Q1 2020 Earnings Call
Good afternoon, My name is Jason and I will be or conference. Operator today at this time I would like to welcome everyone should be planet fitness first quarter 2020 earnings call Orange had been placed on mute to prevent any background noise.
After the speaker's remarks, there will be a question and answer session.
To ask a question about John Please press Star then the number one on your telephone keypad.
To withdraw your question press the pound.
I would now let's turn the call over to your speaker today Brendon Frey. Thank you. Please go ahead Sir.
Thank you for joining us today to discuss planet fitness is first quarter 2020 earnings results.
On today's call or Chris Rondeau, Chief Executive Officer, Dorvin widely President and Tom Fitzgerald, Chief Financial Officer.
Following the prepared remarks, we will open the call up for questions.
I would like to remind you that certain statements. We will make in this presentation are forward looking statements.
These forward looking statements reflect planet fitness is judgment and analysis only as of today and actual results may differ materially from current expectations based on a number of factors affecting planet fitness is business.
Accordingly, you should not place undue reliance on these forward looking statements.
For a more thorough discussion of the risks and uncertainties associated with the forward looking statements to be made in this conference call and webcast.
We refer you to disclaimer regarding forward looking statements included in our first quarter 2020 earnings release, which was furnished to the FCC today on form 8-K, as well as our filings with the FCC referenced in that disclaimer.
We do not undertake any obligation to update or alter any forward looking statements, whether as a result of new information future events or otherwise.
In addition, the company may refer to certain adjusted non-GAAP metrics on this call.
Explanation. These metrics can be found in the earnings release.
Earlier today.
With that I'll turn the call over to Chris Rondeau, Chief Executive Officer of Planet Fitness Chris.
Thank you Brenda and thank everyone for joining us today before we dive into our Q1 results I want to address the unprecedented Cooper 19 situation first and foremost our thoughts or with the family members of those who have lost loved ones. As a result will depend on like in health care providers first responders and essential workers on the frontline supporting our communities.
Given that he has been challenging realities for all businesses a march 17th we of course, all of our nine corporate stores and encouraged by franchisees do the same marsouin second all of our more the 2000 locations will close throughout this evolving situation. We had been in constant communication with our franchisees in our team members also worked to keep our members informed.
Engage with our brand.
Upon the closures of our stores at March all members accounts were frozen we communicate to them that they would not be charged any fees, while our stores closed.
Yes, It was monthly membership dues in annual fees.
As a leader in the industry, we enter franchisees, leaving is critical that plan. If it is put our members interest first and foremost. We believe this message has been extremely well receive you may have also helped minimize cancellation request in fact.
We did not see any material change in our member count do cancels in the second half a marks during the initial closure period.
Our corporate headquarters employees continue to work remotely to support the business in our franchisees during this time.
Given the state orders still in place in many states new store development in equipment placements arnhold at this time.
Our teams and franchisees had been harder work preparing for our reopening of our perspective stores.
Alluding developing ecova 19 operational playbook to address things like enhancing the DC policy procedures reduce contract between team members and members physical dispensing and more as it may 1st we'd be getting thoughtful things reopening approach and opened three stores two in Georgia and one in Utah in accordance with local official guidelines and with the same.
A few of our teams in members our top priority.
We will continue to monitor these guidelines and reopen additional stores throughout the system. We believe we can safely do so in these first few clubs. We have reopened we are executing our updated operational procedures outlined in our cobot 19 operations playbook. We believe this is important for a step and will allow us to obtain key learnings in advance of a broader reopening rollout.
Now onto our Q1 results 2020 got off to a strong start Tom ago, written more detailing how coordinating impacts our first quarter results I'm, certainly pleased where our system wide same store sales increase of 9.8% on top of a 10.2% increase in a year ago period.
In total we opened 39 new stores in the first three months of the year ended the first quarter with 15.5 million members in 2039 stores system wide.
The jumps back 2020 planet fitness was the presenting sponsor uptime squares iconic newsy celebrations once again, which continues to be great opportunity for us. The quick ran front and center on a global stage at the time consumers are thinking about health wellness and joining a Jim.
Our partnership a biggest loser also kicked off in January this platform allowed us to reach captive viewers, who are interested in health and fitness and maybe looking to make the lifestyle change in brand messaging that reinforces health benefits is different than traditional gems.
As part of my marketing mix in Q1, we leaned heavily into TV advertising, debuting new creative which believe resonated with first time was a casual Jim doors as I said, new member sign ups were strong in first quarter. It was business as usual both usage in new member sign ups perspective, right up until the stores started to close due to colder 19 in mid March.
Based on the enhances we've made on a marketing mix messaging and creative in the strong new joint trend in the first quarter, leading up to the store closures in mid March we're confident that we have the right strategy in place for the future to continue to optimize overall effectiveness in results.
His effort to keep our members active and engage with our brand well at home will accelerate our number of digital initiatives, including our United We move to marketing campaign.
This includes daily life worked through Facebook that our 20 minutes or less featuring plant that is traders in special celebrity guess, such as Wieland Patriots football player Julian Edelman biggest loser trainer Erika Lugo famous acting director, Jerry O'connell from an engagement and brand perspective. These workers have been extremely successful averaging more than 100000 views per workout and four point.
5 billion median pressures.
We've also encouraged people to download when it's an app for access to more than 500 exercises that can be done at home with minimal or no equipment. As a result was seen a 173% increase in average daily work on our mobile App.
Finally last month, we announced a new partnership what I spent a leader is streaming work home workouts and interactive connected fitness technology to further accelerate our digital offerings. The first step in our collaboration was a series of new streaming work that's available to anyone exclusively on the plan does that have used with minimal or no equipment to workers are available for free to both planet fitness members and non members.
Span a broad range of fitness wellness categories, including at home cardio and strength training stretching in more.
We continue to explore possibilities for expanding our partially but I sit in the future in order to deliver more value to our members.
Looking ahead.
Our goal is to ensure that we come out of the over 19 situation with the same store count member Count we had we began.
I could not be more proud of the way our key members of franchisees have United to muscled through this together is support one another during this time.
Our current focuses on creating and maintaining a healthy stable environment inside our stores our team in our members for when they reopen in example is a few steps we've taken to assure this include.
Providing personal protective equipment for all employees increased clean stations throughout our stores, enabling members use our cardio equipment, while adhering to physical dystrophin guidelines touchless checking for members via our mobile App in more.
These are difficult times for everyone in impact on our industry. Overall economy took over 19 is still unclear at this point however, based on several factors such as.
The strength of the planet fitness brand, our differentiated business model, our attractive price points and welcoming non pivoting store environment.
Great group of employees and franchisees and an increased focus on imports of health and wellness.
Im confident we will emerge from this period well positioned to further expand our leadership role in the if it is industry I'll now turn the call over to Dorvin.
Thanks, Chris as Chris said, we continue to be optimistic about the future of planet fitness for several reasons one of the biggest being the overall strength of our franchise system and our size and scale advantage versus our competition.
