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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

 

FORM 10-Q

 

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-40638

 

 

Xponential Fitness, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

84-4395129

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

17877 Von Karman Ave., Suite 100

Irvine, CA

92614

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (949) 346-3000

 

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Class A common stock, par value $0.0001 per share

 

XPOF

 

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No

As of November 8, 2021, the registrant had 23,898,042 shares of Class A common stock outstanding and 22,964,984 shares of Class B common stock outstanding.

 

 


 

Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

 

Item 1.

Financial Statements (Unaudited)

1

 

Condensed Consolidated Balance Sheets

1

 

Condensed Consolidated Statements of Operations

2

 

Condensed Consolidated Statements of Changes to Stockholder's/Member’s Equity (Deficit)

3

 

Condensed Consolidated Statements of Cash Flows

5

 

Notes to Unaudited Condensed Consolidated Financial Statements

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

28

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

42

Item 4.

Controls and Procedures

42

PART II.

OTHER INFORMATION

44

Item 1.

Legal Proceedings

44

Item 1A.

Risk Factors

44

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

79

Item 3.

Defaults Upon Senior Securities

79

Item 4.

Mine Safety Disclosures

79

Item 5.

Other Information

79

Item 6.

Exhibits

80

Signatures

81

 

 

 

 


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Xponential Fitness, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(amounts in thousands, except per share amounts)

 

 

 

September 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

Assets

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

Cash, cash equivalents and restricted cash

 

$

25,544

 

 

$

11,299

 

Accounts receivable, net (Note 9)

 

 

7,001

 

 

 

5,196

 

Inventories

 

 

5,087

 

 

 

6,161

 

Prepaid expenses and other current assets

 

 

10,480

 

 

 

5,480

 

Deferred costs, current portion

 

 

3,809

 

 

 

3,281

 

Notes receivable from franchisees, net (Note 9)

 

 

1,833

 

 

 

1,288

 

Total current assets

 

 

53,754

 

 

 

32,705

 

Property and equipment, net

 

 

12,375

 

 

 

13,694

 

Goodwill

 

 

147,863

 

 

 

139,680

 

Intangible assets, net

 

 

106,502

 

 

 

98,124

 

Deferred costs, net of current portion

 

 

39,608

 

 

 

35,445

 

Notes receivable from franchisees, net of current portion (Note 9)

 

 

2,399

 

 

 

2,576

 

Other assets

 

 

584

 

 

 

614

 

Total assets

 

$

363,085

 

 

$

322,838

 

Liabilities and Equity (Deficit)

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

Accounts payable

 

$

14,880

 

 

$

18,339

 

Accrued expenses (Note 9)

 

 

14,985

 

 

 

13,764

 

Deferred revenue, current portion

 

 

21,567

 

 

 

14,247

 

Notes payable (Note 9)

 

 

958

 

 

 

970

 

Current portion of long-term debt

 

 

2,120

 

 

 

5,795

 

Other current liabilities

 

 

2,259

 

 

 

1,804

 

Total current liabilities

 

 

56,769

 

 

 

54,919

 

Deferred revenue, net of current portion

 

 

89,231

 

 

 

74,361

 

Contingent consideration from acquisitions (Note 15)

 

 

26,620

 

 

 

8,399

 

Long-term debt, net of current portion, discount and issuance costs

 

 

91,857

 

 

 

176,002

 

Other liabilities

 

 

4,460

 

 

 

4,408

 

Total liabilities

 

 

268,937

 

 

 

318,089

 

Commitments and contingencies (Note 15)

 

 

 

 

 

 

Redeemable convertible preferred stock, $0.0001 par value, 400,000 shares authorized, 200,000
    shares issued and outstanding as of September 30, 2021,
no shares authorized, issued and
    outstanding as of December 31, 2020

 

 

200,000

 

 

 

 

Redeemable noncontrolling interest

 

 

291,404

 

 

 

 

Member’s/Stockholders' equity (deficit):

 

 

 

 

 

 

