What changed in this filing

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Item 1. Financial Statements

2024-11-12 compared with 2024-08-05 · 326 added, 255 removed, 796 unchanged (42% of the section changed)

3 unchanged sentences

(amounts in thousands, except per share amounts)

September 30,

Current assets:

26 unchanged sentences

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

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

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

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

Class A common stock, $ 0.0001 par value, 500,000 shares authorized, 32,191 and 30,897 shares

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

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

Class B common stock, $ 0.0001 par value, 500,000 shares authorized, 16,091 and 16,566 shares issued,

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

and 16,016 and 16,491 shares outstanding as of September 30, 2024 and December 31, 2023,

Additional paid-in capital

1 unchanged sentence

Accumulated deficit

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

Treasury stock, at cost, 75 shares outstanding as of September 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 June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Revenue, net:

54 unchanged sentences

Balance at June 30, 2024

Equity-based compensation

Vesting of Class B 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 September 30, 2024

See accompanying notes to condensed consolidated financial statements.

32 unchanged sentences

Balance at June 30, 2023

Equity-based compensation

Conversion of Class B shares to Class A shares

Payment of 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

Repurchase and retirement of Class A common stock

Excise tax on share repurchases

Proceeds from disgorgement of stockholders short-swing profits (Note 10)

Payment received from shareholder

Distributions paid to Pre-IPO LLC Members

Balance at September 30, 2023

See accompanying notes to condensed consolidated financial statements.

2 unchanged sentences

(amounts in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from operating activities:

36 unchanged sentences

Debt issuance costs

Payment of preferred stock dividend

Payments of preferred stock dividend

Payment of promissory note liability

Payments of contingent consideration

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 tax receivable agreement

Payments for redemption of preferred stock

Payments for distributions to Pre-IPO LLC Members

Repurchase of Class A common stock

Payment received from shareholder (Note 10)

Loan to shareholder (Note 10)

Net cash used in financing activities

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

Proceeds from disgorgement of stockholders short-swing profits (Note 10)

Net cash provided by (used in) financing activities

Increase in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash, beginning of period

4 unchanged sentences

(amounts in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Supplemental cash flow information:

1 unchanged sentence

Income taxes paid, net

Noncash investing and financing activity:

Capital expenditures accrued

Non-cash investing and financing activities:

Capital expenditures accrued at period end

Adjustment of convertible preferred stock to redemption value

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

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

“Club Pilates,” a Pilates facility franchisor;

9 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 84 company-owned transition studios as of June 30, 2024 and 2023, respectively.

In addition to franchised studios, the Company operated one and 31 company-owned transition studios as of September 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.

Additionally, during the three months ended September 30, 2024, the Company announced that it would wind down AKT franchise operations.

See Note 3 for additional information.

6 unchanged sentences

The Company consolidates XPO LLC on its condensed consolidated financial statements and records a noncontrolling interest related to the Class B units held by the Class B stockholders on its condensed consolidated balance sheet and statement of operations.

Xponential Fitness, Inc.

Notes to Condensed Consolidated Financial Statements

(amounts in thousands, except per share amounts)

Basis of presentation – The Company’s condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”).

3 unchanged sentences

Interim results of operations are not necessarily indicative of results of operations to be expected for a full year.

Xponential Fitness, Inc.

Notes to Condensed Consolidated Financial Statements

(amounts in thousands, except per share amounts)

On January 2, 2024, the Company acquired Lindora Franchise, LLC, a Delaware limited liability company, the franchisor of the Lindora wellness brand (the “Lindora Franchisor” or “Lindora”), and has included the results of operations of Lindora in its condensed consolidated statements of operations from the acquisition date forward.

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.

Reclassifications – To conform with current year presentation, the Company has reclassified impairment charges of $ 4,671 and $ 11,909 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 nine months ended September 30, 2023, respectively.

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 $ 3,502 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.

The Company generated $ 3,808 and $ 10,361 of revenue outside the United States during the three and nine months ended September 30, 2024 , respectively, and $ 3,351 and $ 10,338 during the three and nine months ended September 30, 2023, respectively.

As of September 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.

The Company has marketing fund restricted cash, which can only be used for activities that promote the Company’s brands.

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.

The standby letter of credit is contingent upon the failure of franchisees to perform according to the terms of underlying contracts with the third party.

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

In addition, the Company, as a guarantor, is required to recognize, at inception of the guaranty, a liability for the fair value of the obligation undertaken in issuing the guarantee.

See Note 16 for further discussion of such obligations guaranteed.

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

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

The Company's restricted cash consists of marketing fund restricted cash, which can only be used for activities that promote the Company’s brands, and guarantee of standby letter of credit (See Note 16).

The interest earned on marketing fund restricted cash accounts is also restricted for use.

Restricted cash was $ 12,980 and $ 9,333 at September 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.

These receivables primarily relate to royalties, advertising contributions, equipment and product sales, training, vendor commissions and other miscellaneous charges.

The Company’s payment terms on its receivables from franchisees are generally 30 days .

