Basic-Fit N V Ord

Hello and welcome to BasicFits Q1 2025 Trading Update Call and Live Audio Webcast. Please note that today's conference 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. If you require assistance at any time, please press star 0 and you'll be connected to an operator. I will now hand you over to your host for today's conference, Richard Picker, Head of Investor Relations. Sir, you may begin.

Thank you, Allen, and welcome everyone to this call. With me today are CEO René Moos and CFO Maurice de Klerk. And in this call, René will give a short introduction, after which both René and Maurice will be available for questions. This call is being broadcast live on our website and a recording of the call will be available shortly afterwards. As usual, I would like to point out that safe harbor applies. And with that, René, I hand it over to you.

Thank you, Richard, and welcome everyone to today's call. As stated in our press release this morning, we are pleased to report strong growth figures for the first three months of this year. and we are comfortable with our four-year guidance as communicated in the four-year 2024 earnings release a few weeks ago. During the first three months, we expanded our club network by 41 clubs, reaching a total of 1,616, up from 1,506 clubs in the first quarter of 2024. In Q1, we opened 43 and closed two clubs. We opened 17 new clubs in France, where we now operate 875 clubs. In Spain, we increased our club network by 11 to 220 clubs. In the Benelux, we increased the number of clubs year to date by four to 484. In Germany, we increased the number of clubs by nine to 37 clubs. Our membership base grew by 213,000 to 4.47 million. representing a 10% increase year-on-year. All countries experienced growth, with France and Spain showing the strongest performance. The membership growth in France was partly driven by our successful 24-7 club openings. Compared to last year, our revenue for the first three months increased by 17% year-on-year to $332 million. The increase in the results was a result of a strong growth in memberships combined with a higher average revenue per member. Partly offset by one sales day less as 2024 was a leap year. The average revenue per member per month in the first quarter increased to 2425 compared to 2357 during the same period last year. The importance in average revenue Improvement in average yields was partly driven by the introduction of a new membership structure in the beginning of 2025 with three options, Comfort priced at $24.99, Premium priced at $29.99 and Ultimate priced at $34.99. The main difference from the previous membership structure is that Premium members can now bring a friend only once a week compared to the unlimited times previously. while ultimate members can bring a friend at any time and freeze their membership two times four weeks a year. This membership structure is implemented in all countries except for Germany. So far, we see very positive results in terms of uptake of the ultimate and premium membership across all regions, similar to premium uptake in prior membership structure. The positive results in the first three months of the year put us in a good position to achieve our four-year targets, as outlined in our four-year earnings release in March. We are on track to add 100 clubs to our club network and achieve revenue of between 1.375 and 1.425 billion in 2025. We also maintain our outlook for underlying EBITDA less rent of between 330 and 370 million in 2025. And for overhead costs including marketing as a percentage of revenue of between 11.5 and 12%. We are very happy to announce that we have secured a new 200 million revolving credit facility with ABN AMRO and Rabobank, set to mature in June 2027. With this additional facility and our positive free cash flow in 2025 and 2026, we expect to have enough financial liquidity and meet any action requests from shareholders who choose to exercise their put option in June 26. We expect to launch the 40 million share repurchase program in Q2 2025 and reduce our leverage to below two times in 2026. With that, I conclude the presentation, and Maurice and I can now take questions. Operator, please open the line for questions.

Thank you, sir. If you'd like to ask a question at this time, please press star key followed by digit 1 on your telephone keypad. Please ensure that the mute function on your telephone is switched off to allow your signal to reach our equipment. If you find your question has already been answered, you may remove yourself from queue by pressing star two. Again, please press star one to ask a question. We will pause for just a moment to allow everyone to signal. We will take our first question from Mark Wasenberg, ING, your line is open, please go ahead.

Yeah, good afternoon, everybody, and thanks for taking my questions. My first question is on the clubs in France, the 24-7 clubs. Rene, maybe can you give a bit more color on the ingrowth you're seeing there that would cover for the 35 million investment? Can you give a bit more color maybe how these clubs are performing versus other, let's say, mature clubs in France? Yeah. Let's take them one by one.

