Business Context and Reporting Period
Xponential Fitness, Inc. (XPOF) is a leading global franchisor of boutique health and wellness brands, operating a diversified platform of five core brands: Club Pilates, StretchLab, YogaSix, Pure Barre, and BFT. The company operates under an asset-light franchise model, generating revenue primarily through royalties, franchise fees, and marketing fund contributions. This Form 10-K covers the fiscal year ended December 31, 2025. During the period, the company divested the CycleBar, Rumble, and Lindora brands to focus on its core portfolio and completed a significant debt refinancing.
Key Financial Metrics
| Metric | 2025 | 2024 |
|---|---|---|
| Total Revenue | $314.9 million | $320.3 million |
| Net Loss | $(53.7) million | $(98.7) million |
| Adjusted EBITDA | $111.8 million | $116.2 million |
| Operating Cash Flow | $28.3 million | $11.7 million |
| Total Debt Outstanding | $525.0 million | $387.9 million (prior facility) |
| Cash and Cash Equivalents | $33.7 million | $16.7 million |
| System-Wide Sales | $1.75 billion | $1.55 billion |
| Operating Studios (Global) | 3,097 | 2,896 |
Material Changes vs. Prior Period
- Revenue Decline: Total revenue decreased 1.7% to $314.9 million, driven by a 35.4% drop in equipment revenue and a 12.0% decline in merchandise revenue due to brand divestitures and a strategic shift to outsource retail. This was partially offset by a 10.4% increase in franchise revenue.
- Improved Profitability: Net loss narrowed significantly to $53.7 million from $98.7 million in 2024. Operating income improved to $19.8 million from a loss of $53.6 million, aided by a 47.7% reduction in goodwill and asset impairments ($32.7 million vs. $62.6 million) and lower restructuring charges.
- Debt Refinancing: The company entered a new Credit Agreement on December 8, 2025, consisting of a $525 million term loan and a $25 million revolving facility, maturing in 2030. This refinancing resulted in a $27.3 million loss on debt extinguishment.
- Brand Portfolio Changes: The company divested CycleBar and Rumble in July 2025 and Lindora in September 2025. These divestitures resulted in a net gain of $2.1 million for CycleBar/Rumble and a net loss of $0.5 million for Lindora.
- Operational Growth: Despite divestitures, the company added 201 net studios globally, bringing the total to 3,097. System-wide sales grew 12.6% year-over-year.
Guidance, Outlook, and Risks
- Management Commentary: Management emphasizes a focus on core brands and a "franchisee-first" mindset. The company is transitioning to a data-driven organization and has outsourced retail merchandising to Fit Commerce to reduce costs and complexity.
- Restructuring: The company expects to incur additional restructuring charges of $7.4 million to $11.0 million in 2026 related to lease terminations for company-owned transition studios. Annualized savings from the restructuring plan are estimated at $13.5 million to $15.5 million.
- Regulatory Risks: Franchise sales are temporarily paused in several states (including California, New York, and Washington) pending regulatory review of amended Franchise Disclosure Documents (FDDs). The company is also subject to ongoing investigations by the FTC and state attorneys general regarding franchise disclosure compliance. A proposed FTC Consent Order involves a $17,000 payment.
- Internal Controls: The company identified a material weakness in internal control over financial reporting related to the sufficiency of accounting resources and IT general controls. Remediation efforts are ongoing.
- Impairment Risk: The Pure Barre reporting unit goodwill is at heightened risk of future impairment, with fair value exceeding carrying value by only approximately 6%.
Investor Verification Checklist
- Regulatory Status: Verify the timeline for the resumption of franchise sales in paused states and the final outcome of the FTC and state regulatory investigations.
- Debt Covenants: Confirm compliance with the new Total Net Leverage Ratio covenant under the December 2025 Credit Agreement, which becomes effective March 31, 2026.
- Internal Controls: Monitor progress on the remediation of the material weakness in internal controls over financial reporting to ensure future financial statement reliability.
- Divestiture Integration: Assess the financial impact of the retail outsourcing agreement with Fit Commerce and the realization of expected cost savings.
- Impairment Monitoring: Track the performance of the Pure Barre brand, given the narrow margin between its fair value and carrying value.