Q2 2025 Planet Fitness Inc Earnings Call

Thank you for standing by. My name is Jael, and I will be your conference operator. Today, at this time, I would like to welcome everyone to the second quarter Planet Fitness earnings call.

All lines have been placed on mute to prevent any background noise.

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, press star 1 again.

I would now like to turn the conference over to Stacey Carabella VP of investor relations. You may begin.

Thank you, operator. And good morning, everyone.

Speaking on today's call will be Planet Fitness chief executive officer calling Keating and she Financial Officer J staz.

They 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.

Thank you, Stacy and thank you everyone for joining us. For the Planet. Fitness second quarter, earnings call

We're excited to be joining you from the New York Stock Exchange where we will be ringing, the closing bell today in celebration of our 10th anniversary, as a public company.

Over the past, decade through a steadfast commitment to our mission and purpose. We've added nearly 14 million members expanded our Global footprint by more than 1700 clubs and established a presence in all 50 states and 4 additional countries.

Today, we have 2762 clubs and 20.8 million members around the planet.

Our accomplishments have given us confidence in our even greater opportunity ahead.

As consumers increasingly prioritize, their health and well-being.

Planet Fitness is uniquely positioned to meet that Demand with our judgement free high quality and affordable Fitness experience.

Our reach is unparalleled with a Planet Fitness club, within a 12-minute drive of 170 million people in the US.

At the same time with population growth and de urbanization over the past several years, we see increasing opportunities to bring Planet fitnesses high value offering to an Ever growing community of fitness-minded consumers in more geographies than ever before.

Gen Z continues to be the fastest growing segment of our membership.

The ongoing success of initiatives like our High School Summer Pass—now in its fifth year—is already outpacing last year's signups and workouts.

Highlights the continued strength and potential of our model.

Gen Z is highly Fitness aware, and there are still 3 years of this population that aren't yet of age to join our clubs.

In fact, we have twice the unadded awareness versus our next closest, gin pier and that Gap is even greater among gen Z's.

At the Next Generation Jen, Alpha is expected to be even more focused on health and well-being.

In the second quarter, we delivered strong financial performance and remained confident in our full year outlook for 2025.

We ended the quarter with approximately 20.8 million members and 8.2%. Systemwide, same Club, sales growth.

We added 23 new clubs, ending the quarter with a global Club count of 2762.

I'd now like to review the progress. We've made on our 4 strategies imperatives during the second quarter.

As a reminder, these 4 strategic imperatives are redefining our brand promise and communicating it through our marketing.

Enhancing Our member experience.

Refining our product, optimizing our format, and accelerating new club growth.

Let me start with redefining our brand promise.

In the second quarter, we continued with our. We are all strong on this planet marketing campaign that highlights our best-in-class strength equipment, our welcoming atmosphere and the supportive community that we offer.

we continue to see strong black card penetration, with 65.8% of our membership at that tier, as of the end of the quarter, a 30040 basis point increase from the second quarter of last year,

Consumers continue to recognize the value of the black card with the gap between the classic and black card memberships. Only ten dollars.

That said, it's not a question of if; it's a question of when we implement a black card price increase.

We wanted to anniversary the classic card price increase and will evaluate the impact of the online cancel functionality before making a timing decision on a black card price change.

Now, to member experience and format optimization.

Our commitment to providing a positive member experience starts with a member's very first interaction with our brand.

For many young adults, that initial connection is being forged this summer.

as I noted earlier, High School, summer pass, initial results are outpacing last year's

Exciting to see so many young people, embracing their Fitness Journeys and even more so that they're choosing Planet Fitness to support them along the way.

In line with our Members First philosophy, we completed our national rollout of the online cancel functionality in May, despite the federal appeals court ruling that blocked the claim to cancel the roll.

We are proud to lead by doing the right thing for our members and simplifying, their ability to manage their membership with us.

As a reminder, this was an option that we offered in more than 35% of our system before the end of q1 including all of our corporate clubs where we enable that more than a year ago.

This is contemplated in our same Club sales Outlook that Jay will address in his comments.

In alignment with our core values and commitment to integrity and Excellence, we believe this is the right thing to do.

both to support our members and their experience, and as the industry leader,

In Q2, we once again, had amid 30% rejoin rate and believe that allowing members to more easily manage, their membership will only benefit us when they think about rejoining, a club in the future.

And finally, our efforts to accelerate new club growth.

We are steadfastly focused on unit economics and believe that franchisee success fuels franchise or success.

We continue to refine our product offering and operational efficiencies to maximize the economic value proposition while delivering the most relevant, on-brand experience for our members.

Our goal is to drive the Top Line, while enhancing the bottom line, to realize the tremendous growth opportunity, we have in the US and Beyond.

Internationally, Jay and I were in Spain in July to celebrate the opening of our ninth club located in Madrid, Sham Martine.

The Milestone came just a week after the 1-year anniversary of our first Club in Spain. It was incredible to experience firsthand how the brand is being brought to life by the team in both newly built and a couple of conversion clubs.

Being Our Brands continue to grow in New Markets is extremely rewarding and a testament to our Global appeal.

