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

Hello, and welcome to Basic-Fit Q3, 2025 Trading Update Call and live audio webcast. [Operator Instructions]. I will now turn the call over to your host for today's conference, Richard Piekaar, Head of Investor Relations. Sir, you may begin.

Well, thank you, and good afternoon, and welcome, everyone, to our Q3 2025 Conference Call and webcast. And with me today are CEO, René Moos; and our CFO, Maurice de Kleer. This call is, as usual, being broadcast live on our website, and a recording of this call will be available shortly afterwards. As usual, I would also like to point out that our safe harbor applies. We will start with René, who will discuss the highlights and the operational developments during the first 9 months, and we will then move to René, who will reiterate our outlook. After these prepared remarks, we will open the call for questions. And with that René, I hand it over to you.

Thank you, Richard, and welcome, everyone, to today's call. In the first 9 months of 2025, Basic-Fit continued to see strong member in growth across all countries, putting us in a good position for the fourth quarter and the full year. We announced in March that we took the decision to slow down club openings over the course of 2025 and 2026 to focus on improving our balance sheet, lowering our net leverage ratio to below 2x, 2026 as well as starting a EUR 40 million share buyback program, all of this with the intention of delivering value to our shareholders. With this in mind, in the first 9 months of 2025, we increased our club count by 78, bringing our total club number to 1,653. Most of our new club openings were in our growth markets, France and Spain and followed by the Benelux and Germany. Year-to-date, we've opened 82 clubs and remain on track to reach our target of around 100 club openings in 2025. At the end of Q3, we had 4.73 million Basic-Fit members across all of our countries. The positive membership development seen in the first half of the year continued in the third quarter with a growth of 218,000 memberships. This is 95% higher than the same period last year. This increase is in all the more impressive, when we take into account that Basic-Fit opened 54% fewer clubs over the first 9 months compared to the same period last year. This considerably stronger performance was driven by solid membership development in all countries with visible in growth in both our mature and immature clubs. At the end of the third quarter, our 1,217 mature clubs had an average of 3,176 members. This is up from 3,074 members at the end of the second quarter. Looking at some country-specific details now. In the Benelux, our countries continue to perform well. Spanish Club continued to be on track, supported by national marketing campaigns. In France, with the management change we did and the higher levels of maintenance seen this year and last year, we have delivered the anticipated structural improvement resulting in higher member satisfaction and an improved membership development. Furthermore, we expect a EUR 35 million in additional cost for staffed 24/7 clubs to be fully mitigated on a run rate basis by year-end. In Germany, increased brand awareness is supporting our incremental and targeted rollout strategy, which saw improved membership in growth, giving us confidence that we are on the right path there. Total revenue for the first 9 months was EUR 1.034 billion, a 60% increase over the same period last year. Stronger revenue was boosted by the new membership structure we introduced at the beginning of this year. This moved our average revenue per member to EUR 24.60. The average revenue per member was lower than that was announced in the second quarter of 2025. I'd briefly like to explain why? The first 1 is mathematical. Due to the strong number of joiners in Q3, especially in the month of September, combined with a limited amount of time that these members had to contribute it to the revenue, a slightly lower the average for the first 9 months. Additionally, the strong growth of France and Spain, where VAT rates are higher, has also had a modest impact. The underlying trend in average revenue per member remains very positive and we expect it to continue increasing in the next couple of years. Let's now look at how we are upgrading the member experience. As the largest fitness chain in Europe, we continue to evolve to meet the ever-changing needs of our members. Our aim has always been to give our members the best possible value for money experience. And to make fitness accessible for everyone. How are we doing that? Moving to a 24/7 model gives our members the freedom, convenience to work out how they want and when they want. In the first 9 months of 2025, we continue to expand our 24/7 model into Germany and Spain. When 24/7 is not possible, for example, in a residential building or for zoning reasons, we extended the opening hours. In selected clubs in the Benelux, we introduced strength circuit training and relax and recovery zones, capturing the fitness and wellness trends seen across the fitness landscape with the aim of further increasing the uptake of the Ultimate membership. These services, in addition to improvements in club operation and maintenance are also having an impact on member sentiment. For the first 9 months, we had an average Google review score of 4.3 across our countries. This upward trend proves that we're giving our members what they want. And with that, I will hand it over to Maurice for the final slides.

