Planet Fitness, Inc.

Ladies and gentlemen, welcome to the Planet Fitness Fourth Quarter Earnings Conference Call. My name is Grant, and I'll be the moderator for today's call. If you have any questions for the Q&A or questions, please press star four by one on the telephone keypad now. I will now pass the floor over to Stacey Caravella to begin. Stacey, 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. Also joining us is Edward Hines, President and Chief Operating Officer. They will all 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 and 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 for the Planet Fitness Q4 earnings call. I'm proud of how we continue to prove our system's resiliency, strength of our model, our differentiated offering, and the passion of our franchisees, all of which positions us to continue to succeed in an environment of increasing consumer prioritization of health and wellness. Closing out 2022, we were very pleased with our record membership growth in the fourth quarter, which created great momentum coming into Q1 of this year. Let me start with the two primary drivers behind this record growth. First, we had our new agency structure in place for the entire quarter with one agency handling our national advertising and two agencies partnering with our franchisees on a local level. The fourth quarter was the first time we had access to the ability to leverage our national and local media as we begin to optimize our marketing based on analytical findings. An example of this is our newly implemented post-national sale meetings. with all three agencies to analyze results by region and franchise group to share best practices across our system. Importantly, our franchisees are pleased with the level of service they're getting from their agency partners, and they're confident with how our marketing investments are being executed at both national and local levels. Second, we continue to benefit from the increasing commitment to and interest in overall wellness coming out of the pandemic. Our members who have visited the gym continue to visit more frequently which we believe is a sign that they are more dedicated to working out. We had a successful promotion in November where you received a free Halo, Amazon's fitness and health tracker, if you joined or upgraded to a Black Card membership. It also required a one-year commitment, which should be a tailwind to our average tenure. Additionally, it was our most successful upgrade promotion to date, with members trading up from our $10 Classic membership as well as from our lower-priced Black Card memberships. to the new $24.99 black card price to get the Halo. We are working on an upcoming similar promotion and continue to explore possibilities to work with other well-known brands who are in adjacent categories to the fitness industry. We believe that we are an attractive brand partner given our size and scale and the diversity of our approximately 17 million members across gender, age, incomes, and other attributes. We ended the year with a national promotion letting consumers know that it wasn't too late to join a gym in 2022 for those who made a New Year's resolution. It drove great momentum at the end of the year as we head into the first quarter, during which we typically get 50% of our full-year net membership gains pre-pandemic. Now to 2022 results. We ended the year with approximately 17 million members as our brand appeal continued to attract many first-time gym goers or people looking to get off the couch and restart the wellness journey with our affordable, approachable, non-intimidating fitness environment. We are thrilled to have increased our membership by 1.8 million last year, despite softer membership growth in the first quarter due in part to Omicron. Members did approximately 470 million workouts in our gyms in 2022, up more than 20% over last year. And nearly 40% of our members use our gyms in a 30-day period in 2022, up from mid-30% in 2021. Cancellation rates were also slightly lower compared to pre-COVID. We also grew our store base to 2,410 locations, with the addition of 158 new stores, including 58 new stores in Q4, against the backdrop of an industry that is struggling to grow coming out of the pandemic. We upgraded and enhanced our digital ecosystem with our recently relaunched PF app. We also added more perks, providing value to our members outside the four walls of the gym, even when they can't make it to the club. In 2022, we offered discounts from brands such as Crocs, Grubhub, and Shell. In fact, recent data showed that 25% of our members who engaged with our platform hadn't visited the club in over three months. During 2022, our appeal with younger generations continues to grow. More than 9% of all Gen Zs over the age of 15 in the U.S. are members of Planet Fitness, with Gen Zs representing 25% of our total membership. We ended the year with all age generations nearly back to or above pre-pandemic penetration levels. One of the highlights of the year was our successful High School Summer Pass program. We ended 2022 with approximately 400,000 team participants and their parents and guardians had joined as paying members for a conversion rate of nearly 7%. We continue to significantly outpace the 2019 conversion rate, the last time we ran this similar program. And we had a much bigger base, more than three and a half times the participation we had in 2019. We believe the High School Summer Pass is so important as we're helping teens establish healthy habits and we're building brand loyalty with them. In New Hampshire, we've run this program for three years, as it was a test market before the 2019 program. Today, 11% of all teens in the state of New Hampshire are now members of Planet Fitness, compared to 4% of all teens nationally. We look forward to bringing the program back in 2023. Now to the future. We, along with our franchisees, are very bullish on our growth prospects. We are pleased with the recovery coming out of the pandemic. We ended 2022 with 2.6 million members, more than we had at the end of 2019. And we've opened 420 net new stores during that same period. We are more than halfway through the first quarter of 2023. And so far is the first time in four years that Q1 has not been interrupted by COVID. For the eighth year in a row, we were the presenting sponsor for the Times Square's New Year's Eve event, which was back to high energy and a celebratory atmosphere. This kicked off our big fitness energy campaign, and the campaign addresses the post-workout positive feeling, which we feature in our low E ads that have generated great consumer buzz. Throughout 2022, we met with our top franchise groups, and they are very encouraged by the recovery of their store portfolios with each quarter of positive membership growth. Their top lines are recovering even more quickly, aided by the black card price increase last year in the recent annual fee increase from $39 annually to $49. We were recently recognized by Entrepreneur Magazine with placement as 28th overall on its Franchise 500 list and number one in the fitness category. Along with brand strength and growth metrics, a primary consideration for the recognition is the relationship with our franchisees. We believe our historically strong relationship was further strengthened by working so closely together during the pandemic. It showed in that we didn't have one permanent store closure as a result of COVID. One year ago, we acquired Sunshine Fitness, and doubled our corporate store portfolio to approximately 10% ownership of the system, a level that we think is appropriate as it allows us to maintain the asset-light nature of our business model. Importantly, we now have a dedicated team leading our corporate stores that is focused on driving membership growth in Black Card Percent. We began to see the positive impact in our results in the second half of 2022, when the corporate store or same-store sale outpaced franchising to the sales. A few weeks ago, we welcomed Edward Himes, to our leadership team as our new president and chief operating officer. He's leading our primary business segments, U.S. and international franchise businesses, corporate stores, and equipment sales. He is also overseeing our technology and legal functions. We believe Edward's skillset and franchise leadership will be instrumental in helping to accelerate our growth through existing and new geographies. One of his first tasks is to build a team to lead internationally. Once that team is in place, we believe that we will increase our pace of expansion internationally. For 30 years, it's been our mission to make fitness accessible and affordable for all. And today, more than 6% of all Americans over the age of 15 are Planet Fitness members. But we're not stopping there. We believe we can double our membership given our historic ability to do so and the increasing penetration we've experienced with each successive generation. We also believe that the 4,000-plus store opportunity in the U.S. is the floor, not the ceiling, given the significant industry consolidation caused by the pandemic. We'll be reevaluating this target with a third party this year. We believe our purpose of enhancing people's lives and creating a healthier world sets us, our franchisees, and our shareholders up for long-term success. I'll now turn the call over to Tom.