Basic-Fit N.V. (BFIT) Earnings Call Transcript & Summary

Hello, and welcome to Basic-Fit's Q1 2025 Trading Update Call and Live Audio Webcast. Please note that today's conference is being recorded. [Operator Instructions] I will now hand you over to your host for today's conference, Richard Piekaar, Head of Investor Relations. Sir, you may begin.

Thank you, Alan, and welcome, everyone, to this call. With me today are CEO, René Moos; and CFO, Maurice de Kleer. And in this call, René will give a short introduction, after which both René and Maurice will be available for questions. This call is being broadcast live on our website, and a recording of the call will be available shortly afterwards. As usual, I would like to point out that the safe harbor applies. And with that. René, I hand it over to you.

Thank you, Richard, and welcome, everyone, to today's call. As stated in our press release this morning, we are pleased to report strong growth figures for the first 3 months of this year. And we are comfortable with our full year guidance as communicated in the full year 2024 earnings release a few weeks ago. During the first 3 months, we expanded our club network by 41 clubs, reaching a total of 1,616, up from 1,506 clubs in the first quarter of 2024. In Q1, we opened 43 and closed 2 clubs. We opened 17 new clubs in France, where we now operate 875 clubs. In Spain, we increased our club network by 11 to 220 clubs. In the Benelux, we increased the number of clubs year-to-date by 4 to 484. In Germany, we increased the number of clubs by 9 to 37 clubs. Our membership base grew by 213,000 to 4.47 million, representing a 10% increase year-on-year. All countries experienced growth, with France and Spain showing the strongest performance. The membership growth in France was partly driven by our successful 24/7 club openings. Compared to last year, our revenue for the first 3 months increased by 17% year-on-year to EUR 332 million. The increase in the results was a result of a strong growth in memberships, combined with a higher average revenue per member, partly offset by 1 sales day less as 2024 was a leap year. The average revenue per member per month in the first quarter increased to EUR 24.25 compared to EUR 23.57 during the same period last year. The improvement in average yield was partly driven by the introduction of a new membership structure in the beginning of 2025 with 3 options: Comfort priced at EUR 24.99, Premium priced at EUR 29.99, and Ultimate priced at EUR 34.99. The main difference from the previous membership structure is that Premium members can now bring a friend only once a week compared to the unlimited times previously. While Ultimate members can bring a friend at any time and freeze their membership 2 times, 4 weeks a year. This membership structure is implemented in all countries except for Germany. So far, we see very positive results in terms of uptake of the Ultimate and Premium membership across all regions, similar to Premium uptake in prior membership structure. The positive results in the first 3 months of the year put us in a good position to achieve our full year targets, as outlined in our full year earnings release in March. We are on track to add 100 clubs to our club network and achieve revenue of between EUR 1.375 billion and EUR 1.425 billion in 2025. We also maintain our outlook for underlying EBITDA less rent of between EUR 330 million and EUR 370 million in 2025. And for overhead costs, including marketing as a percentage of revenue of between 11.5% and 12%. We are very happy to announce that we have secured a new EUR 200 million revolving credit facility with ABN AMRO and Rabobank set to mature in June 2027. With this additional facility and our positive free cash flow in 2025 and 2026, we expect to have enough financial liquidity to meet any redemption request from convertible bondholders who choose to exercise their put option in June '26. We expect to launch the EUR 40 million share repurchase program in Q2 2025 and reduce our leverage to below 2x in 2026. With that, I conclude the presentation, and Maurice and I can now take your questions. Operator, please open the line for questions.

[Operator Instructions] We will take our first question from Marc Zwartsenburg, ING.

My first question is on the clubs in France, the 24/7 clubs. René, maybe can you give a bit more color on the ingrowth you're seeing there that would cover for the EUR 35 million investment? Can you give a bit more color maybe how these clubs are performing versus other, let's say, mature clubs in France? Okay, that's my first. Let's take them one by one.

