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Xponential Fitness CEO: Working out at home ‘a small part of the pie’

Xponential Fitness CEO Anthony Geisler joins Yahoo Finance Live to discuss earnings, franchise expansion, and the outlook for the fitness industry.

Video transcript

JULIE HYMAN: Xponential Fitness beat revenue estimates for the first quarter, the company noting an uptick of 17% compared to the previous quarter in its regions in North America, actively paying members as well as visitation rates. For more on this growth, let's bring in Xponential Fitness CEO Anthony Geisler. Anthony, it's good to see you. So we're talking momentum. A lot of people getting back to workout classes, and you guys own a number of different brands within the space. I'm curious how it compares to 2019. I know you said in your release that by some metrics, you're getting back to those levels.

ANTHONY GEISLER: You know, visitations are up 17%, membership count up 17% from this last year, but the most important metric is that our AUV, our Average Unit Volume per store in March reached the 2019 pre-COVID level highs. And so we had nine quarters of quarter over quarter AUV growth prior to COVID, and then six quarters coming out of COVID. And so we're happy to be back to our 2019 pre-COVID highs.

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BRAD SMITH: What type of expansion are you anticipating as you look across not just domestically, but internationally? You've got some expansion further into Mexico as well, we understand. And so how much spending do you expect to be done in the near term to kind of position to unlock that kind of next leg of growth, if you will?

ANTHONY GEISLER: Yeah, so for us, we don't need to spend to do that. We're an asset light, small capital type franchise business. When we expanded into Mexico, we actually signed a franchise agreement where we received cash for the rights to a master franchise agreement for Mexico. So there aren't capital investment dollars for us to go in. It's kind of the opposite of that where we actually derive cash from being able to do that.

BRIAN SOZZI: Anthony, just as you came on here, got news that Peloton is coming out with a rower. My first reaction was, why? I mean, because the brand is really struggling here in many, many ways. Do you think working out at home was just a COVID fad?

ANTHONY GEISLER: I think so. I mean, look, working out at home has been around forever. I tell people my mom did Richard Simmons sweating to the oldies when I was a kid. So it's not that working out at home is new. It's just a small part of the pie. And so it got a lot of attention during COVID because people had no other choice, but to work out at home. But we're communal animals. People love to be inside the studios. Our members are back, our AUVs are back. We'll open more stores this year than ever. We'll have more systemwide sales this year than ever, more global units, more international expansion. And so we're not seeing any slowdown. And we're capping the highs from 2019. So we're happy about that.

JULIE HYMAN: I don't know about you. My mom was wake up and breathe on record the Richard Simmons album. So I have very fond memories of that as well, Anthony. But at the same time, you guys are-- you're maybe hedging your bets, or you're still getting that home exposure with your partnership with Lululemon's Mirror, in which, if I'm reading it correctly, you're going to offer exclusive pre-recorded content for people who buy that subscription from Lululemon. What was the strategic thinking behind making that agreement?

ANTHONY GEISLER: Yeah, so there are people that, like I said, that do work out at home. And so we want to push our content at the at-home place as well. And we couldn't think of anyone better to partner with than a company like Lululemon and Mirror. And so for four of our 10 brands, we'll be delivering our X Plus, which is our digital content. We own our own production studio here. And so we deliver live and on-demand content. So we'll be doing that via the Mirror. So we're excited to partner with them and push forward.

BRIAN SOZZI: Anthony, I'm-- full disclosure-- I'm an LA Fitness member. And the one by me where I live, it's a terrible location. It really has not been invested in many years. But now you are putting your brand, your name on the line with this partnership with LA Fitness. Are you concerned that gym owners and franchisees are just not investing in their gyms for whatever reason? Perhaps, I mean, they just don't have the money after the pandemic.

ANTHONY GEISLER: I mean, like LA Fitness is local to us. Our corporate offices are about two streets away. You know, Chin, who runs that business, does run a great business. They do have 700 and about 50 locations. We chose 500 of kind of they call it the top locations in demographics that we believe will be great for us, so about 2/3 of the company. And then we are going to allow franchisees to do a box and a box type play and enter LA Fitness, but still operate their own independent business inside of LA Fitness.

BRAD SMITH: In terms of operating all of the boutique fitness verticals that you have, are you seeing any type of wage increases broad-based for instructors, as we're seeing wage increases in other industries as well, asked by employees?

ANTHONY GEISLER: Yeah, we're not. I mean, you remember about 30% of the boutique fitness industry permanently closed, so that becomes tailwinds and labor for us of people that are not only members looking for a new home, but also instructors that are looking for a new home, as well as our instructors. And this is what they're passionate about. They work maybe 10, 12 hours a week. This isn't where they drive 100% of their income from. And so they come and do this because it's what they love to do, not necessarily how they pay the bills because it's very hard to teach 40 classes, you know, that we teach and keep up with that in a week.

BRAD SMITH: Anthony Geisler, who is the Xponential Fitness CEO, thanks so much for the time this morning. Appreciate it.

ANTHONY GEISLER: Thank you, guys. Appreciate it.