Hello and welcome to today's Planet Fitness Q2 2022 Quarterly Earnings Call. My name is Jordan, and I'll be coordinating your call today. If you'd like to register a question, you may do so by pressing star followed by 1 on your telephone keypad. I'm now gonna hand over to Stacey Caravella, VP of Investor Relations, to begin. Stacey, please go ahead. Thank you operator, and good morning, everyone. Speaking on today's call will be Planet Fitness Chief Executive Officer, Chris Rondeau, and Chief Financial Officer, Tom Fitzgerald. We also have Dorvin Lively, President of Planet Fitness here, who'll 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 Chris, 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 website, investor.planetfitness.com, along with any reconciliation of non-GAAP financial measures mentioned on the call with their corresponding GAAP measures. Now I'll turn the call over to Chris. Thank you, Stacey. Thank you everyone for joining us for the Planet Fitness Q2 Earnings Call. We continue to be well-positioned for disruptive growth. We're adding new members and new stores, even with the near-term challenges from lingering COVID impacts due to the broader economy and the current climate around recession and inflation. During the second quarter, we added 300,000 net new members, ending the quarter with 16.5 million, and we grew our store base to more than 2,300 locations with the addition of 34 new stores. We believe our high-quality, affordable fitness experience will resonate now more than ever as Americans are seeking value and feeling the rising cost of everyday items such as food and gas. We also believe that people will continue to prioritize their health and wellness while being more cost-conscious, even trading down to Planet from high-priced gyms if they're not using the basketball court, the pool, daycare, et cetera. During the most recent financial crisis from 2007- 2009, we added 1.1 million members from same-store sales by double digits and nearly doubled our store count. Even though we were a much smaller brand at that time, this gives us confidence that should the economy worsen, we are well-positioned to continue to grow. COVID created a very challenging time in the health club industry. The majority of health and fitness locations globally experienced some type of temporary closure due to COVID, with 25% of U.S. gyms permanently closed as a result. Given the resiliency of our franchisees along with our low-cost economic model, we did not permanently close a single store due to COVID. We surpassed our all-time member record in Q1 this year. During the second quarter, 34% of our mature stores were at or above pre-COVID membership levels. We continue to see consistent momentum toward full recovery the longer our stores have been open since the temporary COVID closures. System-wide, our stores are only 6% below pre-COVID membership levels, and we've added more than 330 new locations since the beginning of 2020. We anticipate more normalized join trends and seasonality to continue for the balance of this year. We expect the percent of our mature stores that have recovered to previous membership levels to stabilize, given that mature store membership growth is typically flat in the second half of the year. Our brand continues to resonate with younger generations at rates that surpass prior generations as awareness of health and wellness continuously increases. Gen Z continues to be the fastest-growing demographic group of our membership. Our share of that generation over the age of 15 is 9%, which is much greater than it was for millennials at that same age. In Q2, we launched High School Summer Pass program. It's a rebranded version of the Teen Summer Challenge program we ran in 2019, where high school-aged teens can work out for free in all our stores all summer long. We believe High School Summer Pass is extremely timely and incredibly important given the alarming teen mental health crisis coming out of the pandemic. At the end of July, we had more than 3 million teens enroll in the program versus just 1 million in 2019. This is more than the total paid membership of any of our high-value, low-price competitors. It also represents more than 15% penetration of all high school-aged teens in the U.S. between our Summer Pass participants and paying teenage members. Not only have they enrolled, teens have logged more than 14 million workouts. We made the sign-up process even more seamless this year, allowing teens to register online and enabling us to capture contact info for both the teen and the parent. In fact, our app topped the most-downloaded list of all apps in the App Store during those initial days following the launch, even above TikTok and Instagram. In June, we fielded a survey of some of the participants and their parents and learned that for two-thirds of the high schoolers, this summer represents the first time they stepped into any fitness club. This is absolutely what our brand is about, getting people off the couch to start and to lead a healthier life, and we're getting this to happen even earlier in their lives. More than 80% of respondents' parents reported that seeing their teen exercise has inspired other family members to get more physically active. More than half of them said that they had worked out with their teens at some point this summer. Personally, I'm moved by some of the notes that we received from both parents and teens. One teen participant wrote, "This experience has transformed not only my mental health but my physical health, and this gym membership has really helped me stay on track with my fitness and health journey. I will absolutely be purchasing a membership once it ends." From a parent, "I've seen some extremely positive growth in my son. I know it comes from that quality time with friends, from being physically active, and the independence he gets from taking charge of his health." We believe this program is the right thing to do, and we are helping teens establish healthy habits they can build upon in the future. We estimate that there has been a slight negative impact on our paid membership during the quarter, as some teenagers likely participated in High School Summer Pass who otherwise would have paid for a membership. We are focused on building lifelong brand loyalty with that generation. In New Hampshire, where we tested this program back in 2018, we now have 20% penetration versus 15% nationwide. This demonstrates that the more years we run this program, the greater brand awareness we're building with Gen Z. We're just getting started with our efforts to capture Gen Z members. Pre-pandemic, we had 8% penetration of millennials, and today that is 9%. Pre-pandemic, we had 5.5% of Gen Zs that were over the age of 15, and today that is also 9%. We are gaining an even greater share of each successive generation. It's also encouraging that after we ran 2019's Teen Summer Challenge, 25% of participants became members at one point. 