Q2 2024 Planet Fitness Inc Earnings Call

Speaker Change: Hello and thank you for standing by. At this time, I would like to welcome you to the Planet Fitness Q2 earnings call.

Operator: Q2 Early school. Paul Lantz has been placed on mute to prevent any background noise.

Operator: Thank you for joining us. All lines have been placed on view to prevent any background noise.

Speaker Change: All lines have been placed on mute to prevent any background noise. After the speaker remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad.

Operator: After a speaker remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star one again.

Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, please press star 1 again. I would now like to turn the conference over to Stacey Caravella. Please do so.

Speaker Change: If you would like to withdraw your question, please press star 1 again.

Stacey Caravella: I would now like to turn the conference over to Stacey Caravella. Please go ahead.

Speaker Change: I would now like to turn the conference over to Stacey Caravella. Please, go ahead.

Stacey Caravella: Thank you, operator, and good morning, everyone.

Stacey Caravella: Thank you, operator, and good morning, everyone. Speaking on today's call will be Planet Fitness Chief Executive Officer Colleen Keating and Chief Financial Officer Tom Fitzgerald. Both will be available for questions during the Q&A session following the prepared remarks. Today's call is being webcast live and recorded for replay. Before I turn the call over to Colleen, I'd like to remind everyone that the language on forward-looking statements included in our earnings release also applies to our comments made during the call. Our release can be found on our investor website along with any reconciliation of non-GAAP financial measures mentioned on the call with their corresponding GAAP measures. Now, I will turn the call over to Colleen.

Stacey Caravella: Speaking on today's call will be Planet Fitness Chief Executive Officer Colleen Keating and Chief Financial Officer Tom Fitzgerald. Both will be available for questions during the Q&A session following the prepared remarks. Today's call is being webcast live and recorded for replay. Before I turn the call over to Colleen, I'd like to remind everyone that the language on forward-looking statements included in our earnings release also applies to our comments made during the call. Our release can be found on our investor website, along with any reconciliation of non-GAAP financial measures mentioned on the call with their corresponding GAAP measures.

Stacey Caravella: Thank you, operator, and good morning, everyone.

Speaker Change: Speaking on today's call will be Planet Fitness Chief Executive Officer Colleen Keating and Chief Financial Officer Tom Fitzgerald. Both will be available for questions during the Q&A session following the prepared remarks.

Stacey Caravella: Today's call is being webcast live and recorded for replay. Before I turn the call over to Colleen, I'd like to remind everyone that the language on forward-looking statements included in our earnings release also applies to our comments made during the call. Thank you. Thank you.

Speaker Change: Our release can be found on our investor website along with any reconciliation of non-GAAP financial measures mentioned on the call with their corresponding GAAP measures.

Colleen Keating: Now I will turn the call over to Colleen. Thank you, Stacey, and thank you, everyone, for joining us for the Planet Fitness Q2 earnings call. I'm thrilled to be here speaking with you.

Colleen Keating: Thank you, Stacey, and thank you everyone for joining us for the Planet Fitness Q2 earnings call. I'm thrilled to be here speaking with you.

Speaker Change: Now I will turn the call over to Colleen.

Colleen Keating: Thank you, Stacey, and thank you, everyone, for joining us for the Planet Fitness Q2 earnings call.

Colleen Keating: During the second quarter, we eclipsed the $2,600 store mark, grew same store sales by 4.2%, delivered 5.1% revenue growth, and increased adjusted EBITDA by 7.2%. As I considered the opportunity to join Planet Fitness, I was drawn to two things. First, growing businesses is one of my passions. I believed I could not only contribute to the tremendous potential of our next chapter but that I could have a real impact on it.

Colleen Keating: During the second quarter, we equipped the 2600 store mark, grew same store sales by 4.2%, delivered 5.1% revenue growth, and increased adjusted EBITDA by 7.2%. As I considered the opportunity to join Planet Fitness, I was drawn to two things. First, growing businesses is one of my passions. I believed I could not only contribute to the tremendous potential of our next chapter, but that I could have a real impact on it. With 30 plus years of experience in franchise businesses, real estate, operations, and marketing, I've led high-growth consumer businesses at scale. I believe that I have a unique perspective on our growth opportunities and the actions we need to take to capitalize on them.

Colleen Keating: I'm thrilled to be here speaking with you.

Colleen Keating: During the second quarter, we eclipsed the 2600 store mark.

Speaker Change: grew same-store sales by 4.2%, delivered 5.1% revenue growth, and increased adjusted EBITDA by 7.2%.

Colleen Keating: With 30 years of experience in franchise businesses, real estate, operations, and marketing, I've led high-growth consumer businesses at scale. I believe that I have a unique perspective on our growth opportunities and the actions we need to take to capitalize on them. And second, the franchise model and the opportunity to continue to work with franchisees. Throughout my career, I've worked extensively in franchise businesses within the hospitality industry. There are many similarities between hospitality and fitness. Foundationally, both are focused on bringing an experience to life for guests or members, and ensuring that they leave feeling better than when they came. Since joining in early June, I've hit the ground running.

Speaker Change: As I considered the opportunity to join Planet Fitness, I was drawn to two things.

Speaker Change: First, growing businesses is one of my passions.

Speaker Change: I believed I could not only contribute to the tremendous potential of our next chapter, but that I could have a real impact on it.

Speaker Change: With 30-plus years of experience in franchise businesses, real estate, operations, and marketing, I've led high-growth consumer businesses at scale. I believe that I have a unique perspective on our growth opportunities and the actions we need to take to capitalize on them.

Colleen Keating: And second, was the franchise model and the opportunity to continue to work with franchisees. Throughout my career, I've worked extensively in franchise businesses within the hospitality industry. There are many similarities between hospitality and fitness. Foundationally, both are focused on bringing an experience to life for guests or members, and that they leave feeling better than when they came. Since joining in early June, I've hit the ground running. I've already visited more than a dozen clubs across six states plus Spain, meeting with franchisees and interacting with team members, all with the purpose of listening, engaging, and seeing how our members are experiencing our clubs.

Speaker Change: And second was the franchise model and the opportunity to continue to work with franchisees.

Speaker Change: Throughout my career, I've worked extensively in franchise businesses within the hospitality industry.

Speaker Change: There are many similarities between hospitality and fitness. Foundationally, both are focused on bringing an experience to life for guests or members and that they leave feeling better than when they came.

Colleen Keating: I've already visited more than a dozen clubs across six states, plus Spain, meeting with franchisees and interacting with team members, all with the purpose of listening, engaging, and seeing how our members are experiencing our clubs. We are a 30-plus-year-old brand with a solid base of about 100 franchisees and more than 19 million members. I'm proud to lead this special business and build on this foundation. As CEO, my near-term focus areas are, first, defining our growth ambition.

Speaker Change: Since joining in early June , I've hit the ground running. I've already visited more than a dozen clubs across six states, plus Spain, meeting with franchisees and interacting with team members, all with the purpose of listening, engaging, and seeing how our members are experiencing our clubs.

Colleen Keating: We are a 30-plus year old brand with a solid base of about 100 franchisees and more than 19 million members. I'm proud to lead this special business and build on this foundation.

Speaker Change: We are a 30 plus year old brand with a solid base of about a hundred franchisees and more than 19 million members. I'm proud to lead this special business and build on this foundation.

Colleen Keating: As CEO, my near-term focus areas are first defining our growth ambition. This includes all facets of growth, from stores to members to profit to increasing shareholder value. We are building out our longer-term strategy and how we're going to enable and accelerate healthy growth. On the store growth side, as shown by two third-party studies last year, we believe we can double our footprint domestically to approximately 5,000 locations. Up from the 4,000 target we set at our IPO in 2015. Importantly, we are 70% larger by store count than the next 15 high-value low-price competitors combined, and we have nearly seven times the membership of the next largest competitor.

Speaker Change: As CEO , my near-term focus areas are, first, defining our growth ambition. This includes all facets of growth, from stores, to members, to profit, to increasing shareholder value.

Colleen Keating: This includes all facets of growth, from stores, to members, to profit, to increasing shareholder value. We are building out our longer-term strategy and how we're going to enable and accelerate healthy growth. On the store growth side, as shown by two third-party studies last year, we believe we can double our footprint domestically to approximately 5,000 locations, up from the 4,000 target we set at our IPO in 2015. Importantly, we are 70% larger by store count than the next 15 high-value, low-price competitors combined. And we have nearly seven times the membership of the next largest competitor.

Speaker Change: We are building out our longer-term strategy and how we're going to enable and accelerate healthy growth.

Speaker Change: On the store growth side, as shown by two third-party studies last year, we believe we can double our footprint domestically to approximately 5,000 locations, up from the 4,000 target we set at our IPO in 2015.

Speaker Change: Importantly, we are 70% larger by store count than the next 15 high-value, low-price competitors combined, and we have nearly seven times the membership of the next largest competitor.

Colleen Keating: And we're in the early innings of international store growth as further evidenced by our first European club in Barcelona, Spain. I visited the club last week and saw firsthand our brand being brought to life in an authentic way. I also visited a number of other fitness brands operating in Spain today, and this furthered my confidence that we have a highly differentiated offering and tremendous runway to grow to real scale and density in the Spanish market, where today only roughly 10% of the population belongs to a gym. I also toured our pipeline sites, visited two clubs under construction, and a number of sites currently under consideration.

Colleen Keating: And we're in the early innings of international store growth, as further evidenced by our first European club in Barcelona, Spain. I visited the club last week and saw firsthand our brand being brought to life in an authentic way. I also visited a number of other fitness brands operating in Spain today, and this furthered my confidence that we have a highly differentiated offering and tremendous runway to grow to real scale and density in the Spanish market, where today only roughly 10% of the population belongs to a gym. I also toured our pipeline sites, visited two clubs under construction, and a number of sites currently under consideration. These were thoughtfully selected sites in areas with high population density and population growth.

Speaker Change: And we're in the early innings of international store growth, as further evidenced by our first European club in Barcelona, Spain.

Speaker Change: I visited the club last week and saw firsthand our brand being brought to life in an authentic way.

Speaker Change: I also visited a number of other fitness brands operating in Spain today.

Speaker Change: And this furthered my confidence that we have a highly differentiated offering and tremendous runway to grow to real scale and density in the Spanish market, where today only roughly 10% of the population belongs to a gym.

Speaker Change: I also toured our pipeline sites, visited two clubs under construction, and a number of sites currently under consideration. These were thoughtfully selected sites and areas with strong population density and population growth.

Colleen Keating: These were thoughtfully selected sites in areas with strong population density and population growth. I had an opportunity to spend time with our team in Spain, who have the right skill set, market knowledge, and depth of experience to lead our growth on the ground. At the same time, we're ensuring that we're strategic and disciplined in our ambitions, prioritizing sustainable, profitable growth and the member experience. I see our growth ambition as an ongoing journey. I'm committed to continuously exploring and identifying new opportunities to accelerate our efforts while continuing to deliver value across our stakeholders.

Colleen Keating: I had an opportunity to spend time with our team in Spain, who have the right skill set, market knowledge, and depth of experience to lead our growth on the ground. At the same time, we're ensuring that we're strategic and disciplined in our ambitions, prioritizing sustainable, profitable growth and the member experience. I see our growth ambition as an ongoing journey. I'm committed to continuously exploring and identifying new opportunities to accelerate our efforts while continuing to deliver value to our stakeholders. To that end, my second priority is delivering an unparalleled member experience.

Speaker Change: I had an opportunity to spend time with our team in Spain, who have the right skill set, market knowledge, and depth of experience to lead our growth on the ground.

Speaker Change: At the same time, we're ensuring that we're strategic and disciplined in our ambitions, prioritizing sustainable, profitable growth and the member experience.

Speaker Change: I see our growth ambition as an ongoing journey. I'm committed to continuously exploring and identifying new opportunities to accelerate our efforts while continuing to deliver value across our stakeholders.

Colleen Keating: To that end, my second priority is delivering an unparalleled member experience. We hold a highly differentiated position in the high value low price sector of the fitness industry. We are about bringing an experience to life and sharing a deep emotional connection with our members. We take care of people so they can improve their lives and well-being. I've been truly impressed by the interactions I've witnessed between our team and members during my many club visits today. I experienced firsthand what's so special about this brand, the sense of belonging, in a community you're proud to be a part of.

Speaker Change: To that end, my second priority is delivering an unparalleled member experience.

Colleen Keating: We hold a highly differentiated position in the high-value, low-price sector of the fitness industry. We are about bringing experiences to life and sharing a deep emotional connection with our members. We take care of people so they can improve their lives and well-being.

Speaker Change: We hold a highly differentiated position in the high-value, low-price sector of the fitness industry. We are about bringing an experience to life and sharing a deep emotional connection with our members. We take care of people so they can improve their lives and well-being.

Colleen Keating: I've been truly impressed by the interactions I've witnessed between our team and members during my many club visits to date. I experienced firsthand what's so special about this brand, the sense of belonging in a community you're proud to be a part of. You immediately feel the positive energy when you walk into one of our clubs. I've always been very passionate about having feet on the street, meaning spending time in our clubs and staying close to our members and our team members who deliver on our brand values every day. We strive to ensure that there's no gym intimidation in our club.

Speaker Change: I've been truly impressed by the interactions I've witnessed between our team and members during my many club visits to date.

Speaker Change: I experienced firsthand what's so special about this brand, the sense of belonging in a community you're proud to be a part of. You immediately feel the positive energy when you walk into one of our clubs.

Colleen Keating: You immediately feel the positive energy when you walk into one of our clubs. I've always been very passionate about having feet on the street, meaning spending time in our clubs and staying close to our members and our team members who deliver on our brand values every day. We strive to ensure that there's no gym intimidation in our clubs. We also need to make sure our current members have exceptional experiences, both inside and outside our clubs, so they choose to stay with us.

Speaker Change: I've always been very passionate about having feet on the street, meaning spending time in our clubs and staying close to our members and our team members who deliver on our brand values every day.

Speaker Change: We strive to ensure that there is no gymtimidation in our clubs.

Colleen Keating: We also need to make sure our current members have exceptional experiences both inside and outside our clubs so they choose to stay with us. My third priority is to evolve our brand messaging. In 2023, along with our franchisees, we estimate that we will spend more than $300 million on marketing and advertising.

Speaker Change: We also need to make sure our current members have exceptional experiences, both inside and outside our clubs, so they choose to stay with us.

Colleen Keating: My third priority is to evolve our brand messaging. In 2023, along with our franchisees, we estimate that we spent more than $300 million on marketing and advertising. Looking forward, we have an opportunity to further sharpen our brand promise and mission in our marketing efforts as we encourage members to choose us as they embark on their fitness journeys. We need to increase our emphasis on the high value part of HVLP by communicating the unique selling points of being a Planet Fitness member. Our clubs break away from the cheap gym perception by offering unparalleled experience and a sense of belonging.

Speaker Change: My third priority is to evolve our brand messaging. In 2023, along with our franchisees, we estimate that we spent more than $300 million on marketing and advertising.

Colleen Keating: Looking forward, we have an opportunity to further sharpen our brand promise and mission in our marketing efforts as we encourage members to choose us as they embark on their fitness journeys. We need to increase our emphasis on the high-value part of the HVLP by communicating the unique selling points of being a Planet Fitness member. Our clubs break away from the cheap gym perception by offering unparalleled experiences and a sense of belonging. There are about 140 million people who live within close proximity of an existing Planet Fitness location today who don't currently belong to a gym.

Speaker Change: Looking forward, we have an opportunity to further sharpen our brand promise and mission in our marketing efforts as we encourage members to choose us as they embark on their fitness journeys.

Speaker Change: We need to increase our emphasis on the high-value part of HVLP by communicating the unique selling points of being a Planet Fitness member.

Speaker Change: Our clubs break away from the cheap gym perception by offering unparalleled experience and a sense of belonging.

Colleen Keating: There are about 140 million people who live within close proximity of an existing Planet Fitness location today who don't currently belong to a gym. That's who we're looking to reach, in addition to our current and former members. There are more than four million Gen Zs who become eligible for membership each year as they age. Gen Zs continue to make up the majority of our net new joins each quarter. To this end, we launched our fourth year of the high school summer pass program in June and have more than 2.6 million teen participants to date, which is slightly less than we had last year at this time, but is highly encouraging given that we shortened this year's program.

