Xponential Fitness' Q3 2025: Contradictions Emerge on Same-Store Sales, Marketing Spend, Studio Closures, and License Terms

Date of Call: November 6, 2025

Financials Results

• Revenue: $78.8M, down 2% YOY from $80.5M prior year
• EPS: Net loss of $0.18 per basic share (GAAP), compared to net loss of $0.29 per basic share prior year; adjusted net income $0.36 per basic share

Guidance:

• North America system-wide sales $1.73B–$1.75B (~+12% at midpoint)
• Total 2025 revenue $300M–$310M (~-5% YOY at midpoint)
• Adjusted EBITDA $106M–$111M (~-7% YOY at midpoint; ~35.6% margin at midpoint)
• Global net new studio openings 170–190 (~-37% at midpoint); closures ~5% of system
• SG&A $130M–$140M (adjusted $110M–$115M; ex-stock $95M–$100M)
• CapEx $6M–$8M; Q4 marketing fund spend to exceed revenue by ~$5M
• Unlevered FCF conversion ~90% of adjusted EBITDA; interest ≈ $49M; tax mid-high single digits

Business Commentary:

* Revenue and Financial Performance: - Revenue for Q3 2025 was $78.8 million, down 2% year-over-year. - The decrease in revenue was attributed to a 49% decline in equipment revenue and a 27% drop in merchandise revenue.

• Same-Store Sales Trends:
• Same-store sales were down 0.8% for the quarter.

• The decline was driven by a confluence of factors, including lead flow and member conversion issues, and brand positioning challenges, particularly in StretchLab.

• Club Pilates Growth and Pricing Strategy:

• Club Pilates, the flagship brand, achieved record year 1 revenue ramps, exceeding previous vintages by an average of 27%.

• The strong performance was due to efficient new studio ramp-ups, but this led to high utilization levels that may impact same-store sales contributions.

• Operational and Strategic Adjustments:

• The company executed a reduction in force, resulting in annualized SG&A savings of $6 million.
• This was a necessary step to optimize operations and streamline costs following divestitures and to support a smaller brand portfolio.

Sentiment Analysis:

Overall Tone: Neutral

• Management emphasized strategic actions and cost saves ("annualized SG&A savings of about $6 million"), reported improved adjusted EBITDA and margin (Adjusted EBITDA $33.5M, margin 42% vs 38% prior year), but noted near-term headwinds (system-wide comps modest, revenue down 2% YOY) and conservative near-term guidance.

Q&A:

• Question from Christopher O'Cull (Stifel, Nicolaus & Company, Incorporated, Research Division): John, I know Club Pilates comps had moderated last quarter... can you provide an update on how that played out in Q3 and current trends in Club Pilates specifically?
  Response: Club Pilates comps moderated to ~1% in Q3 as newer units ramp quickly to ~$900K–$1M AUV, reducing incremental comps as system reaches maturity; focus is on improving lead flow and member conversion.

• Question from Christopher O'Cull (Stifel, Nicolaus & Company, Incorporated, Research Division): How do you balance pricing increases with member risk, and how much opportunity exists to fill off-peak capacity versus pricing?
  Response: They're conducting a data-driven pricing study with experts to design nuanced tiers, packages and intro promotions to maximize studio use without bluntly raising prices; expect actionable changes for 2026.

• Question from Randal Konik (Jefferies LLC, Research Division): Can you expand on bringing private equity into the franchisee base and your thoughts on density/site proximity for Club Pilates?
  Response: They are courting larger-scale operators and PE to expand Club Pilates and other brands, and partnering with a third-party real estate provider and AI tools to increase studio density while minimizing cannibalization.

• Question from Randal Konik (Jefferies LLC, Research Division): Philosophy on portfolio construction after recent divestitures—is this the right set of concepts or could there be further paring?
  Response: Management is satisfied with the smaller, focused portfolio today, believes divestitures improve focus and intends to leverage cross-brand best practices rather than signal imminent further sales.