Yeah, we see already in the first quarter that we see much better results. So yeah, we're comfortable that we'll be able to absorb the 35 million additional cost, definitely in 2026. So we'll take this year to grow to the amount of extra members that we need to cover that cost. And yeah, of course, it is very costly. But yeah, we focus on being there for our members. So We try to lower the hurdles for people to join, and next to price, always open is crucially important. And as you know, we have made huge investment in technology and systems, which really allows us to operate in the Benelux without staff, and that works really well. We can't do this yet in France, but we really believe that in the future that will also happen. And again, that is what we hope and expect, but if that doesn't happen, then in time we can change to a more efficient option because, yeah, currently we're working with a structure that we can stop any month, and that is actually a costly affair.

So you're basically saying that if the situation stays at the front, that you have to have someone in the gym, if it's 100% sure that that is the law going forward, that you will transfer maybe to a more cheaper do-it-yourself model or so?

Correct. That's exactly what I'm trying to say, yes. So meaning we now outsource it where we can cancel it on a monthly base. That's costly. So if it's clear that it's never going to happen, then we will do it with staff and then it will be, yeah, around half of the cost that we're paying currently.

And the more positive will be that you are allowed to do it with staff and you can kick them out in a month time.

Correct. That is actually what we are expecting.

Okay, and then maybe on the, can you give us maybe some numbers on the 24-7 gyms? Are they indeed showing, let's say, more than 30, at least 30 more member in-growth versus a normal club? Is that something you're seeing? Because you run the pilots, you have now three months of in-growth, those are emotions. Is that what you're seeing?

Yes, of course, the first quarter you always have more joiners than, let's say, the summer period, so you cannot say it exactly, but what we have seen until now, until half of April, we see definitely a good ingrowth that we can reach this, yeah, around 300 members on that 24-7 club. We don't really look at it that way. We actually look at it at Like if you have one club 24-7, then the clubs around it can also use it. So we're looking at we need around 100,000 extra members. And, yeah, if you have a cluster of three clubs, then we do one club 24-7. So, yeah, all in total we need 100,000 extra members more or less in France, and we're comfortable that we will reach that this year.

Okay, very clear. Then a question I think maybe for Maurice is on the refinancing of the convertible. So you secured now the facility, the $200 million facility. There's still, say, $100 million that you need to generate from your fee cash flow. Give and take that your fee cash flow, for whatever reason, does not come up to, let's say, $100 million by June next year. Do you have enough flexibility then to still manage that with your clip rollout or with your payables that you can bridge that gap and be absolutely sure that you can finance it from your own funds?

Yes. Good question, Mark. Yes. Yeah, first of all, we're quite comfortable that we will have enough cash flow to repay the remainder of the convertible bonds of 100 million, but we're also actually quite flexible in our club openings and also in the timing of our club openings. So the answer is yes, yeah.

Yeah, so you're not by contract obliged for them, let's say, in the first half of next year. You can phase it out to the second half if needed.

Well, of course, some of our clubs are already contracted, and we will open them at the beginning of 26, but we are still flexible.

Okay. And then maybe on the guidance you still have pending there from the capital market day, so the €460,000 per mature club. I think the question was also the full year numbers. But given the investment you're doing in France, is it then logical to assume that it's more a guidance, let's say, for 27? And do you believe still that it's feasible, given the trends you're seeing in your end market?

Yeah, I think the 460,000 per mature club is definitely feasible. If you look at the 1,200 mature clubs that we have now, That means we need 200 more members. I really see no reason that we will not reach that, especially taking into account the low fitness penetration in the countries where we're active. So yeah, there's still a lot of room for growth. Not sure if it's going to be 26 or 27. We have a combination of new club openings and we still have the call them the Corona openings. But we are convinced in time. We just don't know exactly which month, which year. But in the near future, we are very comfortable that we will reach the 460,000 EBITDA on a mature club.

Maybe a final one for me. It was not in the press release, but is there anything to mention or some information about the franchise business still on track for the second half launch?

