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Planet Fitness Inc  (NYSE:PLNT)
Q3 2018 Earnings Conference Call
Nov. 06, 2018, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good afternoon, my name is Connor and I'll be your conference operator today. At this time, I would like to welcome everyone to the Planet Fitness Third Quarter 2018 Earnings Conference 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. (Operator Instructions). Thank you. Brendon Frey, you may begin your conference.

Brendon Frey -- Managing Director

Thank you for joining us today to discuss Planet Fitness' third quarter 2018 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 these 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 that is included in our third quarter 2018 earnings release, which was furnished to the SEC today on Form 8-K 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.

Chris Rondeau -- Chief Executive Officer

Thank you, Brendon. And welcome to Planet Fitness' Q3 earnings call. We had a fantastic quarter highlighted by another strong financial performance.Before Dorvin walks you through the details, I'd like to quickly mention a few notable achievements. Systemwide same-store sales in Q3 increased 9.7% on top of a 9.3% gain a year ago. Adjusted net income per diluted share grew 47% to $0.28 compared to $0.19 in the prior year period. And for the quarter, net member growth -- to 70% of the increase in systemwide same-store sales, reinforcing that our differentiated and affordable approach to fitness continues to resonate with consumers.

The Planet Fitness brand is also experiencing strong momentum both in new member growth and new unit growth. In Q3, our member base was 12.2 million members at the end of the quarter, up from 10.5 million members a year ago. We opened a total of 40 new franchise locations in Q3 and in the quarter with 1,573 franchise stores in the US, Puerto Rico, Canada, Dominican Republic, Panama and Mexico.

And on the corporate store front, we opened one new corporate store in New Hampshire and acquired four franchise locations in the Denver market, while the franchisee continues to focus on operating in other markets. This brings our total corporate store count to 73 at the end of the third quarter, up from 58 in the prior year period and brings our total systemwide store count to 1,646.

With one corporate location in the Denver market prior to our four store acquisition, this acquisition allowed us to strategically maximize our marketing efforts to deliver operational efficiencies and is in line with our previously discussed plans to acquire and develop corporate stores location that make strategic sense. In Q4, we plan to open three additional corporate stores to run off the year. The Planet Fitness brand is truly firing on all cylinders, with enhanced leadership on both the real estate front and marketing front. I'm extremely excited about the work being done in these new areas. From a marketing perspective, our efforts have become more and more sophisticated the enhanced research and analytics, continuing to set benefits apart from the competition.

From a real estate perspective, we are also leveraging enhanced analytics and data for more precise site selection. Our well capitalized franchisees continue to invest in expanding their footprints and are taking advantage of the pressure being placed on many bricks and mortar retailers from the increase in digital commerce to secure eight sites in various markets.

Landlords and REITs looking to feel these banking spaces are continuing to turn to Planet Fitness as the tenant drive traffic to their centers. At the same time, we are having conversations with retailers that are downsizing the stores and are turning to us to takeover extra square footage.

Another positive trend is the number of private equity groups continuing to invest in our existing franchisees. We now have over 10 private equity groups in the system, including our former sponsored TSG Consumer. Importantly, the franchisee from whom they purchased these clubs are staying onboard to lead their day-to-day operations and are focused on driving further development.

With the increase in private equity groups is bringing enhanced systems processes in marketing and analytics to the franchisees. Shifting gears a bit, I want to quickly recap the Teen Summer Challenge pilot program we executed in our 17 corporate clubs in New Hampshire this summer that a lot of high school teenagers in the state to work out for free from June 1 to September 1.

I cannot be more pleased with the final results, as thousands of teenagers took part of the program. What was particularly exciting to me was the number of teens were activated their free membership combined with the number of workouts that remain steady throughout the summer. This program was a great opportunity to help teens, introduced Fitness into their daily lives, is also an opportunity for Planet Fitness to build brand affinity and loyalty with Generation Z which is the largest audience segment of the population today, making up approximately 26% of the US population, according to Nielsen data.

We look forward to potentially expanding this initiative nationwide next summer. While I'm extremely pleased with our consistently strong financial performance today, I'm even more excited about the bright future ahead in the many opportunities for continued growth.

Industry trends continued to be positive in more and more people strive to achieve healthier lifestyles. In fact, a recent national study published in October showed that not exercising is worst for your health and smoking, diabetes and heart disease. Heightened awareness of the importance of the healthy lifestyle for your physical and emotional health will continue to benefit our industry and we are well positioned to capture additional share of the existing market and attract new market entries. Thanks for a welcoming non-intimidating environment and affordable price point.

I look forward to closing of 2018 with a strong fourth quarter typically our busiest period of the year in terms of new store growth. And bringing in 2019, launching Planet Fitness yet again, take over Times Square Dick Clark's iconic Rockin' New Year's Eve celebration viewed by over a 180 million people in the US and 1 billion people worldwide.

Thank you. I'll now turn the call over to Dorvin.

Dorvin Lively -- President and Chief Financial Officer

Thanks, Chris, and good afternoon, everyone. I'll begin by reviewing the details of our third quarter results and then discuss our full year 2018 outlook.

For the third quarter 2018, total revenue increased 40.2% million to $136.7 million from $97.5 million in the prior year period. Total systemwide same-store sales increased 9.7% and from a segment perspective, franchisee same-store sales increased 9.9% and our corporate stores same-store sales increased 6.1%, approximately 70% of our Q3 -- increase was driven by net member growth with the balance being rate growth.

