My name is Christine, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Planet Fitness First Quarter 2019 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Thank you.
Brendan Frey from ICR, you may begin your conference.
Thank you for joining us today to discuss Planet Fitness' Q1 2019 earnings results. On today's call are Chris Rondeau, Chief Executive Officer and Dorvin Lively, President and Chief Financial Officer. A copy of today's press release is available on the Investor Relations section of Planet Fitness' website at planetfitness.com. I would like to remind you that certain statements we will make in this presentation are forward looking statements. These forward looking statements reflect Planet Fitness' judgment and analysis only as of today, and actual results may differ materially from current expectations based on a number of factors affecting Planet Fitness' business.
Accordingly, you should not place undue reliance on forward looking statements.
For a more thorough discussion of
the risks and uncertainties associated with the forward looking statements to be made in this conference call and webcast, we refer you to the disclaimer regarding forward looking statements included in our Q1 2019 earnings release, which was furnished to the SEC today on Form 8 ks, as well as our filings with the SEC referenced in that disclaimer. We do not undertake any obligation to update or alter any forward looking statements, whether as a result of new information, future events or otherwise. In addition, the company may refer to certain adjusted non GAAP metrics on this call. Explanation of these metrics can be found in the earnings release filed earlier today. With that, I'll turn the call over to Chris Rondeau, Chief Executive Officer of Planet Fitness.
Chris?
Thank you, Brendan, and thank you, everyone, for joining us today. 2019 is off to a very good start with strong first quarter results that included system wide same store sales growth of 10.2% and adjusted earnings per share of $0.35 an increase of 29.6% over the prior year period. Our same store sales performance comes on top of an 11.1% gain post last Q1 was primarily volume driven and approximately 75% of the increase came from net new member growth. We kicked off Q1 with a bang as a presenting sponsor of Times Square's iconic New Year's Eve celebration, watched more than 1,000,000,000 viewers worldwide. The impact of this event is far reaching and is a huge contributor to Planet Fitness' remaining number 1 in unaided and aided brand awareness in the fitness category.
Thanks to our tremendous marketing machine, which in addition to New Year's Eve runs nonstop throughout the year, the Planet Fitness brand continues to gain momentum and our system continues to expand. Our group of experienced franchisees are bullish on aggressive thoughtful extension in both new and existing markets, fulfilling our shared mission of bringing non intimidating, affordable and accessible fitness to all. In total, 65 stores, a Q1 company record for Planet Fitness, were opened during 1st 3 months of the year, and we ended the Q1 with more than 13,600,000 members and 1806 stores system wide. Staying on the topic of expansion, in March, we were excited to announce a collaboration with Kohl's to initially open up to 10 Planet Fitness stores adjacent to select Kohl's stores in 2019. Planet Fitness will utilize approximately 20000 to 25000 square feet next to each of the select Kohl's stores in various markets throughout the country with the opportunity for additional locations in the future.
This complementary partnership made strategic sense to both brands. As we continue to grow, it's a great opportunity for us to secure A sites and introduce shoppers to our welcoming, non intimidating and affordable fitness concept, while simultaneously driving traffic to Kohl's stores. In fact, our research shows that our members tend to fulfill daily needs near their club and stay nearby for shopping. For example, 76% of our members combine their gym visit with other shopping, 89% of members shop at other retailers within their club shopping center and 59% do so at least month per week. And 26% of our members reported that they would never visit their club shopping center if fitness were not located in it.
In today's retail landscape, we believe our differentiated approach to fitness continues to drive traffic to our shopping centers across the country, which is why partners like Kohl's and REITs and landlords in general are increasingly looking at become tenants in their centers. Turning to our franchisees. In March, we held franchisee meetings with Palm Springs. We conduct these meetings in between our larger conference to ensure we're continuing to engage with our franchisees on various topics, including development, operations, marketing, technology and more. Personally, I believe spending time with our franchisees and providing them an opportunity to share best practices with one another is extremely valuable.
I'm continuously inspired by their passion for the brand and our shared commitment to open more stores and improve millions of people's lives. The passion of our system and the strong leadership we have with our franchisees continues to be a significant competitive advantage for us. Before I close, last week we announced the nationwide rollout of the Teen Summer Challenge in Nexford in response to our successful pilot program in New Hampshire last summer. The initiative, which allows teenagers from 15 to 18 to work out for free in all our clubs nationwide, officially kicks off on May 15. It runs through September 1, and we will introduce members of Gen Z and their parents to our brand, build loyalty and affinity.
