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DATE

Thursday, May 7, 2026 at 4:30 p.m. ET

CALL PARTICIPANTS

  • Chief Executive Officer — Michael M. Nuzzo
  • Interim Chief Financial Officer — Robert Julian
  • VP, Investor Relations — Patricia Nir

TAKEAWAYS

  • Global Studio Count -- 3,137 open studios at quarter end, reflecting 66 gross openings and 26 closures, with growth driven by 43 new North American and 23 new international locations.
  • Domestic and International Expansion -- 23 net new units opened in North America and 17 net new units internationally, aligning with the targeted range of 150-170 net global studio openings for the year.
  • Club Pilates Pipeline -- Two new expansion agreements secure commitments for approximately 160 future domestic openings, while studios have launched in Mexico, Belgium, and Thailand, and a new development agreement was finalized for the Philippines.
  • Committed Licenses -- Over 780 contractual licenses to open in North America and 750 master franchise obligations internationally as of quarter end.
  • Club Pilates International Studio Base -- 189 international studios open across 14 countries, with licenses sold for 499 additional global studios.
  • Same-Store Sales -- Down 6% company-wide and down 4% for Club Pilates, compared to a 3% Club Pilates decrease in the prior quarter; driven by lower new member acquisition and challenging comparison against 6% and 9% growth last year at the company and Club Pilates, respectively.
  • North America System-wide Sales -- $437 million, representing a 2% increase, with growth attributed primarily to net new studio openings.
  • Total Revenue -- $60.7 million, a decline of $16.2 million, or 21%, with $6.8 million of that attributable to equipment revenue timing, $5.6 million due to the merchandising model transition, and $2.7 million from lower franchise revenue and brand divestitures; remaining $1.1 million shortfall split between marketing fund and other service revenue.
  • Adjusted EBITDA -- $20.4 million, a decline of $6.9 million, or 25%, with margin at 34% versus 36% last year; $2.9 million of the decline due to front-loaded marketing spend and $2.1 million associated with timing of equipment revenue.
  • Member Retention -- Improved by 36 basis points company-wide year over year, with March identified as the best retention month since Q1 2024.
  • Club Pilates Member LTV -- Exceeds $2,300 over three years, with recent surveys showing approximately 80% of members expect to maintain active participation over the next six to twelve months.
  • Digital and Marketing Initiatives -- Transitioned to a new national digital agency, launched automated CRM email campaigns for lead cohorts, and initiated brand-level digital upgrades, yielding a "high single-digit initial booking lift" for pilot StretchLab sites according to CEO Nuzzo.
  • Legal and Regulatory Payments -- $12.5 million in franchisee lawsuit settlement payments made, with $16.4 million in additional regulatory and legal payments forecasted for the remainder of the year.
  • Cash and Credit Facility -- $21.5 million in cash, cash equivalents, and restricted cash at quarter end; $10 million drawn on a $25 million revolver in April to ensure operating flexibility for obligations, with intent to repay by year end or soon after.
  • Long-term Debt -- $523.7 million, up from $379.1 million, primarily due to the retirement of the convertible preferred security.
  • 2026 Guidance Reaffirmed -- Expectations include 150-170 net global studio openings, 3%-5% global closure rate, North America system-wide sales of $1.72 billion-$1.8 billion, total revenue of $260 million-$270 million, and adjusted EBITDA of $100 million-$110 million (midpoint margin 39.6%).
  • Franchisee Relationships -- Strengthened through post-quarter Club Pilates deals with large partners, with CEO Nuzzo stating, "those relationships with larger franchisees continue to pay dividends" for operating and brand growth.

