Xponential Fitness, Inc. 2026 Q2 Earnings Call

Please go ahead. Thank you, operator.

Good afternoon, thank you all for joining our conference call to discuss Xponential Fitness' second quarter 2026 financial results. I am joined by Mike Nuzzo, Chief Executive Officer, and Robert Julian, Interim Chief Financial Officer. A recording of this call will be posted on the investors section of our website at investor.xponential.com. We remind you that during this conference call, we'll make certain forward-looking statements, including discussions of our business outlook and financial projections. These forward-looking statements are based on management's current expectations and involve risks and uncertainties that could cause our actual results to differ materially from such expectations. For a more detailed description of these risks and uncertainties, please refer to our most recent annual report on Form 10-K for the year ended December 31st, 2025, filed with the SEC and subsequent filings with the SEC.

We assume no obligations to update the information provided on today's call, except as required by applicable law. We will be discussing certain non-GAAP financial measures in this conference call. We use non-GAAP measures because we believe they provide useful information about our operating performance that should be considered by investors in conjunction with the GAAP measures that we provide. A reconciliation of these non-GAAP measures to comparable GAAP measures is included in the earnings release that was issued earlier today prior to this call and in the investor presentation available on our website. We are not able to provide a quantitative reconciliation of forward-looking non-GAAP measures without unreasonable efforts to the most directly comparable GAAP financial measures due to the high variability, complexity, and low visibility with respect to certain items.

Please note that all numbers reported in today's prepared remarks refer to global figures unless otherwise noted. In order to ensure period-over-period comparability and consistent with our reporting method since IPO, we report all KPIs on a fully pro forma basis. Meaning for the full KPI history presented, we only include brands that are under our ownership as of the current reporting period. For the period ended June 30th, 2026, this includes BFT, Club Pilates, Pure Barre, StretchLab, and YogaSix. I will now turn the call over to Mike Nuzzo, CEO of Xponential Fitness.

Thanks, Patricia. Good afternoon, and thank you all for joining us today. Over the past decade, Xponential built the largest global boutique fitness platform through an exceptional franchise model with strong brand appeal. That growth was achieved largely through unit expansion and brand development. As we reach greater scale and the consumer environment shifts, our priorities have naturally evolved. Today, our focus is on optimizing the business, driving stronger organic growth, improving franchisee economics, and creating a more consistent member experience across our brands. To support this phase, we've assembled a leadership team with deep operating experience. As I introduced Robert, Eric, and Steph on our last call, I want to officially welcome Danielle Parra as President. Danielle brings extensive experience across all major franchise disciplines, including marketing, operations, and brand strategy, with previous leadership roles at GoTo Foods, Icon Automotive, and Caesars Entertainment.

She has hit the ground running, and her early work is helping advance several important initiatives. She's leading efforts to strengthen franchisee relationships, accelerate studio expansion, improve brand positioning, and drive collaboration across our field operations team to deliver more coordinated support. Overall, the team that we've assembled over the past year asks the hard questions, challenges assumptions, and is relentlessly focused on collaboration, franchise support, and execution. Ultimately, our objective is straightforward. Build a healthier, more productive franchise system that delivers sustainable membership growth and long-term value creation. While we are focused on improving system-level execution, we continue to see strong evidence of the brand affinity and community engagement that underpin our long-term opportunity. The senior team and I witnessed this firsthand in June at the Pure Barre 25th anniversary event in Manhattan, where we hosted 211 franchise owners, members, teachers, media influencers, and partners.

The event featured curated Pure Barre workouts, brand activations, and live stream experiences. Social media from the event drew over 1.8 million views. Moments like this reinforce the strength of our brands, the loyalty of our communities, and the meaningful impact they have on health and wellness routines. We are also finding new ways to expand our reach. In July, Club Pilates collaborated on the launch of Starbucks protein coffee drinks, giving us access to approximately 120,000 Starbucks and Pepsi employees through an exclusive introductory Club Pilates offer. Starbucks will also bring influencers into Club Pilates studios to experience the workout and highlight the lifestyle connection between Pilates, wellness, and Starbucks protein coffee. We view this as a strong example of the kind of consumer brand collaboration that can introduce more people to our brands.