Yeah, so... We only want to announce when we have concrete steps, so we will announce more detail in time, but we need to have a good contract with the right partners. We will take the time that we need to achieve this, so it's not really a deadline for us, but I understand your question, so our advice for modeling purposes, don't expect any meaningful contribution in 25 or meaningful in 2026 from franchise. We want to start with the right partner with the right contract.

But it's still on track.

It's still on track.

I might have a follow-up later on, but I'll leave the floor now for someone else to also ask a question. Thanks very much.

Thank you.

Thank you. We will take our next question from Robert Walsh, ABN Emerald. Your line is open. Please go ahead.

Yes, hi, good afternoon, everyone. I have a couple of questions as well. You added quite a few members in Q1 that was already flagged at the full year results. Can you share with us what the number of memberships would be in 2025 in your base case scenario? That's my first question.

Base case scenario. I'm not sure, as we explained a few weeks ago, is that we want to focus on two things, turnover and EBITDA. So we do not really want to communicate on growth, just looking backwards. So every quarter we will communicate how many members in growth that we expect. But if you look at last year, when we grew with around 450,000 members, and around 180 clubs. We will do less clubs now, so 80 clubs less. So logical, it would be a little bit less growth this year than last year. But again, we don't want to really set the amount. We just took that out. We want to focus on EBITDA and turnover.

Okay, thanks. Yeah, you already said something about the 24-7 clubs in France concerning memberships. But I was wondering, the additional costs that you flagged, what is the conclusion in Q1? Are the additional costs for these 24-7 clubs in line with your expectation range in Q1?

Yes.

Okay. Maybe a question for Maurice on the 200 million facility. Is that facility fully linked to the convertible? In other words, what happens if there are no redemptions in the theoretical case? Does the facility then cease to exist, or do you still have it then for the year thereafter?

Yeah, Robert-Jan, you're right. So the new facility is linked to the redemption of the convertible bonds. But if our convertible bondholders and everyone has the ability to decide for themselves, so it's not a zero-one situation, If they're all staying in, then we don't need a facility and we will not use it.

Okay, thanks. My next question is about the pipeline, the graph that you always put in the press release at the end. It shows that 31 clubs are under construction currently. Does this mean that you will open the four clubs that you have already opened in the quarter plus these 31 clubs in Q2? And if not, can you maybe then elaborate a bit on the facing of the club openings in 2025?

Yeah, so we will still open clubs in April, May, even though when the clubs are finished in June or July, we will not open them. So that could be that the clubs are ready in June and we open them half of August.

And in general about the facing, because you're already 41% open, for 41% basically, you completed your ambition to open approximately 100 clubs. Is it not much in Q4, I assume, and the rest even is split between Q2 and Q3, roughly?

Yes, so our focus is always opening as many clubs as possible in January, February, and opening as many clubs as possible in September, October. It's the ideal period to open clubs, so January, September. But yet it's not possible to have all the builders. So that never works. But we try to manage that to get as many clubs open in that period. And also sometimes, you know, we take our time to open the clubs. So we start build outs a bit later because of the fact that we don't want to open them in June. So then let's say the rent contract started, but we start one or two months later. So we can play with that. Also sometimes builders want to start because they have the staff and don't have any work. So then we make an arrangement saying, okay, you can start, but we will pay you later. So there are many different, but of course we know and we have been doing that for the last many, many years. We will manage the cash flow that we have available with the openings that we can afford.

Those were my questions. Thank you. Thank you.

We will take our next question from Tim . Your line is open. Please go ahead.

Hi. Good afternoon, everyone. Thanks for taking my question. So the first one would be about the new membership structure you're going to introduce across the geographies, and my question would be, Could you maybe explain your thinking behind it, and especially if I look at the change you just made very recently in France when you introduced the weekly subscription again, and what you hope will happen with that new membership structure? I mean, I get it that you eventually want to get rid of the premium bring another person situation, but yeah, could you maybe explain a little bit the way of thinking behind it?

