2. 2PIPER JAFFRAY
Fitness Franchises, Services, and Products
Piper Jaffray & Co. | Leading Advisor to the Fitness Industry
Initial
Public
Offering
August 2015
Initial
Public
Offering
June 2015
has been
acquired by
L Catterton
Sell Side Advisor
May 2015
has been
acquired by
Norwest Equity
Partners
Sell Side Advisor
December 2014
has received an
investment from
Roark Capital
Group
Sell Side Advisor
March 2014
has been
acquired by
Gold’s Gym
Sell Side Advisor
July 2014
Sell Side Advisor
December 2017
has been
acquired by
J.W. Childs
Honors Holdings
an area representative of
has been
acquired by
Perpetual Capital
Sell Side Advisor
January 2016
Has been acquired
by CircusTrix, a
portfolio company of
Palladium Equity
Partners
Sell Side Advisor
April 2017
has received an
investment from
Hearst Ventures
Sell Side Advisor
April 2016
has received an
investment from
Roark Capital
Group
Sell Side Advisor
February 2016
Sell Side Advisor
September 2017
Has been
acquired by
TPG Growth
Buy Side Advisor
December 2017
has made a
significant
investment in
Sunshine Fitness
a Planet Fitness
Franchisee
Brian Smith
Managing Director
+1 415 616-1610
brian.d.smith@pjc.com
Years at Piper Jaffray: 4
Years in Industry: 15
Abe Thomas
Principal
+1 415 616-1831
abe.w.thomas@pjc.com
Years at Piper Jaffray: 4
Years in Industry: 9
3. 3PIPER JAFFRAY
Table of Contents
I. Executive Summary
II. Fitness Industry Overview
III. Rise of Boutiques and HVLP
IV. Piper Jaffray Proprietary Survey Results
V. Capital Markets Update
VI. Closing Remarks
VII. Piper Jaffray Consumer Team Overview
5. 5PIPER JAFFRAY
With our team completing its tenth fitness transaction over the last 36 months, we wanted to take a moment to thank all our clients who
entrusted us to navigate them through the private placement and M&A process. We are honored to work with the visionary leaders and
trendsetting brands in this transformational industry.
Since our 2015 fitness industry update we have had a front row seat to emerging trends, winning concepts, and developing investment
theses in the space. Trends we began tracking before the recession have since solidified and now exploded in the last few years: the
bifurcation of big-box gyms to the high or low end of the market, the rapid expansion of boutique studios, the rise of fitness franchisors,
the deep consumer demand for quality fitness instruction (at-home and in-studio), and the growing investor interest in fitness evidenced
by the robust recent M&A activity and a highly successful IPO in Planet Fitness.
In this update we focus on three trends:
First, the rise of multiple national boutique studio concepts suggests to us that boutique fitness appeals to the masses. Four studio
brands are now in the top 15 fitness brands based on units whereas in 2009 there were none. We believe in an attractive equilibrium for
boutique studios to co-exist with one another and gyms, however a deep backlog of units may quickly saturate certain markets.
Second, the “price / value wars” continue shaping the high-value, low-price (HVLP) space. HVLP version 1.0, marked by a smaller 15,000
sq. ft. box of weights and cardio for $9-19 / month, has quickly seen HVLP version 2.0 emerge with larger clubs offering robust amenities
that look and feel like the full-service offerings of legacy fitness brands at 33% to 50% the price. The rise of HVLP and HVLP 2.0 has been
rapid. At least 15 private-equity-backed operators are now competing for their share of the HVLP 1.0/2.0 market.
Last, we anticipate seeing larger scale and new categories of investors enter fitness and for attractive exits to occur in the coming years
driven by several factors: 1) the compelling growth and scale of multinational and super-regional operators, 2) the disintermediation of
retail which has enhanced the value of foot-traffic-driving service-based retail like fitness, and 3) the growing focus on preventative
healthcare.
As a disclaimer, this report does not opine on several important technological advances in fitness wearables / apps, commercial
equipment, or at-home instruction via content (e.g. Fitness Blender) and equipment (e.g. Peloton).
We hope you find the following pages insightful and informative. Happy reading,
Brian Smith and Abe Thomas
Executive Summary | Opening Remarks
6. 6PIPER JAFFRAY
Steady industry growth with continued bifurcation of marketplace
− High Value Low Price (“HVLP”) and boutiques capturing lion’s share of new members and unit growth
Substantial backlog of HVLP and boutique concepts
− Unit growth outpacing members by 2x+; 2,500+ locations in HVLP and boutique backlog
− Over half of backlog driven by Planet Fitness and Orangetheory Fitness
Club Landscape
Continues to Shift
Boutique
Explosion
Rise of fitness specialization with single and multi-discipline approaches
− HIIT workouts most popular
− Community centric approach on-trend with the more affluent ($75K+) and skews younger (18-
24)
Not just for the 1%, what started on the coasts has moved across the country with rapid rise of
boutique franchisors
− Orangetheory, Club Pilates, CycleBar, Pure Barre, CorePower Yoga
Hyper-competitive
HVLP Landscape
HVLP attracting substantial private equity investment
− Planet Fitness franchisees and corporate-owned regional competitors
Highly fragmented and continued evolution of HVLP category with version 2.0
Evolving Investor
Universe
We predict buyer universe will shift dramatically over next 12-24 months
− Fitness, hospitality, insurance, weight management and international present most likely
strategic exit
− Public markets may also provide viable and attractive exit path
Executive Summary | Key Takeaways
13. 13PIPER JAFFRAY
High Value, Low Price and boutique brands now make up 6 of the top 15 brands
(by # of units) versus only 1 HVLP/boutique brand in 2009
Franchised brands shifting the fitness landscape driven by Planet Fitness,
Anytime Fitness, and Orangetheory Fitness
− Collectively, these three operators have added over 4,000 locations in the last 7 years
Planet Fitness currently commands 6% of the overall fitness market and has
7x+ relative market share of the next closest HVLP competitor
Outside of Planet Fitness, the HVLP landscape is highly fragmented with only three
operators above 100 units (Crunch, Fitness19, YouFit) and a growing number of
regional & super-regional players
HVLP facilities continue to evolve in size and amenities
Boutique fitness has exploded onto the scene with wide range of single discipline and
multi-modality offerings
Several modalities seeing clear market leaders emerge such as Barre (Pure Barre),
Yoga (CorePower Yoga), Pilates (Club Pilates) and High Intensity Interval Training
(“HIIT”) (Orangetheory)
Size of current backlog a key issue with concerns surrounding market saturation
Opening remarks
HVLP Landscape
Boutique
Explosion
Rise of Boutiques & HVLP | Executive Summary
14. 14PIPER JAFFRAY
Source: Club Industry reports, Piper Jaffray estimates; 1) Revenue derived from various financial and industry sources 2) (O) = Owned/Leased. (M) = Managed. (F) = Franchised. (L) = Licensed.
