Quick Pitch: Xponential Fitness (XPOF)

Strategic review: 50% upside (at $6.88)

This is one of those “good asset, bad company” setups. The bad company is Xponential Fitness, a boutique fitness studio franchisor. It has really managed to check off an impressive list of various red and yellow flags: regulatory scrutiny, litigations with franchisees, related party transactions, operational resets, financial restatements, frequent management turnover, and massive leverage with interest payments consuming most of its cash flows. On top of that, growth has also stalled lately.

Normally, I would not touch this company with a ten-foot pole. However, two activists (Voss Capital and Kanen Wealth Management) have made a compelling case that there is a high-quality asset within XPOF that could be worth more than the company’s entire EV. They’ve already managed to push the company into launching a strategic review. If that process results in a sale on terms close to what the activists are suggesting, the upside could exceed 50%. The activists have real skin in the game, and already own a 17% combined. Management owns another 24% and founder/ex-CEO further 16%, so the interests seem to be aligned.

Xponential Fitness operates five fitness studio brands, with 3,097 franchised locations. The crown jewel is Club Pilates, which accounts for roughly half of total locations and 65% of system-wide sales. Club Pilates is the absolute leader in the Pilates niche in the US, and is seven times larger than the next closest competitor. It generated over $1.1bn in system-wide sales last year, from which XPOF earns an 8% very high-margin royalty, plus additional revenue from merchandise, equipment, and rebates.

Club Pilates’ studio count has been growing at a steady 20% CAGR and has more than doubled its footprint since 2021. Growth visibility is fairly strong. The sold license backlog (meaning licenses sold but studios not yet open) stands at roughly 930, and management expects a large portion of these to convert into open studios. Two days ago, Club Pilates announced its largest franchise agreement to date with Riser Fitness (an existing franchisee with 110 studios), which committed to open another 127 studios over five years.

The disclosures on unit economics of pilates studios are limited, but the available signals suggest they are working well for franchisees. Demand remains strong, and new studios appear to ramp up quickly. Management indicates that new locations can reach full capacity or maturity (a level of $1m in annual sales) in roughly one year, which is much faster than the typical multi-year timeline for an average fitness franchise. The insiders of the company also view Club Pilates as an attractive franchise. The chairman personally operates 152 Club Pilates studios through an affiliated vehicle. That footprint has grown from 78 in 2023, and he retains the rights to develop another 73 locations (however, it is not clear if the terms are the same as for other franchisees).

At a quick glance, Club Pilates really seems like a valuable franchise. However, the rest of the XPOF portfolio is underperforming, the debt is very expensive (11% rate, costing $55m/year), and the overheads are bloated at $50-$60m against $105m of EBITDA. Adding the governance and litigation overhang, the whole thing just too hard to fix. The activist Voss Capital argues that Club Pilates has been trapped inside XPOF’s broader dysfunction and that the only path to unlock its full value is a sale process that results in monetizing the franchise.

The legal and operational overhangs, while now finally resolving, have created narrative scar tissue that is difficult to rehabilitate in the public markets. […] A private owner — strategic or financial — could invest through the current SSS softness at Club Pilates with a longer time horizon, rationalize the corporate cost structure, finance Club Pilates as a standalone brand, and capture the full value of the franchise royalty stream without the constraints and costs of public company infrastructure.

Under pressure from Voss Capital, things have started moving quickly:

• On March 4, Voss Capital urged the board to initiate a sale process.
• On March 10, the CFO stepped down, and XPOF reaffirmed its 2026 guidance.
• On April 1, Kanen Wealth Management joined Voss with an open letter that made a lot of similar points. The activist also said its discussions with the board suggested a “degree of alignment at the leadership level” and an openness to strategic alternatives. Kanen’s conversations with other shareholders pointed in the same direction, with broad support for a review.
• On April 6, XPOF formally announced a strategic alternatives process. At the same time, three board members stepped down and one new director was added.

So it seems management might be serious about a sale of the company or the pilates business. The chairman has a 24% stake, and has interest in Club Pilates’ franchise too. The founder/ex-CEO holds 16%. Keeping the status quo would mean carrying significant equity volatility risk given the heavy leverage and execution headwinds. In a value realization scenario, chairman’s stake could be worth $100m+.

The closest peer, Planet Fitness, trades at 15x EBITDA. It is a much larger, less levered business with stronger free cash flow generation, so the multiple doesn’t translate directly, but it serves as a rough anchor for how the market values scaled fitness franchisors. Voss argues that Club Pilates could fetch an 11x to 13x multiple in a sale. On $100m in EBITDA, that would translate to $1.1bn to $1.3bn in sale proceeds compared to XPOF’s current $910m EV. Given the heavy leverage ($460m in net debt and an $87m TRA liability), the returns on equity could be massive in this scenario. Kanen Wealth Management projects $125m-150m in Club Pilates EBITDA “within three years under focused stewardship,” and uses a 10x to 12x multiple for even higher potential sale proceeds.

Overall, I find the activist case compelling. At a high level, it really seems it could work.

However, “good asset, bad company” setups are always extremely difficult to navigate. Just by definition, a lot has to go right for the asset value to show up in the equity. XPOF is highly levered at ~5x net debt/EBITDA, and the outcome hinges on monetizing a single franchise. If that doesn’t happen, the resulting downside could be severe.

