Welcome to the lululemon athletica Third Quarter 2019 Conference Call. [Operator Instructions] The conference is being recorded. [Operator Instructions] I would now like to turn the conference over to Howard Tubin, Vice President, Investor Relations for lululemon athletica. Please go ahead, sir.

Thank you, and good afternoon. Welcome to lululemon's third quarter earnings conference call. Joining me today to talk about our results are Calvin McDonald, CEO; Sun Choe, Chief Product Officer; 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 which by 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 the 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 statistics for the third 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.

Thank you, Howard, and I'd like to welcome everyone to our third quarter earnings call. We're proud of the continued momentum in our business and excited to share these results with you today. I'm consistently impressed by the strong performance of the brand and the ability of our teams to execute at a high level. On today's call, we'll provide an overview of the results within the framework of our power of 3 growth pillars: product innovation, omni guest experiences and market expansion. And I'm pleased to be joined on today's call by 2 members of our senior leadership team: Sun Choe, our Chief Product Officer; and PJ Guido, our Chief Financial Officer. I'd also like to take a moment to thank Stuart Haselden for his contributions over the past 5 years. As we announced this week, Stuart will be leaving lululemon in early January to take on a leadership role at a company outside of the apparel industry. He has been instrumental in helping us build our capabilities within supply chain, finance and IT. And more recently, we have worked together on our long-term growth strategy for our international markets. We are grateful for Stuart's many contributions to lululemon, and we wish him the best in his next chapter. Moving forward, we have a number of experienced leaders ready to take on more responsibility. I'm pleased that Julie Averill, our Chief Technology Officer; and Ted Dagnese, our Chief Supply Chain Officer, have joined our senior leadership team and report to me. In terms of our international business, our regional leadership structure remains in place, and the teams will continue to execute against our growth plans as we identify the ideal leader with proven experience to serve as our new head of international. Let me now share some details about…

Thanks, Calvin. I'm thrilled to be here today to speak with you about the exciting things we have going on within the product function at lululemon. Response to our assortment was strong across the board as we continue to grow our core, expand key categories, delight our guests with pinnacle product and deliver new innovation through the science of feel. As Calvin mentioned, we were pleased with guests' response to our offering over Thanksgiving weekend. Guests love the special edition manifesto print we offered in our Wunder Under tight, Energy bra and define jacket. We also introduced holiday-inspired fabrications in key franchises across men's and women's to drive full-price selling during a period that is highly promotional. Focusing now on Q3, women's comps grew in the mid-teens with particular strength in pants and outerwear. We further leveraged our science of feel innovation platform with the launch of the Mapped Out Tights, which offers our new SenseKnit technology. This technology engineered ventilation and compression and directs varying levels of support and breathability throughout the legging. We're excited with this new innovation and look forward to leveraging it across additional styles over the coming seasons. We're also pleased with the strength we continue to see in our big 3 proprietary fabrics developed through our science of feel lens: Nulu, Nulux and Everlux engineered for yoga, run and train, respectively. We brought units into our Nulux fabric through our suite of technique to address our guest cold weather run needs. This is incredibly successful and gives us more opportunity to offer solutions in thermal comfort. Shifting to men's, one of our key growth pillars, total revenue increased 38%. We saw strength across the board with outerwear, pants, second layers and underwear all standout. Performance in outerwear was particularly encouraging with comps up 100%.…

Thanks, Sun. Before I provide highlights on Q3 and our guidance outlook, I will refer you to the financial supplement posted on our Investor site for additional details. For Q3, total net revenue rose 23% to $916.1 million, driven by continued strong execution across all parts of the business. In our store channel, we delivered an 11% constant dollar comp stores sales increase on top of a 7% increase in Q3 of last year. Square footage increased 18% versus last year driven by the addition of 53 net new lululemon stores since Q3 2018. During the quarter, we opened 19 net new stores and completed 6 optimizations. In our digital channel, we posted a 30% constant dollar comp increase on top of a very strong 46% increase last year. For the quarter, e-com contributed approximately $247 million of top line or nearly 27% of total revenue. Increased traffic in Q3 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 $6.8 million in the quarter compared to Q3 last year. Gross profit for the third quarter was $505 million or 55.1% of net revenue compared to 54.4% of net revenue in Q3 2018. The gross profit rate in Q3 increased 70 basis points versus gross margin last year and was driven primarily by the following: a 120 basis point increase in overall product margin resulting from lower product costs, favorability in product mix and lower markdowns. We remain pleased with the product margin strength we continue to realize on top of the strong gains over the last several years. Occupancy and depreciation leveraged 10 basis points in the quarter. These improvements were partially offset by a 40 basis point…

