SCHEDULE: Voss Capital Urges Xponential Fitness Sale

Activist investor Voss Capital, holding 19.3% of Xponential Fitness, calls for an immediate exploration of strategic alternatives, including a company sale, citing undervaluation.

Summary

• Voss Capital, L.P. and its affiliates beneficially own approximately 19.3% of Xponential Fitness, Inc.'s Class A common stock, totaling 6,788,653 shares.
• Voss Capital believes Xponential Fitness shares are profoundly and persistently undervalued by the public market.
• They are urging the Board of Directors to immediately retain independent financial advisors and form a committee of independent directors to formally explore strategic alternatives, including a potential sale of the entire company.
• Voss Capital contends that Club Pilates alone, with $102 million in EBITDA in 2024, is worth more than the current enterprise value of Xponential Fitness.
• The company's 2026 Adjusted EBITDA guidance midpoint is $105 million, suggesting Club Pilates' standalone earnings are comparable to or exceed the entire company's.
• Xponential Fitness carries over $500 million in debt with $55 million in annual interest expense, consuming most unlevered free cash flow.
• Voss Capital argues the multi-brand structure has led to "multiple compression" and that non-Club Pilates brands are being assigned negative value by the market.
• They believe a private owner could better manage the company, rationalize costs, and finance Club Pilates as a standalone brand without public company constraints.
• Recent share purchases by Voss Capital through separately managed accounts include 13,754 shares at $7.94 on January 30, 2026; 11,246 shares at $8.5112 on February 3, 2026; 150,000 shares at $4.3863 on February 27, 2026; and 250,000 shares at $4.5567 on February 27, 2026.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this filing as significantly negative for Xponential Fitness's current management and strategy, as a major shareholder is publicly demanding a sale due to perceived undervaluation and operational inefficiencies.

Positives

• Club Pilates is identified as a highly valuable and competitively entrenched franchise asset in the consumer wellness space, generating $102 million in EBITDA in 2024.
• Club Pilates has shown strong growth with 3% same-store sales growth, 19% North American system-wide sales growth, 220 new studio openings, and 140 new license sales since 2024.
• Pure Barre and YogaSix are described as "solid brands with positive SSS" (same-store sales).
• The legal and operational overhangs are "now finally resolving."

Negatives

• The public market valuation of Xponential Fitness stock is considered a "profound and persistent misrepresentation" of its value.
• The entire company's 2026 Adjusted EBITDA guidance midpoint is only $105 million, barely exceeding Club Pilates' standalone 2024 EBITDA.
• Xponential Fitness carries over $500 million of expensive debt, resulting in approximately 5x net leverage.
• Annual interest expense of $55 million consumes the majority of the company's unlevered free cash flow.
• Equity holders receive very little cash after legal settlements, capital expenditures, and interest.
• The multi-brand structure has resulted in "steady multiple compression."
• The standalone path is not creating shareholder value due to tens of millions in estimated unallocated corporate overhead, high interest expense, ongoing legal settlement payments, and distraction of quarterly reporting.
• Public shareholders bear the full cost of overhead, leverage, and ongoing distractions.
• Revenue is expected to decline 16% in 2026.
• Net studio openings are down 20% at the midpoint.
• Approximately 30% of North American license obligations are still more than 12 months behind schedule.
• The company faces an 11% interest rate and poor levered free cash flow conversion.
• Ongoing regulatory investigations and years of fines and lawsuit settlements have created "narrative scar tissue."
• Club Pilates experienced negative same-store sales in Q4 2025, which the market is using to extrapolate a worse business outcome.

Risks

• The company's public market valuation persistently fails to reflect the value of its assets, particularly Club Pilates.
• High debt levels ($500 million) and significant annual interest expense ($55 million) constrain free cash flow and shareholder returns.
• The multi-brand structure may be causing "multiple compression" and complexity, leading to undervaluation.
• Ongoing legal settlement payments and regulatory investigations create operational and reputational overhangs.
• Expected revenue decline of 16% in 2026 and a 20% reduction in net studio openings indicate potential business slowdowns.
• A significant portion (30%) of North American license obligations are behind schedule, impacting future growth.
• Negative same-store sales in Club Pilates, even if technical, could lead to negative market perception and further stock price pressure.
• The current public company structure, with corporate overhead and reporting requirements, may not be optimal for realizing the company's full potential.

Future Outlook

Voss Capital believes the standalone path for Xponential Fitness is not creating shareholder value and that the market will not re-rate the stock without a "hard catalyst." They suggest a private owner could invest with a longer time horizon, rationalize corporate costs, and finance Club Pilates as a standalone brand more effectively. They anticipate a well-run sale process would likely surface buyer interest at a price higher than the public market's current valuation.

