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What changed in Xponential Fitness, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Xponential Fitness, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+1025 added−930 removedSource: 10-K (2025-03-14) vs 10-K (2024-03-04)

Top changes in Xponential Fitness, Inc.'s 2024 10-K

1025 paragraphs added · 930 removed · 653 edited across 4 sections

Item 1. Business

Business — how the company describes what it does

123 edited+54 added−50 removed71 unchanged
Biggest changeOur portfolio of ten diversified brands spans a variety of popular fitness and wellness verticals including Pilates, barre, cycling, stretching, rowing, yoga, boxing, dancing, running and functional training. We believe that our diversification represents a significant competitive advantage in a fragmented market comprised primarily of single-brand companies focused on an individual fitness or wellness vertical.
Biggest changeWe believe that our diversification represents a significant competitive advantage in a fragmented market comprised primarily of single-brand companies focused on an individual fitness, health or wellness vertical. The complementary nature of our brands allows our franchised studios to be located in close proximity to one another, providing variety and convenience to both consumers and franchisees.
The extent to which a U.S. state considers particular actions or relationships to constitute practicing medicine is subject to change and to evolving interpretations by medical boards and state attorneys general, among others.
The extent to which a U.S. state considers particular actions or relationships to constitute practicing medicine is subject to change and to evolving interpretations by state medical boards and state attorneys general, among others.
Our and franchisees’ development of properties depends to a significant extent on the selection and acquisition of suitable sites, which are subject to zoning, land use, environmental, traffic and other regulations and requirements. 20 We and franchisees are responsible at the studios we operate for compliance with state laws that regulate the relationship between health clubs and their members.
Our and franchisees’ development of properties depends to a significant extent on the selection and acquisition of suitable sites, which are subject to zoning, land use, environmental, traffic and other regulations and requirements. We and franchisees are responsible at the studios we operate for compliance with state laws that regulate the relationship between health clubs and their members.
Each brand has a dedicated marketing team that is focused on building brand awareness, generating new customer leads and increasing studio traffic at the national and local level. We leverage our corporate platform and marketing expertise to develop tailored marketing strategies to capitalize on each of our brands’ potential. 17 Marketing Spending National advertising .
Each brand has a dedicated marketing team that is focused on building brand awareness, generating new customer leads and increasing studio traffic at the national and local level. We leverage our corporate platform and marketing expertise to develop tailored marketing strategies to capitalize on each of our brands’ potential. Marketing Spending National advertising .
Some states, such as New York, Massachusetts and Tennessee, have passed or considered legislation requiring gyms and health clubs to offer a prepaid membership option at all times and/or limit the duration for which such memberships can auto-renew through electronic fund transfers, if at all.
Some states, such as California, New York, Massachusetts and Tennessee, have passed or considered legislation requiring gyms and health clubs to offer a prepaid membership option at all times and/or limit the duration for which such memberships can auto-renew through electronic fund transfers, if at all.
We cover the cost of production for our digital content. Pure Barre members who purchase a “ LifeStyle ” membership, as well as all Stretch Lab and BFT members, receive a subscription at no additional cost. Other members across our brands may purchase a digital subscription from a studio or directly from us.
We cover the cost of production for our digital content. Pure Barre members who purchase a “ LifeStyle ” membership, as well as all Stretch Lab, BFT, and Lindora members, receive a subscription at no additional cost. Other members across our brands may purchase a digital subscription from a studio or directly from us.
Our Industry We operate in the large and growing boutique fitness segment of the broader health and fitness club industry. Boutique fitness encompasses a social, supportive community of coaches and consumers engaging through class-based programming in small studio spaces (typically 1,500-2,500 square feet).
Our Industry We primarily operate in the large and growing boutique fitness segment of the broader health and fitness club industry. Boutique fitness encompasses a social, supportive community of coaches and consumers engaging through class-based programming in small studio spaces (typically 1,500-2,500 square feet).
We expect that franchisees will be able to continue to leverage this revenue stream in the future as some consumers may continue to make at-home fitness a complementary component of their health and wellness regimens. Expand operating margins.
We expect that franchisees will be able to continue to leverage this revenue stream in the future as some consumers may continue to make at-home fitness a complementary component of their health and wellness regimens. 9 Expand operating margins.
Our geographic reach represents a material competitive advantage, as we have demonstrated success across various markets, and we are able to remain competitive nationally when extraordinary events heavily impact specific markets. 6 Passionate, growing and loyal consumer base.
Our geographic reach represents a material competitive advantage, as we have demonstrated success across various markets, and we are able to remain competitive nationally even when extraordinary events heavily impact specific markets. 6 Passionate, growing and loyal consumer base.
While marketing and fitness programming are specific to each brand, nearly all other franchisee support functions are integrated across brands at the corporate level, and franchisees are guided through the key pillars of successful studio operations.
While marketing, wellness and fitness programming are specific to each brand, nearly all other franchisee support functions are integrated across brands at the corporate level, and franchisees are guided through the key pillars of successful studio operations.
We have developed strong relationships and executed master franchise agreements with master franchisees to propel our international growth. These master franchise agreements obligate master franchisees to arrange the sale of licenses to franchisees in one or more countries outside North America.
We have developed strong relationships and executed master franchise agreements with master franchisees to propel our international growth. These master franchise agreements contractually obligate master franchisees to arrange the sale of licenses to franchisees in one or more countries outside North America.
Our new Xponential+ digital platform is expected to significantly enhance our member experience and further increase our brands’ reach, accessibility and subscriber engagement. 9 • Expanding additional revenue streams within our franchised studios: We believe we have the opportunity to increase consumer spending at our franchised studios by expanding our offering of branded and third-party retail products across apparel and other health and wellness categories.
Our Xponential+ digital platform is expected to significantly enhance our member experience and further increase our brands’ reach, accessibility and subscriber engagement. • Expanding additional revenue streams within our franchised studios: We believe we have the opportunity to increase consumer spending at our franchised studios by expanding our offering of branded and third-party retail products across apparel and other health and wellness categories.
We are subject to franchise sales laws in six provinces in Canada that regulate the offer and sale of franchises by requiring us to provide a FDD in a prescribed format to prospective franchisees and that further regulate certain aspects of the franchise relationship.
We are subject to franchise sales laws in seven provinces in Canada that regulate the offer and sale of franchises by requiring us to provide a FDD in a prescribed format to prospective franchisees and that further regulate certain aspects of the franchise relationship.
We have built our franchised boutique fitness platform across verticals through a series of acquisitions, investments in our brands, corporate infrastructure and leadership team. We expect to realize improved operating leverage and increase operating margins over time as we continue to expand our franchised studio base and leverage our shared services and platform.
We have built our franchised boutique health and wellness platform across verticals through a series of acquisitions, investments in our brands, corporate infrastructure and leadership team. We expect to realize improved operating leverage and increase operating margins over time as we continue to expand our franchised studio base and leverage our shared services and platform.
We currently have in place master franchise and international expansion agreements that grant master franchisees the right to sell licenses to potential franchisees in 22 countries that we have targeted for near-term expansion.
We currently have in place master franchise and international expansion agreements that grant master franchisees the right to sell licenses to potential franchisees in 30 countries that we have targeted for near-term expansion.
Please also see “Business - Our Competitive Strengths.” We also compete to sell franchises to potential franchisees who may choose to purchase franchises from other boutique fitness operators, but who may also consider purchasing franchises in other industries such as restaurants and personal care.
Please also see “Business - Our Competitive Strengths.” We also compete to sell franchises to potential franchisees who may choose to purchase franchises from other boutique health and wellness operators, but who may also consider purchasing franchises in other industries such as restaurants and personal care.
The SEC maintains an Internet site (http://www.sec.gov) containing reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. 22
The SEC maintains an Internet site (http://www.sec.gov) containing reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. 23
We believe there is significant opportunity for further international growth, underscored by our track-record of successful expansion across a diverse array of North American markets and our expansion into multiple international markets, including the 2021 acquisition of BFT. We are focused on expanding into territories with attractive demographics, including household income, level of education and fitness participation.
We believe there is significant opportunity for further international growth, underscored by our track-record of successful expansion across a diverse array of North American markets and our expansion into multiple international markets. We are focused on expanding into territories with attractive demographics, including household income, level of education and fitness participation.
We believe that our digital platform builds significant brand awareness and enhances cross-sell opportunities across our brands and between in-studio memberships and digital subscriptions. Marketing Marketing Strategy Our marketing strategy is designed to highlight our leading brand portfolio, the compelling value proposition of our brands and the unique attributes and benefits of boutique fitness workouts.
We believe that our digital platform builds significant brand awareness and enhances cross-sell opportunities across our brands and between in-studio memberships and digital subscriptions. Marketing Marketing Strategy Our marketing strategy is designed to highlight our leading brand portfolio, the compelling value proposition of our brands and the unique attributes and benefits of boutique health and wellness.
We believe the relationships we maintain with franchisees drive tangible results for consumers: well-managed boutique fitness studios; access to technology capabilities; retention of highly qualified instructors; and a consistent, community-based experience across brands and geographies. We believe the extensive level of support we provide to franchisees is a key driver of system-wide operational excellence.
We believe the relationships we maintain with franchisees drive tangible results for consumers: well-managed boutique health and wellness studios; access to technological capabilities; retention of highly qualified instructors; and a consistent, community-based experience across brands and geographies. We believe the extensive level of support we provide to franchisees is a key driver of system-wide operational excellence.
Our franchise agreements require franchisees to contribute 2% of their monthly gross sales to the marketing fund of their respective brand. Our marketing funds have enabled us to spend approximately $22.7 million, $17.3 million and $13.0 million in 2023, 2022 and 2021, respectively, to increase national awareness of our brands.
Our franchise agreements require franchisees to contribute 2% of their monthly gross sales to the marketing fund of their respective brand. Our marketing funds have enabled us to spend approximately $26.7 million, $22.7 million and $17.3 million in 2024, 2023 and 2022, respectively, to increase national awareness of our brands.
As of December 31, 2023, there were 197 operational studios and 631 licenses sold globally. There are six signature YogaSix class formats: introductory, slow flow, stretching, hot yoga, cardio and strength training. YogaSix offers an extensive accredited teacher training program for Registered Yoga Trainers. The 200-hour program includes both classroom and on-the-job training.
As of December 31, 2024, there were 194 operational studios and 635 licenses sold globally. There are six signature YogaSix class formats: introductory, slow flow, stretching, hot yoga, cardio and strength training. YogaSix offers an extensive accredited teacher training program for Registered Yoga Trainers. The 200-hour program includes both classroom and on-the-job training.
Approximately 75% of our revenue in 2023 and 71% of our revenue in 2022 was considered recurring, and we believe this percentage will increase as franchise royalty fees are expected to account for a greater percentage of our revenue over time. 7 Highly attractive and predictable studio-level economics.
Approximately 74% of our revenue in 2024 and 75% of our revenue in 2023 was considered recurring, and we believe this percentage will increase as franchise royalty fees are expected to account for a greater percentage of our revenue over time. Highly attractive and predictable studio-level economics.
StretchLab was created to help people improve their health and wellness through customized flexibility services. It appeals to customers across a broad range of ages and fitness levels and is highly complementary to our broader brand portfolio. As of December 31, 2023, there were 467 operational studios and 976 licenses sold globally. StretchLab offers one-on-one and group assisted stretching sessions.
StretchLab was created to help people improve their health and wellness through customized flexibility services. It appeals to customers across a broad range of ages and fitness levels and is highly complementary to our broader brand portfolio. As of December 31, 2024, there were 529 operational studios and 1,005 licenses sold globally. StretchLab offers one-on-one and group assisted stretching sessions.
In conjunction with our scale, we have been able to achieve broad geographic diversification across the United States with franchise agreements in 49 states and the District of Columbia as of December 31, 2023.
In conjunction with our scale, we have been able to achieve broad geographic diversification across the United States with franchise agreements in 49 states, Puerto Rico and the District of Columbia as of December 31, 2024.
This partnership allows Princess passengers the opportunity to experience our brands, except for Rumble and BFT. In addition to the in-studio classes offered onboard, on-demand classes are available across Princess’ more than 23,000 staterooms on Princess’ proprietary digital content platform, OceanView.
This partnership allows Princess passengers the opportunity to experience our brands, except for Rumble, BFT, and Lindora. In addition to the in-studio classes offered onboard, on-demand classes are available across Princess’ staterooms on Princess’ proprietary digital content platform, OceanView.
In partnership with its franchisees and master franchisees, XPO LLC offers energetic, accessible, and personalized workout experiences led by highly qualified instructors in studio locations throughout North America and internationally, with franchise, master franchise and international expansion agreements in 49 U.S. states and 22 additional countries as of December 31, 2023.
In partnership with its franchisees and master franchisees, XPO LLC offers energetic, accessible, and personalized workout experiences led by highly qualified instructors in studio locations throughout North America and internationally, with franchise, master franchise and international expansion agreements in 49 U.S. states, Puerto Rico, and 30 additional countries as of December 31, 2024.
We believe that our partnership with Apple Watch and Princess Cruises will further drive excitement and enthusiasm across the Xponential consumer base, while also helping to increase membership engagement and retention. Xponential Playbook supports system-wide operational excellence. We strategically partner with franchisees who have been vetted by a thorough selection process.
We believe that our partnerships such as the one with Princess Cruises will further drive excitement and enthusiasm across the Xponential consumer base, while also helping to increase membership engagement and retention. Xponential Playbook supports system-wide operational excellence. We strategically partner with franchisees who have been vetted by a thorough selection process.
As of December 31, 2023, we had sold a total of 5,496 franchise licenses on a cumulative basis since inception in North America, with approximately 17% of licenses owned by single-unit franchisees and approximately 83% of licenses owned by multi-unit franchisees.
As of December 31, 2024, we had sold a total of 5,359 franchise licenses on a cumulative basis since inception in North America, with approximately 17% of licenses, net, owned by single-unit franchisees and approximately 83% of licenses, net, owned by multi-unit franchisees.
Our training provides opportunities for technical advancement and increased earnings potential for instructors, which we believe enables the brand to attract and retain high quality instructors. Under our suggested operating model, customers may purchase monthly memberships for four, eight or unlimited monthly classes. There is also the option to purchase single classes.
Our training provides opportunities for technical advancement and increased earnings potential for instructors, which we believe enables the brand to attract and retain high quality instructors. Under our suggested operating model, customers may purchase recurring monthly memberships for four, eight or unlimited monthly classes.
As the largest franchisor in the industry, we have significant scale that enables us to negotiate competitive pricing from our suppliers. As a result, we believe that we offer equipment at more attractive pricing than franchisees could otherwise procure on their own, lowering the build-out cost and improving unit economics.
As one of the leading franchisors in the industry, we have significant scale that enables us to negotiate competitive pricing from our suppliers. 16 As a result, we believe that we offer equipment at more attractive pricing than franchisees could otherwise procure on their own, lowering the build-out cost and improving unit economics.
We divide the franchisee selection process into five distinct stages: • Inquiry stage: Potential new franchisees complete and submit a confidential questionnaire form to our franchise development team for consideration. • Preliminary screening stage: Our franchise development team conducts a call with potential franchisees to determine their level of financial, cultural and geographical fit. • Introduction stage: If preliminarily approved, potential franchisees schedule a call with our brand managers to discuss next steps and take part in a number of foundation calls to learn more about the brand. • Approval stage: Following validation calls and potential franchisees’ personal due diligence, potential franchisees are invited to a discovery day at our headquarters in Irvine, California to meet with the corporate team as a final step in the approval process. • Contract sold stage: Following the completion of the above steps and once internally approved, potential franchisees sign a franchise agreement. 14 Franchise Agreements For each of our brands’ franchised studios, we enter into a franchise agreement covering standard terms and conditions.
We divide the franchisee selection process into five distinct stages: • Inquiry stage: Potential new franchisees complete and submit a confidential questionnaire form to our franchise development team for consideration. • Preliminary screening stage: Our franchise development team conducts a call with potential franchisees to determine their level of financial, cultural and geographical fit. 13 • Introduction stage: If preliminarily approved, potential franchisees schedule a call with our brand managers to discuss next steps and take part in a number of foundation calls to learn more about the brand. • Approval stage: Following validation calls and potential franchisees’ personal due diligence, potential franchisees are invited to a discovery day, either virtually or at our headquarters in Irvine, California, to meet with the corporate team as a final step in the approval process. • Contract sold stage: Following the completion of the above steps and once internally approved, potential franchisees sign a franchise agreement.
Our franchised studios provide differentiated and accessible boutique fitness experiences that are fun, energetic and deliver a strong sense of community, engendering loyalty and engagement with consumers. Across our system , we had a total of 51.5 million in-studio and live stream visits in 2023, an increase of 31% over the prior year.
Our franchised studios provide differentiated and accessible boutique fitness experiences that are fun, energetic and deliver a strong sense of community, engendering loyalty and engagement with consumers. Across our system , we had a total of 60.0 million in-studio and live stream visits in 2024, an increase of 19% over the prior year.
Under our suggested operating model for the signature format, customers may purchase class packages ranging from 1 to 30 classes or monthly memberships for 12, 16 and 20 classes. There is also the option to purchase single walk-in classes. Under our suggested operating model for the boutique format, customers may purchase monthly memberships for four, eight or unlimited monthly classes.
There is also the option to purchase single walk-in classes. Under our suggested operating model for the boutique format, customers may purchase monthly memberships for four, eight or unlimited classes a month or class packages ranging from 1 to 20 classes. There is also the option to purchase single walk-in classes.
The loyalty of our consumer base is evidenced by our franchisees’ ability to grow actively paying members by 22% from December 31, 2022 to December 31, 2023, and membership visits for the quarter ended December 31, 2023 increased 27% compared to the quarter ended December 31, 2022.
The loyalty of our consumer base is evidenced by our franchisees’ ability to grow actively paying members by 15% from December 31, 2023 to December 31, 2024, and membership visits for the quarter ended December 31, 2024 increased 19% compared to the quarter ended December 31, 2023.
The key pillars of our Xponential Playbook include: • optimizing the studio prototype and investment cost; • thoroughly vetting franchisee candidates; • real estate identification, site selection, studio build-out and design assistance; • comprehensive pre-opening support, including membership sales, marketing support, employee training and programming development; • detailed studio-level operational framework and best practices; • intensive instructor and studio-level management training; • our robust digital platform offerings that allow franchisees to generate incremental revenue; • data-driven analytical tools to support marketing strategies, member acquisition and retention; • sophisticated technology systems, including uniform point-of-sale and reporting systems, to drive studio-level performance; • centralized model capable of providing resources to franchisees in the event of exceptional crises; and • ongoing monitoring and support to promote success. 4 The Xponential Playbook is designed to help franchisees achieve compelling Average Unit Volumes (“AUVs”), strong operating margins and an attractive return on their invested capital.
The key pillars of our Xponential Playbook include: • optimizing the studio prototype and investment cost; • thoroughly vetting franchisee candidates; • real estate identification, site selection, studio build-out and design assistance; • comprehensive pre-opening support, including membership sales, marketing support, employee training and programming development; • detailed studio-level operational framework and best practices; • intensive instructor and studio-level management training; • our robust digital platform offerings that allow franchisees to generate incremental revenue; • data-driven analytical tools to support marketing strategies, member acquisition and retention; • sophisticated technology systems, including uniform point-of-sale and reporting systems, to drive studio-level performance; • centralized model capable of providing resources to franchisees in the event of exceptional crises; and • ongoing monitoring and support to promote success.
Master franchisees were contractually obligated to sell licenses to franchisees to open an additional 1,055 studios, of which master franchisees have sold 242 licenses for studios not yet opened as of December 31, 2023.
