Greetings and welcome to the Lifetime Group Holdings, Inc. third quarter 2026 earnings call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Connor Wienberg. Senior Vice President of Treasury and Investor Relations. Thank you. You may begin.

Good morning. Thank you for joining us for the third quarter 2026 Lifetime Group Holdings Earnings Conference Call. With me today are Bahram Akradi, Founder, Chairman, and CEO, and Erik Weaver, Executive Vice President and CFO. During the call, we will make forward-looking statements which involve a number of risks and uncertainties that may cause actual results to differ materially from those forward-looking statements made today. There is a comprehensive discussion of risk factors in the company's SEC filings, which you are encouraged to review. The company will also discuss certain non-GAAP financial measures, including adjusted net income, adjusted EBITDA, adjusted diluted EPS, net debt to adjusted EBITDA, or what we refer to as net debt leverage ratio, and free cash flow. This information, along with the reconciliations to the most directly comparable GAAP measures are included. when applicable in the company's earnings release and earnings supplement issued this morning, are 8K filed with the SEC and on the investor relations section of our website. With that, I'll turn the call over to Erik.

Thank you, Connor, and good morning, everyone. We appreciate you joining us for our Q3 business and financial update. This morning, in addition to our earnings release, we posted an earnings supplement to our investor relations website with additional detail on membership mix and comparable center revenue. Starting with our third quarter revenue, Total revenue increased 14.2% to $893.5 million, driven by continued strength in performance across our clubs, including higher dues revenue and strong utilization of our in-center businesses. Comparable center revenue grew 8.7%. This was above our expectations and driven by an outperformance in our membership acquisition and in-center business performance. As outlined in our earnings supplement, Comparable center revenue growth consisted of 2.4% from improved membership mix, 3.0% from price, 3.0% from our in-center businesses, and 0.3% from volume. In-center business growth was driven largely by double-digit growth in dynamic personal training and life spot. As a result of our Q3 performance, we have raised our full-year comparable center revenue guidance to 8.5% to 8.7%. up from 7.9% to 8.3%. Average monthly dues were $244, up approximately 11.9% year-over-year, and average revenue per center membership was $1,016, up 12% year-over-year. Year-over-year growth in average dues was driven primarily by positive membership mixed trends and execution of our pricing strategy. We ended the quarter with approximately 859,000 center memberships, which reflects 2.2% year-over-year growth. As we've discussed on prior calls, we continue to actively manage our membership mix, including limiting certain memberships administered through third-party medical insurance providers, which we refer to as qualified medical memberships. Qualified medical memberships declined by approximately 21,500, or 19.6% year-over-year. all other memberships increased by approximately 39,600 or 5.4%. This strategy is working as reflected in the 13.7% increase in total dues revenue. In the fourth quarter, we expect total center membership growth of 2.4% to 3.1%. Excluding qualified medical memberships, we expect center membership growth of 4.8% to 5.2%. Moving on to net income. For the quarter, net income was $106.5 million, an increase of 4% year-over-year. Adjusted net income was $115.9 million, up 24.6% year-over-year. Net income in the prior year included tax-affected net cash proceeds of $16.2 million received from employee retention credits under the CARES Act and a tax-affected net gain of $5.7 million on a sale-leaseback transaction. Adjusted EBITDA was $256.3 million, an increase of 16.5% over the prior year quarter, and our adjusted EBITDA margin improved by 60 basis points to 28.7%. As noted in our earnings release, we increased our full year 2026 revenue and adjusted EBITDA guidance. We also increased the midpoint of our full year adjusted EBITDA margin guidance to 28.4%. Our updated guidance includes the impact of seven clubs opening in the fourth quarter and the associated pre-opening expenses and early operating ramp impact on margin. Net cash provided by operating activities increased to $262.1 million, approximately 4.4% higher compared to the prior year quarter. The prior year quarter included certain non-recurring items, primarily the same $16.2 million received from employee retention credits under the CARES Act that impacted net income. Total capital expenditures were $288.7 million, up 29.8% from the prior year, reflecting construction activity in support of our new club openings for 2026, as well as the construction of clubs planned for 2027 and beyond. In September, we closed on a sale-leaseback transaction that generated approximately $62 million of proceeds. We expect to complete approximately $135 million of additional sale-leaseback transactions in the fourth quarter. Our full-year target remains unchanged at $400 million, supporting our ongoing focus on generating annual positive free cash flow. With that, I will pass the call to Brahm.

