Good afternoon. My name is Chris, and I’ll be your conference operator today. At this time, I would like to welcome everyone to the Planet Fitness Fourth Quarter 2019 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there’ll be a question-and-answer session. [Operator Instructions] Thank you. I would now like to hand the conference over to Brendon Frey. Please go ahead. Brendon Frey Thank you for joining us today to discuss Planet Fitness's fourth quarter 2019 earnings results. On today’s call are Chris Rondeau, Chief Executive Officer; Dorvin Lively, President; and Tom Fitzgerald, Chief Financial Officer. Following Chris and Dorvin's prepared remarks, we will open the call up for questions. 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's 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's 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 included in our fourth quarter 2019 earnings release, which was furnished to the SEC today on Form 8-K, as well as our filings with the SEC reference in that disclaimer. We do not undertake any obligation to update or alter any forward-looking statements whether as a result of new information, future events or otherwise. In addition, the company may refer to certain adjusted non-GAAP metrics on this call. Explanation of these metrics can be found in the earnings release filed earlier today. With that, I’ll turn the call over to Chris Rondeau, Chief Executive Officer of Planet Fitness. Chris?

Thank you, Brendon, and welcome to Planet Fitness's Q4 earnings call. We wrapped up another fantastic year for Planet Fitness in terms of brand growth and financial performance with another strong fourth quarter. Our recent quarterly results were highlighted by 8.6% increase in same-store sales for a 3-year stack comp of 30.3%. This also marked our 52nd consecutive quarter posted in positive same-store sales, an incredible accomplishment for the brand. For the quarter, net member growth contributed to approximately 75% of the increase in same-store sales, reinforcing that consumers continue to be attracted to our judgment free affordable process fitness. For the full-year, same-store sales increased 8.8% or 29.2% on a 3-year stack comp basis. We added approximately 1.9 million net new members in 2019 with approximately 14.4 million members system-wide. Fourth quarter adjusted net income per diluted share grew 29.4% to $0.44, compared with $0.34 in the prior year period, and increased 30.3% to $1.59 for the full-year. Thanks to our asset-light business model, we generated approximately $204 million in operating cash flow, which allowed us to invest in the business, including our headquarter support team and continued technology focused initiatives. And along with our financing activities, returned over $458 million to shareholders through share repurchases. In 2019, we also had a big year in terms of expansion and our well-capitalized franchisees continue to drive our strategic aggressive growth through both new and existing markets. In 2019, we opened 261 locations, a company record consisting of 255 franchise locations and 6 corporate stores. Incidentally, we opened our [indiscernible] location on New Year's Eve and ended the year with 2001 stores. This milestone is an incredible achievement and speaks to the passion and commitment of our entire system, franchisees, their team members in the front line of our stores and…

Thanks, Chris. Good afternoon, everyone. I'll begin by reviewing the details of our fourth quarter results, highlights from 2019 and discuss our full-year 2020 outlook. For the fourth quarter of 2019, total revenue increased 9.8% to $191.5 million from $174.4 million in the prior year period. Total system wide same-store sales increased 8.6% and from a segment perspective, franchise same-store sales increased 8.8%, and our corporate store same-store sales increased 5.8%. Approximately 75% of our Q4 comp increase was driven by net member growth, with the balance being from rate growth. The rate growth was driven by 120 basis points increase in our black card penetration to 61.3% compared with the prior year period combined with higher card pricing for new joins. The rate growth was mostly driven by the black card price increases over the past two years. The impact from black card pricing drove approximately 190 basis points of the increase in system-wide same-store sales. Our Franchise segment revenue was $73.3 million, an increase of 29.6% from $56.5 million in the prior year period. Let me break down the drivers for the quarter. Royalty revenue was $48.4 million, which consist of royalties on monthly membership dues, and annual membership fees. This compares to royalty revenue of $38.5 million in the same quarter of last year, an increase of 25.7%. This year-over-year increase had three drivers. First, we ended the quarter with 237 more franchise stores compared to the same period last year. Second, as I mentioned, our franchise same-store sales increased by 8.8% and then third, a higher overall average royalty rate. For the fourth quarter, the average royalty rate was 6.3%, up from 5.8% in the same period last year, driven by more stores at higher royalty rates compared to the same period last year. Next, our…

[Operator Instructions] And your first question is from Oliver Chen with Cowen & Company. Thank you. Please go ahead.

