Awesome! Well, thanks everyone for joining. Welcome to day one of the Morgan Stanley's Second Annual Travel and Leisure Conference. I'm Megan Alexander, Morgan Stanley's Leisure Analyst here in the U.S. I'm glad to be here today with Life Time and the company's Founder and CEO, Bahram Akradi. Life Time went public in 2021, and one of the country's largest operators of health and fitness clubs. And for those of you familiar with them, which I'm sure many of you are, you know they're in a league of their own. Very large clubs, over 100,000 sq ft, with pools, tennis and racket sports, cafes, spas, basketball, and yes, pickleball too. Life Time has over 170 locations today with over 800,000 center memberships. So just a quick disclaimer before we start. For important disclosures, please see the Morgan Stanley Research Disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please feel free to reach out to your Morgan Stanley sales representative. So with that, Bahram, you hosted your first Investor Day since your 2021 IPO last week at your corporate headquarters in Minnesota. You laid out a long-term financial algorithm, 10%-12% top line and EBITDA growth. So it'd be great if you could just start with a brief overview of what you shared with us last week, and the overarching message you hope that we walked away from the event with. Thank you. Couple important things that we hoped to accomplish during the Investor Day was to expose the amazing team of the executives and passionate distributors of the company, so the folks don't think that this is a one-man band. So I think that came through pretty nicely. I'm sure people were impressed with the quality of the talent and executives. And the other thing is, the company is much broader than fitness. We have tried to eliminate the fitness out of this, not to be confused by other fitness companies. We are a healthy living, healthy aging, company with the focus on delivering an experience equivalent of what you get in the most high-end country clubs. Deliver a high quality and high volume at the same time. That has worked extremely well for the company. We're broad in terms of the offering, from, just like Megan said, from sports, tennis, pickleball, basketball, leisure pools, outdoor pools, beach clubs. So it. You don't join Life Time just to go work out, you join Life Time to achieve a variety of different, section of your, you know, kind of a lifestyle. As a lifestyle brand, the company is really well poised to achieve the, you know, what you mentioned, the growth that you're talking about. It's simple. We wanted to make sure we map out for people how they can see the free cash flow positive going forward from here, and how they can see that 10%-12% growth, top line, bottom line. Okay, awesome. And I just wanted to mention that we'll— we will open for questions, so I think there's microphones around here. You can just raise your hand if you do have any questions. Wanted to talk a little bit, we'll start with the top line, just about your membership and pricing strategy. I think sometimes there's the perception that at face value, a membership can be expensive. You know, you're looking at $300 rack rates in some cases. Perhaps what's underappreciated is the deliberate changes you've made to the membership and the pricing structure. So can you talk through some of the decisions that went into those changes, both to the price of the membership, but also the offering, and how you think about the value proposition for a consumer today? Yeah, that's a great question. So the question for that, for the investor, is to make sure they have the right set of comparisons. You know, this is not a gym, it's not a Planet Fitness, it's not an LA Fitness, 24 Hour Fitness. We offer so many different programs. As an example, like Ultra Fit, GTX, Alpha, you know, MB360. These are programs that you would pay equivalent of $250-$300 a month for any one of them when you go to specific studios for those. So when you actually look at all that is offered, the value proposition is fantastic. Furthermore, you know, our prices over the last five years are basically up less per use. So if you take our customer who is using the club almost 12 times a month right now, the price per utilization, which was about eight times in 2019 and was less than that before that. So basically, their per visit, they're paying slightly less than if you had just taken the accumulated inflation from 2019. So... and the fact that we have more clubs on a wait list, we have more demand, we're spending less money in advertising, it just pretty much delivers the message that the customer sees the value proposition very much intact for Life Time. But it is the fact that you're getting the beach club and the all those programs and pickleball, all of those things under one roof. So that's a good segue into my next question, which broadly is just, how do you think about that pricing power going forward, and where do you think you can take the membership? I know it'll depend by market, but, you know, is there anything you look at to use to benchmark how much a member is paying today? And do you think you need to constantly enhance