What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-11-10 compared with 2025-08-08 · 180 added, 169 removed, 466 unchanged (43% of the section changed)

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Our actual results and timing may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed below and elsewhere in this Quarterly Report on Form 10-Q, particularly in the section titled “Factors Affecting Our Results of Operations” and “Risk Factors” and in our Annual Report on Form 10-K for the year ended December 31, 2024.

The following Management’s Discussion and Analysis gives effect to the correction of the Company’s condensed consolidated financial statements for the three and six months ended June 30, 2024, as more fully described in Note 2 of Notes to Condensed Consolidated Financial Statements.

The following Management’s Discussion and Analysis gives effect to the correction of the Company’s condensed consolidated financial statements for the three and nine months ended September 30, 2024, as more fully described in Note 2 of Notes to Condensed Consolidated Financial Statements.

Xponential Fitness LLC (“XPO LLC”), the principal operating subsidiary of Xponential Fitness, Inc.

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Pursuant to a reorganization into a holding company structure, the Company is a holding company with its principal asset being a 71.9% ownership interest in XPO LLC through its ownership interest in Xponential Intermediate Holdings, LLC (“XPO Holdings”).

We operate a diversified platform of eight brands spanning across verticals including Pilates, indoor cycling, barre, stretching, boxing, functional training, metabolic health and yoga.

We operate a diversified platform of five brands spanning across verticals including Pilates, barre, stretching, strength training and yoga.

In partnership with its franchisees and master franchisees, XPO LLC offers energetic, accessible, and personalized workout experiences led by highly qualified instructors in studio locations throughout North America and internationally, with franchise, master franchise and international expansion agreements in 49 U.S.

states, Puerto Rico and 30 additional countries as of June 30, 2025.

states, Puerto Rico and 30 additional countries as of September 30, 2025.

The Company's portfolio of brands includes Club Pilates, the largest Pilates brand in the United States;

CycleBar, the largest indoor cycling brand in the United States;

StretchLab, a concept offering one-on-one and group stretching services;

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Pure Barre, a total body workout that uses the ballet barre to perform small isometric movements, and the largest barre brand in the United States;

Rumble, a boxing-inspired full-body workout;

BFT, a functional training and strength-based program;

and Lindora, a provider of medically guided wellness and metabolic health solutions.

As of June 30, 2025, 2,823 studios were open in North America (consists of Canada, the United States and U.S.

and BFT, a functional training and strength-based program.

As of September 30, 2025, 2,575 studios were open in North America (consists of Canada, the United States and U.S.

Territories) and franchisees were contractually committed to open 1,042 additional studios under existing franchise agreements.

In addition, as of June 30, 2025, we had 504 studios open internationally and our master franchisees were contractually obligated to sell licenses to franchisees to open an additional 1,013 new studios, of which master franchisees have sold 246 licenses for studios not yet opened as of June 30, 2025.

During the six months ended June 30, 2025 and 2024, we generated revenue outside the United States of $5.3 million and $7.1 million, respectively.

As of June 30, 2025 and December 31, 2024, we did not have material assets located outside of the United States.

In addition, as of September 30, 2025, we had 491 studios open internationally and our master franchisees were contractually obligated to sell licenses to franchisees to open an additional 746 new studios, of which master franchisees have sold 204 licenses for studios not yet opened as of September 30, 2025.

During the nine months ended September 30, 2025 and 2024, we generated revenue outside the United States of $7.7 million and $10.9 million, respectively.

As of September 30, 2025 and December 31, 2024, we did not have material assets located outside of the United States.

No franchisee accounted for more than 5% of our revenue.

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Nuzzo brings more than 25 years of executive leadership in the retail and consumer services sectors across strategic, operational, financial, and growth-focused disciplines.

Lindora divestiture

On September 19, 2025, we entered into an agreement with a buyer to divest the Lindora brand, including the intellectual property, franchise rights and franchise agreements for open studios, and retained certain liabilities, including liabilities related to known litigation, pre-litigation, and disputes as of the closing of the divestiture.

We will receive total consideration of up to $6.0 million based on 7% of the monthly cash-basis gross revenue of the legacy studio locations, which was recorded at the estimated fair value of $3.8 million at the divestiture date.

We believe the divestiture allows us to better focus and utilize our resources on our core brands and other opportunities which better align with our long-term strategies.

Rumble and CycleBar divestiture

On July 24, 2025, we entered into an agreement with a buyer to divest the CycleBar and Rumble brands, including the intellectual property, franchise rights and franchise agreements for open studios, and retained certain liabilities, including liabilities related to known litigation, pre-litigation, and disputes as of the closing of the divestiture.

We will receive total consideration of $7.0 million, including an initial cash payment of $2.0 million and a final payment of $5.0 million due within 60 days from the divestiture of the CycleBar and Rumble brands.

We will receive total consideration of $7.0 million, of which $2.0 million was received in the three months ended September 30, 2025.

We believe the divestiture allows us to better focus and utilize our resources on our core brands and other opportunities which better align with our long-term strategies.

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On July 3, 2025, we and Fit Commerce, a California Corporation (“FC”), entered into a Retail Supply Agreement (the “Agreement”) to be effective as of December 1, 2025 (the “Effective Date”).

All capitalized terms in this “retail supply agreement” section not otherwise defined herein shall have the meanings ascribed to them in the Agreement.

The Agreement relates to the outsourcing of our retail merchandising, including the manufacturing and distribution, of any retail item sold by a franchisee, subject to terms and conditions outlined in the Agreement.

In addition, FC has agreed to purchase the Company’s existing retail inventory, subject to certain exceptions, no later than the Effective Date of the Agreement.

In addition, FC has agreed to purchase our existing retail inventory, subject to certain exceptions, no later than the Effective Date of the Agreement.

This strategic initiative shifts management of the franchisee retail experience from our in-house teams to a dedicated e-commerce provider, allowing us to focus on core business priorities.

Pursuant to the Agreement, FC will pay us domestic and foreign commissions as well as direct-to-customer commissions (each, a “Commission” and collectively, “Commissions”) in connection with the sale of products to us or our franchisees.

The domestic Commissions will be paid by FC to us based on each Contract Year (prorated for any partial Contract Year) in a minimum aggregate amount of $50 million over the five-year period subject to certain adjustments provided in the Agreement.

Additionally, pursuant to the Agreement, FC is required to have a minimum amount of equity at its inception, including an amount in asset-based lending credit facilities and in inventory financing from FC’s vendors (collectively, the “Capital”).

If such Capital is not fully funded by October 31, 2025, the Agreement will be null and void with no further obligation between the parties except those stated in the prior and underlying agreements.

The domestic Commissions will be paid by FC to us based on each contract year (prorated for any partial contract year) in a minimum aggregate amount of approximately $50 million over the five-year period subject to certain adjustments provided in the Agreement.

Additionally, pursuant to the Agreement, FC is required to satisfy certain financing conditions (the “Financing Conditions”).

We are in the process of confirming whether all of such Financing Conditions have been met.