Thanks, PJ and Sun, for providing these insights in our business and performance. Before we take your questions, I'd like to express my sincere gratitude to our teams around the world. I believe that one of our greatest assets is the direct and authentic connection we have with our guests. This connection is created and nurtured by the educators in our stores, guest education centers and our teams and our distribution in store support centers. I'm constantly inspired by the passion of our teams around the world, and I want to thank each and every member of the lululemon organization, which drives the performance we're sharing with you today. Operator, we can now open it up for questions.

[Operator Instructions] Our first question is from Ike Boruchow with Wells Fargo.

Congrats on the really, really, really strong quarter. Just 2 quick ones. One, I guess PJ or Calvin, any chance you could give some color on the men's category? Curious how the men's comps were. And then maybe, Calvin, this is for you. The comp guide is -- I'm sorry to nitpick. It's a little slower than it was for last quarter. I'm just kind of curious. Maybe -- is there anything you can share about Black Friday or things you've seen quarter to date just to inform us a little bit on current trends in the business?

Absolutely. Thanks, Ike, for the questions. And I'll answer the second, sort of teeing up my sort of view of Q3 where I'll sort of touch on our men's business. Our men's business continues to be very strong. In fact, in the quarter, we saw an acceleration of the growth incoming, so we're very happy with how that continues to grow. And as I've mentioned before, we're just getting started on our product assortment as well as our activations to drive both awareness and consideration, where we see a significant amount of opportunity. In terms of the guidance we gave for Q4, I'll first start with a quick view of what the growth drivers were in Q3. And as we look at the power of 3, we're very pleased with the balance across all of those 3 strategic pillars under product innovation. As I mentioned, we saw an acceleration in our men's business and a very strong continuation of growth in our women's on our omni guest experience. Our digital performance continued at a very strong rate, and we saw an acceleration of our growth in our stores. And across market expansion, we saw an acceleration of our international business, and North America continued its very strong performance. So very, very happy with the balance of growth in Q3, and I'm super excited with the start of Q4. This momentum has extended into the quarter. We had record performance over the Thanksgiving weekend, and we're happy the way that the holiday season has begun. We've always given guidance that we believe is realistic and appropriate, and our guidance for the full year has always contemplated the comps in this range, and our view hasn't changed. Obviously, what I'd want to draw everyone's attention to is the majority of the quarter is still ahead. There are 6 fewer shopping days between Thanksgiving and Christmas this year, which is a unique calendar shift and is reflected in our Q4 comp guidance.

Our next question is from Matt Boss with JPMorgan.

Congrats on another great quarter.

Thanks.

I guess maybe first on the gross margin. So 120 basis points of product margin expansion this quarter was your best 2-year stack in more than a year. So maybe, PJ, how best to think about fourth quarter product margins relative to the third quarter? And then, Calvin, after 800 basis points of improvement over the past 4 years, how best to rank the remaining drivers of product margin from here?

Yes. Matt, it's PJ. So yes, project -- product margin was up 120 basis points. That drove the gross margin increase, and that's on continued lower product costs. We had a slight benefit from product mix. Lower markdowns drove roughly 20 basis points of that improvement. I'd say going forward, the opportunity still remains for us on the product margin side. We'll continue to expand through scale, segmenting the supply chain, better cost visibility, greater efficiency across the distribution network. So happy with Q3 and where gross margin shake out. We were able to leverage occupancy on higher volume. And at the same time, we continue to make investments in product development, bras, accessories, outerwear. So I mean the way to think about it in Q4, we're guiding to, again, modest gross margin expansion. That will be -- we continue to see the tailwind in product cost, but we're also going to continue to invest in product development to keep the top line fuel. So again, the guidance modest expansion tailwinds of product margin. If there's already headwinds, it's the additional investment we're making again to fuel top line.