The rate growth was driven by a 40 basis point increase in our Black Card penetration to 60.5% compared with last year, combined with the $2 increase in Black Card pricing for new joins that was put in place systemwide on October 1 of 2017.

During the quarter, the increased Black Card pricing drove approximately 300 basis points of the increase in same-store sales. Our Franchise segment revenue which beginning in 2018 now includes national advertising fund revenue was $54.8 million, an increase of 54.2% from 35.6 million in the prior period.

Let me break down the drivers of our fastest growing revenue segment. Royalty revenue was $36 million, which consist of royalties on monthly membership dues and annual membership fees. This compares to royalty revenue of $22 million in the same quarter of last year, an increase of 63.3%. This year-over-year increase had three drivers.

First, we have 199 more franchise stores since the third quarter of last year. Second, as I mentioned, our franchisee-owned same-store sales increased by 9.9% and then third, a higher overall average royalty rate. For the third quarter, the average royalty rate was 5.7%, up from 4.3% in the same period last year, driven by more stores at higher royalty rates including stores that amended their franchise agreements.

Next, our franchise and other fees were $3.5 million, compared to $7 million in the prior year period. These fees are received from processing dues through our point-of-sale system, fees from online new member sign ups, fees paid to us for new franchise agreements and area development agreements as well as fees related to the sale and transfer of existing stores. The decrease was primarily due to the number stores that have amended their existing franchise agreements to increase the royalty rate instead of paying these fees just mentioned. In addition, the change in how we recognize ADA and FAP revenue was about $2.5 million headwind in Q3 of this year compared to the prior quarter.

As we outlined previously, we now need to recognize these fees over a 10 year period versus at the time of the related franchise agreement and lease is signed. Also within Franchise segment revenue is our placement revenue, which was 2.5 million in the third quarter, compared to $2.4 million last year. These are fees we received for assembly and placement of the equipment sales to our franchisee-owned stores.

Our commission income, which are commissions from third-party preferred vendor arrangements and equipment commissions for international new store openings, was $1.4 million, compared to 4.1 million a year ago. The decrease was primarily attributable to the number of stores that have amended their existing franchise agreements to increase the royalty rate, instead of paying commissions as just discussed.

Finally, national advertising fund revenue was $11.4 million, compared to zero last year as the new GAAP rules related to how we account for NAF contributions went into effect on January 1 of this year. As a reminder, prior to this year, the NAF contributions really only had an impact on our balance sheet, due to the recent accounting changes we must now recognize these contributions as revenue and record the expenses associated with managing the National Ad Fund as marketing expenses.

Our corporate-owned store segment revenue increased 24% to $35.4 million from 28.6 million in the prior year period. Of the $6.8 million increase, 2.9 million was driven by the six franchise stores in Eastern Long Island we acquired in January, $1.4 million was due to the four new corporate stores we opened in late 2017 and $1.7 million was driven by corporate owned same-store sales increase of 6.1%, as well as increased annual fee revenue. As Chris mentioned, we acquired four franchise stores in Colorado in August, which contributed approximately $0.8 million to third quarter revenue.

Turning to our equipment segment, revenue increased by $13.1 million or 39.1% to 46.4 million from $33.4 million. The increase was driven by higher replacement equipment sales to existing franchisee-owned stores and 15 additional new store equipment sales in the US versus a year ago. For the quarter, replacement equipment sales were 49% of our total equipment revenue compared to 51% a year ago.

Our cost to revenue, which primarily relates to direct cost of equipment sales to new and existing franchise owned stores amounted to $36.9 million compared to $25.8 million a year ago, an increase of 43%, 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 $18.8 million, compared to 15.6 million a year ago.

The increase was driven by costs associated with the six stores acquired on January 1 of 2018 and the 4 new stores opened in Q4 last year. In addition, we experienced increased costs associated with the four Colorado stores acquired in August, one corporate store opened in the current quarter and additional corporate stores planned to open by the end of the year.

SG&A for the quarter was $17.2 million, compared to $14.1 million a year ago, the increase was primarily related to incremental payroll to support our growing operations and infrastructure and some recent senior level hires versus the prior year, as well as higher variable and equity compensation. We expect the year-over-year percentage growth in SG&A to come down in the 4th quarter, compared to the growth experienced in the first three quarters of this year.

National advertising fund expense was $11.4 million, offsetting the aforementioned NAF revenue we generated in the quarter. Our operating income increased 28.3% to $43.6 million for the quarter, compared to operating income of $34 million in the prior period.

Operating margins decreased by approximately 300 basis points to 31.9% in the third quarter of this year. This decrease was driven by the gross-up on the income statement from the NAF revenue and the NAF expense mentioned earlier, which negatively impacted operating margins by approximately 290 basis points, compared to a year ago.

So on an adjusted basis and excluding the impact of NAF, adjusted operating income margins increased approximately 10 basis points to 35.9%. Our GAAP effective tax rate for the third quarter was 26%, compared to 25.7% in the prior year period. As we stated before, because of the income attributable to the non-controlling interest, which is not taxed at the Planet Fitness corporate level, an appropriate adjusted income tax rate for 2017 was approximately 39.5% if all the earnings of the company were taxed at the Planet Fitness, Inc. level.

For 2018, following the passage of tax reform late last year, an appropriate adjusted income tax rate would be approximately 26.3%. On a GAAP basis for the third quarter 2018 net income attributable to Planet Fitness, Inc. was $17.5 million or $0.20 per diluted share, compared to $15.3 million or $0.18 per diluted share in the prior period.

