Planet Fitness, Inc.

Ladies and gentlemen, today's conference is scheduled to begin shortly. Please continue to stand by. Thank you for your patience. Thank you. Ladies and gentlemen, thank you for standing by and welcome to the Planet Fitness fourth quarter 2020 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Brendan Frey from ICR. Thank you. Please go ahead.

Thank you for joining us today to discuss Planet Fitness' fourth quarter 2020 earnings results. On today's call are Chris Rondo, Chief Executive Officer, Dorman Lively, President, and Tom Fitzgerald, Chief Financial Officer. Following Chris and Tom's prepared remarks, we'll open the call up for questions. I would like to remind you that certain statements we will make in this presentation are forward-looking statements. These forward-looking statements reflect Planet Fitness' judgment and analysis only as of today and actual results may differ materially from current expectations based on a number of factors affecting Planet Fitness' business. Accordingly, you should not place undue reliance on these forward-looking statements. For a more thorough discussion of the risks and uncertainties associated with the forward-looking statements to be made in this conference call and webcast, we refer you to the disclaimer regarding forward-looking statements included in our fourth quarter 2020 earnings release. which was furnished to the SEC today on Form 8K, as well as our filings with the SEC referenced in that disclaimer. We do not undertake any obligation to update or alter any forward-looking statements, whether as a result of new information, future events, or otherwise. In addition, the company may refer to certain adjusted non-GATT metrics on this call. Explanation of these metrics can be found in the earnings release filed earlier today. With that, I'll turn the call to Chris Rondeau, Chief Executive Officer of Planet Fitness. Chris?

