Q1 2025 Planet Fitness Inc Earnings Call

Speaker Change: Thank you for studying by, to the Planet Fitness, first quarter, 2020 FAQ, Paul, Colleen Inc. placed on mute to the event in a bad crowdline.

Speaker Change: Hope that today's presentation, there will be an opportunity to ask questions

Speaker Change: To ask a question, you may press star, followed by the number one on your touch now phone. To reveal your question, please press star one again. It is my pleasure to introduce your host, Ms. Susie Caravella. Begin.

Speaker Change: Thank you operator and good morning everyone. Speaking on today's call, we'll be Planet Fitness Chief Executive Officer Colleen Keating and Chief Financial Officer Jay Stasz.

Speaker Change: They 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

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

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

Now, I will turn the call over to Colleen.

Dr. Prima, Dr. Prima, Dr. Prima, Dr. Prima

Colleen Keating: Thank you, Stacey, and thank you everyone for joining us for the Planet Fitness First Quarter Earnings Call.

Colleen Keating: We were pleased to end the first quarter with 20.6 million members in increase of approximately 900,000 from the end of 2024.

Colleen Keating: We grew system-wide same-club sales by 6.1% and opened 19 new clubs globally, bringing our total club count to 2741.

Colleen Keating: Given the strengths and durability of our model, we delivered this healthy growth against a backdrop of increasing volatility in the macroeconomic environment.

Colleen Keating: As a leader in the high value low price fitness category, we've successfully grown our model for over 30 years, while navigating a variety of different market conditions throughout our

Colleen Keating: Before I go deeper into our first quarter performance, I'd like to highlight why we're confident that we're well positioned to execute our strategy and deliver on our 2025 expectations.

Colleen Keating: At the same time, we are mindful of the broader macroeconomic conditions, including consumer sentiment and tariff uncertainty.

Colleen Keating: During the great financial crisis between 2007 and 2010, we achieved strong, same club sales growth, we grew our membership and opened new clubs.

Colleen Keating: Prior to 2020, we had 53 straight quarters of positive Simeon Club sales growth.

Colleen Keating: More recently, we weathered a global pandemic without one club permanently closing due to financial reasons, even though our clubs were shut down and did not collect member dues for an average of six months.

Colleen Keating: We are a resilient brand and continue to strengthen our leadership position by offering consumers a place to get a high quality workout at an incredible value in our judgment-free environment.

Colleen Keating: Now let's review the progress we've made on our four strategic comparatives during the first quarter. As a reminder, these four strategic comparatives are redefining our brand promise and communicating it through our marketing.

Enhancing Member Experience

Colleen Keating: Refining our product and optimizing our format and accelerating new club growth.

Let me start with redefining our brand.

Colleen Keating: We were pleased with our first quarter net member growth, which was in line with our expectations.

Colleen Keating: We kicked off the year with our new creative, a campaign that communicates that we are all strong on this planet. It focuses on our shift to a more balanced complement of equipment in our clubs. [inaudible]

Colleen Keating: Our welcoming, judgment-free atmosphere and the supportive community that we offer all our members.

Colleen Keating: Based on research we conducted during the quarter, the campaign improved brand perception across all fitness levels and enhanced with the perceived value of a Planet Fitness

Colleen Keating: We also saw an increase in purchase intent from former members as we highlighted the capital H.V. aspects of our offering, and we had a strong 30 plus percent rejoin rate during the porter.

Colleen Keating: Looking ahead, we will augment our ability to test, learn and make data-driven decisions as we evolve our brand. We have a pipeline of testing projects currently underway that range from pricing to changes in the physical layout of our clubs.

Colleen Keating: During the first quarter, we used several different promotional strategies that tested successfully in 2024.

Colleen Keating: In addition to our typical 10-day offers, we ran two classic card 2-day flash sales and a first-month free black card offer, both of which contributed to our membership growth during the period

Colleen Keating: We continue to see strong black card penetration with 65% of our membership at that tier as of the end of the quarter, a nearly 300 basis point increase from Q1 of last year.

Colleen Keating: Consumers continue to recognize the value of the black card, with the gap between the classic and black card membership only $10.

Colleen Keating: We will hold on a decision on a system-wide black card price change until after we anniversary the classic card price increase, which you will recall would into effect on June 28th of last year.

Colleen Keating: As for member activity, our members were more engaged during the first quarter of this year and visited a club an average of 6.7 times per month, the highest quarter utilization in five years.

