Xponential Fitness Earnings Call Balances Growth And Strain

Xponential Fitness, Inc. Class A ((XPOF)) has held its Q4 earnings call. Read on for the main highlights of the call.

Xponential Fitness, Inc. walked a tightrope this quarter between scale-driven growth and mounting execution challenges. Management highlighted robust system‑wide sales expansion, strong Club Pilates performance, and tangible cost and operational initiatives, yet acknowledged soft comps, margin compression, and elevated leverage as it invests to reignite organic studio revenue and stabilize underperforming brands.

Net Studio Growth and Scale

Xponential continued to expand its footprint, opening 201 net new studios in 2025 and ending the year with 3,097 locations worldwide. Club Pilates remained the growth engine, accounting for 220 gross openings and about 78% of the 179 licenses sold, reinforcing its central role in the portfolio.

System‑Wide Sales Growth

System‑wide sales climbed about 13% year over year to roughly $1.7 billion, fueled mainly by new studio openings and the heft of Club Pilates. The Pilates brand alone contributed around 65% of system‑wide sales, underscoring how heavily the company’s royalty stream relies on this single concept.

Brand & Training Momentum

Management emphasized its instructor training pipeline as a competitive asset, graduating over 2,100 Pilates and more than 3,000 barre instructors. This internal training infrastructure supports faster franchisee onboarding and helps sustain studio quality and consistency across the network.

Outsourced Retail Transition and Merchandise Improvement

The company completed its shift to an outsourced studio retail and merchandise partner, a key operational change. Q4 merchandise revenue rose 18% year over year to $7.2 million, and Xponential expects the new model to add roughly $9 million to $10 million in annual EBITDA as it scales.

Refinancing and Capital Structure Simplification

Xponential refinanced its balance sheet with a new five‑year $525 million term loan and a $25 million revolver, extending maturities and consolidating debt. It also repurchased convertible preferred stock, removing about 8.1 million potential common shares and reducing future dilution risk for existing shareholders.

Adjusted EBITDA and Cash Generation

Adjusted EBITDA for 2025 came in at $111.8 million, a 4% decline from the prior year, with Q4 delivering $22.9 million as margins tightened. Operating cash flow reached $28.3 million and cash, cash equivalents, and restricted cash rose to $45.9 million from $32.7 million, offering some cushion against upcoming obligations.

Positive Brand‑Level AUVs for Key Brands

Despite pressure, several brands maintained healthy average unit volumes that support royalty potential. Club Pilates posted a robust run‑rate AUV of about $966,000, even after a 6% decline, while Pure Barre and YogaSix saw AUVs increase to $400,000 and $525,000, respectively.

Quarterly Same‑Store Sales Pressure

North America same‑store sales fell 4.3% in Q4, with management pointing to missteps in marketing and lead generation that weakened the top of the funnel. The impact was particularly evident at Club Pilates, where comps were down around 3% in the quarter despite finishing 2025 up 3% for the full year.

Margin Compression and Q4 EBITDA Decline

Profitability took a notable hit in the fourth quarter as adjusted EBITDA dropped 26% year over year to $22.9 million. The adjusted EBITDA margin shrank to 28% from 37%, pressured by a 126% jump in marketing fund expenses and lower sponsorship revenue that diluted operating leverage.

Revenue and Profitability Headwinds

Full‑year revenue slipped about 2% to $314.9 million, while Q4 revenue was essentially flat at $83 million, signaling a pause in top‑line momentum. The company reported an adjusted net loss of $18.4 million and a GAAP net loss of $53.7 million for 2025, highlighting ongoing profitability challenges.

Underperforming Brands and Studio Closures

StretchLab was a key weak spot, with AUV down 12% to $483,000 and same‑store sales off 12%, raising questions about the concept’s trajectory. Across the system, 140 studios closed in 2025, about 4.5% of the base, including 16 cruise ship locations decommissioned in Q4 as the company rebalanced its footprint.

Large Portion of License Obligations Inactive

Roughly 30% of contractually obligated North America and international master franchise openings were more than 12 months behind schedule at year‑end and classified as inactive. This backlog introduces uncertainty around the timing of future unit growth and may limit the near‑term pace of expansion.

Significant One‑Time and Legal Items

The income statement and cash flow were also hit by sizable non‑recurring items, including about $33.5 million of lease settlement payments in 2025 with $9.1 million of liabilities still outstanding. Management also disclosed additional regulatory‑related payments over the next year, adding to near‑term cash demands.

Revenue Impact from Divestitures and Outsourcing

Looking ahead, the company expects a meaningful headwind to reported revenue from portfolio pruning and the outsourced merchandise shift. Management estimated that 2026 revenue will absorb about a $23.1 million impact from 2025 brand divestitures and roughly an $18 million impact tied to merchandise transition effects.

Higher Net Leverage and Interest Cost

The refinancing lifted long‑term debt to $525 million from $352.4 million, increasing financial leverage even as it improved liquidity and flexibility. Xponential projects around $55 million of interest expense in 2026, which will weigh on cash flow and limit levered free‑cash‑flow conversion to roughly 35% of adjusted EBITDA.

2026 Guidance and Strategic Priorities

For 2026, management is guiding to 150 to 170 net new studio openings, implying a more measured expansion stance as it tackles unit economics and brand health. It expects North America system‑wide sales of $1.72 billion to $1.80 billion, total revenue of $260 million to $270 million, adjusted EBITDA of $100 million to $110 million, and elevated free‑cash‑flow conversion driven by tighter SG&A and modest capex.

Xponential’s latest call painted a story of a scaled franchisor leaning on its stronger brands while taking its medicine on weaker segments and higher leverage. Investors will be watching whether the company can translate its sizable studio base and training engine into better same‑store sales and margins in 2026, or if structural pressures continue to overshadow its growth narrative.