Xponential Fitness, Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements reflect, among other things, our current expectations and anticipated results of operations, all of which are subject to known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements, market trends, or industry results to differ materially from those expressed or implied by such forward-looking statements. Therefore, any statements contained herein that are not statements of historical fact may be forward-looking statements and should be evaluated as such. Without limiting the foregoing, the words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “should,” “would,” “could,” “will,” “likely” and the negative thereof and similar words and expressions are intended to identify forward-looking statements. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes thereto and the other financial information included elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2025. 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, 2025. Overview Xponential Fitness LLC (“XPO LLC”), the principal operating subsidiary of Xponential Fitness, Inc. (“XPO Inc.”), and together with its subsidiaries, (the “Company” or “we,” “us,” and “our”), is one of the leading global franchisors of boutique health and wellness brands. Pursuant to a reorganization into a holding company structure, the Company is a holding company with its principal asset being a 85.6% ownership interest in XPO LLC through its ownership interest in Xponential Intermediate Holdings, LLC (“XPO Holdings”). 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 the North America Region and internationally, with franchise, master franchise and international expansion agreements in 49 U.S. states, Puerto Rico and 29 additional countries as of June 30, 2026. The Company's portfolio of brands includes Club Pilates, the largest Pilates brand in the United States; StretchLab, a concept offering one-on-one and group stretching services; YogaSix, the largest franchised yoga brand in the United States; 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; and BFT, a functional training and strength-based program. As of June 30, 2026, 2,645 studios were open in the North America Region (consists of Canada, the United States and U.S. Territories) and franchisees were contractually committed to open 694 additional studios under existing franchise agreements. In addition, as of June 30, 2026, we had 520 studios open internationally and our master franchisees were contractually obligated to sell licenses to franchisees to open an additional 739 new studios, of which master franchisees have sold 198 licenses for studios not yet opened as of June 30, 2026. During the six months ended June 30, 2026 and 2025, we generated revenue outside the United States of $4.9 million and $5.3 million, respectively. As of June 30, 2026 and December 31, 2025, we did not have material assets located outside of the United States. No franchisee accounted for more than 10% of our revenue. We operate in one segment for financial reporting purposes. 34 Recent Developments 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 litigation, pre-litigation, and disputes as of the closing of the divestiture. Under the terms of the agreement, we are entitled to receive consideration of up to $6.0 million based on 7% of the monthly cash-basis gross revenue of the legacy studio locations. Based on current information and operating results of the legacy studio locations, the Company currently expects to receive consideration lower than the contractual maximum amount. 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 received total consideration of $7.0 million, consisting of $2.0 million received in the three months ended September 30, 2025, and a $5.0 million promissory note. From the divestiture date through full repayment of the note, we also received franchise royalty payments from CycleBar and Rumble brands. During the quarter ended December 31, 2025, we received total consideration of $4.7 million in cash and retained royalties of $0.4 million, which was applied against the promissory note, resulting in the note being paid in full. 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. Retail supply agreement On July 3, 2025, we and Fit Commerce, a California Corporation (“FC”), entered into a Retail Supply Agreement (the “Agreement”) which became effective as of December 1, 2025 (the “Effective Date”). 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 purchased $4.5 million of our existing retail inventory on the Effective Date of the Agreement. This strategic initiative shifted 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 aggregate amount of approximately $50.0 million over the five-year period subject to certain adjustments provided in the Agreement, which includes an element of variability in the consideration to which we are entitled. We recognize revenue on the Commissions in the period in which the Commissions are earned, the consideration is deemed collectible, which may include timing of the collections. We record revenue related to the commissions within other service revenues on the condensed consolidated statements of operations. On November 10, 2025, the Company entered into an amendment to the Agreement, pursuant to which certain non-material modifications were made to the provisions governing the purchase of the Company's existing retail inventory. Selling franchises In April 2026, we issued 2026 FDDs for the BFT, Club Pilates, Pure Barre, Stretch Lab, and Yoga Six franchise programs and amended them in June 2026. The franchisors can offer and sell franchises in most states using the 2026 FDDs and continue pursuit of registration of the FDDs from the few remaining states that still require registration. In the remaining states that require registration of the FDDs, we will continue to pause all sales until registration is obtained from the relevant regulatory agencies, except in cases where an exemption permits sales to persons who meet specific criteria. Sales will resume promptly following such approvals registration, subject to any applicable waiting periods. Registration may be further delayed by subsequent amendments to FDDs. Any inability to sell licenses for an extended period can result in 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. 35 Restructuring Plan In the third quarter of 2023, we began a restructuring plan that involves exiting company-owned transition studios and other measures designed to reduce costs to achieve our long-term margin goals and focus on pure franchise operations. The plan was approved and initiated in the third quarter of 2023 and was expected to conclude in 2025; however, the ultimate timing of the completion of our restructuring plan will depend on lease termination negotiations, which is expected to continue throughout 2026. During the fourth quarter of 2023, our 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 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, 2026, we recognized total restructuring charges of $0.2 million, net of gains, and $1.3 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 2026 totaling between approximately $8.2 million to $11.7 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. We are considering subleases or negotiating lease terminations for operating leases for certain studios for which we have 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 negotiations. Cash outflows related to these lease terminations are expected to be incurred throughout 2026. As of June 30, 2026, there were six leases held by us related to divested brands that account for $3.9 million