Gym Group Plc · LSE:GYM
Gym — The Gym Group — FY2023 Earnings Presentation
63 slides from Gym's earnings presentation, Mar 13, 2024
Slide 1: Full Year Results and Strategy Update
Full Year Results and = Strategy Update 13 March 2024
Slide 2: Overview, Financial Results, Strategy Update, Guidance, Summary
CROMOMOMC) Overview Financial Results Strategy Update Financial Guidance & Outlook Summary
Slide 3: Will Orr, CEO
Will Orr CEO
Slide 4: Full year 2023 overview and highlights
Positive Revenue up 18% v FY22 EBITDA LNR £38.5m Offsetting cost inflation (41% v FY22) momen Free Cash Flow £27m continuing ; (+62% v FY22) into FY24 Rollout of Off-peak Stronger Team Successful trial in 64 gyms Board appointments Rolled out fully in November CTO: Milan Juza Yield and volume accret
Slide 5: Luke Tait, CFO
Luke Tait CFO
Slide 6: Financial summary
Financial summary \ (— Average Members ARPMM Revenue Group Adjusted EBITDA Less 872k £19 50 £204 0 Normalised Rent! (LNR) m : : £38.5m +8% 49% +18% “1% +64k “s PY “£168 vs PY eS} Im vs PY +£0.5m vs PY (2022: 808k) (2022: £17.82) (2022: £172.9m) (2022: £38.0m) J Ne ‘a > >) Statutory Loss before Free
Slide 7: Group adj. EBITDA LNR of £38.5m
Group adj. EBITDA LNR! of £38.5m £m 2023-2022 YoY % £m Revenue 204.0 729 311 18% Cost of Sales (2.8) (2.0) (0.8) (39%) Gross Profit 201.2 170.9 30.3 18% Other Income 03 08 (0.5) (63%) Site Costs (105.0) (85.0) (20.0) (23%) Central Costs (21.0) (15.4) (6.6) (37%) Normalised Rent (37.0) (33.3) (3.7) (
Slide 8: Membership volume, ARPMM, LFL revenue
Membership volume ARPMM LFL Revenue
Slide 9: Membership volume, ARPMM, LFL revenue charts
2019 2022 2023 2021 2022 2023 2019 2022 2023
Slide 10: Continued focus on cost
Continued focus on cost Staffing Model Optimisation + Tailored management structures across regions and gyms reflecting gym characteristics using different multi-site and single site manager roles agre longer life-span of gym equipment Support agreement extension by 5 years to 15 years * Ensuring ea
Slide 11: Strong cash flow generation
Strong cash flow generation £m — (1.0) — (1.0) Group Adj Movement in Maintenance Free Cash Non-Underlying Interest on Free Cash Flow Expansionary —_-RefinancingCosts Cash flow before EBITDALNR Working Capital Capex Flow Before Costs Bank Debt & Non- Capex movement in debt Non-Underlying Property Lea
Slide 12: Reinvesting Free Cash Flow to drive the business
Reinvesting Free Cash Flow ' to drive the business Capital expenditure and additions 2023 2022 YoY £m New Sites (including leases) 10.7 317 (21.0) Tech & Data 55 88 (3.3) Brand Relaunch 02 25 (2.3) Expansionary Capex! 16.4 43.0 (26.6) Enhancement (including leases) 69 3] 38 Other Maintenance 3.4 5.7
Slide 13: Bank facilities
£m Bank facilities Lease facilities! Total facilities RCF drawn Cash & cash equivalents Bank net debt Non-property lease indebtedness Non-property Net Debt? Adjusted leverage? Fixed charge cover? nitions o 80.0 12.4 92.4 (59.0) 15 (57.5) (8.9) (66.4) 1.7x 1.7x 80.0 12.5 92.5 (70.0) 5.4 (64.6) (4) (7
Slide 14: Site economics by maturity
on-statutory measures £m Number of gyms Revenue Gross profit Fixed property costs Other opex EBITDA LNR' EBITDA margin Average capital cost Mature site ROIC' Mature 172 09 99% (30)% (40)% 03 29% 14 19% Excl. Workforce 159 09 99% (29%) (39%) 03 31% 13 22% Target locations 101 u 99% (27%) (38%) 0.4 38
Slide 15: 24 25 26 27 28 29
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29
Slide 16: Current trading and gym rollout on track
2 Current trading Gym rollout on track
Slide 17: Will Orr, CEO
Il Orr i CEO =
Slide 18: Agenda
Agenda @) Investment Case @) The Market @) A Winning Proposition (4) Next Chapter Growth Plan © the gym group 8
