What changed in this filing

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Item 1. Financial Statements

2025-05-09 compared with 2024-11-12 · 409 added, 562 removed, 560 unchanged (63% 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 September 30, 2024 and December 31, 2023

115 shares issued and outstanding as of March 31, 2025 and December 31, 2024

Stockholders' equity (deficit):

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

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

outstanding as of March 31, 2025 and December 31, 2024

Class A common stock, $ 0.0001 par value, 500,000 shares authorized, 34,778 and 33,660 shares

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

issued and outstanding as of March 31, 2025 and December 31, 2024, respectively

Class B common stock, $ 0.0001 par value, 500,000 shares authorized, 13,739 and 14,739 shares issued,

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

and 13,664 and 14,664 shares outstanding as of March 31, 2025 and December 31, 2024,

Additional paid-in capital

1 unchanged sentence

Accumulated deficit

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

Treasury stock, at cost, 75 shares outstanding as of March 31, 2025 and December 31, 2024

Total stockholders' deficit attributable to Xponential Fitness, Inc.

6 unchanged sentences

(amounts in thousands, except per share amounts)

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Revenue, net:

9 unchanged sentences

Selling, general and administrative expenses (Note 9)

Impairment of goodwill and other assets

Impairment of goodwill and other noncurrent assets

Depreciation and amortization

2 unchanged sentences

Total operating costs and expenses

Operating income (loss)

Operating income

Other expense (income):

3 unchanged sentences

Total other expense

Income (loss) before income taxes

Net income (loss)

net income (loss) attributable to noncontrolling interests

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

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

Loss before income taxes

Income taxes (benefit)

net loss attributable to noncontrolling interests

Net loss attributable to Xponential Fitness, Inc.

Net loss per share of Class A common stock:

Weighted average shares of Class A common stock outstanding:

13 unchanged sentences

Conversion of Class B shares to Class A shares

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

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

Loan to shareholder and accumulated interest

1 unchanged sentence

Preferred stock dividend

Adjustment of preferred stock to redemption value

Balance at March 31, 2025

Equity-based compensation

Conversion of Class B shares to Class A shares

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

Loan to shareholder and accumulated interest

Distributions paid to Pre-IPO LLC Members

Preferred stock dividend

Adjustment of preferred stock to redemption value

Balance at June 30, 2024

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.

14 unchanged sentences

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

Deemed contribution from redemption of preferred stock

Liability-classified restricted stock units vested

Loan to shareholder and accumulated interest

Balance at March 31, 2023

Equity-based compensation

Conversion of Class B shares to Class A shares

Preferred stock dividend

Adjustment of preferred stock to redemption value

Vesting of Class B shares

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

Loan to shareholder and accumulated interest

Receivable from shareholder arising from the Rumble studios acquisition

Consideration related to the Rumble studios acquisition

Payment received from shareholder

Distributions paid to Pre-IPO LLC Members

Balance at June 30, 2023

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

Loan to shareholder and accumulated interest

Balance at March 31, 2024

See accompanying notes to condensed consolidated financial statements.

2 unchanged sentences

(amounts in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities:

Net income (loss)

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

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

Depreciation and amortization

3 unchanged sentences

Non-cash lease expense

Bad debt expense

Change in tax receivable agreement liability

Bad debt expense (recovery)

Equity-based compensation

Non-cash interest

Loss (gain) on disposal of assets

Impairment of goodwill and other assets

Gain on disposal of assets

Impairment of goodwill and other noncurrent assets

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

13 unchanged sentences

Proceeds from sale of assets

Purchase of studios

Purchase of intangible assets

1 unchanged sentence

Notes receivable payments received

Acquisition of business

Acquisition of businesses

Net cash used in investing activities

3 unchanged sentences

Debt issuance costs

Payments of preferred stock dividend

Payment of promissory note liability

Payment of preferred stock dividend and deemed cash dividend

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

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 9)

Loan to shareholder (Note 10)

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

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

Cash, cash equivalents and restricted cash, beginning of period

4 unchanged sentences

(amounts in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Supplemental cash flow information:

4 unchanged sentences

Adjustment of convertible preferred stock to redemption value

Liability-classified restricted stock units vested

Deemed contribution from redemption of convertible preferred stock

Accrued tax withholding related to convertible preferred stock dividend

1 unchanged sentence

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

Non-cash proceeds from sale of asset

Preferred stock dividend paid-in-kind

Debt issuance costs exit fees - long-term debt

See accompanying notes to condensed consolidated financial statements.

9 unchanged sentences

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

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

As of March 31, 2025 , the Company’s portfolio of eight brands consisted of:

“Club Pilates,” a Pilates facility franchisor;

2 unchanged sentences

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

“AKT,” a dance-based cardio workout concept that combines toning, interval and circuit training;

“Pure Barre,” a total body workout concept that uses the ballet barre to perform small isometric movements;

4 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 31 company-owned transition studios as of September 30, 2024 and 2023, respectively.

In addition to franchised studios, the Company operated one company-owned transition studio as of March 31, 2025 and 2024.

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.

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

See Note 4 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 4 for additional information.

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.

Reclassifications – To conform with current year presentation, the Company has reclassified gift card receivable of $ 5,809 from accounts receivable, net, to prepaid expenses and other current assets in the December 31, 2024 condensed consolidated balance sheet.

The Company has reclassified certain prior period amounts to conform with the current period presentation on the condensed consolidated statements of cash flows.

Specifically, within the condensed consolidated statements of cash flows, changes in tax receivable agreement liability which was previously included in other current liabilities is now reported separately.

The reclassifications do not affect previously reported cash flows from operating activities in the condensed consolidated statements of cash flows.

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

2 unchanged sentences

Actual results could differ from these estimates under different assumptions or conditions.

Note 2 – Correction of Previously Issued Financial Statements

As previously disclosed in Note 2 of Notes to Consolidated Financial Statements within Part II, Item 8 “Financial Statements and Supplementary Data” in the Company's Annual Report on Form 10-K for the year ended December 31, 2024, subsequent to the issuance of the Company's condensed consolidated financial statements for the period ended March 31, 2024, the Company identified misstatements impacting previously issued financial statements.

The Company concluded that the aggregate impact of all the errors did not result in a material misstatement of previously issued condensed consolidated financial statements as of and for the three months ended March 31, 2024.

The accompanying condensed consolidated financial statements as of and for the three months ended March 31, 2024, have been corrected from amounts previously reported.

The Company has also corrected related amounts within the accompanying footnotes.

The identified misstatements impacting the condensed consolidated financial statements for the three months ended March 31, 2024 include the following, for which the amounts described below are the net impact:

Rebates – Certain agreement terms had not been properly or timely communicated to be considered for their accounting impact resulting in misstatements including understatement of costs of product revenue of $ 250 and overstatement of merchandise revenue of $ 366 for the three months ended March 31, 2024.

