Xponential Fitness(XPOF) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - North America system-wide sales reached $465 million, up 21% year-over-year [6][26] - Total members increased to 813,000, a 15% year-over-year growth [7] - Adjusted EBITDA for 2024 was $116.2 million, a 16% increase from $100.3 million in the prior year [35] - The company reported a net loss of $62.5 million in Q4, compared to a net loss of $12.3 million in the prior year [34] Business Line Data and Key Metrics Changes - Franchise revenue for Q4 was $45.3 million, up 17% year-over-year, driven by increased royalty revenue [27] - Equipment revenue declined by 22% year-over-year to $12.7 million due to lower installation volumes [28] - Merchandise revenue decreased by 34% year-over-year to $6.1 million, attributed to lower sales volumes and price discounts [28] Market Data and Key Metrics Changes - North America run rate average unit volumes (AUVs) increased by 9% to $668,000 [26] - Same store sales growth for 2024 was 7%, with Club Pilates leading at 12% [26][39] - The company ended the year with 3,233 global open studios, having opened 120 new studios in Q4 [24] Company Strategy and Development Direction - The company is focused on building a senior management team to scale operations profitably and improve franchisee support [8] - Plans to enhance international presence, particularly for Club Pilates, with leadership in Europe and Asia [12] - Emphasis on innovation and data analytics to improve operational efficiency and member experience [14][15] Management's Comments on Operating Environment and Future Outlook - Management acknowledged operational challenges and the need for foundational improvements in 2025 to support long-term growth [18] - The company aims to reduce global studio closures to low to mid-single digits as a percentage of total open studios [42] - Management expressed a commitment to transparency and addressing legacy operational issues [16][86] Other Important Information - The company restated 2023 financial statements due to material accounting errors, but believes overall financial health remains intact [21][22] - Legal expenses increased significantly due to regulatory inquiries and potential franchise legal settlements [30] - The company anticipates a capital expenditure of approximately $10 million to $12 million for 2025, focusing on technology investments [44] Q&A Session Summary Question: Can you help us understand the comp performance embedded in the 2025 system sales guidance? - The expectation is for mid-single digits comp growth, with Club Pilates historically outperforming [48] Question: Can you provide an update on the franchise recruiting process? - A new Chief Development Officer has been hired, consolidating franchise sales, real estate, and construction under one unit to improve efficiency [50] Question: What is the assessment of StretchLab regarding negative comps? - Management is actively reviewing StretchLab's model, focusing on improving labor qualification and local marketing efforts [56] Question: Can you clarify thoughts around studio closures? - The company is taking a conservative approach to underperforming studios, aiming for a healthier system overall [66] Question: What are the specific hurdle rates for assessing other brands? - Franchisee profitability is the primary focus, with a target of 20% to 25% EBITDA margin at the studio level [73]