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RISKS

  • Negative Same-Store Performance -- Same-store sales declined 6% company-wide and 4% at Club Pilates, with CFO Julian noting, "negative same-store sales performance in Q1" as a continuing challenge.
  • Revenue Decline Drivers -- Total revenue decreased 21% due to a combination of lower equipment sales, merchandising model transition, weak franchise revenue, and brand divestitures, as directly cited by management.
  • Cash Usage and Legal Settlements -- Payments of $12.5 million for settlement obligations and anticipated additional outflows of $16.4 million place pressure on operating cash, highlighted by a short-term $10 million revolver drawdown.
  • Traffic and Lead Generation Headwinds -- CEO Nuzzo detailed that digital traffic was "driven by industry-wide platform changes at Meta and Google," negatively affecting organic studio lead generation.

SUMMARY

Xponential Fitness (XPOF 1.96%) reported 3,137 open studios, supported by 66 openings and 26 closures, and a Club Pilates expansion pipeline bolstered by major domestic and international agreements. Member retention improved by 36 basis points, with high engagement indicated by an above $2,300 Club Pilates member lifetime value and 80% six-to-twelve month participation intent. Despite these positives, total revenue fell 21% to $60.7 million and same-store sales dropped approximately 6.2%, as declines in digital traffic and lead generation stemming from platform changes at Meta and Google weighed on new member growth.

  • Front-loaded digital improvements to StretchLab pilot studio microsites are credited with producing a "high single-digit initial booking lift".
  • CFO Julian confirmed that the $10 million revolver draw was a precaution for sizable legal and regulatory settlements, with an expectation to repay using normal operating cash by year end or soon after.
  • Management stated that studio closure rates are targeted to decline to a low- to mid-single-digit rate, while North America system-wide sales increased 2% despite broader weakness in organic growth and comp sales.
  • Inflationary price adjustments and pricing hygiene, including fewer pricing tiers and reduced discounts for new openings, are planned for implementation in early Q3 to help address comp trends.

INDUSTRY GLOSSARY

  • FDD (Franchise Disclosure Document): Legal document presented to prospective franchisees in the U.S., outlining material information regarding the franchise.
  • Pro Forma Basis: A method of financial reporting where figures exclude effects from brands divested after the quarter to provide period-over-period comparability only among businesses still owned.
  • KPI (Key Performance Indicator): Quantitative business metrics, such as studio openings or same-store sales, used to measure company progress toward strategic goals.
  • LTV (Lifetime Value): Total expected revenue from a customer over their tenure with a particular brand or service.

Full Conference Call Transcript

Patricia Nir: Thank you, Operator. Good afternoon, and thank you all for joining our conference call to discuss Xponential Fitness, Inc.’s First Quarter 2026 Financial Results. I am joined by Michael M. Nuzzo, Chief Executive Officer, and Robert Julian, Interim Chief Financial Officer. A recording of this call will be posted on the investors section of our website at investor.exponential.com. We remind you that during the conference call, we will make certain forward-looking statements, including discussions of our business outlook and financial projections. These forward-looking statements are based on management's current expectations and involve risks and uncertainties that could cause our results to differ materially from such expectations.

For a more detailed description of these risks and uncertainties, please refer to our most recent Annual Report on Form 10-K for the year ended 12/31/2025, filed with the SEC, and subsequent filings with the SEC. We assume no obligation to update the information provided on today's call except as required by applicable law. In addition, we will be discussing certain non-GAAP financial measures on this conference call. We use non-GAAP measures because we believe they provide useful information about our operating performance that should be considered in conjunction with the GAAP measures that we provide.

A reconciliation of these non-GAAP measures to comparable GAAP measures is included in the earnings release that was issued earlier today prior to this call and in the investor presentation available on our website. We are not able to provide a quantitative reconciliation of forward-looking non-GAAP measures without unreasonable efforts to the most directly comparable GAAP measures due to the high variability, complexity, and low visibility with respect to certain items. Please also note that all numbers reported in today's prepared remarks refer to global figures unless otherwise noted.

As a reminder, in order to ensure period-over-period comparability, and consistent with our reporting method since IPO, we present all KPIs on a pro forma basis, meaning for the full KPI history presented, we only include brands that are under our ownership as of the current reporting period. For the period ended 03/31/2026, this includes BFT, Club Pilates, Pure Barre, StretchLab, and YogaSix. I will now turn the call over to Michael M. Nuzzo, CEO of Xponential Fitness, Inc.

