Good morning, and thank you for joining us for the Life Time 2023 annual earnings conference call. With me today are Bahram Akradi, Founder, Chairman and CEO; and Erik Weaver, Interim CFO and Chief Accounting Officer. During this call, the company will make forward-looking statements, which involve a number of risks and uncertainties that may cause actual results to differ materially from those forward-looking statements made today. There is a comprehensive discussion of risk factors in the company's SEC filings, which you are encouraged to review. The company will discuss certain non-GAAP financial measures, including adjusted net income, adjusted EBITDA, adjusted diluted EPS, net debt to adjusted EBITDA or what we refer to as net debt leverage ratio and free cash flow. This information along with reconciliations to the most directly comparable GAAP measures are included in the company's earnings release issued this morning, our 8-K filed with the SEC and on the Investor Relations section of our website. With that, it is my pleasure to turn the call over to Erik Weaver. Erik?

Thank you, Danny, and good morning, everyone. Before I begin, I'd like to take a moment and share how excited I am to be on the call with you today. I've been with Life Time for over 20 years holding various roles in the finance department and have made a seamless transition into my role as Interim Chief Financial Officer. We have an amazing company and a strong financial team. I'm now pleased to share our financial results. Starting with our fourth quarter. Total revenue increased 18.2% to $558.8 million driven by a 20.9% increase in membership dues and enrollment fees and an 11% increase in incentive revenue. Access memberships increased 5.2% to end the year at more than 763,000 memberships. Total memberships ended the quarter at approximately 815,000. Average monthly dues were $183, up 13.2% from the fourth quarter last year. Revenue per access membership increased to $711 from $640 in the prior year period as we continue to benefit from higher dues, increased visits, and increased in-center activity. Net income for the fourth quarter was $23.7 million, up 73% versus the fourth quarter 2022. Adjusted net income was $38 million, an increase of $20.4 million versus the fourth quarter 2022. Adjusted diluted earnings per share was $0.19 compared to $0.09 per share in the fourth quarter last year. Adjusted EBITDA increased 28.7% to $137.7 million, and our adjusted EBITDA margin of 24.6% increased 200 basis points as compared to the fourth quarter 2022. Our strong financial performance continues to drive growth in cash flow and a reduction of our net debt leverage. Net cash provided by operating activities increased 74.7% to $132.1 million as compared to the fourth quarter 2022. We reduced our net debt to adjusted EBITDA leverage to 3.6x in the fourth quarter versus 6.5x in the prior year period. For the full year, total revenue increased 21.6% to $2.217 billion driven by a 24.4% increase in membership dues and enrollment fees and a 15.3% increase in incentive revenue. Net income for 2023 was $76.1 million versus a $1.8 million net loss in 2022. Adjusted net income was $129.7 million, which increased by $171.3 million versus a net loss in the prior year. Adjusted diluted earnings per share was $0.64 compared to a loss of $0.21 per share for the prior year. Adjusted EBITDA increased 90.6% to $536.8 million, and our adjusted EBITDA margin of 24.2% increased 8.8 percentage points compared to the full year in 2022. We are extremely pleased with the company's financial performance in 2023. With momentum on our side, we are very excited about the opportunities in front of us in 2024. I will now turn the call over to Bahram.

