Life Time Reports First Quarter Fiscal 2023 Financial Results

  • Revenue increased by 30.2% to $510.9 million from $392.3 million in the first quarter of 2022
  • Net income increased to $27.5 million from a net loss of $38.0 million in the first quarter of 2022
  • Adjusted EBITDA increased by 195.8% to $120.1 million from $40.6 million in the first quarter of 2022
  • Life Time raises full year fiscal 2023 Adjusted EBITDA guidance by $30 million to $470-$490 million 

CHANHASSEN, Minn., April 25, 2023 /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, 2023.

Bahram Akradi, Founder, Chairman and CEO, stated: "We are very pleased with our start to fiscal 2023. We delivered record levels of revenue and Adjusted EBITDA for the first quarter. We also delivered sequential revenue, profit and margin improvements over our strong fourth quarter 2022 performance. All of our strategic initiatives, together with our rewiring of the Company, are delivering increasing revenue and higher margins. We are successfully opening new clubs, with faster ramping, in desirable locations across the country. With the solid momentum in our business, we are raising our full year Adjusted EBITDA guidance to $470 to $490 million."

Financial Summary


Three Months Ended



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

March 31,



2023


2022


Percent
Change

Revenue

$510.9


$392.3


30.2 %

Center operations expenses

$274.1


$239.6


14.4 %

Rent

$66.5


$56.0


18.8 %

General, administrative, and marketing expenses (1)

$42.5


$66.6


(36.2) %

Net income (loss)

$27.5


$(38.0)


NM

Adjusted EBITDA

$120.1


$40.6


195.8 %

Comparable center revenue

24.6 %


50.3 %



Center memberships, end of period

764,173


673,983


13.4 %

Average center revenue per center membership

$667


$580


15.0 %


NM - Not meaningful

(1)

The three months ended March 31, 2023 and 2022 include non-cash share-based compensation expense of $4.7 million and $19.9 million, respectively, and non-recurring one-time items of $0.3 million and $0.5 million, respectively. 

 

First Quarter 2023 Information

  • Revenue increased due to strong growth in membership dues and in-center revenues, which included the continued ramp of our centers and higher member utilization of our in-center offerings.
  • Net center memberships increased by approximately 39,000, which exceeded the approximately 25,000 increase in net center memberships during the first quarter of 2022. Total memberships, which includes our digital on-hold memberships, increased approximately 9% to 813,500.
  • Center operations expenses increased primarily due to additional staffing requirements to support increased usage in existing and new centers, expanded programming, increased labor costs and utility cost inflation.
  • General, administrative and marketing expenses declined primarily due to higher non-cash share-based compensation expense in the prior year period and the benefits from our operational efficiency efforts that we experienced in the current year period. 
  • Net income included tax-effected one-time net benefits of $8.5 million, primarily from a $5.1 million gain on sale-leasebacks and a $3.6 million gain related to the sale of two triathlon events, and also included $4.2 million of tax-effected non-cash share-based compensation expense. Net loss in the prior year period included tax-effected one-time net benefits of $26.1 million, primarily related to a gain on sale-leasebacks, and also included $19.9 million of tax-effected non-cash share-based compensation expense. Excluding the impact of these net benefits and expenses, net income improved by $67.3 million.
  • Net income and Adjusted EBITDA improved significantly as we experienced greater flow through of our increased revenue and benefited from our ongoing margin expansion efforts.

New Center Openings

  • The Company opened three new centers in the first quarter of 2023.
  • As of March 31, 2023 we operated a total of 164 centers.
  • The Company plans to open seven additional new centers in 2023, resulting in a total of 10 new centers for the year.

Cash Flow Highlights

  • As of March 31, 2023 the Company had total cash and cash equivalents of $35.3 million, and $85.0 million in outstanding borrowings under its $475 million revolving credit facility.
  • Net cash provided by operating activities totaled $74.3 million for the quarter ended March 31, 2023, compared to $9.1 million in the quarter ended March 31, 2022.
  • Free cash flow before growth capital expenditures totaled $26.6 million for the quarter ended March 31, 2023, compared to $(35.3) million for the quarter ended March 31, 2022.
  • Growth capital expenditures, net of construction reimbursements, center maintenance capital expenditures and corporate capital expenditures totaled $123.0 million, $32.9 million and $14.9 million, respectively, for the quarter ended March 31, 2023, compared to $66.4 million, $16.4 million and $27.9 million, respectively, for the quarter ended March 31, 2022.

