piper jaffray 2018 us fitness industry update

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Fitness Industry Update January 2018

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Page 1: Piper Jaffray 2018 US Fitness Industry Update

Fitness Industry UpdateJanuary 2018

Page 2: Piper Jaffray 2018 US Fitness Industry Update

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 AdvisorMay 2015

has been acquired by

Norwest Equity Partners

Sell Side AdvisorDecember 2014

has received an investment from

Roark Capital Group

Sell Side AdvisorMarch 2014

has been acquired by Gold’s Gym

Sell Side AdvisorJuly 2014

Sell Side AdvisorDecember 2017

has been acquired by J.W. Childs

Honors Holdingsan area representative of

has been acquired by

Perpetual Capital

Sell Side AdvisorJanuary 2016

Has been acquired by CircusTrix, a

portfolio company of Palladium Equity

Partners

Sell Side AdvisorApril 2017

has received an investment from Hearst Ventures

Sell Side AdvisorApril 2016

has received an investment from

Roark Capital Group

Sell Side AdvisorFebruary 2016

Sell Side AdvisorSeptember 2017

Has been acquired by TPG Growth

Buy Side AdvisorDecember 2017

has made a significant

investment in Sunshine Fitness

a Planet Fitness Franchisee

Brian SmithManaging Director+1 415 [email protected]

Years at Piper Jaffray: 4Years in Industry: 15

Abe ThomasPrincipal+1 415 [email protected]

Years at Piper Jaffray: 4Years in Industry: 9

Page 3: Piper Jaffray 2018 US Fitness Industry Update

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

Page 4: Piper Jaffray 2018 US Fitness Industry Update

Section I

Executive Summary

Page 5: Piper Jaffray 2018 US Fitness Industry Update

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

Page 6: Piper Jaffray 2018 US Fitness Industry Update

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 LandscapeContinues 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

Page 7: Piper Jaffray 2018 US Fitness Industry Update

Section II

Fitness Industry Overview

Page 8: Piper Jaffray 2018 US Fitness Industry Update

8PIPER JAFFRAY

$8 $9

$10 $11

$12 $12 $13

$14 $15

$16

$18 $19 $19

$20 $20 $21

$22 $22

$24 $26

$28

1.0x

1.5x

2.0x

2.5x

3.0x

3.5x

4.0x

$0

$5

$10

$15

$20

$25

$30

'96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16

Since 1996, fitness has grown 3.5x versus GDP of 2.4x (42% higher); growth sustained through recessions

Source: International Health, Racquet & Sports club Association (“IHRSA”); GDP growth per Worldbank; projected industry growth per IBISWorld

20-Year CAGR

5-Year CAGR

6.4%

5.6%

Projected Growth (’17-’21)

2-3%

Rec

essi

on

Rec

essi

on

Rec

essi

on

Rec

essi

on

U.S. Fitness Industry Revenue ($B)

Fitness

Growth since 1996

Fitness Industry | Strong Market Growth, Resistant to Recession

2.4x

3.5x

Total U.S. Fitness Industry Revenue ($B)

GDP

Page 9: Piper Jaffray 2018 US Fitness Industry Update

9PIPER JAFFRAY

26 28

30 31 33 34

36 39

41 41 43 42 46 45

50 51 50 53 54 55

57

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

0

10

20

30

40

50

60

70

'96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16

Fitness membership up from 12% penetration in 1996 to 22%; growth also sustained through recessions

Source: International Health, Racquet & Sports club Association (“IHRSA”); age 15+ population per Worldbank

20-Year CAGR

5-Year CAGR

4.0%

2.2%

Rec

essi

on

Rec

essi

on

Rec

essi

on

Rec

essi

on

U.S. Health Club Memberships (M)

Fitness Membership % Age 15+ U.S. Population

Fitness Industry | Increasing Memberships, Penetration

22%

Total U.S. Fitness Memberships (M)

12%

Page 10: Piper Jaffray 2018 US Fitness Industry Update

10PIPER JAFFRAY

$333 $320

$333 $345 $361

$375 $358

$371 $373 $375 $389

$429 $451

$437 $441 $419 $413

$433 $427 $456

$472 $490

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

$500

'95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16

Avg. spend per member CAGR of 2.2% since 1996 with last 5 years at 3.5%; current fitness spend % of GNI per capita below historical average

Source: International Health, Racquet & Sports club Association (“IHRSA”); GNI per capita per Worldbank, Atlas method

