Greetings, and welcome to Xponential Fitness, Inc. First Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Kimberly Esterkin from Investor Relations. Please go ahead, ma’am..

Thank you, operator. Good afternoon, and thank you all for joining our conference call to discuss Xponential Fitness’ first quarter 2022 financial results. I am joined by Anthony Geisler, Chief Executive Officer; Sarah Luna, President; and John Meloun, Chief Financial Officer.

A recording of this call will be posted on the investors section of our website at investor.xponential.com. We remind you that during this conference call, we will make certain forward-looking statements including discussions of our business outlook and financial projections.

These forward-looking statements are based on management’s current expectations and involve risks and uncertainties that could cause our actual results to differ materially from such expectations. For a more detailed description of these risks and uncertainties, please refer to our recent and subsequent filings with the SEC.

We assume no obligations to update the information provided on today’s call. In addition, we will be discussing certain non-GAAP financial measures in this conference call.

We use non-GAAP measures because we believe they provide useful information about our operating performance that should be considered by investors in conjunction with the GAAP measures that we provide.

A reconciliation of these non-GAAP measures to comparable GAAP measures is included in the earnings release that was issued earlier today prior to this call. Please also note that all numbers reported in today’s prepared remarks refer to global figures, unless otherwise noted.

I will now turn the call over to Anthony Geisler, Chief Executive Officer of Xponential Fitness..

StretchLab, AKT and Rumble. BFT has also sold its first license in the UK., marking our first entry point into the country. As a reminder, our MFAs are structured to provide Xponential with virtually 100% margin flow-through.

To support our international expansion, we are very pleased to announce that Dan Adelstein has recently joined Xponential Fitness as our Senior Vice President of International Development. His main focus will be supporting our real estate development and studio openings.

Dan previously served as the Senior Vice President of International Development at Orangetheory Fitness. On the M&A front, the integration of BFT remains on track. As a reminder, BFT supports our global growth trajectory with over 170 franchise studios currently open and an additional 180 studios sold and contractually obligated to open globally.

Lastly, in terms of future M&A, we will continue to opportunistically evaluate potential brands and new modalities, taking a disciplined approach to capital allocation. I’d like to now pass the call on to Sarah to discuss our third growth driver, increasing our same-store sales and AUVs..

Thank you, Anthony. As many of you know, I have been working closely with our teams to develop new ways to expand our class offerings to current and prospective members while also increasing overall retention levels across our boutique fitness network.

Having a wider reach and offering a robust experience will allow us to continue enjoying growth in our studios, resulting in improved AUVs and overall systemwide sales. I’d like to take a moment now to speak to these efforts in further detail. But first, a quick refresher.

As previously discussed, the key to Xponential Fitness’ ongoing success is our ability to proactively manage the health of our franchise system and collectively collaborate with franchise partners to bring a best-in-class studio experience to communities worldwide.

We continuously track our core KPIs using our technological capabilities and data analytics tools to understand our business performance in real time.

Beyond looking at these key performance indicators, we also monitor our ability and success of connecting with new and existing members through our omnichannel boutique fitness offering in which we provide both in-person and digital classes across our brands. Beginning with our in-person offering, XPASS provides subscribers access across our U.S.

studio locations under a single monthly recurring subscription. XPASS has been a powerful engagement platform for us, helping us attract new, retain existing and reengage previously churned consumers. XPASS does this by offering a comprehensive fitness program with flexibility across premium fitness modalities and geographies.

XPASS officially launched nationwide in Q4 of last year, and its primary goal is to fill underutilized classes. By driving more bookings into existing classes, XPASS helps our studios increase revenue and profit.

In Q1 2022, the first full quarter of XPASS being fully rolled out, we significantly reduced our customer acquisition cost and simultaneously increased customer order values with the introduction of new plans.

These operational improvements specifically focused on increasing profitability and have resulted in XPASS already breaking even for the quarter, on a relatively small booking set of about 10,000 classes. We are optimistic about XPASS’ differentiated nature and expect that XPASS will help us continue to optimize our franchise system in 2022.

