What is the path to normalizing SG&A as legal costs moderate, and when can positive cash flow generation be expected, considering ongoing lease settlements?

Recurring SG&A is being managed well, but elevated non-recurring legal expenses have obscured this. Legal expenses and settlements have approached $100 million over several years, putting pressure on cash flow. With these mostly behind them, cash flow is projected to be positive in 2027 and continue to improve, with no concerns about the balance sheet or liquidity. “I project you know cash flow to be positive in the future in 2027 that number will and continue to improve. And frankly, I'm not concerned about the balance sheet or cash flow or liquidity.”

Can you provide more detail on the assumed declines for Q3 vs. Q4 in same-store sales, and what's implied for Club Pilates in H2?

The company is assuming fairly consistent same-store sales comps in H2, similar to the -6.5% experienced in H1, with no significant difference between Q3 and Q4. This reflects a prudent forecasting philosophy of not projecting a change in trend until it is observed, despite ongoing initiatives to improve performance. “what's built into the forecast and the guidance is more or less the same thing. trend through the end of the year, you know, pretty consistent with what we've seen in the first half.”

Has the assumption for deletions versus additions changed for net unit growth, and how does the company attract franchisee investment if mature store comps are declining?

Closure trends in H1 2026 mirror H1 2025, which is expected. The focus is on new studio openings, with a strong pipeline. The real estate environment is tougher, but franchisee support is increasing. For franchisees, the focus is on long-term reliable revenue forecasts, expense structures, and four-wall profitability, where the Club Pilates model shows strong durability. Existing franchisees, especially in Club Pilates, are expected to open most new studios as territories are largely spoken for. “As a franchisee, you're always looking for this as a long-term proposition. And so you're even more hyper focused on what is a reliable revenue forecast for the the studio itself, what are the expense structure items that I can count on, and what kind of four-wall profitability can I produce?”

XPOF

Xponential Fitness (XPOF) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Consumer Discretionary· Aug 6, 2026

Source: earnings call transcript

Executive summary

Xponential Fitness Q2 FY26 — Guidance Lowered Amidst Same-Store Sales Pressure and Merchandise Challenges

Xponential Fitness is focusing on optimizing its business, driving organic growth, and improving franchisee economics amidst a challenging consumer environment. The company is implementing initiatives to enhance digital experiences and support franchisees, while also actively exploring strategic alternatives to maximize shareholder value. Despite headwinds in same-store sales and merchandise, the long-term unit growth runway remains charted.

Highlights

Global open studios reached 3,165, with 16 domestic and 12 international net unit growth in Q2.
International studios surpassed 500, including Club Pilates opening its 200th international studio in June.
Total company member retention improved by 28 basis points year over year.
Secured a partnership with Spartan Fitness Holdings to open 117 Club Pilates studios across multiple states over six years.

Concerns

Q2 same-store studio sales were down 6.8% overall and 5% for Club Pilates, remaining below expectations.
Consolidated revenue for the quarter was $66.0 million, down 13% or $10.2 million year over year.
Merchandise revenue declined $5.1 million, impacted by a new outsourced model and execution challenges.
Adjusted EBITDA was $21.9 million, down 22% or $6.2 million compared to Q2 2025, with margin at 33%.
Full-year guidance was lowered primarily due to Q2 performance and anticipated continued pressure on same-store sales and merchandise revenue.

Guidance & targets

Category	Target	Timeline	Confidence
Full-year global net new studio openings	approximately 150 high materiality	FY26	Medium
North America system-wide sales	$1.70 billion to $1.75 billion high materiality	FY26	Medium
Total revenue	$250 million to $260 million high materiality	FY26	Medium
Adjusted EBITDA	$91 million to $97 million high materiality	FY26	Medium
Adjusted EBITDA margin	36.9% medium materiality	FY26	Medium

Orderbook & backlog

Licenses contractually obligated to open more than 690 June 30, 2026

International master franchise obligations 730 June 30, 2026

Product announcements

Product	Type	Timeline	Details
StretchLab digital experience	launch	July 2026
Club Pilates website redesign	launch	Q3 2026

Deals & partnerships

Spartan Fitness Holdings Partnership with largest Club Pilates franchisee to open new studios. over the next six years

Partnership driven by continued demand for Pilates, a key element of long-term growth and emphasizes the strength of the Club Pilates brand.

Starbucks Collaboration on the launch of Starbucks protein coffee drinks.

Strong example of consumer brand collaboration to introduce more people to Xponential brands.

