Planet Fitness, Inc. (PLNT) Q3 2026 Earnings Report, Transcript and Summary

Good morning, and thank you for joining today's Planet Fitness Third Quarter Earnings Conference Call. [Operator Instructions] I would now like to hand the call over to Michael Oriolo, VP of Investor Relations for opening remarks. Please go ahead.

Thank you, operator, and good morning, everyone. Speaking on today's call will be Planet Fitness Chief Executive Officer, Colleen Keating; and Chief Financial Officer and President, International, Sudhanshu Priyadarshi. They will be available for questions during the Q&A session following the prepared remarks. Today's call is being webcast live and recorded for replay. Before I turn the call over to Colleen, I'd like to remind everyone that the language on forward-looking statements included in our earnings release also applies to our comments made during this call. Our release can be found on our investor website along with any reconciliation of non-GAAP financial measures mentioned on the call with their corresponding GAAP measures. Now I will turn the call over to Colleen.

Thank you, Michael, and thank you, everyone, for joining us for the Planet Fitness third quarter earnings call. As you just heard, we're excited to welcome our new Vice President of Investor Relations, Michael Oriolo, to the Planet Fitness team. Michael brings more than 15 years of experience across Investor Relations, corporate strategy, financial planning and analysis and public equity investing in both the consumer and restaurant industries. Sudhanshu and I will be working closely with Michael, and I know he looks forward to meeting our analysts and investors as he settles into the role. Turning to our results. We delivered same club sales growth ahead of our expectations, adjusted EBITDA margins of approximately 41%, and we continue to make progress on our strategic priorities. We drove system-wide same club sales growth of 1.5% and finished the quarter with approximately 21.5 million members, consistent with the end of the second quarter and up approximately 4% year-over-year. Our average monthly attrition rate was 3.6% for the quarter, broadly consistent with historical range and recent trends. Adjusted EBITDA increased 3.9% compared with Q3 2025, and we opened 33 new clubs. We also saw encouraging early traction on our strategies to drive accretive net member growth and strengthen the foundation for 2027. Let's start with member growth, where we are activating strategies to both drive acquisition and increase retention. Our objective is clear: to reach the roughly 70% of the U.S. population not currently paying for fitness and convey why our welcoming, non-intimidating and differentiated environment is the right choice for them to meet their fitness goals. In late August, we launched our interim creative that takes a lighthearted approach to demonstrating that at Planet Fitness, getting fit doesn't have to be a whole big thing. You don't need to train before joining. Our Judgement Free environment welcomes you as you are and supports you as you take your next step towards progress. Focus group feedback indicates that this approach is resonating more strongly with our target demographic. These learnings are informing our next campaign, which we expect to launch in late December ahead of the New Year season. Alongside this evolution in our creative approach, we are also refreshing how the Planet Fitness brand comes to life across the member experience, including our brand identity. Our goal is to ensure that our evolved visual identity continues to reflect our welcoming and supportive ethos while also allowing for a more seamless and flexible presentation of the brand across traditional marketing formats and digital channels. The refreshed identity informed by member feedback builds on the enhancements we have made across the member experience in line with consumer trends and preferences. All new clubs and remodels will now feature the full suite of new branding, while existing clubs will incorporate a collection of elements designed to seamlessly integrate with the current branding over the next several months. In parallel, the rolling launch of our dynamic creative optimization engine began in September, strengthening our ability to optimize our media by dynamically tailoring our messaging to our target audiences. We will continue to monitor and launch additional channels for the remainder of this year and into 2027. Together, these marketing advances are helping us connect with members and prospective members more effectively from acquisition through retention. Building on that momentum, at our September franchisee conference, we introduced a 3-part member engagement strategy designed to deepen connections with our members and improve retention. This strategy is comprised of the first 100 days, signature events and a reimagined PE@PF. Our data shows that the first 100 days of membership are a critical period for retention. In our clubs, we are combining personal guidance, education and structure to reduce uncertainty and help members build confidence faster. Beyond the club, we are leaning into personalized communication based on our members' goals and behaviors. For example, if a new member tells us in their profile that they want to build endurance by visiting the club 3 times a week and then begins to visit less frequently, we can send a supportive message through the app or recommend recovery options in the Black Card Spa. The goal is a seamless first 100 days experience in which every digital interaction extends and reinforces the support members receive in the club. Beyond those critical first 100 