What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-08-05 compared with 2024-05-06 · 328 added, 210 removed, 723 unchanged (43% of the section changed)

15 unchanged sentences

Notes receivable from franchisees, net of current portion

Liabilities, redeemable convertible preferred stock and equity (deficit)

Liabilities, redeemable convertible preferred stock and stockholders' equity (deficit)

Current liabilities:

13 unchanged sentences

Redeemable convertible preferred stock, $ 0.0001 par value, 400 shares authorized,

115 shares issued and outstanding as of March 31, 2024 and December 31, 2023

115 shares issued and outstanding as of June 30, 2024 and December 31, 2023

Stockholders' equity (deficit):

Undesignated preferred stock, $ 0.0001 par value, 4,600 shares authorized, none issued and

outstanding as of March 31, 2024 and December 31, 2023

outstanding as of June 30, 2024 and December 31, 2023

Class A common stock, $ 0.0001 par value, 500,000 shares authorized, 32,160 and 30,897 shares

issued and outstanding as of March 31, 2024 and December 31, 2023, respectively

issued and outstanding as of June 30, 2024 and December 31, 2023, respectively

Class B common stock, $ 0.0001 par value, 500,000 shares authorized, 16,090 and 16,566 shares issued,

and 16,413 and 16,491 shares outstanding as of March 31, 2024 and December 31, 2023, respectively

and 16,015 and 16,491 shares outstanding as of June 30, 2024 and December 31, 2023, respectively

Additional paid-in capital

1 unchanged sentence

Accumulated deficit

Treasury stock, at cost, 75 shares outstanding as of March 31, 2024 and December 31, 2023

Treasury stock, at cost, 75 shares outstanding as of June 30, 2024 and December 31, 2023

Total stockholders' deficit attributable to Xponential Fitness, Inc.

6 unchanged sentences

(amounts in thousands, except per share amounts)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Revenue, net:

9 unchanged sentences

Selling, general and administrative expenses (Note 10)

Impairment of goodwill and other assets

Depreciation and amortization

Marketing fund expense

Acquisition and transaction expenses

Acquisition and transaction expenses (income)

Total operating costs and expenses

Operating income (loss)

Other (income) expense:

Other expense (income):

Interest income

2 unchanged sentences

Total other expense

Loss before income taxes

Income tax benefit

net loss attributable to noncontrolling interests

Net loss attributable to Xponential Fitness, Inc.

Net loss per share of Class A common stock:

Income (loss) before income taxes

Net income (loss)

net income (loss) attributable to noncontrolling interests

Net income (loss) attributable to Xponential Fitness, Inc.

Net income (loss) per share of Class A common stock:

Weighted average shares of Class A common stock outstanding:

13 unchanged sentences

Conversion of Class B shares to Class A shares

Vesting of restricted share units

Issuance of Class A common stock under stock-based compensation plans

Loan to shareholder and accumulated interest

3 unchanged sentences

Balance at March 31, 2024

Equity-based compensation

Conversion of Class B shares to Class A shares

Issuance of Class A common stock under stock-based compensation plans

Loan to shareholder and accumulated interest

Distributions paid to Pre-IPO LLC Members

Preferred stock dividend

Adjustment of preferred stock to redemption value

Balance at June 30, 2024

See accompanying notes to condensed consolidated financial statements.

15 unchanged sentences

Vesting of Class B shares

Vesting of restricted share units, net of shares withheld for taxes

Issuance of Class A common stock under stock-based compensation plans, net of shares withheld for taxes

Deemed contribution from redemption of preferred stock

2 unchanged sentences

Balance at March 31, 2023

Equity-based compensation

Conversion of Class B shares to Class A shares

Preferred stock dividend

Adjustment of preferred stock to redemption value

Vesting of Class B shares

Issuance of Class A common stock under stock-based compensation plans, net of shares withheld for taxes

Loan to shareholder and accumulated interest

Receivable from shareholder arising from the Rumble studios acquisition

Consideration related to the Rumble studios acquisition

Payment received from shareholder

Distributions paid to Pre-IPO LLC Members

Balance at June 30, 2023

See accompanying notes to condensed consolidated financial statements.

2 unchanged sentences

(amounts in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities:

Adjustments to reconcile net loss to net cash provided by operating activities:

Net income (loss)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization

3 unchanged sentences

Non-cash lease expense

Bad debt expense (recovery)

Bad debt expense

Equity-based compensation

Non-cash interest

Gain on disposal of assets

Loss (gain) on disposal of assets

Impairment of goodwill and other assets

Changes in assets and liabilities, net of effect of acquisition:

13 unchanged sentences

Proceeds from sale of assets

Purchase of studios

Purchase of intangible assets

Notes receivable issued

Notes receivable payments received

7 unchanged sentences

Payments for taxes related to net share settlement of restricted share units

Proceeds from issuance of common stock in connection with stock-based compensation plans

Payment for tax receivable agreement

Payments for redemption of preferred stock

Payments for distributions to Pre-IPO LLC Members

Payment received from shareholder (Note 10)

Loan to shareholder (Note 10)

Net cash used in financing activities

Decrease in cash, cash equivalents and restricted cash

Increase (decrease) in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash, beginning of period

4 unchanged sentences

(amounts in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Supplemental cash flow information:

9 unchanged sentences

Debt issuance costs paid-in-kind - long-term debt

Non-cash proceeds from sale of asset

Preferred stock dividend paid-in-kind

See accompanying notes to condensed consolidated financial statements.

9 unchanged sentences

Prior to the formation of XPO Holdings, the Company was a wholly owned subsidiary of H&W Franchise Intermediate Holdings, LLC (the “Member”).

As of March 31, 2024 , the Company’s portfolio of ten brands consists of:

As of June 30, 2024 , the Company’s portfolio of nine brands consisted of:

“Club Pilates,” a Pilates facility franchisor;

1 unchanged sentence

“StretchLab,” a fitness concept offering one-on-one assisted stretching services;

“Row House,” a rowing concept that provides an effective and efficient workout centered around the sport of rowing;

“YogaSix,” a yoga concept that concentrates on connecting to one’s body in a way that is energizing;

6 unchanged sentences

Additionally, the Company, through its ownership of the Lindora brand, franchises clinics that provide medically guided wellness and metabolic health solutions to its members.

In addition to franchised studios, the Company operated one and 87 company-owned transition studios as of March 31, 2024 and 2023, respectively.

In addition to franchised studios, the Company operated one and 84 company-owned transition studios as of June 30, 2024 and 2023, respectively.

On February 13, 2024, the Company divested the Stride brand, including the intellectual property, franchise rights and franchise agreements for open studios.

On May 20, 2024, the Company divested the Row House brand, including the intellectual property, franchise rights and franchise agreements for open studios.

See Note 3 for additional information.

16 unchanged sentences

See Note 3 for additional information.

Reclassifications – To conform with current year presentation, the Company has reclassified impairment charges of $ 7,238 from selling, general and administrative expenses to impairment of goodwill and other assets in the operating costs and expenses section of the condensed consolidated statements of operations for the three and six months ended June 30, 2023.

Principles of consolidation – The Company’s consolidated financial statements include the accounts of its wholly owned subsidiaries.

4 unchanged sentences

Segment and geographic information – The Company operates in one reportable and operating segment.

The Company generated $ 3,051 and $ 2,980 of revenue outside of the United States during the three months ended March 31, 2024 and 2023, respectively.

As of March 31, 2024 and December 31, 2023 , the Company did not have material assets located outside of the United States.

The Company generated $ 3,502 and $ 6,553 of revenue outside the United States during the three and six months ended June 30, 2024 , respectively, and $ 4,007 and $ 6,987 during the three and six months ended June 30, 2023, respectively.

As of June 30, 2024 and December 31, 2023 , the Company did not have material assets located outside of the United States.

Cash, cash equivalents and restricted cash – The Company considers all highly liquid investments with an original maturity of 90 days or less to be cash equivalents.

6 unchanged sentences

The Company's restricted cash consists of marketing fund restricted cash and guarantee of standby letter of credit.

Restricted cash was $ 10,511 and $ 9,333 at March 31, 2024 and December 31, 2023 , respectively.

Restricted cash was $ 11,018 and $ 9,333 at June 30, 2024 and December 31, 2023 , respectively.

Accounts receivable and allowance for expected credit losses – Accounts receivable primarily consist of amounts due from franchisees and vendors.

11 unchanged sentences

(amounts in thousands, except per share amounts)

The following table provides a reconciliation of the activity related to the Company’s accounts receivable and notes receivable allowance for credit losses:

The following tables provide a reconciliation of the activity related to the Company’s accounts receivable and notes receivable allowance for credit losses:

Accounts receivable

1 unchanged sentence

Balance at January 1, 2024

Bad debt expense (recovery) recognized during the period

Bad debt expense recognized during the period

Write-off of uncollectible amounts

Balance at March 31, 2024

Balance at June 30, 2024

Accounts receivable

Notes receivable

Balance at January 1, 2023

Bad debt expense recognized during the period

Write-off of uncollectible amounts

Balance at June 30, 2023

Prepaid expenses and other current assets – Prepaid expenses and other current assets consisted of the following:

Prepaid expenses

Tax receivables

Other current assets

Total prepaid expenses and other current assets

Accrued expenses – Accrued expenses consisted of the following:

12 unchanged sentences

Comprehensive income – The Company does not have any components of other comprehensive income recorded within the consolidated financial statements and therefore does not separately present a consolidated statement of comprehensive income in the condensed consolidated financial statements.

