Xponential Fitness Inc
For the period ended Jun 30, 2024. Filed Aug 5, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 5, 2024
XPOF$4.65+5.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-06.
0000950170-24-053165
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-05.
0000950170-24-090222
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 106 previous paragraphs and 135 current paragraphs.
59 unchanged; 44 reworded; 21 added; 2 removed; 1 previous and 11 current paragraphs rearranged.
Tables are not compared: 13 previous and 18 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (21)
Current report
Appointment of New Chief Executive Officer and Director
Current report
On May 10, 2024, Mr. Anthony Geisler, our former Chief Executive Officer and member of our board of directors, was removed by our board of directors from his duties and suspended indefinitely as Chief Executive Officer. At that time, our board of directors appointed Ms. Brenda Morris, a member of our board of directors since 2019, to serve as our interim Chief Executive Officer. On May 13, 2024, Mr. Geisler resigned as Chief Executive Officer, effective immediately.
Current report
On June 17, 2024, we announced that our board of directors had unanimously appointed Mr. Mark King as Chief Executive Officer effective June 17, 2024. Mr. King also joined our board of directors. At that time, Ms. Morris ceased serving as interim Chief Executive Officer but continues to serve as a member of our board of directors. Mr. King is a highly innovative, growth-oriented leader with an established track record scaling iconic global consumer brands and franchisors.
Current report
Divestiture of Stride and Row House Brands
Current report
Total revenue. Total revenue was $76.5 million in the three months ended June 30, 2024, compared to $77.3 million in the three months ended June 30, 2023, a decrease of $0.8 million, or 1%. The decrease in total revenue was primarily due to a decrease in other service revenue and merchandise revenue, partially offset by an increase in franchise revenue.
Current report
Costs of product revenue. Costs of product revenue was $12.9 million in the three months ended June 30, 2024, compared to $14.2 million in the three months ended June 30, 2023, a decrease of $1.4 million, or 10%, compared to a decrease in related revenues of 18%. Costs of product revenue as a percentage of related revenue increased to 68% in the three months ended June 30, 2024, from 62% in the comparable prior year period. The increase was due to a current year sales promotion that decreased gross margin and to a $0.5 million increase in write down of slow-moving inventory.
Current report
Impairment of goodwill and other assets. Impairment of goodwill and other assets was $12.1 million in the three months ended June 30, 2024, compared to $7.2 million in the three months ended June 30, 2023, an increase of $4.9 million, or 67%. The increase was primarily due to a write down of franchise agreements and goodwill of $12.1 million related to the CycleBar reporting unit in the current year period compared to a $7.2 million intangible asset write down in the prior year related to the acquisition of 14 Rumble studios.
Current report
Acquisition and transaction income. Acquisition and transaction income was $1.2 million in the three months ended June 30, 2024, compared to $31.3 million in the three months ended June 30, 2023, a decrease of $30.0 million, or 96%. This income primarily represented the non-cash change in contingent consideration related to 2021 business acquisitions, partially offset by a $0.3 increase in contingent consideration related to the Lindora acquisition and $0.1 million of acquisition related expenses in the current year period.
Current report
Other Expense (Income), net
Current report
Six Months Ended June 30, 2024 and 2023
Current report
Revenue
Current report
Merchandise revenue. Merchandise revenue was $14.1 million in the six months ended June 30, 2024, compared to $15.6 million in the six months ended June 30, 2023, a decrease of $1.5 million, or 10%. The decrease was due primarily to a decrease in demand from studios, a current year sales promotion and a lower number of company-owned transition studios in the current year period.
Current report
Franchise marketing fund revenue. Franchise marketing fund revenue was $16.2 million in the six months ended June 30, 2024, compared to $12.8 million in the six months ended June 30, 2023, an increase of $3.4 million, or 26%. The increase was primarily due to an increase in same store sales and an increase in number of operating studios in North America since June 30, 2023 (including studios related to the Lindora acquisition in the first quarter of 2024).
Current report
Other service revenue. Other service revenue was $14.2 million in the six months ended June 30, 2024, compared to $24.0 million in the six months ended June 30, 2023, a decrease of $9.8 million, or 41%. The decrease was primarily due to a $9.3 million decrease in package and memberships revenue due to a lower average number of company-owned transition studios.
Current report
Operating Costs and Expenses
Current report
Impairment of goodwill and other assets. Impairment of goodwill and other assets was $12.1 million in the six months ended June 30, 2024, compared to $7.2 million in the six months ended June 30, 2023, an increase of $4.9 million, or 67%. The increase was primarily due to a write down of franchise agreements and goodwill of $12.1 million related to the CycleBar reporting unit compared to a $7.2 million intangible asset write down in the prior year related to the acquisition of 14 Rumble studios.
Current report
Marketing fund expense. Marketing fund expense was $14.4 million in the six months ended June 30, 2024, compared to $10.5 million in the six months ended June 30, 2023, an increase of $3.9 million, or 37% and is consistent with the increase in franchise marketing fund revenue.
Current report
Other Expense (Income), net
Current report
Other expense. Other expense consists of TRA expense, which was $0.9 million in the six months ended June 30, 2024, compared to $1.3 million in the six months ended June 30, 2023.
