PLNT - Earnings call transcript Q2 2019

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Operator

Good afternoon. My name is Josh, and I’ll be your conference operator today. At this time, I would like to welcome everyone to the Planet Fitness Second Quarter 2019 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there’ll be a question-and-answer session. you. Thank Instructions] [Operator

with go Frey ICR. Brendon ahead. Please Mr.

Brendon Frey

Dorvin today Planet On website Officer. Fitness’ you Officer; call for available quarter A Fitness’ discuss the us joining and Executive press Chief results. Thank copy second of Chief release Planet to XXXX Investor Chris Relations Rondeau, at President of today’s planetfitness.com. Lively, and are is Financial today’s on earnings section

forward-looking and in statements. remind statements. to that statements place this you a Planet presentation Planet factors reliance make judgment from as are may these number forward-looking I analysis would like not affecting on undue on materially Fitness’ Fitness’ These we certain expectations reflect actual statements only will Accordingly, based business. differ forward-looking should of current and of results today, you

forward-looking risks refer thorough on a the and statements referenced was to more Form For conference earnings with SEC release, to made our the well of you X-K, furnished webcast, disclaimer. filings second the included forward-looking in which to today SEC as discussion call uncertainties with the this that regarding in in our statements be quarter we XXXX as associated and the disclaimer

or not as any undertake do future to update any result obligation statements otherwise. We whether of or forward-looking alter a events information, new

of today. the addition, earlier can metrics these be Explanation metrics company release found call. filed In may the this refer non-GAAP to adjusted on in earnings certain

Planet call the Chris? turn I’ll Chris Chief Officer that, to Fitness. With Rondeau, Executive over of

Chris Rondeau

same per the of $X.XX, growth X.X% over for increase prior Thank by of today. results We sales you, us XX.X% year delivered of joining system-wide quarter everyone earnings strong an share period. Brendon, adjusted thank another highlighted and of you and store

net was performance member driven again new increase sales growth. from came as approximately store volume XX% of the same primarily Our once

Fitness’ consumers. respectively. fitness Our comps three up resonate continues to with two affordable Planet XX% and stock to year Free Judgement are and XX% basis, approach

the year. over during period quarter XX second an XX% new more than approximately members, added members million last with the to approximately We net XXX,XXX end of increase

We quarter continues extension system-wide also capitalized our and locations Planet to new leverage their execute QX, in stores on experienced group capitalized size current of Fitness’ X,XXX operate. estate this well the partnership we scale in and of with and perfect the dominate XX successfully Kohl’s. where a to as plans. example market the is franchise trends franchisees opened real and continue with A our of

in Fitness to more are Kohl’s We with tracking Planet open of locations XXXX new to five XXXX. follow existing stores adjacent the end to by

nationally are Four invites seen well free year, One U.S. X,XXX in the the new to of results, X. five highlight store. a XX was more this ages September Teen Canada I work from to XX a this not to initiative, kick-off Challenge. teens Summer this our and we’ve me of be May the plus in the to stores which pleased quarter could set the with XX out open rolling out for locations our one from locations, for second corporate franchise is

approximately This X organized members due to summer believe sports declined brand, decreased teens our significantly Z signed also teens impact the have completed up making time to we not meaningful we and on and when program million million XXX,XXX XX activity fitness. made our teens healthier. a physical Gen to the at access over we of have top On of members only have introduced workouts, for

demographic. affinity health increase brand providing loyalty their We fitness overall We’re long-term only and get is free great a not build for teens to this active with access the you also believe and it and with wellness. opportunity helps to

ups coming to with remaining, forward Fitness Planet left great Fitness, parents their brand parents few through approximately enabled teen households. also a Planet teens work us from their non-PF to to weeks efforts. has journey. Teen to addition from the teens have sign them with Challenge And than our look joined In up introducing introduce to July to XX% in fitness mid-May marketing Summer and more to we limited supporting as encouraging the possible With summer keep XX,XXX as many of

a enhanced ability few significant upgrade we like technology of internally building for feedback functionality brief workout Now enhance our this and of look and the and launch positive features membership, segments members’ our the future our launched our functionality app We update plan to it to our in custom officially experience. population mobile classic on over to Card new within workouts. months initiatives. soft one Card features We with system that the past releases and month, version member continue to as tracking Black forward and White to such membership upon have

between opportunity system our lies franchisees strategy front both variety Looking And our X,XXX team our to each meetings and and topics than be our ahead our and we to in team ahead recruitment educational inspiring franchise our and proves technology, and about with what spending training, and and September, look lines get our attend. only of and fund time franchisees more. galleries the businesses our an franchise have the these our marketing, our on relationships to brand I smaller every an day. of development, harness are moment, franchisees with excited with operations, event. to more as to engage biannually including system-wide conference It members conduct on a We members collective forward strengthen expecting

our of months than locations Fitness XXth In closing, Planet store history. the same half been of More sales. during first it’s strong six quarter open QX any first our year on a positive with XXXX consecutive marking

X, to the expanding January franchisees we of just approximately their country. to X.X footprint [ph] our new that across new a previous XXX, reinvest projected outlook to passionate evidenced teenagers up eager and openings provided XXX With to of are the and net of date range increasingly increase by a Our XXX. to that] [fees XXX,XXX store million from approximately members close

across time, the financial great the delivered work top same flexibility. significant flow proud growth I line significant am and tremendous with and a bottom generate company being we would of the free cash At remainder provide members. Fitness system our Their team corporate excited XXXX what’s for been Planet of the about staff for our efforts have franchisees, our and in by store done in longer-term. store the

call I’ll now to Dorvin. turn the over

Dorvin Lively

afternoon, full Thanks, Chris, our and of then outlook. everyone. reviewing quarter year good discuss I’ll the results details by begin our second XXXX

XX.X% the system-wide prior same For million increased to $XXX.X from increased period. sales the million total Total XXXX, year X.X%. quarter $XXX.X in second revenue store