of our total lease liabilities. Once completed, we estimate annualized savings of approximately $13.5 million to $15.5 million as a result of the restructuring plan. However, we may not be able to fully realize the cost savings and benefits initially anticipated from the restructuring plan, as we may not be able to reach agreement with contractual counterparties or the charges may be greater than expected. Any reduction in the amount of annualized savings we expect to achieve would negatively impact our business. See Note 15 of Notes to Condensed Consolidated Financial Statements for additional information. Factors Affecting Our Results of Operations In addition to the impact of the risks described under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025, we believe that the most significant factors affecting our results of operations include: • Licensing new qualified franchisees, selling additional licenses to existing franchisees and opening studios. Our growth depends upon our ability to successfully license new studios to new and existing franchisees. We believe our success in attracting new franchisees and expanding our relationships with our existing franchisees has resulted from our diverse offering of attractive brands, corporate level support, training provided to franchisees and the opportunity to realize attractive returns on their invested capital. We also believe our significant investments in centralized systems and infrastructure help support new and existing franchisees. To continue to attract qualified new franchisees, sell additional studios to existing franchisees and assist franchisees in opening their studios, we plan to continue to invest in our brands to enable them to deliver positive consumer experiences and in our integrated services at the brand level to support franchisees. • Timing of studio openings. Our revenue growth depends to a significant extent on the number of studios that are open and operating. Many factors affect whether a new studio will be opened on time, if at all, including the availability and cost of financing, selection and availability of suitable studio locations, delays in hiring personnel as well as any delays in equipment delivery or installation. To the extent franchisees are unable to open new studios on the timeline we anticipate, or at all, we will not realize the revenue growth that we expect. We believe our investments in centralized systems and infrastructure, including real estate site selection, studio build-out and design assistance help enable franchisees to open studios in a timely manner, and we plan to continue to invest in our systems to continue to provide assistance during the opening process. 36 • Increasing same store sales. Our long-term revenue prospects are driven in part by franchisees’ ability to increase same store sales (discussed below). Several factors affect our same store sales in any given period, including the number of stores that have been in operation for a significant period of time, growth in total memberships and marketing and promotional efforts. We expect to continue to seek to grow same store sales and Average Unit Volumes (“AUVs”) by helping franchisees acquire new members, increase studio utilization and drive increased spend from consumers. We also intend to expand ancillary revenue streams, such as our digital platform offerings and retail merchandise. • International and domestic expansion. We continue to invest in increasing the number of franchisees outside of the North America Region. We have developed strong relationships and executed committed development contracts with master franchisees to propel our international growth. We plan to continue to invest in these relationships and seek new relationships and opportunities, including through acquisitions and partnerships, in countries that we have targeted for expansion. In the U.S., we may from time to time consider acquisition of and partnership with certain complimentary assets or businesses that can enhance and expand our brands and operations. • Demand and competition for consumer income . Our revenue and future success will depend in part on the attractiveness of our brands and the services provided by franchisees relative to other fitness and entertainment options available to consumers. Our franchisees’ AUVs are dependent upon the performance of studios and may be impacted by reduced capacity as a result of various factors, including shifting consumer demand and behavior for fitness services. Macroeconomic factors such as inflation and recession, and economic factors affecting a particular geographic territory, may also increase competition for discretionary income, impact the returns generated by franchisees and therefore impact our operating results. Key Performance Indicators In addition to our financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”), we regularly review the following key metrics to measure performance, identify trends, formulate financial projections, compensate our employees, and monitor our business. 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 remove historical information of 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, 2026 and 2025: Three Months Ended June 30, Six months ended June 30, 2026 2025 2026 2025 ($ in thousands) ($ in thousands) System-wide sales $ 437,255 $ 438,209 $ 874,170 $ 867,268 Number of new studio openings globally, gross 67 79 133 185 Number of studios operating globally (cumulative total as of period end) 3,165 3,020 3,165 3,020 Number of licenses sold globally (cumulative total as of period end) 5,452 5,269 5,452 5,269 Number of licenses contractually obligated to open internationally (cumulative total as of period end) 739 729 739 729 AUV (LTM as of period end) $ 681 $ 701 $ 681 $ 701 Quarterly AUV (run rate) $ 659 $ 686 $ 659 $ 686 Same store sales growth (7 %) 2 % (6 %) 4 % 37 The following tables present additional information related to our studio and license key performance indicators for the three and six months ended June 30, 2026 and 2025: Three Months Ended June 30, 2026 2025 North America Region International Global North America International Global Total operating studios: Studios operating at beginning of period 2,629 508 3,137 2,504 467 2,971 New studio openings, net (3) 16 12 28 34 15 49 Studios operating at end of period 2,645 520 3,165 2,538 482 3,020 Franchise licenses sold: Franchise licenses sold (total beginning of period) 4,455 944 5,399 4,376 836 5,212 New franchise license sales 10 43 53 18 39 57 Franchise licenses sold (total end of period) 4,465 987 5,452 4,394 875 5,269 Development fee payments on future franchise licenses: Development fee payments on future franchise licenses (total end of period) (1) 106 — 106 10 — 10 Studios obligated to open internationally under Master Franchise Agreements ("MFAs"): June 30, 2026 June 30, 2025 Gross studios obligated to open under MFAs 1,259 1,195 Less: studios opened under MFAs 520 466 Remaining studios obligated to open under MFAs 739 729 Licenses sold by master franchisees, net (2) 198 205 Six Months Ended June 30, 2026 2025 North America Region International Global North America International Global Total operating studios: Studios operating at beginning of period 2,606 491 3,097 2,446 450 2,896 New studio openings, net (3) 39 29 68 92 32 124 Studios operating at end of period 2,645 520 3,165 2,538 482 3,020 Franchise licenses sold: Franchise licenses sold (total beginning of period) 4,443 928 5,371 4,376 816 5,192 New franchise license sales 22 59 81 18 59 77 Franchise licenses sold (total end of period) 4,465 987 5,452 4,394 875 5,269 Development fee payments on future franchise licenses: — Development fee payments on future franchise licenses (total end of period) (1) 179 — 179 10 — 10 Studios obligated to open internationally under Master Franchise Agreements ("MFAs"): June 30, 2026 June 30, 2025 Gross studios obligated to open under MFAs 1,259 1,195 Less: studios opened under MFAs 520 466 Remaining studios obligated to open under MFAs 739 729 Licenses sold by master franchisees, net (2) 198 205 (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. 