Revenues – The Company’s evaluation of certain revenue contracts did not appropriately evaluate the accounting for all key terms and conditions, resulting in an understatement of merchandise revenue of $ 537 and costs of product revenue of $ 429 for the three months ended March 31, 2024.

Cost of product revenue – Certain costs and fees related to inventory were not properly expensed in the appropriate period, resulting in an overstatement of cost of product revenue of $ 937 for the three months ended March 31, 2024.

Impairment of assets – Company did not properly assess the disposition of the Stride brand subsequent to the balance sheet date as an impairment indicator as of the balance sheet date, resulting in an overstatement of selling, general and administrative expenses of $ 338 and an understatement of cost of product revenue for inventory write downs of $ 64 for the three months ended March 31, 2024.

Legal Accruals – Certain legal liabilities had not been communicated to be considered for their accounting impact resulting in an overstatement of selling, general and administrative expenses of $ 328 for the three months ended March 31, 2024.

Equipment inventory – Equipment inventory which had been received by the Company was not properly recorded resulting in an understatement of cost of product revenue of $ 95 for the three months ended March 31, 2024.

Xponential Fitness, Inc.

Notes to Condensed Consolidated Financial Statements

(amounts in thousands, except per share amounts)

Cost of product revenue – The Company improperly recognized deferred costs related to equipment resulting in an understatement of $ 273 of costs of product revenue for the three months ended March 31, 2024.

Invoices – The Company did not properly account for certain vendor invoices, including not recognizing expenses in the period incurred, resulting in an overstatement of costs of franchise and service revenue of $ 74 and an understatement of selling, general and administrative expenses of $ 128 for the three months ended March 31, 2024.

The impact of the correction of errors to the Company's condensed consolidated statement of operations, condensed consolidated statement of changes to stockholders' equity (deficit) and condensed consolidated statement of cash flows for the three months ended March 31, 2024 are presented below:

Condensed Consolidated Statement of Operations

Three Months Ended March 31, 2024

As Previously Reported

Revenue, net:

Merchandise revenue

Total revenue, net

Operating costs and expenses:

Costs of product revenue

A, B, C1, C2, C4, C5

Costs of franchise and service revenue

Selling, general and administrative expenses

Total operating costs and expenses

Operating income

Loss before income taxes

Net loss attributable to noncontrolling interests

Net loss attributable to Xponential Fitness, Inc.

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

Xponential Fitness, Inc.

Notes to Condensed Consolidated Financial Statements

(amounts in thousands, except per share amounts)

Condensed Consolidated Statement of Changes to Stockholders' Equity (Deficit)

As Previously Reported

Additional Paid-In Capital

Noncontrolling interests

Total Equity (Deficit)

Balance at December 31, 2023

Conversion of Class B shares to Class A shares

Payment received from shareholder

Balance at March 31, 2024

Additional Paid-In Capital

Noncontrolling interests

Total Equity (Deficit)

Balance at December 31, 2023

Conversion of Class B shares to Class A shares

Payment received from shareholder

Balance at March 31, 2024

Additional Paid-In Capital

Noncontrolling interests

Total Equity (Deficit)

Balance at December 31, 2023

Conversion of Class B shares to Class A shares

Payment received from shareholder

Balance at March 31, 2024

Xponential Fitness, Inc.

Notes to Condensed Consolidated Financial Statements

(amounts in thousands, except per share amounts)

Condensed Consolidated Statement of Cash Flows

Three Months Ended March 31, 2024

As Previously Reported

Reclassification

Cash flows from operating activities:

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

Non-cash lease expense

Change in tax receivable agreement liability

Gain from disposal of assets

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

Accounts receivable

Prepaid expenses and other current assets

Operating lease liabilities

Deferred costs

Accounts payable

Accrued expenses

Other current liabilities

Other liabilities

Net cash provided by operating activities

Cash flows from financing activities:

Payment received from shareholder

Net cash used in financing activities

Note 3 – Summary of Significant Accounting Policies

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

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'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 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 o f credit (See Note 15).

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.

Restricted cash was $ 15,987 and $ 16,063 at March 31, 2025 and December 31, 2024 , respectively.

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

11 unchanged sentences

(amounts in thousands, except per share amounts)

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

Accounts receivable

Notes receivable

Balance at January 1, 2024

Bad debt expense recognized during the period

Write-off of uncollectible amounts

Balance at September 30, 2024

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

Accounts receivable

Notes receivable

Balance at January 1, 2023

Bad debt expense recognized during the period

Balance at December 31, 2024

Bad debt expense (recovery) recognized during the year

Write-off of uncollectible amounts

Balance at September 30, 2023

Supplemental balance sheet information

September 30,

Prepaid expenses and other current assets

Prepaid expenses

Tax receivables

Other current assets

Total prepaid expenses and other current assets

Accrued expenses

Accrued compensation

Contingent consideration from acquisitions, current portion

Sales tax accruals

Legal accruals

Other accruals

Total accrued expenses

Other current liabilities

Lease liabilities, short-term

Promissory note

Tax receivable agreement liability, current portion

Other current liabilities

Total other current liabilities

Balance at March 31, 2025

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.

1 unchanged sentence

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

Xponential Fitness, Inc.

Notes to Condensed Consolidated Financial Statements

(amounts in thousands, except per share amounts)

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, notes payable, and other current liabilities.

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

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.

Redeemable convertible preferred stock – T he redeemable convertible preferred stock (the “Convertible Preferred”) becomes redeemable at the option of the holder as of a specific date unless an event that is not probable of occurring happens before that date.

Therefore, the Company determined that it is probable that the Convertible Preferred will become redeemable based on the passage of time.

The Company has elected to recognize changes in the redemption value immediately as they occur and adjust the carrying amount of the instrument to equal the redemption value at the end of each reporting period.

Noncontrolling interests – Noncontrolling interests represent the economic interests of XPO LLC held by Class B common stockholders.

Income or loss is attributed to the noncontrolling interests based on the weighted average LLC interests outstanding during the period.

The noncontrolling interests' ownership percentage can fluctuate over time as the Class B common stockholders may elect to exchange their shares of Class B common stock for Class A common stock.

Earnings (loss) per share – Basic earnings (loss) per share is calculated by dividing the net income (loss) attributable to Class A common stockholders by the number of weighted-average shares of Class A common stock outstanding for the period.

Shares of Class B common stock do not share in the earnings of the Company and are therefore not participating securities.

As such, separate presentation of basic and diluted earnings (loss) per share of Class B common stock under the two-class method has not been presented.

Diluted earnings per share adjusts the basic e arnings per share calculation for the potential dilutive impact of common shares such as equity awards using the treasury-stock method.

Diluted earnings per share considers the impact of potentially dilutive securities except in periods in which there is a loss because the inclusion of the potentially dilutive common shares would have an anti-dilutive effect.

Shares of Class B common stock are considered potentially dilutive shares of Class A common stock;

however, in loss periods related amounts are excluded from the computation of diluted earnings per share of Class A common stock because the effect would be anti-dilutive under the if-converted and two-class methods.

