All right, good morning everyone. Thank you for joining us for the 3rd and final day of the Raymond James Institutional Investors Conference. I'm Joe Altobello, Leisure Analyst here at Raymond James, and I'm very pleased to introduce our next presentation from Xponential Fitness. The company is the leading curator and franchisor of several boutique fitness brands across numerous modalities, including Club Pilates, Pure Barre, CycleBar, Rumble, and Body Fit Training, just to name a few. More recently, it acquired Lindora, which offers weight management and other wellness services across more than 30 locations on the West Coast. With us today to go over the Xponential story is the company CFO, John Meloun. If there is any time at the end of the presentation, we'll open it up to questions, including some of my own. And so with that, let me hand things off to John.
Great. Can you guys hear me okay? So good morning everybody. There's more of you here than I thought at 8:00 A.M., so thanks for joining us. Xponential is one of the leading global franchisors in boutique fitness. Our mission is to make boutique fitness available to everyone. Today, as Joe mentioned, we have 10 brands across our portfolio and sit at over 3,000 locations globally as of 12/31. So what is boutique fitness? It's grocery-anchored retail centers. It's typically where you see our studios. We have structured class-based formats, so it's class times are set, you show up. It's a very social, communal kind of environment. It's not a big-box gym, much smaller class formats. It's in a very rapidly growing industry across the globe in fitness, so it's one of the fastest-growing components of the fitness industry.
Our consumers are very affluent, highly engaged with the brands that they enjoy. So our management team today, Anthony Geisler, he's our CEO. He's been doing this his whole life. This is what he's good at. He started Xponential nine years ago on the backs of Club Pilates, which we'll talk about in the next slide. I'm John Meloun, the CFO. I cut my teeth as a public company CFO at The Joint Chiropractic, another publicly traded franchise brand. Sarah Luna, she is our president at Xponential. Started at Club Pilates originally, became the president of Pure Barre when we acquired it, grew that brand, and now is, as I mentioned, our president. Andrew Hagopian was hired about a year ago to in-house our chief legal officer role and bring on a legal team. He's been with the MGM Resorts for quite some time.
Was a great addition to the company. So Xponential is one of the largest global franchisors of boutique fitness. As I mentioned, we sit at over 3,000 locations globally today. We sold over 6,000 licenses inception to date. We did $1.4 billion in sales in the cash registers of our franchisees last year. That's up over 36% from the prior year. We have 715,000 total members on recurring memberships, which means they get a charge every month on their credit card for attending our studios. Did $319 million in revenue in 2023, up 30%, and $105 million in Adjusted EBITDA, up 42% over the prior year. So what is boutique fitness? We're mainly located in grocery-anchored retail centers. It's about 1,500-2,500 square feet. At the front of our studios, we have retail operations, both branded and unbranded retail that we sell to consumers.
It's small class sizes, anywhere from one-on-one stretching to up to 50 people in a class doing CycleBar, as an example. It's a very community-driven kind of workout experience. It's not your big-box gym where you just show up, you do your workout, and you leave. This is a class that's driven by instructors. So that's more communal. You see a lot of the same faces, the same instructors, the same people working at the front desk. A little bit more intimate setting. This is our portfolio today. So as I said, the business was founded on Club Pilates back in March of 2015. We've acquired 10 brands along the way.
We have cycling, stretching, Row House, which is rowing, AKT, which is dance, yoga, Pure Barre, Rumble, which is boxing, Body Fit Training, which is like kind of a high-intensity training kind of exercise, and Lindora, which is our most recent acquisition in weight loss management. We'll talk a little bit about that later in the presentation. You can see our studio footprint has grown from 800 studios, about a 25% CAGR, up to almost 3,100 by the end of 2023. So consistently growing the portfolio as we added new brands and opening more and more locations. So our franchise model. One of the things that makes Xponential very successful is the way we approach franchising. First and foremost, it's about investing in the franchisee, making sure you have a qualified candidate financially, but also someone who comes from a business background, somebody who understands how to run a business.
We're not necessarily looking for people who have a passion for yoga to open yoga. It's people that have a business background that are trying to make money running a business. So we want someone with a business background first and foremost. We're not hiring instructors to run franchise studios. We assist the franchisee with site selection. So it's really important that we make sure we get the franchisee opening up in a location where we know the consumer is. So we spend some time with Buxton Technologies to define where we should be putting our studios based off of our core consumer and where they're located. We provide the instructor and management training upfront. So all our instructors are certified through our training program. So when you become a franchisee, we do the training. So it's kind of like McDonald's, wherever you go, the fries taste the same.
