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Xponential Fitness (XPOF) is a multi-branded platform company that is franchising about 2800 locations spread among ten fitness brands, the most prominent and successful of which are Club Pilates and StretchLab. We have followed XPOF from a financial, admittedly not operational, level for almost a year, within our universe of over 60 restaurant/franchising companies. Our subscribers have therefore had access to our historical financial summary for quite some time.

XPOF came public about two years ago, at $12/share, has traded as high as $30, currently is around $20/share. In late June, a research firm put out a negative piece on XPOF and the stock sold off from the mid 20s to about $15/share, since recovering about half of that decline. We take no side relative to the operational concerns expressed by the research firm, or the corporate rebuttal. On the other hand, we would be derelict in our financial analytical role if we did not point out what we consider a material understatement of the fully diluted shares outstanding, therefore understating the current Enterprise Value.

The Bottom Line: While the Company, most analysts, and the reporting services, show the number of shares outstanding to be 33-34M shares, at most citing 42M shares fully diluted as suggested by management, our analysis points to about 60M shares. The resultant valuation discrepancy is obviously material.

We haven’t seen more than couple of analyst reports, but they were focused on 33-34M “Basic Class A” shares outstanding.

As far as the reporting services:

Per Yahoo/Finance –  with XPOF at $19.25 on 9/11/23 SHOWS 33.22M Ordinary Shares, and an Enterprise Value of $939M

Per Seeking Alpha – with XPOF at $19.25 on  9/11/23 shows 33.0M Basic Weighted Shares, and an Enterprise Value of $1.09B.

Per – with XPOF at $19.25 on 9/11/23 shows 33.4M outstanding shares and an Enterprise Valueof $939M.

Our Analysis, with 60M shares fully diluted, at $19.25 per share plus $213M of Long Term Debt net of cash (as of 6/30/23), provides an Enterprise Value of $1.368B, about 40% higher than the others.


As you can see from the 6/30/23 earnings report, as shown below, the weighted average number of Class A “Basic shares” outstanding during the most recent quarter was 33,045,000. Fully diluted, the weighted average number of Class A Basic shares was 41,593,000.

The Company does not include the Class B common in their fully diluted calculation (“anti-dilutive”), though the fully diluted calculation includes the convertible Preferred. The language goes like this:

Earnings (loss) per share – Basic earnings (loss) per share is calculated by dividing the earnings (loss) attributable to Class A common stockholders by the number of weighted-average shares of Class A common stock outstanding. Shares of Class B common stock do not share in the earnings of the Company and are therefore not participating securities. As such, separate presentation of basic and diluted earnings (loss) per share of Class B common stock under the two-class method has not been presented.

Diluted earnings per share adjusts the basic earnings per share calculation for the potential dilutive impact of common shares such as equity awards using the treasury-stock method. Diluted earnings per share considers the impact of potentially dilutive securities except in periods in which there is a loss because the inclusion of the potentially dilutive common shares would have an anti-dilutive effect. Shares of Class B common stock are considered potentially dilutive shares of Class A common stock; however, in loss periods related amounts are excluded from the computation of diluted earnings per share of Class A common stock because the effect would be anti-dilutive under the if-converted and two-class methods.


The Company does not include the Class B common in their fully diluted calculation (“anti-dilutive”), though the fully diluted calculation includes the convertible Preferred. The language goes like this:

Page 24 of 6/30/23 10Q filing:

    “Diluted earnings per share attributable to stockholders adjusts the basic earnings per share attributable to common stockholders and the weighted average number of shares of class A common stock outstanding to give effect to potentially dilutive securities. The potential dilutive impact of redeemable Convertible Preferred shares and class B common stock is evaluated using the as-if-converted method. The potential dilutive effects of class B common stock were determined to be anti-dilutive for the three months ended June 30, 2023 and were excluded from the computation of diluted earnings per share…… The potentially dilutive impact of RSUs is calculated using the treasury stock method.”


Per the most recent quarterly 10Q filing, at 6/30/23:

33,220,000 of Class A Common Shares – issued and outstanding

16,592,000 of Class B Common Shares – issued and outstanding

7,963,000 Class A Common Shs., converted from Preferred

$115,000,000 divided by $14.40/share

1,300,000 Class A Common due to previous Rumble owners

474,000 Restricted Stock Units

Becomes  59,549,000 Total Class A Common Shares Fully Diluted


We understand that some stakeholders at XPOF may not be thrilled with our analysis. We therefore show below the company language regarding each convertible issue. Our editorial underlining is an attempt to emphasize aspects of the convertibility.

        Convertible Class B Common Shares, as Defined

Noncontrolling interests – Noncontrolling interests represent the economic interests of XPO LLC held by Class B common stockholders. Income or loss is attributed to the noncontrolling interests based on the weighted average LLC interests outstanding during the period. The noncontrolling interests’ ownership percentage can fluctuate over time as the Class B common stockholders may elect to exchange their shares of Class B common stock for Class A common stock.

         Redeemable Convertible Preferred Stock, as Defined     

The redeemable convertible preferred stock (the “Convertible Preferred”) becomes redeemable at the option of the holder as of a specific date unless an event that is not probable of occurring happens before that date. Therefore, the Company determined that it is probable that the Convertible Preferred will become redeemable based on the passage of time. The Company has elected to recognize changes in the redemption value immediately as they occur and adjust the carrying amount of the instrument to equal the redemption value at the end of each reporting period.

From page 20 of 10Q

The Convertible Preferred ranks senior to the Company’s common stock with respect to the payment of dividends and distribution of assets upon liquidation, dissolution and winding up. It is entitled to receive any dividends or distributions paid in respect of the common stock on an as-converted basis and has no stated maturity and will remain outstanding indefinitely unless converted into common stock or repurchased by the Company. Series A preferred stock will vote on an as-converted basis with the Class A and Class B common stock and will have certain rights to appoint additional directors, including up to a majority of the Company’s board of directors, under certain limited circumstances relating to an event of default or the Company’s failure to repay amounts due to the Convertible Preferred holders upon a redemption. Shares of Series A-1 preferred stock are non-voting; however, any shares of Series A-1 preferred stock issued to any of the lenders party to the Credit Agreement will convert on a one-to-one basis to shares of Series A preferred


Our analysis points to a great many more shares outstanding on a fully diluted basis than emphasized by the sponsors of Xponential Fitness. While we are openminded relative to the operating outlook, stakeholders should be aware of the realistic number of fully diluted common shares. The Enterprise Value, as calculated by most analysts and the reporting services, is therefore about 40% understated.

 Roger Lipton