20-Year CAGR

5-YearCAGR

2.2%3.5%

Rec

essi

on

Rec

essi

on

Rec

essi

on

Rec

essi

on

Annual Fitness Spend per Member ($)

Fitness Spend % Gross National Income Per Capita

Fitness spend % per capita rising from

historical lows

20-year average

Fitness Industry | Accelerating Fitness Spend per Member

Avg. Annual Fitness Spendper Member ($)

Page 11: Piper Jaffray 2018 US Fitness Industry Update

11PIPER JAFFRAY

1.471.41

1.54 1.52

1.68 1.721.65 1.65

1.57 1.53 1.57

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

1.80

2.00

'06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16

29.1 29.4 29.6 29.8 29.9 30.0 30.5 32.2

34.5 36.2 36.5

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

'06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16

Fitness Industry | Club Growth vs. Avg. Member per Club GrowthUnit growth driven by boutiques and low-cost operators; boutiques driving average memberships lower

Source: International Health, Racquet & Sports club Association (“IHRSA”)

Annual Growth Annual Growth

Rec

essi

on

Rec

essi

on

Rec

essi

on

Rec

essi

on

Rec

essi

on

Rec

essi

on

U.S. # Fitness Locations (000s) Avg. Memberships per Location (000s)

5-Year CAGR

0.6%

5-Year CAGR

5.1% 5-Year CAGR

3.2%

4-Year CAGR

(1.8%)

Page 12: Piper Jaffray 2018 US Fitness Industry Update

Rise of Boutiques and HVLPSection III

Page 13: Piper Jaffray 2018 US Fitness Industry Update

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

Page 14: Piper Jaffray 2018 US Fitness Industry Update

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 ChangeSince 2009

Company Founded2016 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 544Fitness-only clubs under the brandsNew 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

Page 15: Piper Jaffray 2018 US Fitness Industry Update

15PIPER JAFFRAY

Rise of Boutiques & HVLP | Top 15 Fitness Brands by # UnitsHigh Value / Low Price and boutique brands now make up 6 of the top 15 versus only 2 in 2009

RankClub

Company# of Units

in 2009Company

# 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

Page 16: Piper Jaffray 2018 US Fitness Industry Update

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 PricingYear

Founded

Open Studios

(U.S. 2017E)

# ofStates

’17E UnitGrowth Notable Events

98% HIIT Monthly: $99Unlimited: $160

2010 749 45 47% Opened 200th location in April 2015 Roark Investment in February 2016

97% Barre $25/class$225/month

2001Franchise:

2009510 44 18% Catterton investment

in May 2015

98%Kick-

boxing$15/class

2008Franchise:

2009475 42 21% Investment by Snap Fitness in January

2014

96%Kick-

boxing$27/class

$225/month

2009Franchise:

2012237 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/month2008

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/class2004

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/month2011

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

Page 17: Piper Jaffray 2018 US Fitness Industry Update

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 GrowthDramatic 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

Page 18: Piper Jaffray 2018 US Fitness Industry Update

18PIPER JAFFRAY

Rise of Boutiques & HVLP | Boutique Studio ExplosionBoutique 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

Page 19: Piper Jaffray 2018 US Fitness Industry Update

19PIPER JAFFRAY

Rise of Boutiques & HVLP | HIIT Studio Market Growth & BacklogHIIT 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

XsportFitness

World Gym

Town Sports

US Fitness

Life Time Fitness

The Edge Fitness

Announced Nov-17

Announced Aug-17

EstablishedLate 2014

AnnouncedMar-16

EstablishedLate 2016

AnnouncedApr-16

EstablishedAug-15

Established2014

Source: Company Franchise Disclosure Documents, company websites, Piper Jaffray research

2016 End of Year Open Units, Backlog by Brand (US)

Page 20: Piper Jaffray 2018 US Fitness Industry Update

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 AUVGrowth(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

Page 21: Piper Jaffray 2018 US Fitness Industry Update

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 CAGR21%

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 CAGR25%

Systemwide Quarterly Same Store Sales Notable Statistics

9%of systemwidesales spent on

marketing

43%of members are gym first-timers

+50%Female

members

$1.8MAverage unit

revenue

35%Unit-Level Margin after 5% Royalty

+25%unlevered cash-

on-cash return on $1.6M avg. inv.

