Hello everyone, and welcome to the Planet Fitness third quarter earnings conference call. My name is Emily, and I'll be coordinating your call today. At the end of the presentation, you will have the opportunity to ask a question by pressing star followed by the number one on your telephone keypads. I will now turn the call over to Stacey Caravella, VP Investor Relations. Please go ahead, Stacey. 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, both of whom will be available for questions during the Q&A session following the prepared remarks. Today's call is being webcast live and recorded for replay. Before I turn the call over to 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 the 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. I'd also like to invite everyone to listen in to our Investor Day on Tuesday, November fifteenth. You can find details on timing and the link to the webcast on our investor relations website. Now I'll turn the call over to Chris. Thank you, Stacey. Thank you, everyone, for joining us for today's call. We ended the quarter with more than 16.6 million members, an all-time high, and added 29 new locations during the quarter, growing our total store base to 2,353. We continue our steady recovery out of the pandemic. Member trends remain strong with Q3 joins back to historical pre-COVID seasonality. Also, members who are visiting the gym continue to visit more frequently, and cancels are lower compared to 2019, which we believe are signs that members are more committed to fitness. We recently hosted our franchisee conference, and the energy was amazing as we were back to meeting in person for the first time in three years. The theme of the conference was unstoppable, highlighting our ability to succeed over the past 30 years through all types of economic and political climates. While the industry reported that 25% of health and fitness facilities have closed due to COVID, given the strength of our model and franchise system, we survived the pandemic without a single permanent store closure, emerging even stronger with tremendous opportunity for future growth. While all eight generations are nearly back to or above their pre-pandemic penetration levels, a major topic of our presentations during the conference were our efforts to continue to increase our penetration of all generations with a strong focus on Gen Z. We're excited about the potential long-term opportunity we have with Gen Z, as evidenced by the 3.5 million teens who signed up for the High School Summer Pass program. When the program ended in August, more than 14% of all high school-aged teens in the U.S. were high school summer pass participants. Not only did they enroll in the program, teens logged 17 million workouts. We made the sign-up process even more seamless this year, allowing teens to register online, which enabled us to connect with them and their parents or guardians. In fact, our app topped the most downloaded list of apps in the App Store during the initial days following the launch. Through a targeted acquisition strategy, we began reaching out to the participants and their parents or guardians throughout the summer via email, in-app messaging, and text with an offer of one month free if they joined as a paying member once the summer was over. Today, nearly 300,000 teens and parents or guardians have joined for a total conversion rate of 5%, helping to drive member growth in the third quarter. We're already outpacing the conversion rate we had in 2019, the last time we ran the similar program. We have a much bigger base, more than 3.5 times the participants we experienced in 2019. We continue to market to them and believe that when they are ready to join a gym, Planet Fitness will be top of mind. Along with our franchisees, we're focused on gearing up for our first quarter marketing plans. Pre-pandemic, we would typically get 60% of our full-year net membership gains in Q1. We look forward to the first quarter of 2023, which we're planning to be our first uninterrupted Q1 in four years without any impact from COVID. For the eighth year in a row, we will once again be the presenting sponsor for the Times Square New Year's Eve celebration. We're the longest-running sponsor as well as the only gym company ever, given our marketing, size, and scale advantage. This will also kick off our January national brand campaign focused on reinforcing the benefits of working out besides physical health, like mental wellness, managing stress, and improved sleep, as well as a post-workout positive energy feeling and glow. As we noted on our second quarter call, the percent of mature stores that have recovered and surpassed previous membership levels remains stable at around mid-30%, but we added to overall membership counts. Given our cyclical joint seasonality, we don't anticipate this to move significantly until the first quarter when we typically see high net member growth. The system-wide rollout of the Black Card price increase in May from $22.99 to $24.99 continues to outperform the test results. While the price increase is only for new joins, it's driving up our overall average rate. 30% of our 8.2% Q3 comp growth is driven by rate, with the balance coming from net member growth. This helps our franchisees in corporate store segment partially offset increased operational costs experienced in the last couple of years. Yesterday, we announced a promotion that if you join as a Black Card member between November seventh and November fifteenth, you receive a free Halo View, Amazon's fitness and health wearable tracker. We're excited about this collaboration, and we continue to explore possibilities for working with other well-known large brands who are in adjacent categories to the fitness industry. We believe that we are an attractive brand partner given our size and scale and the diversity of our more than 16.6 million members across gender, age, incomes, and other attributes. Lastly, I'm excited about our recent announcement that we promoted Jenna Simmons, previously Senior Vice President of Business Strategy and Analytics, to Division President of Corporate Clubs, and that Paul Barber has joined as our Chief Information Officer. Jen has been with Planet for nine years and has built the business strategy and analytics functions from the ground up using data and analytics to develop and drive our overall corporate strategies. We look forward to her leadership of corporate store fleet, driving performance through insights that will help benefit the entire franchise system. Paul will lead our technology evolution and strategy to deliver technology solutions that will continue to enhance the member experience while optimizing infrastructure, data, and operations for flexibility and scale. Our search for president is still underway, but I feel good about our organizational structure. I believe that we have the leaders in place who will drive our next phase of growth as we emerge even stronger post-pandemic. We also look forward to discussing this in more detail at our Investor Day next week. I'll now turn the call over to Tom Fitzgerald. Thanks, Chris, and good morning, everyone. Through the third quarter of this year, we have repurchased 