Hi. This is Jonah [ph] on for Oliver today. Thank you for taking our question. Just curious on your new store guide of 240 versus 260, in '19, just what you're seeing in terms of this year and what's leading to that guide? And also in terms of your 8% guide, how much is attributable to the price increase and how are you thinking about the new membership growth as you're also making changes to your marketing strategy? Thank you very much.

Yes. Thanks, Jonah. This is Dorvin. So when we took a look at the way we got it in the past, we'd look at kind of what's in the pipeline, what's in line of sight. And based on where our franchisees are with respect to the deals are working on and kind of the history of their franchisees, we decided to, to get to the 240. So a couple of things that come in. One is we still have over a 1,000 in the pipeline and about half of those are in the next three years. So that’s consistent with the past. In terms of, factors that would affect development such as real estate, any of these other kind of factors we've talked about in the past, we don't see any deterioration of any of those things that necessarily would slow that down. Timing is such a huge element when it comes to real estate and really pipeline deals. We did guide slightly lower in Q4 -- Q1 rather, this year. Q1, 2019 was the highest number of placements the company's ever had. And the implied guide that we have now would still be higher than it was back in 27, and 2018. And then I think the last point I'd make is, is that the guide we have as of right now is even higher than it was this time last year. So as we did last year, quarter by quarter, as we get more insight into kind of that line of sight, which is generally about a three to six month kind of time period. And then we'll update our guidance as we go throughout the year, but we feel very good about the economics of the model, or the franchisees or continue to deploy capital and building out their markets. But we think 240 is kind of an appropriate number for right now. In terms of your same-store sales question, the 8% guide includes approximately 200 basis points related to the black card pricing, which is a combination of both the $2 pricing increase back in '17 as well as the dollar price that we took back in early September of last year.

Thank you.

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

Hey, guys. Can we start with your take on member growth this year. Obviously. opening a few less clubs, but you think the member growth tracks close to what you had this past year a little bit less. And then from a seasonality perspective, right, it's becoming gradually a little less first quarter centric and more in 2, 3 and 4. Do you think that continues in '20? That gradual shift away from the first quarter?

Yes. John, its Chris. Yes, we still see the seasonality doesn't affect it quite like it used to that we mentioned last year where the summers aren't quite as a follow-up as you want to see 3 years ago. But I think what we've learned back on the marketing front from third quarter, as we've talked about in the last year, from the marketing mix and driving acquisition, we feel really good on the changes we had made in the reallocations from NAF dollars and those learnings into this year. So we're really pleased with the momentum we're carrying.

Okay. And then maybe secondly, talk about your thoughts on teen summer challenge. kind of year two here. In terms of, how you get started, what you do differently on the marketing budget. And then, I mean, I would think that it would be more impactful this year, right, that 900,000 would go up and the 60,000 member lift would go up as well. But maybe you talk about how you're going to attack that?

Yes, we're definitely relaunching it again this year, for sure. We continue to get many accolades and awards, even just as early as last week from a Golden Halo Award, we got granted for it. So it's a great initiative that we'll do this year. The beauty of it now is you now have, hundreds of thousands of kids, teens are now redirect to go after and parents, as we mentioned before, e-mails that we're launching. So we have, a base already baked in that we can go after and say, you know, we're relaunching crumby., The first of the teens in the U.S. to activate your second free summer, So there are a lot of issues around that to get more momentum. So hopefully we blow that 900,000 teen number out of the water. At top of that, we're going to use our new app actually to on the onboarding process for the teens. So they will actually check in, almost feeling like a real true member with their barcode on their app and some team content. So we're looking forward to a little bit more structure around how we capture or interact with the teams just go around.

Okay. Thank you.

Thanks, John.

Thanks, John.

Your next question is from Ran Konik with. Your line is open.

Yes. Thanks, guys. I'm just curious, Dorvin, is there -- I think you said that black card penetration was up about 120 basis points year-over-year. Is that correct?

Yes. The end of the year by 5%, yes.

Yes, I think that's kind of gone up a tick more than being more flattish. Is there anything kind of that you're seeing in a way that you're going about kind of approaching conversion of white to black? Any amenities being added more than in the past at locations? And as you think about the future, are there other areas or amenities that your customers or your members are asking for that are a little bit outside the box that you're kind of thinking through that could be more impactful for them as you continue to think through of innovative ways to kind of continue to grow more things for those members to keep them happy and talk about those benefits to other potential members in the future? Can you give us some thoughts there, please?