$412MRevenue

(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

40Consecutive

quarters of SSS growth

$173MEBITDA

(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

Page 22: Piper Jaffray 2018 US Fitness Industry Update

22PIPER JAFFRAY

Rise of Boutiques & HVLP | Key HVLP CompetitorsPlanet Fitness 7x the scale of the next largest HVLP operator; only 3 other true HVLP operators at 100+ units

Locations StatesNon-US

CountriesMotto

Nat

iona

lLa

rge

Reg

iona

lN

on-

US

Loca

l Reg

iona

l

Locations StatesNon-US

CountriesMotto

1,432 48 4The world judges.

We don’t.

205 24 Canada No judgements

150 8 SwitzerlandThe City is Your Gym

124 18 -Where you canafford to get fit!

119 14 -Where It’s

All About You

60 4 - Fitness made easy

56 5 - Every body happy

180 - UKWe’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

Page 23: Piper Jaffray 2018 US Fitness Industry Update

23PIPER JAFFRAY

Edge Fitness

Rise of Boutiques & HVLP | HVLP 2nd Largest Operator Market MapPlanet 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

122

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

Page 24: Piper Jaffray 2018 US Fitness Industry Update

24PIPER JAFFRAY

Rise of Boutiques & HVLP | HVLP M&A TransactionsDate 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

Page 25: Piper Jaffray 2018 US Fitness Industry Update

25PIPER JAFFRAY

Rise of Boutiques & HVLP | Boutique M&A TransactionsDate 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

Page 26: Piper Jaffray 2018 US Fitness Industry Update

Section IV

PJC Proprietary Survey Results

Page 27: Piper Jaffray 2018 US Fitness Industry Update

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 6465+

$25-34K

$35-49K

$50-74K

$75-99K

$100-149K

$150-199K$200K+

White

Black

Asian

Hisp./Other

Gym Only

Boutique + GymBoutique 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

Page 28: Piper Jaffray 2018 US Fitness Industry Update

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

Page 29: Piper Jaffray 2018 US Fitness Industry Update

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

Page 30: Piper Jaffray 2018 US Fitness Industry Update

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+

RespondentAge

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

Page 31: Piper Jaffray 2018 US Fitness Industry Update

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 MemberTenure

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

Page 32: Piper Jaffray 2018 US Fitness Industry Update

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

Page 33: Piper Jaffray 2018 US Fitness Industry Update

33PIPER JAFFRAY

Proprietary Survey | Reasons for AttritionFormer 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%

TooExpensive

Moved/NoLonger

Convenient

WantedAnotherType ofExercise

I Felt Out ofPlace

CouldExercise

ForCheaper

Elsewhere

Wasn'tUsing /Going

TooIntimidating

I Met MyFitnessGoals

Nobody IKnew Went

There

LackedAmenities

TooCrowded /No Parking

I Didn'tMeet MyFitnessGoals

No OneThere ToGuide Me

I Didn't LikeTo Exercise

Injury /Surgery /

OtherCondition

I Didn'tKnow Whatto do There

Boutique n=626 Traditional n=143

Source: Proprietary Piper Jaffray consumer survey

Page 34: Piper Jaffray 2018 US Fitness Industry Update

Section V

Capital Markets Update

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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

Page 36: Piper Jaffray 2018 US Fitness Industry Update

36PIPER JAFFRAY

$7

($7)

($24)

($8)

($44)($50)

($32)

($18)

$44

($16)($20)

$20

Q12015

Q2 Q3 Q4 Q12016

Q2 Q3 Q4 Q12017

Q2 Q3 Q40

10

20

30

40

50

0

10

20

30

40

50

60

70

80

90

100

CB

OE

Vol

atili

ty In

dex

Num

ber

of

Dea

ls

IPOsFollow-onsVIX

2015 2016 2017 Weekly Weekly %

Index CY CY CY Close Change Change

S&P 500 (0.7%) 9.5% 15.2% 2578.85 (3.45) (0.1%)

Dow Jones (2.2%) 13.4% 18.2% 23358.24 (63.97) (0.3%)

NASDAQ 5.7% 7.5% 26.0% 6782.79 +31.85 0.5%

Russell 2000 (5.7%) 19.5% 10.0% 1492.82 +17.55 1.2%

CBOE Vol. Index 18.21 14.04 (18.6%) 11.43 +0.14 1.2%

(20%)

(10%)

