Ladies and gentlemen, welcome to the Planet Fitness fourth quarter earnings conference call. My name is Glenn, and I'll be the moderator for today's call. If you have any questions for the Q&A or questions, please press star one one on your telephone keypad now. I will now pass the floor over to Stacey Caravella to begin. Stacey, please go ahead. Thank you, operator. Good morning, everyone. Speaking on today's call will be Planet Fitness Chief Executive Officer, Chris Rondeau, and Chief Financial Officer, Tom Fitzgerald. Also joining us is Edward Hynes, President and Chief Operating Officer. They will all 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 and 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'll turn the call over to Chris. Thank you, Stacy. Thank you everyone for joining us for the Planet Fitness Q4 earnings call. I'm proud of how we've continued to prove our system's resiliency, strength of our model, our differentiated offering, and the passion of our franchisees, all of which positions us to continue to succeed in an environment of increasing consumer prioritization of health and wellness. Closing out 2022, we were very pleased with our record membership growth in the fourth quarter, which created great momentum coming into Q1 of this year. Let me start with the two primary drivers behind this record growth. First, we had our new agency structure in place for the entire quarter, with one agency handling our national advertising and two agencies partnering with our franchisees on a local level. The fourth quarter was the first time we had access to the ability to leverage our national and local media as we begin to optimize our marketing based on analytical findings. An example of this is our newly implemented post national sale meeting with all three agencies to analyze results by region and franchise group to share best practices across our system. Importantly, our franchisees are pleased with the level of service they're getting from their agency partners, and they're confident with how our marketing investments are being executed at both national and local levels. Second, we continue to benefit from the increasing commitment to and interest in overall wellness coming out of the pandemic. Our members who have visited the gym continue to visit more frequently, which we believe is a sign that they are more dedicated to working out. We had a successful promotion in November where you received a free Amazon Halo, Amazon's fitness and health tracker, if you joined or upgraded to a PF Black Card membership. It also required a one-year commitment, which should be a tailwind to our average tenure. Additionally, it was our most successful upgrade promotion to date, with members trading up from our $10 Classic Card membership, as well as from our lower priced PF Black Card memberships to the new $24.99 PF Black Card price to get the Amazon Halo. We're working on an upcoming similar promotion and continue to explore possibilities to work with other well-known 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 approximately 17 million members across gender, age, incomes, and other attributes. We ended the year with a national promotion letting consumers know that it wasn't too late to join a gym in 2022 for those who made a New Year's resolution. It drove great momentum at the end of the year as we head into the first quarter, during which we typically get 60% of our full-year net membership gains pre-pandemic. To 2022 results. We ended the year with approximately 17 million members as our brand appeal continued to attract many first-time gym-goers or people looking to get off the couch and restart their wellness journey with our affordable, approachable, non-intimidating fitness environment. We are thrilled to have increased our membership by 1.8 million last year, despite softer membership growth in the first quarter, due in part to Omicron. Members did approximately 470 million workouts in our gyms in 2022, up more than 20% over last year. Nearly 40% of our members used our gyms in a 30-day period in 2022, up from mid-30% in 2021. Cancellation rates were also slightly lower compared to pre-COVID. We also grew our store base to 2,410 locations, with the addition of 158 new stores, including 58 new stores in Q4, against the backdrop of an industry that is struggling to grow coming out of the pandemic. We upgraded and enhanced our digital ecosystem with our recently relaunched PF app. We also added more perks, providing value to our members outside the four walls of the gym, even when they can't make it to the club. In 2022, we offered discounts from brands such as Crocs, Grubhub, and Shell. In fact, recent data showed that 25% of our members who engaged with our perks platform hadn't visited the club in over three months. During 2022, our appeal with younger generations continued to grow. More than 9% of all Gen Zs over the age of 15 in the U.S. are members of Planet Fitness, with Gen Zs representing 25% of our total membership. We ended the year with all age generations nearly back to or above pre-pandemic penetration levels. One of the highlights of the year was our successful High School Summer Pass program. We ended 2022 with approximately 400,000 teen participants and their parents or guardians had joined as paying members for a conversion rate of nearly 7%. We continue to significantly outpace the 2019 conversion rate, the last time we ran this similar program. We had a much bigger base, more than 3.5 times the participation we had in 2019. We believe the High School Summer Pass is so important as we're helping teens establish healthy habits, and we're building brand loyalty with them. In New Hampshire, we've run this program for three years as it was a test market before the 2019 program. Today, 11% of all teens in the state of New Hampshire are now members of Planet Fitness, compared to 4% of all teens nationally. We look forward to bringing the program back in 2023. To the future. We, along with our franchisees, are very bullish on our growth prospects. We are pleased with the recovery coming out of the pandemic. We ended 2022 with 2.6 million members, more than we had at the end of 2019, and we've opened 420 net new stores during that same period. We are more than halfway through the first quarter of 2023, and so far it is the first time in four years that Q1 has not been interrupted by COVID. For the eighth year in a row, we were the presenting sponsor for the Times Square New Year's Eve event, which was back to high energy and a celebratory atmosphere. This kicked off our Big Fitness Energy campaign, and the campaign addresses the post-workout positive feeling, which we feature in our Low E ads that have generated great consumer buzz. Throughout 2022, we met with our top franchise groups, and they are very encouraged by the recovery of their store portfolios with each quarter of positive membership growth. Their top lines are recovering even more quickly, aided by the Black Card price increase last year and the recent annual fee increase from $39 annually to $49. We were recently recognized by Entrepreneur magazine with placement as 