Xponential Fitness Is An Attractive Investment Opportunity Which May Be Undervalued

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Written By Nathan Goldstein

Xponential Fitness is one of the largest franchisors in the boutique fitness sector globally, boasting ten unique brands such as Club Pilates, StretchLab, and Pure Barre.

Founded and led by CEO Anthony Geisler, Xponential Fitness has demonstrated impressive growth and resilience in a highly competitive industry.

A Proven Track Record

Credits: DepositPhotos

Anthony Geisler has a long history of success in the boutique fitness industry. His journey began with the acquisition of LA Boxing, which he transformed from a handful of locations into nearly 100 before selling it to UFC Gym for $25 million.

After spending a couple of years with UFC Gym, Geisler purchased Club Pilates for $2 million. Under his leadership, Club Pilates grew from fewer than 20 locations generating around $500,000 of EBITDA to approximately 100 locations with $6 million of EBITDA.

This success led to the sale of Club Pilates to the private equity firm TPG for $100 million.

The Birth of Xponential Fitness

TPG’s acquisition of Club Pilates marked the beginning of Xponential Fitness. Geisler spearheaded the creation of a multi-brand entity aiming to replicate the success of Club Pilates across various fitness concepts.

Today, Geisler owns around 15% of Xponential Fitness, valued at approximately $100 million. Historical performance suggests that Geisler is an exceptional CEO with a knack for scaling boutique fitness brands.

Controversy and Response

In mid-2023, an anonymous short report accused Anthony Geisler of unethical business practices and claimed that Xponential Fitness oversells failing fitness concepts.

Following the report, the share price plummeted by over 60%, despite robust financial results. To address these concerns, Xponential Fitness hosted an investor day to discuss the health of the business and its individual brands.

The company refuted the report’s claims, attributing the negativity to a few disgruntled franchisees, a common occurrence in franchise systems.

Financial Performance and Outlook

Despite the controversy, Xponential Fitness remains a high-quality business trading at an attractive price. The company is projected to generate around $100 million of free cash flow in 2024 and currently has a market capitalization of approximately $850 million.

The company’s management has set an ambitious target of achieving $200 million in adjusted EBITDA by 2026, implying a 24% compounded annual growth rate over three years.

Xponential Fitness is currently valued at around 7x adjusted EBITDA, significantly lower than the pre-short report valuation of 20x adjusted EBITDA.

If the company meets its 2026 adjusted EBITDA target and the valuation returns to historical levels, the implied target price in the next two years is $56, representing a potential return of 275% from the current price of approximately $15.

Strong Upside Potential is Possible

Credits: DepositPhotos

Xponential Fitness, under the leadership of Anthony Geisler, has a proven track record of success in the boutique fitness industry. Despite facing recent controversy, the company’s financial performance remains strong, and its future growth prospects are promising.

Given the current attractive valuation and potential for significant upside, Xponential Fitness presents a compelling investment opportunity.


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