Greetings, and welcome to the Lifetime Group Holdings, Inc. Q1-2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone requires operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Connor Feenberg, Senior Vice President, Treasury and Investor Relations. You may begin.

Thank you for joining us for the first quarter 2026 Lifetime Group Holdings Earnings Conference With me today are Barron McCradi, 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 is 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, 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 gap measures, are included, when applicable, in the company's earnings release and earnings supplement 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 Q1 business and financial update. Please note that this morning we posted an earnings supplement on our investor relations website, which includes additional detail on our membership mix and comparable center Starting with our first quarter revenue, total revenue increased 11.7% to $789 million, driven by continued strength in performance across our portfolio, including higher dues revenue and strong utilization of our in-center businesses. Comparable center revenue grew 8.6%, slightly above our expectations. As outlined in the earnings supplement, components of our comparable center revenue were as follows. Improved membership mix, which contributed 3.5% growth. This includes changes in membership types, the replacement of lower dues memberships with higher dues memberships, which we refer to as churn, and continued expansion of clubs into more affluent higher dues markets. Price contributed 3% growth. This includes legacy membership dues increases and changes to the new joint price of clubs within the previous 12-month period. And in-center businesses contributed 2.3% growth due to continued strength in utilization of our in-center businesses, particularly dynamic personal training. Volume contributed a negative 0.2% to comparable center growth. This was driven by a reduction in qualified medical memberships, which I'll discuss shortly. As expected, comparable center revenue growth continues to move towards our long-term target of 6% to 8%. Average monthly dues were $230, up approximately 10.5% year-over-year, and average revenue percenter membership was $930, up 10.2% year-over-year. Growth in average dues was driven primarily by positive membership mixed trends and execution of our pricing strategy, as I just described. We ended the quarter with nearly 838,000 center memberships, which reflects 1.4% 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. These memberships have significantly lower average dues. In Q1-2026, qualified medical memberships represented only 3.4% of our total dues revenue. We expect this to be approximately 3% by the end of the year and continue to represent a smaller proportion of our dues revenue over time. In the first quarter, qualified medical memberships declined by approximately 15,000, down 14.9% year-over-year, while all other memberships grew by approximately 27,000, up 3.7% year-over-year, in total resulting in 11.9% growth in total dues revenue. Due to further year-over-year reductions in qualified medical memberships, we expect total center membership growth of 0.5% to 1% in the second quarter, 1% to 1.5% in the third quarter, and 2% to 3% in the fourth quarter. However, we expect membership growth, excluding qualified medical memberships of 3.5% to 3.8% in the second quarter and 4% to 5% in both the third and fourth quarters. With this strategy, we expect to deliver revenue growth of 10% to 12% for each quarter and the full year. Moving on to net income. For the quarter, net income was $88 million, an increase of 15.8% year-over-year. First quarter net income included approximately $8 million of net tax-affected items excluded from adjusted net income, primarily consisting of share-based compensation. Net income in the prior year benefited from approximately $1 million of net tax-affected items, driven primarily by $12.6 million of income tax benefits, resulting from a significant exercise of stock options by our Chief Executive Officer ahead of their 2025 expiration, partially offset by share-based compensation. Adjusted net income, which excludes the tax-affected impact of these items, was $96 million, up 27.4% year-over-year. Adjusted EBITDA was $227 million, an increase of 18.3% over the prior year quarter, and our adjusted EBITDA margin improved by 160 basis points to 28.7%. The primary factors for our margin expansion included greater leverage on our center operating costs and corporate G&A, an overperformance of dues revenue, and timing of sale leasebacks. Of the 160 basis point margin expansion, approximately 30 basis points relates to employer payroll taxes associated with the CEO's option exercises incurred in Q1 2025. As noted in our earnings release, we updated the midpoint of our full year adjusted EBITDA margin guidance to 28%. This guide includes the impact from a majority of our clubs that are opening in the second half of 2026, and the associated pre-opening expenses and early operating ramp impact on margin. Net cash provided by operating activities increased to $199 million, approximately 8% higher compared to the prior year quarter. Total capital expenditures were $260 million, up 82% from the prior year, reflecting construction activity in support of our new club openings for 2026, as well as the start of construction on clubs planned for 2027. As of today, we have opened five of the 14 clubs scheduled for opening this year. The remaining nine clubs and a number of the clubs scheduled for 2027 opening are under construction. In April, we closed on sale-leaseback transactions that generated approximately 200 million of sale-leaseback proceeds and 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 Bron.

