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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 June 30, 2023

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 July 31, 2023, the registrant had 33,455,003 shares of Class A common stock outstanding and 16,510,913 shares of Class B common stock outstanding.

 

 


 

Table of Contents

 

Page

PART I.

FINANCIAL INFORMATION

Item 1.

Financial Statements

1

Condensed Consolidated Balance Sheets

1

Condensed Consolidated Statements of Operations

2

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

3

Condensed Consolidated Statements of Cash Flows

5

Notes to 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

44

Item 4.

Controls and Procedures

44

PART II.

OTHER INFORMATION

45

Item 1.

Legal Proceedings

45

Item 1A.

Risk Factors

45

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

45

Item 3.

Defaults Upon Senior Securities

45

Item 4.

Mine Safety Disclosures

45

Item 5.

Other Information

45

Item 6.

Exhibits

46

Signatures

47

 

 

 

 


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Xponential Fitness, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(amounts in thousands, except per share amounts)

 

 

 

June 30,

 

 

December 31,

 

 

 

2023

 

 

2022

 

Assets

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

Cash, cash equivalents and restricted cash

 

$

40,189

 

 

$

37,370

 

Accounts receivable, net (Note 10)

 

 

27,016

 

 

 

25,555

 

Inventories

 

 

11,945

 

 

 

10,864

 

Prepaid expenses and other current assets

 

 

11,666

 

 

 

6,294

 

Deferred costs, current portion

 

 

4,264

 

 

 

4,131

 

Notes receivable from franchisees, net

 

 

1,502

 

 

 

1,520

 

Total current assets

 

 

96,582

 

 

 

85,734

 

Property and equipment, net

 

 

21,153

 

 

 

18,524

 

Right-of-use assets

 

 

85,646

 

 

 

30,079

 

Goodwill

 

 

170,563

 

 

 

165,697

 

Intangible assets, net

 

 

125,060

 

 

 

137,175

 

Deferred costs, net of current portion

 

 

44,650

 

 

 

43,620

 

Notes receivable from franchisees, net of current portion

 

 

638

 

 

 

1,067

 

Other assets

 

 

853

 

 

 

795

 

Total assets

 

$

545,145

 

 

$

482,691

 

Liabilities, redeemable convertible preferred stock and equity (deficit)

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

Accounts payable

 

$

26,794

 

 

$

16,185

 

Accrued expenses

 

 

15,130

 

 

 

12,295

 

Deferred revenue, current portion

 

 

34,555

 

 

 

31,996

 

Current portion of long-term debt

 

 

4,260

 

 

 

3,035

 

Other current liabilities

 

 

19,706

 

 

 

9,265

 

Total current liabilities

 

 

100,445

 

 

 

72,776

 

Deferred revenue, net of current portion

 

 

112,816

 

 

 

109,465

 

Contingent consideration from acquisitions (Note 16)

 

 

12,513

 

 

 

28,182

 

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

 

 

257,490

 

 

 

133,039

 

Lease liability

 

 

77,598

 

 

 

30,583

 

Other liabilities

 

 

7,017

 

 

 

8,633

 

Total liabilities

 

 

567,879

 

 

 

382,678

 

Commitments and contingencies (Note 16)

 

 

 

 

 

 

Redeemable convertible preferred stock, $0.0001 par value, 400 shares authorized, 115 and
     
200 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively

 

 

181,738

 

 

 

308,075

 

Stockholders' equity (deficit):

 

 

 

 

 

 

Undesignated preferred stock, $0.0001 par value, 4,600 shares authorized, none issued
   and outstanding as of June 30, 2023 and December 31, 2022

 

 

 

 

 

 

Class A common stock, $0.0001 par value, 500,000 shares authorized, 33,220 and
    
27,571 shares issued and outstanding as of June 30, 2023 and December 31, 2022,
    respectively

 

 

3

 

 

 

3

 

Class B common stock, $0.0001 par value, 500,000 shares authorized, 16,592 and
    
21,647 shares issued, and 16,517 and 21,572 shares outstanding as of June 30, 2023 and
    December 31, 2022, respectively

 

 

2

 

 

 

2

 

Additional paid-in capital

 

 

485,832

 

 

 

505,186

 

Receivable from shareholder (Note 10)

 

 

(21,798

)

 

 

(16,369

)

Accumulated deficit

 

 

(620,828

)

 

 

(641,903

)

Treasury stock, at cost, 75 shares outstanding as of June 30, 2023 and December 31, 2022

 

 

(1,697

)

 

 

(1,697

)

Total stockholders' deficit attributable to Xponential Fitness, Inc.

 

 

(158,486

)

 

 

(154,778

)

Noncontrolling interests

 

 

(45,986

)

 

 

(53,284

)

Total stockholders' deficit

 

 

(204,472

)

 

 

(208,062

)

Total liabilities, redeemable convertible preferred stock and stockholders' deficit

 

$

545,145

 

 

$

482,691

 

 

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 June 30,

 

 

Six Months Ended June 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Revenue, net:

 

 

 

 

 

 

 

 

 

 

 

 

Franchise revenue

 

$

35,133

 

 

$

27,622

 

 

$

68,099

 

 

$

53,122

 

Equipment revenue

 

 

14,428

 

 

 

12,381

 

 

 

27,522

 

 

 

20,160

 

Merchandise revenue

 

 

8,401

 

 

 

6,753

 

 

 

15,565

 

 

 

12,836

 

