Q1 2023 Life Time Group Holdings Inc. Earnings Call
[music].
Good morning, welcome to the Lifetime group holding first quarter 'twenty twenty-three earnings conference call. Please see size that reproduction of this call in whole or in part is not permitted without written authorization from the company.
As a reminder, this conference is being recorded I will now turn the call over to Ken Cooper with Investor Relations for lifetime.
Good morning, and thank you for joining us for the lifetime first quarter of 2023 earnings Conference call with me today are Brian Mecate, founder, Chairman and CEO and Bob Houghton CFO . During this call. The company will make forward looking statements, which involve a number of risks and uncertainties that may cause actual results to differ materially from those forward looking statements made today.
There was a comprehensive discussion of risk factors in the company's SEC filings, which you're encouraged to review also the company will discuss certain non-GAAP financial measures, including adjusted EBITDA net debt free cash flow before growth capital expenditures and free cash flow for purposes of this call free cash flow is defined as net cash provided by operating activity.
And after total capital expenditures this information along with the reconciliations to the most directly comparable GAAP measures where possible and without unreasonable efforts are included in the company's earnings release issued this morning, our 8-K filed with the SEC and within the Investor Relations section of our website. Our website also includes a.
Supplemental presentation pertaining to the Delevering of our business a topic that Brian and Bob will address this morning, I'm now pleased to turn the call over to Bob Houghton Bob.
Thank you Ken and good morning to all our stakeholders on today's call. We appreciate you joining us this morning.
I will briefly cover our first quarter 2023 results the.
The full details of which can be found in the earnings release, we issued this morning.
Ron will then provide a bit more color on the quarter and how we will continue to grow our business.
Prove our profitability.
And reduced our leverage through the remainder of the year.
We are off to a strong start this year.
First quarter revenue increased 30% to $511 million driven by a 31% increase in membership dues and enrollment fees.
And a 28% increase in in center revenue.
Center memberships increased 13% as we ended the quarter at approximately 764000 memberships.
We added 39000 center memberships during the quarter, including one of the strongest January enrollments in our more than 30 year history.
Including digital on hold memberships total memberships increased 9% to approximately 814000 memberships.
First quarter average center revenue per membership increased to $667.
Up from $640 in the fourth quarter and up 15% from $580 in the prior year quarter.
As we continue to benefit from higher membership dues and increased in center activity.
We generated net income for the first quarter of $27 million.
Compared with a net loss of $38 million in the first quarter of 2022.
Adjusted EBITDA increased 196% to $120 million.
And our adjusted EBITDA margin increased 13.1 percentage points to.
To 23, 5% versus 10, 4% in the first quarter of 2022.
We delivered another quarter of improving cash flow with net cash provided by operating activities of $74 million.
Versus $9 million in the prior year quarter.
As I move to an update on our adjusted EBITDA and leverage ratio I will make reference to the new supplemental slides, which are posted to our IR website.
As detailed on slide three we reduced our net debt to adjusted EBITDA leverage in the quarter.
And expect further improvement in this key metric as we continue to grow our adjusted EBITDA and reduced our net debt.
We are very pleased with our start to 2023, we.
We are successfully executing our strategies to deliver significant revenue growth and improved profitability through growing memberships.
Increasing club usage through our expanded programming and.
And opening new clubs that are ramping faster and great locations across the country.
We are also clearly seeing the benefits from the rewiring of the business and the strategic initiatives that we put in place last year.
And we remain confident in our ability to increase cash flow and improve our balance sheet.
I will now turn the call over to Brian .
Thank you.
Bob.
I am very pleased with our first quarter results. Our team has been executing on our strategy with a great deal of passion and care.
With our newly required this structure, we delivered Q1 records of revenue and adjusted EBITDA for a lifetime.
We have great confidence that we can continue.
To elevate our programming and experiences.
For our dedicated member base, while also growing our revenue and adjusted EBITDA as Bob mentioned.