Net income was 20.5 million, compared to 18.9 million a year ago. On an adjusted basis, net income was $27.7 million or $0.28 per diluted share, an increase of 47.9% compared with $18.7 million or $0.19 per diluted share in the prior year period. Adjusted net income has been adjusted to exclude non-recurring expenses and reflect a normalized tax rate of 26.3% and 39.5% for the third quarter of 2018 and 2017 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 24% to $53.8 million from $43.4 million in the prior year period, a reconciliation of adjusted EBITDA to GAAP net income can also be found in the earnings release.

On an adjusted basis and excluding the impact of NAF, adjusted EBITDA margins decreased approximately 160 basis points to 42.9%. The decrease in adjusted EBITDA margin was primarily the result of having 47% of the $13.1 million of our growth in revenue excluding NAF coming from our lowest margin segment or equipment segment.

By segment, our Franchise segment EBITDA increased 23.9% to $37.1 million, driven by higher 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 9.9%, as well as a higher overall average royalty rate.

Excluding NAF revenue and expense, our Franchise segment adjusted EBITDA margins increased by approximately 150 basis points to 86.6%. The increase in adjusted EBITDA margin was due to the 22% increase in revenue, excluding NAF, partially offset by higher SG&A costs discussed above. Corporate-owned store segment EBITDA increased 26.8% to $15.3 million, driven primarily by the 6.1% increase in corporate same-store sales, higher annual fees, the six franchise stores we acquired in January and the four stores opened in late 2017.

Our Corporate Store segment EBITDA margins increased approximately 50 basis points to 44.8%. Our Equipment segment EBITDA increased 25.6% to $9.7 million, driven by higher replacement equipment sales to existing franchise e-owned stores and higher new store equipment sales versus a year ago.

Our Equipment segment adjusted EBITDA margins were 20.9%, compared with 22.7% a year ago. The 180 basis points decrease in margin was mainly due to a one-time impact as a result of how we account for equipment discounts and rebates that are handled differently under the new current contract. We still expect equipment margins to be in the 22% to 23% range for the full year and going forward.

Now turning to the balance sheet. As of September 30, 2018, we had cash and cash equivalents of $572.7 million and undrawn borrowing capacity under our variable funding note of $75 million. During the third quarter, we repurchased approximately 824,000 shares of Planet Fitness' Class A common stock for a total cost of $42.1 million. As of the end of the third quarter, approximately $458 million remained of the $500 million share repurchase plan that the Board approved in August.

Total long-term debt excluding deferred financing cost was $0.2 billion at the end of Q3 consisting solely of our whole business securitization, which includes $575 million of four-year notes due in September 2022 with a fixed interest rate of 4.262% and $625 million of seven-year notes due in September 2025 with an interest rate of 4.666%.

Now to our full year outlook, based primarily on better visibility into the timing of scheduled equipment sales and placements related to 2018, we are raising elements of our full year guidance. We now expect revenue to increase by approximately 33% year-over-year, up from our previous guidance of approximately 26%.

Adjusted EBITDA is now expected to grow approximately 19%, up from 16%. We now expect adjusted EPS to grow approximately 43%, up from approximately 33%. This new guidance assumes we will sell and place equipment in approximately 225 new stores, compared to our previous outlook of approximately 200 stores.

We now expect systemwide same-store sales to increase approximately 10% at the high end of our previous guidance in the 9% to 10% range. I will now turn the call back to the operator for questions.

Questions and Answers:

Operator

(Operator Instructions) Your first question comes from the line of Oliver Chen with Cowen and Company. Your line is open.

Oliver Chen -- Cowen and Company -- Analyst

Hi, great quarter. Regarding the comp store sales composition as you start to lap the pricing increase, we see a different mix in terms of the member growth contribution versus pricing. And Dorvin also on on your helpful comments about raising the full-year outlook. Could you just elaborate on what greater visibility you had into the equipment sales timing, it sounds like that was one of the key factors?

Unidentified Speaker --

Yeah, Oliver. On your first question regarding kind of I guess the two drivers driving comp. As I stated a few minutes ago on the call that about 300 basis points was related to the pricing. We still expect some price impact next year. It will be less than this year, given that we put that in place in Q1 of ' 17. So we've now had a full 12 months. We'll continue to have some but at a much lower rate.

So I would expect that if you compare kind of the mix of volume versus rate in Q3 and year-to-date, you probably see some change on that next year everything else being equal. And then in terms of kind of the visibility on equipment, I think you guys have heard me say a few times, particularly when we kind of start the year when we talk about where we expect the full year to be and then frankly, Q1 and Q2, the life cycle of a side from identifying a location, funding a lease maybe a couple of these locations, you start to negotiate lease on ultimately get a lease signed and then that's when we tend to have more visibility into the timing.

Obviously, the delivery of the box itself can have an impact on that if you get a just a plain vanilla box, it's going to be a quicker time period. We tend to usually say it's about three to four months to get to that point. So, take back now -- go back to the Q2 call, we had some insight into kind of the next two to three months. But as you know, a lot of -- of our new store openings, certainly the equipment sales side of that happens in November-December.

So, we've really just had more visibility into the fact that we know how many leases are signed? How many are currently scheduled at the moment replacement? And then what the GCs and the franchisees are saying what the last three weeks of December looks like? So that's really the cadence of how it looks in how we have visibility into the development side.