Paused offering or selling franchises

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

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

In addition, on April 26, 2024, we received a request for information from the Office of the Attorney General of the State of Maryland related to our compliance with Maryland’s Franchise Registration and Disclosure Law.

As a result of the inquiry, the Company has been unable to offer and sell franchises in Maryland, except in cases where an exemption permitted sales to persons who met specific criteria.

On April 26, 2024, we received a request for information from the Office of the Attorney General of the State of Maryland related to our compliance with Maryland’s Franchise Registration and Disclosure Law.

As a result of the inquiry, we have been unable to offer and sell franchises in Maryland, except in cases where an exemption permitted sales to persons who met specific criteria.

The Maryland matter is ongoing.

The Company is aware of investigations being conducted by the Office of the Attorney General of the State of New York, the Washington Department of Financial Institutions, and the Virginia Division of Securities and Retail Franchising regarding the Company’s compliance with applicable franchise laws.

In March 2025, the 2025 Franchise Disclosure Documents (“FDDs”) were issued for the BFT, Club Pilates, CycleBar, Pure Barre, Rumble, Stretch Lab, and Yoga Six franchise programs.

The franchisors can offer and sell franchises in most states using the 2025 FDDs (except for Rumble and CycleBar due to the divestiture discussed above).

The franchisors continue pursuit of registration of the FDDs in the few remaining states that still require registration and the pause on offering or selling franchises is ongoing in these states.

We are aware of an investigation being conducted by the Office of the Attorney General of the State of New York, and we are in discussions with the Virginia Division of Securities and Retail Franchising, each regarding the Company’s compliance with applicable franchise laws.

Additionally, we previously received notice of an investigation from the State of Washington's Department of Financial Institutions (“DFI”) related to our compliance with Washington state franchise laws.

On August 12, 2025, without admission of wrongdoing, we entered into a consent order with DFI to resolve the matter.

In March 2025, the 2025 Franchise Disclosure Documents (“FDDs”) were issued, and then amended in August 2025, for the BFT, Club Pilates, CycleBar, Pure Barre, Rumble, Stretch Lab, and Yoga Six franchise programs.

The franchisors can offer and sell franchises in all states other than Illinois (in the case of Club Pilates only) and Maryland using the 2025 FDDs (except for Rumble and CycleBar due to the divestiture discussed above).

The inability to sell licenses for an extended period has slowed growth and could result in a reduction in anticipated royalty or franchise revenue, which in turn may materially and adversely affect our business, results of operations, cash flows and financial condition.

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

During the three and six months ended June 30, 2025, we recognized total restructuring charges of $1.5 million, net of gains, and $3.9 million, net of gains, respectively, primarily for contract termination and other associated costs, loss (gain) on lease terminations and sale or disposal of assets, impairment of right-of-use assets and other restructuring charges.

During the three and nine months ended September 30, 2025, we recognized total restructuring charges of $6.3 million, net of gains, and $10.2 million, net of gains, respectively, primarily for contract termination and other associated costs, loss (gain) on lease terminations and sale or disposal of assets, impairment of right-of-use assets and other restructuring charges.

We expect to recognize additional restructuring charges throughout 2025 totaling between approximately $7.3 million to $11.0 million 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.

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While we believe that these metrics are useful in evaluating our business, other companies may not use similar metrics or may not calculate similarly titled metrics in a consistent manner.

All metrics in this “Key Performance Indicators” section are presented on an adjusted basis to reflect historical information of Lindora prior to the acquisition by the Company in January 2024 and on an adjusted basis to remove historical information or both Stride and Row House prior to their divestitures by the Company in February 2024 and May 2024, respectively.

All metrics in this “Key Performance Indicators” section are presented on an adjusted basis to reflect historical information of Lindora prior to the acquisition by the Company in January 2024 and on an adjusted basis to remove historical information of Stride and Row House prior to their divestitures by the Company in February 2024 and May 2024, respectively, CycleBar and Rumble prior to their divestitures by the Company in July 2025, and Lindora prior to its divestiture in September 2025.

Historical information has not been adjusted to reflect the wind down of AKT.

All references to these metrics in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” use this same basis of reporting, unless noted otherwise.

The following table sets forth our key performance indicators for the three and six months ended June 30, 2025 and 2024:

Three Months Ended June 30,

Six months ended June 30,

The following table sets forth our key performance indicators for the three and nine months ended September 30, 2025 and 2024:

Three Months Ended September 30,

Nine months ended September 30,

($ in thousands)

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Same store sales growth

The following tables present additional information related to our studio and license key performance indicators for the three and six months ended June 30, 2025 and 2024 :

Three Months Ended June 30,

The following tables present additional information related to our studio and license key performance indicators for the three and nine months ended September 30, 2025 and 2024:

Three Months Ended September 30,

North America

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Studios obligated to open internationally under MFAs:

June 30, 2025

June 30, 2024

September 30, 2025

September 30, 2024

Gross studios obligated to open under MFAs

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(1) Reflects the number of licenses for studios which have already been sold, but not yet opened, by master franchisees under master franchise agreements, net of terminations.

Six Months Ended June 30,

Nine Months Ended September 30,

North America

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Studios obligated to open internationally under MFAs:

June 30, 2025

June 30, 2024

September 30, 2025

September 30, 2024

Gross studios obligated to open under MFAs

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Licenses sold by master franchisees, net (2)

(1) Reflects the number of development fee payments on future franchise licenses received by us and unused as of period end.

(1) Reflects the number of development fee payments on future franchise licenses received by us and unused under multi-unit agreements as of period end.

The number of development fee payments on future franchise licenses is not included in the franchise licenses sold count.

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Please see the table in the “Same Store Sales” section, sub header “North America studios contributing to same store sales.” The line “studios without 13 months of consecutive sales as of the last month that had positive sales within the period being measured” is an indicator for the number of North America traditional location studios that are older than 13 months, and that have had a recent or current disruption in sales, but that are still included in the number of studios operating count.

For the three and six months ended June 30, 2025, this represented 0.2% of our North America studio base compared to 0.7% for the three and six months ended June 30, 2024.

For the three and nine months ended September 30, 2025, this represented 0.2% and 0.1% of our North America studio base, respectively, compared to 0.6% and 0.5% for the three and nine months ended September 30, 2024, respectively.

While nearly all our franchised studios are licensed to franchisees, from time to time we operate a limited number of company-owned transition studios (typically as we take possession of a studio following a franchisee ceasing to operate it and as we prepare it to be licensed to a new franchisee).

Management reviews the number of studios operating at a given point in time in order to help forecast system-wide sales, franchise revenue and other revenue streams.

The following tables contain information about changes in the number of our North America operating studios for the three and six months ended June 30, 2025 and 2024, respectively:

Three Months Ended June 30,

Six Months Ended June 30,

The following tables contain information about changes in the number of our North America operating studios for the three and nine months ended September 30, 2025 and 2024, respectively:

Three Months Ended September 30,

Nine Months Ended September 30,

North America franchisee-owned studios

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Studios operated at end of period

(1) Includes previously franchised company-owned studios that were converted to franchisee-owned studios in the period.

