Life Time Reports First Quarter 2024 Financial Results

CHANHASSEN, Minn., May 1, 2024 /PRNewswire/ -- Life Time Group Holdings, Inc. ("Life Time," "we," "our," "us," or the "Company") (NYSE: LTH) today announced its financial results for the fiscal first quarter ended March 31, 2024.

Bahram Akradi, Founder, Chairman and CEO, stated: "We are extremely pleased with our first quarter financial performance. The desirability of our brand combined with historic levels of member retention and engagement continues to drive strong financial results. As a result, we are raising our full-year revenue and Adjusted EBITDA guidance. We also remain on track to achieve our other 2024 financial goals, namely being free cash flow positive beginning in the second quarter, further improving our balance sheet, and reducing our net debt leverage ratio."

Financial Summary


Three Months Ended



($ in millions, except memberships and per membership data)

March 31,



2024


2023


Percent
Change

Total revenue

$596.7


$510.9


16.8 %

Center operations expenses

$321.9


$274.1


17.4 %

Rent

$72.3


$66.5


8.7 %

General, administrative and marketing expenses (1)

$48.9


$42.5


15.1 %

Net income (2)

$24.9


$27.5


(9.5) %

Adjusted net income

$30.5


$23.2


31.5 %

Adjusted EBITDA

$146.0


$120.1


21.6 %

Comparable center revenue

11.1 %


24.6 %



Center memberships, end of period

802,010


764,173


5.0 %

Average center revenue per center membership

$745


$667


11.7 %



(1)

The three months ended March 31, 2024, and 2023 included non-cash share-based compensation expense of $7.1 million and $4.7 million, respectively.

(2)

Net income for the three months ended March 31, 2023, included tax-effected one-time net benefits of $8.7 million from sale-leasebacks and the sale of two triathlon events.



First Quarter 2024 Information

  • Revenue increased 16.8% to $596.7 million due to continued strong growth in membership dues and in-center revenue.
  • Center memberships increased by 37,837, or 5.0%, when compared to March 31, 2023, and increased sequentially from December 31, 2023, by 38,794, consistent with typical seasonality.
  • Total subscriptions, which include center memberships and our digital on-hold memberships, increased 4.9% from March 31, 2023, to 853,072.
  • Center operations expenses increased 17.4% to $321.9 million primarily due to increased operating costs related to our new and ramping centers as well as growth in memberships and in-center business revenue.
  • General, administrative and marketing expenses increased 15.1% to $48.9 million primarily due to higher share-based compensation expense in the current period, timing of marketing expenses primarily related to our new club openings, and increased information technology costs.
  • Net income decreased $2.6 million to $24.9 million primarily due to tax-effected one-time net benefits of a $5.1 million gain from sale-leasebacks and a $3.6 million gain related to the sale of two triathlon events in the prior year period, which gains were largely offset by improved business performance in the current period.
  • Adjusted net income increased $7.3 million to $30.5 million.
  • Adjusted net income and Adjusted EBITDA improved significantly as we experienced greater flow through of our increased revenue and benefited from the structural improvements to our business that have improved our margins.

New Center Openings

  • The Company opened one new center in the first quarter of 2024.
  • As of March 31, 2024, Life Time operated a total of 172 centers.

Cash Flow Highlights


Three Months Ended



($ in millions)

March 31,



2024


2023


Percent
Change

Net cash provided by operating activities

$90.4


$74.3


21.7 %







Growth capital expenditures (1)

$105.2


$123.0


(14.5) %

Maintenance capital expenditures (2)

$51.6


$47.8


7.9 %

Total capital expenditures

$156.8


$170.8


(8.2) %



(1)

Includes new center land and construction, asset acquisitions and initial major remodels of acquired centers.

(2)

Includes general maintenance and modernization of existing centers and technology.



Liquidity and Capital Resources

  • As of March 31, 2024, the Company's total available liquidity was $242.7 million, which included availability on our revolving credit facility and cash and cash equivalents.
  • The Company's net debt leverage ratio improved to 3.6x as of March 31, 2024, from 5.2x as of March 31, 2023.