For further discussion, see Note 15.

Income taxes – The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities (“DTAs” and “DTLs”) for the expected future tax consequences of events that have been included in the financial statements.

Under this method, the Company determines DTAs and DTLs on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse.

The effect of a change in tax rates on DTAs and DTLs is recognized in income in the period that includes the enactment date.

The Company recognizes DTAs to the extent that it believes that these assets are more likely than not to be realized.

In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, carryback potential if permitted under the tax law, and results of recent operations.

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.

Notes to Condensed Consolidated Financial Statements

(amounts in thousands, except per share amounts)

have any uncertain tax positions.

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

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

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

As an emerging growth company, the JOBS Act permits the Company an extended transition period for complying with new or revised accounting standards affecting public companies.

The Company has elected to use this extended transition period.

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

Recently adopted accounting pronouncements

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

2023-07, “Segment Reporting (Topic 280):

1 unchanged sentence

In addition, the amendments enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure requirements for entities with a single reportable segment, and contain other disclosure requirements.

ASU 2023-07 is effective for public entities for fiscal years beginning after December 15, 2023, and interim periods in fiscal years beginning after December 15, 2024, with early adoption permitted.

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

The adoption of this accounting standard did not have an impact on the Company's condensed consolidated financial statements.

See Note 17 for additional information .

Recently issued accounting pronouncements

The Company qualifies as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) and will lose this qualification on December 31, 2026, which is the last day of the fiscal year after the fifth anniversary of the Company's IPO, or sooner.

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

As an emerging growth company, the JOBS Act permits the Company an extended transition period for complying with new or revised accounting standards affecting public companies.

The Company has elected to use this extended transition period.

Xponential Fitness, Inc.

Notes to Condensed Consolidated Financial Statements

(amounts in thousands, except per share amounts)

Income Taxes Disclosures – In December 2023, the FASB issued ASU No.

1 unchanged sentence

Improvements to Income Tax Disclosures.” ASU 2023-09 requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid.

ASU 2023-09 is effective for public entities with annual periods beginning after December 15, 2024, with early adoption permitted.

ASU 2023-09 is effective for annual periods beginning after December 15, 2024 for public business entities (“PBEs”) and December 15, 2025 for entities other than PBEs with early adoption permitted.

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

3 unchanged sentences

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.

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

Supplemental balance sheet information

Prepaid expenses and other current assets

Prepaid expenses and other

Tax receivables

Gift card receivable

Total prepaid expenses and other current assets

Accrued expenses

Accrued compensation

Contingent consideration from acquisitions, current portion

Sales tax accruals

Legal accruals

Other accruals

Total accrued expenses

Other current liabilities

Lease liabilities, short-term

Promissory note

Tax receivable agreement liability, current portion

Gift card liability

Other current liabilities

Total other current liabilities

Note 4 – Acquisitions and Dispositions

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

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 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.

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

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

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

common stock owned by the Rumble Sellers .

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

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

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

During the three months ended March 31, 2025 and 2024, the Company refranchised operations at 0 and 10 company-owned transition studios, respectively, received no proceeds in either period, and recorded a net loss of $ 0 and $ 122 on disposal of the studio assets, respectively.

During the three months ended March 31, 2025 and 2024, the Company also ceased operations at 0 and 11 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.

See Note 16 for further discussion of the Company's restructuring plan.

Xponential Fitness, Inc.

1 unchanged sentence

(amounts in thousands, except per share amounts)

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

Accounts receivable

Property and equipment

Right-of-use assets

Deferred revenue

Lease liabilities

Reduction to receivable from shareholder

The resulting goodwill is primarily attributable to synergies from the integration of studios, increased expansion for market opportunities and the expansion of studio membership and is expected to be tax deductible.

The fair value of the property and equipment was based on the replacement cost method.

The fair value of the right-of-use assets was determined using the income approach.

The deferred revenue represents prepaid classes and class packages.

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 was considered to have an eight-year life.

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

During the year ended December 31, 2023, the Company entered into an agreement with a franchisee under which the Company repurchas ed one studio t o operate as a company-owned transition studio.

The purchase price for the acquisition was $ 164 , less $ 8 of net deferred revenue and deferred costs resulting in total purchase consideration of $ 156 .

The following summarizes the aggregate fair values of the assets acquired and liabilities assumed:

Property and equipment

Reacquired franchise rights

Total purchase price

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 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.

See Note 17 for further discussion of the Company's restructuring plan.

On December 31, 2023, the Company entered into agreements to sell six Rumble company-owned transition studios (the “Rumble Held for Sale Studios”).

These agreements triggered the reclassification of Rumble Held for Sale Studios to assets held for sale.

Based on the expected net sales proceeds the Company determined the Rumble Held for Sale Studios to be fully impaired and recognized an impairment of $ 2,190 , within impairment of goodwill and other assets, for studio assets during the year ended December 31, 2023, consisting of property and equipment of $ 985 and reacquired franchise assets of $ 1,205 .

The sale was completed during the three months ended March 31, 2024.

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.

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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.

Notes to Condensed Consolidated Financial Statements

(amounts in thousands, except per share amounts)

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.

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

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 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.

The acquisition contributes to the Company’s vertical integration of its product offerings to its franchisees.

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

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

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:

Property and equipment

Intellectual property

Other intangible assets

Total assets acquired

Accounts payable and accrued expenses

Net assets acquired

The goodwill recognized in this acquisition was attributable to the synergies that the Company expects to achieve.

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

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

During the three months ended March 31, 2025 and 2024 , the Company did no t record any impairment charges related to studio assets.

S ee Note 8 for discussion of impairment charges related to right-of-use assets.

Lindora Acquisition

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

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

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

Xponential Fitness, Inc.

Notes to Condensed Consolidated Financial Statements

(amounts in thousands, except per share amounts)

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:

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

Franchise agreements

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

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.

During the three months ended March 31, 2025 and 2024 , the Company incurred $ 0 and $ 428 , respectively, of transaction costs related to acquisitions, which is included in acquisition and transaction expenses in the condensed consolidated statements of operations.

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

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

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

The Company received no consideration from the divestiture of the Stride brand and will assist the buyer with transition support including cash payments of approximately $ 265 payable over the 12-month period following divestiture.

Xponential Fitness, Inc.

Notes to Condensed Consolidated Financial Statements

(amounts in thousands, except per share amounts)

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

The Company received no con sideration from the divestiture of the Stride brand and will assist the buyer with transition support including cash payments of approximately $ 265 payable over the 12-month period following divestiture.

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 administrative expenses in the condensed consolidated statements of operations.

The Company recognized a gain on divestiture of $ 61 , 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.

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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.

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

As a result of the ongoing wind down of the AKT brand, the Company recognized net charges of $ 1,136 for impairment of intangible assets, inventory write-downs, and other charges during the year ended December 31, 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 5 – Contract Liabilities and Costs from Contracts with Customers

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

Xponential Fitness, Inc.

