Planet Fitness, Inc.

Thank you for standing by and welcome to the Planet Fitness Incorporated Third Quarter 2021 Earnings 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, Ms. Stacey Caravella. Thank you. Please go ahead now.

Thank you, Operator, and good morning, everyone. Speaking on today's call will be Planet Fitness Chief Executive Officer Chris Rondeau and Chief Financial Officer Tom Fitzgerald. We also have Dorvan Lively, President of Planet Fitness, here 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 this 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' Q3 earnings call. We are emerging from the COVID-19 pandemic stronger than ever, having achieved the highest sequential net member growth of any third quarter in company history. With membership levels reaching 97% of our all-time peak, we returned to positive system-wide same-store sales growth in Q3 of 7.2% and 100% of our stores are open globally. The past several decades, we have democratized fitness with our differentiated model, breaking down the barriers of intimidation and affordability for the approximately 80% of the population that does not have a gym membership. As we look ahead to our 30th anniversary next year, there are four factors driving both near and long-term growth opportunities, including our expanded leadership position as we emerge from the pandemic, our franchisees' enthusiasm to continue to invest in the brand through new stores and equipment replacements ahead of their obligations, the consolidation from 16 national and local market agencies to one servicing our entire system to leverage our size and scale, and a number of factors driving a renewed appreciation for improving overall health and wellness. Let me address each one. First, we didn't have a single permanent closure as a result of the pandemic, a sign of the power of our brand and our model. This is a remarkable achievement when you consider that HRSA, the fitness club industry group, estimates that 22% of all fitness and health club locations in the U.S. have permanently closed due to the pandemic. Our size and scale advantage combined with the strength of our franchisees put us in a strong financial leadership position entering the pandemic. And we are recovering quickly. We achieved the highest franchise segment revenue in company history in the third quarter. We're now capitalizing on industry consolidation as more people are realizing the broad range of benefits from exercise and looking for an affordable, non-intimidating workout environment. The second reason is franchisee sentiment. We've always had a strong relationship with our franchisees. I was recently invited to join our franchisees at their annual meeting, marking the first time that we've all been together since the pandemic began. It's a testament to the strength of our relationship that I was invited to join them and speak about our strategy and exciting opportunities that lie ahead. I believe that working together as closely as we did during the challenging days last year only strengthened our already powerful partnership, one that I believe is rare in the franchising world. Our franchisees' enthusiasm to continue to grow the brand, make fitness more affordable, and ultimately change people's lives is incredible. They are seeing strong trends in their businesses, which is driving them to look for new sites, build new locations, and actively replenish their development pipelines with prime locations, capitalizing on the favorable real estate environment. Tom will address this in more detail, but as a result, we are raising our 2021 new store guidance to 110 to 120 new locations. Third, we are flexing our marketing muscle in transitioning from 16 marketing agencies to one, Publicis Group. This transition, which is nearly complete, will unlock our full potential as a top tier US marketer by gaining significant efficiencies through the consolidation, enabling us to truly realize this competitive advantage. It will also ensure a consistent advertising strategy on the national and local levels. We already utilize the buying power of our system in other areas of our business, such as equipment and other common items across our clubs, providing a better value to our franchisees. Now we are doing it without marketing. Collectively, we will be able to purchase on a scale unrivaled in the U.S. fitness industry. resulting in lower cost media, which means even more of the 9% advertising contribution will go to acquisition efforts to fuel incremental member growth. And we are doing it at an important time of year. Pre-pandemic, Q1 historically accounted for approximately 60% of net new joins for the full year. With January making up a large part of that growth, the agency will be fully on board for the creative and media placement in advance of our annual New Year's sale. Finally, The pandemic has taken a major mental and physical toll, creating a focus on improving overall health and wellness. The American Psychological Association found that more than half of U.S. adults have been less physically active than they wanted to be since the pandemic started, with the majority experiencing undesired weight changes, averaging between 30 and 40 pounds gained. And now there are a few bricks and mortar options for people who are looking to start their fitness journey. In the eight years preceding the pandemic, we added approximately 11 million members getting people off the couch to join Planet Fitness and growing industry membership by 87%. We also added approximately 1,500 new locations, representing 13% growth. In that same period, the rest of the industry added only 1.7 million members, part nearly 10,000 locations. In Q3, 40% of our joins were first-time gym members, a trend we've seen continue through 2021, which is up slightly from 2019. And there's still tremendous untapped opportunity with 140 million non-gym members who live within 10 miles of a current plan of fitness. We also believe that the continued evolution of our digital offerings will serve as an important gateway to make the initial step to get off the couch easier and less intimidating. And it's not just about getting in better physical shape. It's also about mental health. The Center for Disease Control reports that even one vigorous to moderate workout can reduce one's risk of depression and anxiety while also improving sleep. Prior to Mental Health Day in October, we commissioned a national study which showed that close to three in five Americans say they haven't made their mental wellness a priority in the past year, while feelings of isolation and loneliness have increased. As the world realizes the multiple benefits of exercise, the tailwinds behind physical and mental well-being continued to drive historically unseasonable membership growth in Q3. In 2019, in line with our historical trends, member growth in mature stores declined sequentially from the second quarter to the third quarter. This year, it grew from Q2 to Q3, albeit slightly, and we ended the quarter with more than 15 million members. We believe this reflects that Americans are waking up to the fact that they need to prioritize their health. Members who are visiting our stores are visiting more frequently than in the past. We believe this demonstrates their commitment to overall wellness. Another potential long-term positive is that in 2021, Gen Zs are outpacing other age groups in terms of joins, which is notable as only half of the generation is even old enough to join. In general, we began to see the return to pre-pandemic seasonality of join patterns towards the end of Q3. This is encouraging as we can focus on what we do best, providing our members a community-based, judgment-free environment in which to get active and feel better about their overall health. Tom will address our positive updates to our 2021 outlook in his comments, and we will anticipate providing our performance targets for 2022 when we report our fourth quarter earnings next year. I hope that you can feel the enthusiasm as I truly believe that we are on the verge of a fitness boom. I am more excited than ever to leverage the collective passion and strength of our system to help millions of people in the U.S. and beyond get healthier, live better, and improve their overall physical and mental well-being, as we've been doing so for the last 30 years. And I believe there is no brand in the industry better positioned to do it than Planet Fitness. And I'll turn the call over to Tom.