Hello, and welcome to the Basic-Fit Third Quarter Trading Update Conference Call and Webcast. My name is Laura, and I will be your coordinator for today's event. Please note, this call is being recorded, and for the duration of the call, your lines will be on listen-only mode. However, you will have the opportunity to ask questions at the end of the call. This can be done by pressing star one on your telephone keypad to register your question. If you require assistance at any point, please press star zero and you will be connected to an operator. I will now hand you over to your host, Richard Piekaar, to begin today's conference. Thank you.
Thank you, Laura, and good afternoon and welcome to our conference call, everyone. With me today are, as usual, René Moos, our CEO, and Hans van der Aar, our CFO. Historically, we did not host investor calls with our trading updates for the first and third quarters. However, based on feedback from analysts, we have decided to host calls with our third quarter trading updates going forward. In this call, René will give a short introduction, after which both René and Hans 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 safe harbor applies. 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 over the first nine months of this year, positioning us well to achieve the full year target we outlined in our Q1 trading update. During the first nine months, we expanded our club network by a hundred and sixty-eight clubs, reaching a total of fifteen hundred and seventy clubs. In Q3, we added thirty-three clubs, and we expect to add around five more clubs to the network in Q4. Over the past nine months, we increased our club network in Spain by seventy clubs, including the forty-two acquired clubs, bringing the total in Spain to two hundred and nine clubs.
You'll recall that we finalized the acquisition of RSG Spain at the end of March, and we completed the sale of the five Holmes Place clubs in the second quarter of this year. Nearly all acquired clubs were rebranded to Basic-Fit by the end of Q3, just in time for the important sale season, September and October. Our team in Spain has done an excellent job, and we believe these clubs are a valuable addition to the Basic-Fit network in Spain. In the Benelux region, we increased the number of clubs by eleven, bringing the total to four hundred and eighty-one, and in Germany, we added sixteen clubs, reaching a total of twenty-eight clubs. Our membership base grew to four point two million, representing a 13% increase year on year. All countries experienced growth, with Spain showing the strongest performance.
Compared to last year, our revenue for the first nine months grew by 17% year on year to EUR 892 million, driven by a strong club opening program, membership growth, and a higher average revenue per membership. The average revenue per membership per month in the first nine months increased to EUR 23.86, compared to EUR 23.28 during the same period last year. Looking at France, the new management structure we implemented earlier this year is now fully operational, and we continue to invest in enhancing the quality of our clubs. Following a successful trial of extended opening hours, we will continue to further expand opening hours. Additionally, we are introducing massage chairs in all clubs to further enhance the membership experience. To highlight the affordability of our membership in France, we have introduced weekly pricing.
A Basic membership is now EUR 4.99 per week, while a Comfort membership is EUR 6.99, and a Premium, EUR 7.99 per week, compared to EUR 19.99, EUR 24.99, and EUR 29.99 for four weeks, respectively. This also reflects the slight price increase for the Comfort and Premium memberships, which will further support our revenue in France. These developments put us in an excellent position to achieve our main targets for the full year, as outlined in our Q1 trading update. We are on track to expand our club network to around 1,575 clubs by year-end, and to achieve the revenue between EUR 1.2 billion and EUR 1.25 billion for the full year. We reintroduced the basic membership in France this year, and we have continued offering this lower price membership over the past few quarters.
We now expect the average revenue per member per month to be around EUR 24-25, which is a bit less than the at least EUR 24.50 we communicated earlier. We maintain our outlook for underlying EBITDA less rent of between EUR 305 million and EUR 330 million, representing a growth of between 17% and 26% compared to last year. We also project a free cash flow before new club expansion of between EUR 2.60 and EUR 2.95 per share, which is 24% to 41% higher than in 2023. A big step forward. As always, we continue to target a return on invested capital of over 30% for our mature clubs. At the Capital Markets Day in November last year, we presented our midterm outlook and shared our plans with you.
One of the topics we discussed was the potential for a franchise model. You may recall that we plan to explore three options: launching our own franchise business, acquiring an existing franchise platform, or partnering with an established franchise chain. We have now decided to move forward with starting our own franchise business and are in discussions with potential franchisees in new countries. We believe that we can leverage our scale, technology, and expertise in this franchise model. This approach requires limited capital and opens up the opportunity to expand into new countries. We expect the first franchise clubs to open in the course of twenty twenty-five, at which time we will provide more details. With that, I conclude the presentation, and Hans and I can now take your questions. Operator, please open the lines. Thank you.
Thank you. Ladies and gentlemen, as a reminder, if you would like to ask a question, please press star one on your telephone keypad. Thank you. We will now take our first question from Robert Voss of ABN AMRO. Your line is open. Please go ahead.