Speaker Change: There are about 140 million people who live within close proximity of an existing Planet Fitness location today who don't currently belong to a gym. That's who we're looking to reach, in addition to our current and former members.

Colleen Keating: That's who we're looking to reach, in addition to our current and former members. There are more than 4 million Gen Zers who become eligible for membership each year as they age. Gen Z continues to make up the majority of our net new joins each quarter. To this end, we launched our fourth year of the High School Summer Pass program in June and have more than 2.6 million teen participants to date, which is slightly less than we had last year at this time, but it's highly encouraging given that we shortened this year's program.

Speaker Change: There are more than 4 million Gen Z's who become eligible for membership each year as they age. Gen Z's continue to make up the majority of our net new joins each quarter.

Speaker Change: To this end, we launched our fourth year of the High School Summer Pass program in June and have more than 2.6 million teen participants to date, which is slightly less than we had last year at this time, but is highly encouraging given that we shortened this year's program.

Colleen Keating: This has been an incredibly successful, relatively low cost program that yielded a 5.5% conversion rate to paying members last year. Across all demographic segments, we will be evolving our messaging of why Planet Fitness and what differentiates us from the competition. Our new brand messaging will start to show up later this year and, importantly, in the first quarter of 2025.

Colleen Keating: This has been an incredibly successful, relatively low-cost program that yielded a 5.5% conversion rate to paying members last year. Across all demographic segments, we will be evolving our messaging about why Planet Fitness and what differentiates us from the competition. Our new brand messaging will start to show up later this year and, importantly, in the first quarter of 2025. And the fourth area of focus is underscoring that franchisee profit drives franchisor profit through product refinement and operational efficiency.

Speaker Change: This has been an incredibly successful, relatively low-cost program that yielded a 5.5% conversion rate to paying members last year.

Speaker Change: Across all demographic segments, we will be evolving our messaging of why Planet Fitness and what differentiates us from the competition.

Speaker Change: Our new brand messaging will start to show up later this year and, importantly, in the first quarter of 2025.

Colleen Keating: And the fourth area of focus is underscoring that franchisee profit drives franchisee profit through product refinement and operational efficiency. I believe in creating a culture of accountability and in having a shared goal with our franchisees. A coach versus cop mentality allows us to continuously iterate on our fantastic model by working together with our franchisees as a team. If franchisees are successful, we will be successful. This will include refining our product offering and operational efficiencies to maximize the economic value proposition of our franchisees while delivering the most relevant on-brand experience for our members.

Speaker Change: And the fourth area of focus is underscoring that franchisee profit drives franchisor profit through product refinement and operational efficiency.

Colleen Keating: I believe in creating a culture of accountability and in having a shared goal with our franchisees. A coach versus cop mentality allows us to continuously improve on our fantastic model by working together with our franchisees as a team.

Speaker Change: I believe in creating a culture of accountability and in having a shared goal with our franchisees. A coach versus cop mentality allows us to continuously iterate on our fantastic model by working together with our franchisees as a team.

Colleen Keating: If franchisees are successful, we will be successful. This will include refining our product offering and operational efficiencies to maximize the economic value proposition of our franchisees while delivering the most relevant on-brand experience for our members. In my interactions with investors since I joined Planet Fitness, there has been a focus on when we will get back to pre-pandemic new store opening levels. It's a very different macro environment than before COVID.

Speaker Change: If franchisees are successful, we will be successful. This will include refining our product offering and operational efficiencies to maximize the economic value proposition of our franchisees while delivering the most relevant on-brand experience for our members.

Colleen Keating: In my interactions with investors since I joined Planet Fitness, there has been a focus on when we will get back to pre-pandemic new store opening levels. It's a very different macro environment than before COVID, and the cost to build a new location was up by more than 30% in 2023 versus 2019. The new growth model aimed at the biggest opportunities to further enhance the attractiveness of our returns is a key lever that we pulled to address unit economics. Additionally, on June 28, the $15 pricing for new classic card members took effect. Just a reminder: current classic card members who joined prior to June 28 are locked in at the $10 monthly membership fee.

Speaker Change: In my interactions with investors since I joined Planet Fitness, there has been a focus on when we will get back to pre-pandemic new store opening levels.

Colleen Keating: And the cost to build a new location was up by more than 30% in 2023 versus 2019. The new growth model, aimed at the biggest opportunities to further enhance the attractiveness of our returns, is a key lever that we have pulled to address unit economics. Additionally, on June 28th, the $15 pricing for new Classic Card members took effect. As a reminder, current Classic Card members who joined prior to June 28th are locked in at the $10 monthly membership fee.

Speaker Change: It's a very different macro environment than before COVID, and the cost to build a new location was up by more than 30% in 2023 versus 2019.

Speaker Change: The new growth model, aimed at the biggest opportunities to further enhance the attractiveness of our returns, is a key lever that we pulled to address unit economics.

Speaker Change: Additionally, on June 28th, the $15 pricing for new Classic Card members took effect. Just a reminder, current Classic Card members who joined prior to June 28th are locked in at the $10 monthly membership fee.

Colleen Keating: We expect that after one year of the price being an effect, existing stores will see a low to mid-single-digit percentage increase to AUVs, with an even greater impact to new stores as the majority of their classic card members will be paying $15. We also launched two black card pricing tests in select markets: 1 at $27.99 and the other at $29.99. If either of these tests prove successful, this increase could also further enhance store returns.

Colleen Keating: We expect that after one year of the price being in effect, existing stores will see a low to mid-single-digit percentage increase in AUVs, with an even greater impact on new stores, as the majority of their Classic Card members will be paying $15. We also launched two black card pricing tests in select markets, one at $27.99 and the other at $29.99.

Speaker Change: We expect that after one year of the price being in effect, existing stores will see a low to mid single digit percentage increase to AUVs, with an even greater impact to new stores, as the majority of their classic card members will be paying $15.

Speaker Change: We also launched two black card pricing tests in select markets, one at $27.99 and the other at $29.99.

Colleen Keating: If either of these tests prove successful, this increase could also further enhance store returns. We look forward to continuing to collaborate with our franchisees, and we're excited to join them at our annual Franchisee Conference in September as we begin the next chapter of growth for Planet Fitness. And to capitalize on these opportunities, we need a great team that competes and wins. I keep a hard hat in my office to remind me that being a builder of blue-ribbon teams is what drives a business forward.

Speaker Change: If either of these tests prove successful, this increase could also further enhance store returns.

Colleen Keating: We look forward to continuing to collaborate with our franchisees, and we're excited to join them at our annual franchisee conference in September as we begin the next chapter of growth for Planet Fitness. And to capitalize on these opportunities, we need a great team that competes and wins. I keep a hard hat in my office to remind me that being a builder of Blue Ribbon Teams is what drives the business forward. As such, a top priority for me is the CFO search, and I've been working closely with the team to identify the best candidate for the future of our brand.

Speaker Change: We look forward to continuing to collaborate with our franchisees and we're excited to join them at our annual Franchisee Conference in September as we begin the next chapter of growth for Planet Fitness.

Speaker Change: And, to capitalize on these opportunities, we need a great team that competes and wins.

Speaker Change: I keep a hard hat in my office to remind me that being a builder of blue ribbon teams is what drives a business forward. As such, a top priority for me is the CFO search, and I've been working closely with the team to identify the best candidate for the future of our brand.

Colleen Keating: As such, a top priority for me is the CFO search, and I've been working closely with the team to identify the best candidate for the future of our brand. The search process we are running is thorough and comprehensive, and we're encouraged by the quality of candidates and their enthusiasm for the role. As the search progresses, Tom has agreed to stay on as CFO until the end of the year. We believe this timing will provide for thorough onboarding and as smooth a transition as possible. We're grateful for Tom's ongoing support and commitment to Planet Fitness. Now, I will turn it over to Tom.

Colleen Keating: The search process we are running is thorough and comprehensive, and we're encouraged by the quality of candidates and the enthusiasm toward the role. As the search progresses, Tom has agreed to stay on as CFO until the end of the year. We believe this timing will provide for thorough onboarding and as smooth a transition as possible. We're grateful for Tom's ongoing support and commitment to Planet Fitness.

Speaker Change: The search process we are running is thorough and comprehensive, and we're encouraged by the quality of candidates and the enthusiasm toward the role.

Speaker Change: The search process we are running is thorough and comprehensive, and we're encouraged by the quality of candidates and the enthusiasm toward the role.

Tom Fitzgerald: As the search progresses, Tom has agreed to stay on as CFO until the end of the year. We believe this timing will provide for thorough onboarding and as smooth a transition as possible. We're grateful for Tom's ongoing support and commitment to Planet Fitness.

Colleen Keating: Now, I would like to thank you for your time.

Tom Fitzgerald: We'll turn it over to Tom. Thanks, Colleen. Before I get to our second quarter results, I'd like to address the debt transaction that we completed in June. The beauty of our asset, light franchise model is that it generates significant free cash flow. This enables us to continuously assess the best use of our cash and how we can leverage our balance sheet to enhance shareholder value. Over the last two and a half years, we have completed two debt transactions. One that enabled us to acquire a top tier operator in the system, as well as this most recent one that funded and accelerated share repurchase.

Tom Fitzgerald: Thanks, Colleen. Before I get to our second quarter results, I'd like to address the debt transaction that we completed in June. The beauty of our AssetLite franchise model is that it generates significant free cash. This enables us to continuously assess the best use of our cash and how we can leverage our balance sheet to enhance shareholder value. Over the last two-and-a-half years, we have completed two debt transactions. One that enabled us to acquire a top-tier operator in the system as well as this most recent one that funded an accelerated share repurchase.

Speaker Change: Now I will turn it over to Tom.

Tom Fitzgerald: Thanks Colleen. Before I get to our second quarter results, I'd like to address the debt transaction that we completed in June .

Tom Fitzgerald: The beauty of our AssetLite franchise model is that it generates significant free cash flow.

Tom Fitzgerald: This enables us to continuously assess the best use of our cash and how we can leverage our balance sheet to enhance shareholder value.

Tom Fitzgerald: Over the last two and a half years, we have completed two debt transactions.

Tom Fitzgerald: One that enabled us to acquire a top-tier operator in the system, as well as this most recent one that funded an accelerated share repurchase.

Tom Fitzgerald: Since 2018, we've returned more than $1.3 billion to shareholders via share repurchases. As part of this transaction, we refinanced approximately 600 million that was due next year, and we upsized the deal to 800 million given the favorable rates compared to what we were anticipating. This included a $425 million five-year tranche with a fixed interest rate of just under 5.8%, and a $375 million 10-year tranche with a fixed interest rate of just over 6.2%. Our total long-term debt, excluding deferred financing costs, now has five tranches of fixed-rate securitized debt of approximately $2.2 billion. We used the proceeds to repay the tranche due next year, which had the highest rate of our existing debt.

Tom Fitzgerald: Since 2018, we have returned more than $1.3 billion to shareholders via share repurchase. As part of this transaction, we refinanced approximately $600 million that was due next year, and we upsized the deal to $800 million given the favorable rates compared to what we were anticipating. This included a $425 million five-year tranche with a fixed interest rate of just under 5.8% and a $375 million 10-year tranche with a fixed interest rate of just over 6.2%.

Tom Fitzgerald: Since 2018 we have returned more than 1.3 billion dollars to shareholders via share repurchases.

Tom Fitzgerald: As part of this transaction, we refinanced approximately $600 million that was due next year, and we upsized the deal to $800 million given the favorable rates compared to what we were anticipating.

Tom Fitzgerald: This included a $425 million 5-year tranche with a fixed interest rate of just under 5.8%.

Tom Fitzgerald: and a $375 million 10-year tranche with a fixed interest rate of just over 6.2%.

Tom Fitzgerald: Our total long-term debt, excluding deferred financing costs, now has five tranches of fixed-rate securitized debt of approximately $2.2 billion. We used the proceeds to repay the tranche due next year, which had the highest rate of our existing debt.

Tom Fitzgerald: Our total long-term debt, excluding deferred financing costs, now has five tranches of fixed-rate securitized debt of approximately $2.2 billion.

Tom Fitzgerald: We used the proceeds to repay the tranche due next year, which had the highest rate of our existing debt. And as a result, our blended interest rate only increased 50 basis points.

Tom Fitzgerald: And as a result, our blended interest rate only increased 50 basis points from 4.0 percent to approximately 4.5 percent. We were more conservative compared to historical refinancing levels this time, given the current rate environment and the existing amount of liquidity already available on our balance sheet in the form of cash and marketable securities. We want to ensure that we have a sizable amount of cash on our balance sheet to weather any storm that may come along, which benefit at us greatly when all of our stores temporarily shut down. Additionally, we use the proceeds to pay costs associated with the transaction and also to fund the majority of the $280 million accelerated share repurchase agreement that we entered into on June 12th.

Tom Fitzgerald: And as a result, our blended interest rate only increased 50 basis points from 4.0% to approximately 4.5%. We were more conservative compared to historical refinancing levels this time given the current rate environment and the existing amount of liquidity already available on our balance sheet in the form of cash and marketable security. We want to ensure that we have a sizable amount of cash on our balance sheet to weather any storm that may come along, which benefited us greatly when all of our stores temporarily shut down due to the pandemic.

Tom Fitzgerald: from 4.0% to approximately 4.5%.

Tom Fitzgerald: We were more conservative compared to historical refinancing levels, this time given the current rate environment and the existing amount of liquidity already available on our balance sheet in the form of cash and marketable securities.

Tom Fitzgerald: We want to ensure that we have a sizable amount of cash on our balance sheet to weather any storm that may come along, which benefited us greatly when all of our stores temporarily shut down due to the pandemic.

Tom Fitzgerald: Additionally, we used the proceeds to pay costs associated with the transaction and also to fund the majority of the $280 million Accelerated Share Repurchase Agreement that we entered into on June 12. The board also approved a new $500 million share repurchase authorization to replace the previous one upon completion of the ASR, which will occur before the end of the third quarter.

Tom Fitzgerald: Additionally, we use the proceeds to pay costs associated with the transaction and also to fund the majority of the 280 million dollar accelerated share repurchase agreement that we entered into on June 12th.

Tom Fitzgerald: The board also approved a new $500 million share repurchase authorization to replace the previous one upon completion of the ASR, which will occur before the end of the third quarter. Importantly, we have made changes over the past year to our underlying business to reduce the cost of owning and operating a Planet Fitness location, as well as our recent classic card price increase, both of which enhance what were already very attractive store-level returns. We believe the combination of our franchise model and strong unit economics sets us up to continue to take advantage of our long-term growth opportunities.

Tom Fitzgerald: The board also approved a new $500 million share repurchase authorization to replace the previous one upon completion of the ASR, which will occur before the end of the third quarter.

Tom Fitzgerald: Importantly, we have made changes over the past year to our underlying business to reduce the cost of owning and operating a Planet Fitness location, as well as our recent Classic Card price increase, both of which enhance what were already very attractive store-level returns. We believe the combination of our franchise model and strong unit economics sets us up to continue to take advantage of our long-term growth opportunities. Now to our second quarter results.

Speaker Change: Importantly, we have made changes over the past year to our underlying business to reduce the cost of owning and operating a Planet Fitness location, as well as our recent Classic Card price increase, both of which enhance what were already very attractive store-level returns.

Speaker Change: We believe the combination of our franchise model and strong unit economics sets us up to continue to take advantage of our long-term growth opportunities.

Tom Fitzgerald: Now to our second quarter results. All of my comments regarding our quarter performance will be comparing Q2 2024 to Q2 of last year, unless otherwise noted. We opened 18 new stores compared to 26. We delivered system-wide same-store sales growth of 4.2% in the second quarter. Branch IZ same-store sales increase 4.3%, and corporate same-store sales increased 4.0%. The classic card price increase, which went into effect on June 28th, did not have any impact on our Q2 same-store sales. Approximately 60% of our Q2 cop increase was driven by net member growth, with the balance being rate growth.

