Note 16 – Contingencies and Litigation

Litigation – The Company has in the past been, is currently and expects to continue in the future to be a party to or involved in pre-litigation disputes, individual actions, putative class actions or other collective actions, U.S. and state government regulatory inquiries and investigations and various other legal proceedings arising in the normal course of its business, including with former or current employees, customers, franchisees, vendors, landlords or others. The Company intends to defend itself in any such matters. The Company believes that the ultimate determination of liability in connection with legal claims pending against it, if any, will not have a material adverse effect on its business, annual results of operations, liquidity or financial position, except for those matters discussed below. However, it is possible that the Company’s business, results of operations, liquidity or financial condition could be materially affected in a particular future reporting period by the unfavorable resolution of one or more matters or contingencies during such period.

As of the end of each applicable reporting period, the Company reviews each of its legal proceedings and, where it is probable that a liability has been incurred, the Company accrues for all probable and reasonably estimable losses. The Company accrued for estimated legal liabilities, where appropriate, or settlement agreements to resolve legal disputes and recorded an aggregate accrual of $44,793 and $14,717, which was included in accounts payable, accrued expenses and other liabilities in the consolidated balance sheets, as of December 31, 2025 and 2024, respectively.

The Company maintains insurance coverage which may cover certain losses and legal costs incurred. When losses exceed the applicable policy deductible and realization of recovery of the loss from existing insurance policies is deemed probable, the Company records receivables from the insurance company for the excess amount. The Company recorded an insurance receivable of $5,000 and $0, which was included in prepaid expenses and other current assets in the consolidated balance sheets as of December 31, 2025 and 2024, respectively. Additionally, during the years ended December 31, 2025 and 2024, the Company received proceeds of $29,750 and $0 in connection with its claims for insurance reimbursement for previous legal expenses. Both the insurance receivable as of December 31, 2025 and the cash proceeds received during the year ended December 31, 2025 were recognized within selling, general and administrative expenses in the consolidated statements of operations. Various factors could affect the timing and amount of recovery and it is reasonably possible that the Company will need to adjust the estimate for insurance receivable or receive additional proceeds, exceeding its current estimated insurance receivable, based on new or additional information. These changes could be material to the operating results and financial position of the Company for the period in which the adjustments to the receivable are recorded or additional proceeds are received.

On November 22, 2023, former employees of a former franchisee of the Company filed a putative class action complaint in the United States District Court for the Southern District of Ohio, captioned Shannon McGill et al. v. Xponential Fitness LLC, et al., Case No. 2:23-cv-03909, against the Company, as well as against a former franchisee of the Company and the franchisee’s legal entity, MD Pro Fitness, LLC. The complaint alleges violations of the Fair Labor Standards Act, as well as employment laws from different states in connection with the franchisee’s owner-operated studio locations. The Company was served with the complaint on December 4, 2023. On April 4, 2025, the parties executed a settlement agreement and filed a motion seeking court approval of the settlement. By order dated June 18, 2025 (the “Order”), the court enumerated requisite changes to the settlement structure. On September 25, 2025, the parties filed the Second Amended Complaint with exhibits containing the settlement structure and agreement and the parties are currently awaiting approval. The Company recorded an accrual in anticipation of this settlement, which was included in accrued expenses in the consolidated balance sheet as of December 31, 2025.

On February 9, 2024, a federal securities class action lawsuit was filed against the Company and certain of the Company’s officers in the United States District Court for the Central District of California. The complaint alleged, among other things, violations of Sections 10(b) and 20(a) of the Exchange Act, and Rule 10b-5 promulgated thereunder, regarding misstatements and/or omissions in certain of the Company’s financial statements, press releases, and SEC filings made during the putative class period of July 26, 2021 through December 7, 2023. On July 26, 2024, plaintiffs filed an amended complaint, adding three Company directors as defendants, as well as the underwriters from the Company’s April 6, 2022 secondary offering, additionally bringing claims under Sections 11, 12(a)(2), and 15 of the Securities Act, and alleging a putative class period of July 23, 2021 through May 10, 2024. The Company filed a motion to dismiss the amended complaint on October 8, 2024. On December 6, 2024, plaintiffs filed their opposition to the motion to dismiss and also filed a motion to supplement the amended complaint, attaching a proposed supplemental complaint. On February 18, 2025, the court granted plaintiffs’ motion to supplement, denying defendants’ pending motion to dismiss as moot. On February 28, 2025, plaintiffs filed the supplemental complaint. On April 15, 2025, Defendants filed their motion to dismiss the supplemental complaint. Instead of opposing Defendants’ motion to dismiss, on May 6, 2025, plaintiffs filed an amended consolidated complaint, which, among other things, adds three new entity defendants to the claim under Section 20(a) of the Exchange Act. The Company filed a motion to dismiss the amended consolidated complaint on October 14, 2025. A hearing took place on December 3, 2025 but no decision has been rendered to date. The litigation is preliminary in nature and involves substantial uncertainties, and the Company believes that a loss is not probable or estimable at this time. However, there can be no assurance that such legal proceedings will not have a material adverse effect on the Company’s business, results of operations, financial condition, or cash flows.

