Xponential Fitness(US:XPOF)2025-03-14 20:56Franchise Growth and Development - As of December 31, 2024, franchisees are contractually committed to open an additional 1,607 studios in North America, with approximately 30% of licenses over 12 months behind schedule[21] - The company has sold a cumulative total of 6,265 franchise licenses globally as of December 31, 2024, up from 5,865 licenses sold as of December 31, 2023[36] - The company expanded its franchised studio footprint in North America from 1,071 studios in December 2018 to 2,758 studios by December 2024, representing a CAGR of 17%[41] - As of December 31, 2024, the company had 1,648 franchisees and licenses for 1,607 studios contractually obligated to be opened under existing franchise agreements in North America[41] - The company sold 253 licenses in 2024, a decrease from 632 licenses in 2023 and 790 licenses in 2022[41] - The franchisee network grew from 985 to 1,648 franchisees from December 31, 2018, to December 31, 2024, representing a CAGR of 9%[73] - In 2024, franchisees opened 353 studios in North America and 111 studios internationally[86] Financial Performance and Revenue - The company achieved gross studio openings globally of 464 and 553 during the years ended December 31, 2024 and 2023, respectively, with a member base approximately 15% larger as of December 31, 2024 compared to the previous year[26] - In 2024, the company recorded a total of 60.0 million in-studio and live stream visits, representing a 19% increase over the prior year[31] - Active paying members increased by 15% from December 31, 2023 to December 31, 2024, with approximately 742,000 members on recurring membership packages[31] - Approximately 74% of the company's revenue in 2024 was considered recurring, with expectations for this percentage to increase over time[34] - The average unit volumes (AUVs) increased by 9% for the quarter ended December 31, 2024 compared to the same quarter in 2023[31] - As of December 31, 2024, the outstanding principal balance on the Credit Agreement was $352.4 million, subject to variable interest rates[452] - A hypothetical 1% change in interest rates on the outstanding debt would change the annual interest expense by approximately $3.5 million[452] - The company is exposed to potential interest rate risk and inflation risk, which may adversely impact financial condition and results of operations[451][453] Operational Strategy and Management - The management team, led by CEO Mark King, has a proven track record of scaling franchised brands, contributing to the company's growth and recognition in the industry[37] - The company aims to enhance operating margins by expanding its franchised studio base and leveraging shared services and platform[44] - The company is focusing on leveraging artificial intelligence and data analytics to enhance customer engagement and optimize franchisee operations[119] - The company has a strategic IT initiative aimed at enhancing cybersecurity, applications, and data analytics capabilities[118] - The company is actively monitoring supplier relationships to ensure competitive pricing and high-quality equipment for franchisees[107] Marketing and Brand Awareness - Marketing funds spent approximately $26.7 million, $22.7 million, and $17.3 million in 2024, 2023, and 2022, respectively, to increase brand awareness[98] - Franchise agreements require franchisees to contribute 2% of monthly gross sales to the marketing fund, supporting national advertising efforts[98] Regulatory and Compliance Issues - The company is subject to various federal and state regulations, including the FTC Franchise Rule, which governs the sale of franchises in the U.S.[126] - Compliance with future laws and regulations may require significant monetary expenditures, potentially increasing overhead costs[136] - The prescribing of compounded semaglutides is subject to changing FDA guidance, which may impact healthcare providers' ability to prescribe these medications[137] - The company faces aggressive price competition in the compounded GLP-1 market, which may affect franchisees' operations[137] - Future introduction of new services may necessitate compliance with additional, yet undetermined, laws and regulations[136] Studio Operations and Franchisee Support - The company operates 2,693 studios across eight brands in the United States, holding leading market share positions in several fitness verticals[29] - The initial franchisee investment averaged approximately $560,000 in 2024, with studios designed to be between 1,500 and 2,500 square feet[19] - The company has paused selling franchises in all states due to the ongoing update and renewal of Franchise Disclosure Documents (FDDs), which has slowed growth and may reduce anticipated royalty or franchise revenue[129] - The company requires franchisees to purchase most studio-related equipment from approved vendors to maintain quality and consistency[106] International Expansion - The company had 475 studios open internationally across 14 countries as of December 31, 2024, with master franchisees contractually obligated to sell licenses for an additional 1,043 studios[46] - Club Pilates, the largest Pilates brand, had 1,200 operational studios and 1,856 licenses sold globally as of December 31, 2024[50] - Pure Barre, the largest barre brand, had 626 operational studios and 800 licenses sold globally as of December 31, 2024[54] - StretchLab had 529 operational studios and 1,005 licenses sold globally as of December 31, 2024[56] - YogaSix, the largest franchised yoga brand, had 194 operational studios and 635 licenses sold globally as of December 31, 2024[58] - CycleBar, the largest indoor cycling brand, had 204 operational studios and 565 licenses sold globally as of December 31, 2024[64] - Lindora acquisition completed on January 2, 2024, with 30 operational clinics and 114 licenses sold globally as of December 31, 2024[66] Employee and Corporate Structure - As of December 31, 2024, the company had approximately 432 employees at its corporate headquarters, with about 145 being part-time employees[109] - The company has approximately 13 employees at its one company-owned transition studio, with about 12 being part-time employees[109] - The company owned approximately 91 registered trademarks and service marks in the United States and approximately 377 in other countries as of December 31, 2024[121] - The company has a 69.5% ownership interest in XPO LLC through Xponential Intermediate Holdings, LLC[139]