Xponential Fitness(US:XPOF)2023-08-06 07:33Financial Data and Key Metrics Changes - Net revenue for Q2 2023 totaled $77.3 million, representing a 30% year-over-year increase [12] - Adjusted EBITDA reached $25.3 million, up 43% from $17.6 million in the prior year, with an adjusted EBITDA margin of 33% compared to 30% in the previous year [55] - North American system-wide sales increased by 37% year-over-year to $341 million [10][44] Business Line Data and Key Metrics Changes - North American studio visits increased by 32% year-over-year, totaling 12.9 million visits [10] - Average unit volumes (AUV) in North America rose to $561,000, a 17% increase from $480,000 in Q2 2022 [11] - Same-store sales growth in North America was 15% for Q2 2023, with studios over three years old seeing a 16% increase [11] Market Data and Key Metrics Changes - Total members in North America grew by 29% year-over-year, reaching 697,000, with over 90% being actively paying members [9] - The company operates nearly 2,900 studios globally, with 5,800 licenses sold across 10 fitness brands [9] Company Strategy and Development Direction - The company is focusing on increasing its franchise studio base, with 141 new studios opened in Q2 2023 and a total of 2,892 studios globally [13] - International expansion is a key growth driver, with over 1,000 studios obligated to open under master franchise agreements, including a recent agreement in France [15] - The company plans to refranchise its company-owned transition studios down to zero, aiming to optimize margins and reduce SG&A expenses [19][51] Management's Comments on Operating Environment and Future Outlook - Management raised guidance for system-wide sales, revenue, and adjusted EBITDA for the full year 2023, reflecting strong performance in Q2 [58] - The company expects adjusted EBITDA margins to reach 35% to 39% by year-end and 40% in 2024 [20][55] - Management anticipates that same-store sales will normalize over time, with expectations of mid-teens growth for the second half of 2023 [100] Other Important Information - The company announced a new share repurchase program of up to $50 million, funded by amended term loan financing [63] - Cash, cash equivalents, and restricted cash increased to $40.2 million as of June 30, 2023, compared to $29.3 million a year earlier [56] Q&A Session Summary Question: Insights on AUV strength and visitation growth - Management indicated that 95% of system-wide sales growth is driven by volume rather than price, with visitation flat in summer months but expected to increase as kids return to school [66][68] Question: Development in new countries and pace of openings - The company has identified 50 countries for potential expansion, with existing franchise partners opening studios abroad, and expects about 25% of future openings to be international [70][72] Question: Studio profitability and transition studios - Most studios ramp to approximately $380,000 in their first year, with a target to reduce transition studios to zero by the end of the year or Q1 next year [74][78] Question: Franchisee profitability and cash-on-cash returns - Established brands like Club Pilates have higher cash-on-cash returns compared to newer concepts, with detailed insights to be provided at the upcoming Investor Day [82][84] Question: Visibility into unit growth outlook - The company has strong visibility into unit growth based on signed leases, with a structured approach to openings [88][90] Question: SG&A expenses and transition studio strategy - SG&A expenses are expected to decrease in the second half of the year as the company ramps down transition studios, aiming for SG&A to fall below 30% of total revenue [94]