Release Date: August 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Revenue for the year increased by 15.9% to $163.6 million, driven primarily by strong organic growth.
- Record EBITDA of $35.4 million, reflecting a 21% increase over the previous corresponding period.
- Corporate memberships grew by 10% to over 200,000, with network memberships up 6.5% to 372,000 members.
- Successful launch of The Hub and Viva Pay, generating over $4 million annually in payment gateway and technology fees.
- Completion of strategic acquisitions in Western Australia and continued strong organic growth.
Negative Points
- Significant inflationary pressures and economic headwinds impacted the business environment.
- Removal of 15,000 low-yielding members from the Fitness Passport program, affecting overall membership numbers.
- High cost of member acquisition due to increased competition in digital advertising.
- Significant investment in strategic refurbishment program, resulting in seven locations closing or merging.
- Ongoing wage increases and inflationary costs impacting overall expenses.
Q & A Highlights
Q: Can I have some color on FY25 CapEx, specifically tech CapEx with Viva Pay completed and also site upgrade CapEx given the step-down in refurbishments?
A: We anticipate tech spend to be around 3% of revenue, consistent with previous years. For site upgrades, we spent $7.3 million in FY24 across 27 sites. Moving forward, we have identified a few more sites for upgrades, but the spend will not be as significant as FY24.
Q: Can you provide details on the Viva Pass pricing point and timing within 2H '25?
A: The pricing model for Viva Pass is still being finalized, but it will either be a recurring revenue model or a token-type model. We expect to launch it in Q3 FY25, initially with corporate clubs and then extending to franchisees.
Q: Can you talk about the fourth quarter EBITDA of $9.8 million and any initiatives or acquisitions that might add to the annualized rate?
A: Viva Pay contributed about $700,000 for the quarter, and we expect around $4 million for the year. Some acquisitions were delayed into July, so they were not fully included in the June results. The WA acquisitions completed recently will add to FY25 results.
Q: What are your plans for price rises across the network to offset wage pressure?
A: We implemented a 4% wage increase from July 1. We typically look at groups of members for fee increases, especially those below retail rates or in recently refurbished sites. We are monitoring member growth before imposing further fee increases.
Q: Can you discuss the acquisition pipeline and potential opportunities?
A: Opportunities are becoming fewer as we have made 95 acquisitions over the last five years. We expect to secure 8 to 15 Plus Fitness locations during the year. We are also looking for more acquisitions in WA and other states, likely single clubs or small chains.
Q: What is the strategy for the Zoo Fitness concept, and how many sites do you plan to open?
A: Zoo Fitness will be a greenfield strategy, similar to HIIT Republic. We expect to open the first location in early 2025 and aim for 40 to 50 sites in Australia. We are also reviewing if any Club Lime locations can be converted to Zoo Fitness.
Q: Can you provide details on maintenance CapEx and greenfield site CapEx for FY25?
A: Maintenance CapEx is expected to be around 3% of total revenue. For greenfield sites, we have secured around 17 new sites, with 4 to 5 expected to open this year. The spend will be similar to FY24, focusing more on greenfield sites than refurbishments.
Q: How do you plan to allocate the additional free cash flow expected in FY25?
A: We are considering acquisitions, dividends, and other strategic investments. The new banking facilities will provide significant free cash flow, and we are evaluating the best uses for this cash, including potential dividends in the future.
Q: How much of the 3,000 member ads in Q1 '25 were organic versus acquired, and what are you seeing in terms of churn?
A: About 1,000 members were from an acquisition, and the rest were organic. Churn remains stable, but the cost of acquisition has increased. We believe our tech initiatives, like family memberships, will help reduce churn.
Q: Can you provide more details on the Supp Society online supplements business?
A: The average product margin is between 40% and 45%. We have a low-cost marketing strategy targeting our 400,000 members. We expect significant upside with minimal risk, leveraging our existing technology and member base.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
