Q4 2023 Planet Fitness Inc Earnings Call

Good morning, and welcome to the Planet Fitness Q4, 2023 earnings conference call.

Please note that today's call is being recorded.

All lines have been placed on mute to prevent any background noise.

Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question, please press star followed by the number 1 on your telephone keypad. To withdraw your question, press star 1 a second time.

After the Speakers' remarks, there will be a question and answer session.

I would like to ask a question. Please press star followed by the number one on your telephone keypad to withdraw your question Press Star one a second time.

Stacey Caravella: I will now turn the call over to Stacey Caravella, VP, Investor Relations. You may begin your conference. Thank you, operator, and good morning, everyone.

I will now turn the call over to Stacey Caravella VP Investor Relations you May begin your conference.

Stacey Caravella: Thank you operator, and good morning, everyone.

Stacey Caravella: Speaking on today's call will be Interim Planet Fitness Chief Executive Officer Craig Benson and Chief Financial Officer Tom Fitzgerald. Both will be available for questions during the Q&A session following the prepared remarks. Today's call is being webcast live and recorded for replay.

On today's call will be interim planet fitness, Chief Executive Officer, Craig Benson and Chief Financial Officer, Tom Fitzgerald, both will be available for questions. During the Q&A session. Following the prepared remarks.

Stacey Caravella: Today's call is being webcast live and recorded for replay.

Stacey Caravella: Before I turn the call over to Craig, I'd like to remind everyone that the language of the forward-looking statements included in our earnings release also applies to our comments made during this call. Our release can be found on our investor website along with any reconciliation of non-GAAP financial measures mentioned on the call with their corresponding GAAP measures. Now, I will turn the call over to Craig. Thank you, Stacy.

Speaker Change: Before I turn the call over to Craig I'd like to remind everyone that the language on forward looking statements included in our earnings release also applies to our comments made during this call.

Speaker Change: Our release can be found on our Investor website, along with any reconciliation of non-GAAP financial measures mentioned on the call with their corresponding GAAP measures.

Speaker Change: Now I will turn the call over to Craig.

Craig: Thank you Stacy and thank you everyone for joining us for the planet fitness Q4 earnings call.

Craig Benson: And thank you, everyone, for joining us for the Planet Fitness Q4 Earnings Call. Before I review our fourth-quarter results, I want to take a moment to discuss the announcement from EA today that Tom Fitzgerald, our CFO, has decided to retire at the end of August 2024. Since joining Planet Fitness four years ago, Tom has been a tremendous asset to our team, bringing 40 years of corporate finance and executive leadership experience to the business. Now I'm going to turn it over to Tom to discuss his decision. Thanks, Craig. It's been a privilege to serve as CFO of Planet Fitness and work alongside such a dedicated and passionate team. I really can't think of a better way to end my career than working for a brand that does so well and also does so much good.

Before I review, our fourth quarter results I want to take a moment to discuss the announcement today that Tom Fitzgerald, Our CFO has decided to retire at the end of August 2024.

Craig: Since joining planet fitness for years ago, Tom has been a tremendous asset to our team.

Thomas J. Fitzgerald: Bringing 40 years of corporate finance and executive leadership experience to the business now im going to turn it over to Tom to discuss his decision.

Thomas J. Fitzgerald: Thanks, Greg it's been a privilege to serve as CFO planet fitness and work alongside such a dedicated and passionate team.

I really can't think of a better way to end my career, then working for a brand that does so well and also does so much good.

Thomas J. Fitzgerald: After 40 years in business, I've made the decision to retire at the end of August 2024 and focus on some of my interests outside of work. I look forward to handing over the reins to new leadership that will guide Planet Fitness' next chapter. I am proud of the work we have done during my time at Planet Fitness to deliver value to our franchisees and our shareholders. I know that we have a lot more work to do, and over the next several months, I will be focused, as I always have, on our key strategic and financial objectives and on ensuring a smooth transition to new leadership. So with that, I'll turn the call back to Charles. Thank you, Charles.

Tom: After 40 years in business I have made the decision to retire at the end of August 2024, and focus on some of my interest outside of work I.

Tom: I look forward to handing over the range to new leadership that will guide planet fitness his next chapter.

Tom: I am proud of the work we've done during my time with planet fitness to deliver value to our franchisees and our shareholders.

Tom: I know that we have a lot more work to do and over the next several months I will be focused as I always have on our key strategic and financial objectives, and uninsured a smooth transition to new leadership.

Tom: So with that I'll turn the call back to Craig.

Craig: Thank you Tom.

Craig Benson: Just two months into his role, the pandemic hit, and all gyms were closed temporarily, which presented an unexpected and once-in-a-lifetime challenge for a newly appointed Chief. Tom embraced this challenge head-on with steadfast leadership. He dove in immediately and spent a considerable amount of time speaking with bankers, lenders, investors, and franchisees, reassuring them that our strong balance sheet would get us through the depths of the crisis, even when all our gyms closed temporarily. He ultimately expanded our capital allocation strategy to include the acquisition of one of our largest and best performing franchisees, which doubled our corporate store footprint overnight. During his time at Planet Fitness, Tom has also helped build a talented finance team that will ensure a smooth transition to the next chapter of the company's financial leadership. He's also been a great partner to me in my role as interim CEO.

Craig: Just two months into his role the pandemic hit and <unk> closed temporarily.

Craig: Which presented an unexpected and once in a lifetime talent for our newly appointed CFO.

Craig: Comment breaks this challenge head on with steadfast leadership.

Craig: <unk> immediately and spent a considerable amount of time speaking with bankers lenders investors and franchisees reassuring them that our strong balance sheet will get us through the depths of the crisis, even monologist close temporarily.

Craig: The ultimately expand our capital allocation strategy to include the acquisition of one of our largest and best performing franchisees, which doubled our corporate store footprint overnight.

Craig: During his time at planet Fitness Com has also help build a talented financial team that will ensure a smooth transition to the next chapter of the company's financial leadership.

Craig: He has also been a great partner to me in my role as interim CEO.

Craig Benson: On behalf of everybody at Planet Fitness, I would like to thank Tom for his many contributions to our company. And now let me turn to the CEO search. The CEO search remains a top priority for the board and the search committee.

Craig: On behalf of everybody at planet fitness I would like to thank Tom for his many contributions to our company.

Craig: And now let me turn to the CEO search the CEO search remains a top priority for the board and the search committee after considering several dozen candidates and having interviewed 13 very qualified pointless. The search committee will be sending a short list to meet with the full board.

Craig Benson: After considering several dozen candidates and having interviewed 13 very qualified finalists, the search committee will be sending a shortlist to meet with the whole board. We look forward to updating you when a final decision has been made. We expect to announce a new CEO prior to identifying our next CEO. Tom's commitment to remain through the summer will provide an extended transition period, allowing the new CEO to be involved in the CFO search process. Now to the results.

Craig: We look forward to updating when a final decision has been made.

Craig: We expect to announce a new CEO prior to identifying our next CFO.

Craig: Tom's commitment to remain through the summer, we will provide an extended transition period, allowing the new CEO to be involved in the CFO search process.

Craig: Now to the results.

Craig Benson: We ended 2023 with 18.7 million members, system-wide same store sales growth of 8.7%, now being driven by new member growth, and a 19% adjusted EBITDA growth. Our system opened 165 new Planet Fitness locations globally in keeping with our mission to make fitness accessible in a clean, safe, and welcoming environment for anyone who walks through our doors. On an annual basis, we experience an improved cancel rate, and we continue to see overall higher visits per member, as well as all age groups visiting more frequently year over year. We also saw significant increases in penetration levels across all generational groups since the end of 2022. Gen Z now makes up more than 25% of our members, and they continue to lead the way in terms of membership growth. This was driven in large part by a successful high school summer pass program, in its third year and second consecutive summer.

Craig: We ended 2023 was $18 7 million members since.

Craig: System wide same store sales growth of eight 7%, primarily driven by new member growth.

Craig: And a 19% adjusted EBITDA growth.

Craig: Our system opened 165, new planet fitness locations globally in keeping with our mission to make fitness accessible and a clean safe and welcoming environment for anyone who walks through our doors.

On an annual basis, we experienced an improved cancel rate and we continue to see overall higher visits per member.

Craig: As well as all age groups visiting more frequently year over year.

Craig: We saw significant increases in penetration levels across all generational groups since the end of 2022.

Craig: <unk> now makes up more than 25% of our members and they continued to lead the way in terms of membership growth.

Craig: This was driven in large part by our successful high School Summer pass program.

Craig: In its third year and second consecutive summer with more than 3 million team participants and our conversion rate to paying customers was above the 2022.

Craig Benson: With more than three million team participants, and our conversion rate to paying customers was above the 2022 level. We aim to be the brand that Gen Z thinks of when they're ready to join a gym, and this program further strengthens our appeal. Our business is unique in the retail sector as a gym membership isn't a frequently purchased item. With 40% of our new customers being first-time gym goers, we need to ensure that we are achieving the correct balance of messaging and pricing. We're exploring whether we have an opportunity to take prices on our classic car. Last fall, we started testing two price points, a $15 and a $12.99 for the Classic Card in about 100 stores each. Both go back to $10 during the national sale periods, and the advertising communicates a call to action to join before the sale expires. We added an additional test in December to include the New York DMA, where we are keeping the price at $14.99 regardless of national sale prices.

Craig: We aim to be the brand agenda, we think of when they are ready to join a gym and this program further strengthen our appeal.

Craig: Our business is unique in the retail sector as a gym membership isn't a frequently purchased items.

Craig: With 40% of our new joins being first time gym goers, we need to ensure that we are achieving the correct balance of messaging and pricing.

Craig: We are exploring whether we have an opportunity to take price on a classic card.

Craig: Last fall, we started testing two price points or 15, and a 12 99 for the classic card and about 100 stores. Each both go back to $10 during the national sale periods and the advertising communicates a call to action to join before the sale expires.

Craig: We added an additional test in December to include the New York, DMA, where we're keeping the price at $14 99, regardless of national scale.

Craig Benson: As we are a recurring revenue model, we plan to continue to run these tests at least through the first quarter to fully understand the impact that increasing price has on average unit volumes by evaluating the impact of the rate of joins, cancels, and change in black card member mix. We're actively navigating today's economic environment and taking a disciplined data-driven approach to determine the optimal outcome for us and our customers. We look forward to sharing more on these results in today's webinar. Now to 2024 and beyond.

Craig: As we are a recurring revenue model, we plan to continue to run these tests at least through the first quarter to fully understand the impact that increasing price has.

Craig: Average unit volumes by evaluating the impact of the rate of joins cancels and change in Black card member mix, we're actively navigating today's economic environment and taking a disciplined data driven approach to determine the optimal outcome for us and our customers.

Craig: We look forward to sharing more on these results of the test.

Craig: Now to 2024 and beyond.

Craig Benson: Our significant size and scale advantage has enabled us to deliver consistent, reliable growth for more than 30 years, and we're focusing on expanding our lead against our high-value, low-price competitors even further. To do this, we're adapting to the post-pandemic macroeconomic environment with the development of our new growth model, which we announced to our franchisees in the fourth quarter. As a reminder, our plan is focused on enhancing our early, strong, new store economy and Reducing Capital Requirements for Opening and Operating a Planet Fitness Franchise Location. This includes... Making Changes to the Pronotizer.

