Planet Fitness Aktie

I'm Sharon Zackfia with William Blair. Thanks for joining us today. Really happy to have with us from Planet Fitness, Colleen Keating, CEO; and Tom Fitzgerald, who's Interim CFO.

Planet Fitness is the pioneer in the high-value, low-price fitness segment. They have almost 3,000 clubs today, over 21 million members. Colleen is going to give us an outlook or some synopsis of Planet Fitness and where they are today. And then we're going to go into a fireside chat. So I'll let Colleen do a few slides to create a foundation. Thank you.

Thanks for having us. I'm going to stand just for this as I kind of click through a few slides. So Sharon shared that some of you are kind of new to Planet Fitness or maybe haven't followed the stock. So I'll give just an overview, a little bit on our strategic imperatives, the things we're focused on as a brand. And then maybe give a couple of the fundamentals as I close before we go into the Q&A.

So our strategic imperatives, and these are really the things that overall govern the strategic direction of our business. The things we're leaning into as we evolve Planet Fitness for the future.

The first of our imperatives, and we'll talk about it a little bit today, is really redefining our brand promise. So we invented the HVLP category, which is High Value, Low Price, really democratization of the access to fitness and wellness in an environment that is both geographically and financially accessible.

One of the things, as we've continued to evolve our brand promise is to ensure that we're meeting the needs of today's consumer, which then takes us into enhancing member experience, the engagement and the relationship that we have with our members and what they enjoy in our unique offering.

And one of the things that makes us unique and special in the member experience is our judgment-free no gymtimidation environment. In fact, the #1 thing that prevents someone from joining a gym is intimidation. People feel like I won't know what to do when I walk through the door. Or I don't know how to use any of the machines. I won't know which button to push.

So we've, over the years, invited people into the category who were never a member of a gym before. And preserving in our brand that no gymtimidation welcoming environment that resonates with all levels of fitness. And one of the beautiful things about Planet Fitness is, unlike many other gyms, you can walk into a Planet Fitness no matter what your age no matter what your body type no matter what your fitness level, you will see someone who looks like you. So member experience and making sure that we're conveying our judgment-free, no gymtimidation environment is really pivotal to our brand strategy and our brand promise.

Refining our format and really optimizing the floor of the club is our third strategic imperative. And when Planet Fitness was first launched, we were known for kind of no line, no waiting. You walked in the front door and you could see a sea of cardio machines as far as the eye could see, and it conveyed to our members and prospective members that they never have to wait.

Over the years and in the recent past, our consumer has evolved to a more balanced complement of strength and cardio. So we see among our members a desire for a mixed modality workout. And getting the floor plan or the equipment mix on the floor right for today's consumer is our third strategic imperative.

So as for example, we used to put 102 pieces of cardio in our typical 20,000 square foot club. Today, we've dropped that to 60-something pieces of cardio depending on the club and really a 50-50 mix of strength equipment and cardio because we've seen, again, across all fitness levels across all ages, a greater utilization of strength in people's workout. It also meant opening up some floor space for people to drop a mat and do their workout their way.

Strength -- I'm sorry, functional training and stretching are also a component of many of our members work out today. So really optimizing the floor plan and the equipment mix was -- is our third strategic imperative.

And then fourth is accelerating new club growth. And I'll end my kind of slides on what that looks like, but growing units, both domestically and internationally, is really the culmination of us landing all of these strategic imperatives right.

We believe we have the opportunity to double our footprint domestically and see an incredible amount of white space internationally as well.

And we've launched recently in Spain. That's our most recent international market. we're seeing club ramp-up. So the build of membership club ramp-ups in Spain, our first foray into Europe that are akin to what we see in mature markets like the United States and Mexico.

Our near-term priorities really reorienting our focus on the fitness beginner or a more casual gym goer, making sure that we're really reaching and resonating with the 70% of the U.S. population that does not today have a gym membership.

And in the other geographies, international geographies where we operate, that number is even greater. The percentage of the population that doesn't have a gym membership.

We're prioritizing member growth, and I should say, net member growth. The thing that's most accretive to unit economics for us and for our franchisees is member growth and the member growth and member retention number in our clubs. We are largely a franchise business. We own 10% of our fleet, 90% of our fleet is franchised.

And we're also evaluating our pricing architecture, in line with our brand promise of democratizing access, making fitness and wellness really accessible to everyone. Today, our entry price point, you can enjoy a Classic Card member, which enables you unlimited use of the club you join for $15 a month. Our second tier, our Black Card membership is $24.99, and that enables you to use our Black Card spa, which has a number of modalities -- wellness modalities as well as the top 2 perks or top 2 benefits of Black Card membership on a utilization basis, which is reciprocity. It means you can use any Planet Fitness. Or bring a guest means you can bring a guest with you to the club at no additional charge.

Kind of core focus areas, we'll lean into these even more in the Q&A is making sure we're really shifting to our target audience and the demand spaces where we have the greatest rate to win.

And broadly speaking, that is the 70% of the U.S. population that doesn't have a gym membership today. That is our sweet spot. Again, no gymtimidation, welcoming environment, all fitness levels we really resonate with that 70%. And when you think about the growth of GLP-1 usage as well, many of the GLP-1 users are also new to fitness. The people who have never had a gym membership before. but they're embarking on a health and wellness journey. And maybe would walk into a gym and feel a bit intimidated because they haven't been there before or look at a piece of equipment and not know how to use it. We're the perfect environment for that because of the culture that we create in our clubs.

We're adjusting our brand messaging a bit to reinforce our personality and make sure that we're conveying accessibility and approachability. We're breaking down really the psychological barriers to fitness, the biggest of which is intimidation.

We often say that the heaviest weight in the gym is the front door, I often say our biggest competitor is fear of walking through it.

Optimizing our marketing and channel mix to make sure that we're extending our reach and relevancy and really showing up, we are -- our target customer is going to have a propensity to see our creative and a propensity to buy.

I touched on this already, affordability, making sure that our pricing is really thoughtfully aligned with our brand promise of accessibility and really democratizing access to fitness.

I touched on member experience with the imperatives. One of the things we're doing specifically is a first 100-day initiative. We know that if we can engage with a new member and help them feel comfortable coming into a Planet Fitness in their first 100 days, our opportunity for them to have enhanced member experience, better retention, higher utilization, and we think utilization is an indication of stickiness, so that member experience is at the forefront of our focus areas.

And then the in-club execution, the experience in the club, I talked about kind of culturally what we stand for, but clean and friendly Hi's and Bye's, really getting the basics of hospitality right so that we are that welcoming environment for our members.

And when we get all of this right, member growth accelerates the flywheel. And I said I'd touch a little bit on the economics of the model. So kind of broad strokes, if building a club costs just shy of $3 million. So club build-out just shy of $3 million. And when a club ramps, its monthly membership dues are roughly about $2 million.

From a GOP margin standpoint or an operating profit, call it roughly 40%. And pretty good returns, right? When you think about IRRs from an IRR standpoint, unlevered, approaching mid-20s IRRs.

But at the end of the day, what drives that, right? What is going to encourage the franchisee to develop more clubs with Planet Fitness. So member growth, which I talked about, driving member growth, getting the brand promise, communicating it right, pulling it through our marketing and really reaching that 70% that is our target. That then drives member growth. We're a subscription business. So membership drives the revenue in a recurring revenue model, which, by the way, has really durable cash flows.

And then the 4-wall profit that I talked about, which in turn generates those pretty incredible returns. There aren't a whole lot of places you can put your money and get that kind of a return today, particularly in a franchise model. That drives new club growth. And that's our ability to hit that doubling of our footprint domestically as well as the incredible white space that we see internationally as we look to continue to grow in more markets globally, really be the leader across the planet.

So I think that's just a quick level set, and I'll turn it back over to Sharon.

Yes, we'll have a chat. I think the -- we'll have to start with talking about member growth this year because I know it was not kind of the new year resolution sign-up season that everyone had hoped for. There were several factors you kind of talked about on the first quarter call, Marketing was one of those. I believe Competitive Infringement was another. Can you help dimensionalize what you saw in the first quarter? And how you can course correct throughout this year to set yourself up for '27?

Yes. And I think we also talked about a little bit of weather and then some question on the macro-environment...

We're not going to be able to fix the weather, though.

This is true. So we can fix the marketing. So I talked a little bit about the brand promise brand positioning. And what we saw a couple of years ago, we used a brand health tracker, we run it a couple of times, 2 to 3 times a year. What we saw a few years ago was a bit of a perception about our brand that while we were conveying approachability and a gym that was welcoming for beginners, we were a bit perceived as just a beginner gym. Or that you might need to graduate from Planet Fitness as you progress along your fitness journey.

We put all life fitness and matrix equipment hammer strength in our clubs. It's top shelf equipment. You could pay several hundred dollars a month at one of the other brands, so call it a Life Time or in Equinox and see similar equipment. So we're putting top-shelf equipment in our clubs. However, there was a bit of a perception that our equipment wasn't top quality and that you really couldn't get strong at Planet Fitness. And this was at a time when across all fitness levels and across all ages, people were utilizing more strength and more strength focused in their workouts.

So we evolved our messaging to convey that we are all strong on this planet and that we would grow stronger together at Planet Fitness. We saw very good performance initially. We came through last year, 2025, with two headwinds on our joins. One was we lifted the entry price point, our Classic Card pricing by 50%. We went from $10 to $15. We did that in mid-June of '24, but our big join quarters are Q1 and then Q2 top 2 join quarters. So the 2025 was the first time those quarters experienced that price lift.

And then we rolled out nationwide, an online member management function where if someone wanted to terminate their membership, they could do it online. They didn't have to go into a club.

And that created two headwinds. And with those two headwinds, we still had a 10% increase in net member growth in 2025 versus 2024. So what our brand health tracker was indicating was that we were making the pivots and perception around the brand that we anticipated, and we were seeing pretty good join volume.

As we came through the year, really late in the year and then into Q1, we noticed a few things. Well, one, we saw some softening in join volume. Two, it was more pronounced in a couple of areas. We saw females coming down a little bit. We also saw a diminution in millennials as a proportion of our join volume. And then, to a lesser degree, Gen Xer. So we're still growing very well with Gen Zs, but we were losing some penetration with millennials and again, to a lesser degree, Gen Xers.

So as we looked at the -- how the marketing was reaching our consumer and what -- how consumer perceptions were changing, we saw a couple of things. We saw intimidation was going up, and we saw gym for beginners was going down. And also algorithmically how kind of in the lower funnel our marketing was reaching people as more fitness-minded consumers were engaging with our creative, the algorithms were now looking for lookalikes, which is a marketing efficiency play with some of those lower funnel channels, but we left a bit of the kind of the consumer population feeling like we weren't talking to them. And that's our sweet spot, right, reaching that 70%.

So our pivot on the marketing is really to make sure that we're going to dial down a little bit of the sweat level that you might see in some of the creative, maybe the bicep won't be as big, we're going to make sure that we're spanning age cohorts a little more broadly in the talent, in the creative and that our messaging really conveys approachability, make it a little bit more lighthearted so that we're reducing the intimidation factor that many people feel with joining a gym.

And we often say, we're not a gym, we're Planet Fitness, because the experience with us is so different.

And Colleen, how quickly can you change the creative and start to impact those memberships?

Yes. We can change some of it quickly in terms of if we have campaigns in flight, we've been able to maybe use a little more female talent in it or put some older talent in the creative. But to launch a full new campaign takes a bit of time. We went out to RFP for a new creative agency in the first quarter. We've selected the new agency, they're under LOI. We've briefed them on the new creative, and we've even started to see some new themes to inform the creative, but we'll test the new themes, then we'll build the messaging and then we'll test several versions of the new messaging to see how it lands and what consumer sentiment is around it. And then after we do that, then we'll build creative underneath it and shoot some new creative. And then we'll test that and then it will be the new campaign.

So it does take time and it is important, particularly considering the size of our estate that it's well pressure tested and that we're getting consumer feedback along every step in the campaign development.

And you touched on the increase in the Classic Card price a couple of years ago, which obviously was very instrumental in helping those IRRs just given the inflation to build a club.

I wonder though, as you think about that, has it created more vulnerabilities from an economic standpoint or from a competitive standpoint and how do you address that?

So do you want to start?

Yes, , go ahead. So I think we think at $15, it's still a great value. compared to what you might spend for a monthly membership to a great club that has great equipment, as Colleen said. And there are some competitors who are -- whose headline price might be $10 in High Value, Low Price. When you get inside, there's lots of other fees that get attached to that. So it's a bit of a head fake in terms of what you ultimately pay compared to what we charge. But we think it's a great value.

Now having said that, the world has changed. So we're fielding some tests in our clubs today. We're going to field some more to see if we've got the right combination of price points and offers to see if there's not something better than what we currently have.

And as you know, Sharon, it takes a while to read our results. We're not like spend some time in apparel and food, you can read something for a couple of weeks and get a pretty good sense of it. Because we're subscription, you have to see how it affects membership joins, folks who come in as well as how they cancel. So we have to read things for a number of months before we can really determine whether one beats what we have today. But I think our appetite to test is always pretty healthy. I think what we're considering testing is probably wider in scope than we have done before.

So theoretically, maybe more tiers?

It could be, yes, we're not being real specific, but I think the wider aperture idea would probably -- what you consider is probably not far from what we might be doing. But yes.

Okay. Can you also talk about you had been testing a Black Card price increase for quite a while. It seemed like it was going well. Obviously, we have a different consumer environment in 2026 with gas prices and so on.

You did decide to defer the Black Card price increase system-wide. Can you talk about the decisions behind that? What were the factors, how the franchisees have reacted to that decision. And is this really just a deferral? I mean do you expect this to be something that you implement in '27 or '28? Or how do you think about that Black Card pricing?

Yes. Maybe I'll keep going. So Black Card is the higher price, but it's a phenomenal value. And I think that the testament to that is about 2/3 of our current membership takes the Black Card -- or is a Black Card member. And of the people who join in any given year, while most of our marketing features the Classic Card when people come in -- used to come into the club to sign up now more people sign up online. The majority of people who join are joining at the higher rate of the Black Card.

So in light of what we experienced in net member growth in the first quarter, which was below our expectations. We just didn't think it was prudent to then raise the price of the thing that most people take. And while we tested it, we tested it in an environment to your point that was different.

So we've taken the Black Card price up over time gradually, and it's percent of the member mix has increased over time. So it proves what a value that is. It used to be $19.99, and we took it up periodically $1 or $2, and it's currently $24.99. We do have some markets that are $29.99 and a couple of them. So I think we -- the time will come when it's right. We just didn't think based on what we've seen and what we're trying to do and really sort of reinforce the importance of net member growth over rate growth that we'll put rate aside until we can prove with the marketing that we've reignited net member growth and then we have more options.

I mean how does that resonate with franchisees? I feel like with franchisees, it often feels easier to take price because you get that immediate impact, it takes longer to build members. So when you're having this discussion with franchisees about we're doing member growth, which is the more durable long-term dynamic, but it's a less impactful near-term dynamic where do they fall on that spectrum of the conversations you're having with them?

I'll do one more, and then I'll shut up. But so the brand just historically to wind the clock back, pre-COVID, we had 53 straight quarters of positive comps, 53. The average of that -- my memory is not what it used to be, but I believe it's 6% over that time. And it was largely member growth driven. We grew faster than the industry in most years in membership. So everybody else was -- and we only built about 25% of the new units. So everyone else was building new units and sharing a smaller pie.

So we think member growth is the sustainable way to grow the business. We think no matter what it is, we love our franchisees. We have just south of 90 of them. Most of them are pretty big, pretty sophisticated. If you ask them any questions, you're not going to get a consensus answer. But I think the ones who've been it for a long time, and there is some private equity money in our business, but the owner operators have typically been. While their ownership -- or the majority owner may change, they tend to roll. So they have a long horizon in how they think about things. And as do we.

And I think the right answer is member growth helped by rate growth. And so I think some were quite resident or had -- were not in favor of the Black Card price going up based on what they saw in Q1 as well. So I think the folks who have the long view believe we're on the right path. There are a couple who would disagree, but they'll disagree with anything.

In addition to member growth, are there other things you're working on to help improve the franchisee IRRs?

Yes, I'll start. So in addition to member growth, certainly, the #1 thing that drives the flywheel the slide that's still up is absolutely net member growth. That's what drives the EFT of the club, and that's also the most profitable dollar that we can bring in for a franchisee, right? The profit margin on an incremental membership is well over 80% from a flow-through standpoint, after you deduct their royalty and the national marketing fee. So the thing that's most accretive.

I think from a value proposition standpoint, we're doing a lot. One is around retention. So we've got a number of things underway that will help ensure that we enhance the life cycle of a membership. That's accretive to a franchisee's economics. So reducing churn, enhancing the relationship with the member so that they stay longer. The first 100 days, I touched on that really important, the level of engagement and getting a member comfortable with the club shortly after they join, so that they increase their utilization and that drives stickiness.

We just launched in April, it's learning. It's in kind of a beta mode, an AI-enabled predictive analytics churn model to help identify among our membership, what are some of the indicators of a propensity to churn. And as this model learns that, then we'll arm it with some inducements or incentives that they can use as retention strategies to serve up retention strategies for members.

So not only leaning in on gross joins. But when we say net member growth, it's gross joins as well as retention.

And then back to the pricing, as Tom said, we've taken pricing from time to time, not often with Classic. We just raised Classic for the first time. But that 2/3 of our membership that participates at the Black Card level, one of the things we're always thoughtful about is enhancing the value of the Black Card membership. And from a Black Card spa's standpoint, we're testing five new modalities that our franchisees are quite excited about. And this isn't to add costs. This will be instead of. So maybe they'll have one less tanning bed, but then they'll put a spray tanner -- self-spray tanner and instead or maybe one of the standup tanners comes out and a red light goes in because red light is really popular right now. So we've had it in -- had these five modalities in 13 clubs today, they've tested really well. We're putting them in 100 club test at a DMA level so that we can put marketing behind them. This will help enable us to support thinking about Black Card pricing in the future and the value that, that could bring to our franchisees.

And then the last thing -- not last, but one of the last things I'll talk about is on the build cost. And we know that construction costs have grown over time since pre-COVID labor, construction materials as well as the rent per square foot that our franchisees are paying for the fairly tight suburban shopping center retail space, 20,000 square feet is our average gym size. So we're also working on reducing that build cost so that our franchisees can build more economically while at the same time being accretive to the member experience.

So as for example, we have over 80% of our joins joined digitally today, either online or through our app. We don't need a big lobby for in-club sign-ups. Big lobbies are expensive, one, because they're square footage, but two, because we tile them. And when we reduce the footprint of the lobby, we can dedicate more space to the gym floor and we reduce the build cost with expensive tile.

Same with locker rooms, we're building locker rooms at -- we were building locker rooms that were similar to what we built at the inception of Planet. People are showering and getting ready less in the gym locker room today, more at home, shower utilization is pretty low. So we can build a smaller locker room. Plumbing is expensive, tile is expensive, lockers are expensive. So shrinking that footprint is answering the call for a more economical build, it's also enabling us to dedicate more of that square footage to the gym floor at a time when people want space for stretching functional training and more strength equipment.

Great. That went really fast. We're out of time. We are yellow Yes, I know right? We are going to have a breakout in the Adler. So hopefully, we'll see everyone there. Thank you.

Thank you all. Thanks, Sharon.

Good morning, and thank you for joining today's Planet Fitness Q1 Earnings Conference Call. [Operator Instructions]

I would now like to hand the call over to Brendon Frey for opening remarks. Please go ahead.

Thank you, operator, and good morning, everyone. Speaking on today's call will be Planet Fitness' Chief Executive Officer, Colleen Keating; and Interim Chief Financial Officer, Tom Fitzgerald. Colleen and Tom will be available for questions during the Q&A session following the prepared remarks. Today's call is being webcast live and recorded for replay.

Before I turn the call over to Colleen, I'd like to remind everyone that the language on forward-looking statements included in our earnings release also applies to our comments made during the call. Our release can be found on our investor website along with any reconciliation of non-GAAP financial measures mentioned on the call with their corresponding GAAP measures.

With that, I'll now turn it over to Colleen.

Thank you, Brendon, and thank you, everyone, for joining us for the Planet Fitness First Quarter Earnings Call. I'm pleased to have Tom Fitzgerald joining me on today's call, and I'd like to thank Tom for pausing his retirement to step in as Interim CFO. Tom is an accomplished finance leader with a deep understanding of our business and franchise model. I look forward to working with him again to position Planet Fitness to drive growth and shareholder value as we conduct a thoughtful and disciplined search to identify our next permanent CFO.

To start today's call, I'll walk through the key drivers of our first quarter performance and review the actions we're taking to refine our go-to-market strategies and reinvigorate member growth. Tom will follow with a review of the financials and outline our updated 2026 guidance.

During the first quarter, we grew net new members by more than 700,000, achieved system-wide same club sales growth of 3.5%, increased adjusted EBITDA 19.5% over Q1 2025 and opened 15 new clubs. While our top and bottom line results exceeded expectations, we are not satisfied with our member growth performance. The fitness industry continues to enjoy a number of long-term tailwinds as more people recognize the critical role movement plays in enhancing both physical and mental well-being, preventing disease and enabling longer, healthier lives. As a result, demand for accessible and affordable fitness continues to grow. We saw this momentum in 2025, delivering 6.4% club growth and adding approximately 1.1 million net new members, a 10% increase in net new membership adds over 2024.

A recent Health & Fitness Association study cited that fitness memberships for 2025 were up 5.4% over '24, reflecting that the industry experienced solid growth last year as well. While this favorable backdrop remains in place, during our key Q1 sign-up period, we faced some internal and external headwinds that impacted our join momentum year-to-date. As a result, we are taking targeted actions to reinvigorate member growth. We believe that a combination of 4 factors most directly affected our performance. First, our marketing largely resonated with a more fitness-minded consumer, yet had less resonance with the fitness beginner or more casual gym goer, traditionally our sweet spot given our differentiated nonintimidating environment. Second, we saw some competitive impacts in certain markets, particularly South Central and Southeast U.S.

Third, unfavorable weather conditions affected a number of regions during the quarter; and fourth, macroeconomic pressures and uncertainty weighed on consumers. Our overall performance reflects the strength and resiliency of our model. However, the addition of more than 700,000 net new members during the quarter did not meet our expectations. While this was driven by multiple factors, refining our marketing messaging and targeting is directly within our control. We are making immediate and near-term adjustments to broaden our reach and ensure our messaging is both visible and resonates with the fitness beginner and more casual gym goer.

Before I further address that, let me provide some context on how the year has unfolded. Member join trends were solid in the first 2 weeks of January, partially offset by temporarily elevated churn. Severe cold and winter weather in late January and February disrupted joins, especially as several of the storms fell on Mondays, our busiest join day of the week. We anticipated that our March campaign, Black Card First Month Free, which was very successful during the same time last year, would improve our join momentum over the remainder of Q1 and into Q2. Yet as we moved through March and into early April, our join trends remained below our plan.

Guided by consumer research and member behavior, over the past 2 years, we've evolved our equipment mix to deliver a more balanced combination of strength and cardio equipment, along with additional open floor space. This ensures members can work out their way. At the end of the first quarter, more than 80% of our entire system featured some version of a format optimized layout or equipment offering. As we've shared previously, our data shows this was the right decision as we enhance the member experience and support long-term engagement, and we shared some of this feedback at our Investor Day last fall. This evolution was a notable shift within our clubs.

To broaden our reach and reinforce that people of all fitness levels can achieve their goals at Planet Fitness, in Q4 of 2024, we began to showcase more advanced aspirational gym goers and strength equipment in our marketing, which resonated with a more fitness-minded consumer. This was a shift from the lighthearted approachable tone that had previously been a hallmark of our brand messaging.

We were encouraged by our net member growth in 2025 and made the decision to extend the campaign into 2026. However, looking at data from Q4 of last year and Q1 of this year, we saw that our messaging and targeting was successful in driving increased penetration with the fitness-minded consumer, yet we may have pivoted too far. To this end, we've identified 2 areas where we're sharpening and intensifying our focus this year, driving member acquisition and reinforcing affordability.

Let me start with member growth. We believe we have an opportunity to dial up the brand's no-gymtimidation ethos in our creative and messaging to appeal broadly to fitness beginners or more casual gym goers, a differentiator that sets us apart from the rest of the industry and is a critical advantage relative to other HVLP peers. To support this, we're testing new marketing initiatives aimed at reigniting net member growth with our target audience at the forefront. We also ran an RFP process in Q1 and recently selected a new creative agency. While we are already refining existing work for Q2 and Q3, we anticipate a new campaign to be in market before year-end to set us up for Q1 2027.

Additionally, as we shared at our Investor Day, we are investing in more advanced data-driven marketing tools that allow us to be more agile in our messaging. This includes testing different machine learning models as we modernize our CRM engine as well as building a dynamic content optimization engine for both development of creative assets and dynamic ad serving. These tools will enable us to deliver personalized advertising in real time through the right channels, driving acquisition and retention.

While we have seen and are actively addressing increased competition from other HVLP brands in certain markets, they generally target a narrower span of fitness levels and age cohorts. In this environment, it is critical that we clearly and consistently message consumers that while our offering has evolved to meet consumer needs, what truly sets Planet Fitness apart is our nonintimidating judgment-free environment. And this is where we can fully leverage our unmatched marketing fund by letting prospective members who are new to fitness know we're the place for them to begin their fitness journey and remain as they progress on that journey. While we know most consumers today are more fitness aware, our sweet spot is the more than 70% of the population that are not a gym member today and who value the welcoming environment at Planet Fitness.

We have a clear plan to expand our leadership position, strengthening the Planet Fitness brand, deepening member engagement, shifting elements of our execution to ensure we continue to maintain and extend our leadership in the HVLP space and driving membership and unit growth.

Now let me turn to our affordability and the everyday value that we offer. Against a macroeconomic backdrop of increasing financial pressure on consumers, we are reinforcing Planet Fitness' long-standing commitment to affordability. Economic data indicates an increasingly uneven economic recovery with higher-income households remaining resilient, while lower-income consumers experience mounting pressure. We want Planet Fitness to be accessible to all consumers who want to improve their health. Our pricing architecture and consumer value proposition is one of our most powerful strategic levers and historically has been a source of disruption and growth for our brand as the leader in the HVLP space.

While we conducted extensive testing over the past couple of years to support a potential Black Card price increase, the consumer and economic backdrop have shifted. Based on our experience, price increases create a near-term headwind to member joins. As a result, given our decision to prioritize member growth, we have decided to pause the national rollout of our Black Card price increase. At the same time, we are a test-and-learn organization, and our objective is to evolve pricing thoughtfully and in line with our brand promise of democratizing access to fitness while delivering exceptional value. Our test-and-learn approach ensures any pricing change is deliberate, data-driven and true to who we are as a brand, reinforcing our HVLP positioning while sustaining our role as the category leader.

Given our softer start to the year and the adjustments to our strategies, we are updating certain elements of our full year guidance. Two key factors driving the revisions are the net member growth shortfall in Q1, which has an outsized impact on the year, and our decision to pause an increase to Black Card pricing. Tom will walk through the specifics shortly.

These changes also impact the 3-year algorithm we shared at Investor Day last November. And as a result, we've made the decision to withdraw that outlook. I want to reaffirm our confidence in our strategy and the many key initiatives that underpinned it, which we outlined at Investor Day. We are continuing with these investments, and they are progressing well and on track. While we are taking action to address current market conditions, we are doing so while leaning into the same initiatives we outlined in November to drive sustainable long-term member growth.

Now I'll turn it over to Tom.

Thanks, Colleen. It's a pleasure to be back at Planet Fitness supporting you and the team while we search for a permanent CFO. This is a great brand with an incredibly strong competitive position, and I love the brand, and I love the team. So it was easy to say yes to rejoin Planet on an interim basis. While 2026 is off to a slower start than expected, I believe the factors impacting our momentum have been identified and are addressable through adjustments to our strategies.

Before I get into the financials, I would like to provide further insight into what we believe drove the softer net member growth in Q1. In addition to the marketing not resonating with the fitness beginner or more casual gym goers and competitive pressures in certain markets that Colleen spoke to, net member growth was also impacted by higher-than-expected attrition in the first quarter. Now Planet Fitness is committed to delivering an exceptional member experience, ensuring that our members choose to stay with Planet Fitness based on the value we provide, not due to any barriers to cancellation. This is why the company took the lead and rolled out online member management nationally in May of last year.

As we have shared before, our monthly attrition has historically been between 3% and 4%. This was true last year even after we introduced online member management more broadly. In January, we experienced elevated churn, which we partially attribute to a heavy rotation of TV advertising that included the use of the phrase "cancel anytime" in the messaging. After adjusting the language, attrition for February and March declined. Though it was still elevated versus last year, the gap was more in line with what we saw in Q4 of last year. For Q1, our attrition rate averaged 3.8% per month, which was within our historical range. For the rest of the year, we expect monthly attrition to continue to be in the top half of our historical range due in part to the implementation of online member management, but also driven by the increased penetration of Gen Z as younger consumers historically churn more than older cohorts.

Adding to what Colleen touched on earlier, the headwind from churn was followed by winter storms in January and February. While these weather-related disruptions were known and contemplated when the company issued guidance on the Q4 call in late February, the expectation was that, with better weather, net member growth would improve over the remainder of the quarter, similar to what we had seen in the latter half of December and the first half of January. Unfortunately, this reversion did not materialize to the levels expected for the reasons Colleen and I mentioned earlier.

Now to our first quarter results. All of my comments regarding our first quarter performance will be comparing Q1 2026 to Q1 of last year, unless otherwise noted. We opened 15 new clubs compared to 19. We delivered system-wide same club sales growth of 3.5% in the first quarter. Both franchisee and corporate same club sales increased 3.5%. Approximately 90% of our Q1 comp increase was driven by rate growth with the balance being net membership growth. Black Card penetration was 67% at the end of the quarter, an increase of 240 basis points from the prior year.

For the first quarter, total revenue was $337 million compared to $277 million, an increase of 22%. The increase was driven by revenue growth across all 3 segments. A 17% increase in franchise segment revenue was primarily due to an increase in National Ad Fund, or NAF, higher royalty revenue from increased same club sales as well as new clubs, and placement and franchise fees. The increase in NAF revenue was primarily due to a 1% increase in NAF contributions from 2% to 3% for 2026. For the first quarter, the average royalty rate was 6.7%, an increase of 10 basis points from prior year. The 5% increase in revenue in corporate-owned club segment was primarily driven by sales from new clubs as well as increased same club sales. As a reminder, we opened 23 new corporate clubs since January 1, 2025, 11 of which occurred in the fourth quarter.