the offering and the programming to justify taking more price? Yeah. So I think the key for that is really the variety of the 170-some clubs, some clubs are executing extremely well across all fronts, the experience, the programming, the number of classes. The visits are, you know, 90,000, 75,000, 80,000 visits per month in a club. And really, in those clubs, the opportunity is just on the pricing, because we have more demand than we have supply in those clubs. The clubs may be about 1/3 of our clubs that we can tighten the execution, teach better classes, have more frequency. Those are the clubs that they could basically gain some more memberships in. But the average membership price, right now, if you take a look at what the rack rate is to what the average price is across the whole system, is about a $30 gap, right? And as these memberships that they are paying less, either churn and a new person comes and pays the full price, or the current members get some legacy pricing, we're gonna see about a 4%-5% same-store comp for the foreseeable future. So we don't see a need having to make any drastic shift in anything. It's just adjusting to the customer experience. And how does the unit expansion strategy and what markets you're going into play into that, right? Because New York's perhaps been a newer market for you, and, you know, you can charge more than you can here. Yeah. So how does the kind of mix of unit opens going forward play into your thinking about price? So right now, last I checked, we have about 85 different deals in the pipeline, and those deals are all different. So signed contracts, own the land, or they are basically LOIs that they have been negotiated, ready to get to the purchase agreement. There are all kinds of... but so we are, our mixture of clubs are gonna come from doing facilities within big, large apartment complexes, like the Life Time Living model. They could be office buildings, could be ground up. And because of the nature, the size of our clubs are so large, and the nature of the real estate, these deals will move from timetable. In order for us to deliver to average of 10 clubs a year, 8-12, 10 clubs a year, we just need to have a pipeline. And there is no way anybody could say to you, we're gonna open this many of this one, that many of that one, and this many in this market. The other thing for us is we will never pay market rates, going to Boston or Manhattan or anywhere else for that matter. Therefore, the deals have to be structured the way we like it from a rent standpoint, and when we get those type of deals, we get them. But the growth is gonna come, I would say, just a normal distribution to what our distribution is today. It's gonna be from LA to New York and from north to south. Just to follow up on something you said before, you said 4%-5% mature comp can come from price. How does the opportunity... is the in-center spend opportunity included in that, or is that, you know- That's included- Okay ... in the mature stores. Got it. And then the other 7%, 8% is new stores or the ramping stores. Okay. All embedded. All of those growth are both dues and in-center revenue. Got it. So it's a revenue per membership- Yeah -t ype of number. Right. Okay. And then from the in-center spend, and how do you think about share of wallet for your customers today? I think you talked about they're doing all of these things in one place, right? Or separate places, right? And they can come to Life Time and do it all in one place. So when you get someone to do, whether it's personal training or perhaps MIORA in the future, is that something that you think you're doing, they're doing elsewhere, and so it's just a shift in wallet and perhaps they're even saving money by coming to Life Time? Or is it, you have to get the members to start doing new things in order to get that? Yeah, look, I think the customers, or you have some customers who wanna be inside the Life Time so bad, that they are basically doing anything they can to just get enough money for their dues. And when they get in the club, they really don't spend money on anything else, just they don't have it. We— I couldn't tell you, we don't have some of those members, we certainly do. And then we have members who basically, if they could spend another $2,000, $3,000 a month, they do it. And they'll do medi spa services, they do spa services, they do, you know, MIORA and/or personal training. Our personal training, you know, we just had our best month since COVID, that in May broke a record. April, we broke records. So while personal training is the second-largest revenue after dues for the company, and it's doing extremely well right now, I'm not seeing the customer, like, holding back. We're not seeing any resistance. It's really just a function of, as the club doing. Our cafe in Miami did $245,000 last month. Now we have a similar sized club with similar traffic, the cafe did $60,000. So it's on us. When sometimes, you know, it's just unfair to think that a company will do such a great job across 170 locations and all the programs. Some of our clubs need more work, and we're working on them. We're constantly trying to identify the top 