Thank you, Erik. Good morning, everyone, and thank you to our team members for their incredible work and dedication. Our third quarter results were above our expectations across the business, including dues, memberships, and our in-center businesses. We are seeing very good results from our new initiatives like CTR, Hybrid XT, LT Games, and LT Social. Our members are engaging with our clubs more than ever as average monthly visits per membership reached 13 times in Q3, up 4% year over year. Opening new clubs remain our most significant growth opportunity. We're on track to open 14 new clubs this year, the high end of our initial range. We also expect to open 14 new clubs in 2027 nearly all of which are already under construction. And we have great visibility into our pipeline beyond that. The quantity and the quality of the development opportunities in front of us have never been better. Our outlook remains strong. We closely monitor visits, joins, retention, and in-center spending, and we continue to feel very good about what we are seeing across the business. While we remain mindful of the macroeconomic environment, we believe we're in a very good position to perform in various economic conditions given the strength of our premium business and our balance sheet. Our net debt leverage ratio is 1.3 times. We have more than $900 million of liquidity, and we expect to deliver another year of positive free cash flow. The financial strength allows us to continue investing in our clubs, pursue attractive growth opportunities, and deliver strong revenue and adjusted EBITDA performance. We look forward to your questions.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question comes from Randy Koenig with Jefferies. Please proceed with your question.

Thanks so much for allowing me to ask some questions here. So I guess, Erik, for you, what I noticed was interesting in the quarter is that when you take out the qualified medical memberships, membership growth is up 5.4% in the quarter, and that accelerated from 4.2% in the second quarter, which also accelerated from Thank you for joining us. Are there items of lower churn impacting that number? Are you seeing higher members per membership impacting that number? It'd be really helpful to unpack that because you're seeing that acceleration from a low single digit to a mid single digit type of growth rate. Thanks.

Yep, you're welcome. Yeah, exactly. You mentioned membership mix. We continue to obviously see that improve, but we got a couple of things happening in our memberships. As you know, This year, the number of clubs that we're opening and the size, you know, they're larger. And so as we open more clubs in Q4, we've got seven in Q4. So, you know, a growth rate that is getting closer or above five is long-term sustainable. And that's going to continue to hold, you know, next year as we plan to do 12 to 14 clubs as well. So that's exactly right. You're seeing kind of that acceleration as we look at that, you know, absent the impact of those qualified medical.

Super helpful. And then maybe just one other here. If you go back to the guidance you gave a couple quarters ago where you said, you put that line in the sand and said, hey, listen, we're generating, we're going to be big enough when we have these units open to generate $400 million of free cash flow by 2030. Yet the quarterly revenue and EBITDA performance seems to be coming in better than expected, or at least what we're modeling, and very balanced. So do you think about that timeline kind of accelerating a little bit versus 2030? How do we think about that? And then when you think about deploying those cash, those free cash flows, maybe remind us of what you're thinking about in terms of builds or other options, dividends or share buybacks or stuff like that that we should be thinking about in the business.

Yeah, I would still point you to 2030. I mean, that is our kind of current forecast. Again, we've got flexibility in how we get there. As you know, we're doing 12 to 14 clubs. We've got the opportunity for ground-ups and some of those more urban builds. You know, at this point, our trajectory, we're still pointing to that 2030. Now, it doesn't mean that, you know, along the way, we may have opportunities to accelerate that. But in the event that we do, obviously, we will update that. But I would continue to point you to 2030. Ram, if you want to add anything there.

I think as we look through the next several years, with the strength of the cash flow generated from the business itself, together with our very, very low leverage that we have right now, continued growth in the asset value that we still own, the fees for the buildings. I think the options are going to be significant. And we will look at obviously two things. We look at the cost of the capital and then what the return on investments are. And we basically would choose the lowest cost of capital to grow our business. We'll maintain that flexibility and then we'll make the decision, you know, according to what's best at any given time.

Understood. Thanks, guys.

Our next question comes from John Heinbockel with Guggenheim Partners. Please proceed with your question.

Hey, guys. Good morning. This is Jake Niebach on for John here. Two for me. The first one, the average incentive revenue per member has been sequentially accelerating pretty meaningfully since the start of the year. And just curious, you know, what is driving those gains? You know, any seasonality factors to consider here, you know, such as anything relating to the pools or, you know, is it largely still related to personal training?

Yeah, I can take that. Yeah, exactly. All right. When you look at our comp, you know, last quarter we had a great comp. This quarter, you know, same thing. And a large part of that continues to be the success that we're seeing in our in-center businesses, right? So, you know, we put out that supplement that kind of broke down that comp and in-center was, you know, 3%. So, that's exactly right. We're seeing, you know, great, you know, in-center business penetration there and average dues and acquisition retention. So, Exactly.

Perfect. And then just a follow-up for me here, and you kind of alluded to it before, but with the 27 club pipeline, you know, almost complete and, you know, rolling through 28 now, you know, just curious if you could talk to us about your current thoughts on the size of the opportunity and the components from ground-up to urban developments. I know, you know, briefly mentioned that a little bit before, but just curious if you can elaborate on that. Thank you, guys.

