On August 6, Xponential Fitness (NYSE:XPOF) reported results for the second quarter ended June 30, and the numbers came in well short of where the boutique-fitness franchisor wanted to be. Revenue fell 13% year over year to $66 million, and the company swung to a net loss of $4.8 million after posting net income in the same period last year. CEO Mike Nuzzo said the quarter came in “below expectations.” The bigger story sits in the outlook section, where the company trimmed nearly every full-year target it had set.
Franchise Footprint Keeps Expanding
Despite the weak headline numbers, Xponential kept adding to its network. The company opened 67 gross new studios and sold 53 franchise licenses during the quarter, a sign that franchisee demand for its brands hasn’t disappeared. North America system-wide sales held essentially flat at $437.3 million, which means new locations are offsetting some of the softness at existing studios rather than the whole system contracting. Even after cutting its 2026 targets, the company still expects to open roughly 150 net new studios for the year and generate North America system-wide sales of $1.7 billion to $1.75 billion. Full-year adjusted EBITDA guidance, while lowered, still points to $91 million to $97 million, meaning the business is still projected to be solidly profitable on that measure.
Same Store Sales Head Backward
The details underneath the topline number are worse than the revenue decline alone suggests. North America same-store sales fell 6.8%, a sharp reversal from 2.4% growth in the same period a year earlier, and the quarterly run-rate average unit volume dropped to $659,000 from $686,000. Franchise revenue slipped 3% to $44 million on that same-store weakness plus brand divestitures completed in 2025, while equipment revenue dropped 26% to $7.1 million as fewer studio openings and license sales meant fewer installations. Merchandise revenue nearly vanished, falling 90% to $0.5 million as the company shifted from an in-house wholesale model to an outsourced retail arrangement, a transition it admitted came with its own challenges.
Costs moved the wrong direction too, with selling, general and administrative expenses up 33% to $32 million on higher legal expenses, and marketing fund expenses up 29% to $11.4 million. Adjusted EBITDA fell 22% to $21.9 million, and adjusted net income collapsed to $0.8 million from $14.5 million a year earlier. The balance sheet adds another concern, with just $25 million in cash, cash equivalents, and restricted cash against $522.4 million in total long-term debt, and $25.7 million in cash used in operating activities during the quarter. Management responded by cutting full-year revenue guidance to $250 million to $260 million, a 19% decline at the midpoint from 2025 and down from a prior forecast of $260 million to $270 million.
Funds Buy While Shorts Pile In
Hedge fund ownership of Xponential rose from 20 funds to 23 in the most recent quarter, a modest sign of accumulating institutional interest even as the business stumbles. Short interest tells a very different story, with 41.19% of the float sold short, a level that signals heavy, organized skepticism about where the stock goes from here. Shares trade at a forward price-to-earnings ratio of 13.32 as of September 4, a multiple that doesn’t scream optimism but isn’t priced for collapse either.
What Happens Next Matters
Xponential’s second quarter makes clear that the same-store slowdown is outrunning the company’s ability to grow through new locations alone. Management is still projecting studio growth and full-year profitability on an adjusted basis, evidence that the underlying franchise model isn’t broken. But climbing legal costs, a shrinking same-store base, and a debt load that vastly exceeds cash on hand point to a business under genuine strain. For the growth story to hold, same-store sales need to stabilize, and the outsourced retail transition needs to stop draining revenue.
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