Paul Cerro on Xponential Fitness
I love video pitches, check out @paulcerro's pitch of $XPOF here:

Transcript below:

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Hey everybody. Paul Cerro here— Cedar Grove Capital.

Today I'm pitching Xponential Fitness. It's a fitness name that specifically revolves around

boutique fitness studios, and the concepts that flow into these studios.

These can be fitness concepts from HIIT training, yoga, pilates, strength training.

There's bunch of different concepts that are rolled up into one.

I actually like this company because it's a fitness ETF.

They have 10 different brands within their portfolio, which actually allows them to not only capitalize on different fitness concepts in the space, but it also helps them mitigate any type of risks associated with just having one type of fitness concept.

So it's not like a gym where it's either go to the gym or you don't.

It's, "Hey, if I want to do pilates one day," great. I can do yoga the other day.

They have capitalized on a new fitness approach for a hybrid model—

meaning that they can support people who want to go in-person to work out and exercise,

people who want to stay home and do it themselves.

And then also they can do this other omni-channel approach where you can actually do live on demand classes,

from the comfort of wherever you want to be.

They offer this subscription called an X-pass,

which allows you to actually be able to have one membership and have access to all different kinds of fitness concepts within their brand.

So again, like if I want to do yoga one day, with this membership I can do pilates the next, I can do boxing the next, etc. etc. etc...

And also what I love about them is that they are very cognizant of new fitness concepts that come up. That's why they've actually closed on their 10th acquisition just last year.

Very quick with financials they've been growing at double digits. They're doing really well creeping back up to pre COVID levels.

Adjusted EBITDA is actually positive for this company.

So they actually are profitable on an adjusted EBITDA basis.

And with operating leverage plan scaling up over time, because this is a fitness franchise, their corporate SG&A can basically stay relatively the same while they're growing their revenue. So you're going to see that more of a margin expansion going on in between that.

And what I'm really excited about is that while they're still growing domestically, international white space is immense.

They have over 2,000 studios in the U.S.

With the potential of over 7,000.

If you're thinking about what they could possibly do— we're looking at least 3X to 4X, the physical location store footprints that they can have.

International: A lot. And they're literally just starting hitting the surface. They're guiding towards double digit growth in both revenue and EBITDA margins, and actually planning on growing EBITDA margins from 17% in 2021 to over 30% in 2022.

So that's over 1,200 basis points, 1,300 basis points in the span of one year.

So very bullish on the stock.
Andy Buchanan's avatar
Great pitch! I have friends who swear by Class pass. The X-Pass seems like a similar idea.

Also, this is my favorite @paulcerro face:
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Conor Mac's avatar
@andybuchanan When someone asks you to do a DCF model in your head
Paul Cerro's avatar
@andybuchanan was a long day lol but yes, the XPass basically an in-house Class Pass
Conor Mac's avatar
For a second, my heart jumped as I thought this was embedded video haha.
Nathan Worden's avatar
@investmenttalk If only 🥹

But nope... Just my workaround (creating a gif of like 10 seconds of the video in order to give a preview)
Joey Hirendernath's avatar
This was an excellent pitch by @paulcerro! I especially like the fact that $XPOF has the benefits of both a fitness ETF and a hybrid model.

Look forward to the next market game!
Nathan Worden's avatar
@joeyhirendernath it definitely was! Thanks Joey!
Dissecting the Markets's avatar
@paulyu81 I have one question for you. What makes X-pass more attractive than ClassPass?
Nathan Worden's avatar
tagging @paulcerro because I think the tag @dissectmarkets used was close but not quite the correct username ☺️
Paul Cerro's avatar
@dissectmarkets @nathanworden X-pass is more attractive to the xponential fitness user. It allows them to stay within its ecosystem and not have to get something else (i.e. a class pass subscription).

This helps the company with retention.

Class Pass also offers more stuff because it's on a case by case basis meaning that gym/studio owners (independent) can sign up for it. XPass is just its house of brands (10). So overall, it's mainly for those that either are users of Xponential Fitness or want to become users of XPOF because of the variety of fitness concepts that they offer
Dissecting the Markets's avatar
@nathanworden I didn't realize I had the wrong handle! Thanks for applying the correct tag.
Dissecting the Markets's avatar
@paulcerro thanks for the insights!
Edmund Simms's avatar
Insightful pitch, @paulcerro! I'm a big fan of your style.
Paul Cerro's avatar
@valuabl Appreciate it!



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