Xponential Fitness, Inc.

Notes to Condensed Consolidated Financial Statements

(amounts in thousands, except per share amounts)

Fair value measurements – Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements and Disclosures , applies to all financial assets and financial liabilities that are measured and reported on a fair value basis and requires disclosure that establishes a framework for measuring fair value and expands disclosure about fair value measurements.

5 unchanged sentences

These inputs would be based on the best information available, including the Company’s own data.

Xponential Fitness, Inc.

Notes to Condensed Consolidated Financial Statements

(amounts in thousands, except per share amounts)

The Company’s financial instruments include cash, restricted cash, accounts receivable, notes receivable, accounts payable, accrued expenses and notes payable.

20 unchanged sentences

If the Company determines that it would be able to realize DTAs in the future in excess of the net recorded amount, an adjustment to the DTA valuation allowance would be made, which would reduce the provision for income taxes.

Xponential Fitness, Inc.

Notes to Condensed Consolidated Financial Statements

(amounts in thousands, except per share amounts)

The Company records uncertain tax positions in accordance with ASC Topic 740 on the basis of a two-step process in which the Company a) determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and b) for those tax positions that meet the more-likely-than-not recognition threshold, recognizes the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.

1 unchanged sentence

The Company recognizes potential interest and penalties, if any, related to income tax matters in income tax expense.

Recently issued accounting pronouncements –

The Company qualifies as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”).

Recently issued accounting pronouncements – The Company qualifies as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”).

An emerging growth company may take advantage of reduced reporting requirements and is relieved of certain other significant requirements that are otherwise generally applicable to public companies.

1 unchanged sentence

The Company has elected to use this extended transition period.

Xponential Fitness, Inc.

Notes to Condensed Consolidated Financial Statements

(amounts in thousands, except per share amounts)

Segment Reporting – In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU No.

16 unchanged sentences

The Company completed the following acquisitions and dispositions which contain Level 3 fair value measurements related to the recognition of goodwill and intangibles.

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.

This acquisition was expected to enhance the operational performance of the 14 Rumble studios as the Company prepares them to be licensed to new franchisees.

1 unchanged sentence

The Company also entered into a mutual termination agreement with the Rumble Sellers to terminate their existing franchise agreements, resulting in cash received and a gain of $ 3,500 , which is included within selling, general and administrative expenses.

Under the Asset Purchase Agreement, consideration for the acquisition included $ 1 , which was recorded as a reduction to receivable from shareholder.

Under the APA, consideration for the acquisition included $ 1 , which was recorded as a reduction to receivable from shareholder.

The Company also agreed to assume liabilities aggregating $ 1,450 , which is expected to be reimbursed to the Company upon the sale of XPO Inc.

1 unchanged sentence

In connection with the transaction, the Company wrote down intangible assets related to franchise agreements, net of reacquired franchise rights, in the amount of $ 7,238 .

The Company determined the estimated fair values assigned to assets acquired and liabilities assumed after review and consideration of relevant information as of the acquisition date.

The fair values are based on management's estimates and assumptions, which include Level 3 unobservable inputs, and are determined using generally accepted valuation techniques.

The Company determined the estimated fair values assigned to assets acquired and liabilities assumed after review and consideration of relevant information as of the acquisition

Xponential Fitness, Inc.

1 unchanged sentence

(amounts in thousands, except per share amounts)

The fair values were based on management's estimates and assumptions, which included Level 3 unobservable inputs, and were determined using generally accepted valuation techniques.

The following summarizes the fair values of the assets acquired and liabilities assumed as of the acquisition date based on the purchase price allocation:

20 unchanged sentences

The acquisition was not material to the results of operations of the Company.

During the three months ended March 31, 2024 and 2023, the Company refranchised operations at ten and three company-owned transition studios, respectively, received no proceeds in either period, and recorded a net loss of $ 122 and $ 0 on disposal of the studio assets, respectively.

During the three months ended March 31, 2024 and 2023, the Company also ceased operations at 11 and 0 company-owned transition studios, respectively.

During the six months ended June 30, 2024 and 2023, the Company refranchised operations at 10 and 34 company-owned transition studios, respectively, received no proceeds in either period, and recorded a net loss of $ 122 and $ 148 on disposal of the studio assets, respectively.

During the six months ended June 30, 2024 and 2023, the Company also ceased operations at 11 and one company-owned transition studios, respectively.

The Company refranchised or closed company-owned transition studios under its restructuring plan that started in the third quarter of 2023.

5 unchanged sentences

When the Company believes that a studio will be refranchised for a price less than its carrying value but does not believe the studio has met the criteria to be classified as held for sale, the Company reviews the studio for impairment.

The Company evaluates the recoverability of the studio assets by comparing estimated sales proceeds plus holding period cash flows, if any, to the carrying value of the studio.

For studio assets that are not deemed to be recoverable, the Company recognizes impairment for any excess of carrying value over the fair value of the studios, which is based on the expected net sales proceeds.

During the three months ended March 31, 2024 and 2023 , the Company did no t record any impairment charges related to studio assets.

The Company evaluates the recoverability of the studio assets by comparing estimated sales proceeds plus holding period cash flows, if any, to the carrying value

Xponential Fitness, Inc.

1 unchanged sentence

(amounts in thousands, except per share amounts)

Xponential Procurement Services Acquisition

On December 29, 2023 , the Company entered into a Membership Interest Purchase Agreement whereby the Company acquired 100 % of the membership rights in Xponential Procurement Services, LLC ( “XPS” ) from the XPS seller.

of the studio.

During the three and six months ended June 30, 2024 and 2023 , the Company did no t record any impairment charges related to studio assets.

Xponential Procurement Services Acquisition - On December 29, 2023 , the Company entered into a Membership Interest Purchase Agreement whereby the Company acquired 100 % of the membership rights in Xponential Procurement Services, LLC ( “XPS” ) from the XPS seller.

The aggregate purchase consideration for the acquisition was $ 9,930 .

16 unchanged sentences

Goodwill and intangible assets recognized from this acquisition are expected to be tax deductible.

Lindora Acquisition

On December 1, 2023 , the Company entered into an agreement to acquire Lindora Franchise, LLC, a Delaware limited liability company, the franchisor of the “Lindora” wellness brand (the “Lindora Franchisor”), for cash consideration of $ 8,500 .

Lindora Acquisition - On December 1, 2023 , the Company entered into an agreement to acquire Lindora Franchise, LLC, a Delaware limited liability company, the franchisor of the “Lindora” wellness brand (the “Lindora Franchisor”), for cash consideration of $ 8,500 .

The transaction also includes up to $ 1,000 of contingent consideration which is subject to the achievement of certain milestones.

7 unchanged sentences

The acquisition of Lindora complements the Company's existing brands and will help the Company deliver on consumers’ increasing demand for a holistic approach to health.

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.

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

Xponential Fitness, Inc.

1 unchanged sentence

(amounts in thousands, except per share amounts)

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.

and estimates made by management.

The fair values assigned to intangible assets acquired are based on management's estimates and assumptions.

9 unchanged sentences

Goodwill and intangible assets recognized from this acquisition are expected to be tax deductible.

During the three months ended March 31, 2024 and 2023 , the Company incurred $ 428 and $ 0 , respectively, of transaction costs related to acquisitions, which is included in acquisition and transaction expenses in the condensed consolidated statements of operations.

During the three and six months ended June 30, 2024 , the Company incurred $ 100 and $ 528 , respectively, of transaction costs related to acquisitions, which is included in acquisition and transaction expenses in the condensed consolidated statements of operations.

The company did no t incur any transaction costs related to acquisitions during the three and six months ended June 30, 2023.

Pro forma financial information and revenue from the date of acquisition have not been provided for these acquisitions as they are not material either individually or in the aggregate.

Divestiture of Stride brand

On February 13, 2024, the Company entered into an asset purchase agreement with a buyer, pursuant to which the Company divested the Stride brand, including the intellectual property, franchise rights and franchise agreements for open studios.

Divestiture of Stride brand - On February 13, 2024, the Company entered into an agreement with a buyer, pursuant to which the Company divested the Stride brand, including the intellectual property, franchise rights and franchise agreements for open studios.

The buyer of the Stride brand is a member of management and shareholder of the Company.

3 unchanged sentences

The divested brand did not represent a strategic shift that has a major effect on the Company's operations and financial results, and, as such, it was not presented as discontinued operations.

Divestiture of Row House brand - On May 20, 2024, the Company entered into an agreement with a buyer, pursuant to which the Company divested the Row House brand, including the intellectual property, franchise rights and franchise agreements for open studios, and retained certain liabilities, including liabilities related to known litigation, pre-litigation, and disputes as of the closing of the divestiture.