1.5 million shares inclusive of a $50 million share repurchase that we executed in Q3 at an average price of $61.68, which we believe underscores the strength of our balance sheet only two years after having all of our stores temporarily closed due to the pandemic. We also announced this morning that our board of directors approved a new $500 million share repurchase authorization that replaces the existing one from 2019. We believe this is another signal of our confidence in the reliability and consistency of our asset-light model to generate significant free cash flow. Now I will cover our Q3 results. All of my comments regarding our quarter performance will be comparing Q3 2022 to Q3 of last year, unless otherwise noted. We opened 29 new stores compared to 24 last year. We had positive same-store sales growth of 8.2% in the quarter. Franchisee same-store sales grew 8.1%, and our corporate same-store sales increased 9.7%. As a reminder, same-store sales for the Sunshine Fitness franchise stores that we acquired in Q1 of this year will not be reflected in our corporate-owned same-store sales until February of 2023. They will continue to be reflected in our system-wide same-store sales consistent with how we've treated prior acquisitions. Approximately 70% of our Q3 comp increase was driven by net member growth, with the balance being driven by rate growth. The rate growth was primarily driven by a 5 basis points increase in our Black Card penetration to 62.9%, as well as our recent price increase in May from $22.99 to $24.99. As a reminder, the Black Card price increase that we took in May was for new joins only, so that should slowly begin to drive up average monthly dues over time. For the third quarter, total revenue was $244.4 million compared to $154.3 million. The increase was driven by revenue growth across all three segments. The 7.1% increase in franchise segment revenue was primarily due to an increase in royalties from same-store sales growth and new stores. Partially offsetting the increase was a decrease of approximately $2.6 million as a result of the stores acquired in the Sunshine Fitness transaction moving from the franchise segment to the corporate-owned segment, higher NAF expenses, and the higher equipment placement expense. For the third quarter, the average royalty rate was 6.4%, which was flat to the prior year period. The 131% increase in revenue in the corporate-owned store segment was primarily driven by the Sunshine Fitness acquisition, as well as same-store sales growth and the new store openings. The equipment segment revenue increased 78%, driven by higher equipment sales to existing franchisee-owned stores. For the quarter, replacement equipment accounted for approximately 75% of total equipment revenue, which was higher than we typically experience, largely due to reequips that shifted from Q2 to Q3 of this year due to COVID-related supply chain disruptions in China earlier this year. We completed 28 new store placements in Q3, flat to last year. Our cost of revenue, which primarily relates to the cost of equipment sales to franchisee-owned stores, amounted to $48 and a half million compared to $27.1 million. Store operations expense, which relate to our corporate-owned store segment, increased to $57.9 million from $27.8 million, primarily due to the additional stores from the Sunshine Fitness acquisition. SG&A for the quarter was $27.1 million compared to $23 million. Payroll costs primarily drove this increase with the addition of the Sunshine Fitness team, as well as increased travel expense and expense related to our franchisee conference. National Advertising Fund expense was $17 million compared to $15.6 million. Net income was $30.7 million. Adjusted net income was $38.2 million, and adjusted net income per diluted share was $0.42. A reconciliation of adjusted net income to GAAP net income can be found in the earnings release. Adjusted EBITDA was $93.9 million, and adjusted EBITDA margin was 38.4% compared to $61.7 million and adjusted EBITDA margin of 40.0%. A reconciliation of adjusted EBITDA to GAAP net income can be found in the earnings release. We are no longer excluding pre-opening costs from our adjusted EBITDA, adjusted net income, and adjusted earnings per share. In the reconciliation, you'll find the prior year period restated reflecting this change. By segment, franchisee adjusted EBITDA was $53.5 million, and adjusted EBITDA margin was 66.3%. Corporate store adjusted EBITDA was $39.6 million and adjusted EBITDA margin was 38.4%. Equipment adjusted EBITDA was $15.8 million and adjusted EBITDA margin was 25.4%. Now turning to the balance sheet. As of September 30, 2022, we had total cash and cash equivalents of $467.2 million compared to $603.9 million on December 31st, 2021, which included $62.7 million and $58 million of restricted cash in each period. As I mentioned earlier, during the quarter, we used $50 million to repurchase approximately 830,000 shares. Total long-term debt, excluding deferred financing costs, was $2.0 billion as of September 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. As a reminder, our view assumes there is no material resurgence of COVID that causes member or supplier disruptions, whether it be a shutdown or more stringent mandates that result in a significant change in membership behaviors. In our earnings press release this morning, we reiterated and updated our growth targets for the year. We continue to expect system-wide same-store sales growth in the low double-digit% range. We decreased our outlook for equipment placements in franchisee-owned locations from approximately 170 to a range of 150-160. This update primarily reflects a worsening of the HVAC supply chain issue. We're continuing to monitor the situation carefully, but we do expect that some placements that we thought would happen in 2022 will now take place in early 2023. We now expect revenue to increase in the high 50% range. Previously, we expected it to increase in the mid-50% range. This revision reflects our better insight into inventory availability to meet franchisee demand for re-equips. We now expect adjusted EBITDA to increase approximately 60%, adjusted net income to increase in the low 100% range, and adjusted earnings per share to increase in the mid-90% range. Previously, we expected adjusted EBITDA growth in the high 50% range, adjusted net income growth in the low 90% range, and adjusted earnings per share in the mid-80% range. Our adjusted EPS guidance is based on diluted shares outstanding of approximately 90.5 million, inclusive of the issuance of equity as part of the Sunshine acquisition and share repurchases through the third quarter. We also continue to expect 2022 net interest expense to be approximately $86 million, which reflects our first quarter debt refinancing and upsize. As Chris said, we are looking forward to a solid Q4, and assuming there is no virus resurgence, we are optimistic that we will have a strong January in Q1. I'll now turn the call back to the operator to open it up for Q&A. Thank you. If you would like to ask a question, please do so now by pressing star followed by the number one on your telephone keypad. If you change your mind and would