Bahram Akradi: Thanks a lot.
Robert Houghton: Thanks, Brian.
Operator: Our next question is from Chris Carril with RBC Capital Markets. Please proceed.
Chris Carril: Hi. Good morning. So could you expand a bit more on your latest thinking around dues pricing strategy? What are you seeing from new and existing members in terms of reaction to pricing actions? And where do you potentially see further room for pricing?
Bahram Akradi: So really, honestly, we — as I’ve mentioned this over and over, our pricing strategy has been a function of controlling the experience we want in the club. So we are — where we have more than abundant opportunity in a certain club to gain yet a couple of thousand more memberships, we are not pressing the price point in that club. Where we have members in a club feeling like it’s being over-membered and we’re trying to limit the membership coming into that club and control the experience then we just raise the price. So it really speaks for itself. The customer clearly demonstrating that they like the new strategy. Our result shows that all across, our NPS shows it, the NPS is higher, revenue is higher, EBITDA is higher.
The customer who wants the Life Time athletic club experience isn’t comparing Life Time athletic country club experience to anything else. They just want to be in Life Time. So and we have limited supply in every club before the experience gets tarnished. So managing that experience naturally guide us for where the price needs to be. And that has allowed the prices to go to where they really need to be established. They’re working right now. We don’t have huge plans to adding additional new rack rates, except if nothing gets done, just Chris, nothing gets done systematically. We don’t have a price increase ever across every club of all the country or something like that. It is literally location by location, member by member. And it’s based on what makes the most sense overall.
So the way that I would tell you for you guys to think about and work with Bob and Ken is you really need to look at the average dues for all subscription. Right now, the full subscription, including the digital on-hold and all access membership is about, as we mentioned, 814,000, 810,000 plus. That number times the average dues for the full subscription, which is roughly about 152 or something. If you back out the 40,000-ish members that are on-hold and you go to the 764 membership, I would look at that number and say, the average dues on this is about 162 whatever. What you should expect that without doing anything at all, naturally that number, that 162 that 152 is going to grow a little bit each quarter because there is some churn and the churn will naturally push that up.
And then there is basically some modest, modest legacy member dues increases. So this is very methodical. We go through it systematically. They will always be paying. They have been with us for five years, six years, seven years and more likely they’re going to pay less than rack rate for a very, very long time because we give them the benefit of the fact that they’ve been a member for a long time, and that also reduces their desire to want to drop out, because if they drop out, they’ve been a long-term member, they want to be a member, they drop out, they come back, they got to pay the new rack rate. So the whole system is working. Does that help you?
Chris Carril: Yeah. No, super clear. And then just for my follow-up here, just circling back to the incentive revenue going forward. Could you update us on demand and trends around dynamic personal training? I know Bahram, that’s been a big focus area for you this year. Thanks.
Bahram Akradi: Yeah. So I’m really happy with our team. I just got to say, the execution of our team has been phenomenal. I believe we set the record EBITDA number in March for that business. It’s really awesome to see our newly invented dynamic personal training model and the re-wiring of that business has been so successful. We significantly and I mean significantly reduced the overhead that was outside of the clubs to the corporate office by like literally like 300%. It’s 1/3 of what it used to be that overhead. And I am involved personally weekly with our personal training leads across the country. And it’s the best momentum, the best model that we have ever had and the results are coming. We’re getting people who had left Life Time because they didn’t like certain things and the COVID kind of made it ice on the cake.
Weekly, we’re getting some of those people knock back on the door and wanting to come back and work on the new culture, new system. And then we are completely tooling the clubs with additional equipments so the clubs have the best environment, the best setup, the best equipment for a trainer to train their customer. You couldn’t find a better opportunity with equipment and spacing to train your customers. So that also attracts the best trainers coming in. So it’s all positive momentum. I expect this year on a monthly basis we’ll also break personal training revenue records, not just EBITDA records. It’s all moving in the right direction.
Chris Carril: Awesome. Thanks so much.
Operator: Our next question is from Brian Harbour with Morgan Stanley. Please proceed.
Brian Harbour: Yeah, thank you. Good morning, guys.
Bahram Akradi: Hello, Brian.
Robert Houghton: Good morning, Brian.
Brian Harbour: Your comments on the cost side I think were clear. I think one question I had was just as we see at the kind of center operating expense is basically back to where it was kind of pre-COVID, actually a little bit better as a percent of revenue. Should we expect that to continue? I know that there’s some seasonality to that, but how should we think about that line?
Bahram Akradi: As I mentioned, we have fine-tuned the model of the way the clubs run with their management system converted to a leadership concept, everybody is leading the way rather than bossing other people around. So the GMs, the structure, they’re called Lead Generals and they have a very, very clear approach on how — they have lots of authority and they’re responsible. And so it is completely match. So pretty much all the waste has been taken out of the clubs and the way they’re running correctly, they’re running right now is the correct way. Where we’re going to see potential margin improvement still is going to be on the revenue that is still are there to increase. And as the dues revenue increase in the clubs, the cost isn’t going to grow proportionally to that.
So there is room for that to improve. But at this point, I would basically model what I told you guys is between assuming the rent will be between 12% and 13%, that’s really the number that I think is going to fall in and so it could be a little lumpy when we do a big sale leaseback, we can get closer to 13%. And prior to that, this is going to be closer to 12% of our revenue. So if you think about that, then our EBITDA margin you can kind of plan between 20% to 23% is where it is right now. Can it improve? Yes. Will I commit to that improvement? Should you put it in your model? Not right now.
Brian Harbour: Okay. Thank you. Could you also just comment on kind of the sale leasebacks, the pacing of what’s still to be done and perhaps kind of the cap rates on those today relative to what you’d seen in the past?
Bahram Akradi: Yeah, the cap rates we have done for the first $135 million is the same range at the mid-6s that we told you guys. And we are not anticipating that there is going to be much higher rates. I think, again, I emphasize, these assets and when people are doing — buying these, they’re buying them. It’s a 20, 25-year lease with 25 years of options with fixed bumps in it. So it’s not tied into the two-year mortgage, it’s two year T-Bills or three year. It’s just a headwind for temporarily. So I think the — our expectation is we’re going to get them done in the same range that we’ve done before. And I’m pretty certain that it’s all going to come together. That’s as all I can kind of share with you right now.
Brian Harbour: Okay. Thank you.
Operator: Our next question is from Robbie Ohmes with Bank of America. Please proceed.
Robert Ohmes: Good morning, Bahram. Great quarter. I have two questions. The first is just can you talk about — give us some insights on how the new clubs are ramping up? And are they ramping up faster than normal or sort of in line with normal? And when you look at the ramp up of new clubs and what are the drivers you think are making some new clubs outperform other new clubs?
Bahram Akradi: Well, that’s a great question. But pretty much the universities are working extremely well. They are ramping faster now in dues and in margin contribution particularly than our old processes. So the new model is working. Again, the new, overall, the new model of execution and these clubs are ramping faster and they are getting to — we have clubs that just opened literally like in 60 days, they are contribution margin positive. In 90 days, they’re contribution margin positive. So they’re working extremely well. I mean, we have virtually no — nothing that looks like is less attractive than the past, Robbie. It’s just all positive to the past.
Robert Ohmes: Got you. That’s helpful. And then maybe for Bob. So the revenue guidance is the same, but the EBITDA guidance is up about $30 million. Could you maybe just give us more — maybe break out how we should think about where that $30 million comes from versus the previous guidance? And obviously, some of it’s the beat today, but that might help us.