Michael M. Nuzzo: Thanks, Patricia. Good afternoon and thank you all for joining us today. Before I discuss the quarter, I would like to highlight three important leadership additions. During the first quarter, we welcomed Robert Julian as Interim CFO and Eric Quaid as Chief Information Officer. Robert brings over 30 years of proven financial leadership with experience guiding high-growth consumer brands including The RealReal, Sportsman’s Warehouse, and Callaway Golf. Eric brings extensive hands-on experience across the full spectrum of multi-site technology disciplines, scaling enterprise capabilities for consumer brands such as Tilly’s, Hot Topic, and Billabong. Finally, in mid-May, we will be welcoming Steph So as our new Chief Marketing Officer.

Steph was most recently Chief Growth Officer at Shake Shack and has led brand-building and performance marketing efforts in senior roles at Ralph Lauren, Estée Lauder, and Cover FX. Collectively, these highly accomplished leaders will strengthen execution across the organization and we are very happy to welcome them to the Xponential Fitness, Inc. team. Now I will turn to a more detailed discussion of the quarter. In Q1, we continued focusing on operating in a more integrated way, aligning marketing, operations, technology, and brand building to drive stronger performance and set the foundation for continued operational improvement.

These organic growth priorities, coupled with our sustained unit expansion, established brands, and industry tailwinds, highlight the potential beyond our existing platform today and position Xponential Fitness, Inc. strongly for future success. With that backdrop, an overview of Q1 is as follows. Domestically, we opened 23 net new units, and internationally we opened 17 net new units, consistent with our midpoint expectation of 160 net new openings globally for 2026. We finalized Club Pilates unit expansion deals with two major domestic franchisee partners, securing commitments for approximately 160 future studio openings. Internationally, Club Pilates opened its first studios in three new countries: Mexico, Belgium, and Thailand. We also recently finalized the development agreement in the Philippines.

Overall, our Club Pilates growth pipeline remains robust and we have an expectation to expand to over 2,100 studios domestically. Internationally, we currently have 189 open studios across 14 countries with committed licenses for more than 499 additional studios in major markets in Europe and Asia, capitalizing on the growing Pilates wave across the world. We also see studio growth potential across our other brands; we will provide more updates as we move through 2026. Our Q1 same-store studio sales were down 6% overall and down 4% for Club Pilates, which was a modest change from the fourth quarter decrease of 3% in Club Pilates.

These sales results, while below our standard, were expected given several factors I will discuss shortly in addition to the challenging year-over-year comparison with Q1 2025, which included 6% total company and 9% Club Pilates same-studio sales. Importantly, we have seen signs of stabilization as we reaffirm our 2026 guidance. Specifically, with front-loaded marketing spend in Q1, we saw paid lead growth with a combination of enhanced national and local paid marketing match efforts. While still early, we expect ongoing improved performance and continued momentum as we further enhance organic top-of-funnel member acquisition capabilities and meaningfully improve our digital experience.

Operationally, we also made progress in Q1, including the following initiatives: completed the transition to a new national marketing and digital agency with extensive expertise in the rapidly changing performance, social, and AI marketing landscape; we are seeing quick improved performance in our paid performance marketing efforts; launched an automated email CRM program which is now being used across all our brands and major new member cohorts, with a second phase that includes the development of member retention outreach; accelerated critical work on all our brand digital properties that I am convinced is a key element to organic growth; our websites in particular are long overdue for upgrades to design, navigation, user experience, and AI SEO.