On March 10, 2024, a shareholder derivative lawsuit was filed in the United States District Court for the Central District of California by Gideon Akande, allegedly on behalf of Xponential Fitness, Inc., against certain current officers and directors as defendants, and Xponential Fitness, Inc., as nominal defendant, for alleged wrongdoing committed by the individual defendants from July 26, 2021 to December 7, 2023. Plaintiff alleges claims for breach of fiduciary duty, unjust enrichment, gross mismanagement, abuse of control, waste of corporate assets, violations of Section 14(a) of the Exchange Act, violations of Sections 20(a) and 10(b) and Rule 10b-5 of the Exchange Act, and against Anthony Geisler, the Company's former Chief Executive Officer, and John Meloun, the Company's Chief Financial Officer, for contribution or indemnification under Sections 10(b) and 21D of the Exchange Act. Plaintiffs seek, inter alia, damages with pre- and post-judgment interest, and an order directing the Company and the individual defendants to improve the Company’s corporate governance, and restitution by the individual defendants. On April 3, 2024, the court entered an Order granting the parties’ Joint Stipulation to Stay Proceedings, which stayed the proceeding pending final resolution of the securities class action. On May 10, 2024, a second derivative lawsuit was filed in the United States District Court for the Central District of California by Patrick Ayers, purportedly on behalf of Xponential Fitness, Inc., alleging similar claims as the Akande action. On June 24, 2024, the court stayed the Ayers action pending resolution of the securities class action and consolidated the proceedings with the Gideon Akande derivative lawsuit. On February 10, 2025, a third derivative lawsuit was filed in the United States District Court for the Central District of California by Stefanie Nelson, purportedly on behalf of Xponential Fitness, Inc., alleging similar claims as the consolidated Akande and Ayers action. On March 31, 2025, the court consolidated the Nelson action with the previously consolidated Akande and Ayers action. On July 21, 2025, the Company received a demand from a purported shareholder making allegations similar to those made by Ayers, Akande and Nelson. The litigation and related demand are preliminary in nature and involve substantial uncertainties and the Company believes that a loss is not probable or estimable at this time. However, there can be no assurance that such legal proceedings will not have a material adverse effect on the Company’s business, results of operations, financial condition, or cash flows.

On November 2, 2023, the Company received a letter from plaintiffs’ counsel purporting to represent unspecified current and former franchisees requesting settlement discussions. On July 31, 2024, plaintiffs’ counsel provided the Company with a list of approximately 250 current and former franchisees, certain of which franchisees consist of more than one individual, that it claimed to represent in this matter. The franchisees allege they were aggrieved by purported misstatements and omissions by the Company or an affiliate thereof. On January 7, 2025, plaintiffs added 50 additional current and former franchisees to their prior list. On April 22, 2025, as a result of mediation, the parties agreed in principle to settle this matter. This matter was settled on December 29, 2025 for $22,750, which settlement amount will be paid in four installments, commencing in fiscal year 2026 and concluding in fiscal year 2028. A total of 509 current and former franchisees are party to the settlement agreement.

On February 21, 2025, the Company received a complaint on behalf of a putative nationwide class alleging violations of the Telephone Consumer Protection Act. The matter was settled on June 24, 2025 for $18.

Government investigations – On December 5, 2023, the Company was contacted by the Securities and Exchange Commission (the “SEC”), requesting that the Company provide it with certain information and documents. On July 1, 2025, the SEC informed the Company that it had concluded its investigation without action.

