Working out Basic Fit's Value with Buckley Capital's Zack Buckley $BFIT

Episode Summary

Executive Summary: The podcast argues Basic Fit is a misunderstood European gym roll-up with strong local-cluster economics, temporary COVID-era operating missteps, and a near-term earnings inflection driven by better member trends, 24/7 rollout in France, and eventual cost normalization. Zach Buckley believes consensus is too low and that the stock can re-rate materially if management executes and the business beats expectations over the next 12-24 months.

Main Topics: Why Basic Fit has lagged despite a strong concept (Priority: 5/5): The stock has been flat/down for years because Basic Fit repeatedly missed overly optimistic investor-day targets, largely due to opening too many gyms during COVID and suffering poor member experience, weak reviews, and disrupted operations. Unit economics and fortress strategy (Priority: 5/5): Basic Fit is framed as the European version of Planet Fitness: low-cost gyms, clustered openings in the same city, and local scale advantages that create quasi-monopoly economics and recurring member convenience. 24/7 France investment as a catalyst (Priority: 5/5): The company invested about €35 million to keep ~330 French gyms open 24/7, which should boost memberships and potentially be partly offset if staffing laws change to allow staffless operation. Forecast reset and upside to consensus (Priority: 5/5): Zach argues consensus estimates are too conservative after being cut by about €60 million for 2026 EBITDA versus a year ago, and he sees room for a beat-and-raise cycle as the business normalizes. Capital allocation and growth discipline (Priority: 4/5): Management should balance opening roughly 100 gyms per year with buybacks; Zach thinks opening gyms is high-return but warns against re-accelerating too quickly after the COVID-era overexpansion. Management quality and lessons from Exponential Fitness (Priority: 4/5): Zach defends CEO René Moos and argues specialized gym operators matter; he contrasts Basic Fit with Exponential Fitness, where management turnover harmed execution despite sound underlying business research. European market and local competition (Priority: 4/5): Basic Fit’s European markets are underpenetrated versus the U.S., but competition remains local and dynamic; the moat comes from density, convenience, and brand scale rather than complete immunity to competitors.

Key Arguments: Basic Fit underperformed because 2020-2022 openings had bad unit economics versus the 2016-2019 cohort, not because the core concept is broken. The current member trend is improving, supported by alt data and management commentary, suggesting the business is entering a beat-and-raise phase. Clustered gym openings create local scale advantages, better marketing efficiency, and a convenience moat similar to Domino’s or cable. The 24/7 France initiative can raise membership materially, and legislation changes could make much of the €35 million spend economically attractive. Maintenance capex concerns are overstated because gym build-outs include longer-lived assets beyond equipment (walls, flooring, showers, etc.). Franchising may help, but it is unlikely to be a major value driver versus corporate-owned growth in the next 3-5 years. At current levels, the stock appears to trade at a very low multiple of forward free cash flow, making downside limited if execution remains stable. The biggest risks are another COVID-like disruption, a return to poor execution, or management again growing too quickly. Basic Fit and Planet Fitness are similar concepts, but Basic Fit has more room to grow in Europe because gym penetration is lower than in the U.S.

Data Points: Current stock price: ~€25 - Used as the reference price for discussing upside to Zach’s target. Implied fair value / target price: ~€90 per share - Zach’s rough multi-year target based on free cash flow and valuation re-rating. Longer-term fair value estimate: ~€60 per share - Andrew notes Zach’s prior framing that fair value today is around €60 over a 10-year lens. Build-out cost per gym: ~$1.3 million - Average capex to open a Basic Fit club. Cash flow per gym: ~$400k-$450k free cash flow per unit - Estimated steady-state unit economics per gym. Target return on invested capital: ~30% - Management’s stated goal for new gyms. 24/7 France investment: €35 million - Capital deployed to keep about 330 French gyms open 24/7. Potential cost recovery from France staffing change: ~€30 million - If gyms can become staffless, much of the incremental cost could be reversed. 24/7 member lift in Spain: ~30% more members per gym - Spanish country manager’s anecdotal observation on 24/7 gyms. Google review gap: ~3.3-3.5 vs ~4.2 average - Zach’s estimate comparing Paris gyms with Barcelona gyms. Google review cadence: ~4 reviews/day - About two reviews per shift manager, roughly four reviews across two shift managers per day. Estimated EBITDA contribution from 24/7 and related actions: ~€65-70 million cumulatively - Zach’s rough sum of several operational improvement buckets. EBITDA from 24/7 gyms: ~€28 million - Estimated benefit from 24/7 operation, per Zach’s calculations. Consensus EBITDA for 2026: ~€390 million - Zach says consensus has fallen to this level. Prior consensus EBITDA for 2026: ~€450 million - Consensus from late 2024 before estimate cuts. Forward FCF estimate: ~€350-400 million in 2025; ~€450-550 million in 2027 - Zach’s conservative free cash flow framework. Valuation multiple: ~15x FCF target; current multiple ~5-6x 2027 FCF - Basis for his upside thesis. Net debt: ~€1.0 billion - Discussed in relation to market cap and enterprise value. Market cap: ~€1.6 billion - Approximate equity value discussed in the podcast. Enterprise value: ~€2.6 billion - Market cap plus net debt. Club count: ~1,600+ clubs - Approximate number of Basic Fit gyms referenced. Franchise value contribution: ~5%-10% of business value - Zach thinks franchising will be helpful but not a major driver. Annual opening pace advocated: ~100 gyms/year - Preferred measured pace for corporate expansion.

Pivotal Quotes: "I think there's been so much negativity around the name the last four years that most, almost everyone, has thrown in the towel." — Zach Buckley: Explaining why Basic Fit may now be mispriced despite years of underperformance. "You have that fortressing strategy, really does create like a local monopoly." — Andrew Walker: Summarizing the investment case around dense cluster openings and convenience. "I think consensus estimates are correct for 2026 is hard for me to get to a place where consensus estimates are correct for 2026." — Zach Buckley: Zach’s view that the market is too pessimistic on near-term earnings.

Implications: Basic Fit may be at an inflection point: if member growth and France 24/7 benefits continue, the stock could rerate sharply from depressed levels. The thesis hinges on disciplined execution and no repeat of the COVID-era growth mistakes.