Current report
Income Taxes
Current report
Income taxes. Income taxes were (0.5)% of pre-tax book income (loss) in the six months ended June 30, 2024, compared to 0.1% in the six months ended June 30, 2023.
Removed paragraphs (2)
Previous report
Divestiture of Stride brand
Previous report
Other (Income) Expense, net
Reworded paragraphs (44)
Previous wording
Xponential Fitness LLC (“XPO LLC”), the principal operating subsidiary of Xponential Fitness, Inc. (the “Company” or “XPO Inc.,” “we,” “us,” and “our”), is the largest global franchisor of boutique fitness brands. Pursuant to a reorganization into a holding company structure, the Company is a holding company with its principal asset being a 65.7% ownership interest in XPO LLC through its ownership interest in Xponential Intermediate Holdings, LLC (“XPO Holdings”).
Current wording
Xponential Fitness LLC (“XPO LLC”), the principal operating subsidiary of Xponential Fitness, Inc. (the “Company” or “XPO Inc.,” “we,” “us,” and “our”), is the largest global franchisor of boutique fitness brands. Pursuant to a reorganization into a holding company structure, the Company is a holding company with its principal asset being a 66.7% ownership interest in XPO LLC through its ownership interest in Xponential Intermediate Holdings, LLC (“XPO Holdings”).
Previous wording
We operate a diversified platform of ten brands spanning across verticals including Pilates, indoor cycling, barre, stretching, rowing, dancing, boxing, functional training, metabolic health and yoga. In partnership with its franchisees and master franchisees, XPO LLC offers energetic, accessible, and personalized workout experiences led by highly qualified instructors in studio locations throughout North America and internationally, with franchise, master franchise and international expansion agreements in 49 U.S. states and 22 additional countries as of March 31, 2024. The Company's portfolio of brands includes Club Pilates, the largest Pilates brand in the United States; CycleBar, the largest indoor cycling brand in the United States; StretchLab, a concept offering one-on-one and group stretching services; Row House, the largest franchised indoor rowing brand in the United States; AKT, a dance-based cardio workout combining toning, interval and circuit training; YogaSix, the largest franchised yoga brand in the United States; Pure Barre, a total body workout that uses the ballet barre to perform small isometric movements, and the largest barre brand in the United States; Rumble, a boxing-inspired full-body workout; BFT, a functional training and strength-based program; and Lindora, a provider of medically guided wellness and metabolic health solutions, which was acquired on January 2, 2024.
Current wording
We operate a diversified platform of nine brands spanning across verticals including Pilates, indoor cycling, barre, stretching, dancing, boxing, functional training, metabolic health and yoga. In partnership with its franchisees and master franchisees, XPO LLC offers energetic, accessible, and personalized workout experiences led by highly qualified instructors in studio locations throughout North America and internationally, with franchise, master franchise and international expansion agreements in 49 U.S. states, Puerto Rico, and 26 additional countries as of June 30, 2024. The Company's portfolio of brands includes Club Pilates, the largest Pilates brand in the United States; CycleBar, the largest indoor cycling brand in the United States; StretchLab, a concept offering one-on-one and group stretching services; AKT, a dance-based cardio workout combining toning, interval and circuit training; YogaSix, the largest franchised yoga brand in the United States; Pure Barre, a total body workout that uses the ballet barre to perform small isometric movements, and the largest barre brand in the United States; Rumble, a boxing-inspired full-body workout; BFT, a functional training and strength-based program; and Lindora, a provider of medically guided wellness and metabolic health solutions, which was acquired on January 2, 2024.
Previous wording
As of March 31, 2024, 2,724 studios were open in North America and franchisees were contractually committed to open 1,914 additional studios under existing franchise agreements. In addition, as of March 31, 2024, we had 432 studios open internationally and our master franchisees were contractually obligated to sell licenses to franchisees to open an additional 1,045 new studios, of which master franchisees have sold 265 licenses for studios not yet opened as of March 31, 2024.
Current wording
As of June 30, 2024, 2,660 studios were open in North America (consists of Canada, the United States and U.S. territories) and franchisees were contractually committed to open 1,810 additional studios under existing franchise agreements. In addition, as of June 30, 2024, we had 442 studios open internationally and our master franchisees were contractually obligated to sell licenses to franchisees to open an additional 1,048 new studios, of which master franchisees have sold 261 licenses for studios not yet opened as of June 30, 2024.
Previous wording
During the three months ended March 31, 2024 and 2023, we generated revenue outside the United States of $3.1 million and $3.0 million, respectively. As of March 31, 2024 and December 31, 2023, we did not have material assets located outside of the United States. No franchisee accounted for more than 5% of our revenue. We operate in one segment for financial reporting purposes.
Current wording
During the six months ended June 30, 2024 and 2023, we generated revenue outside the United States of $6.6 million and $7.0 million, respectively. As of June 30, 2024 and December 31, 2023, we did not have material assets located outside of the United States. No franchisee accounted for more than 5% of our revenue. We operate in one segment for financial reporting purposes.
Previous wording
On February 13, 2024, we entered into an asset purchase agreement with a buyer, pursuant to which we divested the Stride brand, including the intellectual property, franchise rights and franchise agreements for open studios. The buyer of the Stride brand is a member of management and one of our shareholders. We received no consideration from the divestiture of the Stride brand and will assist the buyer with transition support including cash payments of approximately $0.3 million payable over the 12-month period following divestiture. The divestiture allows us to better focus and utilize our resources on our other brands.