Franchise marketing fund revenue

 

 

6,617

 

 

 

4,937

 

 

 

12,828

 

 

 

9,372

 

Other service revenue

 

 

12,761

 

 

 

7,867

 

 

 

24,016

 

 

 

14,432

 

Total revenue, net

 

 

77,340

 

 

 

59,560

 

 

 

148,030

 

 

 

109,922

 

Operating costs and expenses:

 

 

 

 

 

 

 

 

 

 

Costs of product revenue

 

 

14,223

 

 

 

13,519

 

 

 

28,258

 

 

 

23,111

 

Costs of franchise and service revenue

 

 

3,714

 

 

 

4,544

 

 

 

7,746

 

 

 

8,778

 

Selling, general and administrative expenses (Note 10)

 

 

44,448

 

 

 

29,322

 

 

 

79,333

 

 

 

63,241

 

Depreciation and amortization

 

 

4,288

 

 

 

3,579

 

 

 

8,485

 

 

 

7,071

 

Marketing fund expense

 

 

5,466

 

 

 

4,081

 

 

 

10,472

 

 

 

8,436

 

Acquisition and transaction income

 

 

(31,252

)

 

 

(31,627

)

 

 

(15,510

)

 

 

(22,083

)

Total operating costs and expenses

 

 

40,887

 

 

 

23,418

 

 

 

118,784

 

 

 

88,554

 

Operating income

 

 

36,453

 

 

 

36,142

 

 

 

29,246

 

 

 

21,368

 

Other (income) expense:

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

(529

)

 

 

(418

)

 

 

(1,165

)

 

 

(807

)

Interest expense

 

 

8,627

 

 

 

2,866

 

 

 

16,604

 

 

 

5,727

 

Other expense

 

 

698

 

 

 

 

 

 

1,252

 

 

 

 

Total other expense

 

 

8,796

 

 

 

2,448

 

 

 

16,691

 

 

 

4,920

 

Income before income taxes

 

 

27,657

 

 

 

33,694

 

 

 

12,555

 

 

 

16,448

 

Income taxes

 

 

133

 

 

 

2,217

 

 

 

10

 

 

 

150

 

Net income

 

 

27,524

 

 

 

31,477

 

 

 

12,545

 

 

 

16,298

 

Less: net income attributable to noncontrolling interests

 

 

9,145

 

 

 

14,643

 

 

 

4,149

 

 

 

6,983

 

Net income attributable to Xponential Fitness, Inc.

 

$

18,379

 

 

$

16,834

 

 

$

8,396

 

 

$

9,315

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share of Class A common stock:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.44

 

 

$

3.28

 

 

$

0.16

 

 

$

1.86

 

Diluted

 

$

0.09

 

 

$

0.50

 

 

$

0.08

 

 

$

0.26

 

Weighted average shares of Class A common stock outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

33,045

 

 

 

25,414

 

 

 

31,906

 

 

 

24,083

 

Diluted

 

 

41,593

 

 

 

63,183

 

 

 

50,059

 

 

 

62,696

 

 

See accompanying notes to condensed consolidated financial statements.

2


 

Xponential Fitness, Inc.

Condensed Consolidated Statements of Changes to Stockholders' Equity (Deficit)

(Unaudited)

(amounts in thousands)

 

 

 

Class A Common Stock

 

 

Class B Common Stock

 

 

Treasury Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Additional Paid-In Capital

 

 

Receivable from
Shareholder

 

 

Accumulated
Deficit

 

 

Noncontrolling
interests

 

 

Total
Equity (Deficit)

 

Balance at December 31, 2022

 

 

27,571

 

 

$

3

 

 

 

21,647

 

 

$

2

 

 

 

75

 

 

$

(1,697

)

 

$

505,186

 

 

$

(16,369

)

 

$

(641,903

)

 

$

(53,284

)

 

$

(208,062

)

Equity-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,598

 

 

 

 

 

 

 

 

 

14

 

 

 

5,612

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,983

)

 

 

(4,996

)

 

 

(14,979

)

Conversion of Class B shares to
   Class A shares

 

 

4,926

 

 

 

 

 

 

(4,926

)

 

 

 

 

 

 

 

 

 

 

 

(2,332

)

 

 

 

 

 

 

 

 

2,332

 

 

 

 

Payment of preferred stock dividend

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,069

)

 

 

 

 

 

 

 

 

 

 

 

(2,069

)

Adjustment of preferred stock to
   redemption value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(62,660

)

 

 

 

 

 

 

 

 

 

 

 

(62,660

)

Vesting of Class B Shares

 

 

 

 

 

 

 

 

10

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Vesting of restricted share units, net of shares
   withheld for taxes

 

 

402

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,935

)

 

 

 

 

 

 

 

 

 

 

 

(7,935

)

Deemed contribution from redemption of
   preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12,679

 

 

 

 

 

 

12,679

 

Liability-classified restricted stock units
   vested

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,250

 

 

 

 

 

 

 

 

 

 

 

 

2,250

 

Loan to shareholder and accumulated interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,587

)

 

 

 

 

 

 

 

 

(3,587

)

Balance at March 31, 2023

 

 

32,899

 

 

 

3

 

 

 

16,731

 

 

 

2

 

 

 

75

 

 

 

(1,697

)

 

 

438,038

 

 

 

(19,956

)

 

 

(639,207

)

 

 

(55,934

)

 

 

(278,751

)

Equity-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,608