Undesignated preferred stock, $0.0001 par value, 4,600,000 shares authorized, none issued and
    outstanding as of September 30, 2021,
no shares authorized, issued and outstanding as of
    December 31, 2020

 

 

 

 

 

 

Class A common stock, $0.0001 par value, 500,000,000 shares authorized, 23,898,042 shares
    issued and outstanding as of September 30, 2021,
no shares authorized, issued and
    outstanding as of December 31, 2020

 

 

2

 

 

 

 

Class B common stock, $0.0001 par value, 500,000,000 shares authorized, 22,963,246 shares
    issued and outstanding as of September 30, 2021,
no shares authorized, issued and
    outstanding as of December 31, 2020

 

 

2

 

 

 

 

Additional paid-in capital

 

 

 

 

 

 

Member’s contribution

 

 

 

 

 

113,697

 

Receivable from Member/shareholder (Note 9)

 

 

(10,600

)

 

 

(1,456

)

Accumulated deficit

 

 

(386,660

)

 

 

(107,492

)

Total stockholders'/member’s equity (deficit)

 

 

(397,256

)

 

 

4,749

 

Total liabilities and equity (deficit)

 

$

363,085

 

 

$

322,838

 

 

See accompanying notes to condensed consolidated financial statements.

1


 

Xponential Fitness, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

(amounts in thousands, except per share amounts)

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Revenue, net:

 

 

 

 

 

 

 

 

 

 

 

 

Franchise revenue

 

$

19,985

 

 

$

11,920

 

 

$

51,504

 

 

$

35,751

 

Equipment revenue

 

 

6,750

 

 

 

4,845

 

 

 

15,571

 

 

 

16,739

 

Merchandise revenue

 

 

4,879

 

 

 

3,606

 

 

 

13,620

 

 

 

12,222

 

Franchise marketing fund revenue

 

 

3,706

 

 

 

1,790

 

 

 

9,503

 

 

 

5,224

 

Other service revenue

 

 

5,547

 

 

 

3,411

 

 

 

15,509

 

 

 

8,885

 

Total revenue, net

 

 

40,867

 

 

 

25,572

 

 

 

105,707

 

 

 

78,821

 

Operating costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Costs of product revenue

 

 

7,641

 

 

 

5,406

 

 

 

19,259

 

 

 

20,285

 

Costs of franchise and service revenue

 

 

3,169

 

 

 

2,369

 

 

 

8,615

 

 

 

6,499

 

Selling, general and administrative expenses (Note 9)

 

 

24,262

 

 

 

16,629

 

 

 

62,066

 

 

 

43,939

 

Depreciation and amortization

 

 

2,376

 

 

 

1,956

 

 

 

6,838

 

 

 

5,653

 

Marketing fund expense

 

 

3,828

 

 

 

1,621

 

 

 

9,304

 

 

 

5,027

 

Acquisition and transaction expenses (income)

 

 

2,880

 

 

 

(5,131

)

 

 

3,527

 

 

 

(10,940

)

Total operating costs and expenses

 

 

44,156

 

 

 

22,850

 

 

 

109,609

 

 

 

70,463

 

Operating income (loss)

 

 

(3,289

)

 

 

2,722

 

 

 

(3,902

)

 

 

8,358

 

Other (income) expense:

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

(343

)

 

 

(83

)

 

 

(796

)

 

 

(260

)

Interest expense (Note 9)

 

 

5,855

 

 

 

4,558

 

 

 

21,869

 

 

 

16,910

 

Gain on debt extinguishment

 

 

 

 

 

 

 

 

(3,707

)

 

 

 

Total other expense

 

 

5,512

 

 

 

4,475

 

 

 

17,366

 

 

 

16,650

 

Loss before income taxes

 

 

(8,801

)

 

 

(1,753

)

 

 

(21,268

)

 

 

(8,292

)

Income taxes

 

 

103

 

 

 

130

 

 

 

387

 

 

 

292

 

Net loss

 

 

(8,904

)

 

 

(1,883

)

 

 

(21,655

)

 

 

(8,584

)

Less: Net loss attributable to redeemable noncontrolling interests

 

 

(4,848

)

 

 

 

 

 

(17,599

)

 

 

 

Net loss attributable to Xponential Fitness, Inc.

