Planet Fitness, Inc. (NYSE: PLNT) Third Quarter 2022 Results Conference Call November 8, 2022 8:00 a. m. m. ET
Participating companies
Stacey Caravella – Vice President of Investor Relations
Chris Rondeau – President and Chief Executive Officer
Tom Fitzgerald – Chief Financial Officer
Conference Call Participants
Randy Konik – Jefferies
Brian Harbour – Morgan Stanley
Joe Altobello – Raymond James
Alex Perry – Bank of America
Warren Cheng – ISI de Evercore
Max Rakhlenko – Cowen
Jonathan Komp – Robert W. Baird
Simeon Siegel – BMO Capital Markets
John Heinbockel – Guggenheim
Paul Golding-Macquarie Capital
Operator
Hello and welcome to Planet Fitness’ third quarter earnings convention call. My call is Emily and I will coordinate your call today. [Operator Instructions]
I will now pass the floor to Stacey Caravella, Vice President of Investor Relations. Go ahead, Stacey, please.
Stacey Caravelle
Thank you, operator and good morning everyone. Speaking on today’s call are Planet Fitness CEO Chris Rondeau; and Chief Financial Officer Tom Fitzgerald, any of whom will be available for questions in the Q&A consultation after ready comments. Today’s call is broadcast over the Internet live and recorded for playback.
Before I pass the floor to Chris, I would like to remind everyone that the wording of the forward-looking statements included in our earnings release also applies to our comments on the call. Our press release is available on our website, investor. planetfitness. com, along with any reconciliation of the non-GAAP monetary measures discussed in the call for their corresponding GAAP measures. I would also like to invite everyone to pay attention to our investor day on Tuesday, November 15. Details on the timeline and webcast link can be found on our investor relations website.
Now I’m going to pass on to Chris.
Chris Rondeau
Thank you Stacey and thank you all for us on today’s call.
We ended the quarter with more than 16. 6 million members, an all-time high, and added 29 new locations during the quarter, bringing our overall store base to 2353. We continue our stable recovery from the pandemic. Member trends remained strong with the third quarter pass. to the old pre-COVID seasonality. In addition, members were transitioning to the gym, continue to go to the gym more frequently, and there are fewer cancellations compared to 2019, which is a sign that members are more engaged with fitness. We recently hosted our franchise convention and the power was amazing as we met again in users for the first time in 3 years. The theme of the convention was Unstoppable, highlighting our ability to succeed for more than 30 years in all types of economies and political climates.
While the industry reported that 25% of healthcare and fitness services closed due to COVID, given the strength of our style and franchise systems, we survived the momentum without a permanent store closure, emerging even more potent with a huge opportunity for long-term growth. While all generations have almost returned to or surpassed their pre-pandemic penetration levels, A major theme of previous presentations at the convention is our efforts to continue to increase our penetration between generations with a strong focus on Generation Z.
We are excited about the long-term opportunity we have with Gen Z, as evidenced by the 3. 5 million teens who enrolled in the High School Summer Pass program. When the program ended in August, more than 14% of all teens on the U. S. high school summer pass were eligible for a summer pass to the U. S. U. S.
They didn’t enroll in the program, but the teens recorded 17 million workouts. We made the registration procedure even more transparent this year, allowing teens to register online, allowing us to bond with them and their parents and guardians. In fact, our app topped the list of the most downloaded apps on the Apple Store in the first few days after launch.
Through a targeted acquisition strategy, we begin reaching teens and their parents and guardians throughout the summer via email, messaging, and SMS with an ample one-month offer, if they sign up for the paid member once the summer is over. To date, nearly 300,000 teens and parents/guardians have signed up for an overall conversion rate of 5%, which helped drive member expansion in the third quarter. We’re already surpassing the conversion rate we had in 2019, the last time we introduced a similar program AND we have a much larger base, more than 3. 5 times the participants we experienced in 2019. We continue to market them and when they have already registered with a gym, Planet Fitness will be our priority.
Together with our franchisees, we focus on preparing our marketing plans for the first quarter. Before the pandemic, we made 60% of the club’s full-year net profits in the first quarter. We look ahead to the first quarter of 2023, which we expect to be our first uninterrupted quarter in four years without any COVID impact.
For the eighth year in a row, we will once again be the title sponsor of the New Year’s Eve celebration in Times Square. Our January National Logo Crusade focused on reinforcing the benefits of additional education, such as intellectual well-being, tension control and improved sleep, as well as positive post-workout energy.
As you heard from our quarterly call so far, the percentage of mature retail outlets that recovered and exceeded previous conceptual levels remained solid at approximately 30%, yet we increased the total number of members. Given our club’s season cycle, we don’t expect this to happen. Replace particularly until the first quarter, when we generally see strong net club growth.
The system-wide launch of the May black card that is worth increasing from $22. 99 to $24. 99 continues to outweigh the verification effects. 8. 2 percent rate-driven repayment expansion, with the balance coming from net member expansion. This is helping our franchise and corporate store segment partially offset the accumulation in operating prices experienced over the past two years.
Yesterday, we announced the promotion that if you become a Black Card member between November 7 and 15, you’ll get Halo View, Amazon’s fitness and fitness tracker, and wearable device for free. We are excited about this collaboration and continue to explore opportunities to paint with other well-known logos belonging to adjacent categories in the fitness industry. We are a logo wife given our length and scale and the diversity of our more than 16. 6 million members in terms of gender, age, earnings and other attributes.