At the same time, we recognize there is more work ahead to enhance our execution and drive growth. We are focused on the areas that can most directly improve our business, strengthening top of funnel, enhancing the digital journey, improving our franchise support across key operating functions, and evaluating each brand's growth and positioning for long-term health. This is an important time at the company as we set the course to maximize value for our shareholders, franchisees, and employees. I'll now turn to a more detailed discussion of the quarter. Domestically, we delivered net unit growth of 16, and internationally, net unit growth of 12. Year-to-date, we have grown net units by 39 domestically and 29 internationally and have a total of 3,165 open studios globally.

We are also excited to announce a partnership with our largest Club Pilates franchisee, Spartan Fitness Holdings, through which we expect to open 117 total studios across Texas, Florida, Massachusetts, Connecticut, Missouri, Illinois, Indiana, Ohio, New Jersey, and Pennsylvania over the next six years. Partnerships like this, driven by the continued demand of Pilates, are a key element of our long-term growth and emphasize the strength of the Club Pilates brand. We continue to show momentum internationally as well. We now have over 500 international studios open, with Club Pilates opening its 200th studio in June, and we see great white space opportunity in both current and new markets across the globe. We again saw year-over-year increases in leads from paid media through the continued progress with our national marketing agency that helped partially offset year-over-year declines in organic leads.

As in Q1, Q2 total company member retention improved, increasing 28 basis points year-over-year, continuing to reflect our strong member loyalty and affinity for our brands. Our Q2 same-store studio sales were down 6.8% overall and down 5% for Club Pilates, remaining below our expectations and modestly weaker than Q1 trends, with the primary impact coming from top-of-funnel pressure. The quarter also reflected a more challenging environment, consistent with the broader fitness and consumer discretionary sectors, where companies have pointed to more selective spending, higher promotional activity, and pressure on new customer acquisition heading into the summer months. Against this backdrop, we remained focused on our initiatives within our control. This includes several initiatives intended to support franchisee performance.

On the digital front, we implemented our new StretchLab digital experience in July and completed our Club Pilates website redesign, which is now being programmed by our tech team for a Q3 launch. These exciting changes are expected to have a positive impact on same-store sales by improving member navigation, reducing friction in the member journey, and supporting higher lead submission. We also expanded our remodel program in Club Pilates, which we believe will elevate existing studios and have a positive impact on our member experience. All new Club Pilates studio openings will also feature our new design experience. Finally, we continue to expand our engagement with studio operators and our field support teams with a specific focus on improving lead to membership conversion.

As an example, the Pure Barre and YogaSix teams are using data tools to coach studios on adding more class types that drive the highest new member conversion. Overall, our focus remains on driving strong, durable, long-term unit growth while improving studio-level performance. We continue to see healthy development activity supported by a strong pipeline of new Club Pilates studios in various stages of development. Our teams are supporting franchisees in site identification, lease negotiation, and build-out planning. Importantly, our new studio growth runway is charted for the next five-plus years with a great mix of both smaller and larger scale franchise partners. Organic lead trends remain a key top-of-funnel opportunity. We are actively responding with dedicated AI SEO resources, technology tools designed to optimize organic lead flow, and updated website experiences across our brands.

On a weekly basis, we are now producing compelling, unique content for each of our brands, targeting the most popular fitness AI search subjects. While these initiatives are still early, we believe improving the digital experience for customers will be an important way to support franchisees, since virtually all new members start their journey on our web and mobile digital properties. New member conversion from lead to subscription is another meaningful top-of-funnel opportunity to utilize technology and RDO field support in partnership with our franchisees. As I mentioned, our field teams are using new reporting and dashboards to coach franchisees on ways to optimize membership conversion. We are also supporting partnering franchisees who are piloting AI-enabled tools that interface with studio member management systems and provide more automated advanced CRM capabilities for both new member and retention efforts.