XX% increased sales in being net corporate was our was perspective, joins our Card segment put The store on X% penetration store place X.X%, and comp increase increase combined by last compared of growth for QX it of our with growth. rate with driven franchisees in by approximately increased XXX a a same member a driven pricing year to a From system-wide growth $X store October increase was with Card basis new Black XX.X% same XXXX. sales rate in balance points X Black

During the pricing store XXX drove the Black Card increased of the quarter, approximately increase same basis sales. in points

franchisee of of Royalty the higher then million XX.X% Our mentioned last third, the year million, $XX.X the increase our X%; our drivers: royalty This quarter drivers million increase second, a the year, down your including consist the rate dues second same revenue quarter the quarter. an with their royalty XXX $XX.X in was of that of period three me of current compared increase This average for which franchise year; royalty membership an as break membership overall more first, rate was quarter prior stores franchise ended stores sales royalties revenue rate, store had more have million, last X.X% last $XX.X on then XX.X%. I increase from of from annual monthly amended at the let same driven segment agreements. the for to was up period, and quarter the to same year average fees. compares on year-over-year in stores by we second revenue franchise royalty $XX.X X%, in from and

franchise second of These received the of within agreements, prior transfer paid stores quarter $X.X the dues processing existing fees fees system. new is year revenues year franchise our received million fees period. compared agreement, ups, was U.S. $X the to from in franchised-owned Next, the received for through point-of-sale placement our new other stores compared us to within million development member were our our we fees ago. Also franchise of segment with recognition and a million fees assembly are for placement from and and are sales the equipment million $X.X revenue, and $X.X which to These in area sign online the

with compared equipment year During XX the the of we stores second placed ago in quarter XX in period. XXXX, new

compared was ago. preferred vendor third-party new which commission a commissions $X.X to our our year million openings and Our from million international store for commissions income, arrangements equipment $X.X

$XX.X last to compared And then finally, $XX.X our national advertising revenue was million year. million fund

Our corporate-owned revenues same to revenue. or opened year. $XX.X increased $X.X increased since million million annual first The in had prior quarter period. of store several XX X.X% the year stores increase $XX.X including segment store last and fee acquired million from of the drivers XX.X% the sales Corporate-owned increase

$XX existing equipment increased sales higher by store the higher a ago. equipment million, Turning franchise-owned revenue $XX.X equipment and year to sales or was by stores the million increase to million from segment, replacement XX.X%, driven to new $XX.X versus

sales equipment to the relates of a revenue, which ago, and by to amounted of increase stores, an million existing direct the which during sales of year new cost to increased was $XX.X driven the to cost Our equipment compared quarter. franchise-owned $XX.X million primarily the XX%,

associated primarily with and the with compared stores year. million XX to Store by increased our quarter the costs associated The to $XX.X operation stores ago. was corporate-owned increase are which since a acquired expenses first $XX opened year last driven of million

the ago. payroll fund the support was our incremental our generated aforementioned million to and was compared infrastructure. advertising NAF million in franchise National quarter. to a was quarter $XX.X for offsetting $XX.X primarily million year to This we the operations expense $XX.X related growing revenue SG&A increase

to the prior $XX.X increased basis points of Our approximately million XX.X% to million the this margins income quarter year XXX while of period, second in compared year. for operating operating to income operating increased quarter $XX.X in the XX.X%

effective tax rate period. GAAP was Our the quarter XX.X% prior second in XX.X% compared for the to

tax As appropriate would the approximately of to interest income income attributable rate Planet level be we the XX.X%. corporate Fitness at and adjusted not before, the tax because non-controlling stated and

in to basis in income $X.XX million of GAAP a net share income per attributable the quarter compared $XX.X the $X.XX of was or share, diluted diluted Inc per year share million per an with an a net increase was $XX.X second share income Net $X.XX period. attributable prior XX.X% $XX.X to million million $XX.X for prior Inc to diluted year On or Fitness basis, million net $X.XX income to XXXX, of adjusted Planet ago. Fitness compared $XX.X period. million On was year Planet per compared or $XX diluted for the

tax income net nonrecurring has reflect XXXX, normalized and second been the Adjusted respectively. and for exclude adjusted rate XX.X% XX.X% of quarter expenses of to XXXX and a

reconciliation which is evaluation of in We today’s the and ongoing that a period, GAAP found adjusted for from XX.X% have net to non-cash income defined also in million of reconciliation prior adjusted EBITDA the a taxes, earnings be before performance as net can of GAAP are earnings EBITDA, to $XX.X of provided and increased amortization, interest other million net income depreciation in Adjusted $XX.X certain income in not the the operating release. considered income adjusted release. impact to net items

million segment franchise from in well store EBITDA rate. included $XX.X and royalties royalty the increase same of a store driven in average our overall segment, as franchise-owned sales sales franchisee-owned increased not additional an by X% XX.X% to as higher stores base By received same

increased adjusted Corporate-owned the higher fees, points the approximately margins by X.X% sales, four stores segment in XX.X% same million last acquired XXXX. for and corporate XX.X%. new to opened EBITDA primarily August by segment stores XX we franchise store in Our $XX.X EBITDA franchise to driven increase store increased annual basis

corporate segment, to by approximately Our store adjusted XX.X%. points increased EBITDA XXX basis margins

year-ago. equipment store $XX.X million stores driven higher sales equipment versus franchise-owned to to a equipment segment existing and increased higher EBITDA replacement sales XX.X% new by Our

Our increased points XX XX.X%. to basis segment adjusted approximately equipment EBITDA by margins

to the turning Now balance sheet.