Notes to Condensed Consolidated Financial Statements

(amounts in thousands, except per share amounts)

franchise agreement term.

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

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”).

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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 .

The following table reflects the change in franchise and area development and brand fee contract liabilities for the three months ended March 31, 2025 .

Other deferred revenue amounts of $ 13,779 are excluded from the table as the original expected duration of the contracts is one year or less.

Franchise and area development fees

Balance at December 31, 2024

Revenue recognized that was included in deferred

revenue at the beginning of the year (1)

Decrease in deferred revenue due to divestiture

Increase, excluding amounts recognized as revenue

during the period

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.

Revenue recognized that was included in deferred revenue at the beginning

of the year (1)

Increase, excluding amounts recognized as revenue during the period

Balance at March 31, 2025

(1) Includes revenue recognized as a result of terminations of $ 815 for the three months ended March 31, 2025 .

Xponential Fitness, Inc.

Notes to Condensed Consolidated Financial Statements

(amounts in thousands, except per share amounts)

The following table illustrates estimated revenue expected to be recognized in the future related to performance obligations that were unsatisfied (or partially unsatisfied) as of March 31, 2025.

The expected future recognition period for deferred franchise and area 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

Franchise and area development fees

Remainder of 2025

The following table reflects the components of deferred revenue:

September 30,

Franchise and area development fees

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

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

Xponential Fitness, Inc.

Notes to Condensed Consolidated Financial Statements

(amounts in thousands, except per share amounts)

initial franchise agreement is executed.

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

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.

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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

The Company previously provided unsecured advances or extended financing related to the purchase of the Company’s equipment or franchise fees to various franchisees.

These arrangements have terms of up to 18 months with interest typically based on LIBOR plus 700 basis points with an initial interest free period.

The Company accrues the interest as an addition to the principal balance as the interest is earned.

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

The Company has also provided loans for the establishment of new or transferred franchise studios to various franchisees.

These loans have terms of up to ten years and bear interest at a stated fixed rate ranging from 0 % to 15 % or variable rates based on LIBOR plus a specified margin .

The Company accrues interest as an addition to the principal balance as the interest is earned.

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

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.

To the extent a loan becomes past due, the Company ceases the recording of interest in the period that a reserve on the loan is established.

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

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

Note 6 – Property and Equipment

Property and equipment consisted of the following:

September 30,

Furniture and equipment

Computers and software

Leasehold improvements

Construction in progress

accumulated depreciation

Total property and equipment

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.

At March 31, 2025 and December 31, 2024 , there were approximately $ 3,970 and $ 3,940 of current deferred costs and approximately $ 38,453 and $ 39,684 in non-current deferred costs, respectively.

The Company recognized franchise sales commission expense of approximately $ 1,368 and $ 2,845 for the three months ended March 31, 2025 and 2024 , respectively.

Note 6 – Goodwill and Intangible Assets

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

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

The carrying value of goodwill at March 31, 2025 and December 31, 2024, totaled $ 135,240 .

Cumulative goodwill impairment was $ 47,920 at March 31, 2025 and December 31, 2024.

At March 31, 2025 , the trademark intangible asset related to the CycleBar reporting unit of $ 9,649 , and the franchise agreements intangible assets related to BFT reporting unit of $ 1,047 , are considered to be at a heightened risk of future impairment in the event of significant unfavorable changes in assumptions, including forecasted future cash flows, as well as discount rates and other macroeconomic factors.

Xponential Fitness, Inc.

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(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.

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.

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

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

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

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.

At March 31, 2025 , the goodwill related to the Pure Barre and BFT reporting units of $ 42,548 and $ 5,105 , respectively, are at a heightened risk of future impairment if the fair value of the Pure Barre and BFT reporting units, and their associated assets, decreases in value due to the amount and timing of expected future cash flows, an inability to execute management’s business strategies or general market conditions, such as economic downturns, and changes in interest rates, including discount rates.

Future cash flow estimates are, by their nature, subjective, and actual results may differ materially from the Company's estimates.

If the Company's ongoing cash flow projections are not met or if market factors utilized in the impairment test deteriorate, including an unfavorable change in the terminal growth rate or the weighted-average cost of capital, the Company may have to record impairment charges in future periods.

Intangible assets consisted of the following:

September 30, 2024

March 31, 2025

December 31, 2024

Franchise agreements

Reacquired franchise rights

Intellectual property

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Deferred video production costs

Other intangible assets

Total definite-lived intangible assets

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Total intangible 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.

Amortization expense was $ 1,970 and $ 2,948 , for the three months ended March 31, 2025 and 2024, respectively.

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

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Note 7 – Debt

On April 19, 2021, the Company entered into a financing agreement with Wilmington Trust, National Association, as administrative agent and collateral agent, and the lenders party thereto (the “Credit Agreement”), which consists of a $ 212,000 senior secured term loan facility (the “Term Loan Facility”, and the loans thereunder, each a “Term Loan” and, together, the “Term Loans”).

On April 19, 2021, the Company entered into a Financing Agreement with Wilmington Trust, National Association, as administrative agent and collateral agent, and the lenders party thereto (the “Credit Agreement”), which consisted of a $ 212,000 senior secured term loan facility (the “Term Loan Facility”, and the loans thereunder, each a “Term Loan” and, together, the “Term Loans”).

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.

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(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 % ( 11.68 % at September 30, 2024).

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

Xponential Fitness, Inc.

Notes to Condensed Consolidated Financial Statements

(amounts in thousands, except per share amounts)

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

(i) 50 % of XPO Holdings’ and its subsidiaries’ Excess Cash Flow (as defined in the Credit Agreement), subject to certain exceptions;

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and (ix) restricting the issuance of equity.

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

Additionally, on March 10, 2025 the Company obtained a waiver related to EBITDA levels as the Credit Agreement did not contain active exceptions for non-recurring legal expenses.

The waiver permits the exclusion of certain non-recurring legal expenses from the calculation of EBITDA through March 31, 2026.

As of March 31, 2025, 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

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 nine months ended September 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.

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.

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

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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:

(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 ;

(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.

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 nine months ended September 30, 2024.

The Sixth Amendment, among other things, also (i) increased the amount of the quarterly principal payments of the loans provided pursuant to the Credit Agreement (including the Sixth Amendment Incremental Term Loans) commencing on June 30, 2024 to $ 1,287, (ii) included 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.

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 regulatory matters.

Xponential Fitness, Inc.

1 unchanged sentence

(amounts in thousands, except per share amounts)

On March 14, 2025, the Company entered into an eighth amendment (the “Eighth Amendment”) to the Credit Agreement.

The Eighth Amendment extends the final maturity date under the Credit Agreement to August 1, 2027 (the “Final Maturity Date”) and provides for, among other things, additional term loans in an aggregate principal amount of $ 10,000 (the “Eighth Amendment Incremental Term Loans”), an upfront fee, paid-in-kind, equal to 3 % of the (a) aggregate principal amount of term loans outstanding as of the amendment date and (b) the Eighth Amendment Incremental Term Loans funded on the funding date, which will be capitalized and added to the outstanding loan principal, and an exit fee of approximately $ 7,248 payable upon the earlier of the Final Maturity Date or the date all loans under the Credit Agreement have been repaid or prepaid.