Craig: Our significant size and scale advantage has enabled us to deliver consistent reliable growth for more than 30 years, and we're focusing on expanding our lead against our high value low price competitors even further.

Craig: To do this we're adapting to the post pandemic macroeconomic environment.

Craig: The development of our new growth model, which we announced to our franchise ease in the fourth quarter.

Craig: As a reminder, our plan is focused on enhancing our already strong new store economics, and reducing capital requirements for opening and operating a planet fitness franchise location.

Craig: This includes <unk>.

Craig: Making changes to the franchise agreement adjusting the timing of our cardio and strength for your equipment based on usage.

Craig Benson: Adjusting the timing for cardio and strength equipment reequipments based on use, and committing to reducing CapEx for new builds and remodels while also looking for ways to reduce operating expenses. We believe the new model balances improving store returns without significantly impacting our P&L, to win for the franchisees and for us as the franchise owners. And by the end of 2023, all but two franchisees, both of whom are single store owners, will have opted into the plan.

Craig: And committing to reducing capex for new builds and Remodels, while also looking for ways to reduce operating expenses.

Craig: We believe the new model balances improving store returns without significantly impacting our P&L.

Craig: A win for the franchisees and for us as the franchisor and.

Craig: And by the end of 2023, all but two franchisees both of whom are single store owners have opted into the plan. We are now in the planning and executing phase.

Craig Benson: We are now in the planning and executing phase. We believe this change we made to the model will free up a significant amount of capital for our franchisees, providing them with additional flexibility to build their stored portfolios for years to come. We expect 2024 to be a transition year because it will take time to see the results of our new store pipeline. The average time to build a new location from site approval to opening was between 12 and 14 months last year, up from six to nine months pre-pandemic. We're already rolling out tests to change design elements in our stores as part of our commitment to decrease the cost to build a gym without compromising the member experience. For example, we're testing the reimagined lobby and workout areas.

Craig: We believe the change we made to the model will free up a significant amount of capital for our franchisees, providing them with additional flexibility to build their storage portfolio for years to come.

Craig: We expect 2024 to be a transition year, because it will take time to see the results in our new store pipeline as the average time to build the new location from a site approval to opening.

Craig: Was between 12 and 14 months last year.

Craig: Six to nine months pre pandemic.

Craig: We're already rolling our test to change design elements in our store as part of our commitment to decrease the cost to build a gym without compromising the member experience.

Craig: For example, we're testing the re imagine lobby and workout areas.

Craig Benson: And we're also encouraging franchisees to work directly to source more of the materials for the build themselves instead of relying on general contractors who charge a markup on those materials. Finally, I'd like to share some very encouraging results from the third-party studies we conducted on our long-term domestic store opportunities. Based on these results, we now believe we can have 5,000 gyms in the U.S., up from 4,000 at the time of our initial public offering in 2015. And this doesn't even contemplate several of the factors that could potentially increase the number, including First, a smaller store footprint, which could enable us to infill suburban areas, as well as enter geographies that don't meet our standard population requirements, and second, our historic ability to continue to achieve even greater penetration in each successive age generation. And this is only the domestic opportunity. We're excited to announce that we're entering Spain and expected to open a store by the end of the year. Only 10% of the population currently has a gym membership.

Craig: And were also encouraging franchisees to work directly to source more of the materials for the build themselves instead of relying on general contractors.

Craig: Charge, a markup on those materials.

Craig: Finally, I'd like to share some very encouraging results from the third party studies, we conducted on our long term domestic store opportunity.

Craig: Based on the results. We now believe we can have 5000 gyms in the U S up from 4000 at the time of our initial public offering in 2015.

Craig: And this doesn't even contemplate several other factors that could potentially increase the number including.

Craig: First our smaller store footprint, which could enable us to infill suburban areas as well as enter geographies that don't meet our standard population requirements.

Craig: And second our historic ability to continue to achieve even greater penetration in each success of age generation.

Craig: Yes.

Craig: And this is only the domestic opportunity we're excited to announce that we're entering Spain and expected to open a store by the end of the year.

Craig: Only 10% of the population currently has a gym membership and we believe we have a meaningful opportunity to expand our brands outside the U S and can democratize fitness and our non intimidating environment as is evidenced by our recent development progress in Mexico and Australia.

Craig Benson: And we believe we have a meaningful opportunity to expand our brand outside the U.S. and can democratize fitness in a non-intimidating environment, as evidenced by our recent development progress in Mexico and Australia. Finally, we recently took actions to reduce the size of our headquarters workforce and realigned our resources towards key growth initiatives to better position us to succeed in 2024 and into the future. At this time, we will not be reissuing a three-year outlook, given several factors, including, first, continued macroeconomic uncertainty.

Craig: Finally, we recently took actions to reduce the size of our headquarters workforce and realigned our resources towards key growth initiatives to better position us to succeed in 2024 and into the future.

Craig: At this time, we will not be reissuing, a three year outlook given several factors, including first continued macro economic uncertainty second our franchisees are still incorporating the changes from the new growth model into their long term plans and last wed like for a permanent CEO have the opera.

Craig Benson: Second, our franchisees are still incorporating the changes from the new growth model into their long-term plans. And last, we'd like a permanent CEO to have the opportunity to weigh in on our targets. We have very promising opportunities on the horizon as we continue our pricing tests and execute our new growth model. We're capitalizing on our strong momentum, along with our proactive, forward-thinking mindset, to drive enhanced value for Sheryl. Now I'll turn it back over to Tom.

Craig: Turning to weigh in on our targets, we are very promising opportunities on the horizon as we continue our pricing tests and execute our new growth model. We are capitalizing on our strong momentum along with our proactive forward thinking mindset to drive enhanced value for shareholders now I will turn it back over to Tom.

Craig: Yeah.

Thomas J. Fitzgerald: Thanks, Craig. We believe that we are operating from a position of solid financial and balance sheet strength as we continue to break down fitness barriers for first timers and casual gym goers. Today, I'm going to address four things. First, our entry into Spain.

Tom: Thanks, Craig we believe that we are operating from a position of solid financial and balance sheet strength as we continue to breakdown fitness barriers for first timers and casual gym goers.

Tom: Today, I'm going to address four things first our entry into Spain.

Thomas J. Fitzgerald: Second, potential plans to refinance a tranche of our debt in 2024. Third, our Q4 results. And lastly, our 2024. Starting with Spain, we believe we have an opportunity to build on the success we've had internationally to expand into Europe. Spain is an attractive market in which we believe we could have more than 300 Planet Fitness locations over time.

Tom: Potential plans to refinance a tranche of our debt in 2024.

Tom: Third our Q4 results and lastly, our 2020 for outlook.

Tom: Starting with Spain, We believe we have an opportunity to build on the success, we've had internationally to expand into Europe.

Tom: Spain is an attractive market and which we believe we could add more than 300 planet fitness locations over time.

Thomas J. Fitzgerald: In order to accelerate our presence, we plan to open and operate a small initial set of corporate-owned stores in the near term and expect to eventually re-franchise. This is an example of us using our balance sheet to drive growth at a faster pace in exciting new markets as we continue to position Planet Fitness for sustained growth and value creation. Importantly, we continue to believe in our asset-light, highly franchised model, and we reiterate our strategic intent to own approximately 10% of our fleet. Now, to our guests.

Tom: In order to accelerate our presence we plan to open and operate a small initial set of corporate owned stores in the near term and expect to eventually re franchised.

Tom: This is an example of us using our balance sheet to drive growth at a faster pace in exciting new markets as we continue to position planet fitness for sustained growth and value creation.

Tom: Importantly, we continue to believe in our asset light highly franchise model and we reiterate our strategic intent to own approximately 10% of our fleet.

Tom: Now to our debt.

Thomas J. Fitzgerald: We have an approximately $600 million tranche of debt that comes due in September 2025, which we anticipate refinancing in the middle of this year, subject to overall market conditions. Based on indicative pricing, we believe our weighted average interest rate would still be below 5% when we refinance that tranche. Next, I'll cover our fourth quarter results. All of my comments regarding our quarter performance will be comparing Q4 2023 to Q4 of last year unless otherwise noted. We opened 77 new stores compared to 58, and we delivered same-store sales growth of 7.7% in the fourth quarter. Franchisee same-store sales grew 7.6%, and corporate same-store sales increased 8.7%. Nearly 80% of our Q4 comp increase was driven by net member growth, with the balance being rate growth. Black card penetration was 61.9%, a decrease of 60 basis points. The decrease primarily reflects the continued increase in our Gen Z membership growth. For the fourth quarter, total revenue was $285 million compared to $281 million.

Tom: We have an approximately $600 million tranche of debt that comes due in September of 2025, which we anticipate refinancing in the middle of this year subject to overall market conditions.

Tom: Based on indicative pricing, we believe our weighted average interest rate would still be below 5% when we refinance that tranche.

Tom: Next I'll cover our fourth quarter results.

Tom: All of my comments regarding our quarter performance will be comparing Q4 2023 to Q4 of last year unless otherwise noted.

Tom: We opened 77, new stores compared to 58, we.

Tom: We delivered same store sales growth of seven 7% in the fourth quarter franchisee same store sales grew seven 6% and corporate same store sales increased eight 7%.

Tom: Nearly 80% of our Q4 comp increase was driven by net member growth with the balance being rate growth.

Tom: <unk> card penetration was 61, 9% a decrease of 60 basis points. The decrease primarily reflects the continued increase in our Gen Z membership growth.

Tom: For the fourth quarter total revenue was $285 million compared to 281 million. The increase was driven by revenue growth across our franchise and corporate segments.

Thomas J. Fitzgerald: The increase was driven by revenue growth across our franchise and corporate-owned segments. The 13 percent increase in franchise segment revenue was primarily due to increases in royalties, web joint fees, and National Ad Fund revenue. The royalty increase was primarily driven by same-store sales growth, royalties on annual fees, and new stores. For the fourth quarter, the average royalty rate was 6.6%, up from 6.5%. The 15.9% increase in revenue in the corporate owned store segment was primarily driven by same store sales growth, as well as new and acquired stores. However, equipment segment revenue decreased 25 and a half percent.

Tom: The 13% increase in franchise segment revenue was primarily due to increases in royalties web join fees.

Tom: And the National AD Fund revenue.

Tom: The royalty increase was primarily driven by same store sales growth royalties on annual fees and new stores for the fourth quarter. The average royalty rate was six 6% up from six 5%.

Tom: The 15, 9% increase in revenue in our corporate owned store segment was primarily driven by same store sales growth as well as new and acquired stores.

Tom: Equipment segment revenue decreased 25, 5%.

Tom: The decrease was primarily driven by higher equipment sales in Q4, 2022, which were unseasonably high due to the supply chain issues that pushed equipment deliveries from the second quarter to later in the year.

Thomas J. Fitzgerald: The decrease was primarily driven by higher re-equipment sales in Q4 2022, which were unseasonably high due to the supply chain issues that pushed equipment deliveries from the second quarter to later in the year. We completed 67 new store placements this quarter compared to 66 last year. For the quarter, replacement equipment accounted for 43% of total equipment revenue.

