Life Time Group Holdings, Inc.

Greetings and welcome to Lifetime Group Holdings Inc. Q4 and full year 2025 earnings conference call. At this time, all participants are in a listen-only mode. The 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. Please note this conference is being recorded. I will now turn the conference over to Conor Weinberg, SVP of Treasury and IR. Thank you, Conor. You may begin.

Good morning. Thank you for joining us for the fourth quarter and full year 2025 Lifetime Group Holdings Earnings Conference Call. With me today are Bharat McCrotty, Founder, Chairman, and CEO, and Eric 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 issued this morning, our 8K filed with the SEC, and on the investor relations section of our website. With that, I'll turn the call over to Eric.

Thank you, Connor, and good morning, everyone. As always, we appreciate you joining us for our business and financial update, starting with our fourth quarter results. Total revenue increased 12.3% to $745 million, driven by continued execution in our centers, including higher average dues and utilization of our in-center businesses. Average monthly dues were $223, up approximately 10.8% from the fourth quarter of last year, and average revenue per center membership was $882, up 10.8% from the prior year quarter. Comparable center revenue grew 9.9% and was in line with our expectations, reflecting strength in our membership dues and in-center business performance. We ended the year with over 822,000 center memberships. Including on-hold memberships, total memberships reached approximately 873,000. Net income for the quarter was $123 million, an increase of 231%. Fourth quarter net income benefited from approximately $45.6 million of net tax-affected items that are excluded from adjusted net income, as they are not reflective of our ongoing operations. These adjustments primarily included proceeds we received in partial satisfaction of legal claims and employee retention credits, as well as adjustments for net gains on sale leaseback transactions and share-based compensation. Adjusted net income, which excludes the tax-affected impact of these items, was $77 million, up 28.4% year-over-year. Adjusted EBITDA was $203 million, an increase of 14.5% over the prior year quarter, and our adjusted EBITDA margin improved by 50 basis points to 27.2%. Net cash provided by operating activities increased to $240 million, approximately 47% higher compared to the prior year quarter. This included $59 million of non-recurring proceeds from partial satisfaction of legal claims and employee retention credits. For the full year of 2025, total revenue increased 14.3% to $2.995 billion, driven by a 13.9% increase in membership dues and enrollment fees, and a 15.1% increase in in-center revenue. Comparable center revenue grew 11.1%. Relative to our initial guidance in 2025, the outperformance was driven primarily by our mature clubs, which in aggregate reached and exceeded our expected levels of performance faster than we had anticipated. We believe this outperformance from our mature clubs is largely complete coming into 2026. In 2026, we expect full-year comparable center revenue growth of approximately 6.3% to 7.3%. We expect a continuation of the quarterly trends we saw throughout 2025, starting the year at a higher comparable center growth rate and gliding downward as the year progresses. Average revenue per center membership was $3,531, up 11.7% from the prior year. Net income increased 139% to $374 million, and adjusted net income increased 62.3% to $326 million. Adjusted diluted earnings per share increased 51.6% to $1.44 compared to 95 cents per share from the prior year. Adjusted EBITDA increased 21.9% to $825 million, and our adjusted EBITDA margin increased 170 basis points to 27.5%. Net cash provided by operating activities increased to $871 million, approximately 51% higher compared to the prior year. This included $94 million of non-recurring proceeds from partial satisfaction of legal claims and employee retention credits. Total capital expenditures, net of construction reimbursements were $892 million for 2025. This included $657 million for growth capital expenditures. Looking forward to 2026, we expect to invest between $875 million to $915 million of growth capital. It is critical to underscore that over half of our growth capex in 2026 is will be for clubs opening in 2027 and beyond as we have been accelerating the number of new clubs versus prior years. This increased investment in growth CapEx is driven by both the greater number of club openings this year and the next few years compared to 2025 and 2024, as well as the increased size of our clubs. We are nearly doubling the amount of square footage we are opening in 2026 as compared to 2025 and 2024. Of our 2026 clubs, we have opened one and the remaining 13 are under construction. As these owned clubs open and begin to ramp, we expect to recycle the invested capital through sale leasebacks over time. In addition to growth CapEx, we anticipate $140 to $150 million of maintenance capital expenditures and $130 to $140 million for modernization of existing clubs, technology, and corporate investments. We anticipate funding our CapEx through cash from operations, sale-leaseback proceeds, and cash on hand. For 2026, we expect to do a minimum of $300 million of sale-leasebacks. One final note. With our increased growth capital spending, a larger portion of our interest expense will be capitalized this year as compared to 2025. For 2026, we expect to capitalize between $33 and $35 million of interest expense. With that, I will pass the call to Brahm.

