Basic-Fit N V Ord

Hello and welcome to the Basic Fit Full Year Results 2023 call. My name is Laura and I will be your coordinator for today's event. Please note this call is being recorded and for the duration of the call, your lines will be on listen only. However, you will have the opportunity to ask questions at the end of the call. This can be done by pressing star 1 on your telephone keypad to register your question. If you require assistance at any point, please press star zero and you will be connected to an operator. I will now hand over to your host, Richard Pieker, to begin today's conference. Thank you.

Thank you, Laura. And good afternoon and welcome to everyone for this conference call during which we will discuss our results over 2023. With me today are CEO René Moos and CFO Hans van der Aar. This call is being broadcast live on our website, and a recording of the call will be available shortly afterwards. And as usual, I would like to point out that safe harbor applies. We will start now with Rene, who will discuss the highlights and the operational developments, followed by a more detailed look at the financial results from Hans. After these prepared remarks, we will open the call for questions. The call will finish no later than 3 o'clock. And with that, Rene, I would like to hand over to you.

Thank you, Richard, and welcome everyone for joining today's call. It's only a short while ago when we last met at our Capital Market Day back in November, but still plenty has happened since. 2023 was an interesting year, as we were confronted with high cost inflation right at the start of the year, higher rents, wages, and especially higher energy prices. To deal with these higher costs, we made changes to our membership structure at the end of 2022 and continued in 2023. This worked out really well for us. Over the past year, we have spoken a lot about the impact from higher membership pricing and more joiners choosing the premium membership on membership development. Yes, it did impact membership growth. but we also benefited from the increased average revenue per member. This contributed to revenue growth and also to one of our main KPIs, the underlying EBITDA less rent. By the way, from now on, we will call underlying EBITDA, underlying EBITDA less rent, to stress that this metric is after rent cost, as done pre-IFRS 16. I'm happy to report that we ended 2023 with 1,402 clubs, which is a record net increase of 202 clubs. We saw our membership base grow to 3.8 million as guided at our Capital Market Day. We recorded a 32% increase in revenue to 1,047 million, in line with our guidance of more than 1 billion. Lastly, our underlying EBITDA, less rent, went up by 28% to $261 million. Let's go to the next slide on club opening. In 2023, we continued our ambitious club rollout path and expanded our network by 202 clubs to 1402. We opened 213 clubs, mainly in our growth markets, France, Spain, and Germany, and we closed 11 clubs. With a net growth of 134 clubs, the French network increased to 781 clubs, or a plus of 21%. Recently, we opened club 800, and we made sure we got plenty of media attention in France as we opened a club on the Champs-Élysées in Paris. In Spain, we further accelerated our club opening program with a net increase of 49 clubs to 139, an increase of 54%. I will provide an update on Spain and the RSG Spain acquisition in a minute. In our newest growth market, Germany, we opened nine clubs, arriving at 12 by the end of the year. As Redewan explained in great detail during the Capital Market Day, focus will gradually shift towards opening more clubs in Germany, notably as from 2026. In the first months of this year, we've added five more clubs to our German network, including a second club in Cologne. We now have 17 clubs open in Germany. Lastly, Our Benelux club network increased by 10 clubs, bringing the total to 407. Let's go to the next slide about Spain. Last December, we announced the exciting news that we reached an agreement with the RSG Group for the acquisition of RSG Spain. The deal will add 47 clubs to our quickly expanding network. Including the new clubs we opened ourselves in the first months this year, it will lift our Spanish total to around 200 clubs. The new clubs can be found all over Spain, but there are a couple of strongholds like in Barcelona and the Madrid region. As you know, we already have a strong cluster in Madrid, but not yet in Barcelona. This deal will increase the number of clubs in the Barcelona cluster to nine clubs. A smaller number of clubs will also be added to our other successful and fast-growing clusters in Valencia and Seville. After the closing of the transaction, we will start with the rebranding of all McFIT clubs in order to be ready for the important September campaign. Including rebranding costs, the average amount we will spend on these clubs will not be much more than the normal new rollout. We will treat these clubs as new clubs in our network, and they will be included in our fall year 2024 network expansion target towards 1,575 clubs. To conclude, I believe this transaction is great news for the Spanish people, as there will be more and more affordable gyms near where they live, work, or where their friends work out. But we're not even halfway in Spain. Remember my comments made at the Capital Markets Day? We see potential to operating between 450 