Oliver Chen -- Cowen and Company -- Analyst

Okay, great. And Chris, you've had a lot of interesting things happen with on the technology front with the technology ecosystem that you're building and the services you're adding as well as your relationship with manufacturers. Could you update us on what you're seeing lately? And what you're thinking about what's possible? And the last question Chris and Dorvin was just about as we look forward to the holiday period in the next -- this holiday period. What are some key factors in terms of marketing and demand creation programs which are different versus last year? Thank you.

Chris Rondeau -- Chief Executive Officer

Sure. On the cardio front, especially with the premium consoles, we're still capturing all the data here, nothing new to really report, although we have hired a consumer research firm to help us analyze the data that we're capturing as well as put together some consumer focus groups to help refine the offering and experience and plan on probably rolling out some more test stores in 2019 from the learnings, coupled with more conversations with possible wearables integration as well and the next year launch of our version one of our new app. So just kind of all coming together, but next year should be probably more to report.

As far as the holiday period, and actually we'll all gear up for the 2019 New Year's Eve celebration really kicks off our January sale that we do annually. And lot of more integration here. We've got the LA integration as well. We also have one of the major billboards that's just below the ball itself, which will have some great exposure versus right underneath the ball. So it's a new integration there, and we also have some possible celebrity integration and a dance group that's from a TV show that might be we can disclose yet that will also be performing for us in Times Square.

Oliver Chen -- Cowen and Company -- Analyst

Thank you. Best regards.

Chris Rondeau -- Chief Executive Officer

Okay. Thanks, Oliver.

Dorvin Lively -- President and Chief Financial Officer

Thanks, Oliver.

Operator

Your next question comes from the line of John Heinbockel with Guggenheim Securities. Your line is open.

John Heinbockel -- Guggenheim Securities -- Analyst

So, a couple of things. We start with the equipment installations this year. Is that just a timing issue or does it actually reflect the potential for more openings in 200 next next fiscal year? And then along with that, where do you guys stand now with possibly going into taking over some space from the mass retailers is that very non-linear opportunity for '19?

Dorvin Lively -- President and Chief Financial Officer

Yeah, John, it is just a kind of tack on to the comment I made a minute ago to all Oliver. When we give guidance as to where we think that number will be, obviously we're taking into consideration the timing of way things have happened in the past and clearly there are shifts that can happen both ways for stores that either we or the franchisees think are going to happen in December and they get shifted for various reasons, construction delays, permitting, et cetera, gets into into January, but at the same time, sometimes you have franchisees that are able to get their permits faster, are able to just get some of the construction done earlier, be able to get in and at least get the equipment and although the store might not open then until January as an example, and we've had in the past.

I think that the way, kind of, looking backwards is a little bit of both, there's some timing there in terms of stores that we thought probably would happen next year. And then just some of the franchisees trying to accelerate to get things done earlier and get it in and be ready for January 1 et cetera.

In terms of of next year, we'll obviously give full guidance in -- when we report Q4, but I think the momentum of where our business is, and just the -- the drive for some of the private equity groups from a development perspective are -- there are out there trying to find us main locations as they can and we've said in the past that you might be negotiating one or two or three sites in the town, you might end up with two or you might end up with just one depending on what's going on from availability perspective, which kind of ties into your last question.

And we continue to have conversations with a lot of retailers and given all the public news that's out there of some of the guys that are either downsizing, carving off some excess space or just going under closing some stores whether it be like the OSH stores out in California or Pulse(ph)as mentioned that would downsize some, and then the other Toys "R" Us sites, et cetera. So a lot of those clearly are continue to be in our favor. As long as we don't have a store down the street or nearby, so we're continuing those conversations and we expect that we'd be able to -- be able to get in some of those boxes.

John Heinbockel -- Guggenheim Securities -- Analyst

And then just secondly you've added both buying franchisee locations and opening up some greenfield. We've had kind of a spur here right in the corporate segment. So what's the thought philosophically in terms of growing that business and is the idea that some of these, the ultimately see refranchising Denver or some other markets or that's a segment, you actually do want to grow a little bit.

Chris Rondeau -- Chief Executive Officer

Yeah, I think, John, this is Chris. I think more of it's just to do the stores where we're already corporately have franchise clubs like in Denver, for example, we had one store. So we've got the payroll, we've got the taxes going, we got to management on the ground that's running the area, but only one store so to get the economies of scale in the efficiencies there to open more stores or just by the franchisee that's in and around our stores, it's just easy and that franchisee has gone on to use this capital to build more somewhere else. So that makes sense for us and the last one was the one on Long Island, which we had the rest of the rest of the island and this was the most eastern tip of the island that this franchisee was retiring just made sense for us to own it as well as open more stores on Long Island, more or so from a franchisee happen to become rise in our corporate stores. We've managed to do with ourselves and change to build out the rest of the area.

Dorvin Lively -- President and Chief Financial Officer

Yeah, the only other thing I'd add John is to the kind of greenfield obviously, with both of those acquisitions that Chris is talking about, be at Long Island or be it in Colorado, not a ton, but there's some runway there which most likely we would take advantage of obviously. And just in our existing territories where we had our -- let's call it our older mature stores, some of those markets have the opportunity to continue to be able to develop so the question comes down, do we sell it off to a franchisee, which there's going to be some cannibalization to that in some instances or do we build it -- build out a new store ourself and in a lot of situations we've made the decision to do that. I don't see this being a 15-20 store a year at least here in the near-term development. But this year would do for next year we might do 5, 6 or so but this -- it's kind of a I guess a pace of building out some of those ADAs where we already have stores, good markets and we have the opportunity to put another store in that market.

