Financial Data and Key Metrics Changes - For Q4 2025, consolidated revenue was $83 million, flat compared to the prior year period, while total revenue for 2025 was $314.9 million, a 2% decrease from the previous year [24][30] - Adjusted EBITDA for Q4 was $22.9 million, down 26% year-over-year, with an adjusted EBITDA margin of 28%, down from 37% in the prior year [30][31] - The company recorded a net loss of $45.6 million in Q4, or a loss of $1.17 per basic share, compared to a net loss of $62.5 million in the prior year [29][30] Business Line Data and Key Metrics Changes - Franchise revenue for Q4 was $51.5 million, up 14% year-over-year, driven by higher franchise territory revenue [24] - Equipment revenue declined by 45% year-over-year to $7 million, primarily due to lower installation volumes [25] - Merchandise revenue increased by 18% year-over-year to $7.2 million, attributed to favorable retail sales [25] Market Data and Key Metrics Changes - North America system-wide sales for Q4 were $447 million, up approximately 5% year-over-year, while same-store sales were down 4.3% [23] - For 2025, system-wide sales increased approximately 13% to $1.7 billion from $1.6 billion in 2024, with full-year same-store sales at 0.5% [23] - Club Pilates contributed 65% of total system-wide sales for the year, with 1,241 studios operating in North America [33] Company Strategy and Development Direction - The company aims to prioritize investments in new member acquisition and healthy top-line growth for franchisees, focusing on new unit openings and organic studio revenue performance [11][12] - The strategic outlook includes enhancing marketing efforts, improving digital platforms, and evolving brand offerings to drive member engagement [18][19] - The company recognizes the need to address legal and regulatory challenges, underperforming brand acquisitions, and organizational issues to improve execution capabilities [9] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that sales growth moderated beginning in late 2024 and into 2025, with marketing missteps contributing to same-store sales pressure [10] - The company is developing improvements focused on organic growth in partnership with franchisees, particularly for Club Pilates [11] - Management expressed confidence in the company's strategic priorities and plans to evolve the business, despite acknowledging the challenges ahead [19] Other Important Information - The company completed a debt refinancing, entering into a new five-year, $525 million term loan, which improved financial flexibility and reduced refinancing risk [35][36] - The company expects closure rates to decline to low to mid-single digits in 2026, with a focus on reducing global closures [22][38] - The company anticipates total revenue for 2026 to be between $260 million and $270 million, representing a 16% decrease year-over-year at the midpoint of the guided range [39] Q&A Session Summary Question: Can you elaborate on the revenue and same-store sales in the quarter? - Management explained that lower average pricing was due to new studios coming online and promotional activities during Q4, which typically dilute pricing [44] Question: Are you seeing any shift between pricing tiers? - Management noted stability in the distribution of membership purchases, with no material shifts observed [45] Question: How much of an improvement are you assuming from shifting to an outsourced retail model? - Management indicated a significant gross profit improvement, estimating a $9 million to $10 million EBITDA enhancement from the transition [46][49] Question: What is your view on the portfolio's future direction? - Management emphasized a focus on improvement across all brands, particularly StretchLab, while remaining open to divestitures of underperforming brands [52][54] Question: What is the plan for Club Pilates regarding unit growth? - Management expressed confidence in the potential for unit growth, particularly in domestic and international markets, while also focusing on improving performance across other brands [58][59]

