Q2 2026 Earnings Call

Greetings, and welcome to the Lifetime Group Holdings Inc. Q2 2026 Earnings Conference Call. At this time, all participants are in the listen-only mode. A question and answer session will follow the formal presentation. You may be placed into question queue at any time by pressing star 1 on your telephone keypad. As a reminder, this conference is being recorded. If anyone should require operator assistance, please press star 0. It's now my pleasure to turn the call over to Conor Weinberg, Vice President of Capital Markets and Investor Relations. Conor, please go ahead.

Good morning. Thank you for joining us for the second quarter 2026 Lifetime Group Holdings Earnings Conference With me today are Baram Akrati, Founder, Chairman, and CEO, and Eric Weaver, Executive Vice President and CFO. During the call, we 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's a comprehensive discussion of risk factors in the company's SEC filings, which you are encouraged to review. The company will also 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 the reconciliations to the most directly comparable GAAP measures are included, when applicable, in the company's earnings release issued this morning, our 8K filed with the SEC, and on the Investor Relations section of our website. With that, I will turn the call over to Eric.

Thank you, Connor, and good morning, everyone. We appreciate you joining us for our Q2 business and financial update. Please note this morning we posted an earnings supplement on our Investor Relations website, which includes additional detail on our membership mix and comparable center revenue. Starting with our second quarter revenue. Total revenue increased 13.7% to $866 million, driven by continued strength in performance across our clubs, including higher dues revenue and strong utilization of our in-center businesses. Comparable center revenue grew 9.1%. This was above our expectations, driven by in-out performance in our membership acquisition and in-center business performance. As outlined in our earnings supplement, there are four components of our comparable center revenue growth. Improved membership mix contributed 3.1% growth. Price contributed 2.9% growth. In-center businesses contributed 2.9% growth, largely driven by double-digit year-over-year growth in dynamic personal training and life spa, and volume contributed 0.2% to comparable center growth. As a result of our Q2 performance, we have raised our full-year comparable center revenue guidance to 7.9% to 8.3%, up from 6.9% to 7.5%. Average monthly dues were $245, up approximately 12.3 percent year-over-year, and average revenue per center membership was $993, up 11.8 percent year-over-year. Growth in average dues was driven primarily by positive membership mix trends and execution of our pricing strategy. We ended the quarter with approximately 860,000 center memberships, which reflects 1.2 percent year-over-year growth. As we've discussed on past calls we have been managing our membership mix part of our strategy has been to limit certain qualified memberships specifically those administered by third-party medical insurance providers we refer to these as qualified medical memberships this strategy continued in the second quarter qualified medical memberships declined by approximately twenty thousand six hundred down eighteen point nine percent year-over-year all other memberships grew by approximately 30,900, up 4.2% year-over-year. Our strategy is working, as reflected in our 13.3% growth in total dues revenue year-over-year. We expect total center membership growth of 1 to 1.5% in the third quarter and 2 to 3% in the fourth quarter. Excluding qualified medical memberships, we expect center membership growth of 4 to 5% in both the third and fourth quarters. Moving on to net income. For the quarter, net income was $101.4 million, an increase of 40.6% year-over-year. Second quarter net income included approximately $8.5 million of net tax-affected items excluded from adjusted net income, primarily consisting of share-based compensation. Net income in the prior year included tax-affected net cash proceeds of $9.3 million received from employee retention credits under the CARES Act, partially offset by a tax-affected net loss of $9 million on a sale-leaseback transaction. Adjusted net income, which excludes the tax-affected impact of these items, was $109.8 million, up 30.6% year-over-year. Adjusted EBITDA was $246.5 million, dollars, an increase of 16.8% over the prior year quarter, and our adjusted EBITDA margin improved by 80 basis points to 28.5%. As noted in our earnings release, we increased our full year 2026 revenue, net income, and adjusted EBITDA guidance. We also increased the midpoint of our full year adjusted EBITDA margin guidance to 28.2%. Our updated guidance includes the impact of seven clubs scheduled to open in the fourth quarter and the associated pre-opening expenses and early operating ramp impact on margin. Net cash provided by operating activities increased to $209.6 million, approximately 7.1% higher compared to the prior year quarter. Total capital expenditures were $263.3 million, up 18.6% from the prior year, reflecting construction activity in support of our new club openings for 2026, as well as the construction on clubs planned for 2027. As of today, we have opened seven of the 14 clubs scheduled to open this year. The remaining seven clubs are expected to open in the fourth quarter. We still expect 12 to 14 new clubs in 2027. Ten of these clubs are already under construction. In April, we closed on sale-leaseback transactions that generated approximately $200 million dollars of sale leaseback proceeds and we expect to complete approximately 400 million for the full year supporting our ongoing focus on generating annual positive free cash flow with that i will now pass the call to brown thank you eric good morning everyone and thank you to our teams across the company for another outstanding quarter much like last quarter we continue to see strong performance across all aspects of our business.

