Industry Overview - The Consumer Discretionary sector has experienced mixed performance in 2025 due to elevated inflation, high interest rates, and uncertainty in trade and fiscal policies, leading to cautious consumer behavior in discretionary spending categories [1] - Despite a relatively stable job market, inflationary pressures and rising living costs have constrained consumer spending ability [1] - Businesses in the sector face planning challenges due to unpredictable tariff developments affecting sourcing, pricing strategies, and inventory management [1] Earnings Performance - As of April 30, 43.3% of companies in the Zacks Consumer Discretionary sector, representing 60.9% of the sector's market capitalization, reported earnings, with 53.8% beating earnings estimates and 46.2% surpassing revenue estimates [2] - Year-over-year earnings increased by 4% on a 0.7% rise in revenues, influenced by inflationary pressures and fluctuating consumer sentiment, particularly among lower-income households [2] - First-quarter 2025 earnings for the sector are expected to increase by 0.8% year-over-year, a significant decline from the 19% growth in the previous quarter [4] Segment Performance - The leisure and recreation services segment has performed relatively well despite headwinds, driven by a shift in consumer preference towards experience-based spending in fitness, gaming, and entertainment [3] - However, the industry is facing challenges such as rising labor and supply costs, tightening pricing flexibility, and increased competition [3] Company-Specific Insights - Planet Fitness is set to report first-quarter 2025 results, with an Earnings ESP of +0.71% and a Zacks Rank of 3, indicating a potential earnings beat [5][6] - The Zacks Consensus Estimate for Planet Fitness's first-quarter 2025 revenues is $280.7 million, reflecting a 13.2% increase year-over-year, with EPS expected to be 62 cents, up 17% from the previous year [7] - Peloton Interactive is expected to report a revenue decrease of 13.7% year-over-year, with a consensus estimate of $619.7 million and a projected loss per share of 6 cents, an improvement from a loss of 45 cents in the prior year [9] - Xponential Fitness is anticipated to report a revenue decline of 4.3% year-over-year, with revenues pegged at $76.1 million and EPS expected to decline by 6.3% [11] - PENN Entertainment is projected to report first-quarter revenues of $1.7 billion, indicating a 5.9% growth year-over-year, with a consensus loss per share of 29 cents, improving from a loss of 79 cents in the previous year [13]

Core Viewpoint - Pomerantz LLP is investigating potential securities fraud and unlawful business practices involving Xponential Fitness, Inc. and its officers or directors following the company's disappointing financial results and subsequent stock price drop [1][3]. Financial Performance - On March 13, 2025, Xponential reported an unexpected loss for the fourth quarter and a 7.7% year-over-year revenue decline [3]. - The company's Board of Directors announced that the financial statements for the fiscal year ended December 31, 2023, would need to be restated [3]. - Following these announcements, Xponential's stock price fell by $4.66 per share, or 38.45%, closing at $7.46 per share on March 14, 2025 [3]. Legal Investigation - Pomerantz LLP is actively investigating claims on behalf of investors of Xponential Fitness, Inc. regarding possible securities fraud [1]. - Investors are encouraged to contact Pomerantz LLP for more information about the investigation [1].

Core Insights - Xponential Fitness (XPOF) has experienced a significant decline of nearly 50% since the last strong buy recommendation, indicating a substantial drop in investor confidence and market performance [1] Company Analysis - The company has been under scrutiny due to its poor stock performance, which has led to discussions about the potential need for investors to cut losses [1] - The author emphasizes a commitment to providing in-depth analysis that goes beyond previous coverage, focusing on various analytical lenses such as academic research and financial correlations [1]

Core Insights - Pomerantz LLP is investigating claims on behalf of investors of Xponential Fitness, Inc. regarding potential securities fraud or unlawful business practices [1] - Xponential reported an unexpected loss for Q4 2025 and a 7.7% year-over-year revenue decline, leading to a significant stock price drop of 38.45% [3] Financial Performance - Xponential announced a fourth quarter loss and a revenue decline of 7.7% year-over-year [3] - The company's stock price fell by $4.66 per share, closing at $7.46 on March 14, 2025, following the financial results announcement [3] - The Board of Directors determined that the financial statements for the fiscal year ended December 31, 2023, should be restated [3]