2024 Outlook

Full-Year 2024 Guidance






Percent


Year Ended


Year Ended


Year Ended


Change


December 31, 2024


December 31, 2024


December 31, 2023


(Using


(Guidance as of

($ in millions)

(Guidance)


(Actual)


Midpoints)


February 28, 2024

Revenue

$2,500 – $2,530


$2,216.6


13.5 %


$2,460 – $2,500

Adjusted EBITDA

$603 – $618


$536.8


13.7 %


$595 – $610

Rent

$300 – $312


$275.1


11.2 %


$300 – $312









Conference Call Details

A conference call to discuss the Company's first quarter financial results is scheduled for today:

  • Date: Wednesday, May 1, 2024
  • Time: 10:00 a.m. ET (9:00 a.m. CT)
  • U.S. dial-in number: 1-877-451-6152
  • International dial-in number: 1-201-389-0879
  • Webcast: LTH 1Q 2024 Earnings Call

A link to the live audio webcast of the conference call will be available at https://ir.lifetime.life.

Replay Information

Webcast – A recorded replay of the webcast will be available within approximately three hours of the call's conclusion and may be accessed at: https://ir.lifetime.life.

Conference Call – A replay of the conference call will be available after 1:00 p.m. ET the same day through May 15, 2024:

  • U.S. replay number: 1-844-512-2921
  • International replay number: 1-412-317-6671
  • Replay ID: 1374 5673

About Life Time

Life Time (NYSE: LTH) empowers people to live healthy, happy lives through its portfolio of more than 170 athletic country clubs across the United States and Canada. The health and wellness pioneer also delivers a range of healthy way of life programs and information via its complimentary Life Time Digital app. The Company's healthy living, healthy aging, healthy entertainment communities and ecosystem serve people 90 days to 90+ years old and is supported by a team of more than 39,000 dedicated professionals. In addition to delivering the best programs and experiences through its clubs, Life Time owns and produces nearly 30 of the most iconic athletic events in the country.

Use of Non-GAAP Financial Measures and Key Performance Indicators

This press release includes certain financial measures that are not presented in accordance with generally accepted accounting principles in the United States ("GAAP"), including Adjusted net income, Adjusted net income per common share, Adjusted EBITDA and net debt and ratios and calculations with respect thereto. These non-GAAP financial measures are not based on any comprehensive set of accounting rules or principles and should be considered in addition to, and not as a substitute for or superior to, net income, net income per common share, or total debt (defined as long-term debt, net of current portion, plus current maturities of debt) as a measure of financial performance or any other performance measure derived in accordance with GAAP, and should not be construed as an inference that the Company's future results will be unaffected by unusual or non-recurring items. In addition, these non-GAAP financial measures should be read in conjunction with the Company's financial statements prepared in accordance with GAAP. The reconciliations of the Company's non-GAAP financial measures to the corresponding GAAP measures should be carefully evaluated.

Adjusted net income is defined as net income excluding the impact of share-based compensation expense, (gain) loss on sale-leaseback transactions, capital transaction costs, legal settlements, asset impairment, severance and other items that are not indicative of our ongoing operations, including incremental costs related to COVID-19, less the tax effect of these adjustments. Adjusted EBITDA is defined as net income before interest expense, net, provision for (benefit from) income taxes and depreciation and amortization, excluding the impact of share-based compensation expense, (gain) loss on sale-leaseback transactions, capital transaction costs, legal settlements, asset impairment, severance and other items that are not indicative of the Company's ongoing operations, including incremental costs related to COVID-19. Net debt is defined as long-term debt, net of current portion, plus current maturities of debt, excluding fair value adjustments, unamortized debt discounts and issuance costs, minus cash and cash equivalents. Net debt is as of the last day of the respective quarter or year. Our net debt leverage ratio is calculated as our net debt divided by our trailing twelve months of Adjusted EBITDA.

