Xponential Fitness (XPOF)

Boutique fitness studio franchisor Xponential Fitness (NYSE:XPOF) reported Q4 CY2025 results topping the market’s revenue expectations, but sales were flat year on year at $82.96 million. On the other hand, the company’s full-year revenue guidance of $265 million at the midpoint came in 12.5% below analysts’ estimates. Its non-GAAP loss of $0.91 per share was significantly below analysts’ consensus estimates.

Company Overview

Owner of CycleBar, Rumble, and Club Pilates, Xponential Fitness (NYSE:XPOF) is a boutique fitness brand offering diverse and specialized exercise experiences.

The Consumer Discretionary sector, by definition, is made up of companies selling non-essential goods and services. When economic conditions deteriorate or tastes shift, consumers can easily cut back or eliminate these purchases. For long-term investors with five-year holding periods, this creates a structural challenge: the sector is inherently hit-driven, with low switching costs and fickle customers. As a result, only a handful of companies can reliably grow demand and compound earnings over long periods, which is why our bar is high and High Quality ratings are rare.

Leisure facilities companies own and operate theme parks, fitness centers, bowling alleys, and other venue-based entertainment destinations, generating revenue from admissions, memberships, and on-site spending. Tailwinds include consumer preference for experiential spending, tourism recovery, and technology-enhanced guest experiences that support premium pricing. Headwinds are notable: high fixed costs, such as real estate, labor, and maintenance, make profitability highly sensitive to attendance fluctuations during economic slowdowns. Weather, pandemics, and safety incidents can disrupt operations unpredictably. Rising construction and labor costs inflate expansion budgets, while competition from at-home entertainment alternatives and other experiential options limits pricing power in many markets.

Competitors offering fitness experiences include private company Equinox, Life Time (NYSE:LTH), and Planet Fitness (NYSE:PLNT).

A company’s long-term sales performance is one signal of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last five years, Xponential Fitness grew its sales at a 24.2% annual rate. Though this growth is acceptable on an absolute basis, we need to see more than just topline growth for the consumer discretionary sector, which can display significant earnings volatility. This means our bar for the sector is particularly high, reflecting the non-essential and hit-driven nature of the products and services offered. Additionally, five-year CAGR starts around Covid, when revenue was depressed then rebounded.

Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. Xponential Fitness’s recent performance shows its demand has slowed as its revenue was flat over the last two years. Note that COVID hurt Xponential Fitness’s business in 2020 and part of 2021, and it bounced back in a big way thereafter.

We can dig further into the company’s revenue dynamics by analyzing its three most important segments: Franchise, Equipment, and Merchandise, which are 62.1%, 8.4%, and 8.7% of revenue. Over the last two years, Xponential Fitness’s Franchise (royalty fees) and Merchandise (apparel sold to franchisees) revenues averaged year-on-year growth of 13.1% and 61,281%. On the other hand, its Equipment revenue (workout equipment sold to franchisees) averaged 35.2% declines.

This quarter, Xponential Fitness’s $82.96 million of revenue was flat year on year but beat Wall Street’s estimates by 12.3%.

Looking ahead, sell-side analysts expect revenue to decline by 4.3% over the next 12 months, a deceleration versus the last two years. This projection doesn't excite us and indicates its products and services will see some demand headwinds.

Xponential Fitness’s operating margin has been trending up over the last 12 months, but it still averaged negative 5.3% over the last two years. This is due to its large expense base and inefficient cost structure.

Xponential Fitness’s operating margin was negative 9.9% this quarter. The company's consistent lack of profits raise a flag.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Although Xponential Fitness’s full-year earnings are still negative, it reduced its losses and improved its EPS by 24.8% annually over the last four years. The next few quarters will be critical for assessing its long-term profitability.

In Q4, Xponential Fitness reported adjusted EPS of negative $0.91, down from negative $0.19 in the same quarter last year. This print missed analysts’ estimates. Over the next 12 months, Wall Street is optimistic. Analysts forecast Xponential Fitness’s full-year EPS of negative $0.51 will flip to positive $0.96.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

Xponential Fitness has shown poor cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 5%, lousy for a consumer discretionary business.

Xponential Fitness’s free cash flow clocked in at $10.17 million in Q4, equivalent to a 12.3% margin. This result was good as its margin was 11.2 percentage points higher than in the same quarter last year, but we wouldn’t read too much into the short term because investment needs can be seasonal, causing temporary swings. Long-term trends trump fluctuations.

Over the next year, analysts predict Xponential Fitness’s cash conversion will improve. Their consensus estimates imply its free cash flow margin of 7.9% for the last 12 months will increase to 16.7%, it options for capital deployment (investments, share buybacks, etc.).

Xponential Fitness reported $45.86 million of cash and $520 million of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $111.8 million of EBITDA over the last 12 months, we view Xponential Fitness’s 4.2× net-debt-to-EBITDA ratio as safe. We also see its $23.76 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We were impressed by how significantly Xponential Fitness blew past analysts’ revenue expectations this quarter. We were also glad its EBITDA outperformed Wall Street’s estimates. On the other hand, its full-year revenue guidance missed and its full-year EBITDA guidance fell short of Wall Street’s estimates. Overall, this quarter could have been better. The stock traded down 10.3% to $7.23 immediately following the results.

Updated: February 26, 2026 at 10:07 PM EST

Before making an investment decision, investors should account for Xponential Fitness’s business fundamentals and valuation in addition to what happened in the latest quarter.

We see the value of companies helping consumers, but in the case of Xponential Fitness, we’re out. While its projected EPS for the next year implies the company’s fundamentals will improve, the downside is its low free cash flow margins give it little breathing room. On top of that, its operating margins reveal poor profitability compared to other consumer discretionary companies.

Xponential Fitness’s P/E ratio based on the next 12 months is 8.6x. While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are better investments elsewhere.

Wall Street analysts have a consensus one-year price target of $10.90 on the company (compared to the current share price of $6.48).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.