Thanks, Eric. Good morning, everyone, and thank you to our teams across the company for their outstanding work this quarter. As Eric mentioned, we continue to see strong performance across all aspects of our business. We're not seeing any impact from the broader macro environment at this time. Demand has been particularly strong for our new clubs, including four clubs we just opened in the last 30 days. They're all performing extremely well. Our real estate pipeline continues to be robust, and we expect to continue growing both revenue and adjusted EBITDA in the low double-digit range. I'm going to keep my prepared remarks very brief as the results of our business speak for itself. But I would like to focus and provide clarity on our positive free cash flow outlook. Last week, we announced the close of $200 million of sell leaseback and raised our full-year sell leaseback target to $400 million, delivering positive free cash flow in 2026. We expect to deliver growing positive free cash flow each year going forward, while selling only a portion of our fee-owned real estate assets built in any given year, resulting in an increase to the value of real estate portfolio that could be used at any time as additional liquidity. All of this puts us in a very strong position with very low leverage, robust and growing operating cash flow, and a significant portfolio of real estate assets. We will continue to invest in our existing clubs, take advantage of our white space by opening new clubs, and thoughtfully return capital to our shareholders. With that, we will open the call for questions.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, 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 would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Thank you. Our first question comes from the line of John Heimbachle with Guggenheim Partners. Please go ahead.

I want to stop, Baram. When we look at what we know about 27, it looks like another year of suburban ground-ups very significantly. How do you think about beyond 27? Do you think 28, 29 looked like 26 and 27 very much? And then what's your thought on takeovers? You know, you had done a bunch. You haven't done many in a while. I don't know if you like that use of capital. What's your thought on that type of project?

Great question, John. Great to hear from you. The market is incredibly exciting ahead. We have some amazing club openings. non-suburban, and incredibly amazing urban markets. We've been dying to get into these with significant-sized clubs. Interestingly, right now, our urban clubs are performing with incredible return on invested capital. As we go into leases and we put some leasehold improvement, the returns are incredible. they ramp exceptionally well and the suburban clubs have never been better like what we are opening right now anywhere suburban semi-suburban is the best results I have ever seen in 40 years so we're just excited we're excited about all the sites in the pipeline whether they're in a super super hot urban markets where we are going to be part of the larger developments. And we've been negotiating on some of these things for five years, six years, seven years. I mean, they take longer, so they're closer to the other side. And then we still have a growing number of suburban prototype opportunities as the demographics shifting into markets. Like we just, you know, on Monday opened a club in Ocotillo. It's the second location in Gilbert, Arizona. You know, not only that one, all four clubs. Incredible results. But there are – that market five years ago, there was nothing there. And right now it's one of the hottest markets. So we have continued to explain we are not having a concern about an outlook where we're going to run out of opportunities to build urban, semi-urban, or suburban clubs. I don't – that is the last thing on our list of concerns here. Just amazing opportunities, and they're all performing exceptionally well. The most important thing that I think is just misunderstood about this business is the return on cash, the cash on cash return doesn't matter which way we do it. When we go into these clubs, into a lease, put our leasehold improvement dollars in, we're always north of 30% in aggregate. And when we are doing our clubs and take them to sell these back, we do that or better. So I just don't – it doesn't really matter to me if – it doesn't matter to me at all if it's more suburban or urban or what markets right now. They're all doing exceptionally well. Hopefully, that answers you and others in regards to that.

But maybe as a follow-up to that, has that changed your view, that success, maybe, you know, lack of, you know, lack of competition in some respects, has that changed your view on what the white space opportunity is, you know, whether it's, I think at points you've said 600 maybe or more than that, you know, in your mind, has that increased? And if so, by how much do you think?

Fortunately or not fortunately, I think it's going to be way past your time and my time, John. I don't think we are concerned about running. We do 14 clubs a year. I don't see when we're going to get to the point where we have a hard time. And we haven't even – we have been looking at so much opportunity in the United States that that always makes us ponder taking the time to engage in all the requests to go, you know, 10 hours, 20 hours, 30 hours away on an airplane to get to the international demand that there is for our brand. So that's because the amount of opportunity here in North America is enormous. So there is really no concern. And I think that, you know, we've always said 450, 500. I don't think we see any window that is going to be smaller than that. Probably it's going to continue to grow.

All right.

Our next question comes from the line of Brian Nagel with Oppenheimer. Please go ahead.

Hey, guys. Hi, Brian. Congratulations on another nice supporter. congratulations that's very nice thank you and also very much appreciate the fresh disclosures on membership thank you you're welcome so the question i have the first question uh we talked about this before but in release again today you talked about you know within the uh in central offering and dynamic personal training there's being a driver there so the question i want to So, how do you look at the current penetration of DPT, you know, where's kind of the slack there? And then, you know, with regard to membership and the disclosure you gave today, as you continue to, sort of, say, upgrade these memberships and these clubs, did that, in a way, give you more opportunity in DPT, assuming that, you know, these non-qualified members are more likely to uptake that?

