Xponential Fitness (NYSE:XPOF) reported second-quarter results that fell below its internal expectations, prompting the boutique fitness franchisor to lower its full-year outlook as same-store sales declined, merchandise operations remained pressured and the company continued to invest in paid marketing and digital initiatives.
Chief Executive Officer Mike Nuzzo said the company is shifting its emphasis from the unit expansion and brand development that characterized its prior growth toward improving organic growth, franchisee economics, operating execution and consistency in the member experience.
Studio Growth Continues, Though Same-Store Sales Decline
Xponential ended the second quarter with 3,165 open studios globally. The company opened 67 gross new studios during the quarter, including 47 in North America and 20 internationally, while 39 studios closed. Net unit growth was 16 domestically and 12 internationally during the quarter. Year to date, the company added 39 net domestic studios and 29 net international studios.
The company sold 53 licenses globally in the quarter, including 43 internationally and 10 in North America. As of June 30, Xponential had more than 690 North American licenses contractually obligated to open, along with 730 international master franchise obligations.
Club Pilates remained a focal point of the growth strategy. Xponential announced a partnership with Spartan Fitness Holdings, its largest Club Pilates franchisee, that is expected to result in 117 studio openings across 10 states over the next six years. Nuzzo said the arrangement is centered on detailed geographic planning and does not materially differ from the company’s core franchise arrangement.
Internationally, Xponential now has more than 500 studios open, with Club Pilates opening its 200th international studio in June.
However, North America system-wide sales were flat year over year at $437 million, as sales from net new studios were offset by a 6.8% decline in same-store sales. Club Pilates same-store sales declined 5% during the quarter. Nuzzo said the results were modestly weaker than first-quarter trends and were primarily affected by pressure at the top of the customer funnel.
Management pointed to a more challenging consumer environment, including selective consumer spending, higher promotional activity and pressure on new-customer acquisition entering the summer months. Total company member retention nevertheless improved 28 basis points year over year in the second quarter.
Revenue and Adjusted EBITDA Fall
Consolidated second-quarter revenue was $66 million, down $10.2 million, or 13%, from the prior-year period. Interim Chief Financial Officer Robert Julian said approximately $2.5 million of the decline was related to equipment revenue tied to the timing of studio openings and installation schedules.
Merchandise revenue declined $5.1 million from a year earlier. Of that amount, $3.9 million reflected the company’s new outsourced merchandise model, under which Xponential records its commission rather than the full merchandise sales value as revenue. The company also cited operational challenges with its outsourced logistics partner involving vendor operations, sourcing and execution.
Franchise revenue declined $1.4 million, primarily because of lower same-store sales and brand divestitures completed in 2025. The remaining revenue decline was split between marketing fund revenue and other services revenue, Julian said.
- Second-quarter adjusted EBITDA was $21.9 million, down $6.2 million, or 22%, year over year.
- Adjusted EBITDA margin was 33%, compared with 37% in the prior-year quarter.
- Cash equivalents and restricted cash totaled $25 million as of June 30, compared with $38.7 million a year earlier.
- Total long-term debt was $522.4 million, compared with $377.8 million a year earlier, primarily due to the retirement of a convertible preferred security in the fourth quarter of 2025.
Julian said adjusted EBITDA was below the company’s internal forecast because of lower merchandise contribution and higher marketing investment.
Digital, Marketing and Franchisee Initiatives
Xponential said it is responding to top-of-funnel pressure through paid media, website redesigns, artificial intelligence-focused search engine optimization efforts and new data tools for franchisees.
The company implemented a new StretchLab digital experience in July and completed a redesign of the Club Pilates website, which management expects to launch in the third quarter after programming is completed. Nuzzo said the redesigned digital experiences are intended to improve navigation, reduce friction in the member journey and support more lead submissions.
The company is also using reporting dashboards to help franchisees improve conversion from leads to memberships. Pure Barre and YogaSix teams, for example, are using data tools to coach studios on adding class types associated with higher new-member conversion. Xponential is also supporting franchisees that are piloting AI-enabled customer relationship management tools.
Paid-media leads increased year over year, helping offset declines in organic leads. Nuzzo said the company will maintain elevated paid media and digital spending while working to improve organic lead generation later in the year.
On merchandise, management said it is working with its outsourced partner on process improvements while evaluating other ways to improve reliability and performance. Nuzzo said the company’s goal is to return merchandise to a normal operating run rate during the second half, though Julian said the company’s guidance assumes pressure continues through year-end.
Lowered 2026 Outlook and Strategic Review
Xponential lowered its 2026 guidance due to second-quarter performance, expectations for continued merchandise pressure and more cautious assumptions for same-store sales in the second half. Management said its forecast assumes same-store sales trends remain broadly consistent with the first half rather than forecasting an improvement before it is visible in results.
- Global net new studio openings are expected to be approximately 150.
- North America system-wide sales are projected at $1.70 billion to $1.75 billion.
- Total 2026 revenue is expected to be $250 million to $260 million.
- Adjusted EBITDA is forecast at $91 million to $97 million, representing a 36.9% margin at the midpoint.
Julian said the company made $6.8 million in second-quarter payments associated with agreed settlements in franchisee litigation, the Federal Trade Commission case and the New York Attorney General case. It expects approximately $11.4 million of additional settlement payments for the remainder of 2026 related to the franchisee and FTC cases.
The company said it has made significant progress resolving most of its regulatory matters and has substantially refreshed its franchise disclosure documents. Julian said legal expenses and settlements have placed substantial pressure on cash flow in recent years, but he expects cash flow to turn positive in 2027.
Nuzzo also reiterated that Xponential’s board is continuing its strategic alternatives review, which may include a sale, merger or another strategic or financial transaction. The company said it does not intend to comment further on the process until it is complete.
About Xponential Fitness (NYSE:XPOF)
Xponential Fitness is a leading franchisor and operator of boutique fitness studios headquartered in Irvine, California. The company specializes in developing, marketing, and supporting a portfolio of fitness brands that deliver low-impact cardio, strength training, and mindful movement workouts. Through its asset-light franchise model, Xponential provides entrepreneurs with proprietary studio designs, branded equipment, digital support, and comprehensive training programs to ensure consistent member experiences.
Its portfolio comprises core brands such as Club Pilates, Pure Barre, CycleBar, StretchLab, YogaSix, Row House, Rumble, AKT, and STRIDE.
