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Xponential Fitness reported third-quarter revenue of $62.3 million, down 21% from a year earlier, and lowered its forecast for net new studio openings. The results came a week after major shareholder Fund 1 Investments floated a proposal to take the franchisor private; Xponential’s board says its review remains active, but no transaction has been announced.
Xponential Fitness’ third-quarter revenue fell 21% to $62.3 million from $78.8 million a year earlier, and the boutique fitness franchisor cut its forecast for new studio openings as its board continues a review that could lead to a sale or merger. The results followed a proposal by major shareholder Fund 1 Investments to take the company private, but Xponential has not announced a deal.
North American same-store sales declined 7.5% in the third quarter, compared with a 6.8% drop in the second quarter. Xponential kept its full-year revenue forecast at $250 million to $260 million, while reducing its expectation for net new studio openings to 124 to 130, from about 150.
Franchise revenue fell 16% to $43.4 million. The company attributed the decline to lower franchise territory revenue, including reduced revenue recognized from franchise agreement terminations. Equipment revenue dropped 42%, which Xponential tied to fewer studio openings. Merchandise revenue fell 92%; the company said this reflected its move from an in-house wholesale model to an outsourced retail model.
Xponential ended the quarter with 3,185 open studios worldwide across brands including Club Pilates, Pure Barre, StretchLab, YogaSix and BFT. CEO Mike Nuzzo said the company expects more studio openings and equipment installations in the fourth quarter after streamlining its development process. New CFO Jennifer Ryu joined Nuzzo on the earnings call as interim CFO Robert Julian prepares to leave.
Sales Pressure Meets Buyout Review
The results show that operating challenges remain while Xponential weighs a potential ownership change. Lower same-store sales and a reduced opening forecast point to pressure on the franchisor’s near-term expansion, while its revenue outlook remains unchanged. The distinction matters: the company maintained its annual sales range but expects fewer net new studios than it previously anticipated.
A sale or merger could change the company’s ownership and strategic direction, but the board review is not an announced transaction. For franchisees, investors and employees, the combination of falling sales and possible private ownership leaves both day-to-day performance and the company’s longer-term plans in focus. The available information does not establish that the buyout proposal caused the operating declines.
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Club Pilates Anchors Expansion Plans
Club Pilates is Xponential’s largest brand, with more than 1,500 studios worldwide, and Nuzzo identified it as the company’s biggest growth opportunity in the United States and abroad. He said Xponential has franchisees interested in expansion and a pipeline of international master-franchise and sub-franchise partners with plans for the Pilates brand.
Nuzzo said the company’s long-term goal is to grow Club Pilates to more than 2,000 locations within five years. He described the brand’s development and profitability model as healthy, with room to grow. Those comments reflect management’s outlook, not a guarantee that the target will be reached.
Xponential has been weighing a sale since April, with Jefferies serving as adviser, according to the source report. Fund 1 Investments, one of the company’s largest shareholders, floated a plan to take the franchisor private about a week before the quarterly results. The board also adopted a limited-duration stockholder rights plan last month that can be triggered if an investor or group acquires 19.9% or more of Xponential’s Class A shares.
“Our priorities are clear across the organization: improve franchisee and studio-level economics, support healthy and disciplined unit expansion both domestically and internationally, strengthen Xponential’s financial performance, and elevate our member experience across our portfolio.”
— Mike Nuzzo, Xponential Fitness CEO
No Sale Terms or Outcome Announced
The board has not disclosed a decision on whether to pursue a sale, merger or another outcome, and Xponential has not announced terms, a buyer or a timetable. Nuzzo said the board remains actively engaged in its review and that the company would not comment further until the process concludes.
It is also unclear whether Fund 1’s proposal will lead to negotiations or a transaction, and the source material does not provide details of the proposal’s price or conditions. The company has not reported whether its lower sales or opening forecast will affect the review. Its fourth-quarter expectations and Club Pilates growth target remain management forecasts.
Fourth-Quarter Openings and Board Review
Xponential expects to increase studio openings and equipment installations in the fourth quarter, according to Nuzzo. The next results will show whether that projected pickup materialized and how the company’s sales trends and full-year revenue forecast are tracking.
The board’s review remains ongoing, with the company saying it will not comment further before the process concludes. Investors and franchisees will be watching for an announcement from the board and for additional information on any proposed transaction; neither an outcome nor a timing for one has been confirmed.
Key Questions
How much did Xponential’s revenue decline?
Third-quarter revenue was $62.3 million, down 21% from $78.8 million in the same quarter a year earlier.
Did Xponential announce a buyout?
No. The board is reviewing strategic options that could include a sale or merger, but the company has not announced a transaction, buyer or terms.
Why did the company lower its studio-opening forecast?
Xponential reduced its outlook for net new studio openings to 124 to 130, from about 150. The source report does not give a single specific reason for the forecast reduction; it says equipment revenue was down 42% because of fewer studio openings.
What is Xponential’s full-year revenue forecast?
The company reiterated its forecast of $250 million to $260 million in full-year revenue, despite the third-quarter decline.
What is the company’s longer-term plan for Club Pilates?
CEO Mike Nuzzo said Xponential aims to grow Club Pilates to more than 2,000 locations within five years. That is a management goal, not a confirmed future outcome.
Source: athletechnews.com