Yes. So what we typically always test different things in the market, not only in fitness, but in all kinds of other businesses as well. So what is happening in the members, especially phone membership and so on. So what is happening? What are people trying? What works? Of course, we build clubs where you can easily put in four or four and a half thousand people. We don't have that yet, so we... We're always happy to see more members join, so we always look at the right balance between the amount of members and the yield. Of course, if we lower the price to 10 euros, we will have more members, so it has to be a combination between the yield and the amount of members. So we're trying to optimize that. So for that, we try different things. So we have started now with the ultimate, making it more expensive, because what we actually saw is that even though They didn't really see the huge difference between the premium and the ultimate. You see that a lot of people really tend to go to the higher people who have the money and want the best membership are actually easily stepping over five euros extra put that way. So we see actually a bigger group of people going for the premium, going for the ultimate instead of the premium. So overall, we keep testing. So we tested the price per week. That didn't make a big difference, so we stopped at that. This is actually working. We've tested it in the end of last year. We rolled it out in all countries except for Germany this year since January 1st. And we saw a very good member in growth, but also a very good mix. You didn't see that immediately in the yield in the first quarter, but that's a seasonal thing. The people start with a big promotion, but you will definitely see some increase in the yields in, let's say, the coming year.

Okay, great. So basically what you found out is that in France, customers are less sensitive to higher prices eventually. Because if I look at it, you basically increase the base price by 5 euros, so by 25%. That's correct. Okay, great. Thanks for that. Then my next question would be about the openings. I mean, you saw in Q1 that the openings were, as last year, Heidi's Couto's France and Spain. Is that how we also should look at the openings that are still coming in the rest of the year, that most of them will take place in those two regions?

Yes, I would say that we will see. So we had nine openings in Germany. Yeah, I would say that if you look at the mix of the first quarter, something similar you will see in the rest of the year, correct?

Okay, great. Talking about Germany, could you maybe comment a bit on the market situation there and how you see things developing? Is there good interest? Is the membership increased according to your expectations?

Yeah, so the clubs we opened in the beginning, so the first 10 clubs were not very successful. I must say the last 10 clubs are very successful, or actually more than the last 10 clubs. So it's going the right direction. We are new in Germany, so it costs always a bit more money. So you spend a bit more marketing and you're unknown, so you fight yourself into the market. We have 37 clubs open now. We will open a lot more, say, the coming period. So, yeah, once we have this 50, 60 clubs and we are focusing on four regions now, I think you will see a good ingrowth of members.

Okay, great. And the reason why the first – yeah, sorry.

Yeah, the reason why the first 10 clubs were not very successful is a combination of things. Also, the competitors opening – not opening, but giving six months for one euro didn't help. We charge more. We thought one euro for six months is not a lot. So that didn't help. But of course, yeah, you cannot do that. If we keep opening clubs, you cannot keep giving six months for one euro. So they clearly stopped with that. And so now it's a more normal situation. But yeah, I think Germany is a very big country, a lot of people, good economic, sticky members, so we are comfortable that for us it will be a successful country in time.

Okay, so one last question about Germany and then I'll leave you alone. So you're not afraid that due to the quite high level of competition in Germany that you have to eventually just compete on prices and the yields would be quite under pressure in Germany?

No, I think there's actually low competition, personally. So when you look at the German fitness chains, they're growing, but they're growing by acquisitions. So they just put a new logo on a gym, and then they're growing as a company. But, of course, you're not growing the market by just buying from each other. You're growing the market by opening new clubs. That's really not happening. So if you look at the bigger chains in Germany, they grow extremely slow. And it is a huge market. And the fitness penetration is very low if you compare it to the Netherlands, for example. And on that amount of inhabitants, there's a huge opportunity in Germany for growth. Thanks.

That was very helpful.

Thank you.

Once again, if you'd like to ask a question, please press star 1 on your telephone keypad. We will take our next question from Lin Hotiket, KBC Securities. Your line is open. Please go ahead.

