Xponential Fitness(XPOF) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For Q4 2025, consolidated revenue was $83 million, flat compared to the prior year period, while total revenue for 2025 was $314.9 million, a 2% decrease from the previous year [24][30] - Adjusted EBITDA for Q4 was $22.9 million, down 26% year-over-year, with an adjusted EBITDA margin of 28%, down from 37% in the prior year [30][31] - The company recorded a net loss of $45.6 million in Q4, or a loss of $1.17 per basic share, compared to a net loss of $62.5 million in the prior year [29][30] Business Line Data and Key Metrics Changes - Franchise revenue for Q4 was $51.5 million, up 14% year-over-year, driven by higher franchise territory revenue [24] - Equipment revenue declined by 45% year-over-year to $7 million, primarily due to lower installation volumes [25] - Merchandise revenue increased by 18% year-over-year to $7.2 million, attributed to favorable retail sales [25] Market Data and Key Metrics Changes - North America system-wide sales for Q4 were $447 million, up approximately 5% year-over-year, while same-store sales were down 4.3% [23] - For 2025, system-wide sales increased approximately 13% to $1.7 billion from $1.6 billion in 2024, with full-year same-store sales at 0.5% [23] - Club Pilates contributed 65% of total system-wide sales for the year, with 1,241 studios operating in North America [33] Company Strategy and Development Direction - The company aims to prioritize investments in new member acquisition and healthy top-line growth for franchisees, focusing on new unit openings and organic studio revenue performance [11][12] - The strategic outlook includes enhancing marketing efforts, improving digital platforms, and evolving brand offerings to drive member engagement [18][19] - The company recognizes the need to address legal and regulatory challenges, underperforming brand acquisitions, and organizational issues to improve execution capabilities [9] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that sales growth moderated beginning in late 2024 and into 2025, with marketing missteps contributing to same-store sales pressure [10] - The company is developing improvements focused on organic growth in partnership with franchisees, particularly for Club Pilates [11] - Management expressed confidence in the company's strategic priorities and plans to evolve the business, despite acknowledging the challenges ahead [19] Other Important Information - The company completed a debt refinancing, entering into a new five-year, $525 million term loan, which improved financial flexibility and reduced refinancing risk [35][36] - The company expects closure rates to decline to low to mid-single digits in 2026, with a focus on reducing global closures [22][38] - The company anticipates total revenue for 2026 to be between $260 million and $270 million, representing a 16% decrease year-over-year at the midpoint of the guided range [39] Q&A Session Summary Question: Can you elaborate on the revenue and same-store sales in the quarter? - Management explained that lower average pricing was due to new studios coming online and promotional activities during Q4, which typically dilute pricing [44] Question: Are you seeing any shift between pricing tiers? - Management noted stability in the distribution of membership purchases, with no material shifts observed [45] Question: How much of an improvement are you assuming from shifting to an outsourced retail model? - Management indicated a significant gross profit improvement, estimating a $9 million to $10 million EBITDA enhancement from the transition [46][49] Question: What is your view on the portfolio's future direction? - Management emphasized a focus on improvement across all brands, particularly StretchLab, while remaining open to divestitures of underperforming brands [52][54] Question: What is the plan for Club Pilates regarding unit growth? - Management expressed confidence in the potential for unit growth, particularly in domestic and international markets, while also focusing on improving performance across other brands [58][59]