like to remove yourself from the queue, please press star and then two. When preparing to ask your question, please ensure that your device and your microphone are unmuted locally. Our first question today comes from the line of Randy Konik with Jefferies. Please go ahead, Randy. Your line is open. Thanks a lot, and good morning, guys. I guess, Chris, question for you. Mm-hmm. You mentioned in your commentary the change in utilization patterns that you saw, I guess, moved up and your cancel rate moved down. It sounds like it was, you know, significant in trend. Just wanted to kind of understand how that is changing sequentially. It sounds, again, significant. What you think is driving that change in those two items. Yeah. That trend has been somewhat consistent almost coming out of COVID, where the people that are working out are working out more than they were previously. You probably remember, you know, back since the IPO, the average person was working out about five times a month, now it's gone up to six times a month. So I think that's kind of staying there. The cancellation rate is right. I think people are just more committed, so it has fallen slightly from the past. Both are in, you know, both trends are very good mostly for the longer term because, you know, as your attrition gets better and joins continue to flow like they're flowing, you're just gonna add more base, you know? Got it. Super helpful. I guess maybe a question for Tom. I know we haven't disclosed how much you think the conversion could occur of the teen Summer Challenge members to paying members over time. I guess what I wanted to try to understand is, if you look back to 2019, the last time this program took place, and I think 25% of those participants converted to members, can you give us some perspective on the timeframe of those conversions? i.e., how long do should you expect, or how should these conversions start to take place? When should we notice them this time around in 2022 and 2023? Right. Hey, Randy, this is Chris. The, yeah, when we said the 25%, that was, you know, from the time of the ending of the program in 2019. Through the whole COVID years and stuff. It was about, you know, three years ago now, right? We had reported that there's about 11% are still members today, and about 5% of the parents are still members. It's three years later, you know. Right now, we are trending ahead of the conversion rate for the remainder of 2019 compared to that year. If you look at between the end of the program or the program itself through the end of 2019, we are trending higher conversion rates than back then. I think that probably leads us to so the one is just the general Gen Z joining trend is positive in the right direction, is coupled with the fact that we have all their text messages in that messaging and emails now because it was all digital sign up, you know. I think it is the trending is showing that it's doing better, and I can't imagine it's not gonna continue, you know, over the next couple of years ahead. Yeah. Maybe one thing, Randy, as Chris said in his prepared remarks, that conversion rate is not only ahead of where we were in 2019, but it's off a base that's, you know, 3.5 x plus larger. The impact on membership is much greater. Super helpful. Thanks, guys. Yep. Thank you, Randy. Our next question comes from Brian Harbour with Morgan Stanley. Please go ahead, Brian. Yes. Thank you. Maybe just a question on the replacement equipment revenue, which seems like it's really picking up quite quickly. Is that something that you kind of expect to continue in the fourth quarter and into next year or any kind of puts and takes there that we should think about? Yeah. Hey, Brian Harbour, it's Tom Fitzgerald. I'll start that. I think part of the mix shift in it being 75% of the equipment revenue is because of the shifting of reequips from Q2 to Q3 because of the Shanghai shutdown. It pushed reequips into Q3, and then some of the supply chain issues moving the new stores, you know, around a little bit. You know, for the year, maybe this is the direct answer to your question. For the year with the change in our placement outlook, we believe reequips will be closer to 60% of total equipment revenue, compared to where we were saying before it'd be closer to 50/50. That's helpful. Yeah. Thank you. Maybe just a question on kind of new unit openings. I mean, you cited the HVAC issues. Do you think those start to kind of, you know, come off next year? I don't know if there's, like, a rush at the end of the year. Is there anything else that's at play just in openings this year? No. The issue this year primarily is the HVAC issues. From what we hear, no one yet knows when they abate or, you know, go away. I think it's a combination of changing standards, catching the manufacturers off guard a little bit, but also the Shanghai shutdowns and continuing, you know, sort of rolling lockdowns here and there in China. You know, we were in discussions with some larger franchisees here recently, and the frustrations continue because you sort of don't know until it's too late in the cycle. You know, we'd love to say it's gonna end in Q1, but we're not in any position to say we know when it'll end. Hopefully, it's sometime in 2023, but all manufacturers, all big manufacturers are telling us they don't yet have a firm commitment on when it'll return to normal, so to speak. Thank you, guys. Yep. Thank you. Our next question comes from Rahul Krotthapalli with JP Morgan. Please go ahead, Rahul. Your line is open. Good morning, guys. Thanks for taking my question. Chris, you guys talked about the franchise conference. Can you just, like, give us some more insight on what kind of conversations did you have in terms of how the franchises are feeling in terms of store openings or in terms of their financial health or anything else that kind of stood out that makes sense to discuss, that would be appreciated. Sure. Yeah. There's a lot of excitement around the fact that the trends we're seeing with all the generations and specifically Gen Z and the increase of their propensity to join. That's all really good stuff. On top of that, you know, some of the conversations were sometimes about the build-out costs. There's definitely some inflationary costs of build-out and construction, which, you know, luckily, the model can weather that storm. It's not, you know, it's not like nobody wants an expense to go up, but it is for the time being. Will it come down in time? Hopefully. You know, time will tell. We don't really have a crystal ball on that one. It's a lot of things about around that type of stuff. All in all, it was. People were excited to talk about the future. You know, the pandemic's now behind us, it seems like, and everybody's thinking about how to get back on track with looking at real estate and driving marketing and sales and membership back to where it was. We're well on our way today, which is great. They're, you know, bullish and excited to get back to business here to just definitely be great if some of the inflationary costs on the build-out construction came down. I would think it'd just add more fuel to the fire. Got it. Just to follow up on that, talking about real