Teens today are under increasing pressure to succeed academically, socially, battle a growing list of responsibilities both inside and outside the classroom and become well rounded members of their community. At Planet Fitness, a healthy active lifestyle should never be a challenge, which is why we're flipping that notion on its head for teens this summer and giving them a free place to work out in a comfortable judgment free zone. In preparation of the national rollout of this program, we surveyed teens and their parents about their feelings towards health and wellness. Vegas teens are more health conscious than ever before, taking exercise as a way to improve both their physical and emotional health. 91% of teens agree that they want to stay active and healthy over the summer.
Among teens who already work out, 72% said it positively impacts their mental health and 47% said they believe it helped them focus on schoolwork and also 47% we felt more confident and 37% felt less stressed. And perhaps the most interesting, when asked all teens how they prefer to spend their time in the summer, 36% wish to exercise more or workout more, which is greater than the number of teens who want to spend more time playing video games, which was 27%, browse social media, which was 16% and watch TV, which was 16%. Providing youth with free access to fitness not only addresses an important brand in the long run. In summary, it is shaping up to be another year of strong growth of Planet Fitness. We are on pace to open approximately 225 new locations in 2019 and the path to 4,000 stores in the U.
S. Long term is becoming clearer as both health and wellness and real estate trends continue to move in our favor. We are extremely excited about the many growth opportunities that lie ahead, and I know our franchisee groups share our passion and enthusiasm about the future. With that, I'll now turn the call over to Dorvin.
Thanks, Chris, and good afternoon, everyone. I'll begin by reviewing the details of our Q1 results and then discuss our full year 2019 outlook. For the Q1 of 2019, total revenue increased 22.7 percent to $148,800,000 from $121,100,000 in the prior year period. Total system wide same store sales increased 10.2%. From a segment perspective, franchisee same store sales increased 10.3% and our corporate store same store sales increased 8%.
Approximately 75% of our Q1 comp increase was driven by net member growth with the balance being rate growth. The rate growth was driven by a 70 basis point increase in our Black Card penetration 60.6% compared with last year, combined with the $2 increase in Black Card pricing for new joins that was put in place system wide on October 1, 2017. During the quarter, the increased Black Card pricing drove approximately 240 basis points of the increase in the same store sales. Our franchise segment revenue was $65,800,000 an increase of 20.4 percent from $54,600,000 in the prior year period. Let me break down the drivers for the quarter.
Royalty revenue was $44,700,000 which consists of royalties on monthly membership dues and annual membership fees. This compares to royalty revenue of $34,400,000 in the same quarter of last year, an increase of 30.1 percent. This year over year increase had 3 drivers. First, we had 233 more franchise stores compared to the Q1 of last year. 2nd, as I mentioned, our franchisee owned same store sales increased by 10.3% and then 3rd, a higher overall average royalty rate.
For the Q1, the average royalty rate was 5.9%, up from 5.4% in the same period last year, driven by more stores at our current royalty rates, including stores that amended their franchise agreements. Next, our franchise and other fees were $5,400,000 compared to $5,700,000 in the prior period. These are fees received from online new member sign ups, fees paid to us for new franchise agreements and area development agreements, fees received from processing dues through our point of sale system as well as the transfer fee of existing agreements. Also within franchise segment revenue is our placement revenue, which was $2,800,000 in the Q1 compared with $2,100,000 a year ago. These are fees we received for assembly and placement of equipment sales to our franchisee owned stores.
Our commission income, which are commissions from 3rd party preferred vendor arrangements and equipment commissions for international new store openings was $1,000,000 compared with $2,000,000 a year ago. Finally, national advertising fund revenue was $11,800,000 compared to $10,500,000 the prior year. Our corporate owned store segment revenue increased 16.3% to $38,000,000 from $32,700,000 in the prior year period. The $5,300,000 increase was driven by the 4 franchise stores in Colorado that we acquired in August, the 4 corporate stores we opened in late 2018 and corporate owned same store sales increase of 8% as well as increased annual fee revenue. Turning to our Equipment segment.
