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 September 30, 2025. The company operates as a holding company with a 71.9% ownership interest in Xponential Fitness LLC. During the period, the company divested the Lindora, CycleBar, and Rumble brands to focus on core operations and entered into a Retail Supply Agreement to outsource merchandising.
Key Financial Metrics
| Metric | Q3 2025 (3 Months) | Q3 2024 (3 Months) | YTD 2025 (9 Months) | YTD 2024 (9 Months) |
|---|---|---|---|---|
| Total Revenue | $78.8 million | $80.5 million | $231.9 million | $237.1 million |
| Operating Income (Loss) | $3.6 million | $(6.6) million | $28.1 million | $(1.7) million |
| Net Loss | $(6.7) million | $(18.1) million | $(8.1) million | $(36.2) million |
| Net Loss Attributable to XPOF | $(4.9) million | $(12.1) million | $(5.8) million | $(24.2) million |
| Adjusted EBITDA | $33.5 million | $30.8 million | $88.9 million | $85.4 million |
| Cash and Cash Equivalents | $24.9 million | $16.6 million (Restricted) | $41.5 million (Total Cash) | $32.7 million (Total Cash) |
| Long-Term Debt (Principal) | $376.4 million | N/A | $376.4 million | N/A |
Note: Q3 2024 figures have been corrected from previously reported amounts due to accounting misstatements identified in Note 2.
Material Changes vs. Prior Period
- Revenue Mix Shift: Franchise revenue increased 17% year-over-year in Q3 2025, driven by higher royalty fees and territory fees from terminations. Conversely, equipment revenue dropped 49% and merchandise revenue fell 27% due to fewer studio openings and lower demand.
- Impairment Charges: The company recorded $17.6 million in impairment of goodwill and other noncurrent assets in Q3 2025, primarily related to the BFT reporting unit ($12.7 million) and other noncurrent assets. This compares to $4.5 million in the prior year period.
- SG&A Reduction: Selling, general, and administrative expenses decreased 47% to $24.7 million in Q3 2025, largely due to a $14.2 million reduction in legal expenses (including $5.0 million in insurance credits) and lower restructuring charges.
- Divestitures: The company divested CycleBar and Rumble in July 2025 and Lindora in September 2025. These transactions resulted in a net gain on divestiture of $2.2 million for CycleBar/Rumble and a net loss of $1.0 million for Lindora.
- Operating Cash Flow: Net cash provided by operating activities increased to $17.6 million for the nine months ended September 30, 2025, compared to $10.9 million in the prior year period.
Guidance, Outlook, and Risks
- Restructuring Plan: The company expects to recognize additional restructuring charges of approximately $7.3 million to $11.0 million throughout the remainder of 2025. Upon completion, the plan is estimated to yield annualized savings of $13.5 million to $15.5 million.
- Headcount Reduction: In October 2025, the company initiated a Reduction in Force (RIF) expected to incur approximately $0.85 million in costs in Q4 2025.
- Debt Covenants: The company obtained a waiver in March 2025 to exclude certain non-recurring legal expenses from EBITDA calculations through March 31, 2026. As of September 30, 2025, the company was in compliance with all covenants.
- Legal and Regulatory Risks: The company faces ongoing investigations by the U.S. Attorney's Office, FTC, and NYAG. Additionally, franchise sales are paused in Maryland and Illinois (for Club Pilates) due to regulatory inquiries. A shareholder derivative lawsuit and a securities class action lawsuit remain pending.
- Internal Controls: Management concluded that disclosure controls and procedures were not effective as of September 30, 2025, due to material weaknesses in accounting personnel, goodwill impairment assessment, and contract completeness controls.
Investor Verification Checklist
- Correction of Prior Periods: Verify the impact of the accounting corrections made to Q3 and YTD 2024 financial statements (Note 2) on year-over-year comparisons.
- Impairment Sustainability: Assess the remaining goodwill balance ($127.8 million) and the risk of future impairments, particularly for the Pure Barre reporting unit which is noted as being at heightened risk.
- Debt Service Capacity: Review the ability to service $376.4 million in debt principal, including the impact of the $7.2 million exit fee and increased quarterly principal payments.
- Franchise Sales Pipeline: Monitor the status of franchise sales in Maryland and Illinois and the impact of the paused sales on future royalty revenue growth.
- Legal Accruals: Track the resolution of pending litigation and government investigations, specifically the potential for additional legal expenses or settlements beyond the $29.5 million currently accrued.