Xponential Fitness, Inc.

Previous wording

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 71.9% ownership interest in XPO LLC through its ownership interest in Xponential Intermediate Holdings, LLC (“XPO Holdings”).

Current wording

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 85.1% ownership interest in XPO LLC through its ownership interest in Xponential Intermediate Holdings, LLC (“XPO Holdings”).

Previous wording

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 September 30, 2025. 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.

Current wording

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 28 additional countries as of March 31, 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.

Previous wording

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 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.

Current wording

As of March 31, 2026, 2,629 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 789 additional studios under existing franchise agreements. In addition, as of March 31, 2026, we had 508 studios open internationally and our master franchisees were contractually obligated to sell licenses to franchisees to open an additional 750 new studios, of which master franchisees have sold 182 licenses for studios not yet opened as of March 31, 2026.

Previous wording

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. We operate in one segment for financial reporting purposes.

Current wording

During the three months ended March 31, 2026 and 2025, we generated revenue outside the United States of $2.2 million and $2.6 million, respectively. As of March 31, 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.

Previous wording

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.

Current wording

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. We expect to 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.

Previous wording

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, 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.

Current wording

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.

Previous wording

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”). 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 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.

Current wording

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.

Previous wording

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 approximately $50 million over the five-year period subject to certain adjustments provided in the Agreement.

Current wording

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 recognizes revenue on the Commissions in the period in which the Commissions are earned, the consideration is deemed collectible, and the variability is resolved. 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.

Previous wording

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. 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.

Current wording

Additionally, we previously received notice of investigation from the State of Washington's Department of Financial Institutions (“DFI”), the Virginia Division of Securities and Retail Franchising (“VDSRF”), and the Office of the Attorney General of the State of New York (“NYAG”) related to our compliance with relevant state franchise laws. On August 12, 2025, without admission of wrongdoing, we entered into a consent order with DFI to resolve the matter. Similarly, on February 12, 2026, without admission of wrongdoing, the Company signed a settlement order with VDSRF to resolve the matter, which the VDSRF will be countersigning shortly. The NYAG matter is ongoing.

Previous wording

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.

Current wording

In April 2026, we issued 2026 FDDs for the BFT, Club Pilates, Pure Barre, Stretch Lab, and Yoga Six franchise programs. 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, subject to any applicable waiting periods. 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.

Previous wording

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 is expected to continue throughout 2025; however, the ultimate timing of the completion of our restructuring plan will depend on lease termination negotiations. 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 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.

Current wording

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 months ended March 31, 2026 and 2025, we recognized total restructuring charges of $1.1 million, net of gains, and $2.4 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.

Previous wording

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. 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 2025.

Current wording

We expect to recognize additional restructuring charges throughout 2026 totaling between approximately $9.2 million to $12.9 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 March 31, 2026, there were seven leases held by us related to divested brands that account for $5.6 million of our total lease liabilities.

Previous wording

International and domestic expansion. We continue to invest in increasing the number of franchisees outside of North America. 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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

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

Current wording

The following table sets forth our key performance indicators for the three months ended March 31, 2026 and 2025:

Previous wording

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:

Current wording

The following tables present additional information related to our studio and license key performance indicators for the three months ended March 31, 2026 and 2025:

Previous wording

System-wide sales represent gross sales by all studios in North America. 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.

Current wording

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.

Previous wording

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 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 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.

Current wording

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 months ended March 31, 2026, this represented 0.2% of our North America studio base, respectively, compared to 0.2% for the three months ended March 31, 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.

Previous wording

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:

Current wording

The following tables contain information about changes in the number of our North America operating studios for the three months ended March 31, 2026 and 2025. respectively:

Previous wording

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

Current wording

The following table sets forth the total number of operating studios internationally for the three months ended March 31, 2026 and 2025:

Previous wording

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

Current wording

The following table sets forth the total number of operating studios globally for the three months ended March 31, 2026 and 2025:

Previous wording

Non-traditional studio locations refers to studios that are not operated as standalone studio locations. There are currently 20 non-traditional studio locations globally, which are comprised of studios operated inside of other fitness facilities and on cruise ships.

Current wording

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.

Previous wording

The number of licenses sold in North America and globally reflect the cumulative number of licenses sold by us (or, outside of North America, 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.

Current wording

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.

Previous wording

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.

Current wording

As of March 31, 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.

Previous wording

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 North America 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.

Current wording

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.

Previous wording

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 North America 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:

Current wording

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:

Previous wording

AUV (LTM as of period end) consists of the average sales for the trailing 12 calendar months for all traditional studio locations in North America 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.

Current wording

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.

