Good afternoon, everyone. It's my pleasure to introduce management from Life Time and to moderate our fireside chat this afternoon. Today, we have with us Bob Houghton, Executive Vice President and Chief Financial Officer. Thank you so much for joining us today. Yeah, thanks, Kate. Great to be here. I didn't know if you had any opening statements or if it would be okay for me to just launch into the- Yeah, you can jump in. That's fine. Okay. Yep. Okay. Maybe you could talk a little bit about Life Time. I think, you know, we still get a lot of questions from investors about what Life Time is. You're not necessarily in the fitness category exclusively, so maybe if we could hear your updated view on what Life Time offers and who you are. Yeah. When we, when we talk to investors about Life Time, it's really not what we've done in the last six months or what we'll do the next six months, but the fact that in our 32-year history, we've continually reinvented the business. Let's talk about some of the examples that we've done most recently. Coming out of the pandemic, we really made investments in 4 key areas. One, we launched pickleball within Life Time. Today, we have close to 600 pickleball courts nationwide. We're the largest provider of pickleball by a factor of 3. We reinvented our dynamic personal training business with a product called Dynamic Personal Training. This is where you're engaged with the trainer as part of the workout, so that's a very interactive product that we don't feel can be matched. We created dedicated small group training spaces within our clubs, and as a result, saw about a 250% increase in the number of members taking small group training. Then we launched an active aging product called Arora. By continually reinventing the business, we've increased the desirability of our clubs. Life Time is so much more than just a place to work out. It's really a sense of community. When people go to Life Time, they talk about going to their club. They don't talk about going to their gym, and it's really that differentiation that's really, really allowed us to be successful. You know, the other thing that we did coming out of the pandemic is we really looked at structurally rewiring the company. We took layers out of the corporate office. We took layers out between the corporate office and the field, and it's allowed us to rewire the company to a sustainably higher level of profit than we were before the pandemic. So maybe we can talk a little bit about those in-center programs, because I think this is one of the more interesting areas and I think demonstrates your ability to flex. And so you listed, and I hope I have them all, the Dynamic Personal Training, the small group, Arora, Dynamic Stretch, and of course, pickleball. So could you maybe talk about the success of each of these programs, where we are in terms of you introducing them into all your locations, and what sort of return do you see on the investment? Yep. So we'll start with pickleball. As I mentioned, we've got 600 courts today, and what's been unique about Life Time's ability to grow into pickleball is we're typically converting an existing space. So think a basketball court, think a tennis court. So we can do pickleball expansion for far less capital than it would typically cost a company to do it. So the first 500 courts that we built cost us about $25 million in capital. If you were to build ground-up pickleball facility, including acquiring the land, all the necessary permitting, the infrastructure, it would cost about $1 million per court. So for an effective $500 million in capital, we spent $25 million to get that first five—those first 500. We expect to have 1,000 pickleball courts by the end of next year, so we're rapidly expanding in this space. If you look at the number of members who play pickleball today versus who played at the start of last year, we've seen a 7-fold increase in pickleball. So we were very proactive, very, very much in front of this trend. It's the fastest-growing sport in North America, as you probably all know. So we're really pleased with pickleball. That's been incremental memberships for Life Time, some incremental revenue in terms of private lessons and leagues and, and things like that. Dynamic Personal Training, let's talk about that. So this is a business, again, where you're dynamically engaged with your trainer. It's not something you could do on your own. If you videotaped your session with your personal trainer, you would need that trainer the next time you did the class. You couldn't go home and just do it on your own. So this is a business that we've got across all of our clubs. We've seen. We do about 160,000 DPT sessions per month across our clubs, and we've seen a 37% increase in the number of sessions that we've offered versus prior to the pandemic. Dedicated small group training, so the three big brands there are GTX, Arora, and Ultra Fit. And these programs, by creating that dedicated space within the clubs, we've seen a 250% increase in the amount of DPT small group training participation since the start of last year. This is something that we include in what we call our Signature dues, so there's no incremental cost to the member to take these programs. That's been something else that's differentiated. If you're going to a competitor offering, you're paying per time you take one of these classes. It's included in our membership dues. Arora is far more than just classes targeted to people age 55 and older. It's really a sense of community. We also do things like creating coffee chats in our cafes, and we're offering these Arora times at times that are convenient to the Arora member, but also allow us to balance out the membership loads within our clubs a little bit. Kate also talked about that Dynamic Stretch. Mm-hmm. That's a brand-new business for us. We actually just launched that in July, and we think this is gonna be a significant business for us. And just like Dynamic Personal Training, this is... You're actively