Viva Leisure's strategic investment in Boutique Fitness Studios

Viva Leisure (ASX:VVA) has announced a binding agreement for a strategic investment of 34% of Boutique Fitness Studios (BFS) valued at approximately $2 million. The investment will be funded from existing cash reserves and bank facilities. BFS, the Australian and New Zealand Master Franchisee of four brands from Xponential Fitness, will make Viva the largest shareholder in BFS post completion of the transaction. The investment also includes an option for Viva to acquire the entire business within 24 months at a pre-determined value. The BFS founders will continue to drive the business and launch in New Zealand, further diversifying Viva's business and taking advantage of the strong growth trajectory BFS is currently achieving. The investment also paves the way for the implementation of Viva technology across the BFS network in the future, including Viva Pay and The Hub, with an opportunity for the inclusion of the BFS brands into the Viva Pass product that is currently under development and will be launched in H2-FY2025. The completion of the transaction is expected before the end of September 2024.

Executive Commentary on the Strategic Investment

The investment into BFS expands Viva's network to over 400 locations across multiple disciplines and brands, enhancing our diverse offering while simultaneously introducing a new market for Viva Pay and other Viva technologies. This strategic move aligns with our focus on replicating successful growth strategies across all segments of the fitness market and presents significant synergy opportunities. We are confident in the potential for further revenue growth and operating synergies, and look forward to integrating Viva technology across the BFS network. The investment also provides an opportunity to re-brand the corporate owned Rebalance Pilates & Yoga into Club Pilates, capitalizing on a larger network and promoting the recently launched Supp Society across an expanded network.

Summary of the Strategic Investment and Outlook

Viva Leisure's strategic investment in Boutique Fitness Studios (BFS) marks a significant expansion of its network and offerings, with the potential to introduce new markets for Viva Pay and other Viva technologies. The investment, funded from existing cash reserves and bank facilities, positions Viva as the largest shareholder in BFS and includes an option to acquire the entire business within 24 months. The BFS founders' continued involvement and the potential implementation of Viva technology across the BFS network present opportunities for further growth and integration. With a forecast for an additional 25 studios to open over the next 12 months, Viva aims to leverage its proven track record of successfully integrating franchise acquisitions and extracting synergies. The strategic move not only diversifies Viva's business but also aligns with its vision to become Australia's favorite fitness brands. The company's ambitions, goals, and forecasts indicate a strong focus on expanding its footprint in the boutique fitness market and realizing further revenue growth through synergies and strategic positioning.