I'll take that. This is Bahram. As I mentioned in my prepared remarks, the quantity and the quality of opportunities in development for us in the pipeline really has never been better. I don't really want to pigeonhole the company in exactly how many of what type of clubs we're going to deliver on a given year. and the only reason I don't do that is the size of the clubs that we are doing are significantly large buildings, whether if we go into an existing project, into the brand new building that is being built and we're included in that project or we're doing ground up, the timing of these things can move around significantly based on acquisition, approvals, You know, site work, et cetera. So we are very confident right now that we can deliver the higher end of the 12 to 14 for the foreseeable future. And with that, we're super excited with the opportunities that we're seeing. And we're also having a lot of incoming requests for international growth as well on top of what we are addressing to you right now just in US. And those significant additional opportunities are ahead of us when we have the opportunity, the time to invest in going into those markets and start exploring what we can do there. But right now, the last concern I have It's lack of growth opportunities. It's just, we are, we've never seen anything better.

Perfect. Thank you very much, guys. Thank you.

Our next question comes from Arpinia Khatrian with UBS. Please proceed with your question.

Thank you. I appreciate it. Good morning. So, you know, my question is, you know, overall consumer picture has gotten maybe a little bit weaker or at least and the perception of it is that it has softened a little bit. But your results today show acceleration. More importantly, if you look at average revenue per center member is accelerating as well nicely. And this is before larger clubs really get into the same store comp. Before we think about acceleration from here, could you maybe talk about the sustainability of this revenue per center member growth, particularly as it relates kind of these newer clubs coming online. And specifically, if you could talk a little bit about other places you see room for improvement for in-center spend and how you execute on it. Thank you.

All right. That's a great question. We have significant variance between the execution level of our in-center businesses within our roughly 200 locations that we have right now. So without concerning ourselves too much about the outside macroeconomics, we have significant opportunity to focus on improving those particular locations where they have significant opportunity in front of them. I really like to focus the investor and our team members on taking the opportunity when the opportunity is right in front of you. Hiding behind macroeconomics isn't something we're going to do now or we're going to do later, but we're really not seeing any impact from the macroeconomics. We are watching it, as I mentioned in my remarks. are all ignorant to it. We're paying attention as closely as we can, picking up as much information as we can from all sources we trust. And with an eye on that, we're working on what are the things we can do better inside of our control. And there's quite a bit of opportunity still there. Many of our clubs are executing exceptionally well, not only in creating that desirability for the customer experience for the facility, which brings them the subscription and the dues. They do exceptional job in in-centers, whether if it's personal training, cafe, a spa, kids, and some are mediocre. And we have the opportunity to go within and sort it through, and we do it every single week, every single month, and figure out where we can go and improve our performance. and I still feel very comfortable that we have significant opportunity within our capabilities and our execution.

Thank you.

That's very helpful. And my follow-up is related to the lease pack market. You know, in general, the transaction environment given rising rates and maybe just if you could talk to the depth of the market right now and whether some of these kind of core factors like rates affecting you much.

I mean, I could take that. Yeah, I mean, the cap rates don't move one for one, like with the 10-year as an example. And so, you know, we're still getting, you know, attractive rates as it relates to sale leasebacks. And so, yeah, the availability is obviously still there. So we're still able to get those at rates that are attractive.

Rates are still very similar to what they have been historically. And the difference in the, you know, few years percentage points like a 20 basis point, 15 basis point on the cap rate absolutely is insignificant in our total numbers that we will deliver. It's not significant at all. It won't play a factor in our numbers.

Thank you. This is very helpful. Thanks.

Our next question comes from Brant Montour of Barclays. Please proceed with your question.

Hey, good morning, everyone. This is Elizabeth on for Brant. Thanks for taking our question. So I wanted to ask, I know part of your strategy has been this ongoing membership optimization and the continued reduction in qualified medical members. I'm wondering how much more runway do you see here both in terms of where you think that membership base ultimately settles out and over what time period? and then maybe as a follow-up to that, as well as you think about like the general contributors to membership mix in your comp center growth, how do you think about the relative contribution from each of those individual buckets, whether it's expanding it to more affluent markets, members for membership, legacy, legacy churn, et cetera?