Group 1: Stock Performance - Xponential Fitness (XPOF) shares increased by 23.2% to close at $9.19, following a notable trading volume compared to typical sessions, despite a 57% loss over the past four weeks [1] - The stock's rally is seen as a rebound from a 38.45% drop on March 14, 2025, due to a financial restatement announcement, with investors viewing the prior sell-off as an overreaction [2] Group 2: Financial Performance - The company is expected to report quarterly earnings of $0.44 per share, reflecting a year-over-year increase of 450%, while revenues are projected to be $80.61 million, down 10.6% from the previous year [3] - The consensus EPS estimate for the quarter has been revised 15.5% higher in the last 30 days, indicating a positive trend that typically correlates with price appreciation [4] Group 3: Industry Context - Xponential Fitness operates within the Zacks Leisure and Recreation Services industry, where Target Hospitality (TH) also operates, closing the last trading session at $5.71 with a -38.2% return over the past month [4] - Target Hospitality's consensus EPS estimate has decreased by 80.8% over the past month to $0.06, representing a -79.3% change compared to the previous year [5]

Group 1 - Xponential Fitness, Inc. is under investigation for potential securities fraud and unlawful business practices involving its officers and directors [1] - The company reported an unexpected loss for Q4 2025 and a 7.7% year-over-year revenue decline, leading to a restatement of its financial statements for the fiscal year ended December 31, 2023 [2] - Following the financial announcements, Xponential's stock price dropped by $4.66 per share, or 38.45%, closing at $7.46 per share on March 14, 2025 [2] Group 2 - Pomerantz LLP is a prominent firm specializing in corporate, securities, and antitrust class litigation, with a history of recovering multimillion-dollar damages for victims of securities fraud and corporate misconduct [3]