Equipment segment revenue increased 123%. The increase was primarily driven by higher revenue from replacement equipment sales and higher revenue from new franchisee-owned club placement sales. We completed 14 new club placements this quarter compared to 10 last year. For the quarter, replacement equipment accounted for 87% of total equipment revenue compared to 78%.

Our cost of revenue, which primarily relates to the cost of equipment sales to franchisee-owned clubs, amounted to $45 million compared to $22 million. Club operations expenses, which relates to our corporate-owned club segment, increased 8% to $88 million compared to $82 million. This increase was primarily due to operating expenses from 23 new clubs opened since January 1, 2025. SG&A for the quarter was flat to prior year at $34 million, while adjusted SG&A was $33 million, an increase of 2%. National Advertising Fund expense was $32 million compared to $22 million, primarily due to the 1 point shift this year in marketing from the local fund to the national fund.

Net income was $52 million, adjusted net income was $59 million, and adjusted net income per diluted share was $0.74. Adjusted EBITDA was $140 million, an increase of 20% year-over-year, and adjusted EBITDA margin was 41.5% compared to $117 million with adjusted EBITDA margin of 42.3%. By segment, franchisee adjusted EBITDA was $95 million, and adjusted EBITDA margin decreased from 73.7% to 70.4%. Corporate club adjusted EBITDA was $46 million, and adjusted EBITDA margin decreased from 34.3% to 33.1%. Equipment adjusted EBITDA was $19 million, and adjusted EBITDA margin increased from 26.8% to 31.3%.

Now turning to the balance sheet. As of March 31, 2026, we had total cash, cash equivalents and marketable securities of $652 million compared to $607 million on December 31, 2025, which included $81 million and $66 million of restricted cash, respectively, in each period. In Q1 2026, we used $50 million to repurchase approximately 614,000 shares at an average price of $81.47.

Moving on to our 2026 outlook. As Colleen noted earlier, given the net member growth trends in the first quarter and our decision to pause the planned national Black Card price increase, we are adjusting our 2026 guidance. We now expect system-wide same club sales growth to be approximately 1%; revenue to grow approximately 7%; adjusted EBITDA to grow approximately 6%; net interest expense to be approximately $111 million; adjusted net income to decrease approximately 2%; adjusted net income per diluted share to grow approximately 4% based on adjusted diluted weighted average shares outstanding of approximately 79 million. Our decision to pause the increase on Black Card accounts for approximately 150 bps of the reduction in our outlook for same club sales for the year. The rest of the decrease is due to softer net member growth trends. As we think about the composition of same club sales in the future, our goal is to have the majority of growth driven by member growth versus rate growth.

Our outlook for unit growth has not changed. We still expect between 180 and 190 new clubs system-wide and anticipate that the cadence of these openings and the related 150 to 160 equipment placements to be weighted to the second half of the year, especially the fourth quarter. We expect that re-equip sales will make up approximately 70% of total equipment segment revenue for the year with an equipment margin rate of approximately 30%. We expect the second and third quarter to each account for approximately 30% of our full year replacement equipment revenue and the fourth quarter to be approximately 15% of the full year. Lastly, we continue to expect capital expenditures to be up 10% to 15% and depreciation and amortization to be up approximately 10%.

In closing, we recognize that the operating environment has evolved in ways that require us to make some adjustments and to execute with sharpened focus on our core target. In response, we are taking proactive steps to reinvigorate net member growth and leverage our industry-leading marketing scale. Our focus will be to communicate the unique value proposition of Planet Fitness to a broader audience and ensure we connect with both our current and prospective members in a way that drives sustainable and profitable growth.

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

[Operator Instructions] Your first question comes from the line of Simeon Siegel with Guggenheim Securities.

First off, Colleen, any color you can share on how your conversations with franchisees are going amid all of it, just the current performance. And this color -- and then either for you or for Tom, just obviously a notable guidance cut. So maybe just speak to how you arrived at these new numbers, confidence in them. And do you think or do you believe this should be the last cut, and we should be looking at it that way?

Sure. Thanks for the question, Simeon. So from the standpoint of our conversations with franchisees, certainly, we've got alignment on our overarching strategy. Some of the things we're sharing today as it relates to kind of shift in marketing messaging, this is fairly new news. And we have a town hall with our franchisees next week to share more detail on the go-forward plan.

Yes. Simeon, I'll take the second part on the outlook. I think the big change really is how we're seeing same club sales and net member growth for the year coming out of Q1. I think Colleen a couple of minutes ago outlined the 4 reasons behind it. And also not taking the Black Card price up, given our net member trends, we think that makes sense. But that obviously has a bit of a headwind on the outlook for the year. But we think absolutely the right strategic move to make. Our approach was to revise the guidance with the idea that we wouldn't lower it for the rest of the year.

Your next question comes from the line of Randy Konik with Jefferies.

So Tom, just to kind of kind of bounce off that a little more. Coming out of the first quarter, are the trends kind of stable from first quarter into the second quarter? Are they getting worse on a net member basis? Can you kind of elaborate on that a little bit in terms of, again, arriving to the annual outlook change?

Yes. Sure thing, Randy. And we don't really comment on the member growth for the year or project it. But to help you out with a little bit of the color, we -- as Colleen said, we added about 1 million net members in Q1 last year. And this year, it was about 700,000 -- a bit over 700,000. And that's with more new clubs year-on-year. So clearly, we expected more. And I think for the reasons Colleen outlined, we think a big reason is the marketing and sort of trying to go after a more fitness-minded target versus our traditional target. And we think the beginner, first-timer is just a much bigger pool. So we're going to redirect what is, as you know, an outsized orders of magnitude, larger marketing spend than anyone else in the industry.

So we're going to put the crosshairs kind of back on where we used to. And -- but that's going to take a little time. It's not a flip of the switch, as you know, particularly in a franchise system. So I think that's principally what we're seeing. I would say we don't comment in the quarter, but I'd say we projected the rest of the year based on what we've seen coming out of February after the storms and into March -- through March.

Maybe I'll chime in on that a little bit. In March of last year, we had a very, very strong performance from our Black Card First Month Free promotion. And while we had some elevated churn in January and then some storm weather impacts that we were seeing coming out of January and into February, we anticipated very strong performance because we knew we were going to be running the Black Card First Month Free again in March, and we had softer performance than we anticipated there. So some of those trends are what we kind of carried forward in reforecasting the rest of the year because we didn't see the momentum in March that we had anticipated.

And then maybe just to comment a little bit further on the marketing and the shift in messaging, particularly because we, a couple of times a year, do a brand health tracker. We use a third-party research firm to help us evaluate how our marketing is landing. And when we built the 2025 campaign, "Grow Stronger Together," and "We're Are All Strong on This Planet," we were responding to what we saw in the brand tracker in early '24, which was that we needed to communicate to consumers and prospects that you could get strong at a Planet Fitness and that we had the right complement of strength equipment. The early read on that marketing was that it was working and it was communicating that message. So we saw the lift in consumer sentiment as we evaluated that campaign.

What we've come to recognize more recently, particularly in the data that we saw late last year and coming into this year, was that we were penetrating a more fitness-minded consumer. But you'll remember at our Investor Day, Brian Povinelli talked about defending and enhancing. And what this messaging did was enhance, but we missed a little bit of the defending. So where we had a strong ownership of the kind of the beginner or the person who might be more gymtimidated, that 70% of the population that doesn't have a gym membership today, this messaging may have resonated -- or did resonate a bit more intimidating, and we saw that in the more recent brand health data. So that's what's influencing the pivoting on the marketing messaging.

Got it. And then when you think about -- when I look at the Black Card penetration, I believe it was up, and then you're talking about a broader price review. What is the kind of messaging there or thought process there? Because on one hand, you're getting that increased penetration so that fitness-minded person, I'm assuming, is appreciating the value of those amenities in the Black Card spa, yet -- are you kind of looking at that from a perspective of -- is our initial pricing to an initial gymgoer looking too high when they see that Black Card price? Or just kind of give us some perspective of why the broader price review and pausing the Black Card. Just want to get some color there.

Absolutely. Great question. I'm glad you asked it. So as we think about the increased penetration that we've been experiencing with Black Card pricing and in the mid- to upper mid-60s in penetration across our membership, since we've narrowed the delta, the increase in the Classic Card price to $15 narrowed the delta between Classic and Black. That increased penetration is giving us price, right? It's giving us organic price lift because we're getting more penetration at the Black Card price of $24.99 versus the Classic price of $15. So to be clear, and we've said this over the past year, we are getting price from the increased penetration.

We also -- as we've talked about, we have seen -- in the past where we've taken a lift in Black Card pricing, we've seen a slight headwind on joins, certainly a diminution on the penetration, but it builds back over time. Given what we saw in the first quarter and our focus on doubling down on member growth, really leaning into member growth for the rest of the year and kind of the consumer landscape and backdrop, we felt that the most prudent decision was not to put a price headwind when we're doubling down on membership growth.

So we've put the pause on the nationwide rollout of a Black Card price elevation. And we're continuing to do price testing in a number of different markets with a couple of different price scenarios. We're always going to be testing, but the Black Card price test was initiated in a different -- much different consumer environment. So we felt it was prudent to refresh our tests, run a couple of new ones and put the pause as we really, really lean in heavy on driving member growth between now and the end of the year.

Your next question comes from the line of Max Rakhlenko with TD Cowen.

Maybe piggybacking in a way to the last question. But Tom, can you -- just going back to the comp for the year at plus 1%, because -- just give us more help. You are still getting the benefit from the Black Card mix, as Colleen just discussed. You are going to be cycling the worst of click to cancel in 2Q and 3Q. And then in 4Q, you start to get the benefit from the waterfall given all the boxes that you opened late last year. So in the context of all this, sort of how do we build to the 1% comp? And then how should we think about the member versus rate contribution in the rest of the year?

Yes. Max, so I would say that you're right, the clubs coming on board towards the end of the year into the comp base, that helps. It really does come down to the member growth. And as you know, in our business, it's not really what happened last month or last quarter. It's sort of the 12 months prior versus the prior and also the quarter's net member growth versus the net member growth in the prior quarter. And Q1 being so such a big piece of that net member growth change for the year, it kind of has an outsized impact that works its way through. So I think the split -- rate volume split in Q1 was 90-10, 90 rate, 10 volume. And I think, as Colleen said, really doubling down, zeroing in on the primary goal of driving net member growth. we've got to get that split to be different than 90-10. It's kind of unsustainable.

And in our business, you can spend a lot of money to drive -- because net member growth is profitable almost no matter what you do, unless you spend an incredible amount of money very efficiently. It's almost impossible not to make net member growth profitable. So that's really what's the beauty of the model, and I think what we want to rebalance. But the way we're calling the year is really based on the lack of the Black Card price increase that I mentioned, which was in our original outlook, not rolling that nationally, as well as just what we've seen as Colleen and I just mentioned on the last couple of questions about what happened through March that we expected more and didn't get it.

So we've got some work to do, and I think it will take a little bit of time to redirect it, but we're very confident that this is the right approach. And again, given our outsized spend and position in the industry and the fact that no one really goes after who we go after, we're confident that, that will fall into place and start to reaccelerate member growth and ultimately, comps. It's just going to take a while.

Maybe I'll bolt on for a minute, too, just because I know you're going to -- you're looking to model, and I think -- so we get asked the question, well, we can share it broadly. The Black Card price was about 150 basis points of the comp for the year, right? And then I would also say kind of the seasonality and the subscription nature of the model. A miss in Q1 is harder to make up over the rest of the year. January join represents 12 months of revenue. If we -- the marketing engine starts kicking at a higher efficiency later in the year, it will take 2 joins in January -- or 2 joins in July to make up a January join because of the seasonality in the subscription model.

And the other thing I'll just remind you is, while we had a very, very strong unit openings year last year, at 181 unit openings, 104 of those were in Q4 and many of them late Q4. So they won't actually come into the comp until the 13th draft cycle.

Got it. Okay. That's helpful. And then, Colleen, a lot of your comments are around marketing, but there certainly was a lot less color on how you're dealing with a more competitive peer set that, as we all know, it's going to become even more of a challenge over the coming years. So should the takeaway be that in your view, marketing is the biggest issue and not the actual value proposition itself even with an increasing number of peers that arguably offer more for a similar price?

So I think I would say offer different, not offer more. What -- where we're really doubling down is on the 70% who are not a member of a gym or a club today and are gymtimidated. And we know one of the biggest barriers to joining a gym is that fear of walking through the front door. And I've said that before, our biggest competitor is fear of walking through the front door. As I called out in my remarks, we did see competitive pressure in a couple of very specific geographies. So I called out Southeast, I called out South Central. But do keep in mind, we are 5 to 6x the size of our next largest competitor. So we can't say competition broadly and holistically across the estate is the driver of the softer join momentum in Q1.

We do believe, and what we've seen in the brand health track, the data that we've reviewed, is that we're resonating with a more fitness-minded consumer, but that is not as representative of our unique value proposition and the value that we do bring to the table, which is that welcoming all fitness levels, anyone of any age, any fitness level, any body type, you're going to walk into a Planet Fitness and you're going to see somebody who looks like you and feel comfortable in our nonintimidating environment. So we're going to amp that up in the marketing communications to ensure that we're penetrating our core prospective customer base.

But on -- any changes to the box or anything like that, is that more a longer term?

What we've seen is the form in -- the consumer feedback on format optimization is resonating. And Bill Bode shared that at our Investor Day, where our NPS indicates that our members are appreciating the more balanced complement of strength in cardio. So that-ish 50-50 mix of the gym floor having a balance of strength and cardio and also the fact that we've opened up more floor space for people to kind of drop a mat and do their workout their way, that is resonating.

We think the creative -- and candidly, we got exactly what we set out to do. We wanted to convey that you could get strong at Planet Fitness, but when we think about the creative, we dialed up a little bit of the sweat level of our talent in the creative and some of our messaging, and we need to bring back a little bit of the lightheartedness and convey the approachability and the no gymtimidation that makes us so unique and special.

Your next question comes from the line of Joe Altobello with Raymond James.

I guess first question, I'll piggyback off of the competitive pressures question in terms of the quarter. It sounds like it was regionally confined. But what was it about those competitors or maybe those regions that drove that?

Yes, I'll start. Joe, I think it is concentrated. And I think one of the things that we've seen historically is -- and some of them are opening boxes in certain markets fairly aggressively, the newer formats. And sometimes we've seen this historically with Planet, a new gym opens up near one of ours, we lose some members. But over time, we tend to gain them back because they're not comfortable in those environments. And I think back to what Colleen was saying, that's really the -- one of the key things about Planet is we're trying to get you, primarily, the 70% now who don't belong to a gym, to start your journey. And then when you get in, it should feel like -- it should feel very different than any other gym would feel, where it's not intimidating, it's welcoming no matter your fitness level. And we just don't think they have the ability to do that.

I'd say the second thing is, candidly, when we took the Classic Card up from $10 to $15, we thought some of them would follow. And in some markets -- in some of these key markets that Colleen mentioned, they haven't. So the headline price is better than ours. And now when you get inside, there's all kinds of extra fees and add-ons and commitments you have to make. But when you're there, you're there. So we think as we reconsider the approach forward, I think, primarily, to compete, we need to make sure our environment is even less intimidating than it is. That's a never-ending quest. We'll never be satisfied with that. And I think the second piece of it is, redirecting to primarily target the people who aren't -- who don't have a gym membership today.

Got it. That's helpful. I appreciate it, Tom. And maybe secondly, on the macro pressures on member growth. I'm curious when you started to see a shift there because the testing that you did last year, obviously sounded relatively encouraging and allowed you to move forward with the price increase. But I'm curious what the timing was there. And just as a follow-up to that, it looks like it's still $30 in many markets. So is that going to get rolled back?

So I'll start. The testing really started in -- back in 2024. So it was a different consumer environment when we initiated that Black Card test. We started that test almost immediately on the heels of the Classic Card price rollout, which was June 28 of 2024. So we're going back now nearly 2 years and a bit of consumer environment.

The second part of that question?

Yes, I'd say -- I'll pick it up. So we do have some markets still at $29, Joe, if that's what you were asking. And I think we've got -- where we have it, we want to let it run a little longer in part to see how that Black Card and Classic Card mix shifts over time. And also, in some of those markets, the price that other people offer is significantly higher. So we -- and the cost of doing business is significantly higher. So we're going to let them run for a little bit and continue to read, but we don't have any plans at the moment to pull those back.

I think that's right. I think we've got a number of tests in market, but we're not -- there are no -- and we said no nationwide rollout for the Black Card price elevation, but we don't have any imminent plans of a price rollback there either.

Your next question comes from the line of Jonathan Komp with Baird.

Just a broader question. With nearly 3,000 units and your typical approach of testing and learning, is there anything that holds back your ability or speed to which you can test new initiatives, outside of marketing maybe? And when you think about changing the trend in member trends, could you give us a little more concrete, just your specific plans and maybe confidence levels and any thoughts on time line?

Sure. I'll start with maybe the ability to test. Certainly, we own about 10% of the fleet, and we can move very quickly with great agility to run tests in our own corporate clubs. So that's a test accelerant. The other thing I'll say is we've got a super engaged franchisee base. And even some of the tests that are in flight right now, we reached out to a number of franchisees and have had great participation. And that tends to be true in our system. When we reach out to franchisees and ask them to participate in a test, we find a lot of engagement and strong participation. So we can move with speed and agility in testing.

I will say we may tend to test longer because of the size of our estate to make sure we're really pressure testing and because of the seasonality of our business. So we can launch a test quickly and with agility, we may tend to test a bit longer to make sure that we're capturing regional nuances, really understanding the difference in the control group and capturing some seasonality in the test as well.

Anything you want to add to that?

No. John, maybe I'll take the second part of your question, and Colleen may add. I think the confidence we have in the actions will improve net member growth trends once we get them in place. I'd say it's pretty high. I mean we're going back more to -- in an evolved way, not exactly the same way, but going back to what we did and targeting who we did, and it was successful. I mean we grew faster than the industry for years. We used to talk about a higher percentage of people who don't belong to a gym is now lower. That's really due to us. And the power of the marketing. And I think, to Colleen's point, we got what we were trying to do in a way. That also shows the power of the marketing.

That's right.

So I think putting the big bazooka on the right target with the right messaging, it's not a new idea. It's an evolved idea that we used to run for a long time in our playbook that had a lot of success. So that's primarily what gives us the most confidence.

Okay. Great. And then my follow-up, Colleen, in the press release, I think you mentioned confidence in driving enhanced top and bottom line results in 2027. Any more context to that comment and your confidence in driving some re-acceleration after this year and a bit of a reset? And do you see any risk that the trends you're updating guidance for this year creep into less willingness from franchisees to build units?

Yes. So I think when it comes to a shift in marketing and marketing messaging, it takes a minute to work with the agency and develop the new messaging and the new creative and shoot the creative. And then, of course, we've got to test it. And at the end of the day, the biggest quarter -- the biggest joint quarter where we're going to really see the greatest return on these initiatives, while we're moving on them very quickly this year, we'll best evaluate the benefit when we get into a join quarter like Q1 of 2027.

So we see this year as a building year for some of these -- and we communicated some of the things we're investing in at Investor Day, and those are moving forward as well. We've just went into pilot, early pilot, in the launch of our AI-enabled predictive churn model. So that was something that we talked about at Investor Day, that just went into pilot. We're in the short strokes of selecting our partner for the DCO engine. And we're making very good progress on the AI-enabled CRM next best action model that will be in market or be in flight in the back half of the year. That's in the second half that we'll go into pilot in lockstep and in tandem with our new app, our revitalized app.

So there's a lot in flight this year. And we communicated that, right, that this was going to be a year where we were building and investing in some new tools that will help us to drive, particularly, top line in the future. And when that top line grows, because of the flow-through, particularly on member revenue, it has an outsized impact on EBITDA.

Your next question comes from the line of Arpine Kocharyan from UBS.

Your ADA pipeline came down further from 800 to closer to 750 in your latest 10-K. And I think it says including more than 500 clubs over the next 3 years. Could you just maybe address if you're looking at kind of further pruning ADAs, how that's going? And I understand the more accelerated unit openings would bring that number down faster, but wondering what else is driving that lower?

Yes. I'll start and then, Tom, if you want to chime in. So certainly, part of the diminution on the pipeline is the fact that we had such a strong openings here last year, right? So we had 181 new clubs opened last year. At the same time, and Chip talked about this, there's a slide in our Investor Day deck about this as well, about the ability to take back some territory and resell it. So we've got a new team member on our development team that's actively engaging with franchisees and prospective franchisees. And we're seeing opportunity where we may be able to sell some new territory as well.

So we also have talked about population growth and kind of de-urbanization and where -- when transactions happen, we have the ability to recast ADAs, which then in turn kind of fills that pipeline as well. So as we've had transactions occur in our portfolio, we look at the territory. We recast the ADA based on where the population growth has taken place, where there may be another opportunity to support another club in that geo and adjust the ADAs accordingly with a new transaction.

Yes. I maybe just add to that, Arpine. I think over time, we've somewhat shortened the number of years in an ADA. So what happens -- and part of it is we want to see how it's going before we commit so much. It gives us more flexibility, more agility -- and so that -- sort of by shortening the tail, if you will -- or not the tail, but the...

Time line.

Yes, the time line and the number of years on average in an ADA, that has a natural sort of reduction there in total opportunities.

Your next question comes from the line of Chris O'Cull with Stifel Financial Corp.

I had a follow-up on the Black Card pricing. And I apologize if I missed it, but are you -- are there any new Black Card pricing structures you're testing?

Chris, it's Tom. Good to talk to you again. We -- as Colleen said in her -- on the call, we're going to be testing some things. We're going to be talking to our franchisees about what we want to test. As we typically do, we'll share that what it is, where it is and how it's doing at the appropriate time, but it's premature to talk about that. But I think as we think about really putting net member growth front and center in all that we want to do, I think it does make sense to step back and say, "What are we doing today? And what else do we want to think about and potentially test going forward?" More to come, but...

It's price and it's the price value relationship.

That's right. That's right.

Okay. And then, Colleen, my question -- my main question is about just the marketing changes. And just wondering how you envision reworking the message to reach both nonusers and current fitness-minded gym users. I'm just trying to understand how you manage the risk of trying to be a gym for everyone without losing kind of the simplicity and clarity of a message to like a single group.

Yes. I think we've long been kind of the opposite brand, and it's been our sweet spot to target that very large 70% of the population that is not a member of a gym today. And we want to ensure that our marketing messaging is reaching and resonating with that population.

Yes. And I might add, Chris, over the years, when we were targeting the folks who don't belong to a gym, we also had people who were pretty darn ripped in our gyms. You knew one well. And I know that I see him when I go in the gyms that we have. Now they -- and part of the non-intimidation, too, is just because they are body builders, doesn't mean they act like lunks. And I think that goes back to the no gymtimidation, really making sure our members are comfortable. And those are the folks who are wiping down the equipment after they use it, they put it away, and they're not banging it on the floor, there, you can't clap chalk and all that stuff in our place. And that's what you get in the other places. So that is hard for them to replicate because that's a very hard thing to change given who they've attracted compared to who we've attracted.

I think the importance is and what has been our sweet spot is that we attract members of all age cohorts, all fitness levels. And we want to ensure that our marketing is conveying that, that environment exists at Planet Fitness.

Your next question comes from the line of Sharon Zackfia with William Blair.

I guess as we think about the impact on more of those new-to-gym members, is there anything you can share on kind of what the membership mix was in new joins of those new-to-gym versus what you've seen historically?

Yes, Sharon. Without being super specific, the last couple of quarters, it's been down a little bit.

Okay. And then, Tom, as I think about kind of the impact of this tough first quarter, it kind of implies flat comps for the rest of the year. Is there any curve to that comp for the rest of the year? And how do we think about member growth? I mean, do you think there is an opportunity to end '26 with more members than you currently have?

Yes, sure. So we'll stick with our practice of not projecting and providing an outlook on membership. But I do think you're right, Sharon. We see kind of a gradual step down across the quarters without -- we don't provide quarterly guidance, as you know, but it's just based on that subscription model that you know and Colleen and I touched on earlier. That's how we see it.

I will now hand the conference off to Colleen Keating for closing remarks. Colleen, please go ahead.

Thank you. Planet Fitness is a market leader, and the underlying strength of our brand and our business model remains in place. We have a proven track record of successfully navigating market pressures and near-term headwinds. More than 30 years ago, we entered the category as a disruptor, built on a differentiated offering and an unmatched value proposition at an accessible price point. That foundation continues to guide how we operate today, and we look forward to updating you on our progress as we move ahead. Thank you.

This concludes today's call. Thank you for attending. You may now disconnect.

Good morning, and thank you for joining today's Planet Fitness Q4 Earnings Conference Call. [Operator Instructions] I would now like to hand the call over to Stacey Caravella, Vice President, Investor Relations, for opening remarks. Please go ahead.

Thank you, operator, and good morning, everyone. Speaking on today's call will be Planet Fitness Chief Executive Officer, Colleen Keating; and Chief Financial Officer, Jay Stasz. They will be available for questions during the Q&A session following the prepared remarks. .

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

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

Now I will turn the call over to Colleen.

Thank you, Stacey, and thank you, everyone, for joining us for the Planet Fitness Fourth Quarter Earnings Call. Our strong 2025 performance is a direct result of our discipline and focus on our 4 strategic imperatives. I want to personally thank our franchisees and our team members. .

Their passion is what fuels this brand. We ended the year with approximately 20.8 million members and a global footprint of nearly 2,900 clubs. Reinforcing the quality of our member experience and our compelling value proposition. Anyone can get a great workout at Planet Fitness for an incredible value.

Our financial performance was strong across the board for the year as well. Sam's Club sales grew 6.7%. Revenue increased 12% and adjusted EBITDA 13% and we delivered 19% growth in adjusted diluted EPS. Importantly, we opened 181 new clubs and added 1.1 million net new members in 2025. This growth occurred during the first full year of our new classic card membership does proving that the value of our brand remains unique in the industry.

The progress we made on both our top line and new club growth is evidence of our powerful scale and reach, and the strength of our team. Our scale provides a foundation to introduce our brand to even more people looking to improve their physical and mental health globally.

There was no better way to wrap up the strong year than by taking center stage as the presenting sponsor of Dick Clark's New Year's Rockin Eve as we've done for the past decade. With 20,000 Purple Hats blanketing Times Square, we ensured Planet Fitness was the brand's millions of people saw as they set their 2026 wellness goals.

As we continue to grow our international presence, we see New Year's Rockin Eve as an opportunity to put the Planet Fitness brand on a global stage. We are seeing momentum as we execute against our 4 strategic imperatives. As a reminder, they are redefining our brand promise and communicating it through our marketing, enhancing our member experience. refining our product and optimizing our format and accelerating new club growth.

Let's dive into the specific progress we achieved across these areas during 2025. We I'll start with redefining our brand promise. A key driver in member growth was our intentional focus on the next generation of fitness enthusiasts. The 2025 High School Summer Pass program yielded our most successful results to date with more than 3.7 million teams completing more than 19 million workouts. An all-time high.

We believe the strong year-over-year results were enhanced by the marketing emphasis on our expanded product offering, showcasing that our clubs have a strong complement of strength equipment so members can achieve the workout stay desire at Planet Fitness. We also augmented our social media strategy to reach our younger consumer and increased our use of influencers to promote the summer pass.

Through the end of the year, we converted 8.3% of teen participants to paying members which represents an elevation in conversion over the past 2 years. Our strong conversion rate reflects how young people prioritize their well-being, and we provide them with a judgment-free environment to start or continue their fitness journeys.

Our success would not have been possible without our club team members who are instrumental in ensuring the participants first experience with Planet Fitness was positive, laying the groundwork for them to become members.

We continue to lean into our -- we are all strong on this planet campaign, which effectively showcases our best-in-class equipment and supportive atmosphere. This follows our 2025 strategic shift in our messaging approach, leading with the compelling why Planet Fitness message, followed by a Why Planet Fitness now call to action to reengage lapsed members and attract new ones.

Because this campaign resonated so strongly last year, we extended it into 2026. By maintaining this consistency, we avoided the cost of developing a completely new creative platform from scratch, while updating creative assets, focusing on differentiators for our brand.

This efficiency allowed us to redirect those savings into high-impact working media to drive even greater reach. The agreement with our franchisees to shift a portion of contribution from the Local Ad fund to the National Ad fund for 2026 and beginning in the second quarter allows us to move faster in executing on several strategic initiatives.

Beyond driving efficiencies by centralizing more of our ad spend, we are accelerating high-impact technology projects, including AI-enabled CRM and dynamic content optimization, to reach new members more effectively than ever before and invest in an AI-enabled predictive churn model to help us increase member retention.

Marking his first year with us this month, Chief Marketing Officer, Brian Povinelli has made rapid progress in scaling our marketing capabilities. Key milestones include strategic hires who are driving AI-enabled member experience initiative, national media buying and CRM work, a new social media marketing strategy as well as augmenting the team responsible for our perks on partnerships.

These moves will help us refine and better personalize our messaging, drive marketing spend efficiencies and more effectively engage and retain members. We are proud of the progress we've made so far and our strong joint volume last year, and we're excited for the impact these new leaders will make on our business moving forward.

I enjoyed spending time in our clubs, and I particularly like spending time in our clubs in early January to hear from our club managers and get a firsthand look at volume, club traffic and what pieces of equipment are getting the most usage.

Last month, I spent time in several of our corporate clubs that are part of the new Black Card amenities test. I tried a few of the new Black Card Spa modalities we're currently testing, including the Drive Cold Plunge and the Red Light fan-out. I spoke with members who were using the new amenities as well to hear their feedback and it was resoundingly positive.

We see an opportunity to drive both joints and upgrades as well as enhance retention with these new amenities. It's our opportunity to democratize recovery and wellness just as we did with fitness 30 years ago. Turning now to member experience and format optimization.

We are elevating the member experience through a sophisticated data-driven approach, strategically leveraging technology to drive deeper engagement and strengthen member retention. Our mobile app is a prime example. It remains the top download in the health and fitness category, serving as a touch point for our community.

We know that the first 100 days of membership influence long-term retention. Our data indicates that early engagement both digitally and in club contributes to higher lifetime value and the emotional connection to unlock our next wave of growth.