The top 3 players own ~18% of the market; the next 7 own ~13% as of 2016
Rise of Boutiques & HVLP | Top 10 Fitness Brands by Revenue
2016
Rank
1-Yr
Rank
Change
Rank
Change
Since
2009
Company Founded
2016 Revenue
($M) (1)
2016
Revenue
Growth
7-Year
Revenue
CAGR
# of Units in
2016 (2)
# of States
Operate in
2016
# of
Members in
2016 (000s)
Profile
1 - 1 1984 $1,987 4% 10% 689 27 NA Multi-purpose clubs
2 1 1 1992 $1,475 9% 8% 122 26 NA
Fitness, family recreation and spa destination multi-
purpose clubs
3 1 2 1983 $1,420 0% 1% 425 13 NA
Health club company, serving nearly four million
members in nearly 450 clubs across the United States
4 1 2 1991 $1,090 2% 18% 200 7 NA
Equinox Holdings includes Equinox, Blink, Pure Yoga and
SoulCycle
5 1 1 1957 $1,088 (1%) 4%
194 (O)
12 (M)
26 174
A membership-based operator of private golf and country
clubs and business, sports and alumni clubs
6 - 1 1973 $397 (6%) (3%) 150 8 544
Fitness-only clubs under the brands
New York Sports Clubs, Boston Sports Clubs,
Philadelphia Sports Clubs and Washington Sports Clubs
7 - 1 1992 $378 14% 17%
58 (O)
1,255 (F)
48 8,900 Low-cost, judgment-free gym
8 - 2 1977 $229 4% 11% 24 1 60 Operator centered around large, active lifestyle campuses
9 - 2 1997 $193 0% 5% 38 3 345
Operates 50,000-square-foot multipurpose centers and
express model fitness clubs
10 - 10 1989 $170 6% 15%
56 (O)
115 (F)
4 (L)
21 800
Club company that makes serious exercise fun by fusing
fitness and entertainment and pioneering a philosophy of
No Judgments
15. 15PIPER JAFFRAY
Rise of Boutiques & HVLP | Top 15 Fitness Brands by # Units
High Value / Low Price and boutique brands now make up 6 of the top 15 versus only 2 in 2009
Rank
Club
Company
# of Units
in 2009
Company
# of Units
in 2016
Unit Growth
since 2009
1 Snap Fitness 1,012 Anytime Fitness 3,443 259%
2 Anytime Fitness 959 Snap Fitness 1,911 89%
3 24 Hour Fitness 425 Planet Fitness 1,303 320%
4 Powerhouse Gyms 327 LA Fitness 689 113%
5 LA Fitness 324 Orangetheory 570 n/a
6 Planet Fitness 310 9Round 449 n/a
7 EXOS 203 EXOS 439 116%
8 Town Sports 158 24 Hour Fitness 425 -
9 ClubCorp 154 Powerhouse Gyms 315 (4%)
10 Plus One 112 Pure Barre 400 2,757%
11 Life Time Fitness 85 Plus One 300 168%
12 Club One 83 ClubCorp 206 34%
13 American Leisure Corp 68 Equinox 200 300%
14 Lifestyle Family Fitness 55 Crunch 175 821%
15 Equinox 50 CorePower Yoga 150 355%
Town Sports*
Strategic shift in Q1:15 to
increase HVLP mix of clubs
150 (5%)
~19 CorePower Yoga 33
~30 Pure Barre 14
High Value / Low Price
Boutique Studio
Source: Club Industry reports, Franchise Disclosure Documents, Piper Jaffray estimates
16. 16PIPER JAFFRAY
Brand leaders emerging across HIIT, barre, box/kickboxing, yoga, pilates, cycling
Source: Company websites accessed December 2017; prices vary by region; 2017E store count and growth based on Franchise Disclosure Document Item 20 estimates where available
Rise of Boutiques & HVLP | Boutique Studio Snapshot
Company
%
Fran-
chised Category Pricing
Year
Founded
Open
Studios
(U.S. 2017E)
# of
States
’17E Unit
Growth Notable Events
98% HIIT
Monthly: $99
Unlimited: $160
2010 749 45 47%
Opened 200th location in April 2015
Roark Investment in February 2016
97% Barre
$25/class
$225/month
2001
Franchise:
2009
510 44 18%
Catterton investment
in May 2015
98%
Kick-
boxing
$15/class
2008
Franchise:
2009
475 42 21%
Investment by Snap Fitness in January
2014
96%
Kick-
boxing
$27/class
$225/month
2009
Franchise:
2012
237 36 46%
Grew unit base by over 137% in last 3
years
<40% Yoga
$25/class
$205/month
2002 180 22 13% Eric Kufel named CEO in January 2016
98% Boxing $59/month
2008
Franchise:
2009
172 28 12%
Grew unit base by over 44% in last 3
years
96% Pilates $199/month 2007 156 32 103%
Plans to open additional 300+ studios
TPG Growth investment in May 2017
99% Cycling $18-$20/class
2004
Franchise:
2015
139 31 124%
200 signed in first year of franchising
TPG Growth investment in Sep. 2017
98% Barre
$27/class
$225/month
2001 114 28 16%
Former President of YogaWorks, Jay
DeCoons, named CEO in Feb-2015
0% Cycling
$34/1 class
$320/10 classes
2005 82 16 28%
Equinox invests in 2011 and now owns
97% of company
Delayed IPO in 2015
100% HIIT $240/month
2011
Franchise:
2014
65 (U.S.)