28th overall on its Franchise 500 list and number one in the fitness category. Along with brand strength and growth metrics, a primary consideration for the recognition is the relationship with our franchisees. We believe our historically strong relationship was further strengthened by working so closely together during the pandemic. It showed in that we didn't have one permanent store closure as a result of COVID. One year ago, we acquired Sunshine Fitness and doubled our corporate store portfolio to approximately 10% ownership of the system, a level that we think is appropriate as it allows us to maintain the asset-light nature of our business model. Importantly, we now have a dedicated team leading our corporate stores that is focused on driving membership growth in Black Card percent. We began to see the positive impact in our results in the second half of 2022 when the corporate store same-store sales outpaced franchise same-store sales. A few weeks ago, we welcomed Edward Hynes to our leadership team as our new President and Chief Operating Officer. He's leading our primary business segments, U.S. and international franchise businesses, corporate stores, and equipment sales. He is also overseeing our technology and legal functions. We believe Edward's skill set in franchise leadership will be instrumental in helping to accelerate our growth through existing and new geographies. One of his first tasks is to build a team to lead internationally. Once that team is in place, we believe that we'll increase our pace of expansion internationally. For 30 years, it's been our mission to make fitness successful and affordable for all. Today, more than 6% of all Americans over the age of 15 are Planet Fitness members. We're not stopping there. We believe we can double our membership given our historic ability to do so and the increasing penetration we've experienced with each successive generation. We also believe that the 4,000+ store opportunity in the U.S. is the floor, not the ceiling, given the significant industry consolidation caused by the pandemic. We'll be reevaluating this target with a third party this year. We believe our purpose of enhancing people's lives and creating a healthier world sets us, our franchisees, and our shareholders up for long-term success. I'll now turn the call over to Tom. Thanks, Chris, and good morning, everyone. Overall, we feel good about where our business and our system is, particularly given what has happened over the last three years. We believe that we are operating from a position of solid financial and balance sheet strength as we continue to break down fitness barriers for first-timers and casual gym-goers. Our asset-light, highly franchised business model drove consistent and reliable growth last year, and we met or exceeded our financial targets. Notably, in 2022, we accomplished four things that I want to call out. First, we completed the acquisition of one of our largest and best-performing franchisees. Second, we closed a very successful refinancing and upsizing of our debt in an oversubscribed deal that resulted in a lower overall weighted average interest rate for our total fixed-rate debt. Third, we repurchased 1.5 million shares at an average price of approximately $62 per share for a total spend of approximately $94 million. Fourth, our board of directors approved a new $500 million share repurchase authorization that replaces the existing one from 2019. Now I will cover our Q4 financial results, and then we'll address our operational and financial outlook for 2023. All of my comments regarding our fourth quarter performance will be comparing fourth quarter of 2022 to Q4 of 2021. We opened 58 new stores during the quarter, bringing our full-year total new store openings to 158, as Chris noted earlier. We had positive same-store sales growth of 9.0% in the fourth quarter. Franchisee same-store sales grew 8.8%, and our corporate same-store sales increased 11.0%. As a reminder, same-store sales for the Sunshine Fitness franchise stores that we acquired in Q1 of 2022 will not be reflected in our corporate-owned same-store sales until we report first quarter results. They will continue to be reflected in system-wide same-store sales, consistent with how we've treated prior acquisitions. Approximately 75% of our Q4 comp increase was driven by net member growth, with the balance being rate growth. Black Card penetration was 62.5%, down slightly from 62.6%. As a reminder, the Black Card price increase that we took in May was for new joins only. That should slowly begin to drive up average monthly dues over time. For the fourth quarter, total revenue was $281.3 million compared to $183.6 million. The increase was driven by revenue growth across all three segments. The 10% increase in franchise segment revenue was primarily due to an increase in royalties from same-store sales growth in new stores, as well as higher equipment placement and national ad fund revenue. 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. For the fourth quarter, the average royalty rate was 6.5%, which was a 6 basis point increase to the prior year period. The 123.9% increase in revenue in the corporate-owned store segment was primarily driven by the Sunshine Fitness transaction, as well as same-store sales growth and new store openings. Equipment segment revenue increased 56.7%, driven by higher equipment sales to existing and new franchisee-owned stores. For the quarter, replacement equipment accounted for approximately 60% of total equipment revenue. We completed 66 new store placements in Q4 and 153 new store placements for the year. Our new store placements in franchise location is 1 less than we pre-reported in early January. Since that time, 1 store that received the equipment in late December will not open as a new store due to an unresolved landlord dispute. We regret this unforeseen circumstance that resulted in a slight variance to what we previously reported. Our cost of revenue, which primarily relates to the cost of equipment sales to franchisee-owned stores, amounted to $73.8 million compared to $47.4 million. Store operations expense, which relate to our corporate-owned store segment, increased to $57.6 million from $28.6 million, primarily due to the additional stores from the Sunshine acquisition. SG&A for the quarter was $28.7 million compared to $27.3 million. Payroll costs primarily drove this increase with the addition of the Sunshine Fitness team, as well as increased travel expenses. National advertising fund expense was $15.7 million, compared to $17.6 million. We're rolling over the production costs associated with our Super Bowl ad last year, which drove the decrease. Net income was $36.3 million, adjusted net income was $47.3 million, and adjusted net income per diluted share was $0.53. A reconciliation of adjusted net income to GAAP net income can be found in the earnings release. Adjusted EBITDA was $106.1 million, and Adjusted EBITDA margin was 37.7%, compared to $62.2 million with Adjusted EBITDA margin of 33.9%. A reconciliation of Adjusted EBITDA to GAAP net income can also be found in the earnings release. As