Our system is comprised of approximately 130 franchise groups, which compares with approximately 190 at the time of the Apio as there have been some consolidation over the past five years.
Today, the average franchisee owns approximately 15 stores with our largest owning 169 stores are approximately 8% of the store base.
Over 130 groups 13, our majority owned by private equity and represent some of our largest operators.
All in all we have a very experienced group of seasoned operators that have been operating the planet fitness brand for many years.
Well franchise stores average EBITDA margin percentages have historically been in the high 30% range on an adjusted for wall EBITDA basis. Most franchisees have been reinvesting significant cash flows back into the business growing their store fleet, replacing equipment and remodeling older.
Our locations.
In the past few years, we've had many franchisees either sell their business to another franchisee or as I mentioned taken significant investments from private equity in the past some of these private equity firms have indicated to us that they are seeing higher returns on their investment in the planet fitness brand.
Then in many of their former or existing portfolio companies and have significant runway to build out more planet fitness stores. In fact, several these private equity firms have indicated to us recently that they remained extremely interested in further investment in our brand.
When it comes to the capital structure of our franchisees in their balance sheets. It varies some of these businesses have put on leverage in recent times, while others have focused on increasing their financial flexibility and sustainability, regardless of their financial condition. Oliver franchisees are dealing with the same challenge.
As as other businesses that have had the close due to co would not team with no revenue and related cash flows they have taken actions to reduce their cash burn until the stores can start to reopen.
In general we're hearing that franchisees are having productive discussions with other landlords about different forms of rent relief. We know many of our groups were also successful in assessing.
The government assistance through the SBA payroll protection program to help cover their day to day expenses.
More choosing to continue to pay a portion of their workforce, while others have temporary furloughed many of their employees.
At the same time, we are providing flexibility on replacement equipment and store remodel requirements and we'll continue to do so over the near term as we deem necessary.
Finally, we're working closely with our entire system to prepare for one stores are able to reopen to ensure we provide a safe environment for our staff.
Team members and our members.
In terms of development as the overall economy went into shutdown mode. This has had a significant impact on both existing and near term construction projects as well as the overall real estate pipeline activities.
As states and communities reopened.
And our conversations with franchisees continue will be on a better position to evaluate what system wide new store openings and 2020 will look like.
Well, we're not providing guidance at this time due to the high degree of uncertainty created but could not teen.
We anticipate that expansion will ramp slowly once we emerge from this crisis.
It's within the realm of possibility that our equipment placements and our replacement equipment sales could be down 50% or more from our record high in 2019, and this headwind could linger into 2021 as well. This is not a reflection of any change in our market opportunity rather it is based.
On the uncertainty of how the economy will reopen combined with the fact that franchisees are focused on preserving liquidity in the near term.
That said, we believe the impact from coal would not team on the real estate industry will provide a more favorable real estate environment for the planet system over the long term as we continued to build out toward 4000 locations in the us.
With that I'll turn it over to Tom who will review the Q1 financials.
Thanks, Dorvin and good afternoon, everyone.
The first quarter total revenue was 127.2 million.
Compared to 148.8 million in the prior year period.
As you've heard cobot 19 significantly disrupted our business starting in the middle of March.
Ill walk through how the shutdown impacted our overall first quarter results and then provide color by segment.
The biggest impact on our Q1 top and bottom line was the deferral of revenue related to monthly membership dues collected in March before stores closed due to cope with 19.
As previously announced members will be credited for any membership dues paid for periods when our stores were closed.
We expect to recognize franchise revenue and corporate owned store revenue associated with those membership dues that were drafted in March.
Once stores reopened.
In addition, due to the outbreak of Cobot 19, we were unable to move forward with planned new and replacement equipment sales over the last few weeks of March.
Let me summarize the impacts to our topline results due to cover 19, which caused total revenues to be down $35.4 million.
Due to the following three drivers first.
There was a $20 million deferral of revenue related to monthly membership dues collected in March before stores closed.
That's made up of 14.1 million from franchise royalty and 5.9 million from corporate owned stores monthly dues.
Second.
$4.6 million of NAF contributions were deferred and lastly in the equipment segment, new and replacement equipment sales were reduced by $10 million.
And equipment placement revenues were zero point $8 million lower in the franchise segment.
Now with that as context, we're very pleased that first quarter same store sales increased 9.8%.
From a segment perspective franchise same store sales increased 10.0% and our corporate stores same store sales increased 7.3%.
Approximately three quarters of our Q1 comp increase was driven by net member growth.
With the balance being great growth.
The rate growth was driven by 26 basis point increase in our black card penetration to 60.9%.
Compared with the prior year period.
Combined with higher black card pricing for new joints.
The rate growth was mostly driven by black card pricing increase over the past two years the impact from Black card pricing drove approximately 210 basis points of the increase in system wide same store sales.
No one stores are closed and don't draft monthly membership fees or don't execute a full drop upon opening they are not included in the comp base and therefore are not included in the same store sales calculation for that month.
There was a total of 164 stores that were closed prior to March 17th and therefore did not drop.
Of the 164 139 would have been in the comp base, including a 130 franchise and nine corporate stores.
Due to their closure they were excluded from the same store sales calculations for the month of March.
Moving onto a review of our segments revenue results franchise segment revenue was 58.5 million compared to 65.8 million.
In the prior year period.
Now, let me break down the drivers for the quarter.
Royalty revenue, which consists royalties on monthly membership dues, an annual membership fees was 40.6 million compared to 44.7 million in the same quarter of last year.
The 40.6 million of revenue excludes 14.1 million of deferred revenue from stores that closed after the March draft.
As a result of cobot 19.
The average royalty rate for the first quarter was 6.3% up from 5.9% in the same period last year, driven by more stores at higher royalty rates compared to the same period last year.
Next our franchise and other fees were 6.2 million compared to 5.4 million in the prior year period.
These are fees received from online new member sign ups. The recognition of fees paid to us for franchise agreements area development agreement and the transfer of existing stores and fees received from processing dues through our point of sale system.
The increase was primarily driven by higher web join fees due to higher web joint acquisition percentage of total joints.
And higher joint volume compared to the same period last year.
Also one of the franchise revenue segment is our placement revenue, which was 2.0 million in the first quarter compared to $2.8 million a year ago.
These are fees, we received for the assembly and placement of equipment sales to our franchisee owned stores within the U.S.
The decrease reflects the lower new store placements, we executed in the quarter compared with a year ago due to a challenging year over year comparison in our inability to place equipment late in the quarter due to covert 19.
I will further discuss the number of new equipment placements later in my script, when I discuss equipment revenues.
Finally national advertising fund revenue was 9.2 million compared to 11.8 million last year.
The net revenue in the current quarter does not include 4.6 million of deferred math revenue that was collected but not recognized related to cope with 19.
Our corporate owned stores segment revenue increased 6.5% to 40.5 million from 38 million in the prior year period.