570+ Int’l
20 210%
400+ franchises sold in 24 month
800 franchises sold across 27
countries in 3 years
<20% HIIT $22-$40/class 1998 28 9 35%+
North Castle Partners investment in
July 2015
17. 17PIPER JAFFRAY
-
2,000
4,000
6,000
8,000
10,000
12,000
2011 2012 2013 2014 2015 2016
Low-Price, Convenience Low-Price, Convenience Backlog Studio Studio Backlog
Rise of Boutiques & HVLP | HVLP and Boutique Studio Unit Growth
Dramatic increase in the number of HVLP and boutique doors with substantial backlog yet to be realized
Source: Company Franchise Disclosure Documents, company websites, Piper Jaffray research
U.S. # Fitness Locations by Select Brand Category Leaders (000s)
5-Year CAGR
14%
5-Year CAGR
44%
48%
Units in
Backlog
18%
Units in
Backlog
18. 18PIPER JAFFRAY
Rise of Boutiques & HVLP | Boutique Studio Explosion
Boutique studio chains have exploded; 60-65% of unit volume related to high intensity interval training
487
732
1,163
1,682
2,327
3,051
540
835
1,230
1,476
2011 2012 2013 2014 2015 2016 2016
Open Studio Studio Backlog
HIIT
Concepts
60-65%
Open Units
+ Backlog
Source: Company Franchise Disclosure Documents, company websites, Piper Jaffray research
19. 19PIPER JAFFRAY
Rise of Boutiques & HVLP | HIIT Studio Market Growth & Backlog
HIIT market led by Orangetheory; other major brands and entrenched competitors continuing to enter
Entered US
in 2015;
600+ units
international
Announced
Jul-17
Illustrative Large Format Fitness Operator Responses to Boutiques:
170 312
596
921
1,374
1,865
457
709
942
1,089
2011 2012 2013 2014 2015 2016
Open HIIT Studio HIIT Studio Backlog
511
391
308
167 153 140
71 21
408
173
57
211
50 122
16
48
24 Hour Fitness Fitness
Evolution
Xsport
Fitness
World
Gym
Town
Sports
US
Fitness
Life Time
Fitness
The Edge
Fitness
Announced
Nov-17
Announced
Aug-17
Established
Late 2014
Announced
Mar-16
Established
Late 2016
Announced
Apr-16
Established
Aug-15
Established
2014
Source: Company Franchise Disclosure Documents, company websites, Piper Jaffray research
2016 End of Year Open Units, Backlog by Brand (US)
20. 20PIPER JAFFRAY
Rise of Boutiques & HVLP | Fitness Franchisor AUV/Unit Growth (US)
Unit growth (open + backlog) coupled with AUV growth a helpful indicator of franchisor brand momentum
Change in 2016 Open + Backlog Units (US)(2)
2016
AUV
Growth(1)
+10%
5%
(5%)
(+15%)
(100+) (50) 50 100 200150-
-%
+15%
(10%)
Source: Company franchise disclosure documents, company websites, Piper Jaffray research
(1) AUV growth based on year-over-year changes in reported Item 19 average revenue disclosures provided per respective Company Franchise Disclosure Document
(2) Change in Open + Backlog Units (US) based on year-over-year changes in reported Item 20 end of year open units plus franchise agreements signed but not opened
21. 21PIPER JAFFRAY
Rise of Boutiques & HVLP | Planet Fitness Snapshot
Source: Company filings and PJC Research
Highly recognized brand continues to grow and attract new gym members to the industry
Unit Growth Membership Growth (M)
356 457 562
704
863
1,066
1,255
1,374
33
31
44
45
55
58
58
58
389
488
606
749
918
1,124
1,313
1,432
2010 2011 2012 2013 2014 2015 2016 Q3 2017
Franchised Corporate-Owned
6.75-Year CAGR
21%
2.3 2.9
3.7
4.8
6.1
7.3
8.9
10.5
2010 2011 2012 2013 2014 2015 2016 Q3 2017
6.75-Year CAGR
25%
Systemwide Quarterly Same Store Sales Notable Statistics
9%
of systemwide
sales spent on
marketing
43%
of members are
gym first-timers
+50%
Female
members
$1.8M
Average unit
revenue
35%
Unit-Level Margin
after 5% Royalty
+25%
unlevered cash-
on-cash return on
$1.6M avg. inv.
$412M
Revenue
(Sep-17 TTM)
11%
7% 7% 6%
7%
8% 10% 11%
11%
9%
9%
Q1 Q2 Q3 Q4
2015 2016 2017
50%
of Black Card
members have used
multiple clubs
40
Consecutive
quarters of SSS
growth
$173M
EBITDA
(Sep-17 TTM)
58%
YTD Stock Return
($32 in Dec-17)
24%
Annual EBITDA
Growth (TTM); Revenue
growth of 12%
Company announced a 10%
price increase to Black Card
Memberships to $21.99
anticipated to boost future SSS
22. 22PIPER JAFFRAY
Rise of Boutiques & HVLP | Key HVLP Competitors
Planet Fitness 7x the scale of the next largest HVLP operator; only 3 other true HVLP operators at 100+ units
Locations States
Non-US
Countries
Motto
NationalLargeRegionalNon-US
LocalRegional
Locations States
Non-US
Countries
Motto
1,432 48 4
The world judges.
We don’t.
205 24 Canada No judgements
150 8 Switzerland
The City is
Your Gym
124 18 -
Where you can
afford to get fit!