We want the experience with our instructors to be the same from a consumer perspective. We support our members pre-grand opening. So in essence, when a franchisee signs their lease, we start the marketing. We do that so when the franchisee actually opens and conducts their first class, they get the breakeven faster. They've got a couple hundred members already signed up. They could start to tap the next month, and they're generating cash flow in their business. The franchisee doesn't get put into a position where it runs out of capital because they've spent too much time marketing after they open. We start that marketing process much sooner.
Once the studio is open, we use our operational support to ensure the franchisee stays on track, meaning the franchisee is coming up the growth curve, generating the sales that they should be based off of their age and operation. So provide a lot of support to our franchisees once they open. The value proposition as a franchisor, what we get out of it, obviously the recurring revenue. When you look at this business, 75% of the revenue we generated last year was recurring by definition. We'll talk about that later. It's an asset-light model. We're not the ones fronting the cash or the initial investment to open the studios. That comes from the franchisee. So for that, it drives a lot of Free Cash Flow conversion for our business as we generate revenue. Franchisees, they get a strong studio economic model.
We'll go through the four walls in the next coming slides. The multi-brand opportunity. Most of our franchisees buy three locations. They typically buy in one brand, but we have the opportunity for, let's just say, a legacy Club Pilates franchisee now that we bought Lindora to move into Lindora and open that up. The look and feel of the studios and the way we operate is very much the same. So it's not like you're learning an entirely new business model by expanding into multiple brands. The model's very adaptable. During COVID, when gyms were closed, we went to an online digital kind of format. And then when gyms opened back up, we went back to brick and mortar. So we have a very adaptable model. From a consumer perspective, 10 unique brands. We have a pretty wide net.
When it comes to boutique fitness, a lot of consumers like to snack around. They like to try different things. Well, we have 10 different offerings, 10 different modalities that they could choose from. It's a premium value. Again, it's not a big-box gym. It's a more intimate setting, one-on-one instructor kind of intimacy from the consumer perspective and how they engage with us. So who is our consumer? It's primarily female. We have seen an increase in males as we've added more brands, but today it's about 90% of our members are female. Bachelor's degree, highly educated consumers, affluent, $160,000 annually in household income. So these are people that are not price sensitive.
The cost of a gallon of gas going up does not cause our consumers to cancel their memberships, and we haven't seen that as we've gone through some of these macro headwinds in the last coming years. How they purchase is a recurring membership. Again, as I mentioned, 90% of our consumers are on recurring memberships. We do have walk-in available, but it's based off of if there's open spots in the class. Most people buy an unlimited. What that means is you don't go unlimited. They don't typically see that, but what it allows people to do when you buy an unlimited membership is get access to the classes, the class schedule before everybody else. So it's a perk of paying for the unlimited. 50% are on unlimited, 25% on eight times a month, and 25% on four times a month.
That's been very consistent in the most recent years. So people are not trading down due to inflation or the cost of gas, as I mentioned. The eight times membership is about $20 per class. It varies based off of modality, but it's about $20 per class. We offer an X PASS, which is a membership where you could use all our concepts under one recurring membership. It's a point-based system. And X PLUS, which is our digital format. So doing a workout on your phone or on your TV. So we do have an omnichannel approach to how our consumers can use us. As I mentioned, 715,000 members today and growing as we open more studios. 90% are recurring memberships. And the average spend for a membership is about $135 a month. So the studio is designed for good returns. The initial investment is around $360,000.
This is if you take all our concepts weighted based off of the number of studios. You get to about $360,000 initial investment. The average annual revenue in year two is expected to be around $500,000. The ramp-to-base maturity is the six to 12 months. I talked about how we help studios get to kind of a base run rate when they open. That's about $400,000. That's what that is defined as. Base maturity is around $400,000 in six to 12 months. At $500,000 AUV, they'll generate 25%-30% operating margins, have a payback in about two and a half years. Cash-on-cash returns in year two is around 35%-40%. This is how we design our studios from an economic perspective. We have four key growth strategies for growing the business.
First and foremost is opening and growing our installed base of studios in North America. Our second is growing our brands and studios internationally. Third is driving system-wide sales, same-store sales, and average unit volumes across the platform. And lastly is our operating margins and driving Free Cash Flow conversion. And you'll see later in the financial section how we've done a really good job of that over the last number of years. So domestically, you could see we have a very diversified portfolio and footprint across the U.S. When you look at where our studios are located, about 66% of our studios are located within 10 miles of excuse me, 10 miles of 66% of our U.S. population lives within 10 miles of a Xponential studio. We use Buxton Technologies, as I mentioned earlier, to determine where we should be putting our studios. They look at our core customer.