Let me just first give credit to our entire DPT team, from every DPT themselves all the way to our senior vice president who runs that. They do an amazing job. The brand of dynamic personal training has been understood. The quality of our trainers are exceptional. We are continually seeing an increase to the number of productive, dynamic personal trainers, and the execution is exceptional, and we continue to see more opportunity. And you're correct. As we are executing our new brand positioning, which we have been in progress the last three, four years, positioning lifetime as an athletic country club with exceptional desirability, where the price is really not a factor, the kind of customers who are coming to us, they're not talking about the price. We're not promoting. We're not advertising. We're not giving a free month for them to join. They're just coming in and wanting to be part of the Lifetime brand and experience. And those members also engage in in-center businesses way easier than the ones that you pull in trying to give them a free month or two months or something like that to get them signed up. Lifetime has never been in a better position, Brian. We have never been in a better position, and it's entirely because of the change in the positioning of our company and our brand over the last four or five years.

Yeah, and if I can just add to that, you know, Brian, you know, Brom talked about, you know, number of trainers. As we look to serve the demand, as we look across the portfolio, they're up, you know, trainers are up low double digits, and new business is actually up even more. So, again, that just speaks to the increased demand that Brom's talking about.

That's very helpful. So my follow-up question, different topic, but thanks for the commentary on the cash flow dynamics here at 26, but if you look at that CapEx number, either what was posted for Q1 or the guidance for 26, how should we think about that relative to the clubs that you're opening in 26? In other words, how much of that growth CapEx that you've earmarked, so to say, is actually associated with clubs beyond the current year?

Yeah, so that's a great question, but Eric has covered this multiple times. It's roughly half and half. About half of the capital that we launched this year as a new club growth CapEx, half of it was the clubs are opening in 2020. Six and half are the clubs that they're starting. We have already started construction. We bought the land mostly for 27 and some of the 28 even. That's going to be always the case with the way we build our business. This is what the advantage of lifetime business is, the incredible moat that is around this company that I also don't think has been appreciated because it takes such a long time to develop these things. And it takes stamina and capability. For us, it's a routine process. We are investing in 2026, 2027, 2028, and maybe even some beyond at any given time. The interesting thing that I just really wanted to cover is that we are in an amazing financial position as well as our brand position. We have very, very low leverage, you know, significantly below my maximum target of two times debt to EBITDA. That's flexibility. We have zero balance on our revolver. We're sitting on several hundred million dollars of cash. We build every year more than $400 million, $500 million, $600 million in what I would call fee-owned sellable assets. So if we sell $400 million of that, this is not the portion of the CapEx that goes to leasehold improvements. This goes into the assets we buy the land, we build, we own the fee, that it goes into the pool of fee-owned real estate assets that we can sell and add and think of it as additional liquidity. Over the next four or five years, our expectation is that that number will continue to grow, even after if you kept building 14 clubs a year constant, if you build that constant, if you build that you're going to do $400 million a year constant. These are just make it simple assumptions for clarity for people. We will be adding to the value of our net sellable assets, fee-owned sellable assets, real assets, and we will be adding to our free cash flow from 26 on every year. Our long-range plan shows by roughly about 2030, that free cash flow will be more than $400 million, which basically will give you an option. I don't want to sell any of my real estate. That's not really how we're thinking about it. Our assumption is we're going to continue to sell that number, roughly that. And then otherwise now we have an extra $400 million of free cash flow, and we have added. We're not trading our real estate assets to be cash flow positive. We're adding to that. We're cash flow positive. We're growing that. And that puts us in a position we can start thinking about all different ways of return of capital to the shareholder. Hopefully, this creates really, really nice clarity for everybody.

Thank you, Rob. I appreciate all the colors. Congrats again.

Thank you so much.

Thank you. Your next question comes from the line of Arpanay Kocharian with UBS. Please go ahead.

Thanks, and good morning. So you raised revenue for the full year by about $20 million and EBITDA is going up by about $15. that is a very healthy flow through as we think about incremental revenue So maybe if you could go through drivers of that, but more importantly, your underlying members seem to be growing in that sort of 5% range, which is definitely healthier than what meets the eye, right? With the qualifies down double digits, the blended number. Can you maybe expand it a little bit more how you think about member growth in light of revenue optimization versus just chasing volume? So your updated views on that. and then I have a very quick follow-up.

Yeah, I can take the flow through there. Yeah, on the revenue, you know, we're seeing extremely strong performance in our dues line, which, of course, as you know, you know, most of that's going to – all that's going to flow through to the bottom line. And we're also seeing – continue to see strong performance in DPT, which, of course, you know, has a little lower margin than dues does. So that's how kind of that relationship dues and flow through is coming in. And what you're talking about on the, you know, the membership mix versus volume is exactly the strategy as we kind of laid out, you know, instead of just chasing raw volume, it's all about the membership mix. So that means, you know, number of members per membership, you know, that has a higher LTV. So that's a better outcome for us, both from revenue and just strategically.

