhanced franchisee communication .
  • Closures/lease settlements: ~$30.3M in lease settlements, ~$28.1M paid, ~$15M remaining targeted for 1H25 resolution .
  • International expansion: gradual build; initial leadership in UK to support Europe; later Asia .
  • Data initiative: near real-time dashboards for field ops; broader BI for financial/operational tracking .

Estimates Context

  • Wall Street consensus (S&P Global Capital IQ) for Q4 2024 and FY 2024 EPS and revenue was unavailable due to access limits during retrieval; therefore, explicit comparison to consensus cannot be provided at this time. Values would normally be retrieved from S&P Global; unavailable in this instance.

Key Takeaways for Investors

  • Near-term stock narrative centers on a material FY2023 restatement, elevated impairments and legal expenses, and a deliberate reset year in 2025; expect cleansing of underperforming studios and stricter franchisee gating to support healthier unit economics .
  • KPIs remain resilient (system-wide sales, AUV), anchored by scaled brands (Club Pilates, Pure Barre, StretchLab, YogaSix); portfolio concentration suggests focusing diligence on brand-level comps/closure rates, especially StretchLab/CycleBar/YogaSix .
  • Mix and margin dynamics: recurring revenue ~78% in Q4; equipment/merchandise margin actions (inventory reduction, freight normalization) should support Adjusted EBITDA trajectory toward 38% margin in 2025 midpoint .
  • Balance sheet watch items: total long-term debt ~$352.4M; ongoing credit amendment and pursuit of whole business securitization; preferred dividends ~$1.9M/quarter .
  • 2025 guide implies modest EBITDA growth on flat revenue and fewer net openings; stock will likely trade on evidence of execution (license sales resumption, closure normalization, legal cost stabilization, data/ops initiatives hitting milestones) .
  • International expansion is a medium-term growth lever; near-term investments are cost-neutral via role reallocations, reducing risk to SG&A in 2025 .
  • Portfolio actions (“less is more”) could be a re-rating catalyst if capital is redeployed to highest-return brands and 4-wall economics consistently reach 20–25% studio-level EBITDA margins .