Xponential Fitness, Inc. (XPOF) Bundle
Understanding Xponential Fitness, Inc. (XPOF) Revenue Streams
Understanding Xponential Fitness, Inc.’s Revenue Streams
As of the third quarter of 2024, Xponential Fitness, Inc. reported total revenue of $80.5 million, which is a slight increase from $80.4 million in the prior year period. This growth is attributed to increases in franchise and equipment revenues, offset by a decline in other service revenue.
Breakdown of Primary Revenue Sources
The revenue streams can be categorized as follows:
| Revenue Source | Q3 2024 Revenue | Q3 2023 Revenue |
|---|---|---|
| Franchise Revenue | $44.5 million | $36.4 million |
| Equipment Revenue | $14.7 million | $12.6 million |
| Merchandise Revenue | $6.5 million | $8.5 million |
| Franchise Marketing Fund Revenue | $8.6 million | $6.9 million |
| Other Service Revenue | $6.2 million | $16.0 million |
Year-over-Year Revenue Growth Rate
In terms of year-over-year growth, the company experienced a 21% increase in North America system-wide sales, reaching $431.2 million in Q3 2024. However, the overall revenue growth was modest, reflecting a 0.1% increase in total revenue compared to the same period last year.
Contribution of Different Business Segments to Overall Revenue
The contribution of different segments to the total revenue in Q3 2024 is detailed below:
| Segment | Revenue Contribution |
|---|---|
| Franchise Revenue | 55.3% |
| Equipment Revenue | 18.2% |
| Merchandise Revenue | 8.1% |
| Franchise Marketing Fund Revenue | 10.7% |
| Other Service Revenue | 7.7% |
Analysis of Significant Changes in Revenue Streams
The most notable change in revenue streams was the significant decline in other service revenue, which decreased by $9.8 million primarily due to a strategic shift away from company-owned transition studios. This shift reflects a broader focus on franchising as the primary growth driver for the company.
The franchise revenue saw significant growth, increasing by 22% year-over-year, which underscores the effectiveness of the franchise model in driving sales. Equipment revenue also increased, indicating strong demand for fitness equipment among franchisees and consumers.
A Deep Dive into Xponential Fitness, Inc. (XPOF) Profitability
A Deep Dive into Xponential Fitness, Inc.'s Profitability
Gross Profit Margin: For the third quarter of 2024, the gross profit margin stood at 20.5%, a decrease from 26.8% in the same period of 2023. This decline reflects increased costs associated with franchise and service revenue.
Operating Profit Margin: The operating profit margin for Q3 2024 was -8.0%, down from 9.3% in Q3 2023. This shift indicates challenges in managing operational expenses amid rising costs.
Net Profit Margin: The net profit margin for the same quarter revealed a loss margin of -22.3%, compared to a profit margin of 6.5% in Q3 2023. This significant change is driven by higher litigation and restructuring expenses.
Trends in Profitability Over Time
Net Income (Loss): The company reported a net loss of $17.97 million in Q3 2024, worsening from a net loss of $5.18 million in Q3 2023. This trend highlights the ongoing profitability challenges faced by the company.
Adjusted EBITDA: Adjusted EBITDA for Q3 2024 was $31.0 million, reflecting a growth of 17% from $26.5 million in Q3 2023. This improvement indicates a potential for operational efficiency despite overall losses.
Comparison of Profitability Ratios with Industry Averages
The average gross margin in the fitness industry is approximately 30%, indicating that Xponential Fitness, Inc. is underperforming in this area. The operating margin average for the industry is around 10%, further illustrating the operational challenges faced by the company.
Analysis of Operational Efficiency
Cost Management: Total operating costs for Q3 2024 were $86.9 million, compared to $72.9 million in Q3 2023. The increase in costs is mainly attributed to higher selling, general, and administrative expenses, which rose to $46.2 million from $43.9 million.