Tom: We completed 67, new store placements this quarter compared to <unk> 66 last year for the quarter replacement equipment accounted for 43% of total equipment revenue.

Tom: Our cost of revenue, which primarily relates to the cost of equipment sales to franchisee owned stores amounted to $57 5 million compared to $73 8 million.

Tom: Store operation expenses, which relate to our corporate owned store segment increased to $65 6 million from $57 6 million.

Thomas J. Fitzgerald: Our cost of revenue, which primarily relates to the cost of equipment sales to franchisee-owned stores, amounted to $57.5 million compared to $73.8 million. Store operation expenses, which relate to our corporate-owned store segment, increased to $65.6 million from $57.6 million. SG&A for the quarter was $31.2 million compared to $28.7 million.

Tom: SG&A for the quarter was $31 2 million compared to $28 7 million. Adjusted SG&A was $29 5 million. This includes a $1 $2 million adjustment for CEO transition related expenses.

Tom: National advertising fund expense was $17 $6 million compared to $15 7 million.

Tom: Net income was $36 8 million adjusted net income was $53 1 million and adjusted net income per diluted share was <unk> 60.

Thomas J. Fitzgerald: Adjusted SG&A was $29.5 million. This includes a $1.2 million adjustment for CEO transition-related expenses. National advertising fund expense was $17.6 million compared to $15.7 million.

Tom: Adjusted EBITDA was $114 3 million and adjusted EBITDA margin was 41% compared to $106 1 million and adjusted EBITDA margin of 37, 7%.

Tom: By segment franchise, adjusted EBITDA was $68 1 million and adjusted EBITDA margin was 69, 2%.

Thomas J. Fitzgerald: Net income was $36.8 million, adjusted net income was $53.1 million, and adjusted net income per diluted share was $0.60. Adjusted EBITDA was $114.3 million, and the Adjusted EBITDA margin was 40.1% compared to $106.1 million and an Adjusted EBITDA margin of 37.7%. By segment, Franchise Adjusted EBITDA was $68.1 million, and Adjusted EBITDA Margin was 69.2%. Corporate store adjusted EBITDA was $45.6 million, and adjusted EBITDA margin was 39.1%. The equipment adjusted EBITDA was $16.8 million, and the adjusted EBITDA margin was 23.8%.

Tom: Corporate store adjusted EBITDA was $45 6 million and adjusted EBITDA margin was 39, 1%.

Tom: The equipment adjusted EBITDA was $16 8 million and adjusted EBITDA margin was 23, 8%.

Tom: Now turning to the balance sheet.

Tom: As of December 31, 2023, we had total cash cash equivalents in marketable securities.

Tom: $447 9 million compared to $472 5 million of cash and cash equivalents on December 31, 2022, which included $46 3 million and $62 7 million of restricted cash respectively in each period in.

Tom: In 2023, we used $125 million to repurchase approximately one 7 million shares.

Thomas J. Fitzgerald: Now turning to the balance sheet. As of December 31, 2023, we had total cash, cash equivalents, and marketable securities of $447.9 million compared to $472.5 million of cash and cash equivalents on December 31, 2022, which included $46.3 million and $62.7 million of restricted cash, respectively, in each period. In 2023, we used $125 million to repurchase approximately 1.7 million shares. Total long-term debt, excluding deferred financing costs, was $2.0 billion as of December 31, 2023, consisting of our four tranches of fixed-rate securitized debt that carries a blended interest rate of approximately 4.0%.

Tom: Total long term debt, excluding deferred financing costs was 2.0 billion.

Tom: As of December 31, 2023, consisting of our four tranches of fixed rate securitized debt that carries a blended interest rate of approximately 4.0%.

Tom: Finally, moving on to our 2024 outlook, which we provided in our press release this morning.

Tom: Greg noted, we believe 2024 is a transition year for new store development as our system absorbs the new growth model.

Tom: We expect between $140 and 150, new stores, which includes both franchise and corporate locations.

Tom: We recognize that modeling our equipment segment business can be difficult. So we're going to provide more insight on it today.

Greg: Let me address placements first we expect between $120 and 130 equipment placements and new franchise stores, which on a percent basis, we expect will play out similar to last year across the quarters.

Tom: Yeah.

Tom: For the full year, we expect that re equip sales will make up approximately high 60% of total equipment segment revenue.

Thomas J. Fitzgerald: Finally, moving on to our 2024 outlook, which we provided in our press release this morning. As Craig noted, we believe 2024 is a transition year for new store development as our system absorbs the new growth model. We expect between 140 and 150 new stores, which includes both franchise and corporate locations.

Tom: We expect that this year will look more similar to 2023 in terms of the quarterly cadence for those sales as it is a more typical year versus the prior three that were impacted by Covid.

Tom: Now as a reminder, the shift to more strength equipment versus cardio will bring down overall sales on a per store basis.

Thomas J. Fitzgerald: We recognize that modeling our equipment segment business can be difficult, so we're going to provide more insight on it today. Let me address placements first. We expect between 120 and 130 equipment placements in new franchise stores, which on a percent basis, we expect will play out similar to last year across the quarter. For the full year, we expect that re-equipped sales will make up approximately 60% of total equipment segment revenue.

Tom: But we are committed to maintaining our profit dollars. So therefore, our margin rate will increase.

Tom: We do not expect the re equip extensions as part of the growth model to impact our P&L until 2026.

Tom: We expect system wide same store sales growth to be between 5% and 6%.

Tom: All of the following targets reflect growth over fiscal year 2023 results.

Tom: We expect our full year revenue to grow in the 6% to 7% range.

Tom: We expect that our full year adjusted EBITDA will grow in the 10% to 11% range.

Tom: We expect adjusted net income to increase in the 9% to 10% range and.

Tom: And we expect adjusted earnings per share to grow in the 10% to 11% range.

Thomas J. Fitzgerald: We expect that this year will look more similar to 2023 in terms of the quarterly cadence for those sales as it is a more typical year versus the prior three that were impacted by COVID. Now, as a reminder, the shift to more strength equipment versus cardio will bring down overall sales on a per store basis. But we are committed to maintaining our profit dollars, so our margin rate will increase. We do not expect the ReEquip extensions as part of the growth model to impact our P&L until 2026. We expect system-wide SameStore sales growth to be between 5 and 6%. Therefore, all of the following targets reflect growth over fiscal year 2023 results. We expect our full-year revenue to grow in the 6% to 7% range. We expect that our full-year adjusted EBITDA will grow in the 10 to 11% range.

Tom: We also expect shares outstanding to be approximately $88.0 million, which is inclusive of the repurchase of 1 million shares over the course of the year. The minimum amount we committed to back at our Investor day in November of 2022.

Tom: And we expect our net interest expense to be approximately $70 million, which assumes we refinanced the tranche I mentioned earlier at six 5%.

Tom: We will update our net interest expense guidance pending the completion of the anticipated refinancing transaction in 2024.

Tom: Lastly, we expect capex to be up approximately 25% with the increase driven by our entry into Spain, and Remodels and relocations for our U S corporate stores.

Tom: We expect DNA to be up between 11%, 12% driven by the increase in Capex.

Thomas J. Fitzgerald: We expect adjusted net income to increase in the 9 to 10% range, and we expect adjusted earnings per share to grow in the 10 to 11 percent range. We also expect shares outstanding to be approximately 88.0 million, which is inclusive of the repurchase of 1 million shares over the course of the year, the minimum amount we committed to back at our investor day in November of 2022. And we expect our net interest expense to be approximately $70 million, which assumes we refinance the tranche I mentioned earlier at 6.5%. We will update our net interest expense guidance pending the completion of the anticipated refinancing transaction in 2024. Lastly, we expect CapEx to be up approximately 25%, with the increase driven by our entry into Spain and remodels and relocations for our U.S. corporate stores. We expect DNA to be up between 11% and 12% driven by the increase in CapEx. As Craig mentioned earlier, we are not updating our three-year outlook today.

As Craig mentioned earlier, we are not updating our three year outlook today in the meantime, our teams are working with franchisees on their development remodel and re equip plans as they determine their near and long term capital requirements and future growth plans.

Tom: We believe that the changes we recently made will further improve returns for all of our stakeholders as we enhance our model to deliver long term sustainable value for many years to come.

Speaker Change: I'll now turn the call back to the operator to open it up for Q&A.

Speaker Change: At this time I would like to remind everyone in order to ask a question. Please press star one.

Operator: Your first question comes from Simeon Siegel with BMO capital markets. Please go ahead.

Simeon Avram Siegel: Thanks, Hi, everyone. Good morning, and Tom Best of luck on the next chapter at some really great guys know you work with you wish you the best.

Speaker Change: Thank you likewise.

Simeon Avram Siegel: Alright could you guys elaborate a bit more on the lift to 5000 from four maybe speak to that.

Simeon Avram Siegel: Those incremental what are they are they any different than the prior or is there a geographic difference does anything change with economics growth waterfall expect members per gym et cetera. So any help there would be helpful. And then just giving the given the many moving pieces of corporate any help on FY 'twenty.

Simeon Avram Siegel: <unk> SG&A dollars. Thank you.

Simeon Avram Siegel: Yes.

Simeon Avram Siegel: Yes.

Speaker Change: Thanks, Amit.

Operator: In the meantime, our teams are working with franchisees on their development, remodel, and re-equipment plans as they determine their near and long-term capital requirements and future growth. We believe that the changes we recently made will further improve returns for all of our stakeholders as we enhance our model to deliver long-term, sustainable value for many years to come. I'll now turn the call back to the operator to open it up for Q&A. At this time, I would like to remind everyone, in order to ask a question, please press star 1. Your first question comes from Simeon Siegel with BMO Capital Markets. Please go ahead. Thanks. Hey everyone. Good morning.

Speaker Change: Take both and Craig May add so on the on the study that we did.

Speaker Change: As Youll recall, we went back in.

Speaker Change: Use the firm that originally gave us the projections.

Speaker Change: That was Buxton and the current firm we use tango.

Speaker Change: <unk>.

Speaker Change: I think they both said towards using different words that they really.

Speaker Change: Love the project because we.

Speaker Change: It's almost have perfect information right, Unlike a restaurant or a retailer who doesn't really know where their customers.

Speaker Change: No where every single member lives.

Speaker Change: How far are they drive et cetera. So it's data unlike what they typically deal with so they feel really good about the results having said that there based on where the demographics are today.

Speaker Change: And so the the 4000 to 5000 is basically.

Simeon Avram Siegel: And, Tom, best of luck in the next chapter. It's been really great getting to know you, and working with you. I wish you the best. Thank you, Simeon.

Speaker Change: The prototypical planet fitness.

20000 square feet urban suburban locations.

Thomas J. Fitzgerald: All right, could you guys elaborate a bit more on the lift to 5,000 from four? Maybe speak to just those incremental 1,000. What are they? Are they any different from the prior? Is there a geographic difference?

Speaker Change: It does not include small market infill or anything like that so it's literally just penetrating the.

The markets we are in.

Speaker Change: Just on what's happened since the IPO in terms of our own membership growth the generational cohort.