Yes, we see already in the first quarter that we see much better results. So yes, we're comfortable that we will be able to absorb the EUR 35 million additional cost definitely in 2026. So we'll take this year to grow to the amount of extra members that we need to cover that cost. And yes, of course, it is very costly. But yes, we focus on being there for our members. So, yes, we try to lower the hurdles for people to join. And next to price, always open is crucially important. And as you know, we have made huge investment in technology and systems, which really allows us to operate in the Benelux without staff, and that works really well. We can't do this yet in France, but we really believe that in the future that will also happen. And again, that is what we hope and expect. But if that doesn't happen, then in time, we can change to a more efficient option because, yes, currently, we're working with a structure that we can stop any month, and that is actually a costly affair.

So you're basically saying that if the situation stays, in France that you have to have someone in the gym, if it's 100% sure that, that is the law going forward that you will transfer maybe to a more cheaper, do-it-yourself model or so. Is that...

Correct. That's exactly what I'm trying to say, yes. So meaning we now outsource it with -- where we can cancel it on a monthly basis. That's costly. So if it's clear that it's never going to happen, then we will do it with staff and then it will be, yes, around half of the cost that we're paying currently.

And if it's -- and a more positive will be that you are allowed to do with staffers and you can kick them out in a month's time? That's basically what you're saying?

Correct. That is actually what we are expecting.

Okay. And then maybe on the -- can you give us maybe some numbers on the 24/7 gyms? Are they indeed showing, let's say, more than 30 -- at least 30 more member ingrowth versus a normal club? Is that something you're seeing because you run the pilots, you have now 3 months of ingrowth also with promotions. Is that what you're seeing?

Yes. Of course, the first quarter, you always have more joiners than, let's say, the summer period. So you cannot say it exactly. But what we have seen until now, till half of April, we see definitely a good ingrowth that we can reach this around 300 members on that 24/7 clubs. We don't really look at it that way. We actually look at it as -- like if you have 1 club 24/7, then yes, the clubs around it can also use it. So we're looking at -- we need around 100,000 extra members. And yes, if you have a cluster of 3 clubs, then we do 1 club 24/7. So yes, all in total, we need 100,000 extra members more or less in France, and we're comfortable that we will reach that this year.

Okay, very clear. Then a question, I think, maybe for Maurice is on the refinancing of the convertible. So you secured new facility, the EUR 200 million facility, but there's still, say, EUR 100 million that you need to generate from your free cash flow. Give and take that your free cash flow for whatever reason, does not come up to, let's say, EUR 100 million by June next year, do you have enough flexibility then to still manage that with your club rollout or with your payables that you can bridge that gap and be absolutely sure that you can finance it from your own funds?

Yes. Good question, Marc. So, yes, first of all, we're quite comfortable that we will have enough cash flow to repay the remainder of the convertible bond of EUR 100 million. But we're also actually quite flexible in our club openings and also in the timing of our club openings. So the answer is yes. Yes.

Yes. So you're not, by contract, obliged to open them, let's say, in the first half of next year. You can phase it out to the second half if needed, if you fall short a bit?

Yes. Well, of course, some of our clubs are already contracted, and we will open them at the beginning of '26, but we are still flexible.

Okay. And then maybe on the guidance you still have pending there from the Capital Market Day, so the EUR 460,000 per mature club, I think the question was also asked in the full year numbers. But is -- given what you -- given the investment you're doing in France, is it then logical to assume that it's more a guidance, let's say, for '27? And do you believe still that it's feasible given the trends you're seeing in your end markets?

Yes. I think the EUR 460,000 per mature club is definitely feasible. If you look at the 1,200 mature clubs that we have now, that means we need 200 more members. I really see no reason that we will not reach that, especially taking into account the low fitness penetration in the countries where we're active. So yes, there's still a lot of room for growth. Not sure if it's going to be '26 or '27. We have a combination of new club openings and we still have the, call them, the corona openings. So -- but we are convinced in time. I just don't know exactly which month, which year. But in the near future, we will -- we are very comfortable that we will reach the EUR 460,000 EBITDA on a mature club.