Memberships grew very nicely up nearly 40000 in the quarter there.
Our attrition has been coming down steadily.
Each quarter, there and we project June will be the first month.
With attrition rates below 2019 levels now.
Not only our memberships growing our in center businesses are also improving on both top and bottom lines.
These improvements are driving better margins and are reflected in our better than expected first quarter performance.
Our Q2 guidance.
And our updated outlook for 2023.
First we are reiterating our full year revenue guidance of $2 to $2 3 billion.
At the midpoint of that range of revenue increases of approximately $430 million.
Or 23, 5% from last year. This guidance includes <unk>.
A revenue expectation of $560 million.
Two of $570 million for the second quarter, there, which is 21% to 24% growth.
For last year's second quarter there.
Second we're increasing our full year adjusted EBITDA guidance to.
Two $470 million.
Two for $90 million from 440 million to $460 million.
This includes an adjusted EBITDA expectation of 124 million to $126 million in the second quarter there.
We continue.
To be very conservative in our assumptions and are focused on deleveraging our balance sheet.
As I mentioned previously our number one focus has been to lower our net debt to adjusted EBITDA by first and most importantly, growing our adjusted EBITDA.
We have made good progress in this effort as Bob mentioned page three of our supplemental presentation shows the improvement trend.
For our Leverages over the last four quarters and our projection for 'twenty three year end, which is around three.
Three five times.
It's important to mention we have approximately $400 million of debt associated with assets under development. These assets are not yet deployed.
Nor are they generating any revenue or adjusted EBITDA.
Once these assets are brought online.
Mature bad debt.
Debt to adjusted EBITDA will reduce by nearly a full turn.
And that's before any sale leasebacks.
As I've mentioned on prior calls earnings calls.
Our future development strategy will include building more clubs that are financed by landlords.
Which typically require less than $10 million of capital.
On average per location for <unk>.
<unk>.
Further emphasizing this strategy would allow lifetime to generate as much as additional $300 million of free cash flow each year that could be utilized to reduce debt.
In closing I am very happy with the position we're in today.
And we're very excited for the future with that we will answer your questions now.
Yeah.
Thank you.
I would like to ask a question. Please press star one on your telephone keypad.
Formation tone will indicate your line is in the question queue. You May press star two if he would like to remove your question from the queue and for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.
Our first question is from John Hi, backup with Guggenheim Securities. Please proceed.
Hey, Bob can you hear me.
Sure Ken John how are you im good im good.
I wanted to start with right in center revenue seasonally right for the two summer quarters, how do you think about members.
Spend willingness to spend and then the sort of things that youre going to do right. When you think about.
Specifically for those quarters in terms of getting more involvement in the kid's camp.
Some of the events that you run right and trying to get more engagement than you've ever gotten before.
I love it.
John we have been improving.
Our processes and our technology, where the members are they have started buying.
Summary, Tam because the supply on that is basically limited in every club is if you can only take so many summary, Tom chips from our memberships.
That we started that this year by taking those reservations a few months back.
And.
Absolutely certain that we will outperform.
Anything we've done in the past because already we have the.
Kind of a view of how how pack those programs will be.
We are not seeing any resistance from the customer to spend at this time, even though we're extremely conservative and are baking in.
Pretty healthy macroeconomic headwinds coming up.
Sometime in the next six months to 12 months, that's we're baking that into our assumptions, but we are not seeing change people love the programs Love This service <unk>.
Rob all the additional changes we have made to make transactions for them easier.
And more robust and all of those programs are working and personal training is.
Setting records in EBITDA on a monthly basis.
Everything is working I realize I wish we.
And there was something that we could tell you is but right now all things are working.
Great and maybe as a follow up.
Alright, the transaction, you just announced Atlanta, and Tampa right, taking over existing facilities.
Is there much of an additional opportunity to do that right given.
The condition some facilities or owners may be in <unk>.
