Planet Fitness, Inc.

of our members join as Black Card member. Now to our debt. We have a tranche of debt of approximately $600 million that comes due in September of 2025, which we anticipate refinancing in the middle of this year, subject to overall market conditions. Based on forecasted interest rates, we believe our overall weighted average interest rate for all of our debt would still be below 5% when we refinance that tranche. Now to our first quarter results and our revised 2024 outlook. All of my comments regarding our quarter performance will be comparing Q1 2024 to Q1 of last year, unless otherwise noted. We opened 25 new stores compared to 36. We delivered system-wide same-store sales growth of 6.2% in the first quarter. Franchisee same-store sales growth increased 6.3% and corporate same-store sales increased 6.2%. Approximately 70% of our Q1 comp increase was driven by net member growth, with the balance being rate growth. Black card penetration was 62.1%, an increase of 10 basis points. For the first quarter, total revenue was $248.0 million compared to $222.2 million. The increase was driven by revenue growth across the franchise and corporate-owned segments. The 12.2% increase in franchise segment revenue was primarily due to increases in royalties, new stores, and ad fund revenue. For the first quarter, the average royalty rate was 6.6%, up from 6.5%. The 15.6% increase in revenue in the corporate-owned store segment was primarily driven by the same-store sales growth as well as new and acquired stores. Equipment segment revenue decreased 8.6%. The decrease was primarily driven by lower revenue from equipment sales to new and existing franchisee-owned stores, which was driven by fewer new store placements as well as the shift to more strength equipment versus cardio. As we noted last quarter, the shift in the equipment mix brings down overall sales on a per-store basis. We completed 14 new store placements this quarter compared to 18 last year. For the quarter, replacement equipment accounted for 59% of total equipment revenue compared to 58%. Our cost of revenue, which primarily relates to the cost of equipment sales to franchisee-owned stores, amounted to $19.0 million compared to $19.4 million. Store operation expenses, which relate to our corporate-owned store segment, increased to $74.4 million from $66.0 million due primarily to new stores opened or acquired. SG&A for the quarter was $29.2 million compared to $27.8 million. Adjusted SG&A was $27.3 million. This includes a $1.6 million adjustment for severance-related expenses incurred in connection with a reduction in force that we mentioned on our last earnings call, as well as a $0.3 million adjustment for CEO transition-related expenses. National advertising fund expense was $19.8 million compared to $17.0 million. Net income was $35.0 million, adjusted net income was $47.3 million, and adjusted net income per diluted share was $0.53 per share. Adjusted EBITDA was $106.3 million, and adjusted EBITDA margin was 42.9% compared to $90.2 million with adjusted EBITDA margin of 40.6%. By segment, franchise adjusted EBITDA was $76.1 million, and adjusted EBITDA margin was 73.2%. Corporate store adjusted EBITDA was 42.4 million and adjusted EBITDA margin was 34.6%. Equipment adjusted EBITDA was 4.8 million and adjusted EBITDA margin was 22.2%. Now turning to the balance sheet. As of March 31st, 2024, we had total cash, cash equivalents and marketable securities of 486.4 million. compared to $447.9 million on December 31, 2023, which included $46.2 million and $46.3 million of restricted cash, respectively, in each period. In Q1 2024, we used $20.0 million to purchase slightly more than 300,000 shares. Total long-term debt, excluding deferred financing costs, was approximately $2.0 billion as of March 31, 2024, consisting of our four tranches of fixed rate securitized debt that carries a blended interest rate of approximately 4.0%. Finally, moving on to our updated 2024 outlook, which we provided in our press release this morning, we're providing wider ranges for the targets that we are updating given the current choppy environment in which we're operating. We continue to expect between 140 and 150 new stores, which includes both franchise and corporate locations. We also continue to expect between 120 and 130 equipment placements in new franchise stores. For the full year, we continue to expect that re-equipped sales will make up approximately high 60% of total equipment segment revenue. We also continue to expect that this year will look more similar to 2023 in terms of the quarterly cadence for those sales, as it was a more typical year versus the prior three that were impacted by COVID. As I noted earlier, the shift to more strength equipment versus cardio will bring down overall sales on a per-store basis. During Q1, we continued to refine the mix that will result in slightly lower sales per store. We are maintaining our equipment segment profit dollars, so therefore margin rate will increase. We now expect system-wide same-store sales growth to be between 3 and 5 percent. Previously, we expected between 5 to 6 percent growth. This reduction is driven by the factors that Craig noted earlier. All of the following targets are updated to reflect the changes I just mentioned and represent growth over fiscal 2023 results. We now expect full-year revenue to grow in the 4 to 6 percent range. Full-year adjusted EBITDA will grow in the 7% to 9% range. Adjusted net income to increase in the 6% to 8% range. And adjusted earnings per diluted share to grow in the 7% to 9% range. We continue to expect shares outstanding to be approximately 88 million, which is inclusive of the repurchase of 1 million shares over the course of the year, the amount we shared back at our investor day in November of 2022. And we continue to expect our net interest expense to be approximately $70 million, which assumes we refinance the tranche I mentioned earlier at 6.5%. We will update any applicable guidance targets, if necessary, pending the completion of the anticipated refinancing transaction later this year. Lastly, we continue to expect CapEx to be up approximately 25% and DNA to be up between 11 to 12%. Now, despite a challenging start to the year, we believe that the changes we have made as part of our new franchisee growth model, along with the upcoming price increase, improve our store economics and enhance our differentiated brand and market-leading position. We continue to be a highly attractive franchise system that generates strong and stable free cash flow for long-term sustainable growth and increased shareholder value. I'll now turn the call back to the operator to open it up for Q&A.

Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask your question and are listening via loudspeaker on your device, please pick up your handset and ensure your phone is not on mute when asking your question. And please limit yourself to one question in a single follow-up. Your first question comes from the line of Simon Siegel with BMO. Please go ahead.

Thanks. Hey, everyone. Morning. Hope you're all doing well. I was hoping you guys could elaborate a little bit on the lower guidance, particularly just in light of what looked like a pretty solid quarter for member growth and top line X equipment. So is there anything you've been seeing since the start of the quarter to raise that concern, any uptake and churn or anything like that? I guess I'm just trying to understand your characterization of the disappointment in the quarter. I get that member growth was slightly below the last two years, but it still seemed pretty solid. The comps were encouraging, and you had the new members. So I guess I would have thought this was a pretty good quarter, excluding equipment miss. So any color you could give there. And then, Tom, does the number, does the guidance include any of the lift or assumptions from the price hike to 15? Thank you.