Who Am I?....Episode 5 / Xponential Fitness (XPOF)

I’m a franchisor, with 80% of my revenues derived from recurring, high margin royalties and fees, with minimal capex requirements.

I was targeted by a short seller 2 years ago and subsequently:

• the stock price collapsed and short interest remains elevated (10% today).

• the CEO and most of the senior management team departed.

• Federal and state investigations, franchisee and shareholder lawsuits were inititated

• Growth decelerated and expectations were missed repeatedly.

• Multiple sell side houses suspended coverage

Nonetheless, same store sales, system sales, EBITDA have continued to grow and my new management team, who have a strong pedigree, have implemented sensible changes.

My strongest brand (Club Pilates) accounts for 60%+ of system sales and 70%+ of profits. The franchisee base is incredibly healthy, KPIs remains strong, and there’s substantial embedded growth from the pipeline of future openings.

My elevated costs associated with restructuring, legal and interest should all fall materially in 2026. This would drastically improve my FCF conversion. I’m focusing on my strongest core brands, with the right infrastructure to grow profitably and sustainably.

Last week, the SEC investigation closed without action. This was an important step to remove my “uninvestible” tag and unlock refinancing.

At my Capital Markets Day (CMD) in May, I laid out my growth algo:

• Mid to high single digit, system sales growth

• High single to low double digit revenue growth

• 10% EBITDA growth, with 40-45% EBITDA margin

• Levered FCF conversion: 50-60% of adj EBITDA

My market cap is c.$450m, EV is c.$900m and I should be generating c.$100m of levered FCF in 2027 (over 20% FCF yield).

I’m trading on a deep value multiple, yet I’m a growing, high margin business on the cusp of generating substantial free cashflow, which I can use to either buyback stock or pay down debt.

With the resolution of historic issues, if my stock doesn’t re-rate, I’ll be an attractive take private candidate, as alluded to recently by my CFO at the CMD.

"I think the valuation today is quite low, in my opinion, but I understand why, given some of the historical issues the company has been faced with. But you could rest assured we have a very engaged Board, and we've had a lot of engaging discussions on the long-term direction of this company. At this point, we're focused on driving profit and driving cash, and we'll let the cards kind of fall where they lay on whether we stay public or private. But at this point, we're a public company, and that's our focus is to really just drive shareholder value.”

Who Am I? I’m Xpotential Fitness
Ticker: XPOF, Date 7th July 2025, Share Price $9.1.

The author owns securities in XPOF. DYODD, nothing written is investment advice.

Uzo