Our success in bringing the brand to life in Europe. Is another proof point to support the long-term Club growth opportunity for Planet Fitness.

We look forward to providing more insight into our strategy for both domestic and international growth at our Investor Day in November.

Earlier this week, we executed an agreement for the sale of our 8, corporate clubs in California to a franchisee in the market.

This transaction, reflects our commitment to recycling Capital where appropriate and advancing our asset light model.

This sale also allows us to focus our resources on our corporate owned clubs on the East Coast where we are more densely concentrated and therefore can operate more efficiently.

Now, I will turn it over to Jay.

Thanks Colleen. We're pleased to deliver another quarter of strong results, and we're on track to achieve our full year growth service.

we are well positioned for the long-term to further expand our leading market share given the strength of our value proposition in the fitness industry combined, with the proven resilience of our asset light business model,

Demand for our offering is strong as evidenced by our 16. Straight quarters of mid single digit, or higher, same Club, sales growth

Before I review our second quarter financial performance, I'd like to address 3 topics.

The rollout of online membership management the agreement to sell our California clubs to a local franchisee in the market. And our latest thinking on tariffs,

We remain committed to delivering a great member experience, and we want to make the cancellation process as seamless as the join process, as calling noted. We now provide our members the ability to manage their membership conveniently online.

As you recall more than 35% of our system, had online cancel functionality before the end of q1 including all of our corporate clubs where we enabled it more than 1 year ago.

As a reminder, generally the largest impact to the attrition rate occurs in the first couple of months after implementing this functionality and diminishes as time goes on.

we're seeing a slightly elevated cancel rate in both, the clubs that had online cancel before T2, and those that rolled out during the quarter,

the rate is up Less in the Legacy cohort of clubs. Compared to the others, these impacts are included in our Outlook, in same Club, sales growth guidance for the year.

Now to the agreement to sell our California corporate clubs, we continue to believe in our asset rate, highly franchise model and reiterate, our plans to own approximately 10% of the fleet.

To contextualize the impact from the sale of these clubs, we expected these clubs to contribute approximately, 7 million to our revenue and 2 million dollars to our adjusted, even out for the balance of the Year. Assuming an end of August clothes,

These impacts are also contemplated in our out for the year.

Finally given that we're a fitness brand that sells an experience. We are generally less impacted by tariffs and have implemented mitigation

such as leveraging our scale to negotiate with manufacturers.

Now, to our second quarter results.

all of my comments regarding our second quarter performance will be comparing Q2 2025 to Q2 of last year unless otherwise noted

We open 23 new clubs compared to 18.

We delivered systemwide same Club sales growth of 8.2% in the second quarter.

Franchisee same Club sales increased 8.3% in corporate, same Club, sales increased 7.0%.

Approximately 70% of our Q2 campaign increased was driven by rate growth with the balance driven by net membership, growth Black Card penetration was 65.8% at the end of the quarter and increase of 340 basis. Points from the prior year, the sequential increase of approximately 90 basis points from q1,

For the second quarter. Total revenue is 340.9 million compared to 300.9 million and increase of 13.3%.

The increase was driven by Revenue growth across all 3 segments.

And 11% increase in franchise segment, Revenue was primarily due to higher royalty revenue from increased same Club sales as well as new clubs and increase in National add funds as well as franchisee fees.

For the second quarter, the average royalty rate was 6.7% up from 6.6% in the prior year.

The 10.8% increase in Revenue in the corporate owned Club. Segment was primarily driven by increased Sam Club sales as well as sales from new clubs.

Equipment, segment, Revenue increased 21.5%, the increase was primarily driven by higher revenue from a replacement equipment sales. We completed 19, new club, placements. This quarter compared to 18 last year,

For the quarter replacement equipment, accounted for 87% of total equipment, Revenue compared to 84%.

Our cost of Revenue, which primarily relates to the cost of equipment sales to franchisee owned clubs managed to 59.4 million compared to 5 1. 9.

Club operations expense which relates to our corporate owned Club, segment increased 10.4%, to 77.4 million from 70.2 million.

The increase was primarily due to operating expenses from 25 new clubs opened since April 1, 2024.

SG&A for the quarter was $35.5 million compared to $31.6 million. While adjusted SG&A was $33.9 million compared to $30.1 million, this reflects an increase of 12.4%.

primary driver of the increase to adjust the sgna with higher compensation expense from recent executive hires

National advertising fund. Expense was 22.8 Million compared to 20.1 million, and increase of 6.7%.

Net income was 58.3 Million. Adjusted income was 72.6 million and adjusted net income per diluted. Share was 86 cents.

Adjusted even now is 147.6 million and increase of 15.8% year-over-year and adjusted. Even our margin was 43.3% compared to 127.5%.

by segment, franchise adjusted EV but I was 86.5 million in adjusted, a market increase from 71.9% to 72.3%

Corporate Club adjusted me, but I was 56.6 million in adjusted David dog margin increased from 39.5% to 40.7%.

Equipment. Adjusted, even though I was 26.4 million in adjusted David out Market increased from 27.4% to 32.1%.

Now, turning to the balance sheet.