All right, I'm gonna take this on and give you a answer that I can best formulate for you. I start with the end. It's really, once again, not going to play a significant factor. It has never been a huge part of our dues revenue. It is a member sector that we would love to serve in a reasonable fashion. Over the last four or five years, some of our partners, insurance companies, have been extremely good partners and they have been also very realistic on what our particular situation is and what we can do and what we can't do. We have been in negotiations with most everybody. We're in a very, very good place and getting as much flexibility for our side to handle this type of population at the time in our clubs that it does not create capacity issues for the other members. So it is a delicate situation. It's not significant in numbers. It's delicate in terms of how we want to treat all folks as they want to come in and enjoy the lifetime facilities. And we want to try to serve the best way we can without impeding on other types of memberships. So it's a delicate management. We are extremely focused at making sure we're doing the right thing by all constituencies and yet buying as much flexibility in how we handle this. Ultimately, as a percentage of our total membership numbers, these numbers will continue to decline but very, very slowly from here going forward based on our negotiations. As far as the relative dues, as a percentage of our total dues, it's also going to continue to be reduced to almost a diminucible number. It's just not something we have a concern. Again, it's all about making sure We take care of our customers the best way we can.

Yeah, and to your comp, the second part of that question, the way you're going to see that materialize in the comp is, right, some of that, you're still going to see, you know, a mixed component of that being part of the comp, but you're going to start to see, you know, volume, you know, increase as you start to see the, you know, 12 to 14 and some of the larger format clubs. So that's the way it's going to play out in the comp set.

Great, thank you.

Our next question comes from Brian Nagel with Open Highland. Please proceed with your question.

Hey, guys. Good morning. Morning. Nice quarter. Congratulations again.

Thank you.

So the first question I want to ask, or topic I guess I want to, is pickleball. You know, so clearly, you know, we've talked for a while about, you know, pickleball being a significant effort and driver for a lifetime. There's been some news out there lately or recently of maybe some failures within the broader pickleball market. So I guess the question I want to ask is maybe twofold. One is an update on what you're seeing with your pickleball in your center's member engagement and such. And then secondarily, as you have these potential financial dislocations out there, does that create or help to create more of a market share opportunity for lifetime given you're managing the business so much better?

Hi, Brian. This is Bahram. I'll take this one. Look, the Failure of some of these pickleball-only facilities franchise-based, it's not a surprise. It was clearly my expectation from the get-go. Developing a racquet sports business that is strictly based on that particular racquet sport, strictly squash clubs, strictly racquetball clubs, just entirely tennis clubs or pickleball facilities. There's no difference. They are difficult economically to work. Lifetime concept has always been creating an environment that basically gives you all things under one roof. So we haven't been too concerned about those people coming. and we're not too concerned about them going. Many of the locations they have are not the type of real estate we would put a pickleball court in because they're inadequate spaces, they are not in off the right spacing, and it's not something that we're gonna jump in and try to go take over to run them. So we have an incredible, you know, Success with the way we are executing our pickleball. Our customer appreciates the entire facility, everything else they get with pickleball, the quality and the attention to detail that we provide for every aspect of our business. So and actually the business is performing very, very strong still for us. So I don't think These entities coming and going is a function of this. Anything wrong with the sport is really a function of people coming into it half-cocked without enough information, with enough due diligence, and they just roll out a bunch of franchise facilities. And of course, a lot of them will run into trouble. There's nothing more to read into it.

Yep, Rahm, that's very helpful. I appreciate all that context. And then the second question I have, the follow-up question I have, and I guess to follow up some of the prior questions, but you mentioned, or Erik, maybe as you mentioned, SPA is the driver of maybe some of the outsized expansion we're seeing now in incentive revenue. So I guess maybe we just dive a little deeper in there. What is happening with SPA, and how should we think about the runway here from your efforts with the SPA business?

I'll take it, again, with this one. Look, it's all about execution. If you go back and sort of check back the past remarks over the several years, we came back out of COVID with a strategy to focus on our swipes, getting the subscription built, building our dues, working on our basically efficiency of wiring of the company to create the margins, and then the next important priority was DPT, or Dynamic Personal Training, ran by our superpower here, Ryan Sonnenberg, that basically has really transformed the personal training and that has been really working and building and building and building. Sequentially, the next Two areas of focus were then spa and the cafe. The cafe is the strategy to go in and basically streamline, simplify execution so we can execute everything that we do do much better. That has helped us with the margin improvement this year because we are streamlining. and with the expectation that we will grow the revenue in the cafes next year. The spa, the team has done a phenomenal job of increasing engagement and bringing additional talent, recruiting the best spa talent into locations and we're seeing nice growth. So we are basically sequentially picking the areas that we need to improve and SPA has been one of those that has been showing up in revenue growth very nicely and we still have much more runway to go with the SPA and we have significant runway to go with the CAFE. And so those are both areas of focus right now with some early work paying property dividends and there's plenty more work to do in both areas.

Much appreciated. Congrats. Thanks.

Thank you.

Our next question comes from Eric Delores with Craig Hallam Capital Group. Please proceed with your question.