Colleen Keating: This is an encouraging data point as we think about retention in general and in the context of our click to cancel rollout.

Colleen Keating: Gen Z continues to lead our membership growth and has been the fastest-growing demographic group of our membership since 2021.

Colleen Keating: To further this momentum, we're excited to announce that we will be running the high school summer pass program again this year.

Colleen Keating: This has been incredibly successful at building brand loyalty and is a cost-effective program that has yielded a mid-single-digit conversion rate to paying members over the past few years.

Now to member experience and product refinement.

Colleen Keating: We hold a highly differentiated position in the high value low price sector of the fitness industry.

Colleen Keating: We bring a top quality, judgment-free fitness experience to life, and foster meaningful relationships with our members who span a broad spectrum of age, socioeconomic, and fitness levels.

Colleen Keating: Our clubs have many stories from members who have had life-changing experiences because of their memberships.

Colleen Keating: We truly do make fitness accessible to almost everyone, having clubs within a 12-minute drive of 170 million people in the United States.

Colleen Keating: We're proactively tailoring our offering to respond to evolving customer needs.

Colleen Keating: Based on insights from consumer research and member behavior, we expanded our footprint of strength equipment and opened up spaces within our clubs for members to do more functional training.

Colleen Keating: We believe that this move will enhance member experience, providing them with the ideal equipment that makes an environment to achieve their workouts their way.

Colleen Keating: As part of the research that we conducted during the quarter, we asked consumers if they thought they could get strong at Planet Fitness

Colleen Keating: The majority of respondents who had seen our ads noted that they believe that we have the equipment for building strength and that we are a gym they can grow with.

Colleen Keating: This feedback further supports our decision to expand strength equipment in our clubs.

Colleen Keating: At the end of the first quarter, nearly 1,800 clubs had the more balanced mix of equipment with the remainder of the clubs expected to have it by the end of the year.

And finally, to our efforts to accelerate new club growth.

Colleen Keating: During the first quarter, I continued to visit more clubs now 125 globally, including a trip to Australia where I celebrated the opening of a new club with our Australia team and many of our members.

Colleen Keating: Similar to my trips to Mexico and Spain, my biggest takeaway is that our format in brand offering resonates with fitness-minded consumers across geographies and generations.

Colleen Keating: In fact, our clubs in Spain continue to have strong ramps, and we recently opened our eighth club in the country. As evidence of their healthy performance, we believe we will be in a position to refranchise the clubs and future development rights in the medium term.

Colleen Keating: We remain steadfastly focused on unit economics. We made two foundational changes in 2024, giving our franchisees the opportunity to improve club IRRs, the new growth model, and the classic card price increase for new members.

Colleen Keating: Franchisee sentiment was positive coming into 2025 and was bolstered by strong first quarter net member growth and revenue growth that had the added rate benefit from the classic card price increase.

Colleen Keating: As I stated earlier, we are a resilient brand and have historically emerged from prior periods of market uncertainty in an even stronger position.

Colleen Keating: That said, I would be remiss if I didn't touch on tariffs. Our teams are in discussion with our vendors and working through what potential tariff impacts me into our business and franchisee unit economics.

Colleen Keating: We are taking a thoughtful approach focused on the things we can control to continue to execute on our strategic imperatives.

Colleen Keating: We are in communication with our franchisees and at current tariff levels do not see a material impact to our 2025 targets.

Colleen Keating: as such, we are reiterating our growth targets for this year.

Colleen Keating: I am pleased with the progress we've made thus far in 2025 and I am excited about the opportunities that Laya had for Planet Fitness. I look forward to sharing more of our progress with you. Now I will turn it over to Jay.

Jay Stasz: Thanks, Colleen. We're pleased that we're starting to see results from our focus on the strategic imperatives that led to a strong first quarter performance in line with our expectations against the backdrop of increasing volatility in the macroeconomic environment.

Jay Stasz: Given that we're a fitness brand that sells an experience, we are generally less impacted by tariffs and we expect to be able to address these impacts on our equipment at the current levels without adjusting our guidance ranges at this time.

Jay Stasz: We are intently focused on our franchise the Unit Economics and we're taking a thoughtful approach to rising input costs.

Jay Stasz: We're working in partnership with our vendors and our franchisees to navigate potential cost increases.

Jay Stasz: Due to our size and scale in our long-term vendor relationships, we have mitigated a sizeable portion of our system-wide exposure to tariffs on equipment at today's levels.