Brahm? Thank you, Eric. Good morning, everyone, and thank you for joining us. First, I want to recognize and thank all of our team members for their continued passionate execution of our strategies. 2025 was another great year of achieving our objectives and exceeding our financial goals. Many of our centers operated at or near optimal levels with average of 12.5% monthly visits per membership for the year, 4.8% higher than in 2024, and approximately 122 million visits in aggregate, 7% higher than in 2024, with revenue per center membership up 11.7% year over year. We generated substantial cash from our operations and we exceeded our margin objectives. In 2025, we achieved a 27.5% adjusted EBITDA margin, 130 basis point above the midpoint of our initial guidance set in January of last year. We also exceeded our balance sheet objectives. We ended 2025 at 1.6 times net leverage, well below our two times target. These milestones were instrumental in achieving another year of record revenue and adjusted EBITDA and a double B credit rating, which helped reduce our cost of capital. Reflecting on the current status of the company, in aggregate, our mature clubs are operating at optimal levels. Our new and ramping clubs continue to perform extremely well. Together, clubs are generating substantial cash flow from operation. The sale leaseback market is robustly open, and we have a very strong balance sheet. As a result, we have stepped into 2026 with exceptional financial flexibility. Currently, we expect to open up to 28 clubs across 2026 and 2027. to be funded primarily through operating cash flow and a robust selling SPAC market. Next, we are very excited to announce a $500 million share repurchase program, which has just been approved by our board of directors. We intend to utilize this program opportunistically while diligently managing our leverage ratio to stay at or below our two times net leverage target. This is a significant milestone for Lifetime. Our repurchase program reflects our confidence in the predictability of our business model and our ability to generate cash, invest in our future growth, and drive shareholder value. Before I close my remarks, I would like to emphasize that the success of our company has been the result of unwavering focus on our member point of view. We remain committed to optimizing member experience, revenue, and EBITDA on a club by club basis. This is what has delivered our success to date and what will ensure our future success. With that, we will open the call for 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. The confirmation tone will indicate 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 key. One moment, please, while we poll for your questions. Our first questions come from the line of Brian Nagel with Oppenheimer. Please proceed with your questions.

Good morning. Good morning. Congratulations on another nice quarter, nice year.

Thank you so much, Brian.

So the question I want to ask, Because we're looking into 26 now. You know, there's been a lot of success with, you know, for a while now, what you're doing inside the centers with programming and such. Where do you see the biggest opportunities as we go in 26? I know we've talked in the past about some of the changes you've made in the cafe or in some of the training programs. But really, what do you think, what's the biggest opportunities here?

Yeah. So, Brian, this is Abram. You know, our business is always evolving. The customer is the more affluent, more in tune with health and wellness customer who is basically a pro at utilization of this type of services. They're looking for the new proven methods for being healthier and more engage in the clubs, in whatever is the current way that people get involved in health and wellness. We are always focused on modernizing, updating, evolving the facilities to make sure Lifetime is always the best provider of all things people are looking for at the highest level of our customer experience. So we're constantly working on developing new formats, changing the floor in a way that the members are now wanting to use the facilities. And then we're working on all different aspects from our cafes to spa, personal training, small group training. Again, the introduction and rollout of Miura. We're basically constantly adapting and That's what it takes for any company to continue to basically build their revenue and EBITDA and continue in their journey of basically being the place that people want to go to. We have tons of things we're working on right now, lots of opportunities to do things better, and we have just launched this year sort of a work on the cafes to try to improve the speed and the quality of what people want and a lot of great progress early on is sort of happening. And we expect this style to continue. Personal training is doing great. Pickleball is doing great. Our new Miura locations are launching pretty strong. So, you know, we just have a whole host of things we're working on, but the, the, In the big picture, everything is working exceptionally well. Members are using the club at the highest level we have ever seen. Clubs are packed. They're operating at near optimal levels of utilization per day or per month or per year as you look at how much visits a club can take and deliver great quality. So we're as happy as we can be.