Master franchisees were contractually obligated to sell licenses to franchisees to open an additional 1,043 studios, of which master franchisees have sold 237 licenses for studios not yet opened as of December 31, 2024.
For the quarter ended December 31, 2023, run-rate AUVs increased 13% compared to the quarter ended December 31, 2022. We were able to deepen our consumer loyalty during the COVID-19 pandemic and the past few years through our robust digital platform offering, as well as the personal efforts of exceptional franchisees to strengthen their studio communities.
For the quarter ended December 31, 2024, run-rate AUVs increased 9% compared to the quarter ended December 31, 2023. We were able to deepen our consumer loyalty over the past few years through our robust digital platform offering, as well as the personal efforts of exceptional franchisees to strengthen their studio communities.
Under our suggested operating model, customers may purchase recurring monthly memberships for four, eight and unlimited monthly classes. There is also the option to purchase single classes. The typical studio is approximately 2,000 square feet and is designed to allow approximately 25 people to work out together.
Under our suggested operating model, customers may purchase monthly memberships for four, eight or unlimited monthly classes. There is also the option to purchase single walk-in classes. The typical studio is approximately 2,000 square feet and is designed to allow up to 50 people to work out to gether.
The franchisee network in North America has grown rapidly from 985 franchisees as of December 31, 2018 to 1,774 franchisees as of December 31, 2023, representing a CAGR of 12%.
The franchisee network in North America has grown rapidly from 985 franchisees as of December 31, 2018 to 1,648 franchisees as of December 31, 2024, representing a CAGR of 9%.
We receive a platform fee from franchisees for each digital subscription that is purchased from a studio. We offer digital subscriptions on an individual brand basis, as well as an all-access package for our ten brands. Our digital platform encompasses over 5,700 digital workouts with multiple class formats within each brand, and we expect to continue to grow that content.
We receive a platform fee from franchisees for each digital subscription that is purchased from a studio. We offer digital subscriptions on an individual brand basis, as well as an all-access package. Our digital platform offers a great selection of digital workouts with multiple class formats within each brand, and we expect to continue to grow and refresh that content.
The strength of our management team is illustrated by the growth of the business and the recent honors that we and our brands have received, with six brands (Club Pilates, Pure Barre, CycleBar, StretchLab, Row House, and YogaSix) being listed among Entrepreneur’s 2023 Franchise 500 rankings and five brands (Club Pilates, Pure Barre, StretchLab, CycleBar, and YogaSix) being listed among Entrepreneur's 2023 Fastest Growing Franchise rankings.
The strength of our management team is illustrated by the growth of the business and the recent honors that we and our brands have received, with six brands (Club Pilates, StretchLab, Pure Barre, BFT, Rumble and YogaSix) being listed among Entrepreneur’s 2025 Franchise 500 rankings and three brands (Club Pilates, StretchLab, and YogaSix) being listed among Entrepreneur's 2024 Fastest Growing Franchise rankings.
We have the opportunity to meaningfully expand our franchised studio footprint in North America by leveraging our multiple brands and verticals, as well as our proven portability across regions and demographics. 8 We have grown our franchised studio footprint in North America from 1,071 open studios across the U.S. and Canada as of December 31, 2018 to 2,651 open studios across the U.S. and Canada as of December 31, 2023, on an adjusted basis to reflect historical information of the brands we have acquired, representing a Compound Annual Growth Rate ( “ CAGR ” ) of 20%.
We have the opportunity to meaningfully expand our franchised studio footprint in North America by leveraging our multiple brands and verticals, as well as our proven portability across regions and demographics. 8 We have grown our franchised studio footprint in North America from 1,071 open studios across the U.S. and Canada as of December 31, 2018 to 2,758 open studios in North America as of December 31, 2024, representing a Compound Annual Growth Rate ( “ CAGR ” ) of 17%.
As of December 31, 2023, there were 411 studios open internationally, and the master franchisees were contractually obligated to sell licenses to franchisees to open an additional 1,055 studios, of which master franchisees have sold 242 licenses for studios not yet open as of December 31, 2023.
As of December 31, 2024, there were 475 studios open internationally, and the master franchisees were contractually obligated to sell licenses to franchisees to open an additional 1,043 studios, of which master franchisees have sold 237 licenses for studios not yet open as of December 31, 2024.
These areas include: rules governing the practice of medicine by physicians; licensure standards for doctors, advanced practice registered nurses, nurses, and other health professionals; laws limiting the corporate practice of medicine; laws related to the licensure of health care facilities; and cybersecurity and privacy laws.
These areas include: rules governing the practice of medicine by physicians; rules governing the practice of nursing; licensure, scope of practice and supervision and collaboration standards for physicians, advanced practice registered nurses, nurses, and other health professionals; laws limiting the corporate practice of medicine; laws related to the licensure of health care facilities; laws related to the prescribing and administration of medical products; and cybersecurity and privacy laws.
Item 1. Business. Overview Xponential Fitness, Inc. (the “Company” or “XPO Inc.”) through its principal operating subsidiary, Xponential Fitness LLC (“XPO LLC”) is the largest global franchisor of boutique fitness brands. We operate a diversified platform of ten brands spanning across verticals including Pilates, indoor cycling, barre, stretching, rowing, dancing, boxing, running, functional training and yoga.
Item 1. Business. Overview Xponential Fitness, Inc. (the “Company” or “XPO Inc.”) through its principal operating subsidiary, Xponential Fitness LLC (“XPO LLC”) is one of the leading global franchisors of boutique health and wellness brands. We operate a diversified platform of eight brands spanning across verticals including Pilates, indoor cycling, barre, stretching, boxing, functional training, metabolic health and yoga.
There is also the option to purchase single walk-in classes. The typical studio is approximately 2,000 square feet and is designed to allow up to 50 people to work out to gether. StretchLab StretchLab, founded in 2015 and acquired in 2017, is a leading assisted stretching brand.
There is also the option to purchase single walk-in classes. Th e typical studio is approximately 1,500 square feet and is designed to allow up to 26 people to work out together. StretchLab StretchLab, founded in 2015 and acquired in 2017, is a leading assisted stretching brand.
We continue to create a more customizable and efficient experience for members through updated digital tools, including enhanced websites and mobile applications. These digital tools enable consumers to search studio locations, browse class schedules and sign up for classes.
We continue to create a more customizable and efficient experience for members through updated digital tools, including enhanced websites and mobile applications. These digital tools enable consumers to search studio locations, browse class schedules and sign up for classes. We continue to enhance the accessibility of our digital tools to increase our online presence and member engagement.
The strength of our brands is highlighted by the numerous accolades they have received, with six brands (Club Pilates, Pure Barre, CycleBar, StretchLab, Row House, and YogaSix) being listed among Entrepreneur’s 2023 Franchise 500 rankings and five brands (Club Pilates, Pure Barre, StretchLab, CycleBar, and YogaSix) being listed among Entrepreneur's 2023 Fastest Growing Franchise rankings.
The strength of our brands is highlighted by the numerous accolades they have received, with six brands (Club Pilates, StretchLab, Pure Barre, BFT, Rumble and YogaSix) being listed among Entrepreneur’s 2025 Franchise 500 rankings and three brands (Club Pilates, StretchLab, and YogaSix) being listed among Entrepreneur's 2024 Fastest Growing Franchise rankings.
Accordingly, we have the potential to substantially increase our studio base through our existing licenses sold, providing us with highly visible unit growth and further increasing our already significant scale within the boutique fitness industry. Proven and experienced management team with an entrepreneurial culture.
Accordingly, we have the potential to substantially increase our studio base through our existing licenses sold, providing us with highly visible unit growth and further increasing our already significant scale within the boutique health and wellness industry.
To ensure consistency across the studio base, we require franchisees to order equipment and supplies directly from us or approved vendors. Franchisees are required to order replacement or upgraded equipment within five to ten years depending on the manufacturers’ guidelines. Franchisees also must use our approved vendors for equipment maintenance, who provide warranties on certain equipment purchased from them.
Franchisees are required to order replacement or upgraded equipment within five to ten years depending on the manufacturers’ guidelines. Franchisees also must use our approved vendors for equipment maintenance, who provide warranties on certain equipment purchased from them.
Franchisees compete with other health and fitness club industry participants, including: • other national and regional boutique fitness offerings, some of which are franchised and others of which are owned centrally at a corporate level; • other health and fitness centers, including gyms and other recreational facilities; • individually owned and operated boutique fitness studios; • personal trainers; • racquet, tennis and other athletic clubs; • at-home fitness offerings; • online fitness services and health and wellness apps; • participants in the home-use fitness equipment industry; and • businesses offering similar services. 18 The health and fitness club industry is highly competitive and fragmented, and the number, size and strength of competitors vary by region.
Franchisees compete with other health and wellness industry participants, including: • other national and regional boutique fitness offerings, some of which are franchised and others of which are owned centrally at a corporate level; • other health and fitness centers, including gyms and other recreational facilities; • individually owned and operated boutique fitness studios; • personal trainers; • racquet, tennis and other athletic clubs; • at-home fitness offerings; • online fitness services and health and wellness apps; • participants in the home-use fitness equipment industry; • other weight management and metabolic health providers; and • businesses offering similar services.
CycleBar CycleBar, founded in 2004 and acquired in 2017, is the largest indoor cycling brand by number of studios and was approximately four times larger than its next largest competitor as of December 31, 2023. It provides a variety of low-impact, high-intensity indoor cycling workouts that are inclusive for a broad range of ages and fitness levels.
CycleBar We believe CycleBar, founded in 2004 and acquired in 2017, is the largest indoor cycling brand by number of studios as of December 31, 2024. It provides a variety of low-impact, high-intensity indoor cycling workouts that are inclusive for a broad range of ages and fitness levels.
As of December 31, 2023, 55% of franchisees owned more than one license and about 94% of franchisees owned a single brand of licenses. The largest franchisee in North America owned 167 licenses, representing approximately 3% of our total fran chise licenses sold in North America as of December 31, 2023.
As of December 31, 2024, 46% of franchisees owned more than one license and about 54% of franchisees owned a single brand of licenses. The largest franchisee in North America owned 191 licenses, representing approximately 4% of our total fran chise licenses sold in North America as of December 31, 2024.
From inception to December 31, 2023, of our licenses sold, 797 had been terminated in North America and 104 had been terminated internationally. We expect franchisees to meet and maintain minimum monthly gross revenue quotas by the first and second anniversary of their studio opening.
From December 31, 2023 to December 31, 2024, 352 licenses were terminated in North America and 76 were terminated internationally. We expect franchisees to meet and maintain minimum monthly gross revenue quotas by the first and second anniversary of their studio opening.
As of December 31, 2023, there were 638 operational studios and 780 licenses sold globally. There are four signature Pure Barre class formats: introductory, classic barre, interval training and resistance training. Pure Barre offers a specialized multi-tiered teacher training program, which includes both classroom and on-the-job training.
As of December 31, 2024, there were 626 operational studios and 800 licenses sold globally. There are five signature Pure Barre class formats: introductory, strength and power, balance and flexibility, classic barre, and interval training. Pure Barre offers a specialized multi-tiered teacher training program, which includes both classroom and on-the-job training.
Under our franchise agreement, we grant franchisees the right to access our brands in a designated protected area or territory after taking into account population density and demographics based on our internal and third-party analyses.
Franchise Agreements For each of our brands’ franchised studios, we enter into a franchise agreement covering standard terms and conditions. Under our franchise agreement, we grant franchisees the right to access our brands in a designated protected area or territory after taking into account population density and demographics based on our internal and third-party analyses.
There is also the option to purchase single walk-in classes. Th e typical studio is approximately 1,500 square feet and is designed to allow up to 26 people to work out together.
There is also the option to purchase single walk-in classes, as well as one-on-one private training classes. The typical studio is approximately 1,500 square feet and is designed to allow up to 12 people to work out together.
Accordingly, as a general policy, we pursue registration of our marks in the United States and select international jurisdictions, monitor the use of our marks in the United States and internationally and oppose any unauthorized use of our marks. We license the use of our marks to franchisees and third-party vendors through our franchise agreements and vendor agreements.
Accordingly, as a general policy, we pursue registration of our marks in the United States and select international jurisdictions, monitor the use of our marks in the United States and internationally and oppose any unauthorized use of our marks.
Intellectual Property At December 31, 2023, we own approximately 78 registered trademarks and service marks in the United States and approximately 391 registered trademarks and service marks in other countries, including “Xponential,” “Pure Barre,” “StretchLab,” “Row House,” “YogaSix,” “Club Pilates,” “CycleBar,” “Rumble,” “AKT,” “Stride” and “BFT.” We believe the Xponential name, and the marks associated with our ten brands are of value and are important to our business.
Intellectual Property As of December 31, 2024, we owned approximately 91 registered trademarks and service marks in the United States and approximately 377 registered trademarks and service marks in other countries, including “Xponential,” “Pure Barre,” “StretchLab,” “YogaSix,” “Club Pilates,” “CycleBar,” “Rumble,” “Lindora” and “BFT.” We believe the Xponential name, and the marks associated with our eight brands are of value and are important to our business.
As of December 31, 2023, we had 411 studios open internationally across Australia, New Zealand, Japan, Singapore, South Korea, Spain, United Kingdom, Dominican Republic, Germany, Mexico, Portugal, Kuwait, and Hong Kong.
As of December 31, 2024, we had 475 studios open internationally across Australia, New Zealand, Japan, Singapore, Spain, United Kingdom, Dominican Republic, Germany, Mexico, Portugal, Kuwait, Saudi Arabia, Malaysia, Indonesia, France and Hong Kong.
As of December 31, 2023, we had 1,774 fra nchisees and licenses for 1,963 studios contractually obligated to be opened under existing franchise agreements in North America. We sold 628 licenses in 2023 compared to 806 licenses in 2022 and 787 licenses in 2021.
As of December 31, 2024, we had 1,648 fra nchisees and licenses for 1,607 studios contractually obligated to be opened under existing franchise agreements in North America. We sold 253 licenses in 2024 compared to 632 licenses in 2023 and 790 licenses in 2022.
We are the largest boutique fitness franchisor in the United States with 2,611 studios operating across ten brands in the United States. Our Pilates, cycling and barre brands have leading market share positions within their respective verticals.
We are one of the leading boutique health and wellness franchisor in the United States with 2,693 studios operating across eight brands in the United States. We believe that our Pilates, barre and cycling brands have leading market share positions within their respective verticals.
Government Regulation We and our franchisees are subject to various federal, state, provincial and local laws and regulations affecting our business. We are subject to a trade regulation rule on franchising, known as the FTC Franchise Rule, promulgated by the U.S.
Franchisees also license certain intellectual property for use in their studios, including music in some cases. Government Regulation We and our franchisees are subject to various federal, state, provincial and local laws and regulations affecting our business. We are subject to a trade regulation rule on franchising, known as the FTC Franchise Rule, promulgated by the U.S.
We believe our unique combination of a scaled multi-brand offering, resilient franchise model with strong unit economics and integrated platform has enabled us to build our leading market position in the large and growing U.S. boutique fitness industry. We carefully built the Xponential Fitness brand portfolio through a series of acquisitions, targeting select health and wellness verticals.
Our Values : Integrity, Excellence, Fun!, Connection We believe our unique combination of a scaled multi-brand offering, resilient franchise model with strong unit economics and integrated platform has enabled us to build our leading market position in the large and growing U.S. boutique fitness industry.
CycleBar offers an immersive, multi-sensory experience in state-of-the-art “CycleTheaters,” led by specially trained instructors, enhanced with high-energy “CycleBeats” playlists and tracked using rider-specific “CycleStat” performance metrics. As of December 31, 2023, there were 265 operational studios and 563 licenses sold globally. There are four signature CycleBar class formats, including metrics-focused classes and “unplugged” classes in which metrics are not tracked.
CycleBar offers an immersive, multi-sensory experience in state-of-the-art “CycleTheaters,” led by specially trained instructors, enhanced with high-energy “CycleBeats” playlists and tracked using rider-specific “CycleStats” performance metrics. As of December 31, 2024, there were 204 operational studios and 565 licenses sold globally.
During government-mandated studio closures due to the COVID-19 pandemic, franchisees were able to generate revenue in part through retail sales, including the sale of at-home fitness equipment such as exercise balls and weights.
Franchisees are able to generate revenue in part through retail sales, including the sale of at-home fitness equipment such as exercise balls and weights.
The Company's portfolio of brands includes Club Pilates, the largest Pilates brand in the United States; CycleBar, the largest indoor cycling brand in the United States; StretchLab, a concept offering one-on-one and group stretching services; Row House, the largest franchised indoor rowing brand in the United States; AKT, a dance-based cardio workout combining toning, interval and circuit training; YogaSix, the largest franchised yoga brand in the United States; Pure Barre, a total body workout that uses the ballet barre to perform small isometric movements, and the largest barre brand in the United States; Stride, a treadmill-based cardio and strength training concept; Rumble, a boxing-inspired full-body workout; and BFT, a functional training and strength-based program.
The Company's portfolio of brands includes Club Pilates, the largest Pilates brand in the United States; CycleBar, the largest indoor cycling brand in the United States; StretchLab, a concept offering one-on-one and group stretching services; YogaSix, the largest franchised yoga brand in the United States; Pure Barre, a total body workout that uses the ballet barre to perform small isometric movements, and the largest barre brand in the United States; Rumble, a boxing-inspired full-body workout; BFT, a functional training and strength-based program; and Lindora, a provider of medically guided wellness and metabolic health solutions, which was acquired on January 2, 2024.
As of December 31, 2023, there were 293 operational studios and 720 licenses sold globally. There are thirteen signature BFT class formats, consisting of cardio, high intensity interval training and strength, which are programmed in specific layouts to progress members through a strength training program.
Training sessions are overseen by highly qualified coaches in a dynamic group environment. As of December 31, 2024, there were 331 operational studios and 766 licenses sold globally. 11 There are fourteen signature BFT class formats, consisting of cardio, high intensity interval training and strength, which are programmed in specific layouts to progress members through a strength training program.
Our leadership team has significant experience scaling franchised fitness brands and has created a culture designed to enable our future success. Our Growth Strategies We believe we are well-positioned to capitalize on multiple opportunities to drive the long-term growth of our business: Grow our franchised studio base across all brands in North America.
Our Growth Strategies We believe we are well-positioned to capitalize on multiple opportunities to drive the long-term growth of our business: Grow our franchised studio base across all brands in North America.
Such registered copyrighted materials are not material to our business. We also license some intellectual property from third parties for use in our franchised studios. Such licenses, including our music licenses, are not material to our business. Franchisees also license certain intellectual property for use in their studios, including music in some cases.
We register some of our copyrighted material and otherwise rely on common law protection of our copyrighted works. Such registered copyrighted materials are not material to our business. We also license some intellectual property from third parties for use in our franchised studios. Such licenses, including our music licenses, are not material to our business.
Of particular importance are state anti-kickback, and fee-splitting laws, state laws regarding patient brokering and marketing, and laws regarding the licensure of healthcare professionals. 21 In a regulatory climate that is uncertain, our and Lindora franchisees’ operations may in the future be subject to direct and indirect adoption, expansion, or reinterpretation of various laws and regulations.
In a regulatory climate that is uncertain, our and Lindora franchisees’ operations may in the future be subject to direct and indirect adoption, expansion, or reinterpretation of various federal and state laws and regulations.
Lindora With our acquisition of the Lindora Franchisor in January 2024, our and the Lindora franchisee’s ability to conduct business in particular U.S. states is directly dependent upon the applicable laws, regulation and guidance governing the practice of medicine, practice of nursing and healthcare delivery in general, all of which are governed by various federal, state and local regulatory bodies, including, for example, state boards of medicine, state boards of nursing, state attorney generals and departments of health.
