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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 March 31, 2022

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 May 10, 2022, the registrant had 27,007,356 shares of Class A common stock outstanding and 21,807,368 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

4

 

Notes to Unaudited Condensed Consolidated Financial Statements

6

Item 2.

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

28

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

41

Item 4.

Controls and Procedures

41

PART II.

OTHER INFORMATION

42

Item 1.

Legal Proceedings

42

Item 1A.

Risk Factors

42

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

43

Item 3.

Defaults Upon Senior Securities

43

Item 4.

Mine Safety Disclosures

43

Item 5.

Other Information

43

Item 6.

Exhibits

44

Signatures

45

 

 

 

 


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Xponential Fitness, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(amounts in thousands, except share and per share amounts)

 

 

 

March 31,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Assets

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

Cash, cash equivalents and restricted cash

 

$

15,750

 

 

$

21,320

 

Accounts receivable, net (Note 10)

 

 

15,865

 

 

 

11,702

 

Inventories

 

 

9,217

 

 

 

6,928

 

Prepaid expenses and other current assets

 

 

7,389

 

 

 

5,271

 

Deferred costs, current portion

 

 

4,071

 

 

 

3,712

 

Notes receivable from franchisees, net (Note 10)

 

 

2,531

 

 

 

2,293

 

Total current assets

 

 

54,823

 

 

 

51,226

 

Property and equipment, net

 

 

13,910

 

 

 

12,773

 

Right-of-use assets

 

 

16,179

 

 

 

 

Goodwill

 

 

169,073

 

 

 

169,073

 

Intangible assets, net

 

 

134,532

 

 

 

136,863

 

Deferred costs, net of current portion

 

 

42,474

 

 

 

42,015

 

Notes receivable from franchisees, net of current portion (Note 10)

 

 

3,095

 

 

 

3,041

 

Other assets

 

 

558

 

 

 

553

 

Total assets

 

$

434,644

 

 

$

415,544

 

Liabilities, redeemable convertible preferred stock and deficit

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

Accounts payable

 

$

12,359

 

 

$

14,905

 

Accrued expenses

 

 

15,818

 

 

 

21,045

 

Deferred revenue, current portion

 

 

25,664

 

 

 

22,747

 

Notes payable

 

 

 

 

 

983

 

Current portion of long-term debt

 

 

2,960

 

 

 

2,960

 

Other current liabilities

 

 

5,175

 

 

 

3,253

 

Total current liabilities

 

 

61,976

 

 

 

65,893

 

Deferred revenue, net of current portion

 

 

98,698

 

 

 

95,691

 

Contingent consideration from acquisitions (Note 16)

 

 

63,968

 

 

 

54,881

 

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

 

 

127,382

 

 

 

127,983

 

Lease liability

 

 

18,472

 

 

 

 

Other liabilities

 

 

1,529

 

 

 

4,675

 

Total liabilities

 

 

372,025

 

 

 

349,123

 

Commitments and contingencies (Note 16)

 

 

 

 

 

 

Redeemable convertible preferred stock, $0.0001 par value, 400,000 shares authorized, 200,000
    shares issued and outstanding as of March 31, 2022 and December 31, 2021

 

 

327,821

 

 

 

276,890

 

Stockholders' equity (deficit):

 

 

 

 

 

 

Undesignated preferred stock, $0.0001 par value, 4,600,000 shares authorized, none issued
   and outstanding as of March 31, 2022 and December 31, 2021

 

 

 

 

 

 

Class A common stock, $0.0001 par value, 500,000,000 shares authorized, 24,249,205 and
    
23,898,042 shares issued and outstanding as of March 31, 2022 and December 31, 2021,
    respectively

 

 

2

 

 

 

2

 

Class B common stock, $0.0001 par value, 500,000,000 shares authorized, 24,564,155 and
    
22,968,674 shares issued and outstanding as of March 31, 2022 and December 31, 2021,
    respectively

 

 

2

 

 

 

2

 

Additional paid-in capital

 

 

465,525

 

 

 

 

Receivable from shareholder (Note 10)

 

 

(10,600

)

 

 

(10,600

)

Accumulated deficit

 

 

(651,352

)

 

 

(643,833

)

Total stockholders' deficit attributable to Xponential Fitness, Inc.