And if I can add to that, another way for you guys to think about, we are really prioritizing revenue, quality of that revenue, quality of membership, the ability to do in-center business retention. We prioritize those, and of course, all of that results in the EBITDA pass-through. And that, the mix that he's talking about, is naturally taking place. It's been a continued quarter after quarter result of changing the positioning of the company. We were very, very decisive. We wanted to create a brand that the desirability brings the customer who is not price sensitive is experience sensitive. That's taken us four or five years, and we're still getting some churn through that. We love our older customers as we love the young ones and the middle-aged ones, all of them. However, as time goes on, we're going to see that some transition from that into more direct memberships also add to this mixed shift that he's talking about. At the end, you know, all we are, you know, working on is what does a club do in revenue? What does it do in contribution margin? And how is the retention? What's the experience? And the focus that the team has on executing that is delivering these results.

That's great. And then just a quick follow-up on buybacks, just really quickly. You have a $500 million authorization, and you just raised, say, a leaseback target even before reporting today. Could you just give your broad take on how you think about capital allocation at this point as far as buybacks go and where the stock is and the potential to be a little bit opportunistic?

Well, I think that, you know, we are going to definitely use our, you know, authorization here. As long as we see the stock below a fair value to us, we're going to be able to take advantage of that opportunity and buy some shares back, yes. Ultimately, as I mentioned, as the cash flow grows, you know, we're going to be analyzing with our board and capital allocation committee on how to think about different ways to deliver return of capital to the shareholders. But right now, we have this vehicle in place, and we're definitely going to be looking at the share prices, and at the right times, we're going to take the opportunity to, you know, buy some of the shares back.

Thank you very much.

Thank you.

Your next question comes from the line of Randy Koenig with Jefferies LLC. Please go ahead.

Hey, good morning, guys. Thanks for taking my question. Look, I think the theme I'm getting from this is appreciating the continuous growth of quality of the product, the experience, and the membership. So I guess for Brom, to you first, kind of maybe give us some perspective on some of the products, services, and amenities you're thinking about over the next few years, and some of the ones that are existing today that you can see adding more penetration into the centers and for your members. And then I guess then for Eric, have you kind of looked at revenue per membership in different quintiles, and are there any kind of impact? interesting dynamics between what you see in the first quintile of revenue per member ship versus the fifth and how you can try to grow that fifth quintile or fourth quintile to get it closer in spread to what you're seeing with the first quintile of spending in their highest performing membership kind of members. Can you give us some perspective there, guys? Thanks.

Let me start by giving you – we have CTR in the rollout right now. We are only in, you know, 30, 40, 50 locations, targeting to about 60 executions. Maybe we can beat that by the end of the year. We're working as fast as we can to roll those programs out. We are launching Hybrid XT. That's just at the infancy, got tons of potential. Dynamic Stretch has got significant opportunity going forward. We are working on Lifetime Health and Wellness Hub, which basically aggregates the opportunity for people to come to the most qualified registered dietitians in the country to basically get direction about where they are. They go in a world where people are advertising all kinds of things, and some are fantastic, and some are snake oil. So I think we can be the authority to help people navigate through all that information. And then, of course, channel them, whether it's to Miura, to Lifetime Health, LTH products, our personal trainers, dynamic stretch, CTR classes, whatever. So we got so much that is into their thinking and strategy and rollout. Some are further along the way, you know, they've been proven as just a more rapid, you know, rollout. And some are at the earliest stage where we're still fine-tuning the model before we put into a heavy rollout plan. We are busy. I mean, we're not running out of ideas or concepts on how to improve what we want. And I have said this repeatedly. Adaptation is a necessity of survival. Lifetime has demonstrated over the last 35 years how we adapt. This team is poised to adapt as fast as necessary to deliver the best experiences for the customer that is relevant to the customer in today's world. In five years, these customers are going to want different things. I can't tell you exactly what that is. All I can tell you is whatever it is, we will have adapted and delivered it to them as they desire it.

Yeah, and then, you know, on your second part of your question there, I would say, you know, exactly what Brock said, we're always doing things to add value to the memberships at all levels, in all quintiles. But I guess I would just point you to what we're doing around our qualified medical, because that is the biggest opportunity when you look at our ability to, because our clubs are busy, right? So where can we make the most impact to improve average dues and increase in center utilization? It's exactly what we're doing with those qualified medicals.

Your next question comes from the line of Chris Waronka with Deutsche Bank. Please go ahead.

Hey, good morning, guys. Thanks for taking the question. So I also appreciate the expanded disclosure, especially around those qualified memberships. I think super helpful. Maybe just to go one step further a little bit, when you guys are evaluating a new club and you're looking at different locations, you're underwriting, how important is a metric like membership per club that you could put in there versus what kind of dues you think you could get, what kind of ancillary you think you could get, what kind of engagement you could get? I'm just trying to kind of put a button on the idea that members per club is the most important metric to look at for you guys on development, because I don't think that it is, but if you guys would like to opine on that, that would be terrific. Thanks.