Gross Margin Trends: The gross profit for Q3 2024 was $16.5 million, reflecting a decrease compared to $21.5 million in Q3 2023. This decline in gross profit is indicative of rising costs in both product and service revenues.
| Metric | Q3 2024 | Q3 2023 | Industry Average |
|---|---|---|---|
| Gross Profit Margin | 20.5% | 26.8% | 30% |
| Operating Profit Margin | -8.0% | 9.3% | 10% |
| Net Profit Margin | -22.3% | 6.5% | N/A |
| Adjusted EBITDA | $31.0 million | $26.5 million | N/A |
| Total Operating Costs | $86.9 million | $72.9 million | N/A |
Debt vs. Equity: How Xponential Fitness, Inc. (XPOF) Finances Its Growth
Debt vs. Equity: How Xponential Fitness, Inc. Finances Its Growth
Xponential Fitness, Inc. has been navigating its financial landscape with a combination of debt and equity financing. As of September 30, 2024, the company reported a total long-term debt of $353.8 million and approximately $37.8 million in cash, cash equivalents, and restricted cash.
Overview of the Company's Debt Levels
The company's financial strategy includes both long-term and short-term debt. The total liabilities reported amount to $595.5 million. This figure includes redeemable convertible preferred stock, which has implications for equity holders, as it may affect the overall capital structure and future dilution of shares.
Debt-to-Equity Ratio and Comparison to Industry Standards
The debt-to-equity ratio for Xponential Fitness is calculated using the total debt and total equity figures. As of September 30, 2024, the company's total stockholders' deficit was reported at $(155.7 million). Therefore, the debt-to-equity ratio can be approximated as follows:
- Total Debt: $353.8 million
- Total Equity: $(155.7 million)
- Debt-to-Equity Ratio: 2.27 (indicating a high reliance on debt financing compared to equity)
This ratio is notably higher than the industry average, which typically ranges around 1.0 to 1.5 for similar companies in the fitness and wellness sector, suggesting that Xponential Fitness is heavily leveraged.
Recent Debt Issuances, Credit Ratings, or Refinancing Activity
Recently, the company has been active in managing its debt profile. The interest expense for the third quarter of 2024 was reported at $11.4 million, reflecting the costs associated with its existing debt. This indicates the company's ongoing commitment to servicing its debt obligations.
How the Company Balances Between Debt Financing and Equity Funding
Xponential Fitness has strategically balanced its growth through a mix of debt and equity funding. The issuance of convertible preferred stock, which totaled $116.8 million as of September 30, 2024, plays a crucial role in this strategy. The company has opted for debt financing to fund its expansion while managing the dilution of equity through careful issuance of preferred shares.
| Financial Metric | Amount |
|---|---|
| Total Long-term Debt | $353.8 million |
| Total Cash and Cash Equivalents | $37.8 million |
| Total Liabilities | $595.5 million |
| Total Stockholders' Deficit | $(155.7 million) |
| Debt-to-Equity Ratio | 2.27 |
| Interest Expense (Q3 2024) | $11.4 million |
| Convertible Preferred Stock | $116.8 million |
This financial structure reflects the company's approach to leveraging debt for growth while managing risks associated with high leverage. The balance between equity and debt financing is critical for sustaining its operational and expansion strategies in a competitive market.
Assessing Xponential Fitness, Inc. (XPOF) Liquidity
Assessing Liquidity and Solvency
Current and Quick Ratios
As of September 30, 2024, the current ratio for Xponential Fitness, Inc. stood at 1.02, calculated as total current assets of $95.6 million divided by total current liabilities of $94.1 million. The quick ratio, which excludes inventories, was approximately 0.84, indicating the company has $85.0 million in liquid assets (current assets minus inventories of $10.6 million) against its current liabilities.
Working Capital Trends
The working capital, defined as current assets minus current liabilities, is approximately $1.43 million. This represents a slight decrease from the previous period, suggesting potential challenges in maintaining liquidity.
