EX-99.1
Published on August 10, 2022
Exhibit 99.1
Life Time Reports Second Quarter Fiscal 2022 Financial Results
CHANHASSEN, Minn. (August 10, 2022) – Life Time Group Holdings, Inc. (“Life Time,” “we,” “our,” “us,” or the “Company”) (NYSE: LTH) today announced its financial results for the fiscal second quarter ended June 30, 2022.
Bahram Akradi, Founder, Chairman and CEO, stated: “We are happy to report that Life Time is growing back steadily. During the quarter, we made substantial progress on our strategic priorities. We delivered on our financial guidance, while continuing to make strategic investments in broadening and elevating the programs and experiences we provide. We are seeing strong member engagement in our programming and will remain focused on driving these initiatives through the remainder of the year. Our new athletic country club pipeline remains strong with 12 planned openings this year and 11 or more in 2023. To further strengthen our balance sheet, we have entered into a definitive agreement for the sale-leaseback of approximately $200 million of owned real estate, which is expected to close in early October. We are also in discussions for additional sale-leaseback transactions of up to $300 million in gross proceeds by the end of the year. Finally, while we are seeing current macroeconomic headwinds that may slow our near-term recovery, we remain confident in the growth of our business as we accelerate the rollout of our strategic initiatives.”
Second Quarter 2022 Results and Prior Year Comparisons
•Total revenue increased 42.7% to $461.3 million from $323.2 million.
•Comparable center sales increased 36.2%.
•Center memberships totaled 724,778 on June 30, 2022, an increase of 10.2% from 657,737 on June 30, 2021, and up by 50,795 from March 31, 2022.
•Net loss was $2.3 million and included a tax-effected one-time net benefit of $5.4 million, which included a $7.7 million gain on sale-leasebacks, partially offset by $2.2 million in non-cash share-based compensation expense.
•Adjusted EBITDA increased to $63.1 million from $4.2 million.
Six-Month 2022 Results and Prior Year Comparisons
•Total revenue increased 49.1% to $853.5 million from $572.5 million.
•Comparable center sales increased 42.4%.
•Net loss was $40.3 million and included a tax-effected one-time net benefit of $18.4 million, which included a $42.4 million gain on sale-leasebacks, partially offset by $23.4 million in non-cash share-based compensation expense and $0.6 million in non-recurring charges consisting primarily of COVID-19-related expenses.
•Adjusted EBITDA increased to $103.7 million from $(14.8) million.
New Center Openings
•The Company operated 153 centers as of June 30, 2022.
•Year-to-date, the Company has opened two centers, including one in Frisco, Texas, and a second in Chicago.
•The Company plans to open four new centers in the third quarter and six during the fourth quarter, for a total of 12 new centers in 2022.
•The Company plans to open 11 or more new centers in 2023.
Cash Flow Highlights
•As of June 30, 2022, the Company had total cash and cash equivalents of $61.3 million and $30.0 million in borrowings under its $475 million revolving credit facility.
•Net cash provided by operating activities for the three-month and six-month periods ended June 30, 2022, was $71.3 million and $80.3 million, respectively, compared to $25.1 million and $(13.0) million in the same prior-year periods, respectively.
•Free cash flow before growth capital expenditures for the three-month and six-month periods ended June 30, 2022, was $32.4 million and $(1.9) million, respectively, compared to $(6.9) million and $(60.8) million in the same prior-year periods, respectively.
Sale-Leasebacks
•During the second quarter, the Company completed sale-leaseback transactions on two properties for gross proceeds of approximately $95 million, bringing the year-to-date sale-leaseback transaction total to $175 million.
•In August 2022, the Company entered into a definitive agreement for the sale-leaseback of five properties for gross proceeds of approximately $200 million. The transaction is expected to close in early October.
•Additionally, the Company is in discussions for sale-leaseback transactions of additional properties for gross proceeds of up to $300 million by the end of the year.
