Life Time Group Holdings, Inc.

Greetings and welcome to the Lifetime Group Holdings Inc. Q3 2024 earnings conference call. At this time all participants are in listen-only mode. If anyone should require operator assistance, please press star zero on your telephone keypad. A question and answer session will follow the formal presentation. You may be placed into question Q at any time by pressing star one on your telephone keypad. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Ken Cooper, Investor Relations. Please go ahead.

Good morning and thank you for joining us for the third quarter 2024 Lifetime Group Holdings earnings conference call. With me today are Brahma Karate, founder, chairman, and CEO, and Eric Weaver, executive vice president, CFO. During the call, the company 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 issued this morning, are AK filed at the SEC, and on the investor relations section of our website. With that, I will turn the call over to Eric.

Thank you, Ken, and good morning, everyone. We appreciate you joining us this morning. We're excited to share with you our third quarter results, the full details of which can be found in the earnings release we issued this morning. For the third quarter, total revenue increased 18% to $693 million, driven by a 20% increase in membership dues and enrollment fees and a 16% increase in incentive revenue. Center memberships increased 5% compared to last year to end the quarter at more than 826,000 memberships. When combined with our digital on-hold memberships, total memberships ended the quarter at approximately $877,000. Average monthly dues were $198, up approximately from the third quarter of last year. Average revenue per center membership increased to $815 from $722 in the prior year period, as we continued to benefit from higher dues and increased in-center activity. Net income for the third quarter was $41.4 million versus $7.9 million in the third quarter 2023. Adjusted net income was $56.3 million versus $26.7 million in the prior year period, an increase of $29.6 million. Deluded earnings per share was 19 cents compared to 4 cents per share in the third quarter last year and 26 cents per share on an adjusted basis compared to 13 cents in the prior year period. This was an increase of 100% versus the prior year period. Adjusted EBITDA for the third quarter was $180.3 million, an increase of 26% versus $143.0 million in the third quarter 2023, and our adjusted EBITDA margin of .0% increased 160 basis points as compared to the third quarter 2023. Net cash provided by operating activities increased 32% to $151 million as compared to the third quarter 2023. For the second consecutive quarter, we achieved positive free cash flow. Free cash flow increased by $169 million to $138 million in the third quarter compared to the prior year period. While this number includes sale, leaseback, and land sale proceeds of $74 million for the quarter, we achieved positive free cash flow prior to these proceeds. We reduced our net debt to adjusted EBITDA leverage to 2.4 times in the third quarter versus 3.7 times in the prior year period. With that, I will now pass the call over to Brahm.

Brahm? Thank you, Eric, for doing such a fantastic job. And let me extend my thanks to our more than 41,000 team members who made this great performance Eric just shared with you possible. I'm going to keep my remarks very short. The numbers speak for themselves. As many of you know, I am never satisfied, but I am as pleased as I've ever been with the accomplishments of our entire team over the last few years. We responded to the challenges presented over the last four years, reinventing, transforming, and improving every aspect of lifetime. We elevated our brand. We've evolved our clubs, and today, we're engaging with our members deeply and profoundly as never before. Our members love lifetime. At the same time, we have rewired our business and organizational structure to maximize efficiency. Today, we are by far the best version of ourselves that we have ever been. We offer the highest quality member experiences in the best facilities in the health and leisure industry. Our momentum has been spectacular, and it continues today. We exceeded every financial goal and every performance metric we set for ourselves. Membership, retention, revenue, adjusted EBITDA, free cash flow, and EPS. Now that we have deleveraged our balance sheet and we are generating free cash flow, our focus will be on continuing to deliver double-digit revenue and adjusted EBITDA growth. As you read in this morning press release, we are raising revenue guidance to a range of $2.595 billion to $2.605 billion, and our adjusted EBITDA guidance to a range of $658 million to $662 million. We are now looking forward to take your questions.

Thank you. Now that you've done your question and answer session, if you'd like to be placed into question Q, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question Q. You may press star two if you'd like to remove your question from the queue. One moment please while we poll for questions. Our first question is coming from Brian Nagle from Oppenheimer. Your line is now live.

Good morning. Good morning, Ryan. Once again, congrats on a very nice quarter.

Thank you.