Revenue increased by $11,000,000 or 32.3 percent to $45,000,000 from $34,000,000 The increase was driven by higher new store equipment placements and higher replacement equipment sales to existing franchise owned stores versus a year ago. Our cost of revenue, which primarily relates to direct cost of equipment sales to new and existing franchise owned stores, amounted to $34,500,000 compared to $26,500,000 a year ago, an increase of 30.1 percent, which was driven by the increase in equipment sales during the quarter. Store operation expenses, which are associated with our corporate owned stores, increased to $20,900,000 compared to $18,400,000 a year ago. The increase was driven by costs associated with the 8 stores opened and acquired since the Q1 of last year. SG and A for the quarter was $18,200,000 compared to $17,600,000 a year ago.
This increase was primarily related to incremental payroll to support our growing franchise operations and infrastructure, as well as higher variable and equity compensation. This was partially offset by lower expenses associated with the timing of our franchisee conference, which was held in Q1 last year, but will take place in Q3 of this year. National advertising fund expense was $11,800,000 offsetting the aforementioned NAF revenue we generated in the quarter. Our operating income increased 36.7 percent to $53,200,000 for the quarter, compared to operating income of $38,900,000 in the prior year period, while operating margins increased approximately 370 basis points to 35.7% in the Q1 of this year. Our GAAP effective tax rate for the Q1 was 14.3% compared to 22.7% in the prior year period.
The effective tax rate for the 3 months ended March 31, 2019 differed from the U. S. Federal statutory rate of 21%, primarily due to the recognition of approximately $3,800,000 of a deferred tax benefit from the remeasurement of deferred tax assets and liabilities and income attributable to non controlling interest that is not subject to U. S. Federal and state taxes.
As we've stated before, because of the income attributable to the non controlling interest and not tax at the Planet Fitness corporate level, an appropriate adjusted income tax rate would be approximately 26.6%. On a GAAP basis, for the Q1 2019, net income attributable to Planet Fitness Inc. Was $27,400,000 or $0.32 per diluted share compared to net income attributable to Planet Fitness Inc. Of $19,900,000 or $0.23 per diluted share in the prior year period. Net income was $31,600,000 compared to $23,500,000 a year ago.
On an adjusted basis, net income was 32,700,000 or $0.35 per diluted share, an increase of 24.9 percent compared with $26,200,000 or $0.27 per diluted year in the prior year period. Adjusted net income has been adjusted to exclude non recurring expenses that reflect a normalized tax rate of 26.6 percent and 26.3 percent for the Q1 of 2019 2018 respectively. We have provided a reconciliation of adjusted net income to GAAP net income in today's earnings release. Adjusted EBITDA, which is defined as net income before interest taxes, depreciation and amortization, adjusted for the impact of certain non cash and other items that are not considered in the evaluation of ongoing operating performance, increased 29.9% to $63,400,000 from $48,800,000 in the prior year period. A reconciliation of adjusted EBITDA to GAAP net income can also be found in the earnings release.
By segment, our franchise segment EBITDA increased 29.1 percent to 47,400,000 dollars driven by royalties received from additional franchisee owned stores not included in the same store sales base and an increase in franchise owned same store sales of 10.3%, as well as a higher overall average royalty rate. Our franchise segment adjusted EBITDA margins increased by approximately 4 20 basis points to 72.1 percent with a portion of the improvement driven by the aforementioned reduction in expenses associated with the timing of our franchisee conference. Corporate owned store segment EBITDA increased 27.9 percent to $15,600,000 primarily driven by the 8% increase in corporate same store sales, higher annual fees and the 4 franchise stores we acquired in August. Our corporate store segment adjusted EBITDA margins increased by approximately 240 basis points to 41.3%. Our Equipment segment EBITDA increased 39.3% to $10,400,000 driven by higher new store equipment placements and higher replacement equipment sales to existing franchisee owned stores versus a year ago.
Our equipment segment adjusted EBITDA margins increased by approximately 120 basis points to 23.1%. Now turning to the balance sheet. As of March 31, 2019, we had cash and cash equivalents of $336,000,000 compared to $127,100,000 on the same date last year, an increase of 164 0.2%. The company completed its accelerated share repurchase agreement on April 30, 2019, which resulted in an approximate incremental 525,000 shares to be repurchased and retired during the Q2 of this year. This was in addition to the 4,600,000 shares retired during Q4 of last year that was previously disclosed.