Finally, I am delighted with our recent announcement of the promotion of Jen Simmons, former Senior Vice President of Business Strategy and Analytics, to President of the Corporate Clubs division; and which Paul Barber joined as Chief Information Officer. Jen has been with Planet for nine years and has developed the business strategy and analytical purposes from bottom-up knowledge and analysis to expand and drive our overall business strategies.
We look forward to it leading the fleet of corporate stores towards functionality with insights that will gain advantages in all franchise systems. Greater flexibility and scale.
Our search for president is still ongoing, but I feel smart about our organizational structure. And I have the leaders in position who will drive our next phase of expansion as we emerge even more potent from the pandemic. We are also looking ahead to discuss this in more detail at our Investor Day next week.
Now I’ll pass the one on to Tom.
Tom Fitzgerald
Thank you, Chris and good morning everyone. During the 3rd quarter of this year, we repurchased 1. 5 million percents, adding a $50 million percentage buyback we executed in Q3 at an average value of $61. 68, underscoring the strength of our balance sheet just 2 years after all of our retail outlets temporarily closed due to the pandemic. We also announced this morning that our Board of Directors approved a new $500 million percentage buyback authorization that replaces the existing 2019 percentage. This is another sign of our confidence in reliability and consistency. of our style of light assets to generate a significant cash flow.
Now I will show the results of the third quarter. All my feedback related to our quarterly functionality will compare the third quarter of 2022 with the third quarter of last year, unless otherwise stated.
We opened 29 new points of sale compared to 24 last year. We posted a positive comparable store sales expansion of 8. 2% in the quarter. Franchise comparable store sales increased 8. 1% and our comparable store sales increased 9. 7%. As a reminder, same-store sales of the Sunshine Fitness franchise retail outlets we acquired in the first quarter of this year will not be reflected in our company’s same-store sales until February 2023, but will continue to be reflected in our system. strong same store sales, consistent with how we have treated each other beyond acquisitions. Approximately 70% of our payment backlog in the third quarter was due to net member expansion, with the rest due to fee expansion. The price expansion was primarily due to a five basis point increase in our black card penetration to 62. 9%, as well as our recent value increase in May from $22. 99 to $24. 99. As a reminder, the black card worth racking up that we took in May was only for new members, who slowly started racking up average monthly dues over time.
For the third quarter, overall profit was $244. 4 million, compared to $154. 3 million. This accumulation is due to the expansion of earnings in all 3 segments. expansion. This construction was partially offset by a reduction of approximately $2. 6 million due to the shift of outlets acquired as part of the Sunshine Fitness transaction from the Franchise segment to the Company’s owned segment, superior NAF expenses, and superior equipment placement expenses.
For the third quarter, the average royalty rate was 6. 4%, solid compared to the prior year period. The 131% increase in profits in the directly owned stores segment is primarily attributed to the acquisition of Sunshine Fitness, as well as expanding sales from comparable stores and opening new stores.
Sales of the equipment segment increased by 78% in sales of appliances superior to existing franchised stores. For the quarter, replacement appliances accounted for approximately 75% of overall appliance revenue, which was higher than what we experienced, largely due to the reorganization that moved from the moment to the third quarter of this year, due to COVID-related supply chain disruptions in China earlier this year. We finished 28 new stores in the third quarter, unchanged from last year.
Our revenue charge, which relates primarily to the charge for sales of appliances to franchise-owned retail outlets, was $48. 5 million compared to $27. 1 million. , mainly due to more outlets as a result of the acquisition of Sunshine. General and administrative expenses for the quarter were $27. 1 million compared to $23 million. and expenses similar to those of our franchisee conference. National Advertising Fund expenses were $17 million compared to $15. 6 million.
Net income was $30. 7 million, adjusted net income was $38. 2 million and adjusted diluted net income consistent with constant percentage was $0. 42. A reconciliation of the adjusted net income source with the GAAP net income source can be found in the earnings release. Adjusted EBITDA of $93. 9 million and an adjusted EBITDA margin of 38. 4% compared to $61. 7 million and an adjusted EBITDA margin of 40. 0%. A reconciliation of adjusted EBITDA and GAAP net revenue source can be found in the earnings release. We no longer exclude pre-opening prices for our adjusted EBITDA, Adjusted Net Income and Adjusted Earnings consistent with participation. In the settlement, it will locate the consistent period of the last retired year that reflects this change.
By segment, franchise adjusted EBITDA $53. 5 million and adjusted EBITDA margin 66. 3%. Adjusted EBITDA for corporate outlets $39. 6 million and adjusted EBITDA margin 38. 4%. Adjusted EBITDA for appliances $ 15. 8 million and adjusted EBITDA margin 25. 4%.
Let us now turn to the balance sheet. As of September 30, 2022, we had total money and money equivalents of $467. 2 million, compared to $603. 9 million as of December 31, 2021, which included $62. 7 million and $58 million of money allocated in each period. Discussed above, the quarter we used $50 million to repurchase approximately 830,000 shares. Total long-term debt, excluding deferred financing charges, was $2. 0 billion as of September 30, 2022, consisting of our four tranches of fixed-rate securitized debt with a combined interest rate of approximately four percent.
As a reminder, our view assumes that there is no resurgence of COVID causing disruption of members or providers, whether it’s a shutdown or stricter mandates resulting in a significant change in member behavior.