The 2.5 million increase was due to higher revenue of 5.5 million from corporate owned stores opened or acquired since the end of the first quarter of last year.
Partially offset by lower revenue of 3 million from stores included in the same store sales base, but whose monthly membership dues were deferred for the month of March.
The 40.5 million of revenue for the quarter excludes a total of 5.9 million of deferred revenue from stores closed after the March draft due to cover 90.
Turning to our equipment segment revenue decreased by $16.8 million or 37.4% to 28.2 million from 45 million.
The decrease was primarily due to lower new store equipment sales as well as lower replacement equipment sales to existing franchisee owned stores.
Now as we discussed on our fourth quarter call in February we were up against a record high number of new store placements in the first quarter of last year.
And expected this figure to be down year over year.
In addition to the challenging comparison, the decrease reflects approximately $10 million of lower revenue from new and replacement sales due to cope with 19.
In the first quarter, we had 30, new store equipment placements, including one international which was down 24 from the prior year period, and 10 below our expectations due to the cobot 19 impact.
Our cost of revenue, which primarily rates relates to the direct cost of equipment sales to new and existing franchisee owned stores amounted to 21.8 million compared to $34.5 million year ago.
A 36.7% decrease and inline with the revenue decrease I previously mentioned.
So operation expenses, which are associated with our corporate owned stores increased to 26.2 million compared to $20.9 million year ago.
The increase was primarily driven by cost associated with the seven new stores opened and 16 stores acquired since the ended the first quarter of last year.
SGN eight for the quarter was $17 million compared to $18.2 million a year ago.
The decrease was driven primarily by reductions in variable and equity compensation related to cope with 19.
National Advertising fund expense was 15.2 million the difference between NAF expenses and that revenue. This quarter, primarily reflects the deferral of the net revenue associated with the March draft.
Adjusted EBITDA, which is defined as net income before interest taxes, depreciation and amortization adjusted for the impact of certain noncash and other items that are not considered in the evaluation of ongoing operating performance.
Was 46.5 million compared to 63.4 million in the prior year period.
A reconciliation of adjusted EBITDA to GAAP net income can also be done in the earnings release.
The overall impact from Cobot 19, due to the deferral of revenue discussed previously.
On our first quarter adjusted EBITDA was approximately 24.6 million.
Additionally, as previously mentioned there was a $10 million decrease in equipment sales, which would equate to 2.5 million decrease and adjusted EBITDA.
Adjusted net income was 14.4 million down 18.3 million from a year ago and adjusted net income per diluted share was 16 cents a decrease of 19 cents.
The declines reflect the 24.6 million dollar impact to adjusted EBITDA due to the deferral of revenue discussed previously, which equates to $18 million of adjusted net income and 21 cents of adjusted net income per share.
Our adjusted net income and EPS in the first quarter also includes the 10 million dollar of reduced equipment sales due to the impact of coven 19.
Now turning to the balance sheet as of March 31, 2020, we had cash and cash equivalents of 547.5 million compared to 436.3 million on December 31 2019.
The increase in cash and cash equivalents since the end of 2019 was driven by free cash flow generated in the first quarter of approximately 64.1 million combined with the $75 million, we drew down on the variable funding notes during quarter one.
Based on the current situation and our focus on preserving liquidity, we announced in March that we were halting our share repurchase activity for the time be.
Additionally, we took additional measures to reduce our monthly cash burn, including the previously announced compensation reductions for our leadership team and our board of directors.
Total long term debt, excluding deferred financing costs was 1.81 billion as of March 31, 2020, consisting of our three tranches of debt.
And 75 million related to the fully drawing on our variable funding notes in March of 2020 to preserve liquidity and flexibility.
Our WPS debt structures Covenant light, we have to maintenance covenants debt service coverage ratio and a total system wide sales threshold.
These are both tested at the end of every quarter and calculated on a trailing 12 month basis.
And our most recent debt covenant reporting period of March.
2020, our debt service coverage ratio stood at 4.16 times and total system wide sales was 3.25 billion.
Both of these levels are well above a potential triggering event.
For the Dfc are the first trigger would occur when that ratio falls below 1.75 times at which point, 50% of our cash inflows would be automatically trapped to service the principal and interest.
For our other maintenance covenant the trigger occurs when total system wide sales on a trailing 12 month basis fall below 1.25 billion.
If this were to happen rapid amortization would only kick in if it was declared by the control pardon.
At the end of the first quarter, we had a cushion of approximately 50% and 60% to those thresholds for our DS CR and system wide sales maintenance covenants, respectively.
Finally, we would only be at risk of tripping the rapid amortization DSD, our covenant that far stores remain closed through the ended the year and again the control party would have to declare rapid anymore as it does not trigger automatically.
Similar to our liquidity position, we believe we have sufficient headroom for our two maintenance covenants.
Now as Dorvin alluded to with respect to guidance based on the significant near term disruption to our business caused by coven 19, and uncertainty around when conditions will normalize we're not providing an updated financial outlook at this time.
While these are undoubtedly the most difficult operating conditions. The company has ever faced we feel very good about our ability to weather the storm and are confident that planet fitness will be able to resume its long track record.
Delivering growth.
And delivering increased profitability.
I'll now turn the call back to the operator for questions.
The slim I would like to remind everyone. If you would like to ask your question. Please press Star then the number one on your telephone keypad, we will pause for just a moment to compile the culinary roster.
Your first question comes from the line.
Comic from Jefferies. Your line is open.
Yes, Thanks, a lot and good afternoon everybody.
My first question I wanted to ask Chris Chris.
You've been a.
Lifelong participant in the industry and we're starting to see more and more news around.
Bankruptcies.
Can you give us your your perspective on what this movie looks like right now compared to other movies in the industry in the past and talk about.
The market share opportunities that are imported from that.
So on your perspective thanks.
Sure Thanks ready the scrip.
Yes, I think.
Silver lining I think in all this is that it's definitely going to probably accelerate.
One of the.
I guess longevity of a lot of our competition that we've been talking about for few years now and I think with the strength of our model and profitability of our model compared to others and the recent Gold's gym bankruptcy in closing of that 30 stores and what you hear about 25 fitness others I think it's.
Unfortunately is a lot of what.
What they've been I guess known for and a lot of what we had been known for being the opposite of and it's really cater to that casual first taima.
Keeping up on Capex, which is a big one Randy I mean, our stores are always fresh they're always knew were not build at once and what it fit until it was a low slowed debt. So I think this is definitely accelerating.
The timing of would've probably taken at these pandemic didnt happen, so I guess thats a silver lining here.
And actually asked I do think that would have situations like this that people will happen. There's some server has been done right as is definitely a a renewed appreciation I think for the importance of being healthy in endpoints of your health, Indeed fit and I'd just longer term will help the industry and but you've got to weather the storm to get.
Through it so I think we're in a good spot and I think you're right. This will pave the way to widen our mode, even more so than it already is and excited to get back to work here.
Helpful and then.