•Once closed, these transactions would bring the total gross proceeds for sale-leasebacks in 2022 to $675 million. The Company expects to use the net proceeds both to pay down debt and maintain cash on the balance sheet to fund future growth.
•Assuming the successful closure of these sale-leaseback transactions on the timeline outlined above, full-year rent expense is expected to be $245 to $255 million.
Outlook
For the third quarter ending September 30, 2022, the Company is projecting revenue, net loss, and Adjusted EBITDA to be in the ranges of $490 to $510 million, $(24) to $(15) million, and $65 to $75 million, respectively. For the full year ending December 31, 2022, the Company is projecting revenue, net loss, and Adjusted EBITDA to be in the ranges of $1.80 to $1.85 billion, $(73.6) to $(55.6) million, and $250 to $270 million, respectively.
Conference Call Details
A conference call to discuss the Company’s second quarter financial results is scheduled for today, August 10, 2022, at 8:30 a.m. Eastern Time. Investors and analysts interested in participating in the call are invited to dial 877-451-6152 (international callers should dial 1-201-389-0879) approximately 10 minutes prior to the start of the call. A live audio webcast of the conference call will be available online at https://ir.lifetime.life/. A recorded replay of the conference call will be available after the conclusion of the call and will be available for a period of time online at https://ir.lifetime.life/.
# # #
About Life Time®
Life Time (NYSE: LTH) empowers people to live healthy, happy lives through its portfolio of nearly 160 athletic country clubs across the United States and Canada. The Company’s healthy way of life communities address all aspects of healthy living, healthy aging and healthy entertainment for those 90 days to 90+ years with integrity and respect for everyone. With a team of more than 30,000, Life Time is committed to providing the best programs and experiences through its athletic country clubs, iconic athletic events and via a complementary 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 the generally accepted accounting principles in the United States (“GAAP”), including Adjusted EBITDA 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 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.
The Company includes a center, for comparable center sales 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 third quarter and fiscal year 2022, opportunities for growth, 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, risks relating to our human capital, risks relating to legal compliance and risk management, risks relating to our financial performance 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, 2021, filed with the Securities and Exchange Commission (the “SEC”) on March 10, 2022 (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.
Contacts
Investors
John Rouleau, ICR // investorrelations@lifetime.life
Media
Jason Thunstrom, Life Time Corporate Communications // jthunstrom@lifetime.life or 952-229-7435
LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
| Three Months Ended June 30, |
Six Months Ended June 30, |
||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||
| Center revenue | $ | 445,882 | $ | 316,596 | $ | 827,503 | $ | 561,690 | |||||||||||||||
| Other revenue | 15,385 | 6,591 | 26,018 | 10,795 | |||||||||||||||||||
| Total revenue | 461,267 | 323,187 | 853,521 | 572,485 | |||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Center operations | 279,557 | 218,711 | 519,130 | 393,326 | |||||||||||||||||||
| Rent | 59,989 | 51,522 | 115,953 | 102,039 | |||||||||||||||||||
| General, administrative and marketing | 51,950 | 43,322 | 118,511 | 81,592 | |||||||||||||||||||
| Depreciation and amortization | 57,173 | 57,822 | 115,280 | 119,028 | |||||||||||||||||||
| Other operating (income) expense | (8,212) | 8,930 | (25,247) | 15,864 | |||||||||||||||||||
| Total operating expenses | 440,457 | 380,307 | 843,627 | 711,849 | |||||||||||||||||||
| Income (loss) from operations | 20,810 | (57,120) | 9,894 | (139,364) | |||||||||||||||||||