Demand has been strong from our existing members as well as our new members. At the core of our performance is our intense focus on delivering exceptional experiences for our members. We plan to continue this strategy by delivering new, desirable programs and services with the highest level of attention and care. For example, we have accelerated the rollout of CTR and Hybrid XT, our two newest group training formats. CTR is our large group Pilates Reformer class. This class blends performance-based training with the precision and the control of reformer movement. Hybrid XT combines conditioning and strength training for real-world and competition-ready performance and is paired with our LT Games Hybrid Athlete Competition. We are seeing incredible demand from our members for these classes. Our balance sheet and cash flow also remain exceptionally strong. with the sell these SPACs completed this quarter and an additional $200 million of proceeds expected by end of the year, we expect to deliver positive free cash flow while achieving all of our revenue and adjusted EBITDA growth targets. We are currently on track to open 14 new clubs in 2026, the high end of our initial range, and we continue to see an incredibly strong pipeline line of opportunities ahead. Overall, we feel very good about where we are and the trajectory of our business. We look forward to your questions.

Thank you. We'll now be conducting a question and answer session. If you'd like to be placed in the question queue, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue.

For participants, using speaker equipment may be necessary to pick up your handset before pressing star one one moment please while we pull for questions our first question is coming from our pnecrotarian bbs your line is now live hi thanks so much for taking my question um so really solid set of results this morning um and you know it's not every day you look at results and you say actually i have very a few questions, but I do have two. First, your guidance upside for the year is flowing through at a nice 55%, so you raised revenue by about $28 million, and that's raising EBITDA by $15 million. We're now looking at 14 club openings this year from 12 to 14 before. I know it's difficult to talk about 2027, given everything that's going on in the world, but as we think about the ramp up of these large-scale clubs as we get into next year. Anything you would like to share on revenue per member dynamics to kind of help us better understand the opportunity as it relates to actual ramps and also flow through for next year? Then I have a quick follow-up.

You're asking, this is You're asking a great question. The impact of this, you know, certainty of the 14 clubs is actually more on the next year as it is on this year because, you know, they're opening so late into 2026 that they really don't have material impact on our numbers for this year. But we have a pretty robust opening schedule for next year as well, and we have tremendous amounts of real estate deals in the pipeline that I am more excited than I've ever been. So we anticipate really, really good growth across the, you know, in the foreseeable future. We don't see any slowdown in the reason for anything to slow down. However, we don't usually share results or guidance for the next year. Things are, we have nothing to look at and think that there is anything going the wrong way.

Everything is going positively right now. great thank you that's helpful in center business contribution to same store growth came close to about three percent this quarter which was an acceleration from something like two percent earlier this year um and i know you're doing more in ctr and hybrid training classes and maybe on spa and fmb with larger club footprint ramping next year do you see this in-centered business contribution to same-store growth sustaining at that three percent level as we go into next year?

Yeah, so again, without, you know, this is Eric, giving numbers into next year, I think when we think about sustainability of that number, you're absolutely right. That number increased from 2.3 to 2.9, and it really comes down to us continuing to deliver on the experience, right? And so, you know, we've seen excellent engagement in our end centers. We've seen it across DPT and SPA. And so, you know, to the extent that we continue to deliver on that experience, we expect the financial performance will follow.

We have to continue to look for places in our business where we have opportunity to do better than we're doing. And so this year, we are seeing great growth on the revenue from PT from spa we are having great process improvement in our F&B so we're getting the margin improvement in F&B first reorganizing certain things menus processes and then we then focus on developing revenue growth strategy in F&B for 2027 meanwhile we're always working and developing different programs different products that can add to what our consumer can purchase from us so we expect similar results going into the next year very comfortably.