Initial improvements recently completed for a pilot group of StretchLab studio microsites are yielding a high single-digit initial booking lift. Once we expand this new navigation experience to our national site and full studio chain, we anticipate it will have a real impact on StretchLab trends. I also recently saw the new proposed Club Pilates site redesign and it is a significant change that will position us with best-in-class fitness digital experiences. I cannot wait to leverage this work for all of our brands’ web, mobile, and app properties. We expect it to transform our top-of-funnel experience. Nationally, we saw the recently launched Club Pilates Circuit Class gain quick adoption across our chain and popularity with members.

We will also be launching a new Y6 Core class for our YogaSix brand, which incorporates elements of hot mat Pilates. We kicked off our remodel program in Club Pilates, with Pure Barre planned as a fast follow. All new Club Pilates studio openings will feature our new design experience. We meaningfully enhanced our YogaSix, Pure Barre, and BFT brand assets and introductory offers across all marketing channels; leveraged the pricing work we completed in Q4 to plan actions in upcoming quarters, including targeting an inflationary price adjustment in early Q3; and we continue to expand our engagement with studio operators with our field support teams, with a focus on improving lead-to-new-member conversion.

These teams are providing more hands-on support through targeted sales coaching, enhanced marketing tools, and newly developed KPI dashboards. Most importantly, this represents our scaled effort to deliver consistent in-market support, particularly for new studio openings, staff transitions, and underperforming locations, which we believe will be a key driver of improved studio-level performance over time. This is all positive progress, but let me talk more about our same-studio sales, where we have spent considerable time focusing on the drivers of our trends. First, importantly, our existing members are showing even more affinity and loyalty to our modalities and brand proposition.

In fact, in Q1 year-over-year, company-wide member retention improved 36 basis points, and March marked our best member retention month since Q1 2024. In particular, this strong member retention in Club Pilates continues to produce one of the strongest three-year member LTVs at over $2,300, and recent surveys continue to indicate that approximately 80% of members expect to continue taking classes over the next six to 12 months. Clearly, our strong member retention provides a foundation for driving organic growth. So with stronger existing member retention, we are laser-focused on accelerating top-of-funnel and new member conversion as the major opportunity. Here we see the following factors at play.

First, across all our brands, we have seen lower digital traffic driven by industry-wide platform changes at Meta and Google. Meta represents a major share of our local marketing—specifically direct franchisee spend with company-approved local agency partners. Starting in mid-2025, Meta began transitioning to Andromeda. This AI-driven ad approach replaced focused audience targeting, which shifted the platform toward a more broad-based, consolidated spend model. This challenged the efficacy of our structure of many distinct agency arrangements supporting individual studio markets. Essentially, we were not realizing the scale advantage with our Meta spend, and we believe this started to affect lead flow in late 2025 into 2026.

Also in 2025, organic search—primarily Google—underwent significant AI-driven changes that have been widely reported to reduce traditional organic click-through rates across every sector by nearly 30%. Increasingly, search results now yield AI-generated content instead of clickable links or ads, a shift many of you have experienced firsthand. Because virtually all prospective members begin their journey on our web and mobile platforms, these changes had a major impact on our organic website traffic and in turn our new member lead generation. Second, our ability to convert new leads to members was impacted as changes to member privacy systems created confusion at the studio level and complicated lead outreach.

In addition, we had the anticipated transition period from our brand-based sales structure to our new field-based support team. The good news is that all these factors are within our control, and we are actively taking steps to address and capitalize on them. On Meta, we are working to enhance our local account structure to better realize scale benefits from individual franchisee spend. On Google, short term, we are addressing organic traffic pressure with a more front-loaded increase in paid media spend, which you will see in our financial results, while our major planned website improvement projects across all brands will include a focus on all the ways to drive better AI SEO results.

As the industry leader in the space, we expect to be at the forefront of making meaningful progress quickly. On lead-to-member conversion, we have already addressed our studio system-related deficiencies created by privacy-related changes and we are continuing to integrate our field ops team, who are rolling out tools in support of driving our franchisees’ success. In addition, we expect that our recently launched automated email program will support these, and we will also evaluate other technology tools to improve introductory class booking and membership close rates.