In terms of digital engagement, XPLUS, which officially launched in April, will offer all 10 of our brands thousands of live and on-demand digital workouts on a single platform. Subscribers now have even greater access to our robust fitness portfolio to supplement their in-person class attendance.

To further promote brand engagement and drive revenue and customers into our studios, the platform allows users to find nearby Xponential studio locations and contact the studios for class schedules and memberships.

In addition, as a stand-alone digital platform that interfaces with consumers around the world, XPLUS is highly conducive to B2B subscription options and direct marketing partnerships.

We believe we are ideally suited to help our corporate partners maximize their health and wellness programs and we are enthusiastic about the opportunity to access a large number of new customers efficiently and at scale.

Finally, subsequent to the end of the quarter, we announced the expansion of our digital offering in collaboration with lululemon and its home gym technology, the MIRROR. Beginning this fall, four of our brands, Pure Barre, Rumble, YogaSix and AKT will create original fitness programming content for the MIRROR.

We are thrilled to introduce Xponential offerings to the MIRROR community and believe this partnership will help us increase brand awareness and reduce overall customer acquisition costs given that lululemon, MIRROR and Xponential all target a similar customer demographic.

This is just the beginning, and we will provide updates on the progress of our collaboration in future quarters. With that, I’d like to turn the call back to Anthony to speak to our final growth driver..

Thanks, Sarah. As is evident, our 10 brands have created a diverse portfolio that differentiates us from any other fitness franchisor.

Our complementary brands and modalities have been carefully curated to ensure longevity and long-term sustainable growth trajectories, both protecting our position as the industry leader in boutique fitness franchising and providing the scale and breadth needed to participate in meaningful B2B opportunities.

Our partnership with lululemon and MIRROR as well as the previously announced partnership with LA Fitness and other business-to-business offerings are all expected to drive incremental revenue opportunities.

Contributions from our first three growth levers, as just discussed, coupled with continued operating excellence, will support our fourth growth lever, expanding our operating margins and driving free cash flow conversion.

The asset-light nature of our franchise model, together with the many benefits we experienced because of our scale and shared services platform has supported our margins to date. As previously mentioned, our adjusted EBITDA margins nearly doubled from Q4 2021 to Q1 2022, reaching 29%.

We continue to expect our adjusted EBITDA margin will be in the low 30% range for the full year 2022, strengthened by the growth and maturation of our business. In summary, we are very pleased with our solid start to 2022.

Xponential is well positioned for continued growth as we open new studios, drive same-store sales and expand our operating margins. These factors, combined with the ongoing execution of our four strategic growth initiatives, continue to solidify our position as the largest and most differentiated global franchisor in the boutique fitness industry.

Thank you again for your time. I’ll now turn the call to John Meloun to discuss our first quarter results and our guidance in more detail. Before John begins, I’m thrilled to let you all know that John recently won the Orange County Business Journal Public Company CFO of the Year Award.

John was selected in a competitive process for his remarkable leadership at Xponential. On behalf of our entire company and Board of Directors, I’d like to highlight how proud we are of John and thank him for his great contributions to our company..

we expect our total 2022 global new studio openings to be in the range of 500 to 520. This represents the highest number of studio openings in our company’s history.

We project North American systemwide sales to range from $995 million to $1.005 billion or $1 billion at the midpoint, which represents a 41% increase from the prior year and the highest North American systemwide sales in our history.

Total 2022 revenue is expected to be between $201 million to $211 million, an increase of 33% from 2021 at the midpoint of our guided range. Adjusted EBITDA is expected to range from $67 million to $71 million, a 153% year-over-year increase at the midpoint of our guided range.

We anticipate our capital expenditure budget for 2022 to be approximately $5 million to $7 million and will be primarily focused on integrating BFT onto our website and mobile applications, completing the build-out of a Rumble studio with the remainder being allocated to maintenance and other technology investments to support our digital platforms.