These security requirements and further restrictions, including the General Data Protection Regulation (“GDPR”) and the California Consumer Privacy Act (“CCPA”), grant protections and causes of action related to consumer data privacy and the methods in which it is collected, stored, used, and disposed by us, our franchisees, and applicable third parties. 21 Lindora With our acquisition of the Lindora Franchisor in January 2024, our and the Lindora franchisee’s ability to conduct business in particular U.S. states is directly dependent upon the applicable laws, regulation and guidance governing the practice of medicine, practice of nursing, prescribing and healthcare delivery in general, all of which are governed by various federal, state and local regulatory bodies, including, for example, state boards of medicine, state boards of nursing, state attorney generals and departments of health.
Our back-office computer systems are comprised of a variety of technologies designed to assist the operation of our business. These include a third-party hosted accounting and financial system, a SaaS solutions system to manage franchisees’ leases and franchisee agreements, a third-party hosted payroll system, an inventory and online store management system and a customer relationship management system.
These include a third-party hosted accounting and financial system, a SaaS solutions system to manage franchisees’ leases and franchisee agreements, a third-party hosted payroll system, an inventory and online store management system and a customer relationship management system.
Pursuant to a reorganization into a holding company structure, the Company is a holding company with its principal asset being a 65% ownership interest in XPO LLC through its ownership interest in Xponential Intermediate Holdings, LLC (“XPO Holdings”). The Company’s Class A common stock trades on the New York Stock Exchange under the symbol “XPOF”.
Pursuant to a reorganization into a holding company structure, the Company is a holding company with its principal asset being a 69.5% ownership interest in XPO LLC through its ownership interest in Xponential Intermediate Holdings, LLC (“XPO Holdings”).
We believe that local social media pages are additive to the studio-level community and deepen our brands’ connection with consumers. Digital. We utilize digital advertising at the corporate level to drive awareness for our digital platform offerings. For example, in March 2021, we launched an Apple Watch integration designed to offer an enhanced member experienc e across all our brands.
We believe that local social media pages are additive to the studio-level community and deepen our brands’ connection with consumers. 17 Digital. We utilize digital advertising at the corporate level to drive awareness for our digital platform offerings.
Our studio is designed to be between 1,000 and 1,500 square feet and is equipped with approximately ten stretc h benches. 11 Row House Row House, founded in 2014 and acquired in 2017, i s the largest franchised indoor rowing brand by nu mber of studios as of December 31, 2023.
Our studio is designed to be between 1,000 and 1,500 square feet and is equipped with approximately ten stretc h benches. YogaSix We believe YogaSix, founded in 2011 and acquired in 2018, i s the largest fran chised yoga brand by number of studios as of December 31, 2024.
There are four signature AKT class formats: dance-based, cardio and strength circuits, strength training intervals and toning. AKT offers a specialized training program for Authorized AKT Instructors, which includes both classroom and on-the-job training. Our training provides opportunities for technical advancement and increased earnings potential for instructors, which we believe enables the brand to attract and retain high quality instructors.
CycleBar has a number of signature class formats, including metrics-focused classes and “unplugged” classes in which metrics are not tracked. CycleBar offers a specialized training program, which includes both classroom and on-the-job training. Our training provides opportunities for technical advancement and increased earnings potential for instructors, which we believe enables the brand to attract and retain high quality instructors.
Brand Club Pilates Pure Barre CycleBar Stretch Lab Row House YogaSix AKT Stride Rumble BFT Number of U.S. states 47 47 41 44 22 32 8 10 24 15 We continue to drive the international expansion of our studio base.
Brand Club Pilates Pure Barre Stretch Lab YogaSix BFT Rumble CycleBar Lindora Number of U.S. states 47 48 44 31 21 23 35 1 We continue to drive the international expansion of our studio base.
The Xponential Playbook is designed to help franchisees achieve compelling AUVs, strong operating margins and an attractive return on their invested capital. Studios are generally designed to be between 1,500 and 2,500 square feet in size, depending on the brand, which contributed to a relatively low weighted average initial franchisee investment of approximately $360,000 in 2023 and $350,000 in 2022.
The Xponential Playbook is designed to help franchisees achieve compelling AUVs, strong operating margins and an attractive return on their invested capital. Studios are generally designed to be between 1,500 and 2,500 square feet in size, depending on the brand. We believe our strong studio-level economics have contributed to our growth.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe principal risk factors are: Risk Factor Summary • Our financial results are affected by the financial results of master franchisees and franchisees. • We may not be able to successfully implement our growth strategy. • Disruptions in the availability of financing for current or prospective franchisees. • The number of new studios that actually open in the future may differ materially from the number of studio licenses sold to potential, existing and new franchisees. • Our success depends substantially on our ability to maintain the value and reputation of our brands. • Our expansion into new markets may present increased risks due to our unfamiliarity with those markets. • Our expansion into international markets exposes us to a number of risks. • We have incurred operating losses in the past and may not achieve or maintain profitability in the future. • Franchisees may incur rising costs related to the construction of new studios. • Franchisees may not be able to identify and secure suitable sites for new studios. • New brands or services that we launch in the future may not be as successful as we anticipate. • Franchisees have and could in the future take actions that harm our business. • Franchisees may not successfully execute our suggested best practices, which could harm our business. • Macroeconomic conditions or economic downturn could adversely affect demand for our services. • Our future success depends on key employees and our ability to attract and retain highly skilled personnel. • We operate in a highly competitive market. • Franchisees may be unable to attract and retain customers. • We may not be able to anticipate and satisfy consumer preferences and shifting views of health and fitness. • Our planned growth could place strains on our management, employees, information systems and internal controls, which may adversely impact our business. • Our business is subject to various laws and regulations and changes in such laws and regulations. • We are subject to an SEC investigation which could have a material adverse impact on our business, financial condition, results of operation, cash flows and reputation. • We, master franchisees and franchisees could be subject to claims related to health and safety risks to customers that arise while at our and franchisees’ studios. • We rely heavily on information systems provided by a single provider. • We, master franchisees, franchisees or our third-party service providers may fail to properly maintain the confidentiality and integrity of our customer personal data. • Failure by us, master franchisees, franchisees or third-party service providers to comply with existing or future data privacy laws and regulations could have a material adverse effect on our business. • Changes in legislation or requirements related to electronic funds transfer may adversely impact our business operations. • We and franchisees are subject to risks related to Automated Clearing House (“ACH”), credit card, debit card and gift card payments we accept. • We depend on a limited number of suppliers for certain equipment, services and products. 23 • Our intellectual property rights, including trademarks and trade names, may be infringed, misappropriated or challenged by others. • Our quarterly results of operations and other operating metrics may fluctuate from quarter to quarter. • Use of social media may adversely impact our reputation or subject us to fines or other penalties. • We may require additional capital to support business growth and objectives. • We may engage in merger and acquisition activities, which could require significant management attention, disrupt our business, dilute stockholder value and adversely affect our results of operations. • Goodwill and indefinite-lived intangible assets are a material component of our balance sheet and impairments of these assets could have a significant impact on our results. • Our substantial indebtedness could adversely affect our financial condition and limit our ability to pursue our growth strategy. • Our failure to satisfy the covenants in our credit agreement may result in events of default. • Restrictions imposed by our outstanding indebtedness and any future indebtedness may limit our ability to operate our business and to finance our future operations. • We may not be able to maintain required regulatory licenses and permits. • Shifts in consumer behavior may materially adversely impact our business. • The terms of our convertible preferred stock have provisions that could result in a change of control of our Board in the case of an event of default by us. • Our convertible preferred stock impacts our ability to pay dividends on our Class A common stock and imposes certain negative covenants on us. • Our convertible preferred stock ranks senior to our Class A common stock. • We are a holding company, and depend upon distributions from our subsidiary, XPO Holdings, to pay dividends, if any, and taxes, make payments under the tax receivable agreement (the “TRA”) and pay other expenses. • In certain circumstances, XPO Holdings will be required to make substantial distributions to us and the other holders of limited liability company units (the “LLC Units”). • Continuing Pre-IPO LLC Members hold significant voting power and their interests in our business may be different than yours. • We will be required to pay the TRA parties for certain tax benefits we may receive, and the amounts we may pay could be significant. • Delaware law and our certificate of incorporation and bylaws may deter third parties from acquiring us and diminish the value of our Class A common stock or limit our stockholders' ability to obtain a favorable judicial forum. • Our major stockholders may pursue corporate opportunities that could present conflicts with our and our other stockholders’ interests. • We are an “emerging growth company” and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our Class A common stock less attractive to investors. • The requirements of being a public company may strain our resources and distract our management. • Failure to maintain effective internal control over financial reporting may have an adverse effect on our financial condition and stock price. • The trading price of our Class A common stock has been and may continue to be volatile, and the value of your investment could decline. • We have in the past and may in the future be subject to short selling strategies. • Failure to comply with anti-corruption and anti-money laundering laws or similar laws and regulations could subject us to penalties and other adverse consequences. • We may not be able to fully realize the cost savings and benefits initially anticipated from the restructuring plan or the expected charges may be greater than expected, any of which could negatively impact our business. 24 Risks Related to Our Business and Industry Our financial results are affected by the operating and financial results of, and our relationships with, master franchisees and franchisees.
Biggest changeThe principal risk factors are: Risk Factor Summary • Our financial results are affected by the financial results of master franchisees and franchisees. • We may not be able to successfully implement our growth strategy. • Disruptions in the availability of financing for current or prospective franchisees. • The number of new studios that actually open in the future may differ materially from the number of studio licenses sold to potential, existing and new franchisees. • Our success depends substantially on our ability to maintain the value and reputation of our brands. • Our expansion into international markets exposes us to a number of risks. • We have incurred operating losses in the past and may not achieve or maintain profitability in the future. • Franchisees may incur rising costs related to the construction of new studios. • Franchisees may not be able to identify and secure suitable sites for new studios. • New brands or services that we launch in the future may not be as successful as we anticipate. • Franchisees have and could in the future take actions that harm our business. • Franchisees may not successfully execute our suggested best practices, which could harm our business. • Macroeconomic conditions or economic downturn could adversely affect demand for our services. • Our performance may be negatively impacted by our recent Chief Executive Officer transition. • Our future success depends on key employees and our ability to attract and retain highly skilled personnel. • We may not be able to fully realize the cost savings and benefits initially anticipated from the restructuring plan or the charges may be greater than expected, any of which could negatively impact our business. • We operate in a highly competitive market. • Franchisees may be unable to attract and retain customers. • We may not be able to anticipate and satisfy consumer preferences and shifting views of health and fitness. • Our planned growth could place strains on our management, employees, information systems and internal controls, which may adversely impact our business. • Our business is subject to various laws and regulations and changes in such laws and regulations. • Our ability to sell franchise licenses may be impacted due to government investigation regarding compliance with applicable federal and state franchise disclosure laws. • We are subject to government investigations which could have a material adverse impact on our business, financial condition, results of operation, cash flows and reputation. • We, master franchisees and franchisees could be subject to claims related to health and safety risks to customers that arise while at our and franchisees’ studios. • We rely heavily on information systems provided by a single provider. • We, master franchisees, franchisees or our third-party service providers may fail to properly maintain the confidentiality and integrity of our customer personal data. • Failure by us, master franchisees, franchisees or third-party service providers to comply with existing or future data privacy laws and regulations could have a material adverse effect on our business. • Environmental, social and governance issues may have an adverse effect on our business. 24 • Changes in legislation or requirements related to electronic funds transfer may adversely impact our business operations. • We and franchisees are subject to risks related to Automated Clearing House (“ACH”), credit card, debit card and gift card payments we accept. • We depend on a limited number of suppliers for certain equipment, services and products. • Our intellectual property rights, including trademarks and trade names, may be infringed, misappropriated or challenged by others. • Our quarterly results of operations and other operating metrics may fluctuate from quarter to quarter. • Use of social media may adversely impact our reputation or subject us to fines or other penalties. • We may require additional capital to support business growth and objectives. • We may engage in merger and acquisition activities, which could require significant management attention, disrupt our business, dilute stockholder value and adversely affect our results of operations. • If we are unable to accurately forecast demand of our retail products and adequately manage our inventory, our operating results could be adversely affected. • Goodwill and indefinite-lived intangible assets are a material component of our balance sheet and impairments of these assets could have a significant impact on our results. • Our substantial indebtedness could adversely affect our financial condition and limit our ability to pursue our growth strategy. • Our failure to satisfy the covenants in our credit agreement may result in events of default. • Restrictions imposed by our outstanding indebtedness and any future indebtedness may limit our ability to operate our business and to finance our future operations. • We may not be able to maintain required regulatory licenses and permits. • The terms of our convertible preferred stock have provisions that could result in a change of control of our Board in the case of an event of default by us. • Our convertible preferred stock impacts our ability to pay dividends on our Class A common stock and imposes certain negative covenants on us. • Our convertible preferred stock ranks senior to our Class A common stock. • We are a holding company, and depend upon distributions from our subsidiary, XPO Holdings, to pay dividends, if any, and taxes, make payments under the tax receivable agreement (the “TRA”) and pay other expenses. • In certain circumstances, XPO Holdings will be required to make substantial distributions to us and the other holders of limited liability company units (the “LLC Units”). • Continuing Pre-IPO LLC Members hold significant voting power and their interests in our business may be different than yours. • We will be required to pay the TRA parties for certain tax benefits we may receive, and the amounts we may pay could be significant. • Delaware law and our certificate of incorporation and bylaws may deter third parties from acquiring us and diminish the value of our Class A common stock. • Our major stockholders may pursue corporate opportunities that could present conflicts with our and our other stockholders’ interests. • We are an “emerging growth company” and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our Class A common stock less attractive to investors. • The requirements of being a public company may strain our resources and distract our management. • Failure to maintain effective internal control over financial reporting may have an adverse effect on our financial condition and stock price. • The trading price of our Class A common stock has been and may continue to be volatile, and the value of your investment could decline. • We have in the past and may in the future be subject to short selling strategies. • Failure to comply with anti-corruption and anti-money laundering laws or similar laws and regulations could subject us to penalties and other adverse consequences. 25 Risks Related to Our Business and Industry Our financial results are affected by the operating and financial results of, and our relationships with, master franchisees and franchisees.
Our substantial level of indebtedness could adversely affect our financial condition and increase the possibility that we may be unable to generate cash sufficient to pay, when due, the principal of, interest on or other amounts due in respect of our indebtedness.
Our substantial level of indebtedness could adversely affect our financial condition and increase the possibility that we may be unable to generate sufficient cash to pay, when due, the principal of, interest on or other amounts due in respect of our indebtedness.
In the event that we breach one or more covenants in our credit agreement, or any future credit agreement and such breach is not waived or amended, our lenders may choose to declare an event of default and require that we immediately repay all amounts borrowed, together with accrued interest and other fees, and could also foreclose on the collateral granted to them to secure our indebtedness.
In the event that in the future we breach one or more covenants in our credit agreement, or any future credit agreement and such breach is not waived or amended, our lenders may choose to declare an event of default and require that we immediately repay all amounts borrowed, together with accrued interest and other fees, and could also foreclose on the collateral granted to them to secure our indebtedness.
For example, it could: • make it more difficult for us to satisfy our obligations with respect to our indebtedness, and any failure to comply with the obligations under our outstanding credit facility, including restrictive covenants, could result in an event of default under such facility if such obligations are not waived or amended; • require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing funds available for working capital, capital expenditures, acquisitions, selling and marketing efforts, research and development and other purposes; • increase our vulnerability to adverse economic and industry conditions, which could place us at a competitive disadvantage compared to our competitors that have proportionately less indebtedness; • increase our cost of borrowing and cause us to incur substantial fees from time to time in connection with debt amendments or refinancings; 46 • increase our exposure to rising interest rates because a portion of our borrowings is at variable interest rates; • limit our flexibility in planning for, or reacting to, changes in our business and the industries in which we operate; and • limit our ability to borrow additional funds, or to dispose of assets to raise funds, if needed, for working capital, capital expenditures, acquisitions, selling and marketing efforts, research and development and other corporate purposes.
For example, it could: • make it more difficult for us to satisfy our obligations with respect to our indebtedness, and any failure to comply with the obligations under our outstanding credit facility, including restrictive covenants, could result in an event of default under such facility if such obligations are not waived or amended; • require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing funds available for working capital, capital expenditures, acquisitions, selling and marketing efforts, research and development and other purposes; • increase our vulnerability to adverse economic and industry conditions, which could place us at a competitive disadvantage compared to our competitors that have proportionately less indebtedness; • increase our cost of borrowing and cause us to incur substantial fees from time to time in connection with debt amendments or refinancings; • increase our exposure to rising interest rates because a portion of our borrowings is at variable interest rates; • limit our flexibility in planning for, or reacting to, changes in our business and the industries in which we operate; and • limit our ability to borrow additional funds, or to dispose of assets to raise funds, if needed, for working capital, capital expenditures, acquisitions, selling and marketing efforts, research and development and other corporate purposes.
These factors, over which neither we nor franchisees have control, may include: • changes in inflation rates; • recessionary or expansive trends in international markets; • increases in the taxes we or franchisees pay and other changes in applicable tax laws; • legal and regulatory changes, and the burdens and costs of our and franchisees’ compliance with a variety of foreign laws; • changes in exchange rates and the imposition of restrictions on currency conversion or the transfer of funds; • difficulty in protecting our brands, reputation and intellectual property; • difficulty in collecting royalties; 27 • difficulties and interruptions in communications and coordination with international franchisees; • global supply chain disruption and constraints; • political and economic instability; and • other external factors, including actual or perceived threats to public health.
These factors, over which neither we nor franchisees have control, may include: • changes in inflation rates; • recessionary or expansive trends in international markets; • increases in the taxes we or franchisees pay and other changes in applicable tax laws; • legal and regulatory changes, and the burdens and costs of our and franchisees’ compliance with a variety of foreign laws; • changes in exchange rates and the imposition of restrictions on currency conversion or the transfer of funds; • difficulty in protecting our brands, reputation and intellectual property; • difficulty in collecting royalties; • difficulties and interruptions in communications and coordination with international franchisees; • global supply chain disruption and constraints; • political and economic instability; and • other external factors, including actual or perceived threats to public health.
If we fail to remediate any future material weaknesses in our internal controls over financial reporting, if we are unable to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner, if we are unable to conclude that our internal controls over financial reporting are effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal controls over financial reporting when we are no longer an emerging growth company, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be negatively affected.
If we fail to remediate these and any future material weaknesses in our internal controls over financial reporting, if we are unable to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner, if we are unable to conclude that our internal controls over financial reporting are effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal controls over financial reporting when we are no longer an emerging growth company, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be negatively affected.
Our amended and restated certificate of incorporation and our amended and restated bylaws provide for, among other things: • a classified board of directors with staggered three-year terms; • the ability of our board of directors to issue one or more series of preferred stock with voting or other rights or preferences that could have the effect of impeding the success of an attempt to acquire us or otherwise effect a change in control; • advance notice for nominations of directors by stockholders and for stockholders to include matters to be considered at stockholder meetings; • certain limitations on convening special stockholder meetings; and • certain provisions of our amended and restated certificate of incorporation and our amended and restated bylaws that may be amended only by the affirmative vote of the holders of at least two-thirds in voting power of all outstanding shares of our stock entitled to vote thereon, voting together as a single class. 52 In addition, while we have opted out of Section 203 of the Delaware General Corporation Law (the “DGCL”), our amended and restated certificate of incorporation contains similar provisions providing that we may not engage in certain “business combinations” with any “interested stockholder” for a three-year period following the time that the stockholder became an interested stockholder, unless: • prior to such time, our board of directors approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder; • upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the votes of our voting stock outstanding at the time the transaction commenced, excluding certain shares; or • at or subsequent to that time, the business combination is approved by our board of directors and by the affirmative vote of holders of at least two-thirds of the votes of our outstanding voting stock that is not owned by the interested stockholder.