Thomas J. Fitzgerald: Did anything change with economics, growth, the waterfall, expected members per gym, etc.? So any help there would be helpful. And then, just giving the many moving pieces of corporate, any help on FY24 on next year's SG&A dollars? Yeah, thanks, Simeon. I'll take both, and Craig may add.

Speaker Change: Trends that we've seen where the younger generations are joining at a more rapid rate than we're at 9% penetrated with millennials and Gen <unk> geographically.

Speaker Change: The store opportunities or sort of.

Speaker Change: Based almost.

Speaker Change: Mirror, how we rolled the brand out across the country. So starting in the northeast we have much more density in terms of percent of population that belongs to planet.

Thomas J. Fitzgerald: So in the study that we did, as you'll recall, we went back and used the firm that originally gave us the projections pre-IPO, that was Buxton, and the current firm we use, Tango. And I think they both said to us, using different words, that they really loved the project because we, in their words, almost have perfect information, right? Unlike a restaurant or a retailer who doesn't really know where their customers live, we know where every single member lives, how far they drive, etc., so it's data unlike what they typically deal with. So they feel really good about the results.

Speaker Change: It gradually lessons as you go to the southeast and even lower in the southwest middle of the country and lowest in the West where we went last so the store count increases are reflective of that essentially.

Speaker Change: So it's really we think it's really good news not unexpected frankly.

Speaker Change: And because it's a point in time, we think when we re measure it when the company re measures that in a few years again.

Speaker Change: Assuming the generational trends are continue.

Speaker Change: Move as they had been projected that should it should.

It will be another positive story, but so we're really encouraged by it.

Thomas J. Fitzgerald: Having said that, they're based on where the demographics are today. And so the 4,000 to 5,000 is basically the prototypical Planet Fitness that's 20,000 square feet, an urban or suburban location. You know, it does not include small market infill or anything like that. So it's literally just penetrating the

Speaker Change: The second part of your question is SG&A, it's reflected in our outlook.

Speaker Change: More broadly speaking it incorporates all the all the actions we took care earlier and the priorities we're focusing on.

Speaker Change: Great. Thanks, a lot guys best of luck for the year. Thank.

Speaker Change: Thank you Simeon.

Speaker Change: Your next question comes from Meghan Alexander with Morgan Stanley. Please go ahead.

Thomas J. Fitzgerald: The markets we are in, based on what's happened since the IPO, in terms of our own membership growth, the generational cohort. Transcripts provided by Transcription Outsourcing, LLC, penetrated with millennials and, geographically. The store opportunities are sort of. I think we can almost mirror how we rolled the brand out across the country. So starting in the northeast, we have much more density in terms of the percent of population that belongs to the planet. It gradually lessens as you go to the southeast and even lower in the southwest middle of the country and lowest in the west, where we went.

Meghan Alexander: Hi, Good morning, Thanks, one quick clarification Tom.

Meghan Alexander: Thank you said you expect system wide same store sales between five and six the press release said high singles just wanted to clarify that 0.1st.

Meghan Alexander: Yes, it should be five five to six.

Meghan Alexander: Got it okay. Thank you and then.

Speaker Change: Thanks for that.

Speaker Change: No worries maybe in light of that there's been a lot of.

Speaker Change: Data pointing to maybe some softer trends quarter to date a lot of others have commented on some weather noise in January could you maybe comment at all on quarter to date membership trends versus your expectations and perhaps how the cadence play. It has played out so far January to February.

Thomas J. Fitzgerald: So the store count increases are reflective of that. And we think it's really good news, not unexpected, frankly. And because it's a point in time, we think when we re-measure it, when the company re-measures it in a few years again, assuming the generational trends continue to move as they have been projected, it should be good, you know, another positive story. But so, you know, we're really encouraged by it. The second part of your question is SG&A. It's reflected in our outlook, you know, more broadly speaking, it incorporates all the all the actions we took here earlier and the priorities were, Great. Thanks a lot, guys. Best of luck for the year.

Speaker Change: Yes, I'll take that one again.

In.

Speaker Change: In keeping with what we've been doing here for the past several quarters, we're not going to comment on the current quarter, we will certainly.

Speaker Change: Provide a lot of in depth.

Speaker Change: Discussion on our next call, but what I would say is that our outlook includes what we're seeing to date and our best knowledge of how we see that growth unfolding over the rest of the year. So.

Speaker Change: I get it's a big question Theres a lot of.

Speaker Change: Media attention to it we just want to continue our practice of not commenting on the current quarter, but it is reflected in our outlook.

Speaker Change: Okay understood and then maybe as a follow up the placement outlook 120 to 130. It is a bit below last year understand the changes youre, making to the model arent necessarily impact in development, yet, but I was hoping maybe you could just talk through some of the other puts and takes.

Simeon Avram Siegel: Thank you. Your next question comes from Megan Alexander with Morgan Stanley. Please go ahead. Hi, good morning.

Megan Alexander: Thanks. One quick clarification, Tom, I think you said you expected system-wide same store sales between five and six. The press release said high singles.

Speaker Change: Driving the expectation for it to be lower than last year.

Thomas J. Fitzgerald: So I just wanted to clarify that point. Oh, yes, it should be 5 to 6. Got it.

Speaker Change: And maybe in particular, how much the transition to the new cure period is impacting your outlook there.

Megan Alexander: Okay. Thank you. And then, you know, my apologies for that. No worries.

Thomas J. Fitzgerald: Maybe, you know, in light of that, you know, there's been a lot of data pointing to maybe some softer trends quarter to date. A lot of others have commented on some weather noise in January. Could you maybe comment at all on, you know, the quarter to date membership trend versus your expectations and perhaps how the cadence has played out so far, January to February? Yeah, and Megan. I'll take that one again.

Speaker Change: This is Craig good morning.

Craig: We certainly are are vigilant about what were looking at with franchisee new store development as well as all the different elements of remodeling and re equipment.

Craig: And with.

Craig: We've taken a fairly conservative outlook on where we go from this because it's taking quite a long time for the system to absorb the changes and what it means to their capex.

Craig: But it's and needs and the interest rate charges on top of our changes on top but have also added to the mix.

Craig: But we're pretty confident that.

Craig: Alright.

Craig: Franchisees are very aggressive iguana as I've said before one grab as many good locations as possible.

Craig: Part of the challenge is also finding locations as we are at an all time low for retail space.

Craig: 98% of retail space is accounted for using its being used so that doesn't leave a lot of space left over to grab either so that's a phenomenon that I guess has been going on for some time now so clearly COVID-19 and beyond but even perhaps before that.

Craig Benson: In keeping with what we've been doing here for the past several quarters, we're not going to comment on the current quarter. We'll certainly, you know, provide a lot of in-depth END. Okay, understood. And then maybe as a follow-up, you know, the placement outlook of 120 to 130 is a bit below last year. You know, understand the changes you're making to the model aren't necessarily impacting development yet. But I was hoping maybe you could just talk through some of the other puts and takes that's driving the expectation for it to be lower than last year. And maybe in particular, how much the transition to the new cure period is impacting your outlook there. This is Craig.

Craig: So that.

Craig: Somebody who takes down as much retail space as we do.

Craig: A bit harder time, finding those locations that used to be more available.

Speaker Change: Great. Thank you very much best of luck.

Speaker Change: Thanks Megan.

Speaker Change: Our next question comes from John <unk> with Guggenheim. Please go ahead.

John: So guys wanted to start with.

John: Do you think given Gen Z in high school passes as demographics change over time does the business become a little less seasonal January less.

Speaker Change: Less important <unk> less important.

Speaker Change: And how does that kind of fit in with.

John: Thoughts on promotional activity.

John: Alright.

Speaker Change: Yeah that may be you can go everyday low price.

Speaker Change: Not lean on $10 so much sure.

Speaker Change: On that.

Speaker Change: Hey, John It's Tom I'll start that one I think.

Craig Benson: Good morning. We certainly are vigilant about what we're looking at with franchisee new store development, as well as all the different elements of remodeling. We've taken a fairly conservative outlook on where we go from this because... It's taken quite a long time for the system to absorb the changes and what they mean to the community. But it's a need.

Tom: It's frankly too soon to tell whether or not the shift in our membership.

Tom: Mix to be more Gen Z and millennials, which are a little over 60% of our total membership base now whether that causes a change in the.

Craig Benson: Also at, but we're pretty confident. Franchisees are very aggressive and want to grab as many good locations as is possible. Part of the challenge is also finding locations, as we're at an all-time low for retail space. 98% of retail space is accounted for. It's being used. So that doesn't leave a lot of space left over to grab either.

Tom: The seasonality of the business and the membership growth.

Tom: For our promotional strategy.

Tom: Certainly we haven't seen anything that would suggest that.

Tom: Through 2023 again, we're not commenting on 2024 yet.

Tom: I think time will tell but.

What we've seen and maybe you heard anecdotally is the idea of new year's resolutions and starting the new year with some new goals.

Craig Benson: I guess it has been going on for a long time. I am now clearly COVID and beyond, but even so..., so that. Somebody who takes down as much retail space as we do, a bit harder time. www.planetfitness.com. Great. Thank you very much. Best of luck to you. Thanks. Your next question comes from John Heinbockel with Guggenheim. Please go ahead. So guys want to start with, do you think, given Gen Z and high school graduates, as demographics change over time, does the business become a little less seasonal? Right?

Speaker Change: Not necessarily.

Speaker Change: Generationally based it seems more universal, but again I think time will tell.

Speaker Change: And I think that the.

Speaker Change: The other thing that we have to understand is that we are fortunate our membership continues to decrease and age not increase in age so yes.

Speaker Change: Mentioned theres patterns to that and then the last thing I'll mention is we've talked about before especially ICR.

Speaker Change: We have to do a better job branding this company than we have done in the past.

Speaker Change: That will mean that some shift away from some of the promotional collateral added in the past and more towards a branding message.

Speaker Change: That you haven't seen that yet and we're still developing that but that will come over time and I have also mentioned that younger people tend to want to align themselves with brands that can relate to.

John Heinbockel: January less important, 1Q less important? And how does that kind of fit in with, you know, thoughts on promotional activity? Right?

Speaker Change: So by offering a branding message hopefully we can get people to be.

Speaker Change: More fans of planet fitness stay longer planet fitness and <unk>.

Speaker Change: Other things that can be attributed to having a strong brand, which we have but we have not enunciated.

Thomas J. Fitzgerald: The idea that maybe you can go every day low price and not lean on $10 so much? What's your thought on that? Hey, John. It's Tom.

Speaker Change: Okay.

Speaker Change: So Craig since you hit on that maybe a follow up.

Craig: When do you think we start to see that content.

Craig: Brian I don't know necessarily want to wait until peak season next year I was wondering we see that where would you like to see the split on national local right, which today I guess it was $2 seven.

Thomas J. Fitzgerald: I'll start that one. I think it's, frankly, too soon to tell whether or not the shift in our membership mix to be more Gen Z and millennials, which are a little over 60% of our total membership base now, will happen. Whether that causes, you know, a change in the seasonality of the business and the membership growth for our promotional strategy. Certainly, we haven't seen anything that would suggest that, you know, through 2023. Again, we're not commenting on 2024 yet. And I think time will tell, you know. What we've seen and maybe heard anecdotally is the idea of, you know, New Year's resolutions and starting the new year with some new goals is not necessarily generationally based but more universal.