The following table sets forth the total number of operating studios internationally for the three and six months ended June 30, 2025 and 2024:

Three Months Ended June 30,

Six Months Ended June 30,

Total studios

(1) Includes previously franchised company-owned transition studios that were converted to franchisee-owned studios in the period.

(2) Excludes one company-owned transition studio operated at September 30, 2025 under the Rumble brand, which was divested in the third quarter of 2025.

The following table sets forth the total number of operating studios internationally for the three and nine months ended September 30, 2025 and 2024:

Three Months Ended September 30,

Nine Months Ended September 30,

International studios

Studios operated at beginning of period

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Studios operated at end of period

The following table sets forth the total number of operating studios globally for the three and six months ended June 30, 2025 and 2024:

Three Months Ended June 30,

Six Months Ended June 30,

The following table sets forth the total number of operating studios globally for the three and nine months ended September 30, 2025 and 2024:

Three Months Ended September 30,

Nine Months Ended September 30,

Total studios

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Management reviews the number of licenses sold and the number of licenses contractually obligated to open to help monitor and forecast studio growth, system-wide sales and revenue streams.

As of June 30, 2025, we estimate approximately forty percent of our global license obligations are over 12 months behind the applicable development schedule due to various circumstances and are currently inactive.

As of September 30, 2025, we estimate approximately 40% of our global license obligations are over 12 months behind the applicable development schedule due to various circumstances and are currently inactive.

This delay in development has resulted in delays in studio openings and may also lead to increased terminations, which could have a negative long-term impact on our business and operating results.

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Management reviews AUV to assess studio economics.

The following table reconciles our North America operating studios for the three and six months ended June 30, 2025 and 2024, respectively, to the total studios contributing to both AUV (LTM as of period end) and Quarterly AUV (run rate):

Three Months Ended June 30,

Six Months Ended June 30,

The following table reconciles our North America operating studios for the three and nine months ended September 30, 2025 and 2024, respectively, to the total studios contributing to both AUV (LTM as of period end) and Quarterly AUV (run rate):

Three Months Ended September 30,

Nine Months Ended September 30,

North America studios contributing to AUV (LTM as of period)

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non-traditional studio locations

studios with no sales in the period

Same Store Sales

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Management reviews same store sales to assess the health of the franchised studios.

The following table reconciles our North America operating studios for the three and six months ended June 30, 2025 and 2024, respectively, to the total studios contributing to same store sales:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

North America studios contributing to same store sales

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Results of Operations

The following table presents our condensed consolidated results of operations for the three and six months ended June 30, 2025 and 2024:

Three Months Ended June 30,

Six Months Ended June 30,

The following table presents our condensed consolidated results of operations for the three and nine months ended September 30, 2025 and 2024:

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands)

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Total other expense

Income (loss) before income taxes

Net income (loss)

The following table presents our condensed consolidated results of operations for the three and six months ended June 30, 2025 and 2024 as a percentage of revenue:

Three Months Ended June 30,

Six Months Ended June 30,

Loss before income taxes

The following table presents our condensed consolidated results of operations for the three and nine months ended September 30, 2025 and 2024 as a percentage of revenue:

Three Months Ended September 30,

Nine Months Ended September 30,

(As Corrected)

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Total other expense

Income (loss) before income taxes

Net Income (loss)

Comparison of the three months ended June 30, 2025 and 2024

The following is a discussion of our consolidated results of operations for the three months ended June 30, 2025 versus the three months ended June 30, 2024.

Three Months Ended June 30,

Loss before income taxes

Comparison of the three months ended September 30, 2025 and 2024

The following is a discussion of our consolidated results of operations for the three months ended September 30, 2025 versus the three months ended September 30, 2024.

Three Months Ended September 30,

Change from Prior Year

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Total revenue, net.

Total revenue was $76.2 million in the three months ended June 30, 2025, compared to $76.9 million in the three months ended June 30, 2024, a decrease of $0.7 million, or 1%.

Total revenue was $78.8 million in the three months ended September 30, 2025, compared to $80.5 million in the three months ended September 30, 2024, a decrease of $1.7 million, or 2%.

The decrease in total revenue was primarily due to a decrease in equipment revenue due to a decrease in equipment installations and a decrease in merchandise revenue, partially offset by an increase in franchise revenue and franchise marketing fund revenue.

Franchise revenue.

Franchise revenue was $45.4 million in the three months ended June 30, 2025, compared to $43.0 million in the three months ended June 30, 2024, an increase of $2.3 million, or 5%.

Franchise revenue consisted of franchise royalty fees of $33.7 million, franchise territory fees of $4.4 million, technology fees of $4.4 million and training fees of $2.9 million in the three months ended June 30, 2025, compared to franchise royalty fees of $28.5 million, franchise territory fees of $7.4 million, technology fees of $4.2 million and training fees of $2.9 million in the three months ended June 30, 2024.

The increase in franchise royalty fees and technology fees was primarily due to an increase in number of operating studios globally since June 30, 2024.

The decrease in franchise territory fees is primarily attributed to a decrease of $3.0 million, or 83%, in revenue recognized as a result of franchise agreement terminations year-over-year to $0.6 million in the three months ended June 30, 2025, compared to $3.6 million in the prior year period.

Franchise revenue was $51.9 million in the three months ended September 30, 2025, compared to $44.5 million in the three months ended September 30, 2024, an increase of $7.4 million, or 17%.

Franchise revenue consisted of franchise royalty fees of $31.5 million, franchise territory fees of $13.7 million, technology fees of $3.6 million and training fees of $3.1 million in the three months ended September 30, 2025, compared to franchise royalty fees of $29.7 million, franchise territory fees of $7.5 million, technology fees of $4.3 million and training fees of $3.0 million in the three months ended September 30, 2024.

The increase in franchise royalty fees was primarily due to a higher royalty rate for certain new studios, partially offset by a decrease due to brand divestitures in the current year.

The increase in franchise territory fees is primarily attributed to an increase of $6.6 million, or 182%, in revenue recognized as a result of franchise agreement terminations year-over-year to $9.3 million in the three months ended September 30, 2025, compared to $2.7 million in the prior year period.

Equipment revenue.

Equipment revenue was $9.5 million in the three months ended June 30, 2025, compared to $12.9 million in the three months ended June 30, 2024, a decrease of $3.4 million, or 26%.

Equipment revenue was $7.5 million in the three months ended September 30, 2025, compared to $14.7 million in the three months ended September 30, 2024, a decrease of $7.2 million, or 49%.

Most equipment revenue is recognized in the period when the equipment is installed.

The decrease in equipment revenue was primarily driven by a decrease in global equipment installations in the three months ended June 30, 2025, compared to the prior year period, driven by a decrease in studio openings compared to the prior year period and consistent with the decrease in franchise license sales in recent periods.

The decrease in equipment revenue was primarily due to a decrease in global equipment installations in the three months ended September 30, 2025, compared to the prior year period, driven by a decrease in studio openings compared to the prior year period and consistent with the decrease in franchise license sales in recent periods.