My goal in all of this is to become best in class in partnering with our franchisees to generate new member lead flow, create the most seamless digital engagement, and offer the best-supported membership purchase process. With strong member retention as a foundation, by bringing more advanced resources to lead generation with paid performance marketing, new member digital experience improvement, and incremental in-studio membership conversion support, we plan to help our franchisee partners provide a best-in-class member experience. As we look ahead, our focus is on restoring sustainable organic growth through a more disciplined and repeatable execution framework. We also remain focused on retention through ongoing class innovation, our studio remodel programs, and enhanced brand positioning.

I want to thank our franchisees and studio teams for their partnership and continued focus on delivering a great member experience every day. Finally, I would like to thank Chelsea, Jair, and Bruce for their service to our Board, and welcome our newest Board member, Nicole. With that, I will turn the call over to Robert for a review of the financials.

Robert Julian: Thank you, Mike, and good afternoon, everyone. I would like to begin by expressing my excitement to be stepping into the Interim CFO role here at Xponential Fitness, Inc., and supporting the process for selecting and onboarding a new permanent CFO. It has been a pleasure for me to work with Mike again and to meet and work with the executive leadership team here at Xponential Fitness, Inc. Over the past couple of months, I have had the opportunity to work closely with Mike and the team here to gain a deeper understanding of the business and our financial priorities.

I look forward to leveraging my 30-plus years of financial leadership experience to support the company with disciplined financial oversight and focused execution moving forward. It is really great to be here. I will now turn to an overview of our first quarter performance and then discuss our 2026 guidance, which we are reaffirming. While my remarks today will be more streamlined, we encourage you to review the earnings press release and the financial overview section of the investor presentation available on our website. I would also like to mention that, unless otherwise stated, all financial remarks refer to 2026, and all comparisons will be year-over-year comparisons versus 2025. With that, let us turn to the results.

We ended the quarter with 3,137 global open studios, opening 66 gross new studios during Q1, with 43 in North America and 23 international. There were 26 global studio closures in the first quarter, in line with historic trends and concentrated primarily within StretchLab, BFT, and Pure Barre. Moving forward, we expect unit closure rates to decline to the low- to mid-single-digit range. We sold 28 licenses globally during Q1, including 16 internationally and 12 in North America. In April, we completed the FDD update for the 2026 cycle as part of the normal renewal process. As of 03/31/2026, we had more than 780 licenses contractually obligated to open in North America and 750 international master franchise obligations.

While we continue to pursue terminations of inactive licenses, Q1 terminations were impacted by the annual FDD renewal process, and we expect slightly higher termination revenue and EBITDA over the next couple of quarters. First quarter North America system-wide sales of $437 million were up approximately 2% year over year, and same-store sales were negative 6.2%, both on a pro forma basis adjusting for divestitures. The increase in system-wide sales was driven primarily by growth from net new studio openings. Mike addressed in his earlier comments the challenges around the negative same-store sales performance in Q1 and the strategic actions that we are taking to address and improve these trends moving forward.

On a consolidated basis, revenue for the quarter was $60.7 million, down $16.2 million, or 21%, compared to Q1 2025. Approximately $6.8 million of the year-over-year decline was in equipment revenue, which is related to new studio openings and largely a timing issue. $5.6 million of the decline is from our transition from an in-house merchandising model, where we previously recorded the full value of items sold as merchandise revenue, to an outsourced model under which we now record only the royalty or net profit from retail items sold on the merchandise revenue line. Franchise revenue was down $2.7 million from the prior year primarily due to a decrease in same-store sales coupled with the brand divestitures in 2025.

The remaining $1.1 million of revenue shortfall was split evenly between marketing fund revenue and other services revenue. Adjusted EBITDA was $20.4 million in Q1, down $6.9 million, or 25%, compared to the prior year. Adjusted EBITDA margin was 34% in Q1 2026, down from 36% in the prior-year period. Approximately $2.9 million of the year-over-year decline in Adjusted EBITDA is related to the timing of incremental marketing spend, net of marketing fund revenue, as we front-loaded more in Q1 2026, and approximately $2.1 million of the decline is associated with the timing of new studio openings in equipment revenue that I mentioned earlier.

