Xponential Fitness Inc

We believe Xponential Fitness (XPOF) currently represents one of the most asymmetric risk/reward profiles in our portfolio. The stock is trading at roughly 7x 2025 estimated EBITDA and ~6x consensus 2026 EBITDA, a valuation that in our view also implies terminal decline. However, our diligence suggests this headline metric masks a bullish reality regarding unit economics and intrinsic value from a franchisor and franchisee point of view. The market is pricing XPOF as a broken growth story. We see it as a cash-flowing franchisor where the obvious value of owning the largest Pilates studio brand in the country with top tier unit economics remains obscured by noise and short termism.

Xponential Fitness (XPOF) is a franchisor of boutique fitness concepts, with its crown jewel, Club Pilates, likely more valuable than the enterprise value of the entire company. The shares were mispriced due to a short report that led to the removal of the founder and CEO. Future growth is expected as several years' worth of franchise development agreements have already been sold. A new management team is in place to professionalize systems and processes, and regulatory issues are clearing up. Despite recent disappointing earnings, Club Pilates continues to execute well, and management is interested in disposing of subscale brands, indicating potential for future value creation.

Xponential Fitness (XPOF) is a franchisor of boutique fitness concepts, with its flagship brand, Club Pilates, likely more valuable than the entire company's enterprise value. The shares were mispriced due to a short report that led to the removal of the founder and CEO, but future growth is expected as franchise development agreements have already been sold. A new management team is addressing operational issues, and regulatory clouds are clearing. Despite a recent earnings report that disappointed, Club Pilates continues to perform well, and management is interested in divesting subscale brands, indicating potential for future value creation.

Xponential Fitness (XPOF) is a franchisor of boutique fitness concepts, with its flagship brand, Club Pilates, likely more valuable than the entire company's enterprise value. The shares were mispriced due to a short report that led to the removal of the founder and CEO, but future growth is expected as franchise development agreements have already been sold. A new management team is addressing operational issues, and regulatory clouds are clearing. Despite a recent earnings report that disappointed, Club Pilates continues to perform well, and management is interested in divesting subscale brands, indicating potential for recovery and growth.

Xponential Fitness was a new position for us that I started buying in late February. However, shortly after our initial purchases, we were sucker-punched by an incredibly weak Q4 / FY24 report where XPOF announced reduced same store sales growth, a restatement of their 2023 financials, lowered guidance, and issued an outlook for studio closures and new studio openings that in no way resembled the growth path being discussed just a few months prior. I believe investors have been misled and as a result we sold our shares. This was an unforced error on my part that could have been avoided with patience.

Xponential Fitness was a new position for us, but we were caught off guard by an incredibly weak Q4 / FY24 report. The company announced reduced same store sales growth, a restatement of their 2023 financials, and lowered guidance, which indicated a troubling outlook for studio closures and new studio openings. Although the accounting issues were benign, they raised concerns about potential undisclosed problems and management's transparency. As a result, we sold our shares, viewing this as an unforced error that could have been avoided with more patience.

Xponential Fitness was a new position for us, but we were caught off guard by an incredibly weak Q4 / FY24 report. The company announced reduced same store sales growth, a restatement of their 2023 financials, and lowered guidance, which indicated a troubling outlook for studio closures and new studio openings. Although the accounting issues were benign, they raised concerns about potential undisclosed problems and management's transparency. As a result, we sold our shares, viewing this as an unforced error that could have been avoided with more patience.

Xponential Fitness was a new position for us, but we were caught off guard by an incredibly weak Q4 / FY24 report. The company announced reduced same store sales growth, a restatement of their 2023 financials, and lowered guidance, which indicated a troubling outlook for studio closures and new studio openings. Although the accounting issues were benign, they raised concerns about potential management missteps. As a result, we sold our shares, viewing this as an unforced error that could have been avoided with more patience.