Looking ahead, we are piloting AI-driven tools to augment our in-club trainers, providing members with personalized coaching and workout support. We're also leaning into the evolving health landscape specifically regarding GLP-1s. As these treatments can lead to a loss of muscle mass, it's essential that users incorporate strength training to maintain their overall health.

Our judgment-free environment makes us the natural partner for this growing demographic. A recent survey conducted by 1 of our franchisees indicated that roughly 50% of people who take a GLP-1 consider a gym membership. We see positive indicators for continued growth and demand for our offering, as GLP-1s become more accessible through lower pricing and pill formats.

To that end, we are seeing excellent early results from our Perks partnership with [indiscernible] while it is still early days and too soon to run a victory lap, we can share that this has been our most successful program yet with high download and conversion.

Collaborations like this helped to position us at the forefront of a major shift in consumer wellness. Beyond digital perks, we're focused on the physical member experience through format optimization. We believe in giving members the ideal equipment mix designed for them to complete their work out their way.

Not only has member response been favorable, the response from our franchisees has been overwhelming. In 2025, 95% of those who opened or remodeled clubs chose an optimized format. We concluded the year with nearly 80% of our entire system featuring some version of a format optimized layout or equipment offering.

And finally, our efforts to accelerate new club growth. Our focus is on leveraging our collective size and scale to defend and expand our industry leadership position in the HVLP space. Thanks to an incredible push by our total system particularly in the last several weeks of the year, we opened 104 clubs during the fourth quarter, an all-time quarterly high for a total of 181 openings in 2025.

Let me say that again because it bears repeating. This is the highest number of Q4 openings in our history. While the real estate market showed a few signs of easing in 2025, it remains highly competitive. We are navigating this by partnering with franchisees to demonstrate our unique value proposition to landlords.

Specifically, how Planet Fitness drives foot traffic that benefits the entire retail center. Furthermore, we're leveraging industry relationships to capitalize on prime site opportunities emerging from retail bankruptcies. We are also seeing success with franchisee-led acquisitions where they purchase small portfolios of regional gems and convert them to Planet Fitness locations.

An effective way of expanding our footprint in high-demand tight real estate market. This can be beneficial from a build cost standpoint as electrical and plumbing is already in place and from a financial ramp standpoint, as we have seen a solid percentage of members convert to Planet Fitness so the club has a member base and cash flows from day 1.

Our international expansion remains a key growth pillar we are focused on scaling our presence in existing markets like Mexico, Australia and Spain, while strategically entering 1 to 2 new markets annually. A prime example of this momentum is our recent entry into Northern Mexico with a new franchisee set to develop Tijuana and Mexicali.

We've also partnered with a bank to lead the Spain marketing process and have a number of interested investors as we look to convert that territory to a franchise market for accelerated growth. We are disciplined in our approach. We're building sustainable, healthy international market position.

This deliberate strategy is yielding results as we surpassed the 1 million member milestone across our international markets last year and have now crested 200 international clubs. Our Chief Development Officer, Chip Ohlsson, recently celebrated his 1-year anniversary, during which he has strengthened his leadership team with several key appointments.

He recently added a franchise sales director to his team with a focus on driving growth domestically to accelerate our outreach and expand our network of franchise partners. Finally, our commitment to member experience continues to earn prestigious third-party recognition.

We are especially proud to be named one of U.S.A. TODAY's best customer service companies for 2026. We Atlantic Fitness was the highest-rated fitness brand on a list of 750 companies across a wide number of industries, a distinction based on millions of reviews, measuring friendliness, competence and reliability.

Exceptional service is a business imperative that builds trust and drives the loyalty essential to our long-term retention and top line growth.

Now I'll turn it over to Jay.

Thanks, Colleen. Our financial foundation remains exceptionally strong. I'd like to reiterate, we're extremely proud of what we delivered in 2025. Our highly franchised asset-light model continues to generate significant predictable cash flow. This has allowed us to return nearly $800 million to shareholders through buybacks over the last 2 years while also funding strategic investments for future growth. Now to our fourth quarter results.

All of my comments regarding our quarter performance will be comparing Q4 of 2025 to Q4 of 2024, unless otherwise noted. We opened 104 new clubs compared to 86. We completed 96 new club placements this quarter compared to 77 last year. We delivered system-wide same club sales growth of 5.7% and Franchisees same club sales increased 5.6% and corporate same club sales increased 6%.

Approximately 80% of our fourth quarter comp increase was driven by rate growth, with the balance being net membership growth. Black Card penetration was 66.5% at the end of the quarter, an all-time high and an increase of 260 basis points from the prior year.

Our ending fourth quarter member count of approximately $20.8 million was in line with our expectations. For the fourth quarter, total revenue was $376.3 million compared to $340.5 million. The increase was driven by revenue growth across all 3 segments, including a 9.6% increase in the franchise segment, a 7.4% increase in the corporate-owned club segment and a 15.3% increase in the Equipment segment.

The increase in our Equipment segment revenue was driven by higher revenue from equipment sales to franchisee-owned clubs. For the quarter, replacement equipment accounted for approximately 60% of total equipment revenue compared to 58%. For the fourth quarter, the average royalty rate was 6.7%, flat to the prior year.

Our cost of revenue, which relates to the cost of equipment sales to franchisee and clubs was $90.2 million an increase of 12.1% compared to $80.5 million. Club operations expense increased 7.1% to $79.6 million from $74.4 million. SG&A for the quarter was $37.3 million compared to $35.7 million. Adjusted SG&A was $36.8 million or 9.8% of total revenue compared to $34.4 million or 10.1% of total revenue.

National advertising fund expense was $21.4 million compared to $19.4 million, an increase of 10.5%. Net income was $60.7 million, adjusted net income was $69 million and adjusted net income per diluted share was $0.83. Adjusted EBITDA was $146.3 million and adjusted EBITDA margin was 38.9% compared to $130.8 million with adjusted EBITDA margin of 38.4%.

For the full year, adjusted EBITDA margin increased to 41.7% compared to 41.3% in the prior year. Now turning to the balance sheet. As of December 31, 2025, we had total cash, cash equivalents and marketable securities of $607 million compared to $529.5 million on December 31 of '24. which included $66.3 million and $56.5 million of restricted cash, respectively, in each period.

During the quarter, we refinanced approximately $400 million of our debt that was due next year and upsized the deal to $750 million at a blended coupon of 5.4% and executed a $350 million accelerated share repurchase. Now to our outlook. We knew this year would represent the lowest growth year in our 3-year algorithm for 2 primary reasons.

First, the extended replacement cycle for equipment as part of our new growth model that we rolled out in '24. Second, in Q3 of last year, we sold 8 corporate-owned clubs in California. Transitioning these clubs from the corporate owned segment to the franchise segment aligns with our asset-light strategy, yet reduces our revenue and profit year-over-year growth in '26.

We've seen strong joint demand during the quarter, a clear signal that our brand value and offerings are resonating. We've also experienced 2 short-term transitory items quarter-to-date. Our joint trends were impacted by the storms and cold weather in late January across many of our markets, and we experienced a slightly higher cancel rate last month than anticipated. Notably, recent attrition trends are returning in line with their expectations.

Now to our guidance for '26th, which incorporates the factors described earlier. We expect system-wide and club sales growth of 4% to 5%. We expect to open 180 to 190 new club system-wide. Like last year, we anticipate the cadence of these openings and the related 150 to 160 equipment placements to be weighted for the second half of the year and especially the fourth quarter.

We expect reequipment sales to represent approximately 70% of total segment revenue, and we expect an equipment margin rate of approximately 30%. We expect total revenue growth of approximately 9% over 2025. We expect adjusted EBITDA to grow approximately 10% over 2025.

We project adjusted net income growth in the 4% to 5% range. On a per share basis, we expect adjusted diluted EPS to increase between 9% to 10% this is based on approximately 80 million adjusted diluted weighted average shares outstanding, which includes the impact from our ASR entered into at the end of last year, and our plan to repurchase approximately $150 million worth of shares in 2026.

We anticipate 2026 net interest expense of approximately $114 million reflecting the annualized impact of our 2025 refinancing. Lastly, we expect capital expenditures to be up between 10% and 15% and D&A to be up approximately 10%. We reiterate our 3-year growth algorithm that we outlined at last year's Investor Day.

The strategic imperatives and growth initiatives we outlined continue to build momentum, positioning us well to deliver against our long-term objectives. The fundamentals of our business are strong, the model is resilient, and we continue to generate significant cash flow that enables us to return value to shareholders.

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

[Operator Instructions] Your first question comes from the line of Randy Konik with Jefferies.

I guess, Jay, a question for you is when you look at the '26 guide and you think about -- you just reiterated your 3-year growth algo that you gave at the Analyst Day. Give us some perspective on what does that mean for the 2 out years in terms of shaping the revenue growth unit expansion and EBITDA dollar growth?

How are we supposed to think about that as we think further from '26 into '27 and '28.

Randy, thanks for the question. And as we said, right, we knew that this year would represent the lowest growth year in the 3-year range because of the reequipped cycle and because of the sale of the California clubs.

So those impacts, if we think about that on the year-over-year growth for this year is about a 300 basis point impact to top line and about a 200 basis point slightly north of that on the EBITDA. So obviously, that was contemplated and known.

Also included in our guidance this year are, like we mentioned, just some transitory to a much lesser extent, transitory headwinds and related to the weather impact in joints, which we can talk more about as well as a slight elevation in attrition versus our expectations that we saw in January, which is now normalized.

But to your point, right, we have reiterated our commitment to the 3-year algorithm, and we expect to get back to those targets that we laid out both for revenue and EBITDA over the 3-year period.

And to your point. So there's a bit of a step-up in the out years. I think you guys can probably all calculate and do the math. We expected, and this is not dissimilar to what we rolled out with our 3-year auto at Investor Day. We didn't indicate that the Algo was going to be an annual growth rate. But certainly, the strategic imperatives, we see the traction in their building.

And the beauty of this model is that once we start to continue to drive revenue and net member growth, there's significant flow-through to the bottom line. So we see increases in both year 2 and year 3 of that growth and to get back to the targets we laid out.

Got it. And then since you brought it up, can we then follow up with starting to get a little bit more granular about the month of January then?

Yes. So in terms of January, a couple of points that I'll talk about. On a -- from a joint standpoint, we saw nice healthy joint trends leading in -- for the first few weeks of January, leading into the storm that started late in January.

And then as we work through that storm, we had a significant impact across many of our markets, about 2,000 clubs based on our data had some form of impact, and we saw a marked difference in the relative join volumes during the storm period, the storms period in late January. And then since that time, for the markets that were impacted.

We've seen a nice rebound, and then we've seen some very healthy join rates related to promotions we've run in February. So I think those things are temporary in nature. Obviously, with the subscription model, a join that happens earlier in the year is more economically impactful and beneficial to join that happens later in the year.

And so we've reflected that as part of this guidance, and certainly, the impact is much less than the other impacts that we've discussed. And then from an attrition standpoint, slight elevation in January, right? This was the first year of a high-volume period with the ability to manage your membership with our messaging around cancel anytime.

So maybe in January, it's more top of mind just like fitnesses. So we have made some tweaks to our messaging in our digital platform around cancellation. And we have seen that the attrition rate has come in line in February with our expectations.

Your next question comes from the line of Simeon Siegel with Guggenheim Securities.

So Jay, just for the guidance, how are you thinking about Black Card penetration and then price versus member growth embedded within those revenues? And then just because we're talking about January, just I guess, Colleen, we've been talking about smoothing out the seasonality of your joints. So how do you think about the significance of a challenging, whether January now for plan if fitness versus maybe how we would have thought about it historically.

Yes. So I can start with that. I mean, obviously, from a joint standpoint, right, we've talked about -- in the past, I think, historically, they talked about 60% or so of joins coming in the first quarter. Obviously, in the past couple of years, it's been higher than that. we've talked about consistently the ability to get net member growth across several quarters.

And I'll let Colleen speak to it more -- we've got lots of things that we can do, and we're seeing traction on the strategic imperatives to drive joins. In terms of your question -- On Black Card penetration, I mean, we are seeing in the fourth quarter, we continue to see highest ever Black Card penetration of 66.5%. So that is a benefit to rate. As we think about the guide and the comp, we're expecting about a 75-25 split, 75% being rate, 25% being volume or membership growth.

Yes. And I'll just maybe build a little bit on what you said about the January joins. And Simeon, as you've seen we've been successfully running promotions and experiencing net member growth in quarters outside of Q1. This past year, Q4, we had net member growth prior year in the back half, we also had net member growth.

So you'll continue to see us deploy marketing in quarters outside of the first quarter. And I think a couple of things important to note, coming through 2025, with 1.1 million net new members, that was is a 10% increase on net new members versus the prior year 2024, and it was our first full year of the elevated classic card pricing as well as the first year that we rolled out nationwide online member management.

So that, coupled with, as Jay mentioned, we were seeing strong joint trends coming through January prior to the storm impact. I think all of those things together give us real confidence in the momentum that we're seeing in the business.

Your next question comes from the line of Max Rakhlenko with TD Cowen.

So first, just on the lower EBITDA and the EPS guide for 2026, a you maybe talk about the shape of the year and how we should think about both 4 1H versus 2H?

Yes, Max, this is Jay, and I will speak to that. When we think about our comp guide of the 4 to 5. A couple of things to point out, right? We are going to be lapping the nationwide rollout of member management in Q2. So when we think about the comps, we think about lower comps in the first half, and we think about higher comps in the back half as a result of that.

Also, of course, as we've called out with the equipment revenue that is notoriously backloaded. I think last year, we had 57% of our openings in the fourth quarter. This year, I would tell you, it's around that, it might be a few points higher, so maybe closer to 60%.

And then otherwise, I think if you model consistently otherwise, from an equipment standpoint. And then obviously, we're going to have an increase this year in the NAF revenue and I think Brian and Paul and Ellie gave you a ballpark amount for that in -- on the Investor Day. And then otherwise, yes, it's pretty -- the comps are going to be the drivers.

Obviously, we don't guide to membership. We've talked a little bit about the cadence of our membership and our ability to add members throughout the course of the year. We're probably not going to get more granular on that. But I think that should help you shape and form the model.

Just 2 quick follow-ups. Just what about on the margin side? Anything that we should think about first half versus second half because the guide does embed obviously some margin pressure. And you touched on some of the drivers. So how should we think about the year progressing?

And Max, you're talking about EBITDA margin standpoint?

Right.

Yes. So I think if you -- I think when you think about it, we've got to look at it ex NAF. We're expecting to get significant margin leverage on an ex NAF basis. Even with NAV because that is obviously impactful to the EBITDA margin, we're expecting to be pretty consistent year-over-year.

So I think as we think about our guidance, and the way we've approached this. We think the guidance is appropriately given some of the puts and takes we've talked about. And I think what that helps us do has really set our expense structure below that.

I mean, certainly, we're going to do all we can to continue to work hard and drive that top line and drive joins. But we've set our expense structure with this. And if you think about where we've got leverage in the model, it's really on the SG&A.

Got it. That's helpful. And then, Colleen, what's the latest thinking around the timing of the Black Card price increase? And how do you think that it will change the complexion of the comp build as well as the Black Card mix?

And then is it already embedded in the guide? Or are we going to get an update once you roll out the Black Card price increase?

Yes. Great question. So we indicated that we would roll out a card -- the Black Card price increase after our peak join season. For competitive reasons, we're not being overly specific, but you know our business well, and you know when our peak join season is.

And I think where we took the classic card price increase 2 years ago is kind of a directional indication Q3 obviously is our lower join quarter. So that will give you an indication of when we're anticipating to roll that out. And as we've said, as we've increased our Black Card penetration over the past couple of years.

We know we have gotten some organic rate lift out of the increased penetration, and we expect to continue to get -- to be able to take impact from pricing in the comp from the Black Card price lift. And I think we've given directionally anticipate in the comp about 75%-ish coming from rate 25-ish coming from volume.

Awesome. Best regards the rest of the quarter.

Your next question comes from the line of Joe Altobello with Raymond James.

First question on attrition rates. You mentioned them a couple of times this morning. I'm curious, back when you implemented click to cancel, are they back to where you thought they'd be in February?

Joe, this is Jay, and I'll start with that. I mean, yes, from an expectation standpoint, they are back in line with our expectations for February. And like we've talked about historically, while there was an elevation after click to cancel last year, still those rates have been within historical norms.

And that's when we think about the full year and how we expected, we would expect the attrition rate to be within the historical norms. And again, we're anniversary-ing the national rollout of click to cancel in Q2 of this year. And again, from a -- from a stepping back perspective, right, there's a lot of reasons why this is the right approach strategically for a member experience.

We're continuing to see an increase in our conversion rates that are up 6% in the digital joint flow. Obviously, this is still a focus of the FTC and at the state level. So we think this is absolutely the right direction in place to be and the rate has gotten back in line with our expectations.

And I think important to also point out that for the full year 2025, we were still well within historical norms on an annualized basis. And we've shared, it's been a 3 handle average attrition rate on an annualized basis, and that's where we landed in 2025 as well. .

That's helpful.

And just also add to that. We also are continuing to see of our joins mid-30% of our joins are rejoins. So we know that when we're treating our members well and giving them the opportunity to manage their membership, they're coming back to us. And I think Jay also indicated that in the joint flow, we've seen about a 6% increase in conversion in the join flow since noting the ability to manage your membership in the joint flow as well.

Got it. And just to shift gears to interest expense. This is probably the biggest delta, at least from my model, I was not expecting a $29 million increase year-over-year. So maybe could you -- I understand the debt levels are up because of the upsized refi and you've got the buyback here in '26 but still can get the '29 of incremental interest expense.

Yes, Joe, and we can take it offline if needed. But absolutely, it's just a function of the blend -- we were giving up a coupon in the 3s and the coupon on the new tranche of debt is about 5.4%. So it includes the $400 million that was refied plus the $350 million incremental that allowed us to do the ASR.

So that's probably one component, the only other component. Obviously, there's an interest income component embedded in that, but you should be able to get pretty close.

Your next question comes from the line of Chris O'Cull with Stifel Financial Corporation.

Colleen, I'm trying to understand the 4% to 5% comp guide. The company should have becoming benefit of the Black Card pricing, a 25% increase, I think, in media impressions from the additional ad dollars and then just the residual benefit of the classic card pricing. So I mean, in the fourth quarter, comps were up almost 6%.

So can you help us understand why comps are expected to slow? I mean is this conservatism or the higher cancellation rate? I'm just trying to understand how to think about this guidance?

Yes, you want to start or?

Yes. Chris, this is Jay, and I can start with that. I mean a couple of things, right? You've got a -- I mean, this is a subscription model. And when we think about our comp base, obviously, I mean one small factor is the fact that stores enter the comp base after the 13th month.

So when we opened 150 clubs in '24, those are going to largely impact '26, and that was a low club opening year compared like if you think about the 181 that we just opened, which will impact '27 really. So that's a component of it. And then the other piece is just we've got a large installed base of clubs that generate a ton of cash flow.

So even to your point, with the lift that we will see from rate -- it just takes a lot to move that needle from a comp standpoint. Obviously, embedded in that comp guide is the fact that we've had a little bit higher attrition than typically, certainly year-over-year since we did the national rollout.

And again, we would expect that to moderate as we lap that in Q2.

I was just going to say I could build on that a little bit. I do think we're back in -- our openings are back-end loaded. We had a very, very strong unit opening year for 2025. And more than 20% lift in openings in '25 versus '24. However, as Jay said, those clubs will come into the comp base on the 13th draft and because the openings were so back-end loaded, we had over 100 clubs opened in the fourth quarter.

We'll start to experience the benefit of those in the comp base much later in the year this year. And as Jay mentioned, we're also back-end loaded in 2024 openings, but it was a significantly lower opening year with only 150 clubs opening and again, back-end loaded.

So those things certainly factored into our guide. And we also were coming up on the second anniversary of the classic card price lift that we took in June of 2024. So the most pronounced impact of that pricing has been experienced.

And then we've -- we do have the Black Card price lift modeled into our guidance. But as you know, we're going to take that after the peak joint season. So we'll be impactful, but not as impactful if we were taking it on the peak join season.

Okay. And then just a question on the row partnership. Are there any plans to jointly market the benefit to consumers? And is the is a partnership designed to encourage membership retention, meaning is the perks discount a onetime upfront benefit? Or is it structured to be an ongoing benefit?

Yes. So the Perks partnership, we just launched in late Q4 and the intent really is to give -- it's mutually beneficial, right, to give row the opportunity to promote in front of 20.8 million fitness-minded members and at the same time, give our members an added benefit through discounts and the ability to convert with Row as a complement to their commitment to health and wellness.

We've done -- we've seen a number of studies on the GLP-1 impact in our business. One in particular that one of our franchisees commissioned and shared with us indicated that 50% of people who take a GLP-1 consider a gym membership. Those are very, very compelling market -- customer market indicators.

So this is our first attempt to really partner with a provider, a GLP-1 provider and make the offering available to our members. And as I said, we've seen quite high cut-through and quite high conversion, but early days. We think there's more opportunity in our partnership with Row.

But again, for competitive reasons, we won't speak to what our go-forward intentions are other than to say both we and Row have been pleased with the early results from the Perks farmers.

Your next question comes from the line of Rahul Krotthapalli with JPMorgan.

Yes. I just wanted to revisit the comp waterfall and the member joined waterfall for the clubs. Can you remind us how this currently tracks and especially for the classes of the clubs that opened in the last 2 years and then also that entered the comp base, curious to see how this is tracking after the white card pricing.

And then as a follow-up, do you expect to see any tailwinds if rest of the industry on your competition is for to click to cancel at some point? Any color there would be helpful.

So Rahul, this is Jay. And in regards to the comp trends, you broke up a little bit on the question. But right we talk about when those new clubs enter in the first year of comp, they typically are comping in the 40-plus percent range. Year 2 was in the low to mid-teens. Year 3, generally speaking, is in mid-single digits. And then beyond that, low to mid-single digits, if that -- I think that was your question. And then what was the second part of the question?

Click to cancel to the industry and its impact on us.

Yes. So I mean, I'll start and Colin may chime in. But again, I think strategically, we think this is the right thing to do from a member experience standpoint and from a derisking the business standpoint. And from -- we are seeing lift in our digital conversions with the ability to cancel anytime.

So we think that sets us up well strategically and going forward to have an advantage.

I'll just say, again, we're -- as Jay said, focused on doing the right thing by our members. We're seeing more and more municipalities whether at the state level or local municipal level, focused on giving consumers and subscription models, the ability to manage their subscription or manage their membership.

So we believe we did the right thing and also derisk our business by kind of getting ahead of that. And at the end of the day, I touched on the mid-30% rejoin rate. We think that's probably the biggest impact, favorable impact is when we've empowered our members to manage their membership. They feel good about their relationship with us.

And the top 2 reasons why we see people cite a cancellation reason -- are they moving or lack of time. So it's nothing to do with experience or lack of desire. And when they consider rejoining a gym or a club, a large proportion of them come back to Planet Fitness.

Your next question comes from the line of Jonathan Komp with Baird.

Could you share a little bit more on the joint trends that you're seeing? And do you see opportunity to make up for some of the pockets of weakness that you mentioned and still add close to the number of members that you added in 2025. Is there any reason that that's not realistic at this stage?

I'll start maybe and just say we were seeing very strong joint trends coming through the tail end of 2024 and coming -- tail end of 2025 and coming into 2026 prior to the weather impact. So that gives us a lot of confidence around the fact that we've got great secular tailwinds, and people are more fitness-minded than ever before.

So to your point, John, we're confident in our ability to drive strong member growth through the balance of the year. And again, I'll say the results that we had in 2025 and which were a 10% lift in net member growth over the prior year despite the fact that we rolled out online member management and had full year impact of the classic card price lift.

I think the other thing is as our -- we look at consumer data in addition to our lapsed members and the strong results we're seeing with rejoins. As we shared at the Investor Day, active adults in the U.S. likely to pay is somewhere in the neighborhood of 50 million to 60 million people and fitness paying members who could have the opportunity to convert to Planet also in the 60 million people.

So the opportunity to continue to drive joints, have our marketing reach this broad fitness-minded audience is something that we feel really confident about.

Okay. Great. And then, Jay, one follow-up on the full year outlook for adjusted EBITDA. You guided to 10% growth. I think it explained 200 basis points of the difference versus the mid-teens 3-year average that you highlighted in November. Could you just maybe bridge the gap, the remainder of the difference there, the other 300 basis points or maybe 200 to 300 basis points.

Are there any other investments upfront hitting the first year or opportunities the next 2 years after to drive greater leverage? Just any color there.

Yes, John, for sure. So again, we knew about the headwinds coming in. We knew that this year would be the lowest growth year in our 3-year algo, the intent was not that, that 3-year algo was an annual growth rate for each year. So there's a ton of good things happening like Colleen mentioned in her prepared remarks around the strategic imperatives.

And those things will build and gain traction and gain momentum. We talk about the first 100 days. We talk about the Black Card spa amenities. We talked about improving the app in terms of training. So there's lots of good things going on. Obviously, we're focused on joins.

We're focused on retention. So as we think about that, the power of this model is that -- and again, we think the guidance is appropriate. That has helped us set the expense structure in a very good way. So once we start to have this flywheel continue to compound, which we expect in the future years there's significant opportunity from a flow-through and growth perspective.

I might have just -- I might add to that, too, just the momentum we're seeing with the younger consumer as well. And as we think about the potential for lifetime value, high school summer pass, we were just shy of million participants last year, $3.7 million this year and an increased conversion rate to paying members at the conclusion of that.

So I think lots of strong momentum from a joint volume. And the fact that one of the big drivers is obviously unit openings, and we came off an incredibly strong year of unit openings in 2025 with more than 20% lift in unit openings year-on-year, '25 versus '24.

Your next question comes from the line of Sharon Zackfia with William Blair. Please go ahead.

I think one of the big wildcards you had entering this year was the increase to the [indiscernible] fund. I know there's been a lot of -- it sounds like noise in the first couple of months of the quarter for various reasons. But how do you think about that wild card in terms of increased impressions and kind of more shots on goal as we go throughout the rest of the year as it relates to member growth.

So I'll start and then, Jay, if you want to chime in, you're welcome to. So you're right in that we had the 1% shift from the last coming into the NAV for 2026. However, we asked our franchisees to keep their last spending whole for Q1 and we're anticipating that shift to have the most impact in Qs 2, 3 and 4.

And some of the new capabilities that, that shift in dollars to the NAV. Some of the new capabilities that will enable are things like the dynamic content optimization and the enhanced AI-enabled CRM as well as helping to fund the predictive churn model that we've got under development and we'll have in pilot in the fairly near term.

So it's funding the building of some of those capabilities that will make our marketing even more effective over the longer term. When you think about DCO, dynamic content optimization or dynamic creative optimization, it will enable us to customize our marketing messaging and better tailor it to the consumer that we're attempting to reach based on kind of the shopping behavior that we see from that consumer and the same with AI-enabled CRM, it will give us greater insights into consumers and consumer motivation and enable us to be more precise in how we target those prospective customers.

Particularly as we're looking to reach those active likely to pay or fitness paying members that are using other brands or other modalities.

And Colleen, how do we think about your use of $1 down? I know it's up a bit year-over-year through February. Is that something that is more of a lever that you'll use as well after you take the Black Card price increase to kind of bolster the classic card membership joins. .

So we've talked a little bit about the advertising that we want a compelling message that showcases the value of Planet Fitness and then that you can get strong at Planet Fitness. So we called out kind of the YPF why Planet Fitness messaging. And then we use an offer as a compelling kind of reason to join now. So the brand building is why Planet Fitness and then a compelling financial offer is kind of Why Planet Fitness Now or the call to action to drive joints and conversions within a specific time line.

So we'll continue to use a balance of brand building messaging as well as landing on a call to action that may include a financial inducement.

Your next question comes from the line of Xian Sew with BNP Paribas.

I wanted to follow up about the 30% or 30% rejoin rate. Can you maybe talk about the time between maybe members are leaving the system and coming back? Is there any as that time away from the system getting shorter as you're seeing kind of more of this trend? Curious to hear about that.

We continue to market to former members on a very consistent basis. We're continuing to test different time lines. So as for example, and again, for competitive reasons, I won't be super specific. But we used to perhaps wait a little bit longer before we would come back to them with a rejoin offer.

We're testing marketing that approaches them during a narrower lapsed period and again, evaluating the effectiveness of each of the different marketing offers to our former lapsed members. I think -- the most important thing that we are seeing is this increase in rejoin rate. And it's really in the mid-30s. I think we finished the quarter 34.5%? Am I right?

34.8%

34.8% for Q4 rejoin rate. So it's really solidly mid-30s, slightly more than 1/3 of our joins lapsed members returning to our system. .

Okay. And then maybe just on the GLP-1s. Is there any other way to think about what you're seeing so far? I know it's early days, but -- are you starting to see members on GLP-1 join the system? I know the roars, but maybe just kind of what you're seeing so far in terms of the GLP-1 member trends and what the potential could be?

Yes. So again, we don't -- while we don't track specifically the proportion of our members on GLP-1s, given the size of our member population and we believe it's representative of kind of the nationwide utilization, which is roughly about 13% today.

I think importantly, when you think about a GLP-1 user and the fact that they're embarking on a journey of health and wellness for themselves, and perhaps we're not a gym member before, might be a first-time gym goer. And we know that [ gymtimidation ] is real. We feel like for the GLP-1 use our brand, Planet Fitness.

We are perfectly positioned to meet that customer and support them as they look to combat loss of muscle mass with strength training and also being an environment that's welcoming and without intimidation, judgment free as they embark on their fitness journey. So we see this as an opportunity for us to continue to expand our reach.

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

Just wanted to go back to kind of marrying up the 26 guide versus the longer-term guide, but actually focus more on cash and specifically, CapEx, it looks like you've got that growing are expected to grow 10% to 15% this year. Last year was kind of in a similar range.

I know you mentioned this is more around corporate-owned clubs. So is that something that we should be thinking could be front-loaded in that? Or should we be thinking that there's a consistent kind of growth there? And any thoughts around potentially selling additional corporate-owned properties to close?

Yes. So I can start with that. The CapEx, I think, was a little bit lower in the last year, maybe around 6% growth. So to your point, we're maybe always a little conservative in the way we think about that CapEx and that -- the driver of that are a couple of things. It is our corporate-owned clubs.

Of course, we've got the new clubs. And then this year, we are undertaking a fair amount of relocations and remodels are at least planned. Also, from a modeling standpoint, obviously, we've talked about Spain and recycling that capital and getting that in the hands of a franchisee to develop that.