Current wording
On February 13, 2024, we entered into an agreement with a buyer, pursuant to which we divested the Stride brand, including the intellectual property, franchise rights and franchise agreements for open studios. The buyer of the Stride brand is a member of management and one of our shareholders. We received no consideration from the divestiture of the Stride brand and will assist the buyer with transition support including cash payments of approximately $0.3 million payable over the 12-month period following divestiture.
Previous wording
In the third quarter of 2023, we began a restructuring plan that involves exiting company-owned transition studios and other measures designed to reduce costs to achieve our long-term margin goals and focus on pure franchise operations. The plan was approved and initiated in the third quarter of 2023 and is expected to continue throughout 2024; however ultimate timing will depend on lease termination negotiations. During the fourth quarter of 2023 our restructuring plan was expanded due to the addition of Rumble company-owned transition studios to the restructuring plan and a refranchising plan that was terminated by the Company due to the refranchisor’s non-compliance with the franchise agreements and the subsequent closure of certain studios. This refranchise termination resulted in us incurring losses for contract termination expenses, other expenses associated with exiting the studios, and loss contingencies related to the refranchisor’s unpaid payroll. During the three months ended March 31, 2024, we recognized total restructuring charges of $6.9 million, net of gains, primarily for contract termination and other associated costs, loss on lease termination and sale or disposal of assets, and other restructuring charges.
Current wording
In the third quarter of 2023, we began a restructuring plan that involves exiting company-owned transition studios and other measures designed to reduce costs to achieve our long-term margin goals and focus on pure franchise operations. The plan was approved and initiated in the third quarter of 2023 and is expected to continue throughout 2024; however, ultimate timing will depend on lease termination negotiations. During the fourth quarter of 2023, our restructuring plan was expanded due to the addition of Rumble company-owned transition studios to the restructuring plan and a refranchising plan that was terminated by the Company due to the refranchisor’s non-compliance with the franchise agreements and the subsequent closure of certain studios. This refranchise termination resulted in us incurring losses for contract termination expenses, other expenses associated with exiting the studios, and loss contingencies related to the refranchisor’s unpaid payroll. During the three and six months ended June 30, 2024, we recognized total restructuring charges of $2.3 million, net of gains, and $9.2 million, net of gains, respectively, primarily for contract termination and other associated costs, loss on lease terminations and sale or disposal of assets, and other restructuring charges.
Previous wording
We expect to recognize additional restructuring charges throughout 2024 totaling approximately $16.0 million to $20.0 million for rent expense, including amortization of the right-of-use asset and accretion of the operating lease liability, lease termination gains or losses, and other variable lease costs related to company-owned transition studios and other restructuring charges. We are negotiating lease terminations for operating leases for certain studios for which we have lease liabilities recorded and the expected cash payments and expenses to exit the lease may be greater than expected rent expense for that period, depending on the outcome of lease termination negotiations. Cash outflows related to these lease terminations are expected to be incurred throughout 2024.
Current wording
We expect to recognize additional restructuring charges throughout 2024 totaling approximately $13.5 million to $17.0 million for rent expense, including amortization of the right-of-use asset and accretion of the operating lease liability, lease termination gains or losses, and other variable lease costs related to company-owned transition studios and other restructuring charges. We are negotiating lease terminations for operating leases for certain studios for which we have lease liabilities recorded and the expected cash payments and expenses to exit the lease may be greater than expected rent expense for that period, depending on the outcome of lease termination negotiations. Cash outflows related to these lease terminations are expected to be incurred throughout 2024.
Previous wording
The following table sets forth the total number of operating studios in North America for the three months ended March 31, 2024 and 2023:
Current wording
The following table sets forth the total number of operating studios in North America for the three and six months ended June 30, 2024 and 2023:
Previous wording
The following table sets forth the total number of operating studios internationally for the three months ended March 31, 2024 and 2023:
Current wording
The following table sets forth the total number of operating studios internationally for the three and six months ended June 30, 2024 and 2023:
Previous wording
The following table sets forth the total number of operating studios globally for the three months ended March 31, 2024 and 2023:
Current wording
The following table sets forth the total number of operating studios globally for the three and six months ended June 30, 2024 and 2023:
Previous wording
The following table sets forth our key performance indicators for the three months ended March 31, 2024 and 2023:
Current wording
The following table sets forth our key performance indicators for the three and six months ended June 30, 2024 and 2023:
Previous wording
Global franchise licenses sold are presented gross of terminations.
Current wording
Franchise licenses sold are presented gross of terminations.
Previous wording
The following table presents additional information related to our studio and license key performance indicators for the three months ended March 31, 2024 and 2023:
Current wording
The following table presents additional information related to our studio and license key performance indicators for the three and six months ended June 30, 2024 and 2023:
Previous wording
All metrics above are presented on an adjusted basis to reflect historical information of Lindora prior to the acquisition by the Company in January 2024 and on an adjusted basis to remove historical information of Stride prior to the divestiture by the Company in February 2024. All references to these metrics in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” use this same basis of reporting, unless noted otherwise.