days, we are creating more opportunities for members to connect with one another and build a lasting sense of belonging. We know how powerful rituals can be, so we're bringing them back in new relevant ways. When people come together around a shared experience, it builds community and a sense of belonging. Our signature event strategy provides clubs with a consistent framework while allowing them to create authentic, locally relevant experiences to continue to foster these core assets of our brand. That same focus on connection and belonging also extends to how we support members on the club floor. We're piloting new class formats as part of the PE@PF refresh with a broader rollout planned for the first quarter of 2027. The program is designed to help members find support, stay engaged as healthy habits take hold and feel that they belong. Ultimately, retention is about helping more members succeed on their fitness journeys. We believe these strategies will contribute and be effective in driving member growth and retention going forward. Now on to our pricing architecture. Our philosophy is to maintain our HVLP leadership position with a sustainable flywheel to drive member growth while also enhancing franchisee profitability. During the quarter, we executed a number of tests to evaluate our optimum architecture. Specifically, we launched a limited time $10 Classic Card promotion to reinforce affordability, assess regional performance and inform our pricing strategy. The promotion drove a meaningful increase in joins with several markets delivering incremental revenue. While results varied by region, it gave us visibility into regional nuances. Our tests have provided us valuable insights around our pricing strategy, and we now plan to introduce highly targeted regional Black Card price increases in the second quarter of 2027. This decision aligns with our commitment to value and is supported by the modernization of the Black Card Spa with a greater focus on recovery, advancing our goal of making recovery more accessible and affordable. By 2026 year-end, we expect approximately 500 clubs to offer Red Light saunas with further club penetration in 2027. For context, a 40-minute session with an infrared sauna and Red Light recovery at a dedicated recovery center could cost at least $60 for a single purchase session, and our Black Card members will have access to this through their monthly membership at no additional charge. We will share additional details as we finalize the Black Card pricing strategy, guided by our commitment to balancing affordability and member value. Our success and that of our franchisees are inextricably linked. We remain steadfastly focused on our franchisee profitability, which is driven by accelerating revenue growth to improve club level performance. Against that backdrop, we continue to work closely with our franchisees to build confidence in the initiatives designed to accelerate member growth. We appreciate that our domestic franchisees want to see greater traction from our efforts to reinvigorate member acquisition and reinforce affordability. We made meaningful progress towards achieving these priorities during the quarter and built a strong foundation for future improvement. Lastly, turning to development and our growth outlook. On the international front, consistent with our disciplined strategy of entering 1 to 2 new markets a year, we recently acquired Be-Fit in Portugal. Be-Fit portfolio includes 25 clubs and approximately 80,000 members, creating an immediate national platform. The clubs are a strong fit for Planet Fitness, large, high-value, low-priced gyms with ample parking and capacity for additional members. The portfolio is profitable with the mature clubs generating strong EBITDA margins, and we see potential upside as we convert these units to the Planet Fitness brand and implement our best practices. The transaction gives us a profitable entry into a priority European market, complements our growing Spain business and provides a faster, more attractive path to scale than a greenfield entry. Similar to Spain, our long-term plan is to refranchise the Portugal clubs. This acquisition also fits squarely within our capital allocation strategy. We are a cash-generative business, and we put that cash to work in 3 primary ways: repurchasing our shares, investing strategically in the growth of the business and accelerating international development by opening 1 to 2 new international markets per year. Our disciplined, flexible approach and asset-light, highly franchised model give us a clear advantage in creating long-term value. In addition to the Portugal acquisition, which creates a compelling runway for growth across the Iberian Peninsula, over the past 12 months, we have deployed $650 million to repurchase approximately 11% of our adjusted weighted shares outstanding. Sudhanshu will walk through additional details later in the call. Turning to development across our franchise system. Let me address our new club opening outlook. As I mentioned earlier, we opened 33 new clubs during the quarter, bringing our year-to-date total to 71 through the end of Q3. Based on current visibility into the new club development pipeline, combined with the Portugal acquisition, we now expect full year new club openings to be approximately 190 to 195 compared with our prior range of 180 to 190 new clubs. While our full year new club opening outlook reflects a more measured pace of domestic development, our strategic initiatives are designed to reaccelerate growth over the long term, and I am confident in our plans to create shareholder value. Now I will turn it over to Sudhanshu.