The exit fee is treated as additional interest expense and is accreted over the life of the loan using the effective interest method and is presented as a reduction to long-term debt in the condensed consolidated balance sheets.

The Eighth Amendment also increased the amount of the quarterly principal payments of the loans provided pursuant to the Credit Agreement (including the Eighth Amendment Incremental Term Loans) commencing on March 31, 2025 to $ 1,374 .

The Company incurred debt issuance costs of $ 90 and $ 269 for the three months ended March 31, 2025 and 2024 , respectively.

Debt issuance cost amortization and write off amounted to $ 50 and $ 72 for the three months ended March 31, 2025 and 2024, respectively.

Unamortized debt issuance costs as of March 31, 2025 and December 31, 2024 , were $ 337 and $ 297 , respectively, and are presented as a reduction to long-term debt in the condensed consolidated balance sheets.

Unamortized original issue discount as of March 31, 2025 and December 31, 2024 , was $ 14,657 and $ 4,967 , respectively, and are presented as a reduction to long-term debt in the condensed consolidated balance sheets.

Unamortized exit fees as of March 31, 2025 and December 31, 2024, were $ 7,096 and $ 0 , respectively, and are presented as a reduction to long-term debt in the condensed consolidated balance sheets.

Principal payments on outstanding balances, including exit fee, of long-term debt as of March 31, 2025 were as follows:

Remainder of 2025

The carrying value of the Company’s long-term debt approximated fair value as of March 31, 2025 and December 31, 2024 , due to the variable interest rate, which is a Level 2 input.

Note 8 – Leases

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Certain real estate leases include one or more options to renew.

The exercise of lease renewal options is at the Company's sole discretion.

When deemed reasonably certain of exercise, the renewal options are included in the determination of the lease term and lease payment obligation, respectively.

The depreciable life of assets and leasehold improvements are limited by the expected lease term.

The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Right-of-use (“ROU”) assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease.

Operating lease ROU assets and liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term.

When readily determinable, the Company uses the rate implicit in the lease contract in determining the present value of lease payments.

If the implicit rate is not provided, the Company uses its incremental borrowing rate based on information available at the lease commencement date, including the lease term.

The operating lease ROU asset also includes any lease payments made and excludes lease incentives.

The Company lease terms may include options to extend or terminate the lease.

Currently, it is not reasonably certain that the Company will exercise those options and therefore, the Company utilized the initial, noncancelable, lease term to calculate the lease assets and corresponding liabilities for all leases.

The Company has certain insignificant short-term leases with an initial term of twelve months or less that are not recorded in the condensed consolidated balance sheets.

Lease expense for lease payments is recognized on a straight-line basis over the lease term.

The Company applied the practical expedient as an accounting policy for classes of underlying assets that have fixed payments for non-lease components, to not separate non-lease components from lease components and instead to account for them together as a single lease component, which increases the amount of lease assets and corresponding liabilities.

ROU assets from operating leases are subject to the impairment guidance in ASC 360, Property, Plant, and Equipment , and are reviewed for impairment when indicators of impairment are present.

ASC 360 requires three steps to identify, recognize and measure impairment.

Right-of-use (“ROU”) assets from operating leases are subject to the impairment guidance in ASC Topic 360, Property, Plant, and Equipment , and are reviewed for impairment when indicators of impairment are present.

ASC Topic 360 requires three steps to identify, recognize and measure impairment.

If indicators of impairment are present (Step 1), the Company performs a recoverability test (Step 2) comparing the sum of the estimated undiscounted cash flows attributable to the ROU asset in question to the carrying amount.

1 unchanged sentence

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.

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.

The Company recognized ROU asset impairment charges of $ 1,915 and $ 0 during the three months ended March 31, 2025 and 2024, respectively.

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

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Balance Sheet Location

September 30, 2024

March 31, 2025

December 31, 2024

5 unchanged sentences

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)

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

Three months ended September 30,

Nine months ended September 30,

The following table presents the components of lease expense during the three months ended March 31, 2025 and 2024:

Three months ended March 31,

Operating lease costs

Variable lease costs

The following table presents the supplemental cash flow information related to operating leases during the three months ended March 31, 2025 and 2024:

Three months ended March 31,

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

Lease liabilities arising from new ROU assets

The following table presents other information related to leases:

September 30, 2024

March 31, 2025

December 31, 2024

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Weighted average discount rate

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

Maturities of lease liabilities as of March 31, 2025 are summarized as follows:

Remainder of 2025

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Note 9 – Related Party Transactions

The Company had numerous transactions with the pre-IPO Member and pre-IPO Parent and its affiliates.

The significant related party transactions consisted of borrowings from and payments to the Member and other related parties that were under common control of the Parent.

In March 2021, the Company recorded a distribution to the Parent of $ 10,600 , which the Parent used to fund a note payable under a debt financing obligation in connection with the acquisition of Rumble.

The Company earned interest at the rate of 11 % per annum on the receivable from the Parent.

In connection with the Reorganization Transactions, the Parent merged with and into the Member.

In March 2021, the Company funded a note payable under a debt financing obligation in connection with the acquisition of Rumble.

The Company earned interest at the rate of 11 % per annum on the receivable.

In connection with the Reorganization Transactions, XPO Inc.

recorded $ 10,600 receivable from shareholder, as the Rumble Seller is a shareholder of XPO Inc., for the debt financing provided to the Rumble Seller.

2 unchanged sentences

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

During the three 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.

During the three months ended March 31, 2025 and 2024, the Company recorded $ 384 and $ 349 of interest-in-kind, respectively, which was recorded as interest income and an increase to receivable from shareholder within equity.

Xponential Fitness, Inc.

5 unchanged sentences

The outstanding receivable from shareholder and the multi-tranche term loan are collateralized by 75 shares of Class B common stock held by the former owner, which were reclassified to treasury stock, and by the 105 RSUs.

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

As of March 31, 2025 , the former owner of Row House borrowed $ 480 , which was recorded as a reduction to liability.

In March 2023, Spartan Fitness Holdings, LLC (“Spartan Fitness”), which currently owns and operates 117 Club Pilates studios, entered into a unit purchase agreement with Snapdragon Spartan Investco LP (the “Spartan SPV”), a special purpose vehicle controlled and managed by a member of the Company’s board of directors, pursuant to which Spartan SPV agreed to invest in the equity of Spartan Fitness.

In addition, the same member of the Company’s board of directors also invested as a limited partner in the Spartan SPV.

Spartan Fitness intends to use the investment from Spartan SPV to fund expansion of Club Pilates studios, among other concepts.

Spartan Fitness intends to use the investment from Spartan SPV to fund the expansion of Club Pilates studios, among other concepts.