Our amended and restated certificate of incorporation and our amended and restated bylaws provide for, among other things: • a classified board of directors with staggered three-year terms; • the ability of our board of directors to issue one or more series of preferred stock with voting or other rights or preferences that could have the effect of impeding the success of an attempt to acquire us or otherwise effect a change in control; • advance notice for nominations of directors by stockholders and for stockholders to include matters to be considered at stockholder meetings; • certain limitations on convening special stockholder meetings; and • certain provisions of our amended and restated certificate of incorporation and our amended and restated bylaws that may be amended only by the affirmative vote of the holders of at least two-thirds in voting power of all outstanding shares of our stock entitled to vote thereon, voting together as a single class. 54 In addition, while we have opted out of Section 203 of the Delaware General Corporation Law (the “DGCL”), our amended and restated certificate of incorporation contains similar provisions providing that we may not engage in certain “business combinations” with any “interested stockholder” for a three-year period following the time that the stockholder became an interested stockholder, unless: • prior to such time, our board of directors approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder; • upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the votes of our voting stock outstanding at the time the transaction commenced, excluding certain shares; or • at or subsequent to that time, the business combination is approved by our board of directors and by the affirmative vote of holders of at least two-thirds of the votes of our outstanding voting stock that is not owned by the interested stockholder.
On December 1, 2023, we entered into an agreement to acquire Lindora Franchise, LLC, a Delaware limited liability company, the franchisor of the “Lindora” wellness brand (the “Lindora Franchisor”), which grants franchises for wellness clinics that offer a variety of medical and non-medical products and services currently including weight loss and wellness plans and medications, snack and nutritional supplements, hormone replacement therapy, IV therapies, laser treatments and related products and services (“Lindora Clinics”).
On December 1, 2023, we entered into an agreement to acquire Lindora Franchise, LLC, a Delaware limited liability company, the franchisor of the “Lindora” wellness brand (the “Lindora Franchisor”), which grants franchises for wellness clinics that offer a variety of medical and non-medical products and services, including weight loss and wellness plans and medications, snack and nutritional supplements, hormone replacement therapy, IV therapies, laser treatments and related products and services (“Lindora Clinics”).
We are an “emerging growth company” as defined in the JOBS Act, and we intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act and reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements.
We are an “emerging growth company” as defined in the JOBS Act, and we take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act and reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements.
Any debt financing secured by us in the future could include similar or more restrictive covenants, which may likewise limit our ability to obtain additional capital and pursue business opportunities. We may engage in merger and acquisition activities, which could require significant management attention, disrupt our business, dilute stockholder value and adversely affect our results of operations.
Any debt financing secured by us in the future could include similar or more restrictive covenants, which may likewise limit our ability to obtain additional capital and pursue business opportunities. 47 We may engage in merger and acquisition activities, which could require significant management attention, disrupt our business, dilute stockholder value and adversely affect our results of operations.
For example, we have historically incurred higher levels of sales and marketing expenses accompanying the introduction of each brand and service. 34 Our planned growth could place strains on our management, employees, information systems and internal controls, which may adversely impact our business. Since our founding in 2017, we have experienced significant growth in our business activities and operations.
For example, we have historically incurred higher levels of sales and marketing expenses accompanying the introduction of each brand and service. Our planned growth could place strains on our management, employees, information systems and internal controls, which may adversely impact our business. Since our founding in 2017, we have experienced significant growth in our business activities and operations.
If any of these events occur, it could have a material adverse effect on our business, results of operations, cash flows and financial condition. Our intellectual property rights, including trademarks and trade names, may be infringed, misappropriated or challenged by others. Our brands and related intellectual property are important to our continued success.
If any of these events occur, it could have a material adverse effect on our business, results of operations, cash flows and financial condition. 44 Our intellectual property rights, including trademarks and trade names, may be infringed, misappropriated or challenged by others. Our brands and related intellectual property are important to our continued success.
Such repayment would have a material adverse effect on our business, financial condition and results of operations. 47 We will require a significant amount of cash to service our indebtedness. The ability to generate cash or refinance our indebtedness as it becomes due depends on many factors, some of which are beyond our control.
Such repayment would have a material adverse effect on our business, financial condition and results of operations. We will require a significant amount of cash to service our indebtedness. The ability to generate cash or refinance our indebtedness as it becomes due depends on many factors, some of which are beyond our control.
In addition, responding to any enforcement action may result in a significant diversion of management’s attention and resources and significant defense costs and other professional fees. 57 Our and franchisees’ businesses are subject to the risk of earthquakes, fire, power outages, floods and other catastrophic events, and to interruption by manmade problems such as terrorism.
In addition, responding to any enforcement action may result in a significant diversion of management’s attention and resources and significant defense costs and other professional fees. Our and franchisees’ businesses are subject to the risk of earthquakes, fire, power outages, floods and other catastrophic events, and to interruption by manmade problems such as terrorism.
We have from time to time experienced, and we expect to continue to experience in the future, difficulty in hiring and retaining highly skilled employees with appropriate qualifications. 32 Our investments in underperforming studios have been and may be unsuccessful, which could adversely affect our business, results of operations, cash flows and financial condition.
We have from time to time experienced, and we expect to continue to experience in the future, difficulty in hiring and retaining highly skilled employees with appropriate qualifications. Our investments in underperforming studios have been and may be unsuccessful, which could adversely affect our business, results of operations, cash flows and financial condition.
The actual tax basis adjustments that may result from future taxable redemptions or exchanges of LLC Units, as well as the amount and timing of the payments we are required to make under the TRA will depend on a number of factors, including the market value of our Class A common stock at the time of any such future redemptions or exchanges, the prevailing federal tax rates applicable to us over the life of the TRA (plus the assumed combined state and local tax rate) and the amount and timing of the taxable income that we generate in the future. 51 Payments under the TRA will be based on the tax reporting positions we determine, and the IRS or another tax authority may challenge all or a part of the existing tax basis, tax basis increases, NOLs or other tax attributes subject to the TRA, and a court could sustain such challenge.
The actual tax basis adjustments that may result from future taxable redemptions or exchanges of LLC Units, as well as the amount and timing of the payments we are required to make under the TRA will depend on a number of factors, including the market value of our Class A common stock at the time of any such future redemptions or exchanges, the prevailing federal tax rates applicable to us over the life of the TRA (plus the assumed combined state and local tax rate) and the amount and timing of the taxable income that we generate in the future. 53 Payments under the TRA will be based on the tax reporting positions we determine, and the IRS or another tax authority may challenge all or a part of the existing tax basis, tax basis increases, NOLs or other tax attributes subject to the TRA, and a court could sustain such challenge.
Franchisees of the Lindora Franchisor will be responsible for complying with these laws in connection with the operation of their Lindora Clinics, and their failure to do so could disrupt their operations which would, in turn, disrupt the Lindora Franchisor's royalty and other revenue streams and its future sale of franchises for Lindora Clinics, and could result in claims asserted against the Lindora Franchisor and its related parties from clients receiving those services, state and federal regulators, and franchisees of the Lindora Clinics. 36 We currently are, and may in the future be, subject to legal proceedings, regulatory disputes and governmental inquiries that could cause us to incur significant expenses, divert our management’s attention, and materially harm our business, results of operations, cash flows and financial condition.
Franchisees of the Lindora Franchisor will be responsible for complying with these laws in connection with the operation of their Lindora Clinics, and their failure to do so could disrupt their operations which would, in turn, disrupt the Lindora Franchisor's royalty and other revenue streams and its future sale of franchises for Lindora Clinics, and could result in claims asserted against the Lindora Franchisor and its related parties from clients receiving those services, state and federal regulators, and franchisees of the Lindora Clinics. 38 We currently are, and may in the future be, subject to legal proceedings, regulatory disputes and governmental inquiries that could cause us to incur significant expenses, divert our management’s attention, and materially harm our business, results of operations, cash flows and financial condition.
However, the historic conversion rate of signed studio commitments to new studio locations may not be indicative of the conversion rate we will experience in the future, and the total number of new studios that actually open in the future may differ materially from the number of licenses sold that we have at any point in time.
The historic conversion rate of signed studio commitments to new studio locations may not be indicative of the conversion rate we will experience in the future, and the total number of new studios that actually open in the future may differ materially from the number of licenses sold that we have at any point in time.
These activities may divert management’s attention from other business concerns, which could have a material adverse effect on our results of operations, financial condition or business. 54 As an “emerging growth company” as defined in the JOBS Act, we take advantage of certain temporary exemptions from various reporting requirements including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act and reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements.
These activities may divert management’s attention from other business concerns, which could have a material adverse effect on our results of operations, financial condition or business. 56 As an “emerging growth company” as defined in the JOBS Act, we take advantage of certain temporary exemptions from various reporting requirements including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act and reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements.
The CCPA was amended in September 2018, November 2019, and October 2023, and it is possible that further amendments will be enacted, but even in its current format, it remains unclear how various provisions of the CCPA will be interpreted and enforced.
The CCPA was amended in September 2018, November 2019, October 2023, and September 2024 and it is possible that further amendments will be enacted, but even in its current format, it remains unclear how various provisions of the CCPA will be interpreted and enforced.
The termination of our ability to accept payments through ACH, credit or debit card transactions would significantly impair our and franchisees’ ability to operate our businesses. 41 In addition, we and franchisees offer gift cards for classes at our and franchisees’ studios.
The termination of our ability to accept payments through ACH, credit or debit card transactions would significantly impair our and franchisees’ ability to operate our businesses. In addition, we and franchisees offer gift cards for classes at our and franchisees’ studios.
The services provided in each Lindora Clinic, including the provision of weight loss products and services and other medical services, are regulated by federal, state and local laws, rules and regulations including, without limitation, (i) state corporate practice of medicine laws; (ii) laws pertaining to the practice of medicine and/or nursing; (iii) laws governing medical weight management practice; (iv) laws governing the privacy and security of personally identifiable information, protected health information, or other information generated in the course of providing or paying for healthcare services, including HIPAA; (v) applicable state anti-kickback, patient inducement, self-referral, and fee splitting laws; (vi) telemedicine laws and regulations; (vii) laws and regulations pertaining to medical devices and related healthcare equipment; (viii) laws and regulations pertaining to health and wellness centers, including requirements applicable to membership programs; (ix) laws and regulations pertaining to cosmetology/esthetic services; (x) laws regulating the prescribing, compounding, marketing, administering, packaging, and sale of peptides, medications, and other controlled substances; (xi) laws relating to the licensure of music played in the Lindora Clinic; (xii) state and federal employment laws; and (xiii) laws relating to advertising or marketing of healthcare products or services.
The services provided in each Lindora Clinic, including the provision of weight loss products and services and other medical services, are regulated by federal, state and local laws, rules and regulations including, without limitation, (i) state corporate practice of medicine laws; (ii) laws pertaining to the practice of medicine and/or nursing; (iii) laws governing the prescribing and administration of medical weight loss products; (iv) laws governing the privacy and security of personally identifiable information, protected health information, or other information generated in the course of providing or paying for healthcare services; (v) applicable state anti-kickback, patient inducement, self-referral, and fee splitting laws; (vi) telemedicine laws and regulations; (vii) laws and regulations pertaining to medical devices and related healthcare equipment; (viii) laws and regulations pertaining to health and wellness centers, including requirements applicable to membership programs; (ix) laws and regulations pertaining to cosmetology/esthetic services; (x) laws regulating the prescribing, compounding, marketing, administering, packaging, and sale of peptides, medications, and other controlled substances; (xi) laws relating to the licensure of music played in the Lindora Clinic; (xii) state and federal employment laws; and (xiii) laws relating to advertising or marketing of healthcare products or services.
To the extent that we do not distribute such excess cash as dividends on our Class A common stock and instead, for example, hold such cash balances or lend them to XPO Holdings, holders of LLC Units would benefit from any value attributable to such cash balances as a result of their ownership of Class A common stock following a redemption or exchange of their LLC Units. 50 Continuing Pre-IPO LLC Members hold a significant voting power and their interests in our business may be different than yours.
To the extent that we do not distribute such excess cash as dividends on our Class A common stock and instead, for example, hold such cash balances or lend them to XPO Holdings, holders of LLC Units would benefit from any value attributable to such cash balances as a result of their ownership of Class A common stock following a redemption or exchange of their LLC Units. 52 Continuing Pre-IPO LLC Members hold a significant voting power and their interests in our business may be different than yours.
We also heavily rely on the continued service and performance of our senior management team, including each of our brand presidents, who provide leadership, contribute to the core areas of our business and help us to efficiently execute our business.
We heavily rely on the continued service and performance of our senior management team, including each of our brand presidents, who provide leadership, contribute to the core areas of our business and help us to efficiently execute our business.
We recorded goodwill impairments of $4.2 million related to our Stride and Row House brands as well as $2.6 million related to Rumble for held for sale studios in 2023 and $3.4 million related to our AKT brand in 2022.
Additionally, we recorded goodwill impairments of $4.2 million related to our Stride and Row House brands as well as $2.6 million related to Rumble for held for sale studios in 2023 and $3.4 million related to our AKT brand in 2022.
The foregoing provision will not apply to claims arising under the Securities Act of 1933, as amended, the Exchange Act or other federal securities laws for which there is exclusive federal or concurrent federal and state jurisdiction. 53 These exclusive-forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, employees or agents, which may discourage such lawsuits against us and such persons.
The foregoing provision will not apply to claims arising under the Securities Act of 1933, as amended, the Exchange Act or other federal securities laws for which there is exclusive federal or concurrent federal and state jurisdiction. 55 These exclusive-forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, employees or agents, which may discourage such lawsuits against us and such persons.
We and franchisees in North America rely heavily on information systems provided by ClubReady, LLC (“ClubReady”), including the point-of-sale processing systems in our franchised studios and other information systems managed by ClubReady, to interact with franchisees and customers and to collect and maintain customer information or other personally identifiable information, including for the operation of studios, collection of cash, management of our equipment supply chain, accounting, staffing, payment of obligations, ACH transactions, credit and debit card transactions and other processes and procedures.
We and franchisees in North America, except for Lindora franchisees, rely heavily on information systems provided by ClubReady, LLC (“ClubReady”), including the point-of-sale processing systems in our franchised studios and other information systems managed by ClubReady, to interact with franchisees and customers and to collect and maintain customer information or other personally identifiable information, including for the operation of studios, collection of cash, management of our equipment supply chain, accounting, staffing, payment of obligations, ACH transactions, credit and debit card transactions and other processes and procedures.
New studios may not be successful or same store sales may not increase at historical rates, which could materially and adversely affect our business, results of operations, cash flows and financial condition. 25 In addition, new studios build their sales volume and customer base over time and, as a result, generally yield lower amounts of revenue for us than more mature studios.
New studios may not be successful or same store sales may not increase at historical rates, which could materially and adversely affect our business, results of operations, cash flows and financial condition. 26 In addition, new studios build their sales volume and customer base over time and, as a result, generally yield lower amounts of revenue for us than more mature studios.
This could result in fewer transactions or limitations on the prices we and franchisees can charge for services and products, either of which could reduce our sales and operating margins. All of these factors could have a material adverse impact on our results of operations and growth strategy.
This could result in operational disruptions or fewer transactions or limitations on the prices we and franchisees can charge for services and products, either of which could reduce our sales and operating margins. All of these factors could have a material adverse impact on our results of operations and growth strategy.
In addition, the timing of new studio openings is sometimes delayed for a variety of reasons, and delayed openings would adversely affect our business, results of operations, cash flows and financial condition. 26 Our success depends substantially on our ability to maintain the value and reputation of our brands.
In addition, the timing of new studio openings is sometimes delayed for a variety of reasons, and delayed openings would adversely affect our business, results of operations, cash flows and financial condition. 27 Our success depends substantially on our ability to maintain the value and reputation of our brands.
In addition, disasters or outbreaks, such as a pandemic, as well as any resulting recession, depression or other long-term economic impact, could negatively impact consumer spending in the impacted regions or depending upon the severity, globally, which could adversely impact our or franchisees’ operating results.
In addition, disasters or outbreaks, such as a pandemic, as well as any resulting recession, depression or other long-term economic impact in our key markets, could negatively impact consumer spending in the impacted regions or depending upon the severity, globally, which could adversely impact our or franchisees’ operating results.
We are subject to franchise sales laws in six provinces in Canada that regulate the offer and sale of franchises by requiring us to provide a FDD in a prescribed format to prospective franchisees and that further regulate certain aspects of the franchise relationship.
We are subject to franchise sales laws in seven provinces in Canada that regulate the offer and sale of franchises by requiring us to provide a FDD in a prescribed format to prospective franchisees and that further regulate certain aspects of the franchise relationship.
We are a holding company and our principal asset is our direct and indirect ownership of 65% of the outstanding LLC Units. We have no independent means of generating revenue. XPO Holdings is treated as a partnership for U.S. federal income tax purposes and, as such, generally will not be subject to U.S. federal income tax.
We are a holding company and our principal asset is our direct and indirect ownership of 69.5% of the outstanding LLC Units. We have no independent means of generating revenue. XPO Holdings is treated as a partnership for U.S. federal income tax purposes and, as such, generally will not be subject to U.S. federal income tax.
If a franchisee is unable or unwilling to satisfy any of these requirements, the expiring franchise agreement will terminate upon the expiration of its term. 30 Franchisee litigation and effects of regulatory efforts.
If a franchisee is unable or unwilling to satisfy any of these requirements, the expiring franchise agreement will terminate upon the expiration of its term. 31 Franchisee litigation and effects of regulatory efforts.
Additionally, the loss of any key personnel could make it more difficult to manage our operations, reduce our employee retention and revenue and impair our ability to compete. Although we have entered into employment offer letters with certain of our key personnel, including Mr. Geisler, these letters have no specific duration and constitute at-will employment.
Additionally, the loss of any key personnel could make it more difficult to manage our operations, reduce our employee retention and revenue and impair our ability to compete. Although we have entered into employment offer letters with certain of our key personnel, these letters have no specific duration and constitute at-will employment.
In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been brought against that company. On February 9, 2024, a federal securities class action lawsuit was filed against us and certain of our officers in the United States District Court for the Central District of California.
In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been brought against that company. 58 On February 9, 2024, a federal securities class action lawsuit was filed against the Company and certain of the Company’s officers in the United States District Court for the Central District of California.
Our financial condition and results of operations in any given quarter can be influenced by numerous factors, many of which we are unable to predict or are outside of our control, including: • franchisees’ ability to maintain and attract new customers and increase their usage of their studios; • delays in opening new studios; • the continued market acceptance of, and the growth of the boutique fitness market; • our ability to maintain and attract new franchisees; • our development and improvement of the quality of the studio experience, including enhancing existing and creating new services and products; • announcement of major corporate transaction, strategic actions or mergers and acquisitions by us or competitors; • additions or departures of our senior management or other key personnel; • sales, or anticipated sales, of large blocks of our stock; • guidance, if any, that we provide to the public, as well as any changes in this guidance or our failure to meet this guidance; • results of operations that vary from expectations of securities analysis and investors; • issuance of new or changed securities analysts’ reports or recommendations; • system failures or breaches of security or privacy; • seasonality; • constraints on the availability of franchisee financing; • our ability to maintain operating margins; • the diversification and growth of our revenue sources; • our successful expansion into international markets; • increases in marketing, sales and other operating expenses that we may incur to grow and expand our operations and to remain competitive; 43 • pricing pressure as a result of competition or otherwise; • the timing and success of new product, service, feature and content introductions by us or our competitors or any other change in the competitive landscape of our market; • the expansion of our digital platform; • announcement by us, our competitors or vendors of significant contracts or acquisitions; • public response to press releases or other public announcements by us or third parties, including our filings with the SEC; • adverse litigation judgments, settlements or other litigation-related costs, including content costs for past use; • delays by regulators in accepting our annual FDD filing or amendments to our FDD filing; • changes in the legislative or regulatory environment, including with respect to privacy and advertising, or enforcement by government regulators, including fines, orders or consent decrees; • fluctuations in currency exchange rates and changes in the proportion of our revenue and expenses denominated in foreign currencies; • changes in our effective tax rate; • changes in accounting standards, policies, guidance, interpretations or principles, including changes in fair value measurements or impairment charges; • global pandemics; and • changes in business or macroeconomic conditions, including lower consumer confidence, recessionary conditions, increased unemployment rates, or stagnant or declining wages.