119 14 -
Where It’s
All About You
60 4 - Fitness made easy
56 5 - Every body happy
180 - UK
We’re here for
everybody
95 - UK Find your fit
78 - UK Energie for life
39 3 - We’re all about you
37 3 -
Well-rounded and
inspiring approach
to fitness
26 9 - We get you
23 3 -
Better gym.
Better price.
23 2 -
Uplift everyone
through fun, happy
fitness
22 3 -
Less Attitude. More
Fitness
14 2 -
Love your sweat /
Get an EDGE in life
9 1 -
Families working out
together
Only portion is HVLP
23. 23PIPER JAFFRAY
Edge Fitness
Rise of Boutiques & HVLP | HVLP 2nd Largest Operator Market Map
Planet Fitness the #1 operator in all but two states; high fragmentation for #2 HVLP operator across US
Youfit
Chuze
Crunch
Fitness 19
XSport
Fitness
Connection
Retro Fitness
EOS Fitness
Fitness Evolution
Vasa Fitness
Blast Fitness
1331
3
7
3
8
15
48
13
6
2
6
2
4
2
1
22
21 7
7
2
14
43
43
4
2
1
2
2
11 8
67
Is the #1 market operator by # of clubs in all but Northern California and Utah
Identifies the #2 market operator, clubs (#1 in NorCal and Utah)
7
24. 24PIPER JAFFRAY
Rise of Boutiques & HVLP | HVLP M&A Transactions
Date Target Acquirer Fund Size ($ in millions)
Jan-18 6 clubs in Long Island Franchisor NA
Nov-17 30 clubs in the southeast
(Sunshine Fitness)
$2,500
Nov-17 14 clubs in Florida & California
(Atlantic Fitness)
NA
Nov-17 $9,500
Oct-17 11 clubs in Phoenix, New Orleans United PF Partners NA
Sep-17 22 clubs across 6 states
(PF Baseline Fitness)
$1,300
Jul-17 13 clubs in Michigan & Indiana
(Impact Fitness)
$390
May-17 12 clubs in Charlotte, NC
(GNT Holdings, LLC)
National
Fitness Partners NA
Mar-17 10 clubs in Indianapolis, IN
(Planet Fit Indy 10 LLC)
$210
Nov-16 59 clubs in the midwest & northeast
(United PF Partners)
NA
Sep-16 6 clubs in Texas
(Newfit, Ltd. licensee)
$400
Apr-16 10 clubs HQ in Harrisburg, PA
(National Fitness Partners)
NA
Mar-16 $410
Feb-16 18 clubs in Dallas, Austin, TX
(Excel Fitness Holdings, Inc.)
$750
Jan-15 $250
Dec-14 $1,600
Nov-14 $335
Oct-13 10 clubs in San Antonio, TX
(Taymax Fitness LLC)
$300
Note: Planet Fitness went public in August 2015 by TSG Consumer
25. 25PIPER JAFFRAY
Rise of Boutiques & HVLP | Boutique M&A Transactions
Date Target Acquirer Fund Size ($ in millions)
Dec-17
16 studios
(GA, SC, TN, NC, OR)
NA
Dec-17 $2,000
Oct-17 $162
Oct-17 $2,000
Aug-17 IPO NA
Aug-17 ` NA
May-17 $2,000
May-16 $300
Feb-16 $2,500
Jul-15 $300
Jun-15 NA
May-15 $615
Feb-15 NA
Jul-14 $1,500
Apr-14 $615
Jul-13 $615
27. 27PIPER JAFFRAY
Proprietary Survey | Executive Summary
South Atlantic
Middle Atlantic
SE Central
NE Central
New England
Female
Male
18 to 24
25 to 34
35 to 44
45 to 54
55 to 64
65+
$25-34K
$35-49K
$50-74K
$75-99K
$100-149K
$150-199K
$200K+
White
Black
Asian
Hisp./Other
Gym Only
Boutique + Gym
Boutique Only
Lapsed last 12 Mos
0%
20%
40%
60%
80%
100%
Region Gender Age Income Race Fitness Status
U.S. Consumer Survey Respondents (n=2,075)
Region Code: S. Atlantic includes FL, VA, NC GA, MD, SC, DE, WV, D.C.
Mid Atlantic includes PA, NJ, NY; SE Central includes TN, KY, AL;
NE Central includes OH; New England includes MA, CT, ME, RI, NH, VT
Objectives
Measure consumer demographic & psychographic differences between gym-only vs. boutique members
Clarify the role low-price competitors and boutiques play in expanding vs. cannibalizing the market
Highlight fitness brands’ relative market strengths and potential opportunities
28. 28PIPER JAFFRAY
Proprietary Survey | Gym & Boutique Member Highlights
Gym Members
(n=1,916; 1,773 current, 143 former)
Boutique Members
(n=854; 228 current, 626 former)
• Members active on avg. at 2.2 studios
• 66% are 18-24 years old
• 57% have $75K+ income
• 53% are also gym members
• 49% are first-time fitness members
• 42% spend $60+ per month on fitness
• 22% of all survey respondents describe
ideally attending a boutique studio
• 48% avg. Net Promoter Score
• 71% attend 2x+ per week
• 60% anticipate staying 2+ more years
• 27% have tenure of 2+ years
• 54% cite price and convenience of
location as primary reasons for joining
• 35% are first-time fitness members
• 53% of boutique members note they would
leave their boutique if a similar class were
offered at a gym for lower price
• 39% avg. Net Promoter Score
Source: Proprietary Piper Jaffray consumer survey
29. 29PIPER JAFFRAY
Gym-Only
Gym-only members suggest high relative expected future visit growth, lower attrition, and longer actual and
expected tenure; boutiques seeing high spending, high income, young, first-time fitness users with high satisfaction
57%% Age 18-24 66%
% $75K+ Income 42% 57%
% Actual Tenure of 2+ Years 27% 11%
% Expected Future Tenure of 2+ Years 60% 36%
1.2x
1.4x
2.4x
1.7x
% Future Visit Growth, Net
(% Little/Lot More less % Little/Lot less)
33% 7%4.7x
Net Promoter Score 39% 48%1.2x
11%% Spending $60+/Month in Fitness 42%3.7x
% First Time Joiners 35% 49%1.4x
Current % of (Current + Lapsed) 58% 27%2.2x
% Attending 2x+ per Week 71% 54%1.3x
Boutique
(n=1,540) (n=228)
Proprietary Survey | Member Comparison (Gym vs Boutique)
Consumer Takeaways
Overall industry visits expected to
increase, led by gym members
Lower overall attrition in gyms
Proven long-term gym user base
High gym member stability
Strong relative gym usage vs.