25 best performing in every category, in every business, and then the bottom 25, and then how do we go to the bottom 25 and help them lift it? There's quite a bit of opportunity from our execution. We're not seeing a resistance from the customer. We give them the right products, the right services, they want to spend the money. Is there something common about the 25 top performers or bottom performers? I s it just, you know- It's casting. Okay. It's when, you know, we spend significant amounts of energy and time in making sure we cast correctly, and we have the right leaders in the seat. They work. Makes sense. Shifting gears a bit, you know, we did talk a lot last week, or spent a bit of time, I guess I should say, about the digital strategy and the opportunity to expand Life Time brand through that offering. Can you maybe just spend some time talking about your vision and what this looks like over the next three to five years? No, I love that. It's one of the things we're the most excited about. So at Life Time, we have been working on our digital delivery for years, but the more intensely, the last five years, obviously. And once the COVID came, you know, our concept was, okay, we're gonna be the company that delivers health and wellbeing to people, both physically and digitally. You know, I personally have never been someone convinced that a digital-only company can actually survive. So we basically accepted what other people were thinking and just keep doing our thing. But today, we have about 100,000 per month additional subscribers to our LT Digital. We will deliver on that meditation, nutritional classes, exercise, on-demand, streaming, everything, an AI-driven workout planner, tracking, all things that you would want from digital platforms, all under one, just like our clubs, all under one easy app to use. And so as this digital platform— and then we just decided at the beginning of this year that we're gonna make it a free option to bring Life Time's wealth of content over 30 years to everybody in the world. So while we are super excited about what that can do for people in terms of bringing all this information, all the curated data to them, and then couple it with Lacey, which is our L.AI.C, you know, our Life Time AI Companion, basically try to kind of advance that with every iteration, so then give people everything they need. It will generate probably 3 million, 4 million, 5 million worth of subscribers over the next 2, 3 years, and then beyond that, we'll continue to grow. And then the way that that will monetize for us is people can go on L TH Digital and basically get our Life Time Health products. They can get our partner products from our partners, and basically, when they want something, they can just go to one source and get it. We're very excited about that. It also creates a very, very large base of people familiar with the company, who can choose to become a member, access member, much easier if they want to. So it's one of the areas we're super excited about. Maybe two follow-ups. One, first, can you maybe just walk through the economics of how that would work, right? So, you know, you have a HOKA or a Lululemon on Life Time, maybe just on the app, just talk about the economics of that. And then second, you know, any infrastructure investments in margin standpoint, what that looks like, too. That's a great question. Let's start with the last question. So, if you were to build what we are talking about, having millions of subscribers, having 30 years' worth of content that you would have to constantly create, and/or the technology to support all of that, you would be spending hundreds of millions per year. The reality is, we don't have to spend any incremental dollars. All of this is just natural byproduct of what we are doing already, what we have been doing. So the cost of having this business is basically zero. The opportunity is to basically co-brand with companies and have them direct ship, so the customer will come through our website, through our app. They order what they want, that gets shipped to them, and then we get a revenue share. In some cases, it's a partnership. They pay us a marketing fee, partnership marketing, because of all of our athletic events, as well as all of our clubs and all of our digital subscribers. They pay us a partnership. We're right now doing about $15 million, $20 million a year in just partnership that the people are paying to be the advertiser to our eyeballs, but that number is gonna dramatically grow over the next years. Got it. Super helpful. Maybe shifting gears a bit to financing. You know, you did complete your first sale-leaseback last week in quite some time. So, you know, how should we think about your financing strategy going forward, and what do you need to see in terms of cap rates to do more sale-leasebacks? Yeah, that's great. So we have, as you know, a substantial amount of real estate that we can take to sale-leaseback. The company's strategy is all new clubs that we build from ground up will go to sale-leaseback. It's a question of when the timing is. We anticipate that the rates will be coming down to our favor towards by end of the