a reminder, as of the third quarter, we are no longer excluding pre-opening costs from our Adjusted EBITDA. In the reconciliation, you'll find the prior year period restated reflecting this change. By segment, franchise Adjusted EBITDA was $57.5 million and Adjusted EBITDA margin was 66.7%. Corporate store Adjusted EBITDA was $38.9 million and Adjusted EBITDA margin was 38.8%. Equipment Adjusted EBITDA was $24.4 million and Adjusted EBITDA margin was 25.9%. Turning to the balance sheet. As of December 31, 2022, we had total cash and cash equivalents of $472.5 million, compared to $603.9 million on December 31, 2021, which included $62.7 million and $58 million of restricted cash, respectively, in each period. Total long-term debt, excluding deferred financing costs, was $2.0 billion as of December 31, 2022, consisting of our four tranches of fixed rate securitized debt that carries a blended interest rate of approximately 4.0%. Now to our 2023 outlook. Our view for this year assumes there is no material resurgence of COVID that causes member disruptions, whether via shutdowns or more stringent mandates that result in a significant change in membership behaviors or any new significant supply chain disruptions. First, on store growth. As I said at our Investor Day in November, we expect to average 200 new stores per year over the next years. Our 2023 new store openings will be below that as we still face some headwinds, both of which have been factored into our 2023 outlook. First, HVAC availability and other supply chain issues continue to be a challenge for both corporate and franchise locations. Second, we've recently agreed to terms with one of our larger franchisees to defer the majority of their development obligations in the near term and lift their exclusivity from certain markets. This will allow this franchisee to focus their cash flow on reequips and remodels of their existing fleet and service their debt. While this group's stores are profitable, they had an aggressive capital structure in place that became tenuous when the pandemic hit. This will be a drag on placements in 2023, we are hopeful it will be offset somewhat by other developers in the system stepping up to build new clubs in those markets. Therefore, we expect new equipment placements of approximately 160. We expect that reequip sales will make up between mid to high 50% of total equipment segment revenue. As a reminder, these placements are only in franchise-owned locations. Our net new stores for the year will include corporate-owned stores. We also expect system-wide same-store sales growth to be in the high single-digit% range. All of the following targets reflect growth over fiscal 2022 results. We expect our full-year revenue to grow in the 13%-14% range. We expect our full-year adjusted EBITDA will grow in the 17%-18% range. We expect our adjusted net income to increase in the 30%-33% range, and we expect adjusted earnings per share to grow in the 33%-36% range. We also expect shares outstanding to be approximately 89.5 million, which is inclusive of the repurchase of 1 million shares over the course of the year. We repurchased approximately 300,000 shares in January. As we discussed at our Investor Day, we may also opportunistically buy more shares, keeping in mind that we want to ensure that the pandemic's impact is fully behind us. We expect our net interest expense to be approximately $75 million. We expect CapEx to be up in the mid-30% range, driven by additional stores in our corporate-owned portfolio, and D&A to be up in the mid-teens% range, driven by the increase in CapEx and a full year of Sunshine in our results. As Chris noted earlier, during our most recent franchise business reviews in 2022, there was a lot of enthusiasm across our system to build new stores. With each quarter of positive membership growth, franchisees are more encouraged by the recovery of their store portfolios. Additionally, last year's increase in the PF Black Card membership to $24.99, and the recent increase in annual fees to $49, will add approximately 300-400 basis points of margin to new stores as the vast majority of members in a new store will pay these higher rates. With our disruptive brand and disciplined asset-light franchise model, we believe that we are capitalizing on the greater importance that people are putting on their overall health and wellness to drive store and membership growth, which we believe translates into among the best franchisee margins and ROIs. We believe this flywheel creates sustainable long-term value for our shareholders. With that, I'll now turn it over to the operator for Q&A. Thank you. Ladies and gentlemen, if you'd like to ask a question, please press star followed by 1 on your telephone keypad now. When preparing to ask your question, please ensure your phone is unmuted locally. We have our first question comes from Simeon Siegel from BMO Capital Markets. Simon, your line is now open. Thanks. Hey, guys. Hope you're all doing well and nice end to the year. Thanks, Simeon. Tom, any more color just on that last point, the franchisee you mentioned, maybe just how large they are, expected growth from them. Maybe have you seen others step into the areas with lifted exclusivity or interest you've gotten around that, and maybe just your comfort around this being a one-off. Just any thoughts on broader SG&A dollars for next year as we think through some moving pieces within expenses? Thank you. Chris, I'd love to, if you could elaborate at all on your comment about the opportunity to double members. That's obviously an exciting comment in there in press release. Anything there would be helpful. Thanks, guys. Sure. Hey, Simeon. In terms of the franchisee that we're talking about, you know, we're not disclosing who that is, which is our typical practice for any reason. You know, we think that it's the right approach. We think there may be some interest. We're at the beginning of the beginning in terms of this process where their exclusivity is no longer in place in a few of their markets. Existing franchisees may wanna take a bite at that. Also, there's quite a bit of interest from a few former franchisees who are out of the system completely and who miss it, frankly, and wanna get back in somehow, some way. This, you know, may be their only entrée to doing that on a smaller scale compared to maybe what they did previously. You know, we've tried to factor all of that, into our outlook, for the year on placements. That's the long and short of that. You know, as you know, we collect financial information from our franchisees, a couple times a year, and also have discussions with our top franchisees. You know, based on all of that, we believe this is, an isolated situation, just based on a lot of circumstances that we're not gonna get into. In terms of SG&A, you know, I think our outlook, while we're not guiding to it, is very consistent with what we talked about at Investor Day, where we said over the three years, we expect very slight leverage in SG&A. We still have investments we wanna make. We're in the process of building out an international team to drive accelerated growth there. We're also making additional investments in IT as well as the team. We think this is very much a growth business. We wanna support the growth in a prudent way and are not looking for, you know, large basis point leverage from SG&A. It's more very slight leverage. Chris, over to you. Sure. Yes. Thanks, I mean, yeah, I think when you look at our historical track records from, you know, the IPO, we had 1,000 locations at the IPO and about 7 million members. Here we are 8 years later, and arguably, you know, three years of the eighth were COVID, right? You know, if that wasn't happening, it'd probably be faster. Here we are now with 17 million members and 2,400 locations. Even if you go back before the IPO, when we partnered with TSG, the private equity company, before, you know, we went public, we had about 600 stores in 2012, about 4 million members. You can see the cadence of our growth, and leading into COVID, we had 53 straight quarters of positive comps, the vast majority of it being member growth. This year, the same thing. 