As of June 30th 2025, we had total Cash Cash equivalents and marketable, securities at 582.5 million compared to 529.5% of 2024, which included 56.5 million of restricted cash in each period.

Moving on to our 2025 Outlook which we provided in our press release this morning. As I noted earlier, our Outlook assumes tariffs at the current levels.

We continue to expect between 160 and 170 new clubs, which include both franchise and corporate locations.

We expect that the quarterly Cadence will be weighted towards the fourth quarter of 2025 even more so than last year.

We continue to expect between 130 and 140. Equipment, placements in new franchise clubs and again we expect a similar case to our openings

Lastly, we reiterating our growth targets with the exception of same Club sales growth, which we are narrowing to approximately 6% growth from the previous 5 to 6%. Growth range.

We continue to expect the following growth over fiscal year 2024 results.

Revenue to grow approximately 10% adjusted Eva to grow, approximately 10%.

Adjusted net income is expected to increase in the 8% to 9% range.

Per diluted share to grow in the 11 to 12% range based on adjusted diluted weighted average shares outstanding of approximately 84.5 million.

Inclusive of approximately 1 million shares. We expect to repurchase in 2025 in line with what we've previously communicated.

Let me speak to the drivers for the implied. Sequential slowdown in same Club sales growth in the second half of the year.

First, we rolled over the classic carte pricing increase on June 28th. So, while we will continue to get right benefits from it, given our subscription model, and 10 year of our members, the benefit moderates, over this time,

Second, we forecast an elevated attrition rate in the back half of the year since our National Rollout of online cancellation.

Lastly, the continuing volatile macroeconomic environment.

Finally, we continue to expect that re-equip sales will make up approximately 70% of total equipment segment revenue.

2025, net interest, expense for approximately 86 million, inclusive of the annualized impact of our 2024. Refinancing in DNA to be flat to 24 and capex to be up approximately 20%.

I will now turn the call back to the operator to open it up for Q&A.

Thank you. The floor is now open for questions. If you have dialed in and would like to ask a question, please press *1 on your telephone keypad to raise your hand and join the queue.

If you would like to withdraw your question, simply press star 1. Again, if you are called upon to ask your question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question.

And we do request for today's session that you please let me yourself to 1 question and 1 follow-up. Your first question comes from the line of Randy conic of Jeffrey's. Your line is open.

Yeah, thanks. Uh, and good morning everybody. I guess, Colleen. And Jay, maybe give us perspective on where we stand with, um, the proportion of clubs that have been kind of under the new layout, with more strength equipment, relative to cardio. And and, and what trends, or or items, you may see that are different in those clubs versus the older format, from an equipment perspective, Club, whether it be membership, Black Card penetration, uh, attrition Etc. Be very helpful to understand as you're moving into this new format. Uh, or from a, an equipment perspective, what trends are are the same or different from the the the older more cardio focused floor floor, uh, layouts.

Yes, morning, Randy. Uh, great to talk with you. And thanks for the question. So, um, by the end of this year, we will have more than 70% of our clubs, on some version of format optimization. So some optimized floor, plan and mix of equipment. Um, as you know, uh, at the end of last year, we had 65% of the estate opt in to add plate. Loaded equipment. So, those were at least 3 new pieces of plate loaded equipment, um, in the clubs and then we've got even more, you know, in more clubs, uh, adding that this year. So, uh, we'll be well over 70%, uh, not just with the plate loaded, but with the more balanced mix of cardio and strength uh and to your question about the specific, uh, mix of equipment

It really is an issue about a 50/50 mix of cardio and strength. Uh, so we'll still have a strong car. We still do have a strong complement of cardio equipment. In our clubs, we find many of our members like mixed modality. Uh, however, we've

Increase the amount of floor space dedicated, uh, dedicated to strength equipment and augmented that. So really seeing a more balanced mix of cardio and strength and even within the the uh, the cardio. Um, you know, adding things like

Like more stair climbers, because those are getting a high level of utilization. Treadmills, still get a high level of utilization and dialing back things like, uh, Arc Trainers, uh, and ellipticals, uh, where we'll still have a complement of them, but um, you know, gearing it more toward, uh, what we're seeing from a usage perspective from our members.

Great. And then, I know there were some talk in the past about adding new types of, uh, amenities to the, uh, the Black Card, uh, you know, kind of member area, whether it be red, light, cold plunge, uh, spray tan, Etc. Can you, can you update us on where we stand with that? Uh, and any learnings, if any clubs have those uh, amenities at all, if you're seeing anything that's different from a trend perspective versus clubs, obviously, that don't have those yet.

Is in a number of our clubs. Um, and we're also testing spray tanning as an alternative to, uh, to UV tanning. Uh, so, you know, too soon for us to to kind of call which ones we're going to move, move forward. Um, still in Pilot phase and evaluating the utilization. Uh however we continue to see uh that that recovery and renewal are important parts of uh of our members Fitness routine. So we'll continue to, you know, to test and evaluate things that can enhance our members experience.

Your next question comes from the line of John Heinbockel of Guggenheim. Your line is open.