Tom Fitzgerald: All of my comments regarding our quarter performance will be comparing Q2 2024 to Q2 of last year, unless otherwise noted. We opened 18 new stores compared to 26. We delivered system-wide same-store sales growth of 4.2% in the second quarter. Franchisee same-store sales increased 4.3%, and corporate same-store sales increased 4.0%. The Classic Card price increase, which went into effect on June 28, did not have any impact on our Q2 same-store sales. Additionally, approximately 60% of our Q2 COP increase was driven by net member growth, with the balance being rate-based. Black card penetration was 62.4%, flat compared to the prior year.

Speaker Change: Now to our second quarter results. All of my comments regarding our quarter performance will be comparing Q2 2024 to Q2 of last year unless otherwise noted.

Speaker Change: We opened 18 new stores compared to 26.

Speaker Change: We delivered system-wide same-store sales growth of 4.2% in the second quarter.

Speaker Change: Franchisee same-store sales increased 4.3% and corporate same-store sales increased 4.0%.

Speaker Change: The Classic Card price increase, which went into effect on June 28th, did not have any impact on our Q2 same-store sales.

Speaker Change: Approximately 60% of our Q2 COP increase was driven by net member growth, with the balance being rate growth.

Tom Fitzgerald: Black card penetration was 62.4% flat to the prior year. For the second quarter, total revenue was 300.9 million compared to 286.5 million. This increase was driven by revenue growth across the franchise and corporate own segments. The 9.1% increase in franchise segment revenue was primarily due to increases in royalties, new stores, and national ad fund revenue. For the second quarter, the average royalty rate was 6.6%, up from 6.5%. The 10.3% increase in revenue in the corporate own store segment was primarily driven by same-store sales growth, as well as new and acquired stores. Equipment segment revenue decreased 8.4%.

Speaker Change: Black card penetration was 62.4% flat to the prior year.

Tom Fitzgerald: For the second quarter, total revenue was $300.9 million compared to $286.5 million. This increase was driven by revenue growth across the franchise and corporate-owned segments. The 9.1% increase in franchise segment revenue was primarily due to increases in royalties, new stores, and national ad fund revenue. For the second quarter, the average royalty rate was 6.6%, up from 6.5%.

Speaker Change: For the second quarter, total revenue was $300.9 million compared to $286.5 million.

Speaker Change: This increase was driven by revenue growth across the franchise and corporate-owned segments.

Speaker Change: The 9.1% increase in franchise segment revenue was primarily due to increases in royalties, new stores, and national ad fund revenue.

Speaker Change: For the second quarter, the average royalty rate was 6.6%, up from 6.5%.

Tom Fitzgerald: The 10.3% increase in revenue in the corporate-owned store segment was primarily driven by same-store sales growth, as well as new and acquired stores. However, equipment segment revenue decreased 8.4%. The decrease was primarily driven by lower revenue from equipment sales to new and existing franchisee-owned stores, which was driven by fewer new store placements, as well as the shift to more strength equipment versus cardio. As we noted last quarter, the shift in the equipment mix brings down overall sales on a per store basis. We completed 18 new store openings this quarter compared to 26 last year.

Speaker Change: The 10.3 percent increase in revenue in the corporate-owned store segment was primarily driven by same-store sales growth as well as new and acquired stores.

Tom Fitzgerald: The decrease was primarily driven by lower revenue from equipment sales to new and existing franchisee-owned stores, which was driven by fewer new store placements, as well as the shift to more strength equipment versus cardio. As we noted last quarter, the shift in the equipment mix brings down overall sales on a per store basis. We completed 18 new store placements this quarter compared to 26 last-last year. For the quarter, replacement equipment accounted for 84% of total equipment revenue compared to 79%. Our cost of revenue, which primarily relates to the cost of equipment sales to franchisees on stores, was 51.9 million compared to 59.5 million.

Speaker Change: Equipment segment revenue decreased 8.4%. The decrease was primarily driven by lower revenue from equipment sales to new and existing franchisee-owned stores, which was driven by fewer new store placements, as well as the shift to more strength equipment versus cardio.

Speaker Change: As we noted last quarter, the shift in the equipment mix brings down overall sales on a per store basis.

Speaker Change: We completed 18 new store placements this quarter compared to 26 last year.

Tom Fitzgerald: For the quarter, replacement equipment accounted for 84% of total equipment revenue compared to 79%. Our cost of revenue, which primarily relates to the cost of equipment sales to franchisee-owned stores, was $51.9 million compared to $59.5 million. Store operation expenses, which relate to our corporate-owned store segment, increased to $70.2 million from $58.9 million due to higher operating expenses in existing stores, primarily due to a timing shift in marketing spend from Q1 to Q2 of this year, as well as the impact of new and acquired stores.

Speaker Change: For the quarter, replacement equipment accounted for 84% of total equipment revenue compared to 79%.

Speaker Change: Our cost of revenue, which primarily relates to the cost of equipment sales to franchisee-owned stores, was $51.9 million compared to $59.5 million.

Tom Fitzgerald: Store operation expenses, which relate to our corporate own store segment, increased to 70.2 million from 58.9 million due to higher operating expenses in existing stores, primarily due to a timing shift in marketing spend from Q1 to Q2 of this year, as well as the impact of new and acquired stores. S-GNA for the quarter was 31.6 million compared to 32.6 million. Adjusted S-GNA was 30.1 million, which includes a 1.3 million dollar adjustment for CEO transition-related expenses compared to 31.4 million, which included a 1.2 million dollar adjustment for severance-related expenses. National advertising fund expense was 20.1 million compared to 17.9 million.

Speaker Change: Store operation expenses, which relate to our corporate owned store segment, increased to $70.2 million from $58.9 million due to higher operating expenses in existing stores, primarily due to a timing shift in marketing spend from Q1 to Q2 of this year.

Tom Fitzgerald: SG&A for the quarter was $31.6 million compared to $32.6 million. Adjusted SG&A was $30.1 million, which included a $1.3 million adjustment for CEO transition-related expenses, compared to $31.4 million, which included a $1.2 million adjustment for severance-related expenses. National advertising fund expense was $20.1 million compared to $17.9 million.

Speaker Change: as well as the impact of new and acquired stores.

Speaker Change: SG&A for the quarter was $31.6 million compared to $32.6 million.

Speaker Change: Adjusted SG&A was $30.1 million, which includes a $1.3 million adjustment for CEO transition-related expenses.

Speaker Change: compared to $31.4 million, which included a $1.2 million adjustment for severance-related expenses.

Speaker Change: National advertising fund expense was $20.1 million compared to $17.9 million.

Tom Fitzgerald: Net income was 43.9 million, adjusted net income was 62.2 million, and adjusted net income for alluded share was 71 cents. Adjusted EBITDA was 127.5 million, and adjusted EBITDA margin was 42.4 percent compared to 118.9 million with adjusted EBITDA margin of 41.5 percent. By segment, franchise adjusted EBITDA was 77.5 million, and adjusted EBITDA margin was 71.9 percent. Corporate store adjusted EBITDA was 49.6 million, and adjusted EBITDA margin was 39.5 percent. Equipment adjusted EBITDA was 18.6 million, and adjusted EBITDA margin was 27.4 percent.

Tom Fitzgerald: Net income was $43.9 million, adjusted net income was $62.2 million, and adjusted net income for diluted share was $0.71. Adjusted EBITDA was $127.5 million, and adjusted EBITDA margin was 42.4% compared to $118.9 million with an adjusted EBITDA margin of 41.5%. By segment, franchise adjusted EBITDA was $77.5 million, and adjusted EBITDA margin was 71.9%. Corporate store adjusted EBITDA was $49.6 million, and adjusted EBITDA margin was $39.5. Equipment adjusted EBITDA was $18.6 million, and Adjusted EBITDA Margin was $27.4 million. Now, turning to the balance.

Speaker Change: Net income was $43.9 million, adjusted net income was $62.2 million, and adjusted net income for diluted share was $0.71.

Speaker Change: Adjusted EBITDA was $127.5 million and adjusted EBITDA margin was 42.4% compared to $118.9 million with adjusted EBITDA margin of 41.5%.

Speaker Change: By segment, franchise adjusted EBITDA was $77.5 million and adjusted EBITDA margin was 71.9%.

Speaker Change: Corporate store adjusted EBITDA was $49.6 million and adjusted EBITDA margin was 39.5%.

Speaker Change: Equipment Adjusted EBITDA was $18.6 million and Adjusted EBITDA Margin was 27.4%.

Tom Fitzgerald: Now turning to the balance sheet. As of June 30, 2024, we had total cash, cash equivalent, and marketable securities of 447.7 million compared to 447.9 million on December 31, 2023, which included 47.8 million and 46.3 million of restricted cash, respectively, in each period. In Q2 2024, we used $280 million to repurchase and retire approximately 3.1 million shares to date, which is approximately 80 percent of the stock that we expect to repurchase under the ASR, with any remainder to occur as part of the completion of the agreement in the third quarter. Finally, we are reiterating our outlook for 2024, including the targets we updated in June as part of the announcement of our accelerated share repurchase program.

Tom Fitzgerald: As of June 30, 2024, we had total cash, cash equivalents, and marketable securities of $447.7 million compared to $447.9 million on December 31, 2023, which included $47.8 million and $46.3 million of restricted cash, respectively, in each period. In Q2 2024, we will use $280 million to repurchase and retire approximately 3.1 million shares to date, which is approximately 80% of the stock that we expect to repurchase under the ASR, with any remaining purchase to occur as part of the completion of the agreement in the third quarter.

Speaker Change: Now turning to the balance sheet.

Speaker Change: As of June 30, 2024, we had total cash, cash equivalents, and marketable securities.

Speaker Change: of $447.7 million compared to $447.9 million on December 31, 2023, which included $47.8 million and $46.3 million of restricted cash, respectively, in each period.

Speaker Change: In Q2 2024, we used $280 million to repurchase and retire approximately 3.1 million shares to date.

Speaker Change: which is approximately 80% of the stock that we expect to repurchase under the ASR with any remainder to occur as part of the completion of the agreement in the third quarter.

Tom Fitzgerald: Finally, we are reiterating our outlook for 2024, including the targets we updated in June as part of the announcement of our Accelerated Share Repurchase Program. We continue to expect between 140 and 150 new stores, which includes both franchise and corporate locations. We also continue to expect between 120 and 130 equipment placements in new franchise stores. For the full year, we continue to expect that reequipped sales will make up approximately 60% of total equipment segment revenue.

Speaker Change: Finally, we are reiterating our outlook for 2024, including the targets we updated in June as part of the announcement of our Accelerated Share Repurchase Program.

Tom Fitzgerald: We continue to expect between 140 and 150 new stores, which includes both franchise and corporate locations. We also continue to expect between 120 and 130 equipment placements and new franchise stores. For the full year, we continue to expect that re-equip sales will make up approximately high 60 percent of total equipment segment revenue. Let me address the quarterly timing of both replacement equipment sales to existing franchise locations and equipment placements in new franchise teams. During Q2, we sold more replacement equipment to existing franchise stores than we expected, which shifted those sales into the second quarter, and therefore we do not expect those sales in the second half of the year, particularly not in the fourth quarter.

Speaker Change: We continue to expect between 140 and 150 new stores, which includes both franchise and corporate locations.

Speaker Change: We also continue to expect between 120 and 130 equipment placements in new franchise stores.

Speaker Change: For the full year, we continue to expect that re-equipped sales will make up approximately high 60% of total equipment segment revenue.

Tom Fitzgerald: Let me address the quarterly timing of both replacement equipment sales to existing franchise locations and equipment placements in new franchise clubs. During Q2, we sold more replacement equipment to existing franchise stores than we expected, which shifted those sales into the second quarter, and therefore, we do not expect those sales in the second half of the year, particularly in the fourth quarter. In terms of timing for placements in new franchise stores, we continue to expect them to be weighted to the second half with a significant skew to Q4.

Speaker Change: Let me address the quarterly timing of both replacement equipment sales to existing franchise locations and equipment placements in new franchise clubs.

Speaker Change: During Q2, we sold more replacement equipment to existing franchise stores than we expected, which shifted those sales into the second quarter and therefore we do not expect those sales in the second half of the year, particularly not in the fourth quarter.

Tom Fitzgerald: In terms of timing for placements to new franchise stores, we continue to expect them to be weighted to the second half with a significant skew to Q4. As a reminder, we are maintaining our equipment and profit dollars for new placements. With the mixed shift to more strength and less cardio, therefore we expect that margin rate will continue to be higher in the second half of the year versus last year. We continue to expect the following targets that represent growth over fiscal 2023 results. Teams to our sales growth to be between three and five percent, revenue to grow in the four to six percent range.

Speaker Change: In terms of timing for placements in new franchise stores, we continue to expect them to be weighted to the second half with a significant skew to Q4.

Tom Fitzgerald: As a reminder, we are maintaining our equipment segment profit dollars for new places. With the mixed shift to more strength and less cardio, we expect that margin rate will continue to be higher in the second half of the year versus last year. We continue to expect the following targets that represent growth over fiscal 2023 results. Seems to our sales growth to be between three and five percent, and revenue to grow in the four to six percent range.

Speaker Change: As a reminder, we are maintaining our equipment segment profit dollars for new placements.

Speaker Change: With the mixed shift to more strength and less cardio, therefore we expect that margin rate will continue to be higher in the second half of the year versus last year.

Speaker Change: We continue to expect the following targets that represent growth over fiscal 2023 results.

Speaker Change: Same store sales growth to be between 3% and 5%.

Tom Fitzgerald: Adjusted EBITDA will grow in the seven to nine percent range, adjusted net income to increase in the four to six percent range, and adjusted earnings for diluted share to grow in the seven to nine percent range based on adjusted diluted weighted average shares outstanding of approximately 86.5 million, inclusive of the shares expected to be repurchased as part of the ASR agreement. We also continue to expect net interest expense approximately 75.0 million, excluding the write-off of deferred financing costs associated with our debt refinancing transaction. Lastly, we continue to expect CAPEX to be up approximately 25 percent, and DNA to be up between 11 to 12 percent.

Tom Fitzgerald: Adjusted epithelial growth will grow in the 7-9% range, adjusted net income to increase in the four to six percent range, and Adjusted Earnings per Diluted Share to grow in the 7-9% range based on adjusted diluted weighted average shares outstanding of approximately $86.5 million, inclusive of the shares expected to be repurchased as part of the ASR agreement. We also continue to expect net interest expense of approximately $75.0 million, excluding the write-off of deferred financing costs associated with our debt refinancing transaction.

Speaker Change: revenue to grow in the four to six percent range.

Speaker Change: Adjusted epithelial will grow in the seven to nine percent range.

Speaker Change: adjusted net income to increase in the four to six percent range.

Speaker Change: and adjusted earnings per diluted share to grow in the 7 to 9 percent range based on adjusted diluted weighted average shares outstanding of approximately 86.5 million inclusive of the shares expected to be repurchased as part of the ASR agreement.

Speaker Change: We also continue to expect net interest expense of approximately $75.0 million, excluding the write-off of deferred financing costs associated with our debt refinancing transactions.

Tom Fitzgerald: Lastly, we continue to expect CAPX to be up approximately 25% and DNA to be up between 11% to 12%. Now I'll turn the call back over to the operator to open it up for Q&A. Thank you, and the floor is now yours.

Speaker Change: Lastly, we continue to expect CAPX to be up approximately 25% and DNA to be up between 11 to 12%.

Operator: Now I'll turn the call back over to the operator to open it up for Q&A.

Speaker Change: Now I'll turn the call back over to the operator to open it up for Q&A.

Operator: Thank you, and the floor is now open for your questions. So to ask a question this time, these are SR-1.

Operator: Thank you. And the floor is now open for your questions. So to ask a question at this time, please press star 1. We're going to pause for a moment to compile the Q&A roster. Our first question comes from the line of Randy Konik, a Jeff

Speaker Change: Thank you. And the floor is now open for your questions. So to ask a question at this time, please press star 1. We're going to pause for a moment to compile the Q&A roster.

Operator: We're going to boss for a moment to compile the Q&A roster.

Colleen Keating: Our first question comes to the line of Brandy Coney, the Jeffries. Yes, thanks a lot, and good morning. I guess kindly what would be really helpful for us is maybe give us some perspective on your prior leadership roles and different industry experiences and talk about some of those and how you're going to apply some of those learnings to strategies at Planet. And something also that would be really helpful is you highlighted in the script the kind of emphasis on the HD over the LP and HDLP. Maybe kind of give us an added kind of thoughts around what that means to you and how do you want to accentuate that part of the business.