estate, like, is there anything new in terms of, like, store formats or anything that makes sense to consider given the changing trends and the kind of frequency of visitations? Have you guys revisited that, or, like, were there any conversations with the franchises in terms of the white space going ahead, when it comes to the format of the box? I think the only thing that we're looking at now, preliminarily, but looking at a lot of data to look at is the change in our membership base. If you look back pre-COVID, Gen Zs were our smallest segment of our member base. The next being the boomer plus generation, which is boomer and silent. Today they're our second-largest part of our member base, believe it or not. It's grown substantially over the last three years. We're paying attention now just to look at some of their utilization of what they're using in the facility, and is there some retooling slightly of just our equipment makeup. You know, is it ellipticals or is it treadmills or is it kettlebells and different functional training stuff, which functional training is definitely something of the younger generation. Just paying attention to some of that as the makeup of our base changes. As far as size of box, no, I think that'd be about the same, but maybe just retooling inside the four walls. Thanks for this, Chris. You're welcome. Our next question comes from Joe Altobello with Raymond James. Joe, please go ahead. Thanks. Hey, guys. Good morning. Just wanna go back to the HVAC shortage situation. I guess, at first, is there an opportunity to find alternate suppliers outside of China? Secondly, could it actually benefit your store openings next year given the shift in timing from this year and the assumption obviously that it gradually gets better? Hey, Joe, it's Tom. I'll take that. We're in contact with the large suppliers, you know, Carrier, Trane, and so on. I think we're doing all that we can to get, you know, our fair share, more than our fair share of that. The problem is, unlike with equipment, we don't have a real preferred supplier relationship there. It's something we're looking into. You know, we are opening stores. It's not like there are none, there's just not as many as we need, and we've done all that we can to try to secure equipment in advance. Many of our franchisees, as we've talked to them, are actually, you know, looking to refurb or keep the equipment there if they can, via code and just wait until more supply is available and then replace it. They tend to like to replace it all at once, so they don't have to worry about, you know, going back in and doing it a year or two later. I'd say we're doing everything possible as the franchisor and working with our franchisees and with the suppliers to secure what we can. It's just, you know, the demand exceeds the supply, and I know we're not alone. We're hearing it from other multi-unit folks trying to open up new units. I wish I had a better answer on when it'll end. It's not a forever thing for sure. It's just we're not sure exactly when it returns back to normal, as I said previously. Okay. Understood. Just maybe to follow up on that, curious, you guys haven't done an investor day in quite some time. Maybe kind of preview for us what we should expect to hear next week. Yeah. It's gonna be great to bring you know, the team out. Usually, you know, all you really hear from is me and Tom, and previously Dorvin. It's great to bring all the team out and talk about a lot of our different strategies and endeavors we're on with each of the departments, whether it's digital and data and the generational trend. We'll share a lot of what we're seeing and historically what we've seen, how they've grown, as well as the marketing and Jamie and so on. It'll be a lot of the team there, talking about where we've been. You know, a lot of the people, a lot of the even current investors, haven't really heard the story from back in the IPO days and the last 30-year history, what got us here, what's made us be successful and gone through many ups and downs and why we're still here today after COVID with no bruises. A lot of it will be strategy and future-looking plans that we're working on, much like you saw my remarks on the Amazon Halo partnership. We're in the middle of right now. We just started yesterday. Just a lot of exciting things and doors that are opening up here with our size and scale and coming out of COVID, and the highlight on health and wellness is at an all-time high, I think, from not only just members, but they also partnerships like this. Got it. Thank you, guys. Thank you. All right. Our next question is from Alex Perry with Bank of America. Alex, your line is open. Hi. Thanks for taking my questions here. Just first, I just wanted to square away some of the membership numbers from the quarter. You had about 100K net new joins in the quarter. You said churn was lower than 2019. You had 300K new joins from high school summer pass compared to about 65K in 2019. You sort of added the same amount of members quarter-over-quarter compared to 2019. What would sort of be the delta if we sort of compare, you know, the quarter-over-quarter joins versus 2019? Thanks. I believe, well, I think the 300,000 is really from the beginning of the program, which we're in May, you know? Yeah. Gotcha. Okay. You just add. Yeah. Oh, gotcha. You added the high school summer participants earlier this year compared to 2019. Gotcha. Then- Sure. Okay, that makes sense. My second question was, can you just talk about the health of the franchisee base and their willingness to open in, you know, the rising rate environment here? You know, sort of when should we get back to that sort of 200+ algorithm? Is the only thing restraining that, you know, HVAC right now, or, you know, how are you sort of seeing sort of the overall health? You mentioned build-out costs, but, you know, the rising, you know, how are you sort of thinking about the rising rate environment? Thanks. I'll hit on the inflation stuff and have probably Tom talk about the interest rate stuff. What we don't really know quite yet, Alex, is that you know every year franchisees are required to open a certain number of units contractually under their area development agreements. A lot of the developers you know pre-COVID were opening ahead of their schedules, right? What we're not sure of now is with the cost, the rising cost or risen cost of build-outs, is that will franchisees open up a you know two or three units themselves that really aren't required to open until future years? Or do they wanna wait until maybe costs come down, then open them, you know? We just don't know if they're gonna open ahead of their schedules, you know, here going forward until costs come down, or maybe they wanna wait to open future ones when they do come down. That's just the part we really don't know, their appetite for opening ones early on that side of things. Tom can obviously address that. Yeah, Alex, I think you know, interest rates going up isn't helpful, but I still think on a relative basis, the returns as we talk to our franchisees, and we've talked to our largest franchisees here, top 30 as we do every year, we've completed almost all of them now. You know, no