Table of Contents The following table includes the components of operating lease cost included in location operating expenses as a percentage of membership revenue: Six Months Ended June 30, Change 2018 2019 % Lease cost contractually paid or payable 50% 55% 5% Non-cash GAAP straight-line lease cost 17% 15% (2)% Amortization of lease incentives (6)% (5)% 1% Total location operating lease cost 62% 65% 3% The $369.3 million increase in lease cost contractually paid or payable, which is incurred after locations open for members and after the expiration of any free rent period, was primarily driven by the growth from 279 locations as of June 1, 2018 to 507 locations as of June 1, 2019. The increase in lease cost contractually paid or payable is also impacted by escalations in base rent payments. As a percentage of membership revenue, lease cost contractually paid or payable increased by 5% for the six months ended June 30, 2019 as compared to the six months ended June 30, 2018 and was impacted by our expansion into regions where a free rent period in leases is less customary and by an increase in the proportion of non-mature locations that have not yet achieved full occupancy, but are paying full lease cost. The $80.9 million increase in non-cash GAAP straight-line lease cost was primarily driven by free rent periods and lease cost escalations given that a majority of our leases are in the first half of the life of the lease. The impact of straight-lining of lease cost typically increases lease cost in the first half of the life of a lease, when lease cost recorded in accordance with GAAP exceeds cash payments made, and then decreases lease cost in the second half of the life of the lease when lease cost expense is less than the cash payments required. The impact of straight-lining of lease cost nets to zero over the life of a lease. The $30.5 million increase in amortization of lease incentives benefit was also primarily driven by the new locations that opened since June 30, 2018. In addition, upon adoption of ASC 842, we made an accounting policy election to recognize tenant lease incentive receivables as part of the fixed lease payments at the lease commencement date, which resulted in a reduction in total operating lease cost included in location operating expenses of $2.1 million for the six months ended June 30, 2019, related to the amortization benefit of the accrual for these additional lease incentives recorded upon adoption. For additional discussion, see Notes 2 and 4 to the unaudited interim condensed consolidated financial statements included elsewhere in this prospectus. The increase in the number of open locations and the growth of our global platform also resulted in a $33.0 million increase in total tenancy costs (including real estate and related taxes and common area maintenance charges) as compared to the six months ended June 30, 2018. Employee compensation and benefits expense included in location operating expenses increased $68.0 million as compared to the six months ended June 30, 2018. To support the operations of our growing platform, we have made significant personnel investments in teams that run the day-to-day operations of our locations, and functions such as billings, collections, purchasing and accounts payable teams. Sales incentive bonuses are also paid to employees as a means of compensating community team members responsible for location level sales and member retention efforts. Stock-based compensation expense increased $19.5 million, including $16.8 million driven by the 2019 tender offer, through which common shares were acquired from employees at a price greater than the fair market value of the shares and resulted in additional stock-based compensation expense during the six months ended June 30, 2019. Additionally, we made new stock-based grants to new and existing employees and the fair value of our capital stock increased, which also contributed to the increase in stock-based compensation. The overall growth in our global platform was also the primary driver of the remaining $89.6 million increase in all other location operating expenses, which related to increases in cleaning, office, consumables, utilities, repairs and maintenance expenses and other expenses required to operate our locations. As a percentage of membership revenue, these location operating expenses for the six months ended June 30, 2019 decreased 3% to 17% compared to 20% for the six months ended June 30, 2018. 95