Receivables are unsecured;

however, the franchise agreements provide the Company the right to withdraw funds from the franchisee’s bank account or to terminate the franchise for nonpayment.

On a periodic basis, the Company evaluates its accounts receivable balance and establishes an allowance for expected credit losses based on a number of factors, including evidence of the franchisee’s ability to comply with credit terms, economic conditions and historical receivables.

Account balances are written off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

The Company’s accounts and notes receivable are recorded at net realizable value, which includes an appropriate allowance for expected credit losses.

The estimate of expected credit losses is based upon historical bad debts, current receivable balances, age of receivable balances, the customer’s financial condition and current economic trends, all of which are subject to change.

On a periodic basis, the Company evaluates its accounts and notes receivable balances and establishes an allowance for expected credit losses.

The estimate of expected credit losses is based upon historical bad debts, current receivable balances, age of receivable balances, the franchisee’s or customer’s financial condition and ability to comply with credit terms and current economic trends, all of which are subject to change.

Actual uncollected amounts have historically been consistent with the Company’s expectations.

The Company’s payment terms on its receivables from franchisees are generally 30 days .

Account balances are written off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote .

Xponential Fitness, Inc.

7 unchanged sentences

Write-off of uncollectible amounts

Balance at June 30, 2024

Balance at September 30, 2024

Accounts receivable

3 unchanged sentences

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:

Balance at September 30, 2023

Supplemental balance sheet information

September 30,

Prepaid expenses and other current assets

Prepaid expenses

2 unchanged sentences

Total prepaid expenses and other current assets

Accrued expenses – Accrued expenses consisted of the following:

Accrued expenses

Accrued compensation

4 unchanged sentences

Total accrued expenses

Other current liabilities – Other current liabilities consisted of the following:

Other current liabilities

Lease liabilities, short-term

Promissory note, current portion

Promissory note

Tax receivable agreement liability, current portion

2 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.

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.

ASC Topic 820 establishes a valuation hierarchy for disclosures of the inputs to valuations used to measure fair value.

Xponential Fitness, Inc.

1 unchanged sentence

(amounts in thousands, except per share amounts)

ASC Topic 820 establishes a valuation hierarchy for disclosures of the inputs to valuations used to measure fair value.

This hierarchy prioritizes the inputs into three broad levels as follows:

3 unchanged sentences

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

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

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

The carrying amounts of these financial instruments approximate fair value due to their short maturities, proximity of issuance to the balance sheet date or variable interest rate.

19 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.

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.

The Company does not

Xponential Fitness, Inc.

1 unchanged sentence

(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.

The Company does not have any uncertain tax positions.

have any uncertain tax positions.

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

14 unchanged sentences

The Company is currently evaluating the impact of this guidance on its condensed consolidated financial statements.

Profit Interest Awards – In March 2024, the FASB issued ASU No.

2024-01, “Compensation - Stock Compensation (Topic 718):

Scope Application of Profits Interest and Similar Awards.” ASU 2024-01 clarifies how an entity determines whether a profits interest or similar award is within the scope of ASC 718 or not a share-based payment arrangement and therefore within the scope of other guidance.

ASU 2024-01 is effective for public entities for fiscal years beginning after December 15, 2024, and interim periods in fiscal years beginning after December 15, 2024, with early adoption permitted.

Income Statement Expense Disclosures – In November 2024, the FASB issued ASU No.

2024-03, “Income Statement (Subtopic 220-40):

Disaggregation of Income Statement Expenses.” ASU 2024-03 requires disaggregated information about specified categories of expenses included in certain captions presented on the face of the income statement including, purchases of inventory, employee compensation, depreciation, amortization, and depletion.

ASU 2024-03 is effective for public entities with annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption permitted.

The Company is currently evaluating the impact of this guidance on its condensed consolidated financial statements.

2 unchanged sentences

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.

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

The transaction was accounted for as a business combination using the acquisition method of accounting, which requires the assets acquired to be recorded at their respective fair value as of the date of the transaction.

4 unchanged sentences

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

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

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:

10 unchanged sentences

The Company will recognize revenue over time as the members attend and utilize the classes.

The fair value of the reacquired franchise rights after termination of the existing franchise agreements was based on the excess earnings method and is considered to have an eight-year life.

The fair value of the reacquired franchise rights after termination of the existing franchise agreements was based on the excess earnings method and was considered to have an eight-year life.

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

5 unchanged sentences

Total purchase price

The fair value of reacquired franchise rights was based on the excess earnings method and is considered to have an approximate six-year life.

The fair value of reacquired franchise rights was based on the excess earnings method and was considered to have an approximate six-year life.

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

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.

During the nine months ended September 30, 2024 and 2023, the Company refranchised operations at 10 and 78 company-owned transition studios, respectively, received proceeds of $ 0 and $ 60 , respectively, and recorded a net loss of $ 122 and $ 594 on disposal of the studio assets, respectively.

During the nine months ended September 30, 2024 and 2023, the Company also ceased operations at 11 and 14 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

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 and nine months ended

Xponential Fitness, Inc.

1 unchanged sentence

(amounts in thousands, except per share amounts)

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.