It isn't. This is where I want to be clear. That has been, I think, the gap between what we keep trying to explain to the street and it's being misunderstood. What I care about is we spend X amount of dollars on a facility. We want a rate of return on that. That demands we want to be looking for a certain amount of revenue and a contribution margin out of that. When I launched this company, I have said this 100 times, We envisioned comprehensive delivery of all experiences under one roof, and we sold it way too cheap. That caused actually a contrary outcome to what I wanted. I wanted this exceptional experience in the clubs. We couldn't get it with 11,500 memberships in a 100,000-square-feet club. We just couldn't get it. It wasn't there. So mistake was it was too cheap, and the vision of delivering exceptional quality just would not work with that much volume. Today, every time we do a business plan in the last two, three, four years, and this is why I want to avoid giving you guys a number, We thought we, you know, we do these clubs for like 5,000 members instead of 10,000. And then what it really boils down to is that the number is actually a lower number that brings in, fetches a higher revenue and higher margin and better experience. So what's happening is we are, the way we have our position, the demand for our business and the amount of people on a wait list, we generally end up launching a club at a higher price than we had initially in the business plan. Therefore, it's just easy mathematics. It's fewer memberships, but we end up with better revenue, better margin, better results, better experience. So we are curating 100% that experience. And that is the magic to winning, to make sure the experience remains wow. And as long as we deliver that, the numbers will work. And so we don't want to emphasize membership. I want to emphasize revenue and EBITDA and our margin pass-through. And I couldn't be more pleased with what our team is executing with that. Results speak for themselves.

Yeah. Thanks, Brom. That's a very, very helpful answer, I think, hopefully for folks to hear. As a quick follow-up, you know, I know at one point there had been talk on the app or monetization, things like advertising, other forms of revenue generation? Maybe can you spend just a minute on where some of those initiatives are? Is that still on the table?

Yeah, not in the near term. The reality of AI and the way AI is advancing in such a fast pace, Our focus has been delivering, again, the best. Right now, there are features of our Lacey that I think if you experienced it, you will be impressed in terms of like a workout generator, answering any questions regarding health and wellness. It's way more in-depth. We are continually executing the same strategy to deliver something exceptional on that. But our main focus is delivering the best experience inside of our clubs. We want Lacey to be that navigator for the customer to help them find what they want to find. One of the challenges for our company is that we offer so many things. And often, if you are doing one service, it's easy to create an app that gives you the great experience for that one business. We're delivering 20, 30 different businesses inside of Umbrella of Lifetime. It becomes way more complicated, even if the components are good, for people to even find the navigation. So Lacey is Lifetime AI companion. It's your AI companion to help your experience get better. And right now, we are singularly focused on making sure that experience. The subscribers are growing still at 100,000 rough and tough additional subscribers a month. At some point, we will focus on how naturally start thinking about benefiting from that. But right now, we're getting more members coming through from our three, four million people on that list. It's easier for them to join the club, and we're seeing that starting to kind of get ramped up. So we will find the wins as long as we stay focused on delivering something exceptional.

Thanks, Ron.

Your next question comes from the line of Stephen Grambling with Morgan Stanley. Please go ahead.

Hi, thank you. I guess in order to not necessarily surprise investors, I think everyone appreciates the focus on ROIC and your confidence in the new clubs hitting very healthy ROIC. But as we think about some of the KPIs, perhaps over this year, thinking through whether it's members per club, in-center spend, margins as they ramp, any reason to believe that these will be different than what we've seen historically or relative to what's in the pipeline? Thank you.

Yeah, I mean, from a margin perspective, no. I mean, you know, you take the revenue per membership and the growth that we've seen there, we expect that to continue. That's obviously an important KPI for us. So, no, nothing that I could point you to to suggest that, you know, we're going to have anything significantly different from, you know, kind of what we've been showing with our existing KPIs.

Yeah, I think our execution right now, as I mentioned, is best ever. It's like the term we hear when we're going through our analytics, best results ever, best results ever across so many aspects of our business. Our opportunity is to look at individual clubs to see within a particular club what is the embedded additional opportunity, but systematically, if you look at the entire system, results are fantastic, and I think we don't have a reason to believe anything is going to deteriorate in any shape or form.

No, but I do think it's worth reemphasizing. We already covered this when you talk about, you know, number of memberships per club. You know, Brom covered it, but I think it's worth emphasizing as we open these new clubs, we're doing so with fewer memberships to reach our desired utilization. So, you know, when you look at that metric today, you know, roughly 4,400 per club, you know, the trend that we're seeing is, again, intentional as part of the clubs that we're opening at the number of memberships we're planning.