Our financial condition and results of operations in any given quarter can be influenced by numerous factors, many of which we are unable to predict or are outside of our control, including: • franchisees’ ability to maintain and attract new customers and increase their usage of their studios; • delays in opening new studios; • the continued market acceptance of, and the growth of the boutique fitness market; • our ability to maintain and attract new franchisees; • our development and improvement of the quality of the studio experience, including enhancing existing and creating new services and products; • announcement of major corporate transaction, strategic actions or mergers and acquisitions by us or competitors; • additions or departures of our senior management or other key personnel; • sales, or anticipated sales, of large blocks of our stock; 45 • guidance, if any, that we provide to the public, as well as any changes in this guidance or our failure to meet this guidance; • results of operations that vary from expectations of securities analysis and investors; • issuance of new or changed securities analysts’ reports or recommendations; • system failures or breaches of security or privacy; • seasonality; • constraints on the availability of franchisee financing; • our ability to maintain operating margins; • the diversification and growth of our revenue sources; • our successful expansion into international markets; • increases in marketing, sales and other operating expenses that we may incur to grow and expand our operations and to remain competitive; • pricing pressure as a result of competition or otherwise; • the timing and success of new product, service, feature and content introductions by us or our competitors or any other change in the competitive landscape of our market; • the expansion of our digital platform; • announcement by us, our competitors or vendors of significant contracts or acquisitions; • public response to press releases or other public announcements by us or third parties, including our filings with the SEC; • adverse litigation judgments, settlements or other litigation-related costs, including content costs for past use; • Pause in ability to sell franchise licenses during the pendency of government investigations regarding FDD compliance; • delays by regulators in accepting our annual FDD filing or amendments to our FDD filing; • changes in the legislative or regulatory environment, including with respect to privacy and advertising, or enforcement by government regulators, including fines, orders or consent decrees; • fluctuations in currency exchange rates and changes in the proportion of our revenue and expenses denominated in foreign currencies; • changes in our effective tax rate; • changes in accounting standards, policies, guidance, interpretations or principles, including changes in fair value measurements or impairment charges; • global pandemics and natural disasters such as hurricanes, fires and earthquakes; and • changes in business or macroeconomic conditions, including lower consumer confidence, recessionary conditions, increased unemployment rates, or stagnant or declining wages.
In addition, as a public company, we will be required to document and test our internal controls over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act so that our management can certify as to the effectiveness of our internal controls over financial reporting.
In addition, as a public company, we are required to document and test our internal controls over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act so that our management can certify as to the effectiveness of our internal controls over financial reporting.
We believe that the importance of our brands will increase as competition within our markets further intensifies and brand promotion activities may require substantial expenditures. Our brands could be harmed if we fail to achieve these objectives or if our public image were to be tarnished by negative publicity.
We believe that the importance of our brands will increase as competition within our markets further intensifies and brand promotion activities may require substantial expenditures. Our brands could be harmed if we fail to achieve these objectives or if our public image were to be tarnished by negative publicity, litigation or governmental investigations by regulators.
We acquired StretchLab in November 2017, Row House in December 2017, AKT in March 2018, YogaSix in July 2018, Stride in December 2018, Rumble in March 2021, BFT in October 2021, and Lindora in January 2024. We launched our digital platform offerings in 2019 and XPASS in 2021. We may launch additional brands, services or products in the future.
We acquired StretchLab in November 2017, AKT in March 2018, YogaSix in July 2018, Rumble in March 2021, BFT in October 2021, and Lindora in January 2024. We launched our digital platform offerings in 2019 and XPASS in 2021. We may launch additional brands, services or products in the future.
Litigation against a franchisee or its affiliates by third parties or regulatory agencies, whether in the ordinary course of business or otherwise, may also include claims against us by virtue of our relationship with the defendant-franchisee, whether under vicarious liability, joint employer or other theories.
Litigation against a franchisee or its affiliates by third parties or regulatory agencies, whether in the ordinary course of business or otherwise, has in the past and may again in the future also include claims against us by virtue of our relationship with the defendant-franchisee, whether under vicarious liability, joint employer or other theories.
The complaint alleges, among other things, violations of Sections 10(b) and 20(a) of the Exchange Act, and Rule 10b-5 promulgated thereunder, alleging misstatements and/or omissions in certain of our financial statements, press releases, and SEC filings made during the putative class period of July 26, 2021 through December 7, 2023.
The complaint alleged, among other things, violations of Sections 10(b) and 20(a) of the Exchange Act, and Rule 10b-5 promulgated thereunder, regarding misstatements and/or omissions in certain of the Company’s financial statements, press releases, and SEC filings made during the putative class period of July 26, 2021 through December 7, 2023.
The integrity and protection of that customer and employee data is critical to us. 38 Despite the security measures we have in place to comply with applicable laws and rules, our, master franchisees’, franchisees’ and our third-party service providers’ facilities and systems may be vulnerable to both external and internal threats, including security breaches, acts of cyber terrorism or sabotage, vandalism or theft, misuse, unauthorized access, computer viruses, ransomware, denial-of-service attacks, misplaced, corrupted or lost data, programming or human errors or other similar events.
Despite the security measures we have in place to comply with applicable laws and rules, our, master franchisees’, franchisees’ and our third-party service providers’ facilities and systems may be vulnerable to both external and internal threats, including security breaches, acts of cyber terrorism or sabotage, vandalism or theft, misuse, unauthorized access, computer viruses, ransomware, denial-of-service attacks, misplaced, corrupted or lost data, programming or human errors or other similar events.
Our franchise model subjects us to a number of risks, any one of which may impact our royalty revenues collected from franchisees, harm the goodwill associated with our brands, and materially and adversely impact our business, results of operations, cash flows and financial condition. Franchisee bankruptcies.
We are subject to a variety of additional risks associated with franchisees. Our franchise model subjects us to a number of risks, any one of which may impact our royalty revenues collected from franchisees, harm the goodwill associated with our brands, and materially and adversely impact our business, results of operations, cash flows and financial condition. 30 Franchisee bankruptcies.
There can be no assurance that our expectations will prove correct, and even if these matters are resolved in our favor or without significant cash settlements, these matters, and the time and resources necessary to litigate or resolve them, could harm our business, results of operations, cash flows and financial condition.
There can be no assurance that our expectations will prove correct, and even if these matters are resolved in our favor or without significant cash settlements, these matters, and the time and resources necessary to litigate or resolve them, have been significant and could continue to be substantial which has and could in the future continue to harm our business, results of operations, cash flows and financial condition.
We cannot predict whether our reliance on these exemptions will result in investors finding our Class A common stock less attractive. If some investors find our Class A common stock less attractive as a result, there may be a less active trading market for our Class A common stock and our Class A common stock price may be more volatile.
Our reliance on these exemptions may result in investors finding our Class A common stock less attractive. If some investors find our Class A common stock less attractive as a result, there may be a less active trading market for our Class A common stock and our Class A common stock price may be more volatile.
We face significant risks if we or any of our directors, officers, employees, franchisees, agents or other partners or representatives fail to comply with these laws and governmental authorities in the United States and elsewhere could seek to impose substantial civil and/or criminal fines and penalties which could have a material adverse effect on our business, reputation, results of operations, cash flows and financial condition.
We face significant risks if we or any of our directors, officers, employees, franchisees, agents or other partners or representatives fail to comply with these laws and governmental authorities in the United States and elsewhere could seek to impose substantial civil and/or criminal fines and penalties which could have a material adverse effect on our business, reputation, results of operations, cash flows and financial condition. 59 Our employees, contractors, franchisees and agents may take actions in violation of our policies or applicable law.
For example, we had a net loss of $1.7 million for the year ended December 31, 2023 and a net loss of $51.4 million for the year ended December 31, 2021, and we cannot be certain that we will achieve or maintain profitability and may incur operating losses in the future.
For example, we had a net loss of $98.7 million for the year ended December 31, 2024 and a net loss of $6.4 million for the year ended December 31, 2023, and we cannot be certain that we will achieve or maintain profitability and may incur operating losses in the future.
If our, master franchisees’, franchisees’ or service providers’ privacy or data security measures fail to comply with the GDPR requirements, we may be subject to litigation, regulatory investigations, enforcement notices requiring us to change the way we use personal data and/or fines of up to 20 million Euros/17.5 million Pounds or up to 4% of the total worldwide annual turnover of the preceding financial year, whichever is higher, as well as compensation claims by affected individuals, negative publicity, reputational harm and a potential loss of business and goodwill.
The GDPR imposes onerous disclosure and compliance obligations relating to the collection, processing, retention and sharing of personal data, and requirements to demonstrate compliance with such obligations. 42 If our, master franchisees’, franchisees’ or service providers’ privacy or data security measures fail to comply with the GDPR requirements, we may be subject to litigation, regulatory investigations, enforcement notices requiring us to change the way we use personal data and/or fines of up to 20 million Euros/17.5 million Pounds or up to 4% of the total worldwide annual turnover of the preceding financial year, whichever is higher, as well as compensation claims by affected individuals, negative publicity, reputational harm and a potential loss of business and goodwill.
Further, we expect franchisees to follow our suggested best practices, and if a franchisee does not adopt the principles outlined by us, franchisees may not generate the revenue we expect and our forecasts and projections may be inaccurate, which in turn could adversely affect our business, results of operations, cash flows and financial condition. 29 We are subject to a variety of additional risks associated with franchisees.
Further, we expect franchisees to follow our suggested best practices, and if a franchisee does not adopt the principles outlined by us, franchisees may not generate the revenue we expect and our forecasts and projections may be inaccurate, which in turn could adversely affect our business, results of operations, cash flows and financial condition.
As a result, the number of company-owned transition studios has decreased from the prior year. As of December 31, 2023, we had ownership of 22 such studios, compared to 55 studios as of December 31, 2022.
As a result, the number of company-owned transition studios has decreased from the prior year. As of December 31, 2024, we had ownership of one such studio, compared to 22 studios as of December 31, 2023.
Accordingly, we may be required to devote significant resources to understanding and complying with this changing landscape. 40 Noncompliance with privacy laws, industry group requirements or a security breach involving the misappropriation, loss or other unauthorized disclosure of personal, sensitive or confidential information, whether by us, franchisees or our third-party service providers, could have material adverse effects on our and franchisees’ business, operations, brands, reputation and financial condition, including decreased revenue, material fines and penalties, litigation, increased financial processing fees, compensatory, statutory, punitive or other damages, adverse actions against our licenses to do business and injunctive relief by court or consent order.
Noncompliance with privacy laws, industry group requirements or a security breach involving the misappropriation, loss or other unauthorized disclosure of personal, sensitive or confidential information, whether by us, franchisees or our third-party service providers, could have material adverse effects on our and franchisees’ business, operations, brands, reputation and financial condition, including decreased revenue, material fines and penalties, litigation, increased financial processing fees, compensatory, statutory, punitive or other damages, adverse actions against our licenses to do business and injunctive relief by court or consent order.
A number of factors have historically affected, and will continue to affect, our same store sales, including, among other factors: • competition; • overall economic trends, particularly those related to consumer spending; • franchisees’ ability to operate studios effectively and efficiently to meet consumer expectations; • changes in the prices franchisees charge for memberships or classes; • studio closures due to macro-economic conditions and industry-wide trends; and • marketing and promotional efforts. 44 Therefore, the increases in historical same store sales growth should not be considered indicative of our future performance.
A number of factors have historically affected, and will continue to affect, our same store sales, including, among other factors: • competition; • overall economic trends, particularly those related to consumer spending; • franchisees’ ability to operate studios effectively and efficiently to meet consumer expectations; • changes in the prices franchisees charge for memberships or classes; • studio closures due to macro-economic conditions and industry-wide trends; and • marketing and promotional efforts.
Our future success depends on the continuing efforts of our key employees and our ability to attract and retain highly skilled personnel. Our future success depends, in part, on the services of our senior management team and other key employees at our corporate headquarters, as well as on our ability to recruit, retain and motivate key employees.
Our future success depends, in part, on the services of our senior management team and other key employees at our corporate headquarters, as well as on our ability to recruit, retain and motivate key employees.
Some of this data is sensitive and could be an attractive target of criminal attack by malicious third parties with a wide range of motives and expertise, including organized criminal groups, hackers, “hactivists,” disgruntled current or former employees, and others.
Some of this data is sensitive and could be an attractive target of criminal attack by malicious third parties with a wide range of motives and expertise, including organized criminal groups, hackers, “hactivists,” disgruntled current or former employees, and others. The integrity and protection of that customer and employee data is critical to us.
In addition, we may be subject to audits of our income, sales and other transaction taxes by U.S. federal and state and foreign authorities. Outcomes from these audits could have an adverse effect on our financial condition and results of operations.
In addition, we may be subject to audits of our income, sales and other transaction taxes by U.S. federal and state and foreign authorities. Outcomes from these audits could have an adverse effect on our financial condition and results of operations. 60 It em 1B. Unresolved Staff Comments. Not applicable.
There has been a substantial increase in the use of social media platforms, including blogs, social media websites and other forms of internet-based communication, which allow individuals access to a broad audience of consumers and other interested persons.
Use of social media may adversely impact our reputation or subject us to fines or other penalties. There has been a substantial increase in the use of social media platforms, including blogs, social media websites and other forms of internet-based communication, which allow individuals access to a broad audience of consumers and other interested persons.
We cannot predict future business interruptions that may occur, the nature or scope of any such interruptions or the degree to which, or the period over which, franchisees may need to close or re-close studios in the future, and there can be no assurance that in the future we will be able to satisfy the covenants under our credit agreement as a result of a business interruption or otherwise, or obtain any required waiver or amendment.
We cannot predict future business interruptions that may occur, the nature or scope of any such interruptions or the degree to which, or the period over which, franchisees may need to close or re-close studios in the future, and there can be no assurance that in the future we will be able to satisfy the covenants under our credit agreement as a result of a business interruption or otherwise, or obtain any required waiver or amendment. 49 Restrictions imposed by our outstanding indebtedness and any future indebtedness may limit our ability to operate our business and to finance our future operations or capital needs or to engage in other business activities.
As of December 31, 2023, we had 2,651 open studios in North America and master franchisees with 411 studios operating internationally.
As of December 31, 2024, we had 2,758 open studios in North America and master franchisees with 475 studios operating internationally.
In addition, any such costs that may arise in the future as a result of changes to such legislation and regulations or in their interpretation, could individually or in the aggregate cause us to change or limit our business practice, which may make our business model less attractive to franchisees and our and their members.
In addition, any such costs that may arise in the future as a result of changes to such legislation and regulations or in their interpretation, could individually or in the aggregate cause us to change or limit our business practice, which may make our business model less attractive to franchisees and our and their members. 43 We and franchisees are subject to a number of risks related to ACH, credit card, debit card and gift card payments we accept.
We have incurred, and may continue to incur, significant expenses related to legal and other professional services in connection with matters relating to or arising from the SEC investigation.
We intend to cooperate fully with the SEC, USAO, FTC and NYAG in these investigations, and we have incurred, and may continue to incur, significant expenses related to legal and other professional services in connection with matters relating to or arising from these investigations.
Any additional costs which may arise in the future as a result of changes to the legislation and regulations or in their interpretation could individually or in the aggregate cause us to change or limit our business practices, which may make our business model less attractive to franchisees or their customers.
Any additional costs which may arise in the future as a result of changes to the legislation and regulations or in their interpretation could individually or in the aggregate cause us to change or limit our business practices, which may make our business model less attractive to franchisees or their customers. 37 In January 2024 we acquired a weight loss and wellness brand which is subject to healthcare and related laws.
Litigation is inherently uncertain and could divert the attention of management, result in substantial costs and diversion of resources and could negatively affect our sales and results of operations regardless of whether we are able to successfully enforce or defend our rights. 42 We and franchisees are dependent on certain music licenses to permit franchisees to use music in their studios and to supplement workouts.
Litigation is inherently uncertain and could divert the attention of management, result in substantial costs and diversion of resources and could negatively affect our sales and results of operations regardless of whether we are able to successfully enforce or defend our rights.
Any failure to secure such licenses or to comply with the terms and conditions of such licenses may lead to third-party claims or lawsuits against us and/or franchisees and could have an adverse effect on our business.
We and franchisees are dependent on certain music licenses to permit franchisees to use music in their studios and to supplement workouts. Any failure to secure such licenses or to comply with the terms and conditions of such licenses may lead to third-party claims or lawsuits against us and/or franchisees and could have an adverse effect on our business.
If we, master franchisees, franchisees or our third-party service providers fail to properly maintain the confidentiality and integrity of our data, including customer credit, debit card and bank account information and other personally identifiable information, we could incur significant liability or become subject to costly litigation and our reputation and business could be materially and adversely affected.
As a result, we may not be able to meet the full demands of our franchisees and customers and, in turn, our business, financial condition, and results of operations may be harmed. 40 If we, master franchisees, franchisees or our third-party service providers fail to properly maintain the confidentiality and integrity of our data, including customer credit, debit card and bank account information and other personally identifiable information, we could incur significant liability or become subject to costly litigation and our reputation and business could be materially and adversely affected.
Acceptance of these payment options subjects us and franchisees to rules, regulations, contractual obligations and compliance requirements, including payment network rules and operating guidelines, data security standards and certification requirements, and rules governing electronic funds transfers. For ACH, credit card and debit card payments, we and franchisees pay interchange and other fees, which may increase over time.
We and franchisees accept payments through ACH, credit card, debit card and gift card transactions. Acceptance of these payment options subjects us and franchisees to rules, regulations, contractual obligations and compliance requirements, including payment network rules and operating guidelines, data security standards and certification requirements, and rules governing electronic funds transfers.
Such negative publicity also could have an adverse effect on the size, engagement and loyalty of franchisees’ customers and result in decreased revenue, which could have an adverse effect on our business, results of operations, cash flows and financial condition. Our expansion into new markets may present increased risks due to our unfamiliarity with those markets.
Such negative publicity also could have an adverse effect on the size, engagement and loyalty of franchisees’ customers and result in decreased revenue, which could have an adverse effect on our business, results of operations, cash flows and financial condition.
We are subject to an SEC investigation which could have a material adverse impact on our business, financial condition, results of operation, cash flows and reputation. On December 11, 2023, we filed a Form 8-K stating that on December 5, 2023 we were contacted by the SEC, requesting that we provide it with certain documents.
We are subject to government investigations which could have a material adverse impact on our business, financial condition, results of operation, cash flows and reputation. On December 5, 2023, we were contacted by the Securities and Exchange Commission (the “SEC”), requesting that we provide it with certain information and documents.
Such increases in labor costs and other changes in labor laws could affect studio performance and quality of service, decrease royalty revenues and adversely affect our brands. 35 Our and franchisees’ operations and properties are subject to extensive U.S. and Canadian federal, state, provincial and local laws and regulations, as well laws and regulations in other countries in which we and franchisees have begun operating, or in the future may operate, including those relating to environmental, building and zoning requirements.