Financial Data and Key Metrics Changes - For Q4 2025, consolidated revenue was $83 million, flat compared to the prior year period, while total revenue for 2025 was $314.9 million, a 2% decrease from the previous year [24][30] - Adjusted EBITDA for Q4 was $22.9 million, down 26% year-over-year, with an adjusted EBITDA margin of 28%, down from 37% in the prior year [31] - The company recorded a net loss of $45.6 million in Q4, or a loss of $1.17 per basic share, compared to a net loss of $62.5 million in the prior year [29] Business Line Data and Key Metrics Changes - Franchise revenue for Q4 was $51.5 million, up 14% year-over-year, driven by higher franchise territory revenue [24] - Equipment revenue declined by 45% year-over-year to $7 million, primarily due to a lower volume of installations [25] - Merchandise revenue increased by 18% year-over-year to $7.2 million, attributed to favorable retail sales [25] Market Data and Key Metrics Changes - North America system-wide sales for Q4 were $447 million, up approximately 5% year-over-year, while same-store sales were negative 4.3% [23] - For 2025, system-wide sales increased approximately 13% to $1.7 billion from $1.6 billion in 2024, with full-year same-store sales at 0.5% [23] - Club Pilates contributed 65% of total system-wide sales for the year, with an average unit volume (AUV) of $966,000, down 6% year-over-year [33] Company Strategy and Development Direction - The company aims to prioritize investments that support new member acquisition and healthy top-line growth for franchisees, focusing on new unit openings and organic growth [11][12] - The strategic outlook includes enhancing marketing efforts, improving digital platforms, and evolving brand offerings to drive member engagement [18][19] - The company recognizes the need to address legal and regulatory challenges, underperforming brand acquisitions, and organizational issues to improve execution capabilities [9] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that sales growth moderated beginning in late 2024 and into 2025, with marketing missteps contributing to same-store sales pressure [10] - The company expects closure rates to decline to low to mid-single digits and anticipates 150-170 net new studio openings in 2026, representing a 20% decrease at the midpoint from the prior year [38] - Management expressed confidence in the potential for growth, particularly in international markets, and emphasized the importance of enhancing member acquisition strategies [11][61] Other Important Information - The company completed a debt refinancing, entering into a new five-year, $525 million term loan, which improved financial flexibility and reduced refinancing risk [35][36] - The company is under a proposed stipulated consent order with the FTC, agreeing to pay $17 million over the next 12 months to resolve claims [27] Q&A Session Summary Question: Can you elaborate on the revenue and same-store sales in the quarter? - Management noted that lower average pricing was due to new studios coming online and promotional activities during Q4, which typically dilute pricing [44][45] Question: What is the outlook for unit growth and portfolio management? - Management indicated a focus on improvement across all brands, with specific attention to StretchLab, and emphasized the potential for growth in Club Pilates and international markets [55][61] Question: How does the company plan to address same-store sales trends? - Management acknowledged the challenges of maintaining positive same-store sales due to high AUVs and emphasized the importance of opening more units to drive growth [72][74]

Financial Data and Key Metrics Changes - In Q4 2025, consolidated revenue was $83 million, flat compared to the prior year period, while total revenue for 2025 was $314.9 million, a 2% decrease from the previous year [24][30] - System-wide sales for North America in Q4 were $447 million, up approximately 5% year-over-year, while full-year system-wide sales increased approximately 13% to $1.7 billion [23][30] - Adjusted EBITDA for Q4 was $22.9 million, down 26% from $30.8 million in the prior year period, with an adjusted EBITDA margin of 28%, down from 37% [31][32] Business Line Data and Key Metrics Changes - The company opened 201 net new studios in 2025, including 78 in Q4, with Club Pilates leading the growth [5][20] - Franchise revenue for Q4 was $51.5 million, up 14% year-over-year, driven by higher franchise territory revenue [24] - Equipment revenue declined by 45% year-over-year to $7 million, primarily due to lower installation volumes [24] Market Data and Key Metrics Changes - As of December 31, 2025, the company had 3,097 global open studios, with 341 gross new studio openings for the year [20][23] - Same-store sales for the full year were up 0.5%, with Club Pilates at 3%, while StretchLab experienced a decline of 12% [35] - The company expects closure rates to decline to low to mid-single digits in 2026 [20] Company Strategy and Development Direction - The company aims to prioritize investments in new member acquisition and healthy top-line growth for franchisees, focusing on the Club Pilates brand as a critical growth engine [11][12] - Strategic initiatives include enhancing marketing efforts, improving digital platforms, and evolving brand offerings to drive member engagement [18][19] - The company is committed to disciplined capital management, having entered into a new $525 million