Executive Summary

Q3 revenue of $78.8M beat S&P Global consensus ($75.3M) by ~$3.6M; Primary EPS (S&P) of $0.34 beat by ~$0.22, and EBITDA (S&P) beat modestly; company Adjusted EBITDA was $33.5M, up 9% YoY, with margin tailwind from elevated license terminations. Bolded beats reflect Street surprise.
North America system-wide sales grew 10% YoY to $432.2M; AUV rose to $668K (+2% YoY), while same‑store sales dipped ~1% on lead/conversion issues, StretchLab headwinds, and capacity constraints at Club Pilates.
FY25 guidance: revenue $300–310M and Adj. EBITDA $106–111M reiterated; North America system-wide sales trimmed to $1.73–1.75B (from $1.78–1.80B in Q2) given conditions and Lindora divestiture; net new openings 170–190 maintained.
Near-term setup: Q4 to face ~$8M headwinds (franchise convention ~$3.7M and ~$5M Club Pilates national brand campaign spend), and fewer terminations vs Q3; management is pursuing pricing work, marketing upgrades, field ops support, and debt refinancing (term loan current May 2026).

What Went Well and What Went Wrong

What Went Well
- System-wide sales growth +10% YoY to $432.2M; AUV +2% to $668K; 78 gross openings and 49 licenses sold (momentum in network KPIs).
- Franchise revenue +17% YoY on royalty growth and benefit from license terminations; Adjusted EBITDA +9% YoY to $33.5M with margin lift.
- Marketing and ops initiatives: national Club Pilates campaign (“Every Body Club Pilates”) launched; CEO emphasized “substantial opportunity to improve without adding cost” through marketing, ops, pricing, innovation, and cost savings. “This time has only reinforced my confidence in both the power of our brands and the commitment of our franchisees.”
What Went Wrong
- Same-store sales −0.8% (rounded: −1%) as portfolio lead flow/member conversion issues and StretchLab’s Medicare Advantage reduction weighed; Club Pilates cohorts near capacity constrained SSS contribution.
- Equipment revenue −49% YoY on 41% decline in installations; merchandise −27% YoY on lower volumes; 32 closures in Q3 (annualized 4%).
- Guidance trimmed for FY North America system-wide sales versus Q2 posture; Q4 to see sequential revenue/EBITDA pressure given fewer terminations, convention expense, and marketing fund over-spend (~$5M).

Financial Results

Summary vs prior periods and vs S&P Global consensus

Metric	Q1 2025	Q2 2025	Q3 2025	Q3 2025 S&P Consensus	Beat/Miss
Revenue ($M)	76.9	76.2	78.8	75.25*	Beat by ~$3.6M*
Primary EPS (S&P)	−0.20*	0.26*	0.34*	0.124*	Beat by ~$0.22*
Adjusted EBITDA ($M)	27.3	28.1	33.5	25.81 (EBITDA)*	Above by ~$7.7 (Adj vs S&P EBITDA)*

Note: S&P “Primary EPS” actual for Q3 (0.34) aligns with company adjusted diluted EPS (0.34). Company reports Adjusted EBITDA of $33.5M; S&P EBITDA series may reflect a different definition. Values marked with * are retrieved from S&P Global.

Revenue composition – Q3 YoY

Revenue Component ($M)	Q3 2024	Q3 2025	YoY Δ
Franchise revenue	44.46	51.88	+7.42
Equipment revenue	14.68	7.46	−7.22
Merchandise revenue	6.58	4.80	−1.78
Franchise marketing fund revenue	8.57	8.83	+0.26
Other service revenue	6.25	5.85	−0.40
Total revenue	80.53	78.82	−1.71

Drivers: Franchise revenue increase reflected catching up of franchise territory license terminations and higher royalty rate; equipment/merchandise declines tied to lower installations and volume.

Profitability and EPS

Metric	Q3 2024	Q2 2025	Q3 2025
Net income (loss) ($M)	(18.15)	1.35	(6.75)
GAAP EPS (basic) ($)	(0.29)	(0.01) (company disclosed)	(0.18)
Adjusted EBITDA ($M)	30.80	28.10	33.48
Adjusted EPS (diluted) ($)	(0.05)	0.26	0.34

Q3 margin dynamics benefited from accelerated recognition of deferred franchise license revenue via terminations; Q4 will lack that level of benefit.

