Xponential Fitness CEO: At-home fitness ‘will always be a part of what we do’

Xponential Fitness CEO Anthony Geisler joins Yahoo Finance Live to discuss earnings, how the pandemic impacted the fitness sector, at-home versus in-studio classes, and the growth of franchise gyms.

Video transcript

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BRIAN SOZZI: If the US is in a recession, it hasn't found its way to the boutique gym industry. Xponential Fitness saw second quarter sales rise 66% as people got their sweat on at brands like Club Pilates, CycleBar, and Row House. Operating profits rose to $17.6 million from $8.3 million a year ago. Joining us now for more on the quarter is Xponential Fitness founder and CEO Anthony Geisler. Anthony, always good to see you. Do you think the Street has been too pessimistic on your business?

ANTHONY GEISLER: I believe so, and the industry as well. I mean, if you remember back when the pandemic happened, everybody thought that we were going to stop working out in gyms and, you know, Peloton was going to be the next wave. And obviously, we've worked through that now. People realize gyms are back. Our members per studio are up. Our utilization and visitation per studio is up. Our average unit volume per location is the best it's ever been.

We raised guidance. We have 500-plus stores opening this year, selling over 1,000. We got it over a billion in system-wide sales. So, you know, adding the UK, adding Japan, 2,350-plus stores in 14 countries operating. We didn't lose a single location during pandemic. We actually grew during the pandemic. And so Xpo is doing very well. The industry is doing well. And so we're happy with our results.

BRAD SMITH: We saw earlier today in the initial reading for Michigan Consumer Sentiment that as we've seen some of the energy prices start to decline, that certainly has helped out with the consumer sentiment.

And so at least in this interim period of time, do you believe that will actually contribute as well to those consumers who had said, you know what, I'm paying higher prices for groceries, I'm paying higher prices for gas, and I've got to cut out some of the workouts that I'm doing, or at least the boutique workout experiences that I may be doing and paying up for? Do you think that this will be an opportunity to reengage them as some of those other necessity prices begin to come down?

ANTHONY GEISLER: Well, I'd love to say yes. But the reality is, you know, we're on a subscription business. We have over 550,000 members paying on average about $130 a month. And so utilization is up, visitation is up. We didn't see a decline due to gas prices. So I don't know that we'll see an increase due to energy being cheaper. You know, our members in boutique fitness are very sticky, and they've continued to stick with us through a pandemic. And they'll stick with us through higher gas prices as well.

BRIAN SOZZI: Anthony, you mentioned Peloton before. What happens to the at-home fitness industry? It seems to be-- it has come-- really, it has hit a brick wall. You have companies like Tonal laying people off, Peloton laying people off. What's the future for that?

ANTHONY GEISLER: Look, I just think at home will always be a part of what we've always done. I've told people that, you know, my mom did Richard Simmons "Sweatin' to the Oldies" when I was a kid, you know, 30, 40 years ago.

BRIAN SOZZI: My mom too.

ANTHONY GEISLER: So, you know, it'll always be a part of what we do. And, look, Peloton was a great source of fitness and introduced a lot of people to fitness during the pandemic. We were happy about that, and we can convert those people in the CycleBar members. You know, but at home as is at home. It's not the community. It's not the experience that we deliver in boutique fitness. And so it's very hard to compete with.

BRAD SMITH: We were a Billy Blanks Tae Bo household over here, Anthony. And so I don't know, some of those VHS cassette tapes are still around somewhere. But as we do think about those communities that you were talking about a moment ago, what are you hearing from those who are running the experiences in communities and even those who are prospective franchisees as well?

ANTHONY GEISLER: I mean, look, prospective franchisees are doing very well. Like I said, we'll sell about 1,000 new locations this year to new franchisees and existing franchisees that we have in our system. We'll open 500-plus locations. Like I said, AVs are as high as they've ever been in the company history. So that means the average franchisee is making more money than they ever have, and utilization and visitation is up. So we don't have any KPIs right now that are flat or trending down. Everything has continued to exceed pre-COVID levels, which is what allows us to raise guidance going into Q3.

BRIAN SOZZI: Anthony, earlier in the week, we talked to Planet Fitness CEO Chris Rondeau. He struck an upbeat tone, too, on the pace of his business. Have you talked to him? Is there any way your two brands can work together, make-- maybe make some of your classes more accessible to that Planet Fitness customer?

ANTHONY GEISLER: Yeah, Chris and I text all the time. He runs a phenomenal business. I look up to him and what he does. And so we're in constant contact. We're the two kind of franchise fitness businesses on Wall Street, so we spend time together. But I don't know about Planet Fitness and Xponential doing anything together on that type of basis. But we're definitely in constant communication and continue to watch what he does.

BRIAN SOZZI: Hey, Anthony, be sure to send them this video clip, all right? Every view matters.

ANTHONY GEISLER: Yeah, exactly.

BRAD SMITH: Sozzi is being modest. He challenged Chris to a push-up contest when he was in the studio.

BRIAN SOZZI: We did some push-ups. Yeah, it was pretty-- it was pretty funny. He was a good sport earlier in the week. I think we tied five push-ups inside of four seconds. So win for us both.

ANTHONY GEISLER: Chris is great, man. You got to look out. That guy's in great shape.

BRIAN SOZZI: Yes, he is

BRAD SMITH: Absolutely. That was Xponential Fitness CEO Anthony Geisler joining us from the West Coast. Good to see you this morning, Anthony. Appreciate it.