Yes. Hi, good morning, all. I have three questions to start with, and maybe first one for René. There was this activist shareholder recently who sent you a letter with some advice. What are your thoughts about this advice? That's my first question. My second one is on the new yield guidance for 2024. You've slightly reduced it to 24-25. That makes the base for next year slightly lower, obviously. What is your view on being able to achieve the old ambition of a yield of at least 25.50 for next year? That is what you set at the CMD. Is that still achievable? And my third question, it's on the franchise model.
I understand that you cannot reveal the first country because otherwise you would have said so in the press release. But maybe can you confirm that it will be in Europe? And related to this, if you enter a new country with the franchise model, does that still mean that you will never enter this country with company-operated clubs? Those were my questions. Thank you.
I can start with the first one, so yeah, the activist letter. I must say, we always look and think about what's best for the company and all the stakeholders, so for us, it was not a big surprise that somebody would write a letter. We had more calls about this. But I must say, from a personal view, we are happy to be listed, and currently, it is definitely not something that is top of mind. Maybe, Hans, you can ask the second question.
Yeah, I will answer the question, Robert, about the yield. Yeah, we introduced and kept on offering the basic membership in France, so that had an impact on the yield for 2024. But it's good to see that the revenue and also the members, which are the main topics, are still on track, and we can reiterate our outlook for 2024. We're now working on a new pricing system. As you've seen in September, we introduced a weekly pricing in France. We're now also looking at changing prices as of January, and that will have an impact on the yield for 2025. But I don't see any reason that we can't achieve the promised yield for 2025 at this moment.
And then the franchise in or outside Europe? The first steps we will take will be outside of Europe. And your question about if we would then also enter with own clubs, I would say no. But as you know, we have mixed in ladies' clubs. It could be that we would open a few clubs our own, for instance, a few ladies' clubs our own, to see if that works also in that continent or in that country. But yes, I can confirm it will be outside of Europe, and for sure, outside of the countries where we're active now.
Okay, that's very clear, and maybe a final comment, Hans. I assume this will be your last presentation as CFO of Basic-Fit, so I would like to thank you for the past years, and wish you all the best with your retirement. Thank you.
Thank you, Robert.
Thank you, and we'll now take our next question from Natasha Brilliant of UBS. Your line is open. Please go ahead. Natasha, would you like to check if you're muted from your end?
Hi there, it's Natasha here from UBS. A few questions from me, please. Firstly, on France, with the new weekly pricing, obviously early days, but can you just give us a bit more color on what the uptake of that has been? And would you potentially consider offering weekly pricing in other markets? Second question is just on the new membership structure and the pricing for 2025. Is that on underlying pricing, or is that around the premium membership offering? Just if you could give us a bit more color on that. And then finally, any comments on the bad debt numbers, whether that's continuing to improve, particularly in France through Q3? Thank you.
I would start answering the first questions, and then Hans will answer the second two. The weekly prices is something we are testing now in France. What we've seen in the first two weeks is that there's no big change, really. So we haven't seen anything dramatically changing or even a little bit changing. So it's more of the same. Also membership growth in France is still improving compared to last year. So also this slight increase for the comfort and premium membership has no negative effect. So yeah, we are testing this and testing several other things, so we can optimize our structure in the first of January.
So yeah, I'm not saying we will or will not. We are testing different things currently, and the first signs are positive.
Yeah, to add to that, as René said, we're testing in France, and of course, based on the results, it's early days. We just implemented it, and it's just working now for two weeks. We're testing it, and based on the test and outcome of the test, we will decide what we will do, in January, if we also will introduce that in other countries. So it's a bit early to tell that, but I'm still confident that we can reach a twenty-five point fifty for twenty twenty-five. And the third question is about the bad debts.
As I explained before, we saw an increase in bad debts in the beginning of 2024, but it's still on that level, so there's no further increase in the cost of bad debts, and also not in France.
Thank you.
Thank you.
Thank you, and we'll now take our next question from Chandni Hirani at Barclays. Your line is open. Please go ahead.
Hi, thanks for taking my questions. The first one is, you mentioned good year-on-year performance of mature clubs, which includes your 2021 cohort. Can you talk a little bit about how you feel in terms of expectations getting back to that 460K EBITDA per mature club in, I think it was in two years' time? Second question is, can you give us an update on the VAT increases in Netherlands? Have your expectations changed at all on this? As I recall, in the last call, you basically mentioned that you didn't expect it to increase prices even if that's increased. But today, obviously, we've seen prices could be nudged up a little bit next year. And then same question on the VAT in Spain, which was more near term.
Any update on whether that's now reduced to 10% from 21%? Thank you.
I'll take the first questions. We presented at the Capital Markets Day that on the midterm, we would expect EBITDA on the mature clubs of four hundred and sixty K. What we see now is that although the twenty-one cohort is now part of the mature clubs, we still see an improvement of the EBITDA on the mature clubs, and we're still confident that we can reach the four hundred and sixty K on a midterm basis.