Speaker Change: Our first question comes from the line of Randy Konik with Jefferies.

Randal Konik: Yeah, thanks a lot, and good morning. I guess, Colleen, what would be really helpful for us is maybe give us some perspective on your prior leadership roles and different industry experiences and talk about some of those, and how you're going to apply some of those learnings to strategies at Planet. And something also that would be really helpful is you highlighted in the script the kind of emphasis on the HV over the LP and HVLP. Maybe kind of give us an added kind of thoughts around what that means to you and how you want to emphasize that part of the business. Thanks.

Randy Konik: Yes, thanks a lot and good morning. I guess, Colleen, what would be really helpful for us is maybe give us some perspective on your prior leadership roles and different industry experiences.

Speaker Change: And talk about some of those and how you're going to apply some of those learnings to

Speaker Change: strategies at Planet. And something also that would be really helpful is...

Speaker Change: You highlighted in the script, you know, the kind of emphasis on the HV over the LP and HVLP. Maybe kind of give us an added kind of thoughts around, you know, what that means to you and how you want to accentuate that part of the business. Thanks.

Colleen Keating: Thanks.

Colleen Keating: Hey, Brandy, nice to hear from you. I'm sure happy to. So I think to the first part of your question about kind of background and in prior roles. As you know, I spent most of my career in the hospitality space and the hospitality industry in really brand-led organizations. A large part of my career with Starwood and then several years with Intercontinental Hotels Group. And then more recently in the real estate space in the single-family home rental space. And you know, at the end of the day, there are a lot of similarities between my prior experience and the fitness space.

Colleen Keating: Hey, Randy, nice to hear from you. Sure, I'll be happy to.

Speaker Change: Hey, Randy. Nice to hear from you. Sure, happy to. So, you know, I think to the first part of your question about kind of background and prior roles, as you know, I spent most of my career in the hospitality space and the hospitality industry.

Colleen Keating: So, you know, to the first part of your question about kind of background and prior roles, as you know, I spent most of my career in the hospitality space in the hospitality industry, and really brand-led organizations. A large part of my career was with Starwood and then several years with Intercontinental Hotels Group, and then more recently in the real estate space and the single-family home rental space. And, you know, at the end of the day, there's a lot of similarities between my prior experience and the fitness space.

Speaker Change: and really brand-led organizations. A large part of my career with Starwood and then several years with Intercontinental Hotels Group.

Speaker Change: And then more recently, in the real estate space, in the single-family home rental space.

Speaker Change: At the end of the day, there are a lot of similarities between my prior experience and the fitness space. We're really bringing to life experiences for our members here at Planet Fitness. And I often say, in hospitality, we were the home away from home for weary travelers and wanted our guests to leave feeling better than when they came. And I think

Colleen Keating: We're really bringing experiences to life for our members here at Planet Fitness. And I often say, you know, in hospitality, we are the home away from home for weary travelers and want our guests to leave feeling better than when they came.

Colleen Keating: We're really bringing to life experiences for our members here at Planet Fitness. And I often say, you know, in hospitality, we were the home away from home for weary travelers and wanted our guests to leave feeling better than when they came. And I think what we're offering in at Planet Fitness is quite similar. You know, our members enjoy a great high-value experience in our clubs. And let's face it, who doesn't feel better after a great workout or when you have a great workout in the rearview mirror. So, you know, we welcome people into our clubs in a bright, friendly, engaging, and very clean environment with a plethora of equipment and really able to help them wherever they're at in their fitness journey, their wellness journey, and then have them leave our clubs feeling better than when they came.

Colleen Keating: And I think what we're offering at Planet Fitness is quite similar. You know, our members enjoy a great, high-value experience in our clubs, and let's face it, who doesn't feel better after a great workout or when you have a great workout in the rearview mirror? So, you know, we welcome people into our clubs in a bright, friendly, engaging, and very clean environment with a plethora of equipment and are really able to help them at wherever they're at in their fitness journey, their wellness journey, and then have them leave our clubs feeling better than when they came.

Speaker Change: What we're offering at Planet Fitness is quite similar. Our members enjoy a great high-value experience in our clubs, and let's face it, who doesn't feel better after a great workout or when you have a great workout in the rearview mirror? So we welcome people into our clubs in a bright, friendly, engaging, and very clean environment with a plethora of equipment and really able to help them wherever they're at in their fitness journey, their wellness journey, and then have them leave our clubs feeling better than when they came. One of the other things I think that's relevant in the hospitality background versus what we're...

Colleen Keating: One of the other things I think that's relevant in the hospitality background versus, you know, what we're endeavoring to do at Planet Fitness is the opportunity to extend the experience outside the four walls of the club through our app, through loyalty programs and partnerships, and even our Perks program. We just had a great month in June with Perks utilization. So there's an opportunity for us to really leverage our very broad membership base and our high app utilization through partnerships and bringing additional offerings to our members that they value even outside the four walls of the gym.

Colleen Keating: One of the other things I think that's relevant in the hospitality background versus, you know, what we're endeavoring to do at Planet Fitness is the opportunity to extend the experience outside the four walls of the club through our app, through loyalty programs and partnerships, and even our perks program, which is how to great month and June with perks utilization. So there's an opportunity for us to really leverage our very broad membership base and our high app utilization through partnerships and bringing additional offerings to our members that they value even outside the four walls of the gym.

Speaker Change: We just had a great month in June with Perks Utilization.

Speaker Change: So there's an opportunity for us to really leverage our very broad membership base and our high app utilization through partnerships and bringing additional offerings to our members that they value even outside the four walls of the gym. And when I think about high value, low price

Colleen Keating: And when I think about high value, low price, certainly our pricing does make fitness accessible to most. At the same time, I really think about leaning into the HV of HVLP, and I often say to the team here, I think about the HV in capital letters and LP in lower case letters. And that really is about the value offering that we're bringing to our members.

Colleen Keating: And when I think about high value, low price, certainly our pricing does make fitness accessible to most. But at the same time, I really think about leaning into the HV of HVLP, and I often say to the team here, I think about the HV in capital letters and the LP in lowercase letters, and that really is about the value offering that we're bringing to our members.

Speaker Change: Certainly, our pricing does make fitness accessible to most.

Speaker Change: At the same time, I really think about leaning into the HV of HVLP, and I often say to the team here, I think about the HV in capital letters and the LP in lowercase letters, and that really is about the value offering that we're bringing to our members.

Tom Fitzgerald: Superalphalm, I guess just lastly for Tom. I think it was mentioned that there's a test going on for the black card, 2799 and 2999. Can you just elaborate a little bit on when would we potentially hear about any proof of that labor, those testing in terms of potentially implementing a price change on the black card, and then back on the white card with that $15 a dollar now price versus 10?

Randal Konik: I guess just lastly for Tom, I think it was mentioned that there's a test going on for the black card, $27.99 and $29.99. Can you just elaborate a little bit on when we might potentially hear about any fruits of that labor, those tests in terms of potentially implementing a price change on the black card? And then back on the white card, with that $15 price now versus $10, should we be thinking about an incremental impact being, or a noticeable impact occurring in, let's say the front half of next year or the back half of next year? Just kind of a thought process of when that kind of impact would flow through the numbers would be super helpful, thanks.

Speaker Change: No problem. I guess just lastly for Tom...

Tom Fitzgerald: I think it was mentioned that there's a test going on for the Black Card, $27.99 and $29.99. Can you just elaborate a little bit on when would we potentially hear about any fruits of that labor, those tests in terms of potentially...

Speaker Change: Implementing a price change on the black card and then back on the white card with that $15 now price versus $10. Should we be thinking about an incremental impact being or like a noticeable impact occurring in

Tom Fitzgerald: Should we be thinking about an incremental impact being or like a noticeable impact occurring in, let's say, the front half of next year or the back half of next year? Just kind of thought process of when that kind of would flow through the numbers would be super helpful. Thanks.

Speaker Change: let's say the front half of next year or the back half of next year, just kind of thought process of when that kind of would flow through the numbers would be super helpful. Thanks.

Tom Fitzgerald: Yeah, sure thing, Randy. So, on the first part, we have two black card tests running. We actually rolled those tests into new markets where we weren't testing the classic card changes prior, right at the time that we raised the classic card price from $10 to $15. That's like June 28th, which is when those were effective.

Tom Fitzgerald: Yeah, sure thing, Randy. So on the first part, we have two black card tests running. We actually rolled those tests into new markets where we weren't testing the classic card changes prior. Right at the time that we raised the classic card price from 10 to 15, that's like June 28 is when those were effective. So they've only been in place about a month, and you know with our business, we need to let them run for a while. So we expect to run them through the better part of Q3 and maybe even into Q4 before we determine whether or not we have enough information to make a call.

Speaker Change: Yeah, sure thing, Randy. So, on the first part, we have two black card tests running. We actually rolled those tests.

Speaker Change: into new markets where we weren't testing the classic card changes prior, right at the time that we raised the classic card price from $10 to $15. So that's like June 28th is when those were effective.

Tom Fitzgerald: So they've only been in place about a month, and you know, with our business, we need to let them run for a while. So we expect to run them through, you know, the better part of, um... Q3 and maybe even into Q4 before we determine whether or not we have enough information to make a call. And if one of those beats what we're... What we're testing them against, you know; we're pretty thorough in how we do all that with control stores matched up, etc., then we'll make a change. If it doesn't beat them, then we'll stick with what we've got.

Speaker Change: So they've only been in place about a month and you know with our with our business we need to we need to let Them run for a while

Speaker Change: So we expect to run them through, you know, the better part of Q3 and maybe even into Q4 before we determine whether or not we have, you know, enough information to make a call. And if one of those beats what we're

Tom Fitzgerald: And if one of those beats, what we're, what we're testing them up against, you know, we're pretty thorough in how we do all that with control stores, matched up, et cetera, then we'll make a change. If it doesn't beat, then we'll stick with what we've got. So time will tell, but it takes a few months to let those run.

Speaker Change: What we're testing them up against, you know, we're pretty thorough in how we do all that with control stores matched up, etc. Then we'll make a change. If it doesn't beat, then we'll stick with what we've got. So time will tell, but it takes a few months to let those run.

Tom Fitzgerald: So time will tell, but it takes a few months to let those run. In terms of the Classic Card, yeah, that's effective for new members. As you know, it doesn't apply retroactively. So as new Classic Card members join, they're joining at 15, and they'll feather in over time. Now, they're only about 40-ish percent of our membership base, so they're the minority of our members, but it will affect each quarter more so than the prior quarter, and we'll talk about more what that means for 2025 when we get there. But you're kind of thinking about it right in terms of how it feathers. Great

Tom Fitzgerald: In terms of the classic card, yeah, that's effective for new members. As you know, it doesn't apply retro. So as new classic card members join, they're joining at 15, and they'll feather in over time. Now that they're only about 40-ish percent of our membership base. So it's, they're the minority of our members, but it will affect each quarter, you know, more so than the prior quarter. And we'll talk about more what that means for 2025 when we get there, but you're kind of thinking about it right in terms of how it feathers in. Right.

Speaker Change: In terms of the classic card, yeah, that's effective for new members. As you know, it doesn't apply retro.

Speaker Change: So as new Classic Card members join, they're joining at 15, and they'll feather in over time. Now, they're only about 40-ish percent of our membership base, so they're the minority of our members.

Speaker Change: It will affect each quarter, you know, more so than the prior quarter, and we'll talk about more what that means for 2025 when we get there, but you're kind of thinking about it right in terms of how it feathers in.

Colleen Keating: Great, thanks a lot guys. Okay, our pleasure.

Tom Fitzgerald: Thanks a lot, guys. Okay, our pleasure.

Speaker Change: Great, thanks a lot guys. Okay, our pleasure.

Speaker: Our next question comes from the line of CME and C2 cycle. It would be a more capital markets. Thanks, everyone.

Operator: Our next question comes from the line of Simeon Siegel with BMO Capital Markets.

Speaker Change: Our next question comes from the line of Simeon Siegel with BMO Capital Markets.

Simeon Siegel: Thanks. Hey, everyone. Congratulations and welcome, Colleen. Thank you.

Speaker: Congrats and welcome, Colleen.

Colleen Keating: Thank you. Obviously early, recognizing it would be a small sample size so far, but just any initial learnings you're seeing from the price hikes on the rest of the business, through, if there's any benefit to turn, maybe how is the black card penetration for new members that face that higher price?

Simeon Siegel: Obviously, early, and recognizing it would be a small sample size so far, but just any initial learnings you're seeing from the price hikes on the rest of the business? Curious if there's any benefit to churn. Maybe how is the black card penetration for new members that face that higher price? And then, Tom, nice to see the higher margin equipment come through. Can you elaborate a bit, go forward in terms of the tradeoff between revenues versus profit dollars? Because you're now showing us that you're realizing the benefits you were talking about earlier on.

Simeon Siegel: Thanks everyone. Congrats and welcome, Colleen. Thank you. Obviously early, recognizing it would be a small sample size so far, but just any initial learnings you're seeing from the price hikes on the rest of the business? Curious if there's any benefit to churn? Maybe how is the black card penetration for new members that face that higher price?

Tom Fitzgerald: And then Tom, nice to see the higher margin equipment come through. Can you elaborate a bit? I'll go forward in terms of the trade-off between revenues versus profit dollars, because you're now showing us that you're realizing the benefits you were talking about earlier on. Any color there would be really helpful. Thank you. Yes, sure, thanks, CME. So, on the classic card impact, we're really only talking about Q2 here. So given that it happened at the very end, we'll have more to say on that next time. So appreciate your patience on that, but we want to stick to only talking about the prior quarter.

Simeon Siegel: And then, Tom, nice to see the higher margin equipment come through. Can you elaborate a bit, go forward, in terms of the tradeoff between revenues versus profit dollars? Because you're now showing us that you're realizing the benefits you were talking about earlier on. Any color there would be really helpful. Thank you.

Tom Fitzgerald: Any color there would be really helpful. Thank you. Yes.

Tom Fitzgerald: Yeah, sure. Thanks, Simeon.

Speaker Change: Yeah, sure. Thanks, Simeon. So on the Classic Card Impact, we're really only talking about Q2 here, so given that it happened at the very end, we'll have more to say on that next time, so appreciate your patience on that, but we want to stick to only talking about the prior quarter.

Tom Fitzgerald: So on the Classic Card Impact, we're really only talking about Q2 here. So given that it happened at the very end, we'll have more to say on that next time. So, appreciate your patience on that, but we want to stick to only talking about the prior quarter. In terms of the equipment, yeah, so as we talked about the Q1 results, we didn't see the full margin increase or saw very little margin increase because some of those orders were placed before the pricing changed.

Tom Fitzgerald: In terms of the equipment, yeah.

Tom Fitzgerald: So, as we talked about the Q1 results, we didn't see the full margin increase or some very little margin increase because some of those orders were placed before the pricing changed. In really what we're trying to do here is we remixed into having less cardio in any new store and more strength equipment based on what folks want to do in terms of their workout and just rebalancing our mix in the stores that lowers the cost of the equipment for the franchisee or the revenue for our segment. So we raised our prices so that the margin dollars that we get on a per placement basis would be equivalent to before we made the mix change to more strength, less cardio.

Speaker Change: In terms of the equipment, yeah, so as we talked about the Q1 results, we didn't see the full margin increase or saw very little margin increase because some of those orders were placed before the pricing changed.

Tom Fitzgerald: And really, what we're trying to do here is we remixed into having less cardio in any new store and more strength equipment based on what folks want to do in terms of their workout and just rebalancing our mix in the stores, that lowers the cost of the equipment for the franchisee or the revenue for our segment. So we raised our prices so that the margin dollars that we get on a per placement basis would be equivalent to before we made the mix change to more strength and less cardio.

Speaker Change: And really what we're trying to do here is we remixed into having less cardio in any new store and more strength equipment based on what folks want to do in terms of their workout and just rebalancing our mix in the stores.

Speaker Change: That lowers the...

Speaker Change: The cost of the equipment for the franchisee or the revenue for our segment. So we raised our prices so that the margin dollars that we get

Speaker Change: on a per placement basis would be equivalent to before we made the mix change to more strength, less cardio. So you're seeing that. The short answer is the cost per placement for a franchisee is down high single digit, low double digit.