engaged with a stretch technician on a table. It—I can speak from personal experience, you're gonna be stretched in ways that you might not necessarily do on your own, and this is incremental revenue for Life Time and incremental benefit for our members. So thank you. I, I want to go back to just memberships and dues. You mentioned that many of these are part of the membership. They're not incremental, and it seems like coming out of the pandemic, you've been focused on—focused more on rebuilding memberships, but not at the same level as pre-pandemic. You're focused on more higher-quality memberships. So could you maybe walk us through why that's the right formula today? And then we can talk a little bit more about the membership dues as a result. Yeah, Kate, that's a great question, and you have the strategy correctly. We had clubs prior to the pandemic that were frankly too crowded. So coming out of the pandemic, to make sure we could deliver an athletic country club experience to our members, we did not aspire to get back to the same level of membership dues that we were at prior to the pandemic. A really important milestone for us on this journey is recovering membership dues. In the first quarter this year, for clubs open in the pandemic, we surpassed membership dues level that we had prior to the pandemic, despite the fact that we have fewer members. But it's not just a function of membership dues, total revenue in these clubs, it surpasses where it was prior to the pandemic, and profitability is also higher than it was prior to the pandemic. So we feel that the strategy is working. One of the ways that we see that is we look at club usage, and usage per member is up 23% versus where it was prior to the pandemic. So all these investments we're making to increase the desirability of our clubs are working. And despite the fact that membership revenue per member is up 27%, some of that being higher dues, when you look at it, the cost per member per time they come into our clubs, it's only up about 3%. So the value to the member remains there despite higher dues because of all the programming. And again, that shows up in terms of higher usage, and it shows up in terms of higher Net Promoter Scores. Those are as high as they've ever been at Life Time. Maybe we can talk about dues. You talk a little bit about higher dues, but you haven't seen, I think, on an enterprise level, a big uptick necessarily across the board with regards to dues, because I think there's still grandfathered dues. Could you maybe just talk us through the strategy there? How do you introduce new dues? How do you switch people over to, you know, the higher levels- Yep. - and generate membership revenue? So, Kate, to start that question, I want to paint a picture of where membership dues sit in total across all of our clubs, right? As we open new clubs, we open them at higher price points than some of our existing clubs. By offering more programming, we've been able to take some level of price by upgrading to what we call signature dues. Things like small group training and pickleball court time are included in the dues. So there's a number of factors that have led to higher dues that are not simply a function of price. So if you look at dues on a per club basis, they're up about 12% versus where they were in 2019. So there's that piece. As it comes to pricing, we're very scientific in how we price. We pay attention to acquisition levels within a club, we pay attention to attrition, we look at net promoter scores, we look at how individuals use the club. So we're very, very—when we take a price increase, particularly on an existing member, we're very, very specific and targeted in how we do that. If we look at what our members pay today versus what every member would pay if they paid full rack rate, that's about a $17 million monthly gap, and we have no intention to close that gap completely, because we always want to reward our tenured existing members with dues below what the rack rate would cost. But by taking that rack rate dues up, it allows us to ensure that existing members have that country club experience, that our clubs don't get overcrowded. And so again, it's all a very scientific approach to pricing. The last comment I'd make as it relates to pricing is over 70% of our in-center revenue is this subscription-based, very predictable, recurring revenue that we get from membership dues. So it just subjects our revenue to less volatility than it might at other companies. Okay, so maybe we can move on to more of the growth strategy, the unit growth strategy. You added 4 new centers during the first half of this year. I think the plan is another 8 in the second half of this year. Can you talk about how large your current new center pipeline is and how we should think about the pace of openings going forward? Yep, great question. So yep, so we're planning to open 12 clubs this year. We've opened 4 more since the end of the second quarter, very much on track to do 12. You know, as we think about the pipeline of opportunities at Life Time, we have 80 locations in various stages of development. This could be starting to evaluate individual sites. We may have acquired the land, we may be starting to acquire the permitting and entitlements, or we may have actually started construction on the clubs. And there's really 4 distinct club types in our portfolio. The first, the ones that you're probably all most familiar with, are what we call our ground up battleships, our suburban boxes. It's about 110-115 of our clubs are of this type. This—historically, these, you know, these were clubs that we would build, you know, for... You know, they'd be our most expensive capital build. Over the last 7 or 8 years, we started to do more and more sale-leasebacks, an effective way for us to recycle that capital, get the net invested capital cost down to $20-$25 million per club. So that's probably the model you're most familiar with, but there's three other types of club openings. The first is, we've