Franchise Growth and Development - As of December 31, 2024, franchisees are contractually committed to open an additional 1,607 studios in North America, with approximately 30% of licenses over 12 months behind schedule[21] - The company has sold a cumulative total of 6,265 franchise licenses globally as of December 31, 2024, up from 5,865 licenses sold as of December 31, 2023[36] - The company expanded its franchised studio footprint in North America from 1,071 studios in December 2018 to 2,758 studios by December 2024, representing a CAGR of 17%[41] - As of December 31, 2024, the company had 1,648 franchisees and licenses for 1,607 studios contractually obligated to be opened under existing franchise agreements in North America[41] - The company sold 253 licenses in 2024, a decrease from 632 licenses in 2023 and 790 licenses in 2022[41] - The franchisee network grew from 985 to 1,648 franchisees from December 31, 2018, to December 31, 2024, representing a CAGR of 9%[73] - In 2024, franchisees opened 353 studios in North America and 111 studios internationally[86] Financial Performance and Revenue - The company achieved gross studio openings globally of 464 and 553 during the years ended December 31, 2024 and 2023, respectively, with a member base approximately 15% larger as of December 31, 2024 compared to the previous year[26] - In 2024, the company recorded a total of 60.0 million in-studio and live stream visits, representing a 19% increase over the prior year[31] - Active paying members increased by 15% from December 31, 2023 to December 31, 2024, with approximately 742,000 members on recurring membership packages[31] - Approximately 74% of the company's revenue in 2024 was considered recurring, with expectations for this percentage to increase over time[34] - The average unit volumes (AUVs) increased by 9% for the quarter ended December 31, 2024 compared to the same quarter in 2023[31] - As of December 31, 2024, the outstanding principal balance on the Credit Agreement was $352.4 million, subject to variable interest rates[452] - A hypothetical 1% change in interest rates on the outstanding debt would change the annual interest expense by approximately $3.5 million[452] - The company is exposed to potential interest rate risk and inflation risk, which may adversely impact financial condition and results of operations[451][453] Operational Strategy and Management - The management team, led by CEO Mark King, has a proven track record of scaling franchised brands, contributing to the company's growth and recognition in the industry[37] - The company aims to enhance operating margins by expanding its franchised studio base and leveraging shared services and platform[44] - The company is focusing on leveraging artificial intelligence and data analytics to enhance customer engagement and optimize franchisee operations[119] - The company has a strategic IT initiative aimed at enhancing cybersecurity, applications, and data analytics capabilities[118] - The company is actively monitoring supplier relationships to ensure competitive pricing and high-quality equipment for franchisees[107] Marketing and Brand Awareness - Marketing funds spent approximately $26.7 million, $22.7 million, and $17.3 million in 2024, 2023, and 2022, respectively, to increase brand awareness[98] - Franchise agreements require franchisees to contribute 2% of monthly gross sales to the marketing fund, supporting national advertising efforts[98] Regulatory and Compliance Issues - The company is subject to various federal and state regulations, including the FTC Franchise Rule, which governs the sale of franchises in the U.S.[126] - Compliance with future laws and regulations may require significant monetary expenditures, potentially increasing overhead costs[136] - The prescribing of compounded semaglutides is subject to changing FDA guidance, which may impact healthcare providers' ability to prescribe these medications[137] - The company faces aggressive price competition in the compounded GLP-1 market, which may affect franchisees' operations[137] - Future introduction of new services may necessitate compliance with additional, yet undetermined, laws and regulations[136] Studio Operations and Franchisee Support - The company operates 2,693 studios across eight brands in the United States, holding leading market share positions in several fitness verticals[29] - The initial franchisee investment averaged approximately $560,000 in 2024, with studios designed to be between 1,500 and 2,500 square feet[19] - The company has paused selling franchises in all states due to the ongoing update and renewal of Franchise Disclosure Documents (FDDs), which has slowed growth and may reduce anticipated royalty or franchise revenue[129] - The company requires franchisees to purchase most studio-related equipment from approved vendors to maintain quality and consistency[106] International Expansion - The company had 475 studios open internationally across 14 countries as of December 31, 2024, with master franchisees contractually obligated to sell licenses for an additional 1,043 studios[46] - Club Pilates, the largest Pilates brand, had 1,200 operational studios and 1,856 licenses sold globally as of December 31, 2024[50] - Pure Barre, the largest barre brand, had 626 operational studios and 800 licenses sold globally as of December 31, 2024[54] - StretchLab had 529 operational studios and 1,005 licenses sold globally as of December 31, 2024[56] - YogaSix, the largest franchised yoga brand, had 194 operational studios and 635 licenses sold globally as of December 31, 2024[58] - CycleBar, the largest indoor cycling brand, had 204 operational studios and 565 licenses sold globally as of December 31, 2024[64] - Lindora acquisition completed on January 2, 2024, with 30 operational clinics and 114 licenses sold globally as of December 31, 2024[66] Employee and Corporate Structure - As of December 31, 2024, the company had approximately 432 employees at its corporate headquarters, with about 145 being part-time employees[109] - The company has approximately 13 employees at its one company-owned transition studio, with about 12 being part-time employees[109] - The company owned approximately 91 registered trademarks and service marks in the United States and approximately 377 in other countries as of December 31, 2024[121] - The company has a 69.5% ownership interest in XPO LLC through Xponential Intermediate Holdings, LLC[139]

Core Viewpoint - Xponential Fitness, Inc. is under investigation for potential non-compliance with federal securities laws following the announcement of a restatement of its financial statements for the fiscal year ended December 31, 2023, which led to a decline in its stock price [1]. Group 1 - Xponential Fitness announced on March 13, 2025, that its Board of Directors determined the need to restate the Company's financial statements for the fiscal year ended December 31, 2023 [1]. - Following the announcement of the restatement, the stock price of Xponential Fitness experienced a drop [1]. Group 2 - Holzer & Holzer, LLC is investigating the compliance of Xponential Fitness with federal securities laws and encourages affected investors to reach out for legal consultation [2]. - Holzer & Holzer, LLC is recognized as a top-rated securities litigation law firm and has a history of recovering significant amounts for shareholders impacted by corporate misconduct [3].