0%

10%

20%

30%

40% S&P 500Dow JonesNASDAQRussell 2000

Source: Dealogic as of 11/17/2017Data excludes Units, Closed-end Funds, BCC/SPACs and transaction values <$20M

Equity Market Indices

Volatility & Issuance Quarterly Equity Fund Flows ($B)

Capital Markets Update | General Equity Market Update

Page 37: Piper Jaffray 2018 US Fitness Industry Update

37PIPER JAFFRAY

1 1 24 3 3

1 25

2 3 2 1 24

64

2 2 2 2

73

1

4

8

35

56

8

2 53 3

98 11

52

106

12

11

6

5

23

4 2

1

1 8

3

27

52 5160 61

69

51 57

28

56

30 26

6

25 29 25 21

48

2538

$0

$20

$40

$60

0

25

50

75

100

Q12013

Q2 Q3 Q4 Q12014

Q2 Q3 Q4 Q12015

Q2 Q3 Q4 Q12016

Q2 Q3 Q4 Q12017

Q2 Q3 Q4

IPOsCapital ($B)

68

5124

23

17

1512

4 3 Health Care

Technology

Financial

Industrials

Energy & Mining

Consumer

Real Estate

Business Services

Clean Technology

(1%)

0%

25% 26% 28% 31% 32% 39% 43%

Real Estate Energy & Mining Industrials Consumer Business Services Clean Technology Financial Technology Health Care

Source: Dealogic as of 11/17/2017Data excludes Units, Closed-end Funds, BCC/SPACs and transaction values <$20M

AboveIn RangeBelow

Quarterly Activity

Activity & Pricing BreakdownSector Breakdown Since 2016 (# of Deals)

Performance by Sector Since 2016

Capital Markets Update | General IPO Market Update

Page 38: Piper Jaffray 2018 US Fitness Industry Update

38PIPER JAFFRAY

14%

20% 30%

44% 46%

Food Process. & Dist. Apparel / Retailing Leisure Prod. & Svcs. Hotels & Lodging Home & Personal Care

3

1 1

1

1

1

2

1

3

1

0%

25%

50%

75%

100%

Home &Personal Care

Leisure Prod.& Svcs.

FoodProcess. &

Dist.

Apparel /Retailing

Hotels &Lodging

SpecialtyRetailing

4

43

2

11

Home & Personal Care

Leisure Prod. & Svcs.

Food Process. & Dist.

Apparel / Retailing

Hotels & Lodging

Specialty Retailing

2

4 4

6

2

7

2

5

1

6 6

10

3 32 2 2

12

$0

$1

$2

$3

$4

$5

0

2

4

6

8

10

Q12013

Q2 Q3 Q4 Q12014

Q2 Q3 Q4 Q12015

Q2 Q3 Q4 Q12016

Q2 Q3 Q4 Q12017

Q2 Q3 Q4

IPOsCapital ($B)

Source: Dealogic as of 11/17/2017Data excludes Units and transaction values <$20M

Quarterly Activity

Pricing BreakdownSubsector Breakdown Since 2016 (# of Deals)

Performance by Subsector Since 2016

Above In Range Below

Capital Markets Update | Consumer IPO Market Update

Page 39: Piper Jaffray 2018 US Fitness Industry Update

39PIPER JAFFRAY

($ in millions, except per share data) Filing Offer Pricing Deal Market Deal Value / % Price Performance

Date Issuer Range Price vs Range Value Value Market Value Secondary 1-Day 30-Day Current Subsector

11/1/17 Funko Inc $14.00 - 16.00 $12.00 Below $125 $455 27% 0% (41%) --- (38%) Specialty Retailing

10/25/17 National Vision Holdings Inc 18.00 - 20.00 22.00 Above 400 1,243 32% 0% 27% --- 36% Home & Personal Care

8/10/17 YogaWorks Inc 12.00 - 14.00 5.50 Below 40 49 82% 0% (12%) (28%) (53%) Leisure Prod. & Svcs.

6/28/17 Blue Apron Holdings Inc 15.00 - 17.00 10.00 Below 300 1,596 19% 0% 0% (33%) (70%) Food Process. & Dist.

4/26/17 Floor & Decor Holdings Inc 16.00 - 18.00 21.00 Above 213 1,754 12% 0% 53% 102% 83% Home & Personal Care

3/15/17 Canada Goose Holdings Inc 10.50 - 12.00 12.64 Above 290 1,052 28% 68% 27% 27% 98% Apparel / Retailing

3/8/17 J Jill Inc 14.00 - 16.00 13.00 Below 163 569 29% 100% (3%) 3% (57%) Apparel / Retailing

10/27/16 Acushnet Holdings Corp 21.00 - 24.00 17.00 Below 378 1,260 30% 100% 6% 19% 11% Leisure Prod. & Svcs.