Coming out of Covid, because obviously, that's attractive in terms of capital cost.
And remember.
Remember ramp as long as the facilities are halfway are good.
There and opportunity there.
Absolutely when we see these things in order for them to become a lifetime execution.
They require significant overhaul.
And landlords.
Who basically haven't been getting paid by some of these tenants when.
When they have the opportunity to take those assets back there.
And they look around and they look what tenant.
Paid trends toward Covid without monkeying around they call us and they asked us if we want that and they're willing to make bigger concessions to have lifetime be the one going in there. So yes, we have significant.
Discussions on these types of facilities.
They will become a bigger percentage of our growth.
As in the future years, because we are we are in discussions we're talking to them, we'll take them.
Many times, we shut them down to completely overhauled them and get them back with the landlords are providing.
Ti dollars for us to do so they are extremely attractive from.
Extremely attractive from the economic standpoint, there are sometimes two to three times better.
On the return on invested capital then we.
We would do it otherwise.
Okay. Thank you.
Thanks, a lot.
Our next question is from Brian Nagel with Oppenheimer. Please proceed.
Hey, guys good morning.
Good morning, Brian .
Congratulations on another nice quarter.
Thank you.
So my question is you look at the results.
Yes.
Nice nice beat.
<unk>.
EBITDA.
On a modest upside in your in your in your range of revenues. So as you look at that.
How the models flexing here and you know right, we talked a lot about.
Rewiring of the model and the cost controls and such but is there a particular area.
Really gained ramping are you seeing better than expected efficiencies that are allowing you to get to drive these EBITDA beats.
Yes, so I wanted to be clear we spending.
Roughly 40 $45 million more.
Then three or four years back on the annual basis in additional programming. So we have focused on increasing not cost cutting and improving the quality improving the programming that we offer the members as part of the signature membership.
Yeah.
So, but we did go back and we really looked at their infrastructure and the way the company was making decisions.
Really we rewired that so that the decisions we're going through two to three stop at Max.
Other than six or seven we dramatically reduced the red tape in the company.
Very little change in actually there was no cuts in the number of people delivering services I wanted to be clear that is completely contrary to my direction to the team that I want the highest NPS I want the highest quality ever we basically re wire the business and the <unk>.
Improvement in the percentages of the margins you guys are seeing are here and they're permanent there.
Or not.
There are two quarters, you can expect roughly between 20 and 23% EBIT.
Margin, which is a good couple of percent better than what we have done pre COVID-19.
Right before.
All of it once you add the rent back to our EBITDA that number is about 2% to 3% rather than the best numbers, we had before on a steady basis. So as far as the revenue the rabbit revenue was actually even a little better.
It reflects the way you guys are seeing it we haven't been we've taken our foot off the gas.
Pushing the timing of the club openings. So if it takes a little bit more time to renegotiate the bids a little more allow the quality come together not to spend money on over time for delivery of the clubs. So we have had delays in <unk>.
So therefore delays in revenue coming online, but the outperformance of the total clubs open clubs are making up for the delays and we're still kind of giving those revenues. So the revenues are strong.
Yes.
As well as the EBITDA is not just the EBITDA membership sales.
We gained 39 to 40000 additional members net memberships in the first quarter. There amazing results. So everything's working Brian Brian It's Bob just to add the PT business as Brian talked about in his comments I mean, we're delivering record levels of EBIT dollars are record levels of EBITDA margin, we're growing that.
Business sequentially on the top line month over month. So that's another business, that's really working well for us.
Yeah, that's great I appreciate all the color there and then one quick follow up if I could so Bob you mentioned your comments can you just talk about the strength of that membership growth, particularly January which I guess.
New year's resolution types, so as we head now.
The pool season, yes.
We have the guidance you gave how should we be thinking about the membership here.
The trajectory of membership and given that this will be the first.
I guess on Covid affected will see sort of a lifetime.
Yeah.