Based on the visibility today, SG&A excluding equity-based compensation for 2022 will be roughly 33% of total revenues at the midpoint of the range.

For the full year, we expect our tax rate to be in the mid- to high single digits, share count for purposes of earnings per share calculation to be 25.1 million and $3.25 million in quarterly dividends to be paid related to our $200 million convertible preferred stock.

A full explanation of our share count calculation and associated pro forma EPS and adjusted EPS calculations can be found in the tables at the back of our earnings press release. Thank you again for your time today and for your support of Xponential. We look forward to speaking with you on our next earnings call.

We will now open the call for questions.

Operator?.

Thank you very much. [Operator instructions] We have a first question from the line of Joe Altobello with Raymond James. Please go ahead..

Hey, guys. Good afternoon. First, I guess a couple of quick questions. In terms of the 99 new studios you opened in the quarter, could you help us understand how that broke down between North America and international? And same question for the 500 to 520 that you’re expecting to open this year.

How does that break down between North America and international?.

Hey, Joe. Yes. So – when it comes to the domestic versus international, about 23% – about 25% of the studios were international, about 75% were domestic. On the international front, primarily driven by BFT. So international, domestic – or excuse me, international BFT was about 23 studios in total.

And then when you look out on domestic front, StretchLab had 22; Club Pilates, 17; YogaSix, 14; CycleBar, 8. So pretty much our kind of the scale brands that we have that are well above the 150 kind of threshold for total open studios that are pretty much driving the significant amount of growth domestically.

And then some of the younger growth brands like Rumble and STRIDE, they’re on the – still on the early growth stage so they had less studio openings. But about 75% were domestic and 25% international..

And that’s for the full year as well, John?.

No. That was just for Q1. But the mix should be about the same for the full year..

Okay. Okay. And then if I look at your guidance, and I know it’s May 12 and it’s still relatively early in the year. But if I look at 2021 on revenue, for example, Q1 represented about 19% of your full year revenue. Here we are north of $50 million in Q1.

So why wouldn’t we see the same sort of cadence this year? It seems like you guys are assuming maybe AUVs level off? Or are you just being conservative at this point?.

In regards to like the revenue spread and how it will build throughout the year, I mean a large driver of the revenue will be coming from equipment packages as we continue to scale and open more studios in the second half of the year than the first half of the year.

So you will see revenue continue to scale throughout the quarters from a perspective of conservatism. We always maintain – we want to definitely over – under promise, over deliver from our perspective, AUVs continue to climb. The expectation is they will continue to climb throughout 2022.

So from our perspective, the guidance and outlook we put up there, we want to make sure we hit that based on what we put out at this point in time. If we see overperformance in the P&L as we walked through the quarters, we’ll make adjustments to our outlook as necessary.

But at this point in time, we feel the outlook and the guidance we’ve provided for 2022 is a fair representation of what we know with a high degree of confidence we’ll be able to hit..

Okay. Thanks, guys..

Thank you. We have next question from the line of John Heinbockel with Guggenheim Partners. Please go ahead..

Maybe start – if you look at the last time you guys were at the $477,000 of AUV, and I know the brands are all different.

How might members per studio and per member spend be different than last time? On a go-forward basis, which of those two do you think will grow faster, members or per member spend?.

Yes. So what we are seeing that the member spend is increasing, especially as the studio matures. They have a little bit more of an affiliation with the studio buying the retail and just putting more of their dollars into the individual studio. So we are seeing that come back. Retail sales at the studio levels have started to increase.

And so, so far, things are looking very good..

Okay.

And maybe secondly, just remind us, as you – particularly in North America, right, as you sign licenses, those are commitments to open, whether they’re one or multiple, over what time period? And I ask that because the – if you think about the pipeline, is that just going to continue to grow, right? It will be in five to six years and even more.