• Question from John Heinbockel (Guggenheim Securities, LLC, Research Division): Is the Club Pilates economic model assumption still the old ramp versus the faster ramp to $1M AUV, and how does that affect modeling?
  Response: Ramps are faster due to strong presale execution and refined openings; modeling and real-estate tools are being adjusted to reflect improved start-up performance.

• Question from John Heinbockel (Guggenheim Securities, LLC, Research Division): Where is the retail/field support ramp and where are the biggest execution gaps across brands?
  Response: Field team is ~20 now, expanding modestly, using ProfitKeeper to target underperforming studios and improve studio-level economics via focused support and best-practice sharing.

• Question from Joseph Altobello (Raymond James & Associates, Inc., Research Division): What's the purpose of the national ad campaign for Club Pilates given high awareness and utilization?
  Response: Q4 campaign tests new channels (CTV, YouTube, podcasts) to evaluate efficacy and build scalable channel insights for 2026, not just broad awareness uplift.

• Question from Joseph Altobello (Raymond James & Associates, Inc., Research Division): Will learnings from the Club Pilates campaign benefit other brands like StretchLab?
  Response: Campaign is Club Pilates-specific but channel learnings will inform potential application to other brands in 2026.

• Question from Joseph Altobello (Raymond James & Associates, Inc., Research Division): How do license terminations affect accounting and the Q4 EBITDA guide?
  Response: License terminations accelerate deferred license revenue and associated commissions into P&L; Q3 benefited from terminations (~$4M effect) and Q4 will see fewer terminations plus ~$8M of convention and marketing fund spend, explaining sequential adjusted EBITDA guidance decline.

• Question from Jonathan Komp (Robert W. Baird & Co. Incorporated, Research Division): Q3 had ~$4M benefit from terminations and ~40% of backlog is non-current—can you discuss outlook for that backlog and why it remains high?
  Response: Backlog delinquency stems from COVID-era delays; ~1,800 backlog with ~44% Club Pilates (believed likely to open), StretchLab/AUV issues explain others; expect further terminations and gradual reduction as some franchisees move forward.

• Question from Jonathan Komp (Robert W. Baird & Co. Incorporated, Research Division): Any bridge color for Q4 comps, system sales and revenue and which KPIs management will track?
  Response: Q4 system-wide sales guided to $1.73B–$1.75B with sequential seasonal lift (Black Friday); comps expected 0 to low-single-digits; revenue sequentially down due to fewer terminations; weekly KPIs tracked include leads, new members, classes, retail, cancellations and avg studio sales.

• Question from Ryan Meyers (Lake Street Capital Markets, LLC, Research Division): Is innovation (new class content) concept-wide or localized?
  Response: Class content is developed and then rolled out nationwide after testing; innovation will also feed marketing to drive engagement across brands.

• Question from Ryan Meyers (Lake Street Capital Markets, LLC, Research Division): Any shift in membership churn at Club Pilates amid pricing efforts?
  Response: Churn has remained stable; member counts per studio are reaching capacity so growth rate has slowed, not elevated cancellations.

• Question from Richard Magnusen (B. Riley Securities, Inc., Research Division): How are you replacing lost Medicare-driven StretchLab traffic and reducing instructor-to-visitor ratios?
  Response: Focus on expanding membership mix toward younger/athletic customers, intro pricing, partnerships, performance marketing and testing operational changes to reduce labor intensity; no concrete results shared yet.

• Question from Owen Rickert (Northland Capital Markets, Research Division): What franchisee feedback on pressures like labor or occupancy and how are you helping?
  Response: Franchisees report persistent but manageable labor/instructor availability issues; company leverages strong instructor training (esp. Club Pilates) and field support (ProfitKeeper) to help mitigate costs and staffing.

Contradiction Point 1

Club Pilates' Same-Store Sales Trend

It involves differing trends in Club Pilates' same-store sales between the two quarters, affecting growth expectations and franchisee performance.