September 30, 2024 and 2023 , the Company did no t record any impairment charges related to studio assets.

See Note 9 for discussion of impairment charges related to right of- use 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.

1 unchanged sentence

The purchase price consisted of cash consideration of $ 3,467 and a promissory note with a fair value of $ 6,463 payable in two equal installments due on July 1, 2024 and July 1, 2025.

The current portion of the promissory note is included in other current liabilities and the non-current portion is included in other liabilities in the Company’s condensed consolidated balance sheets.

The Company paid the first installment of the promissory note during the three months ended September 30, 2024.

The remaining portion of the promissory note is included in other current liabilities in the Company’s condensed consolidated balance sheets.

XPS specializes in the custom manufacturing of display cases, engraved wood signs, point of sale displays, custom acrylic panels, and other products.

2 unchanged sentences

The Company determined the estimated fair values after review and consideration of relevant information as of the acquisition date, including discounted cash flows, quoted market prices and estimates made by management.

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

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

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

19 unchanged sentences

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

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

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

Xponential Fitness, Inc.

1 unchanged sentence

(amounts in thousands, except per share amounts)

and estimates made by management.

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

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

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

7 unchanged sentences

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

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.

During the three and nine months ended September 30, 2024 , the Company incurred $ 0 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 incurred $ 96 of transaction costs related to acquisitions during both the three and nine months ended September 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.

3 unchanged sentences

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

The Company recognized a loss on divestiture of $ 279 , which was included within selling, general and administration expenses in the condensed consolidated statements of operations.

The Company recognized a loss on divestiture of $ 279 , which was included within selling, general and administrative 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.

2 unchanged sentences

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 Company recognized a loss on divestiture of $ 922 , which was included within selling, general and administrative 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.

Wind down of AKT brand franchise operations – During the three months ended September 30, 2024, the Company announced that it would wind down AKT franchise operations.

As part of the wind down, the Company began terminating franchise agreements with existing AKT studios and signed a licensing agreement with a former franchisee for no consideration received.

As a result of the ongoing wind down of the AKT brand, the Company recognized net charges of $ 588 for impairment of intangible assets, inventory write-downs, and other charges during the three months ended September 30, 2024.

The wind down of the AKT 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

Contract liabilities – Contract liabilities consist of deferred revenue resulting from franchise fees, development fees and master franchise fees paid by franchisees, which are recognized over time on a straight-line basis over the franchise agreement term.

The Company also receives upfront payments from vendors under agreements that give the vendors access to franchisees’ members to provide certain services to the members (“brand fees”).

Revenue from the upfront payments is recognized on a straight-line basis over the agreement term and is reported in other service revenue.

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

Contract liabilities – Contract liabilities consist of deferred revenue resulting from franchise development fees (franchise fees, development fees and master franchise fees paid by franchisees), which are recognized over time on a straight-line basis over the

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 .

franchise agreement term.

The Company also receives upfront payments from vendors under agreements that give the vendors access to franchisees’ members to provide certain services to the members (“brand fees”).

Revenue from the upfront payments is recognized on a straight-line basis over the agreement term and is reported in other service revenue.

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 re flects the change in franchise development and brand fee contract liabilities for the nine months ended September 30, 2024 .

Other deferred revenue amounts of $ 17,220 are excluded from the table as the original expected duration of the contracts is one year or less.

5 unchanged sentences

during the period

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.

Balance at September 30, 2024

(1) Revenue recognized during the period includes revenue recognized as a result of terminations.

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 September 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.

The Company elected to not disclose short term contracts, sales and usage-based royalties, marketing fees and any other variable consideration recognized on an “as invoiced” basis.

Contract liabilities to be recognized in revenue in

Contract liabilities to be recognized in revenue

Remainder of 2024

The following table reflects the components of deferred revenue:

September 30,

Franchise and area development fees

5 unchanged sentences

The total commission is deferred at the point of a franchise sale.

The commissions are evenly split among the number of studios purchased under the development agreement and begin to be amortized when a subsequent franchise agreement is executed.

The commissions are recognized on a straight-line basis over the initial ten-year franchise agreement term to align with the recognition of the franchise agreement or area development fees.

The Company classifies these deferred contract costs as either current deferred costs or non-current deferred costs in the condensed consolidated balance sheets.

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

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

The commissions are evenly split among the number of studios purchased under the development agreement and begin to be amortized when a subsequent or

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.

initial franchise agreement is executed.

The commissions are recognized on a straight-line basis over the initial ten-year franchise agreement term to align with the recognition of the franchise agreement or area development fees.

The Company classifies these deferred contract costs as either current deferred costs or non-current deferred costs in the condensed consolidated balance sheets.

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

At September 30, 2024 and December 31, 2023 , there were approximately $ 3,997 and $ 4,126 of current deferred costs and approximately $ 41,374 and $ 46,221 in non-current deferred costs, respectively.

The Company recognized franchise sales commission expense of approximately $ 2,690 and $ 8,827 for the three and nine months ended September 30, 2024, respectively, and $ 1,419 and $ 5,200 for the three and nine months ended September 30, 2023 , respectively.