Thanks, Colleen, and good morning, everyone. Our third quarter financial results are well detailed in our earnings press release and new supplemental financial presentation that is available on our Investor Relations website. With those resources providing additional detail, I will focus my comments today on the key drivers of our income statement and the broader trend shaping our business. As always, my comments regarding our quarterly performance will be compared to the same period last year, unless otherwise noted. Starting with same club sales, we delivered system-wide same club sales growth of 1.5% in the third quarter with franchisee same club sales up 1.5% and corporate same club sales up 1.8%. Rates drove our Q3 comp gain, supported by a 160 basis point increase in Black Card penetration to approximately 68%. At the same time, the 2-week $10 promo in Q3 provided helpful insights into the relationship between price and volume on a regional basis that is informing our approach going forward. For the third quarter, total revenue grew 9% to $360 million with all 3 segments up year-over-year, led by the franchisee segment, which increased 14% -- as a reminder, a portion of this increase was driven by the 1 percentage point increase in NAF contributions from 2% to 3% for 2026, which will go back to 2% for 2027. For the third quarter, the average royalty rate was 6.7%, flat compared to the prior year. The 3.5% increase in revenue in the Corporate-Owned Club segment was driven by sales from new clubs as well as increased same club sales. As a reminder, we opened 21 new corporate clubs since the end of Q3 last year. With respect to the Equipment segment, the 11.1% revenue increase was driven by higher replacement equipment sales, partially offset by fewer new franchisee-owned club placement sales. For the quarter, replacement equipment accounted for 85% of total equipment revenue compared to 82%, and we completed 21 new club placements this quarter compared to 27 last year. Moving to our bottom line. Adjusted net income was $61.9 million compared with $67 million, reflecting both higher D&A and higher interest expense this year. Adjusted net income per share increased $0.03 to $0.83 based on an adjusted weighted diluted average share count of 75 million shares compared with 84 million in the third quarter of 2025. The meaningful decrease in our share count reflects our recent share repurchase activity, which I will detail in a moment. Adjusted EBITDA was $146.2 million, an increase of 3.9% year-over-year and adjusted EBITDA margin was 40.6% compared to $140.8 million and adjusted EBITDA margin of 42.6% -- the reduction is primarily driven by the higher NAF contribution rate. By segment, franchisee adjusted EBITDA was $86.8 million and adjusted EBITDA margin decreased from 72.5% to 67% with the change in margin driven by the increase in NAF contribution rate. Excluding NAF, franchisee adjusted EBITDA margin were consistent year-over-year. Corporate Club adjusted EBITDA was $53.5 million and adjusted EBITDA margin was 37.5% compared with 39%. Finally, equipment adjusted EBITDA was $25.5 million and adjusted EBITDA margin was 29.2% compared with 30.1%. Now turning to the balance sheet. As of September 30, 2026, we had total cash, cash equivalents and marketable securities of $515 million compared to $607 million on December 31, 2025. At the end of the third quarter, our net leverage was 3.6x. I'd like to spend a few minutes on capital allocation as we are announcing several actions today. We are a cash flow generative business, and we use that cash to create shareholder value in 3 ways; we invest in the business to support growth. We invest in new markets where we can build the position and recycle the capital, and we buy back shares when we see value. Let me start with share repurchases. We continue to see value in our stock, and we intend to continue buying back shares over time, funded by our cash flow in a disciplined way. In Q3, we repurchased 1 million shares at an average price of $48.63 for a total of $50 million. Year-to-date, we have repurchased 6.4 million shares at an average price of $47.16 for a total of $300 million. Yesterday, our Board of Directors approved a new share repurchase program for up to $500 million. In conjunction with the approval of the new program, the existing program will be canceled. This reflects the Board's continued confidence in our business and our commitment to returning capital to shareholders. Second, while our model remains highly franchised and asset-light with corporate clubs now representing approximately 10% of the system, we have begun a strategic review of our domestic corporate-owned club base. We like owning and operating corporate clubs for some reasons. namely, they generate high margins, keep us close to members and give us the ability to quickly test, learn and share best practices with franchisees. That said, we would like to increase the percentage of clubs owned and operated by franchisees. Our plan is to sell a portion of the corporate club fleet to new or existing franchisees with the intention of using the proceeds from these transactions to support our capital allocation strategies. This process is underway and discussions with multiple interested parties are ongoing. We look forward to sharing more specifics at the appropriate time. Third, I want to provide additional detail on our acquisition in Portugal. As Colleen shared, we closed on our acquisition of Be-Fit, a high-value, low-price chain with 25 locations, where we see opportunity to accelerate our strategic priorities and growth, we will use our strong balance sheet. This is in line with our strategy of entering 1 to 2 new international markets each year in a disciplined and focused way. The acquisition is expected to be accretive to earnings in 2027 and gives us a scaled profitable entry into a high-priority European market with natural operating and geographic synergy with our growing Spain business. We see the potential to double our footprint across Iberia over the next 3 to 5 years. The portfolio of clubs in Portugal are profitable with the mature clubs demonstrating a strong EBITDA margin. Newer clubs also offer additional earnings potential as they ramp, and we drive store optimization and membership growth to create additional upside over time. Consistent with our approach in Australia, we plan to recycle the capital. The purchase price was approximately EUR 102.5 million, comprising approximately EUR 100 million paid in cash at closing and up to an additional EUR 2.5 million in contingent cash consideration. We funded the purchase price entirely with cash on hand with no incremental borrowing. That is the balance sheet flexibility I referenced a moment ago, and it leaves us well positioned to continue executing on our capital allocation priorities. To sum up, share repurchases are our near-term priority backed by a larger authorization and a plan to fund additional repurchases through operating cash flow and reducing our corporate club ownership. Our international investments are about disciplined, long-term growth and where we build a position, we recycle the capital. And finally, as always, we will continue to make foundational investments in the business to support long-term growth across the system. Moving on to our 2026 outlook. Reflecting our third quarter results and our expectations for the fourth quarter, we are increasing our outlook for system-wide same club sales growth to approximately 1.5% to 2%, up from our prior expectation of approximately 1%. We are also updating our unit growth outlook. We now expect to open approximately 190 to 195 new clubs system-wide, up from our prior expectation of 180 to 190 to reflect the acquisition in Portugal. We are lowering our outlook for new equipment placements to franchisee-owned location to 135 to 140 from 150 to 160. Based on these changes, we now expect total revenue to grow approximately 8%, previously 7%, adjusted EBITDA to grow approximately 6.5%, previously 6%, adjusted net income to decrease approximately 3% and adjusted net income per diluted share to grow approximately 6% based on adjusted diluted weighted average shares outstanding of approximately 77 million. Net interest expense for the year is still expected to be approximately $115 million. We expect replacement equipment sales will make up approximately 70% of Equipment segment revenue, equipment margin rate of approximately 30%, capital expenditures now up 15%, the high end of prior range of up 10% to 15% and depreciation and amortization up 7% versus previously up approximately 10% -- our outlook does not include any impact from a potential sale of corporate-owned clubs. We operate a resilient, highly profitable global franchise business model with approximately 21.5 million members across nearly 3,000 clubs and 7 countries and a large TAM in the growing health and wellness category. Our strategies are designed to reaccelerate member growth and improve franchisee profitability, which ultimately drive the value of our company. At the same time, we are committed to creating shareholder value by utilizing our strong balance sheet and cash flow for share repurchase and accelerating our strategic priorities. I will now turn the call back to the operator to open it up for Q&A.