one's really saying rising interest rates are holding them back from building. A lot of the stores are funded just from the cash flows of the business. Frankly, a lot of the PE folks don't take money out of the business. They plow the money back in. That's, you know, there's a fair amount of momentum for those new store builds, and I think what Chris said is right. You know, the costs are definitely higher, but as we've looked at commodity costs and even shipping costs, you know, I forget the numbers off the top of my head, but the cost of moving a can from Asia was, you know, a few thousand, then it went to, you know, high teen thousands, and now it's back even below where it was pre-COVID. These things are moving around quite a bit. We've heard from some franchisees that time is their friend. I'd say the other thing that's very encouraging on the development side is, as we've talked to a number of these larger franchisees and we, you know, talk about their financials, a lot of their mature stores have returned or are very close to the pre-COVID profit level. You know, while membership still may be trailing a little bit here and there, depending on their geography, the continued increase in Black Card mix and the recent Black Card pricing will continue to improve margins. I'd say the last thing on the inflation side, there was a lot of talk about wage inflation. You know, that has really slowed down quite a bit. As we've talked about, you know, even with wage inflation in some markets being, you know, fairly considerable, one good year of same-store sales growth because of our model and low labor costs really offsets the impact, and margins basically return back to where they were before the wage inflation after one year of mid-single digit same-store sales increase. Anyway, hope that kind of rounds out the picture for you. Yeah, that's perfect. Best of luck going forward. Thanks, Alex. Our next question is from Warren Cheng with Evercore ISI. Please go ahead, Warren. Hey, good morning. My first question, I know this is a sort of seasonal low period for joins, but do you have data on where your new members are coming from? Are you seeing any uptick in members coming from other gyms or higher priced gyms? Yeah, from what we've seen from closed gyms is a little bit less than 1%, from coming from closed gyms. 25% of our joins now are rejoins still, and almost 40% of our members are still first-time gym members. Not too much has changed there. We haven't really seen or heard or surveyed anything coming from higher priced gyms. Anecdotally, I'm sure it's happening from people trading down. If I go back to 1999, 2000 when the dot-com bomb went off, you know, anecdotally back then we saw it happen. We only had four clubs back then, but we saw it and experienced it back then as well. I'm sure it's happening, and the people getting more cost conscious of what they're spending money on. As many people have gone to multipurpose clubs, you realize you don't use the rock wall or the pool, and why you're paying for it. It's probably something that's in our favor. We had some great same-store sales back in that era, the late nineties. Gotcha. Very helpful. My second question, I just wanted to ask about that Amazon Halo collaboration. Is there any back-end integration with the Halo, either on a data sharing basis or integration with your own Planet Fitness app, where you can kind of tap into that activity tracking data? Not yet, but that's this part of the plan is to have Halo or other wearables also be talking to the app and have the data flow, you know. But very strictly right now, it's basically just a free Halo with any Black Card purchase, $0 enrollment, $24.99 a month, and the Halo is free for the first year. Then after that, they if they wanna continue with it, they can go ahead and pay Amazon their $3.99 or $4.99. But it includes a free one-year membership with the Halo as well. Got it. Thank you. Good luck. Yeah, thank you. Our next question is from Maksim Rakhlenko with Cowen and Co. Max, your line is open. Great. Thanks a lot, and congrats, guys. First, January feels like it's gonna be a very important season for you, following some of this year's challenges. Just curious, how do you feel about your readiness, heading into the season, and what do you plan to do differently next year compared to both this year as well as the pre-pandemic years? Yeah. This year, we have our annual New Year's Eve celebration here to kick it off in Times Square. This will be our eighth year and longest running sponsor of Times Square. The normal integration you'll see with our stage and hats and such in the commercial, and that kicks off our January promotion. We'll normally do an extension towards the end of the month as well for this. Usually, we also push the $10 membership as that entry-level pricing throughout that commercial. The branding and messaging will be similar to what we've been doing this year, which is really about that post-workout glow, the feel-good feeling, the mental health benefits of exercise, as opposed to the general thought people think about the waistline, right? We're gonna continue with that theme. One other thing might be a little different this year is we're gonna lead up to some last week of December promo, end of the year special before we go into that January push. A little bit different timing on that one, where normally December is a mid-month flash sale, so we have a little push at the end as opposed to the middle of the month. Besides that, nothing out of the ordinary, but just more of the same. I think it's gonna be, you know, quite amazing to think this will be the first quarter in four years that, you know, hopefully will not be interrupted by anything. I think it should be a real good one for us. Maksim, it's Tom. Got it. One thing to add there. I think our agencies have transitioned across our franchise system away from Publicis into one of the two existing agencies that we've talked about. In our discussions with franchisees, they're very settled and happy about where they are with their agency and very confident looking forward that the execution will be back to what they were used to, so. Sure. We're also feeling very good about reconnecting with Barkley, you know, strategically on the creative and also working with us as our agency of record for NAF. Compared to, you know, where we were, several months ago, we feel like we're on terra firma here when it comes to agencies. Yeah. I think one other thing I'd add too is, you know, as you know, Max, the marketing flywheel we have, and we're going into this first quarter with once again, the largest member base we've ever had, which is just more marketing dollars. I think if you go back even pre-pandemic, you couldn't even join in the Planet Fitness app. You know, that's in our favor with marketing and having an uninterrupted first quarter. We expect a special first quarter. Awesome. That's great. Appreciate all the color on that. Then separately, just congrats on appointing Jennifer Simmons to Corporate Clubs President. Seems very well deserved. Chris- Yeah What are Jennifer's top priorities today, and how's the integration of Sunshine Fitness going? What can you share