Craig: And then.

Brian: Is the plan still starting in April two to relax the spending requirements right for the first two years on new clubs.

Speaker Change: The answer to that question is yes, so yes.

Speaker Change: That is out there.

Speaker Change: We are developing that content and we're in the early innings of that and I to be honest with you I don't know where its going to land in time wise, but we need to get it done as quickly as possible.

Speaker Change: And hopefully have it so that when we start next year we have.

Speaker Change: Good content going into promotional content, so that's sort of the plan.

Speaker Change: And we need to execute on that as you know because you've followed very closely.

Speaker Change: This company has a lot of good things that we do for people that we just don't talk about and we need to be much better articulating that message in a clear and concise way.

Craig Benson: But again, and I think the other thing that we have to understand is that we are fortunate; our membership continues to decrease in age, not increase in age, so you mentioned this, there's patterns to that, and then the last thing...talk, www.planetfitness.com. We have to do a better job branding this company than we have done in the past. That will mean that some shift away from some of the promotional collateral and in the past, more towards a brand new method. You haven't seen that yet, and we're still developing that, but that'll come over time, so much. Younger people tend to want to align themselves with brands they can relate to, so by offering a branding message.

Speaker Change: And doing that.

Speaker Change: In conjunction with promotional pricing I think will be a real winning combination.

Speaker Change: Okay. Thank you.

Speaker Change: Thanks, John.

Speaker Change: Your next question comes from Jonathan Komp with Baird. Please go ahead.

Jonathan Robert Komp: Yes, hi, good morning, Thank you.

Jonathan Robert Komp: Just wanted to follow up you gave the comps guidance for the year.

Jonathan Robert Komp: 5% to 6% growth for the system could you just talk a little bit more I know that typical target is high single digit. So what are you seeing and are embedding.

Jonathan Robert Komp: And the expectations for comps below your typical plan for the year.

Jonathan Robert Komp: Could you just talk more tactically.

Jonathan Robert Komp: Given some of the signs of a softer start for the industry.

John Heinbockel: Hopefully, we can get fans of Planet Fitness. Planet Fitness, www.planetfitness.com. Craig, since you hit on that, maybe a follow-up. When do you think we start to see that content? Right, I don't know that you'd necessarily want to wait until peak season next year.

Jonathan Robert Komp: Do you have some specific plans or reactions in place to drive better performance going forward.

Jonathan Robert Komp: Yeah, Hey, John It's Tom.

Tom: So I think if you look at how our comps played out over.

Tom: 2023.

Craig Benson: When do we see that? Where would you like to see the split on national-local, right, which today I guess is two and seven? And then, is the plan still, starting in April, to relax the spending requirements, right, for the first two years on new clubs? The answer to that question... is, yeah, out there. We are developing that content. We're in the early innings of that, and to be honest with you, I don't know where it's going to land time-wise, but we need to get it done as quickly as possible, and hopefully have it so that when we start next year, The Bulletproof Executive 2013. So that's sort of the plan. And we need to execute on that, as you know because you follow this company very closely.

Tom: They were still strong.

Tom: But the fourth quarter was was the lowest of the four.

Tom: And sort of.

Tom: Played out that way.

Tom: Q2 and Q3.

Tom: So I think as you know.

Tom: With our business more and more stores are now mature still growing we've talked about our original store in Dover here in New Hampshire is still has positive same store sales growth.

Mostly due to member growth with the mature stores do grow slower and the impact of ramping stores.

Tom: And their first second and third year has always been a big.

Tom: Help to same store sales and that just from a from a composition of our fleet.

Tom: Is just becoming a smaller percentage now as we've said those new stores that we're building here in late.

Craig Benson: This company has a lot of good things that we do for people that we just don't talk about. And we need to be much better at articulating that message in a clear and concise way, and doing that in conjunction with promotional prices. We are. Okay, thank you. Thanks. Your next question comes from Jonathan Komp with Baird. Please go ahead. Yeah, hi. Good morning.

Late 'twenty, three and sorry late 'twenty tuned into 'twenty three.

Tom: Really tightened the gap to where those new store ramps were pre COVID-19.

Tom: So that's really great to see they're not all the way back there, but they are definitely very close.

Jonathan Robert Komp: Thank you. I just want to follow up. You gave the comps guidance for the year, you know, 5 to 6% growth for the system. Could you just talk a little bit more?

Tom: So that's a good part it's just really the composition and the mix of new and ramping clubs compared to the mature store base, but.

Thomas J. Fitzgerald: I know the typical target is high single digits, so what are you seeing or embedding in the expectations for comps below your typical plan for the year? And can you just talk more tactically, you know, given some of the signs of a softer start for the industry, do you have some specific plans or reactions in place to drive better performance going forward? Yeah, hey, John, it's Tom.

Tom: In the Grand scheme, we still feel very good about 5% to 6% and the flow through of the motto franchisees will still and our own corporate clubs should still have an expanding EBITDA margins on a four wall basis with those same store sales.

Speaker Change: Okay, and maybe any thoughts on just tactically plans for 2024 here things that you could do to drive member gains throughout the year.

Thomas J. Fitzgerald: So I think if you look at how our comps played out over, um, 2023, you know they were still strong, um, but the fourth quarter was the lowest of the four and and sort of played out that way in Q2 and Q3. So I think, you know, as you know, with our business, more and more stores are now mature and still growing. We talk about our original store in Dover here in New Hampshire, which still has positive same-store sales growth, mostly due to member growth. But the mature stores do grow slower, and the impact of ramping stores in their first, second, and third year has always been a big help to Same Store Sales.

Speaker Change: Well I think we're.

Speaker Change: Again, we're not talking about 2024 in particular, but generally.

Speaker Change: We always assess whats happening with each passing months and working with our franchisees to coordinate our activity and what we think we need to.

Speaker Change: Two.

Speaker Change: Maintain or tweak the good news is we spend a lot of money. So we definitely are we try to be as agile as possible and redirecting, whether that's channel shift or calendar shifts channel, meaning digital to broadcast.

Speaker Change: Craig's point about messaging I think we'll learn more through the year about how we mix the messaging so.

Speaker Change: We still believe we spend.

Speaker Change: The almost the entirety of the of the marketing spend in the industry in the U S. So.

Speaker Change: We've got a lot of firepower, we just will continue to try to optimize that as we progress across the year just like we do in any year.

Thomas J. Fitzgerald: And that's just from the composition of our fleet, which is just becoming a smaller percentage. Now, as we've said, those new stores that we're building here in late, you know, late 23 and in, sorry, late 22 and into 23, have really tightened the gap to where those new store ramps were pre-COVID. So that's really great to see. They're not all the way back there, but they're definitely, you know, very close.

Speaker Change: Okay. Thanks, Tom and then just one follow up Craig if I could just ask you've been in the interim role now for five months here just could you give any more specific details.

Craig: And the timeline here for the remaining top process, maybe what stage you're in with some of the interviews and any characteristics of some of the candidates you've identified thanks again.

Thomas J. Fitzgerald: So that's a good part. It's just the composition and the mix of new and rising clubs compared to the mature store base. But in the grand scheme, we still feel very good about, you know, five to six percent, and you know the flow-through of the model. Franchisees will still, and our own corporate clubs should still have expanding EBITDA margins on a four-wall basis with those. And any thoughts on just tactically, you know, plans for 2024 here, things you could do to drive member gains throughout the year? Well, I think we're, again, not talking about 2024 in particular, but generally. We always assess what's happening with each passing month and work with our franchisees to coordinate our activity and what we think we need to do, maintain or tweak. The good news is that we spend a lot of money.

Speaker Change: Thank you for the question.

Speaker Change: So we.

Speaker Change: <unk>.

Speaker Change: The committee has has interviewed.

Speaker Change: Several dozen candidates from a pool of over 100 I believe.

Speaker Change: And are now, creating a short list that we should see somewhat shortly.

Speaker Change: So I'm looking forward to seeing that shortlist and then perhaps talking to those people that.

Speaker Change: Our needs.

Speaker Change: Assessing where we go from there, but yes, I think the process is starting to wind down.

Speaker Change: <unk>.

Come to some completion.

Speaker Change: Okay. Thanks, Ian Yes.

Ian: Yes, Thanks John.

Ian: Your next question comes from Max <unk> with TD Cowen. Please go ahead.

Max: Great. Thanks, a lot. So can you share any takeaways, thus far from the pricing and highlights.

Max: <unk> got going on just the impact that they've had on membership.

Max: Growth in elasticity sort of what does churn look like the area as well as the yard the black card mix.

Max: Are the outcomes similar across the various pilots or are you seeing variability there.

Speaker Change: So I'll take the first portion of the question. So we have three tests going as you probably know.

Thomas J. Fitzgerald: So we definitely are; we try to be as agile as possible in redirecting, whether that's channel shift or calendar shifts, channel meaning digital to broadcast. Craig's point about messaging, I think we'll learn more through the year about how we mix the messaging. We still believe we spend almost the entirety of the marketing spend in the industry in the U.S. So we've got a lot of firepower.

Speaker Change: 15, and a $12 99, which both started.

Speaker Change: The August September timeframe.

Speaker Change: We added to that of $2014 99, which started in the December timeframe those in the New York DMA both of the other.

Speaker Change: Test the earlier tests.

Speaker Change: Our combination of Dma's rush.

Speaker Change: Roughly 100 clubs.

Speaker Change: That we're doing it in a 100 clubs so we model against those doing it. So we have a test group.

Speaker Change: The results.

Speaker Change: Vary over time.

Speaker Change: And as you know, we also and those two beginning tests allowed.

Thomas J. Fitzgerald: We just will continue to try to optimize that as we progress across the year, just like we do in every other year. Okay, thanks, Tom. And then just one follow-up question, Craig, if I could just ask, you've been in the interim role now for five months here; could you give any more specific details on the timeline here for the remaining process? Maybe what stage you're in for some of the interviews and any characteristics of some of the candidates you've identified?

Speaker Change: Clubs to when we're on sale for the classic card at $10. They would follow that classic card pricing.

Speaker Change: That was not the case with the New York DMA later tests for $14 99.

Speaker Change: They did not.

Speaker Change: Offer that $10 membership.

Speaker Change: Opportunities since we started in mid December so they have not followed the national sale.

Speaker Change: Model for that particular offering.

Speaker Change: We're still assessing where it is.

Speaker Change: Again, the biggest portion of this is how many people you can sign up but just behind that is how long do they stay.

Speaker Change: That's an iterative process that takes a while to understand I will say that I think and there is no data behind this that it takes a while for the market to absorb pricing changes and so there could be some anomalies associated with that I need to look further to data too.

Jonathan Robert Komp: Thanks again. Thank you for the question. So, um, we. The committee has interviewed several dozen candidates and is now creating a short list.

Speaker Change: Understand that better if there is anything to it at all.

Speaker Change: Just bring that up as a conversation piece Tom do you have anything else no. Yes, just one thing.

Tom: Max I think theres been a lot of understandably, there's been a lot of media.