Merchandise revenue.

Merchandise revenue was $5.6 million in the three months ended June 30, 2025, compared to $6.1 million in the three months ended June 30, 2024, a decrease of $0.5 million, or 8%.

Merchandise revenue was $4.8 million in the three months ended September 30, 2025, compared to $6.6 million in the three months ended September 30, 2024, a decrease of $1.8 million, or 27%.

The decrease was primarily due to lower demand from studios and a decrease in vendor rebates compared to the prior period.

Franchise marketing fund revenue.

Franchise marketing fund revenue was $9.5 million in the three months ended June 30, 2025, compared to $8.4 million in the three months ended June 30, 2024, an increase of $1.1 million, or 13%.

The increase was primarily due to an increase in number of operating studios in North America since June 30, 2024.

Franchise marketing fund revenue was $8.8 million in the three months ended September 30, 2025, compared to $8.6 million in the three months ended September 30, 2024, an increase of $0.3 million, or 3%.

The increase was primarily due to an increase in number of operating studios in North America since September 30, 2024.

Other service revenue.

Other service revenue was $6.3 million in the three months ended June 30, 2025, compared to $6.4 million in the three months ended June 30, 2024, a decrease of 3%.

Other service revenue was $5.9 million in the three months ended September 30, 2025, compared to $6.2 million in the three months ended September 30, 2024, a decrease of 6%.

The decrease was primarily due to a $0.4 million decrease in other preferred vendor commission revenue and brand fee revenue.

Operating Costs and Expenses

Three Months Ended June 30,

Three Months Ended September 30,

Change from Prior Year

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Marketing fund expense

Acquisition and transaction income

Acquisition and transaction expense

Total operating costs and expenses

Costs of product revenue.

Costs of product revenue was $10.5 million in the three months ended June 30, 2025, compared to $13.9 million in the three months ended June 30, 2024, a decrease of $3.4 million, or 25%, compared to a decrease in related revenues of 21%.

The decrease in cost of product revenue was partially driven by a decrease in global equipment installations in the three months ended June 30, 2025, compared to the prior year period.

Costs of product revenue as a percentage of related revenue decreased to 69% in the three months ended June 30, 2025, from 73% in the comparable prior year period.

The decrease was partly due to a decrease in write downs of slow-moving inventory in the current year period.

Costs of product revenue was $10.2 million in the three months ended September 30, 2025, compared to $17.3 million in the three months ended September 30, 2024, a decrease of $7.0 million, or 41%, compared to a decrease in related revenues of 42%.

The decrease in cost of product revenue was partially attributable to a decrease in global equipment installations in the three months ended September 30, 2025, compared to the prior year period.

Costs of product revenue as a percentage of related revenue increased to 84% in the three months ended September 30, 2025, from 81% in the comparable prior year period.

The increase was primarily due to an increase in write downs of slow-moving inventory in the current year period.

Costs of franchise and service revenue.

Costs of franchise and service revenue was $4.0 million in the three months ended June 30, 2025, compared to $5.8 million in the three months ended June 30, 2024, a decrease of $1.9 million, or 32%.

The decrease was primarily due to a $2.0 million decrease in franchise sales commissions, consistent with the related franchise territory revenue decrease.

The decrease in cost of franchise and service revenue is also attributed to a decrease of $1.5 million, or 79%, in costs recognized as a result of franchise agreement terminations year-over-year to $0.4 million in the three months ended June 30, 2025, compared to $1.9 million in the prior year period.

Costs of franchise and service revenue was $7.0 million in the three months ended September 30, 2025, compared to $4.9 million in the three months ended September 30, 2024, an increase of $2.2 million, or 45%.

The increase was primarily due to a $2.0 million increase in franchise sales commissions, including a $2.2 million increase in costs recognized as a result of franchise agreement terminations year-over-year.

This increase is consistent with the increase in related franchise territory revenue.

Selling, general and administrative expenses.

Selling, general and administrative expenses were $24.1 million in the three months ended June 30, 2025, compared to $37.0 million in the three months ended June 30, 2024, a decrease of $12.9 million, or 35%.

The decrease was primarily attributable to a decrease in legal expenses of $7.6 million (driven by nonrecurring insurance credits of $15.0 million in the current period) related to various legal matters including government investigations;

Selling, general and administrative expenses were $24.7 million in the three months ended September 30, 2025, compared to $46.2 million in the three months ended September 30, 2024, a decrease of $21.5 million, or 47%.

The decrease was primarily attributable to a decrease in legal expenses of $14.2 million (including nonrecurring insurance credits of $5.0 million in the current period) related to various legal matters including government investigations;

a decrease of $2.6 million in equity-based compensation expense due to an increase in forfeitures over the prior year period;

a decrease in marketing and advertising expenses of $0.9 million;

lower restructuring and related charges of $7.0 million in the current year period;

a decrease in salaries and wages of $0.5 million;

and a net decrease in other variable expenses of $1.4 million.

and an increase in gain on divestitures of brands of $1.5 million;

partially offset by an $0.8 million increase in bad debt expense;

an increase in salaries and wages of $0.7 million;

a $0.7 million increase in loss on guaranty of franchisee third-party loans;

and a net increase in other variable expenses of $1.6 million.

Impairment of goodwill and other noncurrent assets.

Impairment of goodwill and other noncurrent assets was $12.9 million in the three months ended June 30, 2025, compared to $12.1 million in the three months ended June 30, 2024, an increase of $0.8 million.

The increase was due to impairments of goodwill of $5.1 million and $2.3 million related to the BFT and Lindora reporting units, respectively, impairment of trademark of $3.4 million related to the CycleBar reporting unit, and other noncurrent asset impairments of $2.0 million compared to write down of franchise agreements and goodwill of $12.1 million related to the CycleBar reporting unit in the prior year period.

Impairment of goodwill and other noncurrent assets was $17.6 million in the three months ended September 30, 2025, compared to $4.5 million in the three months ended September 30, 2024, an increase of $13.1 million.

The increase was due to $12.7 million impairment of trademark, franchise agreement and deferred video production intangible assets related to the BFT reporting unit and other noncurrent asset impairments of $4.9 million in the current year period, compared to write down of right-of-use assets and intangible assets of $4.5 million related to studio exits in conjunction with our restructuring plan and wind down of AKT franchise operations in the prior year period.

Depreciation and amortization.

Depreciation and amortization expense was $3.0 million in the three months ended June 30, 2025, compared to $4.5 million in the three months ended June 30, 2024, a decrease of $1.5 million, or 34%.

Depreciation and amortization expense was $3.7 million in the three months ended September 30, 2025, compared to $4.2 million in the three months ended September 30, 2024, a decrease of $0.5 million, or 13%.

The decrease was primarily due to a decrease in fixed assets related to impairment of software assets and a decrease in intangible assets due to impairments during the year ended December 31, 2024.

Marketing fund expense.

Marketing fund expense was $8.9 million in the three months ended June 30, 2025, compared to $7.8 million in the three months ended June 30, 2024, an increase of $1.0 million, or 13%.