Slide 19: Investment case: sustained growth from free cash flow
Slide 20: Agenda
Agenda q) Investment Case @) The Market @) A Winning Proposition (4) Next Chapter Growth Plan © the gym group 20
Slide 21: Robust and growing UK gym market
Robust and growing UK gym market £5.4bn 10.3m 15.1% Market Size Gym Members UK Population increase +40% +35% +25% 2012-23: seats £6.2bn 11.5m 16.5% D the GUM Group sarceresure08 stote ofthe UK Finessindustry Report 2028, TG onalysis FullYeorResuts 202821
Slide 22: Low-cost continues to drive growth and gain share
Low-cost continues to drive growth and gain share 47 49 51 48 @) 39 39 4l 43 44 Market Share Gain Size I} (£billion) 2012 «2013S «2014S «2015, 2018-s—s«20T7-—s«01B_-—S«(2019 2022 © 2023 +1 3 Low-cost Covid 0° 97 99 10.4 99 93 z c23 76 79 8.5 Ss (Million) 2012 2013 2014 2015 2016 2017 2018 2019 2022
Slide 23: Full Year Results - 2023
Full Year Results - 2023
Slide 24: This results in resilient spending on fitness
This results in resilient spending on fitness Consumers are highly unwilling to cut-back on fitness Cost saving categories due to the current inflationary situation Most Least cut-backs cut-backs prnnnncne: 5, a) | Energy/ Restaurants Clothing Electronics Entertainment Everyday =‘ Transportation —_
Slide 25: Agenda
Agenda q) Investment Case @) The Market @) A Winning Proposition (4) Next Chapter Growth Plan © the gym group sults - 2023,
Slide 26: TGG members
TGG members Full Year Results - 2023
Slide 27: Our proposition appeals to our core member more than ever
Our proposition appeals to our core member more than ever From £13.99/month High quality kit Free classes ©) No contract Local Convenience 24/7 ( (( os ) Expert trainers Highly rated app Online workouts © the gym group Member visits up +10% YoY Avg. visits per member per month 2022-23 92% rate us 4/
Slide 28: Gym consideration is increasing among our target customers
Gym consideration is increasing among our target customers... Non-members increasingly considering joining a gym Gym consideration highest among younger people Number of UK 16+ population considering joining a gym, 2019-23 26m #21% 2022 2023 2019 @ the gum group saucexonerprties/umeltoor 9 FnessOues
Slide 29: Headroom for membership growth near current sites
..with headroom for membership growth near current sites 19m ( Peer UK population that fall within TGG age range (16-44) and socio- demographic types 8m Are within easy travel distance (max 3 miles), and not significantly closer to competitor sites Figures = Circa @ the gu group saucetsoscoseandeers
Slide 30: Agenda
Agenda q) Investment Case @) The Market @) A Winning Proposition (4) Next Chapter Growth Plan © the gym group sults - 2023,
Slide 31: The Next Chapter
The Next Chapter Drive like-for-like revenue and Create funds for future growth generate cash options wn, ae | Accelerate rollout of quality sites Broaden our growth Strengthen the core @ the gym group FulveorResuts-2023 8
Slide 32: Key Initiatives
Key Initiatives Optimise new member prices Reduce our existing member price gap Drive volume through Off-Peak and Saver products Innovate in promotions for profitable volume Better monetise features and add-ons Become the #1 brand locally Strengthen Harness ad-tech to enhance efficiency the core Opt
Slide 33: Strengthen the core
Strengthen the core © the gym group + £1 ARPMM = £8.3mM revenue per year (adjusted for elasticity) + 1% Membership Volume = £3.3mM revenue per year + 1 week tenure = £5.9m revenue per year Full Year Results - 2023 33
Slide 34: Low-cost gyms continue to deliver outstanding value