At the end of the Q1, approximately $158,000,000 remained of the $500,000,000 share repurchase plan that the Board approved last August. Total long term debt, excluding deferred financing cost, was $1,200,000,000 at March 31, 2019, consisting solely of our whole business securitization, which includes $572,000,000 of 4 year notes due in September of 2022 with a fixed interest rate of 4.262 percent $622,000,000 of 7 year notes due in September of 2025 with an interest rate of 4.666 percent. Now to our full year outlook. For the year ended December 31, 2019, we still expect revenue to increase approximately 15% over 2018 levels, driven by same store sales growth in the high single digits and the sale and placement of equipment in approximately 2 25 new stores. With respect to profitability, we still expect adjusted EBITDA to grow approximately 20%, adjusted net income to I'll now turn the call back to the operator for questions.
Thank you. Your first question comes from the line of Oliver Chen from Cowen and Company. Your line is open.
Hi, congrats on a great quarter. You've had double digit comp momentum and you're guiding towards high single digit comps and the compares ease throughout the year. Just I was curious about what helped inform your guidance given the momentum and how are you thinking about how the older vintage stores are comping and thoughts around making sure you optimize churn as well? Thank you.
Thanks, Oliver. This is Dorvin. We guided to high single digits and we talked about the impact on same store sales in the quarter with respect to both an increase in Black Card penetration as well as then the impact of the pricing on a year over year basis, which was the pricing impact was about 2 40 basis points. We've talked in the past, I think late last year and then at year end in terms of where we think pricing will kind of end up for the year. It's going to gradually continue to decline as we cycle over more quarters.
I think on a full year basis, we're probably going to be in the 150 plus basis points range full year. So you'll see that start to wane more and more or at least based on what we know today quarter by quarter. I would say in terms of overall store performance, kind of the waterfall we've talked about in the past, no significant changes in the way that our business operates. If you look at we tend to call mature stores being stores that are, call it, 4 years or older. So they've been in comp for 3 years.
And that kind of waterfall matrix is pretty similar, let's just say, in the last 6, 8 quarters or so. If you go back in history, I think you guys will probably remember that historically 3, 4, 5 years ago, you would see the old stores more in kind of a flat to maybe 2%, 3% kind of comp range. I've stated publicly over the last year or so that the overall retention of members has slightly improved. I think the size and scale of our marketing budget has grown. Those stores tend to be more in the 2 to 4, 3 to 5 range these days.
And then the brand new stores in comp or year 2 in operation kind of in that 40% range or so. And then the their 2nd year comp more in that kind of 15% -fifteen percent -plus range. So that's not much of a significant change from the past. So we still we feel comfortable in that high single digit range on a full year basis.
Thank you. And Chris, on both the marketing front and the digital front, what are your thoughts the mobile app and the improvements you've made there? Anything we could we should focus on or look forward to? And also as you continue to innovate in the discipline of marketing, what are some things you're considering just to continue to move the needle forward on initiatives and opportunities to drive continued awareness?
Sure. So on the marketing front, we did come up with some new Black Card Digital Marketing and Black Card Digital in TV marketing. So we have some new creative on Black Card. And typically, we've always focused on almost solely White Card. So we did test some Black Card marketing stuff, which has turned out pretty decent for us.
Digital front is as normal. We have increased it this year and last year compared to years past as we continue to drive that NAF, which will be about national admin this year will be about $225,000,000 up from about $150,000,000 last year. As we add more members, as we keep talking about the marketing machine, that marketing budget continues to grow. On the app, as I mentioned before, we will be rolling out the app this quarter, looks like June. It will be a soft rollout at first, market by market.
And then but really by Q3, it will be a full rollout across the system nationwide. But it will be a slow rollout starting June. And really you won't see it will look different, but you will see as much functionality a little bit function more functionality than the current app. But what it really does is we're taking it in house from an off the shelf third party customer that we use for it that we have really zero flexibility on how to scale it as far as partnerships and content and so forth. So this will be kind of really give us the plumbing all over in the background that we can start doing partnerships and add content and be able to give more value, I guess, really to the member in the club and out of the club quite frankly.
