Xponential Fitness (XPOF) Q3 2026 earnings review
Xponential's studios sell less, and North American closures match openings
Xponential, which franchises Club Pilates and Pure Barre studios, turned a profit even as sales at its studios kept sliding. Sales at studios open over a year fell 7.5%, the fifth drop in a row. Revenue shrank 21%, partly because Xponential now books only a commission on merchandise. By our math, the full-year plan needs fourth-quarter profit excluding one-offs to climb from a year ago.
| Revenue excluding merchandise and license cancellations | $58.7M −9% from a year ago |
|---|---|
| Sales at North American studios open over a year | −7.5% −0.8% a year ago |
| Profit excluding one-offs (adjusted EBITDA) | $24.3M −27% from a year ago |
| Full-year profit outlook | Top cut $3M middle of the range: $92.5M, down 17% |
⚖️ Verdict: 🔴 Bearish
The story got worse because Xponential's North American network stopped adding studios: 28 opened and 27 closed. Management cut its full-year target for new studios and trimmed the top of its profit range. The good news: legal payouts are shrinking, and studios abroad keep opening.
The question now is whether the new Club Pilates website and marketing can stop the slide in studio sales. If they work, royalties steady and the year-end plan holds; if not, shrinking royalties must still cover interest on $521 million of debt. Fourth-quarter sales at existing studios will tell.
🐂 Bull Case
Xponential Is Paying Down Its Legal Bills
For three years, lawsuits and regulators drained cash at Xponential. Chief executive Mike Nuzzo said the company has made "significant progress putting key legal matters behind us". Its reserve for legal claims shrank to $26.0 million from $44.8 million in December.
This year Xponential paid $9 million to the Federal Trade Commission, the US consumer-protection regulator, under its settlement. New York's attorney general settled in June, and a court approved a wage settlement in October. The other side of the story remains: a federal prosecutor's investigation and a shareholder lawsuit are still open.
What to watch: the legal reserve in the year-end report, alongside the $3.4 million franchisee payment that interim finance chief Robert Julian expects this quarter. A smaller reserve with no new charges would leave more cash for repaying debt.
Xponential Keeps Adding Studios Outside North America
Abroad, Xponential sells country rights to master franchisees, local partners that open studios and license them to other operators. That network added 19 studios net this quarter, against 9 a year earlier. Nuzzo said Australia, Spain, France and Portugal reached new opening milestones.
- International studios: 539, up 9.8% from a year ago
- Licenses sold abroad: 43, against 33 a year ago
This matters because foreign partners pay Xponential a share of their sales at almost no added cost. But revenue from outside the US still makes up under 5% of the total, so it cannot yet offset the stall at home.
What to watch: international net openings in the fourth quarter, which help decide whether the year reaches its studio target. A pace near 20 a quarter would keep the foreign network expanding by about a tenth each year.
Positives this quarter didn't test
Three standing strengths drew new actions this quarter but produced no sales numbers yet. Each needs a quarter of results before it can move the case.
- New Club Pilates website: live since late September, and Nuzzo cited a double-digit rise in sign-up forms and first-class bookings. Fourth-quarter sales at existing studios will show whether it works.
- Big franchisee deals: Spartan Fitness, which runs 173 Club Pilates studios, agreed in July to open 50 more over six years. Openings in 2027 will show whether such deals become studios.
- Club Pilates target: Nuzzo now dates the domestic goal of more than 2,000 locations to the next five years. The brand runs 1,543 studios worldwide, so the opening pace will test it.
🐻 Bear Case
Sales at Existing Studios Fell Again
Same-store sales track what studios open more than a year sell, so they show whether members keep coming. In North America they have dropped for five quarters running, and the decline widened to 7.5%. Nuzzo said results came in "below our expectations".
- Club Pilates, the largest brand: down 5.6%
- Yearly sales pace per studio: $634,000, down 5%
- Members across all brands: 775,000, against 796,000
- Royalties, the roughly 7% share of studio sales Xponential keeps: $31.2 million, down 1%
Nuzzo pointed to weaker unpaid online traffic and leads, and said member retention stays strong. But the member base shrank by about 21,000 people, so retention alone does not close the gap. Last quarter, management planned for second-half declines near 6.5%, give or take a point, and this quarter landed on the weak edge.
What to watch: fourth-quarter same-store sales, reported early next year. A decline smaller than this quarter's would be the first sign that the new website and local marketing bring in new members.
North American Closures Now Match Openings
System-wide sales are everything franchised studios in North America sell, and Xponential collects royalties on them. Nuzzo argues that weaker sales per studio still work. "As long as we're continuing to grow total studios, total system-wide sales will increase," he told analysts. This quarter North America added one studio net, and system-wide sales fell 1.8%.
- North American studios: 28 opened, 27 closed
- Signed but unopened North American studios: 618, from 694 in June
- Studio openings worldwide: 54, against 78 a year ago
- Equipment revenue, booked when studio gear is installed: down 42%
Nuzzo blamed a tighter market for shop space and stricter site selection, and said franchisees still want to open. Both reasons may be sound, but Xponential cut its full-year target for new studios again. About 30% of signed licenses run more than a year behind schedule, and interim finance chief Robert Julian plans more cancellations.
