Xponential Fitness, Inc. (XPOF) Earnings

Management highlights

### Strategic and Leadership Updates - Management shifted core priorities from unit expansion and brand development to business optimization, stronger organic growth, improved franchisee economics, and consistent cross-brand member experiences as the firm reaches larger scale amid shifting consumer demand. - Danielle Parra joined as President, bringing deep franchise leadership experience. She leads initiatives to strengthen franchisee relationships, accelerate studio expansion, improve brand positioning, and coordinate cross-team field operations support. The board continues an active review of strategic alternatives to maximize shareholder value, including potential sale, merger, or other strategic/financial transactions; no further updates will be provided until the process concludes. ### Studio Growth and Expansion - Q2 2026 delivered net unit growth of 16 studios domestically and 12 internationally; year-to-date net growth is 39 domestic and 29 international. Total global open studios surpassed 500 international, with Club Pilates hitting its 200th international studio in June 2026. - Announced a multi-year partnership with largest Club Pilates franchisee Spartan Fitness Holdings to open 117 new studios across 11 U.S. states over the next six years, highlighting continued strong demand for the Club Pilates brand. The development pipeline remains healthy, with over 690 contracted unopened licenses in North America and 730 international master franchise obligations.

Guidance

- Full-year 2026 guidance is lowered from prior levels, driven by lower-than-expected Q2 2026 performance, continued projected merchandise revenue pressure, and cautious same-store sales assumptions for the second half of 2026 aligned with recent first-half trends. - Expected full-year global net new studio openings: ~150 studios. - Expected 2026 North America system-wide sales: $1.70 billion to $1.75 billion. - Expected full-year 2026 total revenue: $250 million to $260 billion. - Expected full-year 2026 adjusted EBITDA: $91 million to $97 million, with a 36.9% adjusted EBITDA margin at the midpoint of the range.

Segment performance

Exponential Fitness reports consolidated Q2 2026 total revenue of $66.0 million, a 13% year-over-year decline from Q2 2025. Breakdown by revenue stream (all year-over-year: (1) Equipment revenue: Down $2.5 million, with declines driven by timing of new studio openings and installations, not reduced long-term development demand. (2) Merchandise revenue: Down $5.1 million; $3.9 million of the decline comes from accounting changes for the new outsourced model (the firm now only records commission revenue, rather than full merchandise sales value. (3) Franchise revenue: Down $1.4 million, driven by lower same-store sales and 2025 brand divestitures. (4) Marketing fund and other services revenue: Each down ~$0.7 million, for a total $1.4 million shortfall. Consolidated adjusted EBITDA was $21.9 million, down 22% year-over-year, representing a 33% adjusted EBITDA margin (down from 37% in Q2 2025). North America system-wide sales of $437 million were flat year-over-year, with a 6.8% same-store sales decline; growth from new studio openings was fully offset by same-store weakness. Global total open studios reached 3,165 as of Q2 end.

Risks & headwinds

- Broad consumer discretionary headwinds have increased pressure on top-of-funnel lead generation and new customer acquisition, with consumers increasingly selective about fitness spending. Organic leads have declined year-over-year, partially offset by higher paid media spending that has increased operating costs. - The transition to an outsourced merchandise logistics partner has created unanticipated operational challenges in vendor operations, sourcing, and execution that negatively impacted Q2 2026 results, with improvement progressing slower than originally expected. - Lease negotiations for new studio locations are more challenging than in prior years, as demand for small-format (2,000 square foot) retail space is elevated, which can slow new studio opening timelines. - The firm faces ~11.4 million yen in additional remaining settlement payments for ongoing legal and regulatory matters (franchisee lawsuit, FTC case, and New York Attorney General case) through the end of 2026, which has pressured near-term cash flow.

Analyst Q&A

• Q: What is the plan to reverse Club Pilates same-store sales declines, how important is same-store performance to franchisee economics, and what comp level would ease P&L pressure?

  A: Management is focused on improving organic lead flow and launching a redesigned Club Pilates website in Q3 that is expected to improve top-of-funnel performance, while paid media lead trends are already improving. Management notes that even with modestly lower AUV, Club Pilates still delivers strong franchisee economics, and the brand has room to double its U.S. studio count. Any same-store result near flat or modestly positive is sufficient, and double-digit comps are not required to support profitable growth. P&L pressure currently comes more from transitory weakness in equipment and merchandise revenue, not same-store sales itself.

• Q: What same-store sales trend is baked into second half guidance, and how will you attract new franchisee investment if mature same-store sales are declining?

  A: Guidance assumes the roughly -6.5% same-store sales trend seen in the first half of 2026 continues through the second half, with no meaningful difference between Q3 and Q4. Management will not forecast a trend improvement until tangible improvement is observed, even as multiple initiatives are underway to bend the performance curve. Studio closure rates are in line with 2025 pre-divestiture trends, and the development pipeline remains healthy. The Club Pilates model still delivers strong durable four-wall profitability for franchisees, and most future growth will come from existing reliable franchise partners who already control large territories, supporting a stable growth engine.

• Q: What are the benefits of large franchisee development deals like the Spartan Fitness partnership, and is the pipeline shifting toward more large partners rather than independents?

  A: These large multi-year deals lock in clear long-term expansion plans for specific geographies, and require detailed pre-planning with the corporate real estate team. The terms of the franchise arrangements are not materially different from the core model. Large partners are experienced high-quality operators that bring additional resources to studio management, and act as strong partners for piloting new corporate initiatives. Management notes that additional large deals may be pursued in select geographies going forward, but will continue to mix in independent franchise partners as well.

• Q: What is the timeframe for merchandise revenue to normalize after the transition, and what results have come from increased Q2 2026 marketing investment?

  A: Increased Q2 marketing spending successfully increased paid media leads, which offset ongoing organic lead weakness, and return on paid media investment remains consistent with historical levels. The goal is to return merchandise revenue to a normal run rate in the second half of 2026, but guidance assumes current weak trends continue through year-end as a cautious assumption. The continued weakness in merchandise and same-store sales, combined with the Q2 performance shortfall, fully explain the downward guidance revision.