term loan to strengthen its capital structure [36] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that sales growth moderated beginning in late 2024 and into 2025, citing marketing missteps and top-of-funnel challenges [10] - The company is focused on addressing ongoing growth for Club Pilates and the entire brand portfolio, with a renewed emphasis on member acquisition at the local studio level [10][11] - For 2026, the company projects global net new studio openings to be in the range of 150-170, representing a 20% decrease at the midpoint from the prior year [38] Other Important Information - The company has settled a pending FTC investigation, agreeing to pay $17 million over the next 12 months, which is subject to approval [27] - Total long-term debt increased to $525 million as of December 31, 2025, primarily due to the retirement of convertible preferred securities [37] Q&A Session Summary Question: Revenue and same-store sales in the quarter - Management explained that lower average pricing was due to new studios coming online and promotional activities during Q4, which typically dilute pricing [44][45] Question: EBITDA guidance and outsourced retail model - The transition to an outsourced retail model is expected to improve gross profit significantly, with an estimated $9 million-$10 million EBITDA enhancement [47][50] Question: Portfolio strategy and brand focus - Management indicated a focus on improvement across all brands, particularly StretchLab, while remaining open to divesting brands that do not align with long-term growth [53][55] Question: Unit growth and closures - Management clarified that closures were concentrated in specific brands and that the guidance for 2026 reflects a conservative approach to net unit growth [63][66] Question: Same-store growth outlook - For Club Pilates, same-store sales were positive 3% for the full year, with a decline of 3% in Q4 attributed to tougher year-over-year comparisons [70][75]

Summary of Xponential Fitness Conference Call Company Overview - **Company**: Xponential Fitness - **Industry**: Boutique fitness franchising - **Brands**: Club Pilates, Pure Barre, YogaSix, StretchLab, BFT - **Current Leadership**: CEO Mike Nuzzo, CFO John Malone Key Points and Arguments Company Positioning and Strategy - Xponential Fitness operates in a highly attractive boutique fitness space with significant long-term growth potential [4][5] - The company has shifted from a decentralized to a centralized operating structure to enhance efficiency and support franchisees better [8][9] - Focus is now on sustainability and profitability rather than rapid expansion, ensuring franchisees achieve high Average Unit Volumes (AUVs) early on [9][10] Brand Performance - **Club Pilates**: Recognized as a strong performer with franchisees reportedly earning double their initial investment. The focus is on accelerating unit openings to unlock further growth [10][11] - **StretchLab**: Facing challenges in scaling due to its one-on-one service model. The company is implementing strategies to improve customer engagement and retention [16][18][20] International Expansion - The company is exploring international growth, particularly in Australia and Japan, with a focus on finding strong master franchise relationships [12][13][14] Financial Performance and Debt Management - Current debt stands at approximately $370 million, with a refinancing goal set before year-end to secure better terms and reduce costs [42][43] - The company aims to streamline its capital structure to enhance investor understanding and benefit from potential interest rate reductions [44] Regulatory and Legal Matters - The SEC has closed its investigation into the company, while a franchisee class action lawsuit is in the process of being settled [31][33][34] Future Outlook - The vision for Xponential Fitness includes becoming a solid franchisor with a focus on operational excellence, marketing investments, and technology utilization to drive growth [46][48] - The company is committed to executing its strategic initiatives effectively to ensure long-term success [47][48] Additional Important Insights - The company has reduced its brand portfolio from 11 to 5, focusing on those with the best growth potential [7][24] - There is a strong emphasis on maintaining healthy AUVs across all brands, with a focus on system-wide sales growth rather than just same-store sales [27][30] - The management acknowledges the need for continuous improvement in customer education and engagement, particularly for StretchLab [19][21] This summary encapsulates the key discussions and insights from the Xponential Fitness conference call, highlighting the company's strategic direction, brand performance, financial management, and future outlook.