Thank you, Erik, for your commitment to the company for the past 20 years and for excelling at your new role as Interim CFO. Let me begin by expressing my gratitude to our 37,000-plus team members at Life Time. Our continued progress and success would not be possible without their passionate and relentless commitment to elevating our brand and delivering the finest member experiences in the leisure industry. We accomplished this through our innovative programming and services designed to delight our 1.5 million members across North America. I'm extraordinarily proud of our accomplishment this past year. 2023 was a great year of outstanding progress for Life Time. We achieved every one of our operating and strategic objectives while exceeding our financial goals and our progress is continuing this year and has set us up very nicely for 2024. Early 2024 has been among the strongest starts we have ever seen in terms of member engagement, member visits, and member retention. In terms of financial goals during 2023, we increased our revenue by over 20%. Even more impressively, our adjusted EBITDA almost doubled compared to the prior year. In addition, a primary financial objective has been to lower our net debt to adjusted EBITDA. We are making progress here and we expect this ratio to be under 3x by the end of 2024. As it relates to our operating and strategic progress, we continue to elevate our brand. Our programming and our member experiences are the finest in the high-end leisure industry. The enhancements we have developed in areas such as small group training, pickleball, and Aurora offering have increased the desirability of our brand and the engagement of our members. As a measure of remarkable progress we achieved during 2023, by the back half of the year, member visits in our same-store clubs had essentially caught up to the very high levels of 2019. The clubs look and feel healthy and energized, a trend that we're seeing into 2024. With the increased demand for our membership, we have now more than 20 clubs with waitlists, and we expect to have additional clubs on the waitlist by the April and May timetable. While establishing waitlists for our busiest clubs is designed to maintain our extraordinary member experience, it also improves our member retention. We are experiencing record visits per membership as a result of the strategic initiatives we developed and implemented over the last several years. Increased visits per membership translates into higher retention rates and enhanced member satisfaction. We expect to realize the highest retention rates in the history of Life Time for 2024. Like most high-end leisure brands, we're not seeing any weaknesses in our demands or traffic so far in 2024. Right now, we see no reason to suggest the positive trends we're experiencing today should change going forward. Importantly, we're not seeing any negative impact on our business from the new weight loss drugs we're all hearing so much about. For individuals on such programs, exercise and strength training is absolutely vital for avoiding the loss of lean muscle mass and for maintaining a healthy weight long-term. We are confident that this megatrend will be particularly positive for Life Time. I will be glad to expand on this with more details during Q&A. Now, our key financial objectives for 2024 are: first, to deliver double-digit growth for revenue and adjusted EBITDA. As stated in our earnings release this morning, we're guiding to a revenue of $2.46 billion to $2.5 billion and adjusted EBITDA of $595 million to $610 million for 2024. And secondly, to be cash flow positive after all capital expenditure for the year. At this point, we're still expecting to turn positive during the Q2 of this year. Again, we'll be glad to expand on this during Q&A. Now that Life Time's recovery is very much behind us, going forward our intention is to issue guidance on an annual basis consistent with our high-end leisure industry peers. We plan to revisit this annual guidance quarterly and update as needed throughout the year. To help with this transition, we're providing first quarter revenue and adjusted EBITDA guidance, and this will be our last quarterly guidance. With that, we're guiding to a revenue of $585 million to $595 million and adjusted EBITDA of $142 million to $146 million for the first quarter. Over the last 30 years, Life Time has repeatedly demonstrated the ability to respond to major challenges and emerge better and stronger every time. We have become a highly coveted high-end leisure brand and as such, our growth opportunities have continued to expand as our business has evolved. As a highly evolved subscription business, our priority is to be the most desirable brand in the leisure industry by providing the finest destinations, the strongest programming, and the best customer experiences. To track our success, we constantly measure member engagement, which has never been higher as illustrated by visits per membership and our improving retention rates. In sum, for 2024, we look forward to continuing to build upon the progress and the successes that we delivered in 2023, and the momentum we're enjoying so far this year. Thank you. We're happy to take your questions now.

Thank you. Our first question comes from Megan Alexander with Morgan Stanley. Please proceed with your question.

Hi, good morning. Thanks very much. Bahram, I wanted to ask about membership a bit. You talked about early 2024 being amongst the strongest start in terms of engagements, visits, retention. I guess looking at the fourth quarter where you ended from a membership perspective, it does look to be a bit below what historical seasonality would suggest? So maybe can you just walk us through how 4Q played out relative to your expectations, both from what you're seeing in terms of churn and new what you're seeing so far in 2024?

