Thank you for standing by. This is the conference operator. Welcome to the lululemon Second Quarter 2019 Conference Call. [Operator Instructions] I would now like to turn the conference over to Howard Tubin, Vice President, Investor Relations for lululemon. Please go ahead, sir.

Thank you, and good afternoon. Welcome to lululemon's Second Quarter Earnings Conference Call. Joining me today to talk about our results are Calvin McDonald, CEO; Celeste Burgoyne, EVP Americas and Global Guest Innovation; and PJ Guido, CFO. Before we get started, I'd like to take this opportunity to remind you that our remarks today will include forward-looking statements reflecting management's current forecast of certain aspects of lululemon's future. These statements are based on current information, which we have assessed, but by which its nature is dynamic and subject to rapid and even abrupt changes. Actual results may differ materially from those contained in or implied by these forward-looking statements due to risks and uncertainties associated with our business, including those we have disclosed in our most recent filings with the SEC, including our Annual Report on Form 10-K and our quarterly reports on Form 10-Q. Any forward-looking statements that we make on this call are based on assumptions as of today, and we expressly disclaim any obligation or undertaking to update or revise any of these statements as a result of new information or future events. During this call, we will present both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in our quarterly report on Form 10-Q and in today's earnings press release. The press release and accompanying quarterly report on Form 10-Q are available under the Investors section of our website at www.lululemon.com. Before we begin the call, I'd like to remind our investors to visit our investors site, where you'll find a summary of our key financial and operating statistic for the second quarter as well as our quarterly infographic. Today's call is scheduled for 1 hour. [Operator Instructions] And now I'd like to turn the call over to Calvin.

Thanks, Howard. I'd like to welcome everyone to our second quarter earnings call. I'm pleased to take you through our results, which reflect continued strength across all areas of the business. Lululemon had another successful quarter as our teams across the world continue to build upon momentum in our business and execute on our Power of Three vision for growth. On today's call, I'll provide an overview of our quarter 2 results, including further details on some key initiatives within product innovation and our international business. Next, Celeste Burgoyne, our EVP of the Americas and Global Guest Innovation, will join us to discuss the success within the North American region, early learnings from our Lincoln Park experiential store, and the progress of our membership pilot. Then, PJ will provide a detailed financial review as well as our guidance outlook. To wrap up our call, I'll provide a few closing comments, and then we'll be happy to take your questions. Looking at our second quarter results. Momentum in the business remains strong across product categories, channels and regions. We're now 2 quarters into our 5-year vision, and I'm pleased with the strong execution and passion across the business to continue to deliver on our growth priorities. In quarter 2, total revenue grew 22%. Constant dollar comps increased 17% on top of a 19% increase last year, and earnings per share increased 35%. I'm also proud to share how we are living into our vision to be the experiential brand that ignites a community of people living the Sweatlife through Sweat, Grow and Connect. In July, we opened our first experiential store in Chicago's Lincoln Park neighborhood, and just a few weeks ago, we hosted our eighth annual SeaWheeze Half Marathon in Sunset Festival in Vancouver. These are both fantastic examples of…

Thanks, Calvin. I'm thrilled to speak with you about the growth we're seeing across our stores and online channels, which reflect the strong connection we have with our guests. In Q2, revenue in North America increased 21% as our guests continue to respond well to our merchandise assortment, engaging store environment and unique brand activation. Traffic remains a key driver in North America as our strategies and investments continue to drive guests into stores and to our e-commerce sites. During the quarter, we opened one new store in the U.S., and will remain on track to open 15 to 20 stores this year in North America. In addition, we remain particularly excited with the results we're seeing from our collocated remodeled strategy, and we completed 8 projects in Q2. Within our digital business, guest engagement continues to be strong, and we are focused on pushing forward with improvement to our sites and mobile apps. We are currently in the process of rolling out new search-and-browse functionality, which will further enhance and personalize the experience for guests visiting our e-commerce site. We are also enhancing our product detail page across our digital ecosystem, which will improve product storytelling and product education and further support conversion. And finally, we now have buy online, pick-up in-store capabilities in nearly all of our stores across North America, up from 150 stores at the end of Q1. So far, the favorable response from guests shows how much they appreciate the flexibly and efficiency of this service. As Calvin mentioned, we are living into our vision and engaging with guests in compelling new ways both inside and outside of the store. Our Lincoln Park store is truly the physical manifestation of the heart and soul of lululemon, which is reflected in being active, cultivating mindfulness, and…