Thank you very much.

Thank you. Our next question is coming from John Heimbuckle from Google Heimbachwe. Your line is now live.

Okay, Baram, I wanted to follow up on that. Can you talk about the penetration from your members in things like DPT and SPA? Because I think the penetration is still pretty low, right? right? DPT, I think, right, is still in the single digits. And, you know, talk about awareness, right? So the penetration and then also the awareness, right? Because I think you have not wanted to hard sell members on these services. You wanted it to happen organically. So is that awareness now picking up meaningfully? Yeah.

You know, I don't believe that you can sit there and say the penetration of the personal training is low it's been pretty consistent for years and years and years um our clubs are realistically 50 training exercise 50 all other things so for the social aspect of the business which we are stepping on sort of aggressively right now, the family, the kids, the sports. So the personal training, you know, really applies to 50%, 60% of our customers. And those 60%, you know, so the number is like you say, okay, we have a 7% penetration at a particular month. We have a 10%, 11%, 12% penetration when you look at a larger window in a yearly basis. That number is actually double the number of people who are working out in our clubs for, coming to our clubs for exercise, for lifting, for getting training. So I don't think the number is, like, drastically low. the team does a phenomenal job we have branded dpt masterfully over the last four or five years we are getting productivity that this company has never seen from the personal trainer we have more successful trainers than we've ever had their reputation of the business is that this is the best place for them to come and make the most money and have been the most professional environment. So we have significant amounts of qualified applicants. So I trust that our team will continue pathways. We also have to deliver additional programming. So part of the success of last year was dynamic stretch, still growing, dynamic nutrition, still growing. So these things will lend to one another we we have we have other things we're working on right now which i don't want to discuss uh that would also bring in another uh set of customers in then they can expand their workouts it's a constant work results are really really good and i expect the team to continue to grow that percentage and if i could just add one thing to that john keep in mind penetration is just you know one part one metric of the story you know penetration is up year over year in DPT.

But it's also about trainer efficiency, revenue per trainer, and how much new business they're bringing in. And all of those metrics are up year over year. So you have to look at it holistically.

Okay. And then my follow-up, just maybe, you know, as you now get to 14 openings a year, maybe talk about gating factors on expansion, right? Because I think lots of landlords, right, and otherwise, you know, want you in their locations. So the real estate opportunities are there. Maybe more from a people standpoint, you know, where do you think you're not comfortable going beyond just in terms of, you know, executing the experience?

John, you're trying to get information out of me. You're masterful at it. So I'm going to try masterfully respond back to you we we have tremendous amount of opportunity more than like I said earlier more than I have ever seen before there is more developers more large projects more office buildings that they're reaching to us and they want to have the lifetime brand not just the fitness center the Lifetime Athletic Country Club, coupled with Lifetime Living, or their development. So we have tremendous amount of opportunities in front of us. PJ is working his butt off, his entire team. I'm working as hard as I can with them. We are looking to expand our growth over the next several years. I'm not going to tell you how, other than 14 clubs a year for now is the limit. But we are looking for ways to have bigger development rollouts. Thank you. Because the opportunity coming our way is significantly bigger than it has been in the past. Thank you, guys. Thank you.

Thank you. Our next question is coming from Randy Connick from Jeffrey's. Your line is now live.

Yeah, thanks a lot. Good morning, everybody. I guess a question for Eric. Hey, you have, I think, a lot of the openings weighted to the fourth quarter. There's got to be some kind of opening, the pre-opening kind of expenses impacting, kind of weighing on the numbers even though the numbers are you know much better than expected so maybe kind of give us some perspective there on how much of uh an impact that's been uh and then when you think about next year you know just if just not giving us number of openings what have you would you expect a change in cadence on when you open clubs next year versus this year just curious just because it moves the numbers around a little bit yeah i mean there certainly is an impact on margin as you think about you know those clubs opening later in the year you've got you know seven of them that are going to you know open up in Q4 so you know whether it's you know you know 30 40 there's a little bit of an impact there as we know but you know we've said for next

year we're targeting 12 to 14 as well you know the timing of those obviously are not all announced yet you know you may have a little bit of that in the back half of the year but again as you've seen from our increase in our overall margin even this year obviously we've increased that and so we've been able to absorb that. But it does have a small impact as we open those in the back half of the year.