Cash Flow Statements Overview
In the nine months ended September 30, 2024, the cash flows from operating activities reported a net cash inflow of $10.9 million. The cash flow from investing activities was a net outflow of $13.9 million, primarily due to purchases of property and equipment of $4.8 million and acquisition of business of $8.5 million. Cash flows from financing activities generated a net inflow of $3.7 million.
| Cash Flow Category | Amount (in millions) |
|---|---|
| Operating Cash Flow | 10.9 |
| Investing Cash Flow | (13.9) |
| Financing Cash Flow | 3.7 |
Potential Liquidity Concerns or Strengths
The company holds approximately $37.8 million in cash and cash equivalents as of September 30, 2024. However, with total long-term debt amounting to $353.8 million, there is a significant debt burden that could impact liquidity. The net cash provided by operating activities is a positive sign, but the ongoing net losses, with a reported net loss of $18.0 million for Q3 2024, raise concerns about the sustainability of cash flows in the future.
Overall, while the current and quick ratios indicate a reasonable liquidity position, the negative working capital and substantial debt levels could pose challenges moving forward.
Is Xponential Fitness, Inc. (XPOF) Overvalued or Undervalued?
Valuation Analysis
To assess whether the company is overvalued or undervalued, we will examine key financial ratios, stock price trends, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The P/E ratio for the company is currently not available due to the company reporting a net loss of $17.97 million in Q3 2024, resulting in a basic loss per share of $(0.29).
Price-to-Book (P/B) Ratio
The company's P/B ratio is also not available as it has a total stockholders’ deficit of $(155.71 million). This indicates that the company has more liabilities than assets, making the P/B ratio not applicable.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is currently calculated based on the latest Adjusted EBITDA of $31.0 million. The enterprise value is derived from the total liabilities of $595.51 million. With these figures, the EV/EBITDA ratio is approximately 19.22.
Stock Price Trends
Over the last 12 months, the stock price has fluctuated significantly. As of the end of Q3 2024, the stock price trend shows a decline of approximately 40% from its peak earlier in the year.
Dividend Yield and Payout Ratios
The company has a quarterly dividend payment of $1.9 million related to its Convertible Preferred Stock. Given the net loss, the dividend payout ratio is not applicable as the company does not have positive net income to distribute dividends from.
Analyst Consensus on Stock Valuation
Analyst consensus currently shows a majority rating of hold for the stock, with some analysts suggesting it could be a buy at lower price points.
| Metric | Value |
|---|---|
| P/E Ratio | Not Available |
| P/B Ratio | Not Available |
| EV/EBITDA | 19.22 |
| Net Loss (Q3 2024) | $17.97 million |
| Stock Price Decline (12 Months) | 40% |
| Quarterly Dividend Payment | $1.9 million |
| Analyst Consensus | Hold |
Key Risks Facing Xponential Fitness, Inc. (XPOF)
Key Risks Facing Xponential Fitness, Inc.
The financial health of Xponential Fitness, Inc. is influenced by a variety of internal and external risk factors. Understanding these risks is crucial for investors looking to gauge the company’s future performance.
Industry Competition
The boutique fitness industry is highly competitive, with numerous players vying for market share. This intense competition can lead to pricing pressures and reduced margins. In Q3 2024, the company reported a net loss of $18.0 million, highlighting the challenges faced amidst a competitive landscape.
Regulatory Changes
Changes in regulations related to health and wellness, labor laws, and franchise operations can pose significant risks. Compliance costs can increase, impacting profitability. As of September 30, 2024, the company held approximately $353.8 million in long-term debt, which could be affected by regulatory changes that may alter borrowing costs.
Market Conditions
Economic downturns can adversely affect consumer spending on fitness services. Despite a 21% year-over-year increase in system-wide sales to $431.2 million in Q3 2024, any economic instability could reverse these gains.
Operational Risks
Operational challenges, including franchisee performance and studio management, can impact revenue. The company reported a decline in other service revenue by $9.8 million due to a strategic shift away from company-owned transition studios.