Craig Benson: So I'm looking forward to seeing that short list and talking to those. I think the process is starting. www.planetfitness.com. Okay, thanks again. Yeah, thanks, John. Your next question comes from Max Reklenko with TD Cowan. Please go ahead.

Tom: Things written and said about our pricing test in.

Tom: What we did in.

Max: And most of it is actually inaccurate and I think the principal statement. We want to clarify is some folks have said that we werent we were doing something in the first two weeks of January and then we changed our price because of soft trends in all of that.

Max Reklenko: Great, thanks a lot. So can you share any takeaways thus far from the pricing pilots that you've got going on, just the impact that they've had on membership growth and elasticity, sort of what this churn would look like there as well as the black card backs? Are the outcomes similar across the various pilots?

Max: Just wasn't the case, it's a question of what media people see so if they are watching the national ads, they're not seeing a price point in those ads for the reasons we've articulated.

Max: But then if they saw a local AD all the local.

Max: Media does carry a price point. So it's just a question of what you saw when.

Craig Benson: Or are you seeing variability there? So I'll take the first portion of the question. So we have three tests. 15 and a 1299, which both started.

Max: But we did not change any.

Max: Messaging tactics or pricing.

Max: Through January as a result of anything that we saw in <unk>.

Craig Benson: August-September time. We added to that a $14.99 price tag, which started in the December time frame that was in the New York DMA. Both of the other... past the earlier test, combination of DMAs, roughly a hundred clubs that we're doing it on and 100 clubs that we model against those doing it. The results vary over time, and as you know. We also, in those two beginning tests, allowed clubs to know when we're on sale. $10, they would volunteer; this was not the case with the New York DMA the later. www.planetfitness.com To find out more, visit for that $10 membership, an opportunity since I started, followed the national sale.

Speaker Change: Just add one thing.

Speaker Change: But the lion's share of the advertising in the first quarter as local spend not national spend.

Speaker Change: So.

Speaker Change: Theyre, most likely seen pricing in those local market AD spend you would be seeing nationalized and have no pricing right. The national ads have no pricing across the country with a local ads do have price.

Speaker Change: Got it Okay. That's helpful and then so when the franchisees signed the new 80 AIDS in December.

Speaker Change: Did that have any impact on the cadence of their opening pipelines for the years ahead I'm. Just curious why is there as much ambiguity as it sounds like or are you, providing potentially temporarily greater flexibility on the openings this year.

Speaker Change: But what we're doing is we've gone from grace periods to cure periods.

Craig Benson: We're still assessing where it is, and the biggest portion of this is how many people you can sign up; behind that, it's how long they stay. It's a long, iterative process that takes a while to understand. I will say that data behind this takes a while for the market to absorb pricing changes. Some anomalies associated with that, I need to look further, and that better.

Speaker Change: The Grace periods.

Speaker Change: Sold somewhat.

Speaker Change: And <unk> as far as when you need to cured by the cure period is less but the cure period gives you six months from the date you are supposed to deliver something to fix it.

Speaker Change: And so that does push a number of different obligations, perhaps out of 2024, if youre using it that way.

Speaker Change: But the cure period is a cure period and it needs to be cured in that period of time.

Speaker Change: So there may be some.

Speaker Change: In there, but I'll add the following if I see a good location. This is me speaking for me.

Speaker Change: I'm not going to pass on it.

Speaker Change: Because I mentioned earlier, 98% of retail space is leased you can't find space anywhere easily anymore.

Speaker Change: And it's become quite an exercise to try and find those good retail locations to be able to occupy and thats in spite of some <unk>.

Thomas J. Fitzgerald: No, yeah, just one thing. Max, I think there's been a lot of understandably, there's been a lot of media, things written and said about our pricing test and, you know, what we did, and most of it is actually in action. And I think the principal statement we want to clarify is, Some folks have said that we were doing something in the first two weeks of January and then we changed our price because of soft trends and all that. But that just wasn't the case.

Speaker Change: Hard times for a few different brands.

But as you know we're one of the three.

Speaker Change: The biggest consumers of space and the retail industry, So we need to.

Speaker Change: To make it work.

Speaker Change: And it's hard to find that does slow the shift down in addition.

Speaker Change: What used to take six to nine months to develop a new club is now 12% to 14 months, so that pushes it as.

Speaker Change: Well.

Speaker Change: So theres a lot of dynamics going on in the marketing of our clubs in the building of our clubs and what have you and we're having to adjust to some of that but I think for short periods will be very helpful, especially in the longer term to having tighter timelines to be able to.

Speaker Change: Be able to develop boxes in different territories.

Speaker Change: Max I'd add one thing that we ask franchisees to opt in or opt out.

Speaker Change: By the end of 2023 to the new plan and as we've said essentially all stores, but two to one store operators have did not.

Thomas J. Fitzgerald: It's a question of what media people see. So if they're watching the national ads, they're not seeing a price point in those ads for the reasons we've articulated. But then if they saw a local ad, all the local... Media does carry a price point, so it's just a question of what you saw, but we did not change any messaging tactics or pricing through January as a result of any of those and others like them. The lion's share of the advertising in the first quarter is local spend, not national. You're most likely seeing pricing and those local market ads, then you would be seeing national ads. Hashlags have no price,

Speaker Change: And I would say that was full depths deep.

Speaker Change: Detail. We then had to follow up with contracts and they have to work through it and where that's going to take a couple of months to finalize all of that so that's more like ocean depth detail.

Speaker Change: If that makes sense so.

Speaker Change: What happened by the end of the year was just the beginning of it we had to do some more work with the contracts that they are now getting exposed to and to Craig's point about the lead time, So we feel really good about.

Speaker Change: What we've done the reception has been beyond what we expected. It's just a matter of it all playing through but it's not an increased level of ambiguity. It's not like we're lessening and it's also true that most people were on or ahead of their schedule. So they're not there's no makeup period here that sort of accelerating through hope that makes sense.

Max Reklenko: I'm glad to do it. Got it. Okay, that's helpful. And then, when the franchisees signed the new ADAs in December, did that have any impact on the cadence of their opening pipelines for the years ahead? I'm just curious, why is there as much ambiguity as it sounds like?

Speaker Change: Thats, Great and then just quick last one to Craig's point on real estate I guess why shouldn't we think that the real estate issue is only going to potentially get worse as time goes on.

Craig Benson: Or are you providing potentially temporarily greater flexibility on openings this year? Well, what we're doing is, we've gone from grace periods to cure. Grace Period, sold somewhat. Thank you for watching. It's your period.

Craig Benson: The cure period gives you six months from the date you're supposed to deliver. Please visit www.planetfitness.com for more information. And so, that does push a number of different obligations out of 2024 if you're using it that way. The cure period is a cure. So there may be some there, but I'll add them. If I see a good location.. me.

Speaker Change: Retail is sort of in that same size box that you guys are looking for 98%.

Speaker Change: The real estate is accounted for as Craig said earlier, so I guess, how should we think about that I had and why why would that have would potentially ease at some point in the future.

Speaker Change: Hey, Max I'll start that one.

Craig Benson: I am. I mentioned earlier that 98% of retail space is leased. You can't find space anywhere easily, and it's become quite an exercise to try and find those good retail locations to be able to... Spider, hard times for a few.

Max: So I think I think the combination and you've seen all the stuff whether it's.

Max: CBRE J O all of the folks are saying the same thing I think Costar I think the building of new real estate was definitely.

Craig Benson: But as you know, we're one of the three biggest consumers of space in retail. We need, https://www.planetfitness.com, which used to take 6-9 months to develop a new club is now 12-14 months, so that pushes, And so there's a lot of dynamics going on in the market, and so there are many more. Thank you.

Max: Sort of record lows through 'twenty through 'twenty three.

Max: New strip centers.

Max: The stuff that's available we're not really interested in we don't do a lot of malls unless theyre getting.

Max: Blown up and created more to look like a lifestyle center. We also don't do a lot of office stuff buildings, Thats, just not where theres a lot of that available. So it's really what are we after now.

Thomas J. Fitzgerald: And Max, I'd add one thing that we ask franchisees to opt in or opt out of the new plan by the end of 2023. And as we've said, essentially all stores but two one-store operators did not. And I would say that was pool depth detail.

Thomas J. Fitzgerald: We then had to follow up with contracts, and they have to work through that. And that's going to take a couple of months to finalize all that. So that's more like ocean depth detail, if that makes sense.

Thomas J. Fitzgerald: So, what happened at the end of the year was just the beginning. We had to do some more work with the contract that they're now getting exposed to, and to Craig's point about the lead time. So we feel really good about what we've done. The reception has been beyond what we expected.

Thomas J. Fitzgerald: It's just a matter of it all playing through, but it's not an increased level of ambiguity. It's not like we're diminishing. And it's also true that most people were on or ahead of their schedule, so there's no make-up period here that they're doing.

Max: And then a tightening environment and we think law of supply and demand will let some ultimately recalibrates and maybe look like or what it was pre COVID-19 is just gonna take some time. These are not these are ocean liner sort of Ah Ah changes not cigarettes boat.

Max Reklenko: Oh, I hope that makes sense. No, that's great. And then just quick, last one, to Craig's point on real estate, I guess, why shouldn't we think that the real estate issue is only going to potentially get worse as time goes on? A lot of the growth in retail is sort of in that same size box that you guys are looking for.

Speaker Change: Got it that's very helpful. Thanks, Alot Best regards Mex Max I appreciate it.

Thomas J. Fitzgerald: 98% of the real estate is accounted for, as Craig said earlier. So I guess, how should we think about that in the future? And why, you know, why would the headwood potentially ease at some point?

Speaker Change: Cause I just add one more thing so 14 million square feet of space game and retail space last year.

Speaker Change: Which was half what was the projected demand. So it's a it's a problem that we need to work through but I agree with Tom supply and demand usually works itself out once once the market understands that there's a need to stop being fulfilled.

Speaker Change: [noise]. Your next question comes from Rolla cough syrup, Holly with J P. Morgan. Please go ahead.

Thomas J. Fitzgerald: Hey, Max, I'll start that one. So I think the combination, and you've seen all the stuff, whether it's CBRE, JLL, all the folks who are saying. I think, you know, CoStar, the building of new real estate was definitely, but sort of record lows through 20 through 20, you know, new strip centers that the stuff that's available, we're not really interested in. We don't do a lot of malls unless they're getting, you know, blown up and created more to look like a lifestyle. We also don't do a lot of office stuff, you know, building, that's just not, which there's a lot of that available.

Holly: Good morning, guys. Thanks for taking my question.

Holly:

Holly: Greg you later, some breadcrumbs her ties here I'm talking more about the smaller format starts being a real possibility and you talk a little more about that today, you said previously that there for like.

Holly: The current real estate constraints increased condominiums on that trade area. So.

Holly: Which were not addressed before can you help us thing through the format and then also give us more insight.

Holly: Insight on this and felt strategy on what this could be a potential at the same time and I have a follow up.

Thomas J. Fitzgerald: So it's really what we're after now? So we think as rates lower, as demand continues to grow from folks like us and others, you know, TJX and other people are looking for similar sites, that will ultimately improve. It's just gonna take some time. And I'd say the...

Speaker Change: Yeah roll that's we are actively working on different format clubs.

Speaker Change: And Tom mentioned or maybe I did in the opening comments.