The Company presents these non-GAAP financial measures because management believes that these measures assist investors and analysts in comparing the Company's operating performance across reporting periods on a consistent basis by excluding items that management does not believe are indicative of the Company's ongoing operating performance. Investors are encouraged to evaluate these adjustments and the reasons the Company considers them appropriate for supplemental analysis. In evaluating the non-GAAP financial measures, investors should be aware that, in the future, the Company may incur expenses that are the same as or similar to some of the adjustments in the Company's presentation of its non-GAAP financial measures. There can be no assurance that the Company will not modify the presentation of non-GAAP financial measures in future periods, and any such modification may be material. In addition, the Company's non-GAAP financial measures may not be comparable to similarly titled measures used by other companies in the Company's industry or across different industries.

The non-GAAP financial measures have limitations as analytical tools, and investors should not consider these measures in isolation or as substitutes for analysis of the Company's results as reported under GAAP.

Please note that the Company has not provided the most directly comparable GAAP financial measure, or a quantitative reconciliation thereto, for the Adjusted EBITDA forward-looking guidance for 2024 included in this press release in reliance on the unreasonable efforts exception provided under Item 10(e)(1)(i)(B) of Regulation S-K. Providing the most directly comparable GAAP financial measure, or a quantitative reconciliation thereto, cannot be done without unreasonable effort due to the inherent uncertainty and difficulty in predicting certain non-cash, material and/or non-recurring expenses or benefits; legal settlements or other matters; and certain tax positions. The variability of these items could have an unpredictable, and potentially significant, impact on our future GAAP financial results.

The Company includes a center, for comparable center revenue purposes, beginning on the first day of the 13th full calendar month of the center's operation, in order to assess the center's growth rate after one year of operation.

Forward-Looking Statements

This press release includes "forward-looking statements" within the meaning of federal securities regulations. Forward-looking statements in this press release include, but are not limited to, the Company's plans, strategies and prospects, both business and financial, including its financial outlook for full year 2024, growth, cost efficiencies and margin expansion, improvements to its balance sheet, net debt and leverage ratio, capital expenditures and free cash flow, consumer demand, industry and economic trends, taxes, rent expense, expected number of new center openings and successful signings and closings of center takeovers and sale-leaseback transactions (including the amount, pricing and timing thereof). These statements are based on the beliefs and assumptions of the Company's management. Forward-looking statements are inherently subject to risks, uncertainties and assumptions. Generally, statements that are not historical facts, including statements concerning the Company's possible or assumed future actions, business strategies, events or results of operations, are forward-looking statements. These statements may be preceded by, followed by or include the words "believe," "expect," "anticipate," "intend," "plan," "estimate" or similar expressions. In addition, any statements or information that refer to expectations, beliefs, plans, projections, objectives, performance or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking.

Factors that could cause actual results to differ materially from those forward-looking statements included in this press release include, but are not limited to, risks relating to our business operations and competitive and economic environment, risks relating to our brand, risks relating to the growth of our business, risks relating to our technological operations, risks relating to our capital structure and lease obligations, risks relating to our human capital, risks relating to legal compliance and risk management and risks relating to ownership of our common stock and the other important factors discussed under the caption "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission (the "SEC") on February 28, 2024, (File No. 001-40887), as such factors may be updated from time to time in the Company's other filings with the SEC, which are accessible on the SEC's website at www.sec.gov. These and other important factors could cause actual results to differ materially from those indicated by the forward-looking statements made in this press release. Any forward-looking statement that the Company makes in this press release speaks only as of the date of such statement. Except as required by law, the Company does not have any obligation to update or revise, or to publicly announce any update or revision to, any of the forward-looking statements, whether as a result of new information, future events or otherwise.

LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)



Three Months Ended

March 31,


2024


2023

Revenue:




Center revenue

$           580,485


$         497,752

Other revenue

16,232


13,099

Total revenue

596,717


510,851

Operating expenses:




Center operations

321,900


274,109

Rent

72,282


66,537

General, administrative and marketing

48,853


42,497

Depreciation and amortization

65,903


58,197

Other operating expense

15,722


2,127

Total operating expenses

524,660


443,467

Income from operations

72,057


67,384

Other (expense) income:




Interest expense, net of interest income

(37,403)


(31,195)

Equity in earnings of affiliates

177


143

Total other expense

(37,226)


(31,052)

Income before income taxes

34,831


36,332

Provision for income taxes

9,914


8,872

Net income

$             24,917


$           27,460





Income per common share:




Basic

$                  0.13


$               0.14

Diluted

$                  0.12


$               0.14

Weighted-average common shares outstanding:




Basic

197,498


194,572

Diluted

202,756


202,855

 

LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

(Unaudited)



March 31,
2024


December 31,
2023

ASSETS




Current assets:




Cash and cash equivalents

$             18,598


$             11,161

Restricted cash and cash equivalents

18,126


18,805

Accounts receivable, net

22,854


23,903

Center operating supplies and inventories

53,140


52,803

Prepaid expenses and other current assets

71,000


57,751

Income tax receivable

7,752


10,101

Total current assets

191,470


174,524

Property and equipment, net

3,234,238


3,171,616

Goodwill

1,235,359


1,235,359

Operating lease right-of-use assets

2,183,544


2,202,601

Intangible assets, net

172,364


172,127

Other assets

76,662


75,914

Total assets

$        7,093,637


$        7,032,141

LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:




Accounts payable

$             69,063


$             81,252

Construction accounts payable

81,656


108,730

Deferred revenue

53,217


49,299

Accrued expenses and other current liabilities

161,550


185,305

Current maturities of debt

23,261


73,848

Current maturities of operating lease liabilities

60,772


58,764

Total current liabilities

449,519


557,198

Long-term debt, net of current portion

1,987,180


1,859,027

Operating lease liabilities, net of current portion

2,254,736


2,268,863

Deferred income taxes, net

61,962


56,066

Other liabilities

37,381


36,875

Total liabilities

4,790,778


4,778,029

Stockholders' equity:




Common stock, $0.01 par value per share; 500,000 shares authorized; 198,791 and 196,671 shares issued and outstanding, respectively.

1,988


1,967

Additional paid-in capital

2,861,359


2,835,883

Accumulated deficit

(551,896)


(576,813)

Accumulated other comprehensive loss

(8,592)


(6,925)

Total stockholders' equity

2,302,859


2,254,112

Total liabilities and stockholders' equity

$        7,093,637


$        7,032,141

 

LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)



Three Months Ended

March 31,


2024


2023

Cash flows from operating activities:




Net income

$             24,917


$             27,460

Adjustments to reconcile net income to net cash provided by operating activities:




Depreciation and amortization

65,903


58,197

Deferred income taxes

5,996


6,333

Share-based compensation

7,626


5,622

Non-cash rent expense

5,958


9,028

Loss (gain) on disposal of property and equipment, net

245


(6,693)

Amortization of debt discounts and issuance costs

2,003


1,966

Changes in operating assets and liabilities

(23,820)


(23,650)

Other

1,579


(3,915)

Net cash provided by operating activities

90,407


74,348

Cash flows from investing activities:




Capital expenditures

(156,801)


(170,814)

Proceeds from sale-leaseback transactions


32,676

Other

(1,787)


1,287

Net cash used in investing activities

(158,588)


(136,851)

Cash flows from financing activities:




Proceeds from borrowings


7,916

Repayments of debt

(54,117)


(3,701)

Proceeds from revolving credit facility

445,000


345,000

Repayments of revolving credit facility

(315,000)


(280,000)

Repayments of finance lease liabilities

(193)


(244)

Proceeds from stock option exercises

484


3,456

Other

(1,199)


(102)

Net cash provided by financing activities

74,975


72,325

Effect of exchange rates on cash and cash equivalents and restricted cash and cash equivalents

(36)


6

Increase in cash and cash equivalents and restricted cash and cash equivalents

6,758


9,828

Cash and cash equivalents and restricted cash and cash equivalents—beginning of period

29,966


25,509

Cash and cash equivalents and restricted cash and cash equivalents—end of period

$             36,724


$             35,337


Non-GAAP Measurements and Key Performance Indicators

See "Use of Non-GAAP Financial Measures and Key Performance Indicators" for a discussion of the Non-GAAP financial measures reconciled below.