Note 5 – Notes Receivable

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

At June 30, 2024 and December 31, 2023, the principal balance of the notes receivable was approximately $ 2,760 and $ 3,189 , respectively.

At September 30, 2024 and December 31, 2023 , the principal balance of the notes receivable was approximately $ 596 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.

4 unchanged sentences

Property and equipment consisted of the following:

September 30,

Furniture and equipment

4 unchanged sentences

Total property and equipment

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.

Depreciation expense for the three and nine months ended September 30, 2024 , was $ 1,509 and $ 4,587 , respectively, and $ 1,480 and $ 4,125 for the three and nine months ended September 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 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.

During the nine months ended September 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

Xponential Fitness, Inc.

1 unchanged sentence

(amounts in thousands, except per share amounts)

goodwill at September 30, 2024 and December 31, 2023 , totaled $ 163,036 and $ 171,601 , respectively.

Cumulative goodwill impairment was $ 21,024 and $ 10,113 at September 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.

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.

1 unchanged sentence

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.

In connection with the wind down of the AKT brand, as discussed in Note 3, the Company determined that the deferred video production costs and web design and domain intangible assets related to AKT were impaired and recognized an impairment loss of $ 179 during the quarter ended September 30, 2024.

During the quarter ended September 30, 2023, the Company determined it was necessary to re-evaluate goodwill of the Stride and Row House reporting units for impairment due to indicators of potential impairment resulting from a decline in forecasted and actual cash flows.

Therefore, the Company performed a quantitative assessment of the fair value of the reporting units using an income approach with assumptions that are considered Level 3 inputs and concluded that the carrying value of the Stride and Row House reporting units exceeded their fair value, resulting in a goodwill impairment of $ 3,469 and $ 700 , respectively, resulting in no goodwill remaining for the Stride and Row House reporting units.

The fair value of the reporting units was determined by discounting estimated future cash flows, which were calculated based on revenue and expense long-term growth assumptions ranging from 8.0 % to 43.0 %, at a weighted average cost of capital (discount rate) of 16.0 %.

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

In addition, the Company determined that the franchise agreements intangible assets and trademarks related to Stride and Row House were also impaired and recognized an aggregate impairment loss of $ 230 for the franchise agreements and an aggregate impairment loss of $ 180 for the trademarks in the third quarter of 2023.

Intangible assets consisted of the following:

June 30, 2024

September 30, 2024

December 31, 2023

8 unchanged sentences

Total intangible assets

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.

Amortization expense was $ 2,717 and $ 8,592 , for the three and nine months ended September 30, 2024 , respectively, and $ 2,736 and $ 8,576 for the three and nine months ended September 30, 2023 , respectively.

During the nine months ended September 30, 2023,

Xponential Fitness, Inc.

Notes to Condensed Consolidated Financial Statements

(amounts in thousands, except per share amounts)

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:

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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 % ( 12.11 % at June 30, 2024).

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

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(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.

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

The Credit Agreement contains customary affirmative and negative covenants, including, among other things:

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and (ix) restricting the issuance of equity.

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

As of September 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.

Such events of default include, subject to the grace periods specified therein, failure to pay principal or interest when due, failure to satisfy or comply with covenants, a change of control, the imposition of certain judgments and the invalidation of liens the Company has granted.

Such events of default include, subject to the grace periods specified therein, failure to pay principal or interest when

Xponential Fitness, Inc.

Notes to Condensed Consolidated Financial Statements

(amounts in thousands, except per share amounts)

due, failure to satisfy or comply with covenants, a change of control, the imposition of certain judgments and the invalidation of liens the Company has granted.

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 six months ended June 30, 2023.

On August 3, 2023, the Company entered into a fifth amendment (the "Fifth Amendment") to the Credit Agreement.

In connection with the Fifth Amendment, the Company wrote off a pro rata portion of debt issuance costs related to the Term Loans aggregating $ 84 , which was included in interest expense for the three and nine months ended September 30, 2023.

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

The Sixth Amendment provides for, among other things, additional term loans in an aggregate principal amount of approximately $ 38,701 , with an original issue discount of $ 4,059 , (the “Sixth Amendment Incremental Term Loans”), the original issue discount was paid-in-kind by increasing the principal amount of the Credit Agreement.

The original issue discount was paid-in-kind by increasing the principal amount of the Credit Agreement.

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 six months ended June 30, 2024.

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

The Sixth Amendment, among other things:

(ii) a prepayment premium on the Sixth Amendment Incremental Term Loans;

and (iii) extended the maturity date for all outstanding term loans under the Credit Agreement to March 15, 2026.

On August 23, 2024, the Company entered into a seventh amendment (the “Seventh Amendment”) to the Credit Agreement.

The Seventh Amendment provides for, among other things:

(i) additional term loans in an aggregate principal amount of $ 25,000 , with an original issue discount of $ 750 , (the “Seventh Amendment Incremental Term Loans”);

(ii) an increased amount of the quarterly principal payments of the loans provided pursuant to the Credit Agreement (including the Seventh Amendment Incremental Term Loans) commencing on September 30, 2024 to $ 1,349 ;

and (iii) a prepayment premium on the Seventh Amendment Incremental Term Loans.