In our earnings press release this morning, we reiterated and updated our expansion goals for the year. We continue to expect system-wide same-store sales expansion in double-digit percentage diversity. We have reduced our customers by striking appliances in franchisee-owned homes from approximately 170 to a diversity of 150 to 160. This update basically reflects a worsening of the HVAC supply chain problem. We continue to monitor the scenario closely, but we expect that some of the investments we devised would take position in 2022 will now take position in early 2023.
We now expect earnings expansion of around 50%. Previously, we expected it to increase by around 50%. This review reflects our increased understanding of stock availability to meet franchisees’ demand for retrofit. We now expect adjusted EBITDA to increase by approximately 60%, adjusted net source of earnings to increase by approximately one hundred percent, and adjusted earnings to be consistent with a consistent percentage increase of approximately 90%. Previously, we expected adjusted EBITDA expansion of approximately 50%, adjusted net earnings expansion of approximately 90%, and adjusted earnings consistent with a constant percentage of approximately 80%.
Our adjusted EPS direction is based on approximately $90. 5 million of diluted percentages outstanding, adding the issuance percentage in connection with the acquisition of Sunshine and third quarter percentage repurchases. We also continue to expect net interest expense for 2022 to be approximately $86 million, reflecting the refinancing and accumulation of our debt in the first quarter. As Chris said, we’re looking ahead to a strong fourth quarter, and assuming there isn’t a resurgence of the virus, we’re confident we’ll have a solid January and first quarter.
Now I will call the operator back to open it for questions and answers.
Q&A session
Operator
[Operator Instructions] Our first consultation comes from Randy Konik’s lineage with Jefferies.
Randy Konik
I guess, Chris, a consultation for you. He discussed in his comment the update in usage patterns that he has noticed accumulating and his cancellation rate decreases. It turns out that it was vital in the trend, so I just wanted to understand, how do you replace it sequentially?This is, again, significant and what do you think this replacement is in those 2 elements?
Chris Rondeau
Yes, that loads: this trend has been somewhat constant, almost coming out of COVID, where other people who exercise exercise more than they used to. You probably won’t forget it since the IPO, the average user works about five times a month, now it’s up to 6 times a month. And I think it’s like staying there. But the cancellation rate is fine, I think other people are more engaged, so it’s down a bit compared to the past. So either trend is very good, especially in the long run because the attrition is improving, the joints continue as they were and will simply load more foundation.
Randy Konik
they gave it to me Super useful. And then I guess maybe a question for Tom. I know we haven’t revealed to what extent you think converting Teen Summer Challenge members into paying members could take a stand over time. But I guess what I wanted to see is that if you look back at 2019, the last time this program took a stand and I think 25% of the members, 25% of the participants switched to members. Can you give us a concept of how long those conversions take, i. e. how long do you wait or how do those conversions start?When will we hold them this time in 2022 and 2023?
Chris Rondeau
Right. Randy, this is Chris. Yeah when we said 25% that was from the end of the show in 2019 through all the years of COVID and all that so that was about 3 years ago right? And then it was reported that about 11% are still members today and then about 5% of parents are still members; so 3 years later. But through, even at this point, we’re ahead of the conversion rate for the rest of 2019 compared to this year. So if you look between the end of the show or the show itself through the end of 2019, we have a chance of having a higher conversion rate than we had at the time. So I think that probably leads us to resolve first of all the overall end of joining Gen Z is positive in the right direction, coupled with the fact that we have other technical messages on this messenger and emails now because everything it’s virtual Sign up. So I think the trfinish shows that it is improving. And I can’t believe it’s not going to continue for the next two years.
Tom Fitzgerald
Perhaps one thing, Randy, as Chris said in his ready comments, this conversion rate is not only ahead of what we were in 2019, but is based on a base 3. 5 times larger. The impact on the club is therefore much greater.
Operator
Next is by Brian Harbour with Morgan Stanley.
Port of Brian
Maybe just a question about the benefit of replacement equipment being developed rapidly. Do you expect this to continue in the fourth quarter and next year?Or some kind of put and hold we deserve to think about?
Tom Fitzgerald
Brian, that’s Tom. So I think part of the combine replacement and 75% of the appliance profits are due to the change of tools from the second quarter to the third quarter due to the Shanghai shutdown. the third quarter, and then some of the problems of the chain of origin moved the new points of sale a bit. So, for the year, that could be the direct answer to your question. For the year, with the update in our investment outlook, we that the modifications will be closer to 60% of the total profit of the device, compared to what we said before, it would be closer to 50-50.
Port of Brian
It’s useful, yes. And then just a query about the type of new unit openings. I mean, do you think. . . said it’s HVAC problems?Do you think they will start dating next year?Is there anything else at stake only at this year’s openings?
Tom Fitzgerald
This year’s challenge is basically HVAC issues. And from what we hear, no one knows how to calm down or leave. I think it’s a mix of turning standards, taking brands a little off guard, but also closures in Shanghai. So recently we talked to larger franchisees here and the frustrations continue because you don’t know until you’re too far behind in the cycle. Therefore, we would like to say that it will end in the first trimester, we are not yet in a position to say that we know when it will end. Hopefully it’s in the 23rd, however, all the brands, all the major brands tell us that they don’t yet have a commitment from the company about when it will return to normal, so to speak.
Operator
The next one comes from Rahul [ph] with JPMorgan.
unidentified analyst
Can you give us more on the kind of conversations you had about how franchises feel in terms of store openings or in terms of monetary fitness or anything else that stood out that makes sense to discuss?That would be appreciated.