Marketing fund expense was $9.0 million in the three months ended September 30, 2025, compared to $6.4 million in the three months ended September 30, 2024, an increase of $2.6 million, or 40%.

Marketing fund expenses are recorded as incurred, which may not occur in the same period as the recognition of franchise marketing fund revenue.

For the three months ended June 30, 2025, marketing fund revenue was $0.6 million higher than marketing fund expense, however marketing fund expense is expected to increase in the second half of 2025.

Acquisition and transaction income.

Acquisition and transaction income was $1.9 million in the three months ended June 30, 2025, compared to income of $1.2 million in the three months ended June 30, 2024, a decrease of $0.7 million, or 57%.

For the three months ended September 30, 2025, marketing fund revenue was $0.2 million lower than marketing fund expense.

Acquisition and transaction expense.

Acquisition and transaction expense was $3.1 million in the three months ended September 30, 2025, compared to $3.7 million in the three months ended September 30, 2024, a decrease of $0.6 million, or 16%.

These charges primarily represent the non-cash change in contingent consideration related to 2021 and 2024 business acquisitions.

Other (Income) Expense, net

Three Months Ended June 30,

Three Months Ended September 30,

Change from Prior Year

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Interest income.

Interest income primarily consists of interest on notes receivable and interest income received from various interest-bearing bank accounts, which was $0.7 million in the three months ended June 30, 2025, compared to $0.4 million in the three months ended June 30, 2024.

Interest income primarily consists of interest on notes receivable and interest income received from various interest-bearing bank accounts, which was $1.1 million in the three months ended September 30, 2025, compared to $0.5 million in the three months ended September 30, 2024.

Other income.

Other income consists of royalty payments from franchisees associated with the divested CycleBar and Rumble brands since the divestiture date, which was $1.1 million in the three months ended September 30, 2025, compared to $0 in the three months ended September 30, 2024.

See Note 4 of Notes to Condensed Consolidated Financial Statements for additional information.

Interest expense .

Interest expense was $13.0 million in the three months ended June 30, 2025, compared to $11.3 million in the three months ended June 30, 2024, an increase of $1.7 million, or 15%.

Interest expense was $12.9 million in the three months ended September 30, 2025, compared to $11.8 million in the three months ended September 30, 2024, an increase of $1.1 million, or 9%.

Interest expense consists of interest on long-term debt, accretion of earn-out liabilities and amortization and write off of deferred loan costs and debt discount.

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Other expense.

Other expense consists of TRA expense, which was $0.9 million in the three months ended June 30, 2025, compared to $0.3 million in the three months ended June 30, 2024.

Three Months Ended June 30,

Other expense consists of TRA expense, which was $0.6 million in the three months ended September 30, 2025, compared to $0.1 million in the three months ended September 30, 2024.

Three Months Ended September 30,

Change from Prior Year

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Income taxes (benefit) .

Income taxes was 18.8% of our share of pre-tax book income in the three months ended June 30, 2025, compared to (0.9%) of pre-tax book loss in the three months ended June 30, 2024.

Comparison of the six months ended June 30, 2025 and 2024

The following is a discussion of our consolidated results of operations for the six months ended June 30, 2025 versus the six months ended June 30, 2024.

Six Months Ended June 30,

Income taxes was (4.1%) of our share of pre-tax book income in the three months ended September 30, 2025, compared to (0.7%) of pre-tax book loss in the three months ended September 30, 2024.

Comparison of the nine months ended September 30, 2025 and 2024

The following is a discussion of our consolidated results of operations for the nine months ended September 30, 2025 versus the nine months ended September 30, 2024.

Nine Months Ended September 30,

Change from Prior Year

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Total revenue.

Total revenue was $153.1 million in the six months ended June 30, 2025, compared to $156.6 million in the six months ended June 30, 2024, a decrease of $3.5 million, or 2%.

Total revenue was $231.9 million in the nine months ended September 30, 2025, compared to $237.1 million in the nine months ended September 30, 2024, a decrease of $5.2 million, or 2%.

Franchise revenue.

Franchise revenue was $89.2 million in the six months ended June 30, 2025, compared to $84.8 million in the six months ended June 30, 2024 , an increase of $4.5 million, or 5%.

Franchise revenue consisted of franchise royalty fees of $66.2 million, franchise territory fees of $8.1 million, technology fees of $8.8 million and training fees of $6.1 million in the six months ended June 30, 2025, compared to franchise royalty fees of $56.0 million, franchise territory fees of $14.7 million, technology fees of $8.3 million and training fees of $5.8 million in the six months ended June 30, 2024.

The increase in franchise royalty fees, technology fees and training fees was primarily due to an increase in number of operating studios globally since June 30, 2024 (including studios related to the Lindora acquisition in the first quarter of 2024), partly offset by a decrease in franchise territory fees.

The decrease in franchise territory fees is primarily attributed to a decrease of $5.4 million, or 79%, in revenue recognized as a result of franchise agreement terminations year-over-year to $1.4 million in the six months ended June 30, 2025, compared to $6.8 million in the prior year period.

Franchise revenue was $141.1 million in the nine months ended September 30, 2025, compared to $129.2 million in the nine months ended September 30, 2024 , an increase of $11.9 million, or 9%.

Franchise revenue consisted of franchise royalty fees of $97.7 million, franchise territory fees of $21.8 million, technology fees of $12.5 million and training fees of $9.2 million in the nine months ended September 30, 2025, compared to franchise royalty fees of $85.6 million, franchise territory fees of $22.2 million, technology fees of $12.6 million and training fees of $8.8 million in the nine months ended September 30, 2024.

The increase in franchise royalty fees was primarily due to an increase in the number of operating studios globally since September 30, 2024 (including studios related to the Lindora acquisition in the first quarter of 2024).

The decrease in franchise territory fees is primarily attributed to divestiture of brands in 2024 and 2025, partially offset by an increase of $1.2 million, or 12%, in revenue recognized as a result of franchise agreement terminations year-over-year to $10.7 million in the nine months ended September 30, 2025, compared to $9.5 million in the prior year period.

Equipment revenue.

Equipment revenue was $20.6 million in the six months ended June 30, 2025, compared to $26.8 million in the six months ended June 30, 2024, a decrease of $6.2 million, or 23%.

Equipment revenue was $28.1 million in the nine months ended September 30, 2025, compared to $41.5 million in the nine months ended September 30, 2024, a decrease of $13.4 million, or 32%.

Most equipment revenue is recognized in the period when the equipment is installed.

The decrease in equipment revenue was primarily driven by a decrease in global equipment installations in the six months ended June 30, 2025, compared to the prior year period, driven by a decrease in studio openings compared to the prior year period and consistent with the decrease in franchise license sales in recent periods.

The decrease in equipment revenue was primarily due to by a decrease in global equipment installations in the nine months ended September 30, 2025, compared to the prior year period, driven by a decrease in studio openings compared to the prior year period and consistent with the decrease in franchise license sales in recent periods.

Merchandise revenue.

