Xponential Fitness, Inc.

Greetings and welcome to the Exponential Fitness fourth quarter and full year 2025 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Patricia Neer, Investor Relations, to begin. Thank you.

Thank you, Operator. Good afternoon, and thank you all for joining our conference call to discuss Exponential Fitness' fourth quarter and full year 2025 financial results. I am joined by Mike Nuzzo, Chief Executive Officer, and John Malone, Chief Financial Officer. A recording of this call will be posted on the Investor section of our website at investor.exponential.com. We remind you that during this conference call, we will make certain forward-looking statements, including discussions of our business outlook and financial projections. These forward-looking statements are based on management's current expectations and involve risks and uncertainties that could cause our actual results to differ materially from such expectations. For a more detailed description of these risks and uncertainties, please refer to our annual report on Form 10-K for the year ended December 31, 2025 to be filed with the SEC and subsequent filings with the SEC. Thank you so much for joining us today. and any investor presentation available on our website. Please also note that all numbers reported in today's prepared remarks refer to global figures unless otherwise noted. As a reminder, in order to ensure period-over-period comparability and consistent with our reporting methods since IPO, we present all KPIs on a pro forma basis, meaning for full KPI history presented We only include brands that are under our ownership as of the current reporting period. For the period ended December 31st, 2025, this includes BFT, Club Pilates, Pure Bar, Stretch Lab, and Yoga Six. I will now turn the call over to Mike Nuzzo, CEO of Ponential Fitness.