Great. And then just a follow-up on the expense side. What's the best way to weigh the puts and takes on the SG&A line in the fourth quarter? And just as importantly, any unique strategic investments that we should consider next year that would be outside of that plan for modest SG&A leverage at low teens revenue growth?

Yes, sure. So the puts and takes in SG&A -- the puts -- this quarter and throughout the year, we're leveraging our overhead. So we're picking up leverage there. The -- we're picking up a benefit from channel mix. Regional mix is a little bit of a headwind or take. The key investments that we are making, we're expanding testing in new growth vehicles such as loyalty. We're going to continue to invest in our North American online guest experience, which has been driving conversion. We'll put incremental investment behind our power of 3, particularly our men's business. And we'll continue to invest in our omni platform. So that will continue into Q4 and probably beyond.

Our next question is from Matt McClintock with Raymond James.

Congrats on a great quarter and best of luck, Stuart. So I'm going to start with a short term-question, so apologize for that. But just -- there was a lot of noise this quarter about intense promotional activity. A lot of people believed that your promotions were higher year-over-year, and yet you said that you had lower markdowns. So I was wondering if you could -- maybe we can pick your brains in terms of why maybe people are getting the wrong read from their channel checks in terms of your promotional activity.

Yes. Thanks for the question, Matt. So first, I would just reiterate that lower markdowns have been a tailwind all year and contributed to gross margin expansion in Q3. I would also call out that our inventory was in great shape at the end of the quarter and heading into Q4 with a good balance of core and seasonal products and very low age stock. So with that, with regards to markdown activity, I think it's important to know that our omni capabilities, such as shift from store and our RFID technology, allows us to pool the markdown product in stores, in outlets, in DCs on our website for full availability to the guests. So this, combined with a growing assortment, it does result in a breadth of styles on markdown online, but there's just not much depth for units behind. In fact, we have the ability to clear markdowns faster and at better sell-through rates by offering a digitally consolidated pool of inventory. So you can't really conclude that we're more promotional by scraping the website when in reality we're creating better value for the guests. While clearing what little markdown inventory, we have more efficiency.

That's very helpful. And Calvin, I was just wondering for international, now that you're looking for leadership there, what traits or expertise specifically are you looking for? There's been a lot of volatility in terms of international growth for a lot of brands over the year, maybe athletic less so. But it'd be interesting to see how you think about what you need there.

Thanks, Matt. Great question. And I'm excited about the potential. But I would start with reminding all of us that we have some very tenured, strong leaders in place that are running these regions: Gareth, who's been running our European and Middle East markets for the past 3 years; Ken, who's been running APAC, has been with us for 6 years, 4.5 in RoW; and Shenyang, who's been running our Mainland China market, has been with us 2 years. So very strong leadership, and they will continue to drive these businesses as they have. And I have huge respect and confidence in their ability. And this will give us an opportunity to bring in an executive that has an added experience in these markets, in particular in APAC where we can just build upon the talent and the strength we have, but build and bring a unique perspective that they've been in the market and can contribute to our continued growth story. So for me, we're going to make sure that we select -- we're in no rush. We're going to select the right executive talent that has in-market experience and add to the very strong bench that we have already that have been and will continue to drive the markets for us.

Our next question is from Erinn Murphy with Piper Jaffray.

I guess my question is around the loyalty program. Now that you're in 4 cities, could you just talk a little bit more about what some of your biggest learnings have been? It sounds like you're bringing in an incremental customer. And then some of the things that you would maybe change as you think about rolling this out broader scale, and then maybe just update us on kind of the key hurdle rates, things that you need to see before that happens.

Absolutely. Thanks, Erinn, for the question. So as you know, we've extended the test into the Chicago market, which was our most recent in September, and that provided us with a unique learning opportunity in that it's a much larger market for us. Up to that point, we had been in Edmonton, Denver and Austin. In addition, we had our experiential store, so we could understand the connection with that strategy. And I would tell you the results equal to in the other markets proved to be very strong. We sold and hit our numbers within the first 4 weeks, and we continue to see very, very positive results across all metrics. And those are, one, the engagement of our high-value guests. The amount of new guests we're seeing through this program continues to be very strong. And we over-indexed on men relative to our share of sales of men within our business. So it's proving to be a great loyalty and engagement with our high-value loyal guests, but also an acquisition of new and building our men's guests in a very positive way. And what we learned in Chicago was just the connection to the experiential store and having the sweat studio in place just strengthens the engagement that the guests have. Overall, they -- the guest metrics across most levers have been very, very positive on this, and we are very encouraged. And as we look towards 2020, we are planning on a broader rollout for next year, and we'll share more of that in the coming months. But our intention is to take these learnings and develop the program and expand it into more cities next year.