Key Performance Indicators

($ in thousands, except for Average Center revenue per center membership)

(Unaudited)



Three Months Ended


March 31,


2024


2023

Membership Data




Center memberships

802,010


764,173

Digital on-hold memberships

51,062


49,333

Total memberships

853,072


813,506





Revenue Data




Membership dues and enrollment fees

73.3 %


71.8 %

In-center revenue

26.7 %


28.2 %

Total Center revenue

100.0 %


100.0 %





Membership dues and enrollment fees

$          425,411


$          357,488

In-center revenue

155,074


140,264

Total Center revenue

$          580,485


$          497,752





Average Center revenue per center membership (1)

$                 745


$                667

Comparable center revenue (2)

11.1 %


24.6 %





Center Data




Net new center openings (3)

1


3

Total centers (end of period) (3)

172


164

Total center square footage (end of period) (4)

16,900,000


16,100,000





GAAP and Non-GAAP Financial Measures




Net income

$          24,917


$          27,460

Net income margin (5)

4.2 %


5.4 %

Adjusted net income (6)

$            30,525


$            23,211

Adjusted net income margin (6)

5.1 %


4.5 %

Adjusted EBITDA (7)

$        145,977


$        120,102

Adjusted EBITDA margin (7)

24.5 %


23.5 %

Center operations expense

$        321,900


$        274,109

Pre-opening expenses (8)

$            2,452


$            1,685

Rent

$          72,282


$          66,537

Non-cash rent expense (open properties) (9)

$            4,184


$            6,378

Non-cash rent expense (properties under development) (9)

$            1,774


$            2,650





(1)

We define Average Center revenue per center membership as Center revenue less Digital on-hold revenue, divided by the average number of Center memberships for the period, where the average number of Center memberships for the period is an average derived from dividing the sum of the total Center memberships outstanding at the beginning of the period and at the end of each month during the period by one plus the number of months in each period.





(2)

We measure the results of our centers based on how long each center has been open as of the most recent measurement period. We include a center, for comparable center revenue purposes, beginning on the first day of the 13th full calendar month of the center's operation, in order to assess the center's growth rate after one year of operation.





(3)

Net new center openings is calculated as the number of centers that opened for the first time to members during the period, less any centers that closed during the period. Total centers (end of period) is the number of centers operational as of the last day of the period. During the first quarter of 2024, we opened one center, which excludes two acquired centers that are not currently considered new center openings as they are under major remodel.





(4)

Total center square footage (end of period) reflects the aggregate square footage, excluding the areas used for tennis courts, outdoor swimming pools, outdoor play areas and stand-alone Work, Sport and Swim locations. We use this metric for evaluating the efficiencies of a center as of the end of the period. These figures are approximations.





(5)

Net income margin is calculated as net income divided by total revenue.





(6)

We present Adjusted net income as a supplemental measure of our performance. We define Adjusted net income as net income excluding the impact of share-based compensation expense, (gain) loss on sale-leaseback transactions, capital transaction costs, legal settlements, asset impairment, severance and other items that are not indicative of our ongoing operations, including incremental costs related to COVID-19, less the tax effect of these adjustments.






Adjusted net income margin is calculated as Adjusted net income divided by total revenue.





The following table provides a reconciliation of net income and income per common share, the most directly comparable GAAP measures, to Adjusted net income and Adjusted net income per common share:



 


Three Months Ended


March 31,

($ in thousands)

2024


2023

Net income

$             24,917


$           27,460

Share-based compensation expense (a)

7,626


5,622

Gain on sale-leaseback transactions (b)


(6,732)

Other (c)

214


(4,512)

Taxes (d)

(2,232)


1,373

Adjusted net income

$             30,525


$           23,211





Income per common share:




Basic

$                 0.13


$               0.14

Diluted

$                 0.12


$               0.14

Adjusted income per common share:




Basic

$                 0.15


$               0.12

Diluted

$                 0.15


$               0.11

Weighted-average common shares outstanding:




Basic

197,498


194,572

Diluted

202,756


202,855





(a)

Share-based compensation expense recognized during the three months ended March 31, 2024, was associated with stock options, restricted stock units, performance stock units and our employee stock purchase plan ("ESPP") that launched on December 1, 2022. Share-based compensation expense recognized during the three months ended March 31, 2023, was associated with stock options, restricted stock, restricted stock units, our ESPP and liability classified awards related to our short-term incentive plan in 2023.