That's helpful. Thank you.

Your next question comes from the line of Anthony Bonadio with Wells Fargo.

Yeah, hey, guys. Thanks for taking our question. So I just wanted to ask about EBITDA margin. It looks like another all-time high there in Q1. Can you just talk about what drove the performance you saw there? And I know you've historically pushed that.

Eric. Eric drove that performance. Eric.

Well, I can speak to it, but I didn't drive it. Yeah, I mean, so it was a good quarter. Like we mentioned, I mean, we saw, obviously, I talked about dues, and that was a portion of the flow through. Center Ops margin, as you saw, improved as well. I mean, that was just really great execution from the business in expenses across the board, really. And, you know, the timing of sale leasebacks and the overall rent that we executed later in Q2. So all of that really combined, you know, whether it was G&A or Center Ops, we got leverage and scale.

I want to add, I think actually I want to give credit to our team. Starting the year with all the uncertainties in the macro, our focus was making sure we execute the customer experience at the highest level. However, don't waste any dollars anywhere that, you know, that doesn't need to be wasted. And so the team has executed exceptionally well. And I think the, you know, I always try to caution the street is not asking for more, more, more, because this is the doomsday for public service, public companies on a long-term basis, is that you keep trying to squeeze more and you cannot pinch the customer's experience or the team member's experience. We are in a phenomenal place. We are in a great place. We have some additional clubs opening, you know, significantly more. You know, we've got nine more clubs to open. There are some pre-opening expenses with those, albeit the clubs are performing so well, Many of them are starting at a contribution margin positive in the second month, but still, from an EBITDA standpoint, they can have some margin compression. But for the most part, again, I cannot see anything that's ever executed in better across the lifetime. So I'm proud of our team, but don't expect more.

That's helpful. Thanks. And then maybe just on the consumer, can you just talk a little bit more about the demand side of the equation? It seems like in-center spend growth remains strong in Q1. Reads on the high-income consumer remain good. But there's also been a lot of headline fatigue out there. Just any thoughts on whether appetite to spend has changed at all in that cohort would be helpful?

Absolutely zero. We're not seeing any negative pressure. Sure. I have expected it. You know, I have thought, you know, this macro cannot, you know, you know, deliver this. But right now we haven't seen as of as of right this second, we haven't seen anything. It's it is the customer. The demand is strong for the clubs. Again, we're doing this without hardly do, you know, any marketing span is just naturally coming to us. And the in-centers are doing great, and we're super. The wait lists are substantial for our new clubs. And so we're just basically navigating through giving people the desired service or expectation, and it's all working extremely well.

Thanks so much, guys. Thanks so much, guys.

Your next question comes from the line of Eric DeLaurier with Craig Hallam. Please go ahead.

Thank you for taking my questions, and congrats on the very strong results here. Thank you. You've already touched on it, but I'm just wondering if you could expand on that improving membership mix. How much runway do you have here before we sort of reach kind of a new normal balance of members here? And just kind of how long do you expect this to be a tailwind to your overall dues here?

Well, I think that as you look at our business, we still have roughly, I want to say, two-thirds of our membership that they're paying somewhere below the rack rate. And we've gone through this, and we expect to see some pass through as some of their older legacy paying customers drop out because they move or something happens, and we get a new customer replacing that. No additional membership count, but we get more dues from that. As of right now, we don't have any immediate change in the outlook. I think it's going to continue, but eventually, eventually it will slow down. But right now it's still.

And the thing I would point out is we highlighted in our Q3 supplement where we, you know, we really began de-emphasizing the qualified medicals, right? And so that's why we kind of gave that guidance over the next couple of quarters to kind of help as we see Q2, Q3, and even into Q4. But as we get into, you know, we're opening up the larger, opening up the clubs in Q4, And as you look at those qualified medicals as a proportion of our total membership mix, that's going to continue to become smaller and smaller. So I think when you talk about it, when is it going to be maybe a little more pronounced? Again, I take you back to the guidance we gave for Q2 and Q3.

That's very helpful. And then overall, just looking at the sort of, I guess, macro category horizon here, you know, it's great to hear earlier comments that, you know, even at 14 clubs per year, the saturation point is basically, you know, not even on the horizon. You've got an extremely long runway. How do you view the competitive dynamics in the space between sort of overall growing pie, you know, increased demand for premium fitness, third places, et cetera, and then your ability to sort of increase your size of the pie? I mean, it seems like, you know, there's, there's, there's great tailwinds on both sides.