I have two questions. I guess one bigger picture, maybe one smaller picture. I'll put them together. But first off, the Ram on the bigger picture side. So with all the work on the balance sheet, your debt ratio is now at or below the target you articulated previously. How should we be thinking about, I should say, the growth profile of lifetime going from here, particularly as we start looking towards 2025 and new openings? Then the second question I have is just shorter term. Just with respect to the guidance, you once again beat street estimates and lifted guidance for the year. You don't give quarterly guidance now, but I guess the question I'm asking is are you actually with this guidance increase lifting your own internal targets for the quarter as well? Thank you.

Okay. So let me start with your first question. Our target at EBITDA is debt to EBITDA is 1.75 to 2.25. That's the range that I think is appropriate for our company considering the fact that we own over $3 billion of market price on real estate, more like $3.5 billion. If we didn't have that, I would like to have our debt to EBITDA be one and a quarter, one and a half. So lifetime brand is such an incredible brand. It's paying such an incredible dividend. Our mindset has been the balance sheet has to match that brand. Thanks to our partners and our team, Eric, everybody, we kind of had been steadfast to leverage where we want to. The other thing that I have in mind is a company that is cash flow positive after its growth capital is a different kind of company. It's the kind of company that basically has the destiny in their own hands. So we have guided everybody over and over that $25 to $30 million of net out of our pocket per location. When I say that, and that's basically in our mind, sort of a large format equivalent per 100,000 square feet is what's going to take to build. We have probably about 100 different deals in the pipeline we're chasing right now. The pipeline looks very good for 25, looks even better for 26 and 27. And we will manage the growth so that A, we can continue to deliver excellent results and continue to make sure we uphold our brand. And two, we are able to generate incremental $5,200 million of free cash flow per year. The rest of it is intended to grow the company. So we have substantial free cash flow after interest, which is now going to be significantly lower after what we were able to accomplish last couple days for 2025. Then it's spinning 24 and 23. But after the interest and what we call maintenance capex, modernization capex, we will have significant additional capital. We can start projects, expedite growth, and still maintain that free cash flow positive. So that's really what the first question, the second question is, look, we have always guided you guys with a number that we foresee hard to miss. We want to incorporate any potential macro headwinds or anything conservatively. Make sure the number we give you, Eric and I, is one that we have a very, very high level of confidence that we can deliver. It doesn't mean that's all it can be. All it means is the number we want to share with you to make sure we don't go below that.

Yeah, just to add to that, the guidance, we increased it because we're obviously seeing still very positive trends in the business. And so the implied guidance for Q4 on a revenue basis is about 15% year over year growth and about 16% on adjusted EBITDA. And then for the second half, it's 17% on the revenue side and 21% on adjusted EBITDA. So still very great momentum in the business that we're seeing.

Thanks,

guys. I appreciate it.

Thank

you.

Thank you. Next question is coming from John Heimbacher from Guggenheim Security.

Hey, Brom, I want to start with the 100 plus deals in the pipeline. How would you segregate those out, the ground ups, right, maybe take club takeovers, your various channels, right, residential buildings? How would you segregate that out? And then, yeah, I know you talk about the 10 to 12 LFEs. What do you think is the organization's capacity? Can you eventually do more if you look at a couple of years, do more than the 10 to 12? Or you would prefer to limit it to that?

No, actually, as it looks like right now, next year could be the 10 to 12, 25. 26 right now, as the way the schedule rolls out, is already probably 12 to 14. And I think that number can expand. So we have this pipeline and we're working on deals and some of the gestations are much longer than others. And, you know, we the ground ups, obviously, are the ones that they take longer time to put together. The ones that go into the high rise, resi buildings, those take a long time, but there are deals. We're working on those that have been in the pipeline for a long time. So, as what I can answer you and everybody else, it's you have to look at our, you know, we're not building sweet greens. We're building anywhere from 40, 50,000 square feet to 120, 30, 40,000 square feet. And on a variety of different real estate opportunities. So, and we have these deals in the pipeline and each of them have their own schedule that, you know, is the right timing for the developer, for us, for the whole project. So they're going to be lumpy. What I mean by that is next year could be more of clubs that their takeovers and transformations the following year is going to be a lot more our ground up. So what I would basically recommend to everybody is to really think about them as a blended, you know, half and half of at this point. I think as we go into about three, four years from today, based on the number of conversations we're in, and based on the incredible results that the lifetime living is producing for the lifetime living, the owners of the actual buildings in terms of ramp, consistently we're getting about 15, 20 percent more rent. Consistently we have a retention that they have never seen before is 20, you know, 20 percent attrition rate in that side of the business for them versus as much as 40 in other apartment buildings. And of course we ramp these faster. So that has increased and we now have five, six, seven of these locations in place so they can look at the data. It's not just a thought process. It's actually fact supporting. So we are in a lot of those discussions. So I think as I look out four or five years out, John, I see there's going to be probably a lot more of those coming online. But for right now I would like to guide everyone to, hey, take a look at a three-year period of 30 to 40 locations in that three-year period. About a half and half is the right mix of ground up versus other stuff.