Got it. And then I guess a follow-up back to you would be, you know, last quarter, I think the big unlock was, you know, the idea of, you know, reaching this inflection point in, you know, cash flow such that you could sell fund growth with optionality around sell these banks if wanting to. Just when you think about that target year, what would change to kind of – because these numbers keep coming in better than expected. You know, so I'm assuming the ramps are coming in also starting to ramp a little bit better than expected as well. Anything that would kind of change, you know, to kind of get that number or that year kind of pulled forward a little bit and just remind us how you're thinking about utilizing that optionality, you know, in, you know, not next year or beyond, but like the next three to five years from now, as you kind of, you know, unlock all that cash flow, you have to either do more units or buy more stock? Just kind of give us some, again, parameters of how you're thinking long-term on the business.

I'll take this. This is Baram. We are going to stay disciplined to deliver what we say we do. We've committed to doing 400 million of Sully SPAC this year. So we're going to first and foremost deliver that. As we get into strategies for next year, you're absolutely correct. Our cash flow is increasing each year nicely. We have more optionality than we have ever had. That's the way I have always wanted to lead to get the company financially in a position where we have a significant number of options and flexibility on managing through great times, managing through bad times, and so that requires having super, super strong fundamentals on your balance sheet, and we are there now. We have all kinds of options in front of us, and we're going to be more clearly focused on our WAC our weighted average cost of capital and our ROIC and with a clear focus on taking the capital that is afforded to us by shareholders and debt structures and make sure we provide great return to our investors by putting those in the right places. We are examining all different types of options for the future years. And I think you are correct to have that question, but I would probably expand on the strategy for that towards end of the year or early next year if we choose to change anything because it definitely delivers a better result for a shareholder. But right now, we're staying on course and just evaluating the options.

Super helpful. Thank you.

Question is coming from Molly Baum from Morgan Stanley. Your line is now live.

Hi. Thanks so much for taking my question. Maybe shifting gears a little bit to talk about Meora, can you give an update on how you're thinking about the white space opportunity? And can you maybe frame the revenue or the EBITDA contribution that you're seeing from the mature locations you have open right now? Thank you.

Great question. Not a great answer for you right now. So it is in incubation. We have six or seven locations that we are working. I have been adamant with the team that we are not going to add additional locations until we deliver what I would consider to be a perfect customer journey experience. And we do have some challenges with the technology and some of the processes around that. So we are kind of working around those challenges. Our full intention is to roll out MIRA extremely robustly. But what I believe we need to do is we need to perfect the model and then roll out extremely fast and aggressively once we have a model that doesn't – You know, our clubs, when we open, they open right now with a wait list, they open contribution margin positive in the second month, the third month. I mean, everything is working because we have mastered the execution of a club opening. We have some work to do with MIORA. However, I am the most convinced that it will be absolutely a massive growth opportunity. We can grow really, really fast as soon as we fine-tune these final little touch points that we have to get corrected. So numbers right now on MIORA, the six or seven locations, are just not material. It's really working on the customer journey.

Got it. That makes a lot of sense. And one other question I had wanted to ask. I think that you, as we think about these qualified medical memberships, I think you've spoken in the past that you have some contract renewals coming up at the end of 2026. So how are you evaluating what might happen with these memberships, which relationships to renew, which you might be able to convert into a standard membership. If you could give some more color there, that would be great. Thanks.

Yeah, we're working on it. We have great partners. We have massive, massive companies, Fortune 50 companies in the country that we have great relationships with. There is a significant benefit to certain portion of the population to absolutely love this program. We are working on the details of not doing it or not doing it. Our partners want to continue on. We want to be good partners and do some, but we have to put in all the flexibilities in it so we can absolutely control the experiences in the clubs so that the number of certain type of memberships doesn't overtake the others. Some clubs cannot afford to have any programming around that. So we are basically rolling out a strategy with this. The discussions are going extremely well. We don't expect anything negative to happen at this point other than we will gradually have a lower percentage of our membership being qualified membership. It will continually go down as the percentage of our total membership will become less and less significant to the point it wouldn't be really worth our time to discuss with you guys or you guys with us. But we do love, you know, the population in our clubs. In certain clubs, I think it's just a really nice program to provide when we have the capacity and they don't interfere with the bigger opportunity in the club.

Yeah, I think that's key. I mean, if you remember, these memberships have restricted hours. So in some clubs, it's a great way to fill some of that off-peak time.