Speaker Change: For infill opportunities, but perhaps even more for smaller population areas.

Holly: That we in the past couldn't get into because we needed a bigger population.

Thomas J. Fitzgerald: The other part is, you know, interest rates as interest rates lower, you know, whether that's four moves, three moves, whatever. But over the next couple of years, we anticipate lower interest rates. So all that will be a tailwind.

Holly: And we are actively working with some of our franchisees to to develop those clubs with them.

Holly: We're working right now with.

Holly: Schemes to be able to do those clubs and.

Holly: I'm hopeful that we can add those as opportunities to our pipeline.

Holly: Sooner rather than later, but we have to look at all opportunities and again. This has nothing to do with the upsizing that we did the exercise for.

Holly: That stands on its own those are the more traditional clubs.

Thomas J. Fitzgerald: The other thing is there are some folks who are, you know, walking away from their boxes, and some of those work for us, and some of those don't. We've talked about Bed Bath & Beyond. We've got some of those, so do our franchisees, in our corporate segment, some of our franchisees do too. Rite Aid, you know, recently announced that some of those spaces work for us. It's, you know; parking fields have to be big enough.

Holly: We did a survey on.

Holly: But these would be new opportunities and and.

Holly: How do we have with the franchisees in mid October I talked about Beaver Dam, Wisconsin.

Holly: Beaver Dam, Wisconsin is 20000 population and a 40 minute drive time.

Holly: And we couldn't go in there in the past so.

Holly: To find a way to be able to get it to enter Beaver Dam, Wisconsin and make a successful for the franchisee that has that club is one of the goals I have 220.

Holly: Enable us to be in places we couldn't be in the past.

Speaker Change: That's helpful.

Speaker Change: Follow up is an international on Monday, but he basically it just contemplate that if they can be a potential concentration.

Thomas J. Fitzgerald: There's a lot of stuff to work through, but as some of that happens, that's also a help. It's just... We're still taking down a lot of real estate. It's just in a tightening environment, and we think the law of supply and demand will ultimately recalibrate to maybe look like what it was pre-COVID. It's just going to take some time. These are not, these are ocean liner sort of changes, not cigarette changes. Got it.

Speaker Change: <unk>, even in Europe, giving your brand equity, possibly even buying an established writer until you find things stores to planet fitness ban did you take this started to do that at all or have any conversation supposed 2020 on if not can you also talk more on leveraging the bandage.

Max Reklenko: That's very helpful. Thanks a lot. Best regards. Thanks, Max. I appreciate it. And Max, I just have one more thing.

Thomas J. Fitzgerald: So 14 million square feet of retail space came in retail space last year, www.planetfitness.org. So it's a problem that we need to work through, but I agree. Supply and demand usually work themselves out. www.planetfitness.com. Your next question comes from Rahul Krotthapalli with J.P. Morgan. Please go ahead.

Speaker Change: Could eat organically compete against low cost provide us like basic fit which I think has like almost 200 clubs in Spain today and also out of it. So I'm just suddenly got dogs there yeah.

Speaker Change: Yeah, I'll start that one so we have as you can imagine given our position in the industry we've had.

Rahul Krotthapalli: Good morning, guys. Thanks for taking my question. Craig, you laid out some breadcrumbs at ICR, talking more about the smaller format stores being a real possibility, and you talked a little more about that today. You said previously that this will address the current real estate constraints, increase convenience, and reach the trade areas which were not addressed before. Can you help us think through the format and then also give us a little more insight on this infill strategy and what this could be a potential addition to the TAM? And I have a follow-up. Yeah, roll with it.

Speaker Change: And the U S and internationally, a whole bunch of friends come our way.

Speaker Change: As we've looked at it what's tricky about it is pick your brand in Europe.

Speaker Change: If we buy it or buying members who.

Speaker Change: Basically belong to.

Speaker Change: Gyms that are pretty aggressive and how they work out there definitely not our our our environment you know they've got bought some of them have a tire flipping areas you know big weights not a lot of cardio lot of strength.

Speaker Change: Some even have boxing rings, you've heard us talk about.

Craig Benson: We are actively working on different format clubs. And Tom mentioned, or maybe I did, com, for infill opportunities, but perhaps even more for smaller population areas that we, in the past, www.planetfitness.com ** we needed a bigger. We are actively working with some of our franchisees to develop those clubs with them, and we're working right now with them to be able to do those, and I'm hopeful that we can add those as opportunities to our. We have to look at all opportunities. And again, this has nothing to do with the upsizing that we did in the exercise. That stands on its own. Those are the more traditional, did a survey on...

Speaker Change: So if we buy it we're buying the assets.

Speaker Change: We have to spend a fair amount of money to you know redo the box if they have a pool, we gotta take that out there's a lot of dollars to get invested in that so we've we've paid we've paid to buy the company, we're paying to reformat the stores and we're likely going to lose a lot of the members. So there's not we're essentially buying the book.

Speaker Change: Ox itself, and then spending a lotta money.

Speaker Change: We just think plus we have to you know then change the brand and all that so we've just as we've looked at it we've tried to make it work we haven't yet found a case, where it makes sense. So.

Rahul Krotthapalli: But these would be new opportunities. In a huddle we had with the franchisees in mid-October, I talked about Beaverdale. Beaver Dam, Wisconsin, has a 20,000 population in a 40, and find a way to be able to get it to enter Beaverdam, Wisconsin, and make it successful for the franchisee that has that club. This is one of the goals I..., enable us to be in. That's helpful. And the follow-up is on international and M&A. Previously, it was contemplated if M&A could be a potential consideration to enter new markets, even in Europe, given your brand equity, possibly even buying an established operator and reformatting stores to the Planet Fitness brand. Did you take this strategy further at all or have any conversations post-2020?

Speaker Change: Instead, what we're doing in Spain is we're taking a fresh start.

Speaker Change: We're we're going to build some stores get it going and then and then Refranchise them. We think it's an attractive market, we think while basic fit and others have have an ultra fit you know we're familiar with all these folks.

Speaker Change: They have a presence they just don't do what we do and so just like the U S had a bunch of people who do what they do and then we came along and disrupted the industry. We we still haven't found anybody who does what we do and appeals to the first time casual Jim go or getting people off the couch and you've heard us talk about the penetration in the U S is among the highest there's only one.

Speaker Change: One other small country, that's higher so all these other countries have lower per cent of the population participating we think that's because it's intimidating and it's expensive and we we break those barriers down. So we're excited about it we think Spain is a great opportunity and our balance sheet allows us to put a little capital and.

Thomas J. Fitzgerald: And if not, can you also talk more about leveraging the brand equity to organically compete against low-cost providers like BasicFit, which I think has almost 200 clubs in Spain today, and also AltaFit? So I'm just curious about your thoughts there. Yeah, I'll start that one, Rahul.

Thomas J. Fitzgerald: So we have, as you can imagine, given our position in the industry, we've had, in the U.S. and internationally, a whole bunch of brands come our way. I'm, as we've looked at it, what's tricky about it is to pick your brand in Europe. If we buy it, we're buying members who basically belong to Jim's that are pretty aggressive in how they work out. They're definitely not our environment. Some of them have tire-flipping areas, big weights, not a lot of cardio, and a lot of strength.

Speaker Change: Play to accelerate.

Speaker Change: Where our presence would get to in a few years versus where Ah new franchisee would be able to get into.

Speaker Change: Thanks, Tom that's really helpful. I unveil Miss working with you by the end of this year.

Tom: Oh, Thank you I'm still around for a little while so you haven't gotten it yet but I appreciate that [laughter].

Tom: Okay.

Speaker Change: Your next question comes from a gel auto dial out with Raymond James. Please go ahead, Bronx, Hey, guys. Good morning. The first question on the member base continues to get younger are you guys seeing any difference in average lifetime value between your younger and older member cohorts given to lower your blackheart Penny.

Thomas J. Fitzgerald: Some even have boxing rings you've heard us talk about. So if we buy them, we're buying the asset, and we have to spend a fair amount of money to, you know, redo the box. If they have a pool, we've got to take that out. There are a lot of dollars that get invested in that. So we've paid to buy the company, we're paying to reformat the stores, and we're likely going to lose a lot of the members. So we're essentially buying the box itself and then spending a lot of money.

Bronx: I'm not sure how you Wanna cancel rates might differ.

Speaker Change: Yeah, I can start that in Craig may add.

Speaker Change: Joe it's still incredibly attractive for adjourn Z a contract value.

Speaker Change: For their membership it is a little bit below where it is on average only to your point because when they're younger they're they're black carbon mixed tends to be lower but you've heard us talk about as we look at the different ages with engine Z. There are step function changes in their black hard penetration as the agent and once they.

Thomas J. Fitzgerald: We just think, plus we have to, you know, then change the brand and all that. So we've just, as we've looked at it, we've tried to make it work. But we haven't yet found a case where it makes sense.

Thomas J. Fitzgerald: So instead, what we're doing in Spain is we're taking a fresh start, where we're going to build some stores, get it going, and then re-franchise them. We think it's an attractive market. We think while BasicFit and others have an AltaFit, we're familiar with all these folks. They have a presence. They just don't do what we do.

Bronx: To their twenties.

Bronx: They look much more like the average of roughly 60% of them are black card members. So.

Bronx: We we will take that trade all day long because the contract value, even with a slightly lower black card mix is still.

Thomas J. Fitzgerald: And so, just like the U.S. had a bunch of people who do what they do, and then we came along and disrupted the industry, we still haven't found anybody who does what we do and appeals to the first-time casual gym-goer, getting people off the couch. And you've heard us talk about how penetration in the U.S. is among the highest. There's only one other small country that's higher

Bronx: Many orders of magnitude above the cost of getting a new member.

Speaker Change: Got it very helpful. I, maybe it's the follow up to five to six per cent com growth and thanks for clarifying that by the way is.

Speaker Change: The composition of that you'll expect it to be roughly 75.

Bronx: Remember growth and does it assume a 15 dollar classic car pricing task becomes permanent this year yeah. That's a good question Joe It is still predominantly member growth driven and it assumes the current pricing that we have in the country does not assume we roll any new price test nationally.

Thomas J. Fitzgerald: So all these other countries have lower rates of the population participating. We think that's because it's intimidating and it's expensive, and we break those barriers down. So we're excited about it. We think Spain is a great opportunity, and our balance sheet allows us to put a little capital in play to accelerate growth where our presence would get to in a few years versus where a new franchisee would be able to get to. Thanks, Tom. That's really helpful, and we'll miss working with you by the end of this year. Oh, thank you. I'm still around for a little while, so you haven't gotten rid of me yet, but I appreciate that.

Speaker Change: Okay, Great Bronchials you bet.

Speaker Change: Your next question comes from Sandbox, yet with William Blair. Please go ahead.

Sandbox: Hi, good morning.

Sandbox: I appreciate all the teller on what's going on I'm I'm also interested Rhode Island, and the partnership side of the equation or we've expanded that.

Sandbox: <unk> have those partnerships then to.

Rahul Krotthapalli: Your next question comes from Joe Altobello with Raymond James. Please go ahead. Thanks. Hey, guys. Good morning.