A follow up you mentioned that I believe some of the clubs.
Open a little bit here.
In the first few that kind of opens.
Any particular learnings about what you're seeing from the members for the club operators and then related to that when you have your I think you have the franchisee counsel what are the topics that are being discussed in most in the franchisee County Council right now and I cannot tell how is that high.
Using that kind of physician.
Opening plans and other things for the business going forward.
Sure had great questions. So the openings. It's been just three clubs right now we have two in Georgia, one in Utah has only been a few days those first in May we opened those and as mentioned in mice in my in my opening remarks. It was war, we had about a 100 page.
Cobot 19 operations list of all the protocols and policy, we put in place for members and staff and cleaning procedure. So we're using these five clubs make should we have achieved across and I started as we roll up to the broader system, which right now we're planning, but 150 stores between may 13th and May 15th to open so were feeling that bucket for that for a broader opening.
It's early again can four days, but I'd say so far.
Really keys with the joining momentum early on I think there is little bit of pent up demand cancellations aren't really anything surprising.
Or out of whack, there, which would be great usage is it a bit slower I think.
On a CEO round table of.
Seven Jim change around the world.
And one in particular, whose ahead of us in this whole pandemic and he's been open now seven several weeks with about a 170 stores.
And a lot what he's seeing at the pent up demand is joins our head of last year's cancellations are on par with last year. So, yes, any pent up demand in the member usage.
Which is a little bit different is slow out of the gate and seven weeks and now they're about 80% of last year's member usage. So.
But I think the demand is the most.
Encouraging and exciting thing for me, which back to I just had a minute ago as I think there isn't a renewed interest in exercise in being healthier and I honestly see it ready in my own neighborhood I mean, the PPC walk around and they want to add neighbors until this all happens I think people are just paying more attention to that.
The other question was on the.
Brazil, one makes a franchisee at council big one that Randy and Dorvin filter jump in here the big when there really is.
The opening procedures manual they use our franchisee committees to up design that arent page document and the the big one is.
They all want to direct side to get open and grow and it's more or less getting through the storm and how they want to stake.
On the right side of their 88 schedules and Reequip scheduled stuff, but.
Is there any concessions that we can make to give them. Some leeway so they're not having to re equipped right now and then I have an open so.
Those conversations around that and giving them. Some some some rope here. So they can go and get their feet under him side drafting again in Angola and build up there till here.
Yes really helpful. It sounds like great partnership with the numbers and year. Your franchisee partners. So that's really great. So thanks, a lot and I'll move on.
Thanks Randy.
Your next question comes from the line of John Heinbockel from Guggenheim. Your line is open.
Hey, Chris two things.
How are you sort of or plan to communicate with members to get them comfortable.
Come back and once once that particular, Jim opens.
And then remind us of two things the your demographics, which I think skew younger.
One and then to kind of usage, even at peak times.
That would seem to not be an issue right you're clubs are not overwhelmed with members and they're not stay in for more than probably 45 minutes touch on those please.
Sure.
Members.
Like when we close down as communicating that they weren't going to be build for.
We weren't going to be open. So just like that communication is not communicating when they when the club plans to reopen what your billing process looks like as Thomas mentioned in his opening remarks, how we some members would build and then we close shortly after because of the.
On regulation, so we owe them credit so how that credit gets applied to their opening time, so slow that communication on top of on what they can expect when they see and they walk in the Jim's will definitely be different that first opening compared to when they what they saw when we close so.
More cleaning sanitization stations that we had before which we've always had them for decades, which is not all that common unfortunately in the gym world, but we've always had more of those.
More signage more signage reiterating our already leading policies and procedures where.
In our stores, our members or cleaning as much as our staff is I mean, it before and after they use a bench depleting.
Treadmill or their work at rents that are on so reiterating all of that lot of that self checking in a way, where now using where forcing app download using the barcode there there's no more than men. The staff taken the person's keys are key take from their hand that scanning get back to him where their phone, they're actually doing themselves on the way that way and so thats some of the things that they were for express.
And to the member.
On the on the age thing Youre right. Yeah. So we have 50 million numbers, but 50% of millennial.
And James Eases, another big part of that.
So.
I think anything on the usage is a big one there is that the as we've always said we have mfive thousand workers in the store about two thirds of though that money through Wednesday.
As you already have those are evenings.
Cost between four and seven so if you do feel 5000 workouts on a Monday that same club on a Friday is doing 700, and the weekend Thats, two and three or 400 today.
Shifting to revisit that probably doing fivesix hundred are those between five and seven or or foreign foreign eight so it's really connecting the evening.
Really quick to that one though John is interesting is with work from home in those three recent clubs that are open.
The nine o'clock in the morning, and three in the afternoon hours are busier than I've seen so I think people are not having to come in the crack at Don before work in the not coming in afterward, digis using it throughout the day, so any stipulations on opening which these first three clubs. There is where you can't have more than 150 people in a club a onetime was technically.
Even a Monday night for one hours not that bad.
Even in January would be that bad. So this time of year to money nice that bad but hundred 50 now with this spread in their usage out throughout the day is even better for us.
And then and then lastly, maybe just to the mechanics of the deferred revenue.
Right. So that it sounds like that will get realized when each of those clubs opens so a lot of that would be.
Well I guess, what we spread over Twoq and Threeq is that fair.
Hey, John It's Tom It really depends on when the club reopens the vast majority as Chris said and we said in the opening.
You know drafted and then based on the advice of the authorities.
Jim's closed that's that's I think there is 164 clubs, who actually close before the draft. So just depends on when those clubs opened up and and the member essentially Burns off what is essentially a 30 day credit in most cases.
Okay. Thank you.
Yep.
Your next question comes from the line of Joe Altobello from Raymond James Your line is open.
Hey, guys good afternoon.
First question I want to go back to the notion of communicating.
Your members I'm curious if you guys Tony surveys.
Among your members how to gains how readily and how quickly.
They intend to return to the Jim I think equinox, it's something like that Im curious if you guys have any sense for.
Hey wants to store open.
Yeah, how quickly they come into the GM.
How how how long it might take to build back up to normal volume.
Yes, we've done some we did one where it was saying that.
Compared even our peers were.
Who is looking to.
Resumed their memberships and continue the membership foes somewhere unanswered and we were skewed higher than our competitors and on the cancellation. How many wanted to discontinue after we opened and where our competitors right about 6% Wendy good discontinue we really at about 3%.
So that was some there.
As far as working out.
One of the it actually trying to think of ahead anything that was.
Pointed that part out exactly I don't believe so.
Okay. That's helpful and just maybe secondly.
You had mentioned earlier that we're still targeting 4000 stores in the U.S. So it doesn't sound like.
This has impacted that in any big way.
This pushed out that target in terms of timing.
A couple of years or so.
Hard to really said, we don't adds it was really to trends and how fast we can show the pipeline real estate and get the get that.
Opening flywheel, moving again, but yes, I think Joe the only thing I'd add to that is in my remarks will go I said that obviously with the shutdown across the country.