Jay Stasz: We are leveraging our scale to negotiate with manufacturers to offset these costs, exploring alternative markets for producing products, and bringing equipment into the US ahead of potential tariff implementation deadlines.

Jay Stasz: Before I get to our first quarter result, I'd also like to address how we're approaching and collect the cancel.

Jay Stasz: We remain committed to delivering a great member experience and we want to make the cancellation process as seamless as the join process

Jay Stasz: Given that the challenge to the regulation did not result in any changes to the rolling, we're underway with rolling out online cancel functionality system-wide to meet the mandated deadline of May 14th.

Jay Stasz: As you may recall, more than 35% of our system had clicked to cancel before April , including all of our corporate clubs, where we enabled it more than 18 months ago. Now we are enabling it across the rest of our portfolio because we believe it is the right thing to do for our members.

Jay Stasz: As of this week, online cancel is available to members in more than 50% of our U.S. clubs. The national role out before the mandated deadline is included in our outlook for 2025, including our Simeon Club Sales Growth Outlook.

Jay Stasz: As a reminder, generally the largest impact of the cancer rate occurs in the first couple of months in diminishes as time goes on.

Now to our first quarter results.

Jay Stasz: All of my comments regarding our first quarter performance will be comparing Q1 2025 to Q1 of last year unless otherwise noted.

Jay Stasz: We open 19 new clubs compared to 25. We delivered system-wide, same club sales growth of 6.1% in the first quarter. franchisee same club sales increased 6.2% and corporate same club sales increased 5.1%.

Jay Stasz: Approximately 74% of our Q1 Comp increase was driven by rate growth with the balance being net membership growth. Black card penetration was approximately 65% at the end of the quarter, an increase of 280 basis points from the prior year. [inaudible]

Jay Stasz: The increase was driven by revenue growth across all three segments. A 10.7% increase in franchise segment revenue was primarily due to higher royalty revenue from increased same-club sales as well as new clubs, an increase in national ad funds as well as franchise fees.

Jay Stasz: For the first quarter, the average royalty rate was 6.6% consistent year over year. The 9.2% increase in revenue in the corporate-owned club segment was primarily driven by increased-name club sales as well as sales for new clubs.

Jay Stasz: As a reminder, we open 21 new corporate clubs in 2024, eight of which occurred in the fourth quarter.

Jay Stasz: Equipment Segment Revenue increased 28.7%. The increase was driven by higher revenue from replacement equipment sales, partially offset by lower revenue from new franchisey owned club placement sales.

Jay Stasz: We completed ten new club placements as quarter compared to 14 last year.

Jay Stasz: For the quarter, replacement equipment accounted for 78% of total equipment revenue compared to 58%.

Jay Stasz: Our cost of revenue, which primarily relates to the cost of equipment sales to franchise the own clubs managed at $22.5 million compared to $19 million.

Jay Stasz: Club Operations Expense, which relates to our Corporate Own Club's segment, increased 9.9 percent to $81.7 million from $74.4 million.

Jay Stasz: The increase was primarily due to operating expenses from 24 new clubs open since January 1st of 2024

Jay Stasz: SGNA for the quarter was $34.3 million compared to $29.2 million while adjusted SGNA was $32.5 million compared to $27.3 million and increase of 19.1%.

Jay Stasz: The primary driver of the increase to adjusted STNA was higher expense due to increased compensation from recent executive buyers and investment in our strategic comparatives.

Jay Stasz: National Advertising Fund Expense was $21.9 million compared to $19.8 million, an increase of 10.9% in line with our franchise segment revenue increase.

Jay Stasz: Net income was $42.1 million, adjusted net income was $50 million, and adjusted net income per the limited share was $0.59.

Jay Stasz: Adjusted to EBITDA was $117 million, an increase of 10.1% year-over-year in Adjusted to EBITDA margin was 42.3% in line with our expectations, compared to $106.3 million with Adjusted to EBITDA margin of 42.9%

Jay Stasz: By segment, franchise adjusted EBITDA was $84.9 million, and adjusted EBITDA margin increased from 73.2% to 73.7%.

Jay Stasz: Corporate Club of Justice David, I was $45.8 million in the Justice David I margin decreased from 34.6% to 34.3%.

Jay Stasz: Equipment adjusted EBITDA with $7.4 million and adjusted EBITDA margin increase from 22.2% to 26.8% which was driven by the change to the equipment makes that we made last year but didn't go into effect until the second quarter of 2024.