2022, we had the full year 11% same store sales, but again, vast majority is member growth. There's nothing pointing in any other direction other than why wouldn't that happen again. We're very confident, especially with the Gen Z acceleration we've been talking about and how they're joining. The rate of their signups has been great. The High School Summer Pass tailwinds as well is helping that out. Then, you know, right behind them is Gen Alpha, which will come into the mix in about another four or five years. There's no reason why we can't see us doubling, once again. Great. Thanks a lot, guys. Best of luck for the rest of the year. Thank you. Thank you very much. Thank you, Simon. With our next question comes from Max Rakhlenko from Cowen. Rakhlenko, your line is now open. Hey, good morning, guys. This is Bradley on for Max this morning. Great results this quarter. First, I'd love. Thanks. just discuss quickly any, you know, quarter to date learnings, with the advertising rolling into January and then, perhaps any early results from January. We're not sharing anything really from the current quarter, but I do believe the large promotion we did at the end of December that expired on the 30th, and then we actually kicked off New Year's Eve with the January sale, but actually on the 31st, where I think it helped carry the momentum from the December sale. We're pleased with how the momentum's playing out. Great. Switching gears a little bit to Gen Z, could you just provide any more color on perhaps Gen Z utilization, maybe churn compared to other cohorts, Black Card mix, just kind of any more details on what you're seeing with their ramp up as they continue to join? Thanks, guys. Yeah. Their retention is very similar, and their workout patterns are very similar. It's crazy. That sounds very similar to all the other generations. There's nothing really that stands out that's different. You know, the average member's working out about six times a month. It holds true really across all generations, believe it or not. Even the younger Gen Zs, which is, you know, the teenagers are still the same. We even saw that during the High School Summer Pass last summer. As strange as it sounds, actually their workout patterns are very similar regardless of their age. Great. Thanks, Chris. Best of luck. Great. Thank you, Bradley. Thank you, Bradley. We have our next question comes from John Heinbockel from Guggenheim Partners. John, your line is now open. Hey, guys. I wanna start with, Chris, how do you think the seasonality has changed versus 19, you know, both in terms of, you know, fitness being more top of mind and High School Summer Pass being as important as it is, right? Do you think you're a little less reliant on the 1Q and, you know, 3Q, and particularly 4Q will be bigger? You know, and then also as part of that, right, if you think about High School Summer Pass, right, the 7% penetration, you would think that would build over time, right? I'm not sure how it would build, you know, as you get people, you know, coming in a second, third summer. How do you think about that? I think, you know, you probably recall we were talking about the, you know, for a few years, even before COVID, that, you know, the summers weren't quite the drop off they were, you know, many years ago, right? That it wasn't just first quarter. First quarter will always be the biggest one naturally, but, you know, you go 10, 15 years ago, you know, summers were very different than they are today, where we still today have some net member growth during the summer months, which typically 10, 15 years ago, we didn't. There's definitely a little less of that. I think the, you know, New Year's resolution thing is still there, but it's not quite about that as much as it's just about if it's your time to work out, it's your time to work out. And I think you're right on High School Summer Pass. You know, you've heard my opening remarks. I mean, in New Hampshire, we've ran this three years, where we have 11% of all high school-aged teens are members of Planet. Nationally, that's only 4%. You know, if you think about as we continue to roll this program out summer after summer after summer, you have to imagine that we continue to penetrate more as paying members of teens and get more members, more high schoolers to give it a shot again. You know, what's interesting too is, you know, this coming summer, you know, we did it in 2019, by the time we relaunched it this past summer, you know, probably two-thirds of those teens were already out of high school by then. There wasn't a lot of teens that could repeat the free summer again. It'll be interesting with the 3.5 million teens that did it last year, you know, let's call it, you know, the 18, 19-year-olds are off to college. It backfilled with the new 14, 15 year-olds, but there's gonna be a big chunk of those, you know, the, the freshman, sophomore, and junior kids that are still. Going to do it for the second time. They're going to speak to their friends about joining them again, you know? Hopefully we'll even get more momentum this summer. Secondly, so on international, right? When will that team be in place? How many countries do you think you go into this year and maybe next year? Geographically, right? Will Asia be the focus? Lastly, I assume that you've not been interested in MFAs, and I assume you're still not. John, thanks for the question. This is actually this is Edward. I've actually jumped in a bit on the international side. Already we're currently, you know, definitely taking inventory on the opportunities to really accelerate in that space, and look to new geographies. As, you know, as we've said in the past, though, I think we're not really going to change that strategy in terms of entering, you know, 1 to 3 markets per year. I don't see that changing. Not really interested in kind of planting a flag just to do that. We really want to grow from a strong foundation, and, you know, establish a real disciplined approach around that. Just to, you know, let you know on that. You know, an initial read on Mexico and