All the way down to construction crews generally had to shut down as well.
And then the working of the pipeline.
Since came to halt there's no one knew you'll win in Hal and how long it would take et cetera. So.
And I indicated that we would expect.
Total units to be down this year over our high last year and that could even go into next year, just because you got to get the pipeline back up and going again, a couple of things I guess I would say is one we obviously still don't knows who were in that time period as to how the country or reopen and exactly what that will.
Look like.
I think a little bit to maybe I think it might have been randy's question earlier that Chris answered in terms of.
Petition.
I think that not only.
From a competitor perspective, Atlanta, it's going to load factor going to look a lot different but the whole retail landscape is going to look a lot different coming out of this as well.
I, just think theres going to be a whole repositioning.
In retail World and I think that also then provides opportunities.
In the near or Dave and longer term. So we've always said, we believe and had a lot of confidence in that 4000.
Obviously that still you know even pre co wouldnt was still a few years down the road I don't see this impacting that.
But at the same time, we got to see what.
Maybe the new norm will look like but we expect to take advantage of that size and scale.
In terms of of our base of members, our sophisticated franchisees and the ability to continue to grow this brand and all the markets were ramp because we still have considerable pipeline in almost every market.
Certainly every regional market in the us.
Great. Thank you guys.
Thanks, Jim maybe Joe.
Your next question comes from the line of Peter Keith from Piper Sandler Your line is open.
I think you a good afternoon.
Let's just go a little more detail on the reopening Chris you did some interesting comments on CNBC around maybe unplugging half the cardium machines.
To go back to some of the earlier questions around Jim capacity are you ever at a point, where your gyms are well over 50% capacity I think there's some concern that members might have issues with Jim crowding.
On the other had maybe you'd never really face at issue because so could you help kind of clarify those comments.
Sure yes so.
View, we have about a 120 of so pieces the cardiovascular equipment the clubs and how we are very nice three clubs are open now if there is a social distancing.
Mandated by that area. We're doing every other piece of cardio on plug and then signage so that people spaced out.
So, but I just wanted visa card to see at 60 pieces usable.
It was a Monday night in January.
Kind of a good ways. Its opening here in May and June so things generally get quieter.
For the gym world.
And then back to what I mentioned to John Heinbockel with the question where people coming in here with the work from home people coming in mid day, which is not something you generally see a lot of so luckily a spread that out quite a bit for us.
So I don't really see an issue one time of year.
Two is people spacing out there workouts and also.
Our workout schedule.
Because people work are generally Monday Tuesday Wednesday.
As I mentioned 1500 work us on a club on a Monday, I think probably seven or Friday, so not unlike January people want to what the crowds or can't get in and they just come a different days, a week and spread that usage out so I don't really see us.
Being a different than anything about 50% of a members don't use the club in the 30 day period, either so I mean, I guess, maybe back little bit of Joes question about people want to come back to work out we'll have our members Jody will use the club in the 30 day period, So im a little different customer than a general soul cycle or Gold's gym customer that's 671 person how high water.
Okay, that's interesting and then.
One other question I want to ask was around franchisee concessions that maybe there were some implied comments in there with the cargo equipment replacement, but.
30.
Concessions that you are looking at right now for that reopening process, maybe would add spending.
Curious if you could help us frame up some of the possibilities, we might see unfold over the coming months or quarters.
Yes, I mean this is this is dorvin Peter.
One of the things that Chris It earlier I think in his remarks, and maybe Tom you referred to it but.
I think the the.
The franchisees, obviously are most interesting getting you stores open and.
That's not the highest priority too.
Come out and try to Reequip clubs here for clubs are down or or to plan on it and maybe a July or August when we don't know when clubs are open et cetera. So one of the things that we we want to make sure because obviously our biggest asset our franchisees out there is to in essence.
Take that worry off of their after plate in terms of.
Being in default of their franchise agreements for not being in compliance with that and so what we've done as we.
Communicated to our franchisee base.
We would.
Push out.
All reequipped as well as all new store requirements under the development schedules, just push everything out a year and what that does is a couple of things number one is it allows them to.
Focused on their business focused on getting ready to open the clubs backup focus on taking care of the members and and making sure we're ready for that.
And then not have that issue of losing their territory because quite frankly, that's the.
The pipeline is a huge asset that they have so we wanted to do that too to provide them.
With that level of comfort. So that's number one the second.
Thing that we've done is to make sure that.
Yes, we're there to help support them in ways that that they need to and.
But but on the flip side that is you've heard Chris a that worry as much in advertising company is as anything else. So were we still have the same requirements in terms of.
The local marketing spend et cetera.
Because it can get these calls back open we want to make sure that we're we're out there where the brand and being able to market to to prospective members as well.
And I think that Tom you had a couple of things you want it editors thing.
So we may have mentioned this before but our development team led by re Michael has worked with the franchise.
[music].
Groups, it's really.
Sure. His best this team's best practices on how to really have productive conversations with landlords about abatements and deferrals and I'd say as dorvin touched on earlier.
For the most part those have been very fruitful conversations the majority of landlords.
Giving deferrals very few abatements, but deferrals on rent.
[music].
While the club's well while the stores are closed and so if that's for a month or two months that that rent that was forgone would get added onto the subsequent six or nine months, depending on the situation.
I'd say the final thing is we've tried to help as we think about.
Chris This point, our leadership position in Clinton, cleanliness, and seeing a physician and taking that to another level given the situation and people's expectations, we are investing.
On behalf of the franchisees to secure what is difficult products and tools to secure so we can elevate our.
Ability to.
Enhance our sanitization capabilities at store level, so were essentially buying that inventory in advance. So we make sure we could secure it and then as they ordered and get it in their clubs, though they'll pay it off so that helps with their liquidity. So I'd say a combination of things that we think in the some franchisees are are.
Based on calls we have with them every week.
I think appreciative and understand that we're all in this together and all looking to come out stronger both in terms of how we've treated the customer from a billing standpoint, how we're going to run the clubs going forward and really continue to widen the mode that we have competitively.
Okay. Thank you Thats very helpful feedback and good luck in the coming months of the reopening.
Great. Thank you. Thanks.
Your next question comes from the line of Oliver Chen from Cowen Your line is open.
Thank you.
Okay.
Equipment replacement sales could be much 60%.
And the headwind.
What does that imply.
How you're thinking about.
Okay.
Generally with net openings and things that you're looking at that.
No.
Okay.
Second question was there.
And thinking about managing this.
Correct.
In relation to marketing or strategies that are underway.
And I'm sure that make sure can extend quite different.
Thank you.
Although overall you were cutting out a lot there so I'm going to if I if I didn't get the question exactly right you can come back at the first part of the question I think was on.
On specifically Ria quips, and maybe what the expectation maybe is now versus where we were or where we had in our initial guidance I think was your question.
We we grew our guidance back earlier this year and as Tom said, a few months ago, we're not providing guidance over the balance of the year.