And then maybe as a follow-up on that, right, so I think about the incentive revenue spend per month, per member, you know, is I think it's like 75 bucks. It certainly in theory could be higher than that, right, if people are engaging with all your offerings. But I think you've also not wanted to do a hard sell there. How do you think about expanding that wallet share over the next several years? Is there anything you would want to do differently to accelerate that or it just happens naturally? Yeah,

so there are two, three categories. One, we have really done a nice job. My team has done a nice job with DPT, with our dynamic personal training. And that has been growing really nicely. But despite that, you have clubs that they're doing five million a year in DPT and you have clubs that they're, similar sized clubs, doing two million. So we have always opportunity to go through best practices, do the top 25, bottom 25 clubs in terms in each category, cafes, spa, PT, kids. We do that routinely. And then as more things are going really well, we have more time to focus on the areas where there's more opportunity. And that's what's happening at Lifetime. So I think there's still substantial opportunity to execute better across the board. And when I say that is there are some clubs are doing amazing exceptional performance in PT or in food or in spa. And then there are clubs who are not. So we have in aggregate, we have room to do better job with our F&B. We have aggregately room to do better job with spa. And even with PT, those are the three big drivers of in center. Of course, kids is also one, but we do a pretty good job with that. Now, Miura, which we talked about a while back, and I told you guys to not get excited about it. It's important. You still don't get excited about my goal was to deliver a customer journey that is fantastic. We've done that. Then the goal was to create a profitable unit business model. We are doubling our revenue right now. Sometimes by the week, sometimes by the month over month, for sure is doubling September over August, October over September. And once we have that, and the goal for that is end of this year. Once we have a model that is absolutely perfect, then I would say probably 40, 50 locations across the country, not one in every club, but basically at least one, two, three in it per market. We can roll out Miura. The beauty of that is you need the IP, we have it. You need the chief science officer, we have it. You need space. So we don't have to like, you know, it's a freestanding business has to go. We already have the space. We already have the customers. We have the demand. So we've got that. We have, we are just about to launch LTH, Lifetime Health brand. That's all of the supplements and nutritional products. We expect that business to grow substantially over, you know, year on year. I mean, not 10% or 20%, but significantly more than that in 2025. The digital subscription is growing about 100,000 subscribers a year. We are a month. So just been now over a million, one million, two subscribers. That will fuel the partnership, LTP partnerships revenue. That will improve, that will increase the opportunities that LTH products are apparel that we partner with the different partners and the products of other partners. So we anticipate continuing to roll out opportunities to expand the revenue of the company on an incredibly asset light format based on the power of our brand and our footprint. As we are expanding that footprint, building more incredible exceptional brand building, as well as revenue square foot building locations, we continue to look for ways to expand our revenue and EBITDA and deliver more asset light. So we expect to deliver. Now we don't want to commit to more than a very low double digit revenue and EBITDA for the 10 to 12% revenue EBITDA, just like I mentioned before per year, which I think is a very respectable number. But we obviously aren't going to be satisfied with that. And that's not the internal goal. But we're not going to commit to anything more. As I mentioned earlier, we do not want to disappoint you or any investor by over promising and under delivering.

Thank you.

Thank you. Next question is coming from Megan Alexander from Morgan Stanley. Your line is now live.

Good morning. I wanted to just maybe touch on the change in the leverage target around two times you're talking about at that midpoint versus the two and a half-ish prior. Can you just talk about the thinking around that a bit for us?

