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Slide 1: Jeff Skeen Founder of Titan Fitness and accomplished Health and Fitness Industry Leader 1
Slide 2: Jeff Skeen “I Didn’t Think It Would Be a Career”  1992, became partner in Gold’s Gym in Fairfax,VA.  1992-1998, grew from one club to 11 in four states  1998, hired PricewaterhouseCoopers to secure capital to purchase GGE now know as GGI.  1999-2004, served as principal and CIO of GGI  2004 , founded Titan Management Solutions, a consulting company to assist Gold’s Gym franchisees open new stores and improve operations  Opened a facility with more than 7,000 memberships in pre-sales  Turned chain operating at a loss of $1M per year to a projected annual profit of more than $700k within three months; successfully sold the chain five months later  2007, found Titan Fitness, an investment company dedicated to purchasing and opening gyms under the Gold’s Gym brand 2
Slide 3: Titan’s Long-Term Vision  Build a chain of 60+ clubs in 4 – 6 markets  11/07 purchased 8 in Minneapolis  12/07 purchased 6 in Raleigh  Buy first – both Gold’s branded and non-Gold’s clubs/chains  3+ locations  $1.5 million adjusted EBITDA  Keep management in place to continue to grow out the market  Then build – establish/enhance brand leadership in acquired markets by building top notch clubs 3
Slide 4: Leveraging Technology to Drive Profitability  Value of Using Technology to Drive Profitability  Technology’s Impact on Three Components of Club Health  Setting Up Your Organization for Optimal Club Efficiency 4
Slide 5: State of the Union: Health & Fitness Industry  Our industry characteristics are extremely appealing  Strong growth / recession resistant / stable  Highly fragmented  Excellent economics and cash flows  Our industry has been discovered  Heavy inflow of private and public capital in 2000’s  Run of M&A activity  Well-funded platforms consolidating and building new gyms  Our world has dramatically changed  Continued growth and consolidation – required by private and public investors  Skill sets required to compete have changed  Cost to be in the business has dramatically changed  Technology is critical 5
Slide 6: Value of Using Technology to Drive Profitability 6
Slide 7: Value of Technology to Drive Profitability  Run your club like any other business  Focus on operating each club more effectively not solely on revenue  Technology is a critical element that provides the data and information clubs need to grow as well as tools to leverage staff’s time  Analyzing the data captured by software and other technologies can help identify ways to maximize productivity, increase efficiency and drive profitability 7
Slide 8: Data Analytics  Data is not useful until it becomes information  What does the following data mean to you:  Chain of gyms haa a 40% Corporate EBITDA  Maximum number of members per square foot in a gym is 4  A gym’s payroll is 17% of Revenue  A 7,000 sqft facility has a four wall EBITDA of $300,000  A facility has $5 millions+ dollars in revenue  50% of a gym’s dues billings are billed using credit card  Gym purchased for 7 times EBITDA  Until you have a way to evaluate your gyms performance to others, if you can improve your business. 8
Slide 9: Data Analytics  What are tools you can use to evaluate your data?  IHRSA – Profiles of Success  Billing Company – CheckFree has thousands of facilities in their database  Other operators and consultants  Business Intelligence – Tool used show data in a useful manner 9
Slide 10: Business Intelligence Tool Need to blurr data 10
Slide 11: Billed vs. Collected Rates (Average) Active Members Club Size Average Collection Rate (Average Collection Rate of Clubs with Collection Rates Lower than the Overall Average) 72.3% 62.8% 57.0% 89.7% 89.6% 89.5% Low Mean (Average Collection Rate of Clubs with Collection Rates Higher than the Overall Average) 99.4% 99.7% 99.1% 99.0% 98.4% 98.7% High Mean < 100 101 – 500 501 – 1000 1001 – 5000 5001 – 10000 > 10000 94% 92% 90% 97% 96% 96% 11
Slide 12: Technology’s Impact on Three Components of Club Health 12
Slide 13: Technology’s Impact on Club Health  Business Health  Member Health  Societal/Community Health 13
Slide 14: Technology’s Impact on Business Health  Allows you to view performance in real-time  Running standard daily reports can help identify potential issues and take swift corrective action. Can be as simple as:  “No entry” reports  Credit expiration reports  Analyzing expense and revenue reports can help you find areas where you need to focus  Bid where appropriate  Using data captured through software applications such as accounting, billing and membership management systems to fine-tune club operations  Accurate records help maximize selling price and save time when in the market to sell 14
Slide 15: Technology’s Impact on Member Health  Clubs must have technology in place to help members achieve their personal goals.  Caring about members pays off (have them blame you for their success):  Increased retention  Protects against when competitor enters market  There are many tools / technologies a club can use to help members accomplish their objectives and track their success  Health assessments  Nutritional / meal programs  Personal training 15