Spartan Fitness also owns the rights to 78 Club Pilates licenses to open additional new units.

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.

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

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

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

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

The Company recorded franchise, equipment and marketing fund revenue aggregating $ 3,113 and $ 2,104 , during the three months ended March 31, 2025 and 2024, respectively, from studios owned by Spartan Fitness.

The Company previously earned revenues and had accounts receivable from a franchisee comprised of a former member of the Company's senior management together with their spouse, a former employee of the Company.

The former member of the Company's senior management resigned from the Company effective November 4, 2024, ending the related party relationship, and the former member’s spouse resigned from the Company on April 4, 2025.

Revenues from this affiliate, consisting of franchise revenue, marketing fund revenue and merchandise revenue, were $ 68 for the three months ended March 31, 2024 and no accounts receivable were recorded as of December 31, 2024, for such sales.

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

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

The Company provided additional services to this franchisee 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 and bonuses.

Note 10 – 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

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.

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.

Certain embedded features in the Convertible Preferred require bifurcation.

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

However, the fair value of such embedded features was immaterial upon issuance and as of March 31, 2025.

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

At any time after July 23, 2029, upon a sale of the Company, or at any time after the occurrence and continuance of an event of default, holders of the Convertible Preferred have the right to require the Company to redeem all, but not less than all, of the Preferred shares then outstanding at a redemption price in cash equal to the greater of (i) the fair market value per share of Preferred Stock (based on the average volume-weighted average price per share of Class A common stock for the 10 consecutive trading day period ending on, and including, the trading day immediately preceding the redemption notice), and (ii) the fixed liquidation preference, plus accrued and unpaid dividends.

The Convertible Preferred is recorded as mezzanine equity (temporary equity) on the condensed consolidated balance sheets because it is not mandatorily redeemable but does contain a redemption feature at the option of the Preferred holders that is considered not solely within the Company’s control.

On January 9, 2023, pursuant to a preferred stock repurchase agreement (the “Repurchase Agreement”) between the Company and certain holders of the Convertible Preferred, the Company repurchased 85 shares of Convertible Preferred for an aggregate payment of $ 130,766 .

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

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.

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)

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

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

In addition, the Selling Stockholders granted the underwriters a 30-day option to purchase up to an additional 750 shares of the Company's Class A common stock, which was fully exercised on February 15, 2023.

The shares sold in the offering consisted of (i) 2,276 existing shares of Class A common stock and (ii) 3,474 newly-issued shares of Class A common stock issued in connection with the exchange of LLC units held by the Selling Stockholders.

Simultaneously, 3,474 shares of Class B common stock were surrendered by the Selling Stockholders and canceled.

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 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.

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(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.

At March 31, 2025 and December 31, 2024, the Company recognized the preferred maximum redemption value of $ 116,810 , which is the maximum redemption value on the earliest redemption date based on fair market value per share of Convertible Preferred (based on the average volume-weighted average price per share of Class A common stock for the 10 consecutive trading day period ending on, and including, the trading day immediately preceding the redemption notice and 115 outstanding shares of Convertible Preferred at March 31, 2025 and December 31, 2024).

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 increase (decrease) of $ 0 and $ ( 8,106 ) to additional paid-in-capital for the three months ended March 31, 2025 and 2024 , respectively.

Note 11 – Stockholders' Equity (Deficit)

Common stock – During the three months ended March 31, 2025 and 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 1,000 and 78 shares of Class A common stock on a one-for-one basis, respectively.

Noncontrolling interests – Following the IPO, XPO Inc.

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Future redemptions or exchanges of LLC Units by the Continuing Pre-IPO LLC Members will result in a change in ownership and reduce the amount recorded as noncontrolling interest and increase additional paid-in capital.

During 2024 and 2023, the Company experienced a change in noncontrolling interests ownership due to the conversion of Class B to Class A shares and as such, has rebalanced the related noncontrolling interests balance.

During the three months ended March 31, 2025 and 2024, the Company experienced a change in noncontrolling interests ownership due to the conversion of Class B to Class A shares and as such, has rebalanced the related noncontrolling interests balance.

The Company calculated the rebalancing based on the net assets of XPO LLC, after considering the preferred shareholders' claim on the net assets of XPO LLC.

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

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

The following table summarizes the ownership of XPO LLC as of March 31, 2025:

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.

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Note 12 – Equity Compensation

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

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

Stock-based compensation related to profit interest units increases noncontrolling interests.

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 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.

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

As such, these awards are classified as a liability.

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

During the first quarter of 2023, the performance condition of an award with a total fixed dollar value of $ 2,250 was met and 101 unit s were earned and issued as shares.

During the fourth quarter of 2023, the Company determined that it is no longer probable that the EBITDA targets will be achieved for the remaining RSU awards granted in November 2021.

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 nine months ended September 30, 2024:

Equity classified restricted stock units – The following table summarizes aggregate activity for RSUs for the three months ended March 31, 2025:

Weighted Average

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Forfeited, expired, or canceled

Outstanding at September 30, 2024

Outstanding at March 31, 2025

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

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

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

During the 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.

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

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

As of 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 September 30,

Nine months ended September 30,

The Company grants performance-based RSUs, which are included in the RSUs described above, to executive officers and other key employees that vests upon the achievement of specified market or internal performance goals.

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

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

During the three months ended March 31, 2025, 13 performance-based RSUs were earned and issued and 37 performance based RSUs were forfeited.

The Company did not grant any performance-based RSUs during the three months ended March 31, 2025.

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

Three months ended March 31,

Selling, general and administrative

Total stock-based compensation expense, before tax

Income tax benefit (expense)

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.

Income tax benefit relates to vested RSUs.

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

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

At March 31, 2025, the Company had $ 21,000 of total unamortized compensation expense related to non-vested RSUs.

That cost is expected to be recognized over a weighted-average period of 2.11 years.

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

Note 14 – Income Taxes

Note 13 – Income Taxes and Tax Receivable Agreement

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

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The Company is taxed as a corporation and pays corporate federal, state and local taxes with respect to income allocated from XPO Holdings, based on its 71.7 % economic interest in XPO Holdings.

Xponential Fitness, Inc.

Notes to Condensed Consolidated Financial Statements

(amounts in thousands, except per share amounts)

The provision for income taxes differs from the amount of income tax computed by applying the applicable U.S.

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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 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.

The effective tax rate for the three months ended March 31, 2025 and 2024 , is ( 22.3 %) and 1.2 %, respectively.

During the three months ended March 31, 2025 and 2024 , the Company recognized income tax expense/(benefit) of $ 485 and $( 47 ), respectively, on its share of pre-tax book income (loss), exclusive of the noncontrolling interest of 28.3 % , and 34.3 %, respectively.

As of March 31, 2025, management determined based on applicable accounting standards and the weight of all available evidence, it was not more likely than not (“MLTN”) that the Company will generate sufficient taxable income to realize its deferred tax assets including the difference in tax basis in excess of the financial reporting value for its investment in XPO Holdings.