And in some locations, we just simply don't have really the ability to provide them. And none of the new clubs are opening with them. So you can just feel that some of the open clubs, we don't have any more direct medical program available unless they are choosing to go to a full upgrade with it. So we will manage this. It just won't be a significant piece of what's going to drive the business up or down.

Got it. Thank you.

Thank you. Next question is coming from Anthony Bernadio from Wells Fargo. Your line is now live.

Yeah. Hey, guys. Thanks for taking our questions. So I just wanted to start on the comp, the 9% comp center revenue. Can you just talk a little bit more about the cadence, that growth as you move through the quarter? And then back-half guidance implies some deceleration, which I know isn't new, but that's clearly gone the other way this quarter. So can you just talk about assumptions there and how you're thinking around that has evolved?

Yeah, absolutely. I can take that. So, absolutely right. We did see, as I talked about, an acceleration this quarter. Again, that goes back to all the things that we're doing in DPT and SPA, et cetera. You also mentioned that, you know, it is normal for a, you know, as seasonality kicks in, some slight deceleration. The big thing to keep in mind is a lot of this is in-center business growth, right? And so as we're projecting the year, if you look at the midpoint of our updated guidance, that's still 8.1%. It's above kind of what we've been communicating in terms of our long-term algo. So it's nothing more than just, you know, being prudent as we're thinking about all the summer activity and as we're projecting rest of year.

Got it. That's helpful. And then maybe just on the events, you announced the expansion of the LT Games, also the acquisition of the Phoenix 10K in the quarter. I guess just given the growing popularity of some of these events and competitions, as I look at the other offers out there gaining traction, can you just talk a little bit more about the opportunity set and what growth prospects could look like, and just any thoughts on how margins, returns, compare to the rest of your business?

Great question. So LT Games and Hybrid XT are sort of a yin and a yang. Hybrid XT is today the sort of the current big driver of people wanting to come do that type of a hybrid training. So, you know, the responsible thing to do, as we have always mentioned, these clubs were designed from day one to have the flexibility of adaptation. and so we can roll out the programs that the customers are seeking at that moment in time. And LC Games is basically a very, very, very defined experience, very accurately measurable. I have big vision for what LC Games can do for the company on its own and to sort of bringing the type of customer who wants to do that athletic training into Lifetime to do hybrid XG. It's sort of a thing that goes together. Ultimately, LT Games has the potential of being in a spectator competition. It's not tomorrow. It's not next year. It's going to take years for it to achieve to them, but that's the vision. and so those are the the way we're going to drive those CTR is rolling out as fast as we can roll it out and every class we put on ends up being you know waitlisted so we're rolling as fast as we can we're spending a little more money we're investing more growth capital into these initiatives in our clubs because they are working extremely well so that's where we're uh deploying some additional capital to capture this growth opportunities so hopefully that answers your question thanks guys thank you thank you our next question is from ben chakin

from missouri securities your line is now live hi this is rita chen on for ben thank you for taking our questions we're wondering if you could go back to kind of clarifying your churn expectations for the qualified medical membership in 2027, as well as the opportunities to convert and maybe share some data points on the churn year-to-date and then any of the conversion into the standard membership. Thank you.

We don't look at it in that fashion. We are looking at And sort of our calculation of how our expectation is on total, the average dues per membership growth and the regular and the membership count growth. And the blend of some of these, again, the way you have to think about it is for sure the percentage of medical qualified is going to go down. As that percentage goes down, the average dues on membership goes up. It's just sort of a direct correlation with it. It's virtually not significant enough. I'm telling you like this, the numbers that we are giving you and we're guiding, and this thing is going to be less than 2% of our dues revenue in the future years.

Yeah, I mean, by the end of the year, it's 3%. It's a little too early to talk about next year.

But it will drop down. It will go from the 3% to below that.

Here's what I would tell you. The large decreases we're seeing this year is we've talked about that de-emphasis of that in the prior year. So we're lapping a couple of quarters now that we're lapping that dynamic. So that's why we're, you know, we're giving this guidance here last quarter, this quarter, and then, you know, probably Q4. So, again, we're kind of lapping those four quarters. As we get into 27, with some of the things Bram was talking about, we'll provide, obviously, more information on that. But, again, it's going to be less than 3% of our total.