I'm just sort of wondering how you, you know view this kind of longer term outlook here and your positioning within that thank you that's a great question I don't I don't and I've kind of often said this if I took off on my own and I brought some of the best people with me we couldn't put a dent into a lifetime you're looking at a couple hundred locations that they are open this year we have another, you know, 50 to 75, 80 facilities in the pipeline. These things take several years of gestation and massive amount of dollars, an incredible amount of detail to execute the complexity. The competition for a tool lifetime will not be a head-on operator that can execute with the complexity, the scale, the size, and the brand recognition of lifetime, you will have to compete with somebody opening, you know, sort of a recovery space, somebody opening up a, you know, stretch place, somebody doing a yoga place. I mean, or, you know, some combination. We really don't feel like any concern that there is going to be somebody taking on this model. Good luck if they want to try it. But we're just kind of executing, plowing through the opportunities we have. It's not a real concern. I just don't think it's real.

It's great to hear. Thanks for taking my questions. Congrats again. Thanks.

Thank you. The next question is coming from the line of Logan Reich with RBC Capital Markets. Please proceed with your question.

Hey, good morning. Congrats on the solid results, and thanks for taking my questions. I want to ask first just on how visits per member or anything you can share on retention was trending in the quarter. I know that's been an area of strength for you guys. Just curious if you can provide an update there.

Yeah, the visits per memberships up, retention is absolutely great. I mean, the more they use the club, the less they are likely to want to drop out. So all those metrics are working in our favor right now.

That's helpful. And then I wanted to ask on the on-hold memberships, that number actually declined on a year-to-year basis for the first time, I think, since 23. Is there any color there on what drove that decline on a year-to-year basis?

Yeah, I mean, there's really nothing there. I mean, that number, I think it went down maybe 3,000 or something in that range. But from time to time, you're going to see that fluctuate as people come on or off hold. but there's nothing in there to point you to a trend or anything like that. Great. Thank you very much.

Our next question is coming from the line of Owen Rickert with Northland Capital Markets. Please proceed with your question.

Hey, Brown. Hey, Eric. Thanks for taking my question here, and congrats on another pretty unbelievable quarter. Just quickly for me, can you guys talk about the vision behind this new lifetime innovation hub and how you see it influencing future member experiences, potential ancillary revenue opportunities, and maybe the broader long-term growth strategy there?

Well, look, if you don't have Innovation Hub, you need to go home. You need to be thinking about how to innovate and how to – and our company has all been directed to be thinking about, you know, how we can navigate through what is the new ways we can serve the customer, what are the new products, new services that people are sort of seeking, and then how do we create an engine to deliver what's being asked for. But it's part of the things we're talking about, the delivering, you know, coming up with CTR, rolling it out, and executing that, and the dynamic stretch, which happened a little before that, now Hybrid XT. So we're constantly working on doing those things. And then the next piece is, like I told you, is that building this lifetime health and wellness hub and try to create a whole sort of a robust registered dietitian center that basically can navigate people through all different aspects of our business. So we're working on all different types of things at all times. Now, we've still got tons of runway in thinking about what else we need to add to the clubs, how do we transform the clubs, so people continue to come in as the place they want to stay in, whether for entertainment, to work, to eat, to meet other people, or exercise and get their hormone replacement done. I mean, all of those things are endless opportunities for us to innovate through.

Awesome. Got it. Thanks for the color there. And then secondly for me, just on Miura, maybe can you just tell us how many locations you're currently in and is the long-term vision there still about one to three per region?

Look, I think with that, what we are doing right now is we're in massive, massive sort of a period of making sure we fine-tune the customer journey to an exceptional experience my belief in this space is that it is going to be a main um sort of a main street in terms of what people are going to want to engage in and then once they get on it they'll probably There's really no way to get away from it. They would want to do that. It's being done in mom-and-pop clinics across the country. So it's a huge opportunity for us. And for a clinic of a couple of providers, one lifetime location has all the customers they would need and more. So can we have a MIRA in just about every club eventually? The answer is yes, just like we have personal training in every club. But we've just got to crawl, walk, run. We need to sort of kind of do that with the complexity of the medical aspects of it, the HIPAA compliance, and all the rules and regulations around it. it's a little more complex than rolling out the dynamic stretch or CTR. So we got to make sure we execute that exceptionally well, but I am an incredible believer in the potential of Miura. And, you know, myself and our senior VP that is in charge of that with me, we're all over it in terms of making sure we have a model that we want to roll out much faster in the next, you know, 12 to 24 months. We're working on it, and I'm really excited about it.

Awesome. Thanks for the color, guys. Looking forward to pool season here. Thank you so much.

Our next question comes from the line of Noah Zaskin with KeyBank Capital Markets. Please go ahead.

Hi. Thanks for taking my questions and congrats on the quarter. I guess just looking at slide five in the supplement, kind of conceptually, in terms of the building blocks for the comp, when I think about maybe two or three years out, is it the right way to think about it that the membership volume piece kind of reverses as a headwind maybe related to qualified memberships kind of, you know, no longer churning off? but membership mix might come down a bit. And then just in terms of membership price and in-center business, any thoughts around kind of those building blocks over the next couple of years too?