Got it. That's helpful. And then just a second follow-up on some of the things we're seeing in the store with Selfcare. It seems like you guys have been adding a few third-party brands. Can you just talk a little bit about kind of the balance you're trying to strike between both of them, and just generally, kind of what the rollout strategy from here is to Selfcare?

Sure, Erinn. I'll take that question. Thanks. I'd say we're really excited about Selfcare as a category overall as we test into this. And for next year, we are planning to increase our store distribution. So currently, it's available in 50 stores and online. As far as third party, it is only offered on our U.S. e-com site. I mean it is a fairly limited selection. It's approximately 8 SKUs. And the intention there is to partner with brands that we feel offer our guests a more complete assortment in terms of solving sweaty solutions for athletes.

Our next question is from Sam Poser with Susquehanna.

Many of the questions have been answered, but I mean when -- can you give us some more details on sort of how you planned the events over Thanksgiving weekend? Because it did look a little more promotional than it did a year ago, but it also seemed like it was very controlled. Can you give us some idea of sort of the thought and how that all came together and how you think about that on an annualized basis as well?

Yes, absolutely, Sam. I would tell you -- and I was in market, I had the opportunity to visit a number of our stores across cities, both what was exciting that week obviously with us opening up in Mall Of America, our second experiential store and our Fifth location in New York. And the -- there is no change to our execution. We did take opportunity to utilize markdowns that we have as a means to make those available to the guests. But interestingly over the weekend, although our markdown performed well, our core growth was greater than our growth in markdowns. So we continue -- even though we had a very strong weekend, as I mentioned earlier, record-setting, it was still driven by core, leveraging markdowns as an opportunity to clear through some inventory and really put our innovation front and center, which responded well and no change in strategy. And the guests responded in a very positive fashion to that strategy.

And then we -- on the loyalty program, you said you're attracting more men -- or at least in Chicago, you had -- you attracted more men and so on. Can you give us some idea of -- I think that's a follow-up on Erinn's question. So more of what those lines in the sand are to where you have to surpass them, like could you give us some idea of some of the matrix of what you're looking for?

Yes. It fits -- if this notion of line in the sand is, is there a hurdle or number we need to hit before we decide to go or not go, I would tell you, there isn't a metric in the markets we've been in that hasn't exceeded our expectations in showing a high engagement with the guests. We're just being responsibly cautious as we tweak the program and our ability to make sure that we delight the guests. There are a lot of different types of membership loyalty programs out there, and the majority of them are very easy to operate and execute. And the reason I think the guest is responding so well to ours is it fits with who we are as a brand being experiential. They are joining a cohort of other guests and joining the community, which brings them both event experiences, access to product and access to the Sweatlife, which is very unique and different. And they're responding in a very favorable way, and we're very excited about it. And we just want to make sure that as we scale it, that knowing that we are offering a product to our high-value guests that we're delivering on the commitment and the expectation they have. So it really is us being cautious in scaling as we do, which is right and prudent on something that I think is so unique, special, that we're not -- we're not rushing. We have no need to rush, and the metrics are very positive. So there's no line in the sand in that regard. And our incentive plan next year is to broaden it. And we will move forward in, I think, a responsible fashion. But there's no line that would indicate a metric. They're all very, very positive and encouraging and exciting.

And just one quick follow-up. I mean does that mean like part of this to really surprise and delight, as you put it, your guests? Is this really also then about training your own people to be able to then go and sort of spread the word as you roll to other cities? So now you have 4 cities where you could then bring people and to trade them to go out. When you had one, you were limited. Am I thinking about that sort of the right way? Because you did that with your showroom. You did that with your showrooms and trade people and trade customers. Is that a similar type of manner that you're rolling this out so your own folks need to be trained [ maintaining ] this as well?