Current wording
All metrics above are presented on an adjusted basis to reflect historical information of Lindora prior to the acquisition by the Company in January 2024 and on an adjusted basis to remove historical information for both Stride and Row House prior to their divestitures by the Company in February 2024 and May 2024, respectively. All references to these metrics in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” use this same basis of reporting, unless noted otherwise.
Previous wording
Non-traditional studio locations refers to studios that are not operated as standalone studio locations. There are currently 25 non-traditional studio locations globally, which are comprised of studios operated inside of other fitness facilities and on cruise ships.
Current wording
Non-traditional studio locations refers to studios that are not operated as standalone studio locations. There are currently 24 non-traditional studio locations globally, which are comprised of studios operated inside of other fitness facilities and on cruise ships.
Previous wording
The number of licenses sold in North America and globally reflect the cumulative number of licenses sold by us (or, outside of North America, by our master franchisees), since inception through the date indicated. Licenses contractually obligated to open refer to licenses sold net of opened studios and terminations. Licenses contractually obligated to be sold internationally reflect the number of licenses that master franchisees are contractually obligated to sell to franchisees to open internationally that have not yet opened as of the date indicated. The number of licenses sold is a useful indicator of the number of studios that have opened and that are expected to open in the future, which management reviews in order to monitor and forecast our revenue streams. Of the franchisees that entered into the system in 2021 or later and opened their first studio in 2023 on average it took approximately 15.0 months from signing the franchise agreement to open a studio. Of the franchisees that entered into the system in 2021 or later and opened their first studio in 2022, on average it took approximately 10.5 months from signing the franchise agreement to open a studio. Management also reviews the number of licenses sold globally and the number of licenses contractually obligated to open internationally in order to help forecast studio growth and system-wide sales.
Current wording
The number of licenses sold in North America and globally reflect the cumulative number of licenses sold by us (or, outside of North America, by our master franchisees), since inception through the date indicated. Licenses contractually obligated to open refer to licenses sold net of opened studios and terminations. Licenses contractually obligated to be sold internationally reflect the number of licenses that master franchisees are contractually obligated to sell to franchisees to open internationally that have not yet opened as of the date indicated. The number of licenses sold is a useful indicator of the number of studios that have opened and that are expected to open in the future, which management reviews in order to monitor and forecast our revenue streams. Management also reviews the number of licenses sold globally and the number of licenses contractually obligated to open internationally in order to help forecast studio growth and system-wide sales.
Previous wording
The following table presents our condensed consolidated results of operations for the three months ended March 31, 2024 and 2023:
Current wording
The following table presents our condensed consolidated results of operations for the three and six months ended June 30, 2024 and 2023:
Previous wording
The following table presents our condensed consolidated results of operations for the three months ended March 31, 2024 and 2023 as a percentage of revenue:
Current wording
The following table presents our condensed consolidated results of operations for the three and six months ended June 30, 2024 and 2023 as a percentage of revenue:
Previous wording
Merchandise revenue. Merchandise revenue was $8.2 million in the three months ended March 31, 2024, compared to $7.2 million in the three months ended March 31, 2023, an increase of $1.0 million, or 14%. The increase was due primarily to a higher number of operating studios in the current year period.
Current wording
Merchandise revenue. Merchandise revenue was $5.9 million in the three months ended June 30, 2024, compared to $8.4 million in the three months ended June 30, 2023, a decrease of $2.5 million, or 30%. The decrease was due primarily to a decrease in demand from studios, a current year sales promotion and a lower number of company-owned transition studios in the current year period.
Previous wording
Franchise marketing fund revenue. Franchise marketing fund revenue was $7.8 million in the three months ended March 31, 2024, compared to $6.2 million in the three months ended March 31, 2023, an increase of $1.6 million, or 26%. The increase was primarily due to an increase in same store sales and 318 new studio openings in North America since March 31, 2023 (including studios related to the Lindora acquisition in the first quarter of 2024).
Current wording
Franchise marketing fund revenue. Franchise marketing fund revenue was $8.4 million in the three months ended June 30, 2024, compared to $6.6 million in the three months ended June 30, 2023, an increase of $1.8 million, or 27%. The increase was primarily due to an increase in same store sales and an increase in number of operating studios in North America since June 30, 2023 (including studios related to the Lindora acquisition in the first quarter of 2024).
Previous wording
Other service revenue. Other service revenue was $7.9 million in the three months ended March 31, 2024, compared to $11.3 million in the three months ended March 31, 2023, a decrease of $3.4 million, or 30%. The decrease was primarily due to a $3.0 million decrease in package and memberships revenue due to a lower average number of company-owned transition studios.
Current wording
Other service revenue. Other service revenue was $6.3 million in the three months ended June 30, 2024, compared to $12.8 million in the three months ended June 30, 2023, a decrease of $6.5 million, or 51%. The decrease was primarily due to a $6.3 million decrease in package and memberships revenue due to a lower average number of company-owned transition studios.
Previous wording
Costs of franchise and service revenue. Costs of franchise and service revenue was $5.1 million in the three months ended March 31, 2024, compared to $4.0 million in the three months ended March 31, 2023, an increase of $1.1 million, or 27%. The increase was primarily due to a $0.8 million increase in franchise sales commissions, consistent with the related franchise territory revenue increase.