date XX, last of June our cost of to securitization. $X.X debt, equivalents of As business of solely financing we an consisting $XXX.X excluding at XX, had billion $XXX.X June million the increase same was XXX.X%. cash whole XXXX million Total XXXX, deferred cash year, and compared on long-term

our to XXXX full Now outlook. year

guidance of XX%, approximately approximately be equipment line up sales guidance our new with be our XX, will year including will the approximately are revenue Total approximately total approximately sales. in increase store high-single-digits. XX equipment Same international December For from range new XXX, by X% ended XXXX, adjusting store we XX%. as new stores, XXX from of up the previous in to sales follows: XXX will

increase adjusted and income will from will from up by by EBITDA XX%, from net up up Adjusted approximately XX%, XX%, will increase Total approximately XX%, approximately XX%. approximately approximate EPS XX%. approximately increase adjusted

we turn call back will questions. to the your Now operator for the

Operator

question first your Guggenheim. And Instructions] from comes Heinbockel [Operator John with

is open. line Your

John Heinbockel

Yeah.

a where right, me get operationally. real growth repeating? with this there and down, So you XXX for start the see the estate things, couple this was Clearly, shift better. held is financially in right, so to that Is XXX on? Chris, while don’t a than Or you going because had goes XXX to unit the can more a handle purposely and thought guys of XXX the sort you algorithm, XXX blip let to I think, system openings, a

Chris Rondeau

that answer and I’ll add can Dorvin to it. think, I

call I sophistication we’ve we’re to it’s involved or the sure. I the in seeing little about that it’s think the as more benefit, great infrastructure would seeing it’s their it’s the in and could think that think equity than approximate the but by yes, and that the it’s our expect, we’re XXX that brand brand, last really think, that own franchise adding a I the – current we that probably we whether I seen sophistication at built bit that I just more opened of excited think, to year, year be QX, more model this the we and more momentum system with for within evident private last franchisees sophistication within XXX just commitment

Dorvin Lively

Yeah.

so, sides I think, it’s the people – mentioned maybe three to incremental the thing we that, we’ve kind – on is talked where how John, how facets. or we’ve field, put the that’s resources add brokers about other But the XX that last last heard say and sides Ray months four or in the of the added assist not franchisees Development ago, the more our over we Officer, back basically in start really years you calls XX decline the I’d bring us cases, probably about we months we many put ground and leadership is working last which with of on estate that. REITs – thing were cetera. to commercial under or letting the landlords, approve. I’d boots we’re real – you’ve we if I’ve we’re us over And would all in one Chief we the to estate Miolla, where different for real et would go talk so franchisees

And at well, invested as many they have spread out. and point more of franchisees same Chris’ resources time are then of these kind larger have to the guys because territories

years you something four awareness It’s the And the weren’t we’ve up. so one list, where have the people and of they reach groups. which when calling and frankly that the brand it’s was it’s ago franchisees that I past effort coming five number think then or about all talked collective Kohl’s, three just the the it’s others out in brand the We us, national weren’t. of

the guys those, So equity think as of private terms have the to to we been of of it And larger But as is lot it’s be well good pipeline. good great the I timing, coming able locations. a guys, feel finding funding as to of the the in as environment a combination it’s invest. capital some and estate backed down ever those it’s real about clearly,

John Heinbockel

bit balance franchisees existing sales of cannibalization drives accepting a assume membership some more think clubs. markets, obviously, just that. system-wide you that a a between Is right and between marketing tradeoff, right? little to then total of about a that’s as guys the driving may in the these That step do good all be and And tradeoff, the follow-up and How fair? up a I with that And flywheel. okay cannibalization. of you’re intensifying

Dorvin Lively

more the that, look years, every we than four, a sense the differently expected in a call that more opened we’ve site. years and of five analytics franchisees is the in open, almost XXX the be very going seeing more using And open. that then ago may the we seeing can and are we more approved three, is site, have data to last at not they we in had more same that last we learned saying couple it a on cannibalization I markets the we’re think, learned we ago. lot we’ve date and back Today, few lot with keep to what and have years stores years, approved we

more intensifying the So markets. just these I comfortable think were franchisees

John Heinbockel

you. Thank Okay.

Chris Rondeau

John. Thanks,

Dorvin Lively

John. Thanks,

Operator

question next Jefferies. comes from Your with Randy Konik

open. is line Your

Randal Konik

Thanks Yeah. a lot.

There’s want come instead markets. opening the near to is your something has intensification look of you each back if year of about idea the market. I about thought grow thinking potentially closer they other. we’ve think kind So you of any there process kind of other of essential data, to or or been to When from, about the not just where I consumer stores been two, cannibalization, more don’t or way traditionally actually The know, names. kind the live, Starbucks the learned at has but the more work

there Is you’re market. gaining on So, that would potentially to dynamic? the data more almost consumers more evidence potentially kind seeing your closer of live of to or kind New Any kind actually they that of you I to go guess, where got suggest box, their because work? much that evident Hemisphere or

Chris Rondeau

Yeah.

today started you’ve and we in getting heard game it. even New other well decent yet area. have of to where But of penetration of people still guess, markets maybe – XX% we might building or Massachusetts it’s area. and where may in versus it’s as we’re lot in have so of we’re would the us then this your where then Randy, where be to only there’s reference a in combination up – the or about I maybe talk stores not as early market markets But metropolitan markets, X% clearly like literally or XX% say X% a in X.X% think, we at – closer in of it I Hampshire out, I some others markets and

that getting et a for more planning more opportunities and perspective the the usage Black for provides market reciprocity, from we’re in But market then Card cetera.

still work that of or I combination a built still lot of a you’re there’s there’s then amount there have a there or drive we’re et population significant your out, are has of setting, of XX time. we’re home both, realizing XX% But not of stores And membership. where friends work some be minute it’s markets can cetera. is to so kind to mean, meeting that within XX still population gym Because it a don’t the that where