Great. Thanks for taking my questions. Congrats on another strong quarter here. Thank you. First one for me, just a bit of a follow up on the incentive revenue. So obviously some nice progress, improving the mix of qualified medical memberships. And I know that the sort of difference in Revenue generation mostly comes up in the dues for qualified medical memberships, but wondering if there's any, you know, material or significant difference on incentive revenue spend from those members to call out as we kind of think about that mix continuing to decrease?

No, I mean, nothing there. And quite honestly, a lot of those, you know, qualified medical memberships, they tend to swipe less and they're obviously maybe even a little more less engaged in the in-center businesses. So, you know, it's actually a net positive for us in that regard.

Okay, that's helpful. And then last one for me, just a bit more of like a macro qualitative question. So, you know, obviously, you know, consumer sort of focus on fitness has increased a lot over the past handful of years. As you guys continue opening clubs in new markets and kind of increasing your depth in existing markets, I'm just curious what you're seeing from an overall market share perspective. How much do you kind of view this membership growth as kind of the growing pie overall versus members switching to lifetime from other clubs? I'm just kind of wondering how you're sort of viewing that more longer-term kind of market share opportunity for you guys. Thank you.

I don't know, I promise you have a different perspective here, but a lot of our consumers that we have in our club don't obviously overlap with some of the high-volume, low-price, but what we see is we're going into more high-end markets. You know, our members are willing to spend more wallet share on health and wellness. And so, you know, we obviously expect that to continue, you know, the trend in the industry, obviously, to continue. And we expect to see that play out in all the markets we're going to.

The only thing I can just emphasize is that deliberately since coming back from COVID 2021, 2022, we have consistently focused on placing the company at the top end of the cake. have all been shaped for the consumer. We have consistently felt that we were not seeing any impact from the consumer getting into the macroeconomic pressures. And the customer who is coming to Lifetime is coming to Lifetime fully because of the desirability of what we deliver to them. And that particular customer is not, you know, I don't think they're shying away from buying things still. So we're not seeing any impact. Very helpful and encouraging.

Thanks for taking my questions. Thank you.

Our next question comes from John Kippor with Goldman Sachs. Please proceed with your question.

Great. Thank you, guys. Good morning. I appreciate the question. So I just wanted to talk about incentive revenue a little bit more. Obviously in the comp, We've seen an acceleration in the last three quarters. I'm just wondering if you guys expect for that to continue in 4Q or, you know, it's a seasonally smaller quarter. I'm not sure if you're expecting a draw down there. And then if you can point to maybe the drivers of that sequential improvement. It sounds like it's DPT and SPA, but just any more color on like DPT attachment. Is that going up? Is it higher frequency? Is it pricing? Just exactly what's driving that.

Thank you. You're very clever. As I've said, we tried not to make mid-quarter comments, but I'll refer you back to what I said earlier. We are not seeing any impact from anything, so our results are still following the same trends that we've had in the past. Again, there are There are seasonality into the summer months with the pooled beach clubs, but taking that seasonality out, everything's still exactly the same.

Yeah, and we've kind of said this. It's kind of been the same kind of thing quarter over quarter. As it relates to DPT, we're adding more trainers. Their efficiency is going up. It's another quarter. We don't give penetration, but we did have an increase in penetration. I mean, you can take this across the in-center business as you look at the number of swimmers we have. You know, that was up double digits. So, you know, when we talk about the overall execution and the experience, when we do that, it obviously heightens the level of in-center business engagement, and that's what we're seeing, continue to see.

And are you seeing the same kind of trajectory both in the comp centers as well as new centers, that DPT attachment and revenue generation is

We are, yeah. So it's not just the new clubs. We're also seeing that in comp clubs across the portfolio.

Perfect. Sounds great, guys. Thank you very much.

Thank you.

Our next question comes from Chris Waronka with Deutsche Bank. Please proceed with your question.

Hey, good morning, guys. Congratulations on another great quarter. Thank you. So obviously, again, really impressive results on the comp growth with both dues and in-center. You've talked a lot about it. The question would be, when you look at the bucket of folks who are not spending as much as the top end on in-center things, is there any thought to... giving them bundling options to kind of draw out that spend is just curious. And I'm not really talking about the medical qualified memberships, but there's probably a bucket of folks who are on a relative basis are underspending versus the higher end. Is there any initiatives you guys are working on to increase spend among that group? And again, it's a good problem to have because you're having very good results, but you're always looking for more, right?

Well, I would say we're always looking for ways to obviously add value to the membership. But when you talk about things like bundling and promotions, I mean, as you know, we're not a promotional company. Our focus continues to be on delivering the highest experience in all of our programming, in all of our services. And at the end of the day, that's the draw, what brings people in to engage in those services. So I would say, you know, from bundling promotions, it's just not how we position our products and services.

Deliberately, the strategy of the company is not to focus on promotional packaging, bundling, whatever you want to call it. Once you start going in that direction, you stop focusing on what can I do better to improve the actual product or experience that the customers have. and so we are very deliberate to not engage in those things to try to make sure our results a function of the product that we deliver to the customer.