Membership will be very strong here in May June July .
We expect no at this point, we're not expecting any negative.
Im sorry.
Factor coming into play.
We are so ready the clubs have been upgraded to the beach clubs are looking amazing.
And I think there will be significant pent up demand for that.
So we are also working on figuring out ways to make it easier for people to order food on the pool deck.
And that that will allow us to kind of improve the opportunity on revenue side on that so we're we're pretty we're pretty stoked about what's about to come here. The next the next quarter there as well.
Congratulations again, thanks for all the color I appreciate it.
Hello, Brian .
Our next question is from Chris <unk> with RBC capital markets. Please proceed.
Hey, good morning.
So.
Could you explain a bit more on your latest thinking around June pricing strategy.
What are you seeing from new and existing members in terms of reaction to pricing actions and where do you potentially see further room for pricing.
Yeah, So really honestly, we as I've mentioned this over and over our pricing strategy has been a function of controlling the experience we want in the club.
So we are where we have.
More than abundant opportunity in a certain club.
To gain yet a couple of thousand more memberships, we are not pressing the price point in that club, where we have members club feeling like it's being over members and we're trying to limit the membership coming into that club.
And control the experience then we just raise the price so it's really <unk>.
<unk> four itself.
The customer clearly demonstrating that they like the new strategy our results shows that.
All across our NPS shows that the NPS is higher revenues higher EBITDA is higher the customer who wants the lifetime Athletic club experience.
Isn't comparing lifetime athletic country club experience to anything else. They just wanted to be in a lifetime. So and we have limited supply in every club before the experience gets.
Tarnished, so managing that experience naturally guide us for where the price needs to be and that has allowed the prices to go to where they really need to be established there working right now we don't have huge.
Plans to adding additional new rack rates, except is nothing gets done just Chris to be nothing gets done systematically we don't have a price increase ever across every club all of the country or something like that it is literally location by location member by member and.
It's based on what makes the most sense overall, so the way that I would tell you for you guys to think about and look with Bob worked with Bob and Ken as you really need to look at the average dues for all.
For all subscription right now the full subscription, including the digital on hold.
And all access membership is about you mentioned 814 eight hundreds.
10000, plus that number.
<unk>.
The average dues for the full subscription, which is roughly about 152 or something.
The.
Back out the for the <unk> members are on hold and you go to the 764.
Membership.
I would look at that number and say.
The average dues and this is about 162 what drove.
What you should expect that without doing anything at all naturally that number that 162 was at $1 52 is going to grow.
A little bit each quarter, there because there is some churn in the churn will naturally push that up.
And then there is basically some modest modest legacy.
Member dues increases in this very Masada calls we go through it systematically there will always be paying.
They have been with us for five years six years, seven years or more likely they're going to pay less in rack rates for a very very long time, because we give them the benefit of the fact that they have been a member for a long time and that also reduces their desire to want to dropout.
Because if they drop out they've been a long term member they want to be a member they drop out they come back.
Pay the new rack rate so the whole system's working does that help you.
Yeah Super clear.
And then.
Just for my follow up here, just circling back to the incentive revenue going forward could you update us on demand and trends around dynamic personal training I know, Brian Thats been a big focus area for you. This year. Thanks, Yeah.
So I'm really happy with our.
With our team I, just got to say the execution of our team has been phenomenal.
I believe we set the record EBITDA number in March.
For that business is really awesome to see.
Oh.
Our newly invented dynamic personal training model and.
Why re wiring of that business.
<unk> been so successful, we significantly and I mean significantly reduced.
The overhead that was outside of the clubs to the corporate office by like literally like 300%.
So a third of what it used to be that overhead.
And.
I am involved personally weekly with the.
With our personal training leads across the country.
And it's the best the best momentum the best.
Model that we have ever had and the results are coming.
We're getting.
People, who had left lifetime.
Because unlike certain things and COVID-19 kind of made it ice on the cake.
