Xponential Fitness conducted their third quarter 2024 earnings call on November 7, 2024, at 4:30 p.m. ET. The call featured prepared remarks and a Q&A session with key executives. Avery Wannemacher from investor relations introduced the call, joined by Mark King, CEO, John Meloun, CFO, and Sarah Luna, President, available for questions. The call included cautionary notes on forward-looking statements and non-GAAP measures.
Mark King discussed his initial observations and three main positive takeaways from his first 100 days as CEO. He emphasized the value members find in Xponential’s offerings, strong domestic and international growth, and the robustness of the business model despite current challenges. King also outlined several challenges, including infrastructure and process development, cultural shifts towards marketing and operations, and capital allocation decisions. His vision encompasses five key pillars: becoming the franchiser of choice, enhancing member experiences, leveraging data-driven strategies, fostering innovation, and expanding internationally.
He highlighted the importance of supporting franchisees and shared ambitions for technological improvements to enhance the member journey. John Meloun provided a detailed financial overview for the quarter, noting an 8% increase in North American average unit volumes and a 21% increase in systemwide sales, predominantly driven by greater membership and new studio openings. Xponential ended the quarter with 3,178 global studios, with an expectation of ending the year with a high closure rate but lower in future years. Franchise and equipment revenues increased, while merchandise revenues saw a decline as inventory was reduced.
Operating expenses grew, primarily due to restructuring costs, legal fees, and marketing fund obligations. The company reported a net loss but pointed to adjusted EBITDA growth of 17%, indicating stronger profitability. Looking forward, the company lowered guidance for new studio openings in 2024 but maintained expectations for revenue and adjusted EBITDA. Strategic investments aimed at franchisee success are expected to enhance operational efficiency and profitability.
The Q&A opened by the operator covered topics such as potential divestitures, regional focus in expansion efforts, and operational and member experiences across brands. King expressed support for each brand under Xponential, emphasizing operational improvements and growth opportunities, particularly with successful partners in international markets. John Meloun clarified expectations around costs and revenues and noted a focus on supporting franchisee success from the outset. Overall, the call highlighted Xponential Fitness's strategic focus on refinement and disciplined growth, aimed at sustaining profitability and expanding its international footprint.
The leadership is committed to enhancing operational practices and fostering a culture of innovation to drive member satisfaction and franchisee profitability.