visiting multiple boutique brands
Boutique has fitness wallet share
Boutique appeals to the affluent
Boutique draws new fitness users
Boutique skews younger
Better avg. service / experience
Source: Proprietary Piper Jaffray consumer survey
30. 30PIPER JAFFRAY
5%
6%
3%
14%
7%
17%
13%
13%
37%
18%
30%
13%
5%
8%
3% 6%
Gym-Only Boutique
$0
<$10
$10-19
$20-39
$40-59
$60-99
$100-149
$150-199
$200+
Boutique members typically younger with higher income households and ~2x monthly fitness spend of gym
members (~$66 avg. monthly spend vs ~$35 avg. monthly spend of gym-only)
20%
25%
36%
41%
20%
21%
12%
7%
10%
5%
1% 1%
Gym-Only Boutique
65+
55 to 64
45 to 54
35 to 44
25 to 34
18 to 24
Relative Demographics & Fitness Spend (n=1,540 for Gym Only, 228 for Boutique)
3% 4%
4%
7%
15%
20%
20%
27%
25%
17%
17%
10%
16% 16%
Gym-Only Boutique
$25-34K
$35-49K
$50-74K
$75-99K
$100-149K
$150-199K
$200K+
Respondent
Age
Household
Income
Avg. Total Monthly
Fitness Services Spend
% Age 18-34 % $75K+ Income % $60+ Monthly Spend
11% 42%42% 57%57% 66%
1.2x 1.4x 3.7x
Proprietary Survey | Member Demos & Spend
Source: Proprietary Piper Jaffray consumer survey
31. 31PIPER JAFFRAY
60%
36%
10%
19%
19%
19%
7%
17%
5%
10%
Gym-Only Boutique
<3 Mos
3-5 Mos
6-11 Mos
12-23 Mos
24+ Mos
27%
11%
17%
18%
28%
25%
18%
27%
10%
19%
Gym-Only Boutique
<3 Mos
3-5 Mos
6-11 Mos
12-23 Mos
24+ Mos
27% of gym-only members have a tenure longer than 24 months compared to 11% for boutiques; 60% of
gym-only members anticipate staying for 24 months or more compared to 36% for boutique users
Actual and Expected Tenure (n=1,540 for Gym Only, 228 for Boutique)
Current Member
Tenure
How Much Longer Do
You Plan to be a Member?
% 24+ Months % 24+ Months
60% 36%
1.7x
27% 11%
2.4x
Proprietary Survey | Current and Expected Tenure
Source: Proprietary Piper Jaffray consumer survey
32. 32PIPER JAFFRAY
12%
7%
31%
24%
47%
44%
6%
12%
4%
12%
Gym-Only Boutique
LOT LESS
LITTLE LESS
THE SAME
LITTLE MORE
LOT MORE
71% of gym-only members attend 2x per week or more compared to 54% for boutiques; 33% of net gym-
only members anticipate attending a little to a lot more in the future compared to 7% for boutiques
Actual and Expected Tenure (n=1,540 for Gym Only, 228 for Boutique)
How Do You Expect Your
Attendance to Change in the Future?
% 2x+ per Week (% Little/Lot More) minus
(% Little/Lot Less)
33% 7%
4.7x
71% 54%
1.3x
23%
16%
48%
38%
16%
29%
12%
17%
Gym-Only Boutique
<1x per week
1x per week
2-3x per week
4x+ per week
How Often do you
Currently Attend?
Proprietary Survey | Current and Expected Attendance
Source: Proprietary Piper Jaffray consumer survey
33. 33PIPER JAFFRAY
Proprietary Survey | Reasons for Attrition
Former boutique member overall attrition driven primarily by expense, moving/location convenience, and wanting to
participate in other exercises
Primary Reasons for Leaving (What were the primary reasons you STOPPED your membership?)
24%
18% 18%
15% 15%
10%
9% 8% 8% 8% 8%
7% 6%
5% 5%
4%
13%
20%
5%
10%
20%
22%
4%
5%
7%
4%
7%
4%
5%
8%
13% 13%
Too
Expensive
Moved/No
Longer
Convenient
Wanted
Another
Type of
Exercise
I Felt Out of
Place
Could
Exercise
For
Cheaper
Elsewhere
Wasn't
Using /
Going
Too
Intimidating
I Met My
Fitness
Goals
Nobody I
Knew Went
There
Lacked
Amenities
Too
Crowded /
No Parking
I Didn't
Meet My
Fitness
Goals
No One
There To
Guide Me
I Didn't Like
To Exercise
Injury /
Surgery /
Other
Condition
I Didn't
Know What
to do There
Boutique n=626 Traditional n=143
Source: Proprietary Piper Jaffray consumer survey
35. 35PIPER JAFFRAY
Capital Markets Update | Executive Summary
Market indices at all-time highs
IPO market continues to lag historical periods
Strong investor demand for differentiated growth stories
Asset light models remain particularly attractive to the buyside
Recent survey of top institutional investors suggests public markets are highly
supportive of more health and wellness public companies
Planet Fitness highly successful IPO presents potential path for fitness franchisors
YogaWorks lackluster IPO demonstrates need for true differentiation, scale and
operational excellence
We expect to see new buyers emerge for fitness concepts including retailers, active
apparel, hospitality conglomerates and insurance providers
Opening remarks
IPO Hit or Miss?