38 (2) 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. (3) Reflects the new studio openings, net of terminations. System-Wide Sales System-wide sales represent gross sales by all studios in the North America Region. System-wide sales includes sales by franchisees that are not revenue realized by us in accordance with GAAP. While we do not record sales by franchisees as revenue, and such sales are not included in our consolidated financial statements, this operating metric relates to our revenue because we receive approximately 7% and 2% of the sales by franchisees as royalty revenue and marketing fund revenue, respectively. We believe that this operating measure aids in understanding how we derive our royalty revenue and marketing fund revenue and is important in evaluating our performance. System-wide sales growth is driven by new studio openings and increases in same store sales. Management reviews system-wide sales weekly, which enables us to assess changes in our franchise revenue, overall studio performance, the health of our brands and the strength of our market position relative to competitors. New Studio Openings The number of new studio openings reflects the number of studios opened during a particular reporting period. We consider a new studio to be open once the studio begins offering classes. Opening new studios is an important part of our growth strategy. New studios may not generate material revenue in the early period following an opening and their revenue may not follow historical patterns. Management reviews the number of new studio openings in order to help forecast operating results and to monitor studio opening processes. Studios No Longer Operating A studio is considered no longer operating and excluded from the total number of studios operating if (a) the Company has reason to believe, after reasonable inquiry, that the studio is permanently closed, with no plans for re-opening or relocation, or (b) it has no sales for nine consecutive months or more, whichever comes first. If a studio deemed to be no longer operating subsequently generates sales at a future date, it re-enters the operating studio count (and the number of studios no longer operating is reduced). Studios classified as no longer operating are deemed permanently closed. Furthermore, studios no longer operating also includes de-branded studios (studios that exit our franchise system and continue to operate independently under non-Xponential branding). Number of Studios Operating In addition to the number of new studios opened and studios no longer operating during a period, we track the number of total studios operating at the end of a reporting period. This number represents studios that have already opened, are generating revenue, and are regularly holding classes, though this number could include some number of studios that have temporarily suspended operations, but that are not permanently closed and have not yet met the definition for a studio no longer operating. The number of studios that have temporarily suspended operations is an immaterial percentage of our total studio base. 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 the North America Region 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, 2026, this represented 0.1% and 0.1% of our North America studio base, respectively, compared to 0.3% and 0.2% for the three and six months ended June 30, 2025, respectively. While all our franchised studios are licensed to franchisees, we operate a company-owned transition studio under the Rumble brand, which was divested in the third quarter of 2025 (the table below excludes this studio). Typically, when we take possession of a studio following a franchisee ceasing to operate it 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. 39 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, 2026 and 2025. respectively: Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 North America Region franchisee-owned studios Studios operated at beginning of period 2,629 2,504 2,606 2,446 New studio openings 47 59 90 144 Studios no longer operating (31 ) (25 ) (51 ) (52 ) Studios operated at end of period 2,645 2,538 2,645 2,538 The following table sets forth the total number of operating studios internationally for the three and six months ended June 30, 2026 and 2025: Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 International studios Studios operated at beginning of period 508 467 491 450 New studio openings 20 20 43 41 Studios no longer operating (8 ) (5 ) (14 ) (9 ) Studios operated at end of period 520 482 520 482 The following table sets forth the total number of operating studios globally for the three and six months ended June 30, 2026 and 2025: Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 Total studios Studios operated at beginning of period 3,137 2,971 3,097 2,896 New studio openings 67 79 133 185 Studios no longer operating (39 ) (30 ) (65 ) (61 ) Studios operated at end of period 3,165 3,020 3,165 3,020 Non-Traditional Studio Locations Non-traditional studio locations refers to studios that are not operated as standalone studio locations. There are currently 2 non-traditional studio locations globally, which are comprised of studios operated inside of other fitness facilities and on cruise ships. Licenses Sold The number of licenses sold in the North America Region and globally reflect the cumulative number of licenses sold by us (or, outside of the North America Region, by or to our master franchisees), since inception through the date indicated. The number of licenses sold is not reduced by terminations. The number of licenses sold does not generally include license renewals or licenses issued in connection with a change in ownership of operating studios. Licenses contractually obligated to open refer to licenses sold net of opened studios and terminations. Licenses contractually obligated to be sold internationally reflect the number of licenses that master franchisees are contractually obligated to sell to franchisees to open internationally that have not yet opened as of the date indicated. The number of licenses contractually obligated to open is a useful indicator of the number of studios that may open in the future, although it is not certain that these studios will open. 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, 2026, we estimate approximately 35% 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. 