Current wording
Costs of franchise and service revenue. Costs of franchise and service revenue was $5.8 million in the three months ended June 30, 2024, compared to $3.7 million in the three months ended June 30, 2023, an increase of $2.1 million, or 57%. The increase was primarily due to a $1.5 million increase in franchise sales commissions, consistent with the related franchise territory revenue increase.
Previous wording
Selling, general and administrative expenses. Selling, general and administrative expenses were $37.2 million in the three months ended March 31, 2024, compared to $34.9 million in the three months ended March 31, 2023, an increase of $2.3 million, or 7%. The increase was primarily attributable to restructuring and related charges of $7.9 million in the current year period and a net increase in other variable expenses of $1.9 million, partially offset by a decrease in salaries and wages of $1.1 million related to a lower average number of company-owned transition studios; decrease in occupancy expenses of $1.7 million primarily related to company-owned transition studios; decrease in financial transaction fees and related expenses of $1.4 million; decrease in legal expenses of $1.2 million related to various legal matters and a decrease in equity-based compensation expense of $2.1 million primarily due to a decrease in the number of equity-classified restricted stock units (“RSUs”) outstanding during the current year period and a decrease in the current year common stock price, resulting in lower expense to be recognized on current-year RSU grants.
Current wording
Selling, general and administrative expenses. Selling, general and administrative expenses were $37.0 million in the three months ended June 30, 2024, compared to $37.2 million in the three months ended June 30, 2023, a decrease of $0.2 million, or 1%. The decrease was primarily attributable to a decrease in salaries and wages of $2.9 million related to a lower average number of company-owned transition studios; a decrease in occupancy expenses of $4.0 million primarily related to a decrease in the number of company-owned transition studios; and a decrease in equity-based compensation expense of $1.9 million primarily due to a decrease in the number of equity-classified restricted stock units (“RSUs”) outstanding during the current year period and a decrease in the current year common stock price, resulting in lower expense to be recognized on current-year RSU grants, partially offset by an increase in expense due to $3.5 million mutual termination agreement income related to the acquisition of 14 Rumble studios in the prior year period; an increase in legal expenses of $1.1 million related to various legal matters; restructuring and related charges of $2.3 million in the current year period; loss on disposal of subsidiaries of $1.3 million in the current year period and a net increase in other variable expenses of $0.4 million.
Previous wording
Depreciation and amortization. Depreciation and amortization expense was $4.4 million in the three months ended March 31, 2024, compared to $4.2 million in the three months ended March 31, 2023, an increase of $0.2 million, or 6%. The increase was due primarily to an increase in fixed assets to support our online offerings.
Current wording
Depreciation and amortization. Depreciation and amortization expense was $4.5 million in the three months ended June 30, 2024, compared to $4.3 million in the three months ended June 30, 2023, an increase of $0.2 million, or 5%. The increase was due primarily to an increase in fixed assets to support our online offerings.
Previous wording
Marketing fund expense. Marketing fund expense was $6.5 million in the three months ended March 31, 2024, compared to $5.0 million in the three months ended March 31, 2023, an increase of $1.5 million, or 30% and is consistent with the increase in franchise marketing fund revenue.
Current wording
Marketing fund expense. Marketing fund expense was $7.8 million in the three months ended June 30, 2024, compared to $5.5 million in the three months ended June 30, 2023, an increase of $2.4 million, or 44% and is consistent with the increase in franchise marketing fund revenue.
Previous wording
Interest income. Interest income primarily consists of interest on notes receivable, which was $0.4 million in the three months ended March 31, 2024, compared to $0.6 million in the three months ended March 31, 2023.
Current wording
Interest income. Interest income primarily consists of interest on notes receivable, which was $0.4 million in the three months ended June 30, 2024, compared to $0.5 million in the three months ended June 30, 2023.
Previous wording
Other expense. Other expense consists of TRA expense, which was $0.6 million in the three months ended March 31, 2024, compared to $0.6 million in the three months ended March 31, 2023.
Current wording
Other expense. Other expense consists of TRA expense, which was $0.3 million in the three months ended June 30, 2024, compared to $0.7 million in the three months ended June 30, 2023.
Previous wording
Income tax benefit. Income tax benefit was 1.1% of our share of pre-tax book loss in the three months ended March 31, 2024, compared to 1.0% in the three months ended March 31, 2023.
Current wording
Income taxes. Income taxes were (1.0)% of pre-tax book income (loss) in the three months ended June 30, 2024, compared to 0.5% in the three months ended June 30, 2023.
Previous wording
Total revenue. Total revenue was $79.5 million in the three months ended March 31, 2024, compared to $70.7 million in the three months ended March 31, 2023, an increase of $8.8 million, or 13%. The increase in total revenue was primarily due to an increase in the number of open studios.
Current wording
Total revenue. Total revenue was $156.0 million in the six months ended June 30, 2024, compared to $148.0 million in the six months ended June 30, 2023, an increase of $8.0 million, or 6%. The increase in total revenue was primarily due to an increase in the number of open studios.