Hey, Colleen. I wanted to start with the 170 million person tan, right? That you're within 12 minutes of.

How do you, how do you?

You know, density and then is the opportunity being um, you know, density in some of those existing, more urban markets.

Versus um, maybe less dense. Uh, you know, rural markets are, you know, kind of kind of out there. Uh, so how do you balance the 2? I assume you want to do more, uh, more densification in urban

But, but let me know.

Yeah, so uh, John good morning.

Thanks for the question. So uh, so yes, you know, we

We've seen that on the urbanization and uh, and girls in the suburbs, Give us new market opportunities. Uh you know, where we have the uh the population to support our traditional 20,000 square foot Club at the same time. Uh we've been testing some additional uh additional costs smaller footprint in infill locations uh and also more more

Locations. Uh, so that we're able to bring a Planet Fitness experience to, uh, to even more prospective members, um, around planet.

Okay, and maybe follow up, uh,

What I know you you're in the early stages of what you want to do with the, with your marketing structure.

But you know, is there any thought if you give it any thought to, you know, how you want local National to kind of be set up?

You know, and because I think the idea was, you know, maybe you do more National a little less local and then there is a marketing savings, uh, longer term. I I don't know if if there's been any update on that.

Yeah. Um, so from a marketing standpoint we you know, we launched our new campaign this year um,

And based on what we've seen, uh, you know, from our, from our member join numbers. Um, we're we're confident that the new marketing messaging is landing. So, um, you know, you've, you've seen the campaign around where all strong on this planet and, uh, and growing stronger together. Um, that messaging is very much resonating. I will say specifically, um, you know, we're doing doing more National marketing, driving the brand, uh, and bringing the brand promise to life and at the at the local and Hyper local level. We feel still believe that's a, that's an important compliment uh, to to the National marketing. So so very much in Balance. Um, I mentioned that we're seeing increased participation increase volume as well as utilization with High School summer, pass this summer and there's an example of where we amped up, uh, marketing with influencers to uh, to Target this particular

Uh, customer demographic. Um and it's, you know, it's proven its proven quite successful in the in the numbers we're seeing with the High School summer pass participation in the summer. So, um, you know, with our new, Chief marketing officer, who just came aboard in February, uh, you'll start a, you'll start to see us experimenting with, uh, with, with a new marketing mix. Uh, again balance of, uh, of local and National, and at the national level, we do.

You think there's an opportunity for us to buy more efficiently and aggregate or spend.

Your next question comes from line of Max, raleno of TD Cowen. Your line is open.

Great. Thanks a lot. So first J. Can you speak to, uh, maintaining the the coms guide? I know you provided some caller, but just any additional comments. Because should it turn normalized in 3Q? Given your power comments on click to cancel and then you should still see a benefit from the class of hard pricing how churn works. And then I do think that the, the headwind from 1 cues up black heart promo, should I believe continue to, uh, reverse so just any more color on the conservatives and for the 2 H guy,

Continue to get that benefit. We will continue to get that. But it diminishes over time, over the, the tenure of the membership, uh, to your point, I'll click to cancel as we said that what we're seeing is slightly elevated, uh, than what we had initially modeled. Now, we recast that and it is baked into our full year outlook and the comp guidance and as far as it moderating, um, we would expect that, I mean, it is still early we're still within the first 3 months of the full roll out. So we're still in the early phases of that. Um, but we've, you know, we've we've updated our forecasts and we've contemplated that. So we think what we've got in there is appropriate, and then the last pillar, uh, just given the macroeconomic environment, we do think it makes sense to maintain some level of conservatism in the guide, uh, going forward. So, all that culminated in what we, uh, spoke about today

Got it, that's helpful. And then Colleen, I saw that you recently announced that you're looking to add a director of franchise sales, so your franchise space has been shrinking and I believe you've been close to you and transformed many years. Now, as the whites space has been, uh, Divi it off. Uh, and there has been an m&a inside the system. So what's the mechanism to add new franchises into the bowl besides new ones entering through m&as? Such as the Flint group, and others? And is it more for us or International franchises than just, how should we think about the acceleration and openings, uh, from this?

Yeah, Max 1 of the things. Um, you know we've said is that 2 uh, you know, over the longer term um, to achieve our full growth ambition. We, you know, we believe we'll need more franchises in the system. Uh, we also know that there are several of, uh, our

Can you still hear me that?

Yes, you can be heard. Okay, perfect. Um,

So I I I'll start again in case uh, case it was just disrupted. So you know, in our longer term growth ambition, uh, we believe we need more franchises in the system. And we also know that there are several of our larger franchises, uh, that are approaching the end of, uh, of their fund Horizon and maybe looking to transact. Uh, and in support of those franchises as well, uh, you know, we want to be cultivating prospective new franchisee relationships who might want to, you know, might want to come into the system uh and and grow with uh growth Planet Fitness.

Your next question comes from the line of rauli of JP Morgan. Your line is open.

Good morning guys, thanks for taking the question Colleen. As we think about the time, and going into the analyst day, like, how do you think about the local and Regional HVLP competition? And I mean, we are seeing some of the incumbent brands with, with very well capitalized. Um, uh, operators and backers coming into the market, uh, Curious to hear your thoughts, and I have a follow-up.