Tom Fitzgerald: So you're seeing that. The short answer is the cost per placement for a franchisee is down high single-digit, low double-digit. And the margin improvement is round about 300 basis points when it's all said and done.

Tom Fitzgerald: So you're seeing that the short answer is the cost per placement for a franchisee is down high single digit low double digit, and the margin improvement is round about 300 basis points when it's all said and done.

Speaker Change: And the margin improvement is around about 300 basis points when it's all said and done.

Colleen Keating: That's great, thanks. And then just lastly, Colleen, any higher-level thoughts on the right corporate versus franchisee ratios from your perspective?

Colleen Keating: And then, just lastly, Colleen, any higher-level thoughts on the right corporate versus franchisee ratios from your perspective?

Speaker Change: That's great. Thanks. And then just lastly, Colleen, any higher-level thoughts on the right corporate versus franchisee ratios from your perspective?

Colleen Keating: Yeah, I think we believe strongly in our asset light model. Our corporate clubs, corporate owned clubs, give us a great test opportunity, test and learn opportunity, and we think that the 10%, or ish about 10%, is the right ratio. That said, as you're aware, we just launched in Spain and opened our first club in Barcelona earlier this month. And we are leveraging our balance sheet to enter the market. We think there's an opportunity to get a market started, you know, using our balance sheet there, and then recycle that capital with a franchise partner as we continue to grow the market. Thanks a lot, guys.

Colleen Keating: Yeah, I think we believe strongly in our asset light model. Our corporate clubs, corporate owned clubs, give us a great test opportunity, test and learn opportunity, and we think that the 10% or is about 10% is the right ratio. That said, you know, as you're aware, we're just launched Spain and opened our first club in Barcelona earlier this month, and we are leveraging our balance sheet to enter the market. We think there's an opportunity to get a market started, you know, using our balance sheet there and then recycle that capital with the franchise partners. We continue to grow the market.

Colleen Keating: Yeah, I think...

Colleen Keating: We believe strongly in our asset light model, our corporate clubs, corporate owned clubs.

Speaker Change: give us a great test opportunity, test and learn opportunity, and we think that the 10%, or ish about 10%, is the right ratio. That said, as you're aware, we just launched Spain and opened our first club in Barcelona.

Speaker Change: earlier this month and we are we are leveraging our balance sheet to to enter the market we think there's an opportunity to get a market started you know using our balance sheet there and then recycle that capital with the franchise partners we continue to grow the market

Operator: Great, thanks a lot guys. Nice job again and best luck for the rest of the year.

Speaker: Great, thanks a lot, guys. Nice job again! The best luck for the rest of the year.

Speaker: Thank you very much.

Speaker Change: Great, thanks a lot guys. Nice job again and best of luck for the rest of the year. Thank you, Simeon.

Sharon Zackfia: Our next question comes from Sharon Zachary. William Blair. I guess Kelly and I have a question for you just given your background, and clearly everybody would love to see a planet grow its franchise unit development at a faster pace. I'm sure including yourself, what kind of timeline have you seen historically in your prior experience on kind of what lag would incur to see that kind of growth start to accelerate. Yeah, I think you know what I'll say. You know, first and foremost, is having the right team and the right infrastructure to position ourselves to accelerate growth. And with that in mind, we're about to go out to search for a chief development officer. So I think, you know, first and foremost, and you've heard me touch on the importance of having.

Sharon Zackfia: Our next question comes from Sharon Zackfia, about William Blair.

Speaker Change: Our next question comes from Sharon Zackfia, Gillian Blair.

Colleen Keating: I guess, Colleen, a question for you, just given your background. I mean, clearly, everybody would love to see a planet grow its franchised unit development at a faster pace, I'm sure, including yourselves. What kind of timeline have you seen historically in your prior experience on what kind of lag would incur?

Sharon Zackfia: I guess, Pauline, a question for you, just given your background. I mean, clearly, everybody would love to see Planet grow its franchised unit development at a faster pace, I'm sure, including yourselves.

Sharon Zackfia: What kind of timeline have you seen historically in your prior experience on kind of what lag would incur to see that kind of growth start to accelerate?

Colleen Keating: Yeah, I think, you know, what I'll say, first and foremost is having the right team and the right infrastructure to position ourselves to accelerate growth. And with that in mind, we're about to go out to search for a chief development officer. So I think, you know, first and foremost, and you've heard me touch on the importance of having, I call it, a blue ribbon team, and I use blue ribbon because blue ribbon means you're winning.

Pauline: Yeah, I think, you know, what I'll what I'll say, you know, first and foremost is

Pauline: is having the right team and the right infrastructure to position ourselves to accelerate growth.

Speaker Change: And with that in mind, we're about to go out to search.

Speaker Change: for a Chief Development Officer. So I think, you know, first and foremost, and you've heard me touch on the importance of having, I call it a blue ribbon team, and I use blue ribbon because blue ribbon means you're winning.

Colleen Keating: I call it a blue ribbon team, and use blue ribbon because blue ribbon means you're winning. So you know, really getting the right infrastructure so that we're set up for growth and we're developing the relationships to be able to accelerate our growth. So I think, you know, the first step is we're about to go out to search for chief development officer and then, as I, you know, the into. Indicated in my remarks, really helping to refine and define our growth ambition, is work that's begun and that will do in partnership with that chief development officer when when they are named.

Colleen Keating: So, you know, really getting the right infrastructure so that we're set up for growth, and we're developing the relationships to be able to accelerate our growth. So I think, you know, the first step is we're about to go out to search for a chief development officer. And then, as I indicated in my remarks, really helping to refine and define our growth ambition is work that's begun, and that we'll do in partnership with that chief development officer when they are named. Thanks for that. And then I think it's an opportunity for us to accelerate.

Speaker Change: So, you know, really getting the right infrastructure so that we're set up for growth and we're developing the relationships to be able to accelerate our growth. So I think, you know, first step.

Speaker Change: indicated in my remarks really helping to refine and define our growth ambition is work that's begun and that we'll do in partnership with that with that chief development officer when when they are named.

Speaker: And thanks for that. And then, I think it's an opportunity for us to accelerate girls, I guess, is, you know, is what I would say. Thank you.

Speaker Change: Thanks for that. And then I think it's an opportunity for us to accelerate growth, I guess is, you know, is what I would say.

Sharon Zackfia: Thank you. Tom, just a quick question on GNA. I mean, I know you guys have been really good with cost control, but it's kind of been, I think, better than most people expected the last few quarters. So, how are you thinking about full year GNA? And what's the long-term kind of dollar growth rate that you look to, you know, beyond this year for GNA? Yes, Sharon, it's a good question.

Tom Fitzgerald: Tom, just a quick question on GNA. I mean, I know you guys have been really good with cost control, but it's kind of been, I think, better than most people have expected the last few quarters. I mean, how are you thinking about full year GNA and what's the long term kind of dollar growth rate that you look to, you know, beyond this year for GNA? Yeah, Sharon, it's a good question. I think for this year, you know, what we saw happening in the early part of the year that we talked about on our last call.

Speaker Change: Thank you. Tom, just a quick question on GNA. I mean, I know you guys have been really good with cost control, but it's kind of been, I think, better than most people have expected the last few quarters. I mean, how are you thinking about full-year GNA, and what's the long-term kind of dollar growth rate that you look to, you know, beyond this year for GNA?

Tom Fitzgerald: Yes, Sharon; it's a good question. I think for this year, you know, what we saw happening in the early part of the year that we talked about on our last call, we knew was going to provide some headwinds for the top line, so we wanted to, you know, make sure we were appropriately tightening our belts and, you know, offsetting that what we couldn't offset at all. We wanted to, you know, be prudent how we thought about our investments and really prioritize and make

Tom Fitzgerald: Yes, Sharon, it's a good question. I think for this year, what we saw happening in the early part of the year that we talked about on our last call, we knew was going to provide some headwinds for the top line, so we wanted to make sure we were appropriately tightening our belt.

Tom Fitzgerald: We knew it was going to provide some headwinds for the top line, so we wanted to, you know, make sure we were appropriately tightening our belt. And, you know, offsetting that what we couldn't offset at all wanted to, you know, be prudent how we thought about our investments and really prioritizing and making some changes. I think as we evolve the strategy that Colleen has the team, you know, working on, I think that will determine where we want to make investments and where we maybe have some opportunities to redirect where we've spent money before, and that'll, that'll shake out.

Tom Fitzgerald: I think as we evolve the strategy that Colleen has the team working on, I think that will determine where we want to make investments and where we maybe have some opportunities to redirect where we've spent money before. And that'll all shake out.

Speaker Change: Prioritizing.

Speaker Change: and making some changes. I think as we evolve the strategy that Colleen has the team, you know, working on, I think that will determine where we want to make investments and where we maybe

Speaker Change: have some opportunities to redirect where we've spent money before, and that'll shake out. But we're, you know, this is a growth business, as you know. It's got a lot of opportunity ahead of it, and I think we want to be thoughtful about, continue to be thoughtful about our investments, but not...

Tom Fitzgerald: But we're, you know, this is the growth businesses, you know, it's got a lot of opportunity ahead of it. And I think we want to be thoughtful about our continue to be thoughtful about our investments, but not we're not trying to save our way here. This is about funding the journey to grow the business where we want to accelerate the growth and questioning where we have investments that maybe we thought were important before maybe aren't anymore and just really sort of reevaluating everything. And stack the chips where the growth opportunities are.

Tom Fitzgerald: But we're, you know, this is a growth business, as you know, it's got a lot of opportunity ahead of it. And I think we want to continue to be thoughtful about our investments, but not. We're not trying to save our way here. This is about funding the journey to grow the business where we want to accelerate growth and question where we have investments that maybe we thought were important before, maybe aren't anymore, and just really sort of re-evaluating everything and stacking the chips where the growth opportunities are, but not really talking about what that means for 2025 and beyond. I think we'll cross that bridge when we get to that early part. Thank you.

Tom Fitzgerald: But not really talking about what that means for 2025 and beyond, I think we'll cross that bridge when we get to that outlook early part of next year.

Speaker: Thank you.

Speaker: You bet.

Speaker: Our next question. Colleen, Jonathan. From there. Hi, good morning and Colleen. Welcome.

Operator: Our next question comes from Jonathan Komp from Bayer.

Speaker Change: Our next question comes from Jonathan Komp from Baird.

Jonathan Komp: Yeah, hi, good morning, and Colleen, welcome. Thank you. I want to ask you a question, Colleen.

Colleen Keating: Thank you. I want to ask a question to you, Colleen. You clearly sound excited, you know, by the opportunity to leverage planet scale. But the business, you know, certainly is showing some of the slowest, you know, unit growth and member growth in its history here. So I'm curious maybe if you could share more of your early views on the opportunities. I don't know if that's marketing or other areas, and really the feedback that you're hearing from franchisees in terms of leveraging the scale for new growth opportunities. Absolutely. So, yeah, I'll touch on two things. So when it comes to unit growth, we're really just getting RC legs with the new growth plan that was rolled out earlier this year with our franchisees.

Colleen Keating: You clearly sound excited, you know, by the opportunity to leverage planet scale. But the business, you know, certainly is showing some of the slowest unit growth and member growth in its history here. So, I'm curious maybe if you could share more of your early views on the opportunities. I don't know if that's marketing or other areas, and really the feedback that you're hearing from franchisees in terms of leveraging the scale for new growth opportunities.

Colleen Keating: Absolutely. So, yeah, I'll touch on two things. When it comes to unit growth, we're really just getting our sea legs with the new growth plan that was rolled out earlier this year with our franchisees, and then also the new pricing that is certainly going to factor into their economics. So I think some of what we've identified in the new growth plan, as well as the infrastructure that we're building, and as I mentioned a few minutes ago, a chief development officer, someone who wakes up I think that will help fuel the unit growth and also expand into new geographies, as I mentioned, going into Spain. And I will say with the international growth, what we're not about is flag planting.

Speaker Change: in terms of leveraging the scale for new growth opportunities.

Speaker Change: Absolutely. So yeah, I'll touch on two things.

Colleen Keating: And then also the new pricing that is certainly going to factor into their economics. So I think some of what we've identified in the new growth plan as well as the infrastructure that we're building. And as I, you know, as I mentioned a few minutes ago, you know, Chief Development Officer, someone who wakes up every day and thinks only and exclusively about unit growth. I think that will help fuel the unit growth, and also expanding into new geographies, as I mentioned, going into Spain, and I will say with the international growth, what we're not about is flag planting.

Speaker Change: So I think some of what we've identified in the new growth plan

Speaker Change: as well as the infrastructure that we're building and as I, you know, as I mentioned a few minutes ago, you know, a chief development officer, someone who wakes up every day and thinks only and exclusively about unit growth.

Speaker Change: I think that will help fuel the unit growth and also expanding into new geographies, as I mentioned, going into Spain, and I will say with the international growth.

Colleen Keating: What we are about is getting to real scale, identifying markets where we believe we can get to real scale and real density, and that is the case with Spain.

Colleen Keating: What we are about is getting to real scale, identifying markets where we believe we can get to real scale and real density, and that is the case with Spain. So I think both of those things, new markets and accelerated growth with our franchisees by keenly focusing on their unit economics, will be the keys to unit growth, and then making sure that we're resourced appropriately here to drive that growth. And then on the member growth side, I think it's multi-pronged, but I'll start with two things. First and foremost, the member experience. You've heard me talk about that before.

Speaker Change: You know, what we're not about is flag planting. What we are about is getting to real scale, identifying markets where we believe we can get to real scale and real density, and, you know, and that is the case.

Colleen Keating: So I think both of those things, new markets, and accelerated growth with our franchisees by keenly focusing on their unit economics will be the key to unit growth, and then making sure that we're resourced appropriately here to drive that growth.

Speaker Change: with Spain. So I think both of those things, new markets and accelerated growth with our franchisees by keenly focusing on their unit economics.

Colleen Keating: And then on the member growth side, I think it's really, it's multi-pronged, but I'll start with two things. And first and foremost is the member experience. You've heard me talk about that. We need to make sure that we're continuing to refine and modernize our brand for today's customer and deliver on their fitness expectations, particularly as we're seeing Gen Z's as the fastest growing segment of our member population. So member experience is at the core of that. And then also our marketing, and I touched on it a little bit, but we're doing some work on refining our brand and our brand promise, again, to make sure that we're staying relevant and current, and that our marketing is really landing.

Colleen Keating: We need to make sure that we're continuing to refine and modernize our brand for today's customers and deliver on their fitness expectations, particularly as we're seeing Gen Z as the fastest growing segment of our member population. So the member experience is at the core of that. And then also our marketing. I touched on it a little bit, but we're doing some work on kind of refining our brand and our brand promise, again, to make sure that we're staying relevant and current and that our marketing is really working. So the brand work that we're doing now will help inform the marketing that you'll start to see at the end of 2024, really going into Q1 of 2025.

Speaker Change: So member experience is at the core of that, and then also our marketing, and I touched on it a little bit, but we're doing some work on refining our brand and our brand promise.

Colleen Keating: So the brand work that we're doing now will help inform the marketing that you'll start to see at the end of 2024, really going into Q1 of 2025.

Tom Fitzgerald: And I think, John, maybe just to add one thing to that is, you know, what you mentioned, scale. I mean, our marketing spend for the system is roughly $300 million a year. You know, that dwarfs, based on our measurement, what our next largest competitors spend combined still dwarfs it. So I think it's a matter of what have we not said to get more people to start their fitness journey and, you know, continuing to target the 80 percent who do not have a gym membership in the U.S.

Colleen Keating: Anything, John, maybe just to add one thing to that is what you mentioned: scale. I mean, our marketing spend for the system is roughly 300 million a year annually. You know, that dwarfs based on our measurement, what our next largest competitors spend combined still dwarfs it. So I think it's a matter of what have we not said to get more people to start their fitness journey and continuing to target the 80% who do not have a gym membership in the US.

Speaker Change: And I think, John, maybe just to add one thing to that is, you know, what you mentioned, scale. I mean, our marketing spend for the system is roughly $300 million a year annually.

John: You know, that dwarfs, based on our measurement, what...