Total dues revenue. And if we ever change anything, the dues will go up. But, again, it's not going to be significant. So I think we really need to focus you guys on where the big drivers will be in the business.

Great. Thank you.

Thank you. Our next question is coming from Eric DeLaurie from Craig Hallam. Your line is on live.

Great. Thanks for taking my questions, and congrats again on another impressive quarter. As you look at the new club opportunities in 27 and beyond, obviously there's lots of white space kind of across the board. But how should we be thinking about sort of larger versus smaller footprint, greenfield versus retrofit, and urban versus suburban? Can you just kind of give us a sense of either the changing opportunities there or your evolving priorities?

Yeah, I can't tell you – I would never want to tell you guys we're going to do seven of these and seven of those or eight of these and, you know, six of those. I think the way to think about it is that the pipeline is driven by both all the sites that we go find to buy, purchase a piece of land. And right now we're in a position where we can actually pull the trigger, buy some parcels of land a bit earlier to create a land bank so we can have those ground up opportunities laid out a little more clearly. But then the other developments, they are just, you know, the ferocity of it right now is such that it's quite a bet. So I can't give you a direction to say it's going to be more of these over the time or more of those, but definitely more urban locations coming as a percentage of a whole portfolio. We are, you know, with New York, Miami, you know, there's kind of a big markets, growth markets with sort of a big pipeline of developments. But the question is what year they land in. Those are hard to give you guys because the larger the building, the larger the project, the larger the apartment building, the longer is the, you know, time for them to be developed. and constructed and built and delivered. So we are a very, very good spot to delivering the total amount of a square footage that we want to grow per year. And as we have gone through this, it really doesn't matter if it's one type or the other because the returns after the sell leaves back or from the rentals are always the same. They're in a 30-plus range, IRR range, which is fantastic.

That's very helpful. I think we got some kind of long-term direction in there. So that's very helpful. So, Brom, you've mentioned a number of times sort of how robust the demand is for new clubs right now. Historically, I mean, at least some of your clubs have been offered attractive rent rates as developers look to kind of bring you in as an anchor tenant. is this dynamic still at play? And if so, do you think that, you know, sort of broadly as you look out a number of years that rent rates will generally improve? Or are these kind of opportunities more limited to one-offs that we shouldn't necessarily, you know, extrapolate a broad trend as we look out a couple of years?

No, we're always positioning our clubs at a significantly attractive rent per square foot. Either through the way we build and we do the sell lease back, you know, the rent per square foot is significantly below what it would be naturally in the market. or when we go into development and we actually put in more dollars as a leasehold improvement than we would absolutely have to because we protect that lower rent for years to come. So, we will continue to negotiate great rates. Real estate goes through frenzies. There's times where there's abundance of certain type of real estate in a market, and the landlords are more eager to negotiate and do deals. Sometimes they are absolutely desperate because nothing else can be the catalyst for the filling up the space, and our product does, our brand does. But across the board, I expect our rent percentages stay consistent to what Eric has kind of mapped out to you guys, around that 12%.

That's very helpful.

Thank you. Our next question today is coming from Chris Moronko from Deutsche Bank. Your line is now live.

Hey, good morning, guys. Thanks for taking the questions. And so, Brian, maybe we could spend a minute talking about kind of the broader supplement space and, you know, there's been some headlines around peptides potentially getting more broadly approved by the FDA and other things. So, if you maybe give us a little bit of a, you know, perspective on where you guys are on that and if you think the opportunities are perhaps increasing to monetize that, thanks.

Yeah, we're all over it. We're studying it, working on it, testing it every single day. I was on the phone last night for two hours working on half a dozen different peptides and where they're at, what they do, and who makes them, and what are the pros and cons with them. And it's definitely, most definitely, a space that is going to continue to grow. It's going to grow substantially. We're going to play a big role in it within our facilities through Miura and different forms of rolling that out. We have to be cautious today because it's sort of a wild, wild west. with the pharmacies, the compound pharmacies who make these. And so the science is, in many cases, well-documented. In some places, it's a little more sort of a believe-me kind of a thing. I don't know that there is as much human research, widespread human case studies with them. but the science is of sound. So we are on the cutting edge of studying it. I just caution everyone that it is very, very new and you have to be very, very thoughtful on how you roll this out. And we are. We have Jim LaValle, who is our chief science officer and one of the biggest speakers in this category across the country. We're following the science and administering some of these things right now in our current seven locations, mural locations. But it is going to be a massive, massive growth space because the science is actually pretty sound. Some of the peptides are solid in terms of the fact that they would work.

