Shares of Xponential Fitness Inc. opened below their initial public offering price Friday in a disappointing debut for the operator of boutique exercise brands like CycleBar and Pure Barre.

The stock opened at $11.20 a share, lower than Xponential’s

$12 IPO price that itself came below the company’s expected range of $14 to $16 a share. Xponential downsized its offering to 10 million shares after it initially planned to offer 13.3 million.

Shares made up a bit of ground after trading began and recently changed hands at $11.89, though they were still below the IPO price.

The company is betting on a continued recovery for the in-person fitness category coming out of the pandemic. Chief Financial Officer John Meloun told MarketWatch that the company’s stores, which are run through a franchise model, are “already operating above pre-COVID levels” with an “engaged” member base.

“Boutique fitness is unique and meant for a communal environment,” he said. “People who do it fall in love with it.”

Connected fitness company Peloton Interactive Inc.

was a big pandemic winner amid surging demand for its fancy exercise equipment that is compatible with digital classes, raising the issue of whether some bike owners would abandon in-person fitness memberships after making that investment. Meloun said that Peloton is “right for certain people” but expressed his belief that “exercising outside the home is here to stay and something that will continue to grow.”

Xponential, which operates nine brands, had its own digital platform prior to the pandemic and saw its member base gravitate there during the worst of the crisis. Meloun sees it as a way of “perfecting ties” to Xponential’s members by letting them “supplement” the in-class experience with at-home content.

The company saw $29.1 million in revenue during the March quarter, down from $31.8 million a year earlier, but it projected a rebound for the June quarter. The company anticipates $34.8 million to $35.8 million in June-quarter revenue, according to its prospectus, up from $21.5 million in the year-prior period.

“A substantial portion of our revenue is derived from royalty fees and other fees and commissions generated from activities associated with franchisees and equipment sales to franchisees,” the company said in its prospectus. “These revenue streams were affected by the decline in system-wide sales as almost all studios were temporarily closed intermittently beginning in mid-March and throughout 2020 and early 2021, and new studio openings were delayed.”

Xponential posted a net loss of $4.8 million in the March quarter, compared with $1.9 million a year prior. It projects a loss of $8.5 million to $9 million in the June quarter, compared with a loss of $4.8 million a year earlier.

The company saw “a window of opportunity to raise capital,” said Meloun, hence the timing of the IPO. After raising debt to buy brands and build a portfolio, the company opted for a chance to turn public and “pay down debt, strengthen the balance sheet, and focus on growing the business long term.”

Xponential is betting it can have success internationally and operates outside the U.S. in a master-franchise model in markets like Japan and Australia.

The IPO helps cap off a busy week for deals and follows an offering from fellow fitness company F45 Training Holdings Inc. a week earlier. It also comes as the Renaissance IPO ETF

has dipped about 2% so far this year and as the S&P 500

has gained roughly 17% over the same span.

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