What do you think there, at some point, we get at least a little bit of a catch-up in actual studio openings, right? So you’ll do 500 to 520 this year, but that ends up growing nicely over time, right, the pipeline ends up flattening out or going down?.

Yes. I think you’ll see that pipeline continue to grow. Obviously, sales should be – will outpace store openings and terminations, right, which is what ends up being in the pipeline. Of course, during COVID, we felt that it wasn’t good business to be terminating franchise agreements while people weren’t allowed to be open.

So there was kind of a year and a half to two years, call it, of not real terminations, and we started to fire those back up end of Q3, early Q4 with franchisees. So you’re starting to see us moving the needle a bit on openings this year versus last year..

Okay. Thank you..

Thank you. We have next question from the line of Brian Harbour with Morgan Stanley. Please go ahead..

Yes. Thanks. Hi, guys. On the AUV recovery, obviously, we only kind of see it across all of your 10 brands.

So I guess I’m just curious whether each brand has fully recovered at this point or if there’s any element of brand mix that’s kind of affected that? Any of that are doing better, perhaps something that are lagging?.

Yes. When you think you look at AUVs in general, from Q4 to Q1, we continued to grow in the first quarter, and we expect AUVs now with March – the month of March AUV now meeting the highest point pre-COVID on a quarterly AUV level. Brands like Club Pilates and StretchLab continue to set new records as far as increasing AUVs.

Prior to COVID, our average AUV never really hit its peak. And a lot of our younger brands, they just started growing. So we don’t know where the top end of across all our brands where the AUVs will ultimately get to.

On a number of the brands and we don’t break it down or disclose that across all 10, but we are seeing a lot of the brands already getting back to pre-COVID levels. There’s a few that still haven’t actually got back to pre-COVID, but we have no concerns about them eventually getting there.

But as we mentioned in prior calls, for the most part, on average, across all our systems AUVs at this point, we have a high degree of confidence will exceed pre-COVID levels before the end of Q2..

Okay. Yes. It makes sense.

I guess similar question, just franchisee economics, have those kind of recovered to pre-COVID levels in tandem with AUVs? Or is there any element of cost inflation that has limited that or maybe also, if you think about returns, has there been an increase in equipment prices? I’m just trying to kind of compare those to, as you’ve certainly seen a very strong AUV recovery here..

Yes. Expenses remain the same as they really were in pre-COVID levels, be it the two largest expenses or rent, which is locked in by a lease. If anything, it got better during the pandemic because a lot of our leases were able to renegotiate and then labor. We don’t have minimum wage employees. Really, it’s not our model.

So if an instructor makes $40, $50 a class or whatever they may make in that location at that given modality or time, the minimum wage goes up $1 or 2, [ph] they’re not coming back to make $51 or $52. So we don’t really see any labor rate hikes, and we definitely didn’t see any increases in rent during the COVID period.

If anything, landlords were happy just to get rent. And those are the two biggest components until you kind of start to get into our royalty, which, of course, is set and then you’re down in discussing stuff like utilities and things of that nature..

Thank you..

Thank you. We have next question from the line of Alex Perry with Bank of America. Please go ahead..

Hi. Thanks for taking my questions.

So just first, can you maybe give us a little more color on the lululemon partnership, maybe in terms of sort of the economics of that partnership? And then are you doing anything with them on the apparel side, aside from providing content?.

Yes. We haven’t disclosed the dollar amount in that agreement, but it was a onetime payment. And yes, we were already selling lululemon apparel. But of course, it just – it makes sense that we’re on mission or lululemon definitely as well is on a mission to make sure that as a part of this partnership, we sell more retail..

Perfect. That makes a lot of sense. And then maybe one for John. I think your core SG&A came in a bit higher than expected. What’s driving that? Anything to call out there? And then I think maybe you added back stock-based comp last quarter, but not this quarter. Maybe sort of just help us square away the adjusted EBITDA and SG&A numbers on the quarter.

Thanks..