Management Comments

• "Club Pilates is one of the most valuable and competitively entrenched franchise assets in the consumer wellness space."
• "The Issuer's public market valuation has profoundly and persistently failed to reflect that value."
• "Club Pilates alone is worth more than the current enterprise value of the Issuer."
• "The Issuer's multi-brand structure has resulted in steady multiple compression."
• "The standalone path is not creating shareholder value."
• "The market has had ample time to re-rate this stock. It has not done so and we do not believe it will, absent a hard catalyst."
• "A well-run, credible sale process... would likely surface buyer interest at a price that the public market is simply unwilling to assign to XPOF on a standalone basis."
• "The Board's fiduciary obligation is to ensure its shareholders receive full, fair value for it."

Industry Context

StockSavvy.ai notes that this activist filing highlights a common challenge in multi-brand companies within the fitness and wellness sector: the potential for a highly successful core asset (Club Pilates) to be undervalued due to the perceived drag or complexity of other brands and corporate overhead. The call for strategic alternatives, particularly a sale, reflects a growing trend where investors push for simplification and value realization in mature or complex portfolios, especially when debt levels are high and free cash flow conversion is poor. This situation could attract private equity firms or larger strategic buyers looking to acquire a dominant brand like Club Pilates and potentially divest or restructure the less profitable segments.

Comparison to Industry Standards

• Club Pilates' 2024 EBITDA of $102 million and its growth metrics (3% SSS, 19% North American system-wide sales) position it as a strong performer within the boutique fitness franchise segment, significantly larger than its next closest competitor.
• The company's 5x net leverage and 11% interest rate are considerably higher than the average for well-capitalized, stable franchise businesses, which typically aim for lower leverage ratios (e.g., 2-3x EBITDA) and can secure more favorable borrowing rates.
• The reported 16% expected revenue decline and 20% drop in net studio openings for 2026 contrast sharply with growth expectations for many successful franchise models, which often target consistent unit expansion and revenue growth.
• The market's apparent "multiple compression" for Xponential Fitness, despite strong individual brand performance like Club Pilates, suggests it is being valued below industry leaders or pure-play franchise operators, which often command higher multiples due to their predictable royalty streams and asset-light models.

Corporate Governance

Legal Proceedings

• The company has faced "constant regulatory investigations and years of fines and lawsuit settlements," which are now "finally resolving."

Stakeholder Impact

• Shareholders: Potential for significant value realization if a sale occurs at a premium, as advocated by Voss Capital. Conversely, continued undervaluation and poor free cash flow conversion could negatively impact long-term returns if no action is taken.
• Management/Board: Increased pressure to address shareholder concerns and potentially initiate a strategic review process. Their jobs could be at risk if a sale or significant restructuring occurs.
• Employees: Potential for job insecurity or changes in corporate culture and structure if the company is sold or undergoes significant restructuring.
• Franchisees (Club Pilates): A sale could lead to new ownership with different strategic priorities, potentially impacting support, investment, or royalty structures. Voss Capital suggests securitizing Club Pilates royalties at a lower interest rate, which could benefit the brand's financial health.
• Creditors: A sale could lead to debt refinancing or repayment, potentially impacting existing debt agreements. Voss Capital highlights the high interest rate and suggests securitization could lower financing costs.

Next Steps

• Xponential Fitness Board of Directors to immediately retain independent financial advisors to formally evaluate strategic alternatives, including a sale of the company.
• Xponential Fitness Board of Directors to form a committee of independent directors to oversee the strategic alternatives process with a mandate to maximize shareholder value.
• Voss Capital intends to review its investment on a continuing basis and may engage in further communications, discussions with stockholders or third parties, make proposals, purchase or sell shares, or engage in hedging transactions.

Key Dates

Recommendation

Voss Capital, a significant activist investor, has publicly declared Xponential Fitness to be profoundly undervalued, asserting that Club Pilates alone is worth more than the entire company's current enterprise value. Their call for a strategic review and potential sale, backed by a substantial 19.3% ownership stake, creates a strong catalyst for value realization. The detailed financial arguments, including the high debt burden and poor free cash flow conversion, suggest that a private market transaction could unlock significant value for shareholders, making the stock a "strong buy" based on the potential for a substantial premium from a strategic or financial buyer.

Keywords

Xponential Fitness, XPOF, Voss Capital, Activist Investor, Schedule 13D, Club Pilates, Strategic Alternatives, Company Sale, Undervaluation, Franchise Business, Corporate Governance, Shareholder Value, Fitness Industry, Private Equity, Debt Leverage, EBITDA