It's a great question, Megan. Good morning. So the fourth quarter was just slightly above our expectation in the net memberships. Our expectations are basically as we've stated over and over is focused on really trying to get the right balance of the membership so we can deliver the right experience in the clubs. The fourth quarter of this year, everything was as expected or slightly better, as I mentioned. However, we had more and I'd like this versus like 2019, we had way more club openings in that fourth quarter, so it offset some of the memberships that they drop, the seasonal drops that come from the September to December. But everything is completely in line and again, within our expectation except better. And then the same thing beginning of the year. Our beginning of the year is slightly above our expectation, in terms of the net membership gain, and that is truly the name of the game in our business.

Really helpful. Thank you. And maybe as a follow-up, can you just talk about the openings for the year? I think you said nine to ten, maybe help us with how many of those are asset light versus some of the more big suburban heavy build outs? And then just related to that, I think on the last quarter call, you said you may need more clubs if we're doing more asset light to get to a similar revenue number. I think the nine to ten is a bit below what you've been doing. So maybe just help us understand what the offset is there?

Yes, there's just a slight delay in getting the projects through the construction and approval phases. We've actually been proactive this year, planning to open about half a dozen clubs early. We aim for a total of nine to ten clubs. One thing to note is that being asset light doesn't mean these clubs are smaller. For instance, we are opening two significant clubs this year, Harbor Island and Atlanta. These are full-sized clubs with around 90,000 to 100,000 total square feet, including both indoor and outdoor areas, but they fall under the asset light category. We were able to reclaim these from landlords who provided generous tenant improvements, and we are investing an additional $10 million to $15 million for each one out of our own funds, but they are not small facilities. Additionally, some clubs range from 40,000 to 60,000 square feet, and we have a total of four or five clubs that are set to open early this year. These are large, traditional facilities that we began constructing last year and are now finishing up. As we manage our capital expenditures, a significant portion was allocated last year toward launching these clubs. Most of the funding has been used, and now these facilities are simply opening. For example, the club in Arden, Sacramento, California, is also sizable and will be categorized as asset light. Therefore, asset light does not imply they are smaller; it just means we entered these projects with less than $60 million to $65 million of our capital upfront before the sale leaseback.

Yes, can I if I could just add to that, just from a square footage standpoint, just to add to that, last year we opened up 800,000 square feet and we intend to do the same or more this year? So just to add to that point.

Makes sense. Thank you.

Thank you. Our next question comes from the line of Chris Carril with RBC Capital Markets. Please proceed with your question.

Hi, thanks. Good morning. So, Bahram, maybe can you talk about some of the trends that you're seeing in your newer markets versus your legacy markets? If you could touch on what you're seeing from the perspectives of revenue percent or member or visits, in those different markets that would be helpful?

Yes, let's discuss the distinction between new clubs and legacy markets. Our newer clubs are opening with unprecedented speed, achieving positive cash flow and contribution margins within 60 to 90 days, which is significantly quicker than before. The revenue per square foot and average membership price at these new clubs are higher than those at traditional clubs with legacy memberships. While we are incrementally increasing legacy prices, we remain considerate of customer reactions to these changes. Our new clubs are consistently setting records, with the recent opening in Red Bank, New Jersey, achieving new highs in every metric. We're very pleased with the performance of our business overall. Regarding our older clubs, we've invested considerable time, money, and effort over the past two years to modernize and update them so they can provide the same quality experience and programming as our new clubs. This investment has yielded positive results, as these older clubs are achieving their best same-store performances to date. Many, like those in Westchester, Syosset, and Garden City, are now performing at levels comparable to our new record-breaking locations. We are not observing any negative trends overall. For clubs that previously underperformed, we've been methodical in identifying issues within our top and bottom performers, focusing on execution challenges rather than market conditions. The key takeaway is that our new business model positions Life Time as a premier leisure company, attracting highly engaged customers and recording the highest frequency of visits per membership in our history. This new model is significantly more effective than anything we've implemented over the past 30 years.