| Other (expense) income: | |||||||||||||||||||||||
| Interest expense, net of interest income | (27,093) | (40,078) | (57,036) | (136,295) | |||||||||||||||||||
| Equity in earnings (loss) of affiliate | 8 | (91) | 34 | (384) | |||||||||||||||||||
| Total other expense | (27,085) | (40,169) | (57,002) | (136,679) | |||||||||||||||||||
| Loss before income taxes | (6,275) | (97,289) | (47,108) | (276,043) | |||||||||||||||||||
| Benefit from income taxes | (3,990) | (20,933) | (6,857) | (46,886) | |||||||||||||||||||
| Net loss | $ | (2,285) | $ | (76,356) | $ | (40,251) | $ | (229,157) | |||||||||||||||
| Loss per common share—basic and diluted | $ | (0.01) | $ | (0.57) | $ | (0.21) | $ | (1.65) | |||||||||||||||
| Weighted-average common shares outstanding—basic and diluted | 193,692 | 145,196 | 193,082 | 145,196 | |||||||||||||||||||
LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
(Unaudited)
| June 30, 2022 |
December 31, 2021 |
||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 61,289 | $ | 31,637 | |||||||
| Accounts receivable, net | 10,530 | 6,464 | |||||||||
| Center operating supplies and inventories | 43,734 | 41,007 | |||||||||
| Prepaid expenses and other current assets | 56,282 | 48,883 | |||||||||
| Income tax receivable | 2,572 | 3,533 | |||||||||
| Total current assets | 174,407 | 131,524 | |||||||||
| Property and equipment, net | 2,794,332 | 2,791,464 | |||||||||
| Goodwill | 1,233,176 | 1,233,176 | |||||||||
| Operating lease right-of-use assets | 2,060,368 | 1,864,528 | |||||||||
| Intangible assets, net | 173,425 | 174,241 | |||||||||
| Other assets | 63,536 | 61,742 | |||||||||
| Total assets | $ | 6,499,244 | $ | 6,256,675 | |||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | 75,286 | $ | 71,308 | |||||||
| Construction accounts payable | 108,578 | 83,311 | |||||||||
| Deferred revenue | 41,190 | 33,871 | |||||||||
| Accrued expenses and other current liabilities | 164,253 | 147,920 | |||||||||
| Current maturities of debt | 21,727 | 23,527 | |||||||||
| Current maturities of operating lease liabilities | 48,249 | 46,315 | |||||||||
| Total current liabilities | 459,283 | 406,252 | |||||||||
| Long-term debt, net of current portion | 1,807,418 | 1,775,719 | |||||||||
| Operating lease liabilities, net of current portion | 2,094,104 | 1,909,883 | |||||||||
| Deferred income taxes | 46,143 | 55,213 | |||||||||
| Other liabilities | 13,639 | 18,216 | |||||||||
| Total liabilities | 4,420,587 | 4,165,283 | |||||||||
| Stockholders’ equity: | |||||||||||
Common stock, $0.01 par value per share; 500,000 shares authorized; 193,796 and 193,060 shares issued and outstanding, respectively. |
1,938 | 1,931 | |||||||||
| Additional paid-in capital | 2,772,393 | 2,743,560 | |||||||||
| Accumulated deficit | (691,334) | (651,083) | |||||||||
| Accumulated other comprehensive loss | (4,340) | (3,016) | |||||||||
| Total stockholders’ equity | 2,078,657 | 2,091,392 | |||||||||
| Total liabilities and stockholders’ equity | $ | 6,499,244 | $ | 6,256,675 | |||||||
LIFE TIME GROUP HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| Six Months Ended June 30, |
|||||||||||
| 2022 | 2021 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net loss | $ | (40,251) | $ | (229,157) | |||||||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | |||||||||||
| Depreciation and amortization | 115,280 | 119,028 | |||||||||
| Deferred income taxes | (9,009) | (47,132) | |||||||||
| Share-based compensation | 27,411 | 2,881 | |||||||||
| Non-cash rent expense | 15,635 | 6,219 | |||||||||
| (Gain) loss on disposal of property and equipment, net | (49,743) | 1,110 | |||||||||
| Loss on debt extinguishment | — | 40,993 | |||||||||
| Write-off of discounts and debt issuance costs | — | 18,325 | |||||||||
| Amortization of debt discounts and issuance costs | 3,918 | 5,127 | |||||||||
| Changes in operating assets and liabilities | 17,909 | 71,259 | |||||||||
| Other | (825) | (1,692) | |||||||||
| Net cash provided by (used in) operating activities | 80,325 | (13,039) | |||||||||
| Cash flows from investing activities: | |||||||||||
| Capital expenditures | (252,640) | (121,973) | |||||||||