[Operator instructions] Your first question comes from the line of Arpine Kocharyan with UBS.

I was hoping you could give us your high-level thoughts on Agentic AI and impact on your business potentially. It seems like your churn is nicely within historical range, pretty steady, and you're taking a more regional approach to pricing. Have those pricing decisions been impacted at all by this kind of more heightened focus on Agentic AI and how that -- is that really shaping your strategy? And also, do you plan to keep the $10 pricing option as a promotional tool, more so promotional tool than kind of making permanent changes to your classic card pricing?

It's Colleen. Nice to hear from you, and thanks for the question. I'll start with the impact on the business with AI. So we see a couple of opportunities with AI, and we're utilizing it in our business today. As you know, we launched earlier this year an AI-enabled predictive analytics churn model that helps us identify indications of churn and propensity to churn. And the next phase of that will be to serve up offer retention offers with the next best action engine. So that's one example of how we're using AI in our business today. And then also, as we think about marketing with the precision in our target marketing, using AI to help being more precise in targeting. So where we've moved from search engine optimization or SEO and are now using GEO, which is enabling agentic search and helping us to serve up the Planet Fitness brand into the consideration set of people who are using AI to help them on their health and wellness journey. Those are a couple of examples. And then machine learning, obviously, is helping us with our pricing analytics, and we've done a lot of work this year around our pricing architecture to help inform the decision to launch regional pricing, particularly for Black Card. But AI and machine learning has been something that our data science team has used to help us inform that go-forward strategy.

And then I was hoping you could talk a little bit more about the underlying unit growth outside of the acquisition in Portugal. Why the change in underlying unit openings? Was that merely kind of a decision looking at the acquisition you're making, some timing decisions or there's any underlying change in your unit openings outside of the acquisition?

Hi Arpine, this is Sudhanshu. So as you saw, our overall total unit for '26 is slightly higher. But yes, we added 25 clubs of Portugal. We normally account for some conversions. We run now 3,000 plus, and we already account for some conversions. And we expect the total unit growth in '26 to be 6%, and we feel we have a long runway of growth ahead. So specific to your question, why franchisees are down, I think we guided it came down around 10 to 15 clubs this year. And one of the reason is the real estate market remains very tight. So when we find a good site, we do it, but it's also delays is most of them is timing related where we are right now, we're seeing some slip to next year. So we just wanted to make sure that we guide the right cadence for you all. But we feel that our franchisee health is in a good place, and we expect similar level of growth in the franchise unit growth in '27 also.