Our and franchisees’ operations and properties are subject to extensive U.S. and Canadian federal, state, provincial and local laws and regulations, as well laws and regulations in other countries in which we and franchisees have begun operating, or in the future may operate, including those relating to environmental, building and zoning requirements.
If new brands, services or products are not as successful as we anticipate, it could have a material adverse effect on our business, results of operations, cash flows and financial condition. Franchisees have and could in the future take actions that harm our business.
If new brands, services or products are not as successful as we anticipate, it could have a material adverse effect on our business, results of operations, cash flows and financial condition. We have divested and may, in the future, divest certain assets or brands that do not meet our strategic objectives or growth targets.
The support payments may not be sufficient to help franchisees improve their results, and we may never realize a return on the support payments, which could materially and adversely affect our business, results of operations, cash flows and financial condition. We operate in a highly competitive market and we may be unable to compete successfully against existing and future competitors.
The support payments are intended to help franchisees improve their studios. The support payments may not be sufficient to help franchisees improve their results, and we may never realize a return on the support payments, which could materially and adversely affect our business, results of operations, cash flows and financial condition.
As a result of such foreign currency exchange rate fluctuations, it could be more difficult to detect underlying trends in our business and results of operations.
Accordingly, changes in the value of foreign currencies relative to the U.S. dollar can affect our revenue and results of operations. As a result of such foreign currency exchange rate fluctuations, it could be more difficult to detect underlying trends in our business and results of operations.
Our amended and restated certificate of incorporation provides that, to the fullest extent permitted by law, the doctrine of “corporate opportunity” will not apply to directors, officers, stockholders and affiliates of the Preferred Investors and Snapdragon Capital Partners.
Our amended and restated certificate of incorporation provides that, to the fullest extent permitted by law, the doctrine of “corporate opportunity” will not apply to directors, officers, stockholders and affiliates of the Preferred Investors and Snapdragon Capital Partners. The reduced disclosure requirements applicable to emerging growth companies may make our Class A common stock less attractive to investors.
The higher level of invested capital at these studios may require higher operating margins and higher net income per studio to produce the level of return we, franchisees and our potential franchisees expect.
The higher level of invested capital at these studios may require higher operating margins and higher net income per studio to produce the level of return we, franchisees and our potential franchisees expect. Failure to provide this level of return could adversely affect our business, results of operations, cash flows and financial condition.
This expansion has placed, and our planned future expansion may place, significant demands on our administrative, operational, financial and other resources. Any failure to manage growth effectively could seriously harm our business. To be successful, we will need to continue to implement management information systems and improve our operating, administrative, financial and accounting systems and controls.
This expansion has placed, and our planned future expansion may place significant demands on our administrative, operational, financial and other resources. Any failure to manage growth effectively could seriously harm our business.
If the SEC were to conclude that enforcement action is appropriate, we could be required to pay civil penalties and fines, and the SEC could impose other sanctions against us or against our current and former officers and directors.
We cannot predict or provide any assurance as to the timing, outcome or consequences of these investigations. If the any of these agencies were to conclude that enforcement action is appropriate, we could be required to pay civil penalties and fines, and they could impose other sanctions against us or against our current and former officers and directors.
We, master franchisees and franchisees could be subject to claims related to health and safety risks to customers that arise while at our and franchisees’ studios. The use of our and franchisees’ studios poses some potential health and safety risks to customers through, among other things, physical exertion and the physical nature of the services offered.
The use of our and franchisees’ studios poses some potential health and safety risks to customers through, among other things, physical exertion and the physical nature of the services offered.
Depending upon the outcome, these matters may have a material adverse effect on our business, results of operations, cash flows and financial condition. 37 We, master franchisees and franchisees rely heavily on information systems provided by a single provider, and any material failure, interruption, weakness or termination with such supplier may prevent us from effectively operating our business and damage our reputation.
We, master franchisees and franchisees rely heavily on information systems provided by a single provider, and any material failure, interruption, weakness or termination with such supplier may prevent us from effectively operating our business and damage our reputation.
We may not be able to predict or control the timing or size of a change of control payment, which could adversely impact our results of operations, cash flows and financial condition. If any of our retail products are unacceptable to us or franchisees’ customers, our business could be harmed.
We may not be able to predict or control the timing or size of a change of control payment, which could adversely impact our results of operations, cash flows and financial condition. If we are unable to accurately forecast demand of our retail products and adequately manage our inventory, our operating results could be adversely affected.
As a result of such failures, we could also become subject to investigations by the stock exchange on which our securities are listed, the SEC, or other regulatory authorities, and become subject to litigation from investors and stockholders, which could harm our reputation and financial condition or divert financial and management resources from our regular business activities.
As a result of such failures, we could also become subject to investigations by the stock exchange on which our securities are listed, the SEC, or other regulatory authorities, and become subject to litigation from investors and stockholders, many of which have occurred already for other reasons, which could harm our reputation and financial condition or divert financial and management resources from our regular business activities. 57 We have in the past and may in the future be subject to short selling strategies that may drive down the market price of our Class A common stock.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeKey components of this include assessments of vulnerabilities, establishing security controls and policies, training employees, and having a well-defined incident response plan. Regular testing, compliance adherence, resource allocation, and continuous monitoring are also crucial to keeping our environment secure.
Biggest changeKey components of this include: • Vulnerability assessments - initiating regular evaluations to identify potential weaknesses in our systems. • Security controls and policies - establishing robust security measures and formal company-wide policies. • Employee training - training programs to ensure all employees are equipped to prevent and respond to cyber threats effectively. • Incident response plan - designing and implementing a well-defined plan for addressing cybersecurity incidents. • Continuous monitoring - establishing mechanisms for proactive monitoring of our environment to detect and respond to anomalies.
The information set forth in Note 17 “Contingencies and Litigation” in the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K is incorporated herein by reference. It em 4. Mine Safety Disclosures. Not applicable. 60 PART II It em 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
The information set forth in Note 18 “Contingencies and Litigation” in the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K is incorporated herein by reference. It em 4. Mine Safety Disclosures. Not applicable. 62 PART II It em 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
The Cybersecurity Team engages in regular discussions regarding incident response strategies to assess the preparedness for cyber threats and continually evaluates our incident response plans. The Incident Response Team (“IRT”) is led by the Vice President of Information Technology, who is the overall incident response coordinator.
The Cybersecurity Team engages in regular and ad hoc discussions regarding incident response strategies to assess the preparedness for cyber threats and continually evaluates our incident response plans. The Incident Response Team (“IRT”) is led by the Senior Vice President of Information Technology, who is the overall incident response coordinator.
We are negotiating lease terminations for operating leases for certain studios for which we have lease liabilities recorded, including for company-owned transition studios that have ceased operations prior to December 31, 2023. See Note 9 of Notes to Consolidated Financial Statements for additional information related to our existing lease obligations as of December 31, 2023.
Additionally, we are negotiating lease terminations for operating leases for certain studios for which we have lease liabilities recorded, including for company-owned transition studios that have ceased operations prior to December 31, 2024. See Note 10 of Notes to Consolidated Financial Statements for additional information related to our existing lease obligations as of December 31, 2024.
Governance The audit committee of our board of directors has primary responsibility for overseeing our risk management process relating to cybersecurity, which includes risks arising from cybersecurity threats. The Vice President of Information Technology works together with our board of directors, audit committee, and members of executive management (“Cybersecurity Team”) to set the strategic digital landscape.
Governance The audit committee of our board of directors has primary responsibility for overseeing our risk management process relating to cybersecurity, which includes risks arising from cybersecurity threats. The Chief Technology Officer works together with our board of directors, audit committee, and members of executive management (“Cybersecurity Team”) to set the strategic digital landscape.
A substantially greater number of holders of our Class A common stock are held in “street name” and held of record by banks, brokers and other financial institutions. As of February 22, 2024, there were 17 holders of record of our Class B common stock.
A substantially greater number of holders of our Class A common stock are held in “street name” and held of record by banks, brokers and other financial institutions. As of February 21, 2025, there were 13 holders of record of our Class B common stock.
Item 1C. Cyber security. Risk Management and Strategy We have developed a framework designed to safeguard our organization's digital assets from threats and vulnerabilities. It involves a systematic approach of identifying, assessing, and mitigating risks associated with our technology systems, data, and operations.
Item 1C. Cyber security. Risk Management and Strategy We continue to develop and implement a framework designed to safeguard our organization's digital assets from threats and vulnerabilities as part of our overall risk management system. It involves a systematic approach of identifying, assessing, and mitigating risks associated with our technology systems, data, and operations.
Market Information for Class A Common Stock Shares of our Class A common stock trade on the NYSE under the symbol “XPOF.” Holders of Record As of February 22, 2024, there were 56 holders of record of our Class A common stock.
Market Information for Class A Common Stock Shares of our Class A common stock trade on the NYSE under the symbol “XPOF.” Holders of Record As of March 6, 2025, there were 31 holders of record of our Class A common stock.
Our Vice President of Information Technology’s experience includes various roles in information technology and information security for over 15 years. Members of the Cybersecurity Team each hold undergraduate and, in some cases, graduate degrees in their respective fields, and each have experience managing risk at the Company or at similar companies, and assessing cybersecurity threats. 59 It em 2. Properties.
Our Chief Technology Officer’s experience includes various roles in information technology, data analytics, and information security at both public and private companies. Members of the Cybersecurity Team each hold undergraduate and, in some cases, graduate degrees in their respective fields, and each have experience managing risk at the Company or at similar companies, and assessing cybersecurity threats. It em 2.
Our corporate headquarters are located in Irvine, California, where we lease approximately 40,000 square feet of office space pursuant to a lease agreement which expires in 2032. We lease approximately 6,800 square feet for our digital platform production studio. Prior to September 2022, we leased our digital platform production studio from Von Karman Production LLC, which was owned by Mr.
Properties. Our corporate headquarters are located in Irvine, California, where we lease approximately 40,000 square feet of office space pursuant to a lease agreement which expires in 2032. We lease approximately 6,800 square feet for our digital platform production studio pursuant to a lease agreement which expires in 2027.
Through ongoing communications with these teams, the Vice President of Information Technology and the Cybersecurity Team are informed about and monitor the prevention, detection, mitigation and remediation of cybersecurity threats and incidents in real time and report such threats and incidents to the board of directors and the audit committee when appropriate.
The IRT, under the guidance of the Chief Technology Officer, assesses risk and materiality of an incident and engages members of Cybersecurity Team as needed. 61 Through ongoing communications with these teams, the Chief Technology Officer and the Cybersecurity Team are informed about and monitor the prevention, detection, mitigation and remediation of cybersecurity threats and incidents in real time and report such threats and incidents to the board of directors and the audit committee when appropriate .
We take a proactive approach, aiming to mitigate risk, protect sensitive information, and ensure the resilience of our digital infrastructure from cyber threats. We engage consultants or other third parties in conducting periodic assessments and testing of our policies, standards, processes, and practices. Material risks are those that have the potential to cause substantial harm or financial loss.
To ensure alignment with industry best practices we engage consultants or other third parties in conducting periodic assessments and testing of our policies, standards, processes, and practices. Material risks are those that have the potential to cause substantial harm or financial loss.
These leases expire in October 2024 and November 2025, r espectively. In addition, we also lease approximately 55,000 square feet of warehouse space in Tustin, CA, which lease expires in 2027. We believe that our existing facilities are adequate to meet our business requirements for the near-term and that additional space will be available on commercially reasonable terms, if required.
We believe that our existing facilities are adequate to meet our business requirements for the near-term and that additional space will be available on commercially reasonable terms, if required. We operated one company-owned transition studio in a leased property as of December 31, 2024.
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The IRT works together with our President to assess risk and materiality of an incident and engage members of Cybersecurity Team as needed.
Added
We also lease two Club Pilates training locations, one in Atlanta, Georgia and one in Costa Mesa, California. These leases expire in October 2027 and November 2025, r espectively. In addition, we also lease approximately 55,000 square feet of warehouse space in Tustin, CA, which lease expires in 2027.
Removed
Geisler, our Chief Executive Officer and founder. In September 2022, Mr. Geisler sold the building to an unaffiliated third party. The Company entered into a building lease with the new owner, which expires in 2027. We also lease two Club Pilates training locations, one in Atlanta, Georgia and one in Costa Mesa, California.
Added
Stock Performance Graph The following performance graph illustrates a comparison of cumulative total return of our Class A common stock, the Standard & Poor’s 500 Index (“S&P 500”) and the Standard & Poor’s 1500 Consumer Discretionary Index (“S&P 1500 Consumer Discretionary”).
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We operated 22 company-owned transition studios in leased properties as of December 31, 2023. We are actively seeking to refranchise or close company-owned transition studios under our restructuring plan that started in the third quarter of 2023.
Added
The graph assumes that, on July 23, 2021, a person invested $100 each in our Class A stock, the S&P 500, and the S&P 1500 Consumer Discretionary, and assumes the reinvestment of dividends, if any. The performance graph is not intended to be indicative of future performance.
Removed
Repurchases of Class A Common Stock The following table summarizes our repurchases of our Class A common stock during the three months ended December 31, 2023: Period Total number of shares purchased Average price paid per share Total number of shares purchased as part of publicly announced plans or programs (1) Maximum number (or approximate dollar value) of shares that may yet be purchased under the plans or programs (in millions) October 1 — October 31, 2023 (1) 588,827 $ 16.98 588,827 $ — November 1 — November 30, 2023 — — — — December 1 — December 31, 2023 — — — — Total 588,827 $ 16.98 588,827 $ — (1) On August 1, 2023, our board of directors approved a $50.0 million accelerated share repurchase program (the “ASR Program”) to repurchase shares of our Class A common stock.
Removed
Under the ASR Program, we paid a fixed amount of $50.0 million on August 9, 2023, to a third-party financial institution and received an initial delivery of 2,010,050 shares of our Class A common stock, which were retired immediately.
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The initial delivery of shares of our Class A common stock represented approximately 80% of the fixed amount paid of $50.0 million, which was based on the share price of our Class A common stock on the date of ASR Program execution.
Removed
Under the ASR Program, we also incurred $0.4 million in associated costs, consisting primarily of legal fees and a 1% excise tax. On October 2, 2023, the final settlement of our ASR Program occurred, and we received an additional 588,827 shares of our Class A common stock from the third-party financial institution.
Removed
The average price paid per share was $16.98, excluding legal fees and excise tax, for the fourth quarter 2023. The final average price paid per share upon final settlement for the entire ASR Program was $19.24, excluding legal fees and excise tax.
Removed
The final number of shares repurchased by us was based on the daily volume-weighted average stock price of our Class A common stock during the duration of the ASR Program, less a discount and subject to adjustments pursuant to the terms and conditions of the ASR Program agreement.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeConsolidated Statement s of Changes to Stockholders'/Member’s Equity (Deficit) (amounts in thousands) Class A Common Stock Class B Common Stock Treasury Stock Shares Amount Shares Amount Shares Amount Additional Paid-In Capital Member’s Contribution Receivable from Member/ Shareholder Accumulated Deficit Noncontrolling interests Total Equity (Deficit) Redeemable noncontrolling interests Balance at January 1, 2021 — $ — — $ — — $ — $ — $ 113,697 $ ( 1,456 ) $ ( 107,492 ) $ — $ 4,749 $ — Activity prior to Reorganization Transactions and IPO Equity-based compensation — — — — — — — 708 — — — 708 — Parent contribution of Rumble assets — — — — — — — 20,483 — — — 20,483 — Distributions to Member — — — — — — — ( 10,600 ) — — — ( 10,600 ) — Payment received from Member, net — — — — — — — — 1,456 — — 1,456 — Net loss — — — — — — — — — ( 13,342 ) — ( 13,342 ) — Balance prior to Reorganization Transactions and IPO — — — — — — — 124,288 — ( 120,834 ) — 3,454 — Activity in connection with Reorganization Transactions and IPO Effect of Reorganization Transactions 12,994 1 23,543 2 — — — ( 124,288 ) ( 10,600 ) ( 202,374 ) — ( 337,259 ) 282,513 Issuance of Class A common stock at the IPO, net of underwriting and offering costs 10,000 1 — — — — 104,387 — — — — 104,388 — Purchase of shares from LCAT shareholders — — — — — — ( 104,387 ) — — ( 46,598 ) — ( 150,985 ) — Issuance of Class A common stock for underwriters' option to purchase additional shares 904 — — — — — 10,116 — — — — 10,116 — Redemption of Class B shares — — ( 750 ) — — — ( 9,000 ) — — — — ( 9,000 ) — Balance post the Reorganization Transactions and IPO 23,898 2 22,793 2 — — 1,116 — ( 10,600 ) ( 369,806 ) — ( 379,286 ) 282,513 Activity after the Reorganization Transactions and IPO but prior to the amendment of the LLC agreement Net loss — — — — — — — — — ( 17,155 ) — ( 17,155 ) ( 17,568 ) Equity-based compensation — — — — — — 2,089 — — — — 2,089 5,731 Fair value adjustment for redeemable noncontrolling interest — — — — — — ( 2,065 ) — — ( 172,385 ) — ( 174,450 ) 174,450 Removing the redeemable feature of the noncontrolling interest — — — — — — — — — — 445,126 445,126 ( 445,126 ) Balance subsequent to the amendment of the LLC agreement 23,898 2 22,793 2 — — 1,140 — ( 10,600 ) ( 559,346 ) 445,126 ( 123,676 ) — Activity subsequent to the amendment of the LLC agreement Vesting of Class B shares — — 176 — — — — — — — — — — Adjustment of preferred stock to redemption value — — — — — — ( 1,116 ) — — ( 77,378 ) — ( 78,494 ) — Equity-based compensation — — — — — — 283 — — — 535 818 — Payment of preferred stock dividends — — — — — — ( 307 ) — — ( 5,435 ) — ( 5,742 ) — Net loss — — — — — — — — — ( 1,674 ) ( 1,701 ) ( 3,375 ) — Balance at December 31, 2021 23,898 2 22,969 2 — — — — ( 10,600 ) ( 643,833 ) 443,960 ( 210,469 ) — Equity based compensation — — — — — — 12,925 — — — 12,193 25,118 — Net income — — — — — — — — — 1,930 945 2,875 — Conversion of Class B shares to Class A shares 3,303 — ( 3,303 ) — — — 510,382 — — — ( 510,382 ) — — Vesting of Class B shares — — 1,981 — — — — — — — — — — Vesting of restricted share units, net of shares withheld for taxes 370 1 — — — — ( 1,909 ) — — — — ( 1,908 ) — Loan to shareholder and accumulated interest — — — — — — — — ( 5,769 ) — — ( 5,769 ) — Payment of preferred stock dividend — — — — — — ( 13,000 ) — — — — ( 13,000 ) — Adjustment of preferred stock to redemption value — — — — — — ( 31,185 ) — — — — ( 31,185 ) — Settlement of contingent consideration — — — — — — 29,070 — — — — 29,070 — Purchase of treasury stock — — — — 75 ( 1,697 ) ( 1,097 ) — — — — ( 2,794 ) — Balance at December 31, 2022 27,571 $ 3 21,647 $ 2 75 $ ( 1,697 ) $ 505,186 $ — $ ( 16,369 ) $ ( 641,903 ) $ ( 53,284 ) $ ( 208,062 ) $ — See accompanying notes to consolidated financial statements. 90 Xponential Fitness, Inc.