Risks & headwinds

Same-store studio sales decline Q2 FY26

down 6.8% overall, down 5% for Club Pilates

Mitigation:Implementing digital experience improvements, expanding remodel program, coaching studios on lead-to-membership conversion, AI SEO resources, AI-enabled CRM tools.

Challenging consumer environment Q2 FY26 and heading into summer months

more selective spending, higher promotional activity, pressure on new customer acquisition

Mitigation:Focusing on initiatives within company control, such as digital enhancements and franchisee support.

Merchandise transition challenges Q2 FY26 and slower pace of improvement than anticipated

negatively impacted results; merchandise revenue declined $5.1 million

Mitigation:Supply chain team working closely with vendor on process fixes and evaluating additional ways to improve reliability and performance.

Elevated paid media and digital spend second half of the year

level of elevated spend

Mitigation:To help bridge to expected improvement in organic lead performance later in the year.

Legal expenses and settlements remainder of FY26

approximately $11.4 million of additional payments

Mitigation:Payments are scheduled, and the company expects cash flow to be positive in 2027 as these expenses moderate.

Organic lead trends pressure Q2 FY26

year-over-year declines

Mitigation:Actively responding with dedicated AI SEO resources, technology tools to optimize organic lead flow, and updated website experiences across brands.

What to watch in Q3 FY26

Same-store sales trend

Q3/Q4 FY26

Current -6.5% (H1 average)

Target Closer to flat or modestly positive

Why it matters

Sustained improvement in same-store sales is critical for overall revenue growth and franchisee economics, and will validate the effectiveness of current initiatives.

But until you see it, we aren't going to build the financial structure around it. So I appreciate Robert's thoughtfulness around the guidance there.

Find out whether XPOF delivers this. Inve re-checks your case every morning.

Q&A highlights

How will the company reverse the Club Pilates comp trend, and what comp number would alleviate P&L pressure, considering AUVs and studio expansion?

Management is pleased with Club Pilates' new studio openings and strong AUVs, driven by pre-sale processes. They are focused on improving organic leads and the website experience. While historically double-digit, a modest positive to flat comp would be good, especially with continued studio expansion. The current P&L pressure is more from merchandise and equipment sales, which are considered transitory.

“This is a business that has historically done double digit comps, um, Going forward, we don't need double-digit comps. Anything from a modest positive to even flat would be really good.”

asked by John Hunter Buchholz · answered by Michael Nuzzo

2 min read 6 chapters

Detailed narrative

Leadership and Strategic Focus

The company has assembled a leadership team focused on optimizing the business, driving organic growth, improving franchisee economics, and enhancing the member experience. Danielle Parra was welcomed as President, bringing extensive franchise experience to strengthen franchisee relationships, accelerate studio expansion, and improve brand positioning. The objective is to build a healthier, more productive franchise system for sustainable membership growth and long-term value creation.

Brand Engagement and Partnerships

Xponential Fitness continues to leverage brand affinity and community engagement. The Pure Bar 25th anniversary event generated over 1.8 million social media views, reinforcing brand strength. A new collaboration between Club Pilates and Starbucks protein coffee drinks provides access to approximately 120,000 Starbucks and Pepsi employees, aiming to introduce more people to the brands through consumer brand collaborations.

Operational Initiatives for Growth

Key initiatives are underway to improve execution and drive growth, focusing on strengthening the top of the funnel, enhancing the digital journey, and improving franchisee support. This includes implementing new digital experiences for StretchLab and Club Pilates websites, expanding the Club Pilates remodel program, and coaching studios on lead-to-membership conversion using data tools. The company is also piloting AI-enabled CRM tools with franchisees.

Merchandise and Supply Chain Challenges

The transition to an outsourced logistics partner for merchandise has created initial challenges in vendor operations, sourcing, and execution, negatively impacting results. The supply chain team is actively working with the vendor on process fixes and evaluating additional improvements. While merchandise is a smaller contributor, the goal is to return it to a normal run rate to support profitability for both the company and franchisees.

Strategic Alternatives Review

The Board of Directors initiated a review of strategic alternatives in April to maximize shareholder value, led by independent directors and supported by Jefferies as financial advisor. This process may include a sale of the company, a merger, or another strategic or financial transaction. The board remains actively engaged, but no further comments will be made until the process concludes.

Legal Settlements and Balance Sheet

The company has made significant progress in resolving regulatory matters, including payments of $6.8 million in Q2 related to franchisee lawsuit, FTC, and New York Attorney General cases. An additional $11.4 million in payments is anticipated for the remainder of the year for these settlements.

The franchise disclosure documents have been substantially refreshed, and the company expects cash flow to be positive in 2027 as legal expenses moderate.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.