What to watch: net new studios worldwide in the fourth quarter, which must nearly double from this quarter's pace to meet the plan. A shortfall would mean new studios no longer make up for weaker sales per studio.
Interest Costs Take a Quarter of Revenue
In December Xponential borrowed $525 million to repay old debt and buy back preferred shares. The loan charges 10.5% a year, so interest now absorbs about a quarter of revenue.
- Interest expense: $15.2 million, up 18%
- Debt: $521 million, about 5.5 times a year of profit excluding one-offs
- Cash, including restricted cash: $27.2 million, from $45.9 million in December
This matters because the loan caps debt relative to profit, and Xponential has not published that limit. It says it complies today. But operating cash flow ran negative over nine months, and the franchisor drew $10 million on its credit line in April.
What to watch: fourth-quarter operating cash flow, as legal payouts wind down. Positive cash flow would let Xponential start repaying the loan from its own earnings.
Risks this quarter didn't answer
Four standing risks got no answer in this quarter's materials. Each stays open until Xponential publishes a number or a decision.
- Strategic review: the board's search for a sale, merger or other deal continues, and in October it adopted a plan that makes buying over 19.9% of the shares costly. A deal or an ended review settles it.
- Pure Barre goodwill, the purchase premium still on the books: the filing says it "remains at a heightened risk of future impairment". The year-end test will show it.
- Merchandise partner: Nuzzo said merchandise sales "remain challenged", and Fit Commerce has paid nothing yet toward guaranteed commissions. Year-end comments will show whether the fix arrived.
- Largest franchisee: a director controls the fund that backs Spartan Fitness. Xponential has not said how the board approved its new development deal.
👓 Other Themes
Boutique Fitness Spending Slowed in the Third Quarter
Nuzzo said credit card data showed boutique fitness slowing in the third quarter from the first half, "suggesting a more challenging market backdrop". He added that franchisees found it harder from mid-year to secure 2,000-square-foot spaces in good strip centres. Both pressures sit outside Xponential's control, and they help explain weaker studio sales and slower openings.
A New Finance Chief Will Review Costs
Jennifer Ryu became chief financial officer, replacing interim finance chief Robert Julian. Nuzzo said one of her first tasks is to "assess our cost structure to identify new ways to improve operating efficiency", including technology, AI and long-time vendors. Salaries already fell 22% after job cuts. Xponential has not set a savings target yet.
💲 Other KPIs
Gross margin rose to 88.0% from 78.1% a year ago. Merchandise now earns a commission instead of a low-margin product sale, and equipment sales shrank. Product costs dropped to 5% of revenue from 13%. The margin has stayed above 85% all year, so the gain reflects mix rather than cheaper studio support.
Deferred revenue — franchise fees paid upfront that Xponential books over a studio's life — shrank 21% from a year ago and 1% from June. Cancelled licenses release part of it at once. That release brought $3.2 million this quarter, against $9.3 million a year ago. A smaller balance means less fee income in later years.
🔮 Guidance
Cut. The plan now calls for roughly 127 net new studios worldwide this year, 37% fewer than in 2025. By our math, that leaves about 39 for the fourth quarter. This quarter added 20. It is the second cut in a row, after a 10-studio trim last quarter.
Unchanged. The plan has North American studio sales about 1% below last year. By our math, that leaves about $427 million for the fourth quarter, 4.5% below a year earlier. Nuzzo said the company modelled the fourth quarter on third-quarter sales, adjusted for what it saw in October.
Unchanged. The plan has revenue down about 19% this year. By our math, that leaves about $66 million for the fourth quarter, roughly 20% below a year ago. The comparison stays weak until December, when the switch to booking only a commission on merchandise turns a year old.
Cut at the top. Nuzzo calls it a narrower range, but the middle moved down to $92.5 million. By our math, the fourth quarter needs about $25.8 million, 13% above a year ago. Nuzzo cited natural cost savings, a moved convention and last year's costly awareness campaign. Third move this year: held, then cut by $11 million, now trimmed again.
Unchanged. Xponential still assumes a tax rate in the mid-to-high single digits. The rate stays low because much of the profit passes to partnership owners and the company holds a full allowance against its tax assets.
Unchanged. Xponential will use 41.0 million listed shares for per-share figures this year. The count runs above last year's because early owners swapped partnership units for listed shares, not because the company sold new stock.
❓ Key Questions
How many leads does the new website add?
Nuzzo cited a double-digit rise in sign-up forms but gave no counts. Lead volumes and conversion rates by brand would show whether marketing can reverse the slide in sales at existing studios.
Did the planned price increase reach studios?
Earlier this year management described a third-quarter price adjustment and fewer founder discounts. Neither came up this quarter, so readers cannot tell how much prices helped or hurt studio sales.
How close is Xponential to its loan's debt limit?
The loan caps debt relative to profit, but the company has not published the limit. With debt high and profit falling, the remaining headroom decides how much room management has next year.
What has Fit Commerce paid in commissions so far?
The merchandise contract calls for about $50 million of commissions over five years. Xponential has received no guaranteed payments yet, and Nuzzo said merchandise sales stay weak.
What will the new finance chief's review save?
Jennifer Ryu's first task is a cost review covering technology, AI and vendors. A savings target and a date would show whether lower costs can offset shrinking royalties.