The Company received no consideration from the divestiture of the Row House brand.

The divestiture allows the Company to better focus and utilize its resources on its other brands.

The Company recognized a loss on divestiture of $ 922 , which was included within selling, general and administration expenses in the condensed consolidated statements of operations.

The divested brand did not represent a strategic shift that has a major effect on the Company's operations and financial results, and, as such, it was not presented as discontinued operations.

Note 4 – Contract Liabilities and Costs from Contracts with Customers

3 unchanged sentences

Also included in the deferred revenue balance are non-refundable prepayments for merchandise and equipment, as well as revenues for training, service revenue and on-demand fees for which the associated products or services have not yet been provided to the customer.

The Company classifies these contract liabilities as either current deferred revenue or non-current deferred revenue in the condensed consolidated balance sheets based on the anticipated timing of delivery.

The following table reflects the change in franchise development and brand fee contract liabilities for the three months ended March 31, 2024 .

Other deferred revenue amounts of $ 18,472 are excluded from the table as the original expected duration of the contracts is one year or less.

The Company classifies these contract liabilities as either current deferred revenue or non-current deferred revenue in the condensed consolidated balance sheets based on the anticipated timing

Xponential Fitness, Inc.

1 unchanged sentence

(amounts in thousands, except per share amounts)

The following table reflects the change in franchise development and brand fee contract liabilities for the six months ended June 30, 2024 .

Other deferred revenue amounts of $ 18,188 are excluded from the table as the original expected duration of the contracts is one year or less.

Balance at December 31, 2023

1 unchanged sentence

revenue at the beginning of the year

Decrease in deferred revenue due to divestiture

Increase, excluding amounts recognized as revenue

during the period

Balance at March 31, 2024

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 March 31, 2024.

Balance at June 30, 2024

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 June 30, 2024.

The expected future recognition period for deferred franchise development fees related to unopened studios is based on management’s best estimate of the beginning of the franchise license term for those studios.

14 unchanged sentences

The associated expense is classified within costs of franchise and service revenue in the condensed consolidated statements of operations.

At March 31, 2024 and December 31, 2023 , there were approximately $ 4,127 and $ 4,126 of current deferred costs and approximately $ 45,243 and $ 46,221 in non-current deferred costs, respectively.

The Company recognized franchise sales commission expense of approximately $ 2,845 and $ 2,035 for the three months ended March 31, 2024 and 2023, respectively.

At June 30, 2024 and December 31, 2023 , there were approximately $ 3,974 and $ 4,126 of current deferred costs and approximately $ 42,772 and $ 46,221 in non-current deferred costs, respectively.

The Company recognized franchise sales commission expense of approximately $ 3,292 and

Xponential Fitness, Inc.

1 unchanged sentence

(amounts in thousands, except per share amounts)

$ 6,137 for the three and six months ended June 30, 2024, respectively, and $ 1,746 and $ 3,781 for the three and six months ended June 30, 2023 , respectively.

Note 5 – Notes Receivable

7 unchanged sentences

Activity related to these loans is presented within investing activities in the condensed consolidated statements of cash flows.

At March 31, 2024 and December 31, 2023, the principal balance of the notes receivable was approximately $ 2,902 and $ 3,189 , respectively.

At June 30, 2024 and December 31, 2023, the principal balance of the notes receivable was approximately $ 2,760 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.

10 unchanged sentences

Total property and equipment

Depreciation expense for the three months ended March 31, 2024 and 2023, was $ 1,488 and $ 1,242 , respectively.

Depreciation expense for the three and six months ended June 30, 2024 , was $ 1,590 and $ 3,078 , respectively, and $ 1,403 and $ 2,645 for the three and six months ended June 30, 2023, respectively.

Note 7 – Goodwill and Intangible Assets

1 unchanged sentence

Goodwill is not amortized but is tested annually for impairment or more frequently if indicators of potential impairment exist.

During the three months ended March 31, 2024 , there was an increase of $ 2,346 in previously reported goodwill due to the acquisition of Lindora as discussed in Note 3.

The carrying value of goodwill at March 31, 2024 and December 31, 2023 , totaled $ 173,947 and $ 171,601 , respectively.

Cumulative goodwill impairment was $ 10,113 at March 31, 2024 and December 31, 2023.

During the six months ended June 30, 2024 , there was an increase of $ 2,346 in previously reported goodwill due to the acquisition of Lindora as discussed in Note 3.

The carrying value of goodwill at June 30, 2024 and December 31, 2023 , totaled $ 163,036 and $ 171,601 , respectively.

Cumulative goodwill impairment was $ 21,024 and $ 10,113 at June 30, 2024 and December 31, 2023, respectively.

The impairment charges are included within impairment of goodwill and other assets in the Company's condensed consolidated statements of operations.

During the quarter ended June 30, 2024, the Company determined it was necessary to re-evaluate goodwill of the CycleBar reporting unit for impairment due to indicators of potential impairment resulting from a decline in forecasted and actual cash flows.

Xponential Fitness, Inc.

1 unchanged sentence

(amounts in thousands, except per share amounts)

Therefore, the Company performed a quantitative assessment of the fair value of the reporting unit using an income approach with assumptions that are considered Level 3 inputs and concluded that the carrying value of the CycleBar reporting unit exceeded its fair value, resulting in a goodwill impairment of $ 10,911 and no goodwill remaining for the CycleBar reporting unit.

The fair value of the reporting unit was determined by discounting estimated future cash flows, which were calculated based on revenue and expense long-term growth assumptions ranging from ( 1.0 %) to 3.0 %, at a weighted average cost of capital (discount rate) of 16.0 %.

In addition, the Company determined that the franchise agreements intangible assets related to CycleBar were also impaired and recognized an impairment loss of $ 1,178 in the second quarter of 2024.

Intangible assets consisted of the following:

March 31, 2024

June 30, 2024

December 31, 2023

8 unchanged sentences

Total intangible assets

Amortization expense was $ 2,948 and $ 2,955 , for the three months ended March 31, 2024 and 2023, respectively.

Amortization expense was $ 2,927 and $ 5,875 , for the three and six months ended June 30, 2024 , respectively, and $ 2,885 and $ 5,840 for the three and six months ended June 30, 2023 , respectively.

During the six months ended June 30, 2023, the Company recorded a write down of franchise agreements, net of reacquired franchise rights, in the amount of $ 7,238 in connection with the acquisition of 14 Rumble studios as discussed in Note 3, which is included within impairment of goodwill and other assets.

The anticipated future amortization expense of intangible assets is as follows:

3 unchanged sentences

The Company’s obligations under the Credit Agreement are guaranteed by XPO Holdings and certain of the Company’s material subsidiaries and are secured by substantially all of the assets of XPO Holdings and certain of the Company’s material subsidiaries.

Xponential Fitness, Inc.

Notes to Condensed Consolidated Financial Statements

(amounts in thousands, except per share amounts)

Under the Credit Agreement, the Company is required to make:

(i) monthly payments of interest on the Term Loans and (ii) quarterly principal payments equal to 0.25 % of the original principal amount of the Term Loans.

Borrowings under the Term Loan Facility bear interest at a per annum rate of, at the Company’s option, either (a) the term secured overnight financing rate (“Term SOFR”) plus a Term SOFR Adjustment (as defined in the Credit Agreement per the fifth amendment), plus a margin of 6.50 % or (b) the Reference Rate (as defined in the Credit Agreement) plus a margin of 5.50 % ( 12.09 % at March 31, 2024).

The Credit Agreement also contains mandatory prepayments of the Term Loans with:

4 unchanged sentences

and (v) up to $ 60,000 of net proceeds in connection with an initial public offering of at least $ 200,000 , subject to certain exceptions.

Xponential Fitness, Inc.

Notes to Condensed Consolidated Financial Statements

(amounts in thousands, except per share amounts)

Unless agreed in advance, a ll voluntary prepayments and certain mandatory prepayments of the Term Loan made (i) on or prior to the first anniversary of the closing date are subject to a 2.0 % premium on the principal amount of such prepayment and (ii) after the first anniversary of the closing date and on or prior to the second anniversary of the closing date are subject to a 0.50 % premium on the principal amount of such prepayment.

Unless agreed in advance, a ll voluntary prepayments and certain mandatory prepayments of the Term Loan made:

(i) on or prior to the first anniversary of the closing date are subject to a 2.0 % premium on the principal amount of such prepayment and (ii) after the first anniversary of the closing date and on or prior to the second anniversary of the closing date are subject to a 0.50 % premium on the principal amount of such prepayment.

Otherwise, the Term Loans may be paid without premium or penalty, other than customary breakage costs with respect to SOFR Term Loans.

9 unchanged sentences

and (ix) restricting the issuance of equity.

As of March 31, 2024, the Company was in compliance with these covenants.

As of June 30, 2024, the Company was in compliance with these covenants.

The Credit Agreement also contains customary events of default, which could result in acceleration of amounts due under the Credit Agreement.

1 unchanged sentence

On January 9, 2023, the Company entered into a fourth amendment (the “Fourth Amendment”) to the Credit Agreement.