Yes, there's an element to the role that the educators play. But in fact, one of the strengths to our brand is we have a long history of our educators being connected in the community. And that's one of the big sources of how we grow and build our ambassador base. So that's actually not a factor that would cause us to just go at a pace. It really is our decision and control. Big part of the membership program and the benefits is we like to host local sweat opportunities in the community with studio partners. And so there's an element of us wanting to make sure that we source the right that we are able to host these events and these parties, if you like, and then bring our cohorts together. And therefore, it's just a unique aspect of the program that we've been doing in the 4 cities. And we want to make sure that as we scale it, we're doing it in the right effective manner that's going to deliver the right experience for our guests.

Our next question is from John Kernan with Cowen.

Congrats on another great quarter. So Calvin, you talked a little bit about the new experiential stores both in Lincoln Park and the Mall Of America. Just wondered if you can expand upon it a little bit. How many -- how much of the square footage of lululemon do you think these types of stores can ultimately represent? I think the last -- on the previous call, you talked a little bit about it, but any new color and any learnings that you have on this would be helpful.

Great. Thanks, John. Appreciate that. I think the -- there are really 3 key elements to the benefit of experiential stores that I'll touch on. And the first is they really are the pinnacle expression of our vision of the guests living the Sweatlife. Second is they create a positive impact across the market. There really is a halo impact. And third would be the brand strength. So if I take those each individually from living in and creating our vision, we know through the Lincoln Park and early indication on Mall Of America is that our high-value guest interacts and frequents these stores on a more frequent basis, that they spend more time, that they are both coming back to participate in the sweat activity and/or stay and hang with others at the fuel. And that's also translating into shopping as we're seeing very healthy conversion and growing of share of wallet as well as attracting and building new guests. So in terms of the general metrics, they're very positive, and we just purely look at it through the operational lens of what you'd want from the KPIs. Equally and the second being the positive impact within the market, in Chicago, and we're anticipating the same within Minneapolis, is that we do see the overall market lift, and that's a factor of the ambassador community. These are hubs for them where they are spending time in building out both their influence as well as how they influence lululemon and the Sweatlife community, and overall, just brand awareness and consideration in both online and physical. So we're very, very pleased with that. And third is the brand strength. So if you think of what I believe is truly our unique approach to this loyalty, if you like, it starts with our stores, be it colocated, our current base or in these pinnacle expressions, the experiential. Then you factor in our ambassador community. Then you layer in our membership. Then you layer in our events. It really is creating a layered halo that's impacting not just loyalty engagement, but our strength within these marketplaces. And these experiential stores are really helping to create a hub to drive that. And I'll reiterate what I said on Analyst Day, which is that experiential stores could represent approximately 10% of our store base in the future. We're excited about the early indication. We're equally excited about how our store base factors into that loyalty equation that I just shared with you with the multiple layers of connecting with ambassador membership and events. But experiential will play a key role in tier cities, and we're going to test and learn and see, but they are performing well out of the gate.

Our next question is from Mark Altschwager with Baird.

I wanted to first ask about just the seasonal stores. As you've continued to invest in the CRM capabilities, curious how the strategy around those seasonal stores have evolved. Earlier, I believe you said 30% of transactions are from guests new to Lulu, which sounds like a big opportunity if you're able to capture and leverage that data.

Absolutely. Thanks for the question, Mark. So as you mentioned, the pop-up or the seasonal stores serve a variety of really interesting strategies for us. One, they allow us to go in, in a very low-cost manner to test either new real estate locations within a market and/or a new market altogether. So we've been using that for a number of years, and it's proven to be very effective where we can either determine the risk or no risk of cannibalization, the opportunity of concentration of multiple stores or to really test the opportunity of a new market. And in that, not only are we seeing current guests being able to shop and interact more with us, but it is proving to be a very, very cost-effective way to acquiring a new guest. And then either we turn that seasonal store into a permanent location and we continue to nurture that relationship, or in some cases, we may not sustain it throughout the year but continue to come back into the market at an ad hoc basis. But we do maintain the relationships with those guests and then try to transition them into becoming an omni guest where they would shop with us online. And mainly, we would capture that through our e-mail file growth. And obviously in seasonal, our educators know that one of the key metrics when we go in is e-mail capture. So although we monitor that across our network of stores, in particular in seasonal with it being such an important part of the strategy, that is one of those really important metrics that we work with our educators and our teams to make sure that we're capturing. Once we have it, depending upon the outcome of the location, we would determine to utilize that information relationship with the guests in a variety of ways. 2018, we operated 63. This year, we have 74. That's sort of the run rate we're seeing. I think about 1/3 transitioned to mainline stores, so that's sort of our going-in rate. So it's -- I think it's a really exciting strategy, and as alluded, our new guest acquisition and validation of markets.