But we have, from a CapEx standpoint, modeled continued development in Spain on our balance sheet this year. So I think that rate of growth is a reasonable way to think about it in the model going forward. We will continue to build cash throughout the model.

And of course, we've talked about continuing to invest in buybacks to return value to shareholders. And in terms of recycling capital and looking at other corporate clubs, I mean, we're always going to look at opportunities and options as they come up.

We're right around the 90%, 10% split between franchise and corporate owned and we think in this business. That's a good balance, especially given the 4-wall profitability.

Yes. I think it's important to say we are out to market or we've engaged the banker to go to market for Spain. Would love to bring in a great franchise partner to help us accelerate growth in Spain because those clubs are performing very well and seeing ramps in a new market like Spain that are akin to our new club member ramps that we see domestically.

And then just on the California clubs, I think it's important to note, that was a bit of a geographic outlier for us. This was an efficiency play as well as the opportunity to put that market in the hands of a well-capitalized franchisee who had a good operational infrastructure on the West Coast because majority of our corporate clubs are on the East, Northeast, Southeast.

So this was an efficiency play as well as an opportunity to recycle capital with that sale.

There are no further questions at this time. I would now like to turn the call back to Colleen Keating, CEO, for closing remarks. Go ahead.

Thank you. And thank you for all the thoughtful questions. In closing, I'll just reiterate our performance in 2025 demonstrates the immense power of our model. We remain laser focused on our 4 strategic imperatives, which do serve as the foundation for our next chapter of growth and our unwavering commitment to delivering long-term shareholder value. Thank you.

This concludes today's call. Thank you for attending. You may now disconnect.

Good morning, everybody. Randy Konik of Jefferies. Really pleased to have Planet Fitness management with us this morning to go over some questions that I'm sure are on your minds. With me, Colleen Keating, the company's CEO; and Jay Stasz, the company's CFO. So what I'd like to do is ask some questions of the management team and hopefully, you get a lot out of the conversation. So you know what, let's jump right in.

So Colleen, look, in 2025, you added some people to your C-suite, some really good talent in the business. You hosted your first ever Analyst Day for the company while under your stewardship. And you gave us some long-term outlooks at that Analyst Day, which proved to be very compelling. When you look back at 2025, how do you think about the accomplishments you had and kind of walk through that a little bit.

Yes. Thanks for the question, and great to be here with you today. I guess if I were to sum up 2025 in one word, the word that comes to mind most often is momentum. So I joined the business, many of you know, but I joined the business in mid and June 2024. And in 2024, we kind of laid out our strategic imperatives, shared the strategy and talked about some additions to the leadership team to make sure that we had the right fit-for-strategy operating model because it's really all about the execution, right? And in 2025, we brought on our new Chief Development Officer in January. We brought on our new Chief Marketing Officer in February. At the end of 2024, Jay joined in November, part of building out that Blue Ribbon team.

And I call it Blue Ribbon because you get a Blue Ribbon, even though Purple is our favorite color, Blue Ribbon means you're coming in first, you're winning. And again, for 2025, we executed on the strategic imperatives in a meaningful way and are really proud of the results, right, that culminated in member -- net member growth, 20.8 million members at the end of 2025, 181 new unit openings, a majority of those domestic, largely franchise domestic. So again, the strategic imperatives were all about culminating in growth. And just to state a couple of them. So in refining our brand positioning, our brand promise and pulling it through our marketing, you saw that come to life in our new campaign that we launched last year in Q1 of 2025, had legs through the year, delivered very well for us to the point that we're communicating that brand promise and using the same core campaign, however, with some new creative coming into 2026.

So the -- we are all strong on this planet campaign was really resonating with consumers and driving joins. And then the format optimization work that we've done, we indicated that by the end of 2025, we'd have about 80% of our estate on some version of an optimized format. So a more balanced complement of strength and cardio, augmenting the amount of the floor dedicated to strength equipment, answering the call for today's consumer while still having a very strong complement of cardio equipment, but thoughtful about what members are utilizing more. So maybe dialing up stair climbers, keeping the complement of treads, maybe a few less ellipticals and arcs.

Member experience has also been at the core of everything we're doing. A proof point of that is that we're seeing of our joins about a mid-30% rejoin rate pretty consistently. So members, if they lapse, they're coming back to Planet Fitness, delivering on that member experience and also as evidenced in the join numbers as well. And then the work that Chip and his team have been doing on the build-out and reducing the build cost while at the same time, delivering a club format that today's consumer is looking for. So really have executed on a lot of the underpins of the strategic imperatives, which helped us deliver some really strong KPIs for 2025.

Well, speaking of the preannouncement yesterday caught the attention of the market, and you gave some year-end metrics in the announcement. Can you kind of talk to those metrics and talk to those metrics if they met internal expectations? Just any flavor you can provide on those metrics would be super helpful to the audience.

Yes. I will. I talked a little bit about momentum. The other thing that we talked about internally is we were on New Year's Eve in Times Square, counting the final openings. So our unit openings number, as many of you know, it's right down to the wire. We tend to have a lot of our club openings in the fourth quarter. We had over 100 clubs opened in the fourth quarter this year. We were thrilled with the 181. We were also thrilled with the comp that we delivered this year and came in at 6.7%.

And again, I touched on the 20.8 million members, and we were also delighted. We had a couple of the quarters we were still lapsing or lapping the -- we are anniversarying the classic card price increase from 2024. And we had online member management that we put member management digitally and electronically in the hands of our members at the midyear last year. And with both of those factors, still had very, very strong net member growth and ended at 20.8 million members. So we were delighted.

That's great. So we turn the page on 2025, we get into 2026. And this time of year is a very important time of year for the gym space from a member growth perspective. Any color you can provide at all on just how you should feel or how we should be feeling about January?

So I appreciate you asking the question. You have to ask the question. We're not talking about January just yet. But at the end of the day, what I will say is when I talked about momentum coming off of last year and our confidence in the brand messaging and how that's been delivering, the fact that we were able to take that campaign and just shoot some new creative to put with it, but keep the core campaign coming into 2026, I think, is indicative of how we're feeling about that marketing. And the other thing it's done for us is enabled us to put more money toward working media because we didn't have to build a completely new campaign from scratch.

And then you've also seen us over the course of last year, not talking specifically about January, but over the course of last year, we augmented our social team, augmented our digital team. So you've seen us more present on social channels, using influencers more. One example of that is in the summer, we launched the High School Summer Pass with influencers. So in 2024, we had just shy of 3 million participants. In 2025, we had 3.7 million participants. So a massive increase in participation, which is telling us that using this influencer strategy is [ recording ] our marketing strategic imperative. One of those is the DCO work that we've talked about, which is the digital or dynamic content optimization and the other is the AI-enabled CRM. So those work streams are underway.

That's great. And from a pricing perspective, we've seen the benefits of the White Card going from $10 to $15. The comps have been pretty strong in the business, a mixture of price growth plus member growth. You've indicated at the Analyst Day that you are intending to drive up the -- or take up the price on the Black Card from $24.99 to $29.99. But we also have an environment where the consumer seems to be price sensitive, right? So when you think about the price increases on the White Card and now the Black Card and you've done well with the White Card, what gives you confidence that the Black Card increase will take very well? And do you think you have to enhance the amenities in the business, perhaps the Black Card spa to kind of help with that price value equation in the business?

Yes. So let me -- I'll let Jay start this one.

Yes. So Randy, I can speak to that. I mean, as we talked about at Investor Day, we are in the golden age of fitness, right? You can't open up a headline and not see the importance that's being focused around fitness training, movement and strength training. In addition, Gen Z, right, they grew up with fitness, and it's just part of their daily routine. So when we think about consumer and the way they spend their dollars, we think there's a -- we are in a good position where they're going to choose to spend those discretionary dollars to maintain fitness and health.

It's just part of who they are and what they do. So that's kind of from a consumer lens that we think about it. And then from other lenses, when we look at the business, obviously, since we've done the Classic Card price increase about 18 months ago, we've seen overall penetration of the Black Card increase to Q3 was just north of 66%, so an all-time high. So that -- those are some other metrics that we look at internally that tell us we have the ability to take price. Obviously, the 2 most used benefits of the Black Card are reciprocity, so use any club and then bring a guest.

So to your question, right, we are testing and planning to continue to test new modalities in the Black Card spa, and we can get into that more later, but the early reads are very strong, and there are some modalities that really resonate with the consumers today and will provide value. So absolutely, we're going to do that, but we don't think we need to have that as we roll out the Black Card price to $29.99. And at $29.99, we think it's an incredible value with the equipment we offer, with the experience we offer today. And even at that price point, we'll still be below the average in the median of a monthly gym membership on a national basis.

Don't get rid of those tanning beds. I think when you opened, you said 181 units for the year. I believe that was above the high end of expectations. When you think about real estate supply and real estate rent trends, what are they looking like as we head into 2026 from a supply standpoint? And what does rent growth look like or not look like going forward?

Yes. I think -- so we've started to see real estate availability easing a bit, yet we're still not expecting it to be the year of the bumper crop. So we were sub-4 vacancy for what we're looking for kind of shopping center space. Sub-4 vacancy, that's now 4.3%, 4.4%. So vacancies improved a bit. The first 2 quarters of last year had negative absorption. That was the first time in -- since 2020. Also, first 2 quarters of last year had rent growth below the rate of inflation, again, first time since 2020. So a moderation in rent growth. But again, still 4.3%, 4.4% vacancy. So what we're doing about it is our real estate team under our Chief Development Officer, Chip, really partnering with our franchisees and also partnering with landlords and brokers, so that we do get the first call when space is becoming available.

And there have been a few others that are on a growth trajectory as well, tend to be in kind of the discount space, which is well aligned with our HVLP positioning. There have been some large groceries that have closed and maybe they're space demising. Maybe an Aldi is going in with a smaller footprint, but that demising space frees up some availability for us or even some of the pharmacies have had a 20,000 square foot footprint that have been opportunities for us. So it's really about being proactive and telling the value proposition of having Planet Fitness as a tenant.

When you think about the fact that during COVID, when we had clubs closed for municipal reasons, not one club permanently closed for financial reasons. The durability of this business and the resilience of this business, the durability of the cash flows should be really attractive to brokers and landlords when you consider there was a JLL study coming into this year that cited 9,900 retail closures for 2025. I've read a few things recently. One, I think, was Colliers that cited close to 15,000 in actuality. So the fact that ours is a pretty -- is a very resilient business and the likelihood of lease fulfillment, we should be in the pole position when space is becoming available.

Great. Well, you're the Walmart of the gym space. So when you think about the Analyst Day, at that Analyst Day, you guided for 6% to 7% unit growth over the planning horizon in your outlook, which would, I guess, lead to an accelerating unit opening cadence in 2026 versus 2025, mathematically. So can you give us some perspective on what's the demand looking like from the franchisee community? What are they saying? Where are we going from here?

You want to start and then I'll chime in.

Yes, absolutely. So I think that ultimately, you're asking about the franchisee sentiment, and there are several indicators that it's strong, one of which is the fact that we just opened 181 new clubs. A big part of that, we saw large growth significantly year-over-year in domestic franchise openings. So we think that's an indicator. I think the vote to shift the 1% from LAF to NAF is an indicator. We see the continued investment in the strength equipment that we started with plate loaded in '24 and continue to roll out this year with over -- right around 80% of our system being some form of optimized equipment.

So we think that's important as well and are all indicators to the franchisee sentiment in addition to the work that we're doing to partner with them from Brian Povinelli with Chip to continue to focus on the unit economics because we know that's at the heart and the core of the franchisees. And as we showed at Investor Day, right, the top line trends of our new store openings are right in line with our target IRR which is great. And then getting back to the Investor Day openings, right? Really -- and we're not providing guidance. We'll do that in February, but really no change from that. The 6% to 7% unit growth. And if we think about '26, we talked about that being under 200 and then exceeding 200 in '27 and '28.

And just to be clear, as a follow-up, those IRRs are returning back towards -- getting towards those historical levels, not quite there yet, but they're coming back pretty nicely.

It's solidly mid-20s, yes. Solidly mid-20s.

Absolutely world-class.

Yes. There are not a lot of places you can put your money and get that kind of a return.

Exactly. So speaking of -- let's turn to international markets. One thing that struck me at the Analyst Day was just the amazing metrics put up around, let's say, Spain, for example. And you also talked about at the Analyst Day moving into 1 to 2 new markets internationally per year going forward...

[Audio Gap]

The ramp of the first club that opened in Spain. So we had our first club opened in July of 2024. We showed the ramp curve. And the ramp curve on that club was as good as or better than the U.S. and the Mexico ramp curve. So we've seen that our brand resonates internationally. One of the things I love about the fact that we sponsor New Year's Rock and Eve and have for the last 11 New Year's Eve is it puts our brand on a global stage in a very big way. So I think there's -- we've got greater brand awareness in global geographies than maybe we had given ourselves credit for and also a highly differentiated offering in Spain versus the other HVLP product there. So from a member experience standpoint, the NPS, the Net Promoter Scores in Spain are just off the charts to the point that the survey company went back and did some hand auditing of the surveys because they couldn't believe that the scores were so high.

So there's a big opportunity for us internationally. That said, we do want to be thoughtful. We want to go into a market. We're not going to go in and flag plant just so we can lay claim to another market. We're going to go in where we can really have a strong presence, bring the brand to life in a healthy way and again, want the opportunity to do so with franchise partners. So Spain, we've talked about the fact that we will refranchise Spain. We've actually begun -- just initiated a process. So expect to be able to recycle that capital and bring a great franchise partner into Spain with us to further grow that market. But we've done well in Mexico, done well in Australia, as you know.

And just a quick follow-up to that. When you think about that -- you talked about that baton passing, it almost sounds like going from your balance sheet to a franchise partner in Spain fairly soon. Is it -- does it feel like that's the pattern going a year later franchise? Or how should we just think about that?

Yes. I think maybe for Spain, in particular, building it on our balance sheet was important because it was our first entree into Europe. At the same time, we've gone into other international geographies with great franchise partners, particularly where they've had resources on the ground and really understood those geographies. That's also important. So we would not -- we would be unafraid to go into a new market with a great franchise partner as well.

Great. So I guess not to bring up 2026 guidance because I know you're not going to give it. But are there any type of high-level puts or takes we should be thinking about as an audience as we think about modeling 2026 at all that we should be considering?

Right. So yes, Randy, thanks, and I appreciate you recognizing that we're not going to provide guidance or too many models right now.

Give us something.

Yes. But no, and we'll provide that in February. But a few things to think about when we think about '26, and I'm sure everybody probably has already thought about these things, but just a few puts and takes to consider. From a revenue standpoint, as we think about the shift from LAF to NAF, we're going to have a 1% shift there. So that's going to increase our revenue. It's also going to increase our NAF expenses and have 0 flow-through to EBITDA. Largely offsetting that increase in the revenue is going to be a portion of our equipment segment. So '26 is the first year where under the new growth model, right, we extended the reequip time lines about 1 year each for cardio and strength. So '26 is the first year where we see that. So a portion of the Equipment segment will have a headwind in revenue because of that deferral.

And then finally, the next piece I think about is on net income and EPS. Obviously, we've announced publicly, we've done the refi and the upsizing. So we will have an impact to interest expense. That should be contemplated. But partially offsetting that will be the benefit of the ASR and buying back those shares. So the average weighted share count will come down.

So can we kind of add on to that and talk about capital allocation? Just kind of remind everybody on how you think about that, utilizing your cash flow...

Absolutely. So capital allocation is a great thing to talk about in such a cash-generative business. And as we talked about at Investor Day, it's really kind of 3 pillars that we think about. First is investing to grow the business. Second is returning value to the shareholders via buybacks. And then third, maintaining a leverage profile, and we talk about it in the 4 to 6x range. When we -- when I think about growth of the business, obviously, we are committed to maintaining the capital-light, asset-light model, 90% franchise, 10% corporate. So a lot of our investment is really going into making sure that we can continue to grow and scale the system. whether that's investments in data and analytics and insights or back-office platforms to make sure we can grow and scale or if it's more member-facing like things like AI or the app.

Second to that then is when we get into the corporate clubs, obviously, we want to make sure they maintain -- they're competitive, and they will continue to grow to maintain that 10%. So we will invest in the corporate clubs on new clubs as well as opportunistic reequips and remodels. And so those are really the key elements. The other thing we think about, obviously, in our position in the industry, we look at a lot of M&A opportunities. I think it makes sense that a lot of things come across our desk. And so that's something that we will continue to look at and review. And should an opportunity come to us, that's a point where we could operate and lever up a little bit in the top half of that leverage range. So then after all of those things, right, this business still generates a lot of cash, and we've demonstrated our ability and willingness to return that value to the shareholders via buybacks. We did the ASR that we announced for $350 million. And then prior to that, during this year, we invested $150 million in buybacks prior to that ASR. So a sizable return of capital to the shareholders, and that's something that we would continue to do.

So Colleen, we have about a minute left, and I just want to kind of wrap it all up together. The way you've opened up the conversation is you used the word momentum. Jay used the words golden age of fitness. So as kind of we depart over the next 60 seconds here, what do you want the audience to kind of take away the most of what keeps you really energized and excited about the business over the next 2 to 3 to 4 to 5 years from now?

Yes, over the long term. So I think you -- we talked about the momentum. I think the bigger thing is the fact that consumers today are more fitness-minded and fitness aware than ever before. I think years ago, we used to talk at Planet Fitness about the 80% that were on the couch. Today, I think we're talking about the 70% that are more fitness aware than ever before. I was meeting last week with a major tech company, and that major tech company shared the statistic that 30% of Americans are wearing some type of a wearable that helps them monitor their fitness or health or their well-being.

So whether it's a Fitbit or whether it's an Apple Watch and they're looking at their Apple Watch to tell them that they need to stand up and stretch or they're counting their steps every day, we truly are in the golden age of fitness. And when I think about that and the fact that Planet Fitness is the most welcoming no gymtimidation environment for people who are looking to embark on a fitness journey. I think we're perfectly situated to answer that call. And oh, by the way, we're getting a bit of a cool factor with the younger generation, and we're seeing Gen Zs join at an incredible rate, witnessed the roughly 30% lift in high school summer pass participation. I feel like we're perfectly situated to continue on a really, really strong growth trajectory.

It's really well put, Colleen, Jay, thank you. Audience, thank you. Thanks very much.

All right. Now I'm going to actually start. So good morning, and welcome to Planet Fitness' 2025 Investor Day. My name is Stacey Caravella, I'm Planet Fitness' Vice President of Investor Relations. I want to thank you all for joining us here in Boston today as well as the people on the webcast. Before we begin, I'd like to remind everyone that the forward-looking statement included in our investor presentation also applies to our comments made during today's event.

The presentation can be found on our website along with any reconciliation of non-GAAP financial measures. We'll begin the morning with an overview of the opportunity in front of us and our plans to accelerate growth. Then we'll share a detailed look at the ways we're executing on our strategy through our marketing, our member experience and new club growth, all to further our industry leadership for the long term.

After the presentations, we'll host a 20-minute Q&A. You'll hear from Planet Fitness CEO, Colleen Keating; Chief Marketing Officer, Brian Povinelli; Chief Operations Officer, Bill Bode; Chief Development Officer, Chip Ohlsson; and Chief Financial Officer, Jay Stasz. To get us started, let's take a look at what Planet Fitness is all about today. Let's roll the video.

[Presentation]

And now please welcome Planet Fitness CEO, Colleen Keating.

Thank you, Stacey. Well, good morning, everyone. So excited to be with you here today. Thank you to those of you who traveled and to those who are joining us on the webcast, thanks for making the time. I'm excited to tell you about our strategy to fuel growth, how we're modernizing the member experience, offering our franchisees an even stronger value proposition and generating strong shareholder returns. And what makes us really special is this is a rare moment when a number of growth factors are really coming together.

The demand for our offering is increasing. Real estate availability is beginning to ease, and our brand is evolving in all the right ways. We're executing on our strategy to accelerate growth. We just celebrated our 10-year IPO anniversary in August, and we've come a long way. And we have slides out of where. We've come a long way. We went from about 1,000 clubs in 2015 to over 2,800 clubs today. And yes, this is new news because we finished the quarter just under 2,800 clubs. We're over 2,800 clubs today.

We've gone from just over 7 million members to nearly 21 million members today from a challenger in the category to the clear industry leader, tremendous growth, and we're not slowing down. We're getting ready for our new phase of growth because we're in the golden age of fitness. When you think about it, you can't open a news feed today without reading or hearing about the importance of fitness and movement, especially when it comes to preventing disease, protecting your mental health, aging well and living a long life.

That's why the demand for what we're offering is growing. And at the same time, the average age of our customer is getting younger. So as many of you know, Gen Z is the fastest-growing proportion of our membership. This is the generation that was born between 1997 and 2012. So they're roughly 13 to 28 years old right now. They're still aging into membership at Planet Fitness. So think about that untapped growth opportunity and the prospective or the potential lifetime value of these prospective members.

And right behind Gen Z coming up is Gen Alpha likely to be the most fitness-minded generation yet. So this new wave of demand is still coming and it's growing. I was with a friend of mine. She lives in Brooklyn, and she has a son who is a freshman in high school, a couple of weeks ago. And she was telling me the story of how her husband has a family gym membership at a regional community gym in the Brooklyn area.

And her son came home and said, Mom, I want to join -- he called it PFit. I want to join PFit. And she said, well, we have a family membership at this other gym, like why am I going to pay for you to have a membership at Planet Fitness? And he said, mom, all my friends go to PFit. So we're not renaming our brand, but I did think it was kind of cool that this younger generation has even developed a cool moniker for us.

And more importantly, that we're a brand, we're a community that this younger generation wants to be a part of. So this generation is also growing up with fitness and wellness as such an important part of their daily life. It is part of their community. And we are perfectly and uniquely positioned to appeal to this growing demand because our offering really does appeal to all ages and all fitness levels. And as a matter of fact, we have been increasing our penetration across all generational cohorts.

And I think this is a point of difference that sets Planet Fitness apart. Other brands don't have the breadth of age and fitness levels that we have. And we have such a big opportunity for growth because this growing demand supports more clubs in more locations. And we know to open more clubs, we need more real estate. And for the past 5 or so years, that's been a bit of a headwind on growth.

The 20,000 square foot boxes that we need, well, they were a bit tough to come by. And at the same time, rents were escalating. That's starting to ease. We're starting to see a bit of a shift in that landscape. So thousands of big box retailers have shut their doors over the last several years, opening up great second-generation space opportunities. A recent JLL study cited nearly 10,000 retail closures this year alone.

A recent Colliers study cited that in Q1 and Q2 of this year, multiple million square feet of negative absorption in each quarter and rent escalation in those same quarters was below the rate of inflation. These are positive leading indicators that the climate is starting to turn when it comes to space availability and rent escalation is beginning to moderate. I actually read something very recently about Q3 that said 0.5% growth in rent escalation in Q3.

So great indicators for our ability to access space to fuel that growth ambition to meet this growing demand. So let me tell you with a little more granularity about how we are positioned and what we are doing to take advantage of this great opportunity. And I'm going to start with an update on our 4 strategic imperatives. So for starters, we are evolving our brand to be more modern and relevant while staying true to the fundamentals that make our brand, make Planet Fitness so unique.

And we've made progress to broaden the way we approach members, not just marketing price, but also marketing the value and the benefits of belonging to Planet Fitness. Our marketing messaging this year has performed quite well and has legs to extend into 2026, which will give us the opportunity to put more of that money to working media because we won't be developing a full new campaign.

The messaging is resonating and most importantly, it's driving joins. Through Q3, we increased net membership by roughly 1 million members. This is even more impressive when you consider that this is on top of a 50% lift on our entry-level price point. It speaks to our high value offering and the effectiveness of our marketing. In 2026, we will allocate more to our national ad fund to unlock opportunities for even greater conversion to better leverage our size and scale and to accelerate top line growth.

You'll hear a bit more about that from Brian Povinelli in a few minutes, so I won't steal all his thunder. In addition to seeing the strong member joins that I just talked about, our average visits are also up. Average visits per month are up by roughly 5% versus last year, and utilization matters. It is an indication of member stickiness, the value our members see in our brands and their likelihood to stay with us longer. And as you know, we're all very focused on retention.

This is why our second strategic imperative is also important, enhancing the member experience. This is the direct path to fostering the loyalty and connection that ultimately translates into long-term member growth. In addition to strong new member joins, we're also continuing to see a mid-30% rejoin rate. This reflects the strength of our member experience and underscores a key differentiator for our brand.

And it also supports our commitment to delivering a great member experience because when people have a great experience at Planet Fitness, they come back to Planet Fitness. And we're continuing to think about the lifetime value of our members and what levers we can pull to help them choose Planet Fitness initially, stay with us longer and come back to us over time.

Now let's talk about our third strategic imperative, which is refining our product and optimizing our format. And you can see some of our new product here. So I don't know if you had time before you took a seat, but by all means, spend a few minutes, we brought in a piece of -- a few pieces of the plate-loaded equipment that we've added and the half racks that we're putting into a number of our clubs.

And starting this year, we gave franchisees who are developing clubs, renovating or reequipping clubs, the opportunity to build the traditional layout or one of our new formats optimized clubs and 95% elected to build one of the formats optimized clubs. So by the end of 2025 this year, end of next month, almost 80% of system-wide clubs will have some version of this optimized format. That's roughly 4 out of 5 clubs.

Later, you'll hear from our Chief Operating Officer, Bill Bode, about the new products and how they're performing in our clubs and resonating with our members. So this brings me to our fourth strategic imperative because all of the work that we're doing to redefine our brand promise and have more precision in our marketing to enhance our member experience, to refine our product and optimize our format will lead to one thing, and that is accelerating growth. Because this work will help us increase both joins and retention.

It will increase member counts per club, streamline our build costs and collectively enhance the unit economics to accelerate growth. And as I've said many times, this business is a top line play. Nothing fuels growth better than great 4-wall economics and even better when they're coupled with smart efficiencies in our build costs. You're going to hear more about this later today from our Chief Development Officer, Chip Ohlsson.

He'll tell you about the opportunities we have to optimize our build structure, new materials and layouts, reduce costs and at the same time, enhance member experience. He'll also discuss our growth opportunities outside the United States. So looking ahead, I am proud to say that in partnership with our franchisees, we are delivering on our 2025 growth outlook, and we're thrilled to have upwardly revised key targets on our third quarter earnings call last week.

You'll hear more later from Jay Stasz, the moment you've all been waiting for, about our long-term growth outlook and why we believe we continue to have a robust runway for growth. And finally, when I joined this company about now 17 months ago, I made a commitment to build a Blue Ribbon team to take our business forward.

And today, we have a powerful mix of seasoned leaders who helped make Planet Fitness the powerhouse it is today and new additions to our team who bring deep experience and fresh perspectives from outside the category. These are the right leaders at the right time with the right talent to help us continue leading the industry and accelerating our growth.

They're going to tell you where we're heading and how we're taking advantage of this very special moment when demand is increasing, space is opening or at least easing, our brand is evolving in all the right ways, and they will give you specific examples of how we're executing on our strategic imperatives, how we're positioning Planet Fitness to get there first and how we're accelerating growth. So thank you. And again, thank you for being with us this morning. And now I'm going to turn it over to Brian Povinelli.

Thank you, Colleen, and good morning, everybody. This week marks my 10th month here at Planet Fitness. And after 18 years in the hotel business, overseeing both marketing and member experience, I'm really thrilled to be here to lead disciplines at Planet Fitness. And there's actually some parallel between hotel space and this space. When I actually joined here and thought about it, we ran 9,000 hotels that all had a gym.

So we've been kind of contemplating and designing the member experience at a fitness center on a much smaller scale in the last 18 years of my career. But I made the move to Planet Fitness because I saw an opportunity to help unlock the next wave of growth for this brand through more sophisticated marketing and a more insight-based approach to the member experience.

Now over the last 30 years, Planet Fitness has become one of the most successful franchise businesses across verticals. And we see a path to many more years of growth [indiscernible] leadership team's expertise and capitalize on the growing importance of wellness to the global customer base. And the time to lean in and accelerate change at Planet Fitness is now. As Colleen said, the customer is changing. Younger generations are growing up with fitness as a part of their daily lives.

They create more variety in their workout routines, and they're putting a growing emphasis on strength. As more adults model a wellness lifestyle, each successive generation more and more looks to brands to support their passions. The marketplace is also getting increasingly crowded as wellness becomes a more integral part of those consumers' lives. Over the past few decades, many fitness concepts have come and gone, while Planet Fitness has remained strong.

And we are well positioned to continue to grow because we have a foundation in place to quickly meet consumers' needs, and we have broad offerings that few can match and the scale that allows us to democratize fitness to the masses. In addition, we see the recent growth category continuing with our segment leading the way. The HVlp space has outperformed the entire category by 8% since 2019 with a model that's proven to be quite resilient to macroeconomic fluctuations.

So let me tell you how we're building the Planet Fitness brand for the future. We're focusing on 5 key areas: using data and insights to enhance our customer-first approach, by building an emotional connection with consumers, leveraging our scale to drive efficiencies, maximizing local and national marketing and improving loyalty through the member experience. For starters, we're building the foundation of our evolution based on data and insights and putting the consumer at the forefront of everything we do.

To this end, earlier this year, we invested in a demand center growth project with a major consulting firm. The focus of this work was to help us understand today's market landscape, the needs driving consumer demand, where to play and how to win, all with the intent of identifying the best opportunities for outsized growth. The outcome is a demand map that pinpoints our position in the market based on consumer cohorts.

It defines each cohort's needs when looking for fitness and wellness solutions and evaluates how successfully we're meeting those needs. We'll use this map to guide our growth strategy and build integrated plans to attack opportunities across all areas of the business from marketing to member experience, pricing strategies, future product innovations and club formats. While much of this map is proprietary, let me share some foundational insights we're already putting to work.

The first is a sharper focus on the total addressable market and our greatest opportunity to drive joints. Historically, the brand focused on the 80% of people who don't have fitness memberships and need motivation to get off the couch. This same audience doesn't exist in the way it used to as consumers' wellness knowledge and desire has matured. The chart you see on the screen breaks out 265 million adults in the U.S. into prospect cohorts, and I'll focus on the 2 purple cohorts.

The first is 50 million to 60 million fitness non-member adults active in some fitness activity and demonstrate a high likelihood to pay. The second is 60 million to 65 million adults who are paying for fitness offerings, but they're not the 20 million currently with us. And we'll quickly see a couple of things. In the past, we were primarily focused on bringing new people into the market, and we will still continue to do that. But today, we're putting additional efforts affecting those paying but not with us.