Your next question comes from the line of Rahul Krotthapalli with JPM.

I appreciate the color on the retention initiatives. Can you elaborate on the marketing opportunities, specifically around the DCO and the personalization engine to redirect the parts of the discussed strategy to minimize churn and also elaborate on how you're thinking about the marketing messaging evolution, what we saw in August as we approach December? And the follow-up is on the greenfield versus M&A opportunities internationally. How should we think about the franchise versus company store mix in the near to medium term as you refranchise U.S. clubs, but also bring on some of the international clubs on balance sheet? Is it just a timing thing we should be mindful of?

Sure. So I'll start with your question about the marketing opportunity. I touched a bit in the last answer on AI enablement and agentic search optimization in partnership with the more traditional search engine optimization and that those are tools we're using to have our marketing have a more precise reach to our target consumer. And we use that in partnership with the DCO engine, the dynamic content or dynamic creative optimization engine that we put in use in September of this year that also helps us serve up creative that's more uniquely tailored to the target -- to our target. And then on churn, I touched on the churn mitigation in the last question as well and how we're using AI enablement and then also the in-club experience and how we're engaging with our members to create a sense of belonging and community that we know enhances member retention. I'll also say from a retention standpoint, we've continued to make excellent progress in the Bridge Club format across our estate. So today, the vast majority of our domestic estate has some version of a format optimized layout. And then the full Bridge Club, which a bridge club is where we've got a more balanced footprint of strength and cardio on the gym floor. We've got roughly half of the domestic estate, roughly 50% of the domestic estate has moved to a bridge club format. So we're continuing to make sure that we're offering our members and prospective members the experience in the club, both in terms of format and equipment as well as the warm welcoming culture that has brought people into the category for decades. And then I think the last part of your question was on the international growth and the opportunity we see there as well as the franchising opportunity versus utilization of the balance sheet. We were intentional about bringing Portugal -- identifying clubs in Portugal as a complement and with the synergies to the success we've seen in Spain. And this portfolio, in particular, has the right footprint, the right layouts. They will be converted to Planet Fitnesses over the fairly near term, but a great complementary portfolio to grow the Planet Fitness footprint on the Iberian Peninsula. And as Sudhanshu mentioned in his remarks, -- we remain committed to opening 1 to 2 new markets a year and intend to -- if we use our balance sheet to enter a market as we did with Portugal, our intention is to recycle that capital and bring a franchisee into the territory as well, similar to what you saw us do with Australia. We seeded that with some balance sheet money and then exited our position when we were able to put that territory into the hands of a great well-capitalized franchisee to further grow it.

Your next question comes from the line of Randy Konik with Jefferies.

I guess, Colleen, you talked about, I guess, learnings and there was some variability around the $10 test. Maybe give us some perspective of the different learnings that you got -- you had there and the different types of variability that you saw with that test. And then can you talk a little bit deeper around the Black Card price increase, I think, for 2Q '27. I think you said regional. What does that mean? You're going to cluster states to start? Just to clarify what you mean there would be super helpful.

Sure. So on the learnings, and it's nice to talk with you, Randy. On the learnings from the $10 test, it really did very much give us insights on regional nuance and price elasticity at a DMA level. What we saw specifically in the test is -- or promo, I guess, I'll say, it was a 2-week period, early September. We saw some markets where it was kind of net accretive to the AUV. And we saw other markets where there was join favorability, but it wasn't favorable enough to offset the delta between the $15 and the $10 price point. So I guess for $10 specifically, just to kind of cut to the chase, it did not prove out that the $10 price point was net accretive across the system. But there were pockets and markets where it could be beneficial to allow a franchisee to utilize it in a promo window or maybe in a preopening environment to build volume as a promo. But it did confirm the decision to not do a nationwide rollback to 10. And then I'll say on how it informed Black Card pricing, we've gotten with the $10 promo, but with all of the price testing that we've been doing over the last number of months. We've got much more granular visibility to price elasticity at a market level, and that is informing our go-forward strategy on Black Card. So we will increase Black Card pricing in our system in 2027. We will do it on a regional basis. You may see some price differential at a regional level.

Your next question comes from the line of Simeon Siegel with Guggenheim Securities.

I hope you have a nice holiday season Colleen. The first 100-day comment you made was interesting. Have you been able to isolate different churn profiles based on those first 100 days? I guess, do you see any meaningfully different retention results across member cohorts there in the first 100 versus once they're the older cohorts? And then higher level to follow up maybe on Randy's question in your last comment. Just how you think about pricing maybe as a marketing acquisition or retention tool. So internally, do you guys think about it as being a reason to sign up, a reason not to cancel, a measure of value, something else entirely? Just curious the philosophy on how you're viewing pricing.

