Planet Fitness, Inc.

Ladies and gentlemen, welcome to the Planet Fitness Q1 Quality Earnings Call. My name is Glenn, and I will be the operator for today's call. If you would like to ask a question during the presentation, you may do so by pressing star 1 on a telephone keypad. I will now hand you over to your host, Stacey Calvella, 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 Rondeau, and Chief Financial Officer Tom Fitzgerald. Also joining us is Edward Himes, 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 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 for Planet Fitness' Q1 earnings call. We had a strong start to 2023 as we capitalized on the tailwinds behind the consumer focus on overall health and wellness. We believe we continue to be well positioned to deliver disruptive growth with our high quality affordable fitness experience. I'm going to cover two topics today. First, Q1's member growth and the resiliency of our model in an inflationary or possibly recessionary environment. And then I'll discuss our system's continued recovery from the impacts of COVID-19 pandemic and how it supports our long-term growth opportunity. Let me address our Q1 membership growth. Our strong momentum from the end of 2022 continued into the first quarter, driving membership to more than 18.1 million, a net increase of more than 1.1 million members. This Q1 was the first time in four years that an all-important first quarter of membership growth was not interrupted by COVID. We kicked off the year with our Big Fitness Energy campaign that addresses the post-workout positive feeling. It featured our low E ads that continued to generate great consumer buzz. Prior to COVID, membership growth was the primary driver of our 53 straight quarters of positive same-store sales growth. In Q1, member growth continued to be the primary driver of the 9.9% system-wide same-store sales growth. Our membership growth demonstrates that our high-quality affordable fitness experience resonates now more than ever as Americans are seeing value and feeling the rising cost of everyday items while they continue to prioritize their health and wellness. Historically, we've seen that our model is resistant to inflationary and recessionary pressures. It's proving to be true again in this current environment, validated by three key trends. The first trend is our diverse member growth. During the quarter, all age generations surpassed their pre-pandemic population penetration levels. Our strong value in judgment-free, non-attempting atmosphere also continued to drive people off the couch in Q1, as 40% of our new joins were first-time gym members. The second important trend is our rejoin rate. In Q1, about 30% of our new joins were previous members, compared to about 20% in 2019. We believe this is a really good sign to have former members rejoining faster than they have historically, despite inflationary pressures causing their income to not go as far. The third is our cancel rate, which, again, indexed below prior year's rate in the first quarter. This marked the seventh straight quarter of year-over-year cancel rate improvement. We're also seeing that our members are more committed to fitness, than they were pre-pandemic, with higher overall visits per member as all age groups are visiting more frequently than 2019. This is a good sign since non-use is the number one reason why members cancel, so more usage should continue to bode well for a cancel rate. Now to our continued recovery post-COVID and our long-term growth opportunity. We continue to see consistent momentum towards full recovery the longer our stores have been open since the temporary COVID closures. At the end of Q1, more than 50% of our U.S. stores that opened before 2019 are back to or above pre-pandemic membership levels. Additionally, almost 60% are at or above their pre-COVID revenue per store, partly as a result of the price increases that we made last year. Pre-pandemic, 60% of our full-year net membership gains happened in the first quarter, so an uninterrupted Q1 was huge for the entire system, especially for those stores that opened during the past four years. They had yet to feel the benefit from what has historically been the highest net membership growth quarter. And most of the Black Card members of stores that opened this year and last year are paying the new Black Card price in the increased annual fee, helping to further boost new store profitability. Our growth is fueled by the strength of our collective marketing efforts with our franchisees. We invested more than a quarter of a billion dollars last year to go after the 80% of Americans who do not currently belong to a gym. Our significant marketing spend enables us to attract someone at the right time when they are ready to start their health and wellness journey. More member growth means more dollars towards advertising funds. It's this flywheel that keeps us well ahead of our competitors with our membership more than eight times greater than the next largest U.S. high-value, low-price brand. And we have greater than 60% more stores than our next 17 low-price U.S. competitors combined. Our app and broader digital platform are real differentiators versus the competition as well. To drive even more value to our members, we are leveraging our size and diversity of our member base to partner with our major brands like Shell, Verizon, Sam's Club, Chewy.com, and Puma on perks discounts. In March, the average redemption savings through the perks program was more than $10, exceeding the cost of our monthly classic card membership. While it's a small percent of our members today who engage with our perks offers, We will continue to partner with brands to offer more and better discounts to benefit more of our members. Our confidence in our 4,000-plus long-term store growth opportunity is strengthened by our system's recovery and our historical ability to achieve a greater penetration of each successive generation. We understand that fitness can be intimidating, and we continue to be hyper-focused on breaking down the barriers of all ages. We want to be the fitness brand people think of first when they are ready to start their wellness journey, regardless of their age. Generational trends are also fueling the confidence about the future. Gen Zs and millennials continue to lead our joins with over 9% of each group now a member of Planet Fitness. And that's with the Gen Zs who are over the age of 15. We will continue to have Gen Zs age into our prospect member pool, but Gen Alpha is only a few years behind. To further strengthen our brand's appeal, with Gen Zs, earlier this week we announced the return of our high school summer pass program. We are excited to be able to run this program for the second consecutive year. it's largely similar to last year's, including the seamless online registration process. We had more than 3.5 million teen participants in the high school summer pass last year, along with 2.3 million parents and guardians that signed them up. At the end of the first quarter, more than 600,000 teens and their parents and guardians had joined as paying members for a conversion rate of greater than 10%. We continue to outpace our 2019 conversion rate, the last time we ran a similar program. Finally, We recently republished our 2022 Environmental, Social, and Governance Report, which demonstrates how we are delivering our purpose to create a more judgment-free planet where health and wellness is within reach of all. Looking to the future, I am confident that we will continue to be a differentiated and disruptive force in the health and wellness industry as we have been for over 30 years. We believe that affordable fitness is essential, especially today as research continues to show the other benefits of working out to overall health and wellness besides weight loss. 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.