KPIs and operating metrics

KPI	Q1 2025	Q2 2025	Q3 2025
North America system-wide sales ($M)	466.8	473.5	432.2
Same‑store sales (%)	+4	+1	−1
Quarterly run-rate AUV ($K)	659	659	668
Total members (K)	865	863	796
Gross studio openings	116	86	78
Closures	51	57	32
Licenses sold	21	58	49
Global open studios (end of period)	3,298	3,327	3,066

Liquidity and leverage snapshot: Cash/cash equivalents/restricted cash $41.5M; total long‑term debt $376.4M at 9/30/25.

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Net new studio openings (global, net)	FY25	170–190 (Q2 guide)	170–190	Maintained
North America system-wide sales	FY25	$1.78–$1.80B (Q2)	$1.73–$1.75B	Lowered
Revenue	FY25	$300–$310M (Q2)	$300–$310M	Maintained
Adjusted EBITDA	FY25	$106–$111M (Q2)	$106–$111M	Maintained
Tax rate	FY25	Mid‑to‑high single digits	Mid‑to‑high single digits	Maintained
Share count for EPS	FY25	34.8M	34.8M	Maintained
Convertible preferred dividends	Quarterly	~$1.9M cash ($2.2M PIK)	~$1.9M cash ($2.2M PIK)	Maintained
Capital expenditures	FY25	$10–$12M (Q2)	$6–$8M	Lowered

Additional Q4 items: net ~$3.7M franchise conference expense and marketing fund spending to exceed revenue by ~$5M for Club Pilates campaign.

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 & Q2 2025)	Current Period (Q3 2025)	Trend
Marketing & brand investments	Accelerated spend; planned Club Pilates national campaign; StretchLab support; new CMO; local spend efficiency focus	National Club Pilates campaign executed; ~$5M Q4 marketing fund over-spend for campaign learning across channels (CTV/YouTube/podcasts).	Increasing investment/testing
Pricing & monetization	Club Pilates dynamic pricing/cancellation fees under evaluation; monetization strategies highlighted	Pricing study kicked off; data‑driven approach to tiers, packages, and conversion; expected to help 2026.	Building into 2026
Same‑store sales health	Q1 +4%; Q2 +1%; StretchLab softness; Club Pilates strong but moderating; macro seasonality	Q3 −0.8%; lead/conversion issues; privacy safeguards impact; StretchLab MA headwind; capacity constraints at Club Pilates cohorts.	Near‑term pressure; remediation underway
Portfolio focus/divestitures	CycleBar & Rumble divested; focus on scaled brands; Lindora pending evaluation	Streamlined portfolio to 5 brands; SG&A right‑sizing in Oct; annualized savings ~$6M.	Leaner portfolio; cost actions
Operations support	Field ops buildout from 12 to ~40 over 2025; ProfitKeeper focus	Initial teams launched; focus on best practices, “Opportunity Studios,” and studio‑level economics.	Scaling execution support
Real estate/density tools	FDD progress; infill and site selection improvements planned	Partnering with third‑party real estate; AI‑powered market assessment; manage cannibalization.	More data‑driven
Debt/refinancing	SEC investigation concluded; refi workstreams to start	Exploring multiple workstreams to refi term loan ahead of May 2026 current date.	Active
Supply chain/tariffs	Mitigated via cost‑plus pricing; minimal direct impact expected	No new issues highlighted. —

Management Commentary

CEO (Mike Nuzzo): “Over my first 90 days… it is clear that there is significant potential for improvement across our operations… excited to work with the team to unlock and realize that value.”
On priorities: “The five major areas of focus are marketing, operations support, unit growth and licensing, innovation, and efficiencies and cost savings… not about adding additional cost.”
On cost actions: “In October, we executed a reduction in force… expected to result in annualized SG&A savings of about $6 million.”
On Club Pilates: “Recent… cohorts… have shown record year‑one revenue ramps… exceeding the previous three vintages at month 12 by an average of 27%.”
CFO (John Meloun) on Q3 drivers: “Franchise revenue… driven primarily by the catching up of franchise territory license terminations and… higher effective royalty rate… Equipment revenue… reflecting a 41% decline in global installation volume.”
CFO on Q4 bridge: “There will not be a repeat level of terminations… ~$4M headwind… plus ~$4M convention expense… and ~$5M marketing fund spend.”