John Heinbockel -- Guggenheim Securities -- Analyst

Okay, thank you.

Dorvin Lively -- President and Chief Financial Officer

Yeah, thanks.

Chris Rondeau -- Chief Executive Officer

Thanks, John.

Operator

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

Jonathan Robert Komp -- Robert W. Baird & Co. Incorporated -- Analyst

Yeah, hi, thanks guys. I wanted to ask about the same-store sales. Obviously, you raised to the high end again quite a bit above where you thought you would be coming into the year. So just wanted to maybe hear more about what you think is driving the strength and the sustainability as you look forward?

Dorvin Lively -- President and Chief Financial Officer

Yeah, John, I would say that a couple of things. One would be that clearly the pricing impact. I mean, we didn't know exactly where that would come out when we had one quarter under about last year as we entered the year on that, so to know kind of where Black Card would go? ould the percentage stay the same? Would it increase? Would it come back a little bit? Obviously we had the past which we've talked about, but we didn't know that. And so I think that it's been positive to us that one, we've been able to increase the overall penetration rate slightly, but to be able to get the lift on that.

And then I think the second thing and we've talked about this on a couple of calls that albeit not just huge changes, but there have been slight changes improvements on the attrition side. And I think I attribute that to the brands bigger, we have more occasions. The opportunity for the Black Card usage is bigger, I think our newer clubs are better. I think our effectiveness of our marketing is better and so I think it's a combination of all those things that kind of lead into that but, so from a guidance perspective there were kind of the two things that we took into effect.

One would be just, what does the overall growth rate look like and then to what would be that rate impact as we knew it would have an impact quarter-by-quarter which we obviously either told you exactly what it was in this case, the 300 basis points or what we thought it would come out for the year. But I think those are the two things, but you talk -- Chris and I, we made a lot with franchisees here or out in the field and the guys are as excited today as they've ever been.

The private equity guys are coming and investing in the business and so the model continues to be a very robust model and I think that when you get right down to the what it delivers, we've been able to kind of hit or exceed the top end of our range.

Chris Rondeau -- Chief Executive Officer

Yeah. And I think the only thing I would add to that is on top of the ever-spending marketing budget, we talk about all the time just because its every incremental members additional marketing dollars everyday is back to the private equity in some sophistication of the bigger franchise groups as we -- as our system matures just bringing their own CMOs and more infrastructure on the marketing front. So just I guess with Roger Chacko, our Chief Commercial Officer, which is really just getting under the hood now and he has already been really impressive some of the stuff he's pulled off already that I mean they get lot of good stuff to happen in the future from both sides, franchisees and corporate.

Jonathan Robert Komp -- Robert W. Baird & Co. Incorporated -- Analyst

Great. And then my other question related to that, the buyback in the just over 40 million that you completed in the quarter. Could you maybe give a little more color, how that was executed kind of open market versus other arrangements? And then how should we think about the repurchase opportunity going forward, especially anything that you've been able to complete quarter-to-date here.

Dorvin Lively -- President and Chief Financial Officer

Sure. Those were -- those purchases in Q3 were all just in open market purchases. We had talked about when we increased the buyback plan, the Board authorized back at the beginning of early in Q3 that we intended from time-to-time to be in the market and execute against that program. I think I made the comment that most likely any significant acquisition the shares more than likely would come to an ASR. So we continue to evaluate our options on that. But nothing else at this point in time to report on that.

Jonathan Robert Komp -- Robert W. Baird & Co. Incorporated -- Analyst

Okay. Understood. Thank you.

Dorvin Lively -- President and Chief Financial Officer

Thanks, John.

Operator

Your next question comes from the line of Peter Keith with Piper Jaffray. Your line is open. Peter Keith. Your line is open.

Peter Keith -- Piper Jaffray -- Analyst

Sorry, about that. Hi guys, congratulations on a good quarter. I just wanted to get a little bit of clarity on the, where you think you would land with total opening. It sounds like placing a 225, but maybe not opening 225, where you think you would actually shake out for full year?

Dorvin Lively -- President and Chief Financial Officer

Yeah. Peter, we really own a guide to that placement side and it's kind of, because of the comment I made, I mean I could go back to every year now the last three or four years and we've been public that you're going to have stores that are going to, we're going to get the equipment, we recognize revenue when the equipment gets placed and there is a combination of the things, we just -- you can actually place the equipment in some locales without the CEO to be able to come in and open up for business. And so you can have instances, think about this, that in a lot of cases, municipalities will lift their employees on vacation between Christmas and New Year's.

So if you're contractor just gets it ready to go, you get the equipment and the the staff is trained and everything is turned on ready to go, but the inspector is on a vacation till January the 2nd or 3rd, then you're locked out. So it goes both ways, it's usually not a huge number to be honest with you. But if you think about it, the stores that are -- where we place the equipment, the lease assigned the buildings there, they got the equipment, and so obviously they're going to open and whether it's a three or four days or a week or so, it's not a big deal in terms of the number of EFT dollars or certainly. As you know, we draft our revenue on the 17th of each month.

So if a store opens on December 29th or January the 4th, it doesn't impact what we get really on a revenue basis at all. So the guide is to the number of placements that we will put into the stores and obviously anything that we get placed here in the next four or five weeks most likely open. It's just that last week, 10 days of the year and as I said, it's usually the municipalities on the inspections.