But in terms of kind of that.
Balance of the year or are full year, rather development of new store openings as well as replacement equipment.
I made the comment in my remarks that.
Yes, it could likely be down 50% or more over what it was last year as a result of the fact that sores or close now except for the three stores that Chris mentioned earlier that have opened.
With the uncertainty a when those stores would open back up.
And then ultimately kind of re.
Regenerate the pipeline for new sales down the road and what we said then.
Comment I may just a couple of minutes ago was to be able to give the franchisees some some.
Confidence that we were not going to step in and require them to be putting replacement equipment in.
Here in May or June or July or August or something one we're still trying to get clubs opened that's not the highest priority on our list and we didn't want it to be the highest priority on their list. So that's why I made the comment we were pushing everything out.
12 months from its original date.
We think that is the right thing to do for the brand.
The right thing to do for franchisees and will ultimately pay dividends back to us as a brand and to take care of our members.
And I think on your other question on the churn Oliver I think in the marketing pieces that.
The first and foremost most important thing is that we notified members we weren't billing them, we froze them. So our cancellations leading up to an enduring to closure on their fractions of what we're used to seeing were open so.
And then a base.
Trucking, along pretty solid even though we're not opening so memberships per se I.
I think as far as the churn piece of it.
Keep them active I think you look all the digital stuff we've been doing between Facebook live we launched that March 16th as soon as we close our stores that were doing over 100000 workouts per night on those videos.
So it really unbelievable transaction for both members and non members. So the the people that are really Washington drilling some brand affinity there is big let me pause on you tube and our you tube subscribers up 229% since closing and have over 10 million views. So this is all happening real time. So when you go back I think abroad.
Digital strategy for better when talking about for over a year now and getting the app going all the content, we're definitely going down the right road Luckily that we're able to continue to engage our members along the way under the new I fit.
Partnership we did we launched a bunch of videos there we were already doing 173% increase in average daily workouts in our mobile App and then we've launched that and that's up 122%. So I.
I think keeping them engage and giving them some value, even though were four walls and open.
It's going to keep them engage in the brand and then hopefully keep them longer term that where the weather pattern fitness here.
Chris what are your thoughts with at home and the long term of changes there.
The customer experience as well so its capabilities that you are building.
Are you thinking about about the platform.
Versus your App.
They happened with that digital on demand side of the business.
Yes, I think it's definitely has caused an acceleration in the adoption of digital content, where people are taking advantage of at home and you've seen it whether even the stuff that I was just rattling off and staffing is even other telephones and I said no to track everything else. So I think year I think we've accelerated.
There's also been research study that showed.
Even though has been a big influx of new customers. There's also when the bricks and mortar open they can't wait to get back to that and not maintain necessarily the digital.
Although they're not going to write up 100%, but it will never go back to pre co bid.
Numbers it'll stay ahead of where it was but will not say as to the level infat today.
I think like it we're talking about I think it's a big part of what we wanted to do longer term that we're going to be engaged and be the trusted source in their wellness journey, whether it's in club or at home or running of side. So I think it's proven to putting I think it's really accelerate our point of view on it just than what we're seeing from consumption in the feedback we get from the members and online.
Presenter doing that Facebook live at night and.
Thanks, a lot of something is we're looking at now would just it's going to be probably something we do forever at this point.
So it so I think it's a must have I don't think its end all be all workout at home by any means I think bricks and mortar experienced being around others in and the camaraderie builds in the motivation to build is not replaceable, but.
I think it's.
Good good place to be in when we get the App going last summer.
Your next question comes from the line of Jonathan Komp from Baird. Your line is open.
Yeah, Hi, thank you.
I wanted just follow up on the units that new units in the re equipment.
Side of things.
Just curious broader question of how you and your franchise partner thinking about that but just maybe to be care are you thinking.
With the communicated relaxing their requirements for the next year here are you thinking after that period, you get back on to something close to the prior trajectory for those are you thinking there's some sort of a catch up would you then get to more of a normalized level. Just how are you thinking about.
Most everything going on here.
Yes, John what we're doing is we're saying that that.
Require much that exists now in the pipeline that gets in essence pushed out 12 months from its original date, but all replacement equipment, when it's done and all new storage when they're open they still have the same deadline, the same five and seven and Chris men.
And that a little bit earlier as to one of the reasons. We are we are is that we can't be out nude and we think that's critical to the brand.
And critical to having that high value affordable option.
For what our brand stands for today. So no that's how we're handling it so it's the existing requirements as they are being pushed out a year for what's out there today, but then everything new going in place going forward still has a five and seven.
Okay, and maybe one other topic, then curious your thoughts more I'm as things reopened more omni.
Behavior of here of your members I know, Chris you've always talked about non you feed.
The biggest driver on voluntary cancellations I'm, just wondering how you're thinking about how far you need to get out and kind of looking at risk is that.
There are some contingent of members who don't use the club for certain period of time, how you're thinking about kind of that extended risk of cancellation.
Yes, I don't I don't see that.
I don't think leasing a really change and when I look at.
Even when I go back to own nine when lives as more of a.
Banking or or recession issue. We are same store sales were great back then so I don't think becoming out as people are going to be wont be less healthier less active and I think we did and once every one of ours that we did said that.
Is that over 50% of the members would consider down.
Downsizing downgrading from their higher priced gym membership to a more affordable option, so which is what we saw until nine what people were downtrading. So.
I don't think we're going to see nothing points to any direction I would feel any differently than the something we saw nine.
And have you seen during the downturn and to your question fair inquiries about downgrade income a black card to our white card membership or would you expect to see any of that.
Oh, possibly but there wasn't I wouldn't didn't see any real.
I think kind of like the upgrade situation, we talked about no one really upgrades necessarily for the black card they join on it.
Maybe a maybe a slight chance upon joining that maybe more members take a white card and then example, but.
But we're not talking about a big ticket because even the black card as much cheaper than they're probably where they're coming from.
Okay, Great appreciate the perspective, Okay. That's good luck.
Thanks, John.
Your next question comes from the line of Shurn Zach far from William Blair. Your line is open.
Hi, Good afternoon, I wanted to follow up on the digital dynamic because obviously, it's an important to keep your members engaged but it's also pretty intriguing how many non numbers you've been able to attract.
The different classes you've been offering.
So can you talk about and I don't know if you have this data but is there any demographic different at all.
I mean, what you're seeing in terms of engagement online versus people are coming when the club any evidence that kind of why demean. The aperture for planted and then how do you follow up once club starts reopen trying to engage these folks to move kind of from the digital around into the club.
Yes, Facebook live is how we don't really know who those members are or non members Ari.
Fortunately rose from 1000 night, one thing that will be interesting with our App is a lot of the content that we have on and that was all free no members are nonmembers UBI download the app you get to access to it.
We don't have the data yet, but we're going to work on where we'll be able to report on people who have the app, who is actually a member who is actually just utilizing the content of free and then within that messaging, which is launching as we speak today that will be able to that message to them separately. So it could create a second marketing Avenue for us to use or not second at another marketing Avenue for us to use.