In connection with the Fourth Amendment, the Company wrote off a pro rata portion of debt issuance costs related to the Term Loans aggregating $ 265 , which was included in interest expense for the three months ended March 31, 2023.

On February 13, 2024, the Company entered into a sixth amendment (the “Sixth Amendment”) to the Credit Agreement.

1 unchanged sentence

The proceeds of the Sixth Amendment were used to repay an aggregate of $ 38,701 in existing term loans under the Credit Agreement and for the payment of fees, costs and expenses related to the making of the Sixth Amendment Incremental Term Loans.

The Sixth Amendment, among other things, also (i) increased the amount of the quarterly principal payments of the loans provided pursuant to the Credit Agreement (including the Sixth Amendment Incremental Term Loans) commencing on June 30, 2024 to $ 1,287 and (ii) extended the maturity date for all outstanding term loans under the Credit Agreement to March 15, 2026.

In connection with the Sixth Amendment, the Company wrote off a pro rata portion of debt issuance costs related to the Term Loans of $ 23 and wrote off original issue discount of $ 452 related to the repayment of a portion of the Term Loans, which were included in interest expense for the three months ended March 31, 2024.

The Company incurred debt issuance costs of $ 269 and $ 115 for the three months ended March 31, 2024 and 2023, respectively.

Debt issuance cost amortization and write off amounted to $ 72 and $ 283 for the three months ended March 31, 2024 and 2023, respectively.

Unamortized debt issuance costs as of March 31, 2024 and December 31, 2023 , were $ 415 and $ 218 , respectively, and are presented as a reduction to long-term debt in the condensed consolidated balance sheets.

Unamortized original issue discount as of March 31, 2024 and December 31, 2023 , was $ 7,013 and $ 4,279 , respectively, and is presented as a reduction to long-term debt in the condensed consolidated balance sheets.

Principal payments on outstanding balances of long-term debt as of March 31, 2024 were as follows:

Remainder of 2024

The Sixth Amendment, among other things, also:

(i) increased the amount of the quarterly principal payments of the loans provided pursuant to the Credit Agreement (including the Sixth Amendment Incremental Term Loans) commencing on June 30, 2024 to $ 1,287 and (ii) extended the maturity date for all outstanding term loans under the Credit Agreement to March 15, 2026.

The Company incurred debt issuance costs of $ 269 and $ 115 for the six months ended June 30, 2024 and 2023, respectively.

Debt issuance cost amortization and write off amounted to $ 52 and $ 124 for the three and six months ended June 30, 2024, respectively, and $ 14 and $ 297 for the three and six months ended June 30, 2023, respectively.

Unamortized debt issuance costs as of June 30, 2024 and

Xponential Fitness, Inc.

1 unchanged sentence

(amounts in thousands, except per share amounts)

The carrying value of the Company’s long-term debt approximated fair value as of March 31, 2024 and December 31, 2023 , due to the variable interest rate, which is a Level 2 input, or proximity of debt issuance date to the balance sheet date.

December 31, 2023 , were $ 363 and $ 218 , respectively, and are presented as a reduction to long-term debt in the condensed consolidated balance sheets.

Unamortized original issue discount as of June 30, 2024 and December 31, 2023 , was $ 6,137 and $ 4,279 , respectively, and is presented as a reduction to long-term debt in the condensed consolidated balance sheets.

Principal payments on outstanding balances of long-term debt as of June 30, 2024 were as follows:

Remainder of 2024

The carrying value of the Company’s long-term debt approximated fair value as of June 30, 2024 and December 31, 2023 , due to the variable interest rate, which is a Level 2 input.

Note 9 – Leases

20 unchanged sentences

When determining the fair value of the ROU asset, the Company estimated what market participants would pay to lease the assets assuming the highest and best use in the assets' current forms.

There were no ROU asset impairment charges during the three months ended March 31, 2024 and 2023.

There were no ROU asset impairment charges during the three and six months ended June 30, 2024 and 2023.

Supplemental balance sheet information related to leases are summarized as follows:

1 unchanged sentence

Balance Sheet Location

March 31, 2024

June 30, 2024

December 31, 2023

5 unchanged sentences

Lease liability

Components of lease expense during the three months ended March 31, 2024 and 2023, are summarized as follows:

For the three months ended March 31,

Operating lease costs

Variable lease costs

Xponential Fitness, Inc.

1 unchanged sentence

(amounts in thousands, except per share amounts)

Supplemental cash flow information related to operating leases during the three months ended March 31, 2024 and 2023, are summarized as follows:

Three Months Ended March 31,

Components of lease expense during the three and six months ended June 30, 2024 and 2023, are summarized as follows:

Three months ended June 30,

Operating lease costs

Variable lease costs

Six months ended June 30,

Operating lease costs

Variable lease costs

Supplemental cash flow information related to operating leases during the three and six months ended June 30, 2024 and 2023, are summarized as follows:

Three months ended June 30,

Cash paid for amounts included in the measurement of operating lease liabilities

Lease liabilities arising from new ROU assets

Six months ended June 30,

Cash paid for amounts included in the measurement of operating lease liabilities

Lease liabilities arising from new ROU assets

Other information related to leases is summarized as follows:

March 31, 2024

June 30, 2024

December 31, 2023

1 unchanged sentence

Weighted average discount rate

Maturities of lease liabilities as of March 31, 2024 are summarized as follows:

Maturities of lease liabilities as of June 30, 2024 are summarized as follows:

Remainder of 2024

1 unchanged sentence

imputed interest

Xponential Fitness, Inc.

Notes to Condensed Consolidated Financial Statements

(amounts in thousands, except per share amounts)

Note 10 – Related Party Transactions

8 unchanged sentences

In 2023 and 2022, the Rumble Sellers borrowed an additional $ 4,400 and $ 5,050 , respectively, under the debt financing agreement which was recorded as receivable from shareholder within equity.

During the three months ended March 31, 2024 and 2023, the Company recorded $ 349 and $ 487 of interest in kind, respectively, which was recorded as an increase to receivable from shareholder within equity.

Xponential Fitness, Inc.

Notes to Condensed Consolidated Financial Statements

(amounts in thousands, except per share amounts)

During the three and six months ended June 30, 2024, the Company recorded $ 360 and $ 709 of interest in kind, respectively, which was recorded as interest income and an increase to receivable from shareholder within equity.

During the three and six months ended June 30, 2023 , the Company recorded $ 384 and $ 871 of interest in kind, respectively.

During the six months ended June 30, 2023 , the Company received $ 1,289 cash as partial payment for the receivable from shareholder.

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.

2 unchanged sentences

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 March 31, 2024 , the former owner of Row House borrowed $ 360 , which was recorded as a reduction to liability.

As of June 30, 2024 , the former owner of Row House borrowed $ 410 , which was recorded as a reduction to liability.

In March 2023, Spartan Fitness Holdings, LLC (“Spartan Fitness”), which currently owns and operates 86 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.

2 unchanged sentences

Spartan Fitness also owns the rights to 86 Club Pilates licenses to open additional new units.

The Company recorded franchise, equipment and marketing fund revenue aggregating $ 2,104 and $ 1,232 , during the three months ended March 31, 2024 and 2023, respectively, from studios owned by Spartan Fitness.

The Company recorded franchise, equipment and marketing fund revenue aggregating $ 2,345 and $ 4,449 , during the three and six months ended June 30, 2024, respectively, and $ 1,780 and $ 3,012 for the three and six months ended June 30, 2023, respectively, from studios owned by Spartan Fitness.

The Company earns revenues and has accounts receivable from a franchisee who is also a member of senior management of the Company.

Revenues from this affiliate, primarily related to franchise revenue, marketing fund revenue and merchandise revenue, were $ 68 and $ 136 for the three months ended March 31, 2024 and 2023, respectively.

Included in accounts receivable as of March 31, 2024 and December 31, 2023, is $ 3 and $ 2 , respectively, for such sales.

The Company provided $ 239 of studio support during the three months ended March 31, 2024 to this franchisee.

Revenues from this affiliate, primarily related to franchise revenue, marketing fund revenue and merchandise revenue, were $ 47 and $ 115 for the three and six months ended June 30, 2024, respectively, and $ 134 and $ 270 for the three and six months ended June 30, 2023, respectively.

Included in accounts receivable as of June 30, 2024 and December 31, 2023, is $ 0 and $ 2 , respectively, for such sales.

The Company provided $ 716 and $ 955 of studio support during the three and six months ended June 30, 2024, respectively, to this franchisee.

In August 2023, the Company received payments from an officer and a director of the Company totaling $ 516 related to disgorgement of short-swing profits under Section 16(b) of the Securities Exchange Act of 1934, as amended.

The Company recognized these proceeds as a capital contribution from stockholders and the amounts were recorded as increases to additional paid-in capital on the condensed consolidated balance sheets.

In May 2024, the Company’s board of directors approved the sale of one of the Company’s vehicles to the Company’s former Chief Executive Officer and board member, for $ 275 .

The former Chief Executive Officer paid for the vehicle with a $ 275 reduction of TRA payments and partner distributions owed to him by the Company.

The Company recognized an $ 18 gain on sale of asset during

Xponential Fitness, Inc.