Merchandise revenue was $11.9 million in the six months ended June 30, 2025 compared to $14.5 million in the six months ended June 30, 2024, a decrease of $2.6 million, or 18%.

Merchandise revenue was $16.7 million in the nine months ended September 30, 2025 compared to $21.1 million in the nine months ended September 30, 2024, a decrease of $4.4 million, or 21%.

The decrease was due primarily to a decrease in demand from studios and a decrease in vendor rebates compared to the prior period.

Franchise marketing fund revenue.

Franchise marketing fund revenue was $18.7 million in the six months ended June 30, 2025, compared to $16.2 million in the six months ended June 30, 2024, an increase of $2.5 million, or 16%.

The increase was primarily due to an increase in number of operating studios in North America since June 30, 2024.

Franchise marketing fund revenue was $27.6 million in the nine months ended September 30, 2025, compared to $24.8 million in the nine months ended September 30, 2024, an increase of $2.8 million, or 11%.

The increase was primarily due to an increase in number of operating studios in North America since September 30, 2024.

Other service revenue.

Other service revenue was $12.6 million in the six months ended June 30, 2025, compared to $14.3 million in the six months ended June 30, 2024, a decrease of $1.7 million, or 12%.

The decrease was primarily due to a $1.2 million decrease in package and memberships revenue due to a lower average number of company-owned transition studios.

Six Months Ended June 30,

Other service revenue was $18.5 million in the nine months ended September 30, 2025, compared to $20.6 million in the nine months ended September 30, 2024, a decrease of $2.1 million, or 10%.

The decrease was primarily due to a $1.6 million decrease in brand fee revenue and a $1.1 million decrease in package and memberships revenue due to a lower average number of company-owned transition studios, partially offset by a $1.1 million increase in other preferred vendor commission revenue.

Operating Costs and Expenses

Nine Months Ended September 30,

Change from Prior Year

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Costs of product revenue.

Costs of product revenue was $22.5 million in the six months ended June 30, 2025, compared to $28.5 million in the six months ended June 30, 2024, a decrease of $6.0 million, or 21%, compared to a decrease in related revenues of 21%.

The decrease in cost of product revenue was primarily driven by a decrease in global equipment installations in the three months ended June 30, 2025, compared to the prior year period.

Costs of product revenue as a percentage of related revenue was 69% in both the six months ended June 30, 2025, and 2024.

Costs of product revenue was $32.7 million in the nine months ended September 30, 2025, compared to $45.8 million in the nine months ended September 30, 2024, a decrease of $13.1 million, or 29%, compared to a decrease in related revenues of 28%.

The decrease in cost of product revenue was partially attributable to a decrease in global equipment installations in the nine months ended September 30, 2025, compared to the prior year period.

Costs of product revenue as a percentage of related revenue was 73% in both the nine months ended September 30, 2025, and 2024.

Costs of franchise and service revenue.

Costs of franchise and service revenue was $8.1 million in the six months ended June 30, 2025, compared to $10.9 million in the six months ended June 30, 2024, a decrease of $2.8 million, or 26%.

The decrease was primarily due to a $3.5 million decrease in franchise sales commissions, consistent with the related franchise territory revenue decrease.

Costs of franchise and service revenue was $15.1 million in the nine months ended September 30, 2025, compared to $15.7 million in the nine months ended September 30, 2024, a decrease of $0.6 million, or 4%.

The decrease was primarily due to a $1.5 million decrease in franchise sales commissions, including a $0.5 million decrease in costs recognized as a result of franchise agreement terminations year-over-year.

This decrease is consistent with the decrease in related franchise territory revenue.

Selling, general and administrative expenses.

Selling, general and administrative expenses were $69.6 million in the six months ended June 30, 2025, compared to $73.6 million in the six months ended June 30, 2024, a decrease of $4.0 million, or 5%.

The decrease was primarily attributable to a decrease in salaries and wages of $0.2 million related to a lower average number of company-owned transition studios;

a decrease in occupancy expenses of $0.5 million primarily related to a decrease in the number of company-owned transition studios;

Selling, general and administrative expenses were $94.3 million in the nine months ended September 30, 2025, compared to $119.8 million in the nine months ended September 30, 2024, a decrease of $25.5 million, or 21%.

The decrease was primarily attributable to a decrease in legal expense of $6.2 million (including nonrecurring insurance credits of $34.8 million in the current period) related to various legal matters;

a decrease in equity-based compensation expense of $4.8 million primarily due to a decrease in the number of equity-classified restricted stock units (“RSUs”) outstanding during the current year period and an increase in forfeitures over the prior year period;

a decrease in marketing and advertising expenses of $2.2 million;

a decrease in studio support expense of $1.1 million;

a net increase in gain on divestiture of brands of $2.7 million;

and lower restructuring and related charges of $15.3 million in the current year period;

partially offset by an increase in legal expenses of $8.0 million (net of nonrecurring insurance credits of $29.8 million in the current period) related to various legal matters;

partially offset by an increase in consulting and accounting services of $1.3 million and $1.1 million, respectively;

a $3.0 million increase in loss on guaranty of franchisee third-party loans;

and a net increase in other variable expenses of $1.4 million.

Impairment of goodwill and other assets.

Impairment of goodwill and other assets was $14.8 million in the six months ended June 30, 2025, compared to $12.1 million in the six months ended June 30, 2024, an increase of $2.8 million, or 23%.

The increase was due to impairments of goodwill of $5.1 million and $2.3 million related to the BFT and Lindora reporting units, respectively, impairment of trademark of $3.4 million related to the CycleBar reporting unit, and other noncurrent asset impairments of $3.9 million compared to write down of franchise agreements and goodwill of $12.1 million related to the CycleBar reporting unit in the prior year period.

Impairment of goodwill and other assets was $32.4 million in the nine months ended September 30, 2025, compared to $16.6 million in the nine months ended September 30, 2024, an increase of $15.8 million, or 95%.

The increase was due to impairments of goodwill of $5.1 million and $2.3 million related to the BFT and Lindora reporting units, respectively, impairment of trademark of $3.4 million related to the CycleBar reporting unit, impairment of trademark, franchise agreement and deferred video production cost intangible assets of $12.7 million related to the BFT reporting unit, and other noncurrent asset impairments of $8.9 million compared to write down of franchise agreement intangible asset and goodwill of $12.1 million related to the CycleBar reporting unit and a write down of right-of-use and other assets of $4.5 million in the prior year period.

Depreciation and amortization.

Depreciation and amortization expense was $5.9 million in the six months ended June 30, 2025, compared to $9.0 million in the six months ended June 30, 2024, a decrease of $3.0 million, or 34%.

Depreciation and amortization expense was $9.6 million in the nine months ended September 30, 2025, compared to $13.2 million in the nine months ended September 30, 2024, a decrease of $3.6 million, or 27%.

The decrease was primarily due to a decrease in fixed assets related to impairment of software assets and a decrease in intangible assets due to impairments during the year ended December 31, 2024.

Marketing fund expense.