year, early next year, and we'll be able to achieve the sale-leaseback at exactly the same cap rates we were doing them a couple of years back. The difference right now, we can dribble some sale-leaseback like we just did last week, and maybe in a couple, you know, months from now, do another one. These will be $40 million, $50 million, $60 million, $90 million. Not, not huge amounts, but those sale-leasebacks will be just slightly above 7%. So the difference of 40, 50 basis points in that cap rate is minuscule to the 5% more, the 500 basis point, more EBITDA we're generating right now than 2019. So the point I want the investors to really walk away with is our current business model is poised and ready to pounce on the current conditions of interest rates, cost of construction, labor. Our business is generating the best margins it ever has generated today, and so none of these things are going to be slowing us down. If they don't— if the conditions don't improve, doesn't change anything, we're gonna continue to go forward. If they improve, if the rates go down, we'll be just slightly a little more helpful. But we will accelerate the sale- leaseback as soon as the rates start coming. We will do some right now and accelerate it as soon as the rates get a little more healthy. That's helpful. You know, you talked about, I think it was last week, but also on your earnings call, about $1 billion of unencumbered assets of the, I think, $3.5 billion in terms of what you have, that's not under a sale-leaseback today. Can you just talk about why it's only $1 billion of the $3.5 billion? Yeah. It could, it could be all of it, Megan. It could mean we could actually decide to do 100% sale-leaseback. The issue is a couple, $2 billion, $2.5 billion of it, has such a low tax base that you will end up having a huge amount of that cash coming in, going out in taxes. And we still are benefiting from the tail end of last year. I would say we may have about another year of the losses that incurred during COVID, so we have loss carryover right now. But once we run through that, then you got to be really conscientious of not creating leakage of cash when your only focus is cash flow positive. So as of this quarter, we'll deliver cash flow positive. Going forward, we're cash flow positive, right? The right thing to do is just to do the sale-leasebacks, you know, methodically, so it's the best efficiency of capital for u s. Makes sense. And you just mentioned, but cash flow positive, so reducing leverage, getting to that self-funding status has been a big goal of yours. I think you've laid out around $30 million of free cash flow expectation for 2024. How should we think about the pace of that going forward, right, as you bring down leverage, perhaps pay down some debt, and what's the plan for any use of excess free cash flow? Yeah. So I think the free cash flow after interest and maintenance CapEx should grow substantially next year over this year. So I anticipate over $400 million there. This is again, over $400 million free cash flow after. So even if we do, 10 clubs at $30 million a piece, net invested capital, that would be about $300 million. So the question is, what do you do with the extra $100 million the following year? Would you, put another $50 million of it into the growth and maybe raise the... so you - so going from $300 million, from $30 million, maybe to $50 million or $60 million of free cash flow, and then the rest of it being invested in additional growth. Those are not something that I can commit to, or I want to commit to, because sometimes opportunities come and you wanna use it. What I wanna commit to is that we will not spend more than we will produce, and therefore, the EBITDA will grow, the debt will shrink slightly or doesn't grow, so debt to EBITDA will continue to go down. Okay. And is there a scenario where, you know, it seems like you could do more than that 8-12 opens in a year if the opportunity arises? Definitely. I think there are gonna be moments in time where you would have to take some opportunities either now or you don't - you can't, and you may end up having the opportunity to grab, you know, four or five more locations, and you have to do it. That's what basically... you wanna be in a financial situation where when great opportunity comes, you can pull the trigger. Makes sense. We have about seven minutes left. Wanted to open it up to the room to see if there's any questions from the audience? Okay, I can keep going. The recession question- Yeah. You brought it up a little bit earlier. How do you think about... what are you looking for, right? I mean, your membership base has changed a lot. Attrition is a lot lower than it was in the past. Is it in-center spend? Is it attrition? What are some of the - what's the canary in the coal mine- Yeah ... that, you know, would suggest consumers might be pulling back? So, you know, I'm gonna go back to when I first started the business, selling memberships for $50, $60 a month, and we had probably 50%, 60% of our members weren't regularly using the club. But the dues was low enough for the big, huge 100,000 sq ft, they would hang in there. As we raised the