By focusing on these 2 cohorts, we can be much more effective and efficient in our marketing, and we see a large opportunity to continue growing the market and earning share. Shifting just 1% of share could be very meaningful to a business of our scale. There's also a tremendous opportunity with lapsed members. As you've heard from Colleen, we have a very strong rejoin rate. This cohort is 2x more likely to convert than a new prospect.

And by leaning into our first-party data, we can entice them back in a more personalized way with the right offer or the right product offering. So those are 2 examples of how we're leveraging insights to focus our marketing to make the greatest impact on joins. The map defines the key spaces we need to defend, those where we have an opportunity to enhance to grow growth and importantly, those we should not prioritize, all resulting in greater efficiency and effectiveness across many disciplines.

The second area we're emphasizing is our strategy, and our strategy is building greater emotional equity for our brand. While we have outstanding brand awareness, the DCG work showed we have an opportunity to strengthen our emotional connection with consumers. The study looked at both emotional and functional needs that drive consumer choice when considering a gym. And it focused on the top 15 needs and looked at how Planet Fitness indexed on each compared to our peers in the space.

Now functional needs are answering how consumers would want their experience to be when engaging in a fitness offering. On the functional side, we have the strongest position in the segment versus our peers. We win or over-index on convenient location, low price, value for money, machine variety and availability and ease to get in [indiscernible] with 3 of these identified in the survey as the most important functional needs when making a decision.

And the addition of strength equipment over the past year will help us better meet another important functional need, building muscle and strength. Emotional needs are answering how consumers would want to feel when engaging in a fitness experience. Emotional things -- emotional needs include things like feeling welcomed, improving physical appearance, achieving their goals, stress relief and mood boost and simply having fun.

Now unlike functional needs where many brands are meeting consumer expectations, there's virtually no differentiation or ownership of any emotional equity amongst our peer set. We do get credit for feeling welcomed, which supports our judgment-free positioning. I believe we can drive significant value for Planet Fitness by leaning more into emotional needs. This will help us further differentiate our brand and lead to greater loyalty. Now we're already starting to use some of these insights as we evolve our marketing for Q4 and Q1, which you'll see in one of our new ads. So let's take a quick look at the video.

[Presentation]

So just a little view of how we're drawing consumers in with a more emotive approach while focusing on key functional needs and conveying that you can get strong at Planet Fitness. These are deliberate shifts in our approach that hit on some of the most important needs, both functional and emotional and you'll see more of this and escalating in our social content and other marketing execution over the coming months. Now related to these efforts, we're also launching [indiscernible] in the second half of 2026.

We are using more feedback from consumer research we conducted over the past year to modernize our brand with the goal of ensuring relevancy for decades to come and to ensure it reflects the way our offerings and our consumer has changed over the years. We have a very thoughtful rollout plan that will allow existing clubs to integrate elements of the new ID at minimal cost, helping to expedite the transformation.

We believe now is a great time to give the brand a new voice to invite more people into the brand and encourage re-evaluation while retaining those aspects of our identity that people know and love. It will be an evolution, not a revolution, with a focus on minimal capital outlay, but meaningful brand impact. The third area we're focusing on is better leveraging our scale to drive the brand forward. Now our footprint is 4x larger than our closest competitor.

With over 2,800 clubs and almost $400 million in our marketing fund between national and local, we have the ability to connect with consumers and prospective customers like nobody else can. And I believe we can unlock even greater value for our franchisees by using this scale to drive efficiencies in our marketing and by investing in new capabilities.

To help us do that back in August, the franchisee community overwhelmingly passed a vote to shift 1 percentage point of the local ad fund to the national ad fund for 2026, effectively moving $45 million. This shift will allow us to drive over 20% savings in media commissions on that 1%, thanks to the added scale we will now manage at a national level. That's more capacity we can put to working media instead of fees.

We've also just concluded negotiations with our local agencies -- local media agencies, resulting in close to 10% savings on those fees for '26 and beyond. Again, another driver of more media. This 1% shift also allows us to pull forward our work on dynamic content optimization efforts to help us continue to be more effective at driving joins. In 2026, we plan to build a DCO engine to help develop creative assets and enable dynamic ad serving to our media partners.

In simple terms, it will help us show more personalized digital ads to people based on what's most relevant to them like an offer, an image or a call to action. The system will factor in things like location, time of day, weather and their behavior to figure out which version of an ad will connect best with each person and most importantly, drive an action. Then it will automatically build and serve that version in real time.

So instead of manually testing different messages or designs, this platform will do it automatically. They will learn from the results and keep improving the ads over time to get the best performance. Further, we'll be investing in our customer relationship management program. As we garner more consumer insights from the DCG work, we'll leverage it to create more personalized messaging through our own channels like e-mail, SMS and push.

And this will include building a next best action engine using machine learning to help us meet our 20 million members where they are with the right message in the right place at the right time. A final benefit of this 1% shift comes from unlocking unique media properties, which will help us extend our reach and integrate our brand into new platforms. Next year, we'll increase our presence with targeted ads on platforms like Prime Video, Netflix, Hulu and Twitch.

And we've also secured sponsorships with Jason and Travis Kelce's New Heights podcast and Alex Cooper's Call Her Daddy podcast, which are 2 of the hottest media properties out there, reaching our younger demographic. And we'll continue to build successful integrations with Strava and Barstool Sports, lean further into TikTok and test the waters with Reddit, where our younger consumers are spending more and more time.

And for the first time in 2026, we'll be able to support all national promotions with both local and national funds. This will increase our effectiveness, and we're much more closely coordinating how our national and local agencies work together and plan together. And we'll further orchestrate which marketing channels each agency is used to get the maximum effectiveness. The final area of focus I want to highlight today is our member experience.

Part of my remit is to create an industry-leading member experience and innovation function. Some of the initiatives we have planned for next year include a reimagining of the first 100-day journey a customer follows after joining. This is especially important as 80% of joins now happen online. Data shows that early engagement leads to longer tenure, and we have an opportunity to enhance the first 100-day experience, both in the club and through digital touch points.

This will bring to life and reinforce the tremendous value and experience that membership just unlocked for a customer. And Bill will talk a little bit more about this in a few minutes. We're also going to be leveraging AI to support our insights work and innovation. We're currently launching a pilot with a cross-functional team to test AI-driven research tools that will strengthen our membership experience.

Now these tools will help us collect on-demand research from our members and even team members generating diverse insights in real time. And with these insights, we can create member persona agents that can, in effect, tell us what matters most to them. So it's almost like being able to create through AI an agent that can sit in the room with us. We can ask it questions directly, and it will respond in real time, representing the aggregate data of our membership base.

And we believe this will reduce the time it takes to create and test new ideas by allowing us to talk to that data and creating teams of agents that we can brainstorm with, and those agents can work with each other as well to generate ideas based on different functional expertise. So with new tools, we can build an AI-powered uplifter panel that helps us connect with real members on demand.

So I just talked about kind of synthetic agents. We can also use this technology to connect with our real members, enabling them to share insights about what truly matters to them. We use the term uplifter to define our target audience and their demographic and psychographic attributes. So the idea here is that these panels can create a continuous feedback loop between member voices and the ideas we bring to market.

So -- and to kind of put this in real terms, it's a little bit like we can get members to feed video content to us and have AI aggregate those thousands or tens of thousands of inputs we get into the important elements that are coming back through those videos from our customers almost in real time versus today, we would hire a company, go do customer surveys. It would be very costly, and it would take us weeks, if not months, to aggregate all that. It's almost becoming where we can do that in a matter of a couple of weeks.

So these will create that continuous feedback loop with our members and also our team members in the club. They are working firsthand day in, day out with our members, so to get our team members' feedback can be just as valuable as to what they're seeing, how our customers are reacting. And finally, we're seeing strong interest from other brands in strategic partnerships. And we're exploring new channels for our marketing efforts.

This month, we'll be testing inclusion in T-Mobile Tuesdays platform and Nift to see if these outlets can provide incremental joins at a significantly lower cost per join through their scale. And we're in conversations with several GLP-1 providers. We're exploring possible avenues to align with them to help ensure GLP-1 customers have easy access to the critical fitness regimen they need to offset possible muscle loss. So to sum it up, we're evolving the PF brand for the future. We're enhancing our customer-first mentality backed with data and insights.

We're building greater emotional connection with members. We're going to leverage our scale to drive efficiencies, maximize that local and national marketing fund like never before and invest in the member experience all to ensure Planet Fitness remains the clear leader by staying relevant with the right offerings for the consumers and the right returns for our franchisees. Thank you. And now let me leave you with a quick look at how we're planning to use technology to further elevate the member experience in some of our digital applications as well.

[Presentation]

And now please welcome our Chief Operating Officer, Bill Bode.

Good morning, everyone. What great work by our marketing team under Brian's leadership to take us and lead us into the future. So thank you, Brian. I think also we think about the video demonstrating how we're using technology to enhance that member experience. I'm going to talk about some of the things we're doing in the club as well and with the experience. So other ways we're strengthening our product and our experience and how our focus on providing high value gives us an opportunity to drive revenue and increase our industry leadership.

Let's start with our vision to build the largest and most inspiring fitness community where all members are proud to belong. We're remaining true to our judgment-free experience but evolving to meet the changing landscape. To do that, we do need to understand what drives consumers and our members. We believe if we welcome members with warmth and intention, we help them feel seen, valued and connected to our purpose.

And if every step feels easy and meaningful, we will build trust, reduce churn and inspire more people to join. So let me tell you how we're bringing our vision to life in 3 very important ways. First is improving the members' first 100 days. Second, improving and optimizing our format; and third, evolving our Black Card spa, and I will walk you through each of these.

So that first 100 days, we're using a human-centered approach to evolve the Planet Fitness membership into a best-in-class experience, one that puts the member first. And we're starting with the member's first 100 days from that join day to the very first visit, that first time they walk into the club, to that first week, their first month all the way through that first 100 days because as Brian said, early engagement benefits the length of membership and the lifetime value.

So we're reviewing the join process that, that member goes through, how we onboard that new member, we give them a tour, what that tour looks like, how it's customized to that particular member's needs, how we use our CRM tools and how we engage the member through all of those processes. We've already invested. Brian talked about demand-centric growth to understand our demand spaces and where we choose to play.

We have also done consumer focus groups and use technology to understand equipment usage patterns. We then test and learn to uncover real needs and opportunities. I'll talk about some of these test-and-learn clubs in a bit, but this evolution is essential for creating member-centered innovation.

We create a unified member journey by integrating all the touch points from our app to our in-club design and the experience for the member, everything under one member-centered strategy, which will drive engagement and retention, strengthen brand consistency and our emotional connection with the member and we'll provide tools that empower our team members with purpose that connects culture, service, hospitality in that service and technology to deliver a best-in-class differentiated member experience. So what does best-in-class look like?

It starts with recognition, understanding the members' goals individually and showing appreciation as they're achieving those goals, being connected with them, building community where members feel included, consistently providing meaningful member benefits, value to that membership, being lightly gated, exclusive value, exclusive access with high value, seamless and effortless so that their interactions are just simple and then have purpose and communicating our mission, making sure and helping members understand and be a part of that mission with us.

Second thing I'll talk about is the format optimized club. Two years ago, we revamped, updated and evolved our traditional club layout, intentionally pushing the envelope. We built 20 test-and-learn clubs in 2024 to better understand what resonates with our members. These test-and-learn locations led us to our current format optimized club.

As Colleen shared, 80% of clubs will have some form of updated strength by year-end. Franchisees are very excited about this updated offering. Virtually all new clubs built in 2025 have or will have the current format design. Every remodel is deploying that same current format. And many franchisees are also accelerating their equipment mix to our current format club. I have a video that we'll share just to show you what those franchisees are saying about this format.

[Presentation]

So that format today, very exciting. Members are talking about it. Our franchisees are talking about it. I wake up every morning with an NPS report, and I see a lot of great comments in those reports about the offering and the change. So we now have a world-class layout that consumers and members expect. But it's also one that the member can identify with and grow in no matter where they are in that fitness journey, if they're a first-time user or they're an advanced enthusiast.

So let me walk you through the changes and how they lay out in the club. As I review this, you'll see a yellow highlighted section that I'm going to talk about in each step. So the first thing we did was we reduced the number of cardio pieces in a club. But keeping cardio still front and center as members enter that club.

That is important to the experience. We've reviewed consumer studies and actual equipment usage data to ensure we have the right mix of cardio. By example, we lowered the number of ellipticals and the number of arcs in a club, both in our cardio section, but also in that cardio section, we increased the number of stepmills that are in there. You may know step climbers.

We've increased that number. Some clubs used to have 4. They are now 12. Members wanted that piece of equipment. We made that change. We've expanded our free weight offering, adding functional workout spaces, placing dumbbells and kettle bells in multiple locations around the club, providing the equipment in spaces where the member feels comfortable working out, not just in one spot, but several spots through the club.

Next, we added mobility and stretching areas to the club, again, in several places. In these areas, we've added things like fit benches. That's a personal piece of equipment that you can do a self-contained workout in. It's in the middle picture, yes, the middle picture. We've added HIIT zone. That's a high-intensity interval training. So workouts with our PF 360. There's functional equipment surrounding those pieces of equipment.

There are functional pieces surrounding now turf, which is optional in our clubs, all areas where they can do more high-intensity training. We've added plate loaded. So we talked about some of the pieces are here. This equipment includes these pieces. So there's 3 over there. You probably heard we added those at the end of last year, but we now have a full selection of plate loaded in many of our clubs.

And then half racks. That's the tallest piece of equipment on the side of the room. This piece of equipment includes weighted plates, bars, benches, which fitness enthusiasts are looking for. They can do bench presses, incline bench, squats, overhead press and dead lifts. They can be for a more advanced user. But as mentioned by one of our franchisees in the video, some of the more or less enthusiasts or newer members are also migrating to this space with curiosity. We've also added the optional turf.

So today, we have 400 clubs with this design executing, which gives us some really significant data. So we use a product, Mastercard's Test & Learn platform. We compare to the new format clubs to similar control sets and found that current clubs outperformed the former layout in all categories. Higher joins, lower attrition. And as I said, my report looks a lot better every day, higher NPS scores. Let's hear what those members have to say.

[Presentation]

I love that, anyone can get strong at Planet Fitness, it's awesome. To be honest, it's been a minute or more since we've actually reimagined this area. The 2 biggest privileges within our Black Card membership are guest privileges, that's bring a friend and reciprocity, use any of the clubs in our system. They are what is a joint motivator for Black Card and also the most often used. We see an opportunity, though, to update the amenities to help drive joins and upgrades.

What makes this so powerful is this give us an opportunity to now move past democratizing fitness, but democratizing recovery and wellness. We want to give prospects more reasons to join and classic members a reason to want to upgrade. Said differently, we want to drive joins, upgrades and retention based on physical amenities beyond just reciprocity and guest privileges.

We can do this by enhancing the amenities and better showcasing the current offering in club and in our marketing, as Brian showed you just a little bit ago. Let me walk you through some of those Black Card changes. So first, the Black Card spa looks more like the left today. Currently, the amenities are actually behind our desk through a glass door, basically hidden from the members.

We want to move to the picture on the right, where it's more modern, more upscale and more open so people can see in and be curious about what's back there and hopefully upgrade their membership. But what I'm going to talk a little bit today is not the exterior, but more what's inside and behind that area, the equipment itself. So we've begun testing 5 new amenities alongside our best performers. So those best performers, you probably know, are tanning, massage chairs, hydro lounges.

The 5 new amenities start with the 2 you see on the screen. So first, dry plunge. That's a dry cold plunge, solves for not having a tub of water in the club. Hyperice recovery. So that's percussion guns, full leg compression, sleeves, and zero gravity chairs. In some consumer work we've done, we know that considerers, that somebody who's thinking about joining a gym and switchers, somebody who's a gym member who wants to move to a different gym, are more likely to join with the addition of these amenities.

The most popular one in those surveys is the red light infrared sauna. We also have well-fit skin hydration in many -- in some of our clubs today, originally thought to be a tanning alternative when we put it in, but stronger member feedback and usage indicates high adoption related to skin care. Red Light Recovery Pro, another piece of equipment comparable to the equipment you would find in a much more costly high-end spa will be available in the Planet Fitness.

We're excited to see how these perform in the testing we're about to launch. So while we've tested the pieces uniquely, we're going to test all 5 modalities as a package in 2026 alongside those classic favorites, tanning, hydro lounges and massage chairs. So 8 different amenities in the club.

That is not different. It doesn't take more space than today. It's replacing some of the amenities that are in the club to add these 5 new modalities. Once again, democratizing recovery and wellness. We'll take a member-centered approach, capture their insights in real time, learning and understanding the experience by asking them. Their feedback will help us assess usability and help us design our marketing.

It will also help us operationalize the team members' training to deliver best-in-class experiences for those members. So to recap, we're continuing to evolve our differentiated member experience. We're improving our member engagement, driving joins, improving retention and democratizing recovery and wellness, all while building a world-class great fitness community. So thank you. Now please welcome our Chief Development Officer, Chip Ohlsson.

Thanks so much, Bill. Great new things happening at Planet Fitness, and that's what we're excited about. But what I'm going to talk about today is how we're going to grow. So I'm excited to share with you how we're setting Planet Fitness up for long-term success from a development perspective. I'm going to start with an overview of our international business, summarize the state of domestic real estate and then provide an update on construction, design and our cost efficiencies.

But let's talk about the democratization of fitness, especially internationally. Our international growth continues to accelerate at a fast pace, creating opportunities all across the globe. In fact, 1 in every 20 Planet Fitness members has an international home club. And what does that mean for growth? One million members. Earlier this year, we surpassed 1 million members across all the markets outside of the U.S.

And today, our global footprint spans 6 countries with more than 180 clubs, and we expect to surpass 200 clubs in this coming year. And as we promote clubs around the world, we're building brand awareness for all of our clubs. As an example of international growth, the first club in Spain launched in July of 2024. We focused on a cluster development approach, so Madrid, Valencia, Barcelona and building clubs out from there. This allowed us to rapidly gain market share, member growth and all through brand awareness.

During our first 12 months, we opened 10 clubs with a strong base of all new members. And looking ahead, we have a strong pipeline of approved sites to continue to build on that momentum. Here's an example of a ramp for Sabadell Spain. You can see on the yellow line. This is our first club. It just opened a year ago. So we have a full year of data that we can pull from. As you can see, the ramp started and was on par with the strong openings in the U.S. and Mexico, but then it surpassed them.

And the great news is the early trend on all of our new clubs is on par with Sabadell, demonstrating our model resonates with consumers, both domestic and international. And that's even more clear when we look at how the consumer ranks us in the Spanish market. One of our research firms conducted an NPS survey, and Planet Fitness achieved an NPS of 81. Compare that to all of Spain's fitness, which is just about 27.

The research firm was so surprised they had to recalculate everything by hand to make sure the findings were correct and accurate. Consumers in Spain are seeing the value, which gives us the opportunity to grow. Spain is our proof of concept, which furthers our confidence to grow internationally. Our openings and performance in Australia, Mexico, Spain reinforce the strength of this brand globally.

Overall, when it comes to driving international development, we're taking a deliberate approach that aligns with our strategic road map. We're targeting 1 to 2 large scalable markets using our proven road map, and we're going to disrupt the entrenched competitors. We're recruiting well-established local groups who understand the market and local expertise.

And we're going into markets where we can grow our brand in a healthy way, not just plant a flag. But let's shift to the U.S. and discuss how Planet Fitness continues to resonate with consumers and owners alike. And I'm going to start with an update on the U.S. real estate. While we continue to see stagnant growth with new supply, we're starting to see green shoots, as Colleen mentioned earlier. This creates an opportunity for brands like Planet.

Our prototype provides the ability to flex up or down from our 20,000 square foot layout. This allows us to find real estate in great markets and provides a greater opportunity overall over the other fitness brands. But our real estate team isn't there just to approve sites, but it helps owners with their overall portfolio management. We have the ability to collect data, analytics, showing owners the right target markets and the sites within those markets.

We build those relationships and work with other retailers as they downsize, allowing us to demise spaces or we can leverage relationships restructuring firms, so we get first look at all the opportunities in the market. We're working hand-in-hand with franchisees, and we have the ability with the data and analytics that we collect to show the owners the right target markets and the sites in those markets. We start with the site approvals, then we help them negotiate the best lease terms.

We do it on national and local rate rents and allow the owners to maximize their IRRs. We help landlords understand how Planet Fitness is different and why we're the right choice. As I said earlier, we have flexibility within the space. We can go from just under 15,000 square feet to over 30,000 square feet, depending on the site and the market. And the stronger the relationships we build with these landlords, the more access we have to present all the data.

For example, when we look at this, we drive traffic to co-tenants because 90% of Planet Fitness members shop at retailers in the center. And 76% of our members combine club visits with shopping. What landlord wouldn't want to tap into thousands of consumers to activate their centers. And our members usually visit off-peak. When we look at this chart, the purple bars represent Planet Fitness and the red bars represent a major specialty food retailer, 70% of our visits are Monday through Thursday and about half before 2:00 p.m. Specialty food retailers, they need the parking on the weekends and they need it at night.

So we activate the center the entire week. When it comes to real estate availability, we need to be creative and think differently. And that's why conversions present a great opportunity for us to access second-generation space. Not only does it allow us to enter market quickly, but it provides a platform for members and removes a competitor from the marketplace. Now there's lots of variables to consider when we look at conversions, right?

We have to look at the cost. We have to look at the layout, the scope of work, lease terms. But when done right, it removes risks and allow for quick ramps. So let's take one of the ones that was done right. Texas Family Fitness was a great regional player in the Dallas marketplace. But as Planet Fitness grew, Texas Family Fitness saw the opportunity to sell. It was a great location in a prime retail center, but it needed a reimaging, but we had to provide strong returns for the owner at the same time.

So if we go on the inside, we had to find space for our Black Card spa, a spot that allowed us to expand the equipment on the club floor while enhancing that new member experience. And the daycare provided a perfect spot for that. We reimagined the space and provided a fresh look. An additional benefit was converting the daycare was that the space was less than 10% utilized by the members. Now all our Black Card members can enjoy it, and that represents more than 60% of our members.

So for many, it's a significant upgrade in terms of member experience. In the cardio and strength area, we replaced the old equipment and provided new more functional layout. We removed the old carpet and replaced it with rubber flooring and added turf as a centralized feature. We moved the half racks to their own room, and we took the space from boring to bold. This really was an amazing transformation, not just for the members of the community, but also for the owner.

And conversions provide a great opportunity for all -- for our brand. We know new construction is still the main choice for most of our franchisees. And so now let's talk about the second opportunity we have for growth as we help owners reduce costs on the overall capital. Like everyone else, we've seen a rise in construction costs. Today, we're approximately $3 million all in per club. So to help owners manage costs while enhancing the member experience, we're looking at the current design.

We're making our clubs more efficient while reducing costs. We're delivering on our promise to our members by providing high value at low cost. So on the construction side, we took the lobbies and reducing it about 25%. We relocated the locker rooms and reduced their size by adding lockers to the main gym floor, making the Black Card spa more visible, as Bill said, to better showcase the new recovery modalities and allowing for more prominent location to drive member engagement and upgrades.

In a prototypical build, we estimate more than a 10% savings off the hard construction costs. And we're there to guide the franchisees through these opportunities. Now Bill showed you the current format club. What I'd like to share is a more conceptual club, where we push the envelope, similar to what automakers do when they develop a concept car. We're going to use the learnings from this design to enhance the guest experience and value engineer our prototype.

We've partnered with one of the most preeminent firms in the fitness industry to help guide us on this journey and allow us to think differently. So I'm going to show you an example of some concepts that we're considering for the future, but these are designed to evoke thought and conversation internally. We've moved the strength upfront, adding cardio area to complement it, but keeping the energy at the entrance and allowing for mixed modalities.

We like to think about this as a progression, right? So starting at the top of the club for the newer members, the center of the club, highlighted now by some of the lockers in the turf and then the back -- in the Black Card spa, I'm sorry, Black Card spa right in the middle. And then in the back of the club, we have more serious strength equipment for those advanced members. Our front lobby becomes more efficient, providing a really high-value entrance.

Our locker room is well positioned now directly behind that front desk and our Black Card spa centrally located. Turf is now its own defined space, and we've made it a central feature. It allows for better traffic flow with the removal of the expensive half walls and bulkheads and soffits, and we replaced it with TV partitions. The design reflects what the members want to evolve the value offering and to meet their needs.

And of course, franchisees want happy members and strong returns. We're delivering on both while driving growth. Now let me share how we continue to drive growth within our current ownership base. We recently reviewed a subset of the current ADAs. And as you can see, we unlock growth through different channels. We amended some of the current ADAs. We terminated some of those ADAs and some were transferred.

We're able to work with owners and drove growth an additional 28% over the remaining term of this subset of ADAs. Additionally, we're bringing in a sales leader to accelerate development in the untapped markets throughout the U.S. We'll add new franchisees that are located in markets allowing us to build an owner-operated model and drive growth with smaller ADAs, approximately 3 to 5 units over a few years.

We also know that by expanding our broker network, we can find those conversion opportunities all throughout the U.S. So to wrap up, these initiatives, which are well underway, are expected to yield incremental sustainable growth in the short term and provide a platform that we can build off of to grow into future years. We believe that we're all strong on this planet applies to our members and to our business model. With that, as Colleen said, the moment we've all been waiting for, our Chief Financial Officer, Jay Stasz.

I find it hard to believe that this is the moment you've all been waiting for, but I appreciate the sentiment, and I will take it. So yes, thanks, Chip, and good morning, everyone. Today, you've heard about all the actions we're taking to evolve the business. That's the moments that we've all been waiting for. Now I'll discuss how we're going to distill those actions into results. I'll tell you how we're leveraging our scale to drive profitable growth, expand our competitive edge and strengthen our position as industry leader.

We've built a highly attractive franchise system with a growing network of clubs, a strong membership base and world-class EBITDA margins. We're proud of our achievements in the first decade since going public, building a strong foundation as a growth company, a business that generates strong and stable cash flow, which we're returning to our shareholders and reinvesting in our business to drive growth.

On these next slides, we'll see proof of our strong and consistent track record of growth and profitability over the last 5 years and our commitment to maintaining our capital-light franchise model, starting with approximately 6% unit growth and about 9% growth in members. System-wide sales growth in the high single digits and EBITDA growth at a CAGR of almost 12%. This is evidence of our ability to drive top line, invest appropriately in the business and keep expenses well managed to gain leverage and flow-through from that top line growth.

When it comes to top line, our comp sales trends are impressive, a clear indication of the durability of this business even before the golden age of fitness. We had 53 consecutive quarters of comp sales growth coming into COVID. That's more than 13 years. And now we're building a new trend, 17 quarters since coming out of COVID, strong and consistent results and cash flow. Now looking ahead, I'm going to go a little deeper into 3 topics: our club level returns, our capital allocation strategy; and finally, our 3-year algo.

Let's start with club level returns. The results we're seeing from our recent openings and how they're tracking to our internal return targets. You've heard a lot about all the great work we're doing to drive top line, which we know wins the day in terms of unit economics. Our strength -- our work to strengthen club returns include these items. Many of you've heard about before and many you heard about today.

The new growth model focused on improving franchisee unit economics, reducing capital cost and extending reequipped time lines. And to support the top line, we did the Classic Card price increase last June or June '24, and we've announced the Black Card price increase in 2026. We know that top line is the lead dog. That's why we've built a Blue Ribbon team to execute the strategic imperatives you heard about today, driving member experience in the capital HV in HVlp.

But we're not going to ignore the cost side. Rigor on the cost side of this equation can further drive returns. We're continuing to work to value engineer the investment costs and reduce expenses. We've established a new procurement department to add rigor for spend across the business. It's the early days, but we see opportunities, advertising and savings on build-out costs like flooring and lighting.

The franchisees are excited by the work we're doing and the investments we've made over the last year, all designed to improve IRR and accelerate growth. With this momentum fueling us, we're optimistic about the returns we expect. This slide shows the top line results we're seeing since the rollout of our new growth model and increase in the Classic Card price. The middle line on the chart shows the openings in the back half of '24 and the top line shows the club openings in the first half of this year.

You can see our cohorts are accelerating. The dotted line represents an IRR target of mid-20s, and we're tracking right on it. Now let's talk about capital allocation. First and foremost, we're continuing to invest to grow and evolve our business and ensuring a world-class franchise platform from which we can grow. Next, we're going to return cash to shareholders, just like we've done in the past, and we'll execute on these priorities while operating within our target leverage levels. Let's get into the details on these pieces.

Because 90% of our clubs are franchised, our business is capital light, which means we can focus on strategically investing to scale and drive returns. Those investments could include developing enhanced data and analytics like we've done to help us identify trends and make the best decisions to move our business forward or investing in technology to enhance our member experience from the digital join flow to the fitness app. We're investing in our corporate clubs, new clubs and strategic remodels, reequips and relocations to help us gain share.

With our strong balance sheet and capacity under our debt, we're well positioned to act if and when the right strategic opportunity comes along, and it's accretive. Our next capital allocation priority is to return cash to the shareholders via buybacks. We've done this and we'll continue to do it through both opportunistic repurchases and accelerated share repurchases typically tied to refi events.

Our goal is to be consistent with more investment in buybacks between these refi events. Because of the natural delevering and scheduled debt maturities, we tend to increase buybacks at the refis. Now let me frame how we think about our capital. We appreciate the flexibility of our laddered WBS debt structure that we typically go to market with maturities every couple of years.

This structure allows us to be capital efficient and maintain reasonable leverage ratios. Depending on the market conditions, we expect to operate within the range of 4 to 6x gross leverage. We lean to the bottom half of that range typically as a business as usual while leaving the high end for opportunities and strategic investments.

In a higher rate environment like we have today, we'll typically operate in the bottom half of that range. And then when the leverage drops toward the bottom range or below it, it's likely time for a refi event with an upsize, getting our leverage closer to the middle of the range and executing an ASR. We have ample capacity under our current debt facility, $2 billion of debt today and can borrow another $1.5 billion if there's a strategic need like M&A or another strategic investment.

This brings me to our long-term growth algorithm. You've heard about the strategic imperatives and the work our team is executing, which allow us to continue to deliver strong financial results. Here, you can see our annual targets for the next 3 years. Revenue growth in the low double digits, adjusted EBITDA in the mid-teens and adjusted EPS in the mid- to high teens. Now let me walk you through the building blocks of each one to show you how we'll get there.