Q&A Highlights

Club Pilates comps/pricing: CP comps slowed to ~+1% in Q3; teams pursuing expert‑led pricing analysis (tiers, packages, cancellation policy) and off‑peak monetization to sustain growth without alienating members.
License terminations/accounting: Elevated Q3 terminations accelerated franchise revenue, aiding margins; Q4 expected lower terminations and $8–9M one‑time headwinds (convention, marketing fund).
Backlog delinquency: ~40% of global licenses 12+ months behind; composition ~44% CP, 20% StretchLab, 12% YogaSix, 5% Pure Barre, 20% BFT; ongoing activation/termination campaign.
StretchLab strategy: Replace MA volumes via broader demos, new partnerships, package options, pricing/intro offers, online journey fixes; tests to reduce labor intensity underway.
Franchisee structure: Encouraging larger operators/PE into franchise base to support faster, disciplined CP densification using advanced location analytics.

Estimates Context

Period	Primary EPS (S&P)	Revenue ($M) (S&P)	EBITDA (S&P) ($M)	Result vs S&P
Q1 2025	Est 0.153; Act −0.200*	Est 75.37; Act 76.88*	Est 28.86; Act 22.59*	EPS miss; Rev beat; EBITDA miss*
Q2 2025	Est 0.293; Act 0.260*	Est 77.23; Act 76.21*	Est 29.27; Act 24.86*	EPS miss; Rev miss; EBITDA miss*
Q3 2025	Est 0.124; Act 0.340*	Est 75.25; Act 78.82*	Est 25.81; Act 27.12*	EPS beat; Rev beat; EBITDA beat*

Values marked with * are retrieved from S&P Global.

Implication: Q3 delivered a broad-based beat versus S&P Global consensus after two mixed/soft quarters (EPS/EBITDA misses in Q1/Q2). Street estimates may need to reassess near-term profitability cadence (license termination timing, Q4 one‑offs) and FY25 mix (lower system-wide sales, intact revenue/Adj. EBITDA).

Key Takeaways for Investors

Q3 was a clean top‑line and EPS beat with Adj. EBITDA up 9% YoY; however, part of the Q3 margin strength reflected elevated license terminations that won’t repeat at the same level in Q4.
Same‑store sales softness (−1%) reflects fixable funnel and conversion issues plus StretchLab modality pressures; pricing/marketing/ops workstreams aim to stabilize comps into 2026.
FY25 revenue and Adj. EBITDA guidance reiterated despite lowering system‑wide sales; cost actions (RIF) and capex cut to $6–8M provide cushion while transformation progresses.
Expect Q4 sequential step‑down (lower terminations, ~$3.7M convention, ~$5M marketing over‑spend). Use on weakness: the national CP campaign and pricing study are intended to inform 2026 growth levers.
Club Pilates remains the growth/profit anchor with strong new‑unit economics and densification runway; franchisee mix shifting toward larger, well‑capitalized operators.
Balance sheet: $41.5M cash, $376.4M debt; refinancing workstreams underway ahead of May 2026 term loan current date—a key 2026 catalyst.
Watchlist into 2026: SSS trajectory post‑marketing/pricing actions, StretchLab turnaround proof points, license backlog resolution pace, and progress on debt refi and SG&A savings realization.

Additional Notes and Cross-Checks

Q3 revenue mix underscores structural shift: royalties/franchise revenues rising as equipment/merchandising normalize lower (installations down 41% YoY).
Insurance reimbursements: $10M cash received in Q3 and $10M receivable recorded for SEC investigation/other defense costs—benefited SG&A; recovery timing has no EBITDA/GAAP P&L impact.
Club Pilates national brand campaign (Every Body Club Pilates) launched with multi‑platform media to broaden top‑of‑funnel and test new channels.

All non‑GAAP measures are per company definitions and reconciliations.

S&P Global estimates and actuals in the Estimates Context and Summary tables are marked with * and are Values retrieved from S&P Global.

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