Sure, Randi. You know, we've talked a lot in the past about, kind of the biggest values out of the black card membership. Clearly, reciprocity is the number one benefit. And as we just continue to add more and more clubs and now over 2,000, the availability and the more likelihood of using that, whether it's you yourself, you wanting to, use a club closer to home, closer to work, or just the fact that, you have friends or someone that you want to take that might be at another location. So the big value of reciprocity and [indiscernible] would just continues to increase. And you've heard us talk about that's really why we took the first price increase. And then basically two years later, we tested again and took the dollar increase. And in both cases, we continued to see the black card percentage increase. Quite frankly, even more so than what we were doing the pilot. So I think it speaks to the value of the actual benefit you get from that, just with the scale that we continue to have was we open more stores. Second thing is, is that we continue to sign up more members online year after year through our web join process. And there's a higher propensity of those members to join as a black card member when you join online on a percentage basis versus when you join in a club. So you kind of got a little bit of built-in momentum there. And then, I think the last thing I'd say is that, clearly over the last four or five years or so and continue to do so today, we continuing building really nicer black card spa areas than where we had been if you go back years ago when that…

I guess the only thing I'd add to that is the new [technical difficulty] I think the only I would add to, Randy, as with the app now, the only way you could upgrade your membership to a black card would be physically walk into a facility and go to the front desk and have a staff member upgrade you with the app. Today it is a one click upgrade option. So as more people adopt the app, the convenience of being able to upgrade on the fly is already proven to be really beneficial. Yes, we should get more people upgrade and adopt the app for one click option to be able to get it is an easy way to upgrade.

Great. And just one last question. On -- I think you said in the past you used bucket and what have you to help with thinking through the long-term opportunity on real estate. Have you contemplated doing any updated work there? Perhaps in a more -- kind of a more micro level basis, kind of looked at specific different densities in different parts of the country, for example. Now if you say your highest density is in, New Hampshire. I'm assuming, I’m not sure. How that, the density work may look where you could have added kind of unit opportunity than previously contemplated when the work was done, I don’t know, four or five years ago. What's the update there in terms of density work or that you're either doing or potentially doing and thinking through long-term real estate opportunities for the business?

Sure, Randi. You're right. We used actually -- used Buxton and today we use a company called Tango, which really incorporates a lot more data inputs that we can put in about site location, a lot of other factors, including, population density, drive times, income levels, etcetera. So it's a more powerful tool for us and for our franchisees to use as we do our market planning. But I think what I would say is, is that if you go back, at the time of the IPO, we said that we had over a thousand stores in the pipeline. And look at the number of stores we've opened in the last four years or so now. And we still have over a thousand stores in the pipeline. So what we do in concert with our franchisees is either voluntarily they come in and they say, I bought a fifteen store area development agreement and I built 10. I think I can do 10 more. And so we amend their agreements and add more locations. And today, we can do that in a much more sophisticated way with these tools. So it's all the way from things like having access to third party data with -- Yes, they track cell phone usage. How many people and how many cell phone devices are in parking lots, where they're coming from, where they're going. We've done some studies with consumer intercepts. And in our centers where we have stores, we know where they shop within the center. We know if they -- if this is the first time that they really ever shopped in this location because they joined Planet Fitness or vice versa, that they -- this is a kind of their home shopping center, so to speak. And then all of…

Very helpful. Thanks, guys.

Thanks, randy.

Thanks, Randy.

Your next question is from Jonathan Komp with Baird. Your line is open. Jonathan Komp [indiscernible].

Yes, thank you. Hello?

Hey, Jon.

Hi. Sorry about that. I wanted to first ask on the comps. I look at the last two quarters, it looks like things have stabilized and accelerated a little bit in the fourth quarter and now obviously pretty different approach to the marketing so far in 2020. So just maybe wanted to hear your thoughts on what you're seeing and how you're planning comps for the year here?

Well, I would say it was approximately 8% of what we're forecasting to this year. And I think you're right, I think towards the fourth quarter we saw some momentum in -- on the findings of that, we looked at our data that supported our spend on digital and moving some of that into more TV and specifically cable advertising, which is one of the bigger shifts we did. And I think even in the January sale you saw I think -- you're putting -- I could go away from the TV commercial at the time put on TV. So I think you saw quite a bit of change here from the previous year. So I think the momentum is good. We're happy with how the year started and come from fourth quarter for sure.