All of this makes it even more fascinating that Voss and Kanen have leaned in so heavily here. I’m very curious to see how this all plays out in the end.

I’ll leave a bit more color on the risks and uncertainties involved below.

 

Thoughts on risks and uncertainties

Governance at XPOF has really been a mess. The company has faced a ton of lawsuits from franchisees and former employees. Some are still ongoing. Franchisees have alleged they were misled on unit economics and returns, though it is not clear to which brands these allegations referred to. Last year, XPOF settled a class action with 509 franchisees for $23m, and also reached a $17m settlement with the FTC.

There have also been questionable related-party transactions. For example, the company leased a building from the former CEO until 2022 and in 2024 sold him a company vehicle in exchange for a reduction in future TRA payments. In 2023, XPOF sold a small brand with 20 locations to a former management member and shareholder for zero consideration and even paid ~$265k in cash for transition support.

Most of these issues trace back to the leadership of the founder/ex-CEO Anthony Geisler, who apparently was quite a character and ran the company for aggressive growth. He was ousted in 2024 following SEC and DOJ scrutiny. The SEC investigation closed with no action, but the DOJ probe remains ongoing. It’s not clear whether the remaining legal/regulatory overhang could negatively impact the potential sale. If they could cleanly carve out Club Pilates from this mess, that would probably be the best case scenario in terms of the upside, but I’m no lawyer and I’m not sure if that’s actually feasible.

The chairman has been in place since 2017. So it’s not clear how much governance has really changed behind the scenes. For what it’s worth, XPOF did hit the brakes on hyper-aggressive marketing and growth after Geisler’s exit and started divesting low-ROI brands. But maybe governance doesn’t matter that much for the current setup, as long as they actually want to sell.

Visibility into brand-level economics is very limited. Historical financials (see table below) are messy due to divestments and restatements, and overall it’s quite difficult to get a handle on what’s going on with the company. Adj. EBITDA is heavily massaged. FCF is close to breakeven all the time. The difference comes from massive interest payments, litigation costs, goodwill impairments, divestment costs, and restructuring charges.

Most of the returns on equity come from the massive leverage. However, leverage works both ways.

Same store sales (SSS) have slowed down a lot over the recent years, dropping from ~20% in 2022 and 2023 to 0% in 2025, with a negative low-single-digit guide for 2026. For Club Pilates, its only disclosed that SSS growth was +12% in 2024 and +3% in 2025. Management explained the slowdown by saying that studios have started to mature faster: newly opened units now reach full capacity in year one and then contribute limited growth going forward. Voss Capital notes that their channel checks support this claim, and that the markets have been overreacting to the slowdown. In its Q3 2025 fund letter, the activist wrote: “The market may be penalizing XPOF for accelerated franchisee payback periods, but private equity buyers will look favorably on this dynamic.”

The remaining brands really seem to be performing badly and quality of the 1,800 sold license backlog seems poor. Management says 44% of that backlog is defunct and probably won’t ever convert to open studios. 40% of that 1,800 are Club Pilates studios, but management has indicated that a lot of those should convert. So the defunct portion Club Pilates’ backlog is probably way lower than for the rest.

Pilates as a workout type has been enjoying massive growth in popularity since COVID. My knowledge about it is limited, but fitness trends tend to fade (e.g., aerobics in the 1980s, Zumba in the 2010s, and racquetball in the 90s), so it’s not clear how much growth runway is left ahead for Pilates and how buyers would underwrite this risk. For what it’s worth, the backlog of new studio openings is large. Club Pilates recently signed a record franchise deal. And the activists, who have done a lot more work here than me, do not seem concerned about Pilates fading anytime soon.

 

Other useful data

Xponential Fitness has ~52.7m diluted shares, ~$460m of net debt, and ~$87m TRA liability for the total EV of $910m at the current price. The company guides to $105m of EBITDA for 2026. Club Pilates alone generated ~ $100m of segment EBITDA in 2024, and 2025 figure should’ve been similar. With the available data, it seems that the remaining brands just barely cover the corporate overheads. They might still have some value in a sale scenario, however.

Historical financials:

Revenue drop in 2026 guidance reflects low ROI brands sold in 2025 (Rumble, CycleBar, Lindora) and shift to an outsourced merchandise sales model, which strips this revenue from the top line.

More background on the business can be found in this VIC pitch from Dec’24, as well as Q4 2025 presentation and May’25 analyst day presentation. Brand level earnings have been provided only once in this 2024 presentation (slide 53).

 

Voss Capital

Voss Capital has a solid track record, both in returns and activism. Past campaigns include Rosetta Stone and International Money Express, both of which ended in a sale. At Griffon Corporation, the review led to a sizable asset sale. At Thunderbird Entertainment Group, the process stalled due to industry headwinds, but a sale still materialized a few years later.

Voss has been in XPOF since 2023, with an average cost basis of around $9/share. It has been buying shares recently too. Since November 2025, Voss has raised its stake from 4.9m to 6.8m shares, which translates to a ~14% stake currently. It was buying at the beginning of February at $8.5/share (versus $7 now). In its Q3 2025 letter, Voss called XPOF “one of the most asymmetric risk/reward” opportunities in its portfolio.