worked with mall owners to develop the mall retail property model, which is basically, we take an underperforming mall anchor tenant property. We tear that—that gets torn down. We get the land and the, and the property for a very, very attractive cost from the, from the mall owner. We get tenant improvement dollars from the mall owner, and we build these amazing 100,000 sq ft locations, mall anchor tenant properties, beach club on top of the roof. And the benefit it provides to the mall owner is we're bringing 3,000 people into the mall every day that might otherwise not be coming, at household income levels 1.6-1.8 x what the overall population coming to the mall. So we bring more people, more attractive income demographic. In return, we get to build clubs for very low capital, and we get very attractive cap rates on the capital that our landlords provide. So we've got about 14 of those. We just opened one in Miami, The Falls. That's our newest, not only our newest Life Time property, but our newest mall retail property.... Another type that we have, we have 4 of these today, is where we work with a residential developer, and we put a Life Time Athletic Country Club in a vertical residential building. It's very similar to the mall model. It's very low capital for Life Time, very attractive rent. But what the landlord gets is they get they rent faster at higher rents with better attrition because they have a Life Time in the building and not just a quote, unquote, gym. So it's a win for the developer, it's a win for Life Time. And then the last opportunity, and one that we're seeing a lot more of recently, are these club takeover models, where you've got an existing landlord comes to Life Time. The existing fitness operator isn't performing in their club. They come to us say, "We want you to operate these as a Life Time." They give us, again, very similar tenant improvement capital. We put a very small amount of capital in, and it admittedly takes a little bit more time for these clubs to ramp as they're going through the remodel phase, but it's very low capital. It's great opportunities for us, a great way to us to extend the Life Time brand. We've got 34 of these in our pipeline today. We've just announced three, including Penn 1, here in New York City. We probably have 20 of these, Kate, that are in active development right now. And as we look across the country, the total potential universe of these types of opportunities, it's a couple hundred clubs that are potential opportunities for Life Time. Can we talk about the unit economics? You just walked through the different models that you're pursuing. Is it similar unit economics for each of those? Or maybe you could talk about what the average unit economics and how maybe some of those differ. Yeah, and it's a great question, and as we start to diversify the club type, the unit economic question gets a little bit trickier, but let me give you some context. So we talked about the fact that across all club types, membership dues are up 12% on a per-club basis. Despite all the inflation we've seen since 2019, center operations expense per club is down 1%. Our corporate costs, we run far leaner than we did historically. So on a percent of center revenue, corporate costs are down about 350 basis points. So as a result of that, and despite the fact that we've got more rent because we've done more sale-leasebacks, our EBITDA margins are up about 120 basis points versus where they were in 2019. If we exclude the impact of that additional rent, we're up about 500 basis points versus 2019. So the club-level economics is better. In part, that comes from the fact that we're ramping these clubs faster. So if we look at the clubs we opened in 2018, 2019, 2 years prior to the pandemic, it typically took about 8 months for a club to reach $1 million of monthly revenue, and it took about 10.5 months to be cumulatively cash flow positive from pre-opening expenses all the way through post-opening. Because we ramp these clubs more efficiently, we're now hitting $1 million of revenue in about 4.5 months on average, and it only taking us 6 months to get to cumulative cash flow positive. So we're ramping these clubs faster than we did historically. Again, that's also across all club types on average. That ramp is coming as a result of scale, or is there something more specific versus 2018 and 2019 that you're doing to ramp quicker? So it's scale. It's also the fact that we're doing a better job of matching expenses to revenue. So historically, we sort of put the full cost infrastructure in place, and then revenue would catch up as the club opened. Now, we're doing a much better job of matching cost to revenue, so we're ramping cost as we ramp the revenue. So that's been helping too. So you mentioned sale-leaseback. And I think, I hope I get this right because I don't have it in front of me, but I remember when we were doing the investor education process when you guys were going public, you still had a healthy amount of asset ownership. And sale-leaseback, I feel like, has been maybe a more recent strategy where you've leaned in a little bit more, and it's certainly an important part of your growth strategy today. I think you just closed on a $45 million deal, bringing the year-to-date total of $123 million, with another $177 million planned for the rest of the year. Going forward, you know, has the higher interest rate environment changed how you think about sale-leasebacks at all, and what is your IRR for the leased properties? Yeah. So you've got the numbers right, $123 million through the first three sale-leasebacks. Sale-leasebacks are a very effective way for us to recycle capital, so that even when we get to free cash flow positive after growth capital, you'll see us continue to do those just as a mechanism for recycling capital. The way to think about these leases, these are 25-year leases with 20- to 25-year extensions. So we do pay very close attention to the cap rate that we want to pay on these, and