I think the only thing I'd add to that, John, is that kind of implied in that guide of about approximately 8%, we anticipate about 200 basis points or so related to pricing for 2020. And I think that when you kind of back that out, you're really not all that far off for the last couple of years or so on -- at least on an annual basis of kind of the non-pricing related comp. We think probably about, 75% of our growth will be member growth as kind of where it's been fairly recently with still some pricing, embedded into the -- some lingering on the $2 and then the $1 that we've talked about at the end of Q3 last year. But the other factor is, as we've also talked about, we just have another, 250 some odd stores that are in that base of stores on the comp waterfall that comps in that low to mid single-digit range.

Okay, great. And then maybe a separate question on the unit growth outlook. I guess, one question I had -- maybe bigger picture. I know the annual unit growth has been a part of the annual incentives at the executive level. I just wanted to ask maybe if that still is the case? And if it is, how those targets align with the targets that you've put out for the guidance here for the year?

Yes, we have different incentive factors that depending on the pyramid that, that you work in functionally. But clearly, store openings and placements is a critical factor. Same-store sales is also an element of that as well as EBITDA to drive, drive profits to the bottom line. So it still is a factor in our overall compensation plans.

Okay. Got it. All right, thank you.

Thanks, Jon.

Your next question is from Sharon Zackfia with William Blair. Your line is open.

Hi. Good afternoon.

Hi, Sharon.

Two different sets of questions. So I guess first on equipment. I didn't hear you mention anything about supply chain challenges with China. So if you could just talk to us about supply and whether or not you feel good about the equipment you have to facilitate new unit openings and replacement demand? And then should we expect as well equipment revenue to be down in the first quarter of placements are down. And then secondarily on marketing. You have a huge ad budget. And I'm just wondering, as you delve into optimization, they are kind of where the next legs could be on more optimization for the money you're spending.

Yes, Sharon, I'll take the first part. And Chris can talk about the marketing. I mean, we're having, fairly regularly contact with our suppliers as you can imagine there's a lot of companies are right now. We've been assured by all three of our manufacturers that they have plenty of supply in the distribution centers or in transit to get us all the way through the end of Q2. So we have plenty of supply for Q1 and Q2 at this point. And we continue to monitor that on a regular basis. In terms of revenue for Q1, revenue will be down. I mentioned we'll have, say 10 to 12 placements less this year than the highest we've ever had, which was in Q1 last year. We do expect that our replacement equipment sales on a full-year basis will continue to grow this year. It was about -- this past year of 2019, is about 46%. We think it will be a bit higher in 2020. That is a little bit lumpy quarter by quarter. But we do expect a slight decrease in sales on Q1.

Okay. Can I ask a follow-up just on that before the marketing question. What is all of the equipment assembled or made in China? And if you had to prioritize, would you prioritize new unit openings relative to replacement equipment, if you are kind of limited in supply at some point?

Yes, so we -- our franchisees have the -- they have the election to choose any of the three manufacturers for new equipment. They can pick any of the three. And a lot of the equipment is actually manufactured in the U.S., some in Taiwan and a little bit in Europe. But a lot of it is in the U.S. So they can do that. And then when it comes to re-equipping their clubs, they also can do that. We don't let them kind of pick and choose. You can't replace some pieces with one brand and then some pieces with another brand, because we'd like the consistency of the branding from a member facing experience perspective. But we're not at a point where we think we will ever have to prioritize that. But we as I said earlier, we’ve been in contact with these guys, not daily, weekly, just to make sure that we've got enough supply on hand. And they've assured us that we don't have any issues to get through Q1 and Q2. And quite frankly, we're probably the most important customer some of these guys have in terms of volume on an annual basis. So we get some prioritization with respect to our manufacturers.

On the marketing front, Sharon. Actually, we did the New Year's Eve, we renewed that contract for two more years. We also did the biggest Loser this year, which they brought that back, that started into January, another integration there. I think the bigger lever we have is we started to collect it and towards the tail end of last year, although we've got the spends with the franchisees we're doing locally, it was more than means and methods that we weren't capturing as diligently. So learning best practices around the system so that we can figure out in guide franchisees on their local spend for the 7%, what tactics they should be using. So they were all aligned in all roles in the same direction that I think is a bigger lever for us to be pulling this year and in the future.