Got it. Thanks for all that. And then on the center operations expense, could you provide maybe a little bit more detail on what drove that lower as a percentage of center revenue in the 4Q? I mean, even lapping some of the costs coming out in the 4Q of '22, you were still able to see some good leverage on that line. So hoping you could expand a little bit more on that center ops leverage and to what extent you expect this to continue into '24? Thanks.

We anticipate our EBITDA margin will range between 23.5% and 24.5%. While that may not appear to be a significant margin, even a 1% fluctuation can have a considerable impact, especially regarding the timing of club openings. When multiple clubs open simultaneously, we incur expenses upfront as we pre-hire staff. This creates a buffer for us as we work on getting the clubs fully operational again. A key point to understand is that we faced some misunderstandings at the beginning of last year. As I previously mentioned, our clubs were not fully operational, with most still in the process of ramping up. Currently, this ramping is about 90% complete, but we are not yet at 100%. You'll see the effects of this throughout the year. I recommend targeting an EBITDA margin of around 24%, plus or minus 0.5%. I wouldn’t suggest aiming any higher, as we occasionally choose to make additional investments to maintain a high-quality experience. This approach doesn't indicate a change in our strategy; rather, it's a natural progression as the business aligns with increasing membership dues as clubs become fully operational. We're also increasing our investment in programming, including Pickleball Pros, Pickleball Leagues, and small group classes, paying more to attract the top talents that customers enjoy. We will continue to invest in delivering exceptional experiences, which can lead to clubs reaching capacity and allowing us to charge appropriately to ensure the right quality and achieve desired margins.

Great. Thanks so much.

Thank you. Our next question comes from the line of Alex Perry with Bank of America. Please proceed with your question.

Hi, thanks for taking my questions and congrats on a strong quarter and finish to the year. I guess just first, can you talk about your pricing outlook, especially in light of the large amount of clubs being on waitlist? What is your expectation on where pricing could go versus the $183 of average monthly dues you ended in 2023?

I'm going to start by passing it to Erik and Danny to discuss this. They manage the forecasts and updates regularly. You can think of it in two main categories. We have completed most of the repositioning for our company over the past few years. This involved moving the clubs away from the middle price point to the high end and ensuring that the experiences match, establishing Life Time as a consistent higher-end leisure brand within the athletic country club space. Most of that work is finished. The next challenge we face is some pressure on club utilization. At this point, we consider whether to increase the monthly rate by $10, $15, or $20, as we sometimes feel compelled to raise prices to prevent overcrowding at the club. Currently, we manage this by placing the club on a waitlist, allowing us to handle sign-ups effectively. This means we might raise the rate from $249 to $259 or from $259 to $269. Most of those changes are already made, and going forward, adjustments to rack rates will be modest, driven by excess demand. As we mentioned previously, there is an approximate $17 million monthly gap between what customers are currently paying and the rack rate, if everyone were to pay it. We won't implement that increase all at once; instead, we will gradually adjust to ensure the customer experience remains positive. This gradual approach will also happen as we see churn; when one member drops at $182, the next member might join at $220 or $230, resulting in a slow uplift. Additionally, there will be some legacy price increases. Therefore, I anticipate that while 2024 may not see typical results due to the end of this transition, by 2025, 2026, and 2027, we should expect a growth opportunity of about 3% to 4% in same-store sales as the pricing adjustments work their way through the system.

Yes, that's incredibly helpful. And then my follow-up is I just wanted to ask about the strategic initiatives. Are there any new strategic initiatives we should be thinking about to increase member engagement beyond what you've already talked about? You've talked about pickleball, small format group training, and you started to talk about a new food offering or Miura. Just any new strategic offerings that we should be thinking about that should help drive 2024? Thanks.

