Boutique fitness studio franchisor Xponential Fitness (NYSE:XPOF) reported Q1 CY2024 results topping analysts' expectations, with revenue up 12.5% year on year to $79.52 million. The company expects the full year's revenue to be around $345 million, in line with analysts' estimates. It made a non-GAAP profit of $0.16 per share, improving from its loss of $0.01 per share in the same quarter last year.

Is now the time to buy Xponential Fitness? Find out by accessing our full research report, it's free.

“2024 is off to a strong start,” said Anthony Geisler, CEO of Xponential Fitness,

Owner of CycleBar, Rumble, and Club Pilates, Xponential Fitness (NYSE:XPOF) is a boutique fitness brand offering diverse and specialized exercise experiences.

Leisure Facilities

Leisure facilities companies often sell experiences rather than tangible products, and in the last decade-plus, consumers have slowly shifted their spending from "things" to "experiences". Leisure facilities seek to benefit but must innovate to do so because of the industry's high competition and capital intensity.

Sales Growth

Examining a company's long-term performance can provide clues about its business quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Xponential Fitness's annualized revenue growth rate of 46.6% over the last three years was incredible for a consumer discretionary business. Within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends. That's why we also follow short-term performance. Xponential Fitness's recent history shows its momentum has slowed as its annualized revenue growth of 36.3% over the last two years is below its three-year trend.

We can better understand the company's revenue dynamics by analyzing its three most important segments: Franchise, Equipment, and Merchandise, which are 52.5%, 0%, and 0% of revenue. Over the last two years, Xponential Fitness's revenues in all three segments increased.Franchise revenue (royalty fees) averaged year-on-year growth of 34% while Equipment (apparel sold to franchisees) and Merchandise (workout equipment sold to franchisees) averaged 41.6% and 13.1%.

This quarter, Xponential Fitness reported robust year-on-year revenue growth of 12.5%, and its $79.52 million of revenue exceeded Wall Street's estimates by 0.9%. Looking ahead, Wall Street expects sales to grow 8.4% over the next 12 months, a deceleration from this quarter.

When a company has more cash than it knows what to do with, buying back its own shares can make a lot of sense–as long as the price is right. Luckily, we’ve found one, a low-priced stock that is gushing free cash flow AND buying back shares. Click here to claim your Special Free Report on a fallen angel growth story that is already recovering from a setback.

Cash Is King

If you've followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills.

Over the last two years, Xponential Fitness has shown decent cash profitability, giving it some reinvestment opportunities. The company's free cash flow margin has averaged 12.1%, slightly better than the broader consumer discretionary sector.

Xponential Fitness's free cash flow came in at $1.84 million in Q1, equivalent to a 2.3% margin and down 80.1% year on year.

Key Takeaways from Xponential Fitness's Q1 Results

It was encouraging to see Xponential Fitness narrowly top analysts' revenue and adjusted EBITDA expectations this quarter. Adjusted EBITDA also beat by a small amount, and the company reaffirmed full year guidance, showing that it's staying on track. Overall, this was a solid quarter for Xponential Fitness. The stock is up 17.2% after reporting and currently trades at $15.75 per share.

So should you invest in Xponential Fitness right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.