11% of them are still members, along with 5% of their parents. In May, we increased the Black Card membership to $24.99 from $22.99 for all new joins. The system-wide rollout of the increase has so far outperformed the test results across key metrics such as acquisition rates, retention, average monthly dues per member, and margin. In fact, we haven't seen an initial dip in our Black Card percentage rate as we did with the past price increases. During Q2, Black Card membership penetration was 63.5% from 62.2% in the second quarter last year. Working with our franchisees, we continue to make progress with our national and local marketing agency consolidation effort, despite challenges along the way. We have been looking for a new marketing leader the past few months. As our business has scaled over several years, we decided to use this opportunity to restructure our marketing organization to better align with how our system operates. We announced this morning that we named Chief Brand Officer Jamie Medeiros, who has been with Planet Fitness for 22 years, most recently serving as our VP of National Marketing. She will lead marketing, drive our national and local marketing strategy, oversee our national agency of record, and work collaboratively across the organization to bring our brand's vision to life. Like me, Jamie started at the front desk and joined the brand working at our third location. She has extensive knowledge of our brand and importantly, our members, and has played a major role in defining our uniquely successful marketing positioning. She also has strong relationships with our franchisees. Additionally, after careful evaluation of our marketing agency structure, we believe the best path forward to meet the needs of our system is to transition back to our prior agency, Barkley, to manage our national ad fund. We have a long-standing relationship with Barkley team and are confident in their proven track record. On the local side, our franchisees still have three agencies to choose from at this time to handle their local advertising. We believe few agencies provide greater consistency across our markets and increase data visibility while still giving franchisees choice. We are a brand whose growth is fueled by the strength of our collective marketing efforts. We believe that this marketing structure and the agency transition enable us to most effectively go after the 80% of Americans who do not currently belong to a gym. To summarize, the trends in our business are positive. Our usage is back above the 90% index of 2019. We continue to see that people who are working out are doing so more frequently. The younger generation's prioritizing of fitness is driving down the average age of our member, and there are strong tailwinds behind the focus of overall health and wellness coming out of the pandemic. We are confident based on past performance that we can not only survive but thrive in a high inflation or possibly recessionary environment. Looking to the future, I'm confident that we will continue to be a differentiator and disruptive force in the health and wellness industry, and we believe that fitness is essential and that our industry is a key part to today's healthcare delivery system. Finally, before I hand it over to Tom, I'd like to address our announcement this morning that Dorvin Lively, President, has decided to retire and will transition through the next couple of months. Dorvin joined Planet Fitness in 2013 as our CFO and was instrumental in developing our finance organization, preparing us to go public, and then leading our IPO in 2015, and more broadly, expanding our brand both domestically and globally. We are grateful for Dorvin's leadership, friendship, passion for our members and franchisees, and significant contributions to the brand over the past nine years. We have begun a search for a new president, but we know these are big shoes to fill. Personally, I'd like to thank Dorvin for helping me lead the company, and I'm forever grateful for his guidance and support. I'll now turn the call over to Tom. Thanks, Chris, and good morning, everyone. In the first half of 2022, we completed three transactions to strengthen our resilient asset-light franchise business model. First, we closed the Sunshine Fitness acquisition, which diversified the geographic profile of our corporate stores, as well as added stores with better profit margins while keeping our ownership level at just 10% of the total system. Second, we refinanced and upsized a portion of our debt and have locked in low fixed interest rates, as well as paid off our variable funding note. Finally, in Q2, we executed a $44 million share repurchase at an average price of approximately $63.50, which underscored the strength of our balance sheet only two years after having all of our stores temporarily closed due to the pandemic. Now I will cover our Q2 results. All of my comments regarding our second quarter performance will be comparing Q2 2022 to Q2 of last year, unless otherwise noted. It's important to note that this is the first quarter that reflects a complete quarter of operating results from Sunshine Fitness in our Corporate-Owned Store segment. As a reminder, we completed the Sunshine deal in mid-February. Therefore, our full year results will only reflect 10.5 months of the financial impact from the acquisition. We opened 34 stores compared to 24 last year. We had positive same-store sales growth of 13.6% in the second quarter. Franchisee same-store sales grew 13.4% and corporate same-store sales increased 15.7%. As a reminder, Sunshine same-store sales will not be reflected in our corporate-owned same-store sales until February 2023, but they will continue to be reflected in system-wide same-store sales. This is consistent with how we've treated prior acquisitions. Approximately 80% of our Q2 comp increase was driven by net member growth, with the balance being rate growth. The rate growth was primarily driven by 130 basis points increase in our Black Card penetration to 63.5%. As a reminder, our Black Card price increase that we took in May was only for new joins, so that will slowly begin to drive the rate up going forward. For the second quarter, total revenue was $224.4 million, compared to $137.3 million. The increase was primarily driven by revenue growth across all three segments. The 13.3% increase in Franchise segment revenue was primarily due to an increase in royalties from same-store sales growth, new stores, and stores that were opened this year that were temporarily closed last year, as well as an increase in placement revenue. Partially offsetting the royalty revenue increase was a decrease of approximately $3.1 million as a result of the stores acquired in the Sunshine Fitness transaction, moving from the Franchise segment to the Corporate-Owned Store segment. For the second quarter, the average royalty rate was 6.4%, which was a 9 basis points increase. The 150% increase in revenue in the Corporate-Owned Store segment was primarily driven by the Sunshine Fitness transaction, as well as same-store sales growth, new store openings, and the cycling of temporary store closures in the prior year period. Equipment segment revenue increased 70%, driven by higher equipment sales to new and existing franchisee-owned stores. For the quarter, replacement equipment accounted for approximately 60% of total equipment revenue. We completed 26 new store placements in the quarter versus 19 last year. Our cost of revenue, which primarily relates to the cost of equipment sales to franchisee-owned stores, amounted to $32.5 million compared to $18.5 million. Store operations expenses, which relate to our Corporate-Owned Store segment, increased to $56.4 million from $28.4 million, primarily due to the additional stores from the Sunshine acquisition. SG&A for the quarter was $28.2 million compared to $21.8 million. Payroll costs primarily drove the increase with the addition of the Sunshine Fitness management team, as well as increased travel expense. Included in the adjustments to EBITDA was approximately $1 million related to