Turning to the balance sheet, as of 03/31/2026, cash, cash equivalents, and restricted cash were $21.5 million, down from $42.6 million as of 03/31/2025. During the quarter, we entered into and paid lease settlement agreements of approximately $300,000. As of 03/31/2026, we had approximately $8 million of lease liabilities remaining to be settled. We anticipate most of the remaining liabilities will be settled during the remainder of this year. During Q1, we also paid out $12.5 million related to our agreed settlement in the franchisee lawsuit. For the remainder of the year, we anticipate approximately $16.4 million in additional payments related to the settlement of both the franchisee and FTC cases.

Although we expect to fund these payments from normal operating cash flow, out of an abundance of caution, in April we drew $10 million on our $25 million revolving credit facility to ensure maximum operating flexibility. This is a short-term timing issue, and we do not anticipate making further draws on the revolving line of credit this year. We expect to pay down the line through our normal healthy cash flow generation by year end or shortly thereafter. In the meantime, we have substantially reduced regulatory and legal uncertainty in the business. Total long-term debt was $523.7 million as of 03/31/2026, compared to $379.1 million as of 03/31/2025.

The increase in total long-term debt is primarily due to retiring the convertible preferred security during 2025. Let us now discuss our outlook for 2026. Based on current business conditions and our expectations as of the date of this call, we are reiterating guidance for 2026 as follows. We expect global studios open, net of closures, to be in the range of 150 to 170. We expect the number of closures to be 3% to 5% of the global system this year as a percentage of total open studios. We project North America system-wide sales to range from $1.72 billion to $1.8 billion. Total 2026 revenue is expected to range from $260 million to $270 million.

Adjusted EBITDA is expected to range from $100 million to $110 million. This translates into 39.6% Adjusted EBITDA margin at the midpoint. In closing, we are encouraged by the early traction on the organic growth initiatives Mike outlined, and we remain focused on disciplined execution to drive more consistent performance. Our priorities are straightforward: stabilize lead generation, improve lead-to-member conversion, and support our franchisees and field teams with tools and operating rigor that translate into stronger studio-level results. Before opening the call to questions, I would like to note that we are actively engaged in the company’s recently announced review of strategic alternatives.

We will not be addressing questions regarding that initiative at this time but will provide additional information on the process when appropriate. Thank you all for your time today. We will now open the call for questions. Operator?

Operator: Thank you. At this time, we will be conducting a question-and-answer session. The first question we have is from John Heinbockel of Guggenheim Partners. Please go ahead.

John Heinbockel: Hey, Mike, can you talk to the health of the Club Pilates member base and their behavior—in terms of growth in members, packages that they are buying, visitation—speak to that. And then, when do you think—I know the comps are not going to grow very much—but when do you think you at least return to a flattish trend line?

Michael M. Nuzzo: Yeah. Hey, John. Thanks for your question. I would start by saying one of the things we feel really good about around the Club Pilates business specifically is the member retention that we called out in our prepared remarks. We have always had really strong member retention, and to even have it increase in the quarter was a really good sign. That, to me, shows continued affinity and loyalty to the brand. When we dig into our member statistics, again, we see broad-based participation in the brand.

We see what I would say is very good concentration in what I would call the middle-aged customer, and these are members that tend to be very loyal, as I said before, with very high frequency. So when we were doing the pricing work, we were identifying that these members tend to come to us between eight and 13 times, and I think just under half of them are on our unlimited plan. Those are all great signs—clearly signs of a very healthy member base. We also see it in our new studio openings. Our new studio openings continue to be really strong; each cohort just seems to be getting a little bit better than the previous one.