Yes, we are implementing a significant change in 2024, similar to what we did with DPT regarding our food offerings. After COVID, our food operations had been quite unremarkable and defensive. With the new initiative launched this year, we're allowing clubs more freedom to innovate and suggest offers, and the response has been very positive. While it may take time to see substantial results, I anticipate our food and beverage performance will improve by 10% to 20% in the latter half of the year. Furthermore, MIORA presents a great opportunity for Life Time, given our ideal customer base. Weight loss drugs have become popular and, when combined with proper exercise and nutrition, can be beneficial. Life Time is well-positioned, as our members pay between $200 and $300 a month, while those seeking weight loss solutions often invest much more in these medications. They will seek out professional guidance from our trainers and nutritionists to complement their treatment. Initially, some may feel hesitant to join a gym, but as they start to lose weight, they often become more comfortable. Importantly, as they transition, they may realize they need more than just weight loss; they may want to further improve their fitness. Life Time is uniquely equipped with facilities suitable for launching MIORA clinics focused on longevity and addressing weight loss trends. Additionally, regulations will require in-person doctor visits, and we have the necessary infrastructure in place within our markets. This presents a significant growth opportunity for us.

Perfect. That's very helpful. Best of luck going forward.

Thank you.

Thank you. Our next question comes from the line of Brian Nagel with Oppenheimer & Company. Please proceed with your question.

Hi, good morning. Nice quarter, nice year.

Good morning.

Thank you.

Thank you.

I have a couple of questions that are more quantitative. Bahram, you mentioned on the call today the plan to achieve free cash flow positivity starting in the second quarter. Could you elaborate on that? I realize this may tie back to a prior question, but what are the key components that will help us understand how to reach free cash flow positive in Q2 and beyond, especially with Life Time continuing to pursue an aggressive expansion plan in 2024?

Yes, Brian, this is Erik. I can take that. So I mean, as we kind of mentioned our adjusted EBITDA, call it, $600 right? We expect probably about another $130 for debt service and then you account for our non-cash ramp, that's going to get us to about $500 million of cash before CapEx. So that's going to give us $500 million of capital to deploy. And in our pipeline that we have planned that shows us that gets us to that free cash flow, that pipeline is going to deliver that double-digit top and bottom line that we talked about. So it is math, and the math works, and we've got it planned out.

We expect to spend around $150 million, give or take $10 million or so, on modernizing our facilities and technology. That leaves approximately $320 million to $330 million available for future growth capital. Some of our clubs involve upfront leases where we're receiving tenant improvements and investing our capital. For those types of clubs, I would typically invest about $10 million to $15 million on average. If we develop a club from the ground up for $65 million and then sell it back for $50 million, we still have $15 million, which is just loaded upfront. It's important to understand our current advantageous position. For the clubs we've committed to on an asset-light basis, the landlords have certain expectations for opening dates and are providing their tenant improvements while we contribute funding, so we're essentially locked in. However, the good news is that our investment is minimal. For those we are building from scratch, which costs around $60 million to $65 million upfront, we maintain full control. We own the land and the construction company, which allows us to determine when to start construction. Our commitment to you is that we will achieve double-digit growth in both revenue and profit while effectively managing our cash flow. Next year, we anticipate generating over $320 million to $330 million, enabling us to invest more in growth. We are confident in what we are sharing with you. Does that clarify things?

It's very helpful, Bahram and Erik. Let me ask another question that follows up on that. We've been watching how the business has developed and evolved out of the COVID crisis. You mentioned this in your prepared comments, Bahram, about the ongoing re-ramp in these clubs. Looking at the centers now, aside from the new centers you'll be opening in '24 and beyond, what do you see as the incremental EBITDA? You've been exceeding your EBITDA expectations for the last several quarters, so what do you view as the incremental EBITDA that could come solely from the centers you currently have?

Yes, Brian, that's an excellent question for any investor to ask in order to thoroughly understand and model the situation. We approach it by examining how many clubs we currently have and considering the potential EBITDA if we complete the clubs under construction without initiating new projects. We estimate that there could be an additional $100 million to $150 million in EBITDA if we halt further development and allow our existing clubs to reach full maturity. This aspect is often overlooked when calculating the rate of return. Erik, Danny, and I are focusing on providing clear information about our financial deployment at the end of 2023. We anticipate that, after a two-year period for our investments to mature, we will achieve certain revenue and EBITDA levels. This year, we plan to invest approximately $350 million to $400 million in new net capital, and with leverage considerations, we expect to generate specific revenue and returns over the next three years. It's crucial that we convey our business model clearly to avoid any misunderstandings. If we project that the clubs are opening in the first half of the year and allow them to mature, we could see EBITDA figures rise to around $700 million to $750 million.