Biggest changeConsolidated Statements of Changes to Stockholders' Equity (Deficit) (amounts in thousands) Class A Common Stock Class B Common Stock Treasury Stock Shares Amount Shares Amount Shares Amount Additional Paid-In Capital Receivable from Member/ Shareholder Accumulated Deficit Noncontrolling interests Total Equity (Deficit) Balance at December 31, 2021 (As Corrected) 23,898 $ 2 22,969 $ 2 — $ — $ — $ ( 10,600 ) $ ( 644,072 ) $ 443,713 $ ( 210,955 ) Equity based compensation — — — — — — 12,925 — — 12,193 25,118 Net income (loss) (As Corrected) — — — — — — — — 1,215 ( 114 ) 1,101 Conversion of Class B shares to Class A shares (As Corrected) 3,303 — ( 3,303 ) — — — 510,069 — — ( 510,069 ) — Vesting of Class B Shares — — 1,981 — — — — — — — — Vesting of restricted share units, net of shares withheld for taxes 370 1 — — — — ( 1,909 ) — — — ( 1,908 ) Loan to shareholder and accumulated interest — — — — — — — ( 5,769 ) — — ( 5,769 ) Payment of preferred stock dividend — — — — — — ( 13,000 ) — — — ( 13,000 ) Adjustment of preferred stock to redemption value — — — — — — ( 31,185 ) — — — ( 31,185 ) Settlement of contingent consideration — — — — — — 29,070 — — — 29,070 Purchase of treasury stock — — — — 75 ( 1,697 ) ( 1,097 ) — — — ( 2,794 ) Receivable from holders of the preferred stock (As Corrected) — — — — — — — ( 1,162 ) — — ( 1,162 ) Distributions paid to Pre-IPO LLC Members (As Corrected) — — — — — — — — — ( 394 ) ( 394 ) Balance at December 31, 2022 (As Corrected) 27,571 $ 3 21,647 $ 2 75 $ ( 1,697 ) $ 504,873 $ ( 17,531 ) $ ( 642,857 ) $ ( 54,671 ) $ ( 211,878 ) See accompanying notes to consolidated financial statements. 94 Xponential Fitness, Inc.
The increase was due primarily to amortization of intangibles related to the BodyFit trademark acquired in the second quarter of 2022 and to an increase in fixed assets to support our online offerings. Marketing fund expense.
The increase was due primarily to amortization of intangibles related to BodyFit trademark acquired in the second quarter of 2022 and to an increase in fixed assets to support our online offerings. Marketing fund expense.
Depending on the number of studios purchased under franchise agreements or area development agreements, the initial franchise fee ranges from $ 60 (single studio) to $ 350 (ten studios) and is paid to the Company when a franchisee signs the area development agreement. Area development fees are initially recorded as deferred revenue.
Depending on the number of studios purchased under franchise agreements or area development agreements, the initial franchise fee ranges from $ 60 (single studio) to $ 350 (ten studios) and is paid to the Company when a franchisee signs the franchise agreement or the area development agreement. Area development fees are initially recorded as deferred revenue.
Fees received by the Company for online class training are recognized as revenue over time for the 12-month period that the Company is obligated to provide access to the online training content. Franchise marketing fund revenue – Franchisees are required to pay marketing fees o f 2 % of t heir gross sales.
Fees received by the Company for online class training are recognized as revenue over time for the 12-month period that the Company is obligated to provide access to online training content. Franchise marketing fund revenue – Franchisees are required to pay marketing fees o f 2 % of t heir gross sales.
The acquisition was not material to the results of operations of the Company.
The acquisition was not material to the results of operations of the Company.
Internal control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the Company's principal executive and principal financial officers and effected by the Company's board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that: • Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; • Provided reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and • Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use of disposition of the Company's assets that could have a material effect on the financial statements.
Internal control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the Company's principal executive and principal financial officers and effected by the Company's board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that: • Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; • Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and • Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use of disposition of the Company's assets that could have a material effect on the financial statements.
ASC 820 establishes a valuation hierarchy for disclosures of the inputs to valuations used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows: Level 1 – Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that can be accessed at the measurement date.
ASC Topic 820 establishes a valuation hierarchy for disclosures of the inputs to valuations used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows: Level 1 – Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that can be accessed at the measurement date.
The Company has also provided loans for the establishment of new or transferred franchise studios to various franchisees. These loans have terms of up to ten years and bear interest at a stated fixed rate ranging from 0 % to 15 %, or variable rates based on LIBOR plus a specified margin .
The Company has also previously provided loans for the establishment of new or transferred franchise studios to various franchisees. These loans have terms of up to ten years and bear interest at a stated fixed rate ranging from 0 % to 15 % or variable rates based on LIBOR plus a specified margin .
Management reviews system-wide sales weekly, which enables us to assess changes in our franchise revenue, overall studio performance, the health of our brands and the strength of our market position relative to competitors. New Studio Openings The number of new studio openings reflects the number of studios opened during a particular reporting period.
Management reviews system-wide sales weekly, which enables us to assess changes in our franchise revenue, overall studio performance, the health of our brands and the strength of our market position relative to competitors. 69 New Studio Openings The number of new studio openings reflects the number of studios opened during a particular reporting period.
The following summarizes the aggregate fair values of the assets acquired and liabilities assumed: Amount Property and equipment $ 19 Reacquired franchise rights 137 Total purchase price $ 156 The fair value of reacquired franchise rights was based on the excess earnings method and is considered to have an approximate six-year life.
The following summarizes the aggregate fair values of the assets acquired and liabilities assumed: Amount Property and equipment $ 19 Reacquired franchise rights 137 Total purchase price $ 156 The fair value of reacquired franchise rights was based on the excess earnings method and was considered to have an approximate six-year life.
Notes to Consolidated Financial Statements (amounts in thousands, except per share amounts) ROU assets from operating leases are subject to the impairment guidance in ASC 360, Property, Plant, and Equipment, and are reviewed for impairment when indicators of impairment are present. ASC 360 requires three steps to identify, recognize and measure impairment.
Notes to Consolidated Financial Statements (amounts in thousands, except per share amounts) ROU assets from operating leases are subject to the impairment guidance in ASC Topic 360, Property, Plant, and Equipment , and are reviewed for impairment when indicators of impairment are present. ASC Topic 360 requires three steps to identify, recognize and measure impairment.
Studios On June 5, 2023 , the Company entered into an Asset Purchase Agreement to purchase 14 studios to operate as company-owned transition studios from the original founder sellers of the Rumble brand, which was acquired by the Company in 2021, (the “Rumble Sellers”) and were franchisees and shareholders of the Company.
Studios – On June 5, 2023 , the Company entered into an Asset Purchase Agreement (“APA”) to purchase 14 studios to operate as company-owned transition studios from the original founder sellers of the Rumble brand, which was acquired by the Company in 2021 (the “Rumble Sellers”) and were franchisees and shareholders of the Company.
Immediately prior to the execution of the purchase agreement on December 1, 2023, Lindora Wellness, Inc. signed 31 franchise agreements with the Lindora Franchisor pursuant to which Lindora Wellness, Inc. will continue to operate its Lindora Clinics as a franchisee of the Lindora Franchisor. The acquisition of the Lindora Franchisor was completed on January 2, 2024.
Immediately prior to the execution of the purchase agreement on December 1, 2023, Lindora Wellness signed 31 franchise agreements with the Lindora Franchisor pursuant to which Lindora Wellness will continue to operate its Lindora clinics as a franchisee of the Lindora Franchisor. The acquisition of the Lindora Franchisor was completed on January 2, 2024.
Immediately prior to the execution of the purchase agreement on December 1, 2023, Lindora Wellness, Inc. signed 31 franchise agreements with the Lindora Franchisor pursuant to which Lindora Wellness, Inc. will continue to operate its Lindora Clinics as a franchisee of the Lindora Franchisor . The acquisition of the Lindora Franchisor was completed on January 2, 2024.
Immediately prior to the execution of the purchase agreement on December 1, 2023, Lindora Wellness signed 31 franchise agreements with the Lindora Franchisor pursuant to which Lindora Wellness will continue to operate its Lindora clinics as a franchisee of the Lindora Franchisor. The acquisition of the Lindora Franchisor was completed on January 2, 2024.
Leases – The Company leases office space, company-owned transition studios, warehouse, training centers and a video recording studio. Certain real estate leases include one or more options to renew. The exercise of lease renewal options is at the Company's sole discretion.
Leases – The Company leases office space, company-owned transition studio, warehouse, training centers and a video recording studio. Certain real estate leases include one or more options to renew. The exercise of lease renewal options is at the Company's sole discretion.
Critical Accounting Estimates We prepare our consolidated financial statements in accordance with GAAP, which requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures of contingent assets and liabilities.
Critical Accounting Estimates and Policies We prepare our consolidated financial statements in accordance with GAAP, which requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures of contingent assets and liabilities.
The fair value of the reacquired franchise rights after termination of the existing franchise agreements was based on the excess earnings method and is considered to have an eight-year life. The acquisition was not material to the results of operations of the Company.
The fair value of the reacquired franchise rights after termination of the existing franchise agreements was based on the excess earnings method and was considered to have an eight-year life. The acquisition was not material to the results of operations of the Company.
EBITDA and adjusted EBITDA are also frequently used by analysts, investors and other interested parties to evaluate companies in our industry. 74 We believe that adjusted EBITDA, viewed in addition to, and not in lieu of, our reported GAAP results, provides useful information to investors regarding our performance and overall results of operations because it eliminates the impact of other items that we believe reduce the comparability of our underlying core business performance from period to period and is therefore useful to our investors in comparing the core performance of our business from period to period.
EBITDA and adjusted EBITDA are also frequently used by analysts, investors and other interested parties to evaluate companies in our industry. 81 We believe that adjusted EBITDA, viewed in addition to, and not in lieu of, our reported GAAP results, provides useful information to investors regarding our performance and overall results of operations because it eliminates the impact of other items that we believe reduce the comparability of our underlying core business performance from period to period and is therefore useful to our investors in comparing the core performance of our business from period to period.
Lindora Wellness, Inc. has owned and operated each of the Lindora Clinics in California for at least 25 years and currently owns and operates 30 Lindora Clinics in California and a single Lindora Clinic in the state of Washington.
Lindora Wellness has owned and operated each of the Lindora clinics in California for at least 25 years and currently owns and operates 30 Lindora clinics in California and a single Lindora clinic in the state of Washington.
Interest income primarily consists of interest on notes receivable, which was $1.6 million in the year ended December 31, 2023, compared to $1.8 million in the year ended December 31, 2022. 73 Interest expense .
Interest income primarily consists of interest on notes receivable, which was $1.6 million in the year ended December 31, 2023, compared to $1.8 million in the year ended December 31, 2022. Interest expense .
In March 2023, Spartan Fitness Holdings, LLC (“Spartan Fitness”), which currently owns and operates 78 Club Pilates studios, entered into a unit purchase agreement with Snapdragon Spartan Investco LP (the “Spartan SPV”), a special purpose vehicle controlled and managed by a member of the Company’s board of directors, pursuant to which Spartan SPV agreed to invest in the equity of Spartan Fitness.
In March 2023, Spartan Fitness Holdings, LLC (“Spartan Fitness”), which currently owns and operates 112 Club Pilates studios, entered into a unit purchase agreement with Snapdragon Spartan Investco LP (the “Spartan SPV”), a special purpose vehicle controlled and managed by a member of the Company’s board of directors, pursuant to which Spartan SPV agreed to invest in the equity of Spartan Fitness.
We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. Actual results may differ from those estimates. 78 Our critical accounting policies are those that materially affect our consolidated financial statements, including those that involve difficult, subjective or complex judgments by management.
We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. Actual results may differ from those estimates. 85 Our critical accounting policies are those that materially affect our consolidated financial statements, including those that involve difficult, subjective or complex judgments by management.
Initial franchise fees are recorded as deferred revenue when received and are recognized on a straight-line basis over the franchise life, which the Company has determined to be ten years , as the Company fulfills its promise to grant the franchisee the rights to access and benefit from the Company’s intellectual property and to support and maintain the intellectual property. 97 Xponential Fitness, Inc.
Initial franchise fees are recorded as deferred revenue when received and are recognized on a straight-line basis over the franchise life, which the Company has determined to be ten years , as the Company fulfills its promise to grant the franchisee the rights to access and benefit from the Company’s intellectual property and to support and maintain the intellectual property. 109 Xponential Fitness, Inc.
Additionally, the Company did no t recognize any income tax expense related to interest and penalties on uncertain tax positions in the consolidated statements of operations for the years ended December 31, 2023, 2022, and 2021. The Company does not expect a significant change in unrecognized tax benefits during the next 12 months.
Additionally, the Company did no t recognize any income tax expense related to interest and penalties on uncertain tax positions in the consolidated statements of operations for the years ended December 31, 2024, 2023 and 2022. The Company does not expect a significant change in unrecognized tax benefits during the next 12 months.
The cost and accumulated depreciation of assets sold or retired are removed from the accounts and any gain or loss is included in the results of operations during the period of sale or disposal. Costs for repairs and maintenance are expensed as incurred. Repairs and maintenance costs for the years ended December 31, 2023, 2022 and 2021 were insignificant.
The cost and accumulated depreciation of assets sold or retired are removed from the accounts and any gain or loss is included in the results of operations during the period of sale or disposal. Costs for repairs and maintenance are expensed as incurred. Repairs and maintenance costs for the years ended December 31, 2024, 2023 and 2022 were insignificant.
Shares of Class B common stock are considered potentially dilutive shares of Class A common stock; however, in loss periods related amounts are excluded from the computation of diluted earnings per share of Class A common stock because the effect would be anti-dilutive under the if-converted and two-class methods. For further discussion, see Note 15.
Shares of Class B common stock are considered potentially dilutive shares of Class A common stock; however, in loss periods related amounts are excluded from the computation of diluted earnings per share of Class A common stock because the effect would be anti-dilutive under the if-converted and two-class methods. For further discussion, see Note 16.
Therefore, the Company performed a quantitative assessment of the fair value of the reporting units using an income approach with assumptions that are considered Level 3 inputs and concluded that the carrying value of the Stride and Row House reporting units exceeded their fair value, resulting in a goodwill impairment of $ 3,469 and $ 700 , respectively, resulting in no goodwill remaining for the Stride and Row House reporting units.
Therefore, the Company performed a quantitative assessment of the fair values of the reporting units using an income approach with assumptions that are considered Level 3 inputs and concluded that the carrying values of the Stride and Row House reporting units exceeded their fair values, resulting in a goodwill impairment of $ 3,469 and $ 700 , respectively, resulting in no goodwill remaining for the Stride and Row House reporting units.
Note 11 – Redeemable Convertible Preferred Stock On July 23, 2021, the Company issued and sold in a private placement 200 newly issued shares of Series A-1 Convertible Preferred Stock, par value $ 0.0001 per share (the “Convertible Preferred”), for aggregate cash proceeds of $ 200,000 , before deduction for offering costs.
Note 12 – Redeemable Convertible Preferred Stock On July 23, 2021, the Company issued and sold in a private placement 200 newly issued shares of Series A-1 Convertible Preferred Stock, par value $ 0.0001 per share (the “Convertible Preferred”), for aggregate cash proceeds of $ 200,000 , before deduction for offering costs.
As of December 31, 2023 , the Company has concluded, based on applicable accounting standards, that it was more likely than not that its deferred tax assets subject to the TRA would not be realized. Therefore, the Company has not recorded a liability related to the tax savings it may realize from utilization of such deferred tax assets.
As of December 31, 2024 , the Company has concluded, based on applicable accounting standards, that it was more likely than not that its deferred tax assets subject to the TRA would not be realized. Therefore, the Company has not recorded a liability related to the tax savings it may realize from utilization of such deferred tax assets.
Item 6. [Reserved] 61 It em 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes thereto and the other financial information included elsewhere in this Annual Report on Form 10-K.
Item 6. [Reserved] 63 It em 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes thereto and the other financial information included elsewhere in this Annual Report on Form 10-K.
The Company classifies these contract liabilities as either current deferred revenue or non-current deferred revenue in the consolidated balance sheets based on the anticipated timing of delivery. The following table reflects the change in franchise de velopment and brand fee contract liabilities for the years ended December 31, 2023, 2022 and 2021 .
The Company classifies these contract liabilities as either current deferred revenue or non-current deferred revenue in the consolidated balance sheets based on the anticipated timing of delivery. The following table reflects the change in franchise de velopment and brand fee contract liabilities for the years ended December 31, 2024, 2023 and 2022 .
The information required by this Item 14 will be contained in the Definitive Proxy Statement referenced above in Item 10 and is incorporated herein by reference. 132 PART IV It em 15. Exhibits, Financial Statement Schedules. (a)(1) Financial Statements. The financial statements required by this item are listed in Part II, Item 8 “Financial Statements and Supplementary Data” herein.
The information required by this Item 14 will be contained in the Definitive Proxy Statement referenced above in Item 10 and is incorporated herein by reference. 145 PART IV It em 15. Exhibits, Financial Statement Schedules. (a)(1) Financial Statements. The financial statements required by this item are listed in Part II, Item 8 “Financial Statements and Supplementary Data” herein.
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.
In December 2022, the Company entered into an agreement with the former owner of Row House, pursuant to which contingent consideration relating to the 2017 acquisition of Row House was settled in exchange for the issuance of 105 restricted stock units ( “RSU” ) which vest in full on the fourth anniversary of the grant date.
In December 2022, the Company entered into an agreement with the former owner of Row House, pursuant to which contingent consideration relating to the 2017 acquisition of Row House was settled in exchange for the issuance of 105 restricted stock units (“RSUs”), which vest in full on the fourth anniversary of the grant date.
During the year ended December 31, 2023, the Company determined that the Stride and Row House reporting units had indicators of impairment based on a qualitative assessment and performed a quantitative assessmen t. As a result, the Company recognized an impairment loss to write-off the goodwill associated with the Stride and Row House reporting units.
During the year ended December 31, 2023, the Company determined that the Stride and Row House reporting units had indicators of impairment based on a qualitative assessment and performed a quantitative assessment. As a result, the Company recognized an impairment loss to write-off the goodwill associated with the Stride and Row House reporting units.
Additionally, the Company recorded a goodwill impairment related to the assets held for sale classification of the Rumble Held for Sale Studios, as defined below in Note 3. During the year ended December 31, 2022, the Company recognized an impairment loss to write-off the goodwill associated with the AKT reporting unit.
Additionally, the Company recorded a goodwill impairment related to the assets held for sale classification of the Rumble Held for Sale Studios, as defined below in Note 4. During the year ended December 31, 2022, the Company recognized an impairment loss to write-off the goodwill associated with the AKT reporting unit.
Otherwise, the Term Loans may be paid without premium or penalty, other than customary breakage costs with respect to SOFR Term Loans.
Otherwise, the Term Loans may be paid without premium or penalty, other than customary breakage costs with respect to Term Loans.
In addition, the same member of the Company’s board of directors also invested as a limited partner in the Spartan SPV. Spartan Fitness intends to use the investment from Spartan SPV to fund expansion of Club Pilates studios, among other concepts. Spartan Fitness also owns the rights to 89 Club Pilates licenses to open additional new units.
In addition, the same member of the Company’s board of directors also invested as a limited partner in the Spartan SPV. Spartan Fitness intends to use the investment from Spartan SPV to fund expansion of Club Pilates studios, among other concepts. Spartan Fitness also owns the rights to 79 Club Pilates licenses to open additional new units.
During 2023 and 2022, the Company experienced a change in noncontrolling interests ownership due to the conversion of Class B to Class A shares and as such, has rebalanced the related noncontrolling interests balance. The Company calculated the rebalancing based on the net assets of XPO LLC, after considering the preferred shareholders' claim on the net assets of XPO LLC.
During 2024 and 2023, the Company experienced a change in noncontrolling interests ownership due to the conversion of Class B to Class A shares and as such, has rebalanced the related noncontrolling interests balance. The Company calculated the rebalancing based on the net assets of XPO LLC, after considering the preferred shareholders' claim on the net assets of XPO LLC.