Previous wording
Franchise revenue. Franchise revenue was $41.8 million in the three months ended March 31, 2024, compared to $33.0 million in the three months ended March 31, 2023, an increase of $8.8 million, or 27%. Franchise revenue consisted of franchise royalty fees of $27.5 million, franchise territory fees of $7.3 million, technology fees of $4.2 million and training fees of $2.8 million in the three months ended March 31, 2024, compared to franchise royalty fees of $21.6 million, franchise territory fees of $5.2 million, technology fees of $3.6 million and training fees of $2.6 million in the three months ended March 31, 2023. The increase in franchise royalty fees, technology fees and training fees was primarily due to a 9% increase in same store sales and 405 net new studio openings globally since March 31, 2023 (including studios related to the Lindora acquisition in the first quarter of 2024), which also contributed to the increase in franchise territory fees. The increase in franchise territory fees is also attributed to an increase in franchise agreement terminations year-over-year.
Current wording
Franchise revenue. Franchise revenue was $84.8 million in the six months ended June 30, 2024, compared to $68.1 million in the six months ended June 30, 2023, an increase of $16.7 million, or 25%. Franchise revenue consisted of franchise royalty fees of $56.0 million, franchise territory fees of $14.7 million, technology fees of $8.3 million and training fees of $5.8 million in the six months ended June 30, 2024, compared to franchise royalty fees of $44.6 million, franchise territory fees of $10.6 million, technology fees of $7.4 million and training fees of $5.5 million in the six months ended June 30, 2023. The increase in franchise royalty fees, technology fees and training fees was primarily due to an increase in same store sales and an increase in number of operating studios globally since June 30, 2023 (including studios related to the Lindora acquisition in the first quarter of 2024), which also contributed to the increase in franchise territory fees. The increase in franchise territory fees is also attributed to an increase in franchise agreement terminations year-over-year.
Previous wording
Equipment revenue. Equipment revenue was $13.9 million in the three months ended March 31, 2024, compared to $13.1 million in the three months ended March 31, 2023, an increase of $0.8 million, or 6%. Most equipment revenue is recognized in the period when the equipment is installed. Global equipment installations in the three months ended March 31, 2024, totaled 123 compared to 141 in the prior year period, primarily due to the decrease in studio openings compared to the prior year period. The average revenue per installation increased in the three months ended March 31, 2024, when compared to the three months ended March 31, 2023. The increase in average revenue is due to a brand mix and a higher proportion of equipment installed with brands with higher equipment prices.
Current wording
Equipment revenue. Equipment revenue was $26.8 million in the six months ended June 30, 2024, compared to $27.5 million in the six months ended June 30, 2023, a decrease of $0.7 million, or 3%. Most equipment revenue is recognized in the period when the equipment is installed. Global equipment installations in the six months ended June 30, 2024, totaled 251 compared to 279 in the prior year period, primarily due to the decrease in studio openings compared to the prior year period. The average revenue per installation increased in the three months ended June 30, 2024, when compared to the three months ended June 30, 2023. The increase in average revenue is due to brand mix and a higher proportion of equipment installed with brands with higher equipment prices.
Previous wording
Costs of product revenue. Costs of product revenue was $14.4 million in the three months ended March 31, 2024, compared to $14.0 million in the three months ended March 31, 2023, an increase of $0.4 million, or 3%, compared to an increase in related revenues of 9%. Costs of product revenue as a percentage of related revenue decreased to 65% in the three months ended March 31, 2024, from 69% in the comparable prior year period. The decrease was due to a higher percentage of non-branded merchandise revenue in 2024 for which we earn a commission with no corresponding cost of revenue.
Current wording
Costs of product revenue. Costs of product revenue was $27.3 million in the six months ended June 30, 2024, compared to $28.3 million in the six months ended June 30, 2023, a decrease of $1.0 million, or 4%, compared to a decrease in related revenues of 5%. Costs of product revenue as a percentage of related revenue increased to 67% in the six months ended June 30, 2024, from 66% in the comparable prior year period. The increase was due to a current year sales promotion that decreased gross margin and to a $0.5 million increase in write down of slow-moving inventory partially offset by a higher percentage of non-branded merchandise revenue in 2024 for which we earn a commission with no corresponding cost of revenue.
Previous wording
Acquisition and transaction expense. Acquisition and transaction expense was $4.5 million in the three months ended March 31, 2024, compared to $15.7 million in the three months ended March 31, 2023, a decrease of $11.2 million, or 71%. This expense primarily represents the non-cash change in contingent consideration related to 2017 and 2021 business acquisitions and $0.4 million of acquisition related expenses in the current year period.
Current wording
Acquisition and transaction expense (income). Acquisition and transaction expense was $3.3 million in the six months ended June 30, 2024, compared to income of $15.5 million in the six months ended June 30, 2023, an increase to expense of $18.8 million, or 121%. This expense primarily represents the non-cash change in contingent consideration related to 2021 and 2024 business acquisitions and $0.5 million of acquisition related expenses in the current year period.
Previous wording
Interest expense. Interest expense was $11.6 million in the three months ended March 31, 2024 compared to $8.0 million in the three months ended March 31, 2023, an increase of $3.6 million, or 45%. Interest expense consists of interest on long-term debt, accretion of earn-out liabilities and amortization of deferred loan costs and debt discount. The increase in interest expense is due to higher average debt balances and higher interest rates in the current year period and to a $0.2 million increase in write off of debt issuance costs and debt discount related to credit agreement amendments.
