Xponential Fitness, Inc. Q3 FY2025 earnings call

• Industry: Boutique fitness has substantial momentum and long-term growth potential as consumers invest more in health and wellness. - Brands: Strong studio brands loved by members and led by passionate franchisees. Optimized brand portfolio after divestitures. - Marketing: New leadership team enhancing corporate capabilities in digital media, etc. Launched pricing study for Club Pilates, refreshed corporate brand websites, addressing lead management issues. Fourth quarter to launch national brand campaign for Club Pilates. - Operations support: Launched initial field support teams to provide best practices to studios. Retail transition to outsourced model nearly complete by year-end. - Unit growth and licensing: Ramped up real estate and license sales support, working with outsourced partner, attracting established operators and private equity, completed franchise disclosure documents registration, expanding in international markets. - Innovation: Generating new class content and member engagement, e.g., Club Pilates launched new class Circuit, Yoga6 refining class offering menu. - Efficiencies and cost savings: Swiftly rightsizing corporate organization, executing reduction in force in October, expected to result in annualized SG&A savings of about $6 million.

For the period ended September 30, 2025, Xponential Fitness had 3,066 global open studios. In the third quarter, 78 gross new studios were opened (57 in North America and 21 internationally) and 32 global studio closures occurred. North America system-wide sales were $432.2 million in the third quarter, up 10% year-over-year. Same-store sales were down 0.8% for the quarter and up 5.4% on a 2-year stack basis. North America run rate average unit volumes climbed to 668,000 in the third quarter, up 2% from the prior year period. Revenue for the quarter was $78.8 million, down 2% from the prior year period. Franchise revenue rose 17% year-over-year to $51.9 million. Equipment revenue was $7.5 million, down 49% year-over-year. Merchandise revenue was $4.8 million, down 27% year-over-year. Franchise marketing fund revenue was $8.8 million, up 3% year-over-year. Other service revenue was $5.9 million, down 6% year-over-year. Cost of product revenue were $10.2 million, down 41% year-over-year. Cost of franchise and service revenue were $7 million, up 45% year-over-year. Selling, general and administrative expenses were $24.7 million, down 47% year-over-year. Depreciation and amortization expenses were $3.7 million, down 13% year-over-year. Marketing fund expenses were $9 million, up 40% year-over-year. Acquisition and transaction expenses were $3.1 million, down 16% year-over-year. Net loss was $6.7 million in the third quarter. Adjusted EBITDA was $33.5 million in the third quarter, up 9% year-over-year, with an adjusted EBITDA margin of 42%.

• North America system-wide sales projected to range from $1.73 billion to $1.75 billion, representing a 12% increase at the midpoint. - Global net new studio openings (net of closures) expected to be in the range of 170 to 190, a 37% decrease at the midpoint from the prior year. - Total 2025 revenue expected to be between $300 million and $310 million, unchanged from previous guidance. - Adjusted EBITDA expected to range from $106 million to $111 million, unchanged from previous guidance. - Total SG&A expected to range from $130 million to $140 million. - Fourth quarter to have annual franchise conference with a net $3.7 million expense. - Marketing fund expenses expected to exceed revenue by approximately $5 million in the fourth quarter. - Capital expenditure anticipated to be approximately $6 million to $8 million for the year, about 2% of revenue at the midpoint.

• Forward-looking statements involve risks and uncertainties, refer to SEC filings for details. - StretchLab impacted by Medicare Advantage plans scaling back on stretch as a covered benefit. - Accounting impact related to franchise license terminations, with steep decline in adjusted EBITDA in the fourth quarter due to factors like fewer terminations, franchise conference expense, and marketing fund spend. - Potential risks in labor, occupancy, or instructor availability, with ongoing efforts to mitigate through instructor training programs and field team engagement with studios.

Q: Chris O'Cull asked about Club Pilates comps moderation and current trends.

A: John Meloun said Club Pilates comps were around 1% in Q3, with installed base studios reaching full maturity, and Mike Nuzzo added focus on lead generation, member conversion, marketing, and studio ops support.

Q: Randal Konik asked about private equity entering franchisee base and density.

A: Michael Nuzzo said specifically in Club Pilates looking to bring in larger scale operators and private equity, and on real estate, partnering with third-party and using location selection technologies to place studios without cannibalization.

Q: John Heinbockel asked about Club Pilates economic model and retail ops field consultants.

A: Michael Nuzzo talked about brand strength and ramp, and John Meloun said field team working with ProfitKeeper system to improve studio economics.

Q: Joseph Altobello asked about national ad campaign for Club Pilates.

A: Michael Nuzzo said campaign uses new channels to understand efficacy and help in 2026, and John Meloun explained accounting impact of license terminations and fourth quarter factors affecting EBITDA.

Q: Jonathan Komp asked about backlog and fourth quarter bridging.

A: John Meloun explained license sale accounting, termination impact, and revenue expectations for Q4.

Q: Ryan Meyers asked about innovation and pricing.

A: Michael Nuzzo said class content rolled out nationwide, and John Meloun talked about Club Pilates churn remaining stable.

Q: Richard Magnusen asked about StretchLab efforts.

A: Michael Nuzzo mentioned expanding membership mix, new partnerships, and operational adjustments.

Q: Owen Rickert asked about franchisee feedback on challenges.

A: Michael Nuzzo talked about instructor training and ProfitKeeper system helping mitigate challenges.