Australia, they've really performed well. Been really happy also with sales. You know, the model is actually translating very, very well in the markets outside the US. In the process of expanding that team, working with them now, and you'll be hearing more about that in the future. Okay. Thank you. John, maybe just the last point there. Yeah. We still don't have interest in MFAs. Right. Okay. Thank you. Thank you, John. We have our next question comes from Brian Harbour from Morgan Stanley. Brian, your line is now open. Yeah. Thank you. Good morning, guys. Hey, Brian. Just on kind of unit openings, you know, when I think about this year, and when I think about hopefully stepping up in 2024 and 2025, based on what you've said, how much of that do you think will come from, you know, some other franchisees filling in for this specific issue you called out? You know, how much of that is more just tied to, like, equipment availability and such? How much of that do you think will be international? I guess I'm trying to just kind of parse out, you know, what you think will kind of drive that step up in the subsequent years. Yeah. Brian, it's Tom. I'll start that. I think, you know, we still feel very good about what we said at Investor Day, that over the three years, you know, worldwide, we feel very good about being able to average 200 plus per year across the three years. And we said this year would have some headwinds, we didn't expect it to be at that level when we were all together in November. You know, and there are some headwinds. Costs are up. We talked about that. They're up about 20%. Typically, franchisees would be ahead of their development obligations before COVID. You know, not all of them, but a handful of them. We talked about, you know, if you take the couple of years before COVID, roughly 15%-20% of the new units were built ahead of their obligations. Now with the situation, you know, we've got franchisees, if they're ahead of their obligations as they sit here today with higher costs, then it seems like inflation's coming down, that they'll probably wait that out a little bit versus, you know, maintain their more aggressive posture. Some will go ahead and build. Obviously, there's a lot of new units going in the ground. Some may just take a bit of a wait and see approach. You know, we've talked about, and probably heard Chris say that if it was clear that the costs were going to remain where they are, they'd probably just go ahead and pull the trigger because the returns are still great. I think there's also still, you know, a fair amount of interest outside the system to come in. If you look at multi-unit world, you know, brands, we still believe writ large, our concept, our model is far less impacted by inflation. You look at some of the food concepts, you know, they may have low single-digit same-store sales, but they've got a lot of pricing and not a lot of, you know, traffic growth. Our business is quite the opposite. We've got 75% member growth driving the same store sales. The flow through, there's no additional cost for every new member, so the flow through is terrific. When you look at the absolute and relative returns, the absolute and relative four wall economics, you know, we think there's still going to be a tremendous appetite within the system and those who want to get in the system to come in and grow the units. Both in the U.S. and abroad because the model works, you know, in the countries that we've expanded to beyond the U.S. We feel good about it. You know, We factored in all the puts and takes into our outlook, but I think our model still stands as one of the best, if not the best, economic propositions in multi-unit opportunities. Okay. Sounds good. Maybe just, you know, I know you upgraded the app recently. Anything you would say just about the new app? Has it kind of driven improved engagement? Has I know you have a lot of digital signups, but did that continue to go up? Just any comments on that. Yeah. It's continued to get more and more traction. There's no doubt that the digital signups are staying strong, even when now with gyms open and people walking back in, they're still just joining on the app, and a lot of them were on the web, and they're joining well ahead of where they were pre-COVID. It's not the old ways where they'd take a tour and touch and feel it and join. They're actually joining now, and they're coming in as a member off the shoot. I think we just needed to just. Improve the flow-through of using the app and the ease of use, whether it's joining or it's simply using perks or referring a friend or checking the Crowd Meter. It's more of that type of stuff. Referrals continue to get traction, the perks continue to get traction, and as you just heard in my opening remarks, we'll finally be able to capture the data. We were finding that out of the perks redemptions, the one-ones that have 25% of them haven't been into the club in three m onths or more, which, you know, if you heard some of my last comments from previous calls, you know, the one thing that we're thinking and is and hoping is that, you know, the biggest reason for cancellation is just non-use. I haven't used the club in three months, I haven't used the club in six months, and I'm just gonna cancel. We can provide value outside the four walls, and even if it's not fitness related, like Crocs was a huge plus for us. They just did, like, $1 million in Crocs in three months in the app, and purchases. It's, you know, if we can provide value, people will hold on to the membership just so they might then have a chance to use it. We actually just tipped the tipping point that of, out of all the ones that used the perks and redeemed, the savings had just tipped $10. You know, again, if you're a $10 membership and you're buying stuff, and all of a sudden you're saving a month's dues by your discounts, this is starting to sort of add up. It's a little bit like the AAA model. Thank you. Thank you, Brian. With our next question, it comes from Alex Perry from Bank of America. Alex, your line is now open. Hi, thanks for taking my question, and congrats on a strong quarter. Just first, can you talk a little bit about how churn is trending versus pre-COVID, especially given members are using the club more? Are you seeing customers that are more sticky? Could you maybe just give us a little color on, you know, the how if customers have been receptive to the annual fee increase that you guys implemented? Thanks. Sure. Thanks, Alex. Yeah, the retention is just slightly better than pre-COVID, so just a little bit more stickiness now. Hard to really say exactly what's caused it. I think it's probably just, maybe just more or less people paying attention to fitness more now and health than they were pre-COVID. It's probably driving a lot of that, which I think is also why they're probably working out more than they were pre-COVID. That's a good trend. Hopefully, that continues. What was the other, the last one? On the annual fee. On the annual fee. Yeah, we tested that in about 400, 500 clubs pre-COVID, excuse me, earlier last year. Saw no change in retention or acquisition, which