8-K: Xponential Fitness Announces Q4 and Full Year 2024 Results; Restates 2023 Financials

Xponential Fitness reports a mixed bag for 2024, including a restatement of 2023 financials alongside revenue growth and adjusted EBITDA increases, but also significant net losses.

Summary

• Xponential Fitness announced its Q4 and full-year 2024 financial results, revealing a mix of growth and challenges.
• System-wide sales in North America increased by 21% in Q4 to $464.7 million and by 23% for the full year to $1.71 billion.
• The company opened 464 gross new studios and sold 400 franchise licenses in 2024.
• However, reported revenue decreased by 7% in Q4 to $83.2 million but grew 1% for the full year to $320.3 million.
• The company reported a net loss of $62.5 million in Q4 and $98.7 million for the full year.
• Adjusted EBITDA increased by 13% in Q4 to $30.8 million and by 16% for the full year to $116.2 million.
• Xponential Fitness is restating its 2023 financial statements due to accounting errors related to accrued inventory, 401(k) compliance, purchase accounting, and vendor rebates.
• The company is initiating its full-year 2025 outlook, projecting 200-220 net new studio openings, North America system-wide sales of $1.935 billion to $1.955 billion, revenue of $315.0 million to $325.0 million, and adjusted EBITDA of $120.0 million to $125.0 million.

Sentiment

Score: 5

Explanation: The sentiment is neutral due to mixed results. While there's growth in system-wide sales and adjusted EBITDA, the net losses and financial restatement raise concerns. The outlook for 2025 is cautiously optimistic.

Positives

• North America system-wide sales saw significant growth, increasing by 21% in Q4 and 23% for the full year.
• Adjusted EBITDA increased by 13% in Q4 and 16% for the full year, indicating improved operational efficiency.
• The company opened a substantial number of new studios (464) and sold 400 franchise licenses, expanding its footprint.
• The company is projecting continued growth in system-wide sales and adjusted EBITDA for 2025.

Negatives

• Reported revenue decreased by 7% in Q4 2024.
• The company experienced a significant net loss of $62.5 million in Q4 and $98.7 million for the full year.
• The restatement of 2023 financial statements indicates prior accounting errors.
• Same store sales growth slowed down from 14% to 5% in Q4.

Risks

• The company is subject to ongoing and potential future government investigations and litigation.
• The company's ability to retain key senior management and employees is a risk.
• Difficulties and challenges in opening studios by franchisees could impact growth.
• Expansion into international markets poses risks.
• Geopolitical uncertainty and general economic conditions could affect performance.

Future Outlook

The company anticipates 200 to 220 net new studio openings, North America system-wide sales between $1.935 billion and $1.955 billion, revenue between $315.0 million and $325.0 million, and adjusted EBITDA between $120.0 million and $125.0 million for the full year 2025.

Management Comments

• CEO Mark King stated that the company has made significant progress and gained a deeper understanding of both the opportunities and challenges at Xponential.
• He expressed confidence in the team assembled to execute on the company's growth strategy.

Industry Context

Xponential Fitness operates in the boutique health and wellness industry, which has seen significant growth in recent years. The company's diversified platform of brands allows it to cater to a wide range of fitness preferences. However, the industry is competitive, and Xponential faces challenges in maintaining its market position and driving profitability.

Comparison to Industry Standards

• Comparing Xponential Fitness to other franchise-based fitness companies like Planet Fitness (PLNT) and Anytime Fitness is relevant.
• Planet Fitness, while operating a different model (high-volume, low-price), boasts a larger membership base and a more consistent profitability record.
• Anytime Fitness, as a privately held company, has a similar franchise model but less publicly available financial data for direct comparison.
• Xponential's AUV of $668,000 is competitive within the boutique fitness segment, but it's crucial to assess the profitability of these studios for franchisees.
• The restatement of financials raises concerns about internal controls and accounting practices, which could impact investor confidence compared to companies with a cleaner track record.

Stakeholder Impact

• Shareholders will be impacted by the restatement of financials and the reported net losses.
• Franchisees will be affected by the company's performance and its ability to support their studio operations.
• Employees may be impacted by any restructuring or cost-cutting measures taken by the company.
• Customers may be affected by changes in studio offerings or pricing.

Next Steps

• The company will file its Annual Report on Form 10-K for the year ended December 31, 2024, including the restated 2023 financials, on March 14, 2025.
• The company will host a conference call to discuss its fourth quarter and full year 2024 financial results.

Key Dates