Our revenue growth will be made up of same club sales and unit growth. We expect same club sales of mid-single digits, driven by approximately 75% rate and 25% volume. The split reflects the Classic Card price increase in June of '24 and the planned Black Card price increase in '26. We will always focus on driving membership. The 25% contribution is significant, still growing members in mature clubs, which make up the majority of our comp base.

Now on to the next. The other component of revenue is driving new club unit growth of approximately 6% to 7%. We expect this to consist of about 5 points from domestic franchise growth and roughly 1 point from international. Given this outlook, we expect to open just under 200 new clubs in '26 and north of 200 a year in '27 and '28. Along with top line growth, we will deliver world-class profitability, reflecting the strength and efficiency of our capital-light franchise-driven model.

The bottom line will grow faster than our top line as we maintain our capital-light model committed to a 90-10 franchisee to corporate ratio and continue our disciplined approach to both corporate club and SG&A expense management. And finally, EPS. We expect mid- to high teens growth. The variables include interest expense, driven by the rate and the size of the borrowing at the time of refinancing and of course, the number of shares we repurchase. In closing, this is an exciting time to be part of Planet Fitness.

We're growing our highly attractive franchise system with more clubs, more members and a capital-light model that drives strong predictable cash flow. We're investing that cash strategically to deliver world-class profitability and long-term shareholder value. Simply put, we're growing our business, strengthening our competitive edge and continuing to lead the industry. And with the scale, the strategy and the momentum we've built, this -- the best is still ahead for Planet Fitness. Thank you. And now we're going to open it up for your questions. So let me invite our presenters back to the stage and turn it back to Stacey.

All right. So as hands are already up. I think people are anxious.

Something tells me this might be what they were all waiting.

A couple of things before we get started with our Q&A. I ask that you wait for a microphone so that the webcast participants can hear your question. And then it would be great if you could state your first name and your firm. And then finally, it will be -- if you could just limit yourself to one question initially, if there is time, then we might be able to add for people to ask a second question. So with that, and mic runners are standing by. So let's start with Randy since I think he won the hands-up contest.

Randy Konik at Jefferies. I guess for Chip, you give us some perspective on international development, thinking about 1 to 2 scalable markets a year. Maybe give us a little bit more -- a little bit more meat on the bones. You want to -- probably don't want to give us countries, but maybe where you are kind of targeting just a broad level.

And then maybe from Colleen's perspective, how do we think about that growth? Is it going to be owned growth, franchise? Can you give us that system? And would you ever consider any acquisitions to accelerate international further since you're already seeing some very strong results already in Spain and other markets?

So I'll start with when I talk about where we're going to go for target markets, for competitive reasons, I want to hold back to the actual markets. But we can look at it from -- when we went into Mexico, we went into Spain, we looked at the demographics of the market. We looked at, okay, what's the population density? How many rooftops are there? We look at the political system. We look at the inflation of a given marketplace.

And then we look at who the sponsors can be in that market. That's really important to us. There is a nuance in every international market that we go -- any market we go into actually. And having somebody on the ground that understands what's happening in the market, what rents look like, there's complexities in Spanish -- or I'm sorry, in French real estate as opposed to maybe Spanish real estate.

So understanding those complexities. So for us, the important thing is to go into a market that we know we can highly perform in. We know it has great density. We know that the consumer is out there, and they want to get fit. And then from a local perspective, how do we handle it from political, rents, and things like that.

And I'll build on that, too, to answer your question. So you've seen our brand perform in a number of different geographies. We built Spain on our balance sheet first as a proof of concept. And we wanted to stay very close to the build process. We put a team on the ground. We've got a great country leader. We've got a great operations leader who's experienced in Spain, great marketing leader who is able to engage with agencies and develop marketing creative that really landed great real estate person.

So as we think about other markets, we are very committed, as Jay said, to preserving our asset-light model. We do not think we must go into a market on balance sheet. If we could go into a market with a strong, well-capitalized prospective franchisee partner in a market, we would certainly do that. But we want to make sure that we've also got the right resources on the ground to bring the brand to life in a healthy way.

And as it relates to inorganic opportunities, Jay touched on that in his remarks as well. We have looked at other inorganic opportunities, and we do have capacity. At the same time, it needs to check a couple of boxes, right, from a return profile perspective and is it the right box? Can we really bring the brand to life in a healthy way like we've been able to do in Spain?

And then the other thing from an inorganic standpoint is preserving that-ish 90-10 franchise mix in our system is also important to us. But we talked last year about we took a look at the Blink acquisition as for example. So if there's something in the market, we are going to underwrite it. We've said we look at everything and we should look at everything. So we are going to underwrite it and see how it makes sense in our system.

Simeon Siegel at Guggenheim. So the lapsed member opportunity looks really interesting. Can you just flesh that out a little bit? Maybe talk about what the average duration between lapsed and reactivation that you've seen? What do members give for -- those that leave and come back, what's the reason they give for leaving and then in terms of bringing them back? And just any way you want to quantify order of magnitude of opportunity within that lapsed customer?

Do you want to start, who want to start? I'll start. So as it relates to lapsed members, we've talked a lot about the rejoin rate being in the mid-30s, even a couple of quarters -- recent quarters, wherein last year, we were in the upper 30s. We don't get into specifics about the duration of membership.

However, we are looking at the rejoin rate and how the duration of the original membership as well as the rejoin. So that's where we're doing more work around lifetime value. Again, we've got members who, let's say, boomers who've been with us a long period of time. We are running some regression analysis to understand what the value is on the rejoin.

At the same time, we'll make some assumptions because we haven't seen the same lifespan of a Gen Z to understand if they lapse and rejoin, obviously, we don't have as many years with them as we've done with boomers. So I hope that answers your question to some degree. I know I'm not being maybe as specific about tenure as you would probably like. But you can back into the tenure a bit, too. And then you can talk about the marketing, how we market to lapsed...

One is working, but neither is working. And then on -- the biggest reason when we -- I mean, we do a lot of research on kind of what is the root cause. The #1 is really time, having the time to get to the club. And I think that's why we actually see a lot of rejoin. There's a lot of life just events, whether you're preparing for a race, whether you have a health issue, I think that's why we see a lot of the in and then they come back when they have another event that determines that.

But that's the power of as we're building out the CRM tools and the AI-enabled engine, we're collecting that data. So when a customer cancels, we capture through surveys, both in the club and online, what is the core reason for that? So we have that first-hand reporting. And then when we do the rejoin efforts, we will lead with sort of that reason as with an offset to that. If it was cost, well, there's maybe a different membership level.

If you moved, well, we have the Black Card, you can go anywhere. So I think we're really going to see some acceleration on the ability to personalize that rejoin offer to a lapsed member as we go forward and using not only what they self-report but propensity models we're building to identify that through data signals we're seeing that aren't self-reported.

I'm Max Rakhlenko, TD Cowen. Congratulations on a great morning. So in that TAM analysis slide, you guys pointed out the 2 groups that stand out as opportunities. How do you think about the low-hanging fruit and sort of where those members could come from?

And then how do you think about balancing sort of the sweet spot that Planet Fitness has always had about winning those first-time gym goers and really having that non-intimidating environment versus getting more members from elsewhere that may be looking for different things?

Yes. Well, and I think it's -- the key to me in all of that is that -- and part of why that 80% we used to go to that person get off the couch is the customers evolve so much. Like if you think about the millennials and Gen Z and that whole idea of their parents have modeled behavior that is probably more fitness-oriented than my parents ever did is that it's really about they are already coming into the marketplace with a higher wellness and fitness knowledge than previous generations.

So now it's about providing them the offerings and the access that they want. So I think that's where it's just a significantly different, I don't know if there is a true couch potato customer today that was so prevalent 20 years ago. So it's really looking at if you're coming in with a propensity to want wellness to be part of your lifestyle and you have a better understanding of what that means and all of the different modalities available to you, then it's really for us, as we evolve, it's part of even recovery.

Recovery is a much bigger part of a wellness routine. That's why the Black Card spa evolution is so focused there. So I think it is really now much more of a combination of as the overall wellness interest is growing. That is the growing kind of TAM in the marketplace of people who we can still bring in who maybe haven't paid to join a service yet. And then an opportunity that was much different 20 years ago on stealing share.

That is now a dynamic that we need to get more focused on how do we really go after those other 60 million to 65 million people who are paying, but not our 20 million and give them compelling reasons. And I think the emotional part of what I talked about is really critical.

Not -- that's where my belief is there's the functional needs that drive a lot and probably are where people start, but then they want to attach themselves to a brand. We're all customers. We want to -- we represent brands that speak to us and dialing that up and having people really say, I identify Planet Fitness, they're a brand for me is how we, I think, have a big opportunity to steal share.

I think we've also done such a good job with judgment-free over the life of the brand that the consumer that comes into our club today understands that no matter their body type. So it's very different than when we embarked on fitness. Today, we'll have consumers in our clubs that are fitness enthusiasts, but they understand our values around judgment-free and what that experience should be like in the club. So it's still welcoming for all.

Sharon Zackfia with William Blair. So I'm pretty excited about the idea of bringing in a dedicated sales leader on the franchisee side. I don't think Planet is ever marketed for new franchisees in the U.S. So can you talk about the advent of that function and how critical new franchisees are to that 6% to 7% CAGR over the next 3 years? And ultimately, kind of what kind of franchisee base do you need in the U.S. to tap that TAM over time, which I think is still over 4,000 clubs.

I'll start and then, Chip, if you want to build on it a little bit. But to start, yes, you're right. We say upwards of 4,000 to 5,000 clubs domestically. And today, we've said we are confident that we've got strong, well-capitalized franchisees in our system today who are excited to grow with us. And we've seen that with every time territory has become available, at least in my tenure, every time territory has become available, we've had incumbent franchisees at the table wanting to acquire that territory and grow their portfolios with us.

So that's a very positive signal. And I think that speaks to your question how necessary is it. At the same time, we do believe there's an opportunity to bring some new franchisees into the system and that it would be advantageous for us to have some additional well-qualified franchisees to help us achieve that growth ambition to get to the longer-term growth targets.

And I think Chip talked a little bit about how we've recast some ADAs when maybe transactions were happening or there was an opportunity for us to look at ADA performance and unlock additional territory. So we think that gives us an opportunity now to sell some incremental territory to some new franchisees. And maybe there hasn't been a ton of white space.

There is some white space and when you think about kind of coming out of COVID, the de-urbanization, de-densification, where homes have been built, particularly kind of the median entry-level kind of price homes in the U.S., there are likely more communities today that have that 50,000 or 70,000 rooftops than 5 or 6 years ago.

And again, with the new format, we've got the opportunity to build clubs that are maybe in a community sub-70,000 rooftops that are underserved from a fitness experience standpoint. So all of that together gives us the confidence that we can bring some additional franchisees into the system.

Yes. We think it's a big opportunity. There's -- as Colleen said, there's white space all throughout the U.S. It's not just where major markets are when we look at the LLS and everything. And so there's a lot of owner operators since I've been here, and I've been here about 11 months, way longer than you, Brian, been here about 11 months, and we've gotten a lot of calls.

And we think it benefits everybody in the system. Fitness now is a -- and especially in the franchising model is where people are looking to invest. And so if we bring in the right owners into this marketplace, it benefits our existing owners. It benefits the new markets that we're going to go into because there's a lot of these owner-operator markets out there.

And I have a background in hotels, too. And we know that if we go in and we meet with the local operator that may own the car dealership in the market, but wants to diversify his investment portfolio, doing it through Planet Fitness is a great way to do it. And they can -- they know everybody in that marketplace and so we just think there's a big, big broad stroke that we can go out into there and grow.

Rahul from JPMorgan. The HVlp space growing at 9% CAGR slide is interesting. The model has attracted a lot of capital and competition. Can you discuss a little more detail on the supply growth in the regional and local markets and competition you're seeing? And how aggressive can you get on the conversions or maybe smaller scale M&A given the balance sheet flexibility you have today? And the follow-up is on the mid-single-digit algo on the same-store sales club growth. The 75% mix coming from rate versus the volume, how should we think about this evolving over time?

Maybe I'll start. I'll start on the kind of the conversion opportunity and the growth in HVlp. So I'll say this, a couple of things. First, I think we saw a couple of HVlp peers in the sector transact earlier this year at pretty strong multiples. I think that's a signal that these are smart, well-qualified investors, right, that's a strong signal of the opportunity and the growth opportunity in this sector.

As it relates to conversions, we did a few -- had a few conversion clubs last year. And then we just recently had some conversion clubs in partnership with another franchisee this year, right at the end of the third quarter. There's -- gosh, coming out of COVID, this number is probably higher, but it was 31,000 kind of gyms and clubs domestically in the U.S. and that was after -- that was on the heels after post some of the COVID closures because it was around 40,000 pre-COVID.

So you take that, and you think, gosh, we are today less than 10% of that. And us and our next largest competitor or peer combined, probably still only-ish about 10% of that. So there's a big opportunity with conversion clubs that are small regional -- smaller regional players that the electrical is already run, there's already plumbing. It's -- again, the right footprint, it also gives us access to that second-generation space that already has some build-out if it's well located.

So we see conversions as a nice opportunity. As Chip said, still the majority of our development is new club construction, but we do see it as a path to accelerating growth, working in partnership with our franchisees. And we've got someone on our corporate development team.

We established a corporate development team over the past year, and we have someone who's opportunity sizing that and looking for -- looking at the landscape of these smaller regional players where there might be a 4-pack, a 5-pack, a 6-pack of clubs in a region where we could bring them into the system, help our franchisee with a thoughtful, smart conversion and continue -- to make sure that we're continuing to deliver access to fitness in communities around the United States.

Yes. And just to follow up on your comp question, I'll speak to that. I mean, obviously, the algorithm that we gave across all the metrics is a 3-year algorithm. We expect to operate within that over that time period. As we give specific annual guidance, obviously, we'll be getting into that with '26. We'll give more details around that. I mean, obviously, there are some influences with the Black Card price increase next year that is going to impact that ratio, and it will ebb and flow.

Joe Altobello, Raymond James. A question for Jay. And I know we talked about this earlier, but how should we think about the growth in the equipment business over the next 3 years since -- I think placements, it's pretty straightforward. It should be a nice glide path. The reequip side might be a little bit lumpy. I think there's some -- a slowdown next year, some growth in '27, another slowdown in '28. So how should we think about that?

Right. It's a good question. And obviously, the change in pace of change in the equipment segment is within our guidance that we gave on revenue. To your point, as part of the new growth model, we did shift some of the reequip timing. And so there's some gaps in that timing, which we will be in during this 3-year period.

The first of those is in '26 and then again in '28. And while we would expect growth in the equipment segment, it will be much more muted and certainly not the estimated 16 that we've talked about this year. because of those shifts in the reequip schedule, but all encompassed in the guidance or the targets that we gave.

Chris?

Great presentation. Brian, my question is around the nonworking media that we could expect to grow this year. I mean you guys have spent a lot; it sounds like this year with nonworking media. And so -- and then you've got some efficiencies you talked about. What do you expect the working media growth to be this year?

Well, less about dollars. I mean we're -- just in the 1% shift that I talked about, we will deliver about a 24% increase in impressions that we can derive on a national level than we did 2025. So it's that type of escalation. We're still working on -- as we think about this 1% shift, how do we really ensure that it is not only allowing us to chase some of those like emotional equities that we want to build, but keeping the top line at the forefront and working on that mix between the local, really a bit heavier focused on top line and demand generation.

Like today, with the 7.2 we're a little bit in the middle, a little messy, where some of the local co-ops are doing what I would call upper funnel marketing, and that's where we kind of match. This shift towards more national is going to allow us to really delineate between those channels and have national, again, kind of really be the engine delivering impressions, driving traffic into our ecosystem, traffic into our website, into our join flow and let the local really focus on more just pure demand generation.

So at this point, in the 1% shift, it's more of an impressions game, and then we'll see where we move to in the future. But that's how we're trying to think about the effectiveness of the combined spend and the increase in the working ratio.

I would say you talked about in pure dollars, so that's about $45 million. We made a commitment to the franchisees that vast majority of that was going to go to working media, but more kind of the brand messaging working media. And then the savings that you've achieved through the procurement process with the new agencies is also freeing up dollars that won't be going to agency commissions.

So it's -- I mean, it's fair to say it's in the multiples of millions of dollars of additional funding that is going to go to working media, whether it's at the top of the funnel and then pulling the AI-enabled CRM and the DCO work, the dynamic content optimization, those were 2 initiatives that we had on the longer-term road map, but we were able to pull forward, you and your team were able to pull those forward with the unlock of the additional funding that's not going to fees. So it is more money put to work.

Arpine Kocharyan, UBS. I was wondering if you could talk a little bit about what franchisee returns are embedded in your growth targets. I think you mentioned currently that stands at around mid-20s. Do you see a path to getting closer to maybe high 20s over time despite cost to build increases?

Yes. So as you said, I mean, what we're targeting and as we saw on the slide, is roughly mid-20s. And it's -- we call that continuous improvement, right? We're sharpening this eye every single day on all fronts. The top line, which we know is the big driver, but we continue to focus on the cost side, the build cost as well as the expenses.

This is Marni from Macquarie. Just when we're thinking about further enhancements you've called out to recovery. So for example, making it more visible in the center before it looked like it was behind the desk, so intuitively would have been manned. So just maybe some of the mechanics about do we use barcodes to get in. Obviously, you want to make it visible but also ensuring the exclusivity of the offering and thinking about cost of manning versus not manning, et cetera.

Yes. From a design perspective, we think it's important that, that Black Card spa becomes front and center. There are new modalities going in and people need to understand what we have in those. But when we did the design, we also positioned the door close to the front desk area, but -- and Bill can talk about from a technology standpoint, what we're going to do to prevent anybody from going in and out. But yes, we can do it with access card. We just think that the more people understand what is behind that door, the more they'll utilize that, and that's where we see an increase in our membership and upgrades.

And we have -- we could do it either way. We could put the barcode right on the piece of equipment to fire up the equipment. We could put the barcode on the entry. We're going to look at the different ways. We want to make it, as I said, seamless as possible for the member so that, that experience feels natural for them as they go in and out of those spaces.

Stephen Grambling from Morgan Stanley. This is a bit of a follow-up from others for Jay. In your outlook, how are you thinking about cash conversion over the next couple of years? And what are the major puts and takes to consider?

Yes. So we're not going to give out the GAAP cash conversion metrics specifically. But what we do think about when we think about buybacks opportunistically between refis, we think about $150 million per year between the ASRs as kind of a foundational number.

Todd Wakefield with Newton Investments. Colleen, when you first joined, I think one of the questions I asked was how can you leverage your expertise at and you mentioned these 20 million-plus subscriber bases that really hasn't been monetized outside of the gym fees. And I'm curious, if any, of like the Perks monetization or anything that's built into the 3-year outlook?

So I'll touch on it a little bit and maybe then give Brian an opportunity to talk. And he shared some of it in his remarks, his prepared remarks today. Certainly, Perks is an element, partnerships is another element. And even today, while we don't get into the specifics of the economics of each of the partnerships, we do have partnerships that -- on which we clip a coupon today.

So we have monetized the member base. We do see there's more opportunity to do that. And at the same time, enhancing kind of the stickiness of the relationship with our members through utilization of relevant Perks programs is another component. But I'll let you touch on it because I think you showcased today some really cool new opportunities.

Yes. And I think there's kind of 3 components of that ecosystem. There's digital out-of-home in our clubs. So the screens are vehicles for us to bring in other advertisers to reach our audience. There's the Perks program, which has proven to be quite successful and really just driving stickiness of our customers, those who engage with an offer, we see a bit longer tenure with. And then the data. So monetizing the data.

So those are the areas we're looking to build more infrastructure around as we go forward. And then looking at almost the converse of that, like I mentioned, a couple of platforms we're going to test in the next couple of months of looking at how can we leverage and/or almost barter our ecosystem with other ecosystems that we feel are complementary to drive both joins on our end or member retention and obviously, the motivation of whatever partner we may go with.

So looking at both of those, I think there's a big opportunity to find almost a new way to reach a member base that we're not doing through, we can kind of set the tone with our national advertising and drive impressions, but looking for more effective ways to deliver an offer at a much lower cost per join.

Randy Konik with Jefferies. Just back on the Black Card spa, it's super compelling from what it looks like. Obviously, there's a lot of talk about what a new unit would show from a Black Card spa. But maybe give us some perspective on what you can do with the existing 2,800 units in terms of changing not just the equipment. I don't know if the franchise agreement specify.

But to incentivize the franchisee to kind of change that format of the look of -- because it looks pretty compelling. What can you do there? And if you can do anything there, what's the time line to get not just 80% of the clubs refreshed with equipment, but a majority of the clubs refreshed with that Black Card spa look and feel with the equipment because it looks, again, very compelling in the market.

Yes. We -- so the spa itself, a lot of them have what we would call a lobby area in it, where there's a couch, a chair and a table. It was in one of the images I actually showed or maybe you showed. That area right there, we can bring equipment into. So that as you look through the glass that's there, we can open up that glass a little bit just in deconstructing some walls. You would then be looking into equipment, which gives you a feel that there must be equipment and more back there.

So seeing the first amenity would lead to more. Today, you see a couch. So it's not leading the consumer to that what could be back there. So we think even in the existing footprint, we can open up some more glass, get into that lobby area, something, hydro lounge, do hydros, something into that area that would then open up the consumer's eye to the space and hopefully to upgrading.

Signal wellness and...

And I just also think I just mentioned screens. We have a lot of screens in our clubs. I think we can better utilize our screens to promote what is in those 2,800 clubs where maybe isn't quite as visible and just draw more attention to our customer base while they're in the club.

All right. With that, I'm going to turn it back over to Colleen to give her closing remarks.

Excellent. Well, thank you. Thank you, Stacey. Thank you, everyone, for all of the thoughtful questions today. And thank you for joining us today to hear about all of the work that we're doing to accelerate our growth. I also want to give a couple of shout-outs and thanks. We have 2 of our Board members who joined us this morning as well.

So thank you to Dr. Stephen Spinelli, our Board Chairman, and thank you also to our Board member and former Interim CEO here with us today, Governor Craig Benson. So thank you both for joining this morning as well.

So really to wrap up, I hope we've left you -- and we talked at a very high level and with some granularity about the strategic imperatives over the last -- well, since I've been here about 17 months. I hope today, we've given you a better understanding of some of the building blocks and the actions that we're taking today to help us achieve the growth ambition that we've outlined.

And I hope the time that you've had to hear from some of our Blue Ribbon team members are giving you the confidence and the clarity of our team's commitment to delivering on this ambition because we are making very meaningful progress on these strategic imperatives. We're modernizing the member experience as we brought to life for you today.

So you could see and if you want to go over and touch and feel a couple of pieces of equipment, we're getting more sophisticated in our marketing and really marketing with more precision, being more targeted and getting more value out of every dollar we spend and truly optimizing our format to increase joins and retention, really grow our membership, right?

Because it's joins and retention to streamline the build costs and enhance our unit economics. We're doing all of this with speed, bias for speed while staying hyper-focused on strong returns for our franchisees and our shareholders. And as you leave here today, I want you to know that we're taking advantage of this moment, this very special moment when we've got incredible secular tailwinds.

Demand is increasing. Space is opening or at least beginning to ease. And our brand is evolving in all the right ways. And we're poised to accelerate our industry leadership and drive more growth. So again, thank you for being with us today. Really appreciate your generous time. Thank you.

Thank you for standing by. My name is Van, and I will be your conference operator today. At this time, I would like to welcome everyone to the Q3 Planet Fitness Earnings Call. [Operator Instructions] I would now like to turn the call over to Stacey Caravella, Vice President of Investor Relations. Please go ahead.

Thank you, operator, and good morning, everyone. Speaking on today's call will be Planet Fitness Chief Executive Officer, Colleen Keating; and Chief Financial Officer, Jay Stasz. They will be available for questions during the Q&A session following the prepared remarks.

Today's call is being webcast live and recorded for replay. Before I turn the call over to Colleen, I'd like to remind everyone that the language on forward-looking statements included in our earnings release also applies to our comments made during this call. Our release can be found on our investor website along with any reconciliation of non-GAAP financial measures mentioned on the call with their corresponding GAAP measures.

Now I will turn the call over to Colleen.

Thank you, Stacey, and thank you, everyone, for joining us for the Planet Fitness Third Quarter Earnings Call. In the first 9 months of the year, we made considerable progress in executing our strategic imperatives and are feeling energized to capture even greater opportunities in the evolving fitness landscape. Our strong financial performance in the third quarter is indicative of that progress and allows us to raise elements of our 2025 outlook, which Jay will touch on in greater detail.

As consumers increasingly prioritize their health and well-being, we are pleased to have ended the quarter with approximately 20.7 million members and 6.9% system-wide same club sales growth. We added 35 new clubs and ended the quarter with a global club count of 2,795. Our reach is unparalleled. At the same time, with population growth and deurbanization over the past several years, we see increased opportunities to bring our high-value offering to an ever-growing community of fitness-minded consumers in more geographies than ever before.

In September, we announced record-breaking participation in our 2025 High School Summer Pass program with more than 3.7 million teams completing over 19 million free workouts in our clubs. Participation was up roughly 30% from last year, reflecting team's desire to stay active and prioritize their well-being during a critical time when school is out. We believe that the marketing emphasis on our expanded product offering, including more strength equipment is resonating with younger consumers. We also shifted our marketing approach this year by increasing the number of influencers we use to promote the summer pass, and we prioritized platforms that drive participation, such as TikTok.

This year alone, we've invested nearly $170 million in waived membership dues. Historically, we've converted mid-single-digit percentages of the participants to paying members over time. To reach these highs in the fifth year of the program speaks volumes about Gen Z's commitment to their health and wellness. Key findings from this year's participants are particularly affirming, with 93% of surveyed participants reporting that the program helped them create sustainable fitness routines and 78% feeling more confident.

Let's now turn to the progress we've made on our four strategic imperatives during the third quarter. As a reminder, the four strategic imperatives are: redefining our brand promise and communicating it through our marketing; enhancing our member experience; refining our product and optimizing our format; and accelerating new club growth.

I'll start with redefining our brand promise. In the third quarter, we continued with -- we are All Strong on This Planet marketing campaign that highlights our best-in-class equipment, our welcoming atmosphere and the supportive community we offer. Our strong join trend has continued, and our member count at the end of Q3 was in line with our expectations. We also saw increased Black Card penetration in the quarter with 66.1% of our total membership now at the higher tier, a 300 basis point increase from the same quarter last year.

Consumers continue to recognize the value of the Black Card, with the smallest price gap between our two membership peers since we launched the Black Card. As many of you know, we held off on increasing the price of our Black Card membership until we got on the other side of the Classic Card price increase anniversary. After thoughtful consideration, significant testing and data analysis, we've made the decision to raise the Black Card price to $29.99 after our peak join season in 2026.

We're also continuing to test new Black Card amenities such as dry cold plunge and red light technology that would add even more value to our Black Card offering. We unveiled several of these potential new offerings to our franchisees last week at our annual franchisee meeting, and they were met with great enthusiasm. We look forward to sharing our plans to modernize the Black Card spa at our Investor Day next week. Finally, we're excited to announce that we'll be sponsoring New Year's Rockin' Eve next month in Times Square for our 11th consecutive year. This is a high-visibility event that continues to put Planet Fitness on a global stage and keeps our brand top of mind for consumers as they think about prioritizing their health and fitness goals in the new year.

Now to member experience and format optimization. We know that establishing a relationship with our members is important to their engagement and retention, and utilization matters as people tend to be more loyal to brands that they use regularly. It's an indication of the value they find in their Planet Fitness membership, which is why we're pleased to see utilization rates continue to increase, a leading indicator of member stickiness.

We're partnering with our franchisees to put the member at the core of everything we do, along with the team members in our clubs who play a critical role in personally welcoming every member. We see time and time again when club team members greet our members by name and provide personal recognition, it enhances the experience for both the member and the team member. Our goal is to create a deeper sense of loyalty and emotional connection to drive retention and ultimately, revenue.

Our recent consumer insights study showed that Planet Fitness outperformed several other fitness brands on feel welcomed. This is an important emotional equity when we consider that gym gymtimidation can be a barrier to gym membership and usage. We also saw strong positive associations for Planet Fitness with convenient location, value for money, price, easy access and machine variety and availability. These are strong associations for our brand.

Member experience goes beyond a welcoming atmosphere. It includes providing members with the ideal equipment mix in a club with a format optimized layout so they can achieve their workouts their way. To this end, we gave franchisees who are developing or renovating clubs this year, the opportunity to build a traditional layout or one of the new format optimized clubs. And 95% elected to build one of the newer club formats. By the end of 2025, close to 80% of clubs system-wide will have some version of an optimized format. That's nearly 4 out of 5 clubs. We will share more about this next week at our Investor Day.

And finally, our efforts to accelerate new club growth. We continue to refine our product offering and enhance operational efficiencies to maximize the economic value proposition for our franchisees while delivering the most relevant on-brand experience for today's members. That said, we're a top line-driven business, and we are keenly focused on driving unit economics through top line growth.

In August, our franchisees voted to shift 1 percentage point of the marketing funding from the local advertising fund to the national ad fund. This change will enable us to unlock new marketing opportunities to drive consideration and conversion, spend our dollars more efficiently and ultimately, fuel member growth. Our goal is to drive top line revenue as it is the key driver of unit economics. We do this through more effective marketing while enhancing the bottom line through greater marketing efficiency and the flow-through on incremental revenue in this high-margin business. We're grateful to our franchisees for this vote of confidence in our marketing leadership and strategy.

Finally, we proudly received two notable honors recently. First, we were named to Fortune's 2025 100 fastest-growing companies list. And second, we were recognized as #22 in this year's Franchise Times Top 400 as the top-rated fitness concept. These honors illustrate the strength of our brand and are a testimonial to the dedication of our esteemed team members and franchisees. Now I'll turn it over to Jay.

Thanks, Colleen. We're very pleased to deliver another quarter of strong results. And as Colleen mentioned, we're raising our full year '25 outlook.

Now to our third quarter results. All of my comments regarding our third quarter performance will be comparing Q3 of '25 to Q3 of last year, unless otherwise noted. We opened 35 new clubs compared to 21. Included in our openings are 5 locations where our franchisee acquired and converted regional gyms to Planet Fitness clubs. This is a strategy that we will use as another option to accelerate new club growth. These clubs in many cases, open with a built-in membership base, giving franchisees a jump on top line ramp.