10/6/16 Camping World Holdings Inc 21.00 - 23.00 22.00 In Range 261 1,582 17% 0% 2% 0% 93% Leisure Prod. & Svcs.

9/21/16 elf Beauty Inc 14.00 - 16.00 17.00 Above 163 686 24% 52% 56% 58% 18% Home & Personal Care

8/3/16 At Home Group Inc 14.00 - 16.00 15.00 In Range 143 763 19% 0% 0% 2% 47% Home & Personal Care

7/14/16 AdvancePierre Foods Holdings Inc 20.00 - 23.00 21.00 In Range 449 1,417 32% 40% 14% 19% 92% Food Process. & Dist.

5/25/16 US Foods Holding Corp 21.00 - 24.00 23.00 In Range 1,176 3,891 30% 0% 8% 1% 19% Food Process. & Dist.

5/11/16 Turning Point Brands Inc 13.00 - 15.00 10.00 Below 62 106 59% 0% 1% (17%) 67% Leisure Prod. & Svcs.

4/26/16 Red Rock Resorts Inc 18.00 - 21.00 19.50 In Range 579 1,732 33% 1% (4%) 2% 44% Hotels & Lodging

11/19/15 Duluth Holdings Inc 14.00 - 16.00 12.00 Below 92 296 31% 0% 14% 22% 51% Specialty Retailing

9/30/15 Performance Food Group Co 22.00 - 25.00 19.00 Below 317 1,651 19% 12% 1% 20% 52% Food Process. & Dist.

8/5/15 Planet Fitness Inc 14.00 - 16.00 16.00 In Range 248 1,411 18% 32% 0% 16% 88% Leisure Prod. & Svcs.

8/4/15 Amplify Snack Brands Inc 14.00 - 16.00 18.00 Above 270 1,350 20% 100% (10%) (32%) (69%) Food Process. & Dist.

7/21/15 Blue Buffalo Pet Products Inc 16.00 - 18.00 20.00 Above 778 3,921 20% 100% 36% 35% 45% Food Process. & Dist.

7/16/15 MCBC Holdings Inc 13.00 - 15.00 15.00 In Range 105 167 63% 0% 6% 8% 47% Leisure Prod. & Svcs.

7/15/15 Ollie's Bargain Outlet Holdings Inc 13.00 - 15.00 16.00 Above 164 771 21% 0% 32% 24% 188% Specialty Retailing

6/18/15 Fogo de Chao Inc 16.00 - 18.00 20.00 Above 101 457 22% 0% 29% 8% (43%) Restaurants

6/17/15 Fitbit Inc 14.00 - 16.00 20.00 Above 841 3,667 23% 39% 48% 136% (69%) Leisure Prod. & Svcs.

6/11/15 Wingstop Inc 12.00 - 14.00 19.00 Above 127 502 25% 63% 61% 81% 102% Restaurants

6/4/15 DAVIDsTEA Inc 14.00 - 16.00 19.00 Above 111 383 29% 41% 42% 11% (76%) Food Process. & Dist.

5/7/15 Bojangles Inc 15.00 - 17.00 19.00 Above 169 682 25% 100% 25% 29% (32%) Restaurants

4/15/15 Party City Holdco Inc 15.00 - 17.00 17.00 In Range 428 1,600 27% 0% 22% 30% (27%) Specialty Retailing

1/29/15 Shake Shack Inc 14.00 - 16.00 21.00 Above 121 641 19% 0% 119% 105% 78% Restaurants

11/20/14 Peak Resorts Inc 9.00 - 11.00 9.00 In Range 90 36 251% 0% (5%) (12%) (42%) Hotels & Lodging

Mean $290 $1,190 36% 28% 18% 23% 23%

Median $191 $912 26% 0% 11% 18% 40%

Source: Dealogic as of 11/17/2017Data excludes Units and transaction values <$20M

Capital Markets Update | Recent Consumer IPO Updates

Page 40: Piper Jaffray 2018 US Fitness Industry Update

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

Page 41: Piper Jaffray 2018 US Fitness Industry Update

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 ReleaseAdj. EPS: $0.19 vs. expected $0.16Rev.: $97.5M vs. expected $93.6FY GuidanceAdj. EPS: $0.80–$0.82 vs. prior $0.76-$0.78Rev.: $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