Okay. Very helpful. Thanks, Brom. And just as a follow-up, I know you got a lot of balls in the air, but on app monetization, is there anything kind of new to report there in terms of whether it's some kind of product or service or maybe an advertising revenue stream? Is there anything you're working on in the near term on that?

It's definitely not where our head is at. Our head is the technology at Lifetime needs to be fully directed on delivering consistent to our clubs extraordinary experiences. And we have a long ways to go to make sure we can keep up with the evolution in technology and the AI. And so the customer can achieve what they want to achieve in our clubs, buy what they want to buy, to get the service they want as fast and as easy as they can. So this is all on me. I launched the Lifetime Digital Platform a couple years back. I wanted to see that opportunity. We spent some time. We studied. I talked to some experts. And then my takeaway based on those studies is that the digital subscriptions have such a significant attrition rate that they virtually don't make sense. Now, we didn't lose any money because we didn't invest money in the customer acquisition, but we also couldn't see the customer coming back on a regular basis. So instead of diluting our technology team's focus on trying to do that, divide it and then try to work on the customer, we decided early this year, seven, eight, nine months ago, to put all of the focus on delivering the customer. The number of people on the digital platform are still growing naturally, but those customers are able to sign up. Anybody for free can sign up on Lifetime app and get all those features. We're just not doing two different versions.

Understood. Super helpful. Thanks, Bram.

Thank you. Our next question today is coming from Owen Rickert from Northland Capital Your line is now live.

Hey, Bram. Thanks for taking my questions here. On CTR and hybrid XT, what's the current penetration across the center base as of right now, and how much more room is there to add them to additional clubs?

Oh, they're both different stages. Hybrid XT is extremely new. It's just rolling out. It's in really – I mean, it's being executed to some level, but not to the way that we actually want to call it branded programming. It may be about under 20, and I think our goal is to get to about 60 locations on CTR by the end of the year. We're moving as fast as we can, and ultimately, we will have CTR in just about every club. So I would say that 80% of the clubs, 90% of the clubs will have the space to deliver CTR at some point. So it's just how fast we can map that out. We've allocated more of our growth capital to the CTR rollout this year, but we're rolling them out. They're still, I would say, we're not halfway there.

Yeah, and, Rob, you mentioned earlier there's a nice wait list for CTR, which is absolutely true. CTR also has the highest fill rate across our programming, so it's a very, very popular program.

Awesome. Glad to hear, guys. And then secondly, for me, you had some repurchase activity during the quarter at a pretty solid price relative to where we are today. I guess given the stock's move since then, how are you thinking about the pace and prioritization of the remaining capacity?

That's a great question. I'm not going to give you any answers.

Fair enough. I thought I'd give it a rip. All right. Awesome. Well, thanks, guys. Congrats on the quarter.

Thank you. Next question is coming from Logan Reich from RBC Capital Markets. Your line is now live.

Hey, good morning. Thanks for taking the question. Congrats on the really solid results. My question was on the in-center acceleration. It's been decelerating a few quarters now and, you know, some really impressive numbers in Q2. I guess, like, what is the key driver of that acceleration? I know you called out dynamic personal training as a driver, But anything else to call out, maybe on the cafe, and then just within the sort of membership in-center spending, like, is that coming from newer members or existing members, or is that coming from higher frequency or higher penetration? Just any sort of color you guys can give on what's driving that acceleration quarter-over-quarter would be much appreciated.

Yeah, I mean, it's really coming from both, new and ramping. And, you know, when you ask about, you know, what's driving that in-center, again, it goes back to delivering on our brand and that experience. And so, you know, we talked about a couple of the big drivers being DPT and SPA. Okay, so that strategy is all around engagement. It's all around experience. And so what we've really focused on is the casting in those businesses to meet the demand. And, you know, we're hiring the right number of trainers, the right trainers, the right technicians, et cetera. And so our expectation is that we have the right number, they're delivering on the experience, and that's driving the performance.

Got it. That's helpful. And then just a follow-up on CTR and hybrid XT, just confirming those are included in the membership, so that's not an additional in-center portion of the business. And then like, I guess just had to think about, or sorry, that's correct.