Consequently, the Company has established a full valuation allowance against its deferred tax assets as of March 31, 2025.

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.

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

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

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

federal, state and local income tax or franchise tax that the Company actually realizes as a result of (i) certain favorable tax attributes acquired from Rumble Holdings LLC and H&W Investco Blocker II, LP (the “Blocker Companies”) in the mergers of the Blocker Companies with and into XPO Inc.

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

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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.

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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 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.

Xponential Fitness, Inc.

Notes to Condensed Consolidated Financial Statements

(amounts in thousands, except per share amounts)

As of March 31, 2025 , 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 $ 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 .

Except for $ 2,090 and $ 1,095 of the current and non-current portions of the TRA, respectively, $ 87,896 of the TRA liability was not recorded as of March 31, 2025 .

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.

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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 16,016 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.

Weighted average shares of Class B common stock were 14,464 shares and 16,468 shares for the three months ended March 31, 2025 and 2024, 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 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.

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

Xponential Fitness, Inc.

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

Three months ended September 30,

Nine months ended September 30,

Net income (loss)

net (income) loss attributable to noncontrolling interests

dividends on preferred shares

deemed contribution

deemed contribution from redemption of convertible preferred stock

Net income (loss) attributable to XPO Inc.

Three months ended March 31,

net loss attributable to noncontrolling interests

dividends on preferred shares

deemed contribution

Deemed contribution from redemption of convertible preferred stock

deemed dividend

Net loss attributable to XPO Inc.

Weighted average shares of Class A common stock outstanding - basic

Effect of dilutive securities:

Convertible preferred stock

Weighted average shares of Class A common stock outstanding - diluted

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

- basic and diluted

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

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

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

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Convertible preferred stock

Accelerated Purchase Program - final settlement

Treasury share options

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Profits interests, time vesting

Xponential Fitness, Inc.

Notes to Condensed Consolidated Financial Statements

(amounts in thousands, except per share amounts)

Note 15 – Contingencies and Litigation

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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 $ 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 accrued for estimated legal liabilities, where appropriate, or settlement agreements to resolve legal disputes and recorded an aggregate accrual of $ 28,729 , and $ 14,717 , which is included in accrued expenses in the condensed consolidated balance sheet as of March 31, 2025 and in accounts payable and accrued expenses as of December 31, 2024, 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.

The Company recorded an insurance receivable of $ 5,000 , which is included in accounts receivable, net, in the condensed consolidated balance sheet as of March 31, 2025 .

Additionally, during the first quarter of 2025, the Company received proceeds of $ 9,750 in connection with its claims for insurance reimbursement for previous legal expenses, which was recognized within selling, general and administrative expenses in the condensed consolidated statements of operations for the three months ended March 21, 2025.

Various factors could affect the timing and amount of recovery and it is reasonably possible that the Company will need to adjust the estimate for insurance receivable or receive additional proceeds, exceeding our current estimated insurance receivable, based on new or additional information.

These changes could be material to the operating results and financial position of the Company for the period in which the adjustments to the receivable are recorded or additional proceeds are received.

Xponential Fitness, Inc.

Notes to Condensed Consolidated Financial Statements

(amounts in thousands, except per share amounts)

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.

3 unchanged sentences

The Company was served with the complaint on December 4, 2023.

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 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 April 4, 2025, the parties executed a settlement agreement and filed a motion seeking court approval of the settlement.

The Company recorded an accrual in anticipation of this settlement, which is included in accrued expenses in the condensed consolidated balance sheets as of March 31, 2025.

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.

1 unchanged sentence

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 Company filed a motion to dismiss the amended complaint on October 8, 2024.

On December 6, 2024, plaintiffs filed their opposition to the motion to dismiss and also filed a motion to supplement complaint the amended complaint, attaching a proposed supplemental complaint.

On February 18, 2025, the Court granted plaintiffs’ motion to supplement, denying defendants’ pending motion to dismiss as moot.

On February 28, 2025, plaintiffs filed the supplemented complaint.

On April 15, 2025, Defendants filed their motion to dismiss the supplemented complaint.

Instead of opposing Defendants’ motion to dismiss, on May 6, 2025, plaintiffs filed an amended consolidated complaint, which, among other things, adds three new entity defendants to the claim under Section 20(a) of the Exchange Act.

The Company intends to defend itself against this action by filing a motion to dismiss the amended consolidated complaint.

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.

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.

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.

2 unchanged sentences

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

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

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

On February 10, 2025, a third derivative lawsuit was filed in the United States District Court for the Central District of California by Stefanie Nelson, purportedly on behalf of Xponential Fitness, Inc., alleging similar claims as the consolidated Akande and Ayers action.

On March 31, 2025, the Court consolidated the Nelson action with the previously consolidated Akande and Ayers action.

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)

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 or an affiliate thereof.

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

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

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

On July 31, 2024, plaintiffs’ counsel provided the Company with a list of approximately 250 current and former franchisees, certain of which franchisees consist of more than one individual, that it claimed to represent in this matter.

The franchisees allege they were aggrieved by purported misstatements and omissions by the Company or an affiliate thereof.

On January 7, 2025, plaintiffs added 50 additional current and former franchisees to their prior list.

On April 22, 2025, as a result of mediation, the parties agreed in principle to settle this matter, on behalf of a class of all non-opt-out franchisees for $ 25,000 .

The settlement is subject to entry into a definitive settlement agreement and court approval and will be paid in installments, with 50 % payable upon court approval and the remaining 50 % payable in three equal installments, with the first payment due one year after settlement approval.

The Company recorded an accrual in anticipation of this settlement, which is included in the Company’s aggregate accrual discussed above.

On February 21, 2025, the Company received a complaint on behalf of a putative nationwide class alleging violations of the Telephone Consumer Protection Act.

The Company is investigating the matter and intends to vigorously defend itself.

Claims that the Company has violated the Telephone Consumer Protection Act could be costly to litigate, whether or not they have merit, and could expose the Company to substantial statutory damages or costly settlements.

The Company is not able to determine the likelihood of an outcome or provide an estimate of any reasonably possible loss or range of possible loss related thereto.

However, such losses, if incurred, could be material.

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

2 unchanged sentences

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

The Company intends to cooperate fully with the SEC, USAO and FTC in these investigations, and the Company has incurred, and may continue to incur, significant expenses related to legal and other professional services in connection with matters relating to or arising from these investigations.

On December 12, 2024, the Company received a subpoena from the Office of the Attorney General of the State of New York (the “NYAG”).

The Company intends to cooperate fully with the SEC, USAO, FTC, and NYAG in these investigations, and the Company has incurred, and may continue to incur, significant expenses related to legal and other professional services in connection with matters relating to or arising from these investigations.

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

Other regulatory matters – On April 10, 2023, the Company received notice of an investigation from the Commissioner of California’s Department of Financial Protection and Innovation (“DFPI”) related to the Company's compliance with California’s Franchise Investment Law.