Sale-Leasebacks

  • The Company completed a transaction for one property for gross proceeds of approximately $33.0 million in the first quarter of 2023 and a second transaction for one property for gross proceeds of approximately $45 million in April 2023. The final property from the Company's previously announced letters of intent is expected to be completed by September 30, 2023 for gross proceeds of approximately $45 million.
  • The Company remains on track to complete $300 million in sale-leaseback transactions in 2023.

2023 Outlook

Second Quarter 2023 Guidance






Percent


Three Months Ended


Three Months Ended


Change


June 30, 2023


June 30, 2022


(Using

($ in millions)

(Guidance)


(Actual)


midpoints)

Revenue

$560 – $570


$461


23 %

Net income (loss)

$19 – $20


$(2)


NM

Adjusted EBITDA

$124 – $126


$63


98 %

 

Full-Year 2023 Guidance


Year Ended




Percent


Year Ended


December 31, 2023


Year Ended


Change


December 31, 2023


(Guidance as of


December 31, 2022


(Using


(Guidance as of

($ in millions)

April 25, 2023)


(Actual)


midpoints)


March 8, 2023)

Revenue

$2,200 – $2,300


$1,823


23 %


$2,200 – $2,300

Adjusted EBITDA

$470 – $490


$282


70 %


$440 – $460

Rent

$270 – $280


$245


12 %


$270 – $280

 

Conference Call Details

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

  • Date: Tuesday, April 25, 2023
  • 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 2023

A link to the live audio webcast of the conference call and an accompanying presentation is available at https://ir.lifetime.life/.

Replay Information

A recorded replay of the webcast will be available after 2:00 p.m. ET on April 25, 2023, through May 9, 2023, and may be accessed as follows:

  • Online: https://ir.lifetime.life
  • U.S. replay number: 1-844-512-2921
  • International replay number: 1-412-317-6671
  • Replay ID: 1373 8036

About Life Time®

Life Time (NYSE: LTH) empowers people to live healthy, happy lives through its portfolio of more than 160 athletic country clubs across the United States and Canada. The Company's healthy way of life communities and ecosystem address all aspects of healthy living, healthy aging and healthy entertainment for people 90 days to 90+ years old. Supported by a team of more than 35,000 dedicated professionals, Life Time is committed to providing the best programs and experiences through its clubs, iconic athletic events and comprehensive digital platform.

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 EBITDA, net income excluding net benefits and expenses, and free cash flow before growth capital expenditures. 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 (loss) 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 EBITDA is defined as net income (loss) 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. Free cash flow before growth capital expenditures is defined as net cash provided by (used in) operating activities less center maintenance capital expenditures and corporate capital expenditures.

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 2023 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 the second quarter and full year 2023, growth, cost efficiencies and margin expansion, improvements to its balance sheet and leverage, capital expenditures, consumer demand, industry and economic trends, expected number of new center openings and successful signings and closings of 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, 2022, filed with the Securities and Exchange Commission (the "SEC") on March 8, 2023, (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

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)



Three Months Ended

March 31,


2023


2022

Revenue:




Center revenue

$           497,752


$         381,621

Other revenue

13,099


10,633

Total revenue

510,851


392,254

Operating expenses:




Center operations

274,109


239,573

Rent

66,537


55,964

General, administrative and marketing

42,497


66,561

Depreciation and amortization

58,197


58,107

Other operating expenses (income)

2,127


(17,035)

Total operating expenses

443,467


403,170

Income (loss) from operations

67,384


(10,916)

Other (expense) income:




Interest expense, net of interest income

(31,195)


(29,943)

Equity in earnings of affiliate

143


26

Total other expense

(31,052)


(29,917)

Income (loss) before income taxes

36,332


(40,833)

Provision for (benefit from) income taxes

8,872


(2,867)

Net income (loss)

$             27,460


$         (37,966)





Income (loss) per common share:




Basic

$                  0.14


$             (0.20)

Diluted

$                  0.14


$             (0.20)

Weighted-average common shares outstanding:




Basic

194,572


192,465

Diluted

202,855


192,465

 

LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

(Unaudited)



March 31,
2023


December 31,
2022

ASSETS




Current assets:




