Planet Fitness: International Expansion and Positive Performance Trends
2023-07-30
The company's earning call meeting focused on several key topics, including international expansion plans, membership conversion strategies, and positive performance trends. One of the most important discussions revolved around the company's expectations for new store growth and equipment placements.
During the meeting, the company provided a mixed market outlook. They experienced a decrease in store margin and equipment margin compared to the previous year, primarily due to the absence of a sizable rebate from the primary manufacturer. On the corporate sales side, the margin was impacted by lower local marketing spend and timing of expenses. However, the company remained cautiously optimistic, expecting to be in a good position in terms of top-line growth and adjusted EBITDA growth based on their guidance. They also anticipated that their store openings throughout 2023 would be back-end loaded.
The key drivers of the business were identified as equipment margin, corporate sales margin, and marketing activities. The equipment margin was influenced by rebates received from the primary manufacturer, while the corporate sales margin was impacted by local marketing spend and timing of sales. Marketing activities, both at the corporate and franchisee level, played a significant role in driving the business forward.
The competitive landscape was discussed, highlighting the company's focus on improving corporate store margins and overall margins over time, despite challenges such as increased wages. The company benchmarked their progress against the levels achieved in 2019 and acknowledged the acquisition of Sunshine stores, which brought valuable best practices in marketing and operations. These practices contributed to strong performance in corporate store same-store sales, and the company planned to leverage them for further improvement. The company also recognized the structural differences between their legacy stores and the Sunshine stores, including variations in wages, rents, and traffic.
Although the company did not provide a detailed outlook for the quarter or year, they expressed confidence in ending up in a favorable position in terms of top-line growth and adjusted EBITDA growth. Their progress on strategic initiatives was focused on improving corporate store margins and overall margins, benchmarking against 2019 and expecting ongoing improvements throughout the year. The acquisition of Sunshine stores contributed to outsized performance in corporate store same-store sales, and the company implemented best practices from the Sunshine team in marketing and operations. However, due to the structural differences between legacy markets and Sunshine markets, the complete closing of the margin gap was not anticipated.
The earning call meeting included participation from reputable analysts representing various financial institutions. Analysts from Stifel Financial Corp., Robert W. Baird and Company, JPMorgan Chase and Company, Guggenheim Partners, Evercore ISI, Raymond James, William Blair and Company, and Bank of America Merrill Lynch provided valuable insights and perspectives on the company's financial performance. Their presence highlighted the significance of the company's financial performance and indicated the interest it generated in the financial community.
In addition to the financial discussions, the company also shared updates on its high school summer pass program. This program, running for the second consecutive year, had a seamless online registration process. Last year, the program attracted over 3.5 million team participants, with 2.3 million parents and guardians signing them up. By the end of the first quarter, over 600,000 teams and their parents or guardians had become paying members, resulting in a conversion rate of over 10%, surpassing the company's conversion rate from a similar program in 2019. The company also republished its 2022 environmental, social, and governance report, emphasizing its commitment to creating a judgment-free planet with accessible health and wellness. Affordable fitness was deemed crucial, and the company positioned itself as a differentiated and disruptive force in the health and wellness industry.
Overall, the earning call meeting provided valuable insights into the company's international expansion plans, membership conversion strategies, and positive performance trends. The discussions on market outlook, key drivers of the business, competitive landscape, and strategic initiatives shed light on the company's future prospects. The participation of reputable analysts further emphasized the significance of the company's financial performance and generated interest among investors and stakeholders.