| Proceeds from sale-leaseback transactions | 174,246 | 33,933 | |||||||||
| Other | 692 | (1,678) | |||||||||
| Net cash used in investing activities | (77,702) | (89,718) | |||||||||
| Cash flows from financing activities: | |||||||||||
| Proceeds from borrowings | 8,657 | 1,907,577 | |||||||||
| Repayments of debt | (11,539) | (1,594,439) | |||||||||
| Proceeds from revolving credit facility | 420,000 | 15,000 | |||||||||
| Repayments of revolving credit facility | (390,000) | (109,000) | |||||||||
| Repayments of finance lease liabilities | (697) | (750) | |||||||||
| Increase in debt discounts and issuance costs | — | (44,676) | |||||||||
| Proceeds from stock option exercises | 1,194 | — | |||||||||
| Other | (476) | — | |||||||||
| Net cash provided by financing activities | 27,139 | 173,712 | |||||||||
| Effect of exchange rates on cash and cash equivalents | (110) | 50 | |||||||||
| Increase in cash and cash equivalents | 29,652 | 71,005 | |||||||||
| Cash and cash equivalents—beginning of period | 31,637 | 33,195 | |||||||||
| Cash and cash equivalents—end of period | $ | 61,289 | $ | 104,200 | |||||||
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 | Six Months Ended | ||||||||||||||||||||||
| June 30, | June 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Membership Data | |||||||||||||||||||||||
| Center memberships | 724,778 | 657,737 | 724,778 | 657,737 | |||||||||||||||||||
| Digital On-hold memberships | 50,985 | 101,983 | 50,985 | 101,983 | |||||||||||||||||||
| Total memberships | 775,763 | 759,720 | 775,763 | 759,720 | |||||||||||||||||||
| Revenue Data | |||||||||||||||||||||||
| Membership dues and enrollment fees | 69.4 | % | 68.6 | % | 70.2 | % | 69.9 | % | |||||||||||||||
| In-center revenue | 30.6 | % | 31.4 | % | 29.8 | % | 30.1 | % | |||||||||||||||
| Total Center revenue | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||||||||||||||
| Membership dues and enrollment fees | $ | 309,262 | $ | 217,244 | $ | 581,178 | $ | 392,551 | |||||||||||||||
| In-center revenue | 136,620 | 99,352 | 246,325 | 169,139 | |||||||||||||||||||
| Total Center revenue | $ | 445,882 | $ | 316,596 | $ | 827,503 | $ | 561,690 | |||||||||||||||
Average Center revenue per center membership (1)
|
$ | 639 | $ | 525 | $ | 1,219 | $ | 984 | |||||||||||||||
Comparable center sales (2)
|
36.2 | % | 295.1 | % | 42.4 | % | 16.1 | % | |||||||||||||||
| Center Data | |||||||||||||||||||||||
Net new center openings (3)
|
— | 3 | 2 | 4 | |||||||||||||||||||
Total centers (end of period) (3)
|
153 | 153 | 153 | 153 | |||||||||||||||||||
Total center square footage (end of period) (4)
|
15,300,000 | 15,000,000 | 15,300,000 | 15,000,000 | |||||||||||||||||||
| GAAP and Non-GAAP Financial Measures | |||||||||||||||||||||||
| Net loss | $ | (2,285) | $ | (76,356) | $ | (40,251) | $ | (229,157) | |||||||||||||||
Net loss margin (5)
|
(0.5) | % | (23.6) | % | (4.7) | % | (40.0) | % | |||||||||||||||
Adjusted EBITDA (6)
|
$ | 63,096 | $ | 4,193 | $ | 103,722 | $ | (14,754) | |||||||||||||||
Adjusted EBITDA margin (6)
|
13.7 | % | 1.3 | % | 12.2 | % | (2.6) | % | |||||||||||||||
| Center operations expense | $ | 279,557 | $ | 218,711 | $ | 519,130 | $ | 393,326 | |||||||||||||||
Pre-opening expenses (7)
|
$ | 2,559 | $ | 2,111 | $ | 3,946 | $ | 4,671 | |||||||||||||||
| Rent | $ | 59,989 | $ | 51,522 | $ | 115,953 | $ | 102,039 | |||||||||||||||
Non-cash rent expense (open properties) (8)
|
$ | 4,547 | $ | (1,734) | $ | 5,988 | $ | (657) | |||||||||||||||
Non-cash rent expense (properties under development) (8)
|
$ | 5,079 | $ | 3,630 | $ | 9,647 | $ | 6,876 | |||||||||||||||
| Net cash provided by (used in) operating activities | $ | 71,263 | $ | 25,117 | $ | 80,325 | $ | (13,039) | |||||||||||||||
Free cash flow before growth capital expenditures (9)
|
$ | 32,441 | $ | (6,910) | $ | (1,853) | $ | (60,825) | |||||||||||||||
(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 sales 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 are 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. As of June 30, 2022, all of our 153 centers were open.
