Table of Contents Contribution Margin In evaluating the performance of our business, we supplement our GAAP results by evaluating our contribution margin both in the aggregate and on a location-by-location basis, both including and excluding non-cash GAAP straight-line lease cost. We also review the related contribution margins as a percentage of membership and service revenue. What is contribution margin? We define “contribution margin including non-cash GAAP straight-line lease cost” as membership and service revenue less location operating expenses (both as determined and reported in accordance with GAAP), adjusted to exclude non-cash stock-based compensation expense included in location operating expenses. We define “contribution margin excluding non-cash GAAP straight-line lease cost” as contribution margin including non-cash GAAP straight-line lease cost further adjusted to exclude non-cash GAAP straight-line lease cost. “Location operating expenses” are our largest category of expenses and represent the costs associated with servicing members at our locations. These expenses consist primarily of lease costs (including non-cash GAAP straight-line lease cost), core operating expenses (such as utilities and internet), expenses associated with ongoing repairs and maintenance and the costs of supporting a dynamic community in our locations. Our community team salaries are included in location operating expenses and specifically include a dedicated member of the community team who is responsible for filling spaces after a location reaches maturity. Lastly, location operating expenses include the impact of support functions that are directly attributable to the operation of these locations, such as costs associated with billings, collections, purchasing, accounts payable functions and member technology. Contribution Margin and Contribution Margin Percentage (in millions) 70