And then, Calvin, several times in this call, you've spoken to the powerful impact of events. I was hoping you could just update us on your thoughts on scaling that event strategy. I know it's always been a piece of the community building. It sounds like it's going to be even bigger once loyalty rolls out. But I mean is this specific to loyalty? Or maybe just bigger picture, how are events going to be a bigger part of what lulu's doing?

Great. Thanks, Mark. I think the first thing is to recognize that one of the beauties of this brand is that we host a ton of events globally on an annual basis. Now the size of that event is very different from what a local store may do on a Sunday bringing in guests to the pinnacle event at SeaWheeze or what we're starting to do with our run events to the Sweatlife festival that are happening in Europe and events in Asia. So there has always been rooted in this brand and the community is hosting of events. The opportunity with membership is to build upon that. We know that the guests love the ability to connect with one another, the ability to connect with our educators and our ambassadors within a community either through sweat or through grow, which is another aspect of the Sweatlife. And membership just allows us to create even more events. We do see creating more of these pinnacle events, the 10k event in San Diego. I was down there for the weekend. It was so incredibly powerful. And when you're there and you visit the stores, and all 3 stores in city over the weekend had fantastic results, vibrant. The ambassadors who are in the community, 5,000 people running. I was surprised, pleasantly surprised with the number that are running in our gear. So we are attracting our guests that are really engaged in the essence of what we're creating around the brand, and it's so energetic and electric. Membership will have some unique events. They will have easy and quicker access to other events. And some of the local sweat studio classes that we host will be exclusive for them or they can bring a friend, too. So it's not going to be an exclusive, but there will be unique opportunities. But events is an area that we continue to see an opportunity to strengthen the relationship with the guests and drive that loyalty in a very unique way for this brand and in our community that we're really excited and energized about.

Our last question is from Kate Fitzsimons with RBC Capital Markets.

I'll add my congratulations as well. Calvin, we read about the investment that you guys made in Mirror in the quarter. At the Analyst Day, you spoke to ways to garner greater share of that $3 trillion global wellness pie. Just curious to how you're evaluating lifestyle or experiential opportunities beyond the core lululemon apparel offering in the next 12 to 18 months. Certainly, we talked a lot about loyalty today and the experiential stores, but just any additional detail about what's getting you most excited from a white space perspective would be helpful there.

Great. Thank you. I'll first just mention on the small investment that we made into Mirror and why I'm excited about that and working with Brynn, the CEO of that business, who some of you may or may not know is actually -- is a legacy ambassador. She was an ambassador of lululemon a few years ago. I'm very interested in the space of in-home fitness and that experience. What Mirror provided, which is interesting for us, is the opportunity to learn how the guests are interacting with the content. That is very similar to a lot of how our guests are choosing to sweat, be it through high-impact meditation, yoga or other train activities in home. So it really is an opportunity for us to learn both the balance of how the hardware works and then potentially app and other opportunities down the road. So it's really a front row to work with a wonderful person, being Brynn, that we have a lot of strong relationship with and seek. And I do think when I look at membership and the opportunity that we have, there is in this area of content. What we know the guest is responding to is our curation of content in the physical sweat space, and that is really exciting. And experiential and events allow us to curate other physical opportunities for those cohorts to come together. But equally interesting is how we can provide content in a unique way in the digital space. We ran SeaWheeze. 10,000 runners participated. But 6,000 runners globally ran SeaWheeze virtually around the world. So there's this beautiful and very exciting balance between physical and virtual that we're interested in and exploring. And membership brings it to life both in the physical, and we are leaning in and learning and seeing white space opportunity around the digital/virtual opportunities in which how that content can equally translate into the membership program and beyond. So it's an interesting opportunity to learn in an area that I am excited about and we are paying attention to.

This concludes time allocated for questions. I would like to turn the conference back over to the presenters for any closing remarks.

Thanks, everyone, for joining us today. Happy holidays, and we look forward to speaking to you in a few months when we report our fourth quarter results. Thanks.

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