Chris Rondeau
Yes, of course. There is more enthusiasm for the fact that the trends we see with all generations and especially with Gen Z and the expansion of their propensity to join. So it’s already good. At its most sensible, some of the conversations have been lines about prices of structures that are in fact inflationary structures and prices of structures that fortunately fashion can weather this storm. Not that we need to increase spending, but it is for now. It will take place eventually, hopefully, but time will tell. Actually, we don’t have a crystal ball about it. But therefore, it is about this kind of thing. . The pandemic is not far behind. It turns out everyone is thinking about how to get back on track through real estate search and bring marketing, sales, and members back to where they were.
And we’re on the right track today, which is wonderful. So, they are positive and excited to resume operations here to be wonderful with inflationary prices when the structure and structure stopped. I think that just adds fuel to the fire.
unidentified analyst
Just to get on with that, speaking of real estate, for example, is there anything new in terms of similar store formats or something that makes sense given conversion trends and the type of frequency of visits?Or how have there been conversations with franchisees regarding the white area in terms of e-book format?
Chris Rondeau
I think the only thing we’re looking at now preliminarily, but looking for a lot of information to look at, is the update at the base of our club. If you come back before COVID, Gen Z was our smallest segment of our club base, the next one is the Boomer, Boomer Plus generation, which is Boomer and Silent. And today, they are our largest component of the base of our club, whether it is or not. Therefore, it has increased significantly in the last 3 years. So, we’re paying attention now just to take a look at some of their uses of what they use on the premises and if there’s a bit of a redesign of just the composition of our appliances. Are they ellipticals or treadmills or kettlebells and other functional education tricks?younger generation?
So just pay attention to some of those elements as the composition of our base changes. But as for the length of the box, no, I think it would be more or less the same, but just a remodeling of the interior of the four walls.
Operator
Next is by Joe Altobello with Raymond James.
Joe Altobello
I just need to get back to the HVAC shortage situation. I assume, first of all, that it is possible to locate other suppliers outside of China. time compared to this year and the apparent assumption that it is gradually improving?
Tom Fitzgerald
Joe, that’s Tom. I’m going to take this. So we are in contact with the big suppliers, Carrier, Trane, etc. And I think we’re doing everything we can to get our fair share, rather than our fair share. The challenge is that, unlike gadgets, we don’t have a genuine Supplier who likes Dated there. That’s all we’re looking for. But. . . We are opening stores. We. . . It’s not that there is rarely just one. There just aren’t as many as we need. of our franchisees, as we’ve talked to them, are looking to renew or keep the device there if they can through the code and just wait for more source to become available and then update it. They tend to like to upgrade everything at once, so they don’t have to worry about coming back and doing it a year or two later.
So I would say we do everything we can as franchisors and work with our franchisees and with suppliers to get what we can. It’s just that demand exceeds supply. And I know we are not alone. We hear it from other multi-unit people looking to open new drives. So I’d like to have a better answer on when this will end. It’s not eternal, that’s for sure. It is that we do not know precisely when it will return to normal, as I said before.
Joe Altobello
Okay, they gave it to him. And maybe to get on with that, curious, you haven’t done Investor Day in a long time. Perhaps a kind of preview for us of what we expect to hear next week?
Chris Rondeau
Yes, it’s going to be wonderful to bring a team. Usually, all he’s heard about is from Tom and me and before Dorvin. So it’s wonderful to bring in the team and communicate to them about our other methods and efforts that we’re doing with each of the departments, whether it’s digital, knowledge and generational trend, we’re going to be sharing a lot of what we’re seeing and traditionally what we’ve seen, how they’ve been given growth, as well as marketing and Jamie. etc. So there will be a lot of team members communicating about where we went. Many people, many investors, even existing ones, have not heard the story of the IPO era. And the last 30 years of hitale, what brought us here, what we got through a lot of ups and downs, and why we’re still here today after COVID with no bruises.
So, though, it’s going to be largely the methods and long-term plans that we’re going to execute on and sort of that you saw my feedback about the Amazon Halo partnership, where we’re right in the middle right now. It only started yesterday. Just a lot of exciting things, the doors that open here with our length and scale and come out of COVID and the highest point in fitness and wellness is at its highest, I think, not only members but also I think associations like this.
Operator
Next up is from Alex Perry of Bank of America.
Alex Perry
First, I just looked to square some of the quarter’s club numbers. Therefore, it had around 100,000 net new clubs in the quarter. But you added the same number of members from quarter to quarter compared to 2019, so what would the delta be if we compare unions from quarter to quarter compared to 2019?
Chris Rondeau
I think the 300,000 are from the beginning of the program, April and May. Yes.
Alex Perry
Gotcha. So just added the. . . It is ok. So it added participants to the previous high school Summer Pass this year compared to 2019. Compris. Et then, okay, that makes sense. And then my question at the moment was whether you can simply communicate about the suitability of the franchisee base and their willingness to open and the emerging rate environment here. In a way, when we go back to this kind of rule set of more than 200 – is that the only thing holding back this CVC right now?Or how do you see the overall fitness? And you discussed the costs of structure, but the increase, how do you think about the environment of emerging rates?
Chris Rondeau
I’ll talk about inflation and then let Tom communicate about interest rates. What we still don’t know very well, Alex, is that each and every year, franchisees must contract a limited number of games as part of the progression of their dominance. agreements. But many developers in the pre-COVID world, were opening earlier than expected, weren’t they?So what we are not obliged to do now is the burden: the accumulation of prices or the accumulation of the burden. Of construction, is that the franchisees themselves will open 2 or 3 sets that do not have to open in the next few years or must wait for prices to drop and then reopen them.