They extrapolate that across the U.S., and they determine where our kind of pinpoints on a map of where our studios should be across the U.S. Our current TAM today sits at around 8,000. We have not done the TAM yet for Lindora to see what the size of that business is. We're in the process of doing that work and building those models. So we'll update this once we have that information. Right now, we have about 1,900 sold but unopened licenses expected to get opened in the next three-four years. So a very healthy backlog of already sold licenses that will get opened at the pace of around 500-600 a year. When a franchisee buys a license, just for you guys so you understand, they typically buy three. They don't open all three at the same time. They're end to end to end.
So you typically see three licenses get opened over approximately three years. Oh, just going back. Around 75% of our future growth is coming domestically, and then 25% will come internationally. That's the current mix at which we're selling licenses and opening studios in 2023 and the expectation for 2024 and 2025. So today we sit at about 400 studios open internationally. We sold another 242 as of the end of last year that are expected to get open. That's about two years of backlog internationally. We expect the total to be around 1,100 based off of the master franchises that we have in place today. So right now, we have a commitment of about 1,100 units to get open. And how we grow internationally is different than domestic.
We use a master franchisor, which means Xponential U.S. will partner with somebody in the market for which they would want to operate franchises or sell franchises. So a master franchisor will buy the rights to buy licenses from us and resell them to sub-franchisees in their market. The benefit to Xponential is we get a rev share. So we have a master franchisor in Japan, as an example, who's now selling franchises to franchisees in that market. He'll collect a $60,000 franchise fee in that market, and we get a 30%-50% rev share depending on what was negotiated in that market. And we get to recognize that license fee the moment it's sold because we're not the one ultimately servicing that sub-franchisee, the master franchisee is. And then we get rev share on other revenue components like royalties and retail equipment. All right.
So the third growth strategy is to drive system-wide sales. When you look at 2023, 94% of the growth in system-wide sales came from volume, new members, and 6% on price. So some of the other ways that we drive system-wide sales is we use our digital platform, our XPLUS. As I mentioned, this is where you could get access to our content online on your cell phone, do workouts anywhere, anytime. So if you're traveling at this conference, for example, you can open up your phone, take a class online in your hotel room. You could take it down to the gym, do classes. We also use our digital platform for bookings. So 90% of our class bookings are done through our digital platform. So it really gives us an opportunity to keep our members engaged no matter where they're at and have access to our brands.
One of the other things that we've done is partner with larger companies who, when you look at Xponential, it's really a distribution system. I mean, we have 3,100 locations across the globe. What do you do with that distribution system outside of running classes? So we've done things like partner with Princess for brand building, getting people exposed to Xponential while they're on a cruise ship. It's a captured audience. If they're not a member today, they're getting exposed to yoga on the cruise ships or cycling on the cruise ships. So when they get off, we could market to them in their area that we have these brands available or studios available to them. We've done things like Celsius where we're selling energy drinks inside our studios. Lululemon, big retail opportunity for us where Lululemon has their own retail centers. Well, we have over 3,000 locations.
Lululemon pays us a revenue or what we call a brand access fee to put their retail in our studios. Now they've just grown their retail outlet for their studios or for their clothing by 3,100. We've done a lot of things about creating a distribution system across our studio for brand awareness, but also for driving in-studio revenue. So expanding operating margins, as we continue to focus on growing our footprint by adding more studios and growing the AUV across our platform, it's really allowed us to leverage our SG&A. One of the big strategic changes we made in 2023 was to get away from transition studios. Typically what we did historically is we would not allow studios to close.
If a franchisee had trouble with their operations, we would take it back, help support them or help support that specific location, kind of get it restabilized and then refranchised back out. The problem with that is we typically take back studios that were losing money. So we did get some revenue from it, but we had higher operating costs, which created NOLs on our P&L. So from that perspective, we got out of that business in 2023. So we could really leverage our SG&A better, meaning as we continue to open up five to 600 locations a year, the incremental margin or revenue that was generated on royalties or retail, we didn't have to do additional work from an SG&A perspective to support that revenue. So this year again, we'll open up guided 540-560 locations.
It's the same lift last year from an SG&A perspective as it is this year to do that work. So we don't need to add additional SG&A just because we have more studios. So then our SG&A leverages better. Typically, you see things like accounting, finance, legal, HR, real estate, franchise sales, retail. Those are in our back office SG&A. So those departments support all 10 brands. They're not specific to one brand. You have about four to five headcount when you launch a brand in the brand. So you have a president, you have a CMO, a national sales director, somebody in charge of training. We keep a lot of the core specific brand headcounts in the brands. Everything else is leveraged on the SG&A side. Because we do that, as I mentioned, we generate higher royalties and increasing AUVs across our brands.
