Xponential Fitness(US:XPOF)2024-08-03 11:14Financial Data and Key Metrics Changes - North America run rate average unit volumes (AUVs) increased to $638,000 in Q2 2024, up 10% from $581,000 in the prior-year period [13] - Consolidated revenue for Q2 was $76.5 million, down 1% year-over-year, primarily due to declines in equipment and merchandise revenues [17] - The company recorded a net loss of $13.7 million in Q2 2024, compared to a net income of $27.5 million in the prior-year period [25] Business Line Data and Key Metrics Changes - Franchise revenue increased to $43 million, up 22% year-over-year, driven by higher royalties from increased system-wide sales [18] - Equipment revenue decreased to $12.9 million, down 10% year-over-year, attributed to a higher proportion of installations in less equipment-intensive brands [19] - Merchandise revenue fell to $5.9 million, down 30% year-over-year, due to a slowdown in retail purchases by members [19] Market Data and Key Metrics Changes - North America system-wide sales reached $421.5 million, up 24% year-over-year, with a 7% same-store sales increase [16] - The company ended Q2 with 3,102 global open studios, having opened 108 new studios during the quarter [15] - The company sold 87 licenses globally in Q2, trending lower due to approval delays and regulatory scrutiny [16] Company Strategy and Development Direction - The company will focus on growing its existing portfolio of brands rather than pursuing additional acquisitions [9] - The core focus will be on ensuring the health and profitability of franchisees, which is seen as the greatest determinant of future success [10] - The company plans to refine its operational processes to better support franchisees and improve overall efficiency [34] Management's Comments on Operating Environment and Future Outlook - Management acknowledged short-term disruptions due to leadership changes and regulatory issues, impacting Q2 results and guidance [12] - Despite these challenges, management expressed confidence that these issues would not significantly affect long-term goals [11] - The company expects to see a normalization of same-store sales in the mid to high-single digits for the remainder of the year [49] Other Important Information - The company is winding down the AKT brand, which had eight open studios and was not a significant contributor to revenue [14] - Adjusted EBITDA for Q2 was $25.4 million, slightly up from $25.3 million in the prior-year period, with a margin of approximately 33% [27] - The company anticipates total revenue for 2024 to be between $310 million to $320 million, down from previous guidance [30] Q&A Session Summary Question: What fine-tuning opportunities do you see at Xponential? - Management noted the need for improved internal processes and better communication with franchisees to enhance operational efficiency [34] Question: What are the short-term disruptions affecting the business? - Management indicated a 90-day delay in expected performance due to leadership changes and consumer impacts [40] Question: How do you view international growth opportunities? - Management sees significant potential for brands like Club Pilates to expand internationally, emphasizing the importance of finding strong master franchise partners [37] Question: What is driving the recent decline in merchandise revenue? - Management attributed the decline to a general softness in consumer spending, which has not yet affected membership growth [19][53] Question: What is the outlook for studio openings? - Management expects a total of approximately 300 new studio openings in the second half of the year, with delays primarily due to distractions in Q2 [48] Question: How will pricing strategies affect future revenue? - Management plans to maintain current pricing strategies, with most price increases coming from new members rather than existing ones [68]