John: Our next largest competitors spend combined still dwarfs it, so I think it's a matter of what have we not said to get more people to start their fitness journey and, you know, continuing to target the 80% who do not have a gym membership in the U.S.

Colleen Keating: I'll also just add that, in addition to the CDO, you know, another role I think is critically important for which we'll be going out to search is a chief marketing officer. I very much believe in an integrated approach to top-line strategy and making sure that as we do our brand work and the brand positioning work and refine the brand promise, we're pulling that through in an effective way in our marketing to really reach our target customers.

Colleen Keating: Also just said that in addition to the CDO, you know, another role I think is critically important for which we'll be going out to search is a Chief Marketing Officer. I very much believe in an integrated approach to top line strategy and making sure that as we do our brand work and the brand positioning work and refine. The brand promise that we're pulling that through in an effective way in our marketing to really reach our target customers. So, you know, Tom talked a little bit about it; he touched on it. Kind of, we call it funding the journey, but making sure that we're looking at our resource allocation and have the right leadership roles to help fuel our growth in these critical areas for our business.

Speaker Change: I'll also just add that in addition to to the CDO, you know, another role I think is critically important for which we'll be going out to search is a chief marketing officer. I very much believe in an integrated approach to top-line strategy and making sure that as we do our brand work and the brand positioning work and refine the brand promise that we're pulling that through in an effective way in our marketing to really reach our target customer. So, you know, as Tom talked a little bit about it, he touched on it, kind of, we call it funding the journey, but making sure that we're looking at our resource allocation and have the right leadership role.

Colleen Keating: So, you know, as Tom talked a little bit about it, he touched on it, kind of, we call it funding the journey, but making sure that we're looking at our resource allocation and have the right leadership roles to help fuel our growth in these critical areas for our business.

John: to help fuel our growth in these critical areas for our business.

Speaker: That's great; certainly looking forward to seeing progress on those fronts.

Tom Fitzgerald: That's great. I'm certainly looking forward to seeing progress on those fronts. If I could just ask one follow-up question to Tom, the adjusted EBITDA outlook for the year implies further deceleration in the back half after, you know, the first half was very strong up 12 percent. So could you maybe just review the factors that you're looking forward to in the back half and whether there's any conservatism in that outlook? Thank you. Yeah, hey, John. So I think part of the problem

Speaker Change: That's great. Certainly looking forward to seeing progress on those fronts. If I could just ask one follow-up to Tom. The adjusted EBITDA outlook for the year...

Tom Fitzgerald: If I could just ask one follow-up to Tom, he adjusted even to look for the year implies further deceleration in the back half after you know the first half was very strong, up 12%. So could you maybe just review the factors that you're looking forward to in the back half and you know whether there's any conservatism in that outlook. Thank you. Yeah, hey John, so I think part of the big part of the beat in Q2 was the timing of some of the replacement of equipment that we had projected in our original outlook to be in the back half of the year.

Speaker Change: implies further deceleration in the back half after, you know, the first half was very strong, up 12%. So could you maybe just review the factors that you're looking for in the back half and, you know, whether there's any conservatism in that outlook? Thank you.

Tom Fitzgerald: Yeah, hey, John. So I think part of the beat in the big part of the beat in Q2 was the timing of some of the replacement of equipment that we had projected in our original outlook to be in the back half of the year. The promotion that we ran, we always run a promotion twice a year with our franchisees to do the re-equipment. We did that.

Speaker Change: Timing of some of the replacement of equipment that we had projected in our original outlook to be in the back half of the year. The promotion that we ran, we always run a promotion twice a year with our franchisees to do the re-equips.

Tom Fitzgerald: The promotion that we ran, we always run a promotion twice a year with our franchisees to do the re-equips. So that was the big part of the beat.

Tom Fitzgerald: It had better uptake than we thought, and more of it came into Q2 than we expected. So that was the big part of the surprise. So it's really, you know, that equipment segment can really move around in terms of timing, and that's really what's affecting the change in the growth rates on a year-to-date basis versus the rest of the year that you're referring to. But, you know, we feel good about the full year outlook and, therefore, felt good about reiterating it. But that timing does affect what you're getting at, but I appreciate the question.

Tom Fitzgerald: So it's really, you know, that equipment segment can really move around in terms of timing, and that's really what's affecting the change in the growth rates on a year-to-date basis versus the rest of the year that you're referring to. But, you know, we feel good about the full year outlook and therefore felt good about reiterating it, but that timing does affect what you're getting at. But appreciate the question.

Speaker Change: But that timing does affect what you're getting at, but appreciate the question.

Speaker: Great, thanks again.

Speaker Change: Great. Thanks again.

Joe: Our next question comes from Joe, out of fellow from Raymond James. Thanks. Hey guys, good morning and welcome. Hey, John.

Operator: Our next question comes from Joe Altobello from Raymond James.

Joseph Altobello: Thanks. Hey guys, good morning and welcome.

Speaker: Thank you.

Speaker Change: Thanks. Hey guys, good morning and welcome.

Speaker: In terms of the new growth model, what's the timing on when we start to see the impact of that? I think it takes, correct me from wrong, 12 to 14 months to open up a new store these days. So if you launch it late 23, is the impact more early 25?

Speaker Change: In terms of the new growth model, what's the timing on when we should start to see the impact of that?

Speaker Change: I think it takes, correct me if I'm wrong, 12 to 14 months to open up a new store these days. So, if you launch at late 23, is the impact more early 25?

Operator: In terms of the new growth model, what's the timing on when we should start to see the impact of that? I think it takes, correct me if I'm wrong, 12 to 14 months to open up a new store these days. So if you launch it late 23, is the impact more early 25?

Tom Fitzgerald: Hey, Joe, it's Tom. Yeah, so I think you may recall we always sort of labeled this year as a transition year for franchisees. We're able to opt into this new growth model, which I think all but two of them did, and they each own one or two stores. So it's pretty much systematically a resounding yes to opt into this. But there's, you know, they had to work through the documents and ultimately sign them through Q1, so we always thought it would have an impact on subsequent years, less so than it did in 2024 for the reasons you're mentioning in terms of, you know, development cycles being longer than they were recovered. But, you know, having said that, we feel really good about what it's done to the economics of the business and improving what we're already pretty strong returns.

Speaker Change: Hey Joe, it's Tom. Yeah, so I think you may recall we always sort of labeled this year as a transition year franchisees.

Tom Fitzgerald: Hey Joe, it's Tom. Yeah, so we always sort of labeled this year as a transition year. Franchisees were able to opt into this new growth model, which I think all but two of them did, and they each own one or two stores, so it was pretty much a resounding yes to opt into this. But they had to work through the documents and ultimately sign them through Q1.

Speaker Change: We're able to opt into this new growth model, which I think all but two of them did, and they each own one or two stores. So it's pretty much systematically

Speaker Change: A resounding yes to opt into this.

Tom Fitzgerald: So we always thought it would have an impact on subsequent years, less so than it did in 2024, for the reasons you're mentioning in terms of development cycles being longer than they were pre-COVID. But having said that,

Tom Fitzgerald: We feel really good about what it's done to the economics of the business and improved what were already pretty strong returns. You know, the changes in the growth model where we targeted a 10% reduction in the cost to build a new planet, plus some other changes we made on the timing of replacing equipment helped to improve the unlevered IRR. You know, if it was pre-COVID in the 30-ish percent range with higher costs to build and other changes, it probably got down to the low 20s.

Tom Fitzgerald: You know, the changes in the growth model where we targeted a 10% reduction in the cost to build a new planet plus some other changes we made on timing of replacing equipment help to improve the unlevered IRR. You know, if it was pre-COVID in the 30th percent range with higher cost to build and other changes it probably got down to the low 20s. So the changes in the growth model kind of close half that gap, and then we believe that once there's a full year of the classic hard price increases $15 feathered in, that adds a couple hundred basis points more to that unlevered IRR.

Speaker Change: The changes in the growth model where we targeted a 10% reduction in the cost to build a new planet, plus some other changes we made on timing of replacing equipment.

Speaker Change: helped to improve the unlevered IRR, you know, if it was pre-COVID in the 30-ish percent range.

Tom Fitzgerald: So the changes in the growth model kind of closed half that gap, and then we believe that once there's a full year of the Classic Card price increase at $15 feathered in, that adds a couple hundred basis points more to that unlevered IRR. So now, you know, between the growth model and the Classic Card price, we're pretty much back to pre-COVID IRR. There's certainly a great incentive for franchisees to build the stores because they produce great margins and unlevered IRRs.

Tom Fitzgerald: So now, you know, between the growth model and the classic hard price, we're pretty much back to pre-COVID IRR. So there's certainly great incentive for franchisees to build the stores because they produce great margins and unlevered IRRs. It's just a matter of all that working its way through and people cranking up their pipelines.

Speaker Change: You know, between the growth model and the Classic Card price, we're pretty much back to pre-COVID IRR, so there's...

Speaker Change: Certainly great incentive for franchisees to build the stores because they produce great margins and unlevered IRRs. It's just a matter of all that work in its way through and people cranking up their

Tom Fitzgerald: It's just a matter of all that work finding its way through and people cranking up their... their pipelines. So we'll talk more about 25 when the time's right, but we always thought this year would not have a big impact.

Tom Fitzgerald: So we'll talk more about 25 on the times, right? But we always thought this year would not have a big impact. We said today is below where we thought we would be. And I think it's for a couple reasons. One, we talked about Q1 being kind of soft. You know, that it seems like forever ago, but in the early part of January there, there were still some noise about, you know, COVID and flu and RSVs and all that. So we really had a softer early January than we expected. And then we had that incident that impacted us for a short period of time on joints and March, and the back in the back of the quarter had a longer and had a bigger impact on cancel.

Speaker Change: their pipelines. So we'll talk more about 25 when the time's right, but we always thought this year would not have a big impact from the changes.

Joseph Altobello: understood. Very helpful.

Tom Fitzgerald: And maybe just to follow up on that, I'm curious how you guys view the member growth in Q2. It's a bit below what you've historically done in the second quarter. I know it's a relatively small quarter, and I recall it got off to a slow start, but how did you guys see trends throughout the quarter and, maybe more importantly, what are you seeing in July after the Classic Card impact?

Speaker Change: The Member Gross, Inc.

Speaker Change: and Q2. It's a bit below what you've historically done in the second quarter. I know it's a relatively small quarter, and I recall it got off to a slow start. But how did you guys see trends throughout the quarter? And maybe more importantly, what are you seeing in July after the Classic Card Impact?

Tom Fitzgerald: Yeah, hey Joe, so I think you're right. This year... Well, we don't project membership growth. Kind of where we sit today is below where we thought we would be, and I think it's for a couple of reasons. One, we talked about Q1 being kind of soft, you know, that seems like forever ago. But in the early part of January, there was still some noise around, you know. COVID and flus and RSVs and all that.

Speaker Change: Yeah, hey Joe, so I think you're right. This year...

Speaker Change: While we don't project membership growth, kind of where we sit today is below where we thought we would be, and I think it's for a couple reasons. One, we talked about Q1 being kind of soft, you know, that it seems like forever ago, but in the early part of January there, there was still some some noise about, you know,

Tom Fitzgerald: So we really had a softer early January than we expected. And then we had that incident that impacted us for a short period of time on joints in March, at the back of the quarter, had a bigger impact on cancels. So that has improved across the quarter and is still elevated, but definitely better. Those cancel rates are definitely better than what we were seeing and got better across the quarter. And we're really not talking about Q3 at all, but I think based on where we are and how the team managed all of that, I think we came through. We're happy where we came through.

Speaker Change: COVID and flus and RSVs and all that. So we really had a softer early January than we expected.

Speaker Change: And then we had that incident that impacted us for a short period of time on joints in March in the back of the quarter.

Tom Fitzgerald: So that has improved across the quarter and, you know, still elevated but definitely better. Those cancel rates are definitely better than what we were seeing and got better across the quarter.

Speaker Change: had a longer, or had a bigger impact on cancels. So that has improved across the quarter and, you know, still elevated, but definitely better. Those cancel rates are definitely better than what we were seeing and got better across the quarter.

Tom Fitzgerald: And we're really not, you know, talking about Q3 at all, but I think based on where we are and how the team managed all of that. I think we came through. We're happy where we came through. We were just talking to some of our big franchisees recently. They're happy with how all that, you know, played out and how the team handled it. But it definitely impacted where those two things really impacted our membership levels compared to where we thought. But I think, you know, we have the time now to gear up for the back half of the year, particularly December leading into January and cranking up for what should be a great Q1.

Speaker Change: And we're really not, you know, talking about Q3 at all, but I think...

Speaker Change: Based on where we are and how the team managed all of that, I think we're happy where we came through. We were just talking to some of our big franchisees recently. They're happy with how all that played out and how the team handled it.

Tom Fitzgerald: We were just talking to some of our big franchisees recently. They're happy with how all that played out and how the team handled it. But it definitely impacted where those two things really impacted our membership levels compared to where we thought. But I think, you know, we have the time now to gear up for the back half of the year, particularly December leading into January and cranking up for what should be a great.

Speaker Change: but it definitely impacted where those two things really impacted our membership levels compared to where we thought.

Tom Fitzgerald: Let's add to that. We saw we saw some increase in joins in Lee June. Now granted, some of that was driven by the last chance sale, right at $10. And then I think the branding work that we're doing now to help inform the marketing is really, you know, our, you know, goal is to have that ready to be in flight by December and then going into Q4, going into Q1. So the marketing really lands and affects our joins going into the important first quarter. Got it.

Colleen Keating: I'll just add to that. We saw some increase in joins in late June. Now, granted, some of that was driven by the last chance sale, right, at $10. And then I think the branding work that we're doing now to help inform the marketing is really, you know, our goal is to have that ready to be in flight by December and then going into Q4, going into Q1, so that the marketing really lands and affects our joins going into the important first. Got it. Great.

Speaker Change: Yeah.

Speaker Change: Well, I'll just add to that. We saw some increase in joins in late June . Now, granted, some of that was driven by the last chance sale, right, at $10. And then I think the branding work that we're doing now to help inform the marketing is really, you know, our...

Speaker Change: Our goal is to have that ready to be in flight by December and then going into Q4, going into Q1 so that the marketing really lands and affects our joins going into the important first quarter.

Speaker: Great. Thank you.

Speaker Change: Got it. Great. Thank you. Thanks, Joe.

Chris O'Call: Our next question comes from Chris O'Call from Stiff Open Natural Group. Thanks.

Operator: Our next question comes from Chris O'Call of Pro Stiffo Financial Group.

Speaker Change: Our next question comes from Chris O'Call, Pro Stifo Financial Group.

Chris O'Call: Thanks. Good morning and welcome, Colleen. Thank you.

Colleen Keating: Good morning and welcome, Colleen.

Colleen Keating: Thank you. I have a question about the ADA requirements, and in time, at one point, the company had communicated that franchisees would need to open roughly 500 units, I think between 23 and 25, to comply with the minimum specified in their ADA. I'm just curious; could you give us an update on that and/or at least do you expect franchisees to still kind of meet that minimum ADA requirement?

Chris O'Call: Thanks, good morning and welcome Colleen. Thank you.

Colleen Keating: I have a question about the ADA requirements. I know, Tom, at one point, the company had communicated that franchisees would need to open roughly 500 units, I think, between 23 and 25, to comply with the minimums specified in their ADAs. I'm just curious, could you give us an update on that? And or at least, do you expect franchisees to still kind of meet that minimum ADA requirement?

Chris O'Call: I have a question about the ADA requirements. I know, Tom, at one point, the company had communicated that franchisees would need to open roughly 500 units, I think, between 23 and 25 to comply with the minimums specified in their ADAs.

Speaker Change: I'm just curious, could you give us an update on that, or at least do you expect franchisees to still kind of meet that minimum ADA requirement?

Tom Fitzgerald: Yeah, hey Chris. So, yeah, so the one change from what we said a while ago at our investor day in late 22, I think that was, by changing the growth model, we went from what was somewhat of an idiosyncratic mechanism called cure periods for any delays within your ADA development to what is a more common practice of cure periods. The primary difference is the duration of the window to fix it and also the number of development opportunities that it applies to.

