The boutique fitness franchisor grew its revenue and North American same-store sales, and trimmed its net loss compared to last year
Xponential Fitness, which has been steadily growing its boutique fitness footprint domestically, internationally as well as in the metaverse, has reported strong Q3 2023 results, with a total revenue increase of $16.7 million (26%) to $80.4 million, up from $63.8 million in the prior-year period.
The increase included a corresponding North American same-store sales increase of 15%. The boutique fitness franchisor sold 216 franchise licenses and opened 127 new studios in the quarter, and sold 6,088 total franchise licenses and had 2,980 total studios operating as of Q3 2023. Visitation in Q3 is also the highest it’s ever been in Xponential company history.
Xponential’s net loss totaled $5.2 million compared to a net loss of $13.1 million in the prior-year period. The fitness franchisor explains the lower net loss was the result of an $18.2 million decrease in non-cash contingent consideration primarily related to the Rumble acquisition, and a $0.7 million decrease in non-cash equity-based compensation expense; offset by $3.4 million of lower overall profitability, a $6.7 million increase in restructuring costs from company-owned transition studios, and a $0.9 million increase in write-down of goodwill and brand assets.
“Our KPIs continue to trend well in Q4 and we are confident we will close the year out on a high note,” said Anthony Geisler, founder and CEO of Xponential Fitness. “We have begun implementing the movement away from company-owned transition studios that we discussed during our Analyst and Investor Day in September; the impact of this right-sizing on our profitability in 2024 will be material.”
Weight Loss Drugs, Acquisition Plans & International Expansion
Geisler also mentioned the surging popularity of weight loss drugs, such as Ozempic and Wegovy, as an early tailwind for Xponential’s business model, citing findings demonstrating that consumers are more apt to adopt physical fitness and increase activity after beginning GLP-1s.
On the topic of Xponential acquiring an 11th brand, Geisler is keeping his cards close to the vest but indicated it could happen shortly. He said any acquisition target would be an entity with “a lot of growth opportunity,” one that operates in a fitness and wellness space that’s differentiated from Xponential’s current brands, and is in a “1,500 – 2,000 square foot retail box situation.”
To continue scaling internationally, Xponential has appointed franchising industry veteran Bob Kaufman as president of international to expand the fitness franchisor’s number of overseas locations past its current 350 studios.
When pressed by investors on the reasoning behind Kaufman’s role, Geisler said Xponential had a small team of “great players,” but needed a “great coach” to lead the department and build infrastructure to increase franchise sales and openings.
On the international front, Active Franchise Management Company, Xponential’s master franchise partner in Kuwait, signed a new master franchise agreement in Qatar to develop Club Pilates, Rumble, StretchLab and AKT studios in the country. Asia and Europe also continue to be strong areas of growth for Xponential, with new multi-unit franchise agreements for BFT in Hong Kong, Malaysia, Scotland and Spain.
Looking ahead, the boutique fitness franchisor is raising its full-year 2023 revenue guidance, with revenue in the range of $305.0 million to $310.0 million, or an increase of 26% at the midpoint as compared to full year 2022. New studio openings for the year are expected to be in the range of 550 to 560, or an increase of 9% at the midpoint when compared to 2022.
Courtney Rehfeldt has worked in the broadcasting media industry since 2007 and has freelanced since 2012. Her work has been featured in Age of Awareness, Times Beacon Record, The New York Times, and she has an upcoming piece in Slate. She studied yoga & meditation under Beryl Bender Birch at The Hard & The Soft Yoga Institute. She enjoys hiking, being outdoors, and is an avid reader. Courtney has a BA in Media & Communications studies.