Low-cost gyms as a whole continue to deliver outstanding value In members’ view the value we deliver continues to outweigh the price we charge Net Promoter Scores are high across the board and very similar for TGG and key competitors SKP Value Map: The Gym Group vs. PureGymvs. JD Gyms High Position
Slide 35: Value map: The Gym Group vs PureGym
High Low PureGym Better The Gym Group Better
Slide 36: Pricing Revenue Management
Pricing Revenue Management We use a sophisticated set of tools to optimise prices Examples of our revenue management toolkit Price Elasticity Analytics Rigorous calculation of volume response & revenue gain / loss from price changes based on control groups Introducing our 3-tier architecture has imp
Slide 37: Price by monthly membership type
Price by monthly membership type (excluding joining fee) L_wentismenbertip | Off-Peak Appeals to aNew Type of Member Flexible 1 month rolling £16.99 Off-peak trialled from Q2 23 and rolled out est ide in Nov 23 ®
Slide 38: We have an opportunity to build on local awareness
We have an opportunity to build on local awareness Brand awareness is highest close to our sites... ..and 80% of our base live within 3 miles of the gym *based on off-peak starting price point <Imile 1-2 miles 2-3 miles 3-6miles 6-10 miles 10+ miles
Slide 39: Examples of our digital marketing toolkit
Examples of our digital marketing toolkit Creative Performance Testing Continuous testing programme to « otimise ROI on creative ads Dynamic Creative Generation Real-time ad-te demographics. Impi ion and Website Conversion Optimisation Example - Continuous Performance Testing ‘up to © 50% off | | 50
Slide 40: Focusing on early life experience to boost retention
We are focusing on ‘early life’ experience to boost retention Retaining members beyond the crucial early-life period significantly increases the probability of retaining them beyond their next payment date Optimise promotions Survival rate from preceding month, 2023 Early-life members ior month are
Slide 41: Improving retention starts with how we acquire members
Improving retention starts with how we acquire members We are reducing the number of days on promotion... and optimising the mix of promotions Month 1 survival rate by member joiner type Month 1 survival rate for different promotion types (NJF, HR discount) 1 1 % Planned number of days on promo Memb
Slide 42: Our app development will improve engagement and retention
Our app development will improve engagement and retention Example Upcoming App Developments whats your confidence level ‘in using gym equipment? ‘ertou suas tn basa ns ‘evaareon tein gamer hv Meweeporonce savored Tmacontcononaropver yoo On-boarding questionnaire @ the gym group the gym group kettleb
Slide 43: The Next Chapter
The Next Chapter Drive like-for-like revenue and generate cash ae | Accelerate rollout of quality sites Broaden our growth Strengthen the core © the gym group FulYeorResuts-2023 43
Slide 44: PwC assessment of low-cost gym market full potential
PwC assessment of low-cost gym market ‘full potential’ Existing gyms Additional headroom euwrrrrrrr- . { 1350-1600 1 GC) 1,200 - 1,400 ! ' | 1 i] 1 I 1 i] 1 i] 1 I 1 i] 1 i] 1 I 1 i] 1 i] 1 I T t As at January 2019 1 AsatJanuary2024 I Headroom for new 1 low-cost gums: 550-750 \ 600-850, provides an
Slide 45: Our Target locations focus on proven performance criteria
Our ‘Target’ locations focus on proven performance criteria c 101 sites in these ‘target’ locations are achieving _ average 30% ROIC
Slide 46: Other levers to increase new site returns further
..With other levers to increase new site returns further Proposition: Enhanced tailoring to local markets and continuous improvement Strengthen the core Launch & Year 1: Optimised strategy prioritising early volume build Improved mature Cost Leadership: site returns Cost efficiency projects, includi
