Voss Capital Issues Open Letter to the Board of Xponential Fitness

Core Viewpoint - Voss Capital, the largest shareholder of Xponential Fitness, Inc. (XPOF), believes that Club Pilates is undervalued and worth more than the current enterprise value of XPOF, urging the board to explore strategic alternatives, including a potential sale of the company [1][3][4]. Company Overview - Xponential Fitness, Inc. is a fitness company with a significant stake held by Voss Capital, which owns approximately 19.3% of the outstanding shares [3][4]. - Club Pilates, a key asset of XPOF, operates 1,414 studios globally and has a strong average unit volume (AUV) of nearly $1 million [5]. Financial Performance - Club Pilates generated $102 million in EBITDA in 2024, while the entire company's 2026 Adjusted EBITDA guidance midpoint is only $105 million, indicating that Club Pilates is generating more earnings than the company as a whole [5][6]. - The company carries over $500 million in debt, resulting in approximately 5x net leverage and $55 million in annual interest expenses, which significantly impacts cash flow available to equity holders [6][12]. Market Valuation - The public market has not accurately reflected the value of Club Pilates, with the current enterprise value ascribed by the market being lower than what Club Pilates alone is worth [7][9]. - The market is assigning negative value to other brands within XPOF's portfolio, such as Pure Barre and YogaSix, despite their positive same-store sales [9][12]. Strategic Recommendations - Voss Capital urges the board to retain independent financial advisors to explore a sale of XPOF, believing that a private owner could better realize the value of Club Pilates and streamline operations [10][11][16]. - The board is requested to form a committee of independent directors to oversee the evaluation of strategic alternatives, ensuring that shareholder value is maximized [16][17]. Market Conditions - The market has not re-rated XPOF stock despite the time given, and the complexity of the multi-brand portfolio has led to multiple compression [13]. - Current challenges include expected revenue decline of 16% in 2026 and ongoing legal and operational issues, which hinder the company's public market performance [12][13].