Xponential Fitness Issues Statement Confirming System Health and Strength of Business Operations
28 Junho 2023 - 10:00AM
Business Wire
Xponential Fitness, Inc. (NYSE: XPOF) (the “Company” or
“Xponential”), the largest global franchisor of boutique fitness
brands, today issued the following statement in response to
misleading information in a short-seller report published on June
26, 2023 (the “Report”):
“Together, the Board of Directors and Management of Xponential
denounce the misleading Report, which contains inaccurate
information, and caution investors not to rely on it. The Board and
Management stand firmly behind the strength of the business and
health of its franchisees. As the largest global franchisor of
boutique fitness brands, we take great pride in our talented team
and strong financial results, illustrated by solid and growing
average unit volumes and same store sales. Xponential’s scalable
business model, strong free cash flow generation and history of
margin expansion position the Company for continued success.”
Mark Grabowski, Chairman of the Board of Xponential and founder
of Snapdragon Capital Partners, the Company’s largest investor,
stated: “As an investor in high-performing businesses and
high-integrity management teams, I’ve known and worked closely with
Anthony Geisler, CEO of Xponential, since investing in Club Pilates
at my prior firm. I couldn’t speak more highly of his passion,
commitment to excellence and professionalism. I am confident in the
strength of Xponential’s business and the Company’s continued
execution and creation of long-term shareholder value.”
The Company is providing the following information underscoring
the fundamental strengths of Xponential’s business and operations,
which refute the related allegations in the Report.
Strength of the Xponential Franchise
System
- Studio Locations. Studios remain open, thriving and
tremendously popular. In certain circumstances, Xponential
relocates and/or transitions underperforming studios to other
franchisees in the Xponential franchise network, during which
period the stores may be temporarily closed, but those stores
represent an immaterial number of stores amongst the larger
Xponential system.
- Franchisee Resales. The franchise model has been
successful. While Xponential has in limited cases repurchased or
assumed underperforming studios, this represents a very small
number of Xponential’s overall studio system.
- Studios’ Financial Returns. Xponential’s Q1 2023 average
unit volume (“AUV") of $542,000 provides for healthy unit
economics. Franchisee unit economics are strong, with an expected
25-30% operating margin and 40% cash on cash return.
- Studios Reported in AUV and Same Store Sale (“SSS”)
Calculations. AUV and SSS have been consistently defined and
calculated since the Company’s IPO.
- AUV Calculation: Quarterly Run-rate AUV consists of average
quarterly sales for all studios that are at least six months old at
the beginning of the respective quarter, multiplied by four.
Studios with zero sales in the period have always been excluded
from the calculation. Inclusion of these studios would not result
in a material difference. For Q1 2023, recalculating Xponential’s
systemwide AUV to include these studios would result in a 0.9%
change to the AUV figure ($542,000 vs. $538,000).
- SSS Calculation: Studios are not included in SSS calculations
unless they have 13 months of continuous sales. This is a common
method for calculating same store sales and is disclosed in
Xponential’s audited SEC filings. The Q1 2023 data set of almost
2,000 studios open continuously for 13 months or longer as of March
31, 2023 yielded robust Q1 2023 same store sales of 20%.
Franchisor Strength and Recurring
Revenue
- Debt Covenants. The balance sheet remains strong. The
Company is in compliance with all of its debt covenants, and is
levered at a conservative 2.9x Net Debt / Q1 2023 LTM EBITDA.
- Vendor Relationships. Xponential partners with vendors
who provide the Company with preferred volume pricing because
Xponential provides the vendors with larger order sizes and access
to its network of franchisees. Xponential receives rebates from
vendors for these benefits, which is a standard way of covering
operating costs and generating margin in franchised
businesses.
- Recurring Revenue. Revenue is solid. As disclosed in
Xponential’s latest Q1 2023 Investor Presentation, 74% of the
Company’s revenues are recurring. Recurring revenue includes all
revenue streams other than franchise territory fees and equipment
revenue.