Marketing fund expense was $18.2 million in the six months ended June 30, 2025, compared to $14.4 million in the six months ended June 30, 2024, an increase of $3.9 million, or 27% and is consistent with the increase in franchise marketing fund revenue.

Marketing fund expense was $27.2 million in the nine months ended September 30, 2025, compared to $20.8 million in the nine months ended September 30, 2024, an increase of $6.4 million, or 31% and is consistent with the increase in franchise marketing fund revenue.

Marketing fund expenses are recorded as incurred, which may not occur in the same period as the recognition of franchise marketing fund revenue.

For the six months ended June 30, 2025, marketing fund revenue was $0.5 million higher than marketing fund expense, however marketing fund expense is expected to increase in the second half of 2025.

For the nine months ended September 30, 2025, marketing fund revenue was $0.4 million higher than marketing fund expense.

Acquisition and transaction expenses (income).

Acquisition and transaction income was $10.6 million in the six months ended June 30, 2025, compared to expense of $3.3 million in the six months ended June 30, 2024, an increase in income of $13.9 million, or 420%.

These charges primarily represent the non-cash change in contingent consideration related to 2021 and 2024 business acquisitions.

Six Months Ended June 30,

Acquisition and transaction income was $7.5 million in the nine months ended September 30, 2025, compared to expense of $7.0 million in the nine months ended September 30, 2024, an increase in income of $14.4 million, or 207%.

These amounts primarily represent the non-cash change in contingent consideration related to 2021 and 2024 business acquisitions.

Nine Months Ended September 30,

Change from Prior Year

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Interest income primarily consists of interest on notes receivable and interest income received from various

interest-bearing bank accounts, which was $1.3 million in the six months ended June 30, 2025, compared to $0.8 million in the six months ended June 30, 2024.

interest-bearing bank accounts, which was $2.4 million in the nine months ended September 30, 2025, compared to $1.2 million in the nine months ended September 30, 2024.

Other income.

Other income consists of royalty payments from franchisees associated with the divested CycleBar and Rumble brands since the divestiture date, which was $1.1 million in the nine months ended September 30, 2025, compared to $0 in the nine months ended September 30, 2024.

Interest expense .

Interest expense was $24.4 million in the six months ended June 30, 2025, compared to $22.8 million in the six months ended June 30, 2024, an increase of $1.6 million, or 7%.

Interest expense was $37.3 million in the nine months ended September 30, 2025, compared to $34.6 million in the nine months ended September 30, 2024, an increase of $2.6 million, or 8%.

Interest expense consists of interest on long-term debt, accretion of earn-out liabilities and amortization of deferred loan costs and debt discount.

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Other expense.

Other expense consists of TRA expense, which was $2.0 million in the six months ended June 30, 2025, compared to $0.9 million in the six months ended June 30, 2024.

Six Months Ended June 30,

Other expense consists of TRA expense, which was $1.3 million in the nine months ended September 30, 2025, compared to $0.9 million in the nine months ended September 30, 2024.

Nine Months Ended September 30,

Change from Prior Year

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Income taxes .

Income taxes were (154.5%) of pre-tax book income (loss) in the six months ended June 30, 2025, compared to (0.5%) in the six months ended June 30, 2024.

Income taxes were (15.2%) of pre-tax book income (loss) in the nine months ended September 30, 2025, compared to (0.6%) in the nine months ended September 30, 2024.

Non-GAAP Financial Measures

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We define adjusted EBITDA as EBITDA (net income/loss before interest, taxes, depreciation and amortization), adjusted for the impact of certain non-cash and other items that we do not consider in our evaluation of ongoing operating performance.

These items include equity-based compensation and related employer payroll taxes, acquisition and transaction expenses (income) (including change in contingent consideration and transaction bonuses), litigation expenses (consisting of legal and related fees for specific proceedings that arise outside of the ordinary course of our business net of insurance reimbursements), fees for financial transactions, such as secondary public offering expenses for which we do not receive proceeds (including bonuses paid to executives related to completion of such transactions) and other contemplated corporate transactions, expense related to the remeasurement of our TRA obligation, expense related to loss on impairment or write down of goodwill and other noncurrent assets, loss and ongoing expenses related to brand divestitures and wind down (including ongoing expenses directly related to the divested or wound down brands for arrangements that existed prior to divestiture or wind down), transformation initiative costs (primarily consisting of third-party professional consulting fees related to modifications of our business strategy and cost saving initiatives), and restructuring and related charges incurred in connection with our restructuring plan that we do not believe reflect our underlying business performance and affect comparability.

These items include equity-based compensation and related employer payroll taxes, acquisition and transaction expenses (income) (including change in contingent consideration and transaction bonuses), litigation expenses (consisting of legal and related fees for specific proceedings that arise outside of the ordinary course of our business net of insurance reimbursements), fees for financial transactions, such as secondary public offering expenses for which we do not receive proceeds (including bonuses paid to executives related to completion of such transactions) and other contemplated corporate transactions, expense related to the remeasurement of our TRA obligation, expense related to loss on impairment or write down of goodwill and other noncurrent assets, loss and expenses related to brand divestitures and wind down (including expenses directly related to the divested or wound down brands for arrangements that existed prior to divestiture or wind down), transformation initiative costs (primarily consisting of third-party professional consulting fees related to modifications of our business strategy and cost saving initiatives), other income (consisting of royalties received from divested brands), and restructuring and related charges incurred in connection with our restructuring plan that we do not believe reflect our underlying business performance and affect comparability.

For the nine months ended September 30, 2025, loss and expenses due to brand divestitures and wind down (excluding impairments) represents net gain on divestiture of $1.2 million and certain other expenses recorded primarily in connection with brand divestitures and outsourcing of our retail merchandising, including write-off of accounts receivable determined no longer collectable of $1.3 million, write-off of inventory of $2.5 million, loss on franchisee loan guarantees of $0.8 million, severance costs of $0.3 million, and certain other costs of $0.3 million.

EBITDA and adjusted EBITDA are also frequently used by analysts, investors and other interested parties to evaluate companies in our industry.

We believe that adjusted EBITDA, viewed in addition to, and not in lieu of, our reported GAAP results, provides useful information to investors regarding our performance and overall results of operations because it eliminates the impact of other items that we believe reduce the comparability of our underlying core business performance from period to period and is therefore useful to our investors in comparing the core performance of our business from period to period.

The following table presents a reconciliation of net income (loss), the most directly comparable financial measure calculated in accordance with GAAP, to adjusted EBITDA for the three and six months ended June 30, 2025 and 2024:

Three Months Ended June 30,

Six Months Ended June 30,

The following table presents a reconciliation of net loss, the most directly comparable financial measure calculated in accordance with GAAP, to adjusted EBITDA for the three and nine months ended September 30, 2025 and 2024:

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands)

Net income (loss)

Interest expense, net

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Impairment of goodwill and other noncurrent assets

Loss and ongoing expenses due to brand divestitures and wind down (excluding impairments)

Loss and expenses due to brand divestitures and wind down (excluding impairments)

Executive transition costs

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Liquidity and Capital Resources

As of June 30, 2025, we had $21.8 million of cash and cash equivalents, excluding $16.9 million of restricted cash consisting of marketing fund restricted cash of $16.1 million and a standby letter of credit guarantee.