Yes. Thanks, René. At our full year results, we updated our strategy and gave an outlook replacing the guidance set at our Capital Markets Day in 2023. I'd like to confirm that guidance now. In the first 9 months of 2025, we opened net 78 clubs and 82 clubs years to date. With the operational improvements made or in progress, we remain on track to meet revenue guidance of between EUR 1.375 billion to EUR 1.425 billion. And we are also on track to meet the underlying EBITDA as rent guidance of EUR 330 million to EUR 370 million. Furthermore, we expect to be cash flow positive in 2025. As for franchising, we see great opportunities in launching our own franchise platform, where we can leverage our scale advantages, technologies and knowledge. The franchise business will require limited CapEx and opens the possibility to expand into new countries. In the past quarters, we continue to pursue different franchise options, and we continue to expect to update the market on our franchising plans before year-end 2025. Looking at longer-term targets outside of the scope of 2025, we are committed to reducing our leverage by 2x adjusted EBITDA in 2026. With the strong developments year-to-date and adjusted capital allocation in our updated strategy, we feel comfortable about reaching these targets. Over the past 2 years, we also have been reducing the overhead costs, including marketing as a percentage of revenue. We are on track to achieve the targeted 11.5% to 12% of revenue in 2025. So in conclusion, as we pursue our updated strategy, we remain as ever committed to delivering value to our members, our investors, our employees and to all our stakeholders. And with this, I end our presentation and open it up to questions from analysts and investors.

[Operator Instructions] We will now take our first question from Kris Kippers from Degroof Petercam.

First question related to France. You've mentioned that the new management team, combined with higher CapEx resulted in you quoted higher membership satisfaction and improved membership development. Does it imply that this membership development is somewhat weaker than other regions. Could you provide more details on that? And then I've got a second question regarding your average rate or your ARPU per member, of course, we know the influx indeed in September is quite strong. But to what extent could you provide us with more details whether it's linked to indeed those high new members, which don't contribute for the full period? Or could it also be linked to which formats you are selling. Could you provide more details on that?

Yes, to start with France. Let me answer the France and sorry, if you take the ARPU.

Yes, that's okay.

The France management and the change, I would say, I'm doing this now on top of my head, but I would say that France is actually doing better than the other regions. We had a big in growth in the third quarter in the French region. So we are -- and that is also why we communicated that the EUR 35 million is already this year being, say, cash flow breakeven. So the French management change and the investments we did are working out very well.

Yes. And then the second question, I'll go into that. The average yield per member decrease. Actually, as you said, so the sequential yield decrease is due to the strong numbers of joiners in Q3 and particularly in September. And if you do the math, then the high influx of new members, combined with our limited time contributing to revenue that has a slightly lowered the average of the first 9 months. And then additionally, the strong growth in France and Spain, there is the VAT rates are higher. That has also a modest negative impact. But on the underlying trends in average revenue per member, that remains very positive, and we expect it to continue increasing in the next couple of years.

And we'll now take our next question from Robert Vos of ABN AMRO.

I have a follow-up also on the yield. Did you see any changes in the split between the different membership types at all because you provided 2 reasons for the slightly lower yield versus H1. But of course, the mix of membership types can also have an impact. Did you see anything worth mentioning there? That's my first question. And my second question, at H1, you mentioned several factors that should enable a Basic-Fit reaching positive free cash flow after having reported quite negative free cash flow of almost EUR 60 million in H1. My question is, did you see these factors materialize already in Q3 the way you had anticipated? Or maybe even more positive, maybe a comment there would be very helpful.

I will take the first question again, if you'd take the second. So the Ultimate percentage is stable. It is -- so we have 3 different membership, as you know. So the most expensive membership, the Ultimate is currently just above 40%. That is off their joiners. So that is not of the total base that is less than half. But in growth, so all new joiners, a little bit above 40% is taking the Ultimate membership. So overall, that hasn't changed. Actually, we're very happy with that number, and we're trying to get that Ultimate percentage even higher. So that's why we're testing different things that parts of the membership will only be available in Ultimate membership. So -- but eventually in time, and that's why we also say because we never change prices for our existing members. So only the new joiners are paying these new prices. So it takes time for the whole group of members, the whole 4.7 million members to go on this new system. So we'll take another 1 to 2 years at least to have the full base of members having 40% on the ultimate.

Yes. And then, Robert, on your question about free cash flow in 2025. What we see is improving profitability in the second half of the year, driven by, of course, increasing in membership and yields, and that's also leading to an improvement of underlying EBITDA less rents. Of course, we have a still continuing focus on limiting our costs. And then additionally, we have the timing of our investments and some lower expansion and maintenance CapEx to be expected in the second half of the year. And that combines these factors that will enable us to achieve positive cash flow in 2025.

And we'll now take our next question from [indiscernible] of ING.

My first question would be on the French 24/7 gyms and the costs related. Do you have any visibility? Or can you share anything new about the potential resolution on the staffing costs on these 24/7 gyms in France?