Okay, understood. Thanks, guys. And just as a follow-up, and certainly understanding and respecting Bahram's comment earlier that some of these standalone bracket sport centers don't really work, but do you guys have, when you comb across the whole estate of 200 locations, do you have any opportunities where you could add Again, it's an addition. It's not a standalone where you could potentially add some standalone, whether it's pickleball or tennis or basketball or something else. As you're going through the Sale Eastpac strategies, are there any areas in your own portfolio where there's going to be some stuff that's additive on the kind of outdoor sports side?

I mean, look, if the opportunity is there and the market's there, We are making those types of adjustments all the time. I think we have taken the bulk of, but not all, the bulk of the facilities in the country. We have transformed our spaces from one use to the other to increase utilization of that space. That's work in progress. It always is. We measure the efficiency. of every particular space that we have in any club. And if that utilization isn't at a reasonable level, then we put something else in it. So there are always some adjustments, but the bulk of these movements were taking place. We are, you know, building a lot of new clubs. They have, you know, additional pickleball indoor, outdoor, covered, whatever that, They're part of this. We're almost closing the year just under 1,000 pickleball courts. And within the first few months of next year, we'll have over 1,000 pickleball courts in operations, which is really a number that we set up a few years back. And I'm really, really proud of my team for executing with such level of excellence, both on building the places, managing it, programming it, and delivering the experience to the customer. What we see that I really love is members who are traveling around the country for their work, for their business, for vacation, and they are literally going from lifetime location to lifetime location, sending us pictures. They love the... experiences they get in different parts of the country as we build more incredible extraordinary facilities around the country that will strengthen the relationship between us and our customer because they can touch lifetime even when they're away from home which has been something I've been looking forward to for years and years and finally seeing it in action is really cool.

Okay, very good. Appreciate all that color. Thanks, guys.

Our next question comes from Owen Rickard with Northland Capital Markets. Please proceed with your question.

Hey, Bahram. Hey, Erik. Congrats on another unreal quarter. First, for me, LT Social sounds like it's been an absolute hit so far. I know it's still early, but Do you view LT Social as primarily a retention or loyalty tool, or is there a path to this becoming a real incremental revenue driver? Both.

That's the answer. You asked a very nice question, and I gave you a very great answer. Both. That you did.

I can't argue with that. And then I guess secondly for me, kind of building off that, you know, the GNA was up in the quarter just on incentive, benefit, and marketing costs. Is the step up in marketing spend tied specifically to LT Social and brand elevation? And should we expect that to persist as a higher run rate percentage of revenue going forward?

No, there was very little cost associated with LT Social. And You mentioned the incentive, but we're still scaling G&A as a percent of revenue, so that just wasn't a big driver.

We don't plan to spend any more percent. We don't really don't see a need for spending more money on marketing as a percentage of our revenue. The question is that small percentage that we are spending, You know, as we grow the revenue, that dollar, there's actually at the same percentage, we have more incremental dollars to spend, is how do we deploy that? LT Social events in New York, the premiere was unique, but the other LT Social events, they're not really there for a huge revenue or profit business, but they will generate revenue and margins. as we execute those. The main function of the LT Social right now is to deliver that other dimension of health and well-being, which is a social health, a social connection, feeling happier, being in an environment with the people that you want to be with, you associate with. And there is plenty of opportunities along the way. how we can add additional monetization to it. But initially, it will help retention and customer experience.

And just back to the kind of a little more tactically, you mentioned, you know, in nominal dollars, G&A, but as a percent of revenue, it was actually 20 basis points better than last quarter and last year. So I just want to point that out. Awesome. Thanks, guys. Appreciate it. Thank you.

Our next question comes from Anthony Bonillo with Wells Fargo. Please proceed with your question.

Yeah, hey, guys. Thanks for taking our questions. I just wanted to ask about the Q4 margin guidance for starters. I think this implies a slight step down versus what you would typically see seasonally. I know you've got some cost ramp associated with new clubs coming on, and you guys tend to plan conservatively, but just anything else to flag there in terms of puts and takes as we model that out?

You mentioned one of the bigger ones. So you've got three things going on there. One, we're going to have some presale costs associated with clubs that will open late in the quarter. You got the new clubs coming online, which obviously as they're early in their ramp, there's a little bit of margin compression there. there as well. And then as a reminder, proportionally, when you look at our revenue, we're seeing an outsized growth in our in-center versus dues. We've seen that this year and last year, et cetera. And so as you know, in-center has a lower margin. So it's really just a function of those three things.