Yes. So as far as SG&A, the one thing that was impacting SG&A this quarter, that’s we call onetime in nature is a litigation, which we settled with the AKT founder. It was undisclosed amount, but that is included in SG&A this quarter. We also did get an ERC credit in the quarter, which was an offset, which we added back as well.

So we did provide in the earnings release a walk or a bridge of all the add-back items. Stock-based comp expense was added back as part of our EBITDA – our adjusted EBITDA calculation, and it was about $15.2 million in the quarter.

The elevated above normal run rate levels, which we expect to be around $3.6 million a quarter going forward, but we had some equity that vested associated with some performance conditions from shareholders that own stock at the IPO..

Got you. It’s very helpful..

And we do – as I mentioned on previous calls, we do expect our SG&A to stay in that $65 million to $70 million range for the quarter, roughly 33% of revenue. So still holding to that and operating to that model..

Got you. That makes sense. Thank you..

Thank you. We have next question from the line of Warren Cheng with Evercore ISI. Please go ahead..

Hey. Good evening, gentlemen. Good evening, Sarah. I wanted to ask about your corporate partnerships, just to follow up. So you’re announcing with lulu and MIRROR last month, I thought it was very creative. I followed your announcement with LA Fitness, which I also thought was pretty innovative from a customer acquisition perspective.

Is there a concerted effort or team in place pursuing more of these types of partnerships? I know Dan is working more on the B2B kind of bulk sales partnerships. But I was just curious if there is a team working on partnerships more likely you did with lulu and LA Fitness..

Yes. It’s a good question. We started doing these brand partnerships when COVID happened because we had nothing else that we’re really working on when the stores were closed other than trying to generate cash and use the assets that we had like access to our network, which was an asset that kind of looks intangible, but it’s an asset that we have.

And so we started doing these brand partnerships during COVID, and we did them with various vendors. And then we ended up hiring Steve from the LA Chargers, the football team here locally because we realized that the NFL and MLB and NHL and all the other teams have been doing these brand partnerships for decades.

And so we looked at that and said, well, we could be doing that, too. And so that was what we did. So we actually hired Steve from the Chargers to come in and build that department.

And he really works hand in hand with Garrett, who’s running XPLUS and Dan who is running the XPASS to find creative ways to do these corporate partnerships that could use the XPASS, could use XPLUS, could use brand access, sometimes can use all three.

So you’re correct that there is an ongoing monitored effort to do these types of brand partnerships..

Got you. And just to follow up on the last question. Am I hearing right that there isn’t a revenue or cost share arrangement with the lulu partnership.

It’s really more of a brand partnership and a plug-in for customer acquisition?.

Yes. It’s both of those. I mean, they did pay us real dollars for that access. So it’s not just a marketing partnership. So we were paid to do that deal, but there is not a rev share going forward on the subscription basis because of what we did upfront on that.

But there are partnerships on the retail side and a marketing side that will continue forward outside of the original access fee..

Got you. Thank you and good luck..

Thank you. We have next question from the line of Peter Keith with Piper Sandler. Please go ahead..

Okay. This is Matt Egger on for Peter Keith. Just a quick one.

Can we maybe get an update on the member sign-up trends with kind of assuming January was sluggish and it’s gotten better later in Q1 and then kind of how has April done with – from the lifting of mask mandates?.

Yes. So far in April, we’re seeing new members outpacing cancellation or churn that we’re seeing at the studio level inclusive of freezes. So, so far, the trends are increasing, and we’re very pleased with the studio performances..

Okay. Great. Thanks. And then you mentioned in the prepared remarks that you believe you’re a little bit inflated from the macro pressures, at least your....

Excuse me, this is the operator. We’re not able to hear you very properly. Could you please use the handset or speak a little closer to the mic. Thank you..

Sorry.

Can you hear me better now?.

Yes. Much better. Please go ahead..

Okay. Sorry about that. You mentioned in your prepared remarks that you believe you’re a little insulated from macro pressure. Maybe can you maybe walk us through, is there any pressure that you might – would think you would see from new franchisees during a recession? Is there any risk of that pulling back? Appreciate it..

