Boutique fitness studio franchisor Xponential Fitness (NYSE:XPOF) reported Q1 CY2025 results exceeding the market’s revenue expectations , but sales fell by 3.5% year on year to $76.88 million. The company expects the full year’s revenue to be around $320 million, close to analysts’ estimates. Its non-GAAP loss of $0.20 per share was significantly below analysts’ consensus estimates.
Revenue: $76.88 million vs analyst estimates of $76.09 million (3.5% year-on-year decline, 1% beat)
Adjusted EPS: -$0.20 vs analyst estimates of $0.15 (significant miss)
Adjusted EBITDA: $27.33 million vs analyst estimates of $28.86 million (35.5% margin, 5.3% miss)
The company reconfirmed its revenue guidance for the full year of $320 million at the midpoint
EBITDA guidance for the full year is $122.5 million at the midpoint, in line with analyst expectations
Operating Margin: 12.6%, up from 10% in the same quarter last year
Free Cash Flow Margin: 7%, up from 2.3% in the same quarter last year
Market Capitalization: $302.6 million
StockStory’s Take
Xponential Fitness’s first quarter was marked by a strategic shift toward operational stabilization, as management focused on franchisee health, operational efficiency, and a comprehensive reorganization of resources. CEO Mark King emphasized the company’s transition from aggressive sales to a model prioritizing support for franchisees, including the launch of a new field operations function to assist struggling studios and drive best practices across brands. New leadership appointments, such as a Chief Marketing Officer and a Chief Human Resource Officer, were highlighted as critical to these efforts.
Looking ahead, management’s guidance for the remainder of the year centers on maintaining financial stability while addressing elevated studio closure rates and reactivating franchise license sales following the renewal of franchise disclosure documents. CFO John Meloun described 2025 as a year of business stabilization, anticipating that enhanced operational support and selective franchise development will position Xponential for renewed growth in subsequent years. Management acknowledged the need for cautious execution and plans to share more details at the upcoming Analyst Day.
Key Insights from Management’s Remarks
Management’s remarks focused on operational transformation, franchisee support, and adapting to evolving business dynamics. The company attributed deviations from expectations to increased legal expenses and a deliberate slowdown in new license sales during the franchise disclosure document renewal period.
Operational Reorganization: Xponential began a significant restructuring, including appointing new leaders in marketing and human resources, and launching a field operations team to directly support franchisees. This move reallocates headquarters staff into field roles to increase hands-on support for studio operators.
Elevated Studio Closures: The first quarter saw an annualized closure rate of 6%, with most closures concentrated in CycleBar and StretchLab. Management expects closures to remain elevated this year due to portfolio clean-up, particularly in underperforming brands and international markets.
Selective Franchise Development: New franchise license sales were paused during the quarter as the company updated its franchise disclosure documents. With filings now complete, management anticipates a return to a normalized pace of license sales, especially for Club Pilates, which continues to drive most new openings.
Brand Performance Divergence: Management noted strong membership and same-store sales growth in Yoga Six and Pure Barre, while StretchLab continues to face operational challenges. Efforts are underway to address StretchLab’s model through changes in studio size, pricing, and local marketing support.
Tariff and Cost Pressures: While supply chain cost pressures and tariff uncertainty exist, management believes the company’s cost-plus pricing for equipment and merchandise will limit margin impact. The recurring nature of most revenue streams further mitigates direct exposure to tariffs.
Drivers of Future Performance
Management’s outlook for the rest of 2025 highlights a focus on stabilizing operations, supporting franchisees, and carefully managing expansion in a challenging environment for boutique fitness.
Franchisee Health Initiatives: The rollout of a dedicated field operations team aims to improve studio-level performance, reduce closures, and standardize operational best practices across brands, laying the groundwork for future growth.
Normalization of License Sales: With franchise disclosure documents updated, management expects franchise license sales to recover, led by existing franchisees and bolstered by interest from private equity in scale brands like Club Pilates.
Addressing Brand-Specific Challenges: Strategic adjustments in marketing, pricing, and operational models—especially for underperforming brands like StretchLab—are intended to improve unit economics, though management acknowledged these efforts may take several quarters to show results. Risks include higher-than-expected closures and slowdowns in new studio openings.
Top Analyst Questions
Randy Konik (Jefferies): Asked for clarity on the overarching theme for the year, highlighting concerns about studio closures and operational efficiency. Management described 2025 as a year of business transformation and stabilization, focusing on franchisee support rather than aggressive growth.
Joe Altobello (Raymond James): Questioned the source of increased closure guidance and the pace of license sales. Management cited continued pressure in CycleBar and StretchLab and expects Club Pilates to drive most new openings as license sales normalize.
John Heinbockel (Guggenheim): Inquired about the expected impact of field operations staff on business outcomes and whether portfolio rationalization is necessary. Management expects immediate positive effects from field support and is reviewing brand viability on an ongoing basis.
Chris O’Cull (Stifel): Focused on StretchLab’s marketing investments and potential pricing model changes. Management indicated increased local marketing support and consideration of new membership models to improve StretchLab’s performance.
Korinne Wolfmeyer (Piper Sandler): Asked about tariff impacts and consumer demand assumptions in guidance. Management believes direct tariff exposure is limited and noted no material shifts in consumer demand, with same-store sales expected to remain stable.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will be monitoring (1) the effectiveness of the new field operations team in reducing studio closures and improving franchisee performance, (2) the pace and quality of net new studio openings as franchise license sales resume, and (3) operational improvements in underperforming brands like StretchLab and CycleBar. The results of these initiatives, along with management’s updates at the upcoming Analyst Day, will provide important signals about the company’s ability to return to sustainable growth.
Xponential Fitness currently trades at a forward P/E ratio of 7.8×. At this valuation, is it a buy or sell post earnings? Find out in our free research report.
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