Yes, very helpful. Congratulations. Good luck here. Thank you.

Thank you so much.

Thank you. Our next question comes from the line of John Heinbockel with Guggenheim Partners. Please proceed with your question.

Hey, Bahram, wanted to start with. Can you talk a little bit about the pipeline? I know you look at, right, the Battleships, the takeovers, Urban Residential and Suburban Mall, right, you think about those four. What is the pipeline of projects that you're looking at look like, right, in each of those four? And is the idea going forward that you sort of want to do 50% capital light and maybe not so much projects, but well, I guess projects. 50% capital light and 50% not capital light, is that the idea so that you spend $500 million or so in total CapEx?

Yes, it's a great question. Right now, I'm in discussions regarding sale leasebacks with several entities. There are multiple ways to address your question, and I want to provide full details on this. We have at least 10 sites that are under contract, with the land paid for and permits in progress, allowing us to start building facilities from the ground up. I want to clarify the term "Battleship," as some may think that taking over a 120,000 square foot club on an asset-light basis changes its nature. Let’s focus on ground-up versus non-ground-up developments. Typically, we've purchased land, constructed the facilities, and invested around $60 million to $70 million. After the club opens, we take out between $45 million and $55 million through sale leaseback arrangements. Occasionally, landlords have agreed to purchase the asset shortly after opening, contingent on clearing up all payments and receiving clean lien waivers. Another approach we've considered involves joint investments where we might put in $10 million, they invest $50 million, and we provide the remaining $10 million, creating a mixed lease structure. We're exploring various options, and we have enough projects lined up to begin as many developments as we need to meet our goals, providing us with complete flexibility. On another note, I will be traveling soon to look at potential assets. A couple of them are opportunities we can take over, invest in, remodel, and launch. We're also looking at office buildings, which present significant growth potential. Revitalizing a new office building requires offering a compelling branded experience, rather than just having a small fitness center that goes unnoticed. There are enough deals in the discussion and pipeline that I believe we can deliver 10 clubs annually and accomplish 800,000 to 1 million square feet of new space each year. While I won't specify the exact composition of those projects to avoid any misinterpretations, I expect about 800,000 to 1 million square feet of new assets each year, and the returns on these investments are generally consistent. We aim for a high 30s IRR on our net dollar invested. After sale leaseback, if the numbers align, we're targeting a 35% plus IRR on invested dollars.

That's great. One other question or opportunity I think. So you look at incentive revenue, right, you think about wallet share, right, with your premium households. I mean, how do you think about growing that, because there's a big opportunity to do that. You probably there's some holes, but I also think you have it marketed aggressively. I don't think so to those existing households. So how do you attack that and when?

Yes. If we offer something valuable, our customers will make purchases. When they don't, it reflects our own execution issues. For example, in analyzing our top and bottom performing clubs, some are generating $30 per customer while others are only bringing in $6. If we're only making $6 a month per customer, it means we're not providing an enjoyable experience, where service is slow and food is unexciting. Conversely, locations like Miami Falls and West Palm Beach are successful because they're delivering the right experience, resulting in significantly better numbers. I want to take a moment to commend my team; we've faced immense challenges since 2020, and our progress has been steady and thoughtful. Initially, we focused on increasing traffic and memberships, and then we had to revamp our personal training department. This January, we had 2,500 applicants for personal training, compared to only 1,100 to 1,200 the previous year. Building our brand takes time, and I can confidently say that personal training is making great strides, with record weeks of progress. Now, we’re addressing our café operations, which will take time throughout the year. Additionally, we haven't effectively marketed our shop and the Life Time branded products we offer. Kimo and his team are leading the efforts in this area. While I wouldn’t adjust our numbers for the next quarter or the one after, I do expect to create incremental revenue opportunities through our shops, café, and spa. We're already on track for the numbers we've provided in our guidance for the year and the quarter, based on previous initiatives that don't require the new ones to achieve those targets. However, we want to ensure that we have enough momentum in place by the fourth quarter this year, positioning ourselves well for 2025 and beyond. There are still many opportunities for improvement in our execution, and while we do many things well, there's always room to enhance our efforts.