Randal Konik

of That’s partnerships will Black if and of – more that there’s has is the even be thing one parties, Card up And pop to or benefits where about there’s helpful. kind announcements started if more between all third amenities, you other kind Planet sharing. on these and think members we Planet can to radar all it that seems or Fitness

increasing the kind basis that are more any of show So that’s data or of on utilization of learnings engagement a what gym? the Planet or statistics frequent

to partnerships I’m think of lot with people associate utilizing Planet. period seems churn an trying engagement you either out of to I’m or a is, Thanks. And to reduced getting just to on further that with time, third to long sure reduce a increase you’re how to over time? trying potential you’re opportunity over there’s want get inbounds that that amenities, starting curious of It these increase churn strategically are party want about increase like engagement you to friends see work I the of guess,

Chris Rondeau

as discount wellness, But Black member that one a being audible] is members week with Card Yeah, and Card ability. to app. but whether trial some outside are are [ph] it AAA thing have is giving comes the or clubs the month member. perks like three fitness we’ll looking seen benefits and I in where mean, it studies we we’ve that with you’re Black club believe Reebok a is the of ability actually a [ph] with is just once done This outer stuff in which that obligations, pipe for members get which we launch And where right well. for there’s recent long their [on investigating while partnership of on to content just you’ve of [InterGo] just time. really a that

more lot inbound So we are getting a calls.

I so which scale and us, ability. our opening for competition the it’s which because far more is their behind going size something that doors is to more not great, and is they’re think it’s now, have

and can So our I more members more think give the better for experience benefits value. any way we

Randal Konik

is internationally. the, kind from anything think the thinking system and for there? that get about different comfortable really Last any Thanks. more any versus it. smaller potentially taking people Got be learnings even I’m the the units on through question, really market thought return hold, as can I many differential characteristics to boxes regular see it the I we box Thanks. domestically the we lot of one Dorvin, smaller gives potential guess, both guess, in some formats of share, curious of I on put just box being of these you process the about the question a share and differentials in thousands spot of can market able can the really sizes you get

Dorvin Lively

more of our metropolitan-suburban under to gone Sure. versus less stores some population. that call be working population older of per Sure. to drive one lot return locations size I box XX economic a – the mean, that someone there to get within than on we capital of some and last that where that of seeing are those fewer that locations store. the I of have the smaller what And to And in we’re the a members then it XX,XXX XX,XXX we’ve or initiatives money we’re is while, still out time into that of minute XX stores. that kind we’ve traditional different so, therefore a cities the years clearly and build a in in is number willing likely is But for invested that but can then couple the had think that a return invest there. of towns, more is yet have

that obviously time be there benefits, whether particularly put maybe upon got will reciprocity the depended you we because over got size we other it what’s it’s box. right selling store the that as of the we smaller in Fitness think today drive able box, And a things want a that out value want of look that’s the albeit be brand our and top have membership. still some to in We to feel Planet

cases, then the population And some it it a to want I it think brand, point, represent be. we to does in drive where size maybe could and

We’ve XX,XXX we’ve today. So square different configurations box, in our most last of foot than in the some some And at small built some the couple that’s than years built but boxes looking We’ve working what the range. in a of on we’re that. built size even some that. built of we’ve XX,XXX all smaller

day be drive I call end that small to it you’re the of populations square foot drive to probably will to the need probably able – to going around able think around the be somewhere the end. or to probably And to on XX,XXX that boxes at circle of XX,XXX return. kind XX,XXX in

go minute times, store. the at are you XX drug we’d it Dallas, to is a looking of towns, some at that Chicago different XX suburban smaller Atlanta outlying drive before it these into drive be or get a go driving call it a in drive be one XX grocery where minute XX the minutes time, time thing because or whereas And to because to or makes may the people to XX store to work, that’s

that are put the those I’ll the And at are guess – I and returns things of we we’re couple of they invest, fit corporate franchisees stores. So way. that the profile looking have wanting The stores. to it someone building those and are

Randal Konik

guys. Thanks, appreciate I Understood. it.

Chris Rondeau

Randy. Thanks,

Dorvin Lively

Thanks.

Operator

from Your next Blair. William question comes Ellis Sharon sexy

line Your open. is

Sharon Zackfia

good couple of Hi, afternoon. questions… A

Chris Rondeau

Hi.

Dorvin Lively

Hi, Sharon.

Sharon Zackfia

Hi.

pricing. to then said any Dorvin, I if on I from the And what had out percent think, down equipment not equipment, testing or increase saw letting members rolling versus that planning kind you year were increase replacement be mind in secondarily you’re that you early what at next. you wouldn’t of wondering you I know Card point was whether didn’t an revenues later or and new this think the And Black quarter. one on still to new that to if the us And know case. of expected fourth kind units? you was just

Chris Rondeau

Sharon, this Chris. is Sure.

increase, the test Card a test same [ph] Black – XXX the that that testing price the ago. On years stores now we’re two which and dollar did virtually so [XXXX] testing we’re right was we last

going the We’re play out the of of end towards summer here. probably to the rest then summer and make a decision

has been percentage pushback the as the increase. as very it’s the virtually adopting far the as last results time, as acceptance as So so dollar the acquisition of same well and increase the promising, Card been far, Black

don’t or won’t the be year. half to new probably the we we’re say, evaluating right, doesn’t you’re forward of still next so. week now I So see forward. members it move second going But anything

Dorvin Lively

I you’ve we’ve key about from equipment. had, really XX% us for talk reinvest. heard replacement we that on remiss for a equipment the And and we Sure. Yeah. think that’s mean, was the franchisees in are the differentiator to revenue continue so our this believe total quarter And I’d equipment, – to I be they of say our quarter, brand And that think it.

to would when had as gave gave said, I year, bit shows you – which be I guidance continues XX%. with and guidance a sales still we just bit on full it invest little full for XX% it that I the equipment good year that on it on well. new on quarter sales, So a equipment willing to shy be equipment We but our basis side. it show the will a year, expect be a updated the they’ll think even We under still

it was like it equipment still down about back the range. where QX will the will and we’re we’re year. year. just thinking be quarter. looks year little get fourth year-to-date, to – similar of kind the It balance up bit QX. year-over-year last versus and of that QX just the bit XXX One, is way into believe a But down probably slightly be way at revenue the do the in it to over a The that The earlier where was in then between given QX to a we XXX cadence

Sharon Zackfia

Thank you.