is why we decided to roll it out middle of December. It was great to see that result for sure. That, again, built to Tom's point, it certainly helps profitability of the new stores. Well, all stores as they convert over, 'cause again, it's new members going forward, but on a new build, that is costing, you know, a couple hundred thousand dollars more. This just makes up for it pretty quickly. That's really helpful. Just my second question, maybe give us a little more color on the, how the Halo promotion impacted member growth and Black Card penetration. You mentioned, you know, a maybe a similar upcoming promotion. Could you just maybe give us some more color there and, you know, how you're thinking about utilizing these promotions to drive member growth this year? Yeah. Yeah. It was a, it was a good promotion and, you know, I think the tricky thing with our pricing is, you know, you typically during a normal non-promo, you might have an enrollment fee or what have you, right? During a promo, we'll drop the enrollment fee. Other than that, there's no, there's not many other places to go once you pay somebody to join, right? It's, it's basically no enrollment fee and $24.99 or no enrollment fee or a dollar down and $10 bucks a month. Having a giveaway like this, definitely creates a little bit, well, definitely more buzz, but also a little bit more incentive to wanna join as opposed to just saving the enrollment fee. You're getting two different things. You're getting enrollment fee and a free, you know, $70 Halo for joining, which was great. The promo for new joins was good, but it was really interesting, and we've never seen this with anything we've tried in the past, is that people that were upgrading their current membership dues to the new $24.99 to get the Halo. $10 memberships were doing it. Even old Black Card members that were paying $19.99 for many, many years were upgrading to the $24.99 just for the Halo and signing a new 12-month contract, which was really something to see. We've never really been able to influence upgrades. You probably heard us talking about in the past where, you know, people come in, they join as a PF Black Card or they join as a Classic Card. That's pretty much it. We very, very seldom have any volume of people upgrading once they've already committed to join. It's interesting to see us finding something or a tool that could get old members to pay a higher price in the future. Perfect. That's really helpful. Best of luck going forward. Thanks, Alex. Thanks, Alex. Thank you, Alex. With our next question comes from Jonathan Komp from Baird. Jonathan, your line is now open. Thank you. Good morning. I wanna ask about the membership trends, how you're thinking about the year. You know, if you looked at 2022, you added 1.8 million members for the year, 1 million in Q1 of 2022, that's despite Omicron also not having your marketing in place for the full year. Just thinking through 2023, is there any reason that you wouldn't exceed those targets? Tom, could you just comment on the NAF expectations? Would you expect the revenue to more closely track the expense for the year? Yeah. Hey, John. I'll start that. In terms of membership, as you know, we don't guide on membership. I think, you know, we also stopped kind of our pandemic practice of talking about the current month when we're doing the earnings call. We've sort of reverted back to our pre-pandemic. I think as Chris said, you know, we felt really good about the record growth that we saw in Q4, the momentum coming into New Year's Eve and carrying forward. More to come on that on the next call. In terms of NAF Yeah, we expect again, assuming there's no resurgence or something that goes haywire here, but we expect collections to equal our spend here this year. Actually NAF in 2022 was slightly favorable than what we had been projecting. We thought those were the right investments to make from, you know, across the last 3 years. As I said, expect the spend to equal collections going forward. Yeah. Great. Just one follow-up. Thinking about the margin benefit you outlined for new units from the pricing, assuming that also benefits all stores, you know, in 2023 and 2024 as the pricing rolls in over time, just how are you thinking about the right royalty rate the next few years given the margin benefits and the membership recovery that you're seeing? Sure, John. I guess, Chris. Yeah, I think, you know, as I said in the past, you know, I think if COVID never happened and our track record of same store sales was continuing to just, you know, layer on top of it, of it with 53 straight quarters of positive comps, most of it member growth. As you know, the flow through is about $0.84 to the bottom line because once, adding an extra couple hundred members doesn't change, you know, the cost of running that store. If that never happened, we probably already would have, you know. I think as we still are coming back from getting close back to where their pre-pandemic margins and profitability. Today, we're up to, I think we reported last time about 30% of our clubs were at or above pre-COVID membership, and now we're at about 43%. We're going the right direction. But the pricing is getting ahead of that, you know. As they, as they recover, then it's probably a topic of conversation. Not just yet, but again, you know, in the upcoming year or two, I think it's something that we'll probably have to consider. Yeah, that's really helpful. Thank you. Thanks, John. You're welcome. Thanks, John. Thank you, John. Well, our next question comes from Joseph Altobello from Raymond James. Joe, your line is now open. Thanks. Hey, guys. Good morning. I guess first question on the placement guidance. What's sort of baked in in terms of the HVAC supply situation? Are you guys assuming it gets better by mid-year? Will the cadence of placements be similar to what we saw in 2022? Yeah. Hey, Joe, it's Tom. What we have factored in what we think is our best thinking on HVAC. We still are not hearing anything concrete from the large manufacturers we deal with in terms of when things get back to normal, you know, or anything close to what we experienced before in terms of lead times. We have, you know, worked to try to secure more production for us. But, you know, I think overall we're assuming it's more of the same. I think our cadence in terms of the quarterly openings is not dissimilar to what we've had historically. Got it. Maybe just to follow up on that, on in terms of Black Card penetration, you mentioned it was down slightly. What's been the historical experience when you do raise Black Card pricing? Does it typically take a step back and then maybe 6-12 months later start to grow again? Historically, yes, it would come back slightly, and then, you know, a year later you wouldn't even know it happened. It's gaining traction again. We see this pullback. We tested this in a few hundred stores with no pullback. This one, this pullback is really mostly driven from two things. One is the High School Summer Pass and the teens that are joining. They generally join not Black Card, which is putting pressure on it, as well