That's very helpful. My follow-up question, just with respect to the new center opening. So I guess I'll ask it this way. You opened a number of centers later in 25. So maybe you can just comment upon the initial performance of those. As we're looking at these 26 openings and realizing that, I think you said one's open, but obviously there's still a lot more to come. Is there anything you've gleaned so far from anything you're doing with the pre-sale activity?

Yeah, all I can say to you is our clubs are now opening Stronger than ever and ramping faster than ever. Some clubs reach literally contribution margin positive the first full month of the club operation, which is pretty incredible. We're very, very happy. As a result, we are opening as many clubs as we can. As both Eric and I mentioned in our remarks and in the earlier talks, This year we'll open more square footage of clubs that we opened in 24 and 25, and 27 should be no different than 26. So we're really, really excited. We have an amazing pipeline of more dynamic, exciting locations that are going to come in the future years after 27, 28, and beyond. So we couldn't be more pleased with the way things are going right now.

I appreciate it. Congrats again. Thanks. Thank you.

Thank you. Our next question has come from the line of Arpeen Kocharya with UBS. Please proceed with your questions.

Hi. Good morning. Thanks for taking my questions. I was hoping you could give a little bit more detail on the unit economics of the new clubs you're opening this year. Obviously, much larger square footage with, you know, expanded amenities. As we think about revenue per member trends as well as kind of member mix as we go into the back half of the year, do you expect any changes to the typical seasonality of the business in terms of quarter-to-quarter member growth? And I apologize. It seems I blended two questions in one. But first I want to ask about sort of the unit economics of the new clubs and then any help on the mix of members that we're looking at for the back half of the year.

Yeah, what you should expect is as we are opening new clubs, A, these clubs don't have any discounted program available in them. So there is no discounted membership in them. The membership prices are higher. The model for the new clubs are significantly lower numbers of members. using the clubs significantly more and they're paying a much higher rack rate. This model is actually way more efficient than what we used to do in the very, very past, you know, and we've been adjusting the older clubs gradually to match the performance of the new clubs. And so the memberships are expected to grow altogether. because we're opening all the new clubs. However, again, they're performing extremely well. And we don't see any specific ups and downs for the seasonality, other than the fact that we are basically getting more members using the club more often. They are paying higher dues in average and using the club more. So it's exactly the model we're looking for. It's an engaged, it's a super engaged membership model instead of a non-used membership model. And we are basically operating at optimal levels of that right now.

Yeah, if I could just add some quantitative there. You know, when you look at our kind of existing clubs, you know, if you just take an average membership per club, it's, you know, 45, 4,600. So when you talk about our new clubs that we're, you know, we're planning those at membership levels, you know, you know, $3,700 to $4,000. So, you know, we are building those with fewer memberships because, again, you know, we're assuming a better mix there. But seasonality, to your question, no changes in expectations around seasonality.

That's super helpful. Thank you very much. And then just a quick follow-up. Could you remind us the REC rates you currently have and what's running through the system, sort of what that delta looks like, just a refresher? Thank you.

Was it a question again? Can you say that again?

The RAC rate you have and what's running through the system and what that difference looks like today.

Oh, you're talking about like the delta between the RAC rate. Was that your question?

