Fast Fitness Japan Incorporated Q1 FY2026 earnings call

Business Overview & Market Context

• The company operates with a dual growth engine: core domestic AnyTime Fitness business, and three new growth segments: overseas AnyTime Fitness, new boutique brand The Bar Method, and EC/physical product sales, now in the growth phase after launch in 2025 March fiscal year.
• The domestic Japanese fitness market is recovering strongly post-COVID, reaching 538.9 billion yen in 2024, up 10.3% YoY, with fitness participation reaching just over 5%, adding ~1.24 million new participants for every 1% increase in participation. AnyTime Fitness holds a leading position in the fast-growing 24-hour gym category, differentiated from low-price competitors via a value-focused model.

Core Domestic Business Highlights

• Hit key milestones: 100 million domestic members surpassed in May 2025, 1,200 domestic stores surpassed in June 2025, with the full year 2025 branded as "AnyTime YEAR!" with ongoing celebratory marketing campaigns.
• The 4th national promotion campaign (TV, connected TV, web, SNS) run in June-July 2025 lifted brand recognition to 62.4%, up from below 50% a few years prior. Average members per store topped 850, and June 2025 new signups hit 75,000+, a new record up 25% YoY, with double-digit growth continuing in July, and churn remaining at very low levels. The company's core strategy focuses on increasing lifetime value (LTV) of members.
• Full year 2026 March fiscal year plans call for 71 new stores: 11 directly operated, 60 franchise. 15 new stores opened in 1Q, 6 stores closed (3 directly operated stores converted to franchise), for a net 12 store increase from the prior quarter end. Domestic store mix is 15% directly operated, 85% franchise, aligned with member mix of 14% / 86%.

New Growth Segment Operational Progress

• Overseas: Germany's new second directly operated store opened with over 2,000 initial members, 3 more stores are contracted, but openings are slightly delayed due to longer than expected construction permitting timelines. Singapore serves as a global hub for operational learning and talent development, with a new third store opened on a university campus driving strong initial signups.
• The Bar Method: Building out operations and instructor training for the barre-focused workout concept, targeting new customer demographics, with plans to scale and franchise long-term leveraging AnyTime Fitness's expansion expertise.
• EC Business: Launched own-brand protein with strong initial demand, will introduce an affiliate program for all domestic stores (direct and franchise) starting in the second half of the fiscal year, paying ongoing margins to stores that drive online purchases to diversify store revenue streams.

1. Domestic AnyTime Fitness: The core segment, reached 1,206 total stores (up 57 stores year-over-year) and 1,027,000 total members as of 1Q. Drove 4.9 billion yen in consolidated revenue (up 15.9% YoY), contributing 98% of total company revenue, with 86.9% of total company revenue coming from stable recurring stock revenue (royalty income from franchise stores + membership dues from directly operated stores), up 3.5 percentage points from the prior period. Operating profit for the segment grew 40.8% YoY to 877 million yen. New growth segments combined account for only ~2% of total revenue. 2. Overseas AnyTime Fitness: In Germany, the company holds master franchise rights, operates 2 directly operated stores with 2,000+ members at the newly opened second store. Three additional directly operated stores are contracted and awaiting permitting, and 3 franchise agreements are already signed. In Singapore, 3 stores are now in operation, with the third opened in July 2025 on the Nanyang Technological University campus. 3. The Bar Method: 2 stores are currently open (Jiyugaoka opened November 2024, Futakotamagawa opened June 2025), focused on expanding to a new female-led customer demographic. 4. EC/Product Sales: Launched official online store A PROP in December 2024, launched A PROP WHEY PROTEIN in July 2025. In the first 10 days of protein sales, protein accounted for over 20% of total sales, with 60%+ of buyers being new customers and half opting for recurring subscriptions.

• Management reaffirmed the 3-year 9.6 billion yen total mid-term investment plan, with cumulative investment reaching 4.58 billion yen after 1Q, progressing in line with plan, focused on core domestic growth plus new segment investment.
• Full year dividend guidance is maintained at 45 yen per share, in line with the company's policy of targeting 40% payout ratio with a 4.5% return on equity lower bound.
• Management expects the impact of June-July 2025 promotion new member signups to flow through to profit starting in 2Q, with stronger performance expected in the second half of the full year compared to the first half. As of 1Q, the company is ahead of the lower end of full year projections, with a solid cumulative start to the fiscal year.
• Germany's expansion plan maintains the target of opening multiple additional directly operated and franchise stores in the current fiscal year, though opening timelines for contracted stores are expected to be slightly delayed.

• New store openings in Germany face permitting delays, as construction permitting typically takes multiple months in the country, pushing back planned opening dates for three contracted directly operated stores from the original 2025 calendar year schedule.
• New growth segments (overseas, The Bar Method, EC) remain in an early stage investment phase, continuing to generate upfront costs that pressure near-term consolidated margins, though total investment spending has leveled off after frontloaded investment in the prior fiscal year.
• Ongoing marketing investment for national promotion increases near-term selling general and administrative costs, which suppresses near-term profit even as it drives long-term member base growth.

Q: Why did 1Q operating profit not reach the level seen in 2024 March fiscal year 1Q, is it due to higher labor, materials and advertising costs? / A: The primary factor is increased advertising spend for national promotion campaigns. 2024 March fiscal year 1Q had no national promotion expense, while the current 1Q ran the 4th major national campaign to drive brand growth. New members gained in June and July will not contribute to profit until August and September respectively, so larger profit contributions from this member growth will start in the second half of 1Q. Management expects higher profit contribution from domestic business starting in the second half of the fiscal year.

Q: How does 1Q performance compare to full year guidance expectations? / A: Management does not disclose quarterly guidance, so it cannot share detailed breakdowns. The promotional gains from June-July will benefit later quarters, with the full year plan already structured for a stronger second half. Based on the full year lower bound target, 1Q performance is solid and the company is on track entering the rest of the year.

Q: What is the overseas store expansion strategy, will it follow the direct-to-franchise model used domestically? / A: For Germany, where the company holds master franchise rights, the plan mirrors the domestic Japanese expansion model. Currently, brand recognition is low with only 2 stores open, so the first step is to build a dominant presence around Dusseldorf with 4-5 directly operated stores plus ~2 franchise stores. Once this base is established, expansion will move to new regions. Directly operated stores lead initial market entry to prove the model, similar to domestic expansion, and there is already strong interest from prospective franchisees, with the company gradually adding qualified new partners.

Q: Why is royalty revenue growing much faster than franchise store count, does this relate to the app access pass change? / A: Yes, this mismatch is explained by the access pass accounting change. Previously, members purchased physical keys that were counted as product revenue for franchise sales, now the app-based access pass is counted as royalty revenue. This shifts revenue classification from product sales to royalty income, explaining the faster growth rate for royalty revenue. Franchise royalties are structured to incentivize growth: franchisees pay a fixed base royalty, and keep all additional profit once member counts exceed a fixed threshold, which creates strong incentives for franchise growth.