So hero, um,

Nice to hear from you. Uh, gosh, when I think about, when I think about the Tam, I think about the uh, the growth of gen Z and how Fitness minded they are, and that they are, uh, the the fastest growing segment of our membership. And the fact that, you know, several years of gen Z haven't even aged into our membership opportunity yet. Um, so I think the, the, you know, the, the TM is going to continue to grow and with Gen Alpha coming up behind um, you know, by all accounts.

today, uh, you know, going to be at at least as if not,

um, health and wellness and well-being. Um, and when I, you know, when I think about the the landscape and um, I tend to say peers in the space.

Um, you know, you're right that there are, there are a lot of local and Regional players when you think about the 31,000 gyms and clubs that are in the US today. Um, if you take us in our next largest, pier in the space combined we, you know, together only about slightly more than

you know, it's a big landscape and at the same time, I think,

In the front door. And that's what makes Planet Fitness. So uniquely positioned.

Coming into, um, you know, coming into any, any Market, um, uniquely positioned as our, our welcoming environment, no gym intimidation and that we're uniquely positioned to meet, uh, to meet members wherever they're at, on their fitness journey, whether they're a beginner, uh, or whether they're, you know, an advanced, uh, an advanced gym goer, you know, training for a marathon.

Want to pick up a little more on the Spain. Uh, side, appreciate the update, uh how are the unit, economics shap shaping up, relative to the US, given you have a gym or 2 with almost a year, uh, in. And then also, if you can share any colors, uh, on an update on the franchise, uh, Andre franchising situation there. Thank you.

Happy to you. So, from a um, from a Spain perspective um we are we are thrilled with the way, the clubs are ramping in Spain, um, and in particular, you mentioned the first club that, you know, has just been open a year. It was a year in July. Um, when we look at that clubs ramp and we compare it to a domestic ramp um the the the Spain clubs inclusive of that first 1 that opened um our our ramping like like our domestic clubs which is quite remarkable. Um, considering we only brought the branch of Spain uh, just a year ago. So we're feeling really good about our entree into Europe, really good about the Spain performance. Uh, and we're in the very, very, very early days of having some uh, some conversation about uh, about transacting Spain. But it is Our intention

To recycle that Capital uh to you know to bring a franchise partner into Spain. Um

We built it on our balance sheet as a proof of concept.

And it's proven really well.

Your next question comes from the line of Jonathan comp of beard. Your line is open.

Yeah. Hi, good morning. I just want to follow up. I know you mentioned J in the back half. Uh, now assuming higher churn continues. Could you maybe just talk about some plans, your your, um, you you've embedding to help offset that whether there are some demands that are initiatives, that can help near-term. And then longer term

Just what are the key initiatives. You're you're looking at to help Drive Unit economics uh still higher here.

Yeah, so I think I I think that's a a broad question. Um, you know, when we think about it I think this is a bit of a moment in time if we step back and think about, uh, uh, cooked to cancel or the ability to manage your membership online. Look, we're about putting the members first, we think it's the right thing to do, uh, taking this step even though it wasn't mandated, it's the right thing and then align with our core values. Um, so from that standpoint, it makes all the sense in the world and we think it makes sense to me, the leader, uh, since we're the leader in the industry in this space. Um, as we think about opportunity, we've talked about it before. It's, it's too early to comment on it further. But the ability to Market this further in the join flow, we've done some testing and we've we've seen lifts, um,

calling touch on the High School summer pass, which has been uh you know, a nice program that we think uh think

Will be continue to be successful, and meaningful going forward. And I think as is evidenced by our our comps and our results. For the second quarter of the marketing is landing and the shift, in our clubs with the equipment is landing uh to the full spectrum of of uh, Jim goer. So we're pleased with all that uh, click to cancel, we're managing it. And again, it's, you know, we're talking tens of basis points, uh, compared to what we originally thought, originally thought it is baked in our Outlook and our comp guide. Uh, so we feel good about where we're at.

Okay, thank you. And then just to follow up as we think about the next few months here, any opportunity to better monetize and convert the High School Summer Pass? And then Colleen, just on pricing, I think, you know, we're within a window of a few months where you'd probably make the decision for this year or not. You know, what else do you need to see? Or what are you looking at specifically as you collectively make that decision? Thanks again.

Absolutely. So, um,

So, you know, I think from a conversion standpoint on High School summer pass, uh, we saw last year that we converted higher. We had a higher conversion percentage than we did the year prior, and what we're seeing this year, you know, 27 to get into real specifics. We'll see the conversion in the fall but, um, all indicators are that the both the utilization and the participation are both up marketed, um, this year versus last. So, um, you so that will be very, you know, should be favorable, I guess I should say. Um, you know, if we assume even even a flat conversion percentage, uh, much less, you know, potentially an an increase in conversion like we saw last year so uh, remains to be seen in the fall but uh, the indicators there are, um,

you know, I think our our really strong

Conversing. The classic card price increase which we did at the end of Q2. And uh, we also wanted to get through the roll out of um, you know, of online membership management what we're now calling click to cancel because it really is about empowering our members to, uh, to manage their membership. Um, given that we've seen, you know, as, as Jay said, a slight elevation and I don't want to overplay that, you know, we're talking uh, in the tens of basis points. This is not in the hundreds of bases points, slight elevation Insurance, um, since that roll out. Um, you know, we'd like to give that a a minute to moderate as we've as we've seen in test environments and other markets in the past. Uh there is a moderation uh after that roll out. So we want to, you know, we want to take a minute. Um,

And, uh, and get on the other side of that, roll out as well. Uh, before we make an an absolute decision on the the timing of the black card price increase

Your next question comes from the line of Joe Alto of Raymond, James. Your line is open.