Yeah. That's only increasing. You know, we are, as I, what I want to, this is a good question. I want to do it for the benefit of everybody listening. Our clubs are operating at incredibly optimal levels. The parking lots are packed. People are coming in. They're using the club in every place and all parts of the club. So what now we're reaching, when so many clubs are at that level, we basically want to optimize the membership so that we are making sure the customer experience in no shape or form As we do that, we are basically getting a higher realization of the membership, higher dues, and we are allowing basically fewer memberships in the club. When the visits to the club are basically at the saturation level, and the members you have are paying more, right, then you are using the club more. That makes it that you can have maybe fewer or less members for that optimal deal. Therefore, the only way you can do that is really raise the membership prices. And we are doing that really to protect the customer experience. It's just where we need to do it. It's not across the whole system. It's club-by-club strategy, and we are raising market-by-market, club-by-club. And as we take those rack rates up, then it basically increases the amount of dollars that's between the legacy customer and that. And as we raise the legacy customer prices, that reduces it. But I think right now it's still relatively in that $17 million to $20 million

Yeah, it's $19.5 million.

Yeah, exactly. And that hasn't really changed because the last few years, as we have kind of done both, we've been raising the RAC rates. At the same time, we've been getting some of the members getting some legacy price increases. So that number has kind of stayed between that $17 and $20 million per month.

Thank you very much. It's very helpful.

Mm-hmm.

Thank you. Our next question has come from the line of John Heinbacher with Guggenheim Partners. Please proceed with your questions.

Hey, Buram, I want to get your thought on two topics. You know, one-time initiation fees, right, because I think you've only got those in a handful of clubs. Do you think the experience merits that? And if so, how broad could you apply that? And then secondly, you know, DPT has grown, the sessions have grown 18% the last two years. How sustainable is that? Because I think the penetration rate is still very low. So, you know, is that, can the penetration improve? You know, can you keep growing DPT almost 20%? Yeah.

I want to give credit to our team. across the corporate who leads that category, as well as our folks in the clubs. We have a very, very robust plan for DPT this year as well. Their plan that they presented to us is very, very robust. Yes, we expect the DPT to continue to grow. And in some clubs, the revenues are... by far the biggest revenues and margins we have ever seen in the history of the company. And in some other markets, we still have the opportunity to, you know, add team members, add leaders into those facilities to kind of get those going. But we are super, super happy with where it's at and with its potential and the game plan that we have on hand for continuing to improve the personal training program throughout the year.

Okay. Maybe just as a quick follow-up for either you or Eric, when you think about the openings in 27, what does the composition look like in terms of the ground-ups? It looks like that's going to be pretty heavy. And if we look at the CapEx budget all in, or growth, either one, is this an elevated year? Or are we going to be, you know, as we roll forward, kind of at, you know, a new higher level, but we're also going to have 300, 400 million of sale leasebacks a year?

All right. That's a great question. We have a significant number of ground-ups in 2026 and 2027. So those are basically, you know, we're investing substantial amounts of capex that is for 27 and beyond clubs. But then I am super comfortable with that because, as always, our ground-up clubs perform, I mean, so predictably above expectation that they ramp fast and they are ready to go to the sell these back markets. allowing us to kind of pair the new clubs with the older clubs that they have too much. The, you know, carried book value is really low, so the tax value is low, so we can adjust those and not pay, you know, taxes on the gain and loss and kind of try to even it out. So it allows a significant opportunity for having more sell-leasebacks. So those are all great. Now, when you look into 28 and beyond, we are working on a host of, the real estate team is working on a host of super exciting facilities, but a lot of those sort of really big facilities for the markets, the urban markets they're going into that basically are landlord basic, uh, paying the bulk of the way. And we are putting some leasehold improvement in there. Uh, but it really works itself out because we are now dramatically increasing the amount of owned assets in terms of dollars, which we can take those to sell these back and, or we're doing big, beautiful clubs. in high-rise buildings or, you know, sort of the urban markets that they come in a lease form to begin with. So I don't believe we will have any issue generating, you know, enough cash to pay for things, take it to sell lease back, recycle that, and then be also having the extra capital available for share buyback as well.

All right. Thank you. Mm-hmm.