transaction fees and expenses incurred in connection with our acquisition of the Sunshine Fitness stores, as well as some additional one-time fees. National advertising fund expense was $18.9 million compared to $13.5 million. Net income was $25.1 million, adjusted net income was $34.5 million, and adjusted net income per diluted share was $0.38. A reconciliation of adjusted net income to GAAP net income can be found in the earnings release. Adjusted EBITDA was $89.9 million, and Adjusted EBITDA margin was 40.1% compared to $55.6 million with Adjusted EBITDA margin of 40.5%. A reconciliation of Adjusted EBITDA to GAAP net income can also be found in the earnings release. By segment, Franchise Adjusted EBITDA was $54.4 million, and Adjusted EBITDA margin was 65.9%. Corporate Store Adjusted EBITDA was $40.4 million, and Adjusted EBITDA margin was 39.8%. Equipment Adjusted EBITDA was $10.2 million, and Adjusted EBITDA margin was 25.2%. Turning to the balance sheet. As of June 30, 2022, we had total cash and cash equivalents of $446.3 million compared to $603.9 million on December 31, 2021, which included $62.8 million and $58 million of restricted cash respectively in each period. As I mentioned earlier, during the quarter, we paid off our $75 million variable funding note, and we used $44 million to repurchase approximately 700,000 shares. Total long-term debt, excluding deferred financing costs, was $2.0 billion as of June 30, 2022, consisting of our four tranches of fixed rate securitized debt that carries a blended interest rate of approximately 4%. Finally, to our 2022 outlook. We reiterated our guidance for 2022 in our press release this morning, with the exception of updating our adjusted diluted shares outstanding guidance to $90.7 million, reflecting our second quarter share repurchase, as well as our net interest expense to $86 million. As a reminder, our view for 2022 assumes there is no material resurgence of COVID that causes member or supplier disruptions, whether it be as shutdowns or more stringent mandates that result in a significant change in membership behaviors. As Chris mentioned, the marketing agency consolidation effort has been more challenging than we expected, and as a result, the NAF is incurring additional expenses that we did not anticipate. Therefore, expenses will be higher than collections this year, a portion of which was reflected in the second quarter. Additionally, the HVAC supply shortage has not lessened as the impact from the China COVID manufacturing shutdown lingers. We're monitoring the situation carefully and are working with our franchisees on alternatives, such as keeping in place an existing HVAC system in certain locations. The supply constraint has not eased since we reported our first quarter earnings. We still believe that we can deliver our full year forecast even with these two developments, although they are likely to limit any upside. Importantly, we believe that they are both near term, one-off issues that will not prevent us from capitalizing on our long-term growth opportunities. I'll now turn the call back to the operator to open it up for Q&A. Thank you. As a reminder, if you'd like to register for questions, please press star followed by 1 on your telephone keypad. If you change your mind, please press star followed by 2, and please ensure you're unmuted when speaking. Our first question comes from Randy Konik of Jefferies. Randy, the line is yours. Thanks, guys. Good morning. I guess first question, on the Sunshine Fitness team, I believe you mentioned, I think, Tom, you mentioned that the comps of Sunshine Fitness were outperforming the core corporate-owned by, I think, 200 or more basis points. Can you just give us some perspective on, you know, the processes that Sunshine Fitness is gonna be kind of taking on, you know, broadening out to the other corporate clubs? When you might see the, you know, the gap in comp of those corporate-owned stores start to kind of narrow to Sunshine Fitness? Yeah. Hey, Randy. Thanks. So I think maybe a couple of things. One is, the overall Corporate Store segment is outperforming the Franchise segment in comps, primarily because our stores in our legacy markets, which are still what's in the corporate store same-store sales, were hit harder by the pandemic and, you know, had experienced longer closures, longer mandates, just given the regionality of that business. So that's a little bit why our corporate store same-store sales are stronger, as they recover faster, you know, like the rest of the system that was impacted in a similar way in those markets. So in terms of the best practices, better practices, that's happening. Shane and the team have realigned some of the pricing and the different promotions and the marketing pushing Black Card. We're seeing that traction for sure. I think at the end of the day, when Sunshine, you know, obviously, we see it internally, we're not disclosing it externally, but they continue to be a strong performer. They're just not part of corporate stores similar to how we treated other acquisitions, as I said in the script. They're part of the total system, just not part of corporate stores. Got it. I guess lastly, I believe you guys are hosting a franchisee convention next month for the first time in a couple of years. Maybe Chris, kind of give us your perspective on, you know, how important that event is to have and obviously in person and kind of some things that you've worked on in the past, in past conventions, what you kind of think about as a focus point with your franchisees at this convention in terms of new areas for development, et cetera. Just give us some flavor on that event. Thanks. Sure, Randy. Yeah, yeah. It is next month. It's the first time we've been together since 2019, September of 2019, so three years almost on the dot. You know, a lot of excitement. There's well over 1,000 attendees already registered to go. Besides my main address here on stage and then, some fireside chats with Tom and the rest of the IFC Franchise Committee, then there's a lot of breakout sessions for a couple of days. There's a marketing breakout. There'll be a development breakout. There'll be operational breakout, best practices, training. There's a lot of, it's a lot of just education and re-education, I guess I should say, too, that gets people back, making sure everybody's running, you know, tip-top shape here when they run their club. A lot of that stuff. Now as you heard this morning with the announcement of Jamie Medeiros, who's the Chief Brand Officer now, and you know, her also presenting with Sherrill Kaplan, our Chief Digital Officer, 'cause there's a big, you know, kind of a marketing reset here and a marketing team that's, I think much more in-depth that can help drive these sales. It'll be a lot going on, a lot of excitement. Naturally, everybody comes back, it's like a pep rally. They come back excited to get back to work after all they hear and see from us in trends and data. Great. Thanks, guys. Good luck at the convention. Thank you, Randy. Thanks, Randy. Excellent. Our next question comes from John Heinbockel of Guggenheim Partners. John, please go ahead. Chris, two separate marketing related questions. One, if you look out over the next, I don't know, six, seven, eight months, what's the general plan, right? You'll do New Year's Eve. Will you do anything different? I assume you'll be back at the Super Bowl. Do you do anything different there? And then creative, right? You had the, kind of, you know, B-list celebrity creative. I