Thanks, good morning guys. Um just want to follow up Colleen on that. Last answer you gave about click the cancel. I I guess it's still early obviously, but do you have data on how quickly quickly

Cancel rates, actually, you know, go back to normal after the implementation of click to cancel or or do they stay slightly elevated permanently.

Generally speaking. Um, generally speaking, after ich about 12 weeks, um, they moderate, uh, now they've been a couple of, you know, couple of exceptions. We've talked about Tennessee, um, a couple of exceptions where it's remained a bit elevated, uh, for a longer period of time. But generally speaking, uh, we see a moderation about 12 weeks after rollout, the difference here is that, this is a nationwide rollout as opposed to, um, you know, in in smaller cohorts as we've done in the past. Uh, so, you know, remains to be seen if this behaves like the the prior tests and, you know, prior roll out environments. But um, we're still in that window because it was mid-may. Uh, so we're still within that 12 week window of rollout, um, you know, and we'll, we'll monitor it.

Okay, and then just to follow up on the comp the 8.2%. I know you've talked about kind of getting more be back to more of a 50/50 split between member and and rate growth. How quickly do you think you can? You can get there, you can get there.

Yeah, Joe this is Jay and and as we said on the call, it's 7030. We're not guiding Beyond 25. And I think, you know, especially uh right now as we think about the back half of the year, uh we're going to be more consistent with the 7030 versus getting back to an even split. And as we think about Q3 is historically, not a large increase in membership type of quarter. So I would expect in Q3, for that 7030 to even be more skewed, and we'll give longer term guidance at our investor day, uh,

In November.

Your next question comes from line of Crystal Co of Steel Financial Corp. Your line is open.

Thanks good morning guys. Um Colleen, I was hoping you could provide an update on the progress and reducing investment costs for new units.

Happy too. Um, so as, you know, the, the, uh, more balanced cardio and strengths package, uh, for starters, reduce the build cost, uh, for our franchisees. Um, we've also done things like shrinking the lobby, where we're today seeing well, over 80% of our joints come either online or through the app. Um, you know, we we, uh, determined that we don't need as large a Lobby because we're not doing the signups in the lobby. So um, you know, dedicating more of that space to the gym floor and shrinking. The lobby reduces the build cost because obviously tiles expensive. Um, you know, we're looking at locker room sizes and

Are and shrinking the locker room sizes, a bit to dedicate more space, to the gym floor, uh, that to reduces build cost, uh, building a smaller front desk, um, which we think actually creates some more welcoming environment, uh, you know, for for our members. So, uh, things, you know, structurally, uh, that we're able to do in, in, from a construction cost standpoint our, uh, you know, our are helping me, you know, the economics. But at the end of the day, the biggest thing is this business is a Topline play. And when we drive the top line for our franchisees, that's the thing we do. That's most secretive to their unit economics. So, um, you know, we're really encouraged by The Joint volume that we've seen this year. We're really encouraged that our marketing is landing, uh, and that our product offering

Makes sense. And then do you believe adding some of these high value services like trade painting could unlock the potential for an additional pricing tier.

We're not talking about additional pricing tiers, you know, right now, what we, what we are talking about is, is potentially, uh, you know, and, and the timing of which is not potentially, when when we will take uh, an increase to the Black Card pricing, and we're always going to be thoughtful about. Making sure that, you know, you've heard me say, leaning in to, when we think about HVLP, making sure that we're thinking about the HV and capital letters and the lp and lowercase, that we're delivering, uh, you know, an an incredibly high value, uh, for our members. So always thinking about the offering wanting to stay most relevant um and then you know, pricing in a way that um,

Finances, the economics of our franchisees as well. At the same time, delivers an incredibly high value for our members.

Your next question comes from my name is Jen. Sue of BNP. Your line is open.

Hi guys, thanks for the question. Um, I want to follow up maybe on gen Z.

Any terms of the differences and of how they behave versus other demographics? Are you seeing them tend to join at more White Card versus Black Card? Any differences in utilization or churn? Just kind of curious on how they look.