Thanks, Celeste. Before I provide highlights on Q2 and our guidance outlook, I will refer you to the financial supplement posted on our investor site for additional details. For Q2, total net revenue rose 22% to $883 million, driven by continued strong execution across all parts of the business. In our store channel, we delivered an 11% constant dollar comp store sales increase on top of a 10% increase in Q2 of last year. Square footage increased 17% versus last year, driven by the addition of 45 net new lululemon stores since Q2 of 2018. During the quarter, we opened 5 new stores and completed 8 optimizations, including the opening of our experiential store in Lincoln Park. In our digital channel, we posted a 31% constant dollar comp increase on top of a very strong 47% increase last year. For the quarter, e-com contributed approximately $218 million of top line or nearly 25% of total revenue. Increased traffic in Q2 continues to drive comps, both in-store and online, with increases in the high single digits and over 30%, respectively. And I'd add that the impact of foreign exchange decreased revenues by $8.4 million in the quarter. Gross profit for the second quarter was $485.8 million or 55% of net revenue compared to 54.8% of net revenue in Q2 2018. The gross profit rate in Q2 increased 20 basis points versus gross margin last year and was driven primarily by the following: a 90 basis point increase in overall product margin resulting from lower product costs, favorability in product mix and lower markdowns. This comes despite the additional air freight expense we incurred as a hedge against potential port congestion related to China tariffs. We remain pleased with the product margin strength we continue to realize on top of strong gains…

I would like to thank PJ and Celeste for providing these insights in our business and performance. All of us within the company are proud of what we have achieved. As I travel around the world, I see guests responding to our product, our innovations and living the Sweatlife. Finally, I'd like to thank everyone at lululemon for their commitment and dedication in achieving these results. And with that, we'll be happy to take your questions. Operator?

[Operator Instructions] The first question comes from Paul Trussell who's with Deutsche Bank.

Congrats on another great quarter. My first question is just related to the margin outlook for the third quarter and second half overall. Maybe just talk a little bit more about the puts and takes to the flat to up modest gross margin outlook as well as help us think a little bit more about why just modest leverage when low teen comps in the second half as you leverage some of those strategic investments that you started making last year.

Yes. Paul, it's PJ. Thanks for the question. So similar to Q2 going forward in back half for gross margin, it's a similar story. We expect continued gains in product margin, driven by lower product costs. We don't forecast into a mix benefit, but mix has been a benefit for the first part of the year, given the strength in our women's pants business. But product costs remain the big opportunity, and it comes through scale, through segmenting our supply chain, better cost visibility and certainly greater efficiency across our distribution networks. So we expect that to continue. The takes, as you alluded to, we will see some occupancy and depreciation pressure as we continue to open stores internationally, which carry higher rents, as you know. But we also have some product development costs for newer categories such as bras, outerwear and accessories. So those are the puts and takes we see in the back half, but net-net, we still expect modest gross margin expansion for the year and going forward.

And on SG&A?

And on SG&A, so we committed to modest SG&A leverage. Last year, we delivered. We're committing to the same for this year and going forward. We continue to use strong performance to invest in current long-term growth. We are seeing the results from that. During Q2, we invested, specifically, we expanded testing in new growth vehicles, loyalty. We continued our investment in our North American online guest experience. We continue to expand our omni capabilities, both in North America and globally. And that will continue to roll forward in the second half of the year. If we don't do these investments, we could see higher SG&A leverage for the quarter and beyond, but we continue to believe this is the right strategy for the business.

And lastly for me is one of the more impressive parts of this quarter was the brick-and-mortar comp growth. Maybe just speak a little bit more about what is leading to the traffic increases and improvement in conversion that you're seeing in-store.

Thanks, Paul. On the momentum that we're seeing in the business, I really break it down into 3 key categories. The first is the athletics space in general is very healthy relative to other sectors in both apparel and retail in general. Second, our business has fewer highs and lows relative to other apparel brands. And we're less dependent on seasonal fluctuations, and we have a very healthy core business that is driving our success. And then, finally, and it, to me, is what the team is doing such a wonderful job at, and that's engineering that growth. And that's coming from: one, compelling product; two, brand activations; and three, our continual improvement in our data analytics and digital marketing, where we're testing and learning and developing those strengths within the business. So it's a combination of the health of the space and the success and momentum the team is doing in terms of engineering that growth. And we're seeing that across all international businesses, and we're seeing it within, not just in traffic, but as you alluded to, very healthy conversion numbers, which normally, you don't see those 2 run together. And that's the work that our store teams are doing on guest engagement, investing in the educator. And I also think it's a reflection of the data analytics, as I alluded to. Guests are coming in prepped with what their intent is, and we have educators engaged and ready to assist them, and all that work is paying off.

