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Xponential Fitness reported third-quarter revenue of $62.3 million, down 21% from a year earlier, and reduced its forecast for net new studio openings. The company maintained its full-year revenue outlook as its board continues reviewing options that could include a sale or merger, after shareholder Fund 1 Investments floated a proposal to take it private.
Xponential Fitness reported a 21% year-over-year revenue decline in the third quarter and lowered its forecast for net new studio openings, while saying its board remains actively engaged in a review that could result in a sale or merger. The results came about a week after major shareholder Fund 1 Investments floated a plan to take the boutique fitness franchisor private.
Revenue for the quarter was $62.3 million, down from $78.8 million a year earlier. North America same-store sales fell 7.5%, following a 6.8% decline in the second quarter. Xponential kept its full-year revenue forecast at $250 million to $260 million but reduced its expected net new studio openings to 124 to 130, from about 150.
Franchise revenue dropped 16% to $43.4 million. The company attributed the decline to lower franchise territory revenue, including less revenue recognized from franchise agreement terminations. Equipment revenue fell 42%, which Xponential linked to fewer studio openings. Merchandise revenue was down 92%, which the company said reflected its move from an in-house wholesale model to an outsourced retail model.
Xponential ended the quarter with 3,185 studios worldwide across brands including Club Pilates, Pure Barre, StretchLab, YogaSix and BFT. CEO Mike Nuzzo said the company expects more openings and equipment installations in the fourth quarter after streamlining its development process. New CFO Jennifer Ryu joined Nuzzo on the analyst call as interim CFO Robert Julian prepares to leave.
Falling Sales Meet Sale Review
The results show that Xponential is still facing pressure across sales and studio growth as it considers strategic options. Lower same-store sales and a reduced opening forecast matter to the franchisor because its performance depends in part on franchisees’ ability and willingness to open and operate locations. The reported figures do not, on their own, establish what is driving the full business decline or how long it may continue.
The combination of weaker quarterly results and a potential change in ownership makes the review relevant to investors, franchisees and employees. A transaction could alter the company’s ownership or direction, but no sale or merger has been announced. Xponential has not provided a timetable for the review’s conclusion.
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Fund 1 Proposal and Board Protections
Xponential has been weighing a sale since April and has Jefferies as its adviser, according to the report. Fund 1 Investments, one of the company’s largest shareholders, recently floated a plan to take it private. That proposal is not the same as an agreed deal, and the available information does not identify a finalized transaction or offer accepted by the board.
Last month, Xponential’s board adopted a limited-duration stockholder rights plan. It can be triggered if an investor or group acquires 19.9% or more of the company’s Class A shares. The report also identifies Club Pilates as Xponential’s largest brand, with more than 1,500 locations worldwide, and says management views it as a major source of potential future growth.
“We are making progress in strengthening Xponential’s business with the initiatives we have implemented across marketing, technology and brand management.”
— Mike Nuzzo, Xponential Fitness CEO
No Deal or Review Deadline Disclosed
No transaction has been announced, and the report does not specify whether Fund 1’s proposal has led to formal negotiations or an offer. The board’s review could result in a sale or merger, but its outcome and timing remain unknown. Xponential said it would not comment further until the process concludes.
The company maintained its revenue outlook even as it lowered its opening forecast, but it has not provided in the source material a detailed explanation of how it expects to meet that revenue range. The impact of the outsourced merchandise model, the expected fourth-quarter opening pace and the leadership change in finance also remain developing points.
Fourth-Quarter Openings and Board Review
Investors will be watching for Xponential’s next results and for evidence of the higher fourth-quarter opening and equipment-install pace Nuzzo described. The company has not announced a specific date for its next report in the supplied material.
The board’s strategic review remains active. Xponential has said it will not provide further comment until the process concludes, so a sale, merger or decision to pursue another path would need to be confirmed by the company or the parties involved.
Key Questions
How much did Xponential’s revenue fall?
Third-quarter revenue was $62.3 million, down 21% from $78.8 million in the same quarter a year earlier.
Did Xponential lower its full-year revenue forecast?
No. The company reiterated its forecast of $250 million to $260 million in full-year revenue. It did lower its expected net new studio openings to 124 to 130, from about 150.
Has Xponential agreed to be taken private?
No deal has been announced. Fund 1 Investments floated a plan to take the company private, while Xponential says its board’s review remains active and could lead to a sale or merger.
What is Xponential’s largest growth opportunity, according to its CEO?
CEO Mike Nuzzo identified Club Pilates as the company’s biggest growth opportunity in the United States and internationally. He said the long-term goal is to expand the brand to more than 2,000 locations within five years.
Source: athletechnews.com