and 700 owned clubs by 2030 in Spain. Let's move to the next slide on membership growth. In 2023, our membership base increased by 450,000 to 3.8 million. In December, we experimented with marketing promotion on a limited number of locations, which resulted in decent sales numbers, and which contributed to reaching the 3.8 million membership at the end of the year. This number could even have been higher had we not increased our membership prices at the start of the year, and convinced more than 50% of the joiners to choose a premium membership. At our Capital Market Day, Hans went into great length to explain the impact on overall membership numbers from membership price increase and the much higher uptake of the premium membership by joiners. Hans also showed information about our 2023 churn rates, which were in line with pre-COVID trends. What is important for me is that our membership prices remain affordable, but also that our main Profit Growth Driver, our mature clubs, had an average membership of close to 3,300. This enabled us to realize a return on invested capital of 35% on mature clubs, despite the higher rent, the wages, and the higher energy cost. Our best performing countries in 2023, in terms of membership developments, were Spain and the Benelux countries. In Spain, we are clearly seeing the benefits of higher brand recognition thanks to our increased presence all over Spain and our expanding clusters. Our performance in France was somewhat impacted by the social unrest that affected consumer behavior in the first half of the year. Although we observed a trend towards normalization in the second half, results still fell somewhat below expectations. due to a generally weaker consumer environment. In the first couple of months of 2024, the membership development in France continued to be slightly behind expectations. To support our French membership development, we are implementing initiatives that have been very successful in the Benelux countries. This should improve our performance as from the second half of 2024, Visible initiatives include longer opening hours of our clubs and selectively also having clubs open 24-7. Another visible element is the installation of massage chairs in all our French clubs. These chairs have been very popular in the Benelux and we expect to have them operational before the start of the post-summer campaign. Let's go to the next slide. We continue to have a strong opening pipeline. In our club rollout plans for 2024, we have taken into account the uncertain macroeconomic developments and the wish to have enough liquidity. For 2024, we expect to increase our network from 1,402 clubs to around 1,575 clubs. including in this figure, are the RSG Spain clubs. As you can see in the chart, until mid-March, we grew our network by 57 clubs. Adding the RSG Spain clubs in the next few weeks will lift our net growth total to over 100 clubs. Let's go to the next slide with our growth track record. The updated numbers on this slide show that between 2016, the year of our IPO, and 2023, all our main KPIs, excluding average yield per member, have recorded a compound growth rate of between 18% and 22%. And that is despite two to three years of COVID restrictions. With all the plans we have in mind or are implementing, and the continuous improvement of our product offering, I'm convinced we will continue to deliver strong growth rates going forward. We've only just begun with our journey to make affordable fitness available to everyone, everywhere. Being affordable is something that is really important to us. That is why the increase in average yield has been steady, but modest over the past years. but it will continue to climb towards more than 2450 this year, and this will help us to further improve our club margin and return on invested capital. We expect to reach the 2450 in 2024, despite the reintroduction of the basic membership for 1999 One Club in France and the founding member offer. Founding members are the first joiners of a new club, up until the first week after opening, who can benefit from a low membership fee for the entire duration of their membership. The founding member campaigns have been increasingly successful with a higher level of membership at the start. You can call that a head start, which for as far as we can now see, is maintained during the in-growth period. As I told you during our Capital Market Day, we are exploring how franchise opportunities could maximize our future growth and returns. Let's go to my last slide, which is about our franchise opportunities. You might recognize this slide from our Capital Markets Day. I believe it is important to remind you that we have a unique technology stack that we could leverage on a franchise platform. From the automated member administration and customer journey, the basic fit app with digital classes and coaching, to site selection and construction capabilities. We have all the tools available to help our future franchisees to be as successful as possible. Franchising would enable us to become active in more countries, possible also continents other than Europe. We are currently in the process of determining which of the several franchise options we consider most suitable. We expect to have a clear view before the end of 2024. This concludes my part of the presentation. I now hand it over to Hans for the financial review.