Those are both part of the programs designed to bring in members, keep them engaged and continue to build the dues revenue for the business.

Got it. So is that like a pricing opportunity for you guys to, because I know you use a lot of different metrics and, you know, data in your pricing decisions like is the right way to think about it like that is just an additional component of the uh pricing calculation and you'll view that as like a pricing opportunity or is that uh maybe even like a member growth opportunity as well just trying to think about you know how that's going to going to drive the model look i think the the way we um have transitioned the company over the last five years is the new clubs are coming

in at a much higher rack rates right off the get-go and they are designed for significantly fewer memberships you know three to four thousand membership units and they had much higher dues with the most robust experiences and programming. Those models are working exceptionally well, all of them. And then the older clubs has been basically transitioning from the older price point to a newer price point and adding programming and sort of rolling that out in the market by market, location by location as it makes sense. So in some clubs, you know, you add programming and it would be part of an upgrade signature buy. It's just those are in the older clubs. In all new clubs, all these programs are built in as one, you know, bundled in. But when you look at that, Compared to somebody trying to buy those services a la carte, one program in some studio, the value proposition at Lifetime becomes so incredible that that's why the larger format clubs, new clubs, put all these programs in it, are hugely successful. Got it.

Super helpful. I appreciate it, and congrats again.

Mm-hmm.

Thank you. Your next question is coming from Andrew Chazanoff from Oppenheimer. Your line is now live.

Good morning, and congrats on the quarter, and thanks for taking my question.

I just wanted to build on the in-center offering conversation.

Beyond DPT, you've been discussing the momentum building in CTR, with wait lists forming pretty quickly. Can you give us a sense of how you're thinking about the pathway from CTR into the broader Pilates business, which I know has historically been more of a private, semi-private, higher-ticket offering. And then just as we're starting to think about the scale of the other in-center offerings, cafe, spa, mirror, as they start to scale as DPT and CTR have, how should we be thinking about the margin profiles and if any of them are structurally higher or lower, that we should be thinking about the mix as they scale?

That was one question? All right. Let me help you with what I can help you. So, you asked about CTR being a program that would feed into the regular Pilates. That's absolutely correct. The number of people who would never go sign up for Pilates directly, because it's just a, you know, kind of a different experience completely, but they would go to a CTR program. It's significantly higher to go to CTR than to do a private training. Now, a certain percentage of those people will, a certain percentage of those folks will at some point say, huh, you know, I like this enough, now I'm intrigued, and then there is a natural connection. So we do plan and think through how that transition can be helped or enhanced. That was one of your questions, right?

Yeah, that's very helpful.

It should and it is helping Pilates program, you know, in certain clubs when we're executing that strategy, you know, the way I mentioned. So now what are your other questions?

My follow-up is maybe kind of more around the margin aspect of in-centers and kind of as the other aspects of in-center beyond DBT and CTR begin to scale in a similar degree. You've talked about Miura, the spa, cafes. How would you just be thinking about the mix dynamics just as, you know, as the mix of the in-center offerings just widens?

Yeah. Look, I think our targeted overall company EBITDA margin that we're giving you is the way I would try to do my job as a, you know, mapping out what a club is going to deliver in total revenue and contribution margin, even the margin. The fluctuation in the cafe and the spa margins have been de minimis in terms of overall numbers of the company. They haven't been significant because our focus for decades has been that spa and the cafe are what makes the experience become a complete athletic country club. You can get a massage, you can get your hair done, you can get your nails done, you can get a nice meal. There are significant opportunities in the revenue growth on both categories, and we are focused on fine-tuning those and make those be additional growth drivers in the upcoming years in our overall revenue growth and in-center growth. And with those, we are working the details and the processes right now, perfecting those so that not only we get the revenue, we also get the appropriate margin to come with it. Very, very good opportunity ahead to kind of seize some of what looks like a capturable opportunity to help growing the in-center business and in-center margins.

Great. Thank you very much and good luck. Thank you.

Thank you. We reached end of our question, and answer session. I'd like to turn the floor back over for any further closing comments.

Thank you, operator, and thank you, everyone, for joining us this morning. We look forward to having you on the next quarter's call.

Thank you. That does conclude today's telecoverage. You may disconnect your line at this time and have a wonderful day.

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