Core Viewpoint - Xponential Fitness, Inc. is under investigation for potential securities law violations following a significant drop in its stock price due to the announcement of a restatement of its 2023 financial statements, which revealed material weaknesses in internal controls and potential accounting issues [2][4]. Group 1: Company Overview - Xponential Fitness, Inc. experienced a stock price decline of over 35% on March 14, 2025, after disclosing the need to restate its financial statements for 2023 [2]. - The company admitted to having material weaknesses in its internal controls and potential accounting issues, which triggered the investigation [2]. Group 2: Legal Actions and Investigations - Block & Leviton is investigating Xponential Fitness, Inc. for possible securities law violations and may file actions to recover losses for affected investors [4]. - Investors who have lost money on their Xponential Fitness investments are encouraged to contact Block & Leviton for potential recovery options [3][5]. Group 3: Investor Eligibility and Support - Any individual who purchased common stock of Xponential Fitness, Inc. and has experienced a decline in share value may be eligible for recovery, regardless of whether they have sold their shares [3]. - Block & Leviton is recognized as a leading securities class action firm, having recovered billions for defrauded investors and representing many top institutional investors [7].

Financial Data and Key Metrics Changes - North America system-wide sales reached $465 million, up 21% year over year [10] - North America quarterly run rate average unit volumes increased to $668,000, up 9% year over year [40] - Total members at quarter end stood at 813,000, up 15% year over year [10] - Adjusted EBITDA for 2024 was $116.2 million, up 16% compared to the prior year [58] - Net loss for the fourth quarter was $62.5 million, compared to a net loss of $12.3 million in the prior year [55] Business Line Data and Key Metrics Changes - Franchise revenue for the quarter was $45.3 million, up 17% year over year [43] - Equipment revenue declined by 22% year over year to $12.7 million [44] - Merchandise revenue was down 34% year over year to $6.1 million [45] - Franchise marketing fund revenue increased by 23% year over year to $9.2 million [46] Market Data and Key Metrics Changes - System-wide sales for 2024 increased approximately 23% to $1.7 billion from $1.4 billion in 2023 [40] - Same-store sales for the full year were 7% [40] - The volume of licenses sold was lower due to a pause in sales while updating franchise disclosure documents [39] Company Strategy and Development Direction - The company is focused on building a senior management team to scale operations profitably [13] - Plans to expand international footprint, particularly for Club Pilates, with leadership in Europe and Asia [21] - Emphasis on innovation and data-driven decision-making to enhance member experience and operational efficiency [24][22] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges in the business, including operational issues and a need for structural changes [26][29] - 2025 is viewed as a year for foundation building, with expectations for growth to reaccelerate in subsequent years [30] - The company aims to improve franchisee profitability and is reviewing its brand portfolio for better capital allocation [31][112] Other Important Information - The company restated 2023 financial statements due to accounting errors related to inventory and compliance [33][34] - Total long-term debt increased to $352.4 million as of December 31, 2024, from $328.5 million the previous year [68] Q&A Session Summary Question: Can you help us understand the comp performance that is embedded in the 2025 system sales guidance? - The guidance assumes mid single-digit comp growth, with Club Pilates historically performing better [79] Question: Can you provide an update on the franchise recruiting process? - A new Chief Development Officer has been hired, and functions are now unified under one leadership [81] Question: What is your assessment of StretchLab in terms of negative comps? - Management is actively reviewing StretchLab's model and exploring ways to improve franchisee communication and marketing [91][95] Question: Can you clarify thoughts around studio closures? - The company is taking a conservative approach to underperforming studios, aiming for a healthier system [103] Question: What are the expectations for international expansion? - The company plans to have on-the-ground leadership in Europe and Asia to support franchise operations [99]