as such strong, record quarter growth, which is all promotional driven, definitely pushes it down as well. One was a Black Card, but the December sale was a White Card. You know, member growth is great, but it definitely puts a little bit of pressure on that. That's the only reason I think. It wasn't necessarily the pricing that drove it down. It was more just the volume of members. Got it. Okay. Thanks, guys. You're welcome. Thank you. Thank you, Joe. We have our next question comes from Rahul Krotthapalli from JP Morgan. Rahul, your line is now open. Hi, guys. Thanks for taking my question. Ed, this is more directly directed towards you. It's good seeing you at ICR. Given you are like two months or like just under two months into the role, and clearly you're wearing multiple hats leading most of the segments out there, what do you see are your current priorities, or where do you want to focus in the near and medium term as you get more comfortable into the role? Where do you think you see the most opportunity? Yeah. Thanks for the question and great to talk to you again. Yeah, look, I'm, you know, been in the role a little bit over 30 days now, right? Very happy that I've joined the Planet Fitness team. I mean, the business model Chris and the team put together is just incredible, and the more I had learned about it, the more excited I got about it. You know, I'm really excited about the future 'cause, you know, although we're an industry leader, of course, you know, I believe we're just getting kind of warmed up, and that's one of my main priorities is in the growth side. I mentioned, earlier, you know, taking inventory around what those opportunities are to really grow both domestically and internationally as well. As Chris explained, you know, I'm responsible for the primary business segments and, you know, including U.S. and international franchise businesses, the corporate stores and equipment sales, as well as technology and legal functions as well. I've really spent my first Few weeks, you know, in listening mode and engaging, you know, with as many stakeholders as possible, including franchisees. That's really helped me to kind of take that inventory and putting that plan together to really focus on the growth space, which I'm really excited about. Thanks for that. Tom, this is probably better for you. In terms of thinking about franchise margins, I mean, pre-COVID, we did like closer to, I think, mid-80s% almost. Like, how should I think about, like, going forward, given all the changes to the systems within franchisees and then also, as we move towards, like, building more international stores over time, probably more of a medium to longer term range. How do you see this shaking out? Yeah. Well, I think you're talking about for the franchise segment. I think, you know. Yeah where we see the margins today is kind of where we think they'll be given, you know, the investments we're making in the segment and the resourcing. I think to Chris's point, you know, over time as we see that there may be opportunities to raise the royalty rate, you know, that'll certainly help. You know, I think what you've seen here in the last little while is especially on an adjusted basis, is more indicative of where we see it going forward. You know, once you adjust out the NAF, the NAF discrepancy there. If you, if you equalize the NAF to be not an investment, but where collections and spend equalize, then that's a more predictable margin going forward. That's the one big adjustment you have to make there, Raul. That's helpful, Tom. Thank you. Mm-hmm. Thank you, Raul. Our next question comes from Chris O'Cull from Stifel. Chris, your line is now open. Great. Thanks. Good morning, guys. This is Patrick on for Chris. I wanted to touch on the mix of company development for this year. I mean, you're obviously planning to increase CapEx spend, and that would seem to imply company store openings would accelerate relative to history. I was hoping you could frame that out a little bit more as we just think through what that additional investment could look like in terms of corporate store unit growth relative to maybe the pace you've held in the past. Yeah. Hey, Patrick, it's Tom. I think, you know, we opened 14 new corporate stores this year, and I think, you know, you could... Well, we don't typically guide on that. I think, you know, we expect to be in the same range, maybe up a little bit from that for 2023. I think now with Jen, you know, we had some transition there, and I think now with Jennifer Simmons, who ran strategy, you know, working with Chris for a number of years now in the role and, you know, really focused on that growth. We are very bullish on the opportunities that we've seen so far and want to enhance the pipeline to really crank that up. You know, the margins that we've talked about that were very attractive for the territories that Sunshine operated mostly in the Southeast, you know, we're seeing that come through on the new opportunities that we see. Also, as Chris alluded to, you know, with the on previous calls, with the practices that the marketing team and the broader team that Sunshine had get cascaded into our legacy markets. We're seeing accelerated growth, you know, for the first time, as you know, where those stores are leading the system versus they typically trailed the system given they were a higher mix of more mature stores. You know, we think the opportunities are out there, both in the legacy markets for new opportunities as well as the newly acquired territories. It's a matter of putting additional resources, which we are, against that, against the development opportunities that we see. We expect that number will likely be higher in the future. Great. That's helpful. That was actually a great segue into my second question, which is, you know, you guys had mentioned the focus of the team a couple of times in terms of driving the corporate store same-store sales performance. I was curious, you know, what are the things that are happening today that maybe weren't happening previously, and what's really driving that result? Then, you know, on the margin side for the company stores, can you give us a sense of, you know, what percent of the corporate store portfolio has recaptured their pre-COVID membership levels, maybe relative to that overall system average? How should we be thinking about the opportunity for corporate store margin performance in 2023 to maybe fully recapture at some point in the year, you know, the 2019 margin levels? You still see that being a slower build that maybe pushes out even into 2024? Thanks. Thanks, Chris. Hey, Chris. This is Chris. I'll start, and then I'll hand it over to Tom. The, yeah, I think the, a lot of the same store sales, benefit I think we're seeing that is really a much more disciplined approach, in cadence to the marketing, of the legacy stores that wasn't quite in place. You may recall, like our corporate stores, didn't really have a dedicated team. They were tapping into our marketing team here, who also services the franchisees, was tapping into the development team, who was also working, you know, for