Weekly, we're getting some of those people knock them back on the door and wanting to come back and work on the new culture, a new system.
And then we are comfortable.
Completely tooling the clubs with additional.
Shipments so the clubs have the best environment, the best setup, the best equipment for a trainer.
To train their customer you couldn't find a better.
The opportunity with equipment and spacing to train your customers. So thats also attracts the best trainers coming in so it's all positive momentum.
I.
We expect this year on a monthly basis, we also break.
Personal training.
The revenue Rec.
<unk> not just EBITDA records.
It's all moving in the right direction.
Awesome. Thanks, so much.
Yeah.
Our next question is from Brian <unk> with Morgan Stanley . Please proceed.
Yes. Thank you good morning, guys Hello, Brian Brian .
Your comments on the cost side I think we're clear I think one question I had was just you know as we see it kind of set our operating expense.
Is it basically back to where it was kind of pre COVID-19 actually a little bit better.
As a percent of revenue.
Should we expect that to continue I know that there's some seasonality to that but how should we think about that line.
Yeah, as I mentioned I.
We we have fine tuned the model of the clubs run.
With their management system converted to a leadership concept.
Everybody is leading the way rather than Boston other people around.
So the Gms the structure they are called lead generals and they have a very very clear approach on how they have lots of authority and there Matt is responsible to answer it is completely match.
So.
Pretty much all the waste has been taken out of the clubs and the way they're running correctly right now they are running right now is the correct way.
Where are we going to see potential margin improvement still.
It's going to be on the revenue that this still are there to increase.
And as the dues revenue increase in the clubs the cost isn't going to grow.
Proportionally to that.
So there is room for that to.
To improve but at this point I would basically modeled what I told you guys. We've seen assuming their rent will be between 12% 13%.
It's really the number that I think it's going to fall in and so there could be a little lumpy when we do our big sell leaseback.
Can get closer to the 13 and prior to that this is going to be closer to 12% of our revenue. So if you think about that then our EBIT.
Margin you change kind of plan between 2223%.
That's where it is right now Kennedy improve yes.
We will I commit to that improvement should you put it in your model not right now.
Okay. Thank you.
Could you also just comment on kind of the sale leasebacks the pacing of.
What's still to be done and perhaps kind of the cap rates on those today relative to what you'd seen in the past yeah. The cap rates, we have done for the first $135 million is the same range of the mid sixes. We told you guys.
And we are.
Yeah.
Not anticipating that there is going to be.
Much higher rates.
I think again I emphasize these these assets and when people are doing buying these they are buying them and said 20 to 25 year lease with 25 years of options with fixed bumps Senate.
It's not a it's not tied into the two year mortgage its two year.
T bills or three year.
It's just a.
The headwind for.
Temporarily so I think the.
Our expectation is we're going to get them done in the same range.
We've done before.
And.
Pretty certain that is all going to come together, that's all I can kind of share with you right now.
Okay. Thank you.
Our next question is from Robby <unk> with Bank of America. Please proceed.
Hello, Good morning.
Great quarter.
My two questions. The first is just can you talk about.
Give us some insights on how the new clubs are ramping up.
Or are they ramping up faster than normal.
Or sort of in line with normal and.
And when you when you look at the ramp up of new clubs.
What are the drivers you think are making some new clubs outperform other new clubs.
That's a great question, but pretty much there.
University, they are working extremely well.
They are ramping faster now.
And dues.
And in margin contribution, particularly.
And then our old processes.
So the new model is working again, the new overall, the new model of execution and these clubs are ramping faster.
And they are.
Getting to them, we have clubs that just opened literally like 60 days. They are contribution margin positive and 90 days our contribution margin positive. So they are working extremely well.
I mean, we have virtually no.
Nothing that looks like is less attractive than the past.
All positive to the past.
Got you.
And then maybe for Bob B. So the revenue guidance is the same but the EBITDA guidance is up about $30 million could.