The next question comes from Matthew Boss who's with JPMorgan.

Congrats on a nice quarter, guys. So Calvin, maybe on the gross margin. What do you see as the multi-year opportunity here? Or maybe a different way to put it, any structural feeling as we think about gross margin, considering digital's outpacing store revenues and just the overall control that you have over distribution?

I mean, I think I would -- in our 5-year guidance and our long-term plan that we shared on Analyst Day, it's the best guidance that you should use to model, and it's what we're building into. It's a combination of fine-tuning opportunities to improve cost of goods as we grow in scale and as we build those relationships with our vendor base. Second, obviously, we're mixing in new categories and making sure that we get that balance correctly. Third, we're mixing in new markets. And PJ alluded to different markets around the globe have a different cost structure as well as we're expanding our North American business, in building stores that are driving wonderful sales numbers and engaging with guests in offering them the full product. So that full balance across our 5-year plan, we're committed to. We're seeing great success in it. A lot of that innovation is what's driving our top line. And I think the result is we are going to see leverage in gross margin, but it will be more in line with how we've provided guidance over the next coming years.

Great. And then, maybe just a follow-up on the expense front. So I guess, really, the question is best way to speak to the balance between in-store cost leverage versus ongoing brand investments. I'm trying to figure out, is 2Q a microcosm for the go-forward modest SG&A algorithm? And then just one follow-up would be on the comps. Have you seen any moderation, as you speak to the momentum, any moderation whatsoever in August? Or fair to say that the momentum has continued through strong?

Well, to your second question, we're pleased with the momentum. Can't give too much color on comp, but we're pleased with where we are, and we continue to see strong traffic. So good news there. On your question about SG&A, I would not say it's a microcosm of the future, but I would say given our store performance, we did leverage channel SG&A to a higher degree this quarter, but we also did have higher investment. And again, we use the upside of good performance to set us up for growth in the coming year. So I would also say we'll start to see benefit, and we already are seeing benefit from our prior investments that we've made in prior quarters. Specifically, digital marketing investment has driven guest acquisition. The enhancements to our website, search, browse, checkout are driving conversion. And our investments in data and analytics are allowing for greater personalization and a closer relationship with our guests. So our prior investment is leveraging. And again, that is a model that's been working for us, and we'll continue to deploy that.

The next question comes from Mark Altschwager who's with Baird.

Congrats on the continued momentum. It was nice to see the trend of lower markdowns continuing in the quarter. Was wondering if you could provide some color on the percent of your total sales that are coming from markdowns today. I think you most recently commented on some numbers for the holiday periods. Just curious how that's trending year-to-date? I was also wondering if you could touch on what's been happening with some of the ship-from-store capabilities and how that may be affecting the merch margin trends on the markdown front.

Yes. We don't really give out the specific markdown number, as you said. So our markdown activity was lower and -- this quarter, and it did contribute to gross margin expansion. Yes.

Okay. And then maybe as a quick follow-up. I was hoping you could comment on some of the trends you're seeing in the bra category. Been a tremendous amount of innovation there and a bigger marketing focus. So curious what your key learnings are from the spring season.

Mark, yes, we remain very excited about the opportunity within the bra category. The product team continues to launch and develop product that will launch in the coming quarters and years as we see opportunity to innovate into whitespace within the category and add to our assortment. One of the new areas for this quarter that we activated was a bit of that brand activation and storytelling, and we saw the guest respond well to it. In Q1, we really started to invest and set up the stores, how we merchandise. Q2, as we continue to roll out a couple of incremental SKUs, we got into some of the storytelling. Lincoln Park is a test, but an expression of how we want to lean into the category and tell our unique, innovative story behind science of feel as well as present the athletic bra category to our guests in the different segments that we see as opportunity. So it is very early for us in bra. This will be a multi-quarter, multi-year investment. We are testing and learning and moving along. But the good news is that we're very happy with the results, and we're equally excited about how we're learning as an organization and what's to come as we continue to make investments in this category.

