Xponential Fitness Inc. has whipped its business into tip-top shape, as the fast-growing fitness franchisor makes plans to go public with a reported $1.3 billion valuation.
The Irvine-based holder of nine fitness brands, established in 2017, in late June filed plans for an initial public offering. It expects to trade on the New York Stock Exchange under the ticker “XPOF.”
The public listing comes as Xponential continues to aggressively grow its footprint of more than 1,750 boutique studios across nine fitness brands; nearly another 1,400 studios are currently in the pipeline, according to regulatory filings.
The IPO underscores the tailwinds facing companies in the health and wellness space.
The boutique fitness industry’s market opportunity totaled some $21.1 billion in 2019, fell to $8.8 billion in 2020, and is expected to recover to $22.1 billion by 2022, according to industry data cited by the company in its paperwork for the IPO.
The industry’s market opportunity is expected to reach $26.2 billion by 2025, according to that research.
The proposed IPO, with a $100 million placeholder until pricing terms are set, would make good on Xponential’s prior discussions to go public early last year, plans which were quickly shelved due to the onset of the pandemic.
Fitness Hub
The public listing would solidify Xponential’s growing stature in the local fitness market. A number of major gym operators and fitness industry execs call Orange County home.
Xponential is already the largest fitness operator based in OC by door count, with more than double the number of locations and three times the number of brands than its closest OC competitor, Irvine-based Fitness International LLC—parent to the LA Fitness, Esporta Fitness and City Sports Club brands—which has more than 730 locations.
Xponential still trails the big-box chain in revenue by a significant amount.
Privately held Fitness International, the country’s largest gym operator by revenue, is estimated to have brought in close to $2 billion annually pre-pandemic, according to trade industry data.
Xponential’s revenue, by comparison, is about a quarter of that figure.
Xponential’s bid to go public highlights a shift that’s been taking place among gyms and fitness centers the past several years, as more curated classes and personable instructors replace spartan real estate boxes filled with workout equipment.
The average size of an Xponential location typically runs between 1,000 and 2,500 square feet.
LA Fitness’ flagship gym at the Park Place campus in Irvine runs about 45,000 square feet; the chain’s other spots in the area—which often include dedicated studios for Pilates, stretch work, cycling and other types of exercises that Xponential offers at stand-alone retail locations—are larger.
Scale
Xponential’s growth story is based on an aggressive franchising strategy and an eye for acquisitions.
To date, it has made nine buys, deals which executives say have been as disciplined as the workout routines it touts.
“We’re always focused on the same thing, which is growing our business, and the only way for us to grow our business is to grow the franchisees’ business,” founder and CEO Anthony Geisler told the Business Journal in May.
Geisler, 45, was one of five executives the Business Journal honored earlier this year with an Excellence in Entrepreneurship Award. His stake in the company was not disclosed in the IPO documents.
Xponential last year had systemwide sales of $442 million, down from $560 million in 2019, according to the company’s regulatory filings.
The company reported a net loss of $14 million in 2020, continuing a trend of narrowed losses each year since 2018. It counted an accumulated deficit of $112.2 million as of March, and is carrying nearly $200 million in debt.
A portion of the IPO’s proceeds are expected to pay off some of the company’s debt.
Looking for More
The company’s portfolio includes Club Pilates, CycleBar, StretchLab, Row House, AKT, YogaSix, Pure Barre, Stride and Rumble.
COVID-19 was still a factor in the beginning of the year with Xponential’s first quarter generating systemwide sales of $132 million, down from $160 million a year ago.
The company noted in SEC filings that the impact of the pandemic has “gradually begun to decrease in 2021” and “we expect that the industry will recover as a result of growing consumer interest in health and wellness post-pandemic.”
That would support the 1,391 studios in North America franchisees were already committed to as of March 31.
New York boxing concept Rumble was Xponential’s most recent deal, made in March of this year. The company said that 14 additional licenses have already been sold for new locations as of the end of March for the 13-studio brand.
Geisler told the Business Journal earlier this year that the company was in the market looking to add a 10th brand, one that “makes sense” and wouldn’t’ compete against its existing portfolio.
Another purchase is “definitely a possibility” this year, he said.
Digital
As some consumers ease back into the routine of in-person workouts, Xponential has continued to bolster its digital offering for those looking to continue their workouts virtually.
In fact, digital is what allowed the company to continue pushing a branded experience, even in the midst of the pandemic.
“It allowed us to really weather the storm for COVID, but we feel very confident in our brick-and-mortar locations mostly because we know that humans are communal people and like to be in that community and be out and about,” President Sarah Luna told the Business Journal in January, when she was promoted to president.
Xponential said its digital platform Go, which launched about a year ago, now counts more than 50,000 users, with 16,000 of those people paying for a subscription. That compares to 385,000 members for its physical studios, with 335,000 of those individuals considered active on recurring subscription packages.
Go currently counts more than 2,400 classes with the company employing about 330 workers at its 6,800-square-foot digital studios space, which is owned by Geisler.
The studio is right across the street from Xponential’s 35,000-square-foot headquarters at the Intersect office campus, where it has about 270 employees.
In addition to Go, the company in March said it struck a partnership with Apple to integrate its brands with the tech company’s Apple Watch for users to receive class reminders, check into classes, track and share performance and participate in fitness challenges.