there's modest escalations built into those contracts. So we do pay close attention to the cap rate that we pay. We're in discussions, as we sit here today, with our realty partners on the next set of sale-leasebacks that we want to do, in part because we're such an attractive tenant, right? You think about, you think about the length of these contracts. We paid every nickel of rent to every landlord during the pandemic. So as these landlords are looking to lock in 25-year contracts with Life Time, even, even though we command cap rates well below what the market pays, we're a very consistent payer. As I mentioned, there's very small escalations baked in there. So we're a really very, very reliable, very consistent payer to these landlords. So it allows us to get rates below the, the market rate. So we continue, those will continue to be part of our financing strategy, even though, as I mentioned, in a few years' time, it will be not as a means to fund growth capital, because EBITDA is going to do that for us, and it's just an effective way for us to recycle that capital. The last point I'd make on this is, it's not the only lever we have at our disposal to fund our growth. I've talked about... We'll talk, you know, we can talk more about the adjusted EBITDA growth. It's also a function of these asset-light club takeovers that I've talked about. Yeah. These are $10-$15 million per location. So we very feasibly, as we continue to more of these, will have as much growth, if not more, for more club openings with less capital. So let's move to EBITDA margins, because I know that's something else that you guys like to highlight because it has changed so dramatically. And so with the new operating model in place, how should we think about adjusted EBITDA margins longer term? I think the guidance for this year implies about 23%, but longer term, as programs scale, you know, how should we think about the mid-twenties or something higher? Yeah. As the target. And just to spend a minute on, you know, how we got to these higher margins. This is permanent structural changes to the business. It's not temporary cost cutting. So I just make sure that point is clear. And as I said, it's taking layers out of the corporate office, taking layers out between the corporate office and the clubs. And, you know, most of the rewiring work is behind us. There'll be incremental opportunities in certain parts of the business going forward, but by and large, those rewiring activities are behind us. So as we think about margin expansion from here, we will be able to grow revenues faster than we have to grow expenses. Because as we grow revenue, we won't have to add much, if any, cost to our corporate office. You're going to see a leverage benefit as we continue to scale new club openings, and as we continue to scale those in-center businesses. So you'll see a modest amount of EBITDA margin expansions going forward for Life Time, but there's no question that, you know, the significant step change that we saw this year is a function of this, the rewiring activities that we've completed. Is it right to think then that really just as revenue continues to grow, there's just a lot more leverage in the model, and that's the main driver? Yeah, that's right. The margin going forward. That's right. Okay. And that's, I guess, it's important to point out, that's even with the sale-leaseback, even with the increased rent, that you still have that ability to have these higher margins than you did previously. That's right. And it's a great point, Kate, and it's a function of the fact that by making our clubs more profitable, we can see that margin improvement despite taking on more rent in our P&L than we would have had historically. Okay, if we can move on to maybe the balance sheet and your leverage. You ended the second quarter with net debt to Adjusted EBITDA about 4.2x, much lower than the 6.4x from year-end. Looking forward, I think you're projecting a continued reduction to about 3.3x- Mm-hmm. by the end of fiscal year 2023. What are your longer-term leverage targets, and what is the pathway to getting there? Is it more, you know, the debt side of things, or is it more the EBITDA side of things? Yeah. So long-term target for Life Time is get to 2-2.5 x levered. And important to remind everybody that we have $3 billion worth of fee-o wned real estate on our balance sheet. So we feel that that's the right amount of leverage given the amount of assets that still sit on the balance sheet. In terms of how we get there, you know, the leverage, the deleveraging progress that we've made, the rapid deleveraging progress has been a function of EBITDA growth. And I would as we look to get to 2-2.5 x, the majority of that will come from EBITDA growth, and it's mainly because we have so much growth opportunity ahead of us at Life Time. You know, we have about 165 clubs today. The white space of that is, you know, much, much larger than that. So we think that investing for growth is the right way to grow this company, and so it's going to be largely EBITDA driven. We'll look to, you know, reduce debt where it makes sense to do so, but largely EBITDA-driven deleverage. Maybe you could talk a little bit about what you're seeing this year in terms of member behavior. There's always been a little bit of a seasonality to your business. For those who don't know, there's, you know, there's the pool season, the summer camp season, and obviously the fitness piece of the season. It sounds like things maybe are a little smoothing out a little bit more than what we've historically seen. So could you maybe talk to us about that dynamic a little bit more? Yeah, you've got it right. We still see that. You've described the seasonal businesses perfectly. So typically what we see is we see a ramp-up in memberships in the summer and a little bit of membership attrition once that rolls off, and this year will be no different. Very normal, normal part of our business. As we mentioned, as I mentioned, what we pay very close