So, we just don’t know if they’re moving to open earlier than expected here until prices go down or maybe they need to wait to open long-term ones when they go down. So that’s just the component that we don’t know your appetite. to open early in this aspect of things. But Tom evidently can.
Tom Fitzgerald
Yes, Alex, I think EM interest rates are not helpful, but I think, relatively speaking, yields, as we communicate to our franchisees and have communicated to our largest franchisees here, the first 30, as we do each and every one. year, almost all of us have finished them now. In reality, no one is saying that EM interest rates are preventing them from developing. Many retail outlets are funded only through the company’s coin flow. Do not take coins out of the company. They reinvest the coins. So, it is: there’s a smart push before those new outlets are built.
And I think what Chris said is correct, the prices are particularly higher. But while we looked at commodity prices and even shipping prices, I got the numbers from the bottom of my head, but the charge of moving a can from Asia was a few thousand, then it grew to thousands of teenagers and now it’s back even below where it was before COVID. So those things are moving a little bit. So we’ve heard some franchisees say the climate is different. I would say the other thing that’s very encouraging on the progression aspect is that, like we’ve talked to a number of those giant franchisees and we’re talking about their finances. , many of its mature retail outlets have returned or are very close to the pre-COVID level of profits. So, while the club would possibly still drag on a bit here and there depending on its geography, the continued increase in the combination of Black Card and recent Black Card prices will continue to improve margins.
And I would say the latter thing about inflation, there’s been a lot of communication about wage inflation, which has actually slowed down a little bit. And as we communicated, although wage inflation in some markets is quite significant, a smart year of same-store sales expansion thanks to our style and low hard work prices actually offsets the effect and margins necessarily return to what they were before wage inflation after 1 year of average single-digit same-digit sales increase. In short, I hope this completes the picture for you.
Alex Perry
Yes, it’s perfect. Good luck in the future.
Operator
Next up is from Warren Cheng with Evercore ISI.
Warren Chen
My first question, I know it’s kind of off-season for clubs, but do you know where the new members come from?Do you see an accumulation in the club of other gyms or gyms of higher price?
Chris Rondeau
Yes, from what we’ve noticed of gyms closed, just under 1% of gyms closed. 25% of our unions are still unions. And nearly 40% of our members are still new gym members. So it wasn’t replaced too much there. But we didn’t, we didn’t notice, hear or research anything coming from the most beloved gyms. For the record, I’m sure it happens with other people who play the sport. And if I go back to 1999, 2000, the Internet bomb exploded. As an anecdote at the time, we saw that perhaps it had an [indistinguishable] store at the time, but we also saw and experienced it. But I’m sure it’s happening and other people are more aware of the prices they’re spending on cash. in.
And since so many other people have been in multi-purpose clubs, you realize you’re not a stone wall or the pool, why pay for that?So, it’s probably anything that works in our favor. That time, in the past due 90s.
Warren Chen
Gotcha. Very useful. A question for now, I just wanted to ask about this Amazon Halo collaboration. Is there a back-end integration with Halo, is it in a knowledge-sharing base, or an integration with your own type of fitness app?Can you just leverage that activity tracking knowledge?
Chris Rondeau
Not yet, but that component of the plan is to have Halo or [indistinguishable] but also communicate with the app and have the flow of knowledge. But strictly right now, we’re looking to get the Halo loose with any black card purchases, not registration, $24. 99 consistent with the month. And the Halo is loose for the first year. And then after that, if you need to continue, they will pay Amazon your $3. 99 or $4. 99. But it also includes a loose year subscription to Halo.
Operator
Our next one is Max Rakhlenko from Cowen
Max Rakhlenko
Congratulations guys. So, first of all, January turns out to be a very vital season for you after some of the latest, some of this year’s challenges. So, just curiosity, what do you think of your preparation as the season approaches?And what do you plan to do next year compared to this year, as well as the years leading up to the pandemic?
Chris Rondeau
Yes, this year we will be holding our annual New Year’s Eve birthday party here to start in Times Square. This will be our eighth year and Times Square’s oldest sponsor. But the general integration, see with our level and our hats and etc. and the announcement, which kicks off our January promotion. And then usually we’ll do an extension towards the end of the month for that as well. It’s worth all this announcement. The branding and message will be similar to what we’ve done this year, which is actually about that post-workout glow, the feeling of well-being, the intellectual benefits of training compared to overall thinking. People think about waist circumference, right?So let’s continue with this topic.
One of the things that might be a little different this year is that we’re heading for a promotion of the last week of December, a special end of the year before we get into that January surge. So, a little different from this one, where usually December is a lightning offer in the middle of the month. So, we get a little flavor at the end rather than mid-month. I think it’s going to be, it’s pretty surprising, things will be the first fourth quarter, the first, the first quarter in four years that possibly won’t be interrupted for nothing. So I think he deserves to be very smart for us.
Tom Fitzgerald
One thing to upload here, I think our agencies have moved to one — through our franchise formula away from Publicis in 1 of the 2 existing agencies we talked about. They are with their signature and very sure of themselves waiting for the execution to return to what they were used to. So, and we also felt very smart to reconnect with Barkley strategically in the creation and also in the paintings with us as the reference signature. for NAF. So, compared to where we were a few months ago, we have the impression of being on a company rate here as far as agencies are concerned.