Then maybe a final one for me. It was not in the press release, but is there anything to mention or some information about the franchise business still on track, it's on -- for the second half launch or...

Yes. So, we only want to announce when we have concrete steps. So we will announce more detail in time, but we need to have a good contract with the right partners. We will take the time that we need to do this. So, it's not really a deadline for us. But I understand your question. So, our advice for modeling purposes, don't expect any meaningful contribution in '25 or meaningful in 2026 from franchise. We want to start with the right partner with the right contract.

But it's still on track?

It's still on track.

We will take our next question from Robert Vos, ABN AMRO.

I have a couple of questions as well. You added quite a few members in Q1 that was already flagged at the full year results. Can you share with us what the number of memberships would be in 2025 in your base case scenario? It's my first question.

Base case scenario? Yes, I'm not sure. As we have explained a few weeks ago is that we want to focus on two things; turnover and EBITDA. So, we do not really want to communicate on growth, just looking backwards. So every quarter, we will communicate how many member ingrowth that we expect. But if you look at last year, when we grew with around 450,000 members and around 180 clubs, we will do less clubs now, so 80 clubs less. So logical, it would be a little bit less growth this year than last year. But again, we don't want to really set the amount. We just took that out. We want to focus on EBITDA and turnover.

Okay. Yes, you already said something about the 24/7 clubs in France concerning memberships. But I was wondering, the additional costs that you flagged, what is the conclusion in Q1? Are the additional costs for these 24/7 clubs in line with your expectation range in Q1?

Yes.

Okay. Maybe a question for Maurice on the EUR 200 million facility. Is that facility fully linked to the convertible? In other words, what happens if there are no redemptions in the theoretical case? Does the facility then cease to exist? Or do you still have it then for the year thereafter?

Yes, Robert Jan, you're right. So, the new facility is linked to the redemption of the convertible bonds. But if our convertible bondholders and everyone has the ability to decide for themselves, So it's not a 0 or 1 situation. If they're all staying in, then we don't need a facility and we will not use it.

Okay. My next question is about the pipeline, the graph that you always put in the press release at the end. It shows that 31 clubs are under construction currently. This means that you will open the 4 clubs that you have already opened in the quarter plus these 31 clubs in Q2? And if not, can you maybe then elaborate a bit on the phasing of the club openings in 2025?

Yes. So, we will still open clubs in April, May, even though when the clubs are finished in June or July, we will not open them. So that could be that the clubs are ready in June and we open them half of August.

And in general, about the phasing because you're already 41% completed -- 41%, basically you've completed your ambition to open approximately 100 clubs. Is it the rest of -- not much in Q4, I assume, and the rest evenly split between Q2 and Q3, roughly?

Yes. So, our focus is always opening as many clubs as possible in January, February and opening as many clubs as possible in September, October. This is the ideal period to open clubs, so January, September. But yes, that's not possible to have all the builders. So that never works, but we try to manage that to get as close as many clubs open in that period. And also sometimes we take our time to open the clubs. So we start build-outs a bit later because of the fact that we don't want to open them in June. So then, let's say, the rent contract started, but we start 1 or 2 months later. So, we can play with that. Also sometimes builders want to start because they have the staff and don't have any work. So then we make an arrangement saying, "Okay, you can start, but we will pay you later." So there are many different -- but of course, we know and we have been doing that for the last many, many years. We will manage the cash flow that we have available with the openings that we can afford.

We will take our next question from Tim Ehlers, Kepler Cheuvreux.

So the first one would be about the new membership structure you're going to introduce across the geographies. And my question would be, could you maybe explain your thinking behind it? And especially, if I look at the change you just made very recently in France when you introduced the weekly subscription again and what you hope will happen with that new membership structure? I mean, I get it that you eventually want to get rid of the Premium, bring another person situation. But yes, could you maybe explain a little bit the way of thinking behind it?