the franchisees. Now they have their own development people, their own marketing people. I think it's just more disciplined approach, which is helping. Also some operational and I guess some gamification or competition amongst staff in different club locations to outperform, whether it's black card upgrades or closing percentages or things like that. I think it's just gotten the team more, I guess, jazzed about, you know, servicing the customer and the joints coming through to get them to choose better membership. I think it's a little bit of that from an option, also just the marketing approach. I'll, Tom, answer the margin question. Yeah, Patrick. Yeah, as you know, we don't guide on segment margins, but I think, you know, maybe just to talk about it more generally, the corporate store portfolio isn't too far off from where the system is in terms of recovery to pre-COVID levels. It's a little bit different between the Legacy markets and the Sunshine markets, given the Legacy markets were hit harder during some of the mandates and temporary closures. You know, I think the way to think about it is if you're looking at the 2019 margin, that was for corporate stores, those were all Legacy stores, and now we're mixing in the Sunshine stores, which had more store growth and more ramping stores. There's a bit of a nick on that. Overall, as you've heard us say, you know, at the time of the transaction when we were talking about it, the mature stores that Sunshine had generally were 600-700 basis points higher forward margin than the mature market or sorry, the mature stores in our legacy market. There's kind of an averaging up effect there. We don't wanna really predict the timing of when we cross, you know, that threshold, so to speak. I think that mix impact will be important as well as the pricing impacts both on the Black Card and the annual fees as more of those new members feather into the mix. You know, that will certainly boost the margin. I think, you know, what we don't wanna lose sight of either is, you know, we're predicting high single-digit same-store sales growth, 75 in Q4, like as it's played out historically. Three-quarters of that growth is member growth, and we expect that to continue back to, you know, the opportunity over time to double membership. It's very healthy growth and the flow-through is just incredible, which on the member growth from the same-store sales and even accelerated by the pricing actions we've taken. I think good news ahead for corporate store margins as well as our franchise fees, obviously. Great. Thanks, guys. Okay. Thank you. Thank you. Thank you. We have our next question comes from Randal Konik from Jefferies. Randal, your line is now open. Hi. Yeah, thanks for taking my question. This is Ryan on for Randy this morning. Given the strong growth in Gen Z and millennial penetration, just curious if you could provide your thoughts around how consumers shifting their focus towards strength training could impact performance and retention. Similarly, are you thinking about maybe reimagining, you know, the equipment proportions at franchises? Yeah, it's a good question, and it's actually something we've already begun to do. We have seen, ever since COVID and the increase in our member base of Gen Zs and the millennials continue to grow as they have been in the past. Gen Z is now our second-largest part of our member base, and it was one of our smallest pre-COVID. It's what we have witnessed is that there's less minutes spent on cardio to pre-COVID, and most of it's 'cause they're doing weight training, and it's more functional stuff and that type of TRX medicine ball stuff. We have begun, and we've worked with a couple universities to see the workout habits of college-age kids and then also, what we've witnessed in our own stores and begun to fine-tune some of that. It's a slight decrease in cardio and more gym space for functional training and some kettlebell-type stuff, things like that. We already have begun to do that to adapt to, you know, the growing population of our clubs that are the younger. Great. Thank you. You're very welcome. Thank you, Ryan. We have our last question comes from Linda Bolton-Wefer from Davidson. Linda, your line is now open. Hi. I was curious just about the comment you made about the increase in, I think it was opening costs now versus pre-COVID. I think you said 20% higher. Is that primarily equipment cost or something else? Can you just give a little more color around, like, that number and what goes into that? Hey, Linda, it's Tom. I think it's consistent with what we've talked about on prior calls and at Investor Day that roughly 20%. We also talked about we had passed along some price increases from our equipment vendors, you know, low double-digit price increases, you know, based on the inflation they were seeing and had not changed the price for a while. We passed that along and maintained our margin rate on that. You know, that's a part of the increase. Yeah. I think what we're also seeing, of course, it depends on the market. There was also inflationary pressure on some of the materials, right? The steel and the concrete and whatnot. That's ebbed and flowed depending on the commodity. I think also the general contractor expenses, again, depending on the market and the tightness of their labor and supply and demand, has also caused an increase. When you roll it all together, you know, that's been the 20% or so increase. What I was referring to earlier about our model has less of a inflationary impact. You know, we're not serving food, we're not selling apparel, we're not doing things that have seen price increases. It's really the price increases that we've seen or the inflationary pressures has been in the cost and the wages, which are largely behind us. You know, they spiked quite a bit in 2021 and part of 2022, but we've seen that moderate. It goes back to, you know, the margins and the returns compared to other concepts. It's our model is just far less impacted by some of those things. Definitely the cost of construction's up about 20%. Hopefully that answers your question. Yes. Thank you very much. Okay. Thanks, Linda. Thank you, Linda. This marks the end of the Q&A session. I will now pass the floor back to Chris Rondeau, CEO of Planet Fitness, for closing remarks. Thank you, Lynn. Really, really pleased with our, you know, strong wrap-up for 2022 with a record fourth quarter. You know, it was great. I was actually at the Times Square event in New Year's Eve and to see Times Square back to normal and to kick off our January sale and carry the momentum forward. Really excited too this year with the new, you know, continue with the Black Card price at $24.99 and the annual fee increase, which I think is really gonna be beneficial and great to see the price elasticity that we have and continue to have. And rekicking off the High School Summer Pass in a few months. All good news and good trends ahead. Thanks for joining the call today and look forward to speaking again. Thank you. Ladies and gentlemen, this concludes today's call. Thank you for joining. You may now disconnect your lines.