Robert Houghton: Yeah. So Robbie, starting with the top-line, as Bahram alluded to the timing of opening new clubs is the driver. We’ve shifted those out a bit later than what was assumed in our original guide for the year. So that’s one element. As Bahram said, we feel great about our revenue growth. All the investments we’re making in the clubs are working in terms of higher activity within the club, swipes or badge scans are up, memberships are higher. So all of that’s working. It’s just really the timing of shifting those clubs. And then in terms of the EBITDA guide, we’ve taken it up $30 million. We still have significant macroeconomic headwind assumed in that guide. So that’s a little bit of context from a margin perspective in the back half of the year.
Robert Ohmes: Great. Thanks so much.
Robert Houghton: Thanks, Robbie.
Operator: Our next question is from Dan Politzer with Wells Fargo. Please proceed.
Daniel Politzer: Hey, good morning, everyone and hope you are all doing well.
Bahram Akradi: Good morning, Dan.
Daniel Politzer: I had a question, I wanted to unpack those margin comments a little bit more. I mean, the last couple of quarters, your EBITDA margins have been 36.5%. And I’m trying to kind of bifurcate or isolate for what the factors are that would change last two quarters or with the next three quarters. I mean, is this a function of in-center versus dues mix? Is it something seasonality where employment costs maybe go up or is it also some inherent conservatism, which it does sound like that is a component as well?
Bahram Akradi: So part of it, Dan, is that we’re trying to make sure we give the Street and you guys the guidance that can be met regardless of macroeconomic headwinds. We keep telling you that we’re baking in potentially a recession or at least major headwinds, we are baking that in. Can the results be better? Yes, they could be, but we’re not going to put that out there and then disappoint. Okay. The second thing is that, yes, during the summer, we will have significant increase of revenue and cost. We have to fill these clubs up with lifeguards and the beach clubs are not inexpensive to run. So there is a conservative modeling for rest of the year. But the 36.5% margin you mentioned is really where I would like to see things to continue to come. And I — is there a path that we can get that done throughout the year? Yes. Would I recommend you keep your horns in and be a little more conservative? Absolutely. Is that correct?
Daniel Politzer: Yeah, yeah. That’s helpful. For my follow-up, the enrollment fees, you guys have talked about that I think a little bit last quarter. Is that still something you guys are considering rolling out or have you kind of pushed pause a little bit there?
Bahram Akradi: No, it’s already rolled out. We need to charge a pool pass to make sure we can control the pool experience so they don’t get over-run for new customers coming in and joining just for the summer, crowding the member who has remained a royal member for three years, four years, five years. So this is nothing new. It’s exactly what we’ve done every year. We’re just — we fine-tune, are doing based on what we learn. And — but we have already launched a — in certain clubs, and it’s not universal, it’s not the same, it’s location by location based on how busy the club is already or isn’t that we manage that throttle of the pool pass amount or if there is any. But we’ve already started that week or two weeks ago. And again, we have no reason to think — it’s not a material number on the revenue side, I want to be clear. It’s not about making money. It’s just totally about managing the experience and the flow of the customer through the club we want to manage.
Daniel Politzer: Understood. Thanks for all the color.
Bahram Akradi: Thank you.
Operator: Our next question is from Chris Woronka with Deutsche Bank. Please proceed.
Chris Woronka: Hey, guys. Good morning. Thanks for all the color so far. First question was just kind of on ancillary build and ultimate long-term potential in these new centers. Is there any way to kind of compare and contrast what that ancillary picture might look like at a club you’ve opened in the last couple of years versus kind of the older clubs in the system?
Bahram Akradi: So I want to understand your question better. You’re talking about is the in-center different in the new clubs versus old clubs?
Chris Woronka: Yeah, kind of in terms of ancillary spend on top of the dues.
Bahram Akradi: Yeah, it’s a great question. There is no way that you would be able to — anybody could basically model that out because of the inconsistencies. We open a club that is a little smaller in an urban market, doesn’t have a real bistro, a pool, doesn’t have summer camp, doesn’t have all of that. It’s basically more just personal training and dues, maybe a little bit of a juice bar or something. You open up a big, big, big club in a suburban area with a big huge beach club, full-size cafe, summer camps. And so those are — will be kind of a give or take. The biggest revenue source for Life Time historically after dues has been personal training. One thing we are doing with the things we’re working with the personal training are all working.