The proceeds of the Seventh Amendment will be used for general corporate purposes, including working capital, lease liabilities, and legal expenses arising from previously disclosed regulatory matters.

The Company incurred debt issuance costs of $ 318 and $ 411 for the nine months ended September 30, 2024 and 2023, respectively.

Debt issuance cost amortization and write off amounted to $ 55 and $ 179 for the three and nine months ended September 30, 2024, respectively, and $ 119 and $ 416 for the three and nine months ended September 30, 2023, respectively.

Unamortized debt issuance costs as of September 30, 2024 and December 31, 2023 , were $ 357 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 September 30, 2024 and December 31, 2023 , was $ 5,960 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 September 30, 2024 were as follows:

Remainder of 2024

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

Xponential Fitness, Inc.

1 unchanged sentence

(amounts in thousands, except per share amounts)

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

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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 and six months ended June 30, 2024 and 2023.

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

During the three and nine months ended September 30, 2024, the Company recognized ROU asset impairment charges of $ 4,323 , related to studio exits in conjunction with its restructuring plan.

During the three and nine months ended September 30, 2023, the Company recognized ROU asset impairment charges of $ 92 , related to studio exits in conjunction with its restructuring plan.

The impairment charges were recorded as impairment of goodwill and other assets in the Company's condensed consolidated statements of operations.

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

Operating leases

Balance Sheet Location

June 30, 2024

September 30, 2024

December 31, 2023

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Lease liability

(1) As of September 30, 2024, includes impact of impairment charges of $ 4,323 related to the restructuring plan.

See Note 17 for additional information.

The following table presents the components of lease expense:

Three months ended September 30,

Nine months ended September 30,

Operating lease costs

Variable lease costs

Xponential Fitness, Inc.

1 unchanged sentence

(amounts in thousands, except per share amounts)

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,

The following table presents the supplemental cash flow information related to operating leases:

Three months ended September 30,

Nine months ended September 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:

June 30, 2024

The following table presents other information related to leases:

September 30, 2024

December 31, 2023

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Weighted average discount rate

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

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

Remainder of 2024

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imputed interest

Xponential Fitness, Inc.

Notes to Condensed Consolidated Financial Statements

(amounts in thousands, except per share amounts)

Note 10 – Related Party Transactions

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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 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.

During the three and nine months ended September 30, 2024, the Company recorded $ 373 and $ 1,082 of interest in kind, respectively, which was recorded as interest income and an increase to receivable from shareholder within equity.

During the three and nine months ended September 30, 2023, the Company recorded $ 0 and $ 871 of interest in kind, respectively.

During the nine months ended September 30, 2023 , the Company received $ 8,062 in cash as partial payment for the receivable from shareholder.

Xponential Fitness, Inc.

Notes to Condensed Consolidated Financial Statements

(amounts in thousands, except per share amounts)

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.

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

As of September 30, 2024 , the former owner of Row House borrowed $ 470 , which was recorded as a reduction to liability.

In March 2023, Spartan Fitness Holdings, LLC (“Spartan Fitness”), which currently owns and operates 108 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.

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Spartan Fitness also owns the rights to 81 Club Pilates licenses to open additional new units.

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 $ 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.

The Company recorded franchise, equipment and marketing fund revenue aggregating $ 3,261 and $ 7,710 , during the three and nine months ended September 30, 2024, respectively, and $ 1,368 and $ 4,380 for the three and nine months ended September 30, 2023, respectively, from studios owned by Spartan Fitness.

The Company earns revenues and has accounts receivable from franchisees comprised of a former member of the Company's senior management and a current employee of the Company.

Revenues from these affiliates, primarily related to franchise revenue, marketing fund revenue and merchandise revenue, were $ 94 and $ 209 for the three and nine months ended September 30, 2024, respectively, and $ 126 and $ 396 for the three and nine months ended September 30, 2023, respectively.

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

The Company provided $ 217 and $ 1,172 of studio support during the three and nine months ended September 30, 2024, respectively, to these franchisees.

Studio support to these franchisees included, among other things, cash payments, royalty relief, rent assistance, product and merchandise, and lease guarantees.

The Company provided additional services to these franchisees in the form of assistance from its internal special operations team which focuses on improving studio performance, for which the Company does not allocate any amounts to the franchisees for such employee salaries.

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.

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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.

The Company recognized an $ 18 gain on sale of asset during the nine months ended September 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

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The Company determined that the Convertible Preferred represented an equity host under ASC Topic 815, Derivatives and Hedging .

The Company’s analysis was based on consideration of all stated and implied substantive terms and features of the hybrid financial instrument and weighing those terms and features on the basis of the relevant facts and circumstances.

The Company’s analysis was based on consideration of all stated and implied substantive terms and features of the hybrid financial instrument and weighing those terms

Xponential Fitness, Inc.

Notes to Condensed Consolidated Financial Statements

(amounts in thousands, except per share amounts)

and features on the basis of the relevant facts and circumstances.

Certain embedded features in the Convertible Preferred require bifurcation.