That margin flows through to the bottom line and we get really good margin expansion in the business. So talking about Lindora, this is our most recent acquisition. The thing that was really interesting to us about Lindora is they've been around for 50 years. And throughout the 50 years, they've traditionally had very high AUVs, $900,000+, the number of their locations over $1 million. 31, it's a very small footprint today, but what we liked about that is huge white space opportunity for us to create a distribution system of wellness and weight loss management. We looked at it as very complementary to our portfolio in the sense that you drive leads into your studios that you bring in through Lindora, and then you could also drive leads from the studios into Lindora for people who are looking for weight loss management assistance.
They do other things like IV hydration, hormone therapy. So for us, we looked at it as this is a distribution system that as new things come and go in regards to weight loss management, that we could layer on top of the concept. So it's very complementary. So financial overview. Skip the slide there. So what makes this model really attractive is very predictable recurring revenue. 75% of the revenue we generated last year was recurring. We'll go through that on the next slide. As I mentioned, the fixed SG&A. Now that we've kind of got our SG&A back in line with the business model, as we continue to drive more sales on the top line, you're going to see really good margin expansion on the bottom line, which will translate into good Free Cash Flow conversion on adjusted EBITDA. I talked about our franchisee selection process.
It's very systematized, very consistent in how we approach acquiring new franchisees and proven ability to acquire and scale brands. Lindora is a perfect example. 31 locations. We're going to grow that to hundreds of locations across the U.S. We've bought brands like Pure Barre where they've already had 400+ locations. So we could do both. We could buy small and grow. We could buy existing and continue to scale. So we generate revenue in five major ways. First and foremost is our franchise revenue. Kind of looking at the pie chart, it's the circle around is what we define inside franchise revenue there. Our territory fees. So upfront territory fees, $60,000. If you buy three, it gets discounted. 7% royalty.
Brands like Club Pilates and StretchLab, we now charge an 8% because the AUVs are so high in that brand that we can get a little bit more of a premium on our royalty. Technology fees. Our point of sale system, the digital XPLUS, the digital platform, that's what we charge a technology fee for. So our franchisees, in essence, get a business model in a box with all the technology that comes with it. Transfer fees. The studios transfer from one owner to the next. We charge a fee for that. And then lastly, instructor training. We do upfront instructor training and ongoing instructor training. So as you can imagine, as a franchisee adds more classes, as instructors leave or they need to hire more instructors, we do the training. You have to be certified underneath our brands in order to teach in our classes. Equipment revenue.
We have preferred vendors. We've got pre-negotiated prices. These are prices that you can't just take commercial-grade equipment and put into your studios. You have to use our preferred vendors at the preferred prices that we get for our franchisees. We get rebates on some of the vendors that we use. Merchandise. As I mentioned, we have branded and unbranded, lululemon being branded, unbranded. We have a wholesale warehouse in Irvine, California, for which we buy unbranded retail and sell to our franchisees. We also get rebates from vendors that franchisees can buy direct from. Marketing fund. We get 2% of all gross sales goes into a marketing fund. It's really a pass-through from a margin perspective. But each of our brands has their own unique marketing fund for which we do brand building and marketing activities out of.
Then our other service revenue, which includes everything from rebates, which is a 1% credit card rebate we get on system-wide sales. 1% of all system-wide sales is a credit card rebate to the company. We have company-owned studio revenue in 2023. In our other service revenue, as I mentioned, we've gone away from owning studios. There is about $25 million of other service revenue in 2023 that will not repeat in 2024. There's actually even more cost SG&A that has been removed out of our P&L. It'll be a net immediate EBITDA benefit by not doing the company-owned studios. That's in the other service revenue line in 2023, as well as our X Pass and X Plus revenue. As you look off to the right, as I mentioned, 75% of the revenue is recurring. 30% is royalty. Royalties are virtually 100% margin.
So as we continue to grow AUV and same-store sales, the revenue line or our gross profit continues to uptick 1% or so every year in margin. And as I mentioned, franchise territory fees and equipment revenue by our definition is one-time because they're largely upfront. We do have maintenance revenue associated with equipment. As franchisees have been open longer, they are replacing bikes or rowers or whatever it may be. But the majority of our equipment revenue is upfront as we're opening five to 600 locations a year. So kind of just looking at over the last couple of years, 557 studios opened in 2023, the largest in this company's history. We expect to kind of do about the same level in 2024. Could we do more? Yes.