Thank you.

Thank you.

Thank you. Our last question comes from the line of John Baumgartner with Mizuho Securities. Please proceed with your question.

Good morning. Thanks for the question. Maybe, Bahram, I wanted to ask about the digital strategy. The digital on a whole has really bottomed out in 2023, it seems. And I'm curious how you're thinking about digital as you're gaining visibility into the post COVID world, post COVID activities. How are you thinking about digital engagement at this point? Are there tweaks to the strategy going forward? Is there a need to invest or manage differently in regards to digital? Thank you.

That's a great question. We are diligently working on our execution in this area. The goal is to examine the current status of digital companies that were once seen as revolutionary. Providing digital options to our customers is essential, and we are fully committed to this initiative. Our app currently offers a wide range of features, including podcasts, top-tier content, and on-demand exercises, as well as a comprehensive streaming service. However, we have yet to launch a robust marketing campaign for it or establish clear pricing tiers, such as a $3 monthly subscription or a premium option. For Life Time, this aligns with our efforts to cater to our access customers. We offer various options, including the possibility of attracting a large number of subscribers who might not pay but can access some of our content and shop online with us. This is within our control, and while I won't go into further detail, I want to assure you that we are considering all aspects, and we will implement the right strategy at the appropriate time.

Thanks, Bahram.

Thank you. And our last question comes from the line of Simeon Siegel with BMO Capital Markets. Please proceed with your question.

Thanks. Good morning, guys. Nice job and I hope you're all doing well.

Thank you, Simeon.

So, Bahram, really great seeing increased engagement stats and the retention was fantastic. Could you quantify that at all like, where are we now for retention versus pre-pandemic to your point? And then how does that play into general membership expectations for the coming year? Maybe what are you expecting for membership growth embedded in that full-year revenue guidance? Thank you.

Yes, those are two very insightful questions, Simeon. First, the key indicator of our desirability is that our customers want to stay. I was surprised by the higher attrition rates in the early part of 2023 compared to 2019. Despite lacking sales and promotions, customers were joining on their own merit, yet the attrition was still higher. However, we have since seen that number consistently decline. Moving forward, we want to focus on retention, which is essentially the opposite of attrition. In the fourth quarter of 2023, we started to see results that greatly exceeded both 2019 and 2022. We are projecting retention rates in the 90% range of 2019 and 80% of 2022 for 2023. This means we could experience attrition rates nearly 20% better than last year. Currently, the attrition rates are a couple of months ahead, so if someone were to cancel their membership today, it would reflect an April attrition rate. The trends are very promising. My goal is for us to finish the year with an attrition rate close to 29, which would be the best in the company's history.

That's great.

And what was your other question in membership?

How are you thinking about just within the quarter?

I believe we are in the final stages of reorganizing the business. Moving forward, I do not anticipate losing memberships in order to generate revenue. Therefore, I expect to see a steady and modest increase in membership throughout the year.

Thank you. And we have reached the end of the question-and-answer session. I'll now turn the call back over to CEO, Bahram Akradi for closing remarks.

All right. I just want to thank all of you guys for your very, very diligent Q&A and care that you have for the company. I am grateful to all of our team, as I mentioned early in the call, for their passion and their commitment. And we're looking forward for a great year. So hopefully, we're looking forward to having you guys in just about 60 days again and continue our progress forward. Thank you so much.

And this concludes today's conference and you may disconnect your lines at this time. Thank you for your participation.