Business Context and Reporting Period
Xponential Fitness, Inc. (XPOF) is a global franchisor of boutique health and wellness brands, including Club Pilates, StretchLab, YogaSix, Pure Barre, and BFT. This Form 10-Q covers the quarterly period ended June 30, 2026. The company operates as a holding company with a 85.6% ownership interest in Xponential Fitness LLC. During the period, the company continued to execute a restructuring plan initiated in 2023 to exit company-owned transition studios and focus on pure franchise operations.
Key Financial Metrics
| Metric | Three Months Ended June 30, 2026 | Six Months Ended June 30, 2026 |
|---|---|---|
| Total Revenue, Net | $65.97 million | $126.68 million |
| Operating Income | $9.51 million | $22.56 million |
| Net Loss (GAAP) | $(4.83) million | $(5.65) million |
| Net Loss Attributable to XPO Inc. | $(4.14) million | $(4.86) million |
| Adjusted EBITDA | $21.94 million | $42.35 million |
| Cash and Cash Equivalents | $18.2 million (excluding restricted cash) | $24.99 million (total cash, cash equivalents, and restricted cash) |
| Long-Term Debt (Principal) | $522.4 million | $522.4 million |
| Stockholders' Deficit | $(376.1) million | $(376.1) million |
Material Changes vs. Prior Period
- Revenue Decline: Total revenue decreased 13.4% year-over-year for the quarter and 17.3% for the six-month period. This was primarily driven by a 90.3% drop in merchandise revenue due to the strategic outsourcing of retail merchandising to Fit Commerce (effective Dec 1, 2025) and a 25.8% decline in equipment revenue due to fewer studio openings.
- Operating Expenses: Selling, general, and administrative (SG&A) expenses increased 33.0% for the quarter, largely due to a $5.7 million increase in legal expenses related to government investigations and litigation. However, for the six-month period, SG&A decreased 10.9% due to headcount reductions and lower legal expenses compared to the prior year.
- Impairment Charges: The company recorded no impairment charges in the current period, a significant improvement from the $12.9 million (quarter) and $14.8 million (six-month) recorded in the prior year periods related to BFT, Lindora, and CycleBar reporting units.
- Divestitures: The company completed the divestiture of the CycleBar and Rumble brands in July 2025 and the Lindora brand in September 2025. These transactions are not presented as discontinued operations but have impacted revenue streams.
- Debt Refinancing: In December 2025, the company entered into a new Credit Agreement with a $525 million term loan and a $25 million revolving facility, replacing the prior credit agreement.
Guidance, Outlook, and Risks
- Restructuring Outlook: The company expects to recognize additional restructuring charges of approximately $8.2 million to $11.7 million throughout 2026 related to lease terminations and studio exits. Upon completion, the company estimates annualized savings of $13.5 million to $15.5 million.
- Strategic Review: The Board of Directors initiated a review of strategic alternatives in April 2026 to maximize stockholder value, which may include a sale, merger, or other transaction. There is no assurance a transaction will occur.
- Legal and Regulatory Risks:
- FTC Settlement: The company agreed to a consent order with the FTC to pay $17 million over 12 months regarding franchise rule compliance.
- NYAG Settlement: A settlement with the New York Attorney General for $3.97 million was reached regarding franchise disclosure timelines.
- Class Action Litigation: A federal securities class action lawsuit remains pending, with a motion to dismiss filed by the company in October 2025.
- Internal Controls: The company disclosed that its disclosure controls and procedures were not effective as of June 30, 2026, due to material weaknesses related to insufficient accounting and technology resources. Remediation is ongoing.
- Same Store Sales: Same store sales growth was negative 7% for the quarter and negative 6% for the six-month period, reflecting headwinds in franchisee performance.
Investor Verification Checklist
- Restructuring Costs: Verify the actual cash outflows and timing of the projected $8.2M–$11.7M in remaining restructuring charges for 2026.
- Legal Accruals: Confirm the status of the $29.5 million legal accrual and the progress of payments for the FTC ($17M) and NYAG ($3.97M) settlements.
- Debt Covenants: Monitor compliance with the Total Net Leverage Ratio covenant under the new Credit Agreement, given the current net loss position.
- Merchandise Transition: Assess the impact of the Fit Commerce outsourcing agreement on future revenue recognition and margins, noting the significant drop in merchandise revenue.
- Internal Control Remediation: Track the progress of the remediation plan for material weaknesses in internal controls over financial reporting.
- Strategic Alternatives: Monitor updates on the strategic review process initiated in April 2026 for potential M&A activity.