 

$

(4,056

)

 

$

(1,883

)

 

$

(4,056

)

 

$

(8,584

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) per share of Class A common stock:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.38

)

 

 N/A

 

 

$

(0.38

)

 

 N/A

 

Diluted

 

$

(0.38

)

 

 N/A

 

 

$

(0.38

)

 

 N/A

 

Weighted average shares of Class A common stock outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

22,146,011

 

 

 N/A

 

 

 

22,146,011

 

 

 N/A

 

Diluted

 

 

22,146,011

 

 

 N/A

 

 

 

22,146,011

 

 

 N/A

 

 

See accompanying notes to condensed consolidated financial statements.

2


 

Xponential Fitness, Inc.

Condensed Consolidated Statements of Changes to Stockholders'/Member’s Equity (Deficit)

(Unaudited)

(amounts in thousands)

 

 

 

Class A Common Stock

 

 

Class B Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Additional Paid-In Capital

 

 

Member’s
Contribution

 

 

Receivable from
Member / Shareholder

 

 

Accumulated
 Deficit

 

 

Total
Equity (Deficit)

 

 

Redeemable noncontrolling interest

 

Balance at December 31, 2020

 

 

 

 

$

 

 

 

 

 

$

 

 

$

 

 

$

113,697

 

 

$

(1,456

)

 

$

(107,492

)

 

$

4,749

 

 

$

 

Equity-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

222

 

 

 

 

 

 

 

 

 

222

 

 

 

 

Parent contribution of Rumble assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

20,483

 

 

 

 

 

 

 

 

 

20,483

 

 

 

 

Distributions to Member

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(10,600

)

 

 

 

 

 

 

 

 

(10,600

)

 

 

 

Payment received from Member, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2

 

 

 

 

 

 

2

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,750

)

 

 

(4,750

)

 

 

 

Balance at March 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

123,802

 

 

 

(1,454

)

 

 

(112,242

)

 

 

10,106

 

 

 

 

Equity-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

449

 

 

 

 

 

 

 

 

 

449

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,001

)

 

 

(8,001

)

 

 

 

Balance at June 30, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

124,251

 

 

 

(1,454

)

 

 

(120,243

)

 

 

2,554

 

 

 

 

Equity-based compensation prior to
     Reorganization Transactions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

37

 

 

 

 

 

 

 

 

 

37

 

 

 

 

Payment received from Member, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,454

 

 

 

 

 

 

1,454

 

 

 

 

Net loss prior to Reorganization Transactions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(591

)

 

 

(591

)

 

 

 

Effect of Reorganization Transactions

 

 

12,994,042

 

 

 

1

 

 

 

23,542,663

 

 

 

2

 

 

 

 

 

 

(124,288

)

 

 

(10,600

)

 

 

(202,374

)

 

 

(337,259

)

 

 

282,513

 

Issuance of Class A common stock at the
     IPO, net of underwriting and offering costs

 

 

10,000,000

 

 

 

1

 

 

 

 

 

 

 

 

 

104,248

 

 

 

 

 

 

 

 

 

 

 

 

104,249

 

 

 

 

Purchase of shares from LCAT shareholders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(104,248

)

 

 

 

 

 

 

 

 

(46,737

)

 

 

(150,985

)

 

 

 

Issuance of Class A common stock for underwriters'
     option to purchase additional shares

 

 

904,000

 

 

 

 

 

 

 

 

 

 

 

 

10,116

 

 

 

 

 

 

 

 

 

 

 

 

10,116

 

 

 

 

Redemption of Class B shares

 

 

 

 

 

 

 

 

(750,000

)

 

 

 

 

 

(9,000

)

 

 

 

 

 

 

 

 

 

 

 

(9,000

)

 

 

 

Vesting of Class B shares

 

 

 

 

 

 

 

 

170,583

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjustment of preferred stock to redemption value