Now, Turning to the Balance Sheep

Jay Stasz: As of March 31st, 2025, we had total cash, cash equivalents, and marketable securities of $586.3 million compared to $529.5 million on December 31st, 2024, which included $56.6 million, $36.5 million of restricted cash, respectively in each period.

Jay Stasz: In Q1 2025, we use 50 million to repurchase approximately 544,000 shares.

Jay Stasz: Moving on to our 2025 outlook, which we provided in our press release this morning, as I noted earlier, our outlook assumes tariffs at the current levels.

Jay Stasz: We continue to expect between 160 and 170 new clubs, which includes both franchise and corporate locations.

Jay Stasz: We expect that the quarterly cadence will be waited towards the second half in the fourth quarter of 25, similar to 24.

Jay Stasz: We also continue to expect between 130 and 140 equipment placements in new franchise clubs, and again, we expect that quarterly cadence will be weighted like 2024.

Jay Stasz: We expect that re-equipped sales will make up approximately 70% of total equipment segment revenue for the full year.

Jay Stasz: As I noted earlier, we are reiterating our guidance targets with the exception of CAPEX which we are bringing down slightly.

The following targets represent growth over fiscal year 2024 results.

Jay Stasz: System-wide same club sales growth to be between 5 and 6 percent, revenue to grow approximately 10 percent.

Jay Stasz: Adjusted net income per diluted share to grow in the 11 to 12% range based on adjusted diluted weighted average shares outstanding of approximately 84.5 million, inclusive of approximately 1 million shares we expect to repurchase in 2025 in line with what we previously communicated.

Jay Stasz: We also expect 2025 net interest expense of approximately 86 million inclusive of the annualized impact of our 2024 refinancing.

Jay Stasz: Lastly, we continue to expect DNA to be flat to 2024, and we now expect Apex to be up approximately 20%.

Jay Stasz: I will now turn the call back to the operator to open it up for Q&A.

Speaker Change: Ladies and gentlemen, at this time, we will be conducting a question and answer session. To ask a question, you will press star one on your touchstone phone, and to withdraw your question, please press star one again.

Speaker Change: Our first question comes from the line of Simeon. Siegel from BMO, please go ahead.

Simeon Siegel: Thanks. Hey, morning everyone. Nice job. Hope you're all doing well.

Speaker Change: And then, Jay, just maybe pricing versus new memberships within the Conte. How do you think about that over the year? Any way to think about or help us think about what's the new $15 price impact versus, again, this really impressive black card penetration jump on overall company level pricing. Thanks guys.

Sir, morning. Good to hear from you. [inaudible]

on the Black Card Penetration. [inaudible]

Speaker Change: You know, as we've talked about, this is the narrowest gap we've had between the classic card pricing and the black card pricing since the inception of the black card at roughly $10.99.

Speaker Change: One difference that we'll call out for Q1 was that in March. We ran a black card first month free promotion that was that was quite successful. We tested this in Q4. This was one of the marketing tests that we ran last year in Q4. It performed successfully, so we ran it again in March of this year.

Speaker Change: Yeah, Simeon, this is Jay. Good morning. Good to hear from you. In terms of your question, obviously, you know, we've reiterated the guidance, we've reiterated the comp of five to six percent.

Speaker Change: And in the quarter we had a nice split on the rate, roughly 74% driving 74% of the comp and volume being 26

As we think about... [inaudible]

anniversary in the classic card price increase.

Speaker Change: and June 28th, write the beauty of our subscription models that we will continue to get rate benefit after that point because of the tenure of our membership as well as the continued, and we just talked about the increase on the black rep penetration that we're seeing. So,

Speaker Change: As we think about the comp for the year in the future quarters

Speaker Change: You know certainly we would expect the next quarter to be roughly you know comparable 70-30 kind of a split between rate and volume and then that might drift down slightly in the in the back half just again as we anniversary that June 28 but not a material change you know probably 65 25

Speaker Change: to 70% driven my rate in a little bit of uptick on volume.

Speaker Change: That's great, thanks guys, thanks a lot for the rest of your year. Thank you.

Speaker Change: Thank you. Our next question comes from the line of Sharon Zackfia from William Blair.

So, I think I have some crazy weather during the high number . . .

Speaker Change: as a sign-up season. Can you talk though about kind of any signs of any…

Speaker Change: Macro volatility impacting your business or if you're seeing anything change on the competitive environment as maybe some of your peers that are less well positioned are are trying to scramble in a more volatile consumer climate thank you.