Come One,
Come All
40. 40PIPER JAFFRAY
Capital Markets Update | Strong Appetite from Public Investors
Piper Jaffray discussed current interests with two dozen blue-chip firms:
Institutional investors starved for high-growth consumer brands
Investors willing to pay the premium for asset-light, high cashflow models
Scarcity value – There is a huge lack of investable opportunities in the Health and
Wellness sector
$500M enterprise value viewed as a minimum size for blue chip investors
Building out a public-ready management team ahead of an offering pays
41. 41PIPER JAFFRAY
$0.00
$5.00
$10.00
$15.00
$20.00
$25.00
$30.00
$35.00
$40.00
8/6/2015 12/6/2015 4/6/2016 8/6/2016 12/6/2016 4/6/2017 8/6/2017 12/6/2017
PLNT Price
Capital Markets Update | Planet Fitness
6/22/16: Follow-on
offering of 11,500,000
shares at $16.50
9/23/16: Follow-on
offering of 8,000,000
shares at $19.75
11/16/16: Follow-on
offering of 15,000,000
shares at $23.35
3/8/17: Follow-on
offering of 15,000,000
shares at $20.50
5/4/17: Follow-on
offering of 16,085,510
shares at $20.50
11/7/17: Q3 Earnings Release
Adj. EPS: $0.19 vs. expected $0.16
Rev.: $97.5M vs. expected $93.6
FY Guidance
Adj. EPS: $0.80–$0.82 vs. prior
$0.76-$0.78
Rev.: $425-$430M vs prior
guidance $409-$415M
50
70
90
110
130
150
170
190
8/6/2015 12/6/2015 4/6/2016 8/6/2016 12/6/2016 4/6/2017 8/6/2017 12/6/2017
PLNT Indexed Price S&P 500 Indexed Price
PLNT has
outperformed the
S&P 500 by 88%
since its IPO on
8/6/2015
Strong operating
results driving stock
price to levels to
117% above IPO
price
42. 42PIPER JAFFRAY
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
8/11/2017 9/11/2017 10/11/2017 11/11/2017 12/11/2017
YOGA Price
9/21/17: Q2 Earnings Release
Adj. EBITDA: ($0.6)M
Rev.: $12.5M
FY Guidance
Adj. EBITDA ($0.5)M-($1.5)M
Rev. $53.2M-$54.2M
Capital Markets Update | YogaWorks
8/14/17: Added to
the Nasdaq
Composite Index
8/29/17: Acquires two
studios in Washington DC
from Tranquil Space
9/18/17: Added to
the S&P TMI Index
9/27/17: Acquires Pure
Prana Yoga Studio
10/13/17: Acquires two
studios from Pure Om
Studios
10/19/17:
Acquires
Yoga One
11/14/17: Q2 Earnings Release
Adj. EBITDA: ($0.4)M vs. expected
($0.6M)
Rev.: $13.5M vs. expected
$12.9M
FY Guidance
Adj. EBITDA ($0.5)M-($1.5)M
Rev. $54.3M-$54.8M
News:
Acquires Infinity Yoga
Q2 2017 Q3 2017
Revenue 12.5 13.5
EBITDA 0.6 0.4
$ in millions
40
60
80
100
120
8/11/2017 9/11/2017 10/11/2017 11/11/2017 12/11/2017
YOGA Indexed Price S&P 500 Indexed Price
YOGA has lagged
the S&P (51%) since
IPO
YOGA has fallen
41% since its IPO
debut on 8/11/2017
43. 43PIPER JAFFRAY
$0.00
$5.00
$10.00
$15.00
$20.00
12/20/2012 6/20/2013 12/20/2013 6/20/2014 12/20/2014 6/20/2015 12/20/2015 6/20/2016 12/20/2016 6/20/2017 12/20/2017
CLUB Price
Capital Markets Update | Town Sports International
2/14/12: Acquires
Fitcorp Management
Services Inc. and West
End Sports Club
12/24/13: Sells 151 E. 1st
St. Building in New York
for $82M
5/5/15: Q1 Earnings Release
Adj. EBITDA: $6.8M vs. expected
$7.5M
Rev.: $111.4M vs. expected
$112.0M
3/7/16: Q4 Earnings Release
Adj. EBITDA: $10.00M vs. expected $4.5M
Rev.: $100.8M vs. expected $102.7M
8/12/14: S&P
downgrades credit
from B+ to B
9/21/16: Chairman
Patrick Walsh
appointed as CEO
Q1
‘13
Q2
‘13
Q3
‘13
Q4
‘13
Q1
‘14
Q2
’14
Q3
’14
Q4
’14
Q1
’15
Q2
’15
Q3
’15
Q4
’15
Q1
‘16
Q2
’16
Q3
’16
Q4
’16
Q1
‘17
Q2
’17
Q3
‘17
Revenue 119 120 117 114 115 116 113 110 111 108 104 101 101 101 99 96 99 100 99
EBITDA 23.8 25.0 21.1 17.5 13.5 14.8 14.1 10.7 6.2 4.1 4.9 10.0 7.5 9.4 9.4 11.8 10.2 13.5 10.1
SSS (%) (2.4) (1.7) (1.7) (1.3) (4.7) (4.5) (4.5) (3.9) (3.5) (5.4) (7.1) (3.9) (7.6) (4.5) (3.0) (2.2) 0.7 1.2 1.8
$ in millions
0
50
100
150
200
12/20/2012 6/20/2013 12/20/2013 6/20/2014 12/20/2014 6/20/2015 12/20/2015 6/20/2016 12/20/2016 6/20/2017 12/20/2017
CLUB Indexed Price S&P 500 Indexed Price
10/26/17: Q3 Earnings Release
Adj. EBITDA: $11.0M vs. expected
$12.1M
Rev.: $98.6M vs. expected
$98.7M
While slightly
narrowing the gap,
CLUB continues to
lag the S&P
CLUB showing
signs of life with
substantial 379% lift
from the 2015 low of
$1.19
44. 44PIPER JAFFRAY
Stand-alone scale businesses with runway, consolidating complementary fitness concepts or forming a broader
healthy living brand platform could create a compelling high growth and diversified investment offering for the
public market
Fitness Center Consolidation Healthy Living Consolidation
Capital Markets Update | Potential M&A / IPO Opportunities
z
45. 45PIPER JAFFRAY
Capital Markets Update | Potential New Investors into Fitness
Category Illustrative Brands Benefits / Rationale to Acquire Fitness Brand
Retailers
Active
Apparel
Hospitality
Conglomerates
Insurance
Providers
• Complementary products / services
• Engaged / captive membership base
• Enhanced customer retention / tracking
• Added points of distribution
• Cross-selling opportunities
• Open new customer demographics
• Marketing, sales, G&A synergies
REITs / Real
Estate Holdings
47. 47PIPER JAFFRAY
The last 24 months saw an explosion of fitness press and mainstream adoption of the wellness craze. For example:
“The Urban Fitness Revolution” “Malls Never Wanted Gyms. Now They Court Them”
– CityLab 1/2/18 – WSJ 11/26/17
“Is Specialized Fitness Getting Less Special?” “SoulCycle's Path back to IPO”
– WSJ 12/23/17 – Bloomberg 5/8/17
“Why You’re Paying So Much to Exercise. Millennials are turning the fitness industry upside down”
– Bloomberg 1/30/17
In the not-too-distant future we expect to see fitness penetrate additional areas of consumers’ daily lives with
continued personalization, in-home / out-of-home integrated solutions, and unique health scores enabling, for
example, insurance companies to at last provide meaningful financial rewards to consumers who adopt a healthier
way of life. Some of these trends we will address further in our next industry piece.