Thank you.

Thanks.

Your next question is from Peter Keith with Piper Sandler. Your line is open.

Hey, good afternoon, everyone. Nice quarter here. Just asking a question more on the revenue growth outlook? Hopefully it's not an easy answer that I overlooked, but why is the revenue growth guided at 2% this year versus 15% at the start of last year with what looks like a fairly in-line comp outlook to last year?

Yes, it's I mean, the equipment, the total equipment, the total revenue number obviously is impacted in a big way by the equipment sales. That's the reason I made the comment to Sharon's question a while ago that we expect overall the replacement as a percent of the revenue to be up on a year over year basis. But this year in 2019 when we placed around 260 in total, so it's down. Call it 20 new stores on a year-over-year basis. That's really the only factor that's driving down revenue. I mean it's offset by growth in our other segments. But the biggest increase is coming from the guide of approximately 240 new stores.

Okay. Does that carry forward to the EBITDA and net income guide? They are also -- this year a little bit lower than how you started last year? Or are there other expenses that you should be aware of.

No, it's really a pretty straightforward flow through. Call it a, 23% to 24% kind of margin business. There's not a lot of the SG&A in that segment. So when you take that in and flow through your model, really on a year-over-year basis, the only other change is, is the cap is the debt structure. And we -- in my prepared remarks earlier, I address kind of what the total gross and net interest expense we expect in 2020. But those are really the only other factors affecting the model.

Okay. That's helpful. I just want to pivot then to some of the comments you made around the app. It seems like there's some interesting benefits that are helping your business. I was wondering if you were able to assess what the penetration of app usage is today maybe versus where it started, 2019 and the words you like, where you'd like to get it to over the next year or so.

Yes, I mean it's still a small -- at least rolled. out the tail of last year, so it's a couple of million active users. So it's really just starting off here, but we're really focused on new join. How do we get them onboarded correctly. That’s our main focus, I mean, the current members are one thing, but the newer members as they’re joining, how do we get them just start using it right off the bat, so that you can capitalize on it. And you're right. Whether it's the upgrades referral function to I mean, you think we never really had a formal way for a member to refer another member. And when we’ve a huge volume of join, however, they tell their friends and family that they joined, and hopefully offer them an incentive through them to join. So just have some really deep tactics there. So now it's just a matter of getting everybody on board and so that we can capitalize on them. And we haven’t rolled out messaging or in-app messaging and notifications. So once we roll that out, be able to speak to our members about promos we run so they can refer people. You can't underestimate they will a 14 plus million members here with so much larger than even our competition that, it's such a huge member base that if you can talk to them and offer them incentives, that in itself and word of mouth marketing is just a powerful tool that no one else in the industry has.

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

Sorry about that, guys. The cost of incremental debt would suggest that any acquisition of already established franchise clubs would actually be accretive to earnings, I mean just by the straight math of it. So is there a number that you guys think about in terms of the number of company clubs that you would want to operate in the United States? Or maybe there's a percentage of the total gyms that it's just in the United States that you would potentially want to operate in? Would you consider actually owning any company stores internationally, given what your overall cost of incremental debt is?

Yes, it's a good question, John, and we get this a lot, obviously, from both sides of the equation. I mean, there are some investors will question why we have any. And, you know, that's a good answer. To good answers. So that one is it really is a great kind of R&D lab for, so to speak, because not only can we test things, but we've got a lot of people that work in our corporate office or now work out in the field with our franchisees that, you know, kind of grew up on the corporate store side. So they understand the business and can be great. Great business coaches to our franchisees. So it's good to have that. Secondly, we've gone down a strategy of saying we would like to operate some stores in most geographies so that we understand the different aspects of those geographies all the way from, we have a store in downtown Boston, as you know. So we have an urban store. We have a couple of stores and really fairly high crime area in Oakland that you know quite well. We have stores in rural Pennsylvania and stores in New York and a lot of stores in New Hampshire, which is very rural. And so we -- it gives us a good read and a good kind of pulse on how the business operates in different geographies. In terms of the strategy, we have a roper on every single location. And we take a look at not only does it make sense if a franchisee decides to sell? And we're nearby, that that's kind of a no brainer to take a look at. And sometimes we've done that and we did a couple of acquisitions last year. But we're also looking at…

And we've seen restaurants go from what used to be, kind of 20% need to own in terms of understanding markets that are well under 5%. I mean, is there kind of a percent just in terms of a philosophy that you would like to commit to? And then secondly, for the record, my sister does say that, the high crime area in Oakland is much less high crime than it used to be as that area has significantly changed. So thank you for that comment.