So I look forward to having that flexibility and as we talk to partners in the future. Couple of key features that will be in the new app, which I think will be really neat is right now we have no way to really for a member to refer a friend, come in and try the club for a day. So that will be a neat feature in the app that our members can now just invite one of their friends to come work out and we could instantly be shooting their friend the e mail with the guest pass as well as the opportunity for a White Card member to simply upgrade their membership on the app, which is a simple easy task that should already be there honestly, and it's not there. So that could be a good thing for us as well that a member could literally separate the membership right on the app.
That's very helpful. Thank you and best regards.
Thank you, Oliver. Thank you.
Your next question comes from the line of John Heinbockel from Guggenheim Securities. Your line is open.
So guys, I'm wondering, do you think the business will become and member sign ups become slightly less seasonal and skewed to the Q1 for a variety of reasons, right? Either pre teen summer or your own marketing plans. Do you think that happens and
you actually get It It's interesting you asked that question because what I think as times have changed over not even just a year or 2 just given the last probably 10 years, I think And as more if it becomes more mainstream, I believe that you'll see and I think what we've seen is less of a New Year's Eve being the call to action to work out and it's more of a as you see volumes of growth and as I mentioned in the past, we've had July's in the last few years that have really surprised us in member growth. And I think as millennials and Gen Z, as we'll talk about stores, you see less of that giant spike right after New Year's Eve. And we've had great summers, 2nd, 3rd, 4th quarter. So I think you'll see in the years ahead that it will be just when the demand is there, it's there. It's not about a one night call to action.
As far as the Teen Summer Challenge, yes, that will kick off this month on May 15. And as I'm sure most of it, if not all of it, on the call, we've had tremendous response. I mean, even this early on, I can't believe over 1200 outlets have picked up the story already and we haven't gotten into our really big kickoff and launch on May 15, which will be around a lot more media. So I couldn't be more pleased with that initiative and that I think will come down and really help us in the future and years ahead even.
And then as a follow-up to that, what's your 1st year here, but what's your thought on marketing impetus for the free teen summer? Like the 1st year more kind of what you got in New Hampshire with kind of governors calling you out? Is there more of a shift in the marketing spend maybe around the May June timeframe? How are you going to get the word out, more word-of-mouth or more spend?
I would say we're nationwide we're more launching at how we did in New Hampshire with the governors, TV presence, PR around that. And then but we are going to test some additional tactics in New Hampshire as we now have a baseline in New Hampshire for last year. So additional tactics this year in New Hampshire, see how that works so that we can my plan longer term is this should be in every summer for deal honestly if all goes well. So but yes, I think it's a great opportunity. And as I've mentioned in the past, I mean out of the 2,500 kids in New Hampshire that activated, 2,000 of those came from homes that the parents weren't members yet and they've got to come in and sign the parents sign the kids up.
So it's really great exposure, not even the
teens, but
even their parents. Okay.
Thank you.
Very welcome, Nick. Thank you, John.
Your next question comes from the line of Jonathan Komp from Baird. Your line is open.
Re equipment revenue as a percent of the total equipment or just the amount overall?
Hey, John, you were on mute, I think, there for a second. Can you repeat that again?
Yes, sorry about that. Hopefully, you can hear me. The replacement or the re equipment revenue, did you give the amount that it was in the quarter just for the re equipment piece?
Yes, I did not. But it was 35% for the quarter. And we said back when we gave the full year guidance for the year, we expected it to be just shy of 50% for the year. We still believe that's going to be kind of in that range on a full year basis.
Okay. So should any other color around shaping of that? I mean, that implies a pretty big pickup the next few quarters?
Well, I think that in terms of the it's basically a percent of the total revenue. And you look at the new equipment sales in this quarter as well as in the full year guidance implied that we reiterated on the call. Summermont also, I've talked about this in the past that it tend to do more kind of in that time period of year because it's less busy in the clubs. So you'll see it. I mean, we do some re equip business every quarter, but on a percentage basis, you're typically going to see it more in the kind of the summer months.
Okay, great. And then just related to the unit the development outlook for new units, I know you had the strong Q1. Any color generally what you're hearing from franchisees and the appetite and just maybe more color on what's driving the strength there? And then maybe if you had any color on how the Q2 might play out?