assume you'll add to that, bring that back and maybe add some other people. That's number one, right? That thought. And then secondly, when, you know, when do you, the best practice, right, really diving into the local spend, when does that start to make an impact? Is that, you know, still, you know, far out on the horizon, you know, sometime deep into 2023? Yeah. Thanks, John. Good questions. Yeah, so the New Year's Eve is still on cue at ABC as we speak, so that's all going the same way. You won't see anything different than you've normally seen the last six, seven years here. Super Bowl is still up in the air. We haven't committed to that just yet. But we'll see the same normal cadence in, you know, the big January sales we always see coming into the New Year. Also the normal cadence this year, second half, as far as marketing for October and so on. Nothing there should really change much. I think one thing too, though, is to note with the high school summer passes, and you probably remember us talking previous calls is where, you know, we've seen 25% of 2019 Teen Summer Challenge kids had joined at one point. Today, 11% of those teens from 2019 are still members, and 5% of the parents. With over 3 million teens this year, naturally we're gonna have a much more probably aggressive marketing campaign to get, you know, a lot of them to join. Also you probably recall, you know, this year, we actually used our app to sign a lot of these people up with the website, so we have a lot more data and way to contact both, teens and parents to hopefully get them to convert into a paying membership going forward. It's also too will be interesting, we have, like I said, 25% of those teens joined since 2019, and 11% are members today, but that was also. You know, six months later, pandemic hit, you know. There's a lot of disruption in that normal probably join cycle. could be really interesting what we see from the 3 million teens and their parents, that's a whole nother marketing probably play that we never really had before, you know, the rest of this year and beyond. That could be exciting. As far as best practices, you know, it was already starting somewhat even from January when we first started to see the data that we hadn't really seen before from the NAF spend. But it's really a learn and tune. It's gonna be an evolution that probably really never changes. You know, even if you think about today, the amount of Gen Z that are joining and how we target them, when you go back pre-pandemic, we only had 5% penetration of Gen Z. Now we're at 9%. That's a generation here that we probably have to think maybe a little differently than just strictly, you know, television and network as opposed to streaming and TikTok, for example. It's gonna been always an evolution of learn and then fine-tune and tweak, sale to sale, but now that we're capturing the data, this is the benefit of it. One last thing. When you think about monetizing your membership, right, I think we've talked about this before, right, in terms of Black Card partners. You know, is there a level here of membership? Is it 20 million, right? Or do you think you're there now, you know, where you I know you've done a few things, but in a broader way, right, to bring on more partners and you know, create more out-of-the-box value. Yeah. I mean, I think we're starting to see it, you know, which with Sherrill's help, she's Digital Officer, I think with the perks page and the button on the app. The traction. Yeah ... we've gotten from that and the data we're capturing so that we can show true click-throughs and conversion for other partners, that I think we're now on the cusp of starting to not only just get the discounts, but actually even drive maybe some revenue from those discounts, internally from sheer revenue or whatever, or commission. I think we're just getting there right now. The partnerships and the people that are wanting to work with us now since there's actually a way to prove data is been light years different than it was, you know, two or three years ago when we talked about perks. Okay. Thank you. Thanks, John. Thanks, John. Our next question comes from Brian Harbour of Morgan Stanley. Brian, please go ahead. Yeah. Good morning, guys. Maybe just a quick one to start. How many corporate stores did you open in the second quarter? You know, do you expect maybe somewhat of a similar pace in the second half, or are you holding back on some of those just to help franchisees kind of get the proper equipment to some extent? Yeah. Hey, Brian. It's Tom. We opened four, and I think, you know, we've talked about this before. I think you can expect. We'll try to keep pace with the system in terms of our penetration at 10%. You know, in different years it may be plus or minus that, but so not speaking to quarters per se, but as you think about this year and coming years, that's kind of how we think about it. Okay. Great. Thanks. On the High School Summer Pass, what do you think made that so successful this year? Was there anything you did differently just in terms of marketing it or, you know, maybe it's kind of a digital story, but what do you think kind of explains some of that success? Yeah. I'd say the first thing I'd probably point to is just since even 2019, which is hard to believe is three years ago now, that the pace of what we've seen, Gen Z's join and mostly the older Gen Z's, their counterparts that are in that early 20 stage, so the oldest Gen Z is about 23, 24. The rate at which they've been joining since the pandemic has been. I mean, they're joining about 150% over normal. I think they're the younger counterparts, the high school teens, are following in their footsteps, so I think that drove a lot of the volume as well. I think the ease of signing up, where before, you know, it wasn't digital really. They had to come into the club. The parent had to come with them. They had to sign the paperwork and the waivers and so on, where this was all done digitally through the app and website where, you know, parents and the kid had to sign up, get their emails and packets. Just, it was much more streamlined. I think that probably helped, the ease of volume of signups. Those two things. Besides that, nothing really that large. You know, it wasn't like we did a big media push. It was mostly just all free press that it gained. I think, you know, I think coming out of COVID and what we've seen from the older Gen Zs is just their propensity to join, I think, with mental health and physical health, I think they're just at a different place than they were in 2019 with Grow the Volume. It's been, you know, over 3 million logged, over 14 million workouts. It's been quite amazing, actually. Okay, great. Thank you. Thank you. Our next question comes from Max Rakhlenko of Cowen and Company. Max, please go ahead. Great. Thanks a lot, guys, and congrats, Dorvin, on the retirement. First, can you just talk to franchisee sentiment and enthusiasm to open gyms as we have seen interest rates tick up here, the macro slowing and input costs start increasing. Do you think that there could be any sort of temporary slowdown besides the HVAC issues or anything else? Yeah, this is Dorvin. Thank you, and thank you for your comment. I appreciate that. You know, we, as we've talked about in the past, our franchisees, you know, pre-COVID, were generally all developing ahead of their schedule. You know, we were in 200+ openings there for three years or so. I'd say, as we came out of COVID, no store closures, the momentum of getting you