No, I think you might have misunderstood. Our target was to get to, we committed to get to the three, beginning of the under three, which is a critical point for so many investors. But many investors, some of the large, large balls bracket investors basically said, hey, three is okay. We really don't want to even engage until it's really under two and a half times. We believe the company is a strong double B credit. Thank God, regardless of Moody's or S&P wanting to wait another quarter or two before they actually give that in a corporate rating. The investors hailed us by giving us the rate that matches a strong double B. So we are very, very grateful for what we were able to accomplish this last week. But the target that I believe makes a company a strong double B is exactly the numbers I told you. It needs to be under two times the three, but duh. For sure, if you don't have enough real estate assets, what gives me the comfort to be between 1.75 and 2.25 is the fact that our entire debt could be completely retired by just doing a billion and a half sell lease back. So that is what allows me to say, okay, let's go between 1.75, 2.25 targets. And that number is easily going to be our estimate. Eric's estimate right now is we're going to be under 2.25 by end of the year, which gives us at least one more step down on our revolver. So we just feel like that's where we want to be. We want to have a brand and a balance sheet that they're both excellent, and we get the cheapest cost of capital. But it doesn't by no means, Megan, it's going to restrict our growth opportunity. We can grow inside of that envelope as much as we really feel like the growth opportunities are there.

That's really helpful, makes a lot of sense. And maybe just to follow up on that, I think you said you could do as much as a billion and a half of sale lease backs. Obviously, the sale lease back proceeds have come in better this year than what you were talking about to start the year. Is that still mostly opportunistic? Are you starting to see cap rates that are closer to what you'd like to see? And how are you thinking about kind of the market for sale lease backs as we head into 2025?

Yeah, fantastic question, Megan. So it's going to be incredibly robust. We are already getting inbound sort of conversations from our partners that they like to have a couple hundred million dollars, a hundred million dollars worth of sale lease back that if we can provide the assets. So let's think about it this way. If we were to build, you know, 10 ground up facilities that could take as much as, you know, $600 million of capital, all in. What we keep telling everybody and we keep reiterating is 25 to 30 million. So if you take that number, take even the 30 million off of it on 10 of those, that's $300 million, $250 million bucks. The other portion of it is recycling at clubs that we have already built, if you know what I'm saying to you. So we have right now at least half a dozen clubs we built just in the last year or two, paid for all of the ground up, you know, very, very amazing assets, large format, super large. But we still own all the real estate. We haven't taken those to sell these back. So when the incoming offers are attractive, and I think by middle of next year, we will see sell these backs based on our credit, more favorable than the best sell these backs we've ever done. And I expect us to do about 250 to $300 million worth of sell these back on an annual basis, take that money and recycle it so that the net invested capital in each new ground up is no more than 25, 30 million bucks. Does that make sense?

Makes a lot of sense.

All right. Thank you so much, Megan.

Thank you. Next question is coming from Chris Moronka from Deutsche Bank. Your line is now live.

Hey, guys. Good morning. Good morning. Hey, hey, hey, hey, Brahm. Morning. So, Brahm, when you talk about the some of the, I guess, club takeovers or conversion opportunities, right, that are better, separate and distinct from the new builds. When you when you look at those, those existing assets, is there, you know, obviously, you're solving for for an ROI, see you're solving for some kind of free cash flow yield. Ultimately, do you think you tend to think you'll be more surprised on revenue upside or in the case of, you know, an existing center or something like that or a take over? Is there more opportunity to just get a better a better whether it's rent or, you know, it's an existing club, better operating model? Is there any way to think about which opportunity means more to you?

Not at all. I would give you just two examples. One club has been open in Tampa. One, we took two clubs last year. And the last year we took them from the landlord basically gave it to us with a great TI package. One in Tampa, one in Detroit, in Atlanta. The Tampa club just opened this year and this summer, August, I think, and the Atlanta facility will open in November. Both of them incredible deals, you know, it starts as a lease, landowners providing some additional TI dollars. We go in and we got those things out. When we take a club out from somebody else, many times it's just like a new new build. The benefit is you already have the right zoning. You already have that location is approved for a club business. It cuts through some challenges, but we literally design it, redesign it from a get-go. And sometimes what we're getting is really a piece of land. We're getting a shell. And the fact that it's already zoned for that use, but then it's completely rebuilt from scratch like a brand new club. Now because you have the zoning, you have the curb and gutter, you have all that instead of taking four years, it takes a year or 18 months to do so. Then we expect it to deliver exactly the same type of return. Our business plan isn't going to go into these things and be excited about it if it has a lower rate of return than the other things we do. So that rate of return, generally speaking, is in that 30 to 40 percent IRR on a net invested capital basis. We always look at these the same way. And then there are some that are strategic. You might take over some assets because it's extremely strategic. You're intending to do something with tennis or pickleball or some other deal that it blends in. But I really just want to make your work, all of your work, easy enough is that if you think about how we are guiding you with the 25, 30 million net invested capital per large format equivalent, really what we need to maybe try to help you guys with best is to try to give you a schedule of opening as soon as we can commit to it for how many hundreds of thousands square feet per quarter is probably the better way to go about it. Otherwise, it is really, really hard to create a model that anticipates, oh my God, 26, you're going to get 12 all ground up clubs. And 27, you might get something a little bit different. So it's just we will try to manage that and simplify it and give you guys a way to model much easier.

