That would have required to build those big clubs, which from ground up, were not asset-light, then going to asset light with the sale-leaseback, it would have postponed this situation to probably a couple of years later. But now with the EBITDA growing faster and asset-light opportunities getting stronger, we can deliver this asset — we can deliver this important milestone early next year, which I’m super excited about.
Megan Alexander: Okay. Thanks Bahram. I’ll pass it on.
Bahram Akradi: Thanks.
Operator: Thank you. Our next questions come from the line of Brian Nagel with Oppenheimer & Company. Please proceed with your question.
Brian Nagel: Good morning.
Bahram Akradi: Good morning, Brian.
Brian Nagel: First off, congratulations on another nice quarter. The business continues to look very nicely here. So my first question, Bahram, and it’s probably going to be a bit of a follow-up just to that prior question. We’ve talked a bit about for a while these asset-light opportunities. And clearly, this is key — exploiting exploring these, sort of say, is key to you getting cash flow positive much earlier than you initially thought. So the question I have is as you look at the business, you step back, is there any — do you compare the asset-light opportunities to your more traditional model in the traditional finance model? Is there any other offsets, so to say? Is there any other thing — something we should consider with these asset-light opportunities despite them just, as [ indiscernible ] implied, using less capital?
Bahram Akradi: Yes, there’s a couple of different things with those, Brian. First of all, sometimes it will take a few more clubs to deliver the revenues of some of the other ones. And so, we will probably end up having more clubs opening. Some of them large, the similar size that are big, big, big clubs that we do ground up, and some of them will be smaller. We have some clubs where they’re pretty much brand new clubs, it’s all funded by landlords upfront. And then — but at the end, we are also continuing to secure our locations that we’ve been working on for a long time to do the ground ups. So as you sort of shift the growth a little bit, you can see that in 2024, we can deliver double-digit growth, we can pay down some debt, particularly in the 3Q, 4Q, there’s just nice cash flow coming in, just pure, pure cash flow after growth capital, everything included.
And then as this EBITDA grows and then free cash flow grows, we can even literally fund some of the big boxes, ground-ups, all from internally generated cash flow. However, I just want to be clear, the company is committed to the sale-leaseback sort of proposition. We’re not backing down from doing sale-leaseback, it’s just timing. At this point, we just have to take a look and see if these LOIs come in, considering the fact that interest rates ultimately are going to go back down or they’re going to assume that we’re going to have a grade for 40 years, 50 years locked up based on today’s rates. That’s just [ asinine ] to go ahead and do a deal based on that. You just — and particular, when the company has the ability to hold off and do those sale-leasebacks in the same condition.
I’ve been adamant, we’re not going to pay a ransom for sale-leaseback and we don’t have to. So that’s sort of the — I really see the company being in an amazing position. It seems like every time we have an earnings release and we grow revenue, we grow EBITDA, and we grow margins, the focus goes on what people can pick on that would be negative. There is no — there is nothing negative about our business. We’re proud of our team for rocking and rolling with every objective that we put forward. And regardless of what the Street thinks, Brian, the company has set sequential priorities and knocked them down one after another. And that’s what I’m most proud of with our company is the fact that everybody is just executing what’s right for the entity.
Brian Nagel: That’s very helpful, Bahram. Appreciate that. And if I can just ask one follow-up. So you called out in your comments, the, I guess, I would say, better member utilization of the facilities, which is obviously another huge positive here. The question you see — is that across the chain or are there particular areas where that’s truer? And then — and I know you want to talk specifically about churn, but I guess we’ve got to think that we talked about this for a long time, that if your members are utilizing the facilities more frequently, they’re far less likely to churn then. So there’s a big financial positive, that’s correct, right?
Bahram Akradi: Both of those are — first of all, your first question, it’s universal. When we came out of COVID, I expect the attrition rate with having more promotions, having more programming, having more signature programs, I expected that attrition rate would be lower than 2019. To my surprise, it was consistently higher, but it was coming down. It was higher than 2019 but it had a trend that showed it was getting better, better, better. And then we started seeing roughly about July, August of this last year, the attrition rate sort of started kind of dropping below the 2019 levels. Now ’22 and ’23, we had a shift in student memberships where we used to put them — automatically put them on hold for them and not counted attrition, and ’22 we basically did away with that policy, and just to let them decide to either keep their own membership or drop out and then come back and join.
The effect of that was $0.5 million to $1 million a month of incremental dues positive, but on paper, it shows higher attrition. Comparing apples and apples, when you take that anomaly out compared to 2019, our attritions have been lower almost every month, the last three, four months and what we’re forecasting for the next two, three months as well. And so, it’s really the outcome that we’re looking for. But we are seeing consistently significantly more visits per membership, as I mentioned, 24% through the first nine months, and that’s dramatic. That’s a huge shift. The level of engagement of the customer is so much higher that we should expect to see lower attrition. And finally, we’re seeing it.
Brian Nagel: That’s very helpful. Again, congratulations. Thank you.
Bahram Akradi: Thank you, Brian.
Operator: Thank you. Our next questions come from the line of John Heinbockel with Guggenheim Securities. Please proceed with your question.
John Heinbockel: Bahram, I want to start with how is Dynamic Stretch progressing, right? Is that — do you think that’s still a $50 million opportunity next year or something like that? And then is there anything else — I know nothing may be that big. Any other services or top line initiatives other than the retail stuff you talked about coming next year?
Bahram Akradi: Dynamic Stretch, I think, is a $50 million opportunity next year. The answer is yes. It’s a part and parcel with — the rollout of that, it actually helps our trainers’ engagement with the customers, it helps the pickleball customers. I mean it’s just — it’s really — it’s a great program. I am pleased with the progress we’re making with it. However, I think the big impact is going to show up in 2024. And then, look, we have been very sequential in our priorities. And right now, the club’s core business is solid. That has been caught up. Obviously, like I said, the membership or swipes, people visiting the clubs in month of August, we basically almost in the mature clubs pretty much caught up with a number of visits in those mature clubs.
