Planet Fitness, Inc.

Good day and thank you for standing by. Welcome to the Planet Fitness, Inc. First Quarter 2021 Earnings Conference Call. At this time, all participants' lines are in the listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1 on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your host, Stacey Caravalla, Vice President of Investor Relations. Thank you. Please go ahead.

Thank you, Operator, and good afternoon, everyone. Speaking on today's call will be Planet Fitness Chief Executive Officer Chris Rondo and Chief Financial Officer Tom Fitzgerald. We also have Dorvan Lively, President of Planet Fitness, on the line, who will be available for questions during the Q&A session following the prepared remarks. Today's call is being webcast live and recorded for replay. Before I turn the call over to Chris, I'd like to remind everyone that the language on forward-looking statements included in our earnings release also applies to our comments made during the call. Our release can be found on our website, investor.planetfitness.com, along with any reconciliation of non-GAAP financial measures mentioned on the call with their corresponding GAAP measures. Now I'll turn the call over to Chris.

Thank you, Stacey, and thank you everyone for joining us today for Planet Fitness' Q1 earnings call. Let me start by welcoming Stacey Caravella as our new VP of Investor Relations. We are very excited to have her join our team. We are very encouraged by the steady improvement in overall sentiment we witnessed in the U.S. during the first quarter and the corresponding impact it had on our business. Americans appeared cautiously optimistic early in the new year as COVID-19 vaccines began to slowly roll out to healthcare professionals, frontline workers, and the elderly. As the quarter progressed, National active case counts started to trending downward. States began to ease restrictions and the vaccine availability increased. At the same time, the momentum we experienced in January accelerated as Americans began to feel more comfortable returning to regular activities they enjoy pre-pandemic, including going back to our stores. Even in the early stages of emerging from COVID, it's clear that health and wellness are essential. We are pleased to announce that we experienced sequential net member growth in each month of the quarter. ending March with 14.1 million members up from 13.5 million members at the end of 2020. The positive headline news on COVID-19 vaccine availability seems to have driven a seasonality shift in our membership trend as March membership growth in mature stores exceeded March 2019, reinforcing our belief that people are eager to get back to our gyms, particularly with our continued emphasis on our cleaning and sanitization standards. In fact, in March, 30% of overall joins were prior planned fitness members versus 21% in March 2019. While our cancels remain at similar levels to 2019 on a monthly basis, we're seeing the percent of cancels related to COVID concerns decline significantly. In an effort to capitalize on the shift of seasonality, we added a flag sale in April and are currently running a May sale with an unprecedented offer of the first month free and then just $10 per month with no commitment. to inspire and encourage people to get off the couch and start their fitness journey. With 14.3 million members at the end of April, our target audience of casual first-time gym goers continues to respond favorably to our messaging and value proposition. To put it in perspective, year-to-date, we have regained nearly 100% of our full-year 2020 member loss and 40% from our highest membership levels in Q1 2020. Research continues to show the importance of fitness, Results from a recently published study by Kaiser Healthcare found that just 22 minutes of activity per day can reduce the risk of severe COVID outcomes and death. Additionally, a recent poll by the American Psychological Association showed that more than 50% of adults experience weight changes due to the pandemic, with the average American reporting that they gained approximately 30 pounds, and nearly 50% of parents saying that their stress levels have increased during the same time period. Americans are waking up to the facts. that their overall wellness needs to be a top priority, and we offer them a judgment-free fitness option at an incredible value. And I'm proud of how our franchisees, headquarters staff, and club staff have rallied together to provide a clean, safe fitness experience for our existing and new members seeking a non-intimidating environment. Today, we have nearly all our stores open, with approximately 30 clubs still closed in Canada. Regionally, the Midwest and South are leading the way in terms of performance metrics, having been reopened since May and June of last year. Usage in the stores in those regions is nearly 90% of 2019 levels, while naturally usage trending up during the quarter ending March at more than 80% of March 2019 levels. Usage for all age groups is trending upward with Gen Z leading the way. We believe that as more and more Americans receive the COVID vaccine, usage in the club will continue to climb. Now to our digital strategy. App adoption continues to accelerate with nearly 50% of our total membership base having the plant in its app. up from 40% last quarter. Our app is another channel to engage with, provide service to, and motivate our members inside or outside of our gyms. For example, it provides the ability to upgrade to the black card, a crowd meter to help plan your visit, and content videos on how to use the machines on the gym floor and do virtual workouts. We also continue to test PF Plus, our digital-only subscription for $5.99 per month. More than 30% of PF Plus members join Planet Fitness locations after subscribing, is demonstrating our digital as a gateway to bricks and mortar strategy. This is up from 20% in Q4. Additionally, 65% of our members who have subscribed have visited our core bricks and mortar offering since subscribing. Beyond just being a gateway, more than 80% of the total PF Plus subscriber base are members, an indication that members see the value and are willing to pay more to get more. This is where we believe we can offer real value to our members. Today, consumers can download a wide variety of individual apps at all different prices. for workouts, wellness, nutrition, and mental health. Our goal is to provide a holistic offering at an incredible value with a differentiating concept geared towards breaking down the barriers for casual first-time gym goers all in one app, along with the ability to visit our gyms. To this end, we plan to pilot PF Plus in a limited number of stores to test price elasticity with bundled offerings for both our Classic and Blackheart memberships. We expect to run these tests for the balance of 2021 and look forward to sharing more on possible offerings in early 2022. To underscore our commitment to our digital strategy, today we announced that we have deepened our current partnership with iFit Health and Fitness by taking a minority stake in the business. This enables us to accelerate our current digital content offerings to our members while also exploring complementary mind and body wellness categories. I believe that the future of the fitness industry is truly about bricks with clicks. The powerful combination of providing people with a high-quality in-person fitness experience coupled with the ability to engage and service them outside our four walls with differentiated premium content wherever they are. As I think about the future of Planet, I come back to the fact that we are a purpose-led brand with health at the heart of who we are. We are on a mission to change people's lives for the better. We're in the fitness business, but we are also about providing a supportive community to our members. And this is what people are seeking right now, connections with others. The membership and usage trends that we are experiencing make me optimistic for the long-term growth, and I truly believe we are on the verge of a fitness boom. According to the industry trade group ERSA, approximately 17% of U.S. gyms have closed due to the financial impact from COVID, and it projects that it could eventually be upwards of 25%. We believe that our value proposition, we can take more than our fair share of the people looking for a new gym. The role of fitness has never been clearer, with nearly 80% of people hospitalized for COVID being overweight or obese, according to the CDC. And 90% of the deaths from COVID were in countries with the highest obesity rates, according to the World Health Organization. People realize the value of fitness more than ever. As we look to the future, we believe our purpose of enhancing people's lives and creating a healthier world sets us and our franchisees up for long-term success. I'll now turn the call over to Tom.