Current wording
Interest expense. Interest expense was $22.8 million in the six months ended June 30, 2024 compared to $16.6 million in the six months ended June 30, 2023, an increase of $6.2 million, or 37%. Interest expense consists of interest on long-term debt, accretion of earn-out liabilities and amortization of deferred loan costs and debt discount. The increase in interest expense is due to higher average debt balances and higher interest rates in the current year period and to a $0.2 million increase in write off of debt issuance costs and debt discount related to credit agreement amendments.
Previous wording
We define adjusted EBITDA as EBITDA (net income/loss before interest, taxes, depreciation and amortization), adjusted for the impact of certain non-cash and other items that we do not consider in our evaluation of ongoing operating performance. These items include equity-based compensation and related employer payroll taxes, acquisition and transaction expenses (income) (including change in contingent consideration and transaction bonuses), litigation expenses (consisting of legal and related fees for specific proceedings that arise outside of the ordinary course of our business), fees for financial transactions, such as secondary public offering expenses for which we do not receive proceeds (including bonuses paid to executives related to completion of such transactions) and other contemplated corporate transactions, expense related to the remeasurement of our TRA obligation, loss on brand divestiture, and restructuring and related charges incurred in connection with our restructuring plan that we do not believe reflect our underlying business performance and affect comparability. EBITDA and adjusted EBITDA are also frequently used by analysts, investors and other interested parties to evaluate companies in our industry.
Current wording
We define adjusted EBITDA as EBITDA (net income/loss before interest, taxes, depreciation and amortization), adjusted for the impact of certain non-cash and other items that we do not consider in our evaluation of ongoing operating performance. These items include equity-based compensation and related employer payroll taxes, acquisition and transaction expenses (income) (including change in contingent consideration and transaction bonuses), litigation expenses (consisting of legal and related fees for specific proceedings that arise outside of the ordinary course of our business), fees for financial transactions, such as secondary public offering expenses for which we do not receive proceeds (including bonuses paid to executives related to completion of such transactions) and other contemplated corporate transactions, expense related to the remeasurement of our TRA obligation, expense related to loss on impairment or write down of goodwill and other assets, loss on brand divestiture, executive transition costs (consisting of costs associated with the transition of our former CEO, such as professional services, legal fees, executive recruiting costs and other related costs), one-time costs associated with rebranding one studio to the KINRGY brand, and restructuring and related charges incurred in connection with our restructuring plan that we do not believe reflect our underlying business performance and affect comparability. EBITDA and adjusted EBITDA are also frequently used by analysts, investors and other interested parties to evaluate companies in our industry.
Previous wording
The following table presents a reconciliation of net loss, the most directly comparable financial measure calculated in accordance with GAAP, to adjusted EBITDA for the three months ended March 31, 2024 and 2023:
Current wording
The following table presents a reconciliation of net loss, the most directly comparable financial measure calculated in accordance with GAAP, to adjusted EBITDA for the three and six months ended June 30, 2024 and 2023:
Previous wording
As of March 31, 2024, we had $16.7 million of cash and cash equivalents, excluding $10.5 million of restricted cash consisting of marketing fund restricted cash and a guarantee of standby letter of credit.
Current wording
As of June 30, 2024, we had $15.0 million of cash and cash equivalents, excluding $11.0 million of restricted cash consisting of marketing fund restricted cash and a guarantee of standby letter of credit.
Previous wording
The total principal amount outstanding on the Term Loans was $331.4 million at March 31, 2024. See Note 8 of Notes to Condensed Consolidated Financial Statements for additional information about our debt.
Current wording
The total principal amount outstanding on the Term Loans was $330.1 million at June 30, 2024. See Note 8 of Notes to Condensed Consolidated Financial Statements for additional information about our debt.
Previous wording
The following table presents summary cash flow information for the three months ended March 31, 2024 and 2023:
Current wording
The following table presents summary cash flow information for the six months ended June 30, 2024 and 2023:
Previous wording
In the three months ended March 31, 2024, cash provided by operating activities was $2.7 million, compared to $11.4 million in the three months ended March 31, 2023, a decrease in cash provided of $8.7 million. Of the decrease, $4.1 million was due to lower net income after adjustments to reconcile net loss to net cash provided by operating activities and $4.5 million in unfavorable changes in working capital related to deferred revenue, accrued expenses, other liabilities, and accounts receivable, partially offset by favorable changes in working capital related to prepaid expenses and other current assets, other current liabilities, inventories, and accounts payable in the three months ended March 31, 2024, compared to the three months ended March 31, 2023.
Current wording
In the six months ended June 30, 2024, cash provided by operating activities was $5.7 million, compared to $30.6 million in the six months ended June 30, 2023, a decrease in cash provided of $24.9 million. Of the decrease, $15.6 million was due to lower net income after adjustments to reconcile net income/loss to net cash provided by operating activities and $9.3 million in unfavorable changes in working capital related to deferred revenue, accounts payable, other liabilities, and accrued expenses, partially offset by favorable changes in working capital related to prepaid expenses and other current assets, deferred costs, inventories, and other current liabilities in the six months ended June 30, 2024, compared to the six months ended June 30, 2023.