On November 4, 2024, without admission of wrongdoing, the Company entered into a Consent Order with the DFPI to resolve the matter.

As part of the Consent Order, the Company paid an administrative penalty of $ 450 and agreed to various compliance training.

In addition, the Company has received inquiries from other states, including the Office of the Attorney General of the State of New York, the Office of the Attorney General of the State of Maryland, the Washington Department of Financial Institutions, and the Minnesota Department of Commerce regarding the Company’s compliance with applicable franchise laws.

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

2 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 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.

During the three months ended March 31, 2025 and 2024, the Company recorded an increase (decrease) of $ ( 8,661 ) and $ 4,450 to contingent consideration, respectively, which was recorded as acquisition and transaction expense (income).

At March 31, 2025 and December 31, 2024, contingent consideration of $ 8,644 and $ 17,305 was recorded as contingent consideration from acquisitions in the condensed consolidated balance sheets, respectively.

Xponential Fitness, Inc.

Notes to Condensed Consolidated Financial Statements

(amounts in thousands, except per share amounts)

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 $ 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.

Notes to Condensed Consolidated Financial Statements

(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 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 on a global basis, excluding the United States and Canada.

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

The Company recorded a change to contingent consideration of $ 2 and $ 41 during the three months ended March 31, 2025 and 2024, respectively, which was recorded as interest expense.

The Company recorded additional contingent consideration of $ 6 and $ ( 363 ) during the three months ended March 31, 2025 and 2024, respectively, which was recorded as acquisition and transaction expense (income).

In addition, the Company paid contingent consideration of $ 0 during the three months ended March 31, 2025 and 2024.

At March 31, 2025 and December 31, 2024, contingent consideration was $ 132 and $ 124 recorded as accrued expenses, respectively, in the condensed consolidated balance sheets.

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 $ 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.

The Company recorded additional contingent consideration of $ 31 and $ 17 during the three months ended March 31, 2025 and 2024, which was recorded as interest expense, respectively.

The Company recorded a change to contingent consideration of $ 17 and $ 0 during the three months ended March 31, 2025 and 2024, which was recorded as acquisition and transaction expense, respectively.

In addition, the Company paid contingent consideration of $ 500 and $ 0 during the three months ended March 31, 2025 and 2024, respectively.

At March 31, 2025 and December 31, 2024, contingent consideration was $ 429 and $ 457 recorded as accrued expenses, respectively, and $ 0 and $ 424 recorded as contingent consideration from acquisitions, respectively, in the condensed consolidated balance sheets.

Letter of credit – In July 2022, the Company entered into an agreement with a third-party financing company, who provides loans to the Company's qualified franchisees, pursuant to which the Company serves as guarantor for such loans.

In addition, the Company issued a $ 750 standby letter of credit in connection therewith, which represents a portion of the Company’s potential aggregate liability under the guaranty.

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

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

The 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.

The Company has determined the fair value of these guarantees at inception was not material, and as of March 31, 2025 and December 31, 2024, a $ 1,000 and $ 150 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 $ 1,848 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.

The Company’s maximum obligation, as a result of its guarantees of leases, is approximately $ 2,757 and $ 3,617 as of March 31, 2025 and December 31, 2024, respectively, and would only require payment upon default by the primary obligor.

The Company has determined the fair value of these guarantees at inception is not material, and as of March 31, 2025 and December 31, 2024, a $ 1,146 and $ 2,034 accrual has been recorded for the Company’s potential obligation under its guaranty arrangement, respectively.

Xponential Fitness, Inc.

Notes to Condensed Consolidated Financial Statements

(amounts in thousands, except per share amounts)

Note 16 – 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 into 2025;

however ultimate timing will depend on lease termination negotiations.

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

however, the ultimate timing of the completion of the restructuring plan will depend on lease termination negotiations.

During the fourth quarter of 2023 the Company's restructuring plan was expanded due to the addition of Rumble company-owned transition studios to the restructuring plan and a refranchising plan that was terminated by the Company due to the refranchisor’s non-compliance with the franchise agreements and the subsequent closure of certain studios.

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 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 Company expects to recognize additional restructuring charges throughout 2025 totaling between approximately $ 5,200 to $ 9,000 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 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 September 30,

Nine months ended September 30,

Three months ended March 31,

Impairment and accelerated amortization of right-of-use assets

Contract termination and other associated costs

Loss on lease terminations and sale or disposal of assets, net (1)

Loss (gain) on lease terminations and sale or disposal of assets, net (1)

Other restructuring costs

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(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 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.

Amount for the three months ended March 31, 2024 is net of, among other things, a $ 3,636 gain on lease termination related to a lease for which the Company had recognized accelerated right-of-use asset amortization.

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,

Three months ended March 31,

Costs of product revenue

Selling, general and administrative expenses

Impairment of goodwill and other assets

Impairment of goodwill and other noncurrent 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:

September 30, 2024

Balance at December 31, 2024

Charges incurred

Balance at September 30, 2024

Balance at March 31, 2025

Xponential Fitness, Inc.

Notes to Condensed Consolidated Financial Statements

(amounts in thousands, except per share amounts)

Note 17 – Segment Information

Operating segments are defined as components of an entity for which separate financial information is available and that is regularly reviewed by the Chief Operating Decision Maker (“CODM”) for purposes of making operating decisions, allocating resources to an individual segment and in assessing performance.

The Company’s Chief Executive Officer is the Company’s CODM.

The CODM reviews financial information presented on a consolidated basis for purposes of making operating decisions, allocating resources and evaluating financial performance.

As such, the Company has determined that it operates in one reportable and operating segment.

The Company’s reportable segment is the Company’s franchise business of its health and wellness brands which require similar technology and operating strategies.

The CODM evaluates the operating results through consolidated net income (loss).

The CODM uses consolidated net income (loss) predominantly in the annual budget and forecasting process and to monitor budget-to-actual variances on a monthly basis in order to assess performance and allocate resources.

During the three months ended March 31, 2025 and 2024, the Company generated $ 2,617 and $ 3,588 of revenue outside of the United States, respectively, primarily from franchise development fees and franchise royalty fees earned from master franchisees.

As of March 31, 2025 and 2024, the Company did not have material assets located outside of the United States.

The following table presents the financial information for the Company’s one reportable and operating segment:

Three Months Ended March 31,

Total revenue, net

Costs of product revenue

Costs of franchise and service revenue

Marketing and promotion

Salary and wages

Professional services (including legal and accounting)

Rent and occupancy

Marketing fund expense

Acquisition and transaction expenses (income)

Other segment items (1)

Equity-based compensation

Depreciation and amortization

Impairment of goodwill and other noncurrent assets

Interest income

Interest expense

Income taxes (benefit)

Segment net loss

(1) Other segment items include restructuring expenses of $ 151 and $ 4,443 for the three months ended March 31, 2025 and 2024 , respectively.

Other segment items also include travel expenses, insurance expense, TRA expense, and other selling, general and administrative expenses.

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