Yes. I think that when we sit back and kind of compare our business today or franchisees businesses that we our real estate development construction teams work with. You go back 4 or 5 years ago, usually as the franchisee and maybe one other person that was playing roles of COOs and real estate, construction, development, etcetera, etcetera. Now as we have bigger groups, particularly the private equity groups and then some of our other still franchisee owned groups are quite large as well. They've really invested in all areas, frankly, of their functional teams, be a CFO to COO to CMOs and ops and real estate.
I think that when you get to a to have a pretty big operation like that, you don't want to cram all your stores into 1 year or I'm sorry, into 1 quarter, because the execution and getting those stores up and operating and running, the execution of that's critical. And then at the same time, you can't open a store and then start working on the next one in terms of real estate development, etcetera, etcetera. So I think what we're seeing now with a lot of our groups is that with the teams they have employed, the sophistication of the teams they have employed and then working with our teams that we've enlarged over the last couple of years or so to assist franchisees, you see more quality sites being submitted quite frankly and sites that both the franchisees and we have had our eyeballs on a couple of times. So we feel good about that. In terms of the cadence kind of question, we talked about that it would be front half loaded.
We still believe based on our insight today, we believe that's the case. We obviously have more insight into the next 3, 4 months or so. Typically, it's about a 5, 6 month lead time when you start negotiating lease, get it signed and it's typically 3 months or so to get it open. Once you kind of get it turned over from the landlord, all depending on the quality and the turnover of the box. So as we've done in the past, we will release Q2 in late July or the 1st part of August.
We'll have a lot more insight into the balance of the year then because of just the activity that normally takes place for Q3 and Q4 activity. But we reiterated our guidance, which is very similar to where we were last year, but consistent with the direction we said that we'd be more front half loaded than back half loaded this year.
Okay, great. And just last one, if I could sneak it in. I know you don't guide quarterly, but when you look at the Q1 comps and member sign ups, any color on how it performed versus your plan? And then does that change your confidence at all in the full year targets that you reiterated? Thanks.
Yes. Thanks, John. Just a couple of comments I'd make. I'd say that we were pretty consistent with our plan, both top line and bottom line, in terms of how back to my previous comment of equipment sales, the placement and timing of equipment can drive the revenue changes, if you will, from quarter to quarter. So we came in pretty much on plan on the top line and bottom line as well as comps.
And so that gives us gave us the confidence then to reiterate our full year guidance that we put out back in February.
Okay. Thank you.
Thanks, John. Thanks, John.
Your next question comes from the line of Dave King from ROTH Capital Partners. Your line is open.
Hi, there. This is Andrew stepping on for Dave. We were just curious how different is the churn between your white card and black card members? And is there a reason why one would be higher than the other?
It's basically the same, Andrew, between white card and our black card and it's always been, you're going back in years of history. So no significant difference between the 2.
Great. That's helpful. And then just a follow-up. To what extent have any of your current members churned off at any point in time? And do you have what that percentage might be?
Yes. So what we've talked about how we think about our business model and who we're going after. So we're introducing the masses to fitness. And as you probably know the statistics about only about 20% of the population in the U. S.
Belong to a gym per or so the industry organization. And we really go after the 80%, whereas frankly, a lot of our competition just go after the and try to trade back and forth between the competitors. And in fact, close to 40% of our members that join have never been a member of a gym before in their life. So as we continue to open stores and have more penetration within markets, we're getting closer and closer to some of those people that are in that 80% and either quite frankly have never been a member of a gym or maybe haven't worked out since they were in college. And so we look at it just throwing a lot of people into that funnel and to introduce them to our brand and fitness and the non intimidating environment that is really what our brand is all about.
And a lot of people don't understand that the intimidation factor is just a huge element for particularly people that have never been a member before and they want to give it a try. And working out is hard. It's hard work. So some people are not going to stick with it. And so what we do is we look what happens after a member has joined Planet and been with us for 12 months.
So then what happens after that? And we believe that we've got them to join the club. We've had some consistency of them being a member for a while now and try to turn them into a for lifer. The cancellation rate after 12 months is varies a little bit by seasonality, etcetera, but it's kind of in that 1.5% to 2.5% per month range. And it's been pretty consistent over the last couple of years or so.