know, members back in the clubs and then getting the membership growth back in place, the enthusiasm to open stores, you know, I mean, these guys are still as bullish as they've ever been about the brand and you know, the return on the investment that they can get. Internally, you know, we, Tom, Chris, myself, have thought about, and we've said this in the past, that, you know, that 4,000 potential number of clubs, we feel even more confident today than we did, you know, say, three years ago, about the ability to continue to bring the brand to more and more markets and closer and closer to that 80% population that don't have a gym membership. With that said, you know, this year in particular, you know, late last year and into this year, the whole supply chain constraints has certainly been something that has had an impact on our business. You know, we feel pretty good about where we're at on the equipment side to be able to open new clubs. I'd say the HVAC issue has continued to be a, you know, an issue that we deal with, quite frankly, you know, day to day, week to week, with the shutdown of some of the plants in China and just being able to maneuver around that. You know, all of this certainly came in to the consideration that we had when we gave the guidance that Tom spoke about. I'd say one last comment I'd make is in terms of just the overall retail environment with respect to our franchisees, their development teams, and then landlords, you know, across the U.S. You know, I think most likely because we were a great tenant pre-COVID, with, you know, the economics of the model and the traffic we drive to the centers, you know, et cetera. Where we're at today with, you know, landlords realizing, you know, we didn't close a single store. We've paid back all the rent that, you know, got deferred during COVID. We're still, you know, one of the most attractive tenants to have in markets out there. I'd say that rents haven't really moved a lot. What we found is landlords have certainly been willing to pay more tenant improvement dollars to get, you know, us into a space. In terms of the franchisees wanting to, you know, get back into that pace of where we were pre-COVID, we certainly think we can get there, and we don't have any doubts that they won't be willing to do it. That's very helpful. Then as a follow-up, what is your expectation for when the mature gyms will reach pre-pandemic membership levels? Obviously, sort of we discussed being flattish for back half of the year, but is Q1 2023 the right bogey to think about? Thanks a lot. Yeah. Hey, Max Rakhlenko. It's Tom Fitzgerald. It's a good question, and you know, we think it's tough to really put a time frame on when all of the mature stores will be back to their pre-COVID membership levels. I think it's very encouraging to see that it's continuing to tick up with each passing quarter. Clearly, what happened with Omicron and Q1 that we discussed previously, you know, hurt didn't help. You know, we believe that this January, this Q1, hopefully, will be more of a typical strong Q1 for us. Again, we don't see anything competitively that's a threat on the horizon that's gonna change anything. It's just a matter of time and how long, you know, our continued investment in marketing drives our target off the couch to join. It's really hard to say when that'll be, but we are encouraged by the continued progress and look forward to a strong Q1 to boost that. Our next question comes from Sharon Zackfia of William Blair. Sharon, please go ahead. I'm curious whether you're seeing any kind of change in usage patterns or joins beyond normal seasonality in some of the areas where we're seeing kind of some pandemic flare-ups. I know others have mentioned, you know, Southern California and the Northeast as maybe being a bit more challenged recently from a COVID perspective. I'm curious what you're seeing there. Then secondarily, if I'm doing the math right, it seems like replacement equipment is still kind of well below the trend line that you saw pre-pandemic. I mean, I'm calculating maybe 30% below, even though you've got more clubs in the first half of this year than in 2019. Can you talk about what's going on in replacement equipment? Are franchisees kind of deferring that longer, or, excuse me, is there something else going on there where we'll see some sort of catch-up at some point? Sure, Sharon, this is Chris. I'll take over the first part of that question. Yeah, we aren't seeing anything geographically or anything across the country based on any of the, you know, small flare-ups or anything like that anywhere. It's just all the clubs are acting very similar to each other. They're not even like pre-pandemic, we haven't really had any regions that act very differently. So I haven't seen anything there. You know, I think a lot of that with the 30, almost 35% of clubs are pre-pandemic, it's just more, I think, back to Tom's point, a matter of time. Naturally, most of the stores, I mean, the average club is closed six months, but some clubs, you know, were closed two months, and some were a year. A lot of it's just timing and how long they've been already open. Like, again, if people have clubs in Florida, for example, they've been open for well over two years at this point, where other parts of the country have been really a year. It's just a matter of time at the end of the day. We're not seeing anything change or act differently from a membership join trend. The only one really is just the Gen Zs are just joining well above normal at this point, where the other generations aren't. Yeah. Hey, Sharon, it's Tom. On the reequip piece, I think there's a couple things. One is the lockdowns in China, you know, primarily Shanghai, but certainly the other provinces hurt our manufacturers of equipment. We don't see it as a full year risk. In fact, there's a lot of inventory stateside. Once those provinces reopened, our primary vendor Matrix, you know, essentially ran us full out, ran our equipment full out. It did cause a little bit of a timing shift on some reequips from Q2 to Q3. But doesn't impact the year from everything we can see. Great. I want to wish Dorvin the best. Thank you, Sharon. Appreciate it. Our next question comes from Jonathan Komp of Baird. Jonathan, please go ahead. Yeah. Thank you. A bit of a modeling question, Tom. I'm just curious as you look to the back half, any shaping, cadence that you think is important from new openings or reequip? Or even if you could quantify the NAF comment you made about some of the investments you're making there. Yeah, John. I think, and Dorvin may add some to this. I think, you know, as is pretty typical, the back end for new store openings is weighted more heavily. And that may be, you know, particularly on the reequip side, as I just mentioned, maybe also a little bit more back end heavy just given the disruptions in China in Q2. In terms of NAF, you know, what we're reflecting as a year-to-date gap in the P&L is essentially half of what our expected full year shortfall will be, plus or minus. So hopefully that helps answer your questions. Yeah. That's really helpful. Thank you. Just a broader question on capital allocation. Was curious to see that the buyback activity restart. Just wanna get your perspective on sort of the rationale there and then how we should think going forward since you still have you know, a sizable cash balance and lots of cash you'll generate. Thanks. Yeah, I think it's a. You know, there was obviously a lot of market volatility going on