Financial Risks
Financial risks include significant operating costs and the burden of debt. The company’s total operating costs and expenses were $86.9 million in Q3 2024, leading to an operating loss of $6.4 million.
Strategic Risks
Strategic decisions, such as acquisitions and expansions, carry inherent risks. The company recently incurred $8.9 million in litigation expenses and $5.6 million related to acquisition costs, reflecting the complexities of strategic growth.
Mitigation Strategies
The company aims to mitigate risks through various strategies, including focusing on franchisee success and managing operational costs. As part of its operational strategy, Xponential Fitness plans to open between 490 to 510 new studios in 2024, a 10% decrease from prior guidance.
| Risk Factor | Description | Impact | Mitigation Strategy |
|---|---|---|---|
| Industry Competition | High competition in the boutique fitness sector | Pricing pressures, reduced margins | Focus on franchisee success |
| Regulatory Changes | Changes in health and labor regulations | Increased compliance costs | Monitor regulatory landscape |
| Market Conditions | Economic downturn affecting consumer spending | Potential revenue decline | Diverse revenue streams |
| Operational Risks | Franchisee performance and studio management | Impact on revenue | Enhance franchise support |
| Financial Risks | High operating costs and debt burden | Reduced profitability | Cost management initiatives |
| Strategic Risks | Risks associated with acquisitions | Financial losses from unsuccessful deals | Thorough due diligence |
Future Growth Prospects for Xponential Fitness, Inc. (XPOF)
Future Growth Prospects for Xponential Fitness, Inc.
Analysis of Key Growth Drivers
Key growth drivers for Xponential Fitness, Inc. include:
- Product Innovations: The company continues to enhance its offerings through new fitness programs and technologies aimed at improving customer engagement and retention.
- Market Expansions: Xponential is focused on expanding its footprint across North America and internationally, with a target of opening between 490 to 510 new studios in 2024, although this represents a 10% decrease compared to 2023.
- Acquisitions: Strategic acquisitions, such as the recent Rumble acquisition, are anticipated to bolster the company’s brand portfolio and expand its customer base.
Future Revenue Growth Projections and Earnings Estimates
For 2024, the projected revenue range is between $310.0 million to $320.0 million, which indicates a slight decline of 1% at the midpoint compared to 2023. However, North America system-wide sales are expected to increase by 22% to a range of $1.705 billion to $1.715 billion.
Adjusted EBITDA for 2024 is projected to be between $120.0 million to $124.0 million, reflecting an increase of 16% at the midpoint from the previous year.
Strategic Initiatives or Partnerships that May Drive Future Growth
Strategic initiatives include:
- Franchise Expansion: Xponential has sold 84 franchise licenses and opened 125 gross new studios in Q3 2024, which supports its growth strategy.
- Partnerships: Collaborations with fitness technology companies to integrate advanced tracking and engagement tools into its offerings.
Competitive Advantages that Position the Company for Growth
Xponential Fitness benefits from several competitive advantages:
- Diverse Brand Portfolio: The company operates a diversified platform of nine brands, catering to various fitness preferences.
- Strong Franchise Model: Xponential’s franchise model allows for rapid expansion with lower capital expenditure compared to company-owned studios.
- Market Penetration: With a growing customer base of 827,000 members, Xponential is well-positioned to capture additional market share.
Financial Performance Overview
| Financial Metric | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Total Revenue | $80.5 million | $80.4 million | 0.1% |
| System-wide Sales | $431.2 million | $356.0 million | 21% |
| Adjusted EBITDA | $31.0 million | $26.5 million | 17% |
| Net Loss | $(18.0) million | $(5.2) million | Increase |
As of September 30, 2024, the company reported total long-term debt of $353.8 million and net cash provided by operating activities of $10.9 million for the nine months ended September 30, 2024.
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Resources:
- Xponential Fitness, Inc. (XPOF) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Xponential Fitness, Inc. (XPOF)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Xponential Fitness, Inc. (XPOF)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.