Good afternoon, everyone. I have a couple of questions regarding the tariffs. In case you start with the tariffs from the U.S., in case Trump starts with retaliating tariffs, what will be the impact on your expansion topics for the fitness equipment?

Yeah, so we're not buying anything from the US, so that helps. So we will not have any significant impact. We buy from European and Asian countries. So the Trump tariffs will not have an effect on our club openings or our club cost. But yeah, of course, a lot of things are happening so that the tariffs could be a problem, recession, you read in the paper, could be a problem. But also, for example, if you talk about recession, we believe really that our membership development will be really robust in a period like that. I've been in the business for more than 40 years now, and we've seen a lot of things happening, interest extremely high, recession low. So a lot of things happen in that period. And people cut back on big purchases like cars and big trips and TV screens and so on, but they really do not cut back on their health and social life. So it is really, for us, the recession, of course, we don't hope there will be a recession clearly, but if there's a recession, we think we will not be hit. At least in the past, we actually grew in that period. Because keep in mind that we are a low-cost company, so we might benefit actually from downgrading. People have now higher membership while we have exactly the same equipment. So it could work in our favor. Again, we're not hoping on trade wars and we're not hoping on recession. But if it happens, we don't think we get hurt.

Perfect. You actually answered my second question as well. So thanks for that. Have a nice day. Thank you, Lynn.

We take our next question from Natasha Brilliant, UBS. Your line is open. Please go ahead.

Thank you very much. Two questions for me. The new facility, and apologies if I missed it, but have you said what the interest rate is and how we should think about interest costs for next year if we assume that the put option is exercised and that you use the RCF, just what we should factor in for interest costs for next year. And then the second question, just coming back to your comments on the macro, anything to comment in the most recent weeks, any pickup in bad debt in any particular markets, or just anything to call out that has changed?

Thank you. Thank you, Natasha. As to your first question about the interest, the cost of the new bank facility is a bit higher than the cost of our current bank facility, but at the end of the day it will not have any meaningful impact on our financing costs this year. Of course, in the next 2026, I expect we expect an increase because if the convertible bond is redeemed, then the 1.5% coupon is out. So not a lot for this year and some uptake for 2026. And then maybe you could repeat your second question was about debt write-offs.

Yes, just whether in, you know, given the macro and given the volatility, whether there's anything to call out from trading in the last few weeks or through April in terms of bad debts or anything else, any change in trends, really?

Yeah. So we haven't, if we take a look at that in a somewhat broader perspective than over the past few years after COVID, we had a big cleanup in our debt space. And then an in-growth in 2023. And we expect to be on a stable level right now. So for the remainder of the year, no surprises. We expect no surprises.

If you look currently at the period that we have been through this year, so till let's say half of April, what we see is that the churn is lower. So we have more sticky members as we are. And the write-offs may be also good to say is the more we go south, so the more we go to France and Spain, the more memberships we have over there. There we have a larger part of members that with lesser good-paying discipline. So the more we grow in those countries, the bigger debt write-offs we will have. But it's a limited percentage. So overall, the macro debt, of course, on average, we charge €25 a month, so that it's not really a big impact on people. And again, what I said before, it's their social life, so it's also... People visit us a lot, and it's a social thing, and you cannot enter when you didn't pay. So people who want to join and want to work out, yeah, they have to pay, let's say, on average, what is it, 24 euros.

Okay, that's clear. Can I just come back on the comment about the interest rate? Are you able to quantify what the increased costs will be for 2026?

No, Natasha, we're not getting into that much detail.

Okay. But maybe to add to that, it is not a huge uptake. So what we are paying our current banks, it is not more than 50% more, as an example. So it's a limited increase to what we are paying on our current bank debt.

Okay. Thank you.

Thank you.

We have reached the end of today's conference call. I would like to hand over to Richard Picard for any closing remarks. Please go ahead, sir.

Thank you. And thank you, everyone, for joining today. And if you have any follow-ups at any point, please don't hesitate to call Victoria. Thank you. Bye-bye.

Bye-bye. Thank you for joining today's call. You may now disconnect.