earlier. You know, frankly, we thought it drove the stock too low. We put in a 10b5-1 while we could to essentially buy back and frankly stay at or below what we bought back before. You know, you'll remember, but just for everybody else, in the couple years prior to the pandemic, excuse me, we bought back about $800 million worth of shares. I think the average price was $67, almost 12 million shares. You know, we thought that that's been our typical way of returning cash to shareholders. We were sitting on a lot of cash and thought, in discussions with our board, as we've talked about, that it was a prudent move to take down, you know, roughly a quarter of our outstanding authorization. The board had authorized $500 million. We took down $300 million with an ASR back in 2019 and early 2020 and had $200 million remaining. We, you know, we put that in place. We're also just looking at rising rates. You know, the great news is our debt, as you know, is fixed. The fixed rate is not, you know, L plus or SOFR plus. The VFN, the variable funding note for $75 million that we had drawn back in 2020 was not. That's a floating rate. We just thought it made sense to pay that off, do the share repurchase, and we like where we sit, you know, with our cash, still a very strong balance sheet. You know, we wanna be conservative and prudent, as we're facing here, higher inflationary period and potential recession. We just wanna make sure that, you know, we have sufficient cash should anything cause any kind of disruption. We kinda like where we are, and we thought it was a prudent thing to do given what had happened to the stock price. Yeah, that's great. Thanks for the color. You bet. Our next question comes from John Ivankoe of J.P. Morgan. John, please go ahead. Hi. Thank you. A couple if I may. First, remind us of what the reason was for NAF expenses to be higher than revenue. I thought, you know, kind of a whole point of the NAF is that, you know, the two would basically offset each other, and I'll continue on that. You know, the split that you guys have, 2% national, 7% local, I mean, at least in terms of restaurants, is highly unusual. In fact, I think it's unique, you know, both in terms of the percentage of advertising, you know, that the system spends, but also, you know, a very heavy allocation of national to local as local is generally seen as much less efficient than national. So I guess where are we, you know, on that 9% being the right level? I mean, is there, you know, an opportunity to maybe allocate some of that 9% someplace else? How far along the path are we in terms of maybe rethinking some of that 2-7 split that you have historically had? If possible, I'd like another question after. Hey, John, it's Tom. First of all, I'll get to your NAF question. I may have misstated something there. We, prior to the pandemic, bought back $800 million worth of stock, 12 million shares, average about 67, just to make sure everybody has that. So in terms of NAF, I think prior to COVID, we absolutely wanted to make sure we spent what we collected, you know, and that's what we did. Clearly COVID caused a disruption and 2020 was the first period as you know, all the reasons for that we spent more than we collected to really jumpstart the marketing after a period of temporary store closures. Then 2021 as well. 2022 is a different. You know, we're still in the pandemic, as we all know. It has continued to cause some disruptions, including the softer January. Our collections were not, you know, ultimately where we thought they would be. You know, the agency change has caused some incremental expenses that we didn't expect to pay. We thought taking the long view that it was the right thing to do to incur the expenses that arose, but also to make sure we fund the national sales that we wanna fund, but also to you know, appropriately transition to the new agency back to the former agency, Barkley. You know, our intent is once this thing is in the rearview mirror, absolutely the collections we intend to match the collections to the spend you know, unless there's some unusual circumstance. I think still being in the pandemic, going through an agency transition that clearly had its challenges as Chris articulated, you know, we thought playing the long game, it was the right thing to do because we gotta move forward, still invest to drive membership. No matter what, as you've heard us talk about the lifetime value of a membership, far exceeds the cost, even with some, you know, temporary overspends in NAF. It's orders of magnitude difference between the two. Yeah. I think the split, John, you know, I think maybe again, in time, like it's mentioned in the past, I think once we get through this hopefully final transition here, and begin to use best practices, you know, as I said earlier, fine-tune and sale after sale and quarter after quarter. I guess two things. One, is 9% the right number? Then what should the split really be to be more effective? As we get better at spending, then we can make those calls. You're right. I think longer term, more NAF probably does make some sense, but again, it's hard to really make that call until we get data. It's not gonna be something tomorrow or even next year. It could be something that goes 24 months or plus that we've got to really figure out exactly how it'll all play out. Okay. Understood. Next, it is interesting, you know, to see a brand that, you know, I mean, you have an attractive, you know, experience and offering for the baby boomers all the way down to Gen Z. You know, those aren't necessarily consumer cohorts that, you know, kind of like, you know, are able to use a brand, you know, kind of, you know, in the same way at the same time. You know, I guess am I overthinking that, you know, hey, you guys may have some challenges in terms of being attractive to both? I mean, both, you know, whatever the 18-year-old and the 60-year-old. You know, do you know, as the brand, you know, by definition shifts to a different generation, do you think it makes sense to change something? I don't know what that would necessarily be, but change something about the in-gym consumer experience to make yourself even more attractive, you know, to that younger consumer over time. In other words, how do you envision the, you know, the in-gym Planet Fitness experience changing? Sure. Yeah. I think one thing too is like boomer population in our clubs is only about 13% of our base, so it's not a huge part of our membership. You know, for somebody living on a fixed income or what have you know, and we have tons of cardio. You're not walking on the street, and you can be in the air conditioning in a safe place. I mean, that's why I think boomers come to us a lot, and always have. Again, it's a small part of our base. I think a little bit to your question on Gen Z, I think the one thing that's somewhat anecdotal, but I think a little bit from some of our manufacturers, that from the younger generations, we're not seeing them use probably cardio like the older generations do, meaning they're not, you know, getting on a treadmill for 45 minutes as much like they used to. The more functional training, John, so they're more using, you know, the kettlebells and the functional areas, which we started putting functional areas in our clubs about five years ago, six years ago. There's no doubt that there's a shift there. It's just a matter of, I think, slowly and carefully transitioning as we watch trends, so that we're definitely still getting Gen Z to gravitate towards us and