Cash and cash equivalents

$             35,337


$             25,509

Accounts receivable, net

16,777


13,381

Center operating supplies and inventories

46,233


45,655

Prepaid expenses and other current assets

58,526


45,743

Income tax receivable


748

Total current assets

156,873


131,036

Property and equipment, net

2,961,992


2,901,242

Goodwill

1,235,029


1,233,176

Operating lease right-of-use assets

2,135,203


2,116,761

Intangible assets, net

173,063


173,404

Other assets

73,142


69,744

Total assets

$        6,735,302


$        6,625,363

LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:




Accounts payable

$             65,058


$             73,973

Construction accounts payable

105,737


125,031

Deferred revenue

42,448


36,859

Accrued expenses and other current liabilities

144,788


154,427

Current maturities of debt

65,585


15,224

Current maturities of operating lease liabilities

52,786


51,892

Total current liabilities

476,402


457,406

Long-term debt, net of current portion

1,824,913


1,805,698

Operating lease liabilities, net of current portion

2,189,470


2,162,424

Deferred income taxes, net

47,731


41,393

Other liabilities

34,749


34,181

Total liabilities

4,573,265


4,501,102

Stockholders' equity:




Common stock, $0.01 par value per share; 500,000 shares authorized; 194,998 and 194,271 shares issued and outstanding, respectively.

1,950


1,943

Additional paid-in capital

2,794,657


2,784,416

Accumulated deficit

(625,416)


(652,876)

Accumulated other comprehensive loss

(9,154)


(9,222)

Total stockholders' equity

2,162,037


2,124,261

Total liabilities and stockholders' equity

$        6,735,302


$        6,625,363

 

LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)



Three Months Ended

March 31,


2023


2022

Cash flows from operating activities:




Net income (loss)

$             27,460


$            (37,966)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:




Depreciation and amortization

58,197


58,107

Deferred income taxes

6,333


(3,885)

Share-based compensation

5,622


21,438

Non-cash rent expense

9,028


6,009

Impairment charges associated with long-lived assets


227

Gain on disposal of property and equipment, net

(6,693)


(28,597)

Amortization of debt discounts and issuance costs

1,966


1,945

Changes in operating assets and liabilities

(23,650)


(5,638)

Other

(3,915)


(2,578)

Net cash provided by operating activities

74,348


9,062

Cash flows from investing activities:




Capital expenditures

(170,814)


(110,754)

Proceeds from sale-leaseback transactions

32,676


79,666

Other

1,287


4,805

Net cash used in investing activities

(136,851)


(26,283)

Cash flows from financing activities:




Proceeds from borrowings

7,916


3,198

Repayments of debt

(3,701)


(5,745)

Proceeds from revolving credit facility

345,000


230,000

Repayments of revolving credit facility

(280,000)


(200,000)

Repayments of finance lease liabilities

(244)


(358)

Proceeds from stock option exercises

3,456


Other

(102)


(476)

Net cash provided by financing activities

72,325


26,619

Effect of exchange rates on cash and cash equivalents

6


61

Increase in cash and cash equivalents

9,828


9,459

Cash and cash equivalents—beginning of period

25,509


31,637

Cash and cash equivalents—end of period

$             35,337


$             41,096

 

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,


2023


2022

Membership Data




Center memberships

764,173


673,983

Digital On-hold memberships

49,333


70,289

Total memberships

813,506


744,272





Revenue Data




Membership dues and enrollment fees

71.8 %


71.3 %

In-center revenue

28.2 %


28.7 %

Total Center revenue

100.0 %


100.0 %





Membership dues and enrollment fees

$          357,488


$          271,915

In-center revenue

140,264


109,706

Total Center revenue

$          497,752


$          381,621





Average Center revenue per center membership (1)

$               667


$               580

Comparable center revenue (2)

24.6 %


50.3 %





Center Data




Net new center openings (3)

3


2

Total centers (end of period) (3)

164


153

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

16,100,000


15,300,000





GAAP and Non-GAAP Financial Measures




Net income (loss)

$          27,460


$        (37,966)

Net income (loss) margin (5)

5.4 %


(9.7) %

Adjusted EBITDA (6)

$        120,102


$          40,626

Adjusted EBITDA margin (6)

23.5 %


10.4 %

Center operations expense

$        274,109


$        239,573

Pre-opening expenses (7)

$            1,685


$            1,387

Rent

$          66,537


$          55,964

Non-cash rent expense (open properties) (8)

$            6,378


$            1,068

Non-cash rent expense (properties under development) (8)

$            2,650


$            4,941

Net cash provided by operating activities

$          74,348


$            9,062

Free cash flow before growth capital expenditures (9)

$          26,583


$        (35,256)



(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.