Strong Governance and a Commitment to
Ethics, Diversity and Inclusion
- Company Culture. Xponential maintains a culture
committed to diversity and inclusion and the highest ethical
standards. 80% of the members of the Company’s Board of Directors
are women, people of color or individuals identifying as LGBTQ+.
The Company strongly condemns all forms of hate, prejudice,
mistreatment, misconduct and harassment of any kind. The Company
has strong policies and procedures in place to address any
allegations that are raised, and reviews complaints in line with
best practices and in consultation with legal counsel.
- Insider Ownership. Management believes in the business
and is aligned with shareholders. For example, Xponential’s CEO,
Anthony Geisler, currently owns 8.2 million Xponential shares,
which represents a larger shareholding than the Company’s top five
outside institutional investors combined.
About Xponential Fitness, Inc.
Xponential Fitness, Inc. (NYSE: XPOF) is the largest global
franchisor of boutique fitness brands. Through its mission to make
boutique fitness accessible to everyone, the Company operates a
diversified platform of ten brands spanning across verticals
including Pilates, indoor cycling, barre, stretching, rowing,
dancing, boxing, running, functional training and yoga. In
partnership with its franchisees, Xponential Fitness offers
energetic, accessible, and personalized workout experiences led by
highly qualified instructors in studio locations across 49 U.S.
states and Canada, and through master franchise or international
expansion agreements in 16 additional countries. Xponential
Fitness' portfolio of brands includes Club Pilates, the largest
Pilates brand in the United States; CycleBar, the largest indoor
cycling brand in the United States; StretchLab, a concept offering
one-on-one and group stretching services; Row House, the largest
franchised indoor rowing brand in the United States; AKT, a
dance-based cardio workout combining toning, interval and circuit
training; YogaSix, the largest franchised yoga brand in the United
States; Pure Barre, a total body workout that uses the ballet barre
to perform small isometric movements, and the largest Barre brand
in the United States; STRIDE, a treadmill-based cardio and strength
training concept; Rumble, a boxing-inspired full-body workout; and
BFT, a functional training and strength-based program. For more
information, please visit the Company’s website at
https://xponential.com.
Forward-Looking Statements
This press release contains forward-looking statements that are
based on current expectations, estimates, forecasts and projections
of future performance based on management’s judgment, beliefs,
current trends, and anticipated financial performance. These
forward-looking statements include, without limitation, statements
relating to expected growth of our business; continuation of
revenue; expected continued relationships with franchisees and
vendors; projected franchise resales; projected studio financial
returns; projected number of net new studio openings; anticipated
industry trends; projected financial and performance information
such as system-wide sales; projected annual revenue; our
competitive position in the boutique fitness industry; and ability
to execute our business strategies. Forward-looking statements
involve risks and uncertainties that may cause actual results to
differ materially from those contained in the forward-looking
statements. These factors include, but are not limited to, our
relationships with master franchisees, franchisees and
international partners; difficulties and challenges in opening
studios by franchisees; the ability of franchisees to generate
sufficient revenues; risks relating to expansion into international
markets; loss of reputation and brand awareness; general economic
conditions and industry trends; and other risks as described in our
SEC filings, including our Annual Report on Form 10-K for the full
year ended December 31, 2022 filed by Xponential with the SEC and
other periodic reports filed with the SEC. Other unknown or
unpredictable factors or underlying assumptions subsequently
proving to be incorrect could cause actual results to differ
materially from those in the forward-looking statements. Although
we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results,
level of activity, performance, or achievements. You should not
place undue reliance on these forward-looking statements. All
information provided in this press release is as of today’s date,
unless otherwise stated, and Xponential undertakes no duty to
update such information, except as required under applicable
law.
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Investor Relations ADDO investor@xponential.com (310)
829-5400
Media FGS Global Xponential@FGSGlobal.com (212) 687-8080
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