Peter Keith -- Piper Jaffray -- Analyst

Okay, that's very helpful. Also I just wanted to follow up on the last comment that you made Dorvin. I believe it's Dorvin, on the -- improvement on the attrition side, I think you guys have spoken about, maybe attrition rate of like 1.5% to 2% with them is over 12 months. Could you just dig into that a little more for us. Is it that percentage rate coming down or is the attrition rate also coming down in sort of less than 12 months or less than three months or where is the biggest rate of change at this point?

Dorvin Lively -- President and Chief Financial Officer

Yeah, you're right, we've said it's usually in that 1.5% to 2.5% a month. And what I was alluding to is, a slight improvement over time obviously helped, right? Even if it's just a small amount each month et cetera. But other than that, that's really the only kind of guidance we've given. And marginally, I'd say over the last 12, 18 months its improved slightly. But I think that's a combination of to the caller's earlier question on what could be driving some of these comps that might have been higher here over the last four or five quarters let's say or if you look at 2017 and 2018 as to how we kind of guided, we've tend to have delivered over that guide in all those quarters and up small piece of that has been a slight improvement in that attrition.

Peter Keith -- Piper Jaffray -- Analyst

Okay, that's helpful. Thank you very much.

Operator

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

Unidentified Participant -- -- Analyst

Yeah, thanks guys. I guess, Chris, I wanted -- I guess dive deeper on the Teen Summer Challenge for a second. Can you talk about success of the program, it seems like a really smart strategy to build brand affinity but also a feeder system for future consumers and customers and members. So can you just give us maybe some -- some perspective on potential -- your conversion of people that signed up for the program post the end of the program legacy said ended it was from June to September, something to that. In that regard and seemed like you were working with the Governor of New Hampshire on building awareness of the program. So I'm just curious on how do you think about not only the conversion of -- and looking back on the program in New Hampshire, but also how you're thinking about potentially nationalizing the program and building out awareness for, because it seems like a very big opportunity into next summer to build I think a future customer base for next fall and beyond. So I'm just kind of curious of how you're thinking about this program from a nationalized perspective, but also on an ongoing basis, marketing and then this -- again the statistics around what you learned from the program in its first year in New Hampshire.

Dorvin Lively -- President and Chief Financial Officer

Yeah, great question. So It's really encouraging, especially when I look about how we can leverage them in the future. So in New Hampshire alone, we had about 2,600 students activated and did about 12,000 workouts in that three-month period. A couple of statistics here with a pretty cool out of the 2,500 kids that activated, 2,000 of those work from households that the parents weren't already members. So, not only do we affect the 2,500 kids and introduce them to Planet, those parents had to come in and activate their kids membership.

So they had exposure. Parents' had exposure to the brand as well, which is encouraging for future joints as well. Through September 1, we had about 90 joints off of that. So that's through September 1, so we're -- naturally we're going to retarget those. And I think going forward, you think of the Generation Z population, they are the largest generation, even bigger than the Boomers. And I look at the millennials for example, which we talked about which are almost 45% of our 12 million members and when you think about we started this brand in the '90s, they were just barely toddlers and barely being born at that point and now they make up almost half of our 12 million.

So there's been reports that the Zs are more active than millennials and they've just barely turned 21, and we look at our member base, the joining rate is really at that 21 year old, 22 years olds when people start really joining pretty good clip. So you look at the huge pipeline of Z that has just started to turn 21 and there is 86 million of them is really a feeder system, so it makes sense for us to get ahead of that, introduce them to the brand early, introduce them to fitness early and to be there when they're ready to be in their first club.

Peter Keith -- Piper Jaffray -- Analyst

Yeah, it's helpful. I want to ask -- switch gears to the Black Card program for a second. So the Black Card program penetration around just under, I guess, under 61%. It looks like on the website, there's some additional partnerships, I guess, if you join, there's some sort of benefit with Audible Plus. I think there's also existing member benefit with the Reebok for a percent off on purchases. I know something that you don't have to be a Black Card member. But do you guys, it must be getting a lot of inbounds from other types of companies, one that kind of partner with you given your strong membership base.

Do you think about -- how do you think about that impacting the business either having the ability to raise the Black Card price further or potentially introducing even a third tier of membership Black Card plus-plus or something where for a little incremental more, you get extra benefits as a member into other programs or company that have an affinity our partnership with you going forward. How do you kind of think about that?

Chris Rondeau -- Chief Executive Officer

Yes, you're right. So we have a couple of the Reebok one with the Audible thing we're doing now. With Roger, as a Chief Commercial Officer, he's already looking at a bigger picture than just coming out with the next funny commercial and driving just new sales is how you drive more value pe card members or acquisition of the Black Card, for example. I think maybe higher Black Card penetration or rate or both will probably be our main objective, and we're -- as Roger builds our team, we actually have people in charge now, a new hire that's basically what they're looking for is only job is to look out for curve commercial partners and corporate membership stuff.

So I think you'll see more on that. It's really interesting, because it seems like in the last probably 12 months, we've talked about our affinity programs like this, I think, Randy you probably remember since the IPO even, couldn't really get a lot of traction, but it seems like in the last 12 months, the amount of times our phone rings now is quite a bit different than it was 12 months, 18 months ago. So I think we're at the tipping point of size and scale where we're being noticed.