I'll start maybe on the churn in the first 100 days. We've said we do see statistically significantly higher churn in the first 100 days versus a member who's got longer tenure with us. And we also see higher churn in the younger cohort, specifically the 18- to 22-year-old age cohort. So consider 2 things. With the first 100 days, that's an important inflection point in somebody's fitness journey. We're looking to create a greater sense of belonging and support a member on their fitness journey in a more pronounced way during their first 100 days. We'll do that through both the in-club experience as well as digital engagement through our app so that we can personalize the experience digitally and also recognize the member in their first 100 days with some offerings in the club to help them get acclimated and feel comfortable, feel a sense of belonging in the club environment. And we know that if we improve retention in the first 100 days, we improved churn overall. And then on the age cohorts, I'll just say we talk a lot about Gen Z being the fastest-growing segment of our membership and the greatest proportion of new joins. So that engagement in the first 100 days will also be impactful to that cohort of 18- to 22-year-olds that had higher churn. At the same time, we saw better penetration this quarter across some of the other cohorts. I'll say Boomers specifically, we saw a nice increase in penetration with the Boomer cohort. So I think that speaks to the changes that we've made in our marketing and broadening the reach of that marketing and more diversity of age and fitness level and the talent that we're using. So we're pleased with that result in Q3 as well.

Your next question...

On the pricing piece, if I can add. So as you know, our goal is to maintain this HVLP leadership and drive accretive net revenue growth and also AUV growth because that enhances franchisee profitability. And you saw that our testing showed we can raise pricing in certain markets, and that's the reason we are making a decision that next year, we'll have a regional price increase in different markets. And it also helps our franchisees to have a clarity on pricing that will drive the unit growth next year. And it's a part of the equation. If you -- it's important to put all the price increases we have taken. The last time we implemented Black Card pricing was in 2022. But since then, we have grown our Black Card members from 62.5% to now close to 68% Black Card penetration today. So we feel good about our pricing power, and it is part of the equation of driving net member growth, AUV and ultimately unit opening that creates shareholder value.

Your next question comes from the line of Sharon Zackfia with William Blair.

I guess I'm curious when you did the $10 promo and you saw that regional variation, was there any correlation there with the competitive dynamic in those regions?

Yes, there was -- we have a 3,000 club close to 2,800 club in U.S. And when you run a $10 -- 2 weeks $10 promo, you see regional variations where we have more pricing power, where we have slightly less pricing power. Net-net, it drove higher joins for the country, but it didn't give us enough AUV as Colleen mentioned. So -- but that gave us the learning that which market we can drive Black Card pricing. We made a decision based on this test that we don't intend to go to $10, which Classic Card pricing will remain at $15. But in some regions, some markets where we saw the results we want to do 1 week, 2-week promo in those specific markets, but then they could do it. But we feel that we have the pricing power, and we were using more to understand the regional nuances that allowed us to kind of come up with the regional pricing.

Maybe I should reframe the question. Was the competitive dynamic the main underlying commonalities for the variation you saw across markets? Or were there other common denominators that explain that?

There were, there were multiple factors that influenced the regional read. And some of them were intuitive in what we expected to see, and there were others where we thought a market might respond more and it had more price elasticity maybe than we originally contemplated. But as we think about the go-forward plan with the regional pricing infrastructure, again, we'll go back to we'll let the data drive the decision. The $10 pricing promo was one test, one data point or one period that gave us data, but we've been running other tests in our pricing architecture through the spring and through the summer that also helped inform the go-forward plan. There were -- as Sudhanshu said, there were some competitive markets that responded in a more pronounced way. There were others that have a competitive dynamic that didn't have the kind of the outsized performance. So a lot of regional nuance, but again, our data science team is aggregating all of the data, not just from the $10 promotion. but from all of the reads that we've been doing this year to inform the Black Card pricing increases that will be rolled out in 2027.

Your next question comes from the line of Joseph Altobello with Raymond James.

Just wanted to clarify a couple of things that have been touched on already on the call. I guess, first, you talked about the opportunities from Agentic AI. But are you seeing any impact on churn or any uptick in churn from things like news, for example? And second, I think you mentioned the fewer new club openings this year due to the tight real estate market. Are there any issues with franchisee health or franchisee economics?

I'll take the first one. I'm glad you asked the question. So thank you for asking the question about news impact. We are watching that daily. And I can tell you that the impact has been de minimis. It is actually what we've seen is it's more cumbersome to cancel with an agent and all of the steps that you have to go through and the validations to cancel with an agent is actually more cumbersome than just logging into your account yourself and canceling your membership. So again, we're watching it daily, but the impact has been de minimis so far.