We delivered system-wide same club sales growth of 6.9% in the third quarter, franchisee same club sales increased 7.1% and corporate same club sales increased 6.0%. Approximately 80% of our Q3 comp increase was driven by rate growth, in line with our expectations with the balance driven by net membership growth. Black Card penetration was 66.1% at the end of the quarter, an increase of 300 basis points from the prior year and a sequential increase of approximately 30 basis points from Q2. Our Q3 ending member count of approximately 20.7 million members was in line with our expectations as the third quarter is typically not a quarter with significant membership changed.

Our join trends during the quarter were strong, including conversions to paying members from our High School Summer Pass program. Attrition rates, while elevated on a year-over-year basis, we're not out of line with historical levels, and we started to see moderation late in the quarter. For the third quarter, total revenue was $330.3 million compared to $292.2 million, an increase of 13%. The increase was driven by revenue growth across all three segments, including an 11% increase in franchise segment revenue and a 7.6% increase in our corporate-owned club segment.

For the third quarter, the average royalty rate was 6.7%, flat to the prior year. Equipment segment revenue increased 27.8%. The increase was driven by higher revenue from equipment sales, including both new equipment and reequips. We completed 27 new club placements this quarter compared to 15 last year. For the quarter, replacement equipment accounted for 82% of total equipment revenue compared to 85% last year. Our cost of revenue, which primarily relates to the cost of equipment sales to franchisee-owned clubs was $58.2 million, an increase of 27.3% compared to $45.7 million last year. Corporate club operations expense increased 11.4% to $79.8 million. The increase was driven by operating expenses from 30 new clubs opened since July 1 of '24, including 10 in Spain.

SG&A for the quarter was $30.5 million compared to $32.6 million, while adjusted SG&A was $30 million or 9.1% of total revenue compared to $31.3 million or 10.7% of total revenue, a decrease of 4.2%. National advertising fund expense was $21.4 million compared to $19.7 million, an increase of 8.7%. Net income was $59.2 million, adjusted net income was $67 million and adjusted net income per diluted share was $0.80. Adjusted EBITDA was $140.8 million, an increase of 14.4% and adjusted EBITDA margin was 42.6% compared to $123.1 million with adjusted EBITDA margin of 42.1%.

Now turning to the balance sheet. As of September 30 of '25, we had total cash, cash equivalents and marketable securities of $577.9 million, compared to $529.5 million on December 31 of '24, which included $56.4 million of restricted cash in each period. During the quarter, we used approximately $100 million of cash on hand to repurchase and retire approximately 950,000 shares of our stock.

Moving on to our revised '25 outlook, which we provided in our press release this morning. With 2 months remaining in the calendar year, we are confident in our ability to open between 160 and 170 new clubs, which includes both franchise and corporate locations. We recognize that we have a lot of clubs to open during the fourth quarter, but this is a standard business practice, and we've completed this number of openings in prior fourth quarters. We are also confident that we can complete the 130 to 140 equipment placements in new franchise clubs.

Given our strong results in Q3 and the overall strength in the business, we are increasing our outlook for 25. We now expect the following: Same club sales growth of approximately 6.5%, up from 6%; revenue to grow approximately 11%, up from 10%; adjusted EBITDA to grow approximately 12%, up from 10%; adjusted net income to increase in the 13% to 14% range, up from 8% to 9%; adjusted net income per diluted share to grow in the 16% to 17% range, up from 11% to 12% based on adjusted diluted weighted average shares outstanding of approximately 84.2 million shares inclusive of the impact of the shares we have repurchased throughout the third quarter. We expect net interest expense of approximately $86 million and D&A to be approximately $155 million with CapEx to be up approximately 20%.

In closing, we are excited by the momentum in the business and evidence that our strategic imperatives are producing results. We had a highly successful high school summer pass program as we continue to build loyalty with Gen Zs. And our franchisees are investing in opening, remodeling and adding strength equipment as they see the benefits of our work to reposition our brand and optimize our layouts, putting the member at the core of what we do. I will now turn the call back to the operator to open it up for Q&A

[Operator Instructions] And your next question or your first question comes from the line of John Heinbockel of Guggenheim Securities.

Colleen, you're thought on holistically, this marketing split, right, between local and national. I know the 1% shift that adds maybe, I guess, $50 million to the national piece. How do you want to spend that? Where do you think that goes over time, right? And what's sort of the right level, I guess, you would think as you get larger, right, maybe you end up spending closer to -- in total, 7% of sales as opposed to something higher. What's the thought on that?

So I'll speak to the shift of the 1 percentage point from the local ad fund to the national ad fund. I won't get super granular for competitive reasons, of course. But this will enable us to augment some of the marketing that we're doing digitally, use AI and augment our CRM, digital content optimization and a number of other things that, again, will give us the opportunity to have greater reach with each of those marketing dollars. It will also enable us to buy media more efficiently on a national basis. So again, really get more mileage out of every dollar that we're spending.

Okay. And maybe a follow-up. I know, right, you've got this 5,000 store or club target in the U.S. Just remind us how you thought about that in terms of density? And then when you think about, as you reference geographies, is there a bigger opportunity than you thought for smaller markets, less dense. And does that require to make the economics work or how much smaller of a club do you need to make that work?

So there's a couple of questions in there, and I'll start maybe with the first one on the opportunity and density. As you know, we are more dense on the East Coast, so Northeast, East Coast, Southeast. Less than Midwest, West. And at the same time, where there has been population growth, job growth, de-urbanization, new home construction, which again demographically meets the demand coming from millennials as forming households. We think there's opportunity where we're less dense to increase our penetration. And we think that some of the demographic shifts that have occurred with that de-urbanization and population growth over the last several years, complement that very well. And we've had several studies done to opportunity size the domestic landscape that supports that growth. Generally speaking, those growth numbers are supported with 20,000 or -- traditional 20,000 square foot club. At the same time, I think we've talked before, we're developing prototypes that are a bit smaller than the 20,000 square foot club that will enable us to go into markets that maybe don't have quite as -- quite the population density, but might be underserved from a fitness standpoint today.

Next question comes from the line of Sharon Zackfia with William Blair.

I wanted to actually double-click maybe on the churn. There was a lot of chatter kind of within the quarter amongst investors that maybe the click to cancel churn was much more elevated than what you expected, but it doesn't seem like that was the case. So I wanted to check on that. And you mentioned moderation. Are you kind of back to normal levels of churn? And should we expect member growth sequentially resume again in the fourth quarter?

Sharon, this is Jay, and I'll respond to that to start. And we don't guide to the membership growth, so I'm not going to comment on that. But we're pleased, right, as we said, the 20.7 million members was right in line with our expectations. And in regards to attrition -- the rates were elevated on a year-over-year basis. But when we take a multiyear view, they were not out of line with what we've seen historically. And to your point, we did see some moderation late in the quarter. So what we have in our outlook and what we've modeled is continued elevation on a year-over-year basis, and that's very consistent with the way we thought about it in -- on the last call for Q2 and now this call, and that's what we've modeled. It's included in our outlook that we've guided. So we're pleased with what we're seeing in the underlying trends in the business.

And Jay, can I just follow up? Is that continued elevation just the tail from click to cancel? Or is it something you're seeing that's more macro?

No, I think it's driven by the click and cancel tail.

Your next question comes from the line of Jonathan Komp with Baird.

I wanted to just follow up. Could you maybe talk a little more directly when you look at the guidance raise for the year combined with the confidence to commit to the Black Card pricing after your peak period coming up. Can you maybe just talk about more directly what's driving your increasing confidence to announce both of those today?

I can start with those items. I think, look, from a guidance standpoint, we had a good result in our third quarter. So obviously, that is nice to see and gives us confidence. When we think about some of the drivers and the increase for the year, we have obviously some nice momentum in our equipment business, right? The franchisees are leaning in on these new formats, not only with the new club, but certainly reequips and adders as we call them. So we've got some nice trends there. From an SG&A standpoint, we called out on the call, obviously, we had a decrease in the quarter. Some of that was driven by an annual franchisee conference that we're lapping last year that was pushed in the fourth quarter this year. But taking that out, we are seeing nice trends on SG&A. And we're also carrying forward, obviously, the upside that we had on the sales in the third quarter, pushing that into the full year guide. So all of those components are resulting in the guidance that we gave. We think that's a nice trend, seeing some separation between revenue getting some leverage and driving EBITDA growth.

In terms of the Black Card price increase, so as we said, we've tested this, we've analyzed it and made the decision to go to $29.99. When we've tested that, obviously, we've had -- it's been accretive to the AUVs. So we're not going to really comment on the impacts. As for next year, we'll get to that when we actually do the price increase. But historically, what we have seen when we've made a change in the Black Card price is that the acquisition rate on Black Card does decrease for a period of time, but usually rebounds within the year so that the penetration of Black Card gets back to where it was. The wrinkle and the difference now is that we've had the Classic Card price increase. So that increase is an element that we haven't had historically. So we'll have to wait and see on that. But again, we would expect for that Black Card price increase to be accretive to AUV.

Okay. That's great. And then maybe just a follow-up, Colleen. I know there's quite a bit of quite a few positives in today's announcements, but it's unique that you have an Investor Day coming up next week. So could you maybe just share at a high level, maybe what we should expect to hear or the plans that you hope to share going into next week directionally just to set the stage.

Yes, sure. Happy to. We'll give you a bit more granular detail on the progress that we're making on our strategic imperatives. And we'll also give you a multiyear view what you can expect from a growth trend standpoint. So you'll get some numbers beyond, obviously, just a single year. So some multiyear projections from us.

Your next question comes from the line of Joe Altobello with Raymond James.

I guess first question on the competitive landscape. Curious if you're seeing any shifts at all, whether it be from low-price, high-value competitors or even some of the more higher-priced competitors in the space?

I'll start and just say, for the quarter and year-to-date, we've been quite pleased with the join trends and the join volume. So again, as I've said before, I think our biggest competition is a fear of walking in the front door. And our marketing is really resonating with consumers today, both the strength of equipment and the ability to get strong at Planet Fitness, but also conveying the sense of community at Planet Fitness. So again, feeling very good about the join trends.

Helpful. And maybe just a follow-up on that. In terms of new store openings for next year. I know, obviously, there's not a ton of visibility at this point. But what does the availability of real estate look like? And could we see more acquisitions and conversions like you did in the past quarter?

So we're not obviously guiding next year yet. But what I will talk about a little bit is -- and I have before the real estate landscape and the fact that this year, for the first time in several years, we're seeing negative absorption, specifically of shopping center retail space. So enclosed malls have had negative absorption, but shopping center retail space, the type of space that we're looking for, for Planet Fitness, negative absorption for the first time in several years, year-to-date this year. And also a moderation in rent escalation where rents were going up quite dramatically in this year, the first half of this year, both quarters, they were below the rate of inflation. So we think those are positive indicators. And of course, the retail bankruptcies that have been occurring, store closures and even seeing groceries, grocery stores demising space and going to a smaller footprint. All of that is -- those are positive indicators for increased availability of retail space for clubs.

Your next question comes from the line of Randy Konik with Jefferies.

Colleen, back to you. I think the question was asked what you're going to share at the Analyst Day next week, you gave a brief answer. Maybe give us some perspective on -- based on the content you plan to share next week, some of the kind of key themes or takeaways you want us as on the buy and sell side to kind of take away about the Planet story, Planet business model as we go to the -- ahead of the meeting next week.

Absolutely, happy to do that. And thanks for the question. So I know that many are looking for kind of the puts and takes to an algorithm to help protect our business. But I think, most importantly, we want to really convey the kind of the macro tailwinds for this industry. The -- I've said we're in the golden age of fitness, and I believe that's very much true. The demand for the offering that we provide, people are more fitness-minded than ever before. There's an incredible addressable landscape for fitness-minded consumers. And our ability to answer that call. So we'll get into some specifics on that next week. So really kind of secular tailwinds, macro. And then the other thing, as we've been talking about building our Blue Ribbon team. And we've had a couple of great new leader additions and then had some of our seasoned team members take on expanded roles and want to give everyone an opportunity to meet and hear from them. So marketing, development, operations, including the international opportunity. And you'll hear from a number of our new team members or our team members with expanded roles next week as well.

And then finally, just on how you're thinking about the globalization of the brand. give us some perspective how you're thinking about kind of telling that story for us next week. Do you think about taking Spain and kind of pushing that each year into a new country or a couple of countries each year beyond that? Or do you think about potential acquisitions ever? Just how do you think about the globalization of Planet -- i.e., Planet taking over the Planet.

Absolutely. So I'm going to save a couple of things for next week. But we absolutely will talk about the global expansion opportunity and the success that we have, the success that we've enjoyed in Spain. The strong performance of our brand there. It was -- we launched Spain really as a kind of proof of concept, and it's been wildly successful. So we'll give you some very specific data on Spain on how we define that will be successful, and then also talk about where we see additional opportunities for growth and what the cadence of global growth could look like as a component or as one of the building blocks to the kind of the multiyear outlook for unit growth.

Your next question comes from the line of Rahul Krotthapalli with JPMorgan.

Colleen, can you discuss your thoughts on the strategic brand partnerships with like the large retail or consumer brands, hotel wholesale lines, whatever you're free to talk about. And given the efforts around ramping the marketing strategy and the strong membership base you have? And I have a follow-up.

So we've launched a number of partnerships and brand partnerships already that have inured to the benefit of of our members. And we've had year-to-date well over $7 million of perks redemptions for our consumers. And that -- those redemption rates have been on a growth curve over the last 5 years because we're focusing on expanding that offering for our members. We do see additional opportunities for brand partnerships and we have some that we're cultivating today. Again, for competitive reasons, I won't speak to specific brands until we're ready to go to market with the partnership. But you're right, that that's something that we've been focused on. We've seen good utilization from our members where we've had partnerships in the past, again, with a new high watermark this year in redemption and more opportunity. One of the things that Brian Povinelli brings from his prior experience is one of the absolute leading membership and loyalty programs in the hospitality space, rebranding that and relaunching that after a merger. So he's got a lot of experience with that and has brought perspective. So you'll see more of that to come.

Perfect. And just on tacking on to the membership retention. You guys have a lot of data, 20.7 million members. Can you give a preview under the herd on how you plan on utilizing AI and other technology tools you would like to invest in to improve membership retention and utilization?

Yes. So from an AI perspective, I touched on it a little bit in marketing at a pretty high level. So think about AI-enabled CRM, think about AI-enabled marketing with digital content. So serving up content that is more targeted to a consumer. But again, I won't get into a ton of granular detail just for competitive reasons. And then I think you'll see it embedded in our app. We've talked about kind of the revitalization of our app, our app being one of the most downloaded if not the most downloaded fitness app on the App Store and the opportunity to leverage AI to more personalize the experience for our members when they're utilizing the app. And can enhance the in-club experience and out-of-club experience.

Your next question comes from the line of Chris O'Cull with Stifel.

Colleen, I know the company has been testing additional services in the Black Card spa area like red light therapy and spray tanning among others. But what are you learning about the value of those services to members?

We're measuring utilization and also surveying our members for feedback. And as you know, we rolled out NPS earlier this year across the company, which is giving us immediate real-time feedback and the ability to capture more consumer data. So we also shared the potential Black Card amenities with our franchisees last week at our franchisee huddle and the franchisees were quite enthusiastic. We had a number of the vendors that were there, and they were saying -- our franchisees were asking when can I get this? So we want to do the right amount of testing to make sure that we're really optimizing the Black Card spa offering, at the same time that, that will help inform where we go to market with some new offerings to continue to invigorate the Black Card spa.

Great. And then I believe last year you had some incremental marketing investment in the fourth quarter. So I was just hoping, could you maybe share or elaborate on how you plan to lap that this year, I'm assuming it may be safe to assume that year-over-year spend will at least be in line with the total spend last year?

Keep in mind that as our revenue grows, so too does the marketing fund. So a big part of the marketing fund is influenced by the capture or the percentage capture on the growing revenue. At the same time, without being specific about Q4 kind of promo intentions, what I will say is we've -- we used to think about Q1 as the join quarter and what we've come to realize is that they're all joined quarters, and we know that we can put marketing to work in all quarters of the year and have favorable benefit.

Your next question comes from the line of Maks Rakhlenko with TD Cowen.

Great job, everyone. Very nice quarter. So first, you recently ran a which was a discount on a workout planet app. I'm not sure if that was new or not. But with an increase in popularity in many of these digital personal training or workout planning apps. Are there bigger opportunities to embed this sort of technology into the Black Card membership? There was previously a push in a personal training and something that some of your HVLP peers are doing. So just curious, is leveraging technology and opportunity to both unlock revenues as well as provide a better member experience.

So certainly, and I touched on this a little bit when Rahul asked about AI -- use of AI, and we do see an opportunity to use AI or leverage AI to more personalize the experience for our members. And one of the ways we could use it is in personalizing workout plans for our members as well. So all of that is on the AI road map as well as the app revitalization road map.

Got it. That's helpful. And then can you just unpack the implied 4Q comps guide for us as there are some puts and takes in how we should think about that versus 3Q 6.9, and just comments around sort of better churn especially exiting the quarter? Just how we should think about mix and member rate as well?

Yes, Maks, this is Jay. And the way we're thinking about it, and we don't want to get too granular, but it should be relatively consistent quarter-over-quarter. Obviously, the big driver there is as we anniversary the Classic Card price increase that we did last -- at the end of June last year, right? As we've said, we do get a rate benefit from that. but it diminishes over the tenure of our membership. So that rate benefit is decreasing, which is driving the decrease in the comp comparing Q3 to Q4.

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

Congrats on a strong quarter. My question was on the High School Summer Pass. I mean, up 30% is a really impressive number and you guys talked about the strength of equipment and the marketing. I guess my question was more on the conversion rates of paying members, that's in the mid-single digits. Just any more color you guys can give on that, just on the timing of when those High School Pass users convert kind of the shape of that? And any sense on if that number could potentially be higher than historical levels, just given participation is up a lot. Just curious if that translates to upside to your conversion rate as well.

I'll start. So we'll report on conversion at the end of the fourth quarter because we continue to convert through through September, October, even a little bit in November because they're able to utilize the pass through, through the end of August, and then we see this kind of surge in conversion September, October, but into the fourth quarter as well. So we'll give you more data on that at the end of Q4. And when I think about the number of paid members converted out of summer pass, obviously, it's a bigger denominator. So even at a similar conversion rate, the numerator is going to be larger. But what we're seeing so far is fairly similar conversion percentage and really encouraged by the overall strength of the program.

Your next question comes from the line of Brian McNamara with Canaccord Genuity.

This is Madison Callanan on for Brian. First, are we now behind the lion's share of expected click to cancel impact? And do you expect any positive impact on rejoins next year as a result?

Yes. So we're not giving guidance outside of this quarter right now. Of course, we'll be meeting next week and giving long-term targets and more color there. And from an attrition standpoint, as we said, right, consistent is that we have seen elevation in the attrition rate year-over-year when we look at it at a multiyear lens. It is more consistent with what we've seen historically. We have modeled the elevated attrition rate into Q4, and that is included in our outlook.

Can I just add, one of the things that we have seen, and we saw it in the test environment, a couple of test environments, previously, 1 thing that has proven true is that where we are now able to say one click to cancel or cancel any time in the join flow, we are seeing it give us a lift in the join conversion.

And then I know you touched earlier on rate, but with 80% Q2 comp driven by rate and a Black Card increase timing next year, when should we expect volumes to return to be the primary driver of comp growth again as it has been historically? And would you expect Black Card penetration to return to its historical 60% penetration level after that price increase goes into effect?

We'll talk more about that next week. And certainly, from a Black Card standpoint, we'll get into specifics on that more when we do the price increase.

Your next question comes from the line of JP Wollam with ROTH Capital Partners.

If we could just start first on kind of franchisee returns. A lot has been done in the last few years with the new growth model to really improve those franchisee IRRs. So I'm just wondering, are there maybe 1 or 2 data points you can share about kind of just some accelerating license sales or maybe interest in new licenses that you can share?

I'll start. Yes, I mean, we're not probably going to talk about ADA or license sales or franchise agreement sales. But I can speak to the IRRs and how we -- think about it. We track certainly our more recent club openings post the new growth model, post the Classic Card price increase, and we're tracking those from a top line basis to see if we're hitting kind of our internal hurdle rate for the IRRs, which obviously are shared with ourselves and the franchisees lens. So we're pleased to report that those are tracking right in line. So we're seeing the lift as we would expect from those initiatives. And that's a top line lens. Obviously, part of the new growth model was giving some more flexibility on the CapEx reequipped timing schedules. So that's positive as well. And I think to your point, with Chip now here as the CEO, he continues the effort to value engineer the club build-out costs, and we spoke about that to the franchisee group last week in our huddle. We've also, as part of our fit for strategy structure established a formal procurement team under the finance or under my org. And we've started some initiatives there where we think we can save the franchisees money.

Yes. I'll chime in on that for you. I think a couple of things. One data point I'd point to is franchisees, same club sales growth coming out of the quarter at 7.1%. The franchisees are definitely feeling the strength of the join volume, the marketing landing. And then I think a couple of other proof points that we have talked about, real estate availability, having been a bit of a headwind on development, and I talked a little bit about earlier about that easing. I think another proof point is we've had a franchisee last year and this year buy a couple of conversion clubs and several conversion clubs. And those were conversions that enabled them to bring additional clubs into the system quickly. And that's a strong signal that franchisees are excited to continue to grow with us. I think the third is that in every case where we've had portfolios transact, certainly in my tenure here, in every case, we've had incumbent franchisees at the table wanting to buy additional territory or additional clubs when they become available. So I think that's another proof point of franchisee confidence in the system. At the same time, we're not letting up on enhancing franchisee economics. All of the things that Jay talked about and the things we're doing in build cost and trying to bring build costs down for our franchisees while also protecting the member experience.

Perfect. And then just one quick follow-up, and I think fairly straightforward, but I assume most of the unit openings, I mean, in the fourth quarter, are largely through a lot of maybe permitting and municipal processes. And I would assume it's largely all on a local basis. But anything in terms of the government shutdown that would be a potential risk to unit openings in the fourth quarter?

We've not heard about the government -- the federal government shutdown having any impact on openings. And you're right, a lot of permitting is done early in the build cycle. And then of course, there's -- there are municipal inspections late in the build cycle, like final COs and sign-offs. And those are done at the local municipal level, not at a federal level.

Your next question comes from the line of Arpine Kocharyan with UBS.

Could you talk to the general trend you saw in terms of gross adds for the quarter what you saw in Q3 and what you're seeing into Q4 as we see churn kind of normalize here? And you saw slightly lower membership in Q3 versus Q2, which is, I think, in line with what you saw last year quarter-to-quarter, but last year, you were going through the price increase on Classic Cards. So maybe if you could talk to the process versus underlying attrition trends in the quarter? And then I have a quick follow-up.

Yes. You broke up for the back part of that question. So I heard the part about the gross joints. Could you repeat the back half of your question, please?

Yes. Just your membership is slightly lower in Q3 versus Q2, which is I think, in line what you saw last year quarter-over-quarter. But last year, you were going through the price increase on Classic Cards. So maybe if you could talk to the sort of gross adds versus underlying attrition trends in the quarter that you saw would be helpful.

Yes. Well, I can start. And right, we don't speak to the gross joins or cancels. But I mean we did see strong join trends, and we commented that on the prepared remarks. Those join trends were offset by the elevated attrition rate that we talked about. And the attrition rate was elevated year-over-year. Again, when we look on a multiyear basis, it is more consistent with what we've seen historically. In the third quarter, generally speaking, is not a high net add quarter, right? It could be flat or slightly down. We've seen that before. And that's what we experienced this quarter and it was in line with our expectations. And again, we think those trends will continue going forward on both fronts, right? We have nice trends in the strong join side, and we do -- and we've modeled continued elevated attrition on a year-over-year basis. And both of those are included in our outlook for the year.

And I think also important to note that as we've said in the past, where we where we rolled out click to cancel previously, after about-ish about 12 weeks, we started to see it moderate. Given when we rolled out click to cancel in Q2, we were within that expected elevated attrition window in the beginning of Q3. And as Jay indicated, we started to see that -- we start to see that moderate. And then we've also continue to have very strong rejoin rates. So in the mid-30s again from a rejoin rate standpoint throughout the quarter, and our marketing is very effectively driving join volume, and we're also retargeting lapsed members, and that's helping to drive the strong rejoin rate.

That's super helpful. And then just a really quick follow-up. Maybe just a bit of a bigger picture question. It seems like some of the demographic fits you're seeing is a younger customer that is maybe using the clubs more at a higher frequency, which should be good for structural retention, I would say, in longer term, that may be more wear and tariff for the equipment. Does that mean more frequent replacement of that equipment longer term? And what implications that has for franchisee returns?

You want to start.

Yes, I mean part of the strength of this brand is the quality of our equipment and the way we maintain it. So it is high and great durable equipment, and we would not expect any changes to the replacement timing we're into.

I think the fact that we pushed out the reequip schedules by a year with the new growth model last year. And the fact that also strength equipment does have a longer life than -- the utilization of strength actually is a piece of equipment that has a longer life. So there's no expectation that we're going to pull forward, reequip schedules for our franchisees. And yet at the same time, we know that the consistency of our replacement cycles and the quality of our equipment is something that our members appreciate at Planet Fitness.

Your next question comes from the line of Marni Lysaght with Macquarie.

I think recent more topical matters such as churn, et cetera, have been well covered in prior questions. But my question is mainly concerned or just in terms of what your outlook for rollout, can you kind of give us a bit of color or maybe it's more of an appropriate topic to discuss next week at the Analyst Day, but just about when you're competing for space and you talked earlier about prototypes, the smaller formats, how do we think about franchise groups and yourself looking at those sites and who you may be competing with for that space?

Yes. I think one of the things that our real estate team is doing in partnership with our franchisees is getting ahead of space availability and talking with the large landlords and brokers to make sure that we articulate the value proposition of putting Planet Fitness in a center, particularly, we skew heavy female. We contribute to traffic to the center. Because we don't have classes, we're not taking up significant amounts of parking at a given time. And we also contribute traffic to a center during off-peak times because most retail centers are getting heavy traffic on the weekend and our heaviest traffic is weekday in the early part of the week. So it's really about making sure that we highlight why Planet Fitness is a prospective great tenant. And also the resilience of our business, the durability of our cash flows, the fact that we came through COVID with a number of temporary club closures for municipal reasons, but not one club permanently closing for financial reasons. And compare that to the retail closures and retail bankruptcies, we should be a very attractive tenant. So it's really about promoting the value of having Planet Fitness in a center.

Understood. Another question I have is just more about like the split of how you think about rate growth. So I think you said -- you said back at the prior result, 70-30 for the back half of this year to be driven by rates and volume, and you previously alluded to like a 50-50 split. Just given the nuances here about your members coming in line with your internal expectations and some of the other dynamics at the moment, what's the correct way to be thinking about that?

Yes. So we'll guide to that for future periods, we'll talk -- we won't guide to it, but we'll talk about it next week from kind of lay out the growth algorithm. And really, what we talked about, given the dynamics this year was kind of a 75-25 or an 80-20 split this quarter landed right in line with our expectations, and we don't think that's going to change dramatically in Q4.

I will say, historically, when we've taken Black Card pricing in the past, we have seeing a little diminution on the Black Card penetration, but not on the join volume. So taking Black Card pricing in the past, was not a headwind to join volume. It was just a little bit of a diminution on the Black Card penetration in the mix.

No further questions. I will now turn the call back over to Colleen Keating for closing remarks.

Well, first, I'd like to thank our team members and our franchisees for delivering such a strong, such a solid quarter. Very encouraged by the momentum that we're carrying through -- into the fourth quarter to complete a strong 2025. We look forward to providing more insight into our long-term growth opportunity at our Investor Day next Thursday. Thank you, everyone.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

Thank you for standing by. My name is Joel, and I will be your conference operator today. At this time, I would like to welcome everyone to the second quarter Planet Fitness Earnings Call. [Operator Instructions] I would now like to turn the conference over to Stacey Caravella Caravella, VP of Investor Relations. You may begin.

Thank you, operator, and good morning, everyone. Speaking on today's call will be Planet Fitness Chief Executive Officer, Colleen Keating; and Chief Financial Officer, Jay Stasz. They will be available for questions during the Q&A session following the prepared remarks. Today's call is being webcast live and recorded for replay.

Before I turn the call over to Colleen, I'd like to remind everyone that the language on forward-looking statements included in our earnings release also applies to our comments made during the call. Our release can be found on our investor website along with any reconciliation of non-GAAP financial measures mentioned on the call with their corresponding GAAP measures.

Now I will turn the call over to Colleen.

Thank you, Stacey, and thank you, everyone, for joining us for the Planet Fitness Second Quarter Earnings Call. We're excited to be joining you from the New York Stock Exchange, where we will be ringing the closing bell today and celebration of our tenth anniversary as a public company. Over the past decade, through a steadfast commitment to our mission and purpose, we've added nearly 14 million members, expanded our global footprint by more than 1,700 clubs and established a presence in all 50 states and 4 additional countries.

Today, we have 2,762 clubs and 20.8 million members around the planet. We are proud of our accomplishments and confident in our even greater opportunity ahead as consumers increasingly prioritize their health and well-being. Planet Fitness is uniquely positioned to meet that demand with our judgment-free, high-quality and affordable fitness experience. Our reach is unparalleled, with a Planet Fitness club within a 12-minute drive of 170 million people in the U.S. At the same time, with population growth and deurbanization over the past several years, we see increasing opportunities to bring Planet Fitness' high-value offering to an ever-growing community of fitness-minded consumers in more geographies than ever before.

Gen Z continues to be the fastest-growing segment of our membership. The ongoing success of initiatives like our high school summer pass now in its fifth year as already outpacing last year's sign-ups and workouts highlights the continued strength and potential of our model. Gen Z is highly fitness aware, and there are still 3 years of this population that aren't yet of age to join our clubs. In fact, we have twice the unaided awareness versus our next closest gym peer and that gap is even greater among Gen Zs.

At the next generation, Gen Alpha is expected to be even more focused on health and well-being. In the second quarter, we delivered strong financial performance and remain confident in our full year outlook for 2025. We ended the quarter with approximately 20.8 million members an 8.2% systemwide same club sales growth. We added 23 new clubs ending the quarter with a global club count of 2,762.

I'd now like to review the progress we've made on our 4 strategic imperatives during the second quarter. As a reminder, these 4 strategic imperatives are redefining our brand promise and communicating it through our marketing, enhancing our member experience, refining our product and optimizing our format and accelerating new club growth. Let me start with redefining our brand promise.