The next question comes from Kate Fitzsimons who's with RBC Capital Markets.

Congratulations on the strong results. You've seen amazing strength in the bottoms business in recent quarters. Did you say how much women's bottoms were up in the second quarter? And I guess when you parse out that strength between more athletic offerings maybe versus more lifestyle offerings like office travel commute, how do you think about the strength there? Is it more broad based? We're just trying to get a sense as to what aspects of the customers' lifestyle you guys are really appealing to, and just how to think about the trajectory of that business into the back half.

Thanks, Kate. On the bottoms business, as you know, it's a core category for us in both women's and men's. And in Q2, we saw both of those continue to perform very strong with double-digit comp performance. In fact, men's outperformed women's as we continued to see success in our men's initiative as one of the key Power of Three growth initiatives. Strength in women's was really driven by both long styles in shorts. We're fueling the strength in shorts by leveraging our core line in fashion free franchises into a shorter inseam bike short, which is resonating very well with the guest. And in men's, the ABC franchise continued to see great success with existing guests and as a very strong new guest acquisition item. And equally, seeing success in shorts with the short and the Pace Breaker in Surge. So a very good, healthy, balanced bottoms business across both pants, shorts, men's and women's. And we continue to have innovative plans that we'll be launching to continue to drive that momentum forward. And as I alluded before, the team is doing a wonderful job in leveraging the relationships and then broadening, if you like, the share of wardrobe outside of just the bottom business. And we're seeing a lot of success in that, and that's helping to drive success across many of the other categories. And we anticipate to continue to see success in doing that.

The next question comes from Paul Lejuez who's with Citigroup.

Can you talk a little bit about your average ticket size in North America in-store versus online? Curious to how different the average ticket is there. And how does that compare to what you're seeing in both Europe and Asia, when you look at the stores versus online business?

Yes. Paul, it's PJ. So average ticket has remained relatively stable and is pretty consistent across channel. And there are subtle differences regionally, but by and large, average ticket is fairly similar.

Got you. And then, can you maybe talk about the tops to bottoms ratio? Where you are in the men's business? Where are you in the women's business? And where do you hope to be longer term in each of the genders?

Yes. So the men's business penetration has picked up given the higher growth rate. It's in the low -- was in the low 20s, approaching the mid-20s. So that trend will continue. But while the men's business is growing at a high rate, the women's business is growing pretty steadily as well. So I'm hard-pressed to put specific penetration numbers on it, given both businesses are growing together. So -- but men's has picked up.

PJ, I was talking more about the tops to bottoms ratio within men's and the same within women's, if you can speak to where you are today versus where you're going.

Yes. Sorry, Paul. We don't really share -- we don't share that. But bottoms is predominantly -- the ratio of bottoms to tops is obviously much higher.

The next question comes from Kimberly Greenberger who's with Morgan Stanley.

Great. I was hoping, Calvin, you could just talk about your business in Asia. It sounds like, even with the slight deceleration in some of the economies over there, your numbers have been absolutely fantastic. Is the -- I heard you talk about the strength in digital, but it sounds like the stores are equally good. So I'm just wondering if you can talk to us about -- if you've seen any sort of change in trend there. And perhaps, you're just so early growth stage that you can sort of -- you're outgrowing what appears to be a very slight slowdown there. And then PJ, can you just remind us what your current exposure to China sourcing is and how we should think about the leverage or not to tariffs, given the risk that we could see them move higher? Any quantification you can give us on that side would be helpful.

Thanks, Kimberly. In terms of our APAC business in particular, I'll start off with our international business overall remained very, very strong in Q2 after a very strong quarter 1 and remains that leading into Q3. As you know, Stuart was put into the role working with both the existing leadership of Ken and Gareth to really continue to put the focus on that business. And early -- but we're seeing great success of the strength of that leadership team coming together, shared learnings and working with Celeste and her team to really bring key learnings across the globe and driving the business. Within APAC, it's a balance across both stores as well as e-commerce, and that's what's so exciting. We opened up 8 stores in APAC in Q1, another one in Q2 and plan to continue a very aggressive back half. We opened the year with 15 in China. We plan to end the year 25 to 30 stores. So we're excited about the balance. Guests are responding to both the vision of the Sweatlife and the product. And yes, it's early for us in the -- in our growth journey, but I think it's the strength of the product and the community model that is resonating in that market. That's also helping to fuel our business through these quarters. So it's exciting to see.