Chris Rondeau
Oui. Et I think the only thing that would go up is also, as you know, Max, the marketing flyer that we have and we’re going into this first quarter with the biggest club base we’ve ever had, which is just more marketing dollars. So and I think if you come back even before the pandemic, you can’t even sign up for the Planet Fitness app. While we are in our favor with marketing and having an uninterrupted first quarter, we expect a special first quarter.
Max Rakhlenko
Great, it’s great. Enjoy all the color it has. And then, separately, congratulations on the appointment of Jennifer Simmons as President of the Corporate Club. It seems very deserved. Chris, what are Jennifer’s most sensible priorities today?And how is the Sunshine integration going? And then, what percentage can you contribute on some of the most productive practices that you see that can be implemented in the rest of the portfolio?
Chris Rondeau
Of course. Yes. She is helping to expand all of our insights and strategic analysis here at the company. And most of our decisions here with the franchise system, whether it’s marketing, box size, demographics, I mean, a lot of it comes from the knowledge that she’s accumulated that demonstrates top production practices. So having her influence in our corporate store base of over two hundred outlets now and expanding it, with her expertise, is going to be kind of the ultimate productive storm, I think, in a lot of ways. So I’m thrilled that she’s taking over that fleet with Mary, who’s the VP of operations there; and Scott, who held the marketing position there. She participated in the Sunshine agreement that we signed. And I think it’s vital to note that with our comparable store sales at 8. 6%, I mean 8. 2% systemwide, our fleet of corporate stores, that’s right, it’s. . . you remember, Max, our legacy fleet. , because those are our oldest and most mature markets for 30 years, we don’t have a lot of new store construction in the fleet history to influence comparable store sales.
So, it’s like the first two quarters here with your influence, our corporate fleet exceeded the comparable store sales of the system, which never happened. So, there’s no doubt that some of the most productive marketing and operations practices show that they’ve already implemented. In our existing fleet they have an influence. So, actually, the smart news there. And with Jen now also in Orlando with her home offices, I expect some really smart things.
Operator
Our next one comes from Chris O’Cull with Stifel.
unidentified analyst
I’m Patrick [ph] for Chris. Chris, I appreciate feedback on restrictions and origin chain development, but I just need to ask for a single follow-up. If we take a step back from all this, can you give us a concept of what is in the pipeline in terms of projects and if you see the number of projects in the pipeline expanding in the last 6 to 12 months or so, where was it?
Tom Fitzgerald
Patrick, I’m Tom. I’ll take that. I think you want to get to some kind of attitude by 2023 and we’re moving on to communicating about that. We don’t actually communicate where things are in the flow and in the pipeline. But I go back a little bit to what Chris said. Franchisees surely know what ties they want to build. The comments are very strong. We recently welcomed new PE workers who have invested in some of our largest franchisees. Knowing that the burden to build is emerging and who knows how long they will remain, they are still actively looking to build because the returns, as we are told, are still relatively greater than anything they see. So even though there is possibly a slight pullback due to ROI due to the top construction charge, we don’t see it really whetting the appetite, nor do they know the requirement is there. So, we’ll definitely communicate more about what everything looks like for 2023, as we usually do when we provide that perspective on our year-end call.
unidentified analyst
they gave it to me It’s useful. And then, Tom, I hoped he could provide a little more insight into the contribution of the corporate store’s relative margin that the legacy retail outlet portfolio had. Buy portfolio this quarter. But to what extent have you noticed club titles continuing to recover in those gyms, excluding the upper-margin functionality of Sunshine units?And how does it deserve for us to think about that heading into the fourth quarter and then next year in terms of margin?Trajectory of corporate retail outlets?
Tom Fitzgerald
Yes, that’s a smart question. And I think the smart news is, as Chris said, that the most powerful same-store sales in our old markets certainly, given our style and their largely fixed-cost nature, will come down to profits and continue in the old markets. . Store margins from a four-wall point of view. So all this is very strong. And Sunshine, too, are still performing. And you may remember, Patrick, who we talked about at the time of acquisition, before COVID, Sunshine’s mature retail outlets had several hundred more basic EBITDA margin issues on four walls than our traditional retail outlets, basically because of the markets where they’re less expensive to build, less expensive to operate. And so it remains intact, but as offsets continue to generate higher AUVs and dollars flow toward the bottom line, more than 80 cents on the dollar, margins at any of the retail outlet sets deserve to keep rising.
And I would say the other thing that was talked about year after year with Sunshine is that they had a complete team, rather than a full team at the helm of this unit where we had more of a hybrid technique from an SG perspective.
Operator
Next is from Jonathan Komp with Baird.
Jonathan Komp
I will make some further inquiries about the sets and I am sure we will have more consultations next week as well. A sign that the long-term future is rarely as wonderful or as smart as I thought before COVID?And perhaps in the company’s stores, do you foresee a slowdown in company growth due to construction-like inflation disruptions?
Chris Rondeau
Yes, I don’t see, we still have over 1000 in the works, Jon, network zone progression deals with franchisees in addition to the 2300 or more that are open today. And as we’ve talked about in the past, franchisees, their territory where they haven’t evolved is almost as valuable as the territory they’ve evolved in, right?And that’s where a big part of the price of their business comes from, it’s their sets and the track. They need to lose track of not coming and get rid of it through a contract, which would then sell it to some other franchisee who would build it. So, I think the important factor I discussed earlier is that we don’t know if they’re going to need to open earlier than planned just for the charge of opening retail stores right now, because they have to wait and see if it’s going to fall in a year or 2 because they would open sets that maybe weren’t committed until now. truth?now in 2022.
