Xponential Fitness reiterates $300M–$310M 2025 revenue outlook as it streamlines brand portfolio and targets cost savings

Earnings Call Insights: Xponential Fitness (XPOF) Q3 2025

MANAGEMENT VIEW

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Michael Nuzzo, CEO, stated his first 90 days reinforced confidence in Xponential’s position: "Having completed my first 90 days, I've had the opportunity to deep dive into our business, connect with many of you and gain a clear understanding of both our strengths and the areas where we can improve." Nuzzo highlighted three foundational elements: Xponential’s favorable placement in the growing boutique fitness space, strong studio brands, and recent progress in building an infrastructure to drive growth. He emphasized the impact of recent divestitures, noting a more optimized brand portfolio and improved franchisee support.

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Nuzzo detailed five core focus areas: marketing, operations support, unit growth and licensing, innovation, and efficiencies/cost savings. He announced a reduction in force in October, expected to yield $6 million in annualized SG&A savings, and outlined tactical marketing enhancements, new field support teams, the transition to an outsourced retail model, and investments in AI-powered site selection.

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John Meloun, Chief Financial Officer, reported: "We ended the quarter with 3,066 global open studios. This quarter, we opened 78 gross new studios, 57 in North America and 21 internationally. There were 32 global studio closures in the third quarter or about 1%." Meloun also noted, "Approximately 40% of our global licenses are over 12 months behind their applicable development schedules."

OUTLOOK

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The company reiterated its guidance for 2025: North America system-wide sales projected at $1.73 billion to $1.75 billion, global net new studio openings in the range of 170 to 190, total revenue between $300 million and $310 million, and adjusted EBITDA between $106 million and $111 million. Management expects a 5% closure rate of the global system and a 35.6% adjusted EBITDA margin at the midpoint.

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Meloun underlined a more conservative approach to system-wide sales and the impact of the Lindora divestiture, while confirming that revenue and adjusted EBITDA guidance remain unchanged.

FINANCIAL RESULTS

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Consolidated revenue for the quarter was $78.8 million, down $1.7 million from the prior year period. Franchise revenue rose 17% year-over-year to $51.9 million, while equipment revenue fell 49% to $7.5 million. Merchandise revenue declined 27% to $4.8 million.

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The company recorded a net loss of $6.7 million or a loss of $0.18 per basic share, compared to a net loss of $18.1 million or $0.29 per share in the prior year period. Adjusted net income was $19.3 million and adjusted EBITDA was $33.5 million, with an adjusted EBITDA margin of 42%.

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SG&A expenses fell 47% to $24.7 million. The company reported $10 million in insurance reimbursements related to the concluded SEC investigation, and an additional $10 million insurance receivable was recorded.

Q&A

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Christopher O'Cull, Stifel: Asked about Club Pilates comps and current trends. John Meloun responded that comps moved to the low single digit or about 1% in Q3, citing high utilization and maturation of the installed base. CEO Nuzzo added that while growth remains strong, improvements in lead generation and conversion are needed to support franchisees.

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O'Cull followed up on balancing pricing with retention and off-peak growth. Meloun outlined the company’s data-driven pricing study and collaborative approach with franchisees to optimize packages and promotions.

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Randal Konik, Jefferies: Inquired about private equity interest in the franchisee base and unit density strategy. Nuzzo stated, "Private equity has done very well in this space, and so we're having really good productive conversations with them... On the real estate side, this is what I was specifically referencing when it comes to partnering with an experienced third-party real estate partner and the use of pretty sophisticated location selection technologies."

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John Heinbockel, Guggenheim: Asked about changes in Club Pilates' ramp model and field consultant impact. Nuzzo and Meloun described improvements in presale activity, ongoing model refinement, and field teams focused on studio-level economics.

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Joseph Altobello, Raymond James: Queried the rationale for a national ad campaign for Club Pilates. Nuzzo explained the campaign's focus on new channels and its potential to inform future marketing investments.

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Ryan Meyers, Lake Street: Asked about innovation rollout and pricing impacts on churn. Nuzzo clarified that innovation is approached nationwide, while Meloun noted churn has remained stable.

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Richard Magnusen, B. Riley: Sought details on StretchLab’s response to Medicare changes. Nuzzo outlined efforts to expand membership mix and test operational adjustments to reduce labor demand.

SENTIMENT ANALYSIS

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Analysts voiced concerns over same-store sales trends, backlog delinquency, pricing strategy, and unit economics, pressing management for clarity on turnaround timelines and operational adjustments. The tone was slightly negative, with repeated probing on Club Pilates comps, backlog, and the impact of terminations.

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Management maintained a neutral to confident tone in prepared remarks and Q&A, providing data-driven explanations and emphasizing ongoing strategic actions. Nuzzo frequently highlighted opportunities for improvement and operational focus. The tone was more assertive in prepared statements and slightly more defensive when addressing analyst concerns.

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Compared to the previous quarter, analyst skepticism increased due to ongoing comp and backlog challenges. Management’s tone shifted from introductory optimism to a more granular, action-oriented stance, with clear communication of cost controls and strategic priorities.

QUARTER-OVER-QUARTER COMPARISON

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Guidance for revenue and adjusted EBITDA remains unchanged from the previous quarter, while the approach to North America system-wide sales is more conservative due to divestitures.

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The closure rate and backlog of licenses over 12 months delinquent remain ongoing concerns, with detailed explanations provided on accounting impacts and plans for further terminations.

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Management's focus shifted from the transition of leadership to operational execution, cost savings, and tactical improvements in marketing and support. Analysts' questions concentrated more on comp trends, backlog, and execution risks this quarter versus last quarter’s focus on leadership transition and portfolio changes.

RISKS AND CONCERNS

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40% of global licenses remain 12 months behind development schedules, with ongoing efforts to reduce this through terminations and operational support.

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StretchLab faces challenges from reduced Medicare Advantage coverage, prompting shifts in membership mix and operational testing to support revenue.

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Club Pilates’ high utilization presents both a growth opportunity and a limit to same-store sales increases, with management investigating pricing and density strategies.

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The company continues to manage lease settlement obligations and is exploring term loan refinancing ahead of 2026 maturity.

FINAL TAKEAWAY

Xponential Fitness leadership emphasized that, following strategic divestitures and organizational streamlining, the company is focusing on operational improvements, cost savings, and tactical marketing initiatives to drive organic growth. Management reiterated unchanged revenue and adjusted EBITDA guidance for 2025, with a nationwide push for innovation and efficiency, aiming to position the company for stronger financial performance and franchisee support as it enters 2026.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/xpof/earnings/transcripts]

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