40 Development fee payments on future franchise licenses As part of a multi-unit agreement, franchisees purchase an initial franchise license and make nonrefundable development fee payments to reserve the right to open additional studios. The number of development fee payments on future franchise licenses sold in the North America Region reflect the number of development fee payments received by us and unused as of period end. The number of development fee payments on future franchise licenses is not included in the licenses sold count. The remaining balance of the franchise license fee for each additional studio is due upon site selection for the studio and signing of a franchise agreement by the franchisee. The number of development fee payments on future franchise licenses is a useful indicator of the number of additional licenses that may be sold in the future, although it is not certain that these development fee payments will result in a sold license. Management reviews the number of development fee payments on future franchise licenses to help monitor and forecast license sales and studio growth. Average Unit Volume AUV is calculated by dividing sales during the applicable period for all studios contributing to AUV by the number of studios contributing to AUV. All traditional studio locations in the North America Region are included in the AUV calculation, as long as they meet certain time since opening and sales criteria (as defined immediately below). In particular, AUV (LTM as of period end) and Quarterly AUV (run rate) are calculated as follows: • AUV (LTM as of period end) consists of the average sales for the trailing 12 calendar months for all traditional studio locations in the North America Region that opened at least 13 calendar months ago as of the measurement date and that have generated positive sales for each of the last 13 calendar months as of the measurement date. • Quarterly AUV (run rate) consists of average quarterly sales for all traditional studio locations in North America that had opened at least six calendar months ago as of the beginning of the respective quarter, and that have non-zero sales in the respective quarter (including nominal or negative sales figures; the only figures excluded are exact $0 amounts in the quarter), multiplied by four. We measure sales for AUV based solely upon monthly sales as derived through the designated point-of-sale system. AUV is impacted by changes in same store sales, studio openings and studio closures. Management reviews AUV to assess studio economics. The following table reconciles our North America Region operating studios for the three and six months ended June 30, 2026 and 2025, 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, 2026 2025 2026 2025 North America Region studios contributing to AUV (LTM as of period) Operating studios (end of period) 2,645 2,538 2,645 2,538 Studios no longer operating but generated sales in the period 10 6 10 6 Less: studios less than 13 months old (217 ) (337 ) (217 ) (337 ) Less: non-traditional studio locations (2 ) (4 ) (2 ) (4 ) Less: studios without 13 months of consecutive sales as of measurement date (4 ) (8 ) (4 ) (8 ) Total 2,432 2,195 2,432 2,195 North America Region studios contributing to Quarterly AUV (run rate) Operating studios (end of period) 2,645 2,538 2,645 2,538 Studios no longer operating but generated sales in the period 35 40 35 40 Less: studios less than 6 months old (140 ) (222 ) (140 ) (222 ) Less: non-traditional studio locations (2 ) (4 ) (2 ) (4 ) Less: studios with no sales in the period — (1 ) — (1 ) Total 2,538 2,351 2,538 2,351 41 Same Store Sales Same store sales refer to period-over-period sales comparisons for the base of studios. We define the same store sales to include monthly sales for any traditional studio location in the North America region. If the studio has generated at least 13 months of consecutive positive sales and opened at least 13 calendar months ago as of any month within the measurement period, the respective comparable months will be included. We measure same store sales based solely upon monthly sales as derived through the designated point-of-sale system. This measure highlights the performance of existing studios, while excluding the impact of new studio openings. Management reviews same store sales to assess the health of the franchised studios. The following table reconciles our North America Region operating studios for the three and six months ended June 30, 2026 and 2025, respectively, to the total studios contributing to same store sales: Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 North America Region studios contributing to same store sales Operating studios (end of period) 2,645 2,538 2,645 2,538 Studios no longer operating but generated sales in the period 28 16 48 48 Less: studios less than 13 months old (217 ) (337 ) (217 ) (337 ) Less: non-traditional studio locations (2 ) (4 ) (2 ) (4 ) Less: studios without 13 months of consecutive sales as of the last month that had positive sales within the period being measured (3 ) (7 ) (3 ) (5 ) Total 2,451 2,206 2,471 2,240 42 Results of Operations The following table presents our condensed consolidated results of operations for the three and six months ended June 30, 2026 and 2025: Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 (in thousands) Revenue, net: Franchise revenue $ 43,991 $ 45,353 $ 85,145 $ 89,247 Equipment revenue 7,058 9,509 11,409 20,613 Merchandise revenue 542 5,613 1,195 11,868 Franchise marketing fund revenue 8,733 9,461 17,445 18,730 Other service revenue 5,644 6,272 11,488 12,633 Total revenue, net 65,968 76,208 126,682 153,091 Operating costs and expenses: Costs of product revenue 5,579 10,505 9,209 22,477 Costs of franchise and service revenue 4,198 3,955 7,460 8,052 Selling, general and administrative expenses 32,033 24,084 62,073 69,629 Impairment of goodwill and other noncurrent assets — 12,928 — 14,843 Depreciation and amortization 1,765 2,973 4,017 5,929 Marketing fund expense 11,440 8,855 23,114 18,212 Acquisition and transaction expense (income) 1,439 (1,915 ) (1,748 ) (10,553 ) Total operating costs and expenses 56,454 61,385 104,125 128,589 Operating income 9,514 14,823 22,557 24,502 Other expense (income): Interest income (668 ) (701 ) (1,305 ) (1,320 ) Interest expense 14,948 12,975 29,442 24,363 Tax receivable agreement expense — 891 — 1,975 Total other expense 14,280 13,165 28,137 25,018 Income (loss) before income taxes (4,766 ) 1,658 (5,580 ) (516 ) Income taxes 65 312 71 797 Net income (loss) $ (4,831 ) $ 1,346 $ (5,651 ) $ (1,313 ) 43 The following table presents our condensed consolidated results of operations for the three and six months ended June 30, 2026 and 2025 as a percentage of revenue: Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 Revenue, net: Franchise revenue 67 % 60 % 67 % 58 % Equipment revenue 11 % 12 % 9 % 13 % Merchandise revenue 1 % 7 % 1 % 8 % Franchise marketing fund revenue 13 % 12 % 14 % 13 % Other service revenue 8 % 9 % 9 % 8 % Total revenue, net 100 % 100 % 100 % 100 % Operating costs and expenses: Costs of product revenue 8 % 14 % 7 % 15 % Costs of franchise and service revenue 6 % 5 % 6 % 5 % Selling, general and administrative expenses 49 % 32 % 49 % 45 % Impairment of goodwill and other noncurrent assets — % 17 % — % 10 % Depreciation and amortization 3 % 4 % 3 % 4 % Marketing fund expense 17 % 12 % 18 % 12 % Acquisition and transaction expense (income) 2 % (3 )% (1 )% (7 )% Total operating costs and expenses 86 % 81 % 82 % 84 % Operating income (loss) 14 % 19 % 18 % 16 % Other expense (income): Interest income (1 )% (1 )% (1 )% (1 )% Interest expense 23 % 17 % 23 % 16 % Tax receivable agreement expense — % 1 % — % 1 % Total other expense 22 % 17 % 22 % 16 % Income (loss) before income taxes (8 )% 2 % (4 )% — % Income taxes — % — % — % 1 % Net income (loss) (8 )% 2 % (4 )% 1 % Comparison of the three months ended June 30, 2026 and 2025 The following is a discussion of our consolidated results of operations for the three months ended June 30, 2026 versus the three months ended June 30, 2025. Revenue Three Months Ended June 30, Change from Prior Year 2026 2025 $ % ($ in thousands) Franchise revenue $ 43,991 $ 45,353 $ (1,362 ) (3.0 )% Equipment revenue 7,058 9,509 (2,451 ) (25.8 )% Merchandise revenue 542 5,613 (5,071 ) (90.3 )% Franchise marketing fund revenue 8,733 9,461 (728 ) (7.7 )% Other service revenue 5,644 6,272 (628 ) (10.0 )% Total revenue, net $ 65,968 $ 76,208 $ (10,240 ) (13.4 )% Total revenue, net. Total revenue was $66.0 million in the three months ended June 30, 2026, compared to $76.2 million in the three months ended June 30, 2025, a decrease of $10.2 million, or 13%. The decrease in total revenue was primarily due to lower merchandise revenue and lower equipment revenue related to a decrease in equipment installations. 