Operator

(Operator Instructions) Your next question comes from the line of Brennan Matthews with Berenberg. Your line is open.

Brennan Matthews -- Berenberg -- Analyst

Hi, thank you very much for taking my question. I actually wanted to ask about Mexico, which I think you opened your first location there roughly six months or so. I mean, just any more update on kind of the trends you've been seeing? Any thoughts about maybe adding another location or so to the -- to Mexico next year?

Dorvin Lively -- President and Chief Financial Officer

Yes. They're the franchisees that are in that -- that club's doing great and they're in the process of looking for other markets to go into in that Greater Monterey area. They want to do a couple two different demographic areas other than what they're in now so, they kind of can try three different economic demographic areas to see how it all works and so we can then figure out market size in the future. In Panama, again, we have opened the one last December has already got two more -- three more to open and one more coming down the pipe here, which have all been great.

Brennan Matthews -- Berenberg -- Analyst

Okay, that's great. And then I just had one other question. I wanted to try to rephrase this correctly, but we've been seen some kind of more inflation on even such things as like kind of freight, like higher freight cost. And looking more at your equipment segment, I mean, is that something that is passed on to the franchisees? Is that something that your vendors are having the kind of that's impacting all your vendors or -- or is that something that you guys are going to have to kind of deal with as well? How should we think about that?

Dorvin Lively -- President and Chief Financial Officer

Yeah. So we -- corporately we acquire the product, the equipment from the manufacturers and in most cases take title of that equipment from their doc to the franchisee location. And then a lot of instances, then it's our team that actually assembles equipment, places call it based on the architectural drawings et cetera. So we build the franchisee for the freight, so when we build them for the full cost of the product that includes freight. And we haven't seen any significant freight prices, pricing issues to this point. Some of the franchisees or I'm sorry, some of the manufacturers make their product here in the US, some of the others imported. But at this point in time, in terms of kind of actual cost, let's call it inflation -- we haven't seen anything significant.

Brennan Matthews -- Berenberg -- Analyst

Okay, perfect. Thank you so much.

Dorvin Lively -- President and Chief Financial Officer

Sure. Thank you.

Operator

Your next question comes from the line of John Ivankoe with JPMorgan. Your line is open.

John Ivankoe -- JPMorgan -- Analyst

Hi, thank you, two separate questions if I may. Firstly, when you guys start to think about G&A metrics maybe over the next couple of years, are there any benchmarks that you're using are beginning hone in on weather on a per store basis or as a percentage of system sales or percentage of revenue that we can maybe think about, as you think about the business in in terms of how optimize that G&A number could -- you could in fact see over time.

Dorvin Lively -- President and Chief Financial Officer

Sure, John. Obviously and you know this business. Well, there's not a lot of it, gym businesses that we could do on an apples-to-apples basis. So frankly, the best comps that we look at on a multiple -- multiple KPIs would be the QSR guys and obviously you're familiar with those. But you got the huge guys like McDonald's or Wendy's or so and then you got some really small guys and maybe only have 5,100 stores. So it's, it's always hard to find something that would say OK well, what's the right amount where we're at. And if you try to dig in a deeper and I've tried to do this and really haven't had a lot of luck to say OK from a -- from a franchise or perspective, what's the right kind of cost to manage the -- a franchising system? So we obviously have call it 1,600 stores and whether it's a Duncan or pick one, it's hard to get that kind of data out of some of these other public companies.

And so at the end of the day, you basically just have to kind of look at total SG&A, sometimes you can look at kind of an HQ expense versus ops and try to figure that out. On a store level basis, it's a bit easier. And so we've done some of that on kind of our corporate stores to some of the other systems that have stores. But what I would say the net of it the way I think about it John is that if we went back, call it three to four years ago. Maybe a lot before we went public or right after we went public. We had a significant base of stores with a large pipeline and I think we were probably under funded in terms of how we were supporting the franchisee base, and I'll get a couple of examples that I would point out one in particular would be training.

We're in this kind of business, just isn't the QSR business, you're going to have a lot of turnover. And in a -- I mean on the benefit side with a fixed cost model, obviously, you don't have the kind of the raw material cost and other things, but at the same time, if you're staffing for call it a 12 to 14 person team 24/7 and you're having a lot of turnover, you're going to be paying a lot of overtime, a lot of soft cost for training, et cetera. And then, just on the pure operation side for the bigger guys today that three years ago had three stores and today they have 15 or 20 stores, really helping them develop the processes, really playbook type of stuff. And we've invested a lot of that and continue to invest, not as much as we did back then in building it, but we continue to do it to make it better.

So that would be one example. The second one would be, which I think has been allowed us to continue to go back four or five years ago where we were doing 120 to 150 stores a year to where we're at today and finding smarter -- better locations would be investing on the real estate and the development side in the field. So two years ago, we didn't have anybody in the field, today we do. Two years ago, we frankly didn't have many operation folks in the field, today we do. We believe those are worthwhile investments. And so the way I kind of think about kind of -- so where are you today really and where can the business go. I mean, we'll continue to invest as long as we continue to see the kind of growth we're having and we'll invest it in primarily those areas.

So I think that the headquarters side of the business three years ago, we didn't have some of the executive team leaders we have in place today. We feel really good about our leadership team that we have now. And then secondly, I think that we've also talked about the fact that we really didn't have a full incentive comp program in place when we went public. We now have that in place, we're about to get to the point that we've now, and it's a four-year, so we are now kind of layering it to where it's not a new brand-new incremental layer. So a lot of our cost over the last, call it four to six quarters or so have really been -- have really been on the payroll side, both some HQ in the field and then on the incentive comp plans that we've put in place today. I think our growth rate and SG&A will continue to grow, but at a slower rate when I think about the next call it four to eight quarter or so.

