Xponential Fitness: Optimizing Growth with Omnichannel Strategy and Positive Market Outlook
2023-08-04
Xponential Fitness held an earnings call meeting to discuss various aspects of the company, including its earnings, strategic initiatives, growth opportunities, and an upcoming Analyst and Investor Day. One of the most important topics discussed during the meeting was the announcement of an Analyst and Investor Day, scheduled to take place on September 6th at the New York Stock Exchange.
A particularly interesting outcome of the meeting was the focus on Xponential's omnichannel strategy and its impact on customer engagement, same-store sales, and average unit volumes (AUVs). The company has been actively working on enhancing its omnichannel fitness offering by establishing partnerships, refining its XPASS and XPLUS services, and expanding its digital classes.
The XPASS offering has allowed customers to access all 10 of Xponential's brands through a single recurring monthly membership platform, providing flexibility and driving new lead generation for in-studio memberships. Since its inception, over 60,000 bookings have been made on XPASS. To further enhance customer benefits, Xponential plans to introduce an advertising channel within the XPASS app, offering exclusive third-party deals in categories such as mental health, apparel, and healthy foods. This initiative aims to drive incremental lead flow to the company.
A deep-dive analysis of Xponential's omnichannel strategy would involve examining the effectiveness of the XPASS offering in attracting and retaining customers, analyzing the impact of the advertising channel on lead generation and revenue, and evaluating the success of the company's B2B partnerships in expanding its reach. Additionally, it would be important to assess customer feedback and satisfaction with the omnichannel experience, as well as potential challenges and risks associated with this strategy. Overall, understanding the intricacies of Xponential's omnichannel strategy and its impact on various aspects of the business would provide valuable insights into the company's growth and future prospects.
The market outlook for Xponential Fitness appears positive. The company plans to optimize its capital structure through whole business securitization, which would provide cheaper financing. Additionally, Xponential has increased its full-year 2023 guidance for sales revenue and adjusted EBITDA, indicating higher performance. The company expects a record number of new studio openings and increased sales in North America. Both total revenue and adjusted EBITDA are projected to grow year-over-year. Xponential will also focus on integrating new features, maintaining technology investments, and supporting digital offerings. Furthermore, the company has authorized a share repurchase of up to $50 million. Overall, the company's market outlook seems optimistic.
During the meeting, the Chief Financial Officer, John Meloun, highlighted the significance of two key performance indicators (KPIs) in evaluating the company's studio performance. These KPIs are average unit volumes (AUVs) and same-store sales growth.
AUVs are calculated by taking the average quarterly sales activity of all studios that have been operational for at least six months and multiplying it by four to obtain an annualized figure. This calculation excludes studios with zero sales and nontraditional locations. In the second quarter of 2023, the company reported a run rate AUV of 561,000, which encompassed 99% of their North American studios that were older than six months.
Same-store sales growth, another crucial KPI, measures the sales performance of studios with 13 months of continuous sales activity. The company adheres to the industry standard practice for calculating same-store sales. In the second quarter of 2023, Xponential reported a same-store sales growth of 15%.
These KPIs provide valuable insights into the company's overall performance and help assess the effectiveness of their studios.
Xponential Fitness has made significant progress on its strategic initiatives, including optimizing its capital structure through a whole business securitization of its repeating revenue streams. The company has also increased its full-year 2023 guidance for systemwide sales revenue and adjusted EBITDA, reaffirmed guidance for new studio openings, and focused on capital expenditures for integrating new features. Additionally, Xponential has authorized a new share repurchase funded by its lender.
The company's capital spending plans for the year are expected to be around $10 million to $12 million, representing approximately 4% of revenue at the midpoint. These capital expenditures will primarily be allocated towards integrating BFT, implementing new features for XPASS and XPLUS, and maintaining other technology investments to support the company's digital offerings.
The earnings call for Xponential Fitness saw the participation of key individuals, including Anthony Geisler (CEO), Sarah Luna (President), and John Meloun (CFO), along with analysts from prominent financial institutions. This diverse group of participants demonstrates the interest and attention that Xponential Fitness has garnered in the market. The presence of these analysts also highlights the importance of the earnings call as a platform for discussing the company's financial performance and future prospects. Overall, the participation of these key individuals in the call signifies the significance of Xponential Fitness in the industry and the attention it receives from investors and analysts.
The company also discussed its shift in strategy to drive leverage to SG&A expenses and benefit average unit volumes in the long run. Xponential expressed confidence in achieving adjusted EBITDA margins of 35% to 39% by year-end and 40% in 2024. The meeting also focused on the company's fourth growth driver, which involves increasing same-store sales and average unit volumes. Xponential highlighted its strong in-studio performance, B2B partnerships, omnichannel fitness offering, and the success of its XPASS and XPLUS services. XPASS provides access to all 10 of the company's brands on a single membership platform, while XPLUS allows customers to access digital classes at all 10 brands.
Overall, the earnings call meeting provided valuable insights into Xponential Fitness' earnings, strategic initiatives, growth opportunities, and upcoming events. The company's focus on its omnichannel strategy, positive market outlook, and key performance indicators demonstrate its commitment to growth and success in the fitness industry.