(4)

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

(5)

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

(6)

We present Adjusted EBITDA as a supplemental measure of our performance. We define Adjusted EBITDA as net income (loss) 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 our ongoing operations, including incremental costs related to COVID-19.




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




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

 


Three Months Ended


March 31,


2023


2022

Net income (loss)

$               27,460


$             (37,966)

Interest expense, net of interest income

31,195


29,943

Provision for (benefit from) income taxes

8,872


(2,867)

Depreciation and amortization

58,197


58,107

Share-based compensation expense (a)

5,622


21,438

COVID-19 related expenses (b)

322


212

Gain on sale-leaseback transactions (c)

(6,732)


(28,372)

Capital transaction costs (d)


255

Other (e)

(4,834)


(124)

Adjusted EBITDA

$             120,102


$               40,626



    (a)

Share-based compensation expense recognized during the three months ended March 31, 2023 was associated with stock options, restricted stock units, our employee stock purchase plan ("ESPP") that launched on December 1, 2022, and liability classified awards related to our short-term incentive plan for our executive officers in 2023. Share-based compensation expense recognized during the three months ended March 31, 2022 was associated with stock options, restricted stock and restricted stock units. The majority of this expense was associated with awards that were fully vested and became exercisable on April 4, 2022 in connection with the expiration of the lock-up period following our IPO.

   (b)

Represents the incremental expenses we recognized related to the COVID-19 pandemic. We adjust for these expenses as they do not represent expenses associated with our normal ongoing operations. We believe that adjusting for these expenses provides a more accurate and consistent representation of our actual operating performance from period to period. For the three months ended March 31, 2023 and 2022, COVID-19 related expenses primarily consisted of legal-related costs in pursuit of our claim against Zurich.

   (c)

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

   (d)

Represents one-time costs related to capital transactions, including debt and equity offerings that are non-recurring in nature, but excluding direct costs related to the IPO that were netted against the proceeds of the IPO.

   (e)

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



(7)

Represents non-capital expenditures associated with opening new centers which 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.

(8)

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.

(9)

Free cash flow before growth capital expenditures, a non-GAAP financial measure, is calculated as net cash provided by operating activities less center maintenance capital expenditures and corporate capital expenditures.




The following table provides a reconciliation from net cash provided by operating activities to free cash flow before growth capital expenditures (in thousands):

 


Three Months Ended


March 31,


2023


2022

Net cash provided by operating activities

$            74,348


$              9,062

Center maintenance capital expenditures

(32,899)


(16,396)

Corporate capital expenditures

(14,866)


(27,922)

Free cash flow before growth capital expenditures

$            26,583


$          (35,256)

 

Capital Expenditures Summary

($ in thousands)

(Unaudited)



Three Months Ended


March 31,


2023


2022

Growth capital expenditures, net of construction reimbursements (1)

$           123,049


$             66,436

Center maintenance capital expenditures

32,899


16,396

Corporate capital expenditures

14,866


27,922

Total capital expenditures

$           170,814


$           110,754



(1)

Growth capital expenditures include new center land and construction, growth initiatives, major remodels of acquired centers and the purchase of previously leased centers.

 

Proceeds from Sale-Leaseback Transactions

($ in thousands)

(Unaudited)



Three Months Ended


March 31,


2023


2022

Proceeds from sale-leaseback transactions

$             32,676


$             79,666

 

Reconciliation of Net Income to Adjusted EBITDA Guidance for Second Quarter 2023

($ in millions)

(Unaudited)



Three Months Ended


June 30, 2023

Net income

$19    –    $20

Interest expense, net of interest income

33    –    32

Provision for income taxes

6     –    7

Depreciation and amortization

58    –    59

Share-based compensation expense

8     –    8

Adjusted EBITDA

$124    –    $126

 

Cision View original content to download multimedia:https://www.prnewswire.com/news-releases/life-time-reports-first-quarter-fiscal-2023-financial-results-301806310.html

SOURCE Life Time Group Holdings, Inc.