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

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

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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.

At September 30, 2024 and December 31, 2023, the Company recognized the preferred maximum redemption value of $ 116,810 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 September 30, 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 change of $ 0 and a net increase of $ 34,326 to additional paid-in-capital for the nine months ended September 30, 2024 and 2023 , respectively.

Note 12 – Stockholder's Equity (Deficit)

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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 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.

Additionally, during the three and nine months ended September 30, 2024, pursuant to the Amended Limited Liability Company Agreement of XPO Holdings (“Amended LLC Agreement” ), certain Continuing Pre-IPO

Xponential Fitness, Inc.

Notes to Condensed Consolidated Financial Statements

(amounts in thousands, except per share amounts)

LLC Members exchanged their LLC units for 0 and 476 shares of Class A common stock on a one-for-one basis, respectively.

During the three and nine months ended September 30, 2023 , certain Continuing Pre-IPO LLC Members exchanged their LLC units for 27 and 1,620 shares of Class A common stock on a one-for-one basis, respectively.

Noncontrolling interests – Following the IPO, XPO Inc.

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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:

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

Ownership percentage

Noncontrolling interests

Accelerated Share Repurchase program – On August 1, 2023, the Company's board of directors approved a $ 50,000 accelerated share repurchase program (the “ASR Program”) to repurchase shares of the Company's Class A common stock.

The Company accounted for the ASR Program as two separate transactions, a repurchase of the Company’s Class A common stock and an equity-linked contract indexed to the Company’s Class A common stock that met certain accounting criteria for classification in stockholders' equity.

Under the ASR Program, the Company paid a fixed amount of $ 50,000 on August 9, 2023, to a third-party financial institution and received an initial delivery of 2,010 shares of the Company’s Class A common stock, which were retired immediately.

The initial delivery of shares of the Company’s Class A common stock represented approximately 80 % of the fixed amount paid of $ 50,000 , which was based on the share price of the Company's Class A common stock on the date of ASR Program execution.

On October 2, 2023, the final settlement of the Company's ASR Program occurred, and the Company received an additional 589 shares of the Company's Class A common stock from the third-party financial institution.

The payment of $ 50,000 was recorded as reductions to stockholders' equity, consisting of a $ 40,000 decrease in additional paid-in capital, which reflects the value of the initial shares received and immediately retired, and a $ 10,000 decrease in additional paid-in capital, which reflects the value of the Class A common stock that was delivered by the financial institution upon final settlement.

Under the ASR Program, the Company also incurred $ 439 in associated costs, consisting primarily of legal fees and a 1 % excise tax, which were recorded as a decrease in additional paid-in capital on the Company’s condensed consolidated statements of stockholders’ equity.

In total under the ASR Program, the Company repurchased and immediately retired 2,599 shares of Class A common stock.

The final number of shares received by the Company was based on the daily volume-weighted average stock price of the Company’s Class A common stock during the duration of the ASR Program, less a discount and adjustments pursuant to the terms and conditions of the ASR Program agreement.

Xponential Fitness, Inc.

6 unchanged sentences

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 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.

At September 30, 2024, there were no profit interest units outstanding as the last of these profit interest units vested in August 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.

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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 (including performance-based) for the six months ended June 30, 2024:

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

Weighted Average

3 unchanged sentences

Forfeited, expired, or canceled

Outstanding at June 30, 2024

Outstanding at September 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.

1 unchanged sentence

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 the nine months ended September 30, 2024, 34 performance-based RSUs were earned and issued as shares and 58 performance-based RSUs were forfeited.

During 2024, the Company granted 404 performance-based RSUs, of which 242 contained performance conditions and 162 contained market conditions, with weighted average grant-date fair values of $ 11.97 and $ 12.54 , respectively.

1 unchanged sentence

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.

Notes to Condensed Consolidated Financial Statements

(amounts in thousands, except per share amounts)

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

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

Three months ended June 30,

Three months ended September 30,

Nine months ended September 30,

Selling, general and administrative

2 unchanged sentences

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

Xponential Fitness, Inc.

Notes to Condensed Consolidated Financial Statements

(amounts in thousands, except per share amounts)

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.

At September 30, 2024, the Company had $ 29,877 of total unamortized compensation expense related to non-vested RSUs.

That cost is expected to be recognized over a weighted-average period of 2.19 years.

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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 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.

The effective tax rate for the three and nine months ended September 30, 2024 , is ( 0.7 )% and ( 0.6 )%, respectively, and ( 4.0 )% and 2.8 % for the three and nine months ended September 30, 2023, respectively.

During the three and nine months ended September 30, 2024 , the Company recognized income tax expense of $ 131 and $ 216 , respectively, on its share of pre-tax book income (loss), exclusive of the noncontrolling interest of 33.3 % .

During the three and nine months ended September 30, 2023 , the Company recognized income tax expense of $ 202 and $ 212 , respectively, on its share of pre-tax book income, exclusive of the noncontrolling interest of 34.5 %.

As of September 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 September 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.

1 unchanged sentence

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

Xponential Fitness, Inc.