Yes. I mean, look, if we went into a recession, which we’re not in one, but if we went into a recession, typically, what we’ll see is you’ll see some pressure on franchise sales.

But when I went through the recession in 2008 in boutique fitness franchising, which is something that nobody else can really say in the industry, when I went through that, you see franchise sales start to slow. You actually see openings continue.

And the reason you see that is because people are leaving their jobs or don’t have their jobs, they’re looking for a job. They’re looking for something to open that’s going to generate income for themselves.

And so we actually – back when I owned LA Boxing in 2008 and owned that business through 2012 when I sold it successfully, the reason I sold it in 2012 was because the business was actually doing much better in 2012 than it was in 2008. So that’s what’s good.

And much like in that business is the same with XPO, we have a massive backlog of already prepaid for precontracted territories and franchises. And so people would convert their 401(k)s or take the investment money that they had and then they would now virtually buy themselves a job off of a franchise that they already owned and are already paid for.

So yes, franchise sales can slow, but of course, we don’t generate our revenue from franchise sales. We generate our revenue on reoccurring revenue, which comes from open stores and royalty and equipment packages that get it going.

We used to see landlords actually putting up the equipment package money as additional tenant improvement allowances on leases back in 2008 and 2009 and 2010 as we partnered with large REITs at that point. So we’re not in a recession. We really know what that looks like in 2022 or if we ever get there.

But we do have the team on staff that lived through 2008 as the majority of my team from 2008 is still with me..

That’s very helpful. I appreciate it..

Thank you. We have next question from the line of [indiscernible] with ROTH Capital Partners. Please go ahead..

Hi, everyone, and thank you for the time tonight. And John, congrats on the award. I wanted to quickly start with a question on XPASS. And with the full quarter kind of under the belt, I was just curious if you guys are noticing any trends kind of about user engagement between brands. And then also I think there was a comment about subscribers there.

And I was curious if you could comment on what percent were kind of dead leads originally if you have those kind of mix numbers? Thank you..

Hi. Yes. We are continuing to see that XPASS continues to be a great funnel for new customers. So we’re seeing that 15% of account holders are still brand new to the ecosystem and they’re coming into our studios for the very first time.

And we’re also seeing that 60% of account holders were previously lapsed from an XPO brand or deemed inactive by a studio sales staff member, and they’re coming back into the ecosystem through XPASS. This was a really great quarter in that we were fully launched, and we have over 80% of our studios that have opted in.

We’re seeing more inventory on the system and more bookings. So things are looking really good on the XPASS front..

Great. And that was – you said 15% were brand new to the ecosystem..

Yes. That’s correct..

Great. Thank you very much. And then second question would just be kind of on cadence of studio openings. So in Q1, it looks like you’re 99 openings. And I think prior comments maybe where that openings were going to be toward the back half of the year. But I was just curious, you have the equipment packages ready for new openings.

Have you seen any other kind of delays in time lines, whether that’s labor challenges or costs in build-out? Have there been any delays on the time line? Thank you..

Yes. So as we mentioned on the previous earnings call, we expected around 20% of our openings will be in the first quarter, which is exactly where we came in at. And we said that percent will grow to 30% by Q4. So it will be a continued trending of studio openings.

In regards to delays, one of the things that we did is we did go ahead and acquire all the equipment packages to ensure that, one, we kind of insulate ourselves from any inflationary risks on cost of equipment. Again, that helps the franchisees out because it keeps costs down for them to get studios open.

But – and ensures that we have the packages and no supply chain or logistic issues from Studios getting open.

I think the only place that we’ve seen some delays is more on the micro level within certain markets as far as getting certification or building permits and stuff from a construction standpoint, but it hasn’t materially disrupted the ability for us to get open. So we’re still confident in our ability to get north of 500 studios open this year..

Great. Thank you very much for the time..