Yeah. So

You know what, while while we, um, we haven't really dissect or we don't dissect or deconstruct, uh, the utilization by generational cohort. Um, you know, we we have, uh, shared that we're seeing utilization increase. Um, so where we we used to see our, uh, our active members or members that utilize our club in a given month, um, you know, use the club 6 times a month or 6.1 times a month. Uh, you know, we're seeing that in the high sixes. Um, the hot mid to high sixes today. Uh, so, you know, that is an indication, uh, you can drop, you can glean from that. Um, as as Jen sees are becoming, you know, the are the fastest growing segment of Our member membership. Um, you know,

Compound that with the, with the increase to utilize utilization. Um, and then I talked about High School summer pass this morning, um, and that's all jensie and, you know, I shared with you that not only is the participation of the utilization, uh,

Is also up as well. So um, you know, those are indications, you can drop off.

Okay, that's helpful. And then maybe unit economics a couple times and to your point with the pricing and the formatting of the stores and the marketing. It seems like unit, economics are getting better. I'm just curious like to hear if you're hearing feedback from franchises. Maybe look into either seeing the better unit economics.

And to accelerate opening into the next next year. Next year, what are the beautiful things about a franchise business is the opportunity to thought partner with our franchisees. Um, and our new Chief development officer has been uh, has been out on the road, a lot meeting with our franchises and talking talking talking with them about the changes in format. Uh, the structural changes that we can be making to, uh, to enhance the build costs or improve the build cost. And then, of course, you know, our our new Chief marketing officer, uh, really driving the Top Line. Um, the other thing I'll say that we're, you know, we're seeing and I'm sure you're seeing as well, um, is, uh, improvements in the availability of uh, of retail. Real estate, particularly shopping uh, shopping center, real estate. So, um, you know, we had, uh, we've had you know, strong, uh, strong positive absorption over the last several years and in the first 2 quarters of

This year q1 and Q2 negative absorption. Uh, also a moderation in rent, escalation so rent growth has been, uh, has been below inflation in 2025. So those are also good indicators for improved unit, economics for our franchises. So, you know, we're looking at crop line, which is most important. We're looking at build cost and partnership with our franchises and then trying to also lean in and help them with the availability of real estate. Yeah. And I agree and just to add on specifically, we do look at uh the new cohorts of clubs that we've uh opened both the franchises and our since the new growth model and uh, you know, some of the evolution in the marketing and the floor plan and from a Topline standpoint, we're very pleased with the way those are trending, uh, in terms of a, a Unity economics View.

Your next question comes from line of Alex. Perry of Bank of America. Your line is open.

Quarter. Um I just wanted to to follow up sort of on the guidance, so you narrowed uh the same Source sales range toward the high end. Um, you sort of mentioned that click to cancel attrition is, I think, is a little bit higher than expected. So, I guess, what is the offset? Are you seeing better Black Card penetration than you were expecting? Or, or you know, what else is sort of going on that? That's maybe all setting some of those higher, click to cancel attrition. Thanks. Thanks.

Yeah. So uh, as we said we had a wider range 5 to 6, we've narrowed that range. We obviously came off a, a good quarter. So, uh, part of it is just actualizing Q2. Uh, and then as we think about the guide, uh, the click to cancel, right? We had some of that in that and we we've moderated that slightly. Um, and then otherwise it's just the things that we've talked about, right? Uh,

Continuing to benefit on the classic card price increase, right? We'll still get that. Although not to the extent that we have that was modeled in before and then just some level of conservatism with the macroeconomic environment.

Perfect. And then I guess just my follow-up. Um, as we think about memberships in the back half anything to call out there. I think seasonally on a per Club basis. You normally see declines in the third and fourth quarter. Is that you know how we should be thinking about it as as we look at this year is there, you know, anything else we should be considering giving all the moving parts. Thanks.

Yeah, we don't really guide, uh, to membership. But to your point when we think about the third quarter, historically, that's not been a large, uh, net member ad

Uh quarter. Um, you know, but we're going to continue to do our best and then if you look at the trends that we've had in the last fourth quarter, you can see me have had some slight membership update.

Your next question comes from line of uh Sharon Zakia of William Blair. Your line is open.

Hi, good morning. I wanted to kind of go back to the increase in strength training at at a lot of the clubs at this point. Is there any way to compare and contrast kind of member engagement? Or visitation the patterns that those clubs with the added strength versus kind of where they were before or um, kind of a, a base cohort?

So as I shared you shared a little bit, um, we we are seeing we're seeing utilization up and the number of visits per club, uh, increasing as well. Which is an indication that the format, uh, you know, the format and format optimization, uh, is, is landing as resonating with our members. Um, we do have some clubs that, uh, that have some, uh, some monitor monitoring data. Uh, that gives us some some granular line of sight, but, um, you know, probably too soon for us to talk about that, as

Uh, as a trend. So, um, so we are measuring utilization. Um, but again, uh, we're, you know, really just rolling out the, the plate loaded equipment just went in in the first, you know, right before the first quarter. Um, so probably too soon for us to to really talk about it as a trend yet. Um, but generally

Yes. Sorry. Is it is it, um, a big enough Trend, though, where you might need to go back and add even more equipment on the strength side.