Could you maybe just.
Give us more maybe break out how we should think about where that $30 million.
Comes from versus the previous guidance and obviously some of it's the beat today, but but.
That that might help us.
Yeah, So Rob it's starting with the top line.
As Brian alluded to the timing of opening opening new clubs is a driver we've shifted those out a bit later than what was assumed in our original guide for the year. So that's one element as Brian said, we feel great about our revenue growth all the investments we're making in the clubs are working in terms of higher activity within the club <unk>.
Swipes or batch scans are met.
Memberships are higher so all of that's working it's just really the timing of shifting those clubs and then in terms of the EBIT guide we've taken it up $30 million, we still have significant macroeconomic headwind assumed in that guide. So that's a little bit of context from a margin perspective in the back half of the year.
Great. Thanks, so much.
Thanks Robby.
Our next question is from Dan Pulitzer with Wells Fargo. Please proceed.
Hey, good morning, everyone and hope you're all doing well.
Dan.
Ed a question.
I wanted to unpack those margin comment a little bit more I mean, the last couple of quarters. Your EBITDAR margins have been 36, 5% and I'm trying to kind of bifurcate our isolate for what the factors are that would change last two quarters with the next three quarters.
Is this a function of in center versus Dos mix is it something seasonality, where employment costs, maybe go up or is it.
Also some inherent conservatism, which it does sound like that is a component as well.
So part of it.
That is we're trying to make sure we gave we give the street.
And you guys a guidance there.
It can be.
Matt.
And regardless of macroeconomic headwinds, we keep telling you that we're baking in potentially a recession or at least major headwinds we are baking that in.
Tender results be better, yes, there could be but we're not going to put that out there and then disappoint.
The second thing is that yes. During this summer we will have significant increase of revenue.
And cost we have to fill these clubs up with lifeguards and the beach clubs are not inexpensive to run.
So there is a conservative modeling for rest of the year.
But the 36, 5% margin you mentioned.
Is really where I would like to see things to continue to come and I is there is there a path that we can get that done throughout the year, yes.
I recommend you keep your horns in and be a little more conservative absolutely.
Hi, guys. Good afternoon, so correct.
Yes.
Yes that is.
Helpful.
For my for my follow up the enrollment fees you guys had talked about that I think a little bit last quarter is that still something you guys are considering rolling out or have you kind of push.
Pushed pause a little bit there no it's already rolled out.
We need to charge a pool pass to make sure we can control the pool experience. So they don't get overrun.
For new customers coming in and joining just for this summer crowding. The member who has remained loyal member for three years four years five years.
So this is nothing new.
Exactly what we have done every year, we're just we fine tune our doing based on what.
What we learn and but we have already launched a.
In certain clubs and it's not it's not.
It's not universal it's not the same it's.
Location by location based on how.
Busy the club is already or isn't.
That we manage that throttle of the pool pass amount or if there is any but we've already started that.
<unk> two weeks ago.
And again, we have no reason.
To think it's not a material number.
On the revenue side I wanted to be clear.
It's not about making money, it's just totally about managing the experience and the flow of the customer through the club we want to manage.
Understood. Thanks for all the color.
Thank you.
Our next question is from Chris <unk> with Deutsche Bank. Please proceed.
Hey, guys. Good morning, Thanks for all the color so far.
First question was just kind of on.
Ancillary rebuild and ultimate long term potential in these new centers.
Is there any way to kind of compare and contrast.
What that ancillary picture might look like.
Clubs have opened in the last couple of years versus kind of the older clubs in the system.
So I want to understand your question better Youre talking about is the incentives are different in the new clubs versus the old clubs.
Yes kind of in terms of ancillary spend on top of the dues yeah.
It's a great question.
There is no way that you would be able to anybody you could basically model that out because of the inconsistency as we open our club.
This is Joe.
The smaller.
Urban market doesn't have.