And Kimberly, this is PJ. To answer your question on China tariffs. So just as a reminder, our direct exposure to China is relatively small, with approximately 6% of our finished goods in scope for U.S. tariffs. That percentage is down considerably, given how we have diversified our vendor base. We've never had more flexibility than we do today in our supply chain. So going forward, we do not expect it to be a big impact to the business. In terms of quantifying it, I'll just reiterate that we guided on the last call we expected a $0.04 to $0.05 impact in the back half year weighted towards Q3. We did incur $0.01 of that in Q2. We do see an additional $0.04 in the back half, but more equally weighted given the delay in the tariffs. But it's a situation. We constantly monitor it. We have airfreight in as a hedge to ensure that we deliver for our guests. But again, this is an issue that we feel is highly manageable for us.

The next question comes from Ike Boruchow who's with Wells Fargo.

Calvin, one for you on loyalty. So you're expanding out to Chicago. I know you can't give us too much detail, but I guess my 2 quick questions would be could you name maybe the most interesting or exciting thing that you've learned thus far in the small test? And then if things continue to progress in the right direction to you, when's a reasonable timeline that this could actually go across the U.S. or across North America? And then a quick one for PJ. Just on the supply chain deleverage and on the gross margin. I know you have the new DC in Toronto, and I think that recently opened. How should we think about deleverage on supply chain in the back half? And when does that headwind maybe start to flatten out?

Thanks, Ike. Two great questions. On the first, what's been, quite honestly, a lot of fun in the learnings from the test markets are there are a number of aspects of how the guest is interacting with the program that we're really excited to see. The 2 that come to mind that probably we didn't anticipate to be as strong in the test markets, and that are -- that is, one, the percentage of new guests to lululemon that we're first seeing through the membership program. And the second is the penetration of men's in the program. So we kind of went in expecting, in a pilot, in these contained markets, that it would definitely appeal to our high-value guest, which it has, but to see it be another acquisition to acquire new as well as an acquisition for men's was not something we initially had anticipated and has been really encouraging among many other aspects. As you mentioned, we launched in Chicago. We're excited to be in that market. And we're going to continue to test and learn and roll out. We're going to expand more in 2020, and then really hit our stride probably in '21. We'll share more as we confirm our rollout plans. But it's early, but very positive, and we are continuing and will continue to expand to more markets. And '20 will be bigger than '19 as will '21.

And Ike, it's PJ. To answer your question about the supply chain and the gross margin impact. So yes, the startup in the Toronto DC has had an impact and has caused some modest deleverage. That's due to the fact that, yes, it's ramping up, and we're incurring some costs and some growing pains there. We expect, again, a modest impact associated with that as the facility scales, but it should -- we expect it to leverage thereafter.

The next question comes from John Kernan who's with Cowen.

Let me add my congratulations. You provided some very helpful commentary and guidance on international profitability at the Investor Day. I'm just wondering, given the top line strength, how international profitability has trended relative to your expectations so far this year? And then I just have one quick follow-up on Europe.

So with regards to international profitability, again, we're pleased with the progress we're making in all of our regions. We are profitable from an international standpoint. So last year, we did generate profit, and our China business is profitable, our Asia business is profitable. And our Europe business, which is still generating a modest loss, is quickly marching towards profitability. So we're on plan there, and we do expect to continue to scale and achieve profitability improvement in line with how we guided at Analyst Day.

Got it. And then just on Europe. I think up 35% in the quarter. You talked about some brand activations like the Sweatlife Festival. Just any more comments on how Europe is scaling. Seems like you're more -- it seems like you're a little bit more excited about the region right now, and certainly, some of the growth backs that up.

Thanks, John. I was just with Gareth and team a few weeks ago. And I would say across the management team, we're quite excited about the success of our business in Europe and what the team is executing and how the guest is responding there. We've been longest in London, and we're seeing a real healthy business driven out of that. But at the same point, the other countries we've expanded to are resonating. In Q2, we launched sites in Germany and France, in local language. And the guests are responding well to that continued to open doors. We opened our first full line in Paris in August. And as PJ indicated, we are very close to the profitability mark. And the team is doing a wonderful job in recruiting guests, building that business. And it's going to be a region that plays a big part in our international expansion and the commitment and the goal around the power of 3 of how we're going to quadruple it. And we're seeing some of that success to date.

