Americans have ‘returned to fitness in a big way’ post-COVID: Xponential Fitness CEO

Xponential Fitness CEO Anthony Geisler joins Yahoo Finance Live to discuss the state of the fitness industry.

Video transcript

DAVE BRIGGS: Well, the pandemic shifted our spending in many ways from goods to services, experiences, and travel, in particular. Has fitness in that process become essential? With the parent company of Club Pilates, Row House, and Pure Barre showing a 44% increase in Q4 revenue, the answer appears to be yes, indeed. Xponential Fitness founder and CEO Anthony Geisler joining us now. Good to see you, sir. And congrats. The stock closing at an all-time high today. Why? What did you learn in Q4?

ANTHONY GEISLER: Look, we had an amazing year. I mean, Q4 was great. Q4 was better than 3, 3 better than 2, 2 better than 1. So we continue to see this 2022 cohort quarter over quarter continue to do really well. But ultimately, for the year, I mean, we sold over 1,000 franchises, opened more than 500 stores, did over a billion dollars of systemwide sales, and grew EBITDA by 170%.

So you're right. Our members do view this as essential. They-- it's non-discretionary for them. Our average member makes $130,000 a year and spends $130 a month with us. So it's not necessarily a meaningful part of their overall income, but it's where they drive their entertainment, their community, obviously, of course, their health and their workouts. So it's a lot to give up for $130 a month.

SEANA SMITH: Yeah, certainly, it's reflected here in these membership numbers. You hit a milestone here in January, surpassing 600,000. You're talking about some of the momentum that you're seeing in your business. Looking out a year from now, what do you want to see that number reach?

ANTHONY GEISLER: I mean, look, we comped 25% year over year, 17% in Q4 alone. So we believe that we'll continue to see tailwinds from other competitors that went out of business during COVID. There's displaced members and labor and real estate that we're able to take advantage of. Also, just people really taking their health and wellness way more seriously post-COVID than they did in a post-COVID world. So we continue to enjoy those headwinds, continue to build more stores and drive AUV. Our average revenue per store is at an all-time high at $525,000 in Q4. And we're seeing Q1 trending much the same.

DAVE BRIGGS: So we mentioned the brands Row House, Pure Barre, Club Pilates, Rumble. Where are you seeing the biggest growth among those brands?

ANTHONY GEISLER: Well, we're seeing the biggest openings, or franchise sales, really, in Rumble and BFT because we just bought those brands recently. The 2023 openings will be in Club Pilates and Stretch Lab and Rumble and BFT, so continuing to improve AUVs across all the brands. But those will be the ones that we''ll see the most openings of this year.

SEANA SMITH: And then when you take a look at your stock performance, since you in public back in 2021, you've done extremely well, and this compared to what we've seen from a number of other companies that went public around the same time. They've actually underperformed when you take a look at Bumble, when you take a look at Sweetgreen, just to name two significant underperformers there. What do you attribute that success to? And what do you think that tells us just about the direction of your company here moving forward?

ANTHONY GEISLER: Well, I mean, a couple of things. We went public the week they announced the Delta variant. So it probably wasn't the optimal time for a fitness brand to go public. So we came out under-valued, people not believing that people are going to return to fitness. Obviously, they returned to fitness. They returned to fitness in a big way, bigger than they did post-COVID. And we think that is here to stay. So a lot of our success has to do with us continuing to execute our business plan, our franchisees and our team here continuing to wake up every day and turn the keys and bring in great members and continue to retain them and grow their businesses.

DAVE BRIGGS: There's that, but lingering because we've seen the consumer show signs of starting to cut back. We've heard economist after economist with predictions of recession in the second half of '23. Are gyms, in particular, expensive gyms like these, recession proof?

ANTHONY GEISLER: Yeah, I mean, I think everybody can't answer the question, how deep and how long is that economic downturn. I mean, for us, we sell in a reoccurring four times a month, eight times a month, and unlimited, with 50% of our members on the unlimited. And we're not seeing any tradedowns from unlimited, so we're not seeing any increase in cancellations or freezes across our brands. So we've continued to hit all-time company highs quarter over quarter into these headwinds. So we believe, of course, there must be some headwind, but very hard for us to manage what that headwind is, given that the company continues to outperform itself quarter over quarter.

SEANA SMITH: Anthony, we talk a lot about the importance of loyalty here for consumer facing brands, for companies like yours. I know you have the X Pass for members. What do those membership numbers look like? And how big of a revenue driver is that for your business?

ANTHONY GEISLER: The revenue driver from an X Pass is nominal. But what X Pass does is it allows people to come into our ecosystem, kind of snack around on brands, and then find a home. So it's really a lead driver for us. It's a very creative way for us to acquire customers without kind of going out to market and competing with our competitors on Google Search or Facebook, pay per click campaigns.

We're able to do some of these corporate B2B deals like we did with LG, where our X+ appears on all the LG televisions or Lululemon Mirror or Princess Cruises most recently, where we're building gyms on the boat, but we also have our digital product in 23,000 state rooms. And people can leave, purchasing a promotional X Pass to take back home to go utilize in the locations around where they live.

DAVE BRIGGS: All right, quick question. Talk me into pilates. I've been working out for 20 years. It's one of my favorite things in the world, but I've never tried it. Why do I need to?

ANTHONY GEISLER: What do you do for a hobby? Do you play golf? Do you do anything? Or just--

DAVE BRIGGS: I take care of my kids. Golf. Yeah, golf and working out. That's really it.

ANTHONY GEISLER: Yeah, so you'll golf better. You'll pick up your kids more. You'll have a lot more pain-free flexibility with the kids. It's something much like yoga 10 years ago. Guys weren't doing pilates. It was progressive. Same in yoga today. A lot of guys are doing pilates. A lot of people are seeing the benefits in their golf game, their basketball game, and their parenting game as well. So you'll have to--

DAVE BRIGGS: You had me at golf. My golf game sucks, so.

[LAUGHTER]

ANTHONY GEISLER: You'll have to get on it and get back to me.

SEANA SMITH: I will say, that's a pretty compelling answer. You got to go to a pilates class.

DAVE BRIGGS: All right, he had me.

SEANA SMITH: All right, there we go. Anthony Geisler, great to have you, Xponential Fitness founder and CEO. Thanks so much.