44 Franchise revenue. Franchise revenue was $44.0 million in the three months ended June 30, 2026, compared to $45.4 million in the three months ended June 30, 2025, a decrease of $1.4 million, or 3%. Franchise revenue consisted of franchise royalty fees of $32.0 million, franchise territory fees of $6.2 million, technology fees of $3.3 million and training fees of $2.5 million in the three months ended June 30, 2026, compared to 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. The decrease in franchise royalty fees was primarily due to a decrease in same store sales coupled with a decrease due to brand divestitures in 2025. The increase in franchise territory fees is primarily attributed to an increase of $2.0 million in revenue recognized as a result of franchise agreement terminations year-over-year to $2.6 million in the three months ended June 30, 2026, compared to $0.6 million in the prior year period. Equipment revenue. Equipment revenue was $7.1 million in the three months ended June 30, 2026, compared to $9.5 million in the three months ended June 30, 2025, a decrease of $2.5 million, or 26%. Most equipment revenue is recognized in the period when the equipment is installed. The decrease in equipment revenue was primarily due to a decrease in global equipment installations in the three months ended June 30, 2026, 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 $0.5 million in the three months ended June 30, 2026, compared to $5.6 million in the three months ended June 30, 2025, a decrease of $5.1 million, or 90%. The decrease in merchandise revenue was primarily due to the change in strategy to outsource our retail merchandise inventory and lower overall demand from studios compared to the prior period. Franchise marketing fund revenue. Franchise marketing fund revenue was $8.7 million in the three months ended June 30, 2026, compared to $9.5 million in the three months ended June 30, 2025, a decrease of $0.7 million, or 8%. The decrease was primarily due to a decrease in same store sales and the impact of divested brands compared to the prior year period. Other service revenue. Other service revenue was $5.6 million in the three months ended June 30, 2026, compared to $6.3 million in the three months ended June 30, 2025, a decrease of $0.6 million, or 10%. The decrease was primarily due to a $0.4 million decrease in vendor commission and brand access fee revenues and $0.1 million decrease in package and memberships revenue. Operating Costs and Expenses Three Months Ended June 30, Change from Prior Year 2026 2025 $ % ($ in thousands) Costs of product revenue $ 5,579 $ 10,505 $ (4,926 ) (46.9 )% Costs of franchise and service revenue 4,198 3,955 243 6.1 % Selling, general and administrative expenses 32,033 24,084 7,949 33.0 % Impairment of goodwill and other noncurrent assets — 12,928 (12,928 ) (100.0 )% Depreciation and amortization 1,765 2,973 (1,208 ) (40.6 )% Marketing fund expense 11,440 8,855 2,585 29.2 % Acquisition and transaction expense (income) 1,439 (1,915 ) 3,354 (175.1 )% Total operating costs and expenses $ 56,454 $ 61,385 $ (4,931 ) (8.0 )% Costs of product revenue. Costs of product revenue was $5.6 million in the three months ended June 30, 2026, compared to $10.5 million in the three months ended June 30, 2025, a decrease of $4.9 million, or 47%, compared to a decrease in related revenues of 50%. The decrease in cost of product revenue was primarily driven by strategic shift to outsource retail merchandise inventory and a reduction in global equipment installations during the three months ended June 30, 2026, compared to the prior year period. Costs of product revenue as a percentage of related revenue increased to 73% in the three months ended June 30, 2026, from 69% in the comparable prior year period. Costs of franchise and service revenue. Costs of franchise and service revenue were $4.2 million in the three months ended June 30, 2026, compared to $4.0 million in the three months ended June 30, 2025, an increase of $0.2 million, or 6%. The increase was primarily due to a $0.8 million increase in franchise sales commissions partially offset by a $0.5 million decrease in costs related to technology fee revenue and other revenue, consistent with the related revenue decrease. The overall increase is consistent with the increase in related franchise territory revenue. 45 Selling, general and administrative expenses. Selling, general and administrative expenses were $32.0 million in the three months ended June 30, 2026, compared to $24.1 million in the three months ended June 30, 2025, an increase of $7.9 million, or 33%. The increase was primarily attributable to an increase in legal expenses of $5.7 million related to various legal matters including government investigations; an increase of $2.8 million in professional services and financial transaction fees, decrease in contingent consideration receivable of $3.7 million related to Lindora divestiture and an increase in marketing and advertising expenses of $1.1 million. The overall increase in selling, general and administrative expenses was partially offset by a decrease in salaries and wages of $1.4 million due to a reduction in headcount; a decrease of $1.0 million in equity-based compensation expense due to an increase in forfeitures over the prior year period; $0.9 million decrease in bad debt expense, lower restructuring and related charges of $1.1 million in the current year period, a decrease in other variable expenses of $0.5 million and a $0.5 million decrease in loss on guaranty of franchisee third-party loans. Impairment of goodwill and other noncurrent assets. Impairment of goodwill and other noncurrent assets was $0.0 million in the three months ended June 30, 2026, compared to $12.9 million in the three months ended June 30, 2025, a decrease of $12.9 million 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. Depreciation and amortization. Depreciation and amortization expense was $1.8 million in the three months ended June 30, 2026, compared to $3.0 million in the three months ended June 30, 2025, a decrease of $1.2 million, or 41%. The decrease was primarily due to a decrease in intangible assets related to impairment during the three months ended June 30, 2025. Marketing fund expense. Marketing fund expense was $11.4 million in the three months ended June 30, 2026, compared to $8.9 million in the three months ended June 30, 2025, an increase of $2.6 million, or 29%. The increase reflected the timing of incremental marketing spend, as the Company front-loaded more investment in the second quarter of 2026 compared with the second quarter of 2025. 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, 2026, marketing fund revenue was $2.7 million lower than marketing fund expense. Acquisition and transaction expense (income). Acquisition and transaction expense was $1.4 million in the three months ended June 30, 2026, compared to $1.9 million income in the three months ended June 30, 2025, a decrease of $3.4 million, or 175%. 