Thanks, Patricia, and good afternoon, everyone. The fourth quarter played an important role in my continued integration into the business. highlighted by our very productive and inspiring November franchise convention. The more time I spend with our teams, franchise partners, and members, the more conviction I gain in both our strengths and opportunities to drive long-term, consistent growth. In 2025, we made important progress on several fronts. 201 net new studios opened. including our 1,414th Club Pilates studio. The power of this brand, the compelling four-wall economics driven by an outstanding first-year sales ramp, and ongoing unit growth prospects both domestically and internationally continue to set the standard in the industry. Achieved $1.75 billion in system-wide sales driven by our growing franchise base and strong brands. graduated over 2,100 Pilates and over 3,000 bar instructors from our exponential training programs, which represent a key asset for the business. Completed the transition to an outsourced studio retail and merchandise partner. Closed our debt refinancing, providing a solid financial framework going forward and accomplished key strategic brand divestitures, and completed our important corporate reorganization. Despite this progress, we recognize there is meaningful work and opportunity ahead. These efforts, along with our strategic outlook and financial plan for 2026 and beyond, continue to be shaped by my commentary on three core themes. The strength of the boutique fitness segment, our global franchising platform of strong premium brands, and the opportunity to chart a clear path towards sustained long-term growth. Roughly a decade ago, Exponential was founded with a mission to bring boutique fitness to consumers across the U.S. and the world. Since then, we've grown into the leading global franchisor of boutique fitness, rapidly expanding through new license sales, studio openings and brand acquisitions, to achieve the dominant scale, reach, and market position we have today. As a result, now we are an undisputed market leader by number of studios. We are seven times the size of the next largest Pilates competitor, over three times the size of our next largest bar competitor, and one of the top brands in yoga and stretch. While BFT's unique hit format has a major international presence. Our rapid scaling and success help to foster a more competitive landscape with regional and national concepts and even traditional gyms expanding into group fitness. We maintain a very favorable positioning in this more competitive environment. First, consumers have a strong affinity for our brands, and our scale enables broad, convenient access to our studios across the country and around the world. Second, our approach to Bar, Yoga, Pilates, Hit, and Stretch is time-tested with broad appeal and real results and engagement for members, as illustrated by our consistently strong member growth. And third, our best-in-class, brand-specific training and onboarding programs, driving differentiation in experience and securing key roles to support our new studio expansion, and our experienced franchisees and studio managers bring deep local market insight while our scale as a franchisor delivers brand recognition, visibility, and innovation advantages. At the same time, we acknowledge that over the past few years, legal and regulatory hurdles, underperforming brand acquisitions and divestitures, and organizational challenges limited our ability to consistently execute best-in-class support capabilities. So inevitably and not surprisingly, sales growth started to moderate, beginning in late 2024 and into 2025. In 2025, we also had marketing and lead management missteps that contributed to member top-of-funnel challenges that over time resulted in same-store sales pressure. most visible in Club Pilates. While the brand remains the category leader, operates successfully across virtually every market profile nationwide, and has average studio AUVs far surpassing our original franchise profitability model, addressing ongoing growth for Club Pilates and across our entire brand portfolio remains a top priority. As we start 2026, We are developing and implementing improvements focused on organic growth in partnership with our franchisees. They certainly understand the impact they have in driving this effort and are aligned around a renewed focus on member acquisition at the local studio level. So, I want to make it clear that as we plan for 2026, we intend to prioritize investments that support new member acquisition and healthy top-line growth for our franchisees. First, our most critical growth engine will continue to be our new unit opening pipeline and process, anchored by the Club Pilates brand, and we are already seeing the benefits of enhanced support and tools. We recently enhanced our new franchisee recruiting process across all brands, and implemented an effort to address the global licenses that are lagging more than 12 months behind their development schedules. Our Club Pilates franchisee base is eager to open more units in both new and existing geographies, and we continue to see the potential to double our domestic network. Internationally, the Club Pilates brand is also in high demand, and we anticipate meaningful expansion opportunity specifically in Asia and Europe. Driving overall revenue growth through continued new studio expansion is a key 2026 initiative. Our second critical element of growth is driving organic studio revenue performance across all brands, measured by continued healthy average unit volumes and modest comp sales growth. We view this as a major improvement opportunity and a key investment focus in 2026. We know that today's fitness landscape is characterized by higher member acquisition costs and longer conversion timelines as consumers weigh more options before committing to a particular studio membership. While we have seen our top of funnel lead trends improve since August, we are not where we need to be and require further progress in the focus areas I'll discuss shortly. We generate strong adjusted EBITDA with attractive and expanding margins, reflecting the scalability and capital light nature of our franchisor business model. We implemented SG&A cost reductions and margin improvements in 2025 and see additional savings and efficiency opportunities in 2026. However, based on my experience across other consumer businesses, pulling back on member acquisition-focused resources to meet an adjusted EBITDA growth target typically proves to be misguided and shortsighted. With a more efficient overhead structure, we believe that over time, growing our top line will generate meaningful adjusted EBITDA leverage. John will walk through our guidance in more detail, but it reflects Deliberate marketing, operations, and franchisee support decisions we are making today intended to support durable long-term growth, even if it means near-term adjusted EBITDA growth, will be more modest than previously expected. As I alluded to in our last call, we are focused on the following best-in-class studio performance support areas for 2026. First, Marketing at both the national and local studio level. After some missed opportunities in 2025, we are making improvements to both, particularly in performance marketing. In Q1, we'll have a second year version of our local franchise match program that last year was a successful expo franchisee partnership to put more dollars to work at the local level. Our Club Pilates marketing program in Q4 provided us with valuable insights on additional performance channels we can activate during the year. In 2026, we will amplify more brand content and awareness through social media and performance marketing, such as the 25th anniversary of Pure Bar, the Club Pilates circuit class, our unique Yoga 6 sculpt and flow classes, and BFT's signature eight-week challenge. For Stretch Lab, we are also using social media in a major way to build awareness around the benefits of assisted stretch, particularly for active older adults. We also tested and saw solid results from some new member trial offers that we plan to drive through performance marketing channels. Finally, we will be testing and piloting new pricing and member package changes, informed by our Q4 pricing study, that over time are expected to contribute to organic growth. Second, our digital and studio platforms across our brands can be enhanced to improve member conversion. In Q4, we started work on our Club Pilates and Stretch Lab websites, focusing both on updated imagery and improved navigation and member experience. We expect to leverage these enhancements across all our brands to maintain a consistent, high-quality member experience. In 2026, we also plan to conduct an upgrade to our studio member management systems to incorporate more automation, lead management tools, and enhanced membership offerings and packages based on our learnings from our Q4 pricing analysis. Third, our roughly 35-person field operations team is now in place having spent valuable time extensively training to strengthen on-the-ground studio support. For 2026, they intend to focus their coaching and leadership on increasing studio lead to membership conversion performance. We have a high degree of confidence we can improve every brand's effectiveness by turning leads into trial appointments and first-time classes into memberships. The team will also be a valuable resource to help new studios maximize pre-sale efforts to drive first-year membership growth. And with specifically designed management tools and studio visit protocols, we expect they will also support improved studio profitability. Our senior team and field leaders meet weekly to gather feedback, review KPIs, and pivot accordingly. Fourth, and above all, Both acquiring new members and retaining existing members comes down to continuing to evolve and innovate with our brands, including the look and feel of studios, class content, and member engagement. We are working through a broad studio refresh initiative at Club Pilates with a new format beginning to pilot in coming months. Our circuit class in Club Pilates is off to a strong start. and we are planning additional class styles as part of our innovation roadmaps for each of our brands. You will see these innovations reflected in our marketing, as I mentioned previously. Finally, with strong support from our operations team, we believe we will be positioned to execute new member engagement campaigns and initiatives at a local studio level. While we are still in the early innings, and while I expect to make progress through 2026, it always takes time for new programs, initiatives, and teams to maximize their operational effectiveness. John will discuss our 2026 guidance, but as we gauge resources for driving improved organic growth, and until we understand the timing and extent of our initiative results, we are being very thoughtful not to overreach on our full year guidance. I am confident in our priorities and our plan to evolve the business, and I look forward to providing updates over the coming quarters. Now I'll turn the call over to John.