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Piper Jaffray 2018 US Fitness Industry Update

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A great report by Piper and Brian Smith on transactions and trends in the US health club brand space in 2018.

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Piper Jaffray 2018 US Fitness Industry Update

  1. 1. Fitness Industry Update January 2018
  2. 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. 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
  4. 4. Section I Executive Summary
  5. 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. 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
  7. 7. Section II Fitness Industry Overview
  8. 8. 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 $30 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 Since 1996, fitness has grown 3.5x versus GDP of 2.4x (42% higher); growth sustained through recessions Source: International Health, Racquet & Sports club Association (“IHRSA”); GDP growth per Worldbank; projected industry growth per IBISWorld 20-Year CAGR 5-Year CAGR 6.4% 5.6% Projected Growth (’17-’21) 2-3% Recession Recession Recession Recession U.S. Fitness Industry Revenue ($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
  9. 9. 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% Recession Recession Recession Recession 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%
  10. 10. 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 $500 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 Avg. spend per member CAGR of 2.2% since 1996 with last 5 years at 3.5%; current fitness spend % of GNI per capita below historical average Source: International Health, Racquet & Sports club Association (“IHRSA”); GNI per capita per Worldbank, Atlas method 20-Year CAGR 5-Year CAGR 2.2% 3.5% Recession Recession Recession Recession Annual Fitness Spend per Member ($) 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 Spend per Member ($)
  11. 11. 11PIPER JAFFRAY 1.47 1.41 1.54 1.52 1.68 1.72 1.65 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 Growth Unit 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 Recession Recession Recession Recession Recession Recession 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%)
  12. 12. Rise of Boutiques and HVLP Section III
  13. 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. 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. 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. 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. 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. 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. 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. 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. 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 $21.99 anticipated to boost future SSS
  22. 22. 22PIPER JAFFRAY Rise of Boutiques & HVLP | Key HVLP Competitors Planet Fitness 7x the scale of the next largest HVLP operator; only 3 other true HVLP operators at 100+ units Locations States Non-US Countries Motto NationalLargeRegionalNon-US LocalRegional Locations States Non-US Countries Motto 1,432 48 4 The world judges. We don’t. 205 24 Canada No judgements 150 8 Switzerland The City is Your Gym 124 18 - Where you can afford to get fit! 119 14 - Where It’s All About You 60 4 - Fitness made easy 56 5 - Every body happy 180 - UK We’re here for everybody 95 - UK Find your fit 78 - UK Energie for life 39 3 - We’re all about you 37 3 - Well-rounded and inspiring approach to fitness 26 9 - We get you 23 3 - Better gym. Better price. 23 2 - Uplift everyone through fun, happy fitness 22 3 - Less Attitude. More Fitness 14 2 - Love your sweat / Get an EDGE in life 9 1 - Families working out together Only portion is HVLP
  23. 23. 23PIPER JAFFRAY Edge Fitness Rise of Boutiques & HVLP | HVLP 2nd Largest Operator Market Map Planet Fitness the #1 operator in all but two states; high fragmentation for #2 HVLP operator across US Youfit Chuze Crunch Fitness 19 XSport Fitness Connection Retro Fitness EOS Fitness Fitness Evolution Vasa Fitness Blast Fitness 1331 3 7 3 8 15 48 13 6 2 6 2 4 2 1 22 21 7 7 2 14 43 43 4 2 1 2 2 11 8 67 Is the #1 market operator by # of clubs in all but Northern California and Utah Identifies the #2 market operator, clubs (#1 in NorCal and Utah) 7
  24. 24. 24PIPER JAFFRAY Rise of Boutiques & HVLP | HVLP M&A Transactions Date Target Acquirer Fund Size ($ 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) $300 Note: Planet Fitness went public in August 2015 by TSG Consumer
  25. 25. 25PIPER JAFFRAY Rise of Boutiques & HVLP | Boutique M&A Transactions Date Target Acquirer Fund Size ($ 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
  26. 26. Section IV PJC Proprietary Survey Results
  27. 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. 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. 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. 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. 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. 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. 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
  34. 34. Section V Capital Markets Update
  35. 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
  36. 36. 36PIPER JAFFRAY $7 ($7) ($24) ($8) ($44) ($50) ($32) ($18) $44 ($16) ($20) $20 Q1 2015 Q2 Q3 Q4 Q1 2016 Q2 Q3 Q4 Q1 2017 Q2 Q3 Q40 10 20 30 40 50 0 10 20 30 40 50 60 70 80 90 100 CBOEVolatilityIndex NumberofDeals IPOs Follow-ons VIX 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 500 Dow Jones NASDAQ Russell 2000 Source: Dealogic as of 11/17/2017 Data 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
  37. 37. 37PIPER JAFFRAY 1 1 2 4 3 3 1 2 5 2 3 2 1 2 4 6 4 2 2 2 2 7 3 1 4 8 3 5 5 6 8 2 5 3 3 9 8 11 5 2 10 6 12 1 1 6 5 2 3 4 2 1 1 8 3 27 52 51 60 61 69 51 57 28 56 30 26 6 25 29 25 21 48 25 38 $0 $20 $40 $60 0 25 50 75 100 Q1 2013 Q2 Q3 Q4 Q1 2014 Q2 Q3 Q4 Q1 2015 Q2 Q3 Q4 Q1 2016 Q2 Q3 Q4 Q1 2017 Q2 Q3 Q4 IPOs Capital ($B) 68 51 24 23 17 15 12 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 11/17/2017 Data excludes Units, Closed-end Funds, BCC/SPACs and transaction values <$20M Above In Range Below Quarterly Activity Activity & Pricing BreakdownSector Breakdown Since 2016 (# of Deals) Performance by Sector Since 2016 Capital Markets Update | General IPO Market Update
  38. 38. 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. Food Process. & Dist. Apparel / Retailing Hotels & Lodging Specialty Retailing 4 4 3 2 1 1 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 1 0 3 3 2 2 2 1 2 $0 $1 $2 $3 $4 $5 0 2 4 6 8 10 Q1 2013 Q2 Q3 Q4 Q1 2014 Q2 Q3 Q4 Q1 2015 Q2 Q3 Q4 Q1 2016 Q2 Q3 Q4 Q1 2017 Q2 Q3 Q4 IPOs Capital ($B) Source: Dealogic as of 11/17/2017 Data excludes Units and transaction values <$20M Quarterly Activity Pricing BreakdownSubsector Breakdown Since 2016 (# of Deals) Performance by Subsector Since 2016 Above In Range Below Capital Markets Update | Consumer IPO Market Update
  39. 39. 39PIPER JAFFRAY ($ 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 11/17/2017 Data excludes Units and transaction values <$20M Capital Markets Update | Recent Consumer IPO Updates
  40. 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. 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. 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. 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. 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. 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
  46. 46. Section VI Closing Remarks
  47. 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
  48. 48. Section VII Piper Jaffray Consumer Team Overview
  49. 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. 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. 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. 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. 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.

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