Xponential Fitness: Refinancing, Preferred Share Buyout Strengthen Financial Position
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Mont Blanc Research10 FollowersFollow5ShareSavePlay(10min)CommentsSummaryXponential Fitness (XPOF) secures a favorable $525M term loan, reducing refinancing risk and interest expenses, and repurchases all preferred shares to boost common equity cash flow.New management's strategic divestment of lagging brands and focus on high-margin core brands drives margin expansion and operational efficiency, supporting a 'Buy' rating.Club Pilates' same-store sales slowdown signals brand maturity, with new studios opening at near-full capacity and AUV up 8% year-over-year.Valuation upside is driven by EBITDA margin expansion, lower interest costs, and a conservative 7x multiple, implying a $13.5 target price—nearly double current levels. Maki Nakamura/DigitalVision via Getty Images Thesis Xponential Fitness's (XPOF) new loan agreement with much better conditions will remove the risk of short-term refinancing needs while also significantly reducing interest expenses. Part of the new debt will be used to buy out preferred shares, thereby eliminating theThis article was written byMont Blanc Research10 FollowersFollowAs a financial analyst, I specialize in B2C software and the internet content and information industries. I closely follow industry trends, opportunities, and challenges that companies in the software and internet industries face, analyzing how they will affect companies over the long term. My investment process is lengthy and consists of reading earnings reports, listening to earnings calls, trying to understand the future outlook of a company and its industry, its position in the industry, its competitive advantages, and threats that could influence its margins and growth potential. I build DCF and relative valuation models to determine if the company is undervalued, which usually isn’t the case. After that, I always try to simply move on to the next stock and avoid becoming a victim of the sunk-cost fallacy. On average, I need to look at more than 10 companies to find one that is undervalued. My motivation and purpose for writing on Seeking Alpha is to share my opinion about a company’s valuation, which will lead to additional insights, information, and opinion exchange with other users. This puts me and others in a situation where we can better understand if a company is under-, fairly-, or overvalued.Analyst’s Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.