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Xponential Fitness(XPOF) - 2024 Q3 - Earnings Call Transcript
XPOFXponential Fitness(XPOF)2024-11-10 03:33
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Financial Data and Key Metrics Changes - North America run rate average unit volumes (AUV) increased 8% to 631,000inQ32024from631,000 in Q3 2024 from 585,000 in the prior year period, driven by sales growth at scaled brands [26] - System-wide sales in North America reached 431.2million,up21431.2 million, up 21% year-over-year, with a 5% same-store sales increase [29] - Consolidated revenue for the quarter was 80.5 million, slightly up from 80.4millionintheprioryear[29]−AdjustedEBITDAwas80.4 million in the prior year [29] - Adjusted EBITDA was 31 million, up 17% compared to 26.5millionintheprioryear,withanadjustedEBITDAmarginexpandingto3826.5 million in the prior year, with an adjusted EBITDA margin expanding to 38% [46] Business Line Data and Key Metrics Changes - Franchise revenue increased 22% year-over-year to 44.5 million, driven by a larger base of operating studios and higher royalties [31] - Equipment revenue rose 17% year-over-year to 14.7millionduetoahighervolumeofequipmentinstallations[32]−Merchandiserevenuedecreased2314.7 million due to a higher volume of equipment installations [32] - Merchandise revenue decreased 23% year-over-year to 6.5 million as the company focused on reducing inventory levels [33] - Franchise marketing fund revenue increased 23% year-over-year to 8.6million,reflectinggrowthinsystem−widesales[34]MarketDataandKeyMetricsChanges−ThecompanyendedQ3with3,178globalopenstudios,havingopened125newstudiosduringthequarter[27]−84licensesweresoldgloballyinQ3,withover1,700licensessoldandcontractuallyobligatedtoopeninNorthAmerica[28]CompanyStrategyandDevelopmentDirection−Thecompanyaimstobecomethefranchiseurofchoiceinhealthandwellness,focusingonimprovingthefranchiseeexperienceandoperationalefficiency[13][14]−Plansincludeenhancingmemberexperiencethroughtechnologyimprovementsanddata−drivendecision−making[15][16]−Thecompanyisprioritizinginternationalexpansion,particularlyinmarketslikeJapanandMexico,wherethereissignificantgrowthpotential[18][19]Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementacknowledgedchallengesrelatedtoinfrastructureandprocessesduetorapidgrowth,emphasizingtheneedforsustainable,profitablegrowth[10]−Thecompanyexpectstoseeadecreaseinstudioclosuresasmanagementeffectivenessimprovesandthestrategyshiftfrom2023takeseffect[79]−Guidancefor2024includesaprojected228.6 million, reflecting growth in system-wide sales [34] Market Data and Key Metrics Changes - The company ended Q3 with 3,178 global open studios, having opened 125 new studios during the quarter [27] - 84 licenses were sold globally in Q3, with over 1,700 licenses sold and contractually obligated to open in North America [28] Company Strategy and Development Direction - The company aims to become the franchiseur of choice in health and wellness, focusing on improving the franchisee experience and operational efficiency [13][14] - Plans include enhancing member experience through technology improvements and data-driven decision-making [15][16] - The company is prioritizing international expansion, particularly in markets like Japan and Mexico, where there is significant growth potential [18][19] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges related to infrastructure and processes due to rapid growth, emphasizing the need for sustainable, profitable growth [10] - The company expects to see a decrease in studio closures as management effectiveness improves and the strategy shift from 2023 takes effect [79] - Guidance for 2024 includes a projected 22% increase in North America system-wide sales, with total revenue expected to be between 310 million to 320million[50]OtherImportantInformation−Thecompanyrecordedanetlossof320 million [50] Other Important Information - The company recorded a net loss of 18 million in Q3, compared to a net loss of 5.2millionintheprioryear[43]−Totallong−termdebtincreasedto5.2 million in the prior year [43] - Total long-term debt increased to 353.8 million as of September 30, 2024, primarily due to additional debt drawn for lease termination payments [48] Q&A Session Summary Question: Factors for potential divestitures of certain concepts - Management indicated that all brands are strategically liked, and evaluations will focus on franchisee profitability and momentum before considering divestitures [56] Question: Focus on Japan for international expansion - Japan was highlighted due to positive momentum and strong franchise partnerships, with other markets like Singapore and New Zealand also performing well [58][60] Question: Consistency of execution across brands - Management is working on standardizing execution across brands and creating operational playbooks to improve consistency [62][64] Question: Infrastructure and processes for growth - Management believes that improving infrastructure does not require significant spending but rather a focus on discipline and efficiency [69] Question: Expectations for studio closures - Management expects Q4 closures to be in line or lower than Q3, with a goal of reducing closure rates to 1% to 2% in 2025 [79][80] Question: Revenue guidance for Q4 - Management reiterated that Q4 is expected to show sequential revenue growth, supported by new studio openings and franchisee conference revenues [83]