Thank you. We have a next question from the line of Jonathan Komp with Baird. Please go ahead..

Yes. Hi. Good afternoon. Thank you. I want to ask about new unit performances.

Could you may be further quantify just what you’re seeing for new unit AUVs opened up over the last few quarters or looking back into 2021? And then as we go forward, should we be thinking any sort of mix changes, if you will? I know you had a lot of YogaSix units sold prior to the pandemic as an example.

So just thinking about the new unit productivity going forward..

Yes. We are seeing that as cities are opening as post COVID that they’re opening stronger than they did even pre-COVID.

So we are seeing some great tailwinds coming out of COVID, a lot of interest from customers that are coming into boutique fitness for the very first time, seeing a lot of openings across YogaSix and where Yoga is a very popular modality that is attracting good customer interest and membership levels as well.

And as John had mentioned earlier, just a higher portion of the mix is attributed to our scaled brands, which already have great brand awareness and interest. So opening very strongly with higher level of members and spend right out of the gate..

Yes. That’s great. And then maybe a separate question for John. Just looking at free cash flow, it looks like you’ve had lower cash flow generation relative to the adjusted EBITDA. So could you maybe just highlight any if there’s any sort of timing differences impacting the balance sheet.

I know you mentioned maybe securing some equipment inventory and just more thoughts on what you’d expect operating or free cash flow for the year?.

Yes. From an optics perspective, it looks like we’re using cash, but we’re using it in the right places to ensure that we have growth in the future. So we kind of looked at as we saw inflation and some of those things starting to pop up in supply chain.

We wanted to make sure that we invested in having the equipment, the merchandise coming into the U.S. or into the markets where we need them. So we don’t slow our opening. So from Club Pilates perspective and a CycleBar perspective, we went ahead and prepaid for a lot of equipment packages that will get studios open for the rest of this year.

So we did burn some cash in that sense, but it’s really investing in future openings and future revenue streams. And then we did have in the quarter, as I mentioned earlier, a confidential settlement related to our AKT founder where we use cash to settle that agreement.

So overall, the business was cash flow generative, but we made some investments primarily to drive future revenue and settle a legal issue..

And should we expect to see incremental investments in the next few quarters, throughout the year? Just any thoughts on what the full year might look like?.

Yes. I mean from a going forward perspective, I mean, we have – our free cash flow conversion is high. We’re asset light, so we’re not going to be investing a lot of capital and CapEx. I think we’re – that $5 million to $7 million range of CapEx will hold for the full year as you go quarter to quarter to quarter through the rest of this year.

Cash generation and piling up on the balance sheet is the expectation. Now if we have to make additional investments to ensure we have equipment or merchandise, we’ll continue to do that. But at this point in time, the high-volume opening brands that were expected, we’ve made that investment now.

So I would anticipate through the next coming quarters that cash will continue to increase from what I would consider the low point in Q1..

Okay. Best of luck. Thank you..

Thank you..

Thank you. Ladies and gentlemen, we have reached the end of the question-and-answer session. And I’d like to turn the call back to Anthony Geisler, CEO, for closing remarks. Over to you, sir..

Thanks again for joining our call today and for your support of Xponential. I’d like to thank the entire Xponential Fitness team and our franchisees for your hard work and dedication to our business. I’d also like to note that we have an active marketing schedule coming up in May and June, later this month.

We will be participating in the inaugural Credit Suisse Wellness Investment Summit and the 22nd Annual B. Riley Securities Consumer Investor Conference. In early June, we’ll be attending Baird’s 2022 Global Consumer Technology and Services Conference and the Stifel 2022 Cross Sector Insight Conference.

Finally, in late June, we will be participating in the Jefferies Consumer Conference. We are excited for these great opportunities to meet our investors in person, and hope to see many of you at these events. Thank you, and make it a great day..

Thank you very much, sir. Ladies and gentlemen, this concludes today's conference. You may disconnect your lines at this time. Thank you for your participation..