How did Club Pilates' same-store sales perform in the third quarter? - Christopher O'Cull(Stifel, Nicolaus & Company, Incorporated, Research Division)

2025Q3: In Q2 2025, Club Pilates' same-store sales moderated to low single digits or about 1% in Q3. - John Meloun(CFO)

What are the latest same-store sales trends? - Joseph Altobello(Raymond James & Associates, Inc., Research Division)

2025Q2: The guide accounts for a low-single digit in same-store sales for the second half, with Club Pilates performing well, but StretchLab showing negative comps. - John Kawaja(President, North America)

Contradiction Point 2

Marketing Spend and Strategy

It discusses the company's marketing strategy and spend, which directly impacts brand awareness and growth efforts.

What is the purpose of the national ad campaign for Club Pilates given high brand awareness and usage? - Joseph Altobello(Raymond James & Associates, Inc., Research Division)

2025Q3: We're really going to indicate that there is a focus on brand development, and that's going to be a key part of our strategy. - Michael Nuzzo(CEO & Director)

Why isn't the company opening more Club Pilates units more aggressively? Can you detail the planned marketing channels and initial spend for the campaign? - Christopher O'Cull(Stifel, Nicolaus & Company, Incorporated, Research Division)

2025Q2: The marketing campaign will use all mediums with a significant spend over $20 million in Q3 and Q4, aiming to strengthen brand awareness. - John Kawaja(President, North America)

Contradiction Point 3

Studio Closure Expectations

It involves the expectation of studio closures, which directly impacts the company's financial health and operational efficiency.

What challenges are franchisees facing, and how are you supporting them? - Owen Rickert(Northland Capital Markets)

2025Q3: We are assuming some studios will not reopen, though we expect a majority will. - Michael Nuzzo(CEO)

Why are additional closures expected compared to the prior outlook? - Joe Altobello(Raymond James)

2025Q1: We do expect some studios to close, but it's also important to remember that some studios are moving and some are rebranding. - Mark King(CEO)

Contradiction Point 4

Club Pilates' Sales Performance and Strategy

It involves differing perspectives on the sales performance and strategy for Club Pilates, which is a critical brand for Xponential Fitness' overall growth and success.

What were Club Pilates' same-store sales in Q3? How are you balancing price increases with macroeconomic risks? How much growth potential exists by utilizing off-peak capacity? - Christopher O'Cull(Stifel, Nicolaus & Company, Incorporated, Research Division)

2025Q3: In Q2 2025, Club Pilates' same-store sales moderated to low single digits or about 1% in Q3. - John Meloun(CFO)

Can you clarify the comp performance embedded in the 2025 system sales guidance, which implies 13% growth? - Chris O'Cull(Stifel)

2024Q4: The assumption that we have is what I stated in the guidance. We're looking for about mid-single-digits as an expectation around comp. The split obviously changes amongst brands with Club Pilates has been over indexing to a higher percent historically, but when you take it into context of the entire portfolio, you should expect to see about a mid-single-digit comp for 2025. - John Meloun(CFO)

Contradiction Point 5

Impact of Terms on License Sales

It highlights the impact of terms on license sales, which directly affects the company's growth strategy and revenue expectations.

What were Q3 same-store sales for Club Pilates? How are you balancing price increases with macroeconomic risks? What growth opportunities exist by utilizing off-peak capacity? - Christopher O'Cull(Stifel, Nicolaus & Company, Incorporated, Research Division)

2025Q3: We have not been aggressively pursuing new licenses and will take a more prudent approach to our franchise development strategies. - Michael Nuzzo(CEO)

How will the new field operations team impact the business? - John Heinbockel(Guggenheim Securities, LLC, Research Division)

2025Q1: License sales are expected to reach about 100 per quarter, with a high concentration in Club Pilates, both domestically and internationally. - John Meloun(CFO)