(b)

We adjust for the impact of losses and gains on the sale-leaseback of our properties as they do not reflect costs associated with our ongoing operations. 





(c)

Includes benefits and costs associated with transactions that are unusual and non-recurring in nature.





(d)

Represents the estimated tax effect of the total adjustments made to arrive at Adjusted net income using the effective income tax rates for the respective periods.




(7)

We present Adjusted EBITDA as a supplemental measure of our performance. We define Adjusted EBITDA as net income before interest expense, net, provision for (benefit from) income taxes and depreciation and amortization, excluding the impact of share-based compensation expense, loss (gain) on sale-leaseback transactions, capital transaction costs, legal settlements, asset impairment, severance and other items that are not indicative of our ongoing operations.





Adjusted EBITDA margin is calculated as Adjusted EBITDA divided by total revenue.





The following table provides a reconciliation of net income, the most directly comparable GAAP measure, to Adjusted EBITDA:




 


Three Months Ended


March 31,

($ in thousands)

2024


2023

Net income

$               24,917


$               27,460

Interest expense, net of interest income

37,403


31,195

Provision for income taxes

9,914


8,872

Depreciation and amortization

65,903


58,197

Share-based compensation expense (a)

7,626


5,622

Gain on sale-leaseback transactions (b)


(6,732)

Other (c)

214


(4,512)

Adjusted EBITDA

$             145,977


$             120,102



(a) – (c)

See the corresponding footnotes to the table in footnote 6 immediately above.      


(8)

Represents non-capital expenditures associated with opening new centers that are incurred prior to the commencement of a new center opening. The number of centers under construction or development, the types of centers and our costs associated with any particular center opening can vary significantly from period to period.


(9)

Reflects the non-cash portion of our annual GAAP operating lease expense that is greater or less than the cash operating lease payments. Non-cash rent expense for our open properties represents non-cash expense associated with properties that were operating at the end of each period presented. Non-cash rent expense for our properties under development represents non-cash expense associated with properties that are still under development at the end of each period presented.


 

Proceeds from Sale-Leaseback Transactions

($ in thousands)

(Unaudited)



Three Months Ended


March 31,


2024


2023

Proceeds from sale-leaseback transactions

$                     —


$             32,676

 

Reconciliation of Net Income to Adjusted EBITDA Trailing Twelve Months

($ in thousands)

(Unaudited)



Twelve


Twelve


Months Ended


Months Ended


March 31, 2024


March 31, 2023

Net income

$                         73,520


$                      63,633

Interest expense, net of interest income

137,005


114,789

Provision for income taxes

19,769


10,914

Depreciation and amortization

252,103


228,973

Share-based compensation expense

52,148


21,475

Loss (gain) on sale-leaseback transactions

20,356


(75,992)

Asset impairments

5,340


Other

2,464


(2,592)

Adjusted EBITDA

$                       562,705


$                    361,200

 

Reconciliation of Net Debt and Leverage Calculation

($ in thousands)

(Unaudited)



Twelve


Twelve


Months Ended


Months Ended


March 31, 2024


March 31, 2023

Current maturities of debt

$                         23,261


$                      65,585

Long-term debt, net of current portion

1,987,180


1,824,913

Total Debt

$                    2,010,441


$                 1,890,498

Less: Fair value adjustment

400


1,005

Less: Unamortized debt discounts and issuance costs

(13,466)


(17,480)

Less: Cash and cash equivalents

18,598


23,213

Net Debt

$                    2,004,909


$                 1,883,760

Trailing twelve-month Adjusted EBITDA

562,705


361,200

Net Debt Leverage Ratio

3.6x


5.2x

 

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SOURCE Life Time Group Holdings, Inc.