But the reality is, is we want to make sure we're putting franchisees in good real estate so they can get up to the proper AUVs. We could definitely sign more leases, but we don't want to lose on the quality of the real estate that we have with our franchisees. We've sold, like I said, over 6,000 licenses globally. Our AUVs that we define as quarterly run rate AUVs is taking the average of the sales in each studio, multiplying it by four, $590,000 and growing. Same-store sales, a healthy 16% across our portfolio last year. Brands like Club Pilates, exceptionally well. Older brands like Pure Barre had a good resurgence in same-store sales in 2023. Younger brands like YogaSix, same thing. So we're really happy with the same-store sales performance across the portfolio. Total members growing to 717,000.
Again, that's a function of new studios as well as adding new members on a per-studio basis. And we had over 51.5 million visits last year. So a couple up into the right graphs, you look at system-wide sales, $385 million in Q4 in system-wide sales, the highest in the company's history. North American run rate AUVs, you could see that, as I mentioned in the four-wall economics, they're designed for a $500K AUV. We did $590. So the average studio is performing above the expectation. You have brands like Club Pilates that are doing $900,000-$1 million AUVs. StretchLab, well above that. So we're really happy with the overall portfolio and where the AUVs are heading. We don't know where the top end is.
As we mentioned on the earnings call, we have hundreds and hundreds of studios that are doing over $1 million AUV, and there's a large population of studios at the $900,000 threshold continuing to grow. So we don't expect all our studios to get to a $1 million AUV. We hope they do. But at the end of the day, we are seeing positive growth across all our brands in AUV performance. So kind of taking a look at where we've been over the last five years, about an 18% CAGR in new studio openings. If we assume about a 3% closure rate in 2024, we'll end with about 3,500 locations this year. As we continue to open more studios and grow AUVs, as I mentioned, you'll see system-wide sales continue to uptick. We did $1.4 billion last year in the registers of our franchisees.
The expectation is closer to 1.7 in 2024 at the midpoint of our guidance. More royalties, as I mentioned, juicier margin, higher revenues. At the midpoint this year, we expect to be around $345 million in revenue. As we continue to grow, leverage SG&A by controlling cost. You'll see our Adjusted EBITDA margins grow to over 40% this year. That's in line with what we talked on our investor day in September. Ultimately, by 2026, my goal is to demonstrate that we can get to 45% Adjusted EBITDA margins. From a dollar perspective, it's about $138 million this year. So really strong growth from 2023 at $105 million to almost $140 million in 2024. From an investment highlight and to kind of summarize everything, we talk about our experienced management team. Anthony's been doing this longer than anybody else as far as franchise boutique fitness.
We are a diversified portfolio, which gives us a lot of a larger net to capture consumers and provide the modalities that people are interested in. The portfolio today can expand and contract. We did sell off one of our brands, Stride. It was a smaller brand in January. So we have the ability to both buy brands and also divest brands that are currently just not really resonating with consumers or we just don't see the growth profile that we expect in the Xponential portfolio. We have a very passionate, growing, and loyal consumer base. When it comes to attrition, we measure that after 12 months. It's in the low single digits. So when you find your core consumer at the studio level, they are very sticky. They don't leave. We have an established model.
We have, as I mentioned, 10 brands in our portfolio that we've rapidly been able to scale. It's very asset-light. Again, our CapEx on an annualized basis is like $10 million a year. So as we continue to generate the recurring revenue, it flows to the bottom line. Very predictable recurring revenue with high cash flow conversion. Very highly attractive studio-level economics. As I've shown, the AUV today is well above what it's designed to do. Some brands are far outperforming that, like Club Pilates, but we're very happy with the continued growth at the studio level. And an expanding franchise base. I mentioned 75% of the growth will come in North America over the next couple of years, 25% internationally. So we continue to see good organic growth in our business.
We'll also be able to take the cash flow that we generate off the balance sheet and look for more opportunistic M&A. I don't believe that we'll be buying another brand this year at this point. We're not looking to buy another brand, but if something opportunistically shows up, that's in our wheelhouse and would be complementary. We would consider it, but right now, what we plan to do for 2024 is really focus on kind of the core principles, which is just opening studios, growing AUVs, controlling SG&A, getting the margin expansion in the business. Very vanilla, but for us, the results of that will be very promising for 2024 and 2025. So focus really on organic growth this year, maybe some more M&A next year. So with that, I turn it over to Joe for any questions.
Actually, we are right out of time.
The breakout session is Amarante two downstairs. Thanks, John. All right.