Operator

Lynch. Rafe with Your Merrill Please comes of America Bank next ahead. Jadrosich from question go

Your line is open.

Rafe Jadrosich

questions. Hi, taking good afternoon, for my thanks

Dorvin Lively

Rafe. Hi,

Rafe Jadrosich

a could was little and you online signups talk that’s how wondering mix bit of changed time. about if your I in-store, then, over versus the

Chris Rondeau

join now online. say. Right XX% years XX% from about is about a year, It of it’s I’d the ago, so up past slightly couple in is

Rafe Jadrosich

then America. Okay. an international, can of the new you’re in because on looking at terms us Mexico just markets that trends any seeing and you’re update are And Latin you in And give going forward? then there

Chris Rondeau

open, relatively so. there. and in it mentioned work down that in South there, more at same XX the figure out results blips is So and is and and a one the they ago, I have opened couple working hurdle translates through now one EFT, we been America four that we few for store as good open still well Mexico store this high to world and demand figured Panama is remainder out how there had this or and form is banking the slated months of as year, the three bigger the we A here but

and into really For Mexico and that just for looking getting off really on Canada ground. future, on U.S. rolling be but we’ll Mexico the focusing getting now focus for right more the international and growth now

Rafe Jadrosich

going the then, finished are allocation. any about approach your quarter, capital just changes are priorities in And the leverage how to then cash? for buyback forward there you you thinking And Okay. think authorization I or to

Dorvin Lively

Yeah. net on On a about times QX. basis a X.X of at of the at end cash leverage we’re

the have the on securitization. billion We $X.X outstanding

about the as share strong terms plan and last I flow continue to respect longer cash same. think generate we’re approved I at of to ways plan a year or the that look continue do we’ll to with to And enough balance repurchase to believe We down by with our the we left to way shareholders. our term return $XXX to million over lot million that delever repurchase the shareholders. to we is strategies board at our that, return think, cash work have We chose $XXX of year, cash our where as board. to in continue of under to the the so model

Rafe Jadrosich

Thank you. Okay.

Operator

Komp Your with Baird. Jonathan next comes question from

is line open. Your

Jonathan Komp

Yeah. Hi, thank you.

get First X% what ask X% down first sales half want strong X% question store very the to closer wanted same implies and system just the clarify outlook for the above back few the and there year, half. I think end in And just last comps. drivers? slower ask I to about same that’s very to I to I good, on to the years? and to sales – just you’ve confidence your seen the but the about want the slow store is you of what see maybe maybe on ask ongoing

Dorvin Lively

Jon. Sure,

QX. that We the and kind As at range we in then end had X% X% that mid-single-digit of comps of range. year, coming guidance and saw our for of kind to the then reiterated full the

that guide our the think, way would beginning the and the implies the X%, half assumed would of you X% guidance. moderate decided I are, the the it I kind approximately then in year, two back we fact, through year, things and that’s be that that quarter growth go to by year throughout we’re if call, way, and you’re quarter. moderate at said said a of your to I’d to right the that QX in within say the given that Given say narrow gave we that first still into I go with so that that full in there’s half. would year, three describe We were range. halfway or back the QX And

time. state. to the things to a I’ve over older is, kind those that into in start And to mature stores So of that couple the impact stores continues the you that come grow they on stores mature that: more digits from up and one see past mid-single newer lessening said as the of in a base low- just

offset that’s $X that effect and last even took fact that’s been back that somewhat somewhat had you go back quarters. been price couple certainly on This if Now X. increase of frankly, we by offset year the October year, first

on was this points we basis QX, QX so XQ QX drove call. as about the pricing and pricing example, year’s from Black year’s an And continue at in to last And that look Card more last that, range impact earlier to of XXX XXX to bps basis Black XXX this XX same continue XXX QX sales see XXX QX no pricing this there’s about year points in all incremental year. that’s as as year down whereas of XXX the store QX assumes – And was question about for QX about And so QX. early And to – the and range sales Card sense just for for terms cycle. about basis last But a going in be probably of to and store you QX impact of give we the the same about points. decline on the was QX, in it’s QX. drove we

you’re bps XXX and to as from mentioned to quarter I increase just we to over bps see quarter. dropped QX QX So XX yeah, just plus increasing, about starting

what talked much first I comp would thought in year. we’re joins when about of just think we still kind I just about really of in back still, in X% forecasted QX half – finally, a with an been lighter we when year on comps. we for the then high-single-digit and last and we say and our end new what And we would line range, given the than where back pretty it step be at think the that touch I’d you what we the have But guess, thought

Jonathan Komp

if going few forward think Chris Yeah. just you Understood. what Any And you the that up, the the quarters? of wind joins. you the as when you new should drivers in or have Dorvin, expect out we forward of about of plans going set look thoughts, drivers look marketing to

Chris Rondeau

recall which grown, think, digitized digital, drives previous you looking the marketing had this I over marketing volume. we by in I over amount think, really marketing think Yeah, ad a the national is think has year. early what our hindsight may about what our digital into traditional fund year, as maybe seeing maybe been put And more at we’re has spend I disproportionate mentioned XX% increased that where I we

I going we’ll it’s to some some for retool look think changes as well So probably forward. of and this XXXX year

Jonathan Komp

then thoughts testing it’s the your does couple just could ultimate you’re ability kind the get the if dollar of penetration of that at pricing pretty and to up, it Black Okay, year-over-year have pricing seems it increase, what quarters. great. more follow in on but on thoughts And Black Card power, really basis back nicely accelerated the XXX like thoughts on Any inform last if now I is, know of than I so that? a more broadly bit quite of curious that Card a you’re points your anything penetration

Chris Rondeau

Yeah.

is in I think, dollars. had the the quite couple years make two reason so why decided stores years, more the it here, the XXX last which was question as again move big some that reciprocity increase a may this these even already a we

amenities it’s and have always to as to look lever more store, our provide locations or has within think, it stores, the probably for I that continue more reciprocity we whether constantly ability will it’s a see in that more either raise. open content or pocket if just the back more service to to

Jonathan Komp

Great. you much. Okay. very Thank

Chris Rondeau

Jon. Thanks,

Dorvin Lively

Jon. Thanks,

Operator

with comes and Cowen Oliver question from next Chen Your Company.