I am also feeling better that, you know, we talked a lot about this sort of top of funnel, and I feel better that we have been able to identify it as the major opportunity in the business. We have seen better results in our paid media investment with our new agency partner, which is a really good thing. And then we have seen, with very modest changes in one of our digital properties for StretchLab, better results. So this tells me that we are clearly on the right track, and focusing on the top of funnel—specifically the organic traffic that comes to our digital properties—is really what we need to continue to do good work around.

I think if we do that, we will obviously see that return to better comp results than we had in the quarter.

John Heinbockel: Other than the timing issues around marketing and equipment—that was, I guess, $5 million in the quarter—aside from that, what do you need to do to get to your EBITDA target for the year—any changes? And you referenced this third quarter inflationary adjustment or something to that effect. What does that entail?

Michael M. Nuzzo: I will take it in two parts. You are right on the question about the expectation for full-year EBITDA. We anticipated that there would be roughly four things that would impact our Q1 EBITDA. One was, you called it out, front-loaded marketing spend. The second was lower terminations—that is related to the FDD renewal process that we did. Lower equipment sales, and then you know this and we knew it—we would have the toughest comparison from a comp standpoint. So we shaped the full-year expectation assuming improvement in each of these line items and, most importantly, that the sales trend would improve to that negative low single-digit comp level that we used to base the guidance on.

So that is obviously the focus for us. Around the pricing question, I will go back and talk a little bit about the work that was done there. We did a comprehensive pricing analysis in Q4. It was really helpful on a lot of levels. We are now in what I would call the planning and implementation stage related to that. I would emphasize we are not getting aggressive around price increases. That is probably the worst thing anybody can do in the current pricing environment. The way I would think about it is this is pricing hygiene that probably should have been part of our structure and process before.

So we are looking at the pricing tiers—we have probably too many pricing tiers, and so we are going to try to narrow those down a little bit. We are going to provide some additional coaching around tier opportunities within markets. We are setting up a structure that would allow our franchise partners to do inflationary price increases—again, we are talking modest, consistent with the market. And then we are also looking at the discounts that we provide across our business, especially when it comes to new studio openings. We were giving some pretty generous legacy founder “forever” discounts, and we realized we do not have to do as much of that. I think it is good work.

I think it will benefit us on the top line for our studios and for us. But, again, I want to put it in context.

Operator: The next question we have is from Richard Magnuson of B. Riley Securities. Please go ahead.

Richard Magnuson: Hello. Thank you for taking our call. I was wondering if you could provide an update—maybe more specifics on how you are using tools like CRM to target specific audiences, such as older adults. I think you talked a bit about that last time, but have there been any more metrics that showed improvement around conversion, or can you provide any other results?

Michael M. Nuzzo: Yeah, Richard. Thanks for the question. I would say that in our switch to a new national agency, that was all part of the work that we did—working very closely with them to understand a lot better our target markets, our target member base, and to really create assets and outbound material that would appeal to them through all of our channels. The other piece that we have done specifically around the CRM front is national coordinated email campaigns that automate emails to a number of our key lead cohorts.

For example, if you fill out a lead form but do not show up for that introductory class, we are now outbounding to you to get you to come in for that class. We are starting to see conversion from some of that email work, and it is going to be a huge focus for us over the next couple months. We have started to see better performance from our paid media spend, and I think we are doing as much as we can—and a better job—of making sure that our messaging is much more targeted to the appropriate member for our different brands.

Obviously, a StretchLab customer is going to be a little bit different than Club Pilates and Pure Barre and YogaSix, etc.

Operator: The next question we have is from Chris O’Cull of Stifel. Please go ahead.

Chris O’Cull: Hey, good afternoon, guys. Mike, thanks for the details regarding the Meta and Google advertising issues. Do you have a timeline for those issues being addressed? And what gives you confidence that the company will not need to make marketing investments in the back half of the year to support lead generation?