Okay, I'll start maybe, you know, first I think…

Speaker Change: The fact that we reiterated our Komp guidance is indicative of what we've seen with the consumer coming through the quarter.

Speaker Change: And as I mentioned, you know, even during the GFC, our business performed really well with very strong member growth and revenue growth. So again, we feel like we've got a very resilient business.

Speaker Change: We reach a very broad spectrum of membership. We spend a pretty broad income demographic as well.

Speaker Change: The other thing we've talked about is with Gen Z's and millennials being such a substantial proportion of our membership and really Gen Z's continuing to be the greatest proportion of our member joins.

Fitness is really a part of their lifestyle.

Speaker Change: So as we've seen, you know, a little bit of the consumer sentiment and pullback and consumer spending, you know what we've generally seen is less spending on product.

Speaker Change: but maintained spending on experiences. And when we think about Gencies and Millennials, not only are we in experience, we're really a part of their lifestyle. So, we're feeling confident about the consumer and our member.

and that's reflected in the reiteration of our guidance.

Speaker Change: Yeah, and Sharon just a couple points. I mean, obviously this business has continued to be a great value.

Speaker Change: to the members and potential members. So, you know, we're excited about that. We think it fits in well with the current macro environment. And to put a finer point on Colleen's information right during the Great Financial Crisis, you know, strong, same club sales growth, we also built our membership and open stores during that time. [inaudible]

Speaker Change: So, we feel good about that and look, we think in this kind of environment we could benefit from a trade down from some of the higher price clubs.

Thank you for watching. Bye. Bye.

[inaudible]

Thank you [inaudible]

Speaker Change: Our next question comes from the line of John Heinbockel from Guggenheim, please go ahead.

Colleen, I'm curious, how do you think philosophically about?

Speaker Change: Black Card Pricing, you're going to punt on it right until after you cycle white card but-

Speaker Change: I mean, how do you think about that? And then I don't know, I know you were testing 27, 99 and 29, 99, you know, was running a material difference in how members reacted to those.

So, you know, I think…

As we evaluate what we've seen coming through the test,

Speaker Change: We're really looking at what's most accretive to the AUB of the club.

Speaker Change: And as I indicated in my remarks, we're not going to make a call or announce a decision on it until after we anniversary the classic price increase. So, so that we're not coming through the front half of this year with an increase on both, you know, both classic and black.

Speaker Change: I will say, you know, historically we have taken price on black card, you know, every several years. So every, you know, every few years we've, we've taken price on black card. So, you know, that, that will, that will continue to be, you know, kind of our perspective that, that classics the anchor and the entry point and that there's, you know, there's probably more price elasticity in black. [inaudible]

Speaker Change: and in the testing we haven't seen a significant difference between the 2799 test and the 2999 test when we were testing both last year and currently we're only testing the 2999 now.

Thank you.

Thank you. Our next question comes from the line of Maks.

Rahul Krotthapalli, Rakhlenko from Teddy Colen, please go ahead.

Speaker Change: Great, thanks a lot, and congrats on a really nice quarter. So first, one two's typically about 60% of the years net ads. How do you think about that again for for this year? Do you think that that will be the case or given some of the easy compares to that even be a little bit lower? [inaudible]

Speaker Change: No, Matt, this is Jay, and yeah, historically, right, I think we've talked about that 60% in post-COVID, right? We haven't really seen that relationship hold true, so I would not anchor to that. I would say that, you know, we don't guide to membership count specifically, but that relationship that presents higher, I would say, generally not lower, and it is not the 60% [inaudible]

Speaker Change: God, okay. And then, how should we think about the cadence over the next few quarters just in the context?

Speaker Change: of Quick to Cancel, Growing Out, Fully in 2Q. Can we see a bit of a pickup? Ensure, and as I think you previously talked about sort of each 12 weeks, or how are you just thinking about the model here for the next few quarters? [inaudible]

Speaker Change: Yeah, Maxis, Jay, and I'll start on the click to cancel. I mean, certainly a couple data points. We have a plan to roll it out an appropriated, you know, in a consistent basis between now and the deadline of May 14th.

Speaker Change: We've started that process and just for backdrop, right? Previous to this.

Speaker Change: We had about 35% of our system was on click to cancel. That included a handful of states that were already mandated as well as 100% of our corporate clubs.

which we did about 18 months ago. And so now...

Speaker Change: We're in the process of rolling out the remainder of our clubs to be fully compliant by the May 14 deadline. As of today, we have about 50% of our system.

with the click to cancel functionality.