At any time after July 23, 2029, upon a sale of the Company, or at any time after the occurrence and continuance of an event of default, holders of the Convertible Preferred have the right to require the Company to redeem all, but not less than all, of the Preferred shares then outstanding at a redemption price in cash equal to the greater of (i) the fair market value per share of Preferred Stock (based on the average volume-weighted average price per share of Class A common stock for the 10 consecutive trading day period ending on, and including, the trading day immediately preceding the redemption notice), and (ii) the fixed liquidation preference, plus accrued and unpaid dividends.
At any time after July 23, 2029, upon a sale of the Company, or at any time after the occurrence and continuance of an event of default, holders of the Convertible Preferred have the right to require the Company to redeem all, but not less than all, of the Preferred shares then outstanding at a redemption price in cash equal to the greater of (i) the fair market value per share of Preferred Stock (based on the average volume-weighted average price per share of Class A common stock for the 10 consecutive trading day period ending on, and including, the trading day immediately preceding the redemption notice), and (ii) the fixed liquidation preference, plus accrued and unpaid dividends. 127 Xponential Fitness, Inc.
The Company determined the estimated fair values after review and consideration of relevant information as of the acquisition date, including discounted cash flows, quoted market prices and estimates made by management. The fair values assigned to tangible and intangible assets acquired are based on management's estimates and assumptions.
The Company determined the estimated fair values after review and consideration of relevant information as of the acquisition date, including discounted cash flows, quoted market prices and estimates made by management. The fair values assigned to tangible and intangible assets acquired were based on management's estimates and assumptions.
As discussed in Note 3, the Company determined that the Rumble Held for Sale Studios were considered assets held for sale as of December 31, 2023. Accordingly, based on a relative fair value allocation, the Company reclassified $ 2,568 of goodwill related to the Company’s Rumble brand to assets held for sale.
As discussed in Note 4, the Company determined that the Rumble Held for Sale Studios were considered assets held for sale as of December 31, 2023. Accordingly, based on a relative fair value allocation, the Company reclassified $ 2,568 of goodwill related to the Company’s Rumble brand to assets held for sale.
Note 18 – Restructuring In the third quarter of 2023, the Company began a restructuring plan that involves exiting company-owned transition studios and other measures designed to reduce costs to achieve the Company’s long-term margin goals and focus on pure franchise operations.
Note 19 – Restructuring In the third quarter of 2023, the Company began a restructuring plan that involves exiting company-owned transition studios and other measures designed to reduce costs to achieve the Company’s long-term margin goals and focus on pure franchise operations.
Evaluation of Disclosure Controls and Procedures Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of December 31, 2023.
Evaluation of Disclosure Controls and Procedures Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of December 31, 2024.
The technology solution may include various software licenses for statistical tracking, scheduling, allowing club members to record their personal workout statistics, music and technology support. The Company bills and recognizes the technology fee as earned each month as the technology solution service is performed.
The technology solution may include various software licenses for statistical tracking, scheduling, allowing club members to record their personal workout statistics, music and technology support. The Company bills and recognizes the technology fee as earned each month as the service is performed and access is provided.
Note 4 – Contract Liabilities and Costs from Contracts with Customers Contract liabilities – Contract liabilities consist of deferred revenue resulting from franchise fees, development fees and master franchise fees paid by franchisees, which are recognized over time on a straight-line basis over the franchise agreement term.
Note 5 – Contract Liabilities and Costs from Contracts with Customers Contract liabilities – Contract liabilities consist of deferred revenue resulting from franchise development fees (franchise fees, development fees and master franchise fees paid by franchisees), which are recognized over time on a straight-line basis over the franchise agreement term.
Notes to Consolidated Financial Statements (amounts in thousands, except per share amounts) The following table illustrates estimated revenue expected to be recognized in the future related to performance obligations that were unsatisfied (or partially unsatisfied) as of December 31, 2023.
Notes to Consolidated Financial Statements (amounts in thousands, except per share amounts) The following table illustrates estimated revenue expected to be recognized in the future related to performance obligations that were unsatisfied (or partially unsatisfied) as of December 31, 2024.
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2023. In making this assessment, the Company's management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-integrated 2013 Framework.
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2024. In making this assessment, the Company's management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-integrated 2013 Framework.
The decrease was primarily due to a $3.7 million decrease in franchise sales commissions, consistent with the related franchise territory revenue decrease, partially offset by a $1.1 million increase in cost of technology fees. Selling, general and administrative expenses.
The decrease was primarily due to a $3.7 million decrease in franchise sales commissions, consistent with the related franchise territory revenue decrease, partially offset by a $1.1 million increase in cost of technology. 79 Selling, general and administrative expenses.
For such non-branded merchandise sales, the Company is the agent in the transaction, facilitating the transaction between the franchisee and the supplier, as the Company does not obtain control of the non-branded merchandise during the order fulfillment process. The Company records non-branded merchandise commissions revenue at the time of shipment.
For such supplier merchandise sales, the Company is the agent in the transaction, facilitating the transaction between the franchisee and the supplier, as the Company does not obtain control of the merchandise during the order fulfillment process. The Company records supplier merchandise commissions revenue at the time of shipment.
Acquisition and transaction expenses (income) – Acquisition and transaction expenses (income) include costs directly related to the acquisition of businesses, which include expenditures for advisory, legal, valuation, accounting and similar services, in addition to amounts recorded for changes in contingent consideration (see Note 17).
Acquisition and transaction expenses (income) – Acquisition and transaction expenses (income) include costs directly related to the acquisition of businesses, which include expenditures for advisory, legal, valuation, accounting and similar services, in addition to amounts recorded for changes in contingent consideration (see Note 18).
Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 97* Policy Regarding the Recoupment of Certain Compensation Payments, dated October 26, 2023 101.INS Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. 101.SCH Inline XBRL Taxonomy Extension Schema with Embedded Linkbase Documents 104 Cover Page Interactive Data File (embedded within the Inline XBRL document) * Filed herewith. ** Furnished herewith. + Denotes management contract or compensatory plan, contract or arrangement. † Portions of this exhibit have been redacted pursuant to Item 601(b)(10)(iv) of Regulation S-K.
Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 97 Policy Regarding the Recoupment of Certain Compensation Payments, dated October 26, 2023. 10-K 001-40638 97 03/04/2024 101.INS Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. 101.SCH Inline XBRL Taxonomy Extension Schema with Embedded Linkbase Documents 104 Cover Page Interactive Data File (embedded within the Inline XBRL document) * Filed herewith. ** Furnished herewith. + Denotes management contract or compensatory plan, contract or arrangement. † Portions of this exhibit have been redacted pursuant to Item 601(b)(10)(iv) of Regulation S-K.
Other (Income) Expense, net Years Ended December 31, Change from Prior Year 2023 2022 $ % ($ in thousands) Interest income $ (1,611 ) $ (1,805 ) $ 194 (10.7 )% Interest expense 38,733 13,017 25,716 197.6 % Other expense 3,193 523 2,670 510.5 % Total other expense, net $ 40,315 $ 11,735 $ 28,580 243.5 % Interest income.
Other Expense (Income), net Year Ended December 31, Change from Prior Year 2023 2022 $ % (As Corrected) (As Corrected) ($ in thousands) Interest income $ (1,611 ) $ (1,805 ) $ 194 (10.7 )% Interest expense 38,733 13,017 25,716 197.6 % Other expense 3,193 523 2,670 510.5 % Total other expense, net $ 40,315 $ 11,735 $ 28,580 243.5 % Interest income.
The total commission is deferred at the point of a franchise sale. The commissions are evenly split among the number of studios purchased under the development agreement and begin to be amortized when a subsequent franchise agreement is executed.
The total commission is deferred at the point of a franchise sale. The commissions are evenly split among the number of studios purchased under the development agreement and begin to be amortized when a subsequent or initial franchise agreement is executed.
Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Xponential Fitness, Inc. and subsidiaries (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations, changes to stockholders'/member's equity (deficit) and cash flows, for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”).
Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Xponential Fitness, Inc. and subsidiaries (the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of operations, changes to stockholders’ equity (deficit), and cash flows, for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the “financial statements”).
The Company accrues interest as an addition to the principal balance as the interest is earned. Activity related to these loans is presented within investing activities in the consolidated statements of cash flows. 108 Xponential Fitness, Inc.
The Company accrues interest as an addition to the principal balance as the interest is earned. Activity related to these loans is presented within investing activities in the consolidated statements of cash flows. 119 Xponential Fitness, Inc.
There were no impairments recorded for the years ended December 31, 2023, 2022 and 2021 . Definite-lived intangible assets – Definite-lived intangible assets, consisting of franchise agreements, reacquired franchise rights, customer relationships, non-compete agreements, certain trademarks and web design and domain, are amortized using the straight-line method over the estimated remaining economic lives.
There were no trademark impairments for the years ended December 31, 2023 and 2022. Definite-lived intangible assets – Definite-lived intangible assets, consisting of franchise agreements, reacquired franchise rights, customer relationships, non-compete agreements, certain trademarks and web design and domain, are amortized using the straight-line method over the estimated remaining economic lives.
The standby letter of credit is contingent upon the failure of franchisees to perform according to the terms of underlying contracts with the third party. The Company deposited cash in a restricted account as collateral for the standby letter of credit.
The standby letter of credit is contingent upon the failure of franchisees to perform according to the terms of underlying contracts with the third party. We deposited cash in a restricted account as collateral for the standby letter of credit.
The Company did no t have any unrecognized tax benefits as of December 31, 2023, and 2022. Accordingly, no interest and penalties related to unrecognized tax benefits were accrued on the consolidated balance sheets as of December 31, 2023 and 2022.
The Company did no t have any unrecognized tax benefits as of December 31, 2024, and 2023 . Accordingly, no interest and penalties related to unrecognized tax benefits were accrued on the consolidated balance sheets as of December 31, 2024 and 2023 .
Insider trading arrangements and policies During the quarter ended December 31, 2023 , none of our directors or officers adopted or terminated any “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as defined in Item 408(a) of Regulation S-K. Ite m 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. Not applicable. 131 PART III It em 10.
Insider trading arrangements and policies During the quarter ended December 31, 2024 , none of our directors or officers adopted or terminated any “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as defined in Item 408(a) of Regulation S-K. Ite m 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. Not applicable. 144 PART III It em 10.
This acquisition is expected to enhance the operational performance of the 14 Rumble studios as the Company prepares them to be licensed to new franchisees. The transaction was accounted for as a business combination using the acquisition method of accounting, which requires the assets acquired to be recorded at their respective fair value as of the date of the transaction.
This acquisition was expected to enhance the operational performance of the 14 Rumble studios as the Company prepared them to be licensed to new franchisees. The transaction was accounted for as a business combination using the acquisition method of accounting, which requires the assets acquired to be recorded at their respective fair value as of the date of the transaction.
A change in any of these assumptions could produce a different fair value, which could have a material impact on our results of operations. Assuming there had been a 10% increase in the fair value, contingent consideration would have increased by $2.1 million for the year ended December 31, 2023.
A change in any of these assumptions could produce a different fair value, which could have a material impact on our results of operations. Assuming there had been a 10% increase in the fair value, contingent consideration would have increased by $1.1 million for the year ended December 31, 2024.
The fair value of the reporting units was determined by discounting estimated future cash flows, which were calculated based on revenue and expense long-term growth assumptions ranging from 8.0% to 43.0%, at a weighted average cost of capital (discount rate) of 16.0%.
The fair values of the reporting units were determined by discounting estimated future cash flows, which were calculated based on revenue and expense long-term growth assumptions ranging from 8.0 % to 43.0 %, at a weighted average cost of capital (discount rate) of 16.0 %.
Directors, Executive Officers and Corporate Governance. The information called for by Item 10 is incorporated by reference to our Definitive Proxy Statement relating to our 2024 Annual Meeting of Stockholders.
Directors, Executive Officers and Corporate Governance. The information called for by Item 10 is incorporated by reference to our Definitive Proxy Statement relating to our 2025 Annual Meeting of Stockholders.
In connection with the October 2021 acquisition of BFT, the Company agreed to pay contingent consideration to the Seller consisting of quarterly cash payments based on the sales of the Franchise System and equipment packages in the U.S. and Canada, as well as a percentage of royalties collected by the Company, provided that aggregate min imum payments of $ 5,000 AUD (approximately $ 3,694 USD based on the currency exchange rate as of the purchase date) are required to be paid to the Seller for the two-year period ending December 31, 2023.
In connection with the October 2021 acquisition of BFT, the Company agreed to pay contingent consideration to the Seller consisting of quarterly cash payments based on the sales of the franchise system and equipment packages in the U.S. and Canada, as well as a percentage of royalties collected by the Company, provided that aggregate minimum payments of $ 5,000 AUD (approximately $ 3,694 USD based on the currency exchange rate as of the purchase date) are required to be paid to the Seller for the two-year period ended December 31, 2023.
The plan was approved and initiated in the third quarter of 2023 and is expected to continue throughout 2024, however ultimate timing will depend on lease termination negotiations.
The plan was approved and initiated in the third quarter of 2023 and is expected to continue throughout 2025; however, ultimate timing will depend on lease termination negotiations.
The plan was approved and initiated in the third quarter of 2023 and is expected to continue throughout 2024, however ultimate timing will depend on lease termination negotiations.
The plan was approved and initiated in the third quarter of 2023 and is expected to continue throughout 2025; however ultimate timing will depend on lease termination negotiations.
Equipment revenue is recognized when control of the equipment is transferred to the franchisee, which is at the point in time when delivery and installation of the equipment at the studio is complete. 98 Xponential Fitness, Inc.
Equipment revenue is recognized when control of the equipment is transferred to the franchisee, which is at the point in time when delivery and installation of the equipment at the studio is complete. 110 Xponential Fitness, Inc.
Notes to Consolidated Financial Statements (amounts in thousands, except per share amounts) Merchandise revenue – The Company sells branded and non-branded merchandise to franchisees for retail sales to customers at studios. For branded merchandise sales, the performance obligation is satisfied at the point in time of shipment of the ordered branded merchandise to the franchisee.
Notes to Consolidated Financial Statements (amounts in thousands, except per share amounts) Merchandise revenue – The Company sells wholesale branded and non-branded merchandise to franchisees for retail sales to customers at studios. For wholesale merchandise sales, the performance obligation is satisfied at the point in time of delivery of the ordered merchandise to the franchisee.
S-1/A 333-257443 10.27 06/29/2021 10.17 First Amended and Restated Profits Interest Plan of H&W Franchise Holdings LLC.
S-1/A 333-257443 10.27 06/29/2021 10.15 First Amended and Restated Profits Interest Plan of H&W Franchise Holdings LLC.
See Note 18 of Notes to Consolidated Financial Statements for additional information. 63 Factors Affecting Our Results of Operations In addition to the impact of the risks described above under “Risk Factors”, we believe that the most significant factors affecting our results of operations include: • Licensing new qualified franchisees, selling additional licenses to existing franchisees and opening studios.
See Note 19 of Notes to Consolidated Financial Statements for additional information. 66 Factors Affecting Our Results of Operations In addition to the impact of the risks described above under “Risk Factors”, we believe that the most significant factors affecting our results of operations include: • Licensing new qualified franchisees, selling additional licenses to existing franchisees and opening studios.
Analysis of our cash flows for the year ended December 31, 2021 is included in our Annual Report on Form 10-K for the year ended December 31, 2022.
Analysis of our cash flows for the year ended December 31, 2022 is included in our Annual Report on Form 10-K for the year ended December 31, 2023.
Level 3 – Unobservable inputs that reflect assumptions about what market participants would use in pricing the asset or liability. These inputs would be based on the best information available, including the Company’s own data. The Company’s financial instruments include cash, restricted cash, accounts receivable, notes receivable, accounts payable, accrued expenses and notes payable.
Level 3 – Unobservable inputs that reflect assumptions about what market participants would use in pricing the asset or liability. These inputs would be based on the best information available, including the Company’s own data. The Company’s financial instruments include cash and cash equivalents, restricted cash, accounts receivable, notes receivable, accounts payable, accrued expenses, notes payable, and other current liabilities.
Additionally, during the years ended December 31, 2023 and 2022 , pursuant to the Amended Limited Liability Company Agreement of XPO Holdings (“Amended LLC Agreement”), certain Continuing Pre-IPO LLC Members exchanged their LLC units for 1,620 and 607 shares of Class A common stock on a one-for-one basis, respectively.
Additionally, during the years ended December 31, 2024 and 2023 , pursuant to the Amended Limited Liability Company Agreement of XPO Holdings (“Amended LLC Agreement”), certain Continuing Pre-IPO LLC Members exchanged their LLC units for 1,828 and 1,620 shares of Class A common stock on a one-for-one basis, respectively.
Notes to Consolidated Financial Statements (amounts in thousands, except per share amounts) At December 31, 2023 and 2022 , the principal balance of the notes receivable was approximately $ 3,189 and $ 3,306 , respectively. The Company evaluates loans for collectability upon issuance of the loan and records interest only if the loan is deemed collectable.
Notes to Consolidated Financial Statements (amounts in thousands, except per share amounts) At December 31, 2024 and 2023 , the principal balance of the notes receivable was approximately $ 537 and $ 3,189 , respectively. The Company evaluates loans for collectability upon issuance of the loan and records interest only if the loan is deemed collectable.
The outstanding receivable from shareholder and the multi-tranche term loan are collateralized by 75 shares of Class B common stock held by the former owner, which were reclassified to treasury stock, and by the 105 RSUs. As of December 31, 2023 , the former owner of Row House borrowed $ 320 , which was recorded as a reduction to liability.
The outstanding receivable from shareholder and the multi-tranche term loan are collateralized by 75 shares of Class B common stock held by the former owner, which were reclassified to treasury stock, and by the 105 RSUs. As of December 31, 2024 , the former owner of Row House borrowed $ 480 , which was recorded as a reduction to liability.
Marketing fund expenses – Marketing fund expenses are recognized as incurred, and any marketing fund expenditures in excess of marketing fund revenue are reclassified as SG&A expenses in the consolidated statements of operations.
Marketing fund expenses – Marketing fund expenses are recognized as incurred, and any marketing fund expenditures in excess of marketing fund revenue are presented as SG&A expenses in the consolidated statements of operations.
During the years ended December 31, 2023, 2022 and 2021 , the Company recorded expense related to this lease of $ 0 , $ 239 and $ 319 , respectively. In September 2022, the Company's Chief Executive Officer sold the building to an unaffiliated third party. The Company entered into a building lease agreement with the new owner.
During the years ended December 31, 2024, 2023 and 2022 , the Company recorded expense related to this lease of $ 0 , $ 0 and $ 239 , respectively. In September 2022, the Company's former Chief Executive Officer sold the building to an unaffiliated third party. The Company entered into a building lease agreement with the new owner.
Compensation expense for restricted stock units is recognized on a straight-line basis. For the years ended December 31, 2023, 2022 and 2021, the weighted average grant-date fair value per share of RSUs granted was $ 21.60 , $ 19.82 and $ 13.76 , respectively.
Compensation expense for restricted stock units is recognized on a straight-line basis. For the years ended December 31, 2024, 2023 and 2022, the weighted average grant-date fair value per share of RSUs granted was $ 13.18 , $ 21.60 and $ 19.82 , respectively.
For such branded merchandise sales, the Company is the principal in the transaction as it controls the merchandise prior to it being delivered to the franchisee. The Company records branded merchandise revenue and related costs upon shipment on a gross basis. Customers have the right to return and/or receive credit for defective merchandise.
For such wholesale merchandise sales, the Company is the principal in the transaction as it controls the merchandise prior to it being delivered to the franchisee. The Company records wholesale merchandise revenue and related costs upon delivery on a gross basis. Customers have the right to return and/or receive credit for defective merchandise.

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