To kind of no dividend teen summer challenges waterways introduce our brand to a non member to give them a taste of what we're like so that hopefully we get market to them to getting to come in so and honestly it could be somebody that is we always say after the first time or casual Jim user because it's the intimidation the big piece it could be a level of intimidation that this breaks through that is something.
That they still can't walk in the Jim, but if we can give us some access to some content at home and no plans to be that brand, maybe we can build up some some some some some coverage that come in.
That's helpful. And then I don't think I heard you guys talk about those but on us.
There's a lot you can't control right now, but you can come to us and also on someone to my arm. What we saw this quarter is that.
Correct run rate right now for a quarter Lance.
Yeah, Hey, Sharon, it's Tom I think.
There is some things that hit in Q1 or that.
The some of the actions we've taken since Q1 that we're really werent reflective so that rate will continue to come down, but I think when we look at our cash burn rate.
Weve.
And we made the statements we've made about liquidity and.
Clubs remained close through the year, we had enough liquidity to carry us well beyond the year.
That's still true very true.
And we've taken our cash burn rate, which we don't disclose but through the actions we've taken we've reduced that by about a third.
So we will continue to monitor the situation.
Take additional actions if necessary to the extent this is prolonged but.
Short answer is it'll come down from where it was in Q1, because some of the actions weren't fully reflected.
Thanks.
Yes.
Your next question comes from the line of John Ivan Co from JP Morgan Your line is open.
Hi, Thank you I appreciate the fact that many of your franchisees are in different financial positions from adept perspective in some of them are using that to expand on you know and I think youre business model was the type of one were expecting recurring cash flows was you know I mean, all but quote unquote guaranteed in normal times, but we are.
Obviously not in normal times now.
Do you have a sense of how many franchisees how many stores within that franchise base.
You think really are financially challenged and if that's the case.
Are there other franchisees willing to buy in other franchisees and get them some value for their equity or given your own cash balances. This an opportunity to significantly increase your own company store count.
Hey, John It's Tom I'll start off and maybe Dorvin build on it.
Yes, I think.
I think we've had discussions with some of our lenders of our franchisees in the year pointed with Durbin said earlier the business just produces so much cash for a franchisee that lenders were very willing to.
Put some leverage on the business based on on the.
On the economics in the profitability.
And so I think basically no one including our own structure no one ever contemplated.
A situation where the revenues go to zero. So most of the most the lenders as we.
I think communicated on on other calls.
We have we assumed that lenders would want to work with our franchisees just because of the fact that theyre growing.
That theres, so profitable and if in fact, they have to look across their portfolio as lenders, we would be near the top if not the top of the list of folks they'd want to be accommodating to and that that is borne out in the conversations we've had with some of the lenders.
Who are pretty deepen our system of franchisees.
And they basically said.
They are going to provide it to the extent as needed they would provide.
Waivers, while the clubs are close just until things reopening they get us a better sense of.
Of where the where the trends are where the key metrics are as you'd imagine but.
You know all in all the short answer would be.
Understanding and accommodating knowing that we were very strong.
They were very strong coming into this and will likely be stronger coming out of it given what's happening competitively and with the overall.
Strengthening tailwinds for health and wellness and John There's Dorvin, we've had actually inbound calls from some of our franchisees and some of the private equity backed franchisees that are saying that if there's any body that would love to sell we want to buy.
And I'm sure they are probably reaching out to.
Some of the franchisees themselves.
As they have in the past.
Try to build a bigger overall, our overall portfolio within the planet system and to your latter point I mean, we.
Quarterly we have 99 stores and we've stated that although we like the asset light model were less than 5% of the base.
It's not inconceivable that if something came up and and we knew a franchisee wanted to sell needed. So we clearly would be there to table as well.
So I think that what you've got here is you've got franchisees that have a varying degree of of a capital structure.
Toms point, we believe based on just conversations with various banks and the system, they're willing to work with with this business in the portfolio that they have and then we've got guys on sideline and we would even be there as well if need be.
Understood. Thank you.
Thanks extra.
Your next question comes from the line of Simeon Siegel from BMO capital markets. Your line is open.
Thanks, Hey, guys O'carroll General industrial.
Joining me talking about last point, so looking further out.
Maybe.
Do you envision it changes.
Franchisee base like just based on a consolidated school top viewed as it gets put out more so any thoughts there and then Chris just come back to a point you have made how are you thinking about.
Will you ads from.
And.
People sell more.
Sure semi.
I think that there will be continued consolidation.
Yeah, we don't know what the world's going to look like coming out of this obviously there were deals in the works.
Going into this where.
Both new potential private equity guys from the outside we're looking in as well as guys on the inside that we're looking to grow.
I think that will still be there.
We've gone from about 190 down to roughly 130.
I don't see that.
Accelerating.
I see it probably moderating.
Because we've got a lot of guys that that.
They bleed purple and yellow and they like the business and they want to stay in the business.
And want to grow and then you know overtime.
Fuel the smaller guys will probably end up selling out to some of the larger guys but.
We think thats fine we like the composition of words at today, we'd be fine with it staying where it's at but we also don't see at.
Yes.
Really accelerating to the point that you'd have a.
Significant reduction in the number of franchisees today and quite frankly, we like to partners. We have today that's on the system today.
Yes. This is Chris I'd say on your Blackcard amenity and I think with this.
I think with a pandemic has shown us and like I mentioned earlier I think it is definitely reinforced our direction with content and the robust going down but definitely gives reassure that we're going down the right road with all the consumption that we're seeing within our our app and the Facebook live and Youtube.
And the end the others in the industry, our industry that their consumption or even people that have just your app company in their within seen from a consumption standpoint in the work from home and in this way linkages reinforces that it is.
Something that we Luckily were already going down, but it gets big question isn't a black card benefit is in the third care membership is an add on to any membership people are getting this content somewhere anyway, and I see people to Jim all time and I go to plan and they got their phone annexing debenture on the wall in the following a routine why aren't they.
Thing that from us.
As a benefit so I think it definitely as the world will be in going forward, even more so than before and then figuring how to capitalize on that.
Great. Thanks, guys best of luck in Boston.
Thank you to activity.
Your next question comes from the line of Alex Murkier from Berenberg. Your line is open.
Hi, guys. Good afternoon, I'm thinking about competitor bankruptcies, but in the U.S. and abroad. Do you think forced competitor store closures opens up some opportunities and larger yes that is that might have been over saturated previously or even some of the international regions that were previously unattractive to you guys.
Yes, I think it definitely something to look at.
The bigger did one of the bigger hurdles, we have with those bankruptcies is because our model is very different in the sense. If you don't have pools basketball courts as long as what model is it so in a lot of way in ways that could be strictly a real estate play if it's a somebody who has a big coverage in a city, it's hard to find real estate in Boston and New York.