The last piece would be, and Chris kind of alluded to it earlier on the question about technology. I mean, we really believe that we have the ability to do some pretty special things on technology side, particularly in the digital area. And so some of that technology investment will require some incremental kind of SG&A over time. But that's the way I think about kind of the key drivers of our business from a pure SG&A perspective.

John Ivankoe -- JPMorgan -- Analyst

And that was definitely a great answer, and thank you for that and it actually dovetails, I think, perfectly into my second question, which is sometimes covering QSR and restaurants. You see brands are growing very quickly and even comping very well, but they can begin to see signs at the store level that get satisfaction scores aren't necessarily being maintained maybe because of the spike, those increase in the number of stores, being open and increase in comp.

So can you talk about how you guys are looking at what you think are the most important reasons by people staying members of Planet Fitness or join Planet Fitness, things like cleanliness or equipment quality or availability what have you, friendliness of staff whatever it is. As you kind of look at this very rapidly growing system, the controls that you put into place to make sure that every single year, the customer is getting a better experience despite that rate of growth.

Chris Rondeau -- Chief Executive Officer

Sure. Yes, John, this is Chris. You're right, cleanliness is a definitely huge point of it from member standpoint, which is one of the things we have the Brand Excellence crews on the ground and we have the AMMs which is area marketing managers on the ground to make sure the message is correct and that's on brand as well. But the equipment replacement, I can't under emphasize the importance of that. And I even come back to I mentioned that we went on that roadshow on the road trip with the family this past summer on August when 8,000 miles went to planets all over the country and I couldn't even tell if that was eight years old to two years old.

And there's not many brands of even QSR that can say that. And I think the beauty of that as well on top of that is the fact that almost all of our openings last few years with existing franchisees. So it's not a onesie, twosie franchise system, and we'd have a franchisees that have 20 clubs in the market. They themselves want other clubs to be a shiny -- like a shiny $0.01. So they don't have any clubs out there that are falling apart and making other clubs look bad. So it's really the power of the system we have.

The multi-club operators, they recoup to keep in the clubs to new -- I'm afraid that we never want to be outnewed by competition, so don't be outnewed is what we say. So constantly renovate and the keeping the stores up-to-date. And this industry's never really seen a chain that has done that. Typically, you go into a 10 or 20 club year old store, the club is 10 to 20 years old. And that's what happened with Balley's and a lot of the current larger chains that are out there today. And it's usually important and our franchisees are largely as passionate as we are.

John Ivankoe -- JPMorgan -- Analyst

And maybe there's an internal or external guess satisfaction score that's empirical that we can begin to talk about, that measures something like '19 versus '18 or '18 versus '17, because there has been, I think shown in a lot of different cases to be kind of a leading indicator of comps and profitability in a number of different things, that's really where I'm going to the question if you're prepared to talk about it in that way.

Chris Rondeau -- Chief Executive Officer

Well, I think the only thing probably is relative to same-store sales all cohort of stores are all comp in positive. So it's not like the older stores are anything in the newer stores now we're deploying it is, it's greater there -- just comping a little lower than a two year old store, but they're still comping positive. So we'll constantly just dig deeper and deeper into that, 80% of the population that doesn't have a gym membership.

Dorvin Lively -- President and Chief Financial Officer

The only thing I'd add to that, John, is that we control the customer service side over here. So we get calls as you can imagine with 12-plus million members, we get a lot of calls, but we're able to with that and kind of know where it's coming from, what the issues are and either try to deal with it here if need be or push it down to the location of the franchisees.

But I think Chris really hit an interesting point in that and you've seen it from our results where the replacement equipment side of our business continues to grow and grow as a percentage of our total and to be able to have new equipment in there and then with the Planet Fitness teams, be it the franchisee or corporate stores et cetera to constantly monitor the cleanliness kinds of comments you get and to do the inspections that we do, both us doing them here from a corporate franchisor perspective and many, many of our Zs do their own secret shopping inspections as well, because they're protect this big investment that they continue to invest in.

John Ivankoe -- JPMorgan -- Analyst

That's perfect. Thank you.

Dorvin Lively -- President and Chief Financial Officer

Thanks, John.

Operator

There are no further questions at this time. I will turn the call back over to the presenters.

Chris Rondeau -- Chief Executive Officer

Thank you and thanks, everybody for joining us today for the Q3 call. It was really a great quarter. I look forward to a really strong fourth quarter ending in the year-end. So thanks for taking the time today and look forward to talking to you soon.

Operator

This concludes today's conference call . You may now disconnect.

Duration: 60 minutes

Call participants:

Brendon Frey -- Managing Director

Chris Rondeau -- Chief Executive Officer

Dorvin Lively -- President and Chief Financial Officer

Oliver Chen -- Cowen and Company -- Analyst

Unidentified Speaker --

John Heinbockel -- Guggenheim Securities -- Analyst

Jonathan Robert Komp -- Robert W. Baird & Co. Incorporated -- Analyst

Peter Keith -- Piper Jaffray -- Analyst

Unidentified Participant -- -- Analyst

Brennan Matthews -- Berenberg -- Analyst

John Ivankoe -- JPMorgan -- Analyst

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