Let's go John. I appreciate that and keep telling us how it's going. I think the way we look at it, John, is that, we are an asset light model. We generate a lot of cash. We've said we want to return cash to shareholders, but yet we are and have deployed capital in buying some of the stores. There's a lot of strategies of markets where you have some, one season, two seasons, so to speak. And it makes a lot of sense, whether it's us or a franchisee, to control that market. We're looking at that as well as working with franchisees to kind of dominate the market with one or two operators. I think when you get up into probably the 20%, 25% range in that, that starts to get maybe a little bit high. But I think you would say just because, you know, the QSR business so well that there's not many franchise businesses out there that generate high 30s or 40% EBITDA margins. So, you could make an argument that that in terms of kind of the way investors tend to look at it, maybe you look at our business a little bit different, but we're under 5% today. And I would say over time, we probably would increase that percentage a little bit.

Perfect. Thank you.

Thanks, John.

Your next question is from Rafe Jadrosich from Bank of America Merrill Lynch. Your line is open.

Hi. Good afternoon and thanks for taking my question, guys.

Hi, Rafe.

I just want to follow-up on the question in terms of the priorities of capital allocation. How do you think about the buyback longer term in terms of whether it's accretive to you on a near-term basis or not? Does that matter to you when you're deciding whether to buy a club or buy back stock?

Yes, I think, Rafe, the way we think about it is, the acquisitions that we've done historically, we've all been in the, call it 5x to 7x EBITDA. And obviously, we're trading at a much larger multiple than that. And that kind of goes to John's question that I just answered in that, you could make an argument to buy a business all day long at, 5x, 6x, 7x EBIDTA when you're getting the kind of multiple valuation that we're getting. And rightly so because we've been able to take stores and in essence, you can generate with the kind of comps we are generating, they just become more accretive. So on the one hand, we -- we haven't deployed a significant amount of cash in that area, but that's something that albeit not embedded into our guidance or our budget for 2020. We will always look at all the ropers that come along. In terms of the way we think about the broader strategy of capital allocation, we've stated this now since, the last couple of years or so that we will return cash to shareholder. And in fact, we've done so well north of $400 million last year and over 6 million shares. It is dilutive to 2020. And I mentioned that in my remarks. We believe that over time it's the right thing to do. And if we can keep growing comps, we have the confidence in our business, we have a confidence in our pipeline, this business will generate so much cash flow that we believe that's sort of the right thing to do. We have had conversations with our Board about the right priorities of capital allocation, and those discussions have always been around stock buybacks, dividends and then deploying capital in terms of like corporate stores, both organic as well as acquisitive. So far, obviously, the bigger piece has been cash return via shareholder purchases or stock repurchases. And we'll continue to look at all of those options every time we meet with our Board and have a capital allocation conversation.

Okay. Thank you. That's very helpful. And then, Chris, you mentioned international growth accelerating this year and then going forward, can you talk about within the guide like how many of the openings will be international versus domestic? And then can you sort of go through some of the key markets between Mexico, Canada and Australia and talk about what you see there in terms of the long-term potential, given the comparative to the U.S?

Yes. I'll take a stab at it and Chris can add to it. So last year we opened 261 stores. Out of that, 16 were international. So it's still a small percentage. We ended the year with 55 stores, mostly in Canada, as we've talked about. So that's where we have 44 stores in Canada. Last year we opened 12. And then we just most recently at the end of the year, as we talked about Australia, so we have two stores opened there. In terms of the opportunities and the way we currently see international, clearly, Canada, we've sized it at about 300. So it's a really important country for us. And now with a base of 44 stores and growing, starting to get more scale and there's things that you can do with scale that you can't do when you only have just a small number of stores [indiscernible] be it in this case, let's say, Mexico or even Australia. But Mexico, we also believe is a really important market for us. We do extremely well in a lot of Hispanic markets from Southern Florida to Southern Texas and California. And the stores we have down there at the moment, we think -- I mean, they do very well and we think our brand will resonate in that as well. So we're opening some more stores in the [indiscernible] area, testing kind of some different income levels to try to determine exactly where our brand can really excel in different economic structures down there. But those are really probably the two markets at the moment that have kind of the biggest opportunity within most recently, as I mentioned, just going into Australia.