The next question comes from Michael Binetti who's with Credit Suisse.

Let me add my congrats on a great quarter. Just one, I guess, fairly specific question on the margin. With the brick-and-mortar comp up 10%, obviously, very strong by any compare. I guess I'm curious about the deleverage on the occupancy line. I know there's some lease accounting noise in there, and then you mentioned the international mix and probably some double rent during relocations. But I'm curious if you could help us just look ahead a little bit on the underlying dynamics there. What is the underlying leverage point on that line as we think ahead to things like accounting rolling off next year? And then I have a follow-up.

Yes. I think what we pointed out in the past is that occupancy is going to be a headwind going forward as we open new stores, particularly internationally. But we've also incurred cost associated with building out our distribution network. So going forward, there is a headwind there, but we expect to scale and leverage that over time as stores ramp up, as DCs ramp-up. The real story in the gross margin is that product margin has remained strong and will continue to be the driving force behind gross margin. But we do see occupancy and depreciation in the gross margin line as [indiscernible].

Okay. Fair enough. And then, I guess with the comments on international and some of the color you gave around profitability, but at different markets. I think the longer-term plan, along with quadrupling the revenues there, was to go from, I think, pretty close to breakeven margins in total last year, slightly positive to, I think, 10% to 15% over 5 years. A big move, obviously, but I guess, would you help us think ahead a little bit on how you see the inflection in the overall margin for international? Maybe where it's coming, where you see the profitability contributing the most first? And then is the overarching strategy there similar to the corporate strategy where, look, we're going to spend back any upside on the top line to smooth it out? Or is it back half-weighted within the 5-year window, front half-weighted for any reason? Any kind of color you can help us think about because that seems like a big contributor here for the next few years.

Yes. So the big driver will be the APAC region, and specifically, China. So as that business continues to ramp up, that will drive a lot of the profitability. Europe will be also a contributor. So I do think we're on track to achieve that profitability that you talked about. And as far as the business model, given the fact that our international businesses are fast-growing businesses, that means you'll -- we will continue to be investing in those businesses as we have outside, similar to what we've done in North America, given we've seen the results for that year. So hopefully that answers your question.

The next question comes from Dana Telsey with Telsey Advisory Group.

Congratulations on the results. As you think about inventory and inventory growth for the balance of the year, how are you thinking about inventory and air freight, given those expenses that are wrapped in there? And how do you expect air freight expenses to be moving forward? And then Calvin, given the loyalty program and given the events that you're having in the stores, are you seeing the translation of the events leading to loyalty members, new loyalty members? And how is new guest conversion compared to what it had been?

Dana, it's PJ. So to answer your inventory question. So we feel really good about the inventory position, given our momentum. We did expedite some fall merchandise using air freight, and we'll continue to use air freight as a tool or a hedge if we start to see issues in the Southeast Asia region associated with the volatility around tariffs. But from a pure inventory standpoint, we are a low seasonal business, and our aged inventory is really low. So we feel really good about how our inventory is positioned, both at the end of the quarter and going forward.

Dana, I'll just add a few points to your second question. We continue to see very healthy metrics with our loyal or high-value guest in terms of retention and engagement in the brand. Equally, our new guest acquisition remains very strong quarter-to-quarter, and they're a big part of the conversion number that you're seeing and we're celebrating across both store and on e-commerce. And one of the areas of success is in the migration of this new guest into becoming a high-value, where a healthy portion of our growth is coming from that migration. So we're seeing very good, very healthy new guest acquisition numbers. The teams are doing a wonderful job in migrating them up through the percentage of their spend. And then our retention of our high-value guest is very high and very solid and remaining in a very strong, stable growing position. So in general, when I look at the metrics of our guests, they are healthy across all of those 3 very important levers, and we have many initiatives through both our digital and CRM continue to improve and strengthen. And the notion of events and our vision of the Sweatlife just reinforces those. It's either how we acquire new guests as I shared, through membership events is how we equally share and acquire guests through our 10K events in London -- sorry, in Toronto and in Edmonton and in San Diego. These are great acquisitions. And then they're migrating out. So very healthy across the board.

This concludes time allocated for questions on today's call. I would now like to turn the conference back over to the presenters for any closing remarks.

Thanks, everyone, for joining us. We appreciate the time, and we look forward to speaking with you in a few months when we report our third quarter results. Thanks.

This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.