0000950170-23-060612.txt : 20231108 0000950170-23-060612.hdr.sgml : 20231108 20231107212654 ACCESSION NUMBER: 0000950170-23-060612 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 95 CONFORMED PERIOD OF REPORT: 20230930 FILED AS OF DATE: 20231108 DATE AS OF CHANGE: 20231107 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Xponential Fitness, Inc. CENTRAL INDEX KEY: 0001802156 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS AMUSEMENT & RECREATION [7990] IRS NUMBER: 844395129 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-40638 FILM NUMBER: 231385708 BUSINESS ADDRESS: STREET 1: 17877 VON KARMAN AVE STREET 2: SUITE 100 CITY: IRVINE STATE: CA ZIP: 92614 BUSINESS PHONE: 6507522078 MAIL ADDRESS: STREET 1: 17877 VON KARMAN AVE STREET 2: SUITE 100 CITY: IRVINE STATE: CA ZIP: 92614 10-Q 1 xpof-20230930.htm 10-Q 10-Q
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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, 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 October 31, 2023, the registrant had 30,891,038 shares of Class A common stock outstanding and 16,566,027 shares of Class B common stock outstanding.

 

 


 

Table of Contents

 

Page

PART I.

FINANCIAL INFORMATION

1

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

31

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

48

Item 4.

Controls and Procedures

48

PART II.

OTHER INFORMATION

49

Item 1.

Legal Proceedings

49

Item 1A.

Risk Factors

49

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

49

Item 3.

Defaults Upon Senior Securities

49

Item 4.

Mine Safety Disclosures

49

Item 5.

Other Information

49

Item 6.

Exhibits

50

Signatures

51

 

 

 

 


 

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)

 

 

 

September 30,

 

 

December 31,

 

 

 

2023

 

 

2022

 

Assets

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

Cash, cash equivalents and restricted cash

 

$

51,880

 

 

$

37,370

 

Accounts receivable, net (Note 10)

 

 

27,714

 

 

 

25,555

 

Inventories

 

 

16,339

 

 

 

10,864

 

Prepaid expenses and other current assets

 

 

13,531

 

 

 

6,294

 

Deferred costs, current portion

 

 

6,507

 

 

 

4,131

 

Notes receivable from franchisees, net

 

 

1,113

 

 

 

1,520

 

Total current assets

 

 

117,084

 

 

 

85,734

 

Property and equipment, net

 

 

20,293

 

 

 

18,524

 

Right-of-use assets

 

 

77,353

 

 

 

30,079

 

Goodwill

 

 

165,661

 

 

 

165,697

 

Intangible assets, net

 

 

122,450

 

 

 

137,175

 

Deferred costs, net of current portion

 

 

45,958

 

 

 

43,620

 

Notes receivable from franchisees, net of current portion

 

 

1,181

 

 

 

1,067

 

Other assets

 

 

1,252

 

 

 

795

 

Total assets

 

$

551,232

 

 

$

482,691

 

Liabilities, redeemable convertible preferred stock and equity (deficit)

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

Accounts payable

 

$

24,097

 

 

$

16,185

 

Accrued expenses

 

 

13,389

 

 

 

12,295

 

Deferred revenue, current portion

 

 

37,000

 

 

 

31,996

 

Current portion of long-term debt

 

 

5,195

 

 

 

3,035

 

Other current liabilities

 

 

21,840

 

 

 

9,265

 

Total current liabilities

 

 

101,521

 

 

 

72,776

 

Deferred revenue, net of current portion

 

 

115,229

 

 

 

109,465

 

Contingent consideration from acquisitions (Note 16)

 

 

10,303

 

 

 

28,182

 

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

 

 

319,053

 

 

 

133,039

 

Lease liability

 

 

74,678

 

 

 

30,583

 

Other liabilities

 

 

7,440

 

 

 

8,633

 

Total liabilities

 

 

628,224

 

 

 

382,678

 

Commitments and contingencies (Note 16)

 

 

 

 

 

 

Redeemable convertible preferred stock, $0.0001 par value, 400,000 shares authorized, 114,660 and
     
200,000 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively

 

 

130,304

 

 

 

308,075

 

Stockholders' equity (deficit):

 

 

 

 

 

 

Undesignated preferred stock, $0.0001 par value, 4,600,000 shares authorized, none issued
   and outstanding as of September 30, 2023 and December 31, 2022

 

 

 

 

 

 

Class A common stock, $0.0001 par value, 500,000,000 shares authorized, 31,477,165 and
    
27,571,312 shares issued and outstanding as of September 30, 2023 and December 31, 2022,
    respectively

 

 

3

 

 

 

3

 

Class B common stock, $0.0001 par value, 500,000,000 shares authorized, 16,566,027 and
    
21,647,447 shares issued, and 16,491,502 and 21,572,922 shares outstanding as of September 30,
    2023 and December 31, 2022, respectively

 

 

2

 

 

 

2

 

Additional paid-in capital

 

 

502,606

 

 

 

505,186

 

Receivable from shareholder (Note 10)

 

 

(15,026

)

 

 

(16,369

)

Accumulated deficit

 

 

(624,210

)

 

 

(641,903

)

Treasury stock, at cost, 74,525 shares outstanding as of September 30, 2023 and December 31, 2022

 

 

(1,697

)

 

 

(1,697

)

Total stockholders' deficit attributable to Xponential Fitness, Inc.