Yeah, if we talk about VAT for Spain and the Netherlands, yeah, we have no, not really any guidance. We actually just don't know. If you look at the Dutch VAT, if it's implemented, it will be in 2026. So yeah, I think overall, it's clear that governments need money, so probably there will be an increase, left or right. Being a low-cost company, I would say that an increase will hurt the mid-market and premium market more than the low-cost market. So overall, we just have to wait and see. It's not gonna influence anything for 2025.
If it's really gonna be changed and higher VAT in 2026, we will look at it at that time and make a decision if we need to increase price or not. It also depends, of course, at how the membership base is developing, and it could be also interesting not to increase the prices and try to add members from mid and premium segment.
Maybe a small addition. It's clear, good to notice that we can increase the prices also for existing members as part of the contract, if the VAT... I'm not gonna say that we're gonna do it, because as René said, we'll look at it. But it's possible to also increase the prices for existing members if the VAT will be increased.
That's helpful. Thank you, guys.
And then the-
Thank you.
Third question was about the Spain VAT, which also have the answer. There's no signals that that VAT will be decreased.
Thank you, and we will now take our next question from Kris Kippers of Degroof Petercam. Your line is open. Please go ahead.
Yes, good morning. Still a question on the French market. Looking at the change in the opening hours and the introduction of the massage chairs, could you share with us what the effects are and what you're actually now extending in your rollout? Could you give more detail on that? Thank you.
Yeah, when you look at France now, you still see that the 2020 and 2021 clubs are still behind, but growing slowly, so it's going slowly the right direction. But the good news is that the 2023 and 2024 clubs that we opened in France are completely on track and showing the same results as what we see in the Benelux.
And do you see any change in consumer habits, lately, given, of course, the confidence that was a bit difficult there? Is there any change at all?
What we've seen is, and what we read, is that it has been improving a bit, and also what we see ourselves is also that our results in France are improving a bit. So I think it, it's a bit, it helps.
Okay, thank you. No further questions on my side.
Thank you. Once again, as a reminder, if you would like to ask a question, please press star one on your telephone keypad. Thank you. And we will now move on to our next question from Marc Zwartsenburg of ING. Your line is open. Please go ahead.
Yeah, good morning, gentlemen. Couple of questions. First, on the pricing strategy, to come back on that one. So you're basically moving the Comfort up more than the Premium in terms of increase. And I thought you were going to test more, that there would be a bit more value difference between Premium and Comfort, which is actually not happening. So in order to tackle that cannibalization, I'd expected that you would increase the gap between both, or at least also then, in addition, limit maybe to bring a friend sort of value. Can you explain me why you opted for this structure to test this one and not the other way around?
Well, it's a two-step thing we're doing. So we made the first step now, and we'll take the second step first of January. So I think you will see what you are talking about in first of January.
Yeah. Then you're referring to the bring-a-friend option, so to speak, in that respect.
Uh, yeah.
Correct?
I don't wanna say exactly what we're gonna do first of January, but we will make some smaller changes in the first of January, which makes the difference between Premium and to bring a friend, and so on, a bit more expensive. So the difference between-
And, and-
... Comfort and Premium will be slightly bigger.
Okay, okay. So in case the test in France is successful in terms of the weekly pricing, and then on top, you would also change a bit of structure, and then you would roll it out over the whole footprint. Is that how I should look at it?
You should look in January, and then you will see it.
Okay.
It's a test, Marc, so yeah, the results of the test has an impact on what we will do in January, of course.
Yeah.
That's why we're testing it.
You're testing it in all the eight hundred clubs in France. It's not on a small footprint, but on the whole footprint. Is that correct?
Correct. So yeah, we tested before we put it out in all the clubs in France. So we've been testing already also some areas in August, September. And yeah, the big test is now the whole of France, which we did in October first.
Of course, we did a very elaborate research by Simon-Kucher, a pricing consultancy firm, which we hire every two years to look at our pricing. And based on their survey and their research, we did this test. And now we're gonna look at the results of that test. And based on the results of the test, we will adapt our pricing for the first of January.
Okay. That's clear. And then second question is on the rollout of the gyms. I noticed in the pipeline that it seems to indicate that you're perhaps reducing maybe a bit the rollout in the medium term, let's say next year. Can you say anything about that? What your view is there?
Yeah, so we will in March, as always, disclose our plans, our expectations. So what we think the turnover will be, EBITDA will be, cash flow per share, and club growth. So that is something we will communicate in March. But yeah, we are flexible, so we can do. If you look at that overview, you can actually see we are already building a lot of clubs. But we're also signed a lot of contracts, and we're finalizing a lot of contracts. So yeah, we can, we are flexible. We can go a bit faster or a bit slower, but that is something we will communicate in March.