Thank you. Our next question has come from the line of Kate McShane with Goldman Sachs. Please proceed with your questions.

Hi, good morning. Thanks for taking our question. We wanted to focus on the expense side a little bit. You've done a really great job in managing both the inflation I think we've seen across labor, but also with other expenses such as healthcare costs, which we're seeing other companies struggle with a little bit here over the last couple of quarters. Could you maybe talk a little bit about your expectations for 26 when it comes to these couple of line items and how you continue to manage it?

I'll take it and then Eric will add on to this. We are fully aware of the headwinds that it comes from payroll increases and supply increases. And we... have had those completely in mind and in our plan in a very comfortable fashion in the, you know, numbers that we put forward for the guidance of this year. I'm going to turn it over to Eric, but we are continuing to work on managing those best way we can, yet I want to be totally in terms of like repeating myself, customer experience, member experience has been the number one driver of building a brand that is completely and entirely loved by people who have been, I run into people who have been a member, they move, and all they say is how they miss their lifetime. They miss their lifetime. They want to go somewhere near their lifetime. So we don't want that to change. So we're focused on delivering That's quality, but we have thought through these challenges, and I'm going to turn it over to Eric.

Yeah, absolutely. You know, on the labor side, I think we've done a nice job. You know, we've talked about, you know, the increases we've seen, 2.5% to 3%, pretty consistent. you know, with what others are seeing. I think like everybody else, we've seen supplies and some of those expenses. We've seen some of those increase, but I think we've also done a nice job of, you know, working with our suppliers to mitigate and offset a lot of that. So hats off to our procurement team. And then, you know, on the healthcare cost side, you know, we've done some nice things around managing that risk through our captive. And generally speaking, we've got a pretty healthy employee base. And so, you know, as we look at our healthcare costs, they've been actually very – we've managed those very well. So, all to say, you know, we're seeing some of those same pressures, but we've done, I think, a nice job of mitigating them.

And, again, it's in the numbers. Like, we have anticipated these increases coming. So, when we're establishing the budget, right, we basically put all of those at a level that we feel comfortable we can deliver.

Yes.

Thank you. Our next questions come from the line of Eric Delaurier with Craig Hallam. Please proceed with your questions.

Great. Thanks for taking my questions, and congrats on another strong quarter here. Thank you. I'm wondering first if you could expand on your comments around optimizing membership mix. I'm just curious what levers you have to pull, and how would you think about the potential impact in 26 versus some of the out years here?

Yeah, I mean, some opportunities we have on operating, you know, we kind of talked about it in the beginning in our comments, just the clubs being busy and, you know, traffic. So it's an opportunity for us to continue to manage the member experience, right? So, you know, just optimizing, especially in clubs where we have very, very high traffic. You know, we've talked about discounted memberships and continuing to optimize there. So in a lot of our clubs, we continue to have the ability to do that. And so we're going to continue to run that play through 2026.

And our expectation is the number of members on the sort of a discounted third-party pay will decrease significantly. as we will have a more direct membership activity. And we feel that that's the best way to manage the experience and make sure that we get more revenue and more EBITDA out of the clubs at the same time. So there's three things that we juggle with is member experience, improving our revenue, improving our EBITDA, and we have a clear path on how we can continue to do that.

All right, that's very helpful. And then a clarifying question for me. So you mentioned new clubs have been ramping more quickly, contributing to profitability more quickly. You also have a greater number of large format centers opening up in 26. Should we think about this sort of faster ramp as applying to large format centers as well? Is there anything to kind of call out with respect to the ramp with the large mix of large format centers here?