 

 

(138,322

)

 

 

(154,778

)

Noncontrolling interests

 

 

(68,974

)

 

 

(53,284

)

Total stockholders' deficit

 

 

(207,296

)

 

 

(208,062

)

Total liabilities, redeemable convertible preferred stock and stockholders' deficit

 

$

551,232

 

 

$

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 September 30,

 

 

Nine Months Ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Revenue, net:

 

 

 

 

 

 

 

 

 

 

 

 

Franchise revenue

 

$

36,425

 

 

$

30,006

 

 

$

104,524

 

 

$

83,128

 

Equipment revenue

 

 

12,564

 

 

 

11,770

 

 

 

40,086

 

 

 

31,930

 

Merchandise revenue

 

 

8,456

 

 

 

6,264

 

 

 

24,021

 

 

 

19,100

 

Franchise marketing fund revenue

 

 

6,948

 

 

 

5,172

 

 

 

19,776

 

 

 

14,544

 

Other service revenue

 

 

16,042

 

 

 

10,551

 

 

 

40,058

 

 

 

24,983

 

Total revenue, net

 

 

80,435

 

 

 

63,763

 

 

 

228,465

 

 

 

173,685

 

Operating costs and expenses:

 

 

 

 

 

 

 

 

 

 

Costs of product revenue

 

 

12,709

 

 

 

11,840

 

 

 

40,967

 

 

 

34,951

 

Costs of franchise and service revenue

 

 

3,559

 

 

 

4,811

 

 

 

11,305

 

 

 

13,589

 

Selling, general and administrative expenses (Note 10)

 

 

48,579

 

 

 

32,841

 

 

 

127,912

 

 

 

96,082

 

Depreciation and amortization

 

 

4,216

 

 

 

4,154

 

 

 

12,701

 

 

 

11,225

 

Marketing fund expense

 

 

5,817

 

 

 

4,260

 

 

 

16,289

 

 

 

12,696

 

Acquisition and transaction expenses (income)

 

 

(1,923

)

 

 

16,290

 

 

 

(17,433

)

 

 

(5,793

)

Total operating costs and expenses

 

 

72,957

 

 

 

74,196

 

 

 

191,741

 

 

 

162,750

 

Operating income (loss)

 

 

7,478

 

 

 

(10,433

)

 

 

36,724

 

 

 

10,935

 

Other (income) expense:

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

(24

)

 

 

(402

)

 

 

(1,189

)

 

 

(1,209

)

Interest expense

 

 

10,638

 

 

 

3,333

 

 

 

27,242

 

 

 

9,060

 

Other expense

 

 

1,845

 

 

 

 

 

 

3,097

 

 

 

 

Total other expense

 

 

12,459

 

 

 

2,931

 

 

 

29,150

 

 

 

7,851

 

Income (loss) before income taxes

 

 

(4,981

)

 

 

(13,364

)

 

 

7,574

 

 

 

3,084

 

Income taxes (benefit)

 

 

202

 

 

 

(308

)

 

 

212

 

 

 

(158

)

Net income (loss)

 

 

(5,183

)

 

 

(13,056

)

 

 

7,362

 

 

 

3,242

 

Less: net income (loss) attributable to noncontrolling interests

 

 

(1,801

)

 

 

(5,918

)

 

 

2,348

 

 

 

1,065

 

Net income (loss) attributable to Xponential Fitness, Inc.

 

$

(3,382

)

 

$

(7,138

)

 

$

5,014

 

 

$

2,177

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share of Class A common stock:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.91

 

 

$

(1.53

)

 

$

1.08

 

 

$

0.28

 

Diluted

 

$

(0.50

)

 

$

(1.53

)

 

$

(0.17

)

 

$

0.05

 

Weighted average shares of Class A common stock outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

32,260

 

 

 

26,156

 

 

 

32,025

 

 

 

24,782

 

Diluted

 

 

40,223

 

 

 

26,156

 

 

 

39,988

 

 

 

62,823

 

 

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

 

 

 

 

 

 

 

 

 

3

 

 

 

5,611

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

18,379

 

 

 

9,145

 

 

 

27,524

 

Conversion of Class B shares to Class A shares

 

 

141

 

 

 

 

 

 

(141

)

 

 

 

 

 

 

 

 

 

 

 

(1,332

)

 

 

 

 

 

 

 

 

1,332

 

 

 

 

Payment of preferred stock dividend

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,857

)

 

 

 

 

 

 

 

 

 

 

 

(1,857

)

Adjustment of preferred stock to redemption value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

45,551

 

 

 

 

 

 

 

 

 

 

 

 

45,551

 

Vesting of Class B Shares

 

 

 

 

 

 

 

 

2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

180