Xponential Fitness(US:XPOF)2024-05-05 02:39Financial Data and Key Metrics Changes - Adjusted EBITDA margins expanded to 38% of revenue, up from 32% in Q1 2023, driven by growth in studio footprint and leaner operating expenses [7][28] - Net revenues totaled $79.5 million, a 12% increase year-over-year [9] - Adjusted EBITDA was $29.8 million, up 30% from $22.9 million in the prior-year period [28] - The company recorded a net loss of $4.4 million, significantly improved from a net loss of $15 million in Q1 2023 [25] Business Line Data and Key Metrics Changes - North American system-wide sales increased by 25% to over $400 million, with same-store sales up 9% [8][20] - The company ended the quarter with 3,156 global open studios, having opened 111 new studios during Q1 [10] - Franchise revenue grew by 27% year-over-year to $41.8 million, driven by increased royalty revenue [20] Market Data and Key Metrics Changes - Total members in North America grew 17% year-over-year to 783,000, with total studio visits increasing by 18% to 14.9 million [8] - International business accounted for 31% of license sales and 23% of new openings in Q1 [12] Company Strategy and Development Direction - The acquisition of Lindora is expected to enhance access to the broader health and wellness market, with a total addressable market (TAM) in the U.S. estimated at approximately 8,400 studios [11] - The company is focused on optimizing its portfolio of brands and remains open to acquisition and divestiture opportunities [11] - The company aims to reach 40% adjusted EBITDA margins this year and grow to 45% by 2026 [9][28] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the initial demand for Lindora franchises, with nearly 40 licenses sold since March [7] - The company anticipates same-store sales will normalize to mid-to-high single-digit percentages in 2024 [20] - Management expects gradual increases in revenue and adjusted EBITDA throughout the year, similar to 2023 [32] Other Important Information - The company has approximately $160 million in federal and state net tax loss carry-forwards, resulting in a minimal cash tax burden for the coming years [29] - Total long-term debt increased to $331.4 million as of March 31, 2024, primarily due to share repurchases [31] Q&A Session Summary Question: Free cash flow conversion and debt reduction focus - The company expects around $65 million in free cash flow for 2024, prioritizing debt reduction over stock buybacks [37][38] Question: Lindora's market potential and franchisee interest - Management indicated no cannibalization of franchisee interest from Lindora, expecting the TAM to grow significantly over the next few years [39][40] Question: Same-store sales expectations and quarterly cadence - Same-store sales for Q1 were slightly lower than expected, with management anticipating normalization to high single digits by Q4 [44][45] Question: Changes in opening mix by brand - Club Pilates had the highest number of openings in Q1, with expectations for a similar mix throughout 2024 [50][66] Question: Full-year profit outlook and adjusted EBITDA margin progression - Management expects adjusted EBITDA margins to reach around 40% for the year, with a gradual increase in subsequent quarters [53][54]