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 85.1% 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 85.6% 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 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.

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 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.

Previous 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.

Current wording

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.

Previous 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.

Current wording

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.

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 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.

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. 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.

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 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.

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 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.

Previous 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.

Current wording

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.

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 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.

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 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.

Previous 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.

Current wording

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.

Previous wording

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

Current wording

The following table sets forth our key performance indicators for the three and six months ended June 30, 2026 and 2025:

Previous 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:

Current wording

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:

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 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.

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 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.

Previous 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:

Current wording

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:

Previous wording

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

Current wording

The following table sets forth the total number of operating studios internationally for the three and six months ended June 30, 2026 and 2025:

Previous wording

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

Current wording

The following table sets forth the total number of operating studios globally for the three and six months ended June 30, 2026 and 2025:

Previous 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):

Current wording

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):

Previous 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:

Current wording

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:

Previous wording

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

Current wording

The following table presents our condensed consolidated results of operations for the three and six months ended June 30, 2026 and 2025:

Previous 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:

Current wording

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:

Previous 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.

Current wording

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.

Previous 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.

Current wording

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.

Previous 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.

Current wording

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.

Previous wording

Merchandise revenue. Merchandise revenue was $0.7 million in the three months ended March 31, 2026, compared to $6.3 million in the three months ended March 31, 2025, a decrease of $5.6 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.

Current wording

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.

Previous wording

Franchise marketing fund revenue. Franchise marketing fund revenue was $8.7 million in the three months ended March 31, 2026, compared to $9.3 million in the three months ended March 31, 2025, a decrease of $0.6 million, or 6%. The decrease was primarily due to a decrease in same store sales and the impact of divested brands compared to the prior year period.

Current wording

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.

Previous 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.

Current wording

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.

Previous 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.

Current wording

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.

Previous 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.

Current wording

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.

Previous wording

Impairment of goodwill and other noncurrent assets. Impairment of goodwill and other noncurrent assets was $0.0 million in the three months ended March 31, 2026, compared to $1.9 million in the three months ended March 31, 2025, a decrease of $1.9 million due to impairment of right-of use assets.

Current wording

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.

Previous wording

Marketing fund expense. Marketing fund expense was $11.7 million in the three months ended March 31, 2026, compared to $9.4 million in the three months ended March 31, 2025, an increase of $2.3 million, or 25%. The increase reflected the timing of incremental marketing spend, as the Company front-loaded more investment in the first quarter of 2026 compared with the first 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 March 31, 2026, marketing fund revenue was $3.0 million lower than marketing fund expense.

Current wording

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.

Previous wording

Acquisition and transaction expense (income). Acquisition and transaction income was $3.2 million in the three months ended March 31, 2026, compared to $8.6 million in the three months ended March 31, 2025, a decrease of $5.5 million, or 63%. These charges primarily represent the non-cash change in contingent consideration related to 2021 and 2024 business acquisitions.

Current wording

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.

Previous wording

Interest income. Interest income primarily consists of interest on notes receivable and interest income received from various interest-bearing bank accounts, which was $0.6 million in the three months ended March 31, 2026, compared to $0.6 million in the three months ended March 31, 2025.

Current wording

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.

Previous wording

Interest expense. Interest expense was $14.5 million in the three months ended March 31, 2026, compared to $11.4 million in the three months ended March 31, 2025, an increase of $3.1 million, or 27%. 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.

Current wording

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.

Previous wording

Other expense. Other expense consists of TRA expense, which was $0.0 million in the three months ended March 31, 2026, compared to $1.1 million in the three months ended March 31, 2025. The decrease was due to the absence of TRA expense in the current period. There is no TRA expense, as the Company recorded pretax book loss after discrete items for the three months ended March 31, 2026 , as compared to pretax book income for the three months ended March 31, 2025.

Current wording

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.

Previous wording

Income taxes(benefit). Income taxes was (0.7%) of our share of pre-tax book income in the three months ended March 31, 2026, compared to (22.3%) of pre-tax book loss in the three months ended March 31, 2025.

Current wording

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.

Previous 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.

Current wording

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.

Previous 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.

Current wording

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.

Previous wording

We define adjusted EBITDA as EBITDA (net income/loss before interest, taxes, depreciation and amortization), adjusted for the impact of certain non-cash and other items that we do not consider in our evaluation of ongoing operating performance. These items include equity-based compensation and related employer payroll taxes, acquisition and transaction expenses (income) (including change in contingent consideration and transaction bonuses), litigation expenses (consisting of legal and related fees for specific proceedings that arise outside of the ordinary course of our business net of insurance reimbursements), fees for financial transactions, such as secondary public offering expenses for which we do not receive proceeds (including bonuses paid to executives related to completion of such transactions) and other contemplated corporate transactions, expense related to the remeasurement of our TRA obligation, expense related to loss on impairment or write down of goodwill and other noncurrent assets, loss and expenses related to brand divestitures and wind down (including expenses directly related to the divested or wound down brands for arrangements that existed prior to divestiture or wind down), transformation initiative costs (primarily consisting of third-party professional consulting fees related to modifications of our business strategy and cost saving initiatives), 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 three months ended March 31, 2026, loss and expenses due to brand divestitures and wind down (excluding impairments) primarily represents net expenses of $0.2 million in connection with brand divestitures and outsourcing of our retail merchandising and loss on franchisee loan guarantees of $0.8 million related to divested brands. EBITDA and adjusted EBITDA are also frequently used by analysts, investors and other interested parties to evaluate companies in our industry.

Current wording

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.

Previous wording

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 months ended March 31, 2026 and 2025:

Current wording

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:

Previous wording

As of March 31, 2026, we had $12.2 million of cash and cash equivalents, excluding $9.3 million of restricted cash consisting of marketing fund restricted cash of $8.5 million and a standby letter of credit guarantee.

Current wording

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.

Previous wording

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 $1.3 million during the three months ended March 31, 2026.

Current wording

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.