Look, the message there should be taken like this. Every club we're opening right now, we're seeing incredible success with those clubs. That gives us the sort of a super confidence to continue to expand on our development plan. So that's fantastic. As far as the caution that I would give you guys on Last year, I remember having this conversation, and I told you guys, don't go beyond 25% EBITDA margin because we want to invest. We want to continue to invest in the member experience and upholding our membership experience as well as the brand that has been the major, major part of company success. I have no qualms about our – just guiding you guys again that the EBITDA margin we're giving you is phenomenal, in my opinion. It is not to be taken lightly at this level, and we want to make sure people don't get ahead of themselves in terms of keep wanting to push that number and then expecting us to deliver more. We have zero desire to disappoint you guys or the street or anybody else. So our goal is to make sure we – but we also don't want to disappoint our member at the expense of the shareholder or shareholder at the expense of the member. So that's a balancing act that we have to do, and we are on it every day. But the clubs are ramping faster. They just get to that saturation point sooner. That's all there is to it. But everything is performing extremely well.

Got it. Sorry, helpful. Thanks for taking my questions.

Mm-hmm.

Thank you. Our next question has come from the line of Molly Bell with Morgan Stanley. Please proceed with your questions.

Hi. Thanks so much for taking my questions. I guess I have one near-term question and one longer-term question. So for the first one, the near-term question, can you speak to maybe trends you saw in January and maybe year-to-date from like a new member churn, a member engagement perspective? Did you see any impact from weather or any nuances you'd call out from member behavior so far this year?

You are so clever, but I am more clever than you. I told you guys don't ask middle-of-the-quarter questions. That's just inappropriate for us to answer.

Understood.

No problem at all. But all things are going really good. It's no problem.

All right. Thank you so much. So then maybe shifting to the longer-term question, I know last quarter you had talked about expectations to see, I think, up to 3 million digital members. to start 2026. So I guess my question there is, are you seeing opportunities to, you know, increase conversion of those members into full paying members or any other, you know, monetization opportunities from retail, you know, lifetime nutrition? Can you just comment on maybe the digital and retail landscape and what opportunities you see there in them?

That's a great question. That's a great question. That number is roughly about 3.3 million subscribers now. So it's continually growing. We have adjusted our strategy on the LT digital, and the focus is significantly more on using LACI to enhance the actual member experience, kind of a dues-paying member, The subscribers will now get access to the same pretty much app, less reduced than the past. They get similar, you know, experiences as the regular member guests with the fact they just can't get into the clubs with it. But this allows them when they want to come as a guest or something, they can see the schedule. And then it makes it easier for us, just like you asked, to take that membership one step closer for them to deciding to sign up. And, yes, we are seeing improvement in that strategy.

Got it. Thank you so much.

Thank you. Our next question is coming from the line of John Baumgartner with Mizuho Securities. Please proceed with your questions.

Good morning. Thanks for the question. Maybe, Bram, first off, I wanted to ask about programming opportunities and incentive revenue. I think over the past 12, 24 months, we've really seen consumer spending very resilient for kids and children. And, you know, based on the industry data that we've seen, club memberships for children, or I guess minors, they're also among the highest price that are out there. So I'm curious, aside from the swim programs, how underutilized do you think your model is for monetizing kids' programs, whether it's sports-specific training, intro to weightlifting? What's the opportunity to ramp that contribution as you plan your next phase of investment?

Yeah. Look, I think having... been involved in doing this for as long as we have. We have obviously tried and tested all types of things. And we continually see opportunity to engage parents and kids into more programs. And that business has been a nice growth opportunity for us and a great engagement, great retention sort of a program in the business. As far as the expanding into additional services, you know, we've tried, and there are pros and cons with those. A lot of times this is basically a challenge of what space you use at what time and do you have other programs. So we are doing that, fine-tuning what we can do to maximize the space that we have. being used for a variety of different things as much as possible. So it's not the only category that we can grow the in-center. We have opportunities to grow in-centers on all fronts, from a spa to cafe to training, et cetera, and we're doing all of that, including kids. We're always looking to see how we can get them more involved, more engaged, and give them real value in what they perceive is what they're getting.

Thanks for that. And just a follow-up on the EBITDA margin. The approach there is very clear, under-promise, over-deliver. And I'm not so much curious about how high margins can go. But, you know, if we think back to the investor day in 2024, the ALGA was more of a, you know, kind of a low to mid 20% margin. It's migrated up the last couple of years. I guess I'm more curious relative to plan. What's sort of broken positively for you? Is it more modest incremental expenses? Is it upside for mix or larger utilization of the in-center offerings? Just trying to get more of a sense of your confidence in the margin floor and its sustainability there. Thank you.