Notes to Condensed Consolidated Financial Statements

(amounts in thousands, except per share amounts)

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

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

for years 2019 through 2023.

11 unchanged sentences

To the extent that the Company is unable to timely make payments under the TRA for any reason, such payments generally will be deferred and will accrue interest until paid.

Xponential Fitness, Inc.

Notes to Condensed Consolidated Financial Statements

(amounts in thousands, except per share amounts)

The timing and amount of aggregate payments due under the TRA may vary based on a number of factors, including the amount and timing of the taxable income the Company generates each year and the tax rate then applicable.

6 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 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.

As of September 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 $ 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 .

Except for $ 1,185 and $ 831 of the current and non-current portions of the TRA, respectively, $ 78,148 of the TRA liability was not recorded as of September 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.

7 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’

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.

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.

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 16,244 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.

Weighted average shares of Class B common stock were 16,016 shares and 16,242 shares for the three and nine months ended September 30, 2024, respectively, and 16,503 and 17,206 for the three and nine months ended September 30, 2023, respectively.

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

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.

The potential dilutive effects of Class B common stock were determined to be anti-dilutive for the three and nine months ended September 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 nine months ended September 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.

2 unchanged sentences

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

Three months ended June 30,

Six months ended June 30,

Three months ended September 30,

Nine months ended September 30,

Net income (loss)

1 unchanged sentence

dividends on preferred shares

deemed contribution (dividend)

deemed contribution

deemed contribution from redemption of convertible preferred stock

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.

deemed contribution

Deemed contribution from redemption of convertible preferred stock

Net 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

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

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

2 unchanged sentences

Convertible preferred stock

Accelerated Purchase Program - final settlement

Treasury share options

11 unchanged sentences

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.

The Company accrued for estimated legal liabilities, where appropriate, or settlement agreements to resolve legal disputes and recorded an aggregate accrual of $ 6,727 and $ 1,343 , which is included in accrued expenses in the condensed consolidated balance sheets, as of September 30, 2024 and December 31, 2023, respectively.

The Company maintains insurance coverage which may cover certain losses and legal costs incurred.

When losses exceed the applicable policy deductible and realization of recovery of the loss from existing insurance policies is deemed probable, the Company records receivables from the insurance company for the excess amount.

The Company has not recorded any provision for insurance reimbursement as of September 30, 2024.

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.

4 unchanged sentences

The Company intends to defend itself in this litigation.

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 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 September 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 28, 2024 , the landlord (the "New York Rumble Landlord") for a Rumble studio located in New York, New York (the "New York Studio") filed an Affidavit of Confession of Judgment with the Supreme Court of the State of New York, County of New York (the “Court”), against Rumble Fitness, LLC (the “Rumble Sellers”), in its capacity as the former tenant under the lease for the New York Studio (the "New York Lease"), for rent arrears;

which filing was triggered by the Company's failure to pay rent.

As the current tenant under the New York Lease, the Company had been negotiating a settlement with the New York Rumble Landlord to settle all rent arrears, future rent, and to terminate the New York Lease.

On October 15, 2024, the Company entered into two settlement agreements with the New York Rumble Landlord pursuant to which the parties agreed to terminate the New York Lease and settle all amounts owed for rent arrears and future rent.

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 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.

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.

On July 26, 2024, plaintiffs filed an amended complaint, adding three Company directors as defendants, as well as the underwriters from the Company’s April 6, 2022 secondary offering, additionally bringing claims under Sections 11, 12(a)(2), and 15 of the Securities Act, and alleging a putative class period of July 23, 2021 through May 10, 2024.

The Company intends to defend itself against this action and filed a motion to dismiss the amended complaint on October 8, 2024.

The Court has scheduled a hearing on the Company’s motion to dismiss for February 14, 2025.

The litigation is preliminary in nature and involves substantial uncertainties and the Company believes that a loss is not probable or estimable at this time.

However, 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.

Xponential Fitness, Inc.

Notes to Condensed Consolidated Financial Statements

(amounts in thousands, except per share amounts)

and Xponential Fitness, Inc., as nominal defendant, for alleged wrongdoing committed by the individual defendants from July 26, 2021 to December 7, 2023.

Plaintiff alleges claims for breach of fiduciary duty, unjust enrichment, gross mismanagement, abuse of control, waste of corporate assets, violations of Section 14(a) of the Exchange Act, violations of Sections 20(a) and 10(b) and Rule 10b-5 of the Exchange Act, and against Messrs.

4 unchanged sentences

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.

The litigation is preliminary in nature and involves substantial uncertainties and the Company believes that a loss is not probable or estimable at this time.

However, 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.

Notes to Condensed Consolidated Financial Statements

(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.

11 unchanged sentences

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.

During the three and nine months ended September 30, 2024, the Company recorded an increase of $ 3,797 and $ 7,042 to contingent consideration, respectively, which were recorded as acquisition and transaction expense.

During the three and nine months ended September 30, 2023, the Company recorded a decrease to contingent consideration of $ 3,356 and $ 18,533 , respectively, which was recorded as acquisition and transaction income.