Okay, thanks. Thanks, Brahm. That's super, super helpful. And yeah, we'd certainly appreciate any color on that. I'm quick follow up if I could. And next to some the LTH, the brand, branded things you'll be doing. Is there any way to

put

together a framework now for how big that opportunity is and how you measure it? Is it going to be based on per revenue you ultimately generate per digital member plus in center member? Or how are you going to know that you've reached the full potential whenever you do?

Yeah, I know. I think you might want to look at companies like Thorn, look at the top four or five high quality. And I'm going to give some props to Thorn because I take a bunch of their product myself other than my products are generally either LTH or Thorn. But there are other really great brands. Take a look at really, really high quality brands, high quality production, which is very rare to come by, very hard to trust nutritional products because they're not regulated like the drugs are. And that's why I take about 80 supplement pills a day. I'm not going to put anything in my body that is not tested for what it is. So we've had this discipline for 20 plus years to produce the absolute best products. We didn't really have enough scale to really put energy behind it. But now I emphasize with the Lifetime subscription growing at 100,000 subscribers a month, athletic event is growing, our partnerships is growing, the brand is 130, 40 billion impressions and it's going to keep growing. Now is the time to say, okay, we can build the business that five years, 10 years could be easily a $500 million dollar a billion dollar supplement business. And so, and nobody has a better right to win in that space than Lifetime. So my long term, not 2024 or 2025, my long term vision is that, you know, we haven't built a half a billion dollar business out of that. Then I really have not achieved my vision with that thing. So I think it's a, and it's not just about money. There is a place where we really can do some incredible good for the society because there just aren't that many supplement lines that you take and you take it to a lab, you have them tested and you're going to find half the stuff they say is in there is not there or they're not in the business.

Okay. Thanks. Thanks, Bram. Very, very insightful.

Thank you.

Thank you. Next question today is coming from Michael Hirsch from Wells Fargo. Your line is now live.

Thank you for taking my questions. At your investor day, you announced your long term target of four to 5% growth from fully ramped centers. 2024 exceeded that. So I'm just wondering how should we think about this for 2025?

So Michael, this is Bram. I'm going to start taking those 40 pills with my shake and give a chance to Eric to give you some good stats. Eric, come on.

Yeah, no, that's yeah, we're still benefiting a little bit this year, you know, from some of the, you know, some of the pricing, but the four to 5% is still what we're modeling long term. So for next year and going forward, that's going to begin to normalize into that, you know, four and a half percent range.

Okay, thank you. And then, as my follow up, I know you mentioned 10 to 12 new openings for 2025. You had opened two new centers during the third quarter, and then the Atlanta location in November. So I'm just wondering, was there anything specific in 2024 that led to around seven new openings versus the 10 to 12 target?

Yeah, we've had some delays in projects getting pushed back. Well, like I say, again, you got to look at this in a multi year rather than a year by year. Because as of right now, 26 looks like we make up for everything in 24 and more, all with big humongous clubs. So it's just getting delayed into the 20 but but they're still coming. And we have a pretty good opportunity to get some additional deals done. It's not done yet 100%. But we are working on some additional growth, potentially, yes, for 2025. So it's, it's really irrelevant, because we, as we've told you, we've been very, very methodical about delivering the numbers that we commit to you in terms of top line and bottom line. And then keep enough latitude for how we execute that on our own. And we've known, we have so much and we've told you, we have so much, you know, momentum in our core business, that we could manage to lower openings right now, to make sure we are capturing that in center opportunity and the growth opportunity in the entire portfolio. By the time it drops down to 4-5%, whenever that is, we will then have to have a very, very robust new club opening and additional growth like Miura or LTH and the LTH partnership to continue to deliver that double digit growth, which is a strong desire of the company. We'll figure out a way to deliver what we commit to you.

Thank you.

Thank

you. Next question is coming from Alex Perry from Bank of America. Your line is now live.

Hi, yeah, thanks for taking my question. I just wanted to go back to the guidance raise a bit. What gives you confidence to lift the guide and maybe sort of dissect the pieces for us? Is it, you're seeing less, you know, membership churn than you would, you know, normally seasonally see? Are you baking in higher expectations for pricing, which continues to be a talon for you? Just maybe go through, you know, some of the pieces that led to the raise.