 

 

(196,423

)

 

 

(654,429

)

Noncontrolling interests

 

 

(68,779

)

 

 

443,960

 

Total stockholders' deficit

 

 

(265,202

)

 

 

(210,469

)

Total liabilities, redeemable convertible preferred stock and deficit

 

$

434,644

 

 

$

415,544

 

 

See accompanying notes to condensed consolidated financial statements.

1


 

Xponential Fitness, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

(amounts in thousands, except share and per share amounts)

 

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

Revenue, net:

 

 

 

 

 

 

Franchise revenue

 

$

25,500

 

 

$

13,755

 

Equipment revenue

 

 

7,779

 

 

 

4,066

 

Merchandise revenue

 

 

6,083

 

 

 

4,232

 

Franchise marketing fund revenue

 

 

4,435

 

 

 

2,483

 

Other service revenue

 

 

6,565

 

 

 

4,529

 

Total revenue, net

 

 

50,362

 

 

 

29,065

 

Operating costs and expenses:

 

 

 

 

 

 

Costs of product revenue

 

 

9,592

 

 

 

5,344

 

Costs of franchise and service revenue

 

 

4,234

 

 

 

2,319

 

Selling, general and administrative expenses (Note 10)

 

 

33,919

 

 

 

16,602

 

Depreciation and amortization

 

 

3,492

 

 

 

2,055

 

Marketing fund expense

 

 

4,355

 

 

 

2,616

 

Acquisition and transaction expenses

 

 

9,544

 

 

 

350

 

Total operating costs and expenses

 

 

65,136

 

 

 

29,286

 

Operating loss

 

 

(14,774

)

 

 

(221

)

Other (income) expense:

 

 

 

 

 

 

Interest income

 

 

(389

)

 

 

(95

)

Interest expense (Note 10)

 

 

2,861

 

 

 

4,423

 

Total other expense

 

 

2,472

 

 

 

4,328

 

Loss before income taxes

 

 

(17,246

)

 

 

(4,549

)

Income taxes

 

 

(2,067

)

 

 

201

 

Net loss

 

 

(15,179

)

 

 

(4,750

)

Less: Net loss attributable to noncontrolling interests

 

 

(7,660

)

 

 

 

Net loss attributable to Xponential Fitness, Inc.

 

$

(7,519

)

 

$

(4,750

)

 

 

 

 

 

 

 

Net loss per share of Class A common stock:

 

 

 

 

 

 

Basic

 

$

(1.51

)

 

N/A

 

Diluted

 

$

(1.51

)

 

N/A

 

Weighted average shares of Class A common stock outstanding:

 

 

 

 

 

 

Basic

 

 

22,736,946

 

 

N/A

 

Diluted

 

 

22,736,946

 

 

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, except share amounts)

 

 

 

Class A Common Stock

 

 

Class B Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Additional Paid-In Capital

 

 

Member’s
Contribution

 

 

Receivable from
Shareholder

 

 

Accumulated
 Deficit

 

 

Noncontrolling interests

 

 

Total
Equity (Deficit)

 

Balance at December 31, 2021

 

 

23,898,042

 

 

$

2

 

 

 

22,968,674

 

 

$

2

 

 

$

 

 

$

 

 

$

(10,600

)

 

$

(643,833

)

 

$

443,960

 

 

$

(210,469

)

Equity-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,423

 

 

 

 

 

 

 

 

 

 

 

 

12,204

 

 

 

14,627

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,519

)

 

 

(7,660

)

 

 

(15,179

)

Conversion of Class B shares to Class A shares

 