about just some of the best practices that you're seeing that can be translated to the rest of the portfolio? Sure. Yeah, she really helped build up our whole strategic and data analytics here in the business. Most all our decisions here with the franchise system, whether it's marketing, size of box, demographics, I mean, a lot of it's all coming from data that she's put together that proves out best practices. To have her influence our corporate store fleet, you know, of 200-plus stores I think now and growing it with her background is gonna be kind of the perfect storm, I think, in a lot of great ways. I'm excited to have her take over that fleet along with Mary, who's the VP of Ops down there, and Scott, who's been the marketing position down there. He's been there in the Sunshine Fitness deal that we brought on board. I think it's important to note that, with our same-store sales of 8.6% system, I mean, 8.2% system-wide, that our corporate store legacy fleet, right, is, which you might recall, Max, our legacy fleet, because they're our oldest, most mature markets, you know, back from 30 years ago, we don't have a lot of new store builds in the legacy fleet that influence same-store sales. This is like the first, you know, couple quarters here with their influence that our corporate fleet has outpaced same-store sales of the system, which has never happened. There's no doubt there's some best practices from a marketing and operational storefront that they have already put in place in our legacy fleet that are having influence. Really great news there. With Jen's support now down there as well in Orlando, there, where their home office is, I expect some really good things. Got it. That's very helpful. Best regards, I'll look forward to the Analyst Day. Thank you. See you then. Thanks, Max. Our next question comes from Chris O'Cull with Stifel. Please go ahead, Chris. Great. Thanks, guys. This is Patrick on for Chris. Good morning. You know, Chris, I appreciate all the comments. Hey, I appreciate all the comments around the supply chain constraints and development, but I did wanna ask just one follow-up. If we step back from all of that, can you just give us a sense of what's in the pipeline today in terms of projects, and whether you've seen the number of projects in that pipeline grow, you know, over the last six to 12 months or so relative to where it was? Yeah. Hey, Patrick, it's Tom. I'll take that. You know, I think what you're getting at is sort of the outlook for 2023, and we'll talk about that. We really don't talk about where things are in the flow and in the pipeline, but you know, I kind of come back to what Chris was saying. You know, franchisees absolutely know what those obligations are they have to build. The returns are still, you know, very strong. We've had new PE folks come in and invest in some of our larger franchisees here recently, you know, knowing that the cost to build are up and, you know, who knows how long they stay up, but still aggressively looking to build because the returns, as they tell us, are still relatively better than anything they see. While there might be a slight step back because of, on the ROI, because of the higher cost to build, you know, we don't see it really diminishing the appetite nor the requirement is there. We'll certainly talk more about, you know, where this all looks for 2023 when, as we normally do, when we provide that outlook on our year-end call. Got it. That's helpful. Tom, I was hoping you could provide just a little bit more color on the relative contribution to the corporate store margin that the legacy store portfolio had. I know Chris just mentioned that, you know, the comps are really strong in that segment of the corporate store portfolio this quarter. You know, to what extent have you seen the membership levels continue to recover in those gyms, sort of excluding the higher margin performance in the Sunshine units, and how should we be thinking about that heading into fourth Q and then into next year in terms of the trajectory of the corporate store margin? Yeah, it's a good question, and I think, you know, the good news is, as Chris said, the stronger same-store sales from our legacy markets, you know, will certainly, given our model and the largely fixed cost nature of it, will flow to the bottom line and continue to enhance those legacy store margins from a four-wall standpoint. All that is very strong. Sunshine Fitness, you know, also they continue to perform. You might remember, Patrick, we talked about at the time of the acquisition, you know, pre-COVID, the Sunshine Fitness mature stores were several hundred basis points higher in four-wall EBITDA margin than our legacy stores, primarily because of the markets they're in. You know, lower cost to build, lower cost to operate. That's remaining intact, but as comps, you know, continue to drive higher AUVs and those dollars flow to the bottom line, 80+ cents on the dollar, you know, both sets of stores margins should continue to increase. I'd say the other piece that we talked about year-over-year with Sunshine is they had a full, you know, more of a full team there leading that unit, where we had more of a hybrid approach from an SG&A standpoint, for lack of a better term. Now that that is fully incorporated into our run rate, you know, that might have been a little bit of a headwind on a margin basis, but won't be going forward as we leverage that because sales will grow faster than the SG&A. Got it. Thanks, guys. You bet. Thank you. Our next question is from Jonathan from Piper Sandler. Jonathan, your line is open. Yeah. Hi. Thank you. Good morning. I'll ask one more question on units, and I'm sure we'll have more questions next week too. I guess big picture, if you don't get back to opening 200 units a year on the franchise side, should that be viewed as any sign that the long-term potential is not, you know, as large or as good as you thought it was pre-COVID? Maybe on the company stores, are you planning any slowdown in the company growth just given the inflation challenges with construction? We still have over 1,000 in the pipeline, John, committed area development agreements with the franchisees on top of the 2,300+ that are open today. As we've talked about in the past, you know, the franchisees, their territory that they have undeveloped is, you know, almost as valuable as the ones they have that are developed, right? That's where a lot of the value of their business comes from, is their units along with their runway. You know, they never wanna lose their runway from not developing and have it contractually taken away from them, which then would resell to another franchisee that's willing to build it. You know, I think the big question, as I mentioned earlier, is we're not sure if they're gonna wanna open ahead of schedule just 'cause of the cost of opening stores right now. Do they wanna wait and see if it comes down in a year or two? 