Thank you, Brendan, and thank you, everyone, for joining us today for Planet Fitness' Q4 earnings call. 2020 has certainly been an unprecedented year for the fitness industry and our business. With our members' health, safety, and best interests at the forefront of our decisions, combined with the strong foundation we've built with our franchisees over nearly two decades, Planet Fitness continues to face the ongoing challenges created by COVID-19 head on. I am extremely proud of how our franchisees, headquarters staff, and club staff continue to be agile through this ever-changing environment and rally together to provide a clean and safe fitness experience for our members. Fitness is a key component of strong physical and mental health, which is more important now than ever before in the wake of a pandemic that disproportionately impacts those with health-related risk factors. While the operating environment remains fluid, we are pleased that as of today, 90% of our stores are open. The vast majority of our closed stores are in California. We have statewide restrictions on reopening remaining in place as well as parts of Canada and Panama. We are hopeful that the entire system will be open soon as we believe that the robust safety protocols we put in place allows our stores to operate safely. These include enhanced cleaning and sanitization, touchless check-in, COVID-19 wellness screening questions via the Planet Fitness mobile app, our crowd meter in the app, mandatory mask requirements and physical distancing measures. We remain committed to keeping our members and staff safe and healthy in all our stores. Our ability to successfully operate our stores and service our members relies largely on the financial health of our system. Given the historical strength of our business model and franchisees, we have had zero stores permanently closed due to COVID and zero franchisee bankruptcies. While we have weathered the storm well relative to the overall gym industry, we have provided franchisees with relief in the form of a 12-month extension on all development requirements and an 18-month extension on their replacement equipment commitments. We believe this will allow franchisees to rebuild their balance sheets while continuing to invest in marketing to drive membership growth, which is our number one priority. As we discussed on our Q3 call in November, we resumed our national sales acquisition marketing efforts in September after pausing national promotions in mid-March when our stores temporarily closed. Consumers responded positively to our message, reinforcing that fitness is essential. The pandemic has negatively impacted people's physical and mental health, and we have the right environment in place to keep people motivated and robust protocols in place to keep them safe. This helped to slow the decline in total members we've experienced as a result of pent-up cancellations after our stores reopened and resumed billing. Looking back on the year, our biggest challenge in 2020 wasn't increased cancellations due to COVID, as cancellations were essentially flat to 2019 levels on a per-store basis. Our challenge was the lack of gross new joints as we paused our national sales acquisition marketing for the first time ever, including during certain key sign-up periods of last spring and early summer. On the heels of a successful national sale in September, we conducted two more national sales in October and November. In addition to a flash sale in December, overall, we were pleased with the results, especially given the holiday season is a slower time in terms of sign-ups for the industry. We ended 2020 with approximately 13.5 million members compared to with 14.4 million members at the end of 2019. Building off the momentum from our successful New Year's Eve sponsorship, we kicked off 2021 with our usual January promotions. Our target audience of casual first-time gym goers continued to respond favorably to our messaging and value proposition. We were unsure of what to expect for this key industry sign-up period under these circumstances, and we were pleased with the results. We ended January with 13.8 million members, up from approximately 13.5 million members at the end of December, representing our first month of overall net member growth since before the pandemic. The recent uptick in membership is very encouraging and reinforces our belief that people want to return to bricks-and-mortar fitness. In fact, to date, 5% of our members who canceled during COVID have already rejoined, and 28% have joined overall since COVID were prior Planet Fitness members. In addition to driving members back into our stores, we continue to accelerate our digital efforts to further engage with our members wherever they are and enhance their overall experience with our brand. In fact, Planet Fitness mobile app is currently one of the top-ranked free apps in the health and fitness category for both Apple and Android, reinforcing that Planet Fitness remains a trusted source for health and wellness. Currently, 40% of our total member base has adopted the app, and new joint app adoption rate continues to climb, reaching 70%. In addition, we continue to add value to the app with new features like the crowd meter, which enables members to check the capacity before coming to the gym. Building upon our partnership with iFit in April, we continue to provide streaming and virtual fitness content in our mobile app. These workouts are some of the most popular workouts content to date. We also continue to test PF+, our $5.99 per month digital-only subscription membership. via the mobile app and remain encouraged by the trends we're seeing. For example, testing results so far have shown that more than 20% of PF Plus subscribers are non-Planet Business members, and more than 20% of them have since become Bricks and Mortar members in addition to their PF Plus subscription. Additionally, of our members who have subscribed, nearly 60% of them have visited their store to work out since subscribing to PF Plus. So the majority of subscribers are still engaging with our bricks-and-mortar offering and see PF Plus as a complement to their membership. These trends reinforce our view that a standalone digital membership can serve as a gateway to traditional bricks-and-mortar membership, not a replacement for it, and provides us with an opportunity to further engage members and prospects wherever they are. We will continue to assess content engagement and usability feedback to inform broader roll-up plans down the road. While consumers' adoption of digital fitness has accelerated given the pandemic, I truly believe that the future of fitness industry is about bricks with clicks. The powerful combination of providing a high-quality in-person fitness experience coupled with a complimentary digital experience where consumers can experience the brand in the club and at home. Given everything we've faced in 2020, I am very pleased with how our system has weathered the storm. We opened 130 new stores in line with most recent expectations while at the same time HRSA, the Fitness Industries Trade Association, has predicted that about 25% of U.S. gyms and studios will permanently close as a result of the pandemic. While we have strengthened our leadership position during the pandemic, we anticipate the near-term operating environment to remain volatile. Longer term, however, we are more optimistic about our prospects for growth than we were prior to COVID-19 for several reasons. This includes capitalizing on the Industry consolidation and favorable real estate conditions we believe will emerge over the next several years to grow membership and expand our physical footprint, evolving our technological capabilities to enhance our digital engagement, and utilizing our powerful marketing machine to increase demand for our non-intimidating accessible fitness offering. I am confident that Planet Fitness is well positioned to resume the growth trajectory the business was on at the start of 2020 prior to the outbreak, once the pandemic is behind us. COVID-19 has widened the moat around our bricks-and-mortar business and accelerated our digital strategy, positioning us well to serve the casual first-time gym goer whichever way they want to engage with the brand. Thank you, and I'll turn the call over to Tom.