Xponential Fitness, Inc.

What they do

XPO Inc. is a holding company whose principal asset is an 85.6% ownership interest in Xponential Fitness LLC, the operating franchisor. It licenses five boutique fitness brands — Club Pilates, StretchLab, YogaSix, Pure Barre and BFT — to franchisees and master franchisees across Pilates, barre, stretching, strength training and yoga. As of June 30, 2026, 2,645 studios were open in North America with 694 additional committed, and 520 studios were open internationally with master franchisees obligated to sell licenses for 739 more. It reports as one segment.

Revenue drivers

• Franchise revenue — Largest line at $44.0 million in Q2 2026, down 3% year-over-year, driven by royalties and fees tied to same store sales; the decline reflected lower same store sales and 2025 brand divestitures.
• Franchise marketing fund revenue — $8.7 million in Q2 2026, down 8%, collected from franchisees and tied to system-wide sales, which fell on divested brands.
• Equipment revenue — $7.1 million in Q2 2026, down 26%, generated from equipment installations for new studios; declines tracked fewer studio openings and lower franchise license sales.
• Merchandise and other service revenue — Merchandise was $0.5 million (down 90%) after the shift from in-house wholesale to an outsourced retail model; other service revenue was $5.6 million (down 10%) on lower vendor commissions and brand access fees.

Recent performance

Q2 2026 revenue was $66.0 million, down 13% year-over-year, with the decline attributed to fewer equipment installations and lower merchandise revenue after the outsourced logistics transition. North America system-wide sales of $437.3 million were flat, but North America same store sales fell 6.8% against prior-year growth of 2.4%, and quarterly run-rate AUV declined to $659,000 from $686,000. The company opened 67 gross new studios and sold 53 franchise licenses in the quarter. Net loss was $4.8 million, or $0.10 per basic share, versus net income of $1.3 million a year earlier; adjusted EBITDA fell 22% to $21.9 million. SG&A rose 33% to $32.0 million, primarily on higher legal expenses, and net cash used in operating activities was $25.7 million for the quarter.

Strategy

Management's stated five pillars are becoming the franchisor of choice, delivering a world-class member experience, becoming a data-driven company, creating a culture of innovation, and expanding internationally. The company says it is investing in a data warehouse, reporting tools and digital capabilities, and in using data and artificial intelligence for decision-making. It has simplified the portfolio through divestitures, selling CycleBar and Rumble in July 2025 for total consideration of $7.0 million and Lindora in September 2025 for up to $6.0 million tied to 7% of legacy studio gross revenue. International expansion remains a growth component, with 29 additional countries covered as of June 30, 2026. Management describes its current focus as elevated franchisee studio support and long-term, sustainable growth.

Risks

• Franchisee-dependent results — The company states its financial results are affected by the financial results of its franchisees and master franchisees, and Q2 2026 same store sales fell 6.8%.
• Growth strategy execution — The company acknowledges it may not successfully implement its growth strategy, and new studio openings may differ materially from licenses sold to franchisees.
• Consumer preference shifts — It may fail to anticipate and satisfy consumer preferences and shifting views of health and fitness, a risk reflected in the current same store sales decline.
• Leadership turnover — The company states performance may be negatively impacted by recent changes in executive leadership; 8-K filings since the last 10-K include multiple director or officer changes.

Outlook

Management said second quarter results were below expectations but pointed to continued studio growth domestically and internationally, enhanced digital capabilities, and elevated franchisee studio support. CEO Mike Nuzzo said these efforts are focused on driving long-term, sustainable growth and success for franchisees. The revenue decline was described as expected and tied to fewer equipment installations and the merchandise model transition. The Lindora divestiture consideration is currently expected to come in below the $6.0 million contractual maximum.