So, you're correct. We suggested 23.5 to 24.5, if my memory is correct, on the investor day. And then I told you guys, don't go beyond 25. And we have outperformed. The clubs matured faster. So, remember, at the time, we had a lot of our clubs outperforming in a re-ramp stage, similar to ramping. Today, majority of the clubs are fully, fully re-ramped. I don't, I mean, in aggregate, I say consider it fully re-ramped. So now we have new clubs opening and those new clubs have to ramp. They're ramping nicely. They're ramping better than our expectation. But all in all, I think there is a limit to how much you want to push the margin. Now, here's what I want to say. It may be a quarter we give you more than 27 and a half. I just don't want that to become the standard or the model because I do not want to have the pressure on this company to do things that will damage the company on a long term. So we want to guide you guys conservatively, and we want to make sure we guide to something we don't disappoint. I think 27.5% EBITDA margin is an incredible margin, and I would build as many clubs as I possibly could build when I have a model that produces that. So do I want to take a risk of, you know, damaging our experience with the customer? The answer is no. Thanks, Rob. Mm-hmm.

Thank you. Our next question has come from the line of Owen Rickert with Northland Capital Markets. Please proceed with your questions.

Hey, Bram. Hey, Eric. Congrats on another great quarter and year. Can you update us maybe on what you're thinking about how Miura is performing? How many clubs are you currently operating in, member adoption, visits, anything you could update with us there and maybe the ramp throughout 26 and 27?

Okay, go ahead.

Yeah, I was going to say, yeah, Miura, you know, last year we had two locations open. We've got now seven or eight locations open. And so, again, for us just rolling those out this year, we wanted to make sure that we had really kind of nailed that operating model. And so we've opened those new locations in great markets. We're super excited about them, and they are ramping at our expectations.

And to be fair on that, we've had obviously some challenges with some of those openings, with some knick-knack things left over on construction or permits or something like that. But the ones that they have opened fully with no hiccups as such, they are ramping faster than our original models, and the rest of them will catch up. As we are designing spaces for the future clubs, we are always – kind of planning the place we're gonna execute Miura in, which basically is the cue that this is the one program that we have tested, and I believe it's gonna work extremely well. And it's expected to be in every single market, not necessarily every single club, but accessible to every single customer within a club that they're in or a club or something else close enough to them. It is a very, very well-performing versus the plan business that we're rolling out. I'm confident it's here to stay as long as it's done correctly, and we're working on all aspects of that.

Awesome. Thanks for the color there. And then maybe secondly for me, How is LT Health performing the supplement business across both in-club and digital channels? And maybe what should we be monitoring there for 2026?

Yeah, for 2026, I think the growth strategy is in-clubs mostly. We are rolling out a more robust plan on how to make sure our club members have better visibility to the LTH than the superiority of the quality of that product versus other products being marketed and sold. And then use that as a platform to take it outside of the lifetime walls in 27 and beyond. So right now it's working extremely well against the strategy we are currently driving. As far as the digital space, it's mediocre. It's so-so. It requires more education for people, more direct education, understanding why LTH products are more superior because, once again, we're not cutting any corners on what needs to be put together, the testing, everything that needs to go into a product you can trust and actually works. And so it takes a little more work in terms of educating the customer, and that's why done through our professionals in the club, the PTs and the group fitness people, cafe folks, we're getting great success out of growing that very nicely year on year.

Got it. Thanks, Bron. Thanks, Eric. Appreciate it.

Thank you.

Thank you. Our next question has come from the line of Logan Reich with RBC Capital Markets. Please proceed with your questions.