Got it. That's helpful. And then just on MUSE and AI agents in general, I think we heard some concerns through the quarter from investors in terms of people using these to maybe cancel and negotiate subscriptions. It seems like you didn't really see an impact based on what you just reported, but can you just maybe talk about what you saw there as the consumer started using those?

We've seen zero. We have had zero impact from this. Again, I emphasize the reason why. Some of the things that will end up being done to help the consumer is because many businesses don't build their business from a customer point of view to begin with. And they find ways to just sort of make it more difficult for a customer to get out of a contract or something. We built the company based on the customer point of view, having no contracts. We eliminated any sort of a promotional sales process. focused our company on maximum desirability is our only weapon, as I mentioned earlier, for people to join. And then we have the easiest, we have had the easiest cancellation policy to begin with. Somebody, we have no contracts, they're month to month, and they wanna drop out if we're not pleasing them the way we aspire to, then they just give us a notice, a 30-day notice, and they drop out. would have had zero impact. They're basically forcing other companies to do what we've been doing the entire 30 years.

If I could add to that, Brahm, I mean, the other thing to remember, we are a use model. So when you think about a $10 or $15 subscription that nobody's using, for sure that's at risk. But as Brahm mentioned in his comments, members are visiting 13 times per month. So it just hasn't been an issue, no impact there. Thanks so much, guys.

Our next question comes from Andrew Dodoro with Bank of America. Please proceed with your question.

Hey, good morning, everyone. So, Bahram, just in terms of the unit growth expectations, the 12 to 14, you've clearly had a lot of success with the Comp Store set and new openings. So, I guess what specifically are the constraints, you know, ongoing maybe above 14 new openings per year. Why is that the right target? Anything internally or externally keeping you at that number? And maybe any milestones you would need to see met to move above that 14 new center target? Thank you.

Look, our commitment, my past CFOs, now particularly Erik, one of the best I've ever seen, and myself. Commitment to you guys is try to not over-promise and under-deliver. So we are very cautious on how we speak and what we tell you so it doesn't take any. So the reality is, can it possibly some year go more than 14? Yes, but for right now, I think 12 to 14 is really the right number. It accommodates all of our growth metrics that we have in mind of how fast we want to grow the business. It also allows us to deliver our brand with excellence every time we do it. Now, is it possible that we can deliver more than that? Yes. Would I lead you on to just go ahead and start kind of modeling a bigger number, I wouldn't want to do that. But the main thing is to make sure we deliver the right locations with the right quality and the right talent to deliver the experiences the way we want it.

And if I could come at it from a numbers perspective, I'd remind you also that we're targeting double-digit revenue growth, 10% to 12%. And so, you know, we can get there with 14 clubs. We have ways that we can get there. So it's not inherently just about the number of clubs. It's about, obviously, the experience as Brahm mentioned, but again, targeting that 10% to 12%.

What I feel really great about right now is the focus on the quality, of the experiences and continuing to strengthen our brand with our customer who appreciates what Lifetime brings to them. Secondly, going back to some of the earlier comments regarding sell-leasebacks and such, as we look at our long-range plan, each year going forward, We need to do less sell-leaseback versus 2026 in order to still stay cash flow positive. 28, we would need to do even less sell-leaseback. And as we go forward, by the time we get to 2029, 2030, we can absolutely deliver all of our growth without even needing the sell-leaseback market. That doesn't mean we won't utilize that market when it's efficient capital for us to come in. But we do have now the company at a place that when you can see down the runway, we are in a position to basically pick the best cost of capital, deploy the dollars in the best place for rate of return, and then look and see when we have opportunity to accelerate the growth.

That's great color. I'll leave it there. Thank you. Thank you.

Our next question comes from Molly Baum with Morgan Stanley Investment Management Group. Please proceed with your question.

Hi. Thank you so much for taking our questions. The first one I wanted to ask, another one on AI, but maybe more so if you could just talk about where you see some of the bigger opportunities from an AI standpoint, whether it's from a member experience standpoint with LACI, or if you see opportunities to use it from a maybe club level productivity standpoint. I know you talked about some variants and in-center execution, so if you see opportunities there, thanks.