So to start, what we said before that we saw in the first half that we have between 20, 30 or 30, 40 more joiners a month on those clubs. We have continued to see that in the third quarter. So those costs will actually be gone by the end of the year. But if you're mentioning how it is going, if the French government have signed the contracts already, so we can actually do it. Yes, the thing is we continue to work with our advisers and also the industry bodies. And the French public authorities. And yes, we remain very positive that in time, we'll be able to have the staffless clubs in France like we have in all other countries already. So we will continue to what we're doing right now. So we'll stay flexible. So once that is actually in, then we can switch it quickly. So we are -- so the good thing is we reached extra members this month that we need to pay for the extra cost. So that is a good thing. And we still think that we will get the signature to be able to do staffless in France.

All right. Just to kind of double click on this. If I understood correctly, you're also able to lower these costs for running these 247 gyms, if it turns out so that you cannot do staffless, so is there kind of a point in time when you take matters into your own hands and kind of cut the costs proactively?

Yes. So in a way, that would be a positive because then you have less costs like between EUR 50 million or EUR 20 million less cost, but it would have also -- you could look at it in a negative way because that means we think we will not get the authorities to approve this, and we are really positive that the authorities will approve this. So for the coming at least first half of next year, we will definitely not change anything.

All right. And then my second question would be on kind of capital allocation priorities in 2026. Of course, the first 1 is to get the leverage below 2x, but let's say there would be a resolution in France and then you see that the free cash flow is coming in strong, and you start seeing that, okay, the leverage will go sub 2x. Will you then rather look at share buybacks or increasing the expansion CapEx in 2026. Can you share anything on this?

Yes. Well, that is something that we want to communicate on our Investor Day beginning of next year.

And we'll now take our next question from [ Janna ] of Kampen.

I just have a very straightforward question. Obviously, your membership numbers this quarter were very strong and you say that the growth has been strong across all regions, but particularly strong within your mature clubs. I'm just wondering why do you think that is? Do you think it's something to do with the actions you've taken within the business over the last while? Or do you think it's due to external forces?

Yes. I guess it's a combination of the 2. I think the external. What is happening around us is not that it's all completely normalized, but it is stable, let's call it that way. We have taken some actions to really focus on member satisfaction, and that's also what we communicated already. I think that is very helpful because that shows that our members are happy. So what we also saw is that the length of stay is again improving slightly, but the yield number is -- so the number is around 4% a month now. So the length of stay is between 24 and 25 months. Remember when we get listed, it was like 15 and 16 months. So every year, it's getting a little bit higher. So length of stay is, of course, a big driver for memberships. So that is very good. Yes. I think overall, we're finally back to normal. So it's been now a few years we have corona behind us. And I would say that we also -- so we -- in that period, we lost half of our members, but we also lost a lot of our older members. We lost a lot of female members. They're all coming slowly, but they're coming back. So we see the percentage of female members also increasing again. So yes, I would say we're back to normal again now and that is helpful.

Sure. And then reading between the lines, obviously, you said the mature club members per mature club growth is very strong and doing some back-of-the-envelope calculations that suggests that the immature club growth is not quite as strong. Do you have any views or thoughts around how that could progress going forward? Or if there are any other actions you can take to improve the immature clubs?

No, I think actually, well, I didn't do the cigar calculation, yet. But I think if you look at immature clubs, I think it's even better. So it's sort of around or above 2,000, which is higher than it was last year or the year before. So I think it's better. And what we said during the CMD end of 2023, is that would take we expect it would take between 2 and 3 years to reach this 3,250 members again on mature clubs. Yes, we're close to that now. So that's going in the right direction. We still have the coming months -- so month of October, January, February are definitely growing months. So I think overall, we will eventually reach that number again. So that is very good. If you look at the new club openings, that is, I think, also good to mention is that the new openings every year is going a little bit better. So let's say, 4 years ago, let's call it, we had 500 join us in presales and every year, we see like 100 more. So we're doing it last year better than '23. And this year, we're seeing -- we're doing it better than '24. So we're getting better at it in opening new clubs. So I think overall, it's a combination of mature and immature clubs, but we're going in the right direction. All right. And then if there are no further questions, I see there is somebody else coming on the line. Operator, could you please give KBC the -- the question, please. I see that there's apparently no operator has left the poll, which is unfortunately, I'm not sure if we can -- if you like to hold on for a minute, please, let's see if we can solve this in the coming minute. I'm sorry to -- that I have to say that there are some technical issues at the call provider. So what I suggest is that anyone who has still some questions that they contact either Heather or me, and we can then answer any remaining questions that are left. For now, thank you very much for joining us today, and we'll be in touch. Thank you. Bye-bye.