Slide 47: The Next Chapter
The Next Chapter Now Strengthen the core © the gym group Now Accelerate rollout of quality sites Mid Term Broaden our growth Full Year Results - 2023 47
Slide 48: Financial Guidance & Outlook
Financial Guidance & Outlook
Slide 49: LFL sales growth of 4-5%
© LFL sales growth of 4-5% Costs tightly controlled Disciplined approach to capex Strong Free Cash Flow Target leverage of 1.5-2.0x
Slide 50: Mid-term outlook and capital allocation
LFL sales increases Disciplined approach to rollout Mature estate ROIC target of 25% Strong Free Cash Flow Clear capital allocation policy ©
Slide 51: Mid-term mature estate ROIC target of 25%
Mid-term mature estate ROIC target of 25% £m Mature New openings Include landlord contributions AND rent-free periods to take right commercial decision Number of gyms v2 Number of gyms c50 Rent-free periods previously exc! r Revenue 09 Revenue 11 2 son ROIC in FY23 Ude[sSenbeicinlPice Gross profit 9
Slide 52: Maintenance capex expected at 6% of revenue
Maintenance capex expected at 6% of revenue * Typically, years 1-10 average £30k pa + Mid-life refresh of £300k between years 8-12 depending on usage * Years 10-15 average £50k pa * Lifecycle average maintenance capex of c.£50k per year * Supports guidance at 6% of revenue per year © the gym group
Slide 53: Slide 53
Slide 54: Summary
Summary Large, growing market with low-cost gaining share Best rated low-cost proposition LFL revenue opportunities: pricing headroom, acquisition near current sites, better early life retention Significant white space opportunity (PwC) c.50 new sites over 3 years - focus on quality, funded from FCF
Slide 55: Q&A
Slide 56: Appendix
Slide 57: ESG highlights
o 80 security & pve” eflect alignment to the UNS Social value +18% >50% Carbon emissions cut by SBTi net zero Employee engagement 1S045001 certification Full Year Res Its -2023
Slide 58: Business KPIs (5 year)
Business KPIs (5 year) Financial (£m) 2023 2022 2021 2020 2019 YoY Revenue 204.0 729 106.0 80.5 153.1 18% Group Adj. EBITDA LNR 38.5 38.0 5.7 (10.2) 48.5 1% Free Cash Flow 27.0 16.7 2.0 (16.6) 323 62% Expansionary Capital Expenditure 16.4 43.0 29.0 218 30.9 (62%) Non-Property Net Debt 66.4 76.0 44)
Slide 59: Membership volume, ARPMM, LFL revenue
Membership ARPMM LFL Revenue Membership ARPMM LFL Revenue volume volume
Slide 60: Gym Equipment
Gym Equipment orks and related costs £980 70 10-15 15 £67 Fixtures and Fittings £140 5-7 6 £23 Gym Equipment £280 20) 5-10 7 £39 £1,400 £129 Strength Equipment (Depr. 9yrs) Cardio (Depr. 7yrs) HM Equipment and A ssories (Depr. Syrs)
Slide 61: IFRS16 charges are currently £3m higher than cash rent
IFRS16 charges are currently £3m higher than cash rent Depreciation & Interest vs Property Payments IFRS 16 - Annual Charge £m Right of use asset depreciation 25.7 Property lease interest 145 Total 40.2 Property lease payment 37.0 Variance 3.2 240,000 220,000 200,000 180,000 160,000 140,000 120,000
Slide 62: Definition of non-statutory measures
Definition of non-statutory measures Group Adjusted EBITDALNR Free Cash Flow Operating profit before depreciation, amortisation, share based payments Group Adjusted EBITDA LNR and movement in working capital, less and non-underlying items; less Normalised Rent. maintenance capital expenditure, cash
Slide 63: Forward-looking statement disclaimer
Forward-looking statement disclaimer This presentation and information communicated verbally to you may contain certain projections and other forward-looking statements with respect to the financial condition, results of operations, businesses and prospects of The Gym Group ple. These statements are