And on the franchise health, we have said before that we have a great franchisee base who are committed to Planet Fitness brand and a great operator, and that was reflected in we signed up new 2, 3 franchisees this year and also group expanded its portfolio. And they have expressed optimism on our Go Forward plan as we gain clarity on the key inputs like Black Card pricing. And it also helps them drive their unit economics. And we have also introduced a new prototype that builds costs are roughly 10% lower. So all of these factors will help franchise economics and franchisees health. And the feedback we're getting is that the clarity on this clarity on marketing and what we're planning to do next year will allow them to continue to drive unit economics and that results into better franchisees club opening. And the last thing I would mention, you also saw that we are doing a strategic review of our corporate clubs. And one of the reasons we're doing the strategic review, we're looking at as a growth unlock -- we have roughly 280 clubs in U.S. corporate club. We like corporate club. We like to own them as a lab and -- but we don't need to run 280 clubs. The way we're doing it, we -- strategically, we will look at it in which geography, in which region we can sell some club to new franchisees, some new corporate club to new franchisees that allows us to retap the -- and drive more franchisee growth in U.S. and also drive more unit growth. So we are looking at from all the factors to drive good economics for franchisees and drive growth in U.S.

Your next question comes from the line of Jonathan Komp with Baird.

If I could just clarify, fourth quarter same-store sales, the midpoint is around flat. Just wondering if you expect to do a little better than that or any color? And Colleen, do you have more confidence or visibility to all of the things you laid out driving better member and comp trends, just overall confidence and time line you think you could start to see the payoff with some of those initiatives?

Yes. So I'll touch on that and then Sudhanshu wants to build. I'll say, first of all, we're pleased with where we came through the third quarter as an indication of the momentum that we're seeing and the marketing that we -- the new marketing that we put in place at the end of August, I touched on it on one of the earlier answers how we're seeing the penetration across generational cohorts, saw the growth in boomers, which was encouraging for us. So we're feeling very good about the new creative, and we're using the data and insights that we're getting from the interim creative that we launched at the end of August and through the last couple of months, to inform our full new campaign that will go into market at the end of December and carry us into Q1. The other thing we've done is a couple of different enhancements. The testing that we're doing around the marketing and creative has been very insightful. And we've got several new agency partners that are helping us with the precision of our targeting. So we've got a new agency partner that's helping us run the DCO engine. We've brought in an agency partner that specializes in digital and influencer strategy, which we know is important for the younger consumer. We've brought in a new agency partner to help us with media mix modeling so that we are better able to better understand what's the ROI for every media placement and the optimal channel mix. So we've got some new tools and support and resources, and we're seeing good feedback, early feedback, it's early from the interim creative as well.

And on the same-Club sales growth, yes, we were -- this did better than our expectations. We told you during the last call, we were expecting both Q3 and Q4 not to be negative, but in Q3, we delivered 1.5% same club sales growth. If you look at our 2-year stack in 2025 in Q3, we delivered 6.9% growth. So we're growing on top of our great growth in Q3, and that allowed us to raise our guidance approximately 1% to 1.5% to 2% for the year. If you do the math, we expect to grow again in Q4 in same-store sales. And we have already have a lot of information coming from the marketing creative, and we feel good about Q4, and we feel good about the growth in same-store sales. So that confidence allowed us to guide higher.

That's great. And then if I could just follow up on the opportunity to review refranchising and corporate club ownership. Certainly, the model has been asset-light historically. The CapEx has come up meaningfully versus where it has been in the past. So I'm wondering, Sudhanshu, if you could share a little more just on the parameters you're using of maybe how far you'd be willing to go in terms of the corporate club ownership? And any thoughts on time line that we would expect to start to see some of the interest you mentioned convert into any potential actions here?

Yes. So as we just announced, we are in early stages of the strategic review process. We always had a new franchisee or current franchisees coming to us. And as I just said before, they're trying to take a new ADA, they want some corporate club because this gives them the cash flow already. So we're seeing those interests, and we would like to use this as a growth unlock, as I said before in U.S. At the same time, we are an asset-light -- we think an asset-light model makes perfect sense for us. We don't have a set number. It will be sub-10%, but we don't have a set number, and we want to do it in a strategic way because we want to do it in driving growth and looking at regional, looking at new franchisees, looking at the current franchisees. And we will share a lot more when we have more to share on that. But the key question here is we want to run it as a lab or we don't need to run 280 club in U.S. And we want to use some of this capital to return money to shareholders. At the same time, we want to use a portion of this capital to drive some international opening 1 to 2 markets and then further recycle that capital. So it's a growth unlock for international, growth unlock for U.S. and also shareholder value creation because a portion of this money will go back to shareholders through increased buyback.