Slide 16: Technology’s Impact on Societal/Community Health  The poor health of Americans continues to drive the prevalence of chronic disease in the United States  The increasing prevalence of chronic disease is having an astronomical financial impact on the United States. Costs are in the trillions.  Wellness and health promotion programs are showing positive results  An effective health improvement program needs to take an integrated approach and focus on improving lifestyles 16
Slide 17: Health clubs will become integral to preventive health, disease management, and lifestyle improvement programs  Health club works in unity with wellness programs, physicians, dieticians, and other specialists to personalize lifestyle improvement programs  Utilizes technology to test members, measure progress, and securely share data with appropriate parties  Results and other data supplements traditional medical data to form a more comprehensive “health picture” Source: Briefing, “The Conexion Solution” 17
Slide 18: Value Proposition* Impact of Diabetes $132,000,000,000 Example Number of Diabetics in the U.S. Cost Per Diabetic Reduction In Claim Cost Share In Savings Share to the Consumer, Employee, Employer, Provider, Health Program, Gym 17,000,000 $7,765 $388 $388 % of Diabetics That Can Be Helped AssumptionsTotal Share in Savings Available ($388 x 1.7M)  Lifestyle improvements reduce medical claim costs by 5%  10% of the diabetic population can be helped 1,700,000 $659,600,000 *Provided by Deloitte Consulting 18
Slide 19: Setting Up Your Organization for Optimal Efficiency 19
Slide 20: Setting Up Your Organization for Optimal Efficiency  There are a number of technological products available. Be careful not to overwhelm staff with the implementation of new systems  Strategically implement proven operational and technological systems  Evaluate return on investment to determine if worthwhile  Establish relationship with preferred vendor partners. Vendors have been exposed to many different ways of using their systems. 20
Slide 21: Challenges Finding Right Software Solution  Looking for solutions within the health and fitness industry:  Software companies are small with low employee count and minimal support staff  Greater possibility of company failure  Limited ability to create wide breath of successful product lines  Limited resources to improve core products  Looking outside the industry:  More expensive  Lack of attention due to perceived limited opportunity  Not focused on specific health club needs 21
Slide 22: Choose the Right Tools to Support Your Business, Staff and Members  Qualities of a Successful Software Solution. Should assist in:  Increasing revenues or decreasing expenses  Making staff more effective in completing their jobs  Allowing management insight to business performance  Improving ability to collect dues and keep the money you have earned  Improving member retention by offering services to improve the member experience 22
Slide 23: Example of an Increase in Profitability – Nutrition/Weight Management Division Variables: New clients per month Supplements Weight Mgt Supplement Fees: Enrollment On-going Monthly Attrition Weight Management Fees Annual Increase in EBITDA (Beginning 3rd Year): Revenue Expenses Annual EBITDA System One-time setup Costs: $ $ $ 315,917 160,759 155,157 9,545 $ $ $ 35 11 75 45 10% 315 23
Slide 24: Example of an Decrease in Expenses – Time & Attendance System (Biometric) Variables: 50 employees $10 per hour wage 1% error factor $1,000 setup fee $2.50 per month per employee fee Annual Savings due to accuracy/labor reduction Human Error Factor Savings $ Auditing Savings Corrected Time & Leave Data Entry Savings Lost Time Savings Gross Weekly Savings $ Gross Annual Savings $ 309 50 10 25 267 661 34,353 System Costs Setup (one time) Annual On-going: 24 Employee Fee Time clock rental $ 1,000 1,500 2,400
Slide 25: Example of an Decrease in Expenses – Business Intelligence (Replace Excel) Variables: Hourly rates Regional Ops GM OM $ $ $ 29 per hour 37 per hour 11 per hour Note: includes 10% increase for taxes and benefits Time allotment Ongoing Regional Ops General Mgr Operations Mgr 4 hr per month per gym 15 hr per month per gym 30 hr per month per gym Annual Savings Due to reduction in labor: 25 Regional Ops $ 116
Slide 26: Example of an Decrease in Expenses – Billing Fees Variables: Annual Dues Billing Fees Fee Reduction Annual Savings $ $ 1,200,000 5% 10% 6,000 26
Slide 27: Additional ROI Considerations for Outsourced Billing & Gym Software  No incentive to steal  More effective in collecting money  Significant investment in gym management software & billing systems  No one person responsible for billing or software functions  Possible evaluation of business against large database of gyms  PCI compliance protects against possible fines
Slide 28: Summary - Impact to Value of Business Category Nutrition/Weight Mgt Division Time & Attendance System Business Intelligence Reduction in Billing Fees $ Improvement 155,157 30,453 12,020 6,000 Annual Improvement to EBITDA Purchase multiple of 4 times Less: System implementation Costs Increased Gym Value $ $ 203,630 814,520 (10,545) $ 803,975 28
Slide 29: Contact Information IHRSA Technology Summit was sponsored by: www.checkfreecompete.com 29