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, Change from Prior Year 2026 2025 $ % ($ in thousands) Interest income $ (668 ) $ (701 ) $ 33 (4.7 )% Interest expense 14,948 12,975 1,973 15.2 % Tax receivable agreement expense — 891 (891 ) (100.0 )% Total other expense, net $ 14,280 $ 13,165 $ 1,115 8.5 % 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, 2026, compared to $0.7 million in the three months ended June 30, 2025. Interest expense . Interest expense was $14.9 million in the three months ended June 30, 2026, compared to $13.0 million in the three months ended June 30, 2025, an increase of $2.0 million, or 15%. 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. The increase was primarily due to higher average debt balances in the current year period, partly offset by lower average interest rates on our credit agreement. Other expense. Other expense consists of TRA expense, which was $0.0 million in the three months ended June 30, 2026, compared to $0.9 million in the three months ended June 30, 2025. The decrease was due to the absence of TRA expense in the current period. There is no TRA expense, as the Company recorded a pretax book loss after discrete items for the three months ended June 30, 2026 , as compared to pretax book income for the three months ended June 30, 2025. 46 Income Taxes Three Months Ended June 30, Change from Prior Year 2026 2025 $ % ($ in thousands) Income taxes $ 65 $ 312 $ (247 ) (79.2 )% Income taxes (benefit ) . Income taxes was (1.4%) of our share of pre-tax book loss in the three months ended June 30, 2026, compared to 18.8% of pre-tax book loss in the three months ended June 30, 2025. The decrease in income tax expense was primarily driven by pre-tax book loss after discrete items in the current period as compared to pre-tax book income after discrete items in the prior period. Comparison of the six months ended June 30, 2026 and 2025 The following is a discussion of our consolidated results of operations for the six months ended June 30, 2026 versus the six months ended June 30, 2025. Six Months Ended June 30, Change from Prior Year 2026 2025 $ % ($ in thousands) Franchise revenue $ 85,145 $ 89,247 $ (4,102 ) (4.6 )% Equipment revenue 11,409 20,613 (9,204 ) (44.7 )% Merchandise revenue 1,195 11,868 (10,673 ) (89.9 )% Franchise marketing fund revenue 17,445 18,730 (1,285 ) (6.9 )% Other service revenue 11,488 12,633 (1,145 ) (9.1 )% Total revenue, net $ 126,682 $ 153,091 $ (26,409 ) (17.3 )% Total revenue. Total revenue was $126.7 million in the six months ended June 30, 2026, compared to $153.1 million in the six months ended June 30, 2025, a decrease of $26.4 million, or 17%. 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. Franchise revenue. Franchise revenue was $85.1 million in the six months ended June 30, 2026, compared to $89.2 million in the six months ended June 30, 2025, a decrease of $4.1 million, or 5%. Franchise revenue consisted of franchise royalty fees of $63.9 million, franchise territory fees of $9.4 million, technology fees of $6.6 million and training fees of $5.2 million in the six months ended June 30, 2026, compared to 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. The decrease in franchise royalty fees was primarily due to a decrease in same store sales coupled with a decrease due to brand divestitures in 2025. The increase in franchise territory fees is primarily attributed to an increase of $1.6 million in revenue recognized as a result of franchise agreement terminations year-over-year to $3.0 million in the six months ended June 30, 2026, compared to $1.4 million in the prior year period. Equipment revenue. Equipment revenue was $11.4 million in the six months ended June 30, 2026, compared to $20.6 million in the six months ended June 30, 2025, a decrease of $9.2 million, or 45%. 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, 2026, 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 $1.2 million in the six months ended June 30, 2026, compared to $11.9 million in the six months ended June 30, 2025, a decrease of $10.7 million, or 90%. The decrease in merchandise revenue was primarily due to the change in strategy to outsource our retail merchandise inventory and lower overall demand from studios compared to the prior period. Franchise marketing fund revenue. Franchise marketing fund revenue was $17.4 million in the six months ended June 30, 2026, compared to $18.7 million in the six months ended June 30, 2025, a decrease of $1.3 million, or 7%. The decrease was primarily due to a decrease in same store sales and the impact of divested brands compared to the prior year period. 47 Other service revenue. Other service revenue was $11.5 million in the six months ended June 30, 2026, compared to $12.6 million in the six months ended June 30, 2025, a decrease of $1.1 million, or 9%. The decrease was primarily due to a $1.0 million decrease in vendor commission and brand access fee revenues. Six Months Ended June 30, Change from Prior Year 2026 2025 $ % ($ in thousands) Costs of product revenue $ 9,209 $ 22,477 $ (13,268 ) (59.0 )% Costs of franchise and service revenue 7,460 8,052 (592 ) (7.4 )% Selling, general and administrative expenses 62,073 69,629 (7,556 ) (10.9 )% Impairment of goodwill and other assets — 14,843 (14,843 ) (100.0 )% Depreciation and amortization 4,017 5,929 (1,912 ) (32.2 )% Marketing fund expense 23,114 18,212 4,902 26.9 % Acquisition and transaction income (1,748 ) (10,553 ) 8,805 (83.4 )% Total operating costs and expenses $ 104,125 $ 128,589 $ (24,464 ) (19.0 )% Costs of product revenue. Costs of product revenue was $9.2 million in the six months ended June 30, 2026, compared to $22.5 million in the six months ended June 30, 2025, a decrease of $13.3 million, or 59%, compared to a decrease in related revenues of 73%. The decrease in cost of product revenue was primarily driven by a strategic shift to outsource retail merchandise inventory and a decrease in global equipment installations in the six months ended June 30, 2026, compared to the prior year period. Costs of product revenue as a percentage of related revenue increased to 73% in the six months ended June 30, 2026 from 69% in the comparable prior year period. Costs of franchise and service revenue. Costs of franchise and service revenue were $7.5 million in the six months ended June 30, 2026, compared to $8.1 million in the six months ended June 30, 2025, a decrease of $0.6 million, or 7%. The decrease was primarily due to a $0.5 million decrease in franchise sales commissions, consistent with the related franchise territory revenue decrease. Selling, general and administrative expenses. Selling, general and administrative expenses were $62.1 million in the six months ended June 30, 2026, compared to $69.6 million in the six months ended June 30, 2025, a decrease of $7.6 million, or 11%. The decrease was primarily attributable to a decrease in salaries and wages of $3.0 million due to a reduction in headcount, a decrease in legal expenses of $6.6 million (including nonrecurring insurance credits of $2.2 million in the current period) related to various legal matters including government investigations; a decrease of $2.3 million in equity-based compensation expense due to higher forfeitures in the prior year period; $1.1 million decrease in bad debt expense, lower restructuring and related charges of $0.6 million in the current year period, a $0.6 million decrease in loss on guaranty of franchisee third-party loans and a decrease in other variable expenses of $0.8 million. The decrease in selling, general and administrative expenses was partially offset by an increase of $2.5 million in professional services and financial transaction fees, decrease in contingent consideration receivable of $3.7 million related to Lindora divestiture and an increase in marketing and advertising expenses of $1.2 million. Impairment of goodwill and other assets. Impairment of goodwill and other assets was $0.0 million in the six months ended June 30, 2026, compared to $14.8 million in the six months ended June 30, 2025, a decrease of $14.8 million, or 100%. The decrease 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 in the prior year. Depreciation and amortization. Depreciation and amortization expense was $4.0 million in the six months ended June 30, 2026, compared to $5.9 million in the six months ended June 30, 2025, a decrease of $1.9 million, or 32%. 