Your next question comes from the line of Max Rakhlenko with TD Cowen.

Just one quick clarification, Sudhanshu, did I hear you say that '27 franchise placements should look similar to the updated 2026 guide. Is that right?

Yes. So we will give you official guidance on -- in February, but it was a question about franchisee health and where what we're seeing from them. And if you look at this year, we guided 190 to195. If we take the Portugal M&A out, what I said that it should be a similar level for next year, minus Portugal, but we'll guide officially in February for 2027.

Okay. That's great. And then so just first question, can you provide more color on the personal guidance and group fitness comments that Colleen had as that does obviously sound new and exciting. How is that going to look? And then on the Red Light sauna, I think that there were previously 4 other pieces of equipment that you were piloting. So just curious how that's coming along as well.

I'll maybe start with the some color on PE@PF. So PE@PF has been our opportunity to provide kind of small group class support for our members in the club. We are revamping PE@PF to augment the offering with some very specific class formats. Again, small group, very much in line with the ethos of Planet Fitness, so small group, but an opportunity to engage with our members. We've tested, and I won't be specific about them for competitive reasons, but we've tested 4 specific class formats to date. Two of them have been outsized performance versus our historical PE@PF, and we're seeing very good member feedback. So Rituals is another example of bringing people into the club and creating a sense of community, but specific to the PE@PF class formats, we're revitalizing and reinvigorating that program. And then in addition to the Red Light sauna, you're right, there are 4 additional modalities. At the end of July, we had the full 5 modality suite placed in 100 clubs in a dedicated DMA so that we could put marketing behind them and understand if they drove incremental joins as well as measure the NPS and evaluate the impact on member satisfaction. I specifically called out the Red Light sauna because that's had -- of the 5 modalities, it's all been favorably received, and we've had good member feedback about all of them. But that one in particular, has had very high utilization. And from a manufacturing standpoint, it is one that we've been able to accelerate putting in more of our clubs. But the other 5 modalities are in 100 club test, and we are moving forward with those as well. The other 4 modalities, I should say.

Your last question comes from the line of Brian McNamara with Canaccord...

Correct me if I'm wrong, but it seems like the recent pricing promo test was done within a much shorter time period than you guys normally do in the past, and you came to a pretty quick conclusion here. So I guess what gives you the confidence this is the right move without maybe more rigorous testing?

I'll take that. I'll start that and Sudhanshu, if you want to build. But we've been doing testing around pricing architecture all year. And we had tested Black Card previously when we were contemplating going to $29.99 system-wide. Our testing this year focused more on regional nuances and also the architecture with the thought that when we make -- when we do a rollout system-wide, there are clubs that benefit and there have been clubs that didn't benefit to the same degree. And we thought a more precise pricing architecture that looked at the region performance and price elasticity by region would be the optimum way to capture price and give our franchisees the opportunity to garner price while at the same time, not really not throttling or minimizing the throttle on join volume. So optimal balance.

That's really helpful. And then just finally, I'm curious, do your best and worst performing clubs have commonalities, whether it be club layout, mix of strength in the cardio equipment, operator, competitive intrusion, et cetera? What are those? And can you take those learnings to improve or even close some of the underperformers?

Yes. I'll start and then, Sudhanshu, if you want to chime in. There's -- I can't paint it with one brush. I will say we've got high-performing clubs that are in the right location in the trade area that also provide an excellent member experience and have the right equipment mix to meet the members' needs. Sometimes -- so there are a couple of factors. The club experience and the NPS certainly matters. The equipment mix, we see higher performance in clubs that have moved to the Bridge Club format, member join, member retention and NPS all go up with the Bridge Club format, which is why we've seen the system move to Bridge Club so rapidly. And then I'll also say being in the right location also matters. So the location in the trade area is also a factor.

We have reached the end of the Q&A session. I will now turn the call back to Colleen Keating, CEO, for closing remarks.

Thank you, operator, and thank you, everyone, for joining us this morning. We are very focused on the near-term evolution of our business, adapting our strategy, sharpening our execution and strengthening our foundation for sustainable long-term growth. We're building from a position of strength supported by an enduring brand, a highly resilient business model and an accessible high-value offering that has brought fitness within reach for millions of consumers. I am confident that the actions that we are taking today will position Planet Fitness to capture the significant growth opportunity we see ahead as more and more people around the globe make fitness and wellness an important part of their lifestyle. Thank you.

This concludes today's call. Thank you for attending. You may now disconnect.