(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 loss margin is calculated as net 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 loss, the most directly comparable GAAP measure, to Adjusted EBITDA (in thousands):
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| June 30, | June 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Net loss | $ | (2,285) | $ | (76,356) | $ | (40,251) | $ | (229,157) | |||||||||||||||
Interest expense, net of interest income (a)
|
27,093 | 40,078 | 57,036 | 136,295 | |||||||||||||||||||
| Benefit from income taxes | (3,990) | (20,933) | (6,857) | (46,886) | |||||||||||||||||||
| Depreciation and amortization | 57,173 | 57,822 | 115,280 | 119,028 | |||||||||||||||||||
Share-based compensation expense (b)
|
5,973 | 2,881 | 27,411 | 2,881 | |||||||||||||||||||
COVID-19 related expenses (c)
|
371 | (486) | 583 | (188) | |||||||||||||||||||
(Gain) loss on sale-leaseback transactions (d)
|
(21,212) | 33 | (49,584) | 831 | |||||||||||||||||||
Other (e)
|
(27) | 1,154 | 104 | 2,442 | |||||||||||||||||||
| Adjusted EBITDA | $ | 63,096 | $ | 4,193 | $ | 103,722 | $ | (14,754) | |||||||||||||||
(a) For the six months ended June 30, 2021, we incurred a non-cash expense of $41.0 million related to the extinguishment of a related party secured loan and $18.3 million related to the write-off of debt discounts and issuances costs in connection with the extinguishment of our prior term loan facility, senior unsecured notes and the related party secured loan.
(b) Share-based compensation expense recognized during the three and six months ended June 30, 2022 is associated with stock options, restricted stock and restricted stock units. The majority of the share-based compensation expense recognized during the six months ended June 30, 2022 was associated with awards that were fully vested and became exercisable on April 4, 2022. Share-based compensation expense recognized during the three and six months ended June 30, 2021 was associated with restricted stock and restricted stock units. No share-based compensation expense was recognized during the three and six months ended June 30, 2021 related to stock options because the vesting and exercisability of stock options granted by the Company up through June 30, 2021 was contingent upon the occurrence of a change of control or an initial public offering.
(c) Represents the incremental net expenses (credits) we recognized related to the COVID-19 pandemic. We adjust for these costs as they do not represent costs associated with our normal ongoing operations. We believe that adjusting for these costs provides a more accurate and consistent representation of our actual operating performance from period to period. For the three and six months ended June 30, 2022, COVID-19 related expenses primarily consisted of legal-related costs in pursuit of our claim against Zurich. For the three and six months ended June 30, 2021, COVID-19 related credits primarily consisted of the recovery of certain qualifying expenses recovered under the CARES Act, partially offset by COVID-19 legal-related costs in pursuit of our claim against Zurich.