At September 30, 2024 and December 31, 2023, contingent consideration of $ 14,921 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.

2 unchanged sentences

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 $ 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.

In exchange, the Company will receive certain fees and royalties, including a percentage of the revenue generated by the Master Franchisee under the MFA.

The MFA contains an option for the Company to repurchase the master franchise rights granted under the MFA in 2024 at a purchase price based on the Master Franchisee’s EBITDA.

If the Company (or a designee of the Company) does not exercise the option pursuant to the terms of the MFA, then the Company might be required to pay a cancellation fee to the Master Franchisee which might be material to the Company.

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 June 30, 2024, and, therefore no accrual has been recorded.

The Company recorded additional contingent consideration of $ 31 and $ 108 during the three and nine months ended September 30, 2024 , respectively, and $ 31 and $ 124 during the three and nine months ended September 30, 2023, respectively, which was recorded as interest expense.

The Company recorded a change to contingent consideration of $ ( 302 ) and $ ( 950 ) during the three and nine months ended September 30, 2024 , respectively, and $ 1,338 and $ 1,005 during the three and nine months ended September 30, 2023 , respectively, which was recorded as acquisition and transaction expense

Xponential Fitness, Inc.

1 unchanged sentence

(amounts in thousands, except per share amounts)

The Company paid no contingent consideration during the three and nine months ended September 30, 2024 and $ 1,412 during the three and nine months ended September 30, 2023.

At September 30, 2024 and December 31, 2023, contingent consideration of $ 1,346 and $ 1,564 was recorded as accrued expenses, respectively, and $ 163 and $ 787 was recorded as contingent consideration from acquisitions, respectively, in the condensed consolidated balance sheets.

In exchange, the Company is entitled to receive certain fees and royalties, including a percentage of the revenue generated by the Master Franchisee under the MFA.

The MFA contains an option for the Company to repurchase the master franchise rights granted under the MFA at a purchase price based on the Master Franchisee’s EBITDA, which has been extended to 2025.

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 September 30, 2024, and therefore no accrual has been recorded.

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 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.

The Company recorded additional contingent consideration of $ 27 and $ 61 during the three and nine months ended September 30, 2024, respectively, which was recorded as interest expense.

The Company recorded additional contingent consideration of $ 169 and $ 342 during the three and nine months ended September 30, 2024, respectively, which was recorded as acquisition and transaction expense.

At September 30, 2024, contingent consideration of $ 440 and $ 410 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 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.

The Company has determined the fair value of these guarantees at inception was not material, and as of September 30, 2024 and December 31, 2023, $ 305 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 $ 1,365 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.

The Company’s maximum obligation, as a result of its guarantees of leases, is approximately $ 1,848 and $ 2,755 as of September 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 September 30, 2024 and December 31, 2023, $ 842 and $ 0 accrual has been recorded for the Company’s potential obligation under its guaranty arrangement.

Note 17 – Restructuring

In the third quarter of 2023, the Company began a restructuring plan that involves exiting company-owned transition studios and other measures designed to reduce costs to achieve the Company’s long-term margin goals and focus on pure franchise operations.

The plan was approved and initiated in the third quarter of 2023 and is expected to continue throughout 2024;

The plan was approved and initiated in the third quarter of 2023 and is expected to continue into 2025;

however ultimate timing will depend on lease termination negotiations.

1 unchanged sentence

This refranchise termination resulted in the Company incurring losses for contract termination expenses, other expenses associated with exiting the studios, and loss contingencies related to the refranchisor’s unpaid payroll.

The Company expects to recognize additional restructuring charges throughout 2024 totaling approximately $ 13,500 to $ 17,000 for rent expense, including amortization of the right-of-use asset and accretion of the operating lease liability, lease termination gains or losses, and other variable lease costs related to company-owned transition studios and other restructuring charges.

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 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 Company expects to recognize additional restructuring charges throughout 2024 and 2025 totaling approximately $ 11,500 to $ 15,500 for rent expense, including amortization of the right-of-use assets and accretion of the operating lease liability, lease termination gains or losses, and other variable lease costs related to company-owned transition studios and other restructuring charges.

The Company is negotiating lease terminations for operating leases

Xponential Fitness, Inc.

Notes to Condensed Consolidated Financial Statements

(amounts in thousands, except per share amounts)

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.

The components of the restructuring charges were as follows:

Three months ended June 30, 2024

Six months ended June 30, 2024

Three months ended September 30,

Nine months ended September 30,

Impairment and accelerated amortization of right-of-use assets

Contract termination and other associated costs

2 unchanged sentences

Total restructuring charges, net

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.

(1) 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.

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.

Amounts for the three and nine months ended September 30, 2024 are net of, among other things, $ 0 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 restructuring charges are recorded within the following financial statement captions on the Company’s condensed consolidated statements of operations:

Three months ended September 30,

Nine months ended September 30,

Costs of product revenue

Selling, general and administrative expenses

Impairment of goodwill and other assets

Total restructuring charges, net

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:

June 30, 2024

September 30, 2024

Balance at December 31, 2023

Charges incurred

Balance at June 30, 2024

Balance at September 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