Notes to Condensed Consolidated Financial Statements

(amounts in thousands, except per share amounts)

the three months ended June 30, 2024, which is included in selling, general and administrative expenses on the Company’s condensed consolidated statements of operations.

Note 11 – Redeemable Convertible Preferred Stock

7 unchanged sentences

Certain embedded features in the Convertible Preferred require bifurcation.

However, the fair value of such embedded features was immaterial upon issuance and as of March 31, 2024.

However, the fair value of such embedded features was immaterial upon issuance and as of June 30, 2024.

The Convertible Preferred ranks senior to the Company’s common stock with respect to the payment of dividends and distribution of assets upon liquidation, dissolution and winding up.

3 unchanged sentences

however, any shares of Series A-1 preferred stock issued to any of the lenders party to the Credit Agreement will convert on a one-to-one basis to shares of Series A preferred stock when permitted under relevant antitrust restrictions.

Xponential Fitness, Inc.

Notes to Condensed Consolidated Financial Statements

(amounts in thousands, except per share amounts)

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.

2 unchanged sentences

The excess of fair market value of $ 12,679 over the consideration transferred was treated as deemed contribution and resulted in a decrease to accumulated deficit and was included in the calculation of earnings (loss) per share.

At March 31, 2024 and December 31, 2023, the Company recognized the preferred maximum redemption value of $ 122,766 and $ 114,660 , respectively, which is the maximum redemption value on the earliest redemption date based on fair market value per share of Convertible Preferred (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 115 outstanding shares of Convertible Preferred at March 31, 2024 and December 31, 2023).

The recording of the preferred maximum redemption value was treated as deemed contribution (dividend), which was included in the calculation of earnings (loss) per share and resulted in a net decrease of $ 8,106 and $ 62,660 to additional paid-in-capital for the three months ended March 31, 2024 and 2023 , respectively.

During the three months ended June 30, 2024, the Company elected the paid-in-kind option for the Convertible Preferred quarterly preferential coupon resulting in an increase in the fixed liquidation preference of $ 2,150 , which was recorded as a decrease to additional paid-in-capital and was included in the calculation of earnings (loss) per share.

Xponential Fitness, Inc.

Notes to Condensed Consolidated Financial Statements

(amounts in thousands, except per share amounts)

At June 30, 2024 and December 31, 2023, the Company recognized the preferred maximum redemption value of $ 122,903 and $ 114,660 , respectively, which is the maximum redemption value on the earliest redemption date based on fair market value per share of Convertible Preferred (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 115 outstanding shares of Convertible Preferred at June 30, 2024 and December 31, 2023).

The recording of the preferred maximum redemption value was treated as deemed dividend, which was included in the calculation of earnings (loss) per share and resulted in a net decrease of $ 6,094 and $ 17,109 to additional paid-in-capital for the six months ended June 30, 2024 and 2023 , respectively.

Note 12 – Stockholder's Equity (Deficit)

Common stock – In February 2023, the Company entered into an underwriting agreement with certain existing stockholders, affiliates of H&W Investco and our Chief Executive Officer (collectively the “Selling Stockholders” ) and certain underwriters named therein, pursuant to which the Selling Stockholders sold an aggregate of 5,000 shares of Class A common stock in a secondary public offering at a public offering price of $ 24.50 per share.

Common stock – In February 2023, the Company entered into an underwriting agreement with certain existing stockholders, affiliates of H&W Investco and our former Chief Executive Officer (collectively the “Selling Stockholders” ) and certain underwriters named therein, pursuant to which the Selling Stockholders sold an aggregate of 5,000 shares of Class A common stock in a secondary public offering at a public offering price of $ 24.50 per share.

All of the shares sold in this offering were offered by the Selling Stockholders.

3 unchanged sentences

The Company did not receive any proceeds from the sale of shares of Class A common stock offered by the Selling Stockholders.

Additionally, during the three months ended March 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 78 and 1,451 shares of Class A common stock on a one-for-one basis, respectively.

Additionally, during the three and six months ended June 30, 2024, 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 398 and 476 shares of Class A common stock on a one-for-one basis, respectively.

During the three and six months ended June 30, 2023 certain Continuing Pre-IPO LLC Members exchanged their LLC units for 141 and 1,593 shares of Class A common stock on a one-for-one basis, respectively.

Noncontrolling interests – Following the IPO, XPO Inc.

7 unchanged sentences

The Company used the liquidation value of the preferred shares for such rebalancing.

The following table summarizes the ownership of XPO LLC as of June 30, 2024:

Ownership percentage

Noncontrolling interests

Xponential Fitness, Inc.

1 unchanged sentence

(amounts in thousands, except per share amounts)

The following table summarizes the ownership of XPO LLC as of March 31, 2024:

Ownership percentage

Noncontrolling interests

Note 13 – Equity Compensation

Profit interest units –

Under the pre-IPO plan, the Parent granted profit interest units to certain key employees of the Company and its subsidiaries.

Profit interest units – Under the pre-IPO plan, the Parent granted profit interest units to certain key employees of the Company and its subsidiaries.

Subsequent to the IPO, the profit interest units converted to Class B shares.

1 unchanged sentence

The fair value of the time-based grants was recognized as compensation expense over the vesting period (generally four years ) and was calculated using a Black-Scholes option-pricing model.

At March 31, 2024, the Company had $ 1 of unrecognized compensation expense.

At June 30, 2024, the Company had $ 1 of unrecognized compensation expense.

The unrecognized compensation expense is expected to be recognized over a weighted average period of approximately 0.11 years for the time-based grants.

Liability classified restricted stock units –

In November 2021, the Company granted RSU awards with performance conditions of meeting certain EBITDA targets through the year ending December 31, 2024.

Liability classified restricted stock units – In November 2021, the Company granted RSU awards with performance conditions of meeting certain EBITDA targets through the year ending December 31, 2024.

The awards were granted with fixed dollar valuation and the number of shares granted depends on the trading price at the closing date of the period in which the EBITDA target is met.

4 unchanged sentences

Accordingly, the Company reversed all previously recognized stock-based compensation expense related to these awards.

Equity classified restricted stock units –

The following table summarizes activity for RSUs for the three months ended March 31, 2024:

Equity classified restricted stock units – The following table summarizes activity for RSUs (including performance-based) for the six months ended June 30, 2024:

Weighted Average

3 unchanged sentences

Forfeited, expired, or canceled

Outstanding at March 31, 2024

Outstanding at June 30, 2024

RSUs are valued at the Company’s closing stock price on the date of grant, and generally vest over a one - to four-year period.

Compensation expense for RSUs is recognized on a straight-line basis.

During 2023, 36 performance-based RSUs were earned and issued as shares and seven performance-based RSUs were cancelled or forfeited.

During the six months ended June 30, 2024, 34 performance-based RSUs were earned and issued as shares and 11 performance-based RSUs were forfeited.

During 2024, the Company granted 390 performance-based RSUs, of which 228 contained performance conditions and 162 contained market conditions, with weighted average grant-date fair values of $ 11.92 and $ 12.54 , respectively.

To estimate the fair value of performance-based awards containing a market condition, the Company uses the Monte Carlo valuation model.

For other share-based awards, the fair value is generally based on the closing price of the Company’s Class A Common Stock as reported on the New York Stock Exchange on the date of grant.

As of June 30, 2024, the achievement of remaining performance metrics for performance-based RSUs containing performance conditions is considered probable.

Xponential Fitness, Inc.

1 unchanged sentence

(amounts in thousands, except per share amounts)

During 2022, included in the RSUs described above, the Company granted 171 performance-based RSUs at a weighted average grant-date closing price of $ 18.25 per share.

The performance-based RSUs are recognized as expense on a straight-line basis over the vesting period of three to four years.

Management performs a regular assessment to determine the likelihood of meeting the related metrics and adjusts the expense recognized if necessary.

During 2022, the performance metrics related to 18 performance-based RSUs fell below the minimum threshold and as a result, the Company cancelled these previously granted performance-based RSUs and reversed the previously recorded expense.

During 2023, 36 performance-based RSUs were earned and issued as shares and seven performance-based RSUs were cancelled or forfeited.

During the three months ended March 31, 2024, 34 performance-based RSUs were earned and issued as shares and 11 performance-based RSUs were forfeited.

During 2024, the Company granted 42 performance-based RSUs at a weighted average grant-date closing price of $ 16.54 per share.

As of March 31, 2024, the achievement of remaining performance metrics is considered probable.

Stock-Based Compensation Expense –

Stock-based compensation expense recognized in the condensed consolidated statements of operations was as follows:

For the three months ended March 31,

Stock-based compensation expense – Stock-based compensation expense recognized in the condensed consolidated statements of operations was as follows:

Three months ended June 30,

Selling, general and administrative

Total stock-based compensation expense, before tax

Income tax benefit (expense)

Total stock-based compensation expense, after tax

Six months ended June 30,

Selling, general and administrative

Total stock-based compensation expense, before tax

Income tax benefit

Total stock-based compensation expense, after tax

Income tax benefit relates to vested RSUs, due to the Company's full valuation allowance on its net deferred tax assets, there is no income tax benefit on the unvested RSUs.