(d) We adjust for the impact of gains or losses on the sale-leaseback of our properties as they do not reflect costs associated with our ongoing operations.
(e) Includes costs associated with incremental expenses related to a winter storm that resulted in historical freezing temperatures affecting our Texas region and executive level severance in 2021 and other transactions which 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.
The negative non-cash rent expense amounts associated with our open properties for the three and six months ended June 30, 2021, reflect deferred rent repayments that we made at various dates throughout each of the respective periods. Beginning in the second quarter of fiscal 2020, due to the disruption caused by the COVID-19 pandemic, we began negotiating lease concessions with many of our landlords. The concessions we were able to obtain from these landlords primarily consisted of full or partial rent payment deferrals, with scheduled repayments due at various dates through December 2021. During the periods in which these rent payments were deferred, we recognized the deferred rent payments as non-cash rent expense. During the periods in which we repaid these deferred rent amounts, we recognized the repayment amounts as both an increase in cash rent expense and a decrease in non-cash rent expense.
(9) Free cash flow before growth capital expenditures, a non-GAAP financial measure, is calculated as net cash provided by (used in) operating activities less center maintenance capital expenditures and corporate capital expenditures.
The following table provides a reconciliation from net cash provided by (used in) operating activities to free cash flow before growth capital expenditures (in thousands):
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| June 30, | June 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Net cash provided by (used in) operating activities | $ | 71,263 | $ | 25,117 | $ | 80,325 | $ | (13,039) | |||||||||||||||
| Center maintenance capital expenditures | (19,057) | (17,275) | (35,453) | (24,967) | |||||||||||||||||||
| Corporate capital expenditures | (19,765) | (14,752) | (46,725) | (22,819) | |||||||||||||||||||
| Free cash flow before growth capital expenditures | $ | 32,441 | $ | (6,910) | $ | (1,853) | $ | (60,825) | |||||||||||||||
Capital Expenditures Summary
($ in thousands)
(Unaudited)
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| June 30, | June 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
Growth capital expenditures, net of construction reimbursements (1)
|
$ | 103,064 | $ | 46,617 | $ | 170,462 | $ | 74,187 | |||||||||||||||
| Center maintenance capital expenditures | 19,057 | 17,275 | 35,453 | 24,967 | |||||||||||||||||||
| Corporate capital expenditures | 19,765 | 14,752 | 46,725 | 22,819 | |||||||||||||||||||
| Total capital expenditures | $ | 141,886 | $ | 78,644 | $ | 252,640 | $ | 121,973 | |||||||||||||||
(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 | Six Months Ended | ||||||||||||||||||||||
| June 30, | June 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Proceeds from sale-leaseback transactions | $ | 94,580 | $ | 510 | $ | 174,246 | $ | 33,933 | |||||||||||||||
Reconciliation of Net Loss to Adjusted EBITDA Guidance for Third Quarter and Fiscal Year 2022
($ in millions)
(Unaudited)
| Three Months Ended | Twelve Months Ended | ||||||||||
| September 30, 2022 | December 31, 2022 | ||||||||||
| Net loss | $(24.0) - $(15.0) | $(73.6) - $(55.6) | |||||||||
| Interest expense, net of interest income | 30.5 - 29.5 | 117.4 - 115.4 | |||||||||
| Benefit from income taxes | (4.0) - (2.5) | (12.4) - (9.5) | |||||||||
| Depreciation and amortization | 56.4 - 56.9 | 228.2 - 229.2 | |||||||||
| Share-based compensation expense | 6.1 - 6.1 | 39.3 - 39.4 | |||||||||
| COVID-19 related expenses | 0.0 - 0.0 | 0.6 - 0.6 | |||||||||
| Gain on sale-leaseback transactions | 0.0 - 0.0 | (49.6) - (49.6) | |||||||||
| Other non-recurring expenses | 0.0 - 0.0 | 0.1 - 0.1 | |||||||||
| Adjusted EBITDA | $65.0 - $75.0 | $250.0 - $270.0 | |||||||||