Please ahead. open. with Oliver Chen and is line Your Company. go Cowen

open. Your line is

Unidentified Analyst

Hi.

[Jonah] Sorry. Oliver [ph] on This is for today.

do much. any competitive question. and recently? wellness other Just in have the concepts so rate change the you’ve are more that as stores seen you also a How churn riding about And trend? open you the you noticeable landscape health think Thank you quick noticed and

Chris Rondeau

as slightly the better. in all, mentioned Nothing past, last I better slightly years. No. Yeah. has attrition A bit little the at in happened we’ve is couple mean, with churn

anything, although and I boutiques specialized you see more around. up pop kind think, that Jonah, come of are if concepts that I say different

you I value You lower if the think, guess at Fit] it’s so. like whether or I high cost, look more us, [ph] clubs or [Retro of

has one any where XX You Fit really last at really which SX – would at XX or The only other think, also. amount year that grown that Retro be all, I it is, is grown and grown as after crunch closes stores.

on one, seen I cost change haven’t the anything think lower at there we all.

take with more, XXX or of the a XX-hour box, XXX while XXX been at XX-hour the for Fit even really I that grow either five size You years. and they’ve mid or stuck – kind been guess, seen them the is club in fitness box for fitness fitness, have plus mid And has about been has market

change they’re I different consumer. if think, I in different of a in concepts that’s and we’re up very higher which anything seen whether a price world ways So come realm boutique of that boutiques haven’t lot

Operator

John with Our next question from JPMorgan. comes Ivankoe

Your line is open.

John Ivankoe

service mean, that’s to And in there about of two is of And the average XXXX? you amount of a thank range you right box in to think level square I way customers? at square range per think relative react return XXXX, box, XX? What gym think fiscal footage was begin appropriate between of foot you as was Hi, that the the an I’d think If to is earlier the things foot on about to years? by that for look the it square guess, you’re years? going what investment on of design XXXX that a as narrow we you. The in what have question range what different as asked per of previous amount kind experience, going different the in I about give you you’re range that and you of maybe to like box in fiscal to and hone was do

Dorvin Lively

size year, you I square right three years, going changed XX,XXX to a it XXXX XXX plus and John, think the and and this of The call it It’s opening, hasn’t really say, in feet. be would that year. box probably probably last even between lot, about this I mean, we’re counting XX,XXX XXXX.

that, a you know be that. put was for in a to something a few XX,XXX or want certain place outliers there’s like Now little to because it box it you in happened

opened there. built, XX,XXX small in a big Berlin, small year. down You heard up square town in But the just It’s about in in last We outlier. small Texas a us town of a very store talk about corporate X,XXX that’s we of a shy Vermont. store feet store

we majority that, butter some helps the But and a majority in have XXXX XXXX, So down so XX,XXX. over of the bread around fairways and far far XX,XXX, the the right stores of all XXXX, that right terms average.

them then What enough it. the XX,XXX maybe development states, allude penetration more then at rural drive was earlier, it’s be alluding And the build [ph] a they on looking feet. more say, fringes, market small markets, we’re a franchisees their as how it and was thought in and can that’s I start way as agreements XX,XXX to of asked more small that return us from anywhere the of more open or into being to more stores. and at say and square let’s and and at that frankly get question will career the I kind And just was where was to get towards I trying we question least, the then saying look If to to then return. looking

our call And far all to anywhere enough to it there, believe X,XXX that in markets the handle in members we because put franchisees, I affirmatively, from XX,XXX if of people and there’s we’ve and members too. the to going real can the and XX,XXX said, box, some no way that environment it a that. majority of box, more I that patterns of the foot the XX,XXX markets our said they’re Clearly, before, cheaper there’s estate all square it I to this and can can handle X,XXX doubt yes. usage some of think maybe members And up brand mean, size

and we and there’s be real we of saturated box. say, to the the I’d market number no going Even in people the stores, foot XX,XXX some, box building we where there’s likely square not it’s with in where it’s estate, a most John, markets, enough if on maximum we’re want markets, system. to But have

best ground the to membership get drive you right when we’re square gives because then, And same us customer, we cetera. perception economics. XX,XXX and et town. doing that out We’re best a a from maybe right type of equipment think mix the the to that’s small And some just foot, profile that drive of layout, ups fringes, it the the the can’t it’s okay, done

get if do can willing XX% that kind do they’re the way of at clearly that most people it, to is, looking that low-end willing the on think they’re cash anything it. to they I and cash this and returns, are about

we far, to cash XX% returns. to of that so haven’t of get struggle that had kind And a problem trying on to cash

John Ivankoe

Yes.

XXXX mean boxes, I it think, I And XXXX. it so sounds that’s to mentioning, worse, square material even change maybe you even think I it with foot or per course, a be if be certainly that. Of slight is like worth would not not in are expecting it

Chris Rondeau

Absolutely correct.