At March 31, 2024, the Company had $ 22,075 of total unamortized compensation expense related to non-vested RSUs.

Income tax benefit (expense) relates to vested RSUs.

Due to the Company's full valuation allowance on its net deferred tax assets, there is no income tax benefit on the unvested RSUs.

At June 30, 2024, the Company had $ 36,400 of total unamortized compensation expense related to non-vested RSUs.

That cost is expected to be recognized over a weighted-average period of 2.32 years.

Included in the total stock-based compensation expense above, the Company recorded $ 689 of stock-based compensation for the three months ended March 31, 2024, related to a stock-based incentive bonus plan that the Company plans to settle by issuing fully vested RSUs to employees.

The $ 689 , which is recorded as accrued expenses in the condensed consolidated balance sheets, is for the eligible employees included in the Company’s 2024 annual bonus plan and is expected to be settled during the first quarter of 2025 if certain performance metrics for the Company are met in 2024.

Note 14 – Income Taxes and Tax Receivable Agreement

The Company is the managing member of XPO Holdings and, as a result, consolidates the financial results of XPO Holdings in the condensed consolidated financial statements.

During the second quarter of 2024, the Company reversed $ 689 of previously recognized stock-based compensation expense related to its 2024 annual bonus plan as it was deemed no longer probable the Company would achieve certain performance metrics.

Note 14 – Income Taxes

Income taxes - The Company is the managing member of XPO Holdings and, as a result, consolidates the financial results of XPO Holdings in the condensed consolidated financial statements.

XPO Holdings is a pass-through entity for U.S.

7 unchanged sentences

income tax purposes, state taxes, preferred stock dividends, non-deductible expenses, change in fair value of contingent consideration and the valuation allowance against the deferred tax asset.

The effective tax rate for the three months ended March 31, 2024 and 2023, is 1.1 % and 1.0 %, respectively.

During the three months ended March 31, 2024 and 2023 , the Company recognized income tax benefit of $ 47 and $ 123 , respectively, on its share of pre-tax book income (loss), exclusive of the noncontrolling interest of 34.3 % , and 33.7 %, respectively.

The effective tax rate for the three and six months ended June 30, 2024 , is ( 1.0 )% and ( 0.5 )%, respectively, and 0.5 % and 0.1 % for the three and six months ended June 30, 2023, respectively.

During the three and six months ended June 30, 2024 , the Company recognized income tax expense of $ 132 and $ 85 , respectively, on its share of pre-tax book income (loss), exclusive of the noncontrolling interest of 33.3 % .

During the three and six months ended June 30, 2023, the Company recognized income tax expense of $ 133 and $ 10 , respectively, on its share of pre-tax book income, exclusive of the noncontrolling interest of 33.3 %.

As of June 30, 2024, management determined based on applicable accounting standards and the weight of all available evidence, it was not more likely than not (“MLTN”) that the Company will generate sufficient taxable income to realize its deferred tax assets including the difference in tax basis in excess of the financial reporting value for its investment in XPO Holdings.

Consequently, the Company has established a full valuation allowance against its deferred tax assets as of June 30, 2024.

In the event that management subsequently determines that it is MLTN that the Company will realize its deferred tax assets in the future over the recorded amount, a decrease to the valuation allowance will be made, which will reduce the provision for income taxes.

The Company is subject to taxation and files income tax returns in the United States federal jurisdiction and many state and foreign jurisdictions.

The Company is not currently under examination by income tax authorities in federal, state or other jurisdictions.

Xponential Fitness, Inc.

1 unchanged sentence

(amounts in thousands, except per share amounts)

As of March 31, 2024, management determined based on applicable accounting standards and the weight of all available evidence, it was not more likely than not (“MLTN”) that the Company will generate sufficient taxable income to realize its deferred tax assets including the difference in tax basis in excess of the financial reporting value for its investment in XPO Holdings.

Consequently, the Company has established a full valuation allowance against its deferred tax assets as of March 31, 2024.

The Company is subject to taxation and files income tax returns in the United States federal jurisdiction, many state and foreign jurisdictions.

The Company is not currently under examination by income tax authorities in federal, state or other jurisdictions.

The Company’s tax returns remain open for examination in the U.S.

Company’s tax returns remain open for examination in the U.S.

for years 2019 through 2023.

3 unchanged sentences

Tax receivable agreement – In connection with the IPO, the Company entered into a Tax Receivable Agreement (“TRA”) pursuant to which the Company is generally required to pay to the other parties thereto in the aggregate 85% of the amount of cash savings, if any, in U.S.

federal, state and local income tax or franchise tax that the Company actually realizes as a result of (i) certain favorable tax attributes acquired from the Blocker Companies in the Mergers (including net operating losses and the Blocker Companies’ allocable share of existing tax basis), (ii) increases in the Company's allocable share of existing tax basis and tax basis adjustments that resulted or may result from (x) the IPO Contribution and the Class A-5 Unit Redemption, (y) future taxable redemptions and exchanges of LLC Units by Continuing Pre-IPO LLC Members and (z) certain payments made under the TRA, and (iii) deductions attributable to imputed interest pursuant to the TRA (the “TRA Payments”).

federal, state and local income tax or franchise tax that the Company actually realizes as a result of:

(i) certain favorable tax attributes acquired from Rumble Holdings LLC and H&W Investco Blocker II, LP (the “Blocker Companies”) in the mergers of the Blocker Companies with and into XPO Inc.

(including net operating losses and the Blocker Companies’ allocable share of existing tax basis);

(ii) increases in the Company's allocable share of existing tax basis and tax basis adjustments that resulted or may result from (x) the IPO Contribution and the Class A-5 Unit Redemption, (y) future taxable redemptions and exchanges of LLC Units by Continuing Pre-IPO LLC Members and (z) certain payments made under the TRA;

and (iii) deductions attributable to imputed interest pursuant to the TRA (the “TRA Payments”).

The Company expects to benefit from the remaining 15 % of any tax benefits that it may actually realize.

9 unchanged sentences

The TRA also provides that, upon certain mergers, asset sales or other forms of business combination, or certain other changes of control, the TRA will not terminate but the Company’s or the Company’s successor’s obligations with respect to tax benefits would be based on certain assumptions, including that the Company or the Company’s successor would have sufficient taxable income to fully utilize the increased tax deductions and tax basis and other benefits covered by the TRA.

As of March 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.

As of June 30, 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.

Except for $ 2,892 and $ 1,712 of the current and non-current portions of the TRA, respectively, $ 77,171 of the TRA liability was not recorded as of March 31, 2024 .

Except for $ 3,686 and $ 780 of the current and non-current portions of the TRA, respectively, $ 78,182 of the TRA liability was not recorded as of June 30, 2024 .

If utilization of the deferred tax asset subject to the TRA becomes more likely than not in the future, the Company will record a liability related to the TRA which will be recognized as expense within its consolidated statements of operations.

Xponential Fitness, Inc.

Notes to Condensed Consolidated Financial Statements

(amounts in thousands, except per share amounts)

Note 15 – Earnings (Loss) Per Share

6 unchanged sentences

level also exists at the XPO Holdings level.

The Company applies the two-class method to allocate undistributed earnings or losses of XPO Holdings, and in doing so, determines the portion of XPO Holdings’ income or loss that is attributable to the Company and accordingly reflected in income or loss available to common stockholders in the Company’s calculation of basic earnings (loss) per share.

The Company applies the two-class method to allocate undistributed earnings or losses of XPO Holdings, and in doing so, determines the portion of XPO Holdings’

Xponential Fitness, Inc.

Notes to Condensed Consolidated Financial Statements

(amounts in thousands, except per share amounts)

income or loss that is attributable to the Company and accordingly reflected in income or loss available to common stockholders in the Company’s calculation of basic earnings (loss) per share.

Due to the attribution of only a portion of the preferred stock dividends issued by XPO Holdings to the Company in first determining basic earnings (loss) per share at the subsidiary level, the amounts presented as net income (loss) attributable to noncontrolling interests and net income (loss) attributable to XPO Inc.

2 unchanged sentences

The potential dilutive impact of redeemable Convertible Preferred shares and Class B common stock is evaluated using the as-if-converted method.

Weighted average shares of Class B common stock were 16,468 shares and 18,564 shares for the three months ended March 31, 2024 and 2023, respectively.

Weighted average shares of Class B common stock were 16,244 shares and 16,356 shares for the three and six months ended June 30, 2024, respectively, and 16,574 and 17,563 for the three and six months ended June 30, 2023, respectively.

The potentially dilutive impact of RSUs is calculated using the treasury stock method.

Because the Company reported net losses for the periods presented, all potentially dilutive common stock equivalents are antidilutive and have been excluded from the calculation of diluted net loss per share.

The potential dilutive effects of Class B common stock were determined to be anti-dilutive for the three months ended June 30, 2023 and were excluded from the computation of diluted net earnings (loss) per share.

The potential dilutive effects of redeemable Convertible Preferred shares were determined to be anti-dilutive for the six months ended June 30, 2023 and were excluded from the computation of diluted net earnings (loss) per share.