Previous wording

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):

Current wording

The following table reconciles our North America Region operating studios for the three months ended March 31, 2026 and 2025, respectively, to the total studios contributing to both AUV (LTM as of period end) and Quarterly AUV (run rate):

Previous wording

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 North America. 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.

Current wording

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.

Previous wording

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 same store sales:

Current wording

The following table reconciles our North America Region operating studios for the three months ended March 31, 2026 and 2025, respectively, to the total studios contributing to same store sales:

Previous wording

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

Current wording

The following table presents our condensed consolidated results of operations for the three months ended March 31, 2026 and 2025:

Previous wording

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:

Current wording

The following table presents our condensed consolidated results of operations for the three months ended March 31, 2026 and 2025 as a percentage of revenue:

Previous wording

Total revenue, net. 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.

Current wording

Total revenue, net. Total revenue was $60.7 million in the three months ended March 31, 2026, compared to $76.9 million in the three months ended March 31, 2025, a decrease of $16.2 million, or 21%. The decrease in total revenue was primarily due to lower equipment revenue due to a decrease in equipment installations and lower merchandise revenue.

Previous wording

Franchise revenue. 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.

Current wording

Franchise revenue. Franchise revenue was $41.2 million in the three months ended March 31, 2026, compared to $43.9 million in the three months ended March 31, 2025, an decrease of $2.7 million, or 6%. Franchise revenue consisted of franchise royalty fees of $31.9 million, franchise territory fees of $3.3 million, technology fees of $3.3 million and training fees of $2.7 million in the three months ended March 31, 2026, compared to franchise royalty fees of $32.5 million, franchise territory fees of $3.9 million, technology fees of $4.4 million and training fees of $3.1 million in the three months ended March 31, 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 decrease in franchise territory fees is primarily attributed to divestiture of brands in 2025, coupled with a decrease of $0.4 million, or 48%, in revenue recognized as a result of franchise agreement terminations year-over-year to $0.4 million in the three months ended March 31, 2026, compared to $0.8 million in the prior year period.

Previous wording

Equipment revenue. 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 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.

Current wording

Equipment revenue. Equipment revenue was $4.4 million in the three months ended March 31, 2026, compared to $11.1 million in the three months ended March 31, 2025, a decrease of $6.8 million, or 61%. 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 March 31, 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.

Previous wording

Other service revenue. 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.

Current wording

Other service revenue. Other service revenue was $5.8 million in the three months ended March 31, 2026, compared to $6.4 million in the three months ended March 31, 2025, a decrease of $0.5 million, or 8%. The decrease was primarily due to a $0.3 million decrease in vendor commission and brand access fee revenues and less than $0.1 million decrease in package and memberships revenue.

Previous wording

Costs of product revenue. 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.

Current wording

Costs of product revenue. Costs of product revenue was $3.6 million in the three months ended March 31, 2026, compared to $12.0 million in the three months ended March 31, 2025, a decrease of $8.3 million, or 70%, compared to a decrease in related revenues of 71%. The decrease in cost of product revenue was primarily driven by a reduction in global equipment installations and strategic shift to outsource retail merchandise inventory during the three months ended March 31, 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 March 31, 2026, from 69% in the comparable prior year period.

Previous wording

Costs of franchise and service revenue. 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.

Current wording

Costs of franchise and service revenue. Costs of franchise and service revenue was $3.3 million in the three months ended March 31, 2026, compared to $4.1 million in the three months ended March 31, 2025, a decrease of $0.8 million, or 20%. The decrease was primarily due to a $0.3 million decrease in franchise sales commissions and a $0.3 million decrease in costs related to brand access fee revenue. This decrease is consistent with the decrease in related franchise territory revenue.

Previous wording

Selling, general and administrative expenses. 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; lower restructuring and related charges of $7.0 million in the current year period; 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.

Current wording

Selling, general and administrative expenses. Selling, general and administrative expenses were $30.0 million in the three months ended March 31, 2026, compared to $45.5 million in the three months ended March 31, 2025, a decrease of $15.5 million, or 34%. The decrease was primarily attributable to a decrease in legal expenses of $12.3 million (including nonrecurring insurance credits of $2.2 million in the current period) related to various legal matters including government investigations; a decrease in salaries and wages of $1.7 million; a decrease of $1.3 million in equity-based compensation expense due to an increase in forfeitures over the prior year period; $0.1 million decrease in bad debt expense and a net decrease in other variable expenses of $1.0 million; partially offset by a $0.4 million increase in loss on guaranty of franchisee third-party loans and higher restructuring and related charges of $0.5 million in the current year period.

Previous wording

Depreciation and amortization. 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.

Current wording

Depreciation and amortization. Depreciation and amortization expense was $2.3 million in the three months ended March 31, 2026, compared to $3.0 million in the three months ended March 31, 2025, a decrease of $0.7 million, or 24%. 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.