Possibly they would have opened 2023, 24 and 25 in the same year, right?Then they could slow down for you to buy contractually open but didn’t open earlier than expected. So whether we go back to two hundred or go back to 260 like we did in 2019, I think there might be some hesitation about opening 20% more sets than are required because of that. So there are still many sets to open and many contracts to open. So he is going on to push a lot of openings every year. It’s hard to say if we’re going from 200 to 260 to 300 or if we’re going to slow down until prices go down.
Tom Fitzgerald
And Jon, on the corporate side, I mean, as you know, the component of the appeal of the Sunshine acquisition was not just the existing portfolio that they had and the profitability and the team that they had, but also the pipeline. And so, in addition to the opportunities in our old markets, we like the ROI opportunities for new retail outlets in Sunshine territory. Therefore, we do not plan to slow down the progression of corporate retail outlets. We need to maintain our penetration rate of around 10%, so they are looking to grow with the system.
In a given year, it may be a little early, a little behind just depending on real estate opportunities and what’s going on at Array, but our strategic goal is to stay around 10%.
Jonathan Komp
Yes, it’s great. And then only 1 tracking of the values. I think from year to year, you’ve noticed that maybe it accumulates a little less in the penetration of black cards. And do you see a setback in the top price per month of the black card?And then some resolution on the annual price and just thinking about the value merit you could see for the new sets until 2023?
Chris Rondeau
We say the slight decline in Black Card acquisition this quarter was basically due to the accumulation of teens in the High School Summer Pass to $10 consistent with the month. So, this resulted in a slight reduction in Black Card acquisition this quarter, however, it was not similar to the value of the Black Card itself. Acquiring those general consistent off-sale values was normal, in fact, a little better, whether it was or not, which is attractive because this is the first time we’ve had the black card value increase, it’s the third time we’ve done it. But this is the first time we do this in which we do not notice a minimum: an initial minimum in the acquisition of the black card for a few months. before he recovers. It’s really appealing that even though we had a $2 raise, we saw an increase in acquisitions, only teens cut it down this quarter.
Tom Fitzgerald
And Jon, we said on the call that the Black Card, since the rate increase, we overcome the control effects that we have.
Chris Rondeau
And I don’t see — in terms of, and I think it’s worth building in general, I don’t see that $10 change, making, as we’ve talked about, getting you off the couch worth it. And I think it’s just an amazing business style where we promote it for $10 overall and other people come in. And when they really get the benefits, they end up taking the Black Card in that 60% range. So it’s a wonderful interest prize, to get other people interested in checking it out and then hopefully have them convert upwards.
Operator
Our next one comes from Simeon Siegel’s lineage of BMO Capital Markets.
Simeon Siegel
So, Chris, you’ve had Sunshine for a while and you see the total popularity of EBITDA. Just learning or tweaking your thinking about long-term business numbers versus franchise numbers in the future?And then, Tom, can you. . . Sorry if I missed that?
Chris Rondeau
Oui. Je I think about Tom’s previous comments, I think we should stay within that 10% diversity that we reiterated when we bought Sunshine. So, as the fleet grows, do we continue to build corporate outlets in all of our markets, classic markets, as well as the Sunshine markets and probably all the small franchise teams that come to sell in and around our existing locations where we are right?So, everything that’s in this component of the southeast of the country or the northeast, where we are, most of our corporate outlets are and as small franchisees, let’s say, come and sell, bring them. But I think it’s – I think I’m leveraging their operations and some of the marketing techniques they’ve put into practice, as I just said, are that sales in comparable stores of traditional retail outlets are ahead of systems, which never happened. So it’s a big influence that they have on the system, which is great.
I think we’re now with Jen’s leadership there, with the rest of the team, I’m looking for smart things to make happen and I’m also proceeding to build retail stores based there. So it’s still the same plan, but I think, probably a bigger prospect, I think, in the future.
Tom Fitzgerald
And Simeon, on the side of the NAF. Before COVID, we balanced what we spent with what we collected. And then, during COVID, we made the decision to make unilateral moves where we spend more than we collect. And then, starting this year, we intended to recover. to where we were historically. But I think with all the effect of the Omicron variant in January, right during peak season, the jerks, frankly, that we had with Publicis and some of the things that we ended up having that the payment that we thought the component of our long-term contract would have been loose for, actually replaced the dynamic there. NAF will be larger than collections. I think it’s $7. 3 million so far this year, on track to about $10 million for the entire year.
Our goal, as Chris said, assuming COVID is us and we go back to a more general first quarter in January, which actually happens to be the case compared to what we’ve noticed here over the last two years, our goal would be for NAF collections and expenses to adjust as they did before COVID.
Operator
Next is by John Heinbockel with Guggenheim.
Jean Heinbockel
Chris, let me start with what you think lately about national versus local, right?Because I think maybe the concept that you would eventually make more national, less local. But if the local is improved, directly and adjusted, does it move more in a national direction?And then I think that’s the first question. And then the other component of that, on the right, would perhaps pave the way for a rate buildup in the Are we far enough from that, especially considering the charge that franchisees accumulate to open a club?
