XPOF Q3 Deep Dive: Streamlined Brand Focus and Franchise Economics Take Center Stage

Boutique fitness studio franchisor Xponential Fitness (NYSE:XPOF) beat Wall Street’s revenue expectations in Q3 CY2025, but sales fell by 2.1% year on year to $78.82 million. The company expects the full year’s revenue to be around $305 million, close to analysts’ estimates. Its non-GAAP profit of $0.34 per share was significantly above analysts’ consensus estimates.

Is now the time to buy XPOF? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

Xponential Fitness delivered third quarter results that exceeded Wall Street’s revenue and profit expectations, leading to a significant positive market reaction. Management attributed the quarter’s performance to the company’s streamlined brand portfolio, growth in franchise revenue, and operational improvements, particularly within Club Pilates, which continues to benefit from robust new studio ramp-up economics. CEO Michael Nuzzo highlighted that Club Pilates’ recent cohorts have achieved higher first-year revenue ramps than prior vintages, underscoring the brand’s appeal and operational execution. Meanwhile, the company’s efforts to address member acquisition and retention challenges in brands like StretchLab also played a role in the quarter’s outcome.

Looking ahead, Xponential Fitness is focused on driving organic growth and improving franchisee support through targeted marketing, operational efficiencies, and innovation. Management emphasized continued investment in digital marketing and class content updates to enhance member engagement, as well as ongoing efforts to optimize pricing strategies and studio density. CEO Michael Nuzzo stated, “We are reallocating and refining how we operate to drive greater focus and efficiency,” while CFO John Meloun added that the company is actively working to address backlog development delays and expects progress in unit openings and member acquisition initiatives through 2026.

Key Insights from Management’s Remarks

Management cited a more focused brand portfolio, improved franchisee economics, and operational streamlining as key drivers of the latest quarter’s financial results.

• Club Pilates ramp and capacity: Recent Club Pilates studio openings ramped up to near full capacity within the first year, which management said led to both higher average unit volumes (AUVs) and a change in how mature studios contribute to same-store sales. CFO John Meloun noted, “new units are coming on pretty efficiently and getting up to that $900,000 to $1 million AUV very early."
• Portfolio streamlining: The divestiture of three brands (CycleBar, Rumble, and Lindora) allowed Xponential Fitness to concentrate resources and franchisee support on its strongest concepts. CEO Michael Nuzzo described the move as creating a “more optimized brand portfolio,” enabling better support infrastructure and operational focus.
• Operational efficiency and cost reduction: The company executed a reduction in force across most corporate departments, expected to yield $6 million in annualized SG&A savings. Management stressed these actions are about reallocating, not increasing, resources to drive efficiency.
• Marketing and innovation initiatives: A new corporate marketing leadership team launched a nationwide Club Pilates campaign, with expanded use of digital channels and performance marketing. Additionally, the company introduced new classes such as Circuit at Club Pilates and is refining offerings at Yoga6, aiming to boost engagement across demographic groups.
• Franchisee and real estate strategy: Xponential Fitness is leveraging AI-powered tools for site selection and is working to attract larger operators, including private equity, to accelerate unit growth while maintaining healthy studio economics.

Drivers of Future Performance

Management expects future performance to be shaped by enhanced marketing, pricing optimization, and continued operational streamlining across its core brands.

• Pricing and membership strategies: The company is conducting deep pricing analyses, particularly for Club Pilates, to identify opportunities for new price tiers, packages, and disciplined cancellation policies. Management believes these initiatives can drive incremental revenue without materially increasing member churn, though they acknowledge the need to balance pricing with member retention in a competitive environment.
• Studio growth and backlog execution: Xponential Fitness aims to accelerate new studio openings, especially through attracting larger-scale franchisees and optimizing site selection. While about 40% of its license backlog remains behind on development schedules, management is focused on reducing this through targeted franchisee support and addressing operational bottlenecks—especially for brands like StretchLab, where member acquisition challenges persist.
• Operational and cost discipline: The company is committed to maintaining a leaner corporate cost structure, with ongoing reviews of SG&A, retail operations, and field support. Management also highlighted efforts to improve franchisee profitability through tools like the ProfitKeeper system and to enhance studio-level performance by addressing local execution gaps.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will be watching (1) the impact of the new Club Pilates national marketing campaign on member growth and engagement, (2) progress in reducing the license backlog and accelerating new studio openings, and (3) the effectiveness of pricing strategy changes and operational improvements in driving franchisee profitability—especially for underperforming brands like StretchLab. Continued execution in these areas will help gauge the sustainability of Xponential Fitness’s growth initiatives.

Xponential Fitness currently trades at $7, up from $6.30 just before the earnings. At this price, is it a buy or sell? The answer lies in our full research report (it’s free for active Edge members).

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