then Gen Alpha eventually. Right now I think we're doing the right thing. Its functional area is definitely busy. They could be expanded, I think, in time if this trend continues, and as the boomer population continues to be a smaller part of our base over years. I got it. Thank you. Thanks, John. Our next question comes from Simeon Siegel of BMO Capital Markets. Simeon, please go ahead. Hi, this is Garrett Klingshirn for Simeon. Thanks for taking our question. I'm just hoping you could give a little color on digital unit. You mentioned kind of the High School Summer Pass benefiting from sign up from online and being able to not have to do that entirely in store. I'm just curious how you're thinking about innovations on the digital side within the clubs and, you know, where you're thinking about investments there. Yeah, I'd say there's a few different buckets and I think one thing that most people first think digital, the first thing that comes to mind is, you know, the digital workouts and exercises, which is a part of the app for sure and always will be. Two things. One is how do they better use the equipment in the club and acclimate themselves to the club easier without having to either, you know, get a trainer or to go find somebody to show them something. We've put QR codes on almost all the equipment where people use the app to scan the QR code on equipment with a quick 15, 30-second tutorial on how to use the equipment. Have some workouts that you can do in club. They follow through the app, and then we have out of club, so you can work out at home if you can't make it to the club or if you're traveling, what have you. So that's the digital component piece of it. But I think probably the bigger part of the digital component is more how do you improve customer experience and remove friction? A lot of it is, you know, think about pre-pandemic, you couldn't even join in our app. Today it's about 20%-25% of our joins are in our app, and that didn't exist pre-COVID. People now pay their balances in the app. A big portion of our balance payments system-wide are done through the app, which didn't exist even this time last year. A lot of it's reducing friction to help improve customer experience, the Crowd Meter. It can go on and on. Now the perks button continues to expand with more and more benefits there. You know, we did the Shell gasoline one last November, and that continues to run. They're very happy. I think it's upwards of almost towards the 2 million gallons of, like, gas at this point that members have redeemed. The Crocs partnership, which was a Gen Z favorite. Crocs actually was extremely happy over three months, how much they did and the discount there. So I think it's just how do we give benefit, how do we improve customer experience, and not just look at it as a fitness-only component of digital. We'll continue to evolve it as we learn more. The beauty of it is we can track all the trends and all the data that comes and supports around that, where, you know, previous to this, we really didn't have much to do. On top of that, one thing I always talk about where, you know, in this industry, unless somebody walks through the front door, we really didn't have a way to engage our member outside our four walls. Unless somebody walked through our door, we gave them, you know, a hello and a goodbye and kept the clean club, they never really got to experience or touch Planet, and now we can reach out and touch them when they're not in the club, which I think is important. Got you. Appreciate that. I know you guys don't comment on churn, but I'm just kind of curious if we're thinking about kind of, you know, recession times in the past, and you kind of gave all that great color earlier, how did churn kind of compare within, you know, Black Card versus kind of the Classic membership? Was there any notable differences within there? How do you think that would maybe trend this time around if there is a recession or an economic downturn? Yeah. I can't recall back from 2008, 2009 off the top of my head, but I mean, even recent trends we've seen that even through COVID, that the Black Card members were canceling slower than the White Card, as crazy as that sounds. Even more recently with our Black Card increase in pricing, that our Black Card acquisition is actually going up, which is kind of counterintuitive to what you would expect. I think that's great to see. Awesome. Great. Appreciate the color. Thank you. Thanks, Garrett. Our next question comes from Alex Perry of Bank of America. Alex, please go ahead. Hi. Thanks for taking my questions, and I'd like to echo my congrats on your retirement, Dorvin. Just first, I wanted to circle back to some questions earlier. Could you give us some more color on how you're thinking about conversion for Summer Pass participants and their family members? How could this year be different? Would you still sort of expect that 25% conversion rate? Then maybe just remind us on sort of the timing of that. What is the participant participation rate of the 3.3 million Summer Pass participants then? Are you seeing, you know, similar levels of usage from them as you saw in sort of 2019? Thank you. I think, this is Chris. When I say 25% of the 2019 High School Summer Pass kids, they joined at one point from 2019 to today, and today 11% are still current members, and 5% of their parents are still current members. Remember that, you know, that has COVID and a shutdown in the middle of that. I would imagine if you were to take these teens and you fast-forward next three years without any kind of shutdown, lockdown, you have to imagine it'd be higher. I think on top of that is the trend that we saw in the last couple of years here after COVID, that the older Gen Z population is joining. I talked about this a little earlier. The older Gen Z population is joining much higher than they were pre-COVID. I would imagine these high school teens, which are Gen Z, will probably have a same kind of trend. You know, I think 25%, I would say, on the lower side or conservative. Then on top of that, you know, we have a lot more ways of contacting and reaching out between emails of both parents and kids. They all have the app to get into the club, right, to check in. We have in-app messaging now that we can in-app message all these kids to get them to hopefully join in the future as well, whether it's right in September or it's, you know, they have the app on the phone and it's next February, you know? I think just being able to reach out and talk to them a heck of a lot easier and more efficient than we definitely had in the past. I think are the two big things that'll help us on a conversion standpoint. Their usage. With that, they've logged over 14 million workouts, but their usage is pretty much the same. Believe it or not, it's actually pretty much the same as a normal Gen Xers or something. Their usage patterns aren't really necessarily any more or less than a typical member that we normally have. I'd say their day part usage is slightly different naturally. We saw it as more and more of the country get out of school, 'cause High School Summer Pass launched in mid-May, and some of the country, a good portion of the country, like the Northeast, is still in school till the end of June. We saw usage shift from, you know, the after-school evenings, like most of their older generations coming out of work, to then they started bumping up forward into the day parts of the day where they weren't in school any longer. Perfect. That's really helpful. Just