Page 42: Piper Jaffray 2018 US Fitness Industry Update

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 ReleaseAdj. EBITDA: ($0.6)MRev.: $12.5MFY GuidanceAdj. EBITDA ($0.5)M-($1.5)MRev. $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 ReleaseAdj. EBITDA: ($0.4)M vs. expected ($0.6M)Rev.: $13.5M vs. expected $12.9MFY GuidanceAdj. EBITDA ($0.5)M-($1.5)MRev. $54.3M-$54.8MNews: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

Page 43: Piper Jaffray 2018 US Fitness Industry Update

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 ReleaseAdj. EBITDA: $6.8M vs. expected $7.5MRev.: $111.4M vs. expected $112.0M

3/7/16: Q4 Earnings ReleaseAdj. EBITDA: $10.00M vs. expected $4.5MRev.: $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 ReleaseAdj. EBITDA: $11.0M vs. expected $12.1MRev.: $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

Page 44: Piper Jaffray 2018 US Fitness Industry Update

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

Page 45: Piper Jaffray 2018 US Fitness Industry Update

45PIPER JAFFRAY

Capital Markets Update | Potential New Investors into Fitness

Category Illustrative Brands Benefits / Rationale to Acquire Fitness Brand

Retailers

ActiveApparel

HospitalityConglomerates

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

Page 46: Piper Jaffray 2018 US Fitness Industry Update

Section VI

Closing Remarks

Page 47: Piper Jaffray 2018 US Fitness Industry Update

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

Page 48: Piper Jaffray 2018 US Fitness Industry Update

Section VII

Piper Jaffray Consumer Team Overview

Page 49: Piper Jaffray 2018 US Fitness Industry Update

49PIPER JAFFRAY

5141

3834

3222

211919

18

Piper JaffrayRobert W BairdHoulihan Lokey

William BlairHarris Williams

JefferiesMoelis

JP MorganGoldman 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 by has 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 beenacquired by

September 2017

has beenacquired by

December 2017

has beenacquired by

December 2017

Has made a significantInvestment in

December 2017

Piper Jaffray has built the largest and fastest-growing consumer M&A franchise in the middle market

has beenacquired by

November 2017

has beenacquired by

November 2017

has received a significant investment

from

November 2017

Sunshine Fitness

Honors Holdingsan area representative of

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50PIPER JAFFRAY

Restaurants

1. Healthy, active & sustainable living logos include Partnership Capital Growth deals

PJC Consumer | Global Consumer GroupWith 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

DamonChandik

CarlosSanchez

BrianSmith

MattRoghair

JanicaLane

ToshDhanalal

Thomas Ragsdale

MichaelHoffman

Joel Schneider, Head of Consumer Equity Capital Markets

Damon Chandik, Global Group Co-Head

John Twichell, Head of Consumer M&A

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51PIPER JAFFRAY

PJC Consumer | Recent Consumer Transactions

Initial Public Offering

Joint BookrunnerApril 2017

$213,088,000

ABL Facility, Euroline, Senior Term Loan,

Subordinatd Debt and HoldCo PIK note

Sole Placement AgentJune 2017

Has been acquired by Merit Capital

Sell-Side AdvisorJune 2017

Has been acquired by Lion Capital

Sell-Side AdvisorJune 2017

Has been sold to Max Brenner Israel

Sell-Side AdvisorMay 2017

Has been acquired by Lavazza

Sell-Side AdvisorMay 2017

Follow-On Offering

Joint BookrunnerMay 2017

$72,450,000

Has received an equity investment from Dean

Foods Company

Sell-Side AdvisorMay 2017

Has been acquired by Oak Hill Capital

Partners

Sell-Side AdvisorMarch 2017

Follow-On Offering

Joint BookrunnerMarch 2017

$258,957,000

Has been acquired by CircusTrix, a portfolio company of Palladium

Equity Partners

Sell-Side AdvisorMarch 2017

Has been acquired by Castanea Partners

Sell-Side AdvisorMarch 2017

Has been acquired by Maple Leaf Foods

Sell-Side AdvisorMarch 2017

Has been acquired by Glanbia

Sell-Side AdvisorFebruary 2017

Has been acquired by Walmart

Sell-Side AdvisorFebruary 2017

Has received an investment from

TPG Growth

Sell-Side AdvisorSeptember 2017

Has been acquired by Freeman Spogli

Sell-Side AdvisorSeptember 2017

Has received a significant investment from Butterfly Equity

Sell-Side AdvisorAugust 2017

Has been acquired by Landry’s Inc.