Chris Rondeau
Yes, I think, that’s a smart question, John and I think we’ve discussed it in the past. But if it weren’t for COVID, we have 53 consecutive quarters of positive compositions leading up to that and we were probably at a point where royalty accrual would probably have been on the map. But naturally, now that we’re coming out of COVID and we’re not one hundred percent back to where they were and some payroll prices are expanding in some of them in operating expenses. So once EBITDA margins have closed again or exceeded what they were, I think that’s indeed a topic of discussion. A matter of time.
As for the lap, I think a few more: at least a year, maybe 2 with Zimmerman, Merak and Barkley is now our simplest record and now fastest in the data. We just had our big annual October sale, as I’m sure you’ve seen, we’re now going to have an autopsy for sale and all 3 agencies will be coming into the room. We’re all skipping over the most productive and the worst acting markets and then summarizing precisely why and what combination of means and spfinish they did so that now we can have this to t and show the entire Z’sArray what to do. for the next sale. And it will be subtle both once and both once and both times that we do that, right? Anything will be reported to us both once and both once and both times. And I think as we get to that we end up understanding the mix better and getting them to finish more efficiently so we’re just putting more money into the national and then leading the way so it’s less difficult and less franchised . they have to worry about their own appearance and then maybe move some of it.
And now the power is better, the best typhoon would be that 9% no longer has to be 9%. And the 3000 to 4000 retail outlets are reopening, does it have to be 9%, maybe not?So that gives us more opportunities to accumulate royalties as well. And it’s the same dollars apart from the franchisee’s total compensation, which would be great. So I think it’s only a matter of time. I think we would get there. That’s about how long.
Jean Heinbockel
And maybe secondly, what do you think now about the pace, right, of the geography of outer expansion, right?Do you need to accentuate it? And I guess it would be virgin land, would Asia be the first?
Chris Rondeau
Oui. Je I think, as we’ve talked about in the past, a kind of hybrid approach. We didn’t really have a foreign team to talk about. It was just a progression team here and an operations team here doing, call it, one country a year, right?We managed to get where it didn’t really work. Mexico has been phenomenal for us. Australia has been phenomenal. I mean an average of more members than: Mexican outlets open with 3 or 4 members of the American store. Panama has done well. Australia has done a smart job. New Zealand will open the first store this year. The smart thing now, we will look to build a foreign team that focuses only on overseas and start building this team. It would be abnormal for us to now do 2 or 3 countries a year.
I think some will have to be creative. And if it were the acquisition of a logo, as you know, in Europe there are many giants, does it make sense if someone has to win one logo at a time?Asia, on the other hand, Japan in particular, is actually not a cheap large-scale supplier whose value makes no sense to enter, Planet and start building stores. So, I think I see more attention and probably more than, probably more than 2 or 3 in all probability according to the year instead of 1
Operator
Our latest inquiry comes from Paul Golding’s line with Macquarie Capital.
Paul Golding
In the past, I noticed that reciprocity is the biggest advantage. And I was wondering how this trend has evolved after COVID now and maybe with more hybrid paints and how PF Plus also take into account given the platform’s inclusion in Black Card now and all the engagement metrics around that?
Chris Rondeau
Yes, it’s Chris. We have: the trading procedure remains by far the most used feature. Even with some of the house works or a hybrid approach, we haven’t noticed a massive drop in reciprocity at all. The most popular moment is guest privileges, strong moment, so you take visitors loose to practice with you. And all the others are relatively small, whether they’re hybrids, I mean, with whirlpool or tanning beds or virtual use. So everything is small in that sense.
The other is reciprocity, as well as the use of black card services, I mean, reciprocity and black card use are by far the most commonly used. Everything is included, so it is very difficult to see what is driving the Black Card acquisition sale. Or is it virtual? We had very few virtual subscribers at $5. 99. But what is attractive are those who do, more than a part of them end up installing bricks and cement after the fact. That’s right, you know, there are very few. it ends up being a kind of gateway to bricks and cement along the way. So it converts people, but it’s a very small number.
Paul Golding
And then, when it comes to Amazon Halo’s offering, are there opportunities for you to take advantage of cross-selling or cross-marketing?Or do you get some kind of media guarantee from them?What are the opportunities there?
Chris Rondeau
Yes, there is not much we can say about how the couple works, but it is wonderful to work with them, first of all. And that’s the beginning, if everything goes well with sales, it’s probably the beginning of a lot of other things that we can do with them in the future. We haven’t, or nobody has yet, sold gym memberships on Amazon. So if there was a way to do this, it would be a pretty cool thing to discover. But we didn’t cross that bridge at all. But I think this is just the beginning of a long-term relationship, this sale is going well this year. But what’s really clever is that if it works, as you’ve probably noticed or know, we win $1 or $0 during a promotion. Where do you go from there, right? We pay them to sign up with us, that’s wrong – you can’t get cheaper, okay, $10 a month. But I think when you start giving stuff like that, it’s like you’re paying them to sign up. SoArray, this may just be the beginning of understanding and learning tactics to generate volume on other tactics besides directory fees.
Operator
Those are all questions we have for today. I will now give the floor to CEO Chris Rondeau for his closing remarks.
Chris Rondeau
Thank you all for registering for us today and I hope you can register for us on Investor Day next week. And excited to wrap up the fourth quarter here as the Amazon Halo promotion launches, Times Square kicks off here for New Year’s Eve. and a wonderful uninterrupted first trimester. So I hope to see you all next week. Thank you.
Operator
Thank you all for joining us today. This concludes ours and you can now log out.