Great. That's helpful. Thanks for taking my questions.
Thanks, Andrew.
Your next question comes from the line of Rys Jagrzywosik from Bank of America. Your line is open.
Hi, good afternoon. Thanks for taking my questions.
Hi, Rick. Hi, Rick. Hi, Rick. Hi, Rick. Hi, Rick.
Hi, Rick. Hi, Rick. Hi, Rick. Hi, Rick. Hi, Rick.
Hi, Rick. Hi, Rick. Hi, Rick.
Hi, Rick. Hi, Rick. Hi, Rick. Hi, Rick. Hi, Rick.
Hi, Rick. Hi, Rick. Hi, Rick. Hi, Rick. Hi, can
you talk
a little bit more about the new initiative with Kohl's? What stood out about Kohl's that made you choose that retailer versus maybe some others? Then do you see other opportunities longer term to pursue other partnerships with other retailers?
Yes. We've done quite a few deals with Kohl's in the past as well as other retailers. Even Burlington Coat have done some that they were downsizing. I think they've just been more proactive with their rightsizing initiatives. So they looking at their portfolio had us next to some of theirs and kind of reached out.
So that's kind of how the conversation started. So it definitely I think will open doors up more in the future as more retailers decide to right size their boxes. The other thing to think with Kohl's which is interesting is they're also it's a much bigger I think turn to a much bigger partnership than just strictly real estate which is going to be great for us. They want to work together from a marketing initiative. And in fact, we work on a deal now where their rewards customers and their members get discount their employees get discounts at our stores and our members we had to do a deal where their our members get a shopping week for a discount at their store.
So it's a great partnership and I think it will turn into more things in the future as well.
Great. And then just in terms of pricing, how do you think about essentially increasing Black Card pricing more longer term? The Black Card increased the pricing 2 years ago. Do you see additional pricing power there? And then how have the competitors that have historically had similar pricing to you, how have they responded to your Black Card increases?
Yes, I'd say that it seems that they've followed us, which is interesting as far as the pricing. But we originally did the increase from that $19.99 price point to $21.99 back October of 2017 was it. And it was that was strictly based on reciprocity, which happens to be the most used perk of the black card. And we started it a decade ago, we had 100 stores. And here we started we made the change.
I think we had probably 1300, 1400. So if you look at today, we're even today, we're about 30% at 30% more basis less than we even tested it. So I think based on reciprocity alone, I think it's something we should revisit every year, couple of years, 3 years, whatever, how much and when is a different topic of testing and what the elasticity is just based on that perk alone. But it does beg the question, reciprocity alone could drive some pricing around that. Outside of that reciprocity piece, we're constantly looking at ways of driving more value for the members, whether it's inside those Black Card Spa areas.
Is there a better massage bed that we could put in there or red light or something like that, that would drive more usage and more demand? Or like we mentioned, talked about the app earlier, is it more functionality with the app where we did some consumer studies where a lot of what the members are looking for is to be able to collect their data from the cardio, for example. So by the time they hit the front door on the way out, they have their mileage, their pace, their speed, their calories burned on their app and how it compares to last week or last year. So could that be a Black Card perk that they get their data that they could be able to look at that and keep their workouts going forward. So, I believe we constantly look at other ways to drive value to the members to make it a Black Card perk, which again could drive more acquisition or price or both.
So it's definitely something that we're very focused on.
Great. Thank you.
Thank you.
Our next question comes from the line of Peter Keith from Piper Jaffray. Your line is
open. Hey, good afternoon. It's actually Bobby Frina on for Peter. Thanks for taking my question. I just want to follow-up on the Teen Summer program.
It seems very compelling and great way to introduce Gen Zs to the brand. Do you have a target for the number of teams you're hoping to have signed up this year? And related booking at last year, what percent of teams or parents of teams who signed up for the program ended up becoming full members afterward? Thank you.
Yes. We weren't in New Hampshire, we had about 2,500 teens and that was on about 18 stores. So they could extrapolate some of that volume we could do nationwide. I guess the only difference there is the density of New Hampshire is much less. So I'm hoping for a much better turnout than that.