Speaker Change: and we have contemplated this in our outlook and our guidance.

Speaker Change: that we started last year and that we've just reiterated. So it is contemplated in there. And to your point, as we do the rollout, the largest impact is typically in the first month or two when that optionality is rolled out, but then we see a normalize in the weeks and months after that. [inaudible]

Speaker Change: And the eight impact potentially on joints is the customer experience improves and we've heard that maybe it actually helps joints a little bit as an offset.

Speaker Change: I'll talk about that in a fairly small test.

Speaker Change: Cancelation Option in the Joint Flow. So we do think once it's rolled out across the entire state, we could see, potentially could see again based on a fairly small test.

Speaker Change: We could see some left in joint conversion because of consumer confidence that they can cancel

Great, thanks a lot and best regards.

Sure, thank you.

Speaker Change: Thank you. Our next question comes from the line of Shen, Q from BNP Paribas. Please go ahead.

Speaker Change: Hi guys, thanks for the question. Understanding that some franchises might have wanted to wait a little bit to see how pricing would play out in the key kind of one-quarter, first-quarter ad-peared for leaning into new openings.

Shan Hsu: and seems like one cue at or really solid considering that tough macro. So maybe could you give some color on how franchisees are evaluating that at period and maybe if they're sounding more positive on openings, I'm going forward.

Shan Hsu: Maybe I'll start. I think, would you look at our guidance, opening guidance for this year versus where we finished last year? I think that's reflective of...

of Franchisee Sentiment around openings.

Shan Hsu: and I think that's less reflective of questions around pricing and more reflective of wanting to get open ahead of the highest join quarter of the year.

Shan Hsu: You know, getting clubs open in Q4 sets them up for, you know, for very favorable ramp and coming into the first quarter.

Speaker Change: Okay, got it. Thanks. And then on the comps, you know, nice growth in what first quarter?

How much do you think I guess? [inaudible]

Shan Hsu: New Format and the strength allocation is helping there and also the new advertising efforts. How do you kind of balance some of the or evaluate which drivers are kind of the

Thank you for joining us.

Speaker Change: You want to start? No. Yeah, I can start. I mean, look, we don't we don't bifurcate that. You know, it's it's difficult to do that. We feel good about the comps that we had. We did run that black card. First month free promotion in March, which had a bit of a headwind to our comp, which we expect to get back within the year and have a slight benefit to the comps and choose two through four. [inaudible]

Speaker Change: from all the work that the teams are doing but certainly in the repositioning of the brand.

and the focus on strength and getting strong and together.

We're optimistic We're optimistic.

Speaker Change: Maybe I'll add on that from a format standpoint. We gave our franchisees who were opening clubs in 2025 coming into the year. We gave them the opportunity to look at the traditional equipment layout or equipment mix and the new equipment mix, not one franchisee chose the more traditional. They all took the new rebalanced mix of equipment with the balance of strengths and cardio. So I...

Speaker Change: I think, you know, that discretionary choice is really reflective of their buy-in and what they're seeing in hearings from their membership. You know, what our members are looking for in our clubs and this new mix, this new equipment mix, a new layout is answering that call.

Great. Thanks, guys, and good luck. Thank you.

Speaker Change: Thank you. Our next question comes from the line of Rahul Krotthapalli from JP Morgan. Please go ahead.

Good morning, guys.

Speaker Change: and have you seen a mix of ownership of the clubs? [inaudible]

Speaker Change: How is the organization thinking about this strategy given this is such a critical driver for brands growth going forward?

Speaker Change: Yeah, so two separate questions. I'll take the first one which is kind of the PE, the PE landscape.

Speaker Change: as well as PE. We see new interest maybe from family office as well. But the end of the day, our PE owners have been great owners and have developed a lot of clubs with us.

Speaker Change: generally have been well capitalized and are smart owners as well. So, you know, we're pleased with the balance.

Speaker Change: of the advertising and make sure that we're being not only efficient but also effective in how we're spending it. As you know, Brian Povenelli joined as our new CMO in mid-February. He's been out engaging with our franchisees, with our agencies and with our marketing committees. He's done.

We again see an opportunity to continue it.

Speaker Change: Good success coming through Q1 with a new brand messaging it landed well and we saw you know favorability in visits to our website, favorability in search and the effectiveness of how that marketing messaging landed as you know as I referenced in my remarks.

Speaker Change: But you know, more to come as Brian , you know, kind of gets his arms around it as well [inaudible]

I appreciate the color.