In the second quarter, we continued with our We Are All Strong On This Planet marketing campaign that highlights our best-in-class strength equipment are welcoming atmosphere and the supportive community that we offer. We continue to see strong black card penetration with 65.8% of our membership at that tier as of the end of the quarter, a 340 basis point increase from the second quarter of last year.

Consumers continue to recognize the value of the Black Card, with the gap between the Classic and Black Card memberships only $10. That said, it's not a question of if, it's a question of when we implement a Black Card price increase. We wanted to anniversary the Classic Card price increase and will evaluate the impact of the online cancel functionality before making a timing decision on a Black Card price change.

Now to member experience and format optimization. Our commitment to providing a positive member experience starts with a member's very first interaction with our brand. For many on the goals, that initial connection is being forced this summer. As I noted earlier, high school summer past initial results are outpacing last year. It's exciting to see so many young people embracing their fitness journeys and even more so that they're choosing Planet Fitness to support them along the way.

In line with our members first philosophy, we completed our national rollout of the online cancel functionality in May despite the Federal Appeals Court ruling that block the [indiscernible] role. We are proud to lead by doing the right thing for our members and simplifying their ability to manage their membership with us. As a reminder, this was an option that we offered in more than 35% of our system before the end of Q1, including all of our corporate clubs where we enabled it more than a year ago.

We are seeing a higher attrition rate now that this functionality is live across our system. This is contemplated in our same club sales outlook that Jay will address in his comments. In alignment with our core values and commitment to integrity and excellence, we believe this is the right thing to do, both to support our members and their experience and as the industry leader. In Q2, we once again had a mid-30% rejoin rate and believe that allowing members to more easily manage their membership will only benefit us when they think about rejoining a club in the future.

And finally, our efforts to accelerate new club growth. We are steadfastly focused on unit economics and believe that franchisee success fuels franchise or success. We continue to refine our product offering and operational efficiencies to maximize the economic value proposition while delivering the most relevant on brand experience for our members. Our goal is to drive the top line while enhancing the bottom line to realize the tremendous growth opportunity we have in the U.S. and beyond.

Internationally, Jay and I were in Spain in July to celebrate the opening of our ninth club located in Madrid Chamartin. The milestone came just a week after the 1-year anniversary of our first club in Spain. It was incredible to experience firsthand how the brand is being brought to life by the team in both newly built and a couple of conversion clubs. Seeing our brands continue to grow in new markets is extremely rewarding and a testament to our global appeal. Our success in bringing the brand to life in Europe is another proof point to support the long-term club growth opportunities for Planet Fitness.

We look forward to providing more insight into our strategy for both domestic and international growth at our Investor Day in November. Earlier this week, we executed an agreement for the sale of our 8 corporate clubs in California to a franchisee in the market. This transaction reflects our commitment to recycling capital where appropriate and advancing our asset-light model. This sale also allows us to focus our resources on our corporate-owned clubs on the East Coast where we are more densely concentrated and, therefore, can operate more efficiently.

Now I will turn it over to Jay.

Thanks, Colleen. We're pleased to deliver another quarter of strong results, and we're on track to achieve our full year growth target. We are well positioned for the long term to further expand our leading market share given the strength of our value proposition in the fitness industry, combined with the proven resilience of our asset-light business model. Demand for our offering is strong as evidenced by our 16 straight quarters of mid-single-digit or higher same club sales growth.

Before I review our second quarter financial performance, I'd like to address 3 topics. The rollout of online membership management, the agreement to sell our California clubs to a local franchisee in the market and our latest thinking on tariffs. We remain committed to delivering a great member experience, and we want to make the cancellation process seamless at the join process.

As Colleen noted, we now provide our members the ability to manage their membership conveniently online. As you recall, more than 35% of our system had online cancel functionality before the end of Q1, including all of our corporate clubs where we enabled them more than 1 year ago. As a reminder, generally, the largest impact of the attrition rate occurs in the first couple of months after implementing this functionality and diminishes as time goes on. We're seeing a slightly elevated cancel rate in both the clubs that had online canceled before Q2 and those that rolled out during the quarter. The rate is up less in the legacy cohort of clubs compared to the others. These impacts are included in our outlook in same club sales growth guidance for the year.

Now to the agreement to sell our California corporate clubs, we continue to believe in our asset-light, highly franchised model and reiterate our plans to an approximately 10% of the fleet. To contextualize the impact on the sale of these clubs, we expected these clubs to contribute approximately $7 million to our revenue and approximately $2 million to our adjusted EBITDA for the balance of the year, assuming an end of August close. These impacts are also contemplated in our outlook for the year.

Finally, given that our fitness brand that sells an experience, we are generally less impacted by tariffs and have implemented mitigation plans such as leveraging our scale to negotiate with manufacturers exploring alternative markets for producing products and bringing equipment into the U.S. on an accelerated basis.

Now to our second quarter results. All of my comments regarding our second quarter performance will be comparing Q2 2025 to Q2 of last year, unless otherwise noted. We opened 23 new clubs compared to 18. We delivered system-wide same club sales growth of 8.2% in the second quarter. Franchise same club sales increased 8.3% and corporate same club sales increased 7.0%. Approximately 70% of our Q2 comp increase was driven by rate growth with the balance driven by net membership growth.

Black Card penetration was 65.8% at the end of the quarter, an increase of 340 basis points from the prior year. and a sequential increase of approximately 90 basis points from Q1. For the second quarter, total revenue was $340.9 million compared to $300.9 million, an increase of 13.3%. The increase was driven by revenue growth across all 3 segments. An 11% increase in franchise segment revenue was primarily due to higher royalty revenue from increased same club sales as well as new clubs an increase in national ad funds as well as franchisee fees.

For the second quarter, the average royalty rate was 6.7%, up from 6.6% in the prior year. The 10.8% increase in revenue in the corporate owned club segment was primarily driven by increased same club sales as well as sales from new clubs. Equipment segment revenue increased 21.5%. The increase was primarily driven by higher revenue from replacement equipment sales. We completed 19 new club placements this quarter compared to 18 last year.

For the quarter, replacement equipment accounted for 87% of total equipment revenue compared to 84%. Our cost of revenue, which primarily relates to the cost of equipment sales to franchisee-owned clubs amounted to $59.4 million compared to $51.9 million. Club operations expense, which relates to our corporate-owned club segment increased 10.4% to $77.4 million from $70.2 million. The increase was primarily due to operating expenses from 25 new clubs opened since April 1 of '24.

SG&A for the quarter was $35.5 million compared to $31.6 million while adjusted SG&A was $33.9 million compared to $30.1 million, an increase of 12.4%. The primary driver of the increase to adjusted SG&A was higher compensation expense from recent executive hires. National advertising fund expense was $22.8 million compared to $20.1 million, an increase of 6.7%. Net income was $58.3 million. Adjusted net income was $72.6 million and adjusted net income per diluted share was $0.86.

Adjusted EBITDA was $147.6 million, an increase of 15.8% year-over-year and adjusted EBITDA margin was 43.3% compared to $127.5 million with adjusted EBITDA margin of 42.4%. By segment, franchise adjusted EBITDA was $86.5 million and adjusted EBITDA margin increased from 71.9% to 72.3%. Corporate club adjusted EBITDA was $56.6 million, and adjusted EBITDA margin increased from 39.5% to 40.7%. Equipment adjusted EBITDA was $26.4 million, and adjusted EBITDA margin increased from 27.4% to 32.1%.

Now turning to the balance sheet. As of June 30, 2025, we had total cash, cash equivalents and marketable securities of $582.5 million compared to $529.5 million on December 31, 2024, which included $56.5 million of restricted cash in each period.

Moving on to our 2025 outlook, which we provided in our press release this morning. As I noted earlier, our outlook assumes tariffs at the current levels. We continue to expect between 160 and 170 new clubs, which include both franchise and corporate locations. We expect that the quarterly cadence will be weighted towards the fourth quarter of 2025, even more so than last year. We continue to expect between 130 and 140 equipment placements in new franchise clubs. And again, we expect a similar case to our openings.

Lastly, reiterating our growth targets with the exception of same club sales growth, which we are narrowing to approximately 6% growth from the previous 5% to 6% growth range. We continue to expect the following growth over fiscal year 2024 results, revenue to grow approximately 10%, adjusted EBITDA to grow approximately 10%, adjusted net income to increase in the 8% to 9% range, adjusted net income per diluted share to grow in the 11% to 12% range based on adjusted diluted weighted average shares outstanding of approximately $84.5 million inclusive of approximately 1 million shares we expect to repurchase in 2025, in line with what we've previously communicated.

Let me speak to the drivers for the implied sequential slowdown in same club sales growth in the second half of the year. First, we rolled over the Classic Card price increase on June 28. So while we will continue to get rate benefit from it given our subscription model and tenure of our members, the benefit moderates over this time. Second, we forecast an elevated attrition rate in the back half of the year since our national rollout of online cancellation. Lastly, the continuing volatile macroeconomic environment.

Finally, we continue to expect that reequipped sales will make up approximately 70% of total equipment segment revenue. 2025 net interest expense of approximately $86 million, inclusive of the annualized impact of our 2024 refinancing, the D&A to be flat to 24% and CapEx to be up approximately 20%.

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

[Operator Instructions] Your first question comes from the line of Randy Konik of Jefferies.

I guess Colleen and Jay, maybe give us effective on where we stand with the proportion of clubs that have been kind of under the new layout with more strength equipment relative to cardio? And what trends or items you may see that are different in those clubs versus the older format from an equipment perspective clubs, whether it be membership, black card penetration, attrition, et cetera? It would be very helpful to understand as you're moving into this new format or from an equipment perspective, what trends are the same or different from the older more cardio focused floor layout?

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

And to your question about the specific mix of equipment. It really is about a 50-50 mix of cardio and strength. So we'll still have a strong -- we still do have a strong complement of cardio equipment in our clubs. We find many of our members like mixed modality. However, we've increased the amount of floor space dedicated to strength equipment and augmented that. So really seeing a more balanced mix of cardio and strength.

And even within the cardio adding things like more stair climbers because those are getting a high level of utilization, treadmills still got a high level of utilization and dialing back things like arc trainers, [indiscernible] where we'll still have a complement of them, but hearing it more toward what we're seeing from a usage perspective from our members.

Great. And then I know there was some talk in the past about adding new types of amenities to the Black Card kind of member area, whether it be Red Light, Cold Plunge, Spray Tan, et cetera. Can you update us on where we stand with that? And any learnings, if any clubs have those amenities at all, if you're seeing anything that's different from a trend perspective versus clubs, obviously, that don't have those yet?

Yes. So we've got -- we have a number of our clubs where we're piloting some of these new Black Card amenities. So -- and you're right, you cited many of the things that are in flight. So testing Red Light, also Red light hybrid is in a number of our clubs, and we're also testing spraying as an alternative to [indiscernible]. So too soon for us to kind of call which ones we're going to move forward still in pilot phase and evaluating the utilization. However, we continue to see that recovery and renewal are important parts of our members' fitness for [indiscernible]. We'll continue to test and evaluate things that can enhance our members' experience.

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

Colleen, I wanted to start with the 170 million person TAM, right, you're within 12 minutes of -- how do you think about density? And then is the opportunity being density in some of those existing more urban markets. versus maybe less dense rural markets or kind of out there. So how do you balance the 2? I assume you want to do more more densification in urban, but let me know.

Yes. So John, thanks for the question. So yes, we -- you've seen that we be urbanization and growth in the suburbs, new market opportunities where we have the population to support our traditional 20,000 square foot club. At the same time, we've been testing some additional smaller footprint in infill locations and also more rural locations so that we're able to bring a Planet Fitness experience to even more prospective members for onset.

Okay. And maybe a follow-up. I know you're in the early stages of what you want to do with your marketing structure. But is there any thought or have you given any thought to how you want local national to kind of be set up because I think the idea was maybe you do more national, a little less local and then there's marketing savings longer term. I don't know if there's been any update on that.

Yes. So from a marketing standpoint, we launched our new campaign this year. And based on what we've seen from our member join numbers or we're confident that the new marketing messaging is landing. So you've seen the campaign around we're all strong on this planet and growing stronger together. That messaging is very much resonating. I will say specifically, we're doing more national marketing, driving the brand and bringing the brand promise to life. And at the local and hyperlocal level, we still believe that's an important complement to the national marketing.

So very much in balance. I mentioned that we're seeing increased participation, increased volume as well as utilization with high school summer pass this summer. And there's an example of where we amped up marketing with influencers to target this particular customer demographic and it's proven quite successful in the numbers we're seeing with the high school summer past participation in the summer.

So with our new Chief Marketing Officer, who just came aboard in February, you'll start to see us experimenting with the new marketing mix again, balance of local and national. And at the national level, we do think there's an opportunity for us to buy more efficiently and aggregate our spend.

Your next question comes from the line of Maksim Rakhlenko of TD Cowen.

Great. So first, Jay, can you speak to maintaining the comp guide? I know you provided some color, but just any additional comments because should it churn normalize in 3Q, given your prior comments on Click-to-Cancel? And then you should still see a benefit from the classic card price increase given how it turn works? And then I do think that the headwind from 1Q's Black Card promo should, I believe, continue to reverse? So just any more color on the conservatism for the 2H guide?

Yes, Max, thanks for the question. And yes, I mean, to your point, obviously, the classic car price increase will continue to get that benefit. We will continue to get that, but it diminishes over time over the tenure of the membership. To your point, I'm click-to-cancel, as we said, that what we're seeing is slightly elevated than what we had initially modeled. Now we recast that, and it is baked into our full year outlook and the comp guidance. And as far as it moderating, we would expect that. I mean it is still early. We're still within the first 3 months of the full rollout.

So we're still in the early phases of that. But we've updated our forecast and we've contemplated that. So we think what we've got in there is appropriate. And then the last pillar, just given the macroeconomic environment, we do think it makes sense to maintain some level of conservatism in the guide going forward. So all that culminated in what we spoke about today.

Got it. That's helpful. And then, Colleen, I saw that you recently announced that you're looking to add a director of franchise sales. So your franchise space has been shrinking. And I believe we've been close to new entrants for many years now as the white space has been divvied off. And there has been M&A inside the system. So what's the mechanism to add new franchisees into the fold besides new ones entering through M&A such as the Flint Group and others? And is it more for U.S. or international franchisees? And just how should we think about the acceleration in openings from this?

Yes, Max, one of the things we've said is that to over the longer term to achieve our full growth ambition, we believe we'll need more franchisees in the system. We also know that there are several of our [Technical Difficulty]

Yes, you can be heard.

Okay. Perfect. So I'll start again in case it was disrupted. So to achieve our longer-term growth ambition, we believe we need more franchisees in the system. And we also know that there are several of our larger franchisees that are approaching the end of their fund horizon and maybe looking to transact and in support of those franchisees as well, we want to be cultivating prospective new franchisee relationships. You might want to come into the system and grow with growth benefits.

Your next question comes from the line of Rahul Krotthapalli of JPMorgan.

Colleen, as we think about the TAM and going into the Analyst Day, like how do you think about the local and regional competition. I mean we are seeing some of the incumbent brands with very well capitalized operators and bankers coming into the market. Curious to hear your thoughts. And I have a follow-up.

So Rahul, nice to hear from you. Gosh, when I think about the TAM, I think about the the growth of Gen Z and how fitness-minded they are and that they are the fastest-growing segment of our membership and the fact that several years of Gen Z haven't even aged into our membership opportunity yet. So I think the TAM is going to continue to grow. And with Gen Alpha also coming up behind by all accounts today, going to be at least as, if not more focused on health and wellness and well-being.

And when I think about the landscape and I tend to say peers in the space. You're right that there are a lot of local and regional players. When you think about the 31,000 gyms and clubs that are in the U.S. today, if you take us in our next largest peer in the space combined, we're together only about slightly more than 10% of that. So it's a big landscape. And at the same time, I think our biggest competitor is fear of locking in the front door. And that's what makes Planet Fitness so uniquely positioned coming into any market uniquely positioned is our welcoming environment, no gemtemidation and that we're uniquely positioned to meet members wherever they're at on their fitness journey, whether they're a beginner or whether they're in advanced gymgoer training for marathon.

I appreciate the color. I want to pick up a little more on the Spain side. appreciate the update. How are the unit economics shaping up relative to the U.S. given you have a gym [indiscernible] with almost a year in? And then also, if you can share any color on an update on the franchise -- on refranchising situation there.

So from a Spain perspective, we are thrilled with the way the clubs are ramping in Spain. And in particular, you mentioned the first club that has just been to open a year. It was a year in July. When we look at that club's ramp and we compare it to a domestic ramp, the Spain cloud is inclusive of that first one that opened are ramping like our domestic clubs, which is quite remarkable considering we only brought the brand to Spain just a year ago.

So we're feeling really good about our entree into Europe, really good about the Spain performance. And we're in the very, very, very early days of having some conversation about transact in Spain, but it is our attention to recycle that capital to bring a franchise partner into Spain. We built it on our balance sheet as a proof of concept, and it's proving really well.

Your next question comes from the line of Jonathan Komp of Baird.

I just want to follow up. I know you mentioned, Jay, in the back half now assuming higher churn continues. Could you maybe just talk about some plans or you're embedding to help offset that, whether there are some demand centric initiatives that could help near term and then longer term? Just what are the key initiatives you're looking at to help drive unit economics still higher here?

Yes. So I think that's a broad question. When we think about it, I think this is a bit of a moment in time if we step back and think about click-to-cancel or the ability to manage your membership online. Look, we're about putting the members first. We think it's the right thing to do. Taking this step even though it wasn't mandated is the right thing and then align with our core values. So from that standpoint, it makes all the sense in the world, and we think it makes sense to be the leader since we're affiliated in the industry in this space.

As we think about opportunity, we've talked about it before, it's too early to comment on it further. But the ability to market this further in the join flow. We've done some testing and we've seen lifts coming to [indiscernible] on the high school summer pass, which has been a nice program that we think will be -- continue to be successful and meaningful going forward. And I think as is evidenced by our comps and our results for the second quarter, the marketing is landing and the shift in our clubs with the equipment is landing the full spectrum of [indiscernible].

So we're pleased with all that. Click to cancel we're managing it. And again, it's -- we're talking tens of basis points compared to what we originally thought or originally thought, it is baked in our outlook and our comp guide. So we feel good about where we're at.

Okay. And then just 2 follow-ups as we think about the next few months here. Any opportunity to better monetize and convert to high school summer pass? And then Colleen, just on pricing, I think we're within a window of a few months where you'd probably make a decision for this year or not. What else do you need to see? Or what are you looking at specifically as you collectively make that decision?

Absolutely. So I think from a conversion standpoint, on high school summer pass, we saw last year that we converted higher -- we had a higher conversion percentage than we did the year prior. And what we're seeing this year, too soon to get into real specifics, we'll see the conversion in the fall. But all indicators are that the -- both the utilization and the participation are both up markedly this year versus last.

So that will be very -- should be favorable, I guess, I should say. If we assume even a flat conversion percentage, much less potentially an increase in conversion like we saw last year. So it remains to be seen in the fall, but the indicators there are, I think, are really strong. Black Card pricing. So we said last quarter that we -- it wasn't a matter of when. It was a matter of when, but we wanted to get on the other side of anniversarying the Classic Card price increase, which we did at the end of Q2.

And we also wanted to get through the rollout of online membership management, what we're now calling Click to Cancel because it really is about empowering our members to manage their membership. Given that we've seen as Jay said, a slight elevation, and I don't want to overplay that, we're talking in the tens of basis points. This is not in the hundreds of basis points. Slight elevation in churn since that rollout, we'd like to give that a minute to moderate.

As we've seen in test environments and other markets in the past, there is a moderation after that rollout. So we want to take a minute and get on the other side of that rollout as well before we make an absolute decision on the timing of the Black Card price increase.

Your next question comes from the line of Joe Altobello of Raymond James.

Just wanted to follow up, Colleen, on the last answer you gave about Click to Cancel. I guess it's still early, obviously, but do you have data on how quickly cancel rates actually go back to normal after the implementation of click to cancel? Or do they stay slightly elevated permanently?

Generally speaking, generally speaking, after ish about 12 weeks, they moderate. Now there have been a couple of exceptions we talked about Tennessee a couple of exceptions where it's remained a bit elevated for a longer period of time. But generally speaking, we see a moderation about 12 weeks after rollout. The difference here is that this is a nationwide rollout as opposed to in smaller cohorts as we've done in the past. So it remains to be seen if this behaves like the prior test and prior rollout environments. But we're still in that window because it was mid-May. So we're still within that 12-week window of rollout, and we'll monitor it.

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

Yes, Joe, this is Jay. And as we said on the call, it's 70-30. We're not guiding beyond 25%. And I think especially right now, as we think about the back half of the year, we're going to be more consistent with the 70-30 versus getting back to an even split. And as we think about Q3 is historically not a large increase in membership type of quarter. So I would expect in Q3 for that 70-30 need be more skewed. And we'll give longer-term guidance at our Investor Day in November.

Your next question comes from the line of Chris O'Cull of Stifel Financial Corp.

Colleen, I was hoping you could provide an update on the progress of reducing investment costs for new units.

So as you know, the more balanced cardio and strength package for starters reduce the build cost for our franchisees. We've also done things like shrinking the lobby, where we're today seeing well over 80% of our joins come either online or through the app. We determined that we don't need as large lobby because we're not doing the sign-ups in the lobby. So dedicating more of that space to the gym floor and shrinking the lobby reduces the build cost because obviously, tiles ever looking at locker room sizes and shrinking the locker room sizes a bit to dedicate more space to the gym floor, that too, reduces build cost, building a smaller front desk which we think actually creates a more welcoming environment for our members.

So things structurally that we're able to do from a construction cost standpoint are helping the unit economics. But at the end of the day, the biggest thing is this business is a top line play. And when we drive the top line for our franchisees, that's the thing we do that's most accretive to their unit economics. So we're really encouraged by the joint volume that we've seen this year. We're really encouraged that our marketing is landing and that our product offering is really resonating with consumers, particularly Gen Z, a younger consumer as we think about kind of longer-term lifetime value.

Makes sense. And then do you believe adding some of these high-value services like [indiscernible] gaining could unlock the potential for an additional pricing tier?

We're not talking about additional pricing tiers right now. What we are talking about is potentially and the timing of which it's not potentially when we will take an increase to the Black Card pricing. And we're always going to be thoughtful about making sure that you've heard me say leaning into -- when we think about HVLP making sure that we're thinking about the HVlp that we're delivering an incredibly high value for our members. So always thinking about the offering, wanting to stay most relevant and then pricing in a way that enhances the economics of our franchisees while at the same time, delivers incredibly high value for our members.

Your next question comes from the line of Xian Siew of BNP.

I want to follow up maybe on Gen Z in terms of the differences and how they behave versus other demographics? Are you seeing them tend to join it more by card versus Black Card, any differences in utilization or churn? Just kind of curious on how they look.

Yes. So while we haven't really dissect or we don't dissect or deconstruct the utilization by generational cohort we have shared that we're seeing utilization increase. So where we used to see our active members or members that utilize our club in a given month, use the club 6 times a month or 6.1 times a month. We're seeing that in the high 6s mid- to high 6s today. So that is an indication you can glean from that as Gen Zs are becoming -- they are the fastest-growing segment of our membership, compound that with the increased utilization.

And then I talked about high school summer pass this morning, and that's all Gen Z. And I shared with you that not only is the participation of the utilization is also up as well. So those are indications you can talk about them.

Okay. That's helpful. And then maybe a unit economics a couple of times and to your point, with the pricing and the formatting, the stores and the marketing, it seems like unit economics are getting better. I'm just curious like if you're hearing feedback from franchisees maybe looking to seeing better unit economics and maybe wanting to accelerate opening into the next year?

One of the beautiful things about our franchise business is the opportunity that thought partner with our franchisees. And our new Chief Development Officer has been out on the road a lot, meeting with our franchisees and talking with them about the changes in format, the structural changes that we can be making to enhance the build costs or improve the build cost. And then, of course, our new Chief Marketing Officer really driving the top line. The other thing I'll say that we're seeing, and I'm sure you're seeing as well is improvements in the availability of retail real estate, particularly in shopping center real estate.

So we've had a strong positive absorption over the last several years. and in the first 2 quarters of this year, Q1 and Q2, negative absorption, also a moderation in rent escalation. So rent growth has been has been below inflation in 2025. So those are also good indicators for improved unit economics for our franchisees. So we're looking at top line, which is most important. We're looking at build cost in partnership with our franchisees and then trying to also lean in and help them with the availability of real estate.

Yes. And I agree, just to add on, specifically, we do look at the new cohorts of clubs that we've opened both the franchisees and our since the new growth model. and some of the evolution in the marketing and the floor plan. And from a top line standpoint, we're very pleased with the way those are trending in terms of a unit economics.

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

Congrats on a strong quarter. I just wanted to follow up sort of on the guidance. You narrowed the same-store sales range towards the high end you sort of mentioned that click to cancel attrition, I think, is a little bit higher than expected. But I guess what is the offset? Are you seeing better Black Card penetration than you were expecting? Or what else is sort of going on that's maybe offsetting some of this higher Click to Cancel attrition?

Yes. So as we said, we had a wider range of 5% to 6%. We've narrowed that range. We obviously came off a good quarter. So part of it is just actualizing Q2. And then as we think about the guide, the click to cancel, right, we had some of that and we've moderated that slightly. And then otherwise, it's just the things that we've talked about, right, continuing the benefit on the Classic Card price increase, right? We'll still get that, although not to the extent that we have that was modeled in before and then just some level of conservatism with the macroeconomic environment.

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

Yes. We don't really guide to membership. But to your point, when we think about the third quarter, historically, that's been a large net member add quarter. But we're going to continue to do our best. And then if you look at the trends that we've had in the last 4 quarters, you can see we have had some slight membership uptick.

Your next question comes from the line of Sharon Zackfia of William Blair.

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

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

But again, we're really just rolling out the plate-loaded equipment just went in, in the first -- right before the first quarter, probably too soon for us to to really talk about it as a trend yet. But generally [indiscernible].

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

Sharon, that's one of the things that we're evaluating, and it may not be broadly all strengths that may be certain specific pieces of equipment that we're hearing member feedback that may indicate we want to add more of it. I'll give you one example, in particular, we have significantly increased the complement of stair climbers in our clubs. That was based on data that we showed from a member utilization standpoint. And the same will hold true with strength equipment as we hear from our members, the pieces of equipment there, that they're using more could help inform our equipment packages going forward.

And the other thing that we've noticed is the utilization of floor space for functional training. So we've been intentional in our clubs about opening up floor space so that our members have space to do functional training. That's another trend that we've be responding to.

Yes. And as we've talked about before, we have NPS now fully rolled out across our system. So that's a great area for us to get feedback across the entire fleet of clubs.

Your next question comes from the line of Marni Lysaght of Macquarie Capital.

I just got some questions and maybe pertaining to more just some cash flow nuances. Just noticed that the -- your accounts receivable balance is quite elevated compared to more recent history as of June end. And it's kind of ratcheting up to what it was in December, on the back of some of those re-equipped dynamics. Is there anything you can kind of unpack there? Is there any potential inflation coming through on equipment?

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

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

Yes. I think it's -- I was mentioned on one of the questions earlier about how frequently when assets transact when clubs transact in our system, it's an incumbent franchisee who's looking to purchase. And in the sale of the California clubs, we had multiple bids on that portfolio of clubs and once again, strong interest from inside the system to purchase the additional clubs. So no diminution in appetite for sure.

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

I had a question on the Black Card pricing test. You've been doing it for a little while now. I was just wondering if you can share any observations or differences you guys are seeing in the test relative to broader store portfolio and maybe in relation to Black Card mix, retention, net adds, anything you would be able to share on the Black Card?

Logan, I'll start. So when we went in -- and I wouldn't call it a touch at this point. I think we've evaluated it now it's about -- we've made a decision. It's just about the right timing. But at any rate, when we were in the test, we wanted to see 2 things. It was there headroom on price and was that headroom at $27.99 or $29.99. The second was, did we see elevated churn. And then the third was, did we -- was it more accretive to enjoy do we see an increased Black Card penetration?

And net-net, on price, there was not a material difference between the $27.99 and the $29.99 price cost, which is why we've anchored to the $29.99 from a churn perspective. We do not see a material difference in churn at the different price point. And from a Black Card penetration, we've been talking about that. Gosh, we're up 340 basis points in Black Card penetration quarter to prior year.

And that's been a trend that we've been seeing. So with the gap between classic and Black we've had being the narrowest that it's been since the inception of the Black Card at a $10 price delta, we've definitely enjoyed increased Black Card penetration that has been accretive.

Got it. Super helpful. And just a quick follow-up. How many stores of the $30 are regions of the $30 Black Card [indiscernible] today?

We have it in 2 geographies today. It's in our New York market and our Charlotte market today.

Your last question comes from the line of Brian McNamara of Canaccord Genuity.

This is Mason Calnan on for Brian. We were just curious why net new unit guidance hasn't been adjusted as we would have said your visibility would be much higher today on that front compared to May. Also, is there like an internal time line when you expect to surpass the 200-plus net growth number that the company did [indiscernible]?

Yes. So I can start on that. As far as the $200 million number and what we've talked about, I mean Colleen is a fan of a big number. And so we appreciate that. We want to continue to do the right things and what that will allow for is continued steady growth in the units, right? We don't want to hear it the bumper crop, but we think doing the work that we're doing on all fronts will eventually lead us back to that, and that includes both domestic and international.

And then from a net growth standpoint, to your point, right, we have had a couple of closures. Some of that was related to lease terms and some of that was just natural lease ending. So it's just part of the normal course of the business, nothing unusual, and we can refine that going forward.

I think too, we also know that we've got -- because of the nature of the business, our seasonal favorability to a Q4 opening, it's a very profitable quarter to open because you're right in front of the strong Q1 join volume. The flip side of that is that it's a race to the finish when you've got a lot of the openings back-end loaded in the last quarter of the year. So we felt confident in the range that we guided, and we feel confident that we have a great line of sight to those openings. However, at the same time, there are a lot in Q4.

That concludes our Q&A session. I will now turn the conference back over to CEO, Colleen Keating, for closing remarks.

Thank you. In closing, I am encouraged by our performance during the first half of 2025. We continue to be a highly attractive franchise system that generates strong and stable free cash flow for long-term sustainable growth and increased shareholder value. Thank you.

This concludes today's conference call. You may now disconnect.