Sell-Side AdvisorAugust 2017

Has acquired Nutraceutical International

Buy-Side AdvisorAugust 2017

Sell-Side AdvisorSeptember 2017

Has been acquired by TA Associates

Has been acquired by Otsuka Pharmaceutical

Sell-Side AdvisorAugust 2017

Follow-On Offering

Joint BookrunnerJuly 2017

$428,742,000

Has been acquired by Kellogg

Sell-Side AdvisorOctober 2017

Has been acquired by Nestle

Sell-Side AdvisorNovember 2017

Has received a significant investment

from Brentwood Associates

Sell-Side AdvisorNovember 2017

Has been acquired by Premium Brands

Sell-Side AdvisorNovember 2017

Follow-On Offering

Joint BookrunnerNovember 2017

$269,100,000

Initial Public Offering

Joint BookrunnerNovember 2017

$125,000,000

Has been acquired by Colgate-Palmolive

Company

Sell-Side AdvisorDecember 2017

Has made a significant investment in Sunshine

Fitness

Buy-Side AdvisorDecember 2017

Has been acquired by J.W. Childs

Sell-Side AdvisorDecember 2017

Honors Holdingsan Area Rep for

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52PIPER JAFFRAY

PJC Consumer | Recent Consumer Transactions (continued)

Has received a growth equity investment from Roark Capital Group

Sell-Side AdvisorFebruary 2016

Follow-On Offering

Joint BookrunnerFebruary 2016

$178,817,000

Has made a significant investment in Revzilla

Buy-Side AdvisorFebruary 2016

Has been acquired by General Mills

Sell-Side AdvisorJanuary 2016

Has been acquired by Perpetual Capital

Partners

Sell-Side AdvisorDecember 2015

Has been acquired by Northwest Equity

Partners

Sell-Side AdvisorDecember 2015

Has been acquired by Church & Dwight & Co.

Sell-Side AdvisorFebruary 2016

Has received a majority investment from TA

Associates

Sell-Side AdvisorMay 2016

Has been acquired by Lonza Group

Sell-Side AdvisorAugust 2016

Has been acquired by Hormel

Sell-Side AdvisorMay 2016

Has received a strategic investment from Hearst Ventures

Sell-Side AdvisorApril 2016

Follow-On Offering

Co-ManagerMay 2016

$112,500,000

Follow-On Offering

Joint BookrunnerJune 2016

$349,393,000

Follow-On Offering

Joint BookrunnerJune 20416

$189,750,000

Has been acquired by L’Oreal

Sell-Side AdvisorJuly 2016

Has received an investment from Roark

Capital

Sell-Side AdvisorJune 2016

Has been acquired by Aterian Investment

Partners

Sell-Side AdvisorOctober 2016

Has made an investment in OTG

Management

Buy-Side AdvisorSeptember 2016

Has been acquired by Conagra

Sell-Side AdvisorSeptember 2016

Initial Public Offering

Joint BookrunnerSeptember 2016

$162,917,000

Has been acquired by L Catterton

Sell-Side AdvisorAugust 2016

Has been acquired by Estée Lauder Companies

Sell-Side AdvisorNovember 2016

Follow-On Offering

Joint BookrunnerNovember 2016

$119,025,000

Has been acquired by Linden

Sell-Side AdvisorDecember 2016

Has been acquired by Nagatanien

Holdings Co.

Sell-Side AdvisorDecember 2016

ABL, 1st % 2nd

Lien Debt

Sole Placement AgentDecember 2016

$310,000,000

2nd Lien Debt

Sole Placement AgentJanuary 2017

Has been acquired by Smithfield Foods

Sell-Side AdvisorJanuary 2017

Fairness Opinion for sale to Golden Gate

Capital

Financial AdvisorJanuary 2017

Has been acquired by Unilever

Sell-Side AdvisorFebruary 2017

Has been acquired by Cerberus Capital

Management

Sell-Side AdvisorJanuary 2017

Has been acquired by Sovos Brands, a

portfolio company of Advent International

Sell-Side AdvisorFebruary 2017

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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.