Yeah, it's a great question. We have AI initiatives in every part of our business. From customer standpoint, we continue to work on making sure AI can become a better tool for them and they can use AI in a way that just they expect today as they get better with utilization of AI, that naturally they have to be able to do that with our lifetime assets. So as of just yesterday, within our own group, somebody brought up the LT Shop, and so it's harder to find on the app because of course we offer 50 different programs on one app. So it's hard to have everything surface on the front page. But if you go to Lacey and just say, take me to LT Shop, it will take you right to that. That's a simple, that's an easy, simple example of having to make sure LACI will continue to become a tool, an AI tool for our members to navigate all the different programs that we offer in the company better. For internally, it's everywhere. I mean, when you think about what AI can do for any individual, for every position, AI should be able to help any position. If somebody who manages a club, How can they be more aware of all the administrative, all the analytical things? With their AI companion, they will be able to be much more aware and organize, prioritize, execute all managerial tasks much, much better by proper utilization of AI. and then we of course have to build them a enterprise system companion so our information stays within our walls and then give them that, then that makes them more capable of delivering what we're looking for from them, which is performance, entertainment, engagement, leadership type of qualities. So I think if I don't think there is a day that I am not in multiple meetings that we are taking a look and see how AI utilization can enhance our execution. And the back of the house, when you look at the, from our legal department to our finance department, analytics, we are basically putting AI to work in every aspect of our business every day. bringing AI champions in different areas to make sure they focus on educating and training everybody else on how to operate, how to prompt the AI functions. So it's really part of every hour of every day. I don't know what else I could tell you, but we have been engaged. I have been driving. the company for the last three years and I can say the team has done an amazing job and we're really really good place at this moment in time and we have plenty of runway to go and we don't need to build anything in particular what we need to do is we need to become more efficient in learning how to operate the AI tools that are available they will enhance themselves every six months as everybody's So you just have to stay on top of how to use them.

Got it. Now that makes a lot of sense, and it's very interesting. My next question is a bit more boilerplate than that, but just quickly, I wanted to also ask for new club openings. You may have talked about this in past calls, but it's back end weighted this year, and you talked today about your confidence in unit targets for 2027. Are you able to give any additional color in terms of cadence? Are you expecting a similar cadence where more of the clubs in 27 are back-end loaded as well? And that's it for me. Thanks so much.

I don't think we could make anything more back-ended than this year. So it's just pretty much the way the schedule fell together. There's almost seven clubs opening in the last quarter. I don't expect that to happen next year. It will be a little more balanced throughout the year as I look at the schedule.

Yeah, we're just not going to have as many in Q4. I mean, you know, maybe a little back half, but certainly not back Q4.

No, back Q4. It's moving forward a little bit.

Got it. Great. Thank you so much.

Thanks a lot.

Our next question comes from Logan Reich with RBC Capital Markets. Please proceed with your question.

Hey, good morning. Thanks for taking the questions and congrats on the solid execution for yet another quarter. I wanted to ask just on Miura, we haven't gotten an update on it yet on the call. And I recall last quarter you were still working on kind of ironing out the kinks in the operating model before scaling it up. So maybe just an update on how the operating model Work is progressing. And then second part of it is just what's the or how should we think about the rollout to additional clubs and maybe just sizing that opportunity either from number of clubs perspective or revenue or EBITDA contribution.

I would caution everybody not to put anything specifically for that. for the immediate near future. This is a long-term growth opportunity for us. We have two ways to think about it. A broader, much easier, accessible to most members strategy that we're working on through what we call Lifetime Health and Wellness Hub. that basically does not require as sophisticated process as MIORA. And then a much more in-depth programming and service and hands-on touch almost concierge-like service with MIORA. And that one is going to take a lot more fine-tuning of our systems. picked a system early this year for our administration and software to operate, and that system has not proved to be successful for our team. So we had to pause, and we are in the process of changing the system. A few more details ironed out, and then we will I have no doubt that long term we will have a Miura location in every market and then more likely in probably every other club ultimately or a third of our clubs would have them because the demand is there. Our customer wants this. We have incredible engagement. So the retention of our customer in Miura is absolutely amazing. It's in the 90% range, which is really what we've expected from that physical connection. The expectation long-term is to be rolled out across every market and many, many clubs. There's no loss of enthusiasm towards that. We just want to make sure we do it very, very right. And then the other plan is to just have a much broader reach, you know, blood work, blood analysis, and guidance to lifetime health and wellness hubs. So those are the two channels that we're working, the macro and the micro. one much easier, accessible for everyone, and one a lot more in-depth through the MIORA facilities. Got it. That's helpful, Bahram.

And then just my follow-up is on in-center services more broadly. I mean, you guys have executed really well on the DPT model. You're taking that over to the SPA, and that seems to be driving acceleration as well. I guess just bigger picture for the in-center business, are there any other services that you guys are sort of contemplating adding into the clubs to capture more wallet share from your members and the health and wellness space that appears to be growing pretty rapidly?

The answer, short, short answer is yes. We're always, always working on what are the other natural programs and services that our customers would want to have under the same brand. And we are excited about some of the initiatives that we are on right now, particularly through potential growth channels for LT Social. But we'll give you more color as we get closer to implementation of some of those concepts. Very helpful. Thanks, guys. Thanks a lot. Bye.

We've reached the end of our question and answer session. I would now like to turn the floor back over to Connor Wienberg for closing comments.

Great. Thank you, operator. Thank you, everyone, for joining us this morning. Look forward to having you on the next call.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.