Okay. Clear to you. And then on the October, you mentioned since we see ongoing growth also in October on the back of the back-to-school promotions. You said, "Well, we're, we're seeing growth versus last year." Does that mean that you're seeing better growth than you've seen in growth in October last year? Is that what you're trying to say?
Yeah, what we wanna say is that we're... Of course, it's early days. It's only two weeks in October, but the sales month, back to school campaign is for September and October, and the first results for October are also promising. I don't want to give any guidance for the sales numbers for total of October, because we still have two weeks to go. But if you look at the first weeks, yeah, we're going, we're satisfied with the development in the first two weeks.
So the first two weeks were slightly higher than last year. But it doesn't say anything-
True
... about the whole month of October, of course.
No, of course, but there's a difference between just growing, 'cause that's logical if you have more clubs, but it's the in-growth trend is higher. That's what you mean?
Yes, correct.
Okay. Exactly. Then lastly, on the cash flow, Hans, you mentioned, I think in the intro, René mentioned it, that the cash flow per share, that the guidance is up. Can you explain me, what is driving that mainly? Is that more, you know, working capital, or is it CapEx, or is it something else? Maybe give a bit more color on that.
Well, René said that we make a big step, but if you compare the free cash flow per share compared to last year, we didn't increase the guidance, so it's still the same guidance as we gave with the half year numbers. So the free cash flow guidance for twenty-four is reiterated. It's not that we see an increase of that free cash flow. And of course.
That's why I was a bit confused. Sorry.
Yeah. But when I said it was a big step, if you compare the free cash flow per share with 2023, there's an increase between the 25% or 26% to 41%.
Yeah.
That's a big step.
Okay.
But, it's not that we increase the guidance for the free cash flow for 2024.
Okay, that's then cleared up. Sorry, I didn't hear that properly. Those were my questions. Thank you very much.
Thank you, Marc.
Thank you. And we'll now take our next question from Lynn Hautekeete from KBC Securities. If your line is open, please go ahead.
Hi, good morning. Thank you for taking my questions. The first one I have is also on the membership. You changed from monthly to weekly, and I was wondering if the invoicing will now also be done on a weekly basis, and also if there are any changes in your cancellation policy, because you can cancel once per month or per year, depending on your subscription. Can you now cancel weekly as well, or how do I have to see this?
Well, if you, it's only France, by the way. So it's only France where we introduce this. And if you go to the website of France, you'll see that we still do the direct debit every four weeks. So we don't do weekly direct debit. So, and that means you can also cancel, not weekly, but every four weeks.
Yeah, the cancellation procedure hasn't changed. So if you have a one-year contract, you are fixed, stuck for one month. For twelve months. After twelve months, you can cancel every four weeks.
Or you have a flexible membership, and then the flexible membership, which is more expensive, then you can cancel every four weeks.
Okay, perfectly clear, and then maybe, second question was actually on the underlying EBITDA, the guidance that you've given in first quarter of 2024. The range was EUR 305 million-EUR 313 million. My impression was that this was based on a yield of EUR 24.5. Now that the guidance slightly drops by EUR 0.25, why then does your underlying EBITDA guidance not change? Is it because you see more members than initially expected?
Well, we iterated the guidance for EUR 305 million to EUR 330 million. Yield is, of course, one of the factors that will influence that, but revenue is, of course, the most important part of that metric. We reiterated also the guidance for the revenue for 2024. So the EUR 1.2 billion-EUR 1.25 billion revenue per year. So that, we didn't change that. So also the EBITDA guidance that we gave hasn't changed. So if your conclusion is that that means we have more members, yeah, that's the right conclusion.
Okay, thanks. And then the last one is on the RSG acquisition. I was wondering how many clubs you still have to be converted, and also, how the in-growth of members is going there, because I know when you take over a brand and you rebrand it, it's always a bit more difficult. Can you maybe explain this or give some color?
Yes, if you look at the RSG, there's still three clubs we have to do. So of the 42, 39 clubs are branded as Basic-Fit. The integration is going well. We're happy with all 42 clubs, I must say. It was a well-run company with a good team of people. So overall, because of that, it went smooth. So, I must say much more smooth than acquisition we did in the past. So it is, yeah, it's going well. The 42 clubs are doing good.
Okay, that's all good news. Thank you for answering the questions.
Thank you.
Thank you. There are no further questions in queue. I will now hand it back to Richard for closing remarks.
Thank you. And, thank you everyone for dialing in today and joining our conference call. If there are any remaining questions at any later time, please don't hesitate to contact us, and we're happy to continue the discussion. Have a nice day.
Thank you.
Thank you.
Thank you. This concludes today's call. Thank you for your participation. You may now disconnect.