The evolution of fitness presents real challenges to traditional health club operators. Technology, pricing, and
availability of real estate, coupled with HVLP versions 2.0+ put pressure to maintain legacy dues levels.
Commoditization of personal training, high attrition, and boutique studio substitution put pressure to maintain
legacy ancillary revenues. New opportunities must emerge for operators to drive higher revenue per member in the
wake of increasing minimum wage and overall inflation. We believe these challenges present the industry’s savvy
operators the opportunity to continue industry innovation to drive membership and revenue growth and retention.
We remain bullish on the fitness sector. As with any industry there will be winners and losers, but this environment
is ripe for new entrants with space for multiple winning concepts to break out and capture compelling shares of the
growing industry profit. We look forward to the future and helping facilitate capital into this dynamic industry.
All the best in the New Year,
Brian Smith and Abe Thomas
Closing Remarks | Piper Jaffray Fitness Industry Update
49. 49PIPER JAFFRAY
51
41
38
34
32
22
21
19
19
18
Piper Jaffray
Robert W Baird
Houlihan Lokey
William Blair
Harris Williams
Jefferies
Moelis
JP Morgan
Goldman Sachs
BAML
PJC Consumer | Preeminent Growth Consumer M&A Franchise
Source: Securities Data Corporation, Capital IQ, and company websites. Data based on closed U.S. transactions as of 1Q 2015 – Aug 31, 2017 up to $1B.
Includes transactions only in the consumer sector while excluding fairness opinions and terminated deals
Significant momentum and market share gains – 75+ completed consumer
M&A transactions over the past three years
On pace for a record year in 2017
Continued focus on lower- and middle-market clients while many of our
competitors have migrated up-market
Unparalleled industry knowledge and relationships with consolidators and
consumer-focused sponsors
Process-agnostic advisors with a differentiated “hand-selling” process
approach
Advisor of choice for our clients’ premier branded assets
Select Recent Consumer M&A Transactions
Consumer M&A Transactions <$1B: 2015 – YTD 2017
September 2017
has been acquired by
August 2017
has been acquired byhas been acquired by
September 2017 August 2017
has acquired
August 2017
has been acquired by
Butterfly Capital
June 2017
has been acquired by
has been acquired by
June 2017
has been
acquired by
September 2017
has been
acquired by
December 2017
has been
acquired by
December 2017
Has made a significant
Investment in
December 2017
Piper Jaffray has built the largest and fastest-growing consumer M&A franchise in the middle market
has been
acquired by
November 2017
has been
acquired by
November 2017
has received a
significant investment
from
November 2017
Sunshine Fitness
Honors Holdings
an area representative of
50. 50PIPER JAFFRAY
Restaurants
1. Healthy, active & sustainable living logos include Partnership Capital Growth deals
PJC Consumer | Global Consumer Group
With nearly 35 investment banking professionals, Piper Jaffray’s Consumer Group is one of the largest
teams dedicated to the Consumer sector across Wall Street
Michael Hoffman, Global Group Co-Head
Specialty Retail and Lifestyle Brands
• Household / Personal Care
• Sporting / Outdoor Retail
• Toys / Juvenile Products
• Hardlines Retail & Brands
• Specialty Retail / Services
• Softlines Retail & Brands
• Food / Beverage Products
• Distribution / Retail
• Healthy Living
• Active Lifestyles
• Fitness
• VMS
Food / Beverage and Healthy / Active1
• Upscale / Casual Dining
• Quick Service / Casual
• Multi-Unit Food & Beverage
Damon
Chandik
Carlos
Sanchez
Brian
Smith
Matt
Roghair
Janica
Lane
Tosh
Dhanalal
Thomas
Ragsdale
Michael
Hoffman
Joel Schneider, Head of Consumer Equity Capital Markets
Damon Chandik, Global Group Co-Head
John Twichell, Head of Consumer M&A
51. 51PIPER JAFFRAY
PJC Consumer | Recent Consumer Transactions
Initial Public Offering
Joint Bookrunner
April 2017
$213,088,000
ABL Facility, Euroline,
Senior Term Loan,
Subordinatd Debt and
HoldCo PIK note
Sole Placement Agent
June 2017
Has been acquired by
Merit Capital
Sell-Side Advisor
June 2017
Has been acquired by
Lion Capital
Sell-Side Advisor
June 2017
Has been sold to Max
Brenner Israel
Sell-Side Advisor
May 2017
Has been acquired by
Lavazza
Sell-Side Advisor
May 2017
Follow-On Offering
Joint Bookrunner
May 2017
$72,450,000
Has received an equity
investment from Dean
Foods Company
Sell-Side Advisor
May 2017
Has been acquired by
Oak Hill Capital
Partners
Sell-Side Advisor
March 2017
Follow-On Offering
Joint Bookrunner
March 2017
$258,957,000
Has been acquired by
CircusTrix, a portfolio
company of Palladium
Equity Partners
Sell-Side Advisor
March 2017
Has been acquired by
Castanea Partners
Sell-Side Advisor
March 2017
Has been acquired by
Maple Leaf Foods
Sell-Side Advisor
March 2017
Has been acquired by
Glanbia
Sell-Side Advisor
February 2017
Has been acquired by
Walmart
Sell-Side Advisor
February 2017
Has received an
investment from
TPG Growth
Sell-Side Advisor
September 2017
Has been acquired by
Freeman Spogli
Sell-Side Advisor
September 2017
Has received a
significant investment
from Butterfly Equity
Sell-Side Advisor
August 2017
Has been acquired by
Landry’s Inc.