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, 2025. Marketing fund expense. Marketing fund expense was $23.1 million in the six months ended June 30, 2026, compared to $18.2 million in the six months ended June 30, 2025, an increase of $4.9 million, or 27%. The increase reflected the timing of incremental marketing spend, as the Company front-loaded more investment in the six months ended June 30, 2026 compared with the prior year. 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, 2026, marketing fund revenue was $5.7 million lower than marketing fund expense. 48 Acquisition and transaction expenses (income). Acquisition and transaction income was $1.7 million in the six months ended June 30, 2026, compared to income of $10.6 million in the six months ended June 30, 2025, a decrease in income of $8.8 million, or 83%. These charges primarily represent the non-cash change in contingent consideration related to 2021 and 2024 business acquisitions. Six Months Ended June 30, Change from Prior Year 2026 2025 $ % ($ in thousands) Interest income $ (1,305 ) $ (1,320 ) $ 15 (1.1 )% Interest expense 29,442 24,363 5,079 20.8 % Tax receivable agreement expense — 1,975 (1,975 ) (100.0 )% Total other expense, net $ 28,137 $ 25,018 $ 3,119 12.5 % Interest income. 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, 2026, compared to $1.3 million in the six months ended June 30, 2025. Interest expense . Interest expense was $29.4 million in the six months ended June 30, 2026, compared to $24.4 million in the six months ended June 30, 2025, an increase of $5.1 million, or 21%. Interest expense consists of interest on long-term debt, accretion of earn-out liabilities and amortization of deferred loan costs and debt discount. The increase was primarily due to higher average debt balances in the current year period, partly offset by lower average interest rates on our credit agreement. Other expense. Other expense consists of TRA expense, which was $0.0 million in the six months ended June 30, 2026, compared to $2.0 million in the six months ended June 30, 2025. Six Months Ended June 30, Change from Prior Year 2026 2025 $ % ($ in thousands) Income taxes $ 71 $ 797 $ (726 ) (91.1 )% Income taxes . Income taxes were -1.3% of pre-tax book loss in the six months ended June 30, 2026, compared to -154.5% in the six months ended June 30, 2025. The decrease in income tax expense was primarily driven by pre-tax book loss after discrete items in the current period as compared to pre-tax book income after discrete items in the prior period. Non-GAAP Financial Measures In addition to our results determined in accordance with GAAP, we believe the following non-GAAP measures are useful in evaluating our operating performance. We use the following non-GAAP financial information to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that non-GAAP financial information, when taken collectively, is helpful to investors because it provides consistency and comparability with past financial performance. In addition, our management uses non-GAAP measures to compare our performance relative to forecasts and to benchmark our performance externally against competitors. However, non-GAAP financial information is presented for supplemental informational purposes only, has limitations as an analytical tool, and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. In addition, other companies, including companies in our industry, may calculate and present similarly titled non-GAAP measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measure as tools for comparison. A reconciliation is provided below for the non-GAAP financial measures to the most directly comparable financial measures stated in accordance with GAAP. Investors are encouraged to review the related GAAP financial measures and the reconciliation of the non-GAAP financial measures to their most directly comparable GAAP financial measures and not rely on any single financial measure to evaluate our business. We believe that the non-GAAP financial measures presented below, when taken together with the corresponding GAAP financial measures, provide meaningful supplemental information regarding our performance by excluding certain items that may not be indicative of our business, results of operations or outlook. 49 Adjusted EBITDA 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), 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 (including costs related to strategic alternatives and other contemplated corporate transactions), expense related to the remeasurement of our TRA obligation, expense related to loss on impairment of goodwill and other noncurrent assets, loss and expenses related to brand divestitures (including expenses directly related to the divested brands for arrangements that existed prior to divestiture), executive transition costs (consisting of executive recruiting costs and other related costs), 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. For the six months ended June 30, 2026, loss and expenses due to brand divestitures (excluding impairments) primarily represents net expenses of $0.5 million in connection with brand divestitures and outsourcing of our retail merchandising, loss on franchisee loan guarantees of $0.8 million related to divested brands and decrease in contingent consideration receivable related to Lindora of $3.7 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 loss, the most directly comparable financial measure calculated in accordance with GAAP, to adjusted EBITDA for the three and six months ended June 30, 2026 and 2025: Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 (in thousands) Net income (loss) $ (4,831 ) $ 1,346 $ (5,651 ) $ (1,313 ) Interest expense, net 14,280 12,274 28,137 23,043 Income taxes 65 312 71 797 Depreciation and amortization 1,765 2,973 4,017 5,929 EBITDA 11,279 16,905 26,574 28,456 Equity-based compensation 1,703 2,666 3,687 5,947 Employer payroll taxes related to equity-based compensation 28 144 72 259 Acquisition and transaction expense (income) 1,439 (1,915 ) (1,748 ) (10,553 ) Litigation expenses (benefit) 791 (4,921 ) 4,831 11,268 Financial transaction fees and related expenses 1,592 139 1,781 442 TRA remeasurement — 891 — 1,975 Impairment of goodwill and other noncurrent assets — 12,928 — 14,843 Loss and expenses due to brand divestitures (excluding impairments) 4,004 — 4,964 81 Executive transition costs 931 — 931 — Transformation initiative costs — — — 889 Restructuring and related charges (excluding impairments) 168 1,263 1,256 1,818 Adjusted EBITDA $ 21,935 $ 28,100 $ 42,348 $ 55,425 50 Liquidity and Capital Resources As of June 30, 2026, we had $18.2 million of cash and cash equivalents, excluding $6.8 million of restricted cash consisting of marketing fund restricted cash of $6.0 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, 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 August 7, 2026 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, 2025. There can be no assurance, however, that our business will generate sufficient cash flows