Because the Company reported a net loss for the three and six months ended June 30, 2024, all potentially dilutive common stock equivalents are antidilutive and have been excluded from the calculation of diluted net earnings (loss) per share.

Xponential Fitness, Inc.

Notes to Condensed Consolidated Financial Statements

(amounts in thousands, except per share amounts)

The following table presents the calculation of basic and diluted loss per share of Class A common stock:

Three Months Ended March 31,

net loss attributable to noncontrolling interests

Three months ended June 30,

Six months ended June 30,

Net income (loss)

net (income) loss attributable to noncontrolling interests

dividends on preferred shares

deemed dividend

deemed contribution (dividend)

deemed contribution from redemption of convertible preferred stock

Net loss attributable to XPO Inc.

- basic and diluted

Weighted average shares of Class A common stock outstanding - basic and diluted

Net loss per share attributable to Class A common stock - basic

Net loss per share attributable to Class A common stock - diluted

Net income (loss) attributable to XPO Inc.

net income (loss) attributable to non-controlling interests

dividends on preferred shares

deemed (contribution) dividend

Net income (loss) attributable to XPO Inc.

Weighted average shares of Class A common stock outstanding - basic

Effect of dilutive securities:

Restricted stock units

Convertible preferred stock

Conversion of Class B common stock to Class A common stock

Weighted average shares of Class A common stock outstanding - diluted

Net earnings (loss) per share attributable to Class A common stock - basic

Net earnings (loss) per share attributable to Class A common stock - diluted

Anti-dilutive shares excluded from diluted loss per share of Class A common stock:

9 unchanged sentences

Note 16 – Contingencies and Litigation

Litigation – On November 22, 2023, former employees of a former franchisee of the Company filed a putative class action complaint in the United States District Court for the Southern District of Ohio, captioned Shannon McGill et al.

Litigation – The Company has in the past been, is currently and expects to continue in the future to be a party to or involved in pre-litigation disputes, individual actions, putative class actions or other collective actions, U.S.

and state government regulatory inquiries and investigations and various other legal proceedings arising in the normal course of its business, including with former or current employees, customers, franchisees, vendors, landlords or others.

The Company intends to defend itself in any such matters.

The Company believes that the ultimate determination of liability in connection with legal claims pending against it, if any, will not have a material adverse effect on its business, annual results of operations, liquidity or financial position, except for those matters discussed below.

However, it is possible that the Company’s business, results of operations, liquidity or financial condition could be materially affected in a particular future reporting period by the unfavorable resolution of one or more matters or contingencies during such period.

As of the end of each applicable reporting period, the Company reviews each of its legal proceedings and, where it is probable that a liability has been incurred, the Company accrues for all probable and reasonably estimable losses.

The Company accrued for estimated legal liabilities, where appropriate, or settlement agreements to resolve legal disputes and recorded an aggregate accrual of $ 2,295 and $ 1,343 , which is included in accrued expenses in the condensed consolidated balance sheets, as of June 30, 2024 and December 31, 2023, respectively.

On November 22, 2023, former employees of a former franchisee of the Company filed a putative class action complaint in the United States District Court for the Southern District of Ohio, captioned Shannon McGill et al.

Xponential Fitness LLC, et al., Case No.

3 unchanged sentences

The Company intends to defend itself in this litigation.

The Company recorded an accrual for estimated loss contingencies associated with this matter in an amount equal to $ 900 , which is included in accrued expenses in the condensed consolidated balance sheets as of March 31, 2024, based on currently available information.

The Company recorded an accrual for estimated loss contingencies associated with this matter, which is included in accrued expenses in the condensed consolidated balance sheets as of June 30, 2024, based on currently available information.

The accrual does not reflect the Company’s views of the merits of claims in this action.

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.

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 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 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.

On July 26, 2024, plaintiffs filed an amended complaint, additionally bringing claims for Sections 11, 12(a)(2), and 15 of the Securities Act.

The Company intends to defend itself against this action.

At this stage, the Company is unable to provide an evaluation of the likelihood of an unfavorable outcome or an estimate of the amount or range of potential loss, if any.

The litigation is preliminary in nature and involves substantial uncertainties and is not probable or estimable at this time.

Therefore, there can be no assurance that such legal proceedings will not have a material adverse effect on the Company’s business, results of operations, financial condition, or cash flows.

On March 10, 2024, a shareholder derivative lawsuit was filed in the United States District Court for the Central District of California by Gideon Akande, allegedly on behalf of Xponential Fitness, Inc., against certain current officers and directors as defendants, and Xponential Fitness, Inc., as nominal defendant, for alleged wrongdoing committed by the individual defendants from July 26, 2021 to December 7, 2023.

1 unchanged sentence

Geisler and Meloun for contribution or indemnification under Sections 10(b) and 21D of the Exchange Act.

Plaintiffs seek, inter alia, damages with pre- and post-judgment interest, and an order directing Xponential and the individual defendants to improve Xponential’s corporate governance, and restitution by the individual defendants.

Plaintiffs seek, inter alia, damages with pre- and post-judgment interest, and an order directing the Company and the individual defendants to improve the Company’s corporate governance, and restitution by the individual defendants.

On April 3, 2024, the court entered an Order granting the parties’ Joint Stipulation to Stay Proceedings, which stayed the proceeding pending final resolution of the securities class action.

SEC investigation – On December 5, 2023, the Company was contacted by the Securities and Exchange Commission (the “SEC”), requesting that the Company provide it with certain information and documents.

The Company intends to cooperate fully with the SEC in this matter.

The Company has 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.

At this stage, the Company is unable to assess whether any material loss or adverse effect is reasonably possible as a result of the SEC’s investigation or estimate the range of any potential loss.

The Company is subject to normal and routine litigation brought by former or current employees, customers, franchisees, vendors, landlords or others.

The Company intends to defend itself in any such matters.

however, it is possible that the Company’s business, results of operations, liquidity or financial condition could be materially affected in a particular future reporting period by the unfavorable resolution of one or more matters or contingencies during such period.

The Company accrued for estimated legal liabilities and has entered into certain settlement agreements to resolve legal disputes and recorded $ 831 and $ 443 which is included in accrued expenses in the condensed consolidated balance sheets, as of March 31, 2024 and December 31, 2023, respectively.

Contingent consideration from acquisitions – In connection with the Reorganization Transactions, the Parent merged with and into the Member.

The Company recorded contingent consideration equal to the fair value of the shares issued in connection with the Rumble acquisition of $ 23,100 and $ 10,600 receivable from shareholder for debt financing provided to the Rumble Seller.

The shares issued to the Rumble Seller are treated as a liability on the Company's balance sheet as they are subject to vesting conditions.

The fair value of the contingent consideration is measured at estimated fair value using a Monte Carlo simulation analysis.

During the three months ended March 31, 2024 and 2023, the Company recorded an increase of $ 4,450 and $ 15,975 to contingent consideration, respectively, which was recorded as acquisition and transaction expense (income).

At March 31, 2024 and December 31, 2023, contingent consideration totals $ 12,329 and $ 7,879 , respectively, recorded as contingent consideration from acquisitions in the condensed consolidated balance sheets.

On May 10, 2024, a second derivative lawsuit was filed in the United States District Court for the Central District of California by Patrick Ayers, purportedly on behalf of Xponential Fitness, Inc., alleging similar claims.

On June 24, 2024, the Court stayed the Ayers action pending resolution of the securities class action and consolidated the proceedings with the Gideon Akande derivative lawsuit.

The litigation is preliminary in nature and involves substantial uncertainties and is not probable or estimable at this time.

Therefore, there can be no assurance that such legal proceedings will not have a material adverse effect on the Company’s business, results of operations, financial condition, or cash flows.

On November 2, 2023, the Company received a letter from plaintiffs’ counsel purporting to represent unspecified current and former franchisees requesting settlement discussions.

On July 31, 2024, plaintiffs’ counsel provided the Company with a list of approximately 250 current and former franchisees, certain of which current and former franchisees consist of more than one individual, that it purported to represent in this matter, who purport to have been aggrieved by alleged misstatements and omissions by the Company

Xponential Fitness, Inc.

1 unchanged sentence

(amounts in thousands, except per share amounts)

or an affiliate thereof.

No litigation has been commenced, and the Company intends to vigorously defend itself in this matter.

The Company recorded an accrual for estimated loss contingencies associated with this matter, which is included in accrued expenses in the condensed consolidated balance sheet.

The accrual does not reflect the Company’s views of the merits of claims in this action.

Government investigations – On December 5, 2023, the Company was contacted by the Securities and Exchange Commission (the “SEC”), requesting that the Company provide it with certain information and documents.

The Company received notice on May 7, 2024 of an investigation by the U.S.

Attorney’s Office for the Central District of California (the “USAO”).

On July 29, 2024, the Company received a civil investigative demand from the United States Federal Trade Commission (the “FTC”).

The Company intends to cooperate fully with the SEC, USAO and FTC in these investigations, and the Company has 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.

At this stage, the Company is unable to assess whether any material loss or adverse effect is reasonably possible as a result of these investigations or estimate the range of any potential loss.