'Cause they would sometimes, John, open up units that maybe weren't committed until, you know, here right now it's 2022. They might have opened up 2023s, 2024s and 2025s in the same year, right? So they might just kind of slow down slightly so that you still open contractually but not open ahead of schedule. You know, whether we get back to 200, you know, or we get back to 260 like we did in 2019, I think it might be just a little bit of hesitation to go, you know, open up, you know, 20% more units than they're required to because of that. You know, there's still a lot of units to be opened and a lot of contractual units to be opened, so it'll push a lot of openings each year. Just hard to say if we go from, you know, 200 to 260 to 300, or are we gonna be a slow ramp until costs come down. John, on the corporate side, I mean, as you know, part of the attraction of the Sunshine acquisition was not only their current portfolio they had and the profitability and the team that they had, but also the pipeline. In addition to the, you know, opportunities in our legacy markets, we really like the ROI opportunities for the new stores in the Sunshine territory. We do not anticipate slowing down corporate store development. We wanna maintain roughly our 10% penetration, so we would look to grow with the system. In any given year, it might be a little bit ahead, a little bit behind, just based on real estate opportunities and what's happening, you know, site by site, but our intent strategically is to stay around the 10%. Yeah, that's great. Just one follow-up on pricing. I think year over year, you saw maybe a little less increase in the Black Card penetration. Any drivers behind that, and are you seeing any pushback on the higher Black Card monthly pricing? Any decision on annual pricing, and just trying to think about how much pricing benefit you might see for new units going into 2023. Yeah. I would say that slight pullback in Black Card acquisition this quarter was mostly just from the increase in the $10 a month high school summer pass teens converting into. Just drove a little bit of a slight decrease in Black Card acquisition this quarter, but wasn't related to the pricing on the Black Card itself. The acquisition of those of just general off-sale periods were normal. Actually, it was slightly even better, believe it or not. Which is interesting because this is the first time we've raised the Black Card price, which is the third time we've done it. This is the first time we've done it where we didn't see a decrease, initial decrease in Black Card acquisition for a couple months before it rebounded. Really interesting that even though with a $2 increase, we saw an increase in acquisition, just that the teens actually drove it down this quarter. Jon, we said on the call that the Black Card, since the rate increase, we're still outperforming the test results that we had. Yeah. I don't see as far as the thinking of price increase in general, I don't see that $10 changing. I think that still, as we've always talked about, it's a kind of the get you off the couch price. I think it's just an amazing business model where we advertise $10, generally speaking, and people come in, and when they realize the benefits, they end up taking the Black Card, you know, in a 60% range. It's a great curiosity price, gets people interested in checking it out, and then we hopefully get them to convert upwards. Great. That's helpful. Thanks again. Thanks, Jon. Thanks, Jon. Our next question comes from the line of Simeon Siegel with BMO Capital Markets. Please go ahead, Simeon, your line is open. Thanks. Hey, guys. Hope you're all doing well this quarter. Thank you. Chris, you've had Sunshine Fitness for a bit now, and you're seeing the full top line without recognition. Just any learnings or changes to how you're thinking about long-term corporate versus franchise numbers going forward? Just Tom, can you, I'm sorry for missing this. Can you just remind us how long the NAF expenses should outweigh the NAF revenues? Any help on what that discrepancy is during that time? Thank you. Yeah, I think to Tom's earlier comment, I think we want to stay at that 10% range like we reiterated when we bought Sunshine. So as the fleet grows, we continue to build corporate stores in all our markets, the legacy markets as well as the Sunshine markets. Probably, you know, any smaller tuck-ins of franchisees that come up for sale in and around our current locations that we're in, right? So anything in that southeast part of the country or northeast where most of our corporate stores are. As smaller franchisees, let's say, come up for sale, probably tuck them in. I think it's, you know, I think leveraging their ops and some of their marketing techniques that they've put in place, as I just said, is their legacy store same-store sales are ahead of systems, which has never happened. It's great influence there that they're having on the system, which is great. I think now with Jen's leadership down there, with the rest of the team, I look for some really good things to happen and continue to build ground up stores as well there. Still the same plan, but I think probably a better outlook, I think, in the future. Simeon, on the NAF side, you know, pre-COVID, we always kind of balanced what we spent with what we collected. During COVID, we decided to make some unilateral moves where we spent more than we collected. Coming into this year, we were intending to be sort of back to where we were historically. I think with all the impact of the Omicron variant in January, right during the peak join season, the fits and starts, frankly, that we had with Publicis and some of the things that we ended up having to pay for that we thought, you know, part of a longer term contract would have been free really changed the dynamic there. We felt that was appropriate for us to absorb to where NAF expense will be greater than collections. You know, I think it's $7.3 million year to date, on track to be right around $10 million full year. Our intent, as Chris said, you know, assuming COVID is behind us and we get back to a more normal Q1 in January, which certainly looks like it'll be the case compared to what we've seen here in the last couple of years, our intent would be for NAF collections and expense to match up as they did pre-COVID. Great. Thanks a lot, guys. Best of luck ahead, and looking forward to seeing you next week. Yeah, likewise. Thank you. Thank you. Our next question is from John Heinbockel with Guggenheim. Please go ahead, John. Hey, Chris, let me start with what is your current thought on national versus local? Right? Because I think the idea was maybe eventually you would do more national, less local. If the local is improved, right, and tweaked, you know, do you move more in a national direction? Then I think that's question one, and then the other part of that, right, was maybe that would pave the way for a royalty rate increase down the road. Are we quite a ways away from that, particularly given the cost increases that franchisees were absorbing to get a club open? Yeah, I think that it's a good question, John, and I think I've probably mentioned this in the past. If it wasn't for, you know, if it wasn't for COVID, you know, we had 53 straight quarters of positive comps leading into it, and we were probably at a point where raising the royalty probably would have been in the cards. Naturally now coming out of COVID and we're not 100% of the stores aren't back