Thanks. Yeah, this is Eric. So a couple of things here. We're still seeing really great flow through from our membership dues. So that's one big piece. And retention, you know, as you mentioned, continues to be very strong. You also probably saw in our release our same store sales was, you know, north of 12%. And another big driver of that, and Bram talked about it earlier, was our DPT. So we continue to see very strong demand in DPT, which is a big driver of that. So all of those things are again, as we've talked about just the consumer continuing to show strong demand gives us absolute confidence in being able to raise that guidance.

Alex, to speak to you with a little more color. We've told you over and over, we told all of you guys that we are seeing the best retention. When I say the customers love lifetime, they really do love lifetime. We have the best retention I have, you know, ever seen in the history of the company in 34, 35 years. And on top of that, it's really like, it looks like it could be like even better than that in 2025. So we're at this point, you know, retention, again, it's not a number we're going to continue to give, but I have given it during the presentation with the death guys. So I just want to, we are, we're going to finish the year north of 70% in retention. And for anybody who really understands this business, there is no more important metric than that retention, just no different than our partner business. It's really strong. And the brand is resonating with the customer and it's giving us additional opportunities where we're working to kind of create more products for that. But that's the reason the retention is really the key. And as it results into the dues. And once you have a strong dues, everything else will follow.

Perfect. And then just on pricing, are you expecting the same level of, you know, year of year price lift as we move into the fourth quarter? And then as you think about your pricing structure for next year, as we move into 2025, will you likely, you know, reset prices even higher to start the year given the membership demand you're seeing? Thanks.

Look, I think we have largely repositioned the company to where we want to be. We want to be the athletic country club destination. It's not a gym, it's people third place, second place, as we see with our customer. They're now using the facilities just about on average every other day. So that is another reason for the strong retention is this engagement that is at the all time high. And we are working, we're working strongly on actually, okay, what can we do right now to deliver even more exceptional desirability in every aspect of our business? That's really the strategic work that is taking place today with me, Peram, you know, president of the club operations, real estate, and then everybody, all the RVPs and all the lead generals. So as we rolled out you know, we're, we see that getting, getting that demand at the level that we are creating gives you pricing power. And then the, the way to adjust the price is really a function of, you know, clubs have like 3000 visits a day. At that level, we really don't want any more visits in that club per day. It's busy throughout the day. Now the key is, okay, maybe there's an enrollment fee. We're now, you know, starting more locations, you know, we started with just a few, now we're looking at other locations where we have to raise the enrollment fee from a few hundred bucks, 300 bucks to a thousand bucks, 500 bucks, in order to manage that type of club. The clubs that they're sitting at 55,000, this is a large format location equivalent, 55,000 swipes, 60,000 swipes in a month, they have room to get more membership. So there's not necessarily, you know, we got to get, we got to get that club yet to 70,000, 80,000 people going through. So it's club by club, location by location. We have opportunity right now, I think this last few weeks, four weeks, six weeks, there has been quite a few clubs that they've gotten that rack rate moved a little bit. And based on everything I just told you, it's not just because we want to raise or something like that. It's really managing to the club experience, the right customer mix into a particular club. And then the real big thing is that that gap between the pricing of a rack rate, and once you run that rack rate for a month or two, and it's clear indication of customer that, oh, that's completely unacceptable rate, nobody's having a hard time with it. So now that so that you know that you've tested that price, then the code then the gap is everybody who's paying below that rate, it gives you that, you know, 17, 18, $19 million that we've told you. That's the difference between what people are paying versus if everybody pays the rack rate that creates that reservoir, that you can basically draw from two ways to draw from it, either people turn new people coming in same number of swipes, you get more dues for it, or some number of memberships, or you pass on, you know, $10, $15, $20 legacy price increase, you know, per year for those people paying below the rack rate. They're happy because they're still not paying below the rack rate and they recognize we appreciate their loyalty to the company. We're good, and you guys are good, and the investors are good because you keep getting this a natural same store coming through even when other retailers don't have the opportunity to fight maybe a little bit of a tough macro and then maybe their sales go down 2%. We are buffered extremely well for that.

Perfect, that's incredibly helpful. Best of luck going forward.

Thank you.

Thank you. Next question is coming from Alex Sperman from Craig Hallam. Your line is now live.

Great, thanks very much for taking my question. Bram,

you alluded to