John Ivankoe

want a Okay. That’s in [XXXX] [ph] point. you obviously, XXXX. the you [ph] of important Black And time, have secondly, then it [XXXX] October Card long the about pricing, for just talking to

have a kind such cost at always because there’s keeping amount member franchisees of have The high that of basically restaurants a or asking big of really fairly in value philosophical maintain are taking level. certainly there’s the pressure you can what and to, it an for You’re you when pricing is, growth perception. because pricing you excellent debate

some really of profitability we what’s in driving it I for keep of So taking like I I about increases we think I is, do because they price, itself. of growth point that the really mean, kind franchisees want that’s hey, in balance is asking cost love and flywheel want they keep you shareholders what guess versus just is the cover I mean, maybe, are answer that of need and the maybe the hey, and guess between to it’s this what going, the labor is, and profitability member it that – mean, pricing to mean, answer just more their at I

Dorvin Lively

Yeah.

members members they is, still really portion segregate we so [indiscernible] we and still our think advertise $XX factor. membership large what a I to they’re what is pay. and of that’s that’s a get look pay only want the the And and curiosity $XX which the really are at, we willing to

less giving the membership that in the Card more to is Black So are of sense or pretty to treadmill. Card Black is more or benefits and spars fitness, access outside the unique really not less access kind a of I think

Chris Rondeau

[mask you is willing it’s think do will so to never you’re think one use definitely look think If I pay for for too is will But and sure. well. in the that right that I’d price, at I we the as more that some issue, [ph] I people want other] something to is future to thing is,

John Ivankoe

Thank Okay. you.

Chris Rondeau

John. Thanks,

Dorvin Lively

John. Thanks,

Operator

Keith with comes question Jaffray. next from Your Peter Piper

is open. line Your

Peter Keith

results, good and afternoon guys. Good thanks. Hi,

Chris Rondeau

Thanks, Peter.

Peter Keith

earlier to year, of probably guess, couple want total maybe the the to is rate up maybe to to baseline absolute up questions unit going wanted the growth, least XXX of like guide to follow one how all regarding forward just run on place potentially least tools I and to the to are kind number it rough overall years? of next of this don’t maintain in at XXX step the a of we but seems assets about you the us and just could a think openings at for next I

Dorvin Lively

any I don’t committed. the XXXX. But under think over we pipeline to still into in giving thousands have every development that early are – want we are guidance the agreement get into

But few or continuing of are the find how doing reinvesting there’s then place XXXX, a what drawings clearly and sites but we And firming and in a from somewhere the about in mature. their to are if stores locations of that that good and up are early first and franchisees I it’s getting architectural of or sites being XXXX. early market Chris good existing to our in in close there fleet, it’s you’ll signed to markets whether try locking more there’s a new be the for you’re that – leases beat months bit whatever kind to that maybe all things still little loading said out from a ground and not only and – the are even it’s terms really in of in markets, were what deploying they best old QX. clearly we’ve and Just a either committed are earlier, on are to pipeline in franchisees they’re reiterate capital, certainly negotiated to got place feel

a ago, remarks as I about think, international XX then was of the I it I locations. year that XXX a XX. of few those made XXX – said my to would months be And in And data just that out point, prepared to last

that but doubling close out be size think the that it to of albeit we that about, now, XXX the Canada, between feel call But we’re the out give we in at get clearly, of So small, from we’re those right any we’ll in et as international earlier intel of about more it, to year. was Chris number when about towards next Mexico, XXXX, where XX good to locations, we talking will about and event really cetera.

Peter Keith

rates cardio years it’s refresh following for for years that franchisees reason faster strong on seeing on are seven the equipment question curious caused also maybe so beyond from regarding strength, QX growth. And if up equipment or you’re quite return five any dynamic maybe enough. seeing was replacement I’m normal timing just or sales, that a good Fair that and that strong, growth just Okay. another the before whatever it’s the in if a for with

Dorvin Lively

and I’d when up may and to saying and they back first, way you about it, is it Teen lower got all bit it, good do use say first to this the do the But incremental year had it’s QX own. – a started we’ve just go time on we guys was period to bit all with when success till public. because replace usage of It’s it time their a kind it. Yeah. we always today quarter’s do we to the a But little been that we’ve of they’re laughed with calling a although, always just franchisees the it’s $X.X you you talked the Summer we good doing equipment, been of the over to not that equipment, replace Challenge. no the is gym, the within lumpy and time you a million I’d it have say since about way

going when kind now, And coming you at and is about the year prior volume you’ve the more coming we’ve The what new first call so years first opened have last years to know significantly more stores fact be stores the up it up. look that that so cardio of cardio got up that five is you two less, and also over to talked three of first now their strength. are to the that that on

that then And doing that’s others third around. or into got second you’ve their time rolling

our to to business. club, about I’ll brand want be XX% So, go like again, the willing that continue don’t just grow this it’s everything replacement although, rate. to XX it else a XX% testament or going you being X, And and differentiates are and in think year franchisees look and reinvest to X, much old years I XX-year in say they faster equal at shy old the clubs it’s it said to that’s what their I a a

Peter Keith

luck helpful. with the lot. Okay. Good half, Very back guys. Thanks a

Dorvin Lively

Peter. Thanks,

Operator

James. comes Raymond Altobello question next with Your Joe from

line open. Your is

Joseph Altobello

Thanks. Hey, guys, good afternoon.

membership lighter wanted bit said mentioned why question, I and the something back lighter First a the you second seeing bit earlier, comps, just was a the of year. than you to you you’re little in Dorvin, guess, that you for I to thought, growth half thought go reason

to is, this are that that second was that look range It you If a range. is, membership was thought, why XX% maybe few last and XX% quarters, at guess, than do with in if think expecting so you in bit quarter, lighter what you you it’s right is? first in the it been I

Dorvin Lively

term going Yeah. as things. the to A couple use think, lighter. touch a One I’m I is,

spend that as maybe bit hindsight to spend that opposed more towards more year, maybe shifted significant one. where a media as a the we’re we but comment our that percentage the driving our of continuing another two, But new that’s past campaigns. bit with some basis of marketing So we look you been in maybe I’ll the in can QX. maybe But is it’s in we as look has data spend marketing at back at point digital the to it factor just Chris’s our that look little But so – budgeting and a huge just plan we’ll of driver or aggressive, if in of traditional XXXX marketing maybe tight we wasn’t it’s kind clearly successful something of to balance were point the it we total lighter as go was joins. over on a a at look that shifted of the XXXX