to follow up here, could you just give us a little more color on how the business performed in prior, you know, economic downturns? Are you already seeing any benefits of trade down with new joins coming from, you know, some higher price clubs? Would you expect similar levels of Black Card penetration, or would you expect, you know, more joins to come from that sort of entry-level price point? Thanks. Yeah, we haven't seen, you know, any real data that shows that it's coming from trade downs yet. We have to do some sort of survey or some sort to try to capture that stuff, that part of it. I think just the retention trend on the Black Card membership and then the more recent trends we're seeing on the Black Card price and the acquisition of Black Cards leads me to believe that I don't think it's gonna be a, you know, White Card only option because Black Card's too expensive. Otherwise, I think we probably would have saw that through the last couple, two, three years and then the more recent price increase, but we're not seeing that. Perfect. That's really helpful. Best of luck going forward. Thanks, Alex. Our next question comes from Chris O'Cull of Stifel. Chris, please go ahead. Thanks. Good morning, guys. Chris, it's been well publicized that roughly 25% of gyms permanently closed since the start of the pandemic, but it seems that those operating still haven't been able to get back to that pre-COVID average store membership level. I guess the question is, what has your research indicated is the reason these members haven't returned to gyms, and what opportunities do you think you have to bring them back? Then I had a follow-up. Sure. I mean, I think it's the one good thing that I've seen since coming out of COVID when we reopened our stores is our rejoin rate is higher than it's ever been historically over decades. Our rejoin rate is still about 30% of our joins are rejoins. The second quarter was about 33% were rejoins. People are coming back to gyms at a faster rate or more volume than they have ever had in the past. That's a good thing. I just think it's taking them a lot longer to break the couch trend. They were told to go home and sit down and not work out and now they've got to come back and it's just a slow process to get them to convince them to get off the couch and join again, you know. You know, even though the Gen Z are way above what was seen in prior years on a join ratio where you know, Millennials and Boomers and Gen Xers aren't quite back to where they should be, at the same time, I think it's important to note that our penetration of those generations are also increasing. With Gen Z and millennials are above where they were at the closed period, so their now penetration is higher. It's just the Gen Xers and Boomers are out. They're going the right direction, but they're still gonna take some time to get back to where we were pre-COVID. I think it's just time. Back to Tom mentioned this a little earlier, but it's not a matter of if, it's just time. It's just that it's not like the industry's gonna have a hockey stick recovery and everyone's on the sidelines in one month, all get off the couch and make fitness a new hobby, you know? It's, I think, unfortunately it takes a little bit of time and we're just gonna have to keep marketing our way out of this, you know? There's nothing points to the fact that it's not gonna get there. You know, if you go pre-COVID, we had over 13 years of positive comps averaging 12% over those 13 years, and most of it's member growth. Outside of COVID, there was nothing that would've stopped that trend. Now it's just kind of picking up where we left off and get the momentum back. Okay. My second question relates to development. Do you have any visibility as to how long the HVAC and other equipment issues will continue to remain a challenge in terms of just lengthening project timelines? Can you give us any sense of the 2023 pipeline and your confidence level that you can accelerate development next year? No, I mean. Yeah, maybe I'll start that on the. I think I said earlier. I'm sorry. Go ahead, Dorvin Lively. Please add to it, Tom. I think the one comment I'd make is that, you know, we, throughout the year, we've worked very closely with, you know, our franchisees and the various vendors that they use. And we've never, you know, really required a particular vendor for, say, an HVAC system, et cetera, and, you know, never had a problem to this point. As we got into, you know, some of these supply chain constraints, one thing that we've done on the, you know, the franchisor side, the corporate side, is to try to work more with some of the bigger guys and work with, you know, almost consolidating some of those types of purchases so that the bigger suppliers knew that they had maybe a bigger piece of the business, you know, now and potentially going forward. With that said, though, these guys are constrained too. It may be that only a certain, you know, couple parts to what they need to fulfill an entire system from an HVAC perspective is missing, and everything else is, you know, is here. They're obviously, you know, they're working their channels on the supply chain to be able to do that. One thing that in the past, you know, pre-COVID, we generally would never do, would be to try to take the existing HVAC system that's there in that facility that we're taking over for a new store and, you know, either try to do a bit of maintenance and have some extended life on that old system for our new club. We're doing more and more of that today just to buy some time so that, you know, instead of trying to open the brand-new Planet with a brand-new HVAC system, we're able to open some of those with some existing systems that are there. Then, you know, some time down the road when the supply chain constraints ease up a bit, you know, they'll have time to be able to do some replacements there. I think the short answer is it's still somewhat of a day by day, but I think that the further we get along, the more we're able to see, you know, things moving and the supply chain moving along. It's just that basically, you know, us and everybody else out there, no one's caught up yet in terms of our vendors with not only us, but, you know, their other customers as well. I don't know, Tom, you wanna add to that or not? No, I think you covered it well. Okay. Thanks, guys. Thank you. I'll hand back to Chris for closing remarks. Great. Well, thank you everybody for joining us today. You know, I couldn't be pleased with the second quarter, how it ended up and adding more members per store here and coming out of, I don't know, the pandemic and fighting our way back. Pretty happy with that, and really pleased with how High School Summer Pass has gone. I mean, it's truly amazing to see this many teens getting off the couch, using our stores here. To be, you know, more than three times the 2019 shows how the younger generations are really gravitating towards health and wellness. It's just a great tailwind to have now and in the future and our ways of being able to convert them to memberships longer term. It's a great place to be than to not have a younger generation that gravitates to a brand. It feels really great, and look forward to being with our franchisees next month the first time in three years, see them all face to face, talk some strategy, talk future, and talk execution. Look forward to that wholeheartedly. Have a great day, afternoon. Thank you. This concludes today's call. Thank you for joining. You may now disconnect your line.