prices to the $100, $120, $130 a month memberships, we had more users. You know, those clubs had more of the people paying that, put to that, using the club and fewer people not using it. This is inverse to the clubs that they're charging $10 a month or $15 a month, where maybe about 80%, 85% of their members who are paying that dollars aren't using the club. So when big financial moments, like a great recession comes, big things happen, big recession, kind of a hefty recession comes in, the easiest things to give up are the things you're not using, right? So when we look back at 2008, those customers who were in our $120-a-month club, which is now equivalent of $250-a-month clubs, those customers had 30% better retention than the clubs that they were $50, $60, $40 a month. So because they were more of a user. Today, the members are using the club the most. They're using the club 12 times a month on average. This is the last thing they'll give up. It's part of their life, part of their lifestyle. Their kids are using it, some husband and wife. They literally have to be the last thing they cut out. So my belief is the business that we have today is substantially more recession-proof than the one we had 10 years back. Really not worried about it, not afraid of it. Inflation is our friend, and actually, because when the costs go up, our rates can go up accordingly, but not all of our costs will go up. Some of the costs are fixed, so the— and recession is really not a factor. Okay, helpful. And you talk a lot about desirability- Right. And it kind of plays into, you know, the dues and the pricing work you've done. I guess when you think about the maintenance CapEx, which I think you said $10 a sq ft, is that inclusive of, you know, the constant enhancements you need to make to the gym, whether it's adding pickleball, right? I mean, that's been a huge investment over the last couple of years. And maybe just, I know you've broken it up- Yeah. So maybe just kind of walk through. If you think about, you wanna have a club, have the right parking lot, the right roof, the right HVAC, and not dated, you know, everything looks new, like we call it like new condition. That costs about $6 a foot. Then the other $4 a foot on average is modernization. You know, we spend, you know, $40 million, $45 million in a given normal year, $50 million in modernizing the club, changing the floor plan to provide, like, the space for the GTX or Ultra Fit, or convert some courts, some basketball courts or some tennis courts to pickleball. So this modernization and maintenance Ca— intense maintenance CapEx is a signature of Life Time. We've done that since the inception. Is why the company is commanding such big... I mean, clubs that they're 15 years old on a wait list, as well as the brand new clubs on a wait list, because every club looks new. That's what we're gonna continue with. The breakdown is about, of the 10, is 60/40. Okay, that's helpful. Maybe we can, in the last couple of minutes, maybe talk about MIORA, which is a new initiative for you. I was lucky to experience it in Minneapolis. Did you like it? Loved it. Yeah. Had a nice IV drip. Yeah. Was lucky to experience it last week. Maybe talk about, you know, it's one center right now, so in your downtown Minneapolis location. Maybe talk about the strategy going forward, how many you envision having, what it will look like? Is this a 2025, 2026, or should we think about it more- Yeah ... you know, longer term? So then the hormone replacement therapy is here to stay. You know, once people recognize what it does, the problem with it is that it's like one of those things, when something gets hot, there's also a lot of snake oil. People are making a lot of promises that they're not true. And unfortunately... so we are very focused on delivering. We just brought on Dr. LaValle, who is our Chief Science Officer, is the authority in this space. We've been doing it with Metabolic Code for years. So we're gonna fine-tune that model that you experienced in that Target Center in Minneapolis. And we have demand right now, multiple facilities around the country, where there are doctors knocking on our door, they're wanting to join us and deliver the same sort of plan. We also have the spaces. We have a lot of spas that they have the ability to, you know, embed the MIORA into that spa space. So it's an opportunity, but I wouldn't— we don't need the dollars, the revenue, the EBITDA for 2024. We don't really think we need it for 2025, but I think by 2025, it can be a nice, substantial business for the company. Okay, awesome. Maybe in the last 30 seconds- Yeah. You know, what do you think is the most underappreciated part about the Life Time story today? It's the brand. I think people just don't appreciate how much the... you know, we've got 140 billion, 130 billion, 140 billion impressions per year. And that NPS is extremely high. People want the product, they want the name, and I think that gives us opportunity to expand brand extension across the system. Great way to end it, right on time. Thanks, Bahram- Yeah. Thank you. Thank you. Thanks, everyone, for joining. Thank you, guys. Thank you. Thank you.