And I think that is really just a function of launching the club with the right model of personal training. And, yes, they do end up having a better start with the PT model, with the DPT, Dynamic Personal Training model. In fact, we have a club in pre-sell right now in Miami Falls. And the way we’re running that, they are basically selling personal training every day as they’re selling new memberships, which is much better new model of execution than we have done in the past.
Chris Woronka: Okay. Super helpful. Thanks, Bahram. And then follow-up is, I know you’ve talked a little bit about the Atlanta and Tampa, I guess, club re-openings, conversions. There’s also — I think we continue to read about a lot of big box retail, including some stores that might be typical of the size of your clubs closing in 2023. Is there any thought to potentially re-purposing some of those? I know some of them are in markets you wouldn’t want to be in, but maybe some are. So is there any thought to looking at those?
Bahram Akradi: Yeah. I mean, I’ll respond to your question like this. Our pipeline of opportunity is as robust as it’s been ever before. And with Life Time’s execution, again, and the relationships we have established, we don’t think of our landlord as landlords, we think of them as our partners. We treat them like a partner as we treat our employees like a partner, as we treat — it’s the culture of Life Time. And all I can tell you is, yes, there is significant opportunity for more additional capital-light growth coming up more than ever before and we are uniquely in a position to take advantage of that.
Chris Woronka: Okay. Very good. Thanks, guys.
Bahram Akradi: Thank you.
Robert Houghton: Thanks, Chris.
Operator: Our next question is from Simeon Siegel with BMO Capital Markets. Please proceed.
Simeon Siegel: Thanks. Hey, guys. Good morning. Hope you are all doing well.
Bahram Akradi: Good morning, buddy. How are you?
Simeon Siegel: Not bad. Looking forward to the summer and getting out there. So we’re almost there. So really nice job on the improved profitability guys. This is nice to see. You’ve talked about the center OpEx efficiency. In addition to that, the G&A was down meaningfully and even ex the share-based comp. So anything you can dig in there as to what drove the savings and maybe what you think G&A should look like embedded in the 2Q and the full year guide? And then Bahram, I was just curious about this. With all the success of converting the digital on-hold back to center memberships, the digital on-hold memberships have actually been nicely lower than pre-COVID for the past several quarters. Just curious what do you think about that?
Is this — is there kind of like a post-COVID normalization that happened and you’d expect that number to revert back up to what it’s historically been or do you think there’s something more structural as to why fewer people are going on-hold?
Bahram Akradi: You’re asking a bunch of really good questions. Let’s talk about the G&A. I just be the first one to say when things are not great, they’re under my dime, they’re my fault, they’re nobody’s else fault. Our G&A was broken. I complained about it, but I didn’t do — I wasn’t forceful enough about it for years and years and years. And our G&A was growing pretty much linearly in a dollar for dollar for top-line growth, which makes no sense whatsoever. So as we re-wired the business the last eight, nine months, it’s a franchisor-franchisee model, which basically means our corporate office G&A for all of the in-centers and all those things should not grow proportionally as the club. As we build another $1 billion worth of revenue coming out of centers, the corporate office shouldn’t grow 50%.
It should grow 10% from where it is today. It will be very, very modest to — versus the new expansion of our revenue. And I would feel embarrassed if I wasn’t able to give our investors that margin expansion that would come from scaling the company correctly. It’s all in place. I don’t have any reason to believe it’s going to change. The field loves it. The area directors, VPs and the lead generals, they love the new system. They have more clear lines of authority. And so that’s working extremely well. The other question you had was about fundamental re-design of the on-hold digital. Yes, we changed that over time gradually. It used to be you could go on-hold and stay on-hold forever. We basically gradually took that down to like nine months than six months and now it’s four months.
You can go on-hold for four months, but you can’t go on-hold forever. You automatically have to come back. And so it’s just basically — it just happens on an autopilot. So — and you can only go on-hold one time a year. So my anticipation is that the percentage of on-hold to the total membership really shouldn’t fluctuate from here dramatically. Is that helpful?
Simeon Siegel: That is perfect. Best of luck for the rest of the year guys. Nicely done.
Bahram Akradi: Thank you so much.