As of September 30, 2025, we had $24.9 million of cash and cash equivalents, excluding $16.6 million of restricted cash consisting of marketing fund restricted cash of $15.9 million and a standby letter of credit guarantee.

We principally require cash to fund day-to-day operations, finance capital investments, service our outstanding debt and address our working capital needs.

Additionally, we require cash to fund the investments in our data warehouse project and other investments to become a data driven company.

Based on our current level of operations and anticipated growth, we believe that our available cash balance and the cash generated from our operations will be adequate to meet our anticipated debt service requirements and obligations under our TRA, capital expenditures, payment of tax distributions and working capital needs for at least the next twelve months beginning July 1, 2025 and beyond such twelve month period based on our current business plans.

Based on our current level of operations, we believe that our available cash balance and the cash generated from our operations will be adequate to meet our anticipated debt service requirements and obligations under our TRA, capital expenditures, payment of tax distributions and working capital needs for at least the next twelve months beginning October 1, 2025 and beyond such twelve month period based on our current business plans.

Our ability to continue to fund these items and continue to reduce debt could be adversely affected by the occurrence of any of the events described under “Risk Factors”, as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024.

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

As of June 30, 2025, we were in compliance with these covenants.

As of September 30, 2025, we were in compliance with these covenants.

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

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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 $1.4 million.

The total principal amount outstanding on the Term Loans, including exit fee, was $377.8 million at June 30, 2025.

On July 24, 2025, we entered into a ninth amendment (the “Ninth Amendment”) to the Credit Agreement in connection with the divestiture of the Rumble and CycleBar brands.

The Ninth Amendment did not modify the terms of the Credit Agreement.

Instead, the Ninth Amendment requires us to apply the net proceeds received from the divestiture of the Rumble and CycleBar brands to repayment of the outstanding loan principal.

The total principal amount outstanding on the Term Loans, including exit fee, was $376.4 million at September 30, 2025.

See Note 8 of Notes to Condensed Consolidated Financial Statements for additional information about our debt.

Material Cash Requirements

At June 30, 2025, there had been no material changes in our cash requirements from known contractual and other obligations as disclosed in Part II, Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations,” of our Annual Report on Form 10-K for the year ended December 31, 2024.

The following table presents summary cash flow information for the six months ended June 30, 2025 and 2024:

Six Months Ended June 30,

At September 30, 2025, there had been no material changes in our cash requirements from known contractual and other obligations as disclosed in Part II, Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations,” of our Annual Report on Form 10-K for the year ended December 31, 2024.

The following table presents summary cash flow information for the nine months ended September 30, 2025 and 2024:

Nine Months Ended September 30,

(in thousands)

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Cash Flows from Operating Activities

In the six months ended June 30, 2025, cash provided by operating activities was $8.3 million, compared to $5.7 million in the six months ended June 30, 2024, an increase in cash provided of $2.7 million.

Of the increase, $6.9 million was due to higher net income after adjustments to reconcile net loss to net cash provided by operating activities and $4.3 million in unfavorable changes in working capital related to accounts receivable, accounts payable, inventories, prepaid expenses and other current assets and other current liabilities, partially offset by favorable changes in working capital related to accrued expenses, deferred revenue, other assets and other liabilities in the six months ended June 30, 2025, compared to the six months ended June 30, 2024.

In the nine months ended September 30, 2025, cash provided by operating activities was $17.6 million, compared to $10.9 million in the nine months ended September 30, 2024, an increase in cash provided of $6.7 million.

Of the increase, $20.9 million was due to higher net income after adjustments to reconcile net loss to net cash provided by operating activities and $37.2 million in unfavorable changes in working capital related to accounts payable, accrued expenses, inventories, prepaid expenses and other current assets, deferred revenue, and other current liabilities, partially offset by $23.0 million in favorable changes in working capital related to accounts receivable, deferred costs, other assets and other liabilities in the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024.

Cash Flows from Investing Activities

In the six months ended June 30, 2025 and 2024, cash used in investing activities was $2.9 million and $11.8 million, respectively.

The change year over year of $8.9 million was primarily attributable to cash used of $8.5 million for acquisition of Lindora in the prior year and the decrease in cash used to purchase property and equipment of $1.0 million in the current year.

In the nine months ended September 30, 2025 and 2024, cash used in investing activities was $2.3 million and $13.9 million, respectively.

The change year over year of $11.6 million was primarily attributable to cash used of $8.5 million for acquisition of Lindora in the prior year and the decrease in cash used to purchase property and equipment of $1.7 million in the current year and cash received of $2.0 million from the divestiture of CycleBar and Rumble brands in the current year.

Cash Flows from Financing Activities

In the six months ended June 30, 2025, cash provided by financing activities was $0.5 million, compared to cash used of $5.0 million in the six months ended June 30, 2024, representing a year over year improvement of $5.5 million.

The increase in cash provided was primarily attributable to net borrowings on long-term debt of $7.2 million in the current year, partially offset by payments of $2.1 million for taxes related to net share settlement of restricted share units.

In the nine months ended September 30, 2025, cash used in financing activities was $6.6 million, compared to cash provided of $3.7 million in the nine months ended September 30, 2024, representing a year over year deterioration of $10.3 million.

The increase in cash used was primarily attributable to net borrowings on long-term debt of $5.8 million in the current year compared to $20.1 million in the prior period year, a decrease in cash used for payments of tax receivable agreement of $2.3 million and a decrease in payments for distributions to Pre-IPO Members of $6.5 million, partially offset by increased payments of $2.3 million for taxes related to net share settlement of restricted share units in the current year.

Off-Balance Sheet Arrangements

As of June 30, 2025, our off-balance sheet arrangements consisted of guarantees of lease agreements for certain franchisees.

As of September 30, 2025, our off-balance sheet arrangements consisted of guarantees of lease agreements for certain franchisees.

Our potential obligation under these agreements is approximately $3.5 million and would only require payment upon default by the primary obligor.

We determined the fair value of these guarantees at inception was not material, and as of June 30, 2025 a $1.2 million accrual has been recorded for our potential obligation under the guaranty arrangements.

We determined the fair value of these guarantees at inception was not material, and as of September 30, 2025 a $1.2 million accrual has been recorded for our potential obligation under the guaranty arrangements.

See Note 16 of Notes to Condensed Consolidated Financial Statements for more information regarding these operating leases and guarantees.

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

The estimated fair value of these guarantees at inception was not material, and as of June 30, 2025, a $0.7 million accrual has been recorded for our potential obligation under this guaranty arrangement.

The estimated fair value of these guarantees at inception was not material, and as of September 30, 2025, a $0.8 million accrual has been recorded for our potential obligation under this guaranty arrangement.

See Note 16 of Notes to Condensed Consolidated Financial Statements for more information.

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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 2. Management’s Discussion and Analysis