Hey, good morning. Thanks for taking my questions. I just had two. The first one is on the RAC rate versus the average member dues. I know you guys are talking about that. Delta has been relatively consistent, just strategically and in longer term, Is there a level for that delta you have in mind that the business should run at, or should that delta converge over time? And then second question is just on the 26 guidance on the same-store sales. Can you just help us think about how the composition of member growth versus pricing versus in-center growth contemplates into the guidance? Thank you.

All right. Let's start with your – the latter part of your question. We want to go with the rack rate. Look, for right now, we are basically analyzing on a club-by-club basis where we need to set the price in that club and then consequently in that market in order to maximize the experience and make sure the brand stays in the exact position, which is top brand in the market. When we're doing that, um, you know, sometimes you just basically almost are forced to take the price of 10 bucks, 20 bucks, whatever you have to. And that's what exercise we're going through. Um, When does that end? I don't know. It's not ending right now. We're still reaching those type of clubs where we have to raise that rate. When we raise that rate, we'll get the gap. And then when we do the legacy price increase, then that gap gets closer. My expectation is sometime in the future, that number will shrink. It should shrink because it's not our expectation that the RAC rates will continue to go up at the level they have been going. But right now, we're not seeing any immediate change in those numbers. On the second question, I'm going to turn it over to Eric, and then I'll add on to it.

Yeah, I mean, you kind of touched on it in terms of, you know, the delta and, you know, what that ultimately, when it closes. It's really a tough question to answer because it's really dependent on the pace you, you know, you increase your rack rate. But you have to remember part of, you know, when we lump things or call things pricing, part of it is, you know, when a member turns out at a lower rate, you're getting the benefit of that arbitrage. So it's not like, necessarily a direct pricing increase, if you will. So when you think about that, you have to kind of break it up into those two pieces. Legacy will continue to be part of our pricing strategy as we go forward. It's just hard to definitively say when that gap closes. I don't see a world where it's ever closed. I mean, that's part of the, you know, kind of the retention play, having members pay under the RAC rate. And so that will continue. Does that help?

They were helpful. Thanks, guys. And then just on the 26th guide, just how to think about composition of comp between member growth, pricing, how you guys define it, and then in-center growth.

So the revenue per membership is going to increase. That's part of that growth. The membership count we've guided to Roughly.

Membership growth, we haven't given a membership guide, but we will see growth that exceeds 2025. Again, we're not guiding directly to it.

Directly, but we're going to see an increase in that number from 25. And then the rest of it will become part of the in-center growth, the increase in revenue per member broken into dues as well as in centers. So, again, we are continually focusing on optimizing the revenue and EBITDA of the club, which comes through optimizing the membership experience.

Got it. Super helpful. I really appreciate the clarification.

Thank you. Our next question has come from the line of Chris Wawonka with Deutsche Bank. Please proceed with your question.

Hey, guys. Hey, Warden. Thanks for taking questions. Congratulations on the year. Thank you. Just one question for me today. Baram, you know, there's been a lot of focus, I think, in the industry around, you know, you guys have a higher-end consumer, higher-end product service offering. there's been, you know, some issues at the lower end. So my question is, do you think about potentially leaning into even the higher end of the market? And, you know, we've heard that high-end consumers are still looking to spend their money. So is there any thought or any plans for kind of any kind of white glove type service and higher up that, you know, what that might include in terms of transportation or special things? Is there any thought to try to tap into even the highest end of your customer?

Thanks. Absolutely, yes. You know, we have been working on, you know, bundling more programming, yet, you know, just sort of more to come on that. But, yes, we have been seeing that there is a certain number of memberships that they are wanting to spend more, and a more, to your point, white-club service, more bundled approach, easier for them to transact. That's correct.

Okay. Super helpful. That's it. Thanks. Thank you.

Thank you. As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. Ladies and gentlemen, thank you. This does now conclude our question and answer session. And with that, I would like to turn the call back over to Connor Weinberg for closing comments.

Yeah, thank you, everyone. Thank you, operator, for joining us this morning. We look forward to speaking with you all again next quarter.

Thank you for your participation. This does conclude today's teleconference. Please disconnect your lines at this time and enjoy the rest of your day.