Joseph Altobello

then or should the you That’s Great. of of the say. those helpful. came many And secondly Challenge? signed new quarter Teen new this you members net maybe you XX,XXX up from think members Summer How

Chris Rondeau

summer parents We now point, August start we’ll the effort to May marketing with to target joined we’re since this rolling have real XX,XXX XX. so very this here the teens this far With point. both – had them little up no and at our

So see kids we have join the do free people see great get what in happens exposure. with after to these that in the finally the future. But the it actually was

Joseph Altobello

next do well? year something this going Is you’re as to

Chris Rondeau

we see the honestly, why term, it’s to that it’s it don’t I will do society, pay right thing – the we’re known Yeah. quite I think something it’s great a brand and wouldn’t in we thing, for think, great the be I for longer dividends for future.

we for X,XXX kids X quick about great for perspective e-mails here sense of the stories population two, in and had – this that’s office way. the of that X% a X% Planet, it’s this it them it’s not I us the amount just country, to from that truly XX in to just women I thing mean members it to remarkable, we a an thing is the achieved impressions entire parents, this to just had teenagers that billion do penetration came over and involved up. of of it’s that to of of us was just think So letters in we great second old exposure Gen at think of it think through for whole XX make We a have the XX was cause I made amount X be mention year didn’t we was years media with XX days. with

Joseph Altobello

guys. Thank Great. you,

Chris Rondeau

you. Thank

Dorvin Lively

Thanks, Joe.

Operator

Your next Michael D.A. question Davidson. comes with from Kawamoto

Your line is open.

Michael Kawamoto

Hey, guys, question. thanks for taking my

expand connected going the in you tests on the can XX update First, forward? stores going are and equipment just plans replacing how to planning maybe you’re that

Chris Rondeau

complete all last then the going stuff experience we’re XX what stores, matrix Yeah. And going and still I call from stores quarter, working equipment current studies. some make learned. to a kind segmentation based those consumer in with retool to screens the learned of and that that’s The it on test what we lot experiences of we of platform the Out studies is my matrix point on we’re out roll these member of this with that retool guess, new a the, from I today. platform fourth

and forth. Hulu and and about talk so on we and Netflix so Although Spotify

Netflix was most of it. of used used only all the but members out X% those,

So while to it’s cardio. I do much think what their streamlined and more stuff too they members almost run clutter the wanted some ways in

around so is in lot educational cardio studies was results they a for purposes to better surprising more – the time exercise of of nutrition. consumer that use to wanted what some And get how through

stuff newer demands, those to So more retool could of we in we’re some quarter get going the interaction. to if satisfy fourth to the try

Michael Kawamoto

helpful. That’s

you to three continue just that matrix are one choosing. or So three with them on vendors, you’re or to going the of all

Chris Rondeau

role, going sort different just and all all getting to we’re three with of at them, this going for working this three on down of are focus We matrix but test just point. a

Michael Kawamoto

Got it. Thanks, guys.

Chris Rondeau

Yeah. Thank you.

Dorvin Lively

you. Thank

Operator

Sumit Sharma Your last question with Berenberg comes from Capital.

Your line is open.

Sumit Sharma

you taking my question. Thank for Hi.

structure discussed we, sale-leaseback or I developed vast real traditional more you allowances your volume deal of a – of guess. have mean, landlord, you’re to effectuated, being the we’re the development estate. what nationwide like the has get because a of bigger sort where majority kind leasing at how just But of lot sense the already I I Who it is your under on think been gets is is identity? a sort this that I from looking situation and franchisee think

Chris Rondeau

up along business are play – estate directly real bring equipment land our the guess, stores I because buy bit building little combined the our that buy with we’re franchisees versus a more the – retail have we a good far building, that and just situations, of a few across they’ll a particularly Yeah, the lease that with the at kind of lighter. you leasing it’s franchisees the of country. they’ll of majority in it. the at. box REITs owning and and Yeah, looking the today landlords, of Most build general from all that a or the will it’s is just where beauty, goes in a But we’re point, size with

Us, it’s the this Old Office Depot; the I Navy, Staples, Max kind boxes, generally Office kinds think way "R" of of Circuit about those City. Toys

into, you fill find that today. were it, a and those in X where to the maybe but a if last those stores a take they’re down you revitalize of vacancy like up all there’s and go lot and list, way that. a lot and really centers a got out of As to it’s go the in trying that’s that back those particular more to try you retailers in there space. no mean they’re lot I those to landlords are closed. And XX go add And years – things that boxes of have center do trying to take will and There’s

And amount to a a of do we X,XXX will drive traffic a about workouts week. center tremendous

into we’re bringing people that And a so to center may intents in that have shopping ever purposes all gone and shopping not center.

region talking not allowances. million from uncommon It’s for It $X getting that, square so going to they are for tenant end box, not today. to build you’re to attractive to range. it’s this foot a tenant allowances, mean, XX,XXX improvement – but varies you’re improvement going bit, of you’re store typical region a $XXX,XXX if makes a that unheard $XXX,XXX, that So $XXX,XXX, get store I in

et time with on the value it on you and certainly ROI, on cash cetera. return helps so the And can money – the

the question So mainly your leases. to it’s – answer but

Sumit Sharma

Thank you.

So for I about it that’s much, to. me guess

Dorvin Lively

you. Thank

Chris Rondeau

Thank you.

Operator

turn I’ll for remarks. call the Chris to Instructions] closing any [Operator back

Chris Rondeau

pleased and achieve second our first the forward Thank our momentum. And the today, we support of the well our quarter with as committed look the carry corporate help second franchisees and as and to you. more by half I year the be the appreciate staff time of your these results for the results. them year great couldn’t great the of to half

So Have good a thank evening. you.

Operator

today’s call. conclude does conference This

You may disconnect. now

Planet Fitness (PLNT) 7 Aug 192019 Q2 Earnings call transcript