Tom Fitzgerald: Yeah, hey Chris. So, yeah, I saw the one change from what we said a while ago at our investor day in late '22, I think that was, is by changing the growth model. We went from what was somewhat of an idiosyncratic mechanism called cure periods for any delays within your ADA development to what is a more common practice of cure periods. The primary difference being the duration of the window to fix it and also the number of development opportunities that are applied to. So, with the cure periods as part of the new growth model, all stores in the pipeline have the ability to extend by six months if there's a delay in something that is beyond the franchisee's control, permitting, or landlord.

Tom Fitzgerald: Yeah, hey, Chris. So, yeah, so the one change from what we said a while ago at our investor day, and

Speaker Change: late 22 I think that was, is by changing the growth model we went from what was somewhat of an idiosyncratic mechanism called cure periods for any delays within your ADA development to what is a more common practice of cure periods.

Speaker Change: The primary difference being the duration of the window to fix it, and also the number of development opportunities that it applied to.

Tom Fitzgerald: So with the cure periods as part of the new growth model, all stores in the pipeline have the ability to extend by six months if there's a delay in something that is beyond the franchisee's control, such as permits or landlord, work that gets delayed for reasons outside of their control. So that does affect the timing. All of that is factored in as we see our pipeline for the year and the reaffirmation of our outlook for 140 to 150 new stores this year.

Speaker Change: So, with the cure periods as part of the new growth model, all stores in the pipeline have the ability to extend by six months if there's a delay in something that, you know, is beyond the franchisee's control, you know, permitting or, you know, landlord.

Tom Fitzgerald: Work that gets delayed for reasons outside of their control, so that does affect the timing. You know, all of that is factored in as we see our pipeline for the year and the reaffirmation of our outlook of 140 to 150 new stores this year.

Speaker Change: work that gets delayed for reasons outside of their control. So that does affect the timing. All of that is factored in as we see our pipeline for the year and the reaffirmation of our outlook of 140 to 150 new stores this year.

Tom Fitzgerald: And I think when we get to our February call for Q4 and provide the outlook for 2025, we can talk more about how we see that pipeline for next year. It is kind of a big change, but the ADA requirements that you're describing have not changed. We have not altered those. It's just a matter of the timing and the new mechanisms we have versus what we had.

Tom Fitzgerald: And I think when we get to, you know, cue our February call for Q4 and provide the outlook for 2025, we can talk more about how we see that pipeline for next year, but it is kind of a big change. But the ADA requirements that you're describing have not changed. We have not altered those. It's just a matter of the timing and the new mechanisms we have versus what we had before. So it's kind of been pushed out six months, I guess, is that the way to think about it? Not comprehensively, but it could be for some stores.

Speaker Change: And I think when we get to our February call for Q4 and provide the outlook for 2025, we can talk more about how we see that pipeline for next year.

Speaker Change: It is kind of a big change, but the ADA requirements that you're describing have not changed. We have not altered those. It's just a matter of the timing and the new mechanisms we have versus what we had before.

Chris O'Call: So it's kind of been pushed out for six months, I guess. Is that the way to think about it?

Speaker Change: So they've kind of been pushed out six months, I guess. Is that the way to think about it?

Tom Fitzgerald: Not comprehensively, but it could be for some.

Speaker Change: Not comprehensively, but it could be for some stores.

Chris O'Call: Okay. Okay. And just one other question.

Speaker: Okay, okay.

Tom Fitzgerald: And just one other question. I was hoping you can maybe, I know you talked a little bit about the classic or the black card membership pricing test, but can you give a little more color as to how you decide whether to implement that price increase for the black card? I'm just trying to understand what KPIs you're looking at to determine whether or not it's a go or no-go. Is it just come down to whether or not it raises the monthly membership, you know, or raises your average monthly ticket or, you know, average dues, or is there some other mechanism or KPIs you're looking at to determine whether this is a good idea to make this change.

Speaker Change: Okay, okay. And just one other question. I was hoping you can maybe, I know you talked a little bit about the classic, or the black card membership pricing test, but can you give a little more color as to...

Speaker Change: How do you decide whether to implement that price increase for the black card? I'm just trying to understand what KPIs you're looking at.

Tom Fitzgerald: I was hoping you could maybe – I know you talked a little bit about the classic or the black card membership pricing test, but can you give a little more color as to how you decide whether to implement that price increase for the black card? I'm just trying to understand what KPIs you're looking at to determine whether or not it's a go or no go. Is it just going to come down to whether or not it raises the monthly membership or raises your average monthly ticket or average dues, or is there some other mechanism or KPIs you're looking at to determine whether this is a good idea to make this change? Yeah, it's a good question and somewhat unique to our business.

Speaker Change: to determine whether or not it's a go or no go. Is it just come down to whether or not it raises...

Speaker Change: The monthly membership, you know, raises your average monthly ticket or, you know, average dues, or is there some other mechanism or KPIs you're looking at to determine whether this is a good idea to make this change?

Tom Fitzgerald: Yeah, it's a good question. And somewhat unique to our business compared to the typical, you know, multi unit QSR-like business where traffic, transactions, ticket with ours, we have to measure. There's no one single metric, as you can appreciate, Chris; we have to look at a bunch of them. One of which is the cancel rate; you know, do people sign up for the higher priced black cards in these tests and then cancel sooner? You know, that's something that we don't want to have happen. We also look at the mix between the black card and the classic card at the time of join.

Tom Fitzgerald: Yeah, it's a good question and somewhat unique to our business compared to the typical multi-unit QSR-like business, where it's the traffic transactions ticket. With ours, we have to measure – there's no one single metric, as you can appreciate, Chris.

Speaker Change: Yeah, it's a good question and somewhat unique to our business compared to the typical, you know, multi-unit QSR like business where it's traffic transactions ticket.

Tom Fitzgerald: We have to look at a bunch of them, one of which is the cancellation rate. Do people sign up for the higher-priced black cards in these tests and then cancel them sooner? That's something that we don't want to have happen.

Speaker Change: With ours we have to measure, there's no one single metric as you can appreciate Chris, we have to look at a bunch of them, one of which is the cancel rate, you know, do people sign up for the higher priced

Chris O'Call: Black cards in these tests and then cancel sooner, you know, that's something that we don't want to have happen.

Tom Fitzgerald: We also look at the mix between the black card and the classic card at the time of join. And we still want the majority of our members to sign up as they do today for the black card because it's such great value even though it's priced higher, and then also the impact on the classic card. So there's a lot to look at, but ultimately, what we're trying to do... has raised the AUV of the units once more members join in at the higher prices, where we're confident that it's a sustainable increase in AUV.

Speaker Change: We also look at the mix between the black card and the classic card at the time of join. And we still want the majority of our members to sign up, as they do today, for the black card, because it's such a great value, even though it's...

Tom Fitzgerald: And we still want the majority of our members to sign up as they do today for the black card because it's such a great value, even though it's priced higher. So, and then also the impact on classic card. So there's a lot to look at, but ultimately what we're trying to do is raise the AUV of the units once more members feather in at the higher prices where we're confident that it's a sustainable increase in AUV. And by that, we mean it's not all rate-driven, but there's still member growth. We want to have a good balance, always have a good balance of more member growth and rate growth.

Speaker Change: Price Tire. So and then also the impact on Classic Car. So there's there's a lot to look at but ultimately what we're trying to do is raise the AUV

Speaker Change: of the units once more members feather in at the higher prices where we're confident that it's it's a it's a sustainable increase in AUV and by that we mean

Tom Fitzgerald: And by that, we mean it's not all rate-driven, but there's still member growth. We want to have a good balance, always want to have a good balance of more member growth than rate growth. I describe it, you know, from an old life: we're more of a fast nickels business than a slow dime business. We like volume. We like member growth. That's what we think is the sustainable way to continue to grow the business and has been, it's typically been 70 plus percent of our member's, our same store sales growth is member growth. And so we want these tests to be attractive, but in a sustainable way. So hopefully that helps.

Speaker Change: It's not all rate driven, but there's still member growth. We want to have a good balance, always want to have a good balance of more member growth than rate growth.

Tom Fitzgerald: I describe it, you know, from an old life of more of a fast nickels than a slow dimes business. We like volume; we like member growth. That's what we think is the sustainable way to continue to grow the business and has been. It's typically been 70 plus percent of our member of our seems to our sales growth is member growth. And so we want these tests to be creative, but in a sustainable way.

Speaker Change: I describe it, you know, from an old life of, we're more of a fast nickels than a slow dimes business. We like volume, we like member growth.

Speaker Change: That's what we think is the secret.

Speaker Change: Simeon Siegel, Rahul Krotthapalli, Simeon Siegel, Rahul Krotthapalli, Simeon Siegel,

Speaker Change: 70 plus percent of our member of our same store sales growth is member growth And so we we we want these tests to be a creative but in a sustainable way, so hopefully that helps

Speaker: So hopefully that. and helps.

Rahul Krotthapalli: It does, thanks. Our next question comes from Rahul Krotthapalli with JP Morgan. Good morning, guys. Colleen, good to meet you here. Can you discuss your philosophy on the marketing for the brand? I wanted to specifically dig on your comment regarding sharpening the 300 million spend, given the importance of this for not only the gross ads, but also improve the churn.

Speaker Change: It does, thanks.

Operator: Our next question comes from Rahul Krotthapalli of JP Morgan.

Speaker Change: Our next question comes from Rahul Krotthapalli with J.P. Morgan.

Rahul Krotthapalli: Good morning, guys. Colleen, it's good to meet you here.

Rahul Krotthapalli: Good morning guys

Rahul Krotthapalli: Colleen, good to meet you here. Can you discuss your philosophy on the marketing for the brand?

Colleen Keating: Can you discuss your philosophy on marketing for the brand? I wanted to specifically dig into your comment regarding sharpening the $300 million spend, given the importance of this for not only the gross ads but also improving the churn. Any preliminary thoughts or specific steps? Or I probably shouldn't be calling this low-hanging fruit, but in that context, how do you also view the current 2-7 national-local structure split and whether you think this is optimal for the new growth model?

Rahul Krotthapalli: Specifically, dig on your comment regarding sharpening the $300 million spend.

Colleen Keating: Any preliminary thoughts or specific steps are probably I shouldn't be calling low hanging fruit, but in that context, how do you also view the current two to seven national local structures, and if you think this is optimal for the new growth model? Yeah, so let me touch on a couple things first. You know, you mentioned churn, and I think I'm going to take that one first, just because I really think churn is really indicative of member experience, and that's why we're really doubling down on the experience that we're providing for our members, both inside and outside the four walls of our club.

Speaker Change: Any preliminary thoughts or specific steps, or probably I shouldn't be calling low hanging fruit, but in that context, how do you also view the current 2-7 national-local structure split, and if you think this is optimal for the new growth model?

Colleen Keating: Yeah, so let me touch on a couple things. First, you mentioned churn, and I think I'm going to take that one first, just, just because I really think churn is really indicative of member experience. And that's why we're really doubling down on the experience that we're providing for our members, both inside and outside the four walls of our club. When our members see tremendous value for the low price of entry point of $15 a month, that reduces churn.

Speaker Change: Yeah, so let me touch on a couple of things first.

Speaker Change: You know, you mentioned churn, and I think I'm going to take that one first, just because I really think churn is...

Rahul Krotthapalli: is really indicative of member experience. And that's why we're really doubling down on the experience that we're providing for our members, both inside and outside the four walls of.

Colleen Keating: When our members see a tremendous value, you know, for the low price of entry point of $15 a month, that reduces churn. So we believe member experience is what's going to enhance our stickiness and continue to further our relationship with our members. And now, you know, now to the marketing, you know, I think we work very closely with our franchisee partners and their marketing teams to make sure that we've got an integrated strategy. And I think first and foremost is getting our brand promise and the brand positioning right, and this is not a wholesale change; it's really a refinement and evolution in really modernizing our messaging so that it lands.

Rahul Krotthapalli: of our club, when our members see a tremendous value.

Rahul Krotthapalli: for the low price of an entry point of $15 a month.

Colleen Keating: So we believe member experience is what's going to enhance our stickiness and continue to further our relationship with our members. And now, you know, now to the marketing. I think we work very closely with our franchisee partners and their marketing teams to make sure that we've got an integrated strategy. And I think first and foremost is getting our brand promise and the brand positioning right. And this is not a wholesale change.

Rahul Krotthapalli: that that reduces churn. So we believe member experience is what's going to enhance our stickiness and continue to further our relationship with

Rahul Krotthapalli: with our members.

Rahul Krotthapalli: And now, you know, now to the marketing. You know, I think we work very closely with our franchisee partners.

Rahul Krotthapalli: and their their marketing teams.

Rahul Krotthapalli: to make sure that we've got an integrated strategy. And I think first and foremost is getting our brand promise and the brand positioning right.

Rahul Krotthapalli: And this is not a wholesale change, it's really it's a refinement and an evolution and really modernizing our messaging so that it lands. I think we shared, perhaps it was the last earnings call, that our Q1 marketing didn't land as effectively as we...

Colleen Keating: I think we we shared, perhaps it was the last earnings call that, you know, we didn't that are key one marketing didn't land as effectively as we had hoped. So refining that brand promise and then making sure that we're pulling it through the marketing, and we're clear about what we stand for and who we're targeting. You know, that that that's first and foremost to make sure that we that what we're marketing is really effective and is going to to generate the the joints that we're anticipating. And then I think there are some things inside the club.

Rahul Krotthapalli: as we had hoped. So, refining that brand promise and then making sure that we're pulling it through the marketing and we're clear about what we stand for and who we're targeting, you know, that's first and foremost to make sure that we, that what we're marketing is really effective and is going to generate the joins that we're anticipating. And then I think there are some things inside the club and, you know, I think we're not ready to share what those are yet, but you'll start to see them emerge in late fourth quarter and early first quarter, you know, really the signals of change and how we're modernizing and

Colleen Keating: And you know, I think we're not ready to share what those are yet, but you'll start to see them emerge in late fourth quarter and early first quarter, you know, really the signals of change and how we're modernizing and evolving our brand, and then you're pulling that through both in the club experience and in the marketing.

Rahul Krotthapalli: and evolving our brand and then you're pulling that through both in the club experience and in the marketing.

Colleen Keating: That's for the two-seven split. You know, the thing I think that's most important is that we're taking an integrated approach with our franchisees and that there's alignment between our national marketing and our local marketing and that we're helping our franchisees have access to the marketing products that can be used in the local spend to really bring our brand to life in an effective way. And you know, I think about this is you know, this is all products, all mediums of marketing, including our digital marketing, digital marketing, which is a focus area for us as well, especially as Gen Z is our fastest growing segment of membership.

Speaker Change: As for the 2-7 split...

Rahul Krotthapalli: The thing I think that's most important is that we're taking an integrated approach with our franchisees.

Rahul Krotthapalli: and that there's alignment between our national marketing and our local marketing and that we're helping our franchisees have access to the marketing products that can be used in the local spend.

Rahul Krotthapalli: to really bring our brand to life in an effective way. And, you know, when I think about this, this is, you know, this is all products, all mediums of marketing, including our digital marketing, which is a focus area for us as well, especially as Gen Z is our fastest growing segment of membership. So, you know, as for the 2-7 split, I think the thing that's most important right now, first and foremost, is that we have an integrated approach and that we're able to really highlight the value proposition that really differentiates Planet Fitness, makes us different and special and attractive to a very broad base of customers and prospective customers.

Colleen Keating: It's really, it's a refinement and an evolution and really modernizing our messaging so that it lands. I think we shared on the last earnings call that, you know, we didn't, that our Q1 marketing didn't land as effectively as we had hoped. So, you know, as for the 2-7 split, I think the thing that's most important right now, first and foremost, is that we have an integrated approach and that we're able to really highlight the value proposition that really differentiates Planet Fitness, makes us different and special and attractive to a very broad base of customers and prospective customers who could consider joining Planet.

Colleen Keating: So, you know, it's for the two seven split. I think the thing that's most important right now, first and foremost, is that we have an integrated approach and that we're able to really highlight the value proposition that really differentiates Planet Fitness, makes us different and special and attractive to a very broad base of customers and prospective customers who could consider joining Planet Fitness.

Rahul Krotthapalli: That's really a great update, Colleen. Thank you. I wanted to also pick up on the real estate side of the business, given your background, and then also the kind of elevated constraints on retail space availability we have been seeing the past few quarters. I'm just curious about how you think about the lay of the land. There have been a bunch of bankruptcies and closures among retail brands. How do you think you can flex your planet scale to basically take advantage of some of these openings and then also work with franchise communities when it comes to real estate planning? Thank you.