Yeah, I'll take the price one first. I mean, we've kind of, you know, we've given our long-term algorithm and we've kind of, you know, kind of stated in there as we look at the pricing component of that, you know, roughly 2% to 3%. So I think that's a very sustainable, you know, part of this model. And, yeah, you're right. Like, you know, as we work through kind of some of these membership dynamics with qualified, right, those things kind of work themselves out. And, you know, in your matures, you're, you know, basically call it flattish, and you're getting your growth from your ramping and your new club. So I think that's a directionally fair expectation.

Got it. Really helpful. And then maybe just one on GLP-1s. Wanted to get any updated thoughts there in terms of, you know, that being a tailwind to the industry, anything you guys are seeing. around maybe a benefit to new ads as well as retention. Any thoughts that would be helpful?

It's me. I'm going to take this question for you. It is going to be a home run win for all exercise facilities across the country. It is an absolute no-brainer science. It will make people lose weight, so they're going to be happy and celebrating there. It's going to kill their muscle mass, which then is going to kill their bone density, which is going to be an absolute issue for them. It will be an epidemic if it's not handled correctly. I believe that the doctors, the, you know, the pharmaceuticals will continue to improve their education to people, that they need to do this along with weight-bearing exercise. So I don't believe the net outcome. I can say from the 40 years of experience that a lot of times people have not come to the clubs to exercise because they feel self-conscious. They feel like they're overweight. They don't want to go in because they feel like they're fat. I think actually now they're going to be able to feel like, oh, God, you know, I'm comfortable going in, but they absolutely and positively need to combine exercise with GLP. We're going to, in MIORA, we're going to, basically, we are telling people, come in, get your GLP here. But what we're doing is, you know, if you look at the history of what we, if you look at the results of what we're delivering with people who are coming to us through MIORA to do GLP, they actually are not losing muscle mass. because we're combining that with the proper regimen of nutrition and exercise, that is going to help every health club operator long-term. It's a zero concern. It's a wrong bet thinking that GLP is going to hurt the health club business.

Thank you.

Okay.

Your last question comes from the line of John Baumgartner with Mizuho Securities. Please go ahead.

Thanks. Thanks for the question. Hey, John. How are you? Good, thanks. Maybe first off, Eric, I wanted to come back to your outlook for memberships growth. You know, placing the qualified memberships to the side, can you speak to the mix from that bucket of all other memberships? I realize there's some noise from the mix of club locations, more locations in urban areas now, but what are you seeing broadly in terms of families versus singles and the influence of programs like Pickleball on drive memberships growth?

Yeah, I mean, as we look across directionally in our mix, when we take the, you know, number of couples and families as a percent of our mix, that continues to increase. So, you know, when we're talking about improved mix, we're talking about, you know, more members per membership. That trend continues. We're talking about, you know, our mix of clubs that are opening in locations that have higher average dues. So, again, those trends are all part of kind of that mix story, and those are continuing.

Okay. And then, Bron, in terms of your programming, you know, exiting COVID, I think a lot of the programming investment seemed to focus on enhancing your offerings of classes that were, you know, they were available outside of Lifetime in the specialty boutique segment and, you know, doing it better and giving members more for their money. But now I look at CTR, hybrid XT, which seem more specific or exclusive to Lifetime and your ecosystem that you're building. And I'm curious the extent to which this is maybe a new angle in your strategy to, I don't know, maybe lead more and more visibly than maybe you have in the past with classes that are different than what's available outside of Lifetime and that you can leverage to draw new members going forward.

Yeah. Look, we are navigating through a couple hundred clubs, new and brand new coming in and existing clubs, and then we work on spatialization efficiency. We look at the spaces that we have. We look at how they're being used, the services the customers are receiving. And so it takes a tremendous amount of thought process on how to change the space from one program to the other. and then really the longevity of the program that is coming versus the longevity of the program that maybe is being de-emphasized. So it's a complicated equation that we are working on, but there is tremendous opportunity for us to think about these programs and how we can accelerate our growth through different channels. I'm not going to get into too much detail on that. But right now, I am most excited about, you know, how well we are rolling out these different programs and how well they're being sort of accepted or coveted by the members. um altogether what we're looking for is maximizing the visits in a club and a spread throughout the day as much as possible uh throughout the week so that the club gets a steady utilization but doesn't doesn't create uh sort of a discomfort for too much traffic at one given time It's quite a bit. Hopefully I answered your question, but we're not out of ideas in terms of how to, you know, kind of roll out new programs. It's navigating through, you know, all that we are delivering at one given time in a club. Does that help, John? Hello?

John is no longer in the queue, sir.

All right. I guess it did. I guess it did.

There are no further questions at this time. I'll turn it back to management for closing remarks.

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