On July 29, 2024, the Company received a civil investigative demand from the United States Federal Trade Commission (the “FTC”) regarding the Company’s compliance with Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), and of the FTC’s Franchise Rule. On December 12, 2025, the Company received a letter from the staff of the FTC (the “FTC Staff”) stating that the FTC Staff was prepared to recommend the filing of a complaint against the Company seeking injunctive and monetary relief and civil penalties. On February 24, 2026, the FTC Staff indicated they will recommend the FTC Commissioners enter into a stipulated consent agreement (the “FTC Consent Order”) to fully resolve all of the FTC's claims. As part of the proposed FTC Consent Order, the Company has agreed, without any admission of liability, to pay $17,000 over the course of twelve months, and to desist and refrain from violating applicable laws. The FTC Consent Order is subject to approval by the FTC Commissioners and the court. The Company recorded an accrual of $17,000 in anticipation of this settlement, which was included in accrued expenses in the consolidated balance sheet as of December 31, 2025.

The Company received notice on May 7, 2024 of an investigation by the U.S. Attorney’s Office for the Central District of California (the “USAO”). The Company is cooperating fully with the USAO in this investigation, and the Company has incurred, and may continue to incur, significant expenses related to legal and other professional services in connection with matters relating to or arising from this investigation. At this stage, the Company is unable to assess whether any material loss or adverse effect is reasonably possible as a result of this USAO investigation or estimate the range of any potential loss.

Other state regulatory matters – As previously disclosed, the Company received notice of an investigation from the State of Washington’s Department of Financial Institutions (“DFI”) related to the Company's compliance with Washington state franchise laws. On August 12, 2025, without admission of wrongdoing, the Company entered into a Consent Order with the DFI to resolve the matter. As part of the Consent Order, the Company paid an immaterial administrative penalty and related costs and agreed to desist and refrain from violating applicable franchise laws. Also, on July 9, 2025, the Virginia Division of Securities and Retail Franchising (“VDSRF”) formally notified the Company regarding its investigation of the Company’s compliance with Virginia franchise disclosure laws. On February 12, 2026, without admission of wrongdoing, the Company signed a settlement order with VDSRF to resolve the matter, which the VDSRF will be countersigning shortly. As part of the VA Settlement Order, the Company paid an immaterial administrative penalty and related costs.

In addition, the Office of the Attorney General of the State of Maryland (“MAG”) has previously contacted the Company regarding compliance with applicable franchise laws. The Company is cooperating fully with the MAG in this investigation. The Company has recorded an accrual in connection with potential settlement of this matter, which was included in accrued expenses in the consolidated balance sheet as of December 31, 2025.

On December 12, 2024, the Company received a subpoena from the Office of the Attorney General of the State of New York (the “NYAG”). The Company is cooperating fully with the NYAG in this investigation. The Company has recorded an accrual in connection with potential settlement of this matter, which was included in accrued expenses in the consolidated balance sheet as of December 31, 2025.

Contingent consideration from acquisitions – In connection with the Reorganization Transactions, the Parent merged with and into the Member. The Company recorded contingent consideration equal to the fair value of the shares issued in connection with the Rumble acquisition of $23,100 and a $10,600 receivable from shareholder for debt financing provided to the Rumble Seller. The shares issued to the Rumble Seller are treated as a liability on the Company's balance sheet as they are subject to vesting conditions. The fair value of the contingent consideration is measured at estimated fair value using a Monte Carlo simulation analysis, which represents a Level 3 measurement. The Monte Carlo simulation assumptions used for the periods presented were as follows:

During the years ended December 31, 2025, 2024 and 2023, the Company recorded an increase (decrease) of $(6,996), $9,462, and $(19,811) to contingent consideration, respectively, which was recorded as acquisition and transaction expense (income). At December 31, 2025 and 2024, contingent consideration of $10,309 and $17,305, was recorded as contingent consideration from acquisitions in the consolidated balance sheets, respectively.

In connection with the October 2021 acquisition of BFT, the Company agreed to pay contingent consideration to the Seller consisting of quarterly cash payments based on the sales of the franchise system and equipment packages in the U.S. and Canada, as well as a percentage of royalties collected by the Company, provided that aggregate minimum payments of $5,000 AUD (approximately $3,694 USD based on the currency exchange rate as of the purchase date) are required to be paid to the Seller for the two-year period ended December 31, 2023. The aggregate amount of such payments is subject to a maximum of $14,000 AUD (approximately $10,342 USD based on the currency exchange rate as of the purchase date). At the acquisition date, the Company determined that the fair value of the estimated contingent consideration liability was $9,388. The Company recorded additional contingent consideration of $2, $135, and $164, during the years ended December 31, 2025, 2024 and 2023, respectively, which was recorded as interest expense. The Company recorded a change to contingent consideration of $7, $(1,414), and $878, during the years ended December 31, 2025, 2024 and 2023, respectively, which was recorded as acquisition and transaction expense (income). The Company paid the $133 and $949 during the years ended December 31, 2025 and 2024, respectively, via an offset of contingent liability due to the Seller with an accounts receivable balance of $133 and $949 owed from the Seller as the Company determined that a right of offset existed as of December 31, 2025 and 2024, respectively. At December 31, 2025 and 2024, contingent consideration of $0 and $124 was recorded as accrued expenses, respectively, in the consolidated balance sheets.

