Planet Fitness, Inc.

Hello everyone and welcome to the Planet Fitness Q1 2022 quarterly earnings call. My name is Seb and I will be the operator for your call today. There will be an opportunity to ask questions on the call and you can do so by pressing star 1 on your telephone keypad or if you change your mind and wish to withdraw your question, please press star 2. I will now hand the floor over to Stacey Caravella to begin. Please go ahead.

Thank you operator and good morning 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, 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 would 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 will turn the call over to Chris.

Thank you, Stacey. And thank you, everyone, for joining us for Planet Fitness' Q1 earnings call. We remain extremely bullish on the long-term growth opportunities for our brand in business for many reasons. led by the tailwinds behind health and wellness and our appeal to millennials and Gen Zs. Despite continuing to operate in a fluid environment, we've set an all-time record high for member count, ending the first quarter with 16.2 million members. We also added 37 new stores, a nearly 30% increase over Q1 2021, bringing our total worldwide club count to 2,291 locations. Like many businesses, we were impacted by the ups and downs of consumer sentiment around COVID-19 during the first quarter. The Omicron variant led to a softness in our January joint trend compared to pre-pandemic levels. This was not surprising given that the U.S. Census Bureau estimated that approximately 14 million Americans were directly or indirectly impacted by the virus at some point during the month. Omicron also impacted usage. In January, it slipped below the 90% index in 2019 that we had most of last year. Higher member usage historically corresponds with higher joint activity. But as the quarter progressed, both joins and usage rebounded. And while our net membership growth in February and March this year outpaced 2019, it wasn't enough to make up for January's softness. However, by the end of the quarter, approximately 30% of our mature stores hit their pre-pandemic membership levels. In the final week of Q1, usage was back above the 90% index 2019. We continue to see that people who are working out are doing so more frequently. The regions that are the hardest hit by COVID restrictions, the Mid-Atlantic, Northeast, and West, all achieved visit frequency highs since the start of the pandemic. Both Gen Zs and Millennials also hit post-pandemic visit frequency highs, and baby boomers, who have been slower than the other generations, had the highest usage in March since COVID. As we mentioned on our fourth quarter call, we experienced some challenges with our national and local marketing and advertising agency consolidation efforts. Our franchisees now have three agencies to choose from, to handle their local advertising. They include publicists in two of our previous top performing local agencies. We believe that the long-term benefits from the consolidation of agencies outweigh some near-term disruption. We now just say that Chief Marketing Officer Jeremy Tucker is no longer with Planet Fitness. We appreciate his contributions to the brand and wish him the best in his future endeavors. We are beginning the search for his replacement. Throughout the past two years of the pandemic, we've learned to be nimble and resilient. This resulted in our single permanent closure of a Planet Fitness store due to the pandemic, which is very different than how the industry fared, where more than 25% of the U.S. gyms are now permanently closed. And hopefully the worst of the pandemic is behind us as the world begins to learn to live with the virus. Looking to the future, I am confident that we will continue to be a differentiated and disruptive force in the health and wellness industry. We offer what people need now, more than ever, for both physical and mental wellness. a high-quality, affordable fitness experience in a welcoming, non-intimidating environment. We are focused on two main growth strategies. First, driving system-wide same-source sales through both membership growth and pricing. And second, continuous store expansion in a broad range of markets. Let me start with driving same-source sales. Gen Z was the fastest-growing demographic group of our membership in 2021, bringing our total share of that generation who are over the age of 15 to nearly 8%, which is exciting as only half of Gen Zs are even old enough to join our gyms. And the research shows that Gen Zs, like millennials, prioritize an active lifestyle more solid than previous generations. We are focused on building lifelong brand loyalty with both generations who capitalize on our appeal to these groups, which is why we are excited about the upcoming launch of the High School Summer Pass. It's a rebranded version of the Teen Summer Challenge program rebranded in 2019, where high school-aged teens could work out for free in all of our stores all summer long. The program resulted in nearly 1 million teen participants, and more than 11% of those teens are members today. And we're bringing it back for after two-year hiatus, making the sign-up process even more seamless. Teens can register online, and if they're under the age of 18, parents and guardians can electronically give their consent. We believe high school summer pass is extremely timely and incredibly important given the alarming teen mental health crisis in the U.S. According to the Journal of American Medical Association, less than 15% of teens met the recommended daily physical activity guidance during the pandemic, while teen screen time doubled for pre-COVID estimates, not including virtual learning. We recently commissioned a national study and found that a majority of teens who exercise also agree that physical fitness makes them feel healthier, stronger, and happier. Almost half of the teens admitted that they struggled with mental health for the first time since the pandemic. To help address this issue, we're offering teens a chance to stay active during the summer for free and perhaps introduce them to a lifelong commitment to their overall health. It's also an opportunity to introduce their parents to our brand and then our already members. We want to be the fitness brand people think of first when they're ready to go into a healthy, active lifestyle. We understand that fitness can be intimidating, and we're focused on breaking down the barriers for all ages. In fact, more than 5% of the parents who joined during Teen Summer Challenge program are still members today. Our price and model is another way that we are a disruptive force in the fitness industry. And it was a key driver of our 53 straight quarters of positive comments prior to the pandemic. For just $10 per month, our standard membership offers access to high-quality cardio and strength equipment in our judgment-free environment. And while we predominantly advertise our standard membership, 6 out of 10 people who join Clamp It has purchased a Blackheart membership. which is more than twice the price. We launched a Black Card pricing test in summer of 2021 in about 100 stores. The test was successful across key metrics such as acquisition rates, retention, average monthly dues per member, and margin. Beginning this month, the new price for the Black Card is $24.99 for all new joins. I've always said that we won't raise price without adding value for our members. Since the last price increase in 2019, a new Black Card membership now includes access to an additional 400 plus stores, with reciprocity being our number one use flat card amenity, access to premium digital content via our PF Plus platform in our app, and an always expanding perks program. We believe there's tremendous untapped opportunity for our brand long term in the U.S. to get people off the couch. Within 10 miles of the current plant business store, there are approximately 140 million people old enough to join a gym, but do not belong to any gym. With fewer competitors due to significant industry consolidation, We believe that perhaps our 4,000 store potential in the US may be the floor and not the ceiling for store growth. We're also laying the groundwork for expansion outside the US, where the majority of the countries have much lower gym membership penetration. To this end, we announced this morning that we signed an agreement to bring the Planet Fitness brand to New Zealand, where 86% of the population doesn't belong to a gym. The agreement is for a minimum of 25 locations over the next several years. We believe we have the right local team in place to replicate the success we're seeing in Australia, where our growing fleet of clubs are performing very well since they reopened last year. We recently opened our first stores in Mexico under the new development agreement we signed last summer for at least 80 new stores over the next five years. Nearly 97% of the Mexican population doesn't have a gym membership in a country where more than 70% of the people consider overweight. Our high-quality, affordable, and welcoming fitness experience appears to be resonating. The first new store's membership count on day one far exceeded that of a typical U.S. store on opening day. It's hard to believe that this year marks the 30th anniversary for the point of business brand. This milestone is very personal for me. I joined the company one year after it was founded, working the first door in Dover, New Hampshire. As our brand has grown, so too is our ability and opportunity to help people be healthier physically, which leads to being healthier mentally. With COVID, we have seen firsthand the repercussions of not prioritizing our mental and physical wellness. It highlighted the importance of access to fitness centers for one's overall health. We believe that fitness is essential and that our industry is a key part to today's healthcare delivery system. I'll now turn the call over to Tom.