Sandbox: Getting a new members are getting them to try it out the blackheart concurrently with that have you explored any opportunities to kind of tap into what's happening with G. L. P. One then.

Joseph Nicholas Altobello: So first question on the member base: as it continues to get younger, are you guys seeing any difference? in average lifetime value between your younger and older member cohorts, given the lower black card penetration rates. I'm not sure how the cancel rates might... Yeah, I can start that, and Craig may add, Joe, it's still incredibly attractive for a Gen Z contract value for their membership. It is a little bit below where it is on average, only to your point because when they're younger, their black card mix tends to be lower, but you've heard us talk about, as we look at the different ages within Gen Z, there are step function changes in their black card penetration as they age, and once they get to their 20s, they look much more like the average of roughly 60% of them are black card members.

Sandbox: They need to there to build muscle mass and you know and it seems like it is that convenient.

Sandbox: Judgments club that you would be well applies to <unk> and more prevalent trend.

Speaker Change: Yeah, Let me, let me start with.

Speaker Change: Last question [noise].

Sandbox: So the the weight loss drugs that are now available.

Sandbox: Clearly presented an opportunity for us too.

Sandbox: Teach people how to maintain their muscle mass and in fact.

Sandbox: Enhance their their weight loss journey by being healthy or about it but also speeding it up.

Sandbox: Because as you know exercise helps burn off calories too.

Sandbox: So we see that as an opportunity we have some plans in place.

Sandbox: To develop a few things to augment what we offer in a club to to those type of people, it's still not a big portion of the population I believe there's only 4 million prescriptions right now.

Sandbox: But it's clearly gaining a lot of momentum.

Thomas J. Fitzgerald: So we will take that trade all day long because the contract value, even with a slightly lower black card mix, is still many orders of magnitude above the cost of getting a new card. Got it. Very helpful. And maybe just to follow up, the 5% to 6% comp growth, and thanks for clarifying that, by the way, is the composition of that still expected to be roughly 75% to 80% member growth? And does it assume that the $15 classic card pricing test becomes viable? Yeah, that's a good question, Joe.

Speaker Change: I'd also say that too.

Speaker Change: Traditional weight loss drugs are fairly expensive for our members.

Speaker Change: So I'd say on an average basis, our membership perhaps is lower.

Speaker Change: Users of that because of the affordability factor.

Speaker Change:

Speaker Change: Sort of struggle. The purpose was the other one okay perfect. The person continues to be Ah a nice add onto what we offer our members.

Speaker Change: And in some ways, we hope that over time, it's an anchor for them to maintain their membership we've seen small takedowns on that and a small additions to those using it.

Speaker Change: To keeping their memberships for a longer period of time than the average I.

Speaker Change: I still think we've got a lot of work to do in that area to make it as complete as it possibly can be.

Speaker Change: For the lifestyle needs of our members and.

Speaker Change: In the past we've used phonics.

Thomas J. Fitzgerald: It is still predominantly member growth driven, and it assumes the current pricing that we have in the country does not assume we roll out any new price tests now. Great, thank you. Your next question comes from Sharon Zackfia with William Blair. Please go ahead. Hi, good morning.

Speaker Change: Products, but I believe there's also services, we could augment whether it's insurance or mortgages or what have you that people use.

Speaker Change: All the time basis versus a one time purchase thing.

Speaker Change: [noise] Okay. Thank you.

Speaker Change: Yeah.

Speaker Change: You know our final question comes from Alex Parry with Bank of America. Please go ahead.

Alex Parry: Hi, Thanks for taking my question and Tom Congrats on your retirement.

Sharon Zackfia: I appreciate all the color on what's going on. I'm also interested, though, in the partnership side of the equation, as you've expanded that. You know, how pertinent have those partnerships been to getting new members or getting them to trade up to Blackheart? And concurrently with that, have you explored any opportunities to kind of tap into what's happening with GLP-1s and, you know, the need there to build muscle mass?

Alex Parry: I just wanted to ask a little bit more about blackheart penetration. So what gets black card penetration going in a positive direction or should we expect given the gens. The acquisition you know continued declines in black card penetration do you think potentially narrowing the pricing gap between white card I'm black card could help.

Craig Benson: And, you know, it seems like a convenient low-judgment club that you would be well-poised to benefit if this does become a more prevalent trend. Yeah, let me start with saying that the weight loss drugs that are now available clearly present an opportunity for us to teach people how to maintain their muscle mass and, in fact, www. PlanetFitness.com being healthier about it, but also speeding, www.planetfitness.com. So we see that as an opportunity, we have some plans in place, to develop a few things to augment what we offer in a club to those type of people. It's still not a big portion of the population. I believe there are only 4 million prescriptions, but it's clearly gaining a lot of popularity. I'd also say that Traditional weight loss drugs are fairly expensive for our members.

Alex Parry: S.

Alex Parry: [laughter].

Speaker Change: Well preliminary narrowly we've seen.

Speaker Change: Some some movement in that direction, but again, that's there is still somewhat new.

Alex Parry: Alright.

Alex Parry: The more you can narrow the price commonsense is the more.

Alex Parry: More of the the opportunities there to train people out.

Alex Parry: So that's clearly helps.

Alex Parry: Maybe and we continue to experiment with pricing is something that we will continue to do.

Alex Parry: For a long time, because I think there's opportunities to look at ways that we can value engineer the pricing. So that members still feel they are getting a great deal.

Alex Parry: But also allow us to move the margin equation.

Alex Parry: Especially with some of the changes that have occurred in the issue of the supply costs or.

Alex Parry: Labor costs or what have you.

Speaker Change: Perfect. That's really helpful. And then my follow up is just not international is Spain. The only international market you a new international market you expect to enter this year and then could you just how many stores in Spain, where you're expecting to open. This year and then are you looking at other.

Craig Benson: So I'd say on an average basis, our membership, perhaps, is lower, but users of that because of the affordability. The Perks continue to be a nice add-on to what we offer our members, and in some ways, we hope that over time it's an anchor for them to maintain their membership, take down on that, and small additions to those using it, to keep their memberships for a longer period of time. I still think we've got a lot of work to do in that area to make it... Please see the complete disclaimer at https://sites.google.com.au, for the lifestyle needs of our members, the www.planetfitness.com product, but I believe there's also services we could augment. Mortgages, or what have you, people, all the time, versus a one.

Speaker Change: European markets. Thank you.

Speaker Change: Hey, Alex word only talking about Spain at the moment and I think we're still on our path to now that we've bolstered that team a bit here over.

Alex Parry: Over the last few months to increase our pace.

Alex Parry: From one year to ultimately two to three years. So we're still in the early early stages of ramping that up we feel really good about Spain.

Craig Benson: Okay, thank you. Your final question comes from Alex Perry with Bank of America. Please go ahead.

Alex Parry: It is a it's a great country to enter in Continental Europe.

Alex Perry: Hi, thanks for taking my question. And Tom, congrats on your retirement. I just wanted to ask a little bit more about black card penetration. So what gets black card penetration going in a positive direction?

Speaker Change: We believe over time that it could be a 300 plus store opportunity I think time will tell.

Speaker Change: But.

Speaker Change: The market and we feel really good about it we have set aside the capital to do a few stores. This year as part of our plan and we're working on our way through too you know getting leases and building our pipeline. So.

Craig Benson: Or should we expect, given the Gen Z acquisition, continued declines in black card penetration? Do you think potentially narrowing the pricing gap between white cards and black cards could help this? Preliminarily, we've seen some movement in that direction, but again, tests are still somewhat limited.

Speaker Change: Time will tell exactly how many we open this year versus next year, but.

Craig Benson: Bye. The more you can narrow the price, common sense, and more of the opportunities there today. So that's clearly how.

Speaker Change: We feel good about the progress we've made in a short period of time and I think.

Speaker Change: As I mentioned earlier coming in as the franchise or really just opens up more doors than a franchisee who might be starting off on their own. So we like how we're approaching this and.

Craig Benson: May, And we continue to experiment with pricing. It's something that we will continue to do for a long time because I think there are opportunities to look at ways that we can... Value engineer the pricing so that members still feel they're getting a great deal, but also allow us to move the margin equation, especially with some of the changes that have occurred in the industry with supply costs and labor costs. Perfect, that's really helpful.

Speaker Change: But we're in and it's.

Speaker Change: It's one thing to say, we're going to add one or two markets a year, but it's a different thing obviously to say of Spain at 300, plus location potential as a New Zealand, which we're happy to enter but there's just so much smaller opportunity. So this is going to look and feel much more like Mexico, and Canada size store potential wise and and we feel good about that.

Alex Perry: And then my follow-up question is just on international markets. Is Spain the only international market, new international market, you expect to enter this year? And then could you just tell me how many stores in Spain were you expecting to open this year? And then are you looking at other European markets?

Speaker Change: So more to come on where else in the World you know down the road, but we're very excited about this one.

Thomas J. Fitzgerald: Thank you. Hey Alex, we're only talking about Spain at the moment, and I think, you know, we're still on our path now that we've bolstered that team a bit here over the last few months to increase our pace from, you know, one-ish a year to, ultimately, two to three a year. So we're still in the early stages of ramping that up. We feel really good about Spain. It is a great country to enter into continental Europe.

Thomas J. Fitzgerald: Perfect. That's really helpful best of luck going forward.

Speaker Change: Thank you Alex.

Thomas J. Fitzgerald: This will conclude the question and answer session and our call I will now turn it back over to Craig Nance N for closing remarks.

Speaker Change: Listen we are very appreciative of your time this morning.

Craig Nance: Look forward to talking to you in the near future and thank you for supporting planet fitness and helping us along our journey.

Speaker Change: And have a great day.

Craig Benson: This concludes Danny's conference call. Thank you for your participation you may now disconnect.

Thomas J. Fitzgerald: We believe, over time, that it could be a 300-plus door opportunity. I think time will tell the market, and we feel really good about it. We have set aside the capital to do a few stores this year as part of our plan, and we're working on our way through to, you know, getting leases and building our pipeline, so time will tell exactly how many we open this year versus next year, but we feel good about the progress we've made in a short period of time. And I think, as I mentioned earlier, coming in as the franchisor really just opens up more doors than So we like how we're approaching this. But we're, and, you know, it's one thing to say we're going to add one or two markets a year, but it's a different thing, obviously, to say Spain at 300 plus location potential versus New Zealand, which we're happy to enter, but it's just a much smaller, www.planetfitnessinc.com, Perfect.

Megan Alexander: Please wait the conference will begin shortly.

Thomas J. Fitzgerald: [music].

Alex Perry: That's really helpful. Best of luck going forward. Yeah

Alex Perry: Yeah.

Craig Benson: Thank you. This will conclude the question and answer session on our call. I will now turn it back over to Craig Benson for closing remarks. Listen, we are very appreciative of your time this morning. Look forward to talking to you in the near future. Thank you for supporting Planet Fitness on our journey, and I have a great day.

Alex Perry: [music].

Craig Benson: This concludes today's conference call. Thank you for your participation. You may now disconnect.

Operator: Please wait; the conference will begin shortly. Please stand by for a moment of silence. Please stand by for a moment of silence. Please stand by for a moment of silence. Please stand by for a moment of silence. Please stand by for a moment of silence.