Your next question is from Joe Altobello with Raymond James. Your line is open.

Great. Thanks, guys. Good afternoon. I guess first question, Dorvin, just want to go back to the comments you made earlier about marketing and the fine tuning of the marketing that needs to be done at 2020. And I know you guys have done a very good job of reorienting the marketing effort back toward traditional and cable TV, for example, in a way digital. But beyond that sort of high level, what other fine tuning do you guys see happening at 2020 on the marketing side?

Yes, more around -- this is Chris, actually. The -- you may recall last year we did a big market segmentation study on our member base and categorize our members into five different buckets, and learned a lot about TV channels, retailers as they shop at and so on and so forth. So not only have we directed more towards cable and from digital, but also fine tuned what particular channel networks we're actually going to be on besides network television being ABC or NBC [indiscernible] about Food Network, History Channel A&E goes on the big list of them, insights that we really didn't have before. So we fine tune a lot of that part of it and use that for -- and last year as well as 2020.

Got it. Okay.

Got it. Okay. Just one more on productivity. And this sort of goes back to the commentary about opening 240 new stores this year versus 260 last year. If you look at the productivity of your recent new store openings compared to some of the older core -- older cohorts, how do they stack up? Is the productivity improving on the newer stores?

Yes, I'd say if you look over the last, call it three years, four years or so, and you look at kind of the comps of older stores versus how stores kind of get out of the gate, there hasn't been any significant difference. And you know, we get this question a lot in terms of if you are in a higher market penetration, kind of area of the country where we have more stores and therefore more higher percentage of the TAM, it we don't see really any significant difference from that than we do in a market where you have a lower percentage, which comes back to why we keep saying that we continue to have confidence and kind of that 4,000 potential in the U.S. And we haven't looked at our 100 older stores in the system and our 100 older stores, which goes way back. Actually, last year outperformed even the more mature stores, older, older than, say, 3 or 4 years old. So not only are we seeing, kind of those newer stores and then kind of year 2, 3, 4, 5 year ramp, even the $100 stores continue to comp positive and in fact, higher than some of the mature stores. So I think it speaks to a number things. Its more and more marketing dollars, as Chris just talked about, going into a market, obviously, in those store -- in those markets where some of the older stores are, we have a lot more stores today. So you have the availability of reciprocity. So you got the black card penetration contribute to the total revenue and then therefore the comp. But it just speaks to the power of the brand as we go into more and more markets, including some of the oldest we have and some of the highest penetrated markets we have today. And we feel really good about how our store performance has been and feel good about what it's going to do even this year.

Great. Thank you, guys. I appreciate it.

Thank you, Joe.

Our last question comes from Simeon Siegel with BMO Capital Markets. Your line is open.

Thanks. Hi, guys. Any color you can share on what percent of black card members are still grandfathered in at the lower rates? And then just congrats on an ongoing SG&A leverage. Can you -- how are you thinking about that for line item for next year? Thanks.

Yes. We don't break out the, I guess, the layers of our pricing. We give what our total black card is versus our standard classic membership. But I mean we still have a pretty good sized numbers at the $19.99 membership as well. You know we've talked about in the past as to maybe there's some stickiness to that and over time we'll see, because it's only been now, nine quarters I guess since we put that price in effect. But we don't break out that. What was the second part of your question?

How are you thinking about SG&A the next year?

SG&A.

Yes, I mean, we -- yes, we -- and we had -- if you remember back in Q3, we said we get leverage for Q4 and then the full-year. I think that we will -- based on our guide, we believe we'll continue to get some leverage this year.

Great. Thanks a lot, guys. Best of luck for the year.

Thank you.

Thank you. I appreciate it.

This does conclude the Q&A period. I'll now turn it back over to Chris Rondeau for any closing remarks.

Great. Well, thanks, everybody, for joining the call today. And it was a record year for us. We brought 2,000 stores, so we’re happy with that number as well as the record year opening of 261. I'm really pleased with the changes in marketing and the performance there and look forward to Q1 release. Thank you.

Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation, and you may now disconnect.