Yes. So, what -- we typically always test different things in the market, not only in fitness, but in all kinds of other businesses as well. So what is happening in members, especially phone membership and so on. So what is happening? What are people trying? What works? Of course, we build clubs where you can easily put in 4,000 or 4,500 people. We don't have that yet. So we're always happy to see more members join. So we always look at the right balance between amount of members and the yield. Of course, if we lower the price to EUR 10, we will have more members. So it has to be a combination between the yield and the amount of members. So we're trying to optimize that. So for that, we try different things. So we try -- we have started now with the Ultimate, making it more expensive, because what we actually saw is that even though they didn't really see the huge difference between Premium and the Ultimate, you see that a lot of people really tend to go to the higher, the people who have the money and want the best membership are actually easily stepping over EUR 5 extra, put it that way. So we see actually a bigger group of people going for the Premium -- going for the Ultimate instead of the Premium. So overall, we keep testing. So we tested the price per week, that didn't make a big difference. So we stopped with that. This is actually working. We've tested it in the end of last year. We rolled it out in all countries except for Germany this year since January 1. And we saw a very good member ingrowth, but also a very good mix. You didn't see that immediately in the yield in the first quarter, but that's a seasonal thing, people start with a big promotion, but you will definitely see some increase in the yields in, let's say, the coming year.

Okay. Great. So basically what you found out is that in France, customers are less sensitive to higher prices eventually. Because if I look at it, you basically increased the base price by EUR 5, So by 25%.

Correct. That's correct.

Yes. Okay. Great. Then my next question would be about the openings. I mean, you saw in Q1 that the openings were as last year, highly skewed towards France and Spain. Is that how we also should look at the openings that are still coming in the rest of the year, that most of them will take place in those two regions?

Yes, I would say that we will see -- so we had 9 openings in Germany. Yes, I would say that if you look at the mix of the first quarter, something similar you will see in the rest of the year, correct.

Okay. Great. Talking about Germany, could you maybe comment a bit on the market situation there and how you see things developing? Is there good interest? Is the membership increase according to your expectation?

Yes. So the clubs we opened in the beginning. So the first 10 clubs were not very successful. I must say the last 10 clubs are very successful or actually the last -- more than the last 10 clubs. So it's going in the right direction. We are new in Germany, so that costs always a bit more money. So you spend a bit more in marketing and you're unknowns. So you have to fight yourself into the market. We have 37 clubs open now. We will open a lot more, say, the coming period. So, yes, once we have this 50, 60 clubs, and we are focusing on 4 regions now, I think you will see a good ingrowth of members.

Okay. Great. And the reason why the -- yes, sorry.

Yes, the reason why the first 10 clubs were not very successful is a combination of things. Also, the competitors opening -- not opening, but giving 6 months for EUR 1 didn't help. We charge more. We thought EUR 1 for 6 months is not a lot. So that didn't help. But of course, yes, you cannot do that. If we keep opening clubs, you cannot keep giving 6 months for EUR 1. So they clearly stop with that. And so now it's a more normal situation. But yes, I think Germany is a very big country, a lot of people, good economic, sticky members. So we are comfortable that for us, it will be a successful country in time.

Okay. Sorry, one last question about Germany, and then I'll leave you alone. So you're not afraid that due to the quite high level of competition in Germany that you have to eventually just compete on prices and the yield would be quite under pressure in Germany.

No, I think there's actually low competition personally. So when you look at the German fitness chains, they are growing, but they're growing by acquisitions. So they just put a new logo on a gym and then they are growing as a company. But of course, you're not growing the market by just buying from each other. You're growing the market by opening new clubs. That's really not happening. So if you look at the bigger chains in Germany, they grow extremely slow, and it is a huge market. And the fitness penetration is very low, if you compare it to the Netherlands, for example. And on that amount of inhabitants, there's a huge opportunity in Germany for growth.

[Operator Instructions] We will take our next question from Lynn Hautekeete, KBC Securities.