Speaker Change: Thank you. Our next question comes from the line of Martin Matella from Raymond James. Please go ahead.

Martin Metella: Good morning, this is Martin Nonfer Joe Altobello. I'm just wondering about, you know, Niner-K as it's this quarter, was that sort of within expectations, or is trying an idea around there?

Speaker Change: Yeah, that was within our expectations. We felt that about that result. And as Colleen is alluded, I think the franchisees are pleased with the first quarter and the cadence and effectiveness of the promotion. So yeah, we feel good about where we're at and not only on the member trends, but the entire P&L.

Speaker Change: Thanks. And can you just speak to churn? I mean, not necessarily about to quit the cancel, but given the end of price increase.

Speaker Change: Yeah, I mean, Sharon continues to run in line with her expectations and gun down kind of historical norms after the price increase pretty quickly last year, and we're continuing to see those trends so run in line with our expectations in pretty consistent year over year.

[inaudible]

Speaker Change: Hi, this is Lucas Hudson on for Alex. Thanks for taking my questions. Just considering, are you guys considering any other changes to the club format? You know, you recently added straight equipment, which was met with positive reception. Are you considering any new equipment ads?

Speaker Change: I'll start. We're testing a couple of different formats and different levels of amenities in some clubs.

Speaker Change: of pieces of plate loaded and you're continuing to test.

Other Strengths Modalities

Speaker Change: in a number of clubs. So we believe it's important that we continue to be kind of a test and learn environment. So we're always testing new pieces of equipment and in communication with our equipment manufacturers to understand kind of what are the hottest pieces following trends, listening to our consumers and our members and we'll continue to test.

Again, be a test and learn environment.

Speaker Change: Very helpful, and then a quick follow-up for May. Are you guys going to change any of the black card offering or any adding or looking at adding any other premium offerings for the black card members? [inaudible]

Speaker Change: I'll talk a little bit about that we have. We have in a number of our clubs added some red light that has performed quite well. We've tested spray tanning in some of our clubs.

Speaker Change: and certain geographies, and some of that has been well received as well.

Speaker Change: and we're looking at some other, you know, without signaling all of the things that we're looking at. There are some other amenities that we're evaluating for the optimization of the Black Card Spa.

Perfect, well good luck in the quarter. Thank you

Speaker Change: Our last question comes from the line of JP Wallam from Ross Capital Partners, please go ahead.

Great. Good morning. Thanks for taking my questions.

Speaker Change: If we could just start two quick questions on development. One, could you just kind of touch on big box availability? I've been somewhat challenged recently. And then the second one is sort of a follow up to an earlier question, but you know, I would assume that kind of with the development guide.

Most of those units are...

Speaker Change: Whether under construction or at least kind of in the process but I'm wondering just given the macro environment and kind of tear of concerns how much are you having conversations with franchise ease about future pipeline and maybe some hesitancy there. [inaudible]

Speaker Change: Maybe I'll start and then Jay, you can get into some of those specifics on Tara. So, you know, from a big box availability standpoint.

Speaker Change: A bit tighter. There have been a number of big box retailers that have announced closures. We've talked about that on prior calls.

Speaker Change: I think it was a JLL article a couple of months ago that talked about kind of a forecast of 9,900 significant retail closures on the horizon and we're continuing to see retail bankruptcies.

Speaker Change: You know, we do believe that there will be more and more second generation space

Speaker Change: Traditionally building larger than a 20,000 square foot club, maybe upwards of a 30,000 square foot club, but again the availability is really you know it varies by.

by Geography. [inaudible]

Speaker Change: And you know, let Jake get into some of the specifics, but again, as I mentioned in my remarks, from a terrorist impact standpoint, you know, given what we have line of sight to today, so tariffs at the current levels.

Um...

Speaker Change: We don't see a material impact and you know that gave us the confidence to to reiterate our opening guidance for this year but Jay, I don't know if you want to. Yeah just to follow up on that I mean the tariffs and certainly one of the biggest impacts is the equipment and that I mean the team has done great work across. Thank you very much.

Jay Stasz: The board to mitigate the impact, but certainly on the equipment

at tariff levels, at the current levels that they're at.

Jay Stasz: We feel good and not overly material and that's embedded in the guidance that we've reiterated.

Jay Stasz: We do have lines that kind of tear question around. [inaudible]

Jay Stasz: Or, you know, top of mind is the build out costs, tier point for 25. We've reiterated the development plans and, you know, many of the franchisees are very far down the path in terms of leases and construction. But, you know, that said, the team also was working on certain build out materials. [inaudible]

Jay Stasz: to work with the vendors, you know, whether that's HVAC or other things to really, you know, do what we can offset the impact of the tariff. So that's another body of work.