We can look extrapolate those numbers on the 1800 stores we have opened today. On the parents themselves, we had some joins even right after ending of it, we had about 80 or so parents join off of that program. But this year, now that we've learned a lot more from it, we're getting a lot more, I guess, focus on being sure to get their email addresses and addresses to be able to market opportunities for both the teenagers as well as parents. So I think we'll be much more creative this year on how we move forward with the capture of those going forward. All right.
Thanks for the detail. Yes. Thank you.
Your next question comes from the line of Brandon Svanhoeffer from JPMorgan. Your line is open.
Yes. Thanks guys. This is Brandon on for John Ivankoe. I believe a gym with less than 8,000 square feet was tested recently. You discuss that experience versus a typical 20,000 square foot gym?
And are different sized boxes changing the way the company thinks about their 4th theft and unit count potential target in the U. S?
Yes. We did just open one of those in Texas, for example. It was actually very successful for us. Although, we believe and even the franchisee believes it should be probably more in that 10000, 12000 square foot range for the real right customer experience. It's a nice customer experience, but you get to a point where is the Black Card spy area really as nice as it could be?
Is the lockers really as large as they should be? And is the equipment selection having a variety that should be. So I think that 10000 to 12000 is probably a better number. And that's more of a small market, which is that one there was in a market that typically we hadn't been in the future. And we're still really validating how small is small, how small we can go as far as the density of population is concerned.
But in those markets like that one, for example, it is that is really a club in a market that really isn't in the 4,000 number. So as long as we're still investigating it and figure out what the potential there is, there would be upside.
And then if I could just circle back on the pricing question. I think you've talked about in the past, potentially when you reach 2,000 stores, you consider an additional price increase. Is that, call it, mid-twenty 20 timeline still the right time line you're thinking about? And what that what could that price increase look like?
Yes. I mean, I think it's all up for testing. I don't think I still think the lower we can keep both memberships, the more volume we can do and the more penetration. We don't want to get over our skis and be in the high 20s, for example. And you also the $10 membership really is what drives a lot of demand.
We get people off the couch back to Dortman's point almost 40% have gone to Germany their life. And that's why we really pound the $10 as much as we do to get people really curious to walk through that door. And even though we have 60% acquisition of Black Card, which is great thinking that they want to pay $10 and Walkout paying $21.99 I think if we had too much of a spread between that 10 and call it 29, I don't think you'd have that kind of conversion. I think you have to be careful, you don't get too much of a spread there. But I think it's to look for $1 or 2, I don't think is out of the question.
So nothing really concrete today, but it's something we'll constantly look at.
Great. Thanks guys.
Yes. Thank you.
Your last question comes from the line of Brennan Matthews from Berenberg. Your line is open.
Hi. Thank you for taking my question. I just wanted to ask about Mexico. I think you had a location there for just over a year now. I mean, how has that performed relative to your expectation?
And any update on maybe opening some more stores there or maybe any other countries you've gotten interested in or thinking about?
Sure. Yes. So we have the 1 store open in a city right outside of Monterrey. That's in like, call it, a middle income area. And what we're testing now, we're looking to do probably over the model of 2 or 3 there later this year in different demographic areas, to see if it works everywhere like it does here in the States.
We have clubs in Manhattan and we have clubs in Oakland, California and here in New Hampshire. So it's very it works in very diverse markets compared to the others. So once we get those open, we'll get allow us to size Mexico and figure out if we can work everywhere or not to determine the full market potential in Mexico before we have a real strong game plan on a quicker rollout. But we'll have 2 or 3 open later this year and then size it from there. But that club performed great, opened on day 1 with 5,000 members, which we've said in the past in the States we opened with about 1200 to 1500.
So that club just went crazy from day 1, not unlike Panama, then just as well. So the Hispanic markets have done very well for So but for now really focus on Mexico, get that off the ground and running before we really focus on any other big countries.
Okay. Thank you so much. You're welcome.
There are no further questions at this time. Mr. Chris Rondeau, I turn the call back over to you.
Thank you. Thanks, everybody, for joining us today, me and Dorvin. We had a great Q1, great openings, another record quarter for us, on top of a record openings last year at 2:30. So I'm looking forward to our 225 openings this year and strong same store sales and the team's Summit Challenge is really exciting for. We look forward to reporting later on that this summer.
Thank you. Have a good evening.
This concludes today's conference call. You may now disconnect.