A real bistro pool doesn't have summer jam doesn't have all of that is basically more just personal training and do is maybe a little bit of a juice bar or something.
You open up a big Big Big club in a suburban area, but a big huge beach club full sized cafe summer camps and so those are those are will be kind of a give or take the biggest.
The biggest revenue source for lifetime historically after dos has been personal training.
One thing we are doing with first of all the things that we're working with the personal training are all working.
Think that is.
It's really just a function of <unk>.
<unk> the club with the right model of personal training and yes, they do end up having a better start.
With the PT model, where the DPT diamagnet personal financial model.
In fact, we have a club on the in pre sell right now.
In Miami Falls, and the way were running that.
They are basically selling personal training every day as they are selling new memberships, which is much better new model of execution than we've done in the past.
Okay Super helpful. Thanks, Thanks, Brian and then follow up is.
I know you've talked a little bit about the Atlanta and Tampa.
I guess club club reopening as conversions. There's also I think we continue to read about a lot of big box retail.
Including some stores that might might be typical of the size of your clubs closing in two.
<unk> 2023 is there any thought to essentially repurposing. Some of those I know some of them are in markets you wouldn't want to be in but maybe some are so is there any any thoughts on looking at those.
I mean, I would respond to a question like this.
Our pipeline of opportunity.
And it is robust.
As has been ever before.
With lifetimes execution again, and the relationships we have established.
We don't we don't think of our landlord as landlords, we think of them as our partners, we treat them like a partner.
As we treat our employees like our partner as we treat as the culture of lifetime.
And all I can tell you is yes, there is significant opportunity for more additional capital light growth.
Coming up more than ever before and we are uniquely in a position to take advantage of that.
Okay very good thanks, guys.
Thank you thanks, Chris.
Our next question is from Simeon Siegel with BMO capital markets. Please proceed.
Thanks, Hey, guys. Good morning drill doing well good morning, guys.
Are you.
Not bad looking forward to the summer and getting out there. So so we're almost there so really nice job on the improved profitability guys. This is nice to see you talked about the center Opex efficiency. In addition to that the G&A was down meaningfully and even extra share based comp. So anything you can dig in there as to what drove the savings maybe what you think.
G&A should look like embedded in the <unk> and the full year guides and then Brian I was I was just curious about this with all the success of converting to digital on hold back to center memberships that just on hold memberships have actually been nicely lower than pre COVID-19 for the past several quarters. Just curious what you think about that is this is there.
Kind of like a post COVID-19 normalization that happened and you would expect that number to revert back up to what has historically been or do you think there's something more structural that's why fewer people are going on hold.
Okay, you are asking a bunch of really good questions, let's talk about the G&A.
I just be the first one to say when things are not great.
Under my Dime, they're my fault, there nobody else fault.
Our G&A was broken.
Complained about it but it didn't do force I wasn't forceful enough about it.
For years and years and years and our G&A was growing pretty much linearly.
Dollar for dollar for topline growth, which makes no sense whatsoever.
So as we wired the business the last eight nine months as a franchise or franchisee model.
Which basically means our.
Corporate office.
G&A for all of the in centers in all of those things should not grow.
Proportionally as the club as we as we build another $1 billion worth of revenue coming out of centers.
The corporate office shouldn't grow 50% it should grow 10% from where it is today it will be very very modest.
Two versus the the new expansion of our revenue and I would feel embarrassed.
I wasn't able to give our investors.
That margin expansion that would come from scaling the company correctly. It's all in place I don't have any reason to believe it's going to change.
That field loves it.
<unk>.
<unk>.
The area directors Vps and the lead generals they love the new system. They have more clear lines of authority and so that's working extremely well.
The other question you had was about fundamental redesign of the on whole digital yes, we change that over time gradually it used to be you could go on hold and stay on hold forever.
We basically gradually took that down to like nine months than six months and now it's four months you can go on hold for four months.