from operations or that future borrowings will be available under our credit facility or otherwise to enable us to service our indebtedness, including our credit facility, or to make anticipated capital expenditures. Our future operating performance and our ability to service, extend or refinance the credit facility will be subject to future economic conditions and to financial, business and other factors, many of which are beyond our control. Credit Facility On December 8, 2025 (the “Closing Date”), we entered into a Financing Agreement with HPS Investment Partners LLC, as administrative agent and collateral agent, and the lenders party thereto (the “Credit Agreement”), which consisted of a term loan facility in a principal amount of $525 million (the “ Closing Date Term Loans”) and a revolving credit facility in a principal amount of $25 million (the “Revolving Loans”). Our obligations under the Credit Agreement are jointly and severally guaranteed by XPO Holdings and certain subsidiaries of XPO Holdings (collectively, the “Guarantors”, and together with the us, the “Loan Parties”) and are secured by a first priority lien on substantially all of our assets, subject to customary exceptions. The net proceeds from the Credit Agreement was used (i) to repay all outstanding indebtedness under the prior credit agreement, (ii) to repurchase all outstanding shares of the redeemable convertible preferred stock and (iii) to pay the Transaction Expenses (as defined in the Credit Agreement). The proceeds of the Revolving Loans will be used by the Company for working capital and general corporate purposes. The Credit Agreement contains various conditions to borrowing and certain customary affirmative and negative covenants, including, without limitation, covenants that restrict our ability to incur debt, grant liens, make investments, make restricted payments and dispose of assets. The Credit Agreement includes a financial covenant requiring us to maintain a Total Net Leverage Ratio (as discussed further in the Credit Agreement) not to exceed a certain threshold (pursuant to the table as set forth in Section 7.12 of the Credit Agreement) as of the last day of each Test Period (as defined in the Credit Agreement) commencing with March 31, 2026. The Credit Agreement also contains customary events of default. The Closing Date Term Loans and the Revolving Loans will both mature five years after the Closing Date. As of June 30, 2026 the Company was in compliance with these covenants. Commencing with the fiscal quarter ending March 31, 2026, and subject to customary adjustments, we will be required to repay (a) on the last Business Day (as defined in the Credit Agreement) of each March, June, September and December (each a “Principal Payment Date”), an aggregate principal amount equal to (i) 0.25% of the aggregate principal amount of all Closing Date Term Loans outstanding on the Closing Date, in respect of the first four Principal Payment Dates (commencing March 31, 2026), (ii) 0.75% of the aggregate principal amount of all Closing Date Term Loans outstanding on the Closing Date, in respect of the next four Principal Payment Dates (i.e., commencing on March 31, 2027) and (iii) 1.25% of the aggregate principal amount of all Closing Date Term Loans outstanding on the Closing Date, in respect of each Principal Payment Date thereafter (i.e., commencing on March 31, 2028). The amount of the quarterly principal payments pursuant to the Credit Agreement was $2.6 million during the six months ended June 30, 2026. The total principal amount outstanding on the Closing Date Term Loans was $522.4 million at June 30, 2026. See Note 7 of Notes to Consolidated Financial Statements for additional information about our debt. Material Cash Requirements At June 30, 2026, 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, 2025. 51 Cash Flows The following table presents summary cash flow information for the six months ended June 30, 2026 and 2025: Six Months Ended June 30, 2026 2025 (in thousands) Net cash provided by (used in) operating activities $ (25,727 ) $ 8,341 Net cash provided by (used in) investing activities (1,209 ) (2,860 ) Net cash provided by (used in) financing activities 6,061 459 Net increase (decrease) in cash, cash equivalents and restricted cash $ (20,875 ) $ 5,940 Cash Flows from Operating Activities In the six months ended June 30, 2026, cash used in operating activities was $25.7 million, compared to cash provided by operating activities of $8.3 million in the six months ended June 30, 2025, a decrease in cash provided of $34.1 million. Of the change, $16.3 million was due to decrease in earnings after adjustments to reconcile net loss to net cash provided by (used in) operating activities and $43.7 million in unfavorable changes in working capital related to inventories, operating lease liabilities, accounts payable, other assets and accrued expenses, offset by $26.0 million in favorable changes in working capital related to accounts receivable, prepaid expenses and other current assets, deferred costs, other current liabilities, deferred revenue and other liabilities in the six months ended June 30, 2026, compared to the six months ended June 30, 2025. Cash Flows from Investing Activities In the six months ended June 30, 2026 and 2025, cash used in investing activities was $1.2 million and $2.9 million, respectively. The change year over year of $1.7 million was primarily attributable to decrease in cash used to purchase property and equipment of $1.3 million in the current year. Cash Flows from Financing Activities In the six months ended June 30, 2026, cash provided by financing activities was $6.1 million, compared to cash provided of $0.5 million in the six months ended June 30, 2025, representing a year over year change of $5.6 million. The increase in cash provided was primarily attributable to cash used for payments of preferred stock dividend of $3.8 million in the prior year. In addition, in the current period compared to the prior period, cash provided increased due to lower payments for distributions to Pre-IPO Members of $0.3 million and lower payments for taxes related to net share settlement of restricted share units of $0.9 million. Off-Balance Sheet Arrangements As of June 30, 2026, our off-balance sheet arrangements consisted of guarantees of lease agreements for certain franchisees. Our potential obligation under these agreements is approximately $4.6 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, 2026 no accrual has been recorded for our potential obligation under the guaranty arrangements. See Note 14 of Notes to Condensed Consolidated Financial Statements for more information regarding these operating leases and guarantees. In July 2022, we entered into an agreement with a third-party financing company, who provides loans to our qualified franchisees, pursuant to which we serve as guarantor for such loans. In addition, we issued a $0.8 million standby letter of credit in connection therewith, which represents a portion of our 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. 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, 2026, a $2.0 million accrual has been recorded for our potential obligation under this guaranty arrangement. See Note 14 of Notes to Condensed Consolidated Financial Statements for more information. Critical Accounting Policies and Estimates There have been no significant changes to our critical accounting policies and estimates from the information provided in Part II, Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations,” included in our Annual Report on Form 10-K for the year ended December 31, 2025. 52