Speaker: That's really a great update, Colleen.

Rahul Krotthapalli: who could consider joining Planet.

Rahul Krotthapalli: Thank you. I wanted to also pick up on the real estate side of the business, given your background and then also the kind of the elevated constraints in retail space availability. We have been seeing the past few quarters. I'm just curious about how you think about the lay of the land. There has been, I mean, there have been a bunch of like bankrupt sales closures among retail brands. How do you think you can flex planet scale to basically take advantage of some of these openings and then also working with franchise communities when it comes to the real estate planning.

Speaker Change: That's really a great update Colleen. Thank you. I wanted to also pick up on the real estate side of the business.

Speaker Change: Given your background and then also the kind of the elevated constraints in retail space availability we have been seeing the past few quarters. I'm just curious about how you think about the lay of the land. There have been a bunch of bankruptcies, closures among retail brands.

Speaker Change: How do you think you can flex planet scale to basically take advantage of some of these openings and then also working with franchise communities when it comes to the real estate planning?

Colleen Keating: Thank you for that question, Rahul. I'm glad you asked it. You know, I think I touched on a little bit of it, and when I made my remarks about Spain, but I think, you know, and I think this, this is relevant across all of our geographies. You know, when I walked the sites we were considering, as well as the sites we have under agreement in Spain, we looked at things like population density, population growth in those markets.

Colleen Keating: Thank you for that question, Rahul. I'm glad you asked it.

Speaker Change: Thank you for that question, Rahul. I'm glad you asked it.

Colleen Keating: You know, I think I touched on a little bit of it when I made my remarks about Spain, and I think this is relevant across all of our geographies. You know, when I walked the sites we're considering as well as the sites we have under agreement in Spain, we looked at things like population density and population growth in those markets. And I'll stop there because I don't want to reveal all the secret sauce of our playbook.

Speaker Change: You know, I think I touched on a little bit of it and when I made my remarks about Spain But I think you know and I think this this is relevant across all of our geographies

Speaker Change: You know, when I walked the sites we're considering as well as the sites we have under agreement in Spain, you know, we looked at things like population density, population growth in those markets.

Colleen Keating: And I'll stop there because I don't want to, I don't want to signal all the secret sauce of our playbook. But, you know, I will say we do have a playbook when we're looking at opening new sites. And as it relates to retail space availability, I think, you know, there are two things to consider. One is the space availability. And then, you know, one is the price per square foot. But the price per square foot gets to kind of the unit economics of our franchisees. And Tom has touched on that a lot. So I won't, I won't repeat all of that.

Speaker Change: And I'll stop there because I don't want to signal all the secret sauce of our playbook, but I will say we do have a playbook when we're looking at opening new sites.

Colleen Keating: But, you know, I will say we do have a playbook when we're looking at opening new sites. And as it relates to retail space availability, I think, you know, there are two things to consider. One is the space availability. And then, you know, one is the price per square foot. The Price per Square Foot gets to kind of the unit economics of our franchisees, and Tom has touched on that a lot, so I won't repeat all of that, but we are really focused on unit economics so that even with the recent price escalation in real estate, the economic model still works, and we can get back to pre-COVID IRRs for our franchisees.

Speaker Change: As it relates to retail space availability, I think there are two things to consider. One is the space availability, and then one is the price per square foot.

Tom Fitzgerald: The Price per Square Foot gets to kind of the unit economics of our franchisees, and Tom has touched on that a lot, so I won't repeat all of that, but we are really focused on unit economics so that even with a recent, over the last couple of years, price escalation in real estate, the economic model still works and we can get back to pre-COVID IRRs for our franchisees.

Colleen Keating: But we are really focused on unit economics so that even with a, you know, a recent over the last couple of years, price escalation and real estate, the economic model still works and we can get back to pre-COVID IRRs for franchisees. At the same time, you know, you appropriately noted that there have been many retail, you know, retail tenants, anchor tenants that occupy space that has square footage very similar to what we would look for, you know, that have had bankruptcies and that could and should be an opportunity for us. The other thing that I think about is the fact that throughout the pandemic, we did not have one club permanently closed for financial or economic reasons.

Colleen Keating: At the same time, you appropriately noted that there have been many retail tenants, anchor tenants, that occupy space that has square footage very similar to what we would look for that have had bankruptcies, and that could and should be an opportunity for us. The other thing that I think about is the fact that, throughout the pandemic, we did not have one club permanently closed for financial or economic reasons. So, if I'm a developer, if I'm a landlord, and I look at some of the retail bankruptcies that have, you know, been experienced with some of the big box retailers or midsize box retailers over the last couple of years, and then I look at, you know, Planet with no club closures throughout the pandemic, we should be, we should be in the pole position when space becomes available for retail space. And I think the durability of our cash flows and the resilience of our business is something that we have an opportunity to further promote when we're seeking space, when we're seeking retail space for new clubs.

Speaker Change: At the same time, you know, you appropriately noted that there have been many retail, you know, retail tenants, anchor tenants.

Tom Fitzgerald: that occupy space that has square footage very similar to what we would look for, you know, that have had bankruptcies, and that could and should be an opportunity for us. The other thing that I think about is the fact that throughout the pandemic,

Speaker Change: We did not have one club permanently closed for financial or economic reasons.

Colleen Keating: So if I'm a, if I'm a developer, a formal landlord, and I look at some of the retail bankruptcies that have, you know, been experienced with some of the big box retailers or midsize box retailers over the last couple of years. And then I look at, you know, I look at planet with no club closures throughout the pandemic. We should be, we should be in the poll position when space becomes available in, you know, for retail space. And I think the durability of our cash flows and the resilience of our business is that is something that we have an opportunity to further promote when we're seeking space, when we're seeking retail space for new clubs.

Speaker Change: So...

Tom Fitzgerald: If I'm a developer, if I'm a landlord, and I look at some of the retail bankruptcies that have, you know, have been experienced with some of the big box retailers or mid-sized box retailers over the last couple of years,

Tom Fitzgerald: and then I look at Planet with no club closures.

Speaker Change: throughout the pandemic. We should be in the pole position when space becomes available for retail space. And I think the durability of our cash flows and the resilience of our business

Speaker: Thank you.

Max Bricklenko: Our next question comes from Max Bricklenko from D.D. Cal. Great, thanks a lot, and congrats, Colleen.

Operator: Our next question comes from Maks Rakhlenko from TD Cal.

Speaker Change: [inaudible]

Speaker Change: Our next question comes from Maks Rakhlenko from TD Cal.

Maks Rakhlenko: Great, thanks a lot and congrats, Colleen. Thank you. So with the Blackheart pilot now taking memberships to $30 in some markets, how are you thinking about the ceiling to where prices can go? Seemingly, it may be tough to get above the mid-30s in a construct of an HVLP 1.0 box. So just Colleen, if you can touch on a focus that you discussed earlier of having an unparalleled member experience, what can be done, and what can be tweaked in a capital-light way to improve it, which would allow for a bit more pricing power?

Max Reklenko: Great, thanks a lot and congrats Colleen. Thank you.

Colleen Keating: Thank you. So with the BlackHard pilot now taking memberships to $30 in some markets, how are you thinking about the seal into where prices can go? Similarly, maybe it's tough to get above mid-30s in a construct about HVLP 1.0 box.

Speaker Change: So, with the Blackheart pilot now taking memberships to $30.00 a month...

Max Reklenko: Submarkets. How are you thinking about the ceiling to where prices can go?

Speaker Change: Seemingly, it may be tough to get above mid-30s in a construct of a HVLP 1.0 box. So just, Colleen, if you can touch on a focus that you discussed earlier of having an unparalleled member experience. What can be done and what can be tweaked?

Colleen Keating: So just Colleen, if you can touch on a focus that you discussed earlier of having an unparalleled member experience, what can be done and what can be tweaked in a capital lightweight to improve it, which would allow for a bit more price and power? Yeah, I think a couple of things. So you know, we touched already a little bit on the mix of equipment. You know, we're seeing a greater demand for space, for strength. You know, we still want our members to walk into a Planet Fitness and see that beautiful bright sea of equipment and know that, you know, they're not going to have to wait.

Colleen Keating: and a capital light way to improve it, which would allow for a bit more price and power.

Colleen Keating: Yeah, I think a couple of things. So, you know, we've already touched on a little bit on the mix of equipment. You know, we're seeing a greater demand for space for strength. But we still want our members to walk into a Planet Fitness and see that beautiful, bright sea of equipment and know that, you know, they're not going to have to wait. At the same time, we are optimizing the mix. So, you know, HVLP maybe 2.0 is really what we should be talking about and how we are evolving the equipment mix for today's consumer.

Colleen Keating: Yeah, I think a couple of things. So, you know, we touched already a little bit on the, the mix of equipment, you know, we're seeing a greater demand.

Colleen Keating: for space, for strength.

Colleen Keating: We still want our members to walk into a Planet Fitness and see that beautiful, bright sea of equipment and know that they're not going to have to wait. At the same time, we are optimizing the mix, so HVLP maybe 2.0 is really what we should be talking about and how we are evolving the equipment mix for

Colleen Keating: At the same time, we are optimizing the mix. So, you know, HVLP, maybe 2.0, is really what we should be talking about and how we are evolving the equipment mix for today's consumer. I will also say we're continuing to look at low-cost amenities to, you know, to continue to offer the greatest value, whether it be for a classic card member or a black card member. And I touched on this a little bit, and that is some of the amenities and the value proposition that we can bring to life through the app. You know, adding value for our members, both in the gym experience or in the club experience and outside the four walls of the club.

Colleen Keating: for today's consumer. I will also say we're continuing to look at low cost amenities to, you know, to continue to offer the greatest value, whether it be for a classic card member or a black card member. And I touched on this a little bit. And that is some of the amenities and the value proposition that we can bring to life through the app.

Colleen Keating: I will also say we're continuing to look at low-cost amenities to continue to offer the greatest value, whether it be for a classic card member or a black card member. And I touched on this a little bit, and those are some of the amenities and the value proposition that we can bring to life through the app. You know, adding value for our members, both in the gym experience or in the club experience and outside the four walls of the club.

Colleen Keating: You know, adding value for our members both in the gym experience or in the club experience.

Colleen Keating: You know, I often talk about my AAA membership and, you know, my car comes with roadside assistance, but I don't cancel my AAA membership because even if I don't immediately need a tow, I know that I'm getting so many more amenities for that relationship. And I think that, leveraging our nearly 20 million member base, we saw one of our greatest participation rates with the Perks program in June. I think there's an opportunity to continue to leverage our member base to bring additional offerings that add value for that membership. As we think about black card pricing, we're also thinking about the black card experience and what we're delivering for our black card members.

Colleen Keating: You know, I often talk about my AAA membership and, you know, my car comes with roadside assistance, but I don't cancel my AAA membership because even if I don't immediately need to tell, I know that I'm getting so many more amenities for that relationship. And I think, you know, leveraging our nearly 20 million member base, we saw one of our greatest participation rates with the Perks program in June. I think there's an opportunity to continue to leverage our member base to bring, you know, additional offerings that add value for that membership. And as we think about, you know, black card pricing, we're also thinking about the black card experience and what we're delivering for our black card members.

Colleen Keating: and outside the four walls of the club. You know, I often talk about my AAA membership and you know, my car comes with roadside assistance, but I don't cancel my AAA membership because even if I don't immediately need a tow,

Colleen Keating: I know that I'm getting so many more amenities for that relationship, and I think leveraging our nearly 20 million member base.

Colleen Keating: We saw one of our greatest participation rates with the Perks program in June . I think there's an opportunity to continue to leverage our member base to bring additional offerings.

Colleen Keating: that add value for that membership. And as we think about black card pricing, we're also thinking about the black card experience and what we're delivering for our black card members.

Speaker: That's very helpful.

Maks Rakhlenko: That's very helpful. And then just a quick one, but can you provide an update on progress and the rolling out of the media network? If you could speak to the opportunity conceptually with where you are on the medium-term path, and then just how should we think about the revenue opportunity as well as margins because it has historically been quite a high-margin business for others

Tom Fitzgerald: And then just a quick one, but can you provide an update to progress and rolling out the media network?

Speaker Change: That's very helpful. And then just a quick one, but can you provide an update to progress in rolling out the media network?

Tom Fitzgerald: If you could speak to the opportunity conceptually with where you are in the medium-term path.

Colleen Keating: If you...

Speaker Change: speak to the opportunity conceptually with where you are in the medium term path.

Tom Fitzgerald: And then just, how should we think about the revenue opportunity as well as margins because it has historically been quite a high-margin business for others? Yeah, hey, Max, it's Tom. I'll take that one. I would say we're still in the sussing out stage on that one. I think we see it as a potential opportunity. We want to make sure we do it the right way. So I think we're not yet at a position where we're going to go full throttle on that, nor sort of project what we think the impact could be. We think it's a nice opportunity to make to enhance the broader economic model, but we're still working our way through that.

Speaker Change: And then just how should we think about the revenue opportunity as well as margins because it has historically been quite a high margin business for others.

Tom Fitzgerald: Hey Maks, it's Tom. I'll take that one. I would say we're still in the sussing out stage on that one, but I think we see it as a potential opportunity. We want to make sure we do it the right way, so I think we're not yet at a position where we're going to... Go full throttle on that, nor sort of project what we think the impact could be. We think it's a nice opportunity to enhance the broader economic model, but we're still working our way through that one.

Colleen Keating: Yeah, hey Maks, it's Tom. I'll take that one. I would say we're still in the...

Speaker Change: Sussing out stage on that one. I think we see it as a potential opportunity. We want to make sure we do it the right way. So I think we're not yet at a position where we're going to...

Speaker Change: go full throttle on that nor sort of project what we think the impact could be. We think it's it's a it's a nice opportunity to make to enhance the the broader economic model but we're still working our way through that one.

Colleen Keating: Thank you for all the thoughtful questions, and thank you for the warm welcome. I'm about about eight weeks in and continue to be just so excited about the opportunity to lead this brand as we enter our next chapter of growth. As you heard from us today, our team and I are very committed to further defining our growth ambition and to capitalizing on really meaningful opportunities across the industry, both in the US and internationally. We will maintain a clear-eyed focus on delivering an unparalleled member experience, evolving our brand messaging and operating under the principle that we can enhance the economic value proposition for all stakeholders.

Tom Fitzgerald: Great. Thanks a lot. Best regards. Yeah, thanks. Well, thank you.

Speaker Change: Great, thanks a lot and best regards. Yep, thanks Max.

Colleen Keating: Well, thank you for thank you for all the thoughtful questions and thank you for the warm welcome. I'm about eight weeks in and continue to be just so excited about the opportunity to lead this brand as we enter our next chapter of growth. As you heard from us today, our team and I are very committed to further defining our growth ambition and to capitalizing on really meaningful opportunities across the industry, both in the U.S. and internationally.

Speaker Change: Well, thank you for all the thoughtful questions and thank you for the warm welcome. I'm about eight weeks in and continue to be just so excited about the opportunity to lead this brand as we enter our next chapter of growth.

Speaker Change: As you heard from us today, our team and I are very committed to further defining our growth ambition and to capitalizing on really meaningful opportunities across the industry both in the U.S. and internationally.

Colleen Keating: We'll maintain a clear-eyed focus on delivering an unparalleled member experience, evolving our brand messaging, and operating under the principle that we can enhance the economic value proposition for all stakeholders, from the franchisor to the franchisees, to ultimately deliver significant value for our shareholders. So, thank you for your time today.

Speaker Change: will maintain a clear-eyed focus on delivering an unparalleled member experience.

Speaker Change: evolving our brand messaging and operating under the principle that we can enhance the economic value proposition for all stakeholders from the franchisor to the franchisees to ultimately deliver significant value for our shareholders. So, thank you for your time today.

Colleen Keating: From the franchise or to the franchisees to ultimately deliver a significant value for our shareholders.

Colleen Keating: So thank you for your time today.

Operator: The meetings are completed and without disconnect.

Operator: The meeting is now concluded, and the webinar is connected.

Speaker Change: The meeting is now concluded. The window is closed.

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