Michael M. Nuzzo: Good question, Chris. I will take the second question first. We planned heavier spend in Q1 and part of Q2. We are going to have to judge based on the ROI. If we are getting good ROI from that, that will help judge how much more we spend over the back part of the year. But I would expect that in the middle to back part of the year, we will start to make some meaningful progress around both the Meta and the Google issues, which will meaningfully help our organic top of funnel, because we really need that to work for us. You cannot do what we do around member acquisition with just paid.

There is always a big part that is organic. So fixing that is a major focus. I think we can make some really good progress over the next couple of quarters.

Chris O’Cull: I had a question about franchisee consolidation that seems to be occurring across the Club Pilates system. Has the number of franchisees in that system fallen during the past year? Is there a goal in terms of the number of franchisees you would like to see in that system? And lastly, how do you see that impacting your ability to manage and grow the brand? I would assume it would make it easier.

Michael M. Nuzzo: I would not characterize that we have lost a lot of franchisees from the brand at all. But what we are doing is we are fortifying our relationships with some of our larger franchisee partners. We completed two deals after the quarter, and we have another couple in the works. Those relationships with larger franchisees continue to pay dividends. They are great operating partners. They partner with us very closely around the real estate side of the business—identifying new studios, whitespace opportunities, fill-in opportunities. It benefits us a lot when it comes to the growth of the brand.

However, again, I think that for that brand and its success, there will always be a mix of smaller-scale franchisees and some larger franchisees, and I think the dynamics there create a really healthy overall franchise base.

Operator: Next question we have is from Arpine Kocharyan of UBS. Please go ahead.

Analyst: Hello. This is Daren Sesikan on behalf of Arpine. Thanks for taking this question. You had previously guided to approximately a 4% decline in same-store sales continuing into the first quarter, but the actual performance appears to have come in somewhat softer than that expectation. Could you walk us through the key drivers behind this variance, particularly how much of the change was driven by pricing versus volume?

Michael M. Nuzzo: We guided for 2026 to a low single-digit negative comp. If you take a look at the comparison to the 2025 comp performance, we knew that Q1 was going to be the biggest anniversary—anniversarying the strongest quarter from last year. So the comp performance there did not necessarily surprise us. I called out the factors: most of it is around the top of funnel—the new member acquisition side being the bigger contributor to it. That should give you some insight there.

Operator: Ladies and gentlemen, [inaudible]. The next question we have is from Owen Rickert of Northland Capital Markets. Please go ahead.

Analyst: Hi. This is Keaton on for Owen. On the innovation side, which newer formats or studio refresh initiatives are generating the strongest early engagement from members and franchisees?

Michael M. Nuzzo: That is a good question. I will talk a little bit about the work that we are doing there. We just launched the Club Pilates refresh efforts, so we are now engaging with franchisees around that refresh format. We are also going to utilize that for all of our new studio openings, so we are excited about it. Anytime you have a chance to go out and refresh studios—especially as we have some studios that are up in age—I think that is going to be a really big opportunity for us.

In my past, when you do that, you do not always expect a big uplift, but I am usually surprised that oftentimes that is exactly what you see—better member acquisition and better member retention just from having a new studio environment. We are also making progress on a similar refresh program for Pure Barre, and I have seen some of the initial designs for that and it looks great. So studio refresh is a really big focus for us. On the innovation front, we have launched the Circuit class in Club Pilates that at this point is at about 75% of the chain, which is great.

Then we have new classes in both YogaSix and Pure Barre that will be launching and rolling out in the next couple of months. The more we can do to keep our brands fresh and new—and changing for the members—the better. It is an area that I have a lot of passion around, and I know the teams and the franchisees get excited to see these new elements roll out.

Operator: We have reached the end of the question and answer session. I would like to turn the call back to Michael M. Nuzzo for closing remarks.

Michael M. Nuzzo: I want to thank you all for your questions and for joining us today. We appreciate the continued interest in Xponential Fitness, Inc., and we look forward to updating you on our progress as we move through the year. Thank you.

Operator: That concludes today’s conference. Thank you for joining us. You may now disconnect your lines.