Contingent consideration from acquisitions – In connection with the Reorganization Transactions, the Parent merged with and into the Member.

The Company recorded contingent consideration equal to the fair value of the shares issued in connection with the Rumble acquisition of $ 23,100 and a $ 10,600 receivable from shareholder for debt financing provided to the Rumble Seller.

The shares issued to the Rumble Seller are treated as a liability on the Company's balance sheet as they are subject to vesting conditions.

The fair value of the contingent consideration is measured at estimated fair value using a Monte Carlo simulation analysis, which represents a Level 3 measurement.

During the three and six months ended June 30, 2024, the Company recorded a decrease of $ 1,205 and an increase of $ 3,245 to contingent consideration, respectively, which were recorded as acquisition and transaction expense (income).

During the three and six months ended June 30, 2023, the Company recorded a decrease to contingent consideration of $ 31,152 and $ 15,177 , respectively, which was recorded as acquisition and transaction income.

At June 30, 2024 and December 31, 2023, contingent consideration of $ 11,124 and $ 7,879 , respectively, was recorded as contingent consideration from acquisitions in the condensed consolidated balance sheets.

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 ending December 31, 2023.

The aggregate amount of such payments is subject to a maximum of $ 14,000 AUD (approximately $ 10,342 USD based on the currency exchange rate as of the purchase date).

At the acquisition date, the Company determined that the fair value of the estimated contingent consideration liability was $ 9,388 .

The Company recorded additional contingent consideration of $ 41 and $ 49 during the three months ended March 31, 2024 and 2023, respectively, which was recorded as interest expense.

The Company recorded additional contingent consideration of $ ( 363 ) and $ ( 233 ) during the three months ended March 31, 2024 and 2023, respectively, which was recorded as acquisition and transaction expense (income).

In addition, the Company paid contingent consideration of $ 0 during the three months ended March 31, 2024 and 2023.

At March 31, 2024 and December 31, 2023, contingent consideration was $ 1,746 and $ 1,564 recorded as accrued expenses, respectively, and $ 283 and $ 787 recorded as contingent consideration from acquisitions, respectively, in the condensed consolidated balance sheets.

The Company recorded additional contingent consideration of $ 36 and $ 77 during the three and six months ended June 30, 2024 , respectively, and $ 44 and $ 93 during the three and six months ended June 30, 2023, respectively, which was recorded as interest expense.

The Company recorded a change to contingent consideration of $ ( 285 ) and $ ( 648 ) during the three and six months ended June 30, 2024 , respectively, and $ ( 100 ) and $ ( 333 ) during the three and six months ended June 30, 2023, respectively, which was recorded as acquisition and transaction expense (income).

The Company paid no contingent consideration during the three and six months ended June 30, 2024 and 2023.

At June 30, 2024 and December 31, 2023, contingent consideration of $ 1,666 and $ 1,564 was recorded as accrued expenses, respectively, and $ 114 and $ 787 was recorded as contingent consideration from acquisitions, respectively, in the condensed consolidated balance sheets.

In addition, in connection with the October 2021 acquisition of BFT, the Company entered into a Master Franchise Agreement (“MFA”) with an affiliate of the Seller (the “Master Franchisee”), pursuant to which the Company granted the Master Franchisee the master franchise rights for the BFT TM brands in Australia, New Zealand and Singapore.

3 unchanged sentences

If the Master Franchisee rejects an offer to repurchase the franchise rights, then the cancellation fee is not required to be paid.

The Company believes the likelihood of a cancellation payment being required is remote as of March 31, 2024, and, therefore no accrual has been recorded.

The Company believes the likelihood of a cancellation payment being required is remote as of June 30, 2024, and, therefore no accrual has been recorded.

Xponential Fitness, Inc.

Notes to Condensed Consolidated Financial Statements

(amounts in thousands, except per share amounts)

In connection with the January 2024 acquisition of Lindora, the Company agreed to pay contingent consideration to the seller subject to the achievement of certain milestones.

1 unchanged sentence

At the acquisition date, the Company determined that the fair value of the estimated contingent consideration liability was $ 446 .

The Company recorded additional contingent consideration of $ 17 during the three months ended March 31, 2024, which was recorded as interest expense.

At March 31, 2024, contingent consideration was $ 104 and $ 359 recorded as accrued expenses and contingent consideration from acquisitions, respectively, in the condensed consolidated balance sheets.

The Company recorded additional contingent consideration of $ 17 and $ 34 during the three and six months ended June 30, 2024, respectively, which was recorded as interest expense.

The Company recorded additional contingent consideration of $ 173 during the three and six months ended June 30, 2024, which was recorded as acquisition and transaction expense (income).

At June 30, 2024, contingent consideration of $ 291 and $ 362 was recorded as accrued expenses and contingent consideration from acquisitions, respectively, in the condensed consolidated balance sheets.

Letter of credit – In July 2022, the Company issued a $ 750 standby letter of credit to a third-party financing company, who provides loans to the Company's qualified franchisees.

1 unchanged sentence

The Company deposited cash in a restricted account as collateral for the standby letter of credit.

The Company has determined the fair value of these guarantees at inception was not material, and as of March 31, 2024 and December 31, 2023, $ 237 and $ 536 accrual has been recorded for the Company’s potential obligation under its guaranty arrangement, respectively.

The Company has determined the fair value of these guarantees at inception was not material, and as of June 30, 2024 and December 31, 2023, $ 285 and $ 536 accrual has been recorded for the Company’s potential obligation under its guaranty arrangement, respectively.

Lease guarantees – The Company has guaranteed lease agreements for certain franchisees.

The Company’s maximum obligation, as a result of its guarantees of leases, is approximately $ 1,644 and $ 2,755 as of March 31, 2024 and December 31, 2023, respectively, and would only require payment upon default by the primary obligor.

The Company has determined the fair value of these guarantees at inception is not material, and as of March 31, 2024 and December 31, 2023 , no accrual has been recorded for the Company’s potential obligation under its guaranty arrangement.

Xponential Fitness, Inc.

Notes to Condensed Consolidated Financial Statements

(amounts in thousands, except per share amounts)

The Company’s maximum obligation, as a result of its guarantees of leases, is approximately $ 1,365 and $ 2,755 as of June 30, 2024 and December 31, 2023, respectively, and would only require payment upon default by the primary obligor.

The Company has determined the fair value of these guarantees at inception is not material, and as of June 30, 2024 and December 31, 2023 , no accrual has been recorded for the Company’s potential obligation under its guaranty arrangement.

Note 17 – Restructuring

6 unchanged sentences

The Company is negotiating lease terminations for operating leases for certain studios for which the Company has lease liabilities recorded and the expected cash payments and expenses to exit the lease may be greater than expected rent expense for that period, depending on the outcome of lease termination negotiations.

During the three months ended March 31, 2024 , the Company recognized total restructuring charges of $ 6,934 , primarily for contract termination and other associated costs, loss on lease termination and sale or disposal of assets, and other restructuring charges.

The components of the restructuring charges are as follows:

Three months ended March 31,

During the three and six months ended June 30, 2024, the Company recognized total restructuring charges of $ 2,310 and $ 9,244 , primarily for contract termination and other associated costs, loss on lease terminations and sale or disposal of assets, and other restructuring charges.

The components of the restructuring charges were as follows:

Three months ended June 30, 2024

Six months ended June 30, 2024

Contract termination and other associated costs (1)

Loss on lease termination and sale or disposal of assets, net (2)(3)

Loss on lease terminations and sale or disposal of assets, net (2)(3)

Other restructuring costs (1)

Total restructuring charges, net

(1) These charges are recorded in selling, general and administrative expenses on the Company’s condensed consolidated statements of operations.

(2) Charges of $ 96 are recorded in cost of product revenues and charges of $ 4,100 are recorded in selling, general and administrative expenses on the Company’s condensed consolidated statements of operations.

Xponential Fitness, Inc.

Notes to Condensed Consolidated Financial Statements

(amounts in thousands, except per share amounts)

(1) These charges were recorded in selling, general and administrative expenses on the Company’s condensed consolidated statements of operations.

(2) Charges of $ 17 and $ 113 were recorded in cost of product revenues for the three and six months ended June 30, 2024 , respectively.

Charges of $ 404 and $ 4,504 were recorded in selling, general and administrative expenses for the three and six months ended June 30, 2024 , respectively.

(3) Loss on lease termination and sale or disposal of assets represents net losses on studio lease terminations and sales or disposal of studio assets primarily related to studio property and equipment.

Amount is net of, among other things, a $ 3,636 gain on lease termination related to a lease for which the Company had recognized accelerated right-of-use asset amortization.

Amounts for the three and six months ended June 30, 2024 are net of, among other things, $ 421 and $ 4,057 , respectively, for gains on lease terminations related to leases for which the Company had recognized accelerated right-of-use asset amortization.

The following table provides the components of and changes in the Company’s restructuring charges, included in accounts payable and accrued expenses on the condensed consolidated balance sheets:

March 31, 2024

June 30, 2024

Balance at December 31, 2023

Charges incurred

Balance at March 31, 2024

Balance at June 30, 2024

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements