Executive Summary

Q1 2025 revenue modestly beat consensus but EPS/EBITDA missed on elevated legal accruals and accelerated marketing spend; revenue was $76.9M vs $75.4M S&P consensus (beat), while Primary/Adjusted EPS was $(0.20) vs +$0.15 (miss) and EBITDA trailed consensus (see Estimates Context) . Values retrieved from S&P Global.*
Operational KPIs remained solid: North America system-wide sales +18% YoY to $466.8M, quarterly AUV $659K (+8% YoY), members 865K (+12% YoY), and SSS +4% .
FY25 guidance: lowered net new studio openings to 160–180 (from 200–220 prior), while reiterating system-wide sales ($1.935B–$1.955B), revenue ($315M–$325M), and Adjusted EBITDA ($120M–$125M); tax rate mid-high single digit, capex $10–$12M, SG&A $145–$155M .
Management framed 2025 as a stabilization year while launching field operations (target ~40 by YE) and retooling franchise development and retail; post-quarter, CEO announced retirement due to health reasons; Investor Day set for May 29 at NYSE—both are potential stock catalysts .

What Went Well and What Went Wrong

What Went Well

Strong KPIs despite muted P&L: System-wide sales +18% YoY to $466.8M; AUV $659K (+8% YoY); members 865K (+12% YoY); SSS +4%—supporting royalty/marketing revenue resilience .
Franchise revenue grew 5% YoY to $43.9M; marketing fund revenue +18% YoY to $9.3M on studio and sales growth .
Strategic pivot toward operations: launching field ops (12 near-term, target ~40 by YE) to coach/audit studios; management emphasized transformation “from a very aggressive sales-focused company to one that’s building a foundation of efficiency and effectiveness” .

What Went Wrong

EPS/EBITDA miss drivers: $15M incremental legal accrual (total $25M potential settlement), plus accelerated ~$1M marketing fund spend pulled into Q1, reducing Adj. EBITDA; Adjusted EBITDA fell to $27.3M (−9% YoY) .
Revenue mix pressure: Equipment (−20% YoY to $11.1M), Merchandise (−25% YoY to $6.3M), and Other service (−19% YoY to $6.4M) declined, offsetting franchise revenue gains .
Development pause: No North America license sales in Q1 while renewing FDDs; only 21 licenses sold (all international). Elevated closures (51 in Q1; annualized ~6%) concentrated in CycleBar and StretchLab; FY25 net opening outlook cut to 160–180 .

Financial Results

P&L, EPS, and Margin (chronological: Q3 2024 → Q4 2024 → Q1 2025)

Metric	Q3 2024	Q4 2024	Q1 2025
Revenue ($M)	$80.5	$83.2	$76.9
Net Income (Loss) ($M)	$(18.0)	$(62.5)	$(2.7)
Adjusted EBITDA ($M)	$31.0	$30.8	$27.3
Adjusted EBITDA Margin (%)	38%	37%	35.5%
Adjusted EPS ($)	$(0.04)	$(0.19)	$(0.20)

Why Q1 miss vs prior: ~$1M marketing expense pull-forward and higher legal accruals pressured margins; product/other revenue declines offset royalty growth .

Revenue mix (Q1 2025 vs Q1 2024)

Revenue Component ($M)	Q1 2024	Q1 2025
Franchise	$41.8	$43.9
Equipment	$13.9	$11.1
Merchandise	$8.3	$6.3
Marketing Fund	$7.8	$9.3
Other Service	$7.9	$6.4
Total	$79.7	$76.9

KPIs and development

KPI	Q3 2024	Q4 2024	Q1 2025
North America System-wide Sales ($M)	$431.2	$464.7	$466.8
SSS (North America, YoY)	+5%	+5%	+4%
AUV (Quarterly run-rate, $K)	$631	$668	$659
Members (K)	827	813	865
Gross Openings (Studios)	125	120	116
Closures (Studios)	49	65	51

Balance sheet & cash flow highlights (Q1 2025): Cash/cash equivalents/restricted cash $42.6M; long-term debt (total) $379.1M; operating cash flow $5.8M .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Net new studio openings	FY 2025	200–220	160–180	Lowered
North America system-wide sales	FY 2025	$1.935B–$1.955B	$1.935B–$1.955B	Maintained
Revenue	FY 2025	$315M–$325M	$315M–$325M	Maintained
Adjusted EBITDA	FY 2025	$120M–$125M	$120M–$125M	Maintained
Tax rate	FY 2025	Mid–high single digits	Mid–high single digits	Maintained
Capex	FY 2025	~$10–$12M	~$10–$12M	Maintained
SG&A	FY 2025	$130–$140M (excl. items)	$145–$155M; $115–$120M ex. lease/reg. legal; $99–$104M ex. SBC	Updated detail

Management also expects closures to be 6–8% of the global system in 2025, with a longer-term goal to reduce to low-to-mid single digits .

Earnings Call Themes & Trends

Topic	Q3 2024 (Prior-2)	Q4 2024 (Prior-1)	Q1 2025 (Current)	Trend
Strategic posture	Laid out 5 pillars; shift to operations/marketing focus	Transparent reset; 2025 as foundation-building	2025 “stabilization” message reiterated	Consistent shift to ops
Field operations	Planned playbooks/audits	Building field ops team	12 managers now; ~40 by YE planned	Scaling up support
FDD/licensing	Concerns slowed license sales	FDD renewals forthcoming	FDDs filed (except Lindora); no N.A. Q1 license sales	Re-entry post-renewal
Closures	Trending high end of range	225 in FY24; ~7%	6–8% expected in 2025; Q1 closures 51	Elevated near-term
Brand performance	Focus on profitability; portfolio review	StretchLab under pressure; hurdle 4-wall economics	StretchLab “all hands”; YogaSix/Pure Barre strength; CP >50% of openings	Mixed by brand
Tariffs/macro	Not a focus	Not a focus	Minimal direct impact via cost-plus pricing; 80% recurring revenue cushions	Managed risk
Retail/merchandising	Inventory reduction underway	Inventory −50% YoY; retail optimization planned	Exploring alternatives to improve profitability/service	Restructuring continues
Data/Tech	Data dashboards rolling out	Data lakehouse initiative	Real-time dashboards near launch	Execution phase
Legal/regulatory	Litigation expenses rising	Restatement; legal accruals; D&O coverage noted	$25M potential settlement accrual; expect insurance recovery	Elevated, being addressed
International	Japan/Australia momentum	Plan boots on ground EU/Asia	London presence live; Mexico MF deal; EU/JP/AU momentum	Building infrastructure

Management Commentary

“Transformation…from a very aggressive sales-focused company to one that’s building a foundation of efficiency and effectiveness…putting people out in the field…to help franchisees get open, get started, audit their operations” .
“2025 is more of a stabilization…you’re not seeing a degradation in the overall financial health…as we start to improve…franchisee health, that’s when the company itself will return to growth” .
On StretchLab: “We believe very much in the concept…looking at…studio size…train flexologists…pricing strategy…labor model…all hands on deck” .
On legal: “Incremental accrual of $15M…total of $25M related to the potential settlement of a threatened franchise class action…expect at least $5M…recovered from…insurance” .
Cash conversion: “Unlevered free cash flow conversion ~90% of Adjusted EBITDA…levered ~37% given ~$49M interest, ~$10M tax, ~$8M preferred dividends” .

Q&A Highlights

Closures and development cadence: Expect 6–8% closures in 2025; gross openings ~80–90 per quarter; ~50/50 1H/2H phasing .
License sales: Target ~100 per quarter going forward post-FDD; Club Pilates will be >50% of new openings/license sales .
License termination accounting: Historically ~$2M revenue and ~$1M EBITDA per quarter from accelerated recognition; 50% margin on terminations .
Field ops roll-out: 12 by end of Q2; targeting ~40 by YE; early focus on lowest performers for immediate impact .
Tariffs: Cost-plus pricing model expected to largely mitigate margin effects; minimal direct/indirect impact observed so far .

Estimates Context

Q1 2025 vs S&P Global consensus (Primary EPS aligns with Adjusted EPS per company disclosure):

Metric	Consensus	Actual
Revenue ($M)	$75.37*	$76.88
Primary/Adjusted EPS ($)	$0.15*	$(0.20)

EBITDA consensus ~$28.86M* vs reported Adjusted EBITDA $27.33M (gap reflects estimate basis vs company’s Adjusted definition) .
Values retrieved from S&P Global.*

Implications: Revenue beat suggests healthy royalty/marketing contributions from strong KPIs; EPS/EBITDA miss driven by legal accrual and timing of marketing spend likely prompt downward EPS revisions and scrutiny of margin trajectory while full-year revenue/Adj. EBITDA ranges were maintained .

Key Takeaways for Investors

Near-term: Expect continued stabilization as field ops scale and FDD-driven license sales resume; monitor quarterly closures and StretchLab turnaround milestones—both are key to sentiment .
Earnings quality: Non-GAAP adjustments (notably legal, restructuring, TRA and contingent consideration) and marketing fund timing can swing reported profitability; core royalties remain supported by KPIs .
Guidance risk skew: Net openings guide reduced; revenue/Adj. EBITDA reiterated—execution on openings/closures and insurance recovery on legal costs are swing factors .
Balance sheet & cash: ~$42.6M cash; long-term debt ~$379.1M; levered FCF conversion ~37% as guided—interest expense a meaningful headwind to equity cash yield .
Brand mix: Club Pilates remains growth engine; YogaSix and Pure Barre show positive momentum; StretchLab is under intensive redesign—watch pricing, labor, format experiments .
Strategic catalysts: Investor Day (May 29) to detail ops/brand plans; CEO transition underway; international build-out (EU/JP/MX/AU) may broaden runway .
Stock narrative: KPI strength vs EPS/EBITDA noise; evidence of field ops impact (SSS/retention improvements, AUV uplift) and closure deceleration would be thesis-confirming .

Additional Materials and Events

CEO Retirement/Transition (May 15): Board commencing search; CEO remains through transition and to participate in Investor Day .
Analyst & Investor Day (May 29, NYSE): Management presentations and Closing Bell ceremony; replay available on IR site .

Notes on non-GAAP: Company excludes items including equity-based comp, acquisition/transaction (incl. contingent consideration), litigation, TRA remeasurement, impairments, transformation and restructuring costs when presenting Adjusted EBITDA and Adjusted EPS; reconciliations provided in filings .

Xponential Fitness, Inc. (XPOF)·Q1 2025 Earnings Summary