Jay Stasz: That the team is doing today. We've got a little bit less line of sight to, you know, exactly how it's all going to pull down.

Jay Stasz: from a GC Cost Impact, but again, it's something that we think we can manage through and work off set in 25.

Jay Stasz: And then, you know, as we think about it, we haven't provided long-term guidance at this point. We are expecting to have an investor day later in the year where we'll give more color on that. Maybe just add two other points on that.

if there's greater tariff impact in other sectors.

Jay Stasz: and building slows in other sectors. That could have some favorability, and speculative at this point, but that could have some favorability on construction, construction labor costs, GC cost, and trades and subs.

Jay Stasz: and that the other thing I'll say is, you know, we've, this is a pretty low op-ex model, so we're not, we're not burdened with a, with a heavy, heavy op-ex impact from, from tariffs. And lastly, the most important thing to unit economics is the top line. And as we're seeing our marketing messaging land.

Jay Stasz: We saw a good joint volume coming out of the quarter and the newly optimized format is resonating with consumers. I think the top line is the most important component. We're keenly focused on that.

Speaker Change: Understood, I appreciate the color there. If I could just one follow up on member rejoins, I know over the last few quarters you've talked about it being strong.

Jay Stasz: So one, you know, does that strength continue through your strong winter season? And two, any comments on how you're seeing black card in terms of members rejoining?

Jay Stasz: Joint Rate in Q1.

Perfect, appreciate the color and best of luck going forward.

Jay Stasz: Our last question comes from the line of Randy Punik from Jeffries. Please go ahead.

Speaker Change: Hey guys, how are you? Sorry I've been with the owner of a ton of calls this morning.

Speaker Change: So I apologize if you kind of addressed this, but maybe Colleen just talk through...

Speaker Change: You know, give us an update on not just Spain but just kind of other markets or how you're thinking about international development beyond and then you know not just this year but like in the next. [inaudible]

Speaker Change: You know, it's few years, how do we think about that, you know, that, that part of the model going forward? Thanks.

Speaker Change: Yeah, so our inner thanks for the question, Randy, and good to hear from you. Our Spain clubs are performing very well. We're seeing ramps on those clubs.

Speaker Change: that are equal to or in some cases even slightly favorable to our domestic ramps. So I'm really encouraged about how the brand is resonating in our first European market. So while we're not ready to talk about which markets will go to next, I guess you can read, you can glean from that that the brand's performing well in our first European market.

International as part of our Growth Road Map.

Speaker Change: Super helpful. And then again, I don't know if you addressed this, but I'll ask it. We had have heard in the pipeline that I think franchisees were

Speaker Change: Happy with, you know, as you change the white card to 15, it gets closer in price point to the black card, you know, almost encouraging a new member to kind of join the black card relative to the white card.

Speaker Change: that are relative value, maybe kind of update us on that kind of framework, if that is happening. And if that is, how do you think about the cadence of, you know, black card price change, again over the next few years, how should we think about that? Thanks.

Speaker Change: Yeah, so I did touch on this a little bit earlier, but I've been when you were on another call. We will, we're going to anniversary the classic card price increase before we make a decision to to move on black card. We're going to, we're going to, we're going to, we're going to,

Speaker Change: What we have seen, again, looking at what's most accretive to AUVs, we have seen significant favorability in black card penetration with the narrowed gap now, roughly $10.99.

Speaker Change: The Geographies, we son set 27.99 because we weren't seeing a material difference.

Speaker Change: And the other thing I touched on is we're looking at the black card spot offerings, we started some things like...

Speaker Change: Classic as the entry price point for a longer span. So you'll continue to see us take a look at black card pricing and take black card pricing on a periodic basis.

Super helpful. Thanks guys.

Thanks, Randy.

Colleen Keating: Thank you. This concludes our question and answer session. I would like to turn the call back over to Colleen for closing remarks.

Colleen Keating: Thank you, thank you operator, and thank you for the thoughtful questions.

Colleen Keating: I'll just close by saying that I'm quite encouraged by our performance during the first quarter of 2025, we continue to be focused on boosting the economic value proposition for all our stakeholders, as a franchisee or franchisees and members to ultimately deliver even more value for our shareholders.

These concludes today's conference, and we now disconnect. [inaudible]