I have a couple of questions regarding the tariffs. In case Europe starts with the tariffs from the U.S. in case Trump starts with retaliating tariffs, what will be the impact on your expansion CapEx for the fitness equipments?

Yes. So, we're not buying anything from the U.S., so that helps. So we will not have any significant impact. We buy from European and Asian countries. So, the Trump tariffs will not have an effect on our club openings or our club cost. But yes, it's of course -- yes, a lot of things happening so that the tariffs could be a problem. Recession, if you read in the paper, could be a problem. But also if you -- for example, if you talk about recession, we believe really that our membership development will be really robust in a period like that. I've been in the business for more than 40 years now and we've seen a lot of things happening, interest extremely high, recession. So a lot of things happened in that period, and people cut back on big purchases like cars and big trips and TV screens and so on, but they really do not cut back on their health and social life. So, it is really for us, the recession, of course, we don't hope there will be a recession, clearly. But if there's a recession, we think we will not be hit. At least in the past, we actually grew in that period because keep in mind that we are a low-cost company, so we might benefit actually from downgrading people who have now higher membership while we have exactly the same equipment. So, it could work in our favor. Again, we're not hoping on trade wars and we're not hoping on recession. But if it happens, we don't think we'd get hurt.

We will take our next question from Natasha Brilliant, UBS.

Two questions from me. The new facility, and apologies if I missed it, but have you said what the interest rate is and how we should think about interest costs for next year, if we assume that the put option is exercised and that you use the RCF and just what we should factor in for interest costs for next year? And then the second question, just coming back to your comments on the macro, anything to comment in the most recent weeks, any pickup in bad debt in any particular markets or just anything to call out that has changed?

Thank you, Natasha. As to your first question about the interest, the cost of the new bank facility is a bit higher than the cost of our current bank facility. But at the end of the day, it will not have any meaningful impact on our financing cost this year. Of course, in the next 2026, I expect -- we expect an increase because if the convertible bond is redeemed, then the 1.5% coupon is out. So, not a lot for this year and some uptake for 2026. And then maybe you could repeat your second question, it was about bad debt write-offs?

Yes. Just whether in -- given the macro and given the volatility, whether there's anything to call out from trading in the last few weeks or through April in terms of bad debts or anything else, any change in trends really?

Yes. So we haven't -- if we take a look at that in a somewhat broader perspective than over the past few years, after COVID, we had a big cleanup in our debts and then an ingrowth in 2023. And we expect to be on a stable level right now. So, for the remainder of the year, no surprises. We expect no surprise.

If you look currently at the period that we have been through this year, so till, let's say, half of April, what we see is that the churn is lower. So, we have more sticky members as we are. And the write-offs, maybe also good to say, is the more we go south, so the more we go to France and Spain, the more membership we have over there, there we have a larger part of members with lesser good paying discipline. So the more we grow in those countries, the bigger debt write-offs we will have. But it's a limited percentage. So, overall, the macro bad debt, of course, on average, we charge EUR 25 a month. So that is not really a big impact on people. And again, what I said before, it's their social life. So it's also people visit us a lot and it's a social thing. And you cannot enter when you didn't pay. So people who want to join and want to work out, yes, they have to pay, let's say, on average 20 -- what is it, EUR 24.

Okay. That's clear. Can I just come back on the comment about the interest rates? Are you able to quantify what the increased costs will be for 2026?

No, Natasha, we're not getting into that much detail.

Okay.

But maybe to add to that, it is not a huge uptake. So what we are paying our current banks, it is not more than 50% more, as an example. So it's a limited increase to what we are paying on our current bank debt.

We have reached the end of today's conference call. I would like to hand over to Richard Piekaar for any closing remarks. Please go ahead, sir.

Yes. Thank you. And thank you, everyone, for joining today. And if you have any follow-ups at any point, please don't hesitate to call Victoria or me. Thank you. Bye-bye.

Thank you for joining today's call. You may now disconnect.