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Hiring fitness instructors 'continues to be challenging,' Xponential Fitness CEO says

Yahoo Finance's Brian Sozzi speaks with CEO Xponential Fitness Anthony Geisler on his company's partnership with LA Fitness and how they dealt with challenges during the pandemic.

Video Transcript

BRIAN SOZZI: All right, Wall Street is taking up their price targets on Xponential Fitness following its latest earnings release. The owner of well-known workout brands [? Rowhouse ?] and [? Rumble ?] saw third-quarter sales rise 60% to $40.9 million. Adjusted operating profits increased by more than four times versus last year.

Joining us now is Xponential Fitness CEO Anthony Geisler. Anthony, good to see you again. Thanks for taking the time. We'll get into the quarter in a it, but I'm pretty fascinated by this new deal with LA Fitness here, where you will be opening up, if I'm correct, other brands inside of LA Fitness. Take us through that.

ANTHONY GEISLER: That's correct, yeah. We're really excited about it, too. We-- you know, we had an agreement with LA Fitness for our franchisees to be able to open up their brands inside their studios. So it'll be an independent business, but inside an LA Fitness, you know, taking advantage of the thousands of people that come and work out at LA Fitness on a daily basis, and, you know, extending our brand across their 500 plus LA Fitness locations.

BRIAN SOZZI: How does this deal work, Anthony? Does this-- will this be favorable to your profits next year?

ANTHONY GEISLER: Yes, you know, it will be. It'll be accretive to, you know, our revenue and EBITDAs. As we're able to accelerate openings, franchisees will be able to get open faster. It's easier to get open inside an LA Fitness. And it'll be in addition to their regular, traditional locations. And so, you know, it definitely will be, and we're very excited about the opportunity with them.

JULIE HYMAN: Anthony, it's Julie here. What are you seeing in terms of cadence among the different brands? What is really seeing a lot of momentum right now, and what could use a little bit of an extra boost?

ANTHONY GEISLER: You know, it's interesting, going into the pandemic, we were concerned with a modality like Stretch Lab, right, because, you know, people didn't want to touch people. And we thought that was, you know, that was going to be tough, but it wasn't. And it came back first. It is our strongest [? AUV ?] across the brands that we have. And it's been our number one franchise seller so far this year.

And so, you know, you never know. We look at all of our brands equally. It's kind of like choosing between your children. So you know, all the brands do great, but we're a portfolio approach. And so we're really excited about the 248 franchises we sold this last quarter, the 68 that we got open. And we're really happy to be back.

BRIAN SOZZI: The lifeblood, Anthony, of a lot of these studios is the instructors in them. What are your franchisees telling you about their ability to find new instructors in this challenging labor environment?

ANTHONY GEISLER: Yeah, you have to remember about 20% of the fitness industry closed, right? So if you look at something like a Yoga Works that closed, you have a lot of yoga instructors that are out looking for a new home. You also have a lot of members out looking for a new home. And hiring great talent, maintaining great talent has been challenging for every business, whether it's pre-pandemic or today. So it continues to be challenging, but, you know, it continues to be a challenge that we rise to and we overcome.

BRIAN SOZZI: You want to share any new acquisitions you're about to make? You've been on fire lately. Feel free to tell us.

ANTHONY GEISLER: Look, we are-- we're always looking to do deals that are accretive to shareholder value and businesses that are out there. And so we're always looking. Doesn't mean we're always buying, but we definitely are always looking.

BRIAN SOZZI: Have to try. Xponential Fitness CEO Anthony Geisler, good to see you. Have a good weekend.