Sell-Side Advisor
August 2017
Has acquired
Nutraceutical
International
Buy-Side Advisor
August 2017
Sell-Side Advisor
September 2017
Has been acquired by
TA Associates
Has been acquired by
Otsuka Pharmaceutical
Sell-Side Advisor
August 2017
Follow-On Offering
Joint Bookrunner
July 2017
$428,742,000
Has been acquired by
Kellogg
Sell-Side Advisor
October 2017
Has been acquired by
Nestle
Sell-Side Advisor
November 2017
Has received a
significant investment
from Brentwood
Associates
Sell-Side Advisor
November 2017
Has been acquired by
Premium Brands
Sell-Side Advisor
November 2017
Follow-On Offering
Joint Bookrunner
November 2017
$269,100,000
Initial Public Offering
Joint Bookrunner
November 2017
$125,000,000
Has been acquired by
Colgate-Palmolive
Company
Sell-Side Advisor
December 2017
Has made a significant
investment in Sunshine
Fitness
Buy-Side Advisor
December 2017
Has been acquired by
J.W. Childs
Sell-Side Advisor
December 2017
Honors Holdings
an Area Rep for
52. 52PIPER JAFFRAY
PJC Consumer | Recent Consumer Transactions (continued)
Has received a growth
equity investment from
Roark Capital Group
Sell-Side Advisor
February 2016
Follow-On Offering
Joint Bookrunner
February 2016
$178,817,000
Has made a significant
investment in Revzilla
Buy-Side Advisor
February 2016
Has been acquired by
General Mills
Sell-Side Advisor
January 2016
Has been acquired by
Perpetual Capital
Partners
Sell-Side Advisor
December 2015
Has been acquired by
Northwest Equity
Partners
Sell-Side Advisor
December 2015
Has been acquired by
Church & Dwight & Co.
Sell-Side Advisor
February 2016
Has received a majority
investment from TA
Associates
Sell-Side Advisor
May 2016
Has been acquired by
Lonza Group
Sell-Side Advisor
August 2016
Has been acquired by
Hormel
Sell-Side Advisor
May 2016
Has received a
strategic investment
from Hearst Ventures
Sell-Side Advisor
April 2016
Follow-On Offering
Co-Manager
May 2016
$112,500,000
Follow-On Offering
Joint Bookrunner
June 2016
$349,393,000
Follow-On Offering
Joint Bookrunner
June 20416
$189,750,000
Has been acquired by
L’Oreal
Sell-Side Advisor
July 2016
Has received an
investment from Roark
Capital
Sell-Side Advisor
June 2016
Has been acquired by
Aterian Investment
Partners
Sell-Side Advisor
October 2016
Has made an
investment in OTG
Management
Buy-Side Advisor
September 2016
Has been acquired by
Conagra
Sell-Side Advisor
September 2016
Initial Public Offering
Joint Bookrunner
September 2016
$162,917,000
Has been acquired by
L Catterton
Sell-Side Advisor
August 2016
Has been acquired by
Estée Lauder
Companies
Sell-Side Advisor
November 2016
Follow-On Offering
Joint Bookrunner
November 2016
$119,025,000
Has been acquired by
Linden
Sell-Side Advisor
December 2016
Has been acquired by
Nagatanien
Holdings Co.
Sell-Side Advisor
December 2016
ABL, 1st % 2nd
Lien Debt
Sole Placement Agent
December 2016
$310,000,000
2nd Lien Debt
Sole Placement Agent
January 2017
Has been acquired by
Smithfield Foods
Sell-Side Advisor
January 2017
Fairness Opinion for
sale to Golden Gate
Capital
Financial Advisor
January 2017
Has been acquired by
Unilever
Sell-Side Advisor
February 2017
Has been acquired by
Cerberus Capital
Management
Sell-Side Advisor
January 2017
Has been acquired by
Sovos Brands, a
portfolio company of
Advent International
Sell-Side Advisor
February 2017
53. 53PIPER JAFFRAY
Piper Jaffray Companies (NYSE: PJC) is an investment bank and asset management firm headquartered in
Minneapolis with offices across the U.S. and London, Zurich and Hong Kong. Securities brokerage and
investment banking services are offered in the United States through Piper Jaffray & Co., member NYSE and
SIPC, in Europe through Piper Jaffray Ltd., authorized and regulated by the Financial Conduct Authority, and in
Hong Kong through Piper Jaffray Hong Kong, authorized and regulated by the Securities and Futures
Commission. Asset management products and services are offered through three separate investment advisory
affiliates registered with the U.S. Securities and Exchange Commission; Advisory Research Inc., Piper Jaffray
Investment Management LLC and PJC Capital Partners LLC.