That's Sharon, that's 1 of the things that we're evaluating, um, and it may not be broadly, all strengths, that may be certain specific pieces of equipment, uh, that were were hearing member feedback that, you know, that may indicate we want to add more of it. Um, he'll give you 1 example in particular. Um, we have significantly increased the comp the complement of stair climbers in our clubs that was based on data that we showed, uh, you know, from a member utilization standpoint. Um, and the same will will hold true with strength equipment as we hear, from our members, the pieces of equipment. They're, they're or see, you know that they're using more. Um, you know, could help could help inform, um, uh, our, our equipment packages going forward. And and the other thing that we've noticed is, uh, the utilization of floor space for functional training. So we've been intentional in our clubs about opening up floor space, uh, so that our our members have space to do functional training. That's that's another

trends that we've, uh, we've been responding to

Yeah, and as we've talked about before we have, uh, NPS now fully rolled out across our system so it's a a great area for us to get feedback across the entire, uh, bleed of Clubs.

Your next question comes from the line of Murray. Lat of McQuarrie Capital, your line is open.

Pertaining to more just some cash flow nuances. Just noticed that the, um, your accounts receivable balance is quite elevated, compared to more recent history, um, as of June end, and it's kind of, you know, ratcheting up to what it was in December. Um, on the back of some of those re-equipped Dynamics, is there anything you can kind of unpack there is there any potentially any inflation coming through on, um, on equipment?

No, I think there's nothing unusual there. It's just uh, standard timing differences.

Okay. Okay, um, and just, um, kind of moving on, you've obviously spoken to the deal in California. Are you seeing any changes in the appetite of the franchise group for these kinds of deals in the current climate? Or is it still kind of like, business as usual?

Yeah, I think, you know, I think it's, I was mentioned on for 1 of the questions earlier, uh, about how frequently, uh, when, uh, when assets transact, when clubs transact and our system, it's an incumbent franchisee, uh, you know, who's who's looking to purchase and in the sale of the California clubs. Um, you know, we had we had multiple, uh, multiple bids on that portfolio of clubs and, you know, once again, uh, strong interest from inside the system uh, to, to purchase the the additional clubs

So don't, you know, no Divination in appetite for sure.

Your next question comes from the line of Logan Reich of RBC Capital Markets. Your line is open.

Hey, good morning, thanks for taking my question. I had a question on the Black Card pricing. Tests you've been doing it for for a little while. Now I was just wondering if you can share any observations or or differences, you guys are seeing in the test relative to broader uh, store portfolio and maybe in relation to blackard, mix. Um, retention net adds anything would be able to share on the black card test. Thanks.

Logan, um, I'll start. Uh, so when we went in and I I probably, you know, I wouldn't call it a test at this point. I think we've evaluated it now. It's about, you know, we've made a decision it's just about the right timing. Um, but at any rate when, when we were in the test, we wanted to see 2 things, you know, was there Headroom on price, and was that Headroom at 27.999% to the 2999?

Uh, from a churn perspective, uh, we do not see a material difference in churn, uh, at at the different price point. Um, and from a black card penetration, we've been talking about that. Gosh, we're uh, you know, we're up 30040 basis points in black art, penetration quarter, uh, you know, quarter to Prior year. Um, and, and that's been a trend that we've been seeing. So, with the gap between classic and black, um, you know, we've had sign, you know, being the narrowest that it's been uh, since the Inception of the Black Card at a ten dollar price, Delta, um we've definitely enjoyed increased Black Card penetration that has been you know, has been a creative

Got it super helpful and just a quick follow up. Uh, how many stores have the $30 or uh, how many gems of the $30 uh black card price today?

Yeah, we have it in 2 geographies today. Um, it's in our New York market and our Charlotte Market uh market today.

Your last question comes from the line of Brian, mcnamera of Cano cord genuity, your line is open.

Hi. This is Madison Cowan on for Brian. Thanks for taking our question. Um, we were just curious why net new unit guidance hasn't been adjusted as we would have figured visibility would be much higher today on that front compared to May. Um also is there like an internal timeline when you expect to surpass the 200 plus net new unit growth number that the company did pre-pandemic thing,

Fronts will eventually lead us back to that and that includes both domestic and international. Um, and then from a net growth standpoint to your point, right? We have had a couple of closures, some of that was related to lease terms, um, and some of that was just natural uh, uh, lease ending. So, uh, the, you know, it's just part of the normal course of the business. Nothing unusual. And we can, uh, you know, refine that going forward. I think 2 were we also know that we've got, you know, because of the nature of the business, they're seasonal favorability to a Q4 opening. Um, you have the the it's a very profitable quarter to open because you're right in front of the strong q1, um, you know, join volume, uh, the flip side of that. Is that it's, it's, you know, it's a, it's a race to the Finish when you've got a lot of the openings back and loaded in the, in the last quarter of the year. So we felt we felt confident uh, in the range that we got it. And we feel confident that we have a great line of sight to uh to those

Openings. However, at the same time, uh, there are a lot in Q4.

Thank you very much.

That concludes our Q&A session. I'll now turn to conference back over to CEO calling keeping for closing remarks.

Thank you. Uh, in closing, I am encouraged by our performance. During the first half of 2025. We continue to be a highly attractive franchisee franchise system, uh, that generates strong and stable, free cash flow for long-term sustainable growth.

And increased shareholder value. Thank you.

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