But you can't go on hold forever, you automatically have to come back.
And so it's just basically it just happens.
On auto pilot.
So and you can only go on hold one time of year. So my anticipation is that the percentage of on hold to the total membership really shouldnt fluctuate from here dramatically is that helpful.
That is perfect best of luck the rest of the year guys nicely done.
As you so much thanks Simeon.
Our final question is from John Baumgartner with Mizuho Securities. Please proceed.
Good morning, Thanks for the question.
Thank you.
Just just one for me I wanted to come back to the growth in memberships do you have a sense for where those members are being sourced from other premium or specialty gyms is it from the at home peloton crowd is it folks trading up from lower priced clubs and then demographically are there any themes you're seeing.
Whether it's newer younger versus older families versus singles and.
And I'm curious when you think about that accomplished of members coming in is it informing or requiring any sort of changes in how you're thinking about reinvesting at the margin whether it's in programming or anything else. Thank you.
Great Great Great Great question.
So then when we look that post COVID-19.
From two years three years ago I did not believe.
Yet all of the members that left would come back.
I figured.
85%, 80% would come back.
So we went to the redesign of what do we need to do so we overhauled and revamped.
Our.
Our small group training and we made this small group training.
So easy for people to stay in that this is equivalent of.
Our ultra fit or GTS or alpha.
Equivalent of certain boutiques, we made it a singular membership data <unk> has to make a double purchased by our signature membership and we dramatically increased the number of.
Classes, we offer it to dimension I mentioned to the tune of about $45 million a year more spend.
In all the extra programming we're doing.
That.
Tripled.
More than that we looked at it over a 14 month period. We went from 16000 unique participants to 56000 unique participants in that space.
That simply is where we're getting the membership DPT, we're getting customers who come in they want that.
Pickle ball.
<unk> added.
At least 100000 people.
Plus that Theyre, playing pickle ball in lifetime, and so and simply if you increase the reasons for people to wanting to come to a lifetime.
And then you will see that every Dropsley 10, 11 swipes ends up being.
Being one membership so it's not complicated all we have to do is given reason to people to want to be in lifetime for.
For a visit.
And then every 10 or so now to your question is across the board, we see people coming from boutiques.
We see coming people coming for haven't been working on in.
In clubs they are tired of doing their homework out.
I don't know some at one point everybody thought all the clubs are going to go bankrupt and everybody forever is going to be sitting on their bikes at home board.
Bored to death, but we knew that's not the case all we have to do is deliver the experiences.
Furthermore, if you go to a lifetime and spend time to lifetime. It is the social country club that they get to do all of the activities. They can do recovery. They can do hot hot tub. They can do coal plus they can do red.
They can do heat.
I mean everything they can do the red light therapy I mean, it just we are continually looking to see whether the things that the health and wellness customer wants.
And in our large format clubs, we provide them all the things related to health and well being that they want in one place conveniently at the highest level of execution. So results are we have the highest satisfaction we've ever had people are coming in.
Many many clubs surpassed surpassed their swipes over the past years so.
The customer came from everywhere its young as old as middle age.
And because all the programs we.
Invented and rolled out.
They basically are working and they are pretty much now are in that leap states. They are really producing.
Fruit at this moment.
Great. Thanks, Bob Thank you so much.
Yes.
We have reached the end of our question and answer session I would like to turn the conference back over.
Okay.
Closing comments.
We are thankful to all of you.
All of our investors and our members and our amazing Amazing team members, who have really passionate who put their heart and soul.
Underlying to make sure lifetime prevails.
And get back and go beyond where we were pre COVID-19.
We're excited.
For the future.
We are very very confident that we can deliver.
What we are promising you.
Hopefully we can improve that as time goes on and so with that we'll just look forward to seeing hearing you.
Are you guys back on our next call in July August Thanks, so much.
Thank you. This does conclude today's conference you may disconnect. Your lines at this time and thank you for your participation.
Okay.
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