attention to is usage. And not only are swipes or club usage up 23% versus 2019, that rate of improvement has increased as we move through the year. So you're seeing a more and more active member because of all the programming investments that we've made. And you've got, you know, the, we have these amazing beach clubs. I encourage any of you who are doing diligence on Life Time to go out, see our clubs, really see the pools. It really is an exceptional experience that we offer. So, the usage has been as high as it's ever been. The Net Promoter Scores, as I mentioned, Kate, are as high as they've ever been, and that tells us as a management team that we're making the right investments from a member perspective at Life Time. Can you talk a little bit about Life Time Living? I think that's something that, we hear a little bit about, but, it sounds like there are more and more locations, that are in place now. Just how many locations do you have? What's the longer-term strategy here? And are property, property developers, indicating increased interest? Yeah. So Life Time Living. So this, this is a great example of how we've leveraged the power of the Life Time brand. And, you know, we'll do 150 billion impressions of the Life Time brand this year. So truly an amazing amount of impressions for our brand. And what it's allowed us to do is extend the brand into new places. So to prove the Life Time Living concept, we built a Life Time Living just outside of Las Vegas, and it opened about a year ago. We're commanding rents $3.50 a sq ft in a market that's below $2 a sq ft. So much, much higher rents. We're filling the units faster. We're about 85% occupied after a year, and we had over 95% renewal rate. So faster ramp, better rates, better attrition. So prove the concept, and now we started to work with developers, where going forward, this is a 100% asset light opportunity for Life Time, where the developer funds the cost, they go to equity, they get that same benefit in their facility, right? Faster, faster ramp of units, better rent, better retention. We get a management fee or a licensing fee by having a Life Time brand on there. And in many locations, we're putting an athletic country club in there, too. So we get to build the club very, very asset light at very attractive cap rates on the lease. So it's, it's a great win for Life Time. It's a great win for the developer. You know, we've got three of these clubs open. We've got more under development. You know, this is, this will be a part of our portfolio. Again, that's 100% asset light for the company going forward. Another similar extension of the brand, given the power of the brand, is Life Time Work. Yep. ... So these are Class A locations, where again, we work with the developer, we get a fee for the Life Time brand on the building, and these are adjacent to our clubs, so we get incremental memberships to our club. And we're the only company that can give tenants of Life Time Work a Class A work experience, and an athletic country club, as, you know, all under one, under one dues package. So we—that's something else that we're looking to increase. 100% asset light to the company. I probably should have started the conversation out with this, but we'll maybe end it with this. The health of the consumer. Could you maybe walk through, I think you cater to a slightly higher end consumer, but could you maybe talk us through any kind of consumer trends you've seen, any sensitivities you've seen, elasticity, just from some of your membership changes and how sensitive your customer is? Yep. So there's a couple places we would see, you know, indication that our consumer is soft, and I want to be clear that we're not seeing these. The first is in membership attrition, and attrition rates have actually continued to come down as we've gone through 2023. In fact, each of the last three months, attrition rates were below where they were in 2019, and that's despite the fact that our dues are higher. So better attrition, despite the fact that we've got higher dues. The second place we'd see it is in our in-center businesses. Those continue to grow at a double-digit pace. Q2 in-center revenue is sequentially higher than the first quarter. So as we've talked about this, increasing the desirability, we're seeing that in terms of additional retention of our membership base. We continue to acquire new members. We've had to put a very, very small number of clubs on a wait list because the demand has been so high. So any measure that we would look at is regarding the health of our consumer, you know, all those metrics are positive. Thank you. The share of wallet has been a big discussion too, just among all of the companies that have presented here today, but obviously, services has been trending a little bit better than goods. Do you have any thoughts about as things start to normalize, as maybe the consumer goes back to purchasing more of the discretionary goods, how that would impact your business? Yeah. So I think for us, you know, I think that we're, you know, as we've talked about the club usage data, the acquisition, all the metrics we've talked about, that continues to be positive. You know, I think for us, it's just regardless of the macro environment, continuing to invest in the desirability of our clubs. We talked about Stretch. We've got other businesses that are in the works that we'll launch. So it allows us really, regardless of the context, you know, the macro backdrop, that we're gonna continue to see our consumers want to spend more with Life Time, want to continue to engage in the healthy way of life community that we provide. So, you know, those same metrics that allow us to assess the health of our member are certainly the metrics that allow us to assess our members spending even more with Life Time as that consumer discretionary spend in your example continues. With that, I have no more questions. Okay. Thank you so much for your time. You're welcome. Thanks for joining us today. Yeah. Thank you.