to where they were, and there's some, you know, payroll expense increase in some of these and operational expense. Once our margins, I think, return to close or past where they were then, that definitely is a topic of discussion, I believe. We're not quite there, but I believe, you know, we've seen those same store sales, and as you know, they'll flow through it. It's just a matter of time. As far as the lap, I think a couple more, you know, at least a year, maybe two with Zimmerman, Mrozek, and Barkley now is our easier comps, and now collecting the data. We just had our big annual October sale, as I'm sure you saw. Yep. We're gonna have a postmortem now every sale, and all three agencies are gonna get in a room. We're all gonna go over our most outperforming markets and most weakly performing markets and then boil down exactly reasons why and what media mix and spend they did so that we can now have that to teach and show all the Zs what to do for the next sale, you know? That'll be refined every time we do this, right? We'll learn something every time. I think as we get there, we end up understanding the mix better and make the spend more efficient, which then leads it to why don't we just put more money in national and then pave the way so it's easier, and the franchisees have less to worry about on their own end, you know, and just maybe moving some of that over. Now if efficiency goes better, perfect storm would be that the 9% doesn't have to be 9% anymore, you know? The 3,000-4,000 store reopen, does that really need to be 9%? Maybe not. That just gives us more opportunity for a royalty increase as well, and it's the same dollars outside the four walls the franchisee pays, which would really be great, you know? I think it's just a matter of time. I believe we get there. It's just a matter of how soon. Maybe secondly, what's your thought now on pace, timing, right, and geography of international expansion, right? You know, do you wanna step it up? I guess it would be greenfield Asia would be the focus initially. Yeah. I think, you know, I think as you, as you've talked about in the past, kind of a little bit of a hybrid approach. We didn't really have any international team per se. It was just development team here and ops team here, you know, doing, call it a country a year, right? You know, we get to go anywhere that it didn't really work. You know, Mexico's been phenomenal for us. Australia's been phenomenal. I mean, they all average more members than, you know, Mexico. Those stores open with three or four times the members of the U.S. store. Panama's done great. Australia's done great. New Zealand is gonna be open, the first store, this coming year. I think now we're gonna look to put an international team together that focuses solely on just international and begin to build that team out. You know, I don't think it would be abnormal for us to now look at doing two or three countries a year. You know, I think some will have to be creative and whether it be an acquisition of a brand, you know. As you know, in Europe there's a lot of big ones. Yeah. Does it make sense for somebody to go one at a time or do we acquire? Asia, on the other hand, or Japan specifically, is not really any large-scale, low-cost provider that there probably does make sense to go in, Planet and start to build out stores. I think you'll see more focus and probably see more than, you know, probably see more two or three possibly a year as opposed to one. Thank you. Thanks, John. Thanks, John. Our final question today comes from the line of Paul Golding with Macquarie Capital. Paul, your line is open. Thanks so much, and congrats on the quarter. I wanted to talk a bit more about Black Card. In the past you've noted that reciprocity is the biggest benefit, and I was wondering how that trend has evolved sort of post-COVID now and with maybe more hybrid work and how PF+ is also factoring in given the inclusion of the platform in Black Card now and any engagement metrics around that. Thanks. Yeah. This is Chris. You know, the reciprocity is still of the most used feature by far, even with some of the either work from home or hybrid approach, we haven't seen, you know, a huge fall off at all on the reciprocity side of things. Second most popular is the guest privileges, strong second. You bring a guest for free to work out with you. All the others are pretty relatively small, whether it's the HydroMassage beds or tanning or the digital usage. It's all fairly small in that sense. The other ones are the reciprocity as well as the Black Card amenity usage. I mean, the reciprocity and the guest privileges are definitely the most used by far. You know, it's hard, it's all bundled, so it's really hard to see what is driving the Black Card acquisition sale. You know, is it the reciprocity or is it the digital? We only have very few $5.99 digital subscribers, but the interesting thing is the ones that do, more than half of them end up becoming bricks and mortar after the fact. It's even though there's very few of them, when they do it, they end up being kind of a gateway into the bricks and mortar down the road. It is converting people over, but it's a very small number in that sense. Got it. In terms of the Amazon Halo offering, is there any opportunities there that you're taking advantage of cross-selling or cross-marketing or are you getting any sort of media collateral from them, and what are the opportunities there? Yeah. It's still, it's not too much we can disclose on how the partnership's working, but, they're really, great to work with, first off. This is the beginning, hopefully, if all goes well with this sale, it's probably gonna be the beginning of a lot of other stuff we can do in the future with them. You know, we haven't or no one's really sold gym memberships on Amazon yet. If there was a way to do that'd be something that'd be pretty interesting to understand. But we haven't crossed that bridge at all, but I think it's just the beginning of a hopefully a long-term relationship, granted that the whole sale goes well this year. What's really cool about it is if it does, you know, for it to work, you know, as you've probably seen or know, you know, we either do a dollar down or zero down during a promotion. You know, where do you go from there, right? Unless we pay them to join, it can't get any cheaper, right? You know, the $10 a month. You know, I think when you start giving stuff away like this, it is like paying them to join. Hopefully this could be the beginning of understanding and learning ways to drive volume otherwise, other than just going to, you know, no enrollment fee. Great. Thanks for that, Chris. Thank you. Those are all the questions we have for today. I'll now turn the call over to CEO Chris Rondeau for concluding remarks. Thanks, everybody, for joining us today, and hopefully you get to join us at the Investor Day next week. Really excited to wrap up fourth quarter here, see how this Amazon Halo promotion goes, Times Square kickoff here for New Year's Eve, and an uninterrupted great first quarter. Hope to see you all next week. Thank you. Thank you everyone for joining us today. This concludes our call, and you may now disconnect your line.