Xponential Fitness(US:XPOF)2023-11-12 06:40Financial Data and Key Metrics Changes - For Q3 2023, net revenue totaled $80.4 million, an increase of 26% year-over-year [16] - Adjusted EBITDA was $26.5 million, representing a 33% increase from $20 million in the prior year, with an adjusted EBITDA margin of 33% compared to 31% in the previous year [58] - The company recorded a net loss of $5.2 million, improved from a net loss of $13.1 million in the prior year [56] Business Line Data and Key Metrics Changes - North American system-wide sales reached $357 million, up 35% year-over-year, driven by a 15% same-store sales growth [12][44] - Franchise revenue was $36.4 million, up 21% year-over-year, primarily due to increased royalty revenue [46] - Equipment revenue increased by 7% to $12.6 million, while merchandise revenue rose by 35% to $8.5 million [47][48] Market Data and Key Metrics Changes - Total members in North America grew 26% year-over-year to 726,000, with 92% being actively paying members [10] - North American studio visits increased by 30% year-over-year, totaling 13.1 million visits [12] - The boutique fitness industry is projected to grow by 17% by 2025, with Xponential positioned to capture a significant share of this growth [10] Company Strategy and Development Direction - The company is prioritizing international growth, with franchise agreements in 23 countries and new master franchise agreements in Qatar [9][23] - A new position of President of International has been created to enhance international expansion efforts [21] - The company aims to refranchise its portfolio of company-owned transition studios to improve operating leverage and EBITDA margins [26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strength of consumer demand and the resilience of the membership base despite economic challenges [7][30] - The company raised its full-year 2023 guidance for revenue and adjusted EBITDA, anticipating continued strong performance in Q4 [62] - Management noted that the adoption of weight loss drugs like Ozempic has positively influenced consumer activity levels [11] Other Important Information - The company has a stock repurchase program approved for $50 million, with shares repurchased at an average price of $19.24 [60] - The company anticipates elevated SG&A expenses in Q4 due to the annual franchise convention, expected to add approximately $5 million in expenses [64] Q&A Session Summary Question: Opening mix by banner and geography - The company opened 127 new studios in Q3, with a breakdown of 41 in Club Pilates, 36 in BFT, and others [69] Question: Performance of Q3 cohort relative to past cohorts - The 2023 cohort is performing well, with average AUVs increasing as studios mature [72] Question: Trends in member frequency and pricing power - Q3 visitation was the highest in company history, with pricing contributing only 5% to system-wide sales growth [78] Question: SG&A impact from transition studios - SG&A is expected to be around 30% of revenue in 2024, with significant reductions anticipated as transition studios are refranchised [91] Question: Impact of GLP-1 drugs on business - Management acknowledged potential tailwinds from GLP-1 drugs, noting increased engagement from users [92] Question: Other service revenue dynamics - Other service revenue was significantly impacted by transition studios, with $8 million attributed to them in Q3 [109]