Showing the first 40 of 44 pairs. Open the source sections for the rest.
Rearranged current paragraphs (11)
Current report — wording carried from elsewhere
On May 20, 2024, we entered into an agreement with a buyer, pursuant to which we divested the Row House brand, including the intellectual property, franchise rights and franchise agreements for open studios, and retained certain liabilities, including liabilities related to known litigation, pre-litigation, and disputes as of the closing of the divestiture. We received no consideration from the divestiture of the Row House brand.
Current report — wording carried from elsewhere
These divestitures allow us to better focus and utilize our resources on our other brands.
Current report — wording carried from elsewhere
Franchise revenue. Franchise revenue was $43.0 million in the three months ended June 30, 2024, compared to $35.1 million in the three months ended June 30, 2023, an increase of $7.9 million, or 22%. Franchise revenue consisted of franchise royalty fees of $28.5 million, franchise territory fees of $7.4 million, technology fees of $4.2 million and training fees of $2.9 million in the three months ended June 30, 2024, compared to franchise royalty fees of $23.0 million, franchise territory fees of $5.4 million, technology fees of $3.8 million and training fees of $2.9 million in the three months ended June 30, 2023. The increase in franchise royalty fees and technology fees was primarily due to an increase in same store sales and an increase in number of operating studios globally since
Current report — wording carried from elsewhere
June 30, 2023 (including studios related to the Lindora acquisition in the first quarter of 2024), which also contributed to the increase in franchise territory fees. The increase in franchise territory fees is also attributed to an increase in franchise agreement terminations year-over-year.
Current report — wording carried from elsewhere
Equipment revenue. Equipment revenue was $12.9 million in the three months ended June 30, 2024, compared to $14.4 million in the three months ended June 30, 2023, a decrease of $1.5 million, or 10%. Most equipment revenue is recognized in the period when the equipment is installed. Global equipment installations in the three months ended June 30, 2024, totaled 128 compared to 138 in the prior year period, primarily due to the decrease in studio openings compared to the prior year period. The average revenue per installation decreased in the three months ended June 30, 2024, when compared to the three months ended June 30, 2023. The decrease in average revenue was due to brand mix and a higher proportion of equipment installed with brands with lower equipment prices.
Current report — wording carried from elsewhere
Interest expense. Interest expense was $11.3 million in the three months ended June 30, 2024 compared to $8.6 million in the three months ended June 30, 2023, an increase of $2.6 million, or 31%. Interest expense consists of interest on long-term debt, accretion of earn-out liabilities and amortization of deferred loan costs and debt discount. The increase in interest expense is due to higher average debt balances and higher interest rates in the current year period.
Current report — wording carried from elsewhere
The following is a discussion of our consolidated results of operations for the six months ended June 30, 2024 versus the six months ended June 30, 2023.
Current report — wording carried from elsewhere
Costs of franchise and service revenue. Costs of franchise and service revenue was $11.0 million in the six months ended June 30, 2024, compared to $7.7 million in the six months ended June 30, 2023, an increase of $3.2 million, or 41%. The increase was primarily due to a $2.4 million increase in franchise sales commissions, consistent with the related franchise territory revenue increase.
Current report — wording carried from elsewhere
Selling, general and administrative expenses. Selling, general and administrative expenses were $74.1 million in the six months ended June 30, 2024, compared to $72.1 million in the six months ended June 30, 2023, an increase of $2.0 million, or 3%. The increase was primarily attributable to restructuring and related charges of $10.2 million in the current year period; an increase in professional services, including consulting and recruiting fees, of $2.3 million; an increase in expense due to $3.5 million mutual termination agreement income related to the acquisition of 14 Rumble studios in the prior year period and a loss on disposal of subsidiaries of $1.5 million in the current year period, partially offset by a decrease in salaries and wages of $4.0 million related to a lower average number of company-owned transition studios; a decrease in occupancy expenses of $5.7 million primarily due to a decrease in the number of company-owned transition studios; a decrease in financial transaction fees and related expenses of $1.0 million; a decrease in equity-based compensation expense of $4.0 million primarily due to a decrease in the number of equity-classified RSUs outstanding during the current year period and a decrease in the current year common stock price, resulting in lower expense to be recognized on current-year RSU grants; and a net decrease in other variable expenses of $0.8 million.
Current report — wording carried from elsewhere
Depreciation and amortization. Depreciation and amortization expense was $9.0 million in the six months ended June 30, 2024, compared to $8.5 million in the six months ended June 30, 2023, an increase of $0.5 million, or 6%. The increase was due primarily to an increase in fixed assets to support our online offerings.
Current report — wording carried from elsewhere
Interest income. Interest income primarily consists of interest on notes receivable, which was $0.8 million in the six months ended June 30, 2024, compared to $1.2 million in the six months ended June 30, 2023.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
Beginning in the quarter ended June 30, 2023, we introduced an additional definition for studios no longer operating to better capture the composition of our studios in operation. A studio is considered no longer operating and excluded from the total number of studios in operation if it has no sales for nine consecutive months or more. If a studio deemed to be no longer operating subsequently generates sales at a future date, it re-enters the operating studio count (and the number of studios no longer operating is reduced). All prior periods presented have been updated to reflect this additional definition.