 

351,163

 

 

 

 

 

 

(351,163

)

 

 

 

 

 

517,283

 

 

 

 

 

 

 

 

 

 

 

 

(517,283

)

 

 

 

Payment of preferred stock dividend

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,250

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,250

)

Adjustment of preferred stock to redemption value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(50,931

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(50,931

)

Vesting of Class B Shares

 

 

 

 

 

 

 

 

1,946,644

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 31, 2022

 

 

24,249,205

 

 

$

2

 

 

$

24,564,155

 

 

$

2

 

 

$

465,525

 

 

$

 

 

$

(10,600

)

 

$

(651,352

)

 

$

(68,779

)

 

$

(265,202

)

 

 

 

Class A Common Stock

 

 

Class B Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Additional Paid-In Capital

 

 

Member’s
Contribution

 

 

Receivable
from Member

 

 

Accumulated
 Deficit

 

 

Noncontrolling interests

 

 

Total
Equity

 

Balance at December 31, 2020

 

 

 

 

$

 

 

 

 

 

$

 

 

$

 

 

$

113,697

 

 

$

(1,456

)

 

$

(107,492

)

 

$

 

 

$

4,749

 

Equity-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

222

 

 

 

 

 

 

 

 

 

 

 

 

222

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,750

)

 

 

 

 

 

(4,750

)

Parent contribution of Rumble assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

20,483

 

 

 

 

 

 

 

 

 

 

 

 

20,483

 

Distributions to Member

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(10,600

)

 

 

 

 

 

 

 

 

 

 

 

(10,600

)

Payment received from Member, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2

 

 

 

 

 

 

 

 

 

2

 

Balance at March 31, 2021

 

 

 

 

$

 

 

 

 

 

$

 

 

$

 

 

$

123,802

 

 

$

(1,454

)

 

$

(112,242

)

 

$

 

 

$

10,106

 

 

See accompanying notes to condensed consolidated financial statements.

3


 

Xponential Fitness, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(amounts in thousands)

 

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(15,179

)

 

$

(4,750

)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

3,492

 

 

 

2,055

 

Amortization of debt issuance cost

 

 

33

 

 

 

311

 

Amortization of discount on long-term debt

 

 

151

 

 

 

 

Change in contingent consideration from acquisitions

 

 

9,546

 

 

 

120

 

Bad debt expense (recovery)

 

 

(617

)

 

 

(105

)

Equity-based compensation

 

 

15,248

 

 

 

222

 

Non-cash interest

 

 

(208

)

 

 

226

 

Gain on disposal of assets

 

 

(43

)

 

 

 

Changes in assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(3,300

)

 

 

(1,173

)

Inventories

 

 

(2,289

)

 

 

430

 

Prepaid expenses and other current assets

 

 

(2,117

)

 

 

(985

)

Operating lease right-of-use assets and operating lease liabilities

 

 

(20

)

 

 

 

Deferred costs

 

 

(818

)

 

 

(533

)

Notes receivable, net

 

 

5

 

 

 

168

 

Accounts payable

 

 

(2,758

)

 

 

(1,797

)

Accrued expenses

 

 

(3,650

)

 

 

491

 

Notes payable

 

 

(983

)

 

 

 

Other current liabilities

 

 

20

 

 

 

65

 

Deferred revenue

 

 

5,924

 

 

 

5,033

 

Other assets

 

 

(10

)

 

 

(1

)

Other liabilities

 

 

461

 

 

 

23

 

Net cash provided by (used in) operating activities

 

 

2,888

 

 

 

(200

)

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of property and equipment

 

 

(1,798

)

 

 

(1,125

)

Purchase of studios

 

 

 

 

 

(245

)

Proceeds from sale of assets

 

 

65

 

 

 

 

Purchase of intangible assets

 

 

(316

)

 

 

(288

)

Notes receivable issued

 

 

(585

)

 

 

 

Notes receivable payment received