In addition, in connection with the October 2021 acqulisition of BFT, the Company entered into a Master Franchise Agreement (“BFT MFA”) with an affiliate of the Seller (the “Master Franchisee”), pursuant to which the Company granted the Master Franchisee the master franchise rights for the BFTTM brands on a global basis, excluding the United States and Canada. In exchange, the Company is entitled to recei3ve certain fees and royalties, including a percentage of the revenue generated by the Master Franchisee under the BFT MFA. The BFT MFA contained an option for the Company to repurchase the master franchise rights granted under the BFT MFA at a purchase price based on the Master Franchisee’s EBITDA, which had been extended to 2025. If the Company (or a designee of the Company) did not exercise the option pursuant to the terms of the BFT MFA, then the Company might have been required to pay a cancellation fee to the Master Franchisee. On December 31, 2024 the Company and the Master Franchisee entered into an Amended Master Franchise Agreement (“Amended BFT MFA”) pursuant to which, among other things, the option for the Company to repurchase the master franchise rights has ended and the Company is no longer required to pay a cancellation fee to the Master Franchisee. As part of the Amended BFT MFA, the Company agreed to pay the Master Franchisee a fee of $1,170, which is included in accrued expenses in the consolidated balance sheet as of December 31, 2024. The Amended BFT MFA grants the Master Franchisee the master franchise rights for the BFTTM brands on a global basis, excluding the United States and Canada, for a ten year period expiring on December 31, 2034.

In connection with the January 2024 acquisition of Lindora, the Company agreed to pay contingent consideration to the seller subject to the achievement of certain milestones. Payment of additional consideration is contingent on Lindora reaching two milestones based on a certain gross sales target and the number of operating clinics during the 15-month and 24-month period following the acquisition date, respectively. At the acquisition date, the Company determined that the fair value of the estimated contingent consideration liability was $446. The contingent consideration remains payable notwithstanding the divestiture of the brand. The Company recorded additional contingent consideration of $77 and $90 during the years ended December 31, 2025 and 2024, respectively, which was recorded as interest expense. The Company recorded a change to contingent consideration of $42 and $345 during the years ended December 31, 2025 and 2024, respectively, which was recorded as acquisition and transaction expense. In addition, the Company paid contingent consideration of $500 and $0 during the years ended December 31, 2025 and 2024, respectively. At December 31, 2025, contingent consideration of $500 and $457 was recorded as accrued expenses, respectively, and $0 and $424 was recorded as contingent consideration from acquisitions, respectively, in the consolidated balance sheets. In January 2026, the Company settled the remaining contingent consideration obligation of $500 through a non-cash offset, whereby the contingent liability payable to the seller was reduced and a corresponding reduction was recorded to accounts receivable due from the seller.

Letter of credit – In July 2022, the Company entered into an agreement with a third-party financing company who provides loans to the Company's qualified franchisees, pursuant to which the Company serves as guarantor for such loans. In addition, the Company issued a $750 standby letter of credit in connection therewith, which represents a portion of the Company’s potential aggregate liability under the guaranty. The standby letter of credit is contingent upon the failure of franchisees to perform according to the terms of underlying contracts with the third party. The Company deposited cash in a restricted account as collateral for the standby letter of credit. The Company has determined the fair value of these guarantees at inception was not material, and as of December 31, 2025 and 2024, a $1,348 and $150 accrual has been recorded for the Company’s probable obligation under its guaranty arrangement, respectively, which is included in accrued expenses in the condensed consolidated balance sheets.

Lease guarantees – The Company has guaranteed lease agreements for certain franchisees. The Company’s potential obligation, as a result of its guarantees of leases, is approximately $4,560 and $3,617 as of December 31, 2025 and 2024, respectively, and would only require payment upon default by the primary obligor. The Company has determined the fair value of these guarantees at inception is not material, and as of December 31, 2025 and 2024, a $0.3 and $2,034 accrual has been recorded for the Company’s potential obligation under its guaranty arrangement, respectively.