Example, and they have a lot of real estate that could be available it could be more run a real estate Blake, but frankly the necessarily.
Perfect box, but it's we could just renovate it and make it look like ours. So there's no doubt that there could free up some of some of that but most markets as well we talk about what the real estate way. It is with retailers real estate is not that hard to come by and most were all markets.
Probably out of this will be even better for us longer term, but.
But definitely I think in some of these really dense markets. It could definitely free up some some potential new location for us that generally on available.
International probably the yes.
Im sorry, you get finished.
I think the international front.
I don't know anything that's helped my head yet, but there's something.
Said, if we go to some of these countries, where there is already some pretty large players that.
I don't know if I want to go in one or one of the Tuesday at a time, but if there was an opportunity to come in and make a bigger.
Bigger presence at one time I make some sense for sure.
Okay and then the second one is on the Sta loans that labor cost at the mid metric for how much. Some a small businesses were able to get can you give us a general sense of what labour costs are as a percentage of total opex for the franchises.
Yes, Hey, it's Tom.
Between labor and.
Occupancy combined there.
Kind of mid mid Thirtys, sorry, 30 ish.
It depends on the location, but and it's generally 50 50 between labor and occupancy might be little more and in some circumstances little less than others, but thats pretty close.
Okay, Great. That's helpful. Thank you.
Yes.
Your next question comes from the line of.
Routing.
Draw search from Bank of America. Your line is open.
Hi, its racing good afternoon, thanks for taking my question.
Hey, Rick.
It's hard to clarify the revenue deferrals from the store closures would you expect to recognize that in the second quarter as the stores starts the club start to reopen.
Yeah, Hey, right it's Tom.
It really depends on when they reopen.
And so as soon as the clubs reopened in that that membership clock starts ticking, where we're burning off the 30 days that folks roughly 30 days folks paid for than we can recognize the revenue.
So yeah, if thats, if that's inside the quarter than we are good.
In sum clubs, which we for different things from different states. If that extends it could be Q3. So really is a club by club basis, which is how we'll recognize it.
Got it and then Chris you mentioned that the membership has stayed steady and you didnt see an uptick cancellations.
In the second half of March in prior periods, where you've seen.
Visual club, maybe close for an extended period of time.
When that club reopen did you see an uptick in churn or you can can you just talk about what's happened in the past when you've had club closures.
And Howard how it reopens and how long it takes to return to.
It's a prior productivity.
Yes, I think knowing that probably be.
Anything somewhat close to this would be Puerto Rico in 2017 Archi Maria.
Let's say the island and they had 11 stores at that time that were completely closed.
Probably half a little to say, we're close for three to six months of that completely rebuild.
Those was reopened and continue to bill if he wants a rebuilt the store and was essentially was business as usual.
And within a year those stores are doing better than they were pre hurricane and that franchisee went on to build another store in that market. So.
They recovered in pretty resilient and if you remember back than they were saying that but 30. So the island may move moved off the islands that for there is no worker housing so.
We are really pleasant surprise with our turned out when we open the stores.
Being close I'd, probably only at that similar we have our close in Florida, but really we can best.
And then if you could some of the.
Clubs that are a little bit more expensive some of your competitors.
When you've seen them close clubs in the past that has that have you picked up new members.
From them is there a crossover in membership or would you guys can gain share if they exit the market.
You know bigger clubs that may have thousand or 2000 members you start to see an uptick when they cancel.
But all these boutiques to where they have three if wonder members you almost don't see the such a small number members when they can't when they close we just see though a lot of those tools I think we'll see a lot more of those with this fund.
But you don't such a few members at saw you don't really see the uptick I think longer term, we just need new joint not having really I placed early shop that were the only option deals today.
Okay, great. Thank you.
Thanks, Rick.
Your next question comes from the line of Paul globally from Macquarie. Your line is open.
Hi, Thanks, so much for taking my question.
I was hoping.
You could give us some color around the mechanics of the resumption.
And around membership dues turning back on.
If I think about a black card member and reciprocity there.
Is this turned on when the home Gen turns back on or I mean or is there and the ability to because if we looked at urban versus suburban I could see there being some differential there and when.
Numbers may have access and the membership dues turned back on so any light you could shed on that.
Yeah, that's a good question actually.
I'd, probably say that.
We probably would let them use the club close by of their club was an open as we do when when there is a slaughter as while hurricane in certain clubs or even we've been do that Darren presale construction, where somebody joins a club during the construction presale period in their black I remember, we allow them to use a.
One of the other locations nearby while we're not opened yet not even billing them yet so.
That would probably be something that none of these mentioned that's a great. Yeah I think we'll look at that for sure.
Great I appreciate the color on that Chris and then.
On.
Understanding contact lists and virtual uptake I'm looking out into the future.
Sort of offset with the increased physical cleanliness protocols anything you can say on what the stickiness of any margin.
Improvement or decrement could look like going forward on a longer term basis from us.
I don't see is there's really no more or less payroll what are we don't need more people to do and a lot of our protocols as I mentioned is it just I guess reinforcing what we've already done and just I guess taking credit for it.
And calling it out we've always done it and now we have but we never really took credit for the fact that we have sanitization stations throughout the entire tire Jim with paper towels, probably within 30 40 feet of any any given machine.
And actually happens to be Luckily one of the approved disinfectants and I always was four foot is virus. So there's a lot of us is taking credit for where credit is due and just reinforcing with the members that proper Jim etiquette.
And our club members are I mean, if you don't have equipment down our members going to call you always want even the SAP as the do it.
Understood. So then.
Potentially contract loss and.
Now having.
More virtual consumption of your fitness content, whether it's through likes it or whatever it could.
[music].
Could potentially benefit margins longer term would you say less need to to maintain certain things from usage just trying to get a picture of how the environment could look from a cost side.
Well I think one thing is yield the unknown is will create some retention benefit.
I mentioned.
He was sort of a members don't use the Jim.
We don't know in the App will tell US now is we don't know is that because theyre working out at home and they're not using the gym and if they are using our content and maybe they'll keep the membership longer than I guess in somebody else's. So that'd be probably the bigger upside I think I'd look to track and try to watches that we're providing some days, maybe we'll stay a little longer because im not going somewhere else.
Got it thanks, so much appreciate it.
Thank you pleasure.
Your last question comes from the line.
Wanzer from D.A. Davidson your line is open.
Hi, actually my question has been asked and answered thank you very much.
Okay. Thanks, Thanks Linda.
Okay.
There are no further questions at this time I turn the call back to Chris Rondeau for closing remarks.
Right well. Thank you everybody for attending the call today for first quarter release.
Under pretty different times for for all of Us.
Still happy to see the